Final Results - Part 2

22nd Feb 2006 07:02

Anglo American PLC22 February 2006 PART 2 1. Segmental information Based on risks and returns the directors consider the primary reporting formatis by business segment and the secondary reporting format is by geographicalsegment. The analysis of associates' revenue by business segment is provided here forcompleteness and consistency. Primary reporting format - by business segment Segment result before Segment result special items after Segment and special items revenue remeasurements and (1)(2) (3) remeasurementsUS$ million 2005 2004 2005 2004 2005 2004 Subsidiaries and joint venturesPlatinum 3,646 3,065 835 527 835 527Gold 2,629 2,396 332 296 (50) 295Coal 2,766 1,914 752 321 753 321Base Metals 3,647 3,232 1,678 1,280 1,667 1,160Industrial Minerals 4,043 3,833 366 416 350 407Ferrous Metals and Industries 6,030 5,137 1,308 591 1,312 746Paper and Packaging 6,673 6,691 484 575 401 575Exploration - - (150) (120) (150) (120)Corporate Activities - - (261) (245) (261) (245)Total subsidiaries and joint 29,434 26,268 5,344 3,641 4,857 3,666ventures Net income from associatesPlatinum 68 55 12 4 12 4Gold 15 13 - - (2) -Diamonds 3,316 3,177 386 319 257 329Coal 583 468 192 118 192 118Base Metals - 88 - (4) - (85)Industrial Minerals 30 25 3 4 3 4Ferrous Metals and Industries 743 1,526 96 191 189 191Paper and Packaging 283 228 7 (12) 6 (12)Corporate Activities - 90 - 1 - 1Total associates 5,038 5,670 696 621 657 550Total Group operations including netincome from associates 34,472 31,938 6,040 4,262 5,514 4,216 Net profit on disposals 87 1,015 Total profit from operations and 5,601 5,231associates As further additional information, a segmental analysis of associates' operating profit is set outbelow to show operating profit for total Group operations including associates. Operating Operating profit profit before after special items special items and and remeasurements remeasurementsUS$ million 2005 2004 2005 2004 Total subsidiaries and joint ventures 5,344 3,641 4,857 3,666AssociatesPlatinum 19 9 19 9Gold - - (2) -Diamonds 583 573 431 573Coal 267 176 267 176Base Metals - (4) - (121)Industrial Minerals 4 5 4 5Ferrous Metals and Industries 148 296 149 296Paper and Packaging 11 (6) 11 (6)Corporate Activities - 7 - 7Total associates 1,032 1,056 879 939Total Group operations including 6,376 4,697 5,736 4,605operating profit from associates 1. Segmental information (continued) Primary reporting format - by business segment (continued) (1) Revenue is measured at the fair value of consideration received or receivable for all significant products.Where a by-product is not regarded as significant, then revenue may be credited against cost of sales. The amountcredited to cost of sales for the 12 months ended 31 December 2005 was $76 million (December 2004: $81 million)and related principally to AngloGold Ashanti who credit uranium, silver and acid to cost of sales in accordancewith the Gold Industry Standard on production cost. (2) Base Metals' turnover is stated net of treatment and refining charges on concentrate sales to external partiesand refining charges on copper anode sales from Chagres to refineries. (3) Segment result is defined as being segment revenue less segment expense; that is operating profit and gains andlosses from foreign currency derivatives that have been recycled in the income statement in cash flow hedges of salesand purchases. In addition net income from associates is shown by segment. There are no material inter-segmenttransfers or transactions that would affect the segment result. Special items are set out in note 4. Associates'operating profit is reconciled to 'Net income from associates' as follows: 2005 2004 US$ million Operating profit from associates before special items and 1,032 1,056remeasurements Operating special items and remeasurements (see note 4) (153) (117)Operating profit from associates after special items and 879 939remeasurementsNet profit on disposals (see note 4) 98 10Other special items and remeasurements (see note 4) 7 -Net finance costs (before remeasurements) (51) (100)Income tax expense (after special items and (274) (280)remeasurements)Underlying minority interest (after special items and (2) (19)remeasurements)Net income from associates 657 550 The segment result and associates' operating profit before special items andremeasurements, as shown above, is reconciled to 'Profit for the financial year'as follows: 2005 2004US$ million Operating profit, including associates, before special items and remeasurements 6,376 4,697 Operating special items and remeasurements (see note 4):Subsidiaries and joint ventures (487) 25Gold (382) (1)Coal 1 -Base Metals (11) (120)Industrial Minerals (16) (9)Ferrous Metals and Industries 4 155Paper and Packaging (83) -Associates (153) (117)Gold (2) -Diamonds (152) -Base Metals - (117)Ferrous Metals and Industries 1 -Operating profit, including associates, after special itemsand remeasurements 5,736 4,605Net profit on disposalsSubsidiaries and joint ventures 87 1,015Associates 98 10Associates' financing remeasurements 7 -Associates' net finance costs (51) (100)Associates' income tax expense (274) (280)Associates' underlying minority interests (2) (19)Total profit from operations and associates 5,601 5,231Financing remeasurements 35 (112)Net finance costs before remeasurements (428) (255)Profit before tax 5,208 4,864Income tax expense (1,275) (923)Profit for the financial year 3,933 3,941 1. Segmental information (continued) Primary reporting format - by business segment (continued) Primary segment disclosures for segment assets, liabilities and capitalexpenditure are as follows: Segment Segment Net segment Capital assets(1) liabilities(2) assets expenditure(3)US$ million 2005 2004 2005 2004 2005 2004 2005 2004 Platinum 7,550 7,939 (532) (379) 7,018 7,560 685 910Gold 7,890 7,693 (908) (569) 6,982 7,124 721 3,653Coal 3,024 3,087 (780) (784) 2,244 2,303 331 271Base Metals 5,358 5,415 (573) (463) 4,785 4,952 273 505Industrial Minerals 5,041 5,381 (1,059) (901) 3,982 4,480 312 365Ferrous Metals and 5,341 6,364 (902) (1,062) 4,439 5,302 376 432IndustriesPaper and Packaging 7,400 8,140 (1,035) (1,544) 6,365 6,596 703 1,546Exploration - - (3) - (3) - - -Corporate 251 177 (310) (272) (59) (95) 27 11Activities 41,855 44,196 (6,102) (5,974) 35,753 38,222 3,428 7,693UnallocatedInvestment in associates 3,165 3,486 - - 3,165 3,486Financial/fixed asset 915 1,086 - - 915 1,086investmentsDeferred tax assets/ 337 128 (5,201) (5,810) (4,864) (5,682)(liabilities)Cash and cash equivalents 3,430 2,955 - - 3,430 2,955Other financial assets/ (liabilities) -(derivatives) 930 - (1,794) - (864) -Other non-operating assets/ (liabilities) 1,258 1,600 (2,420) (2,384) (1,162) (784) Provisions - - (356) (370) (356) (370)Borrowings - - (8,439) (11,200) (8,439) (11,200)Net assets 51,890 53,451 (24,312) (25,738) 27,578 27,713 Segment assets at 31 December 2005 are operating assets and consistprimarily of tangible assets ($30,796 million), intangible assets ($2,572million), biological assets ($350 million), environmental rehabilitation trusts($288 million), inventories ($3,569 million), pension and post-retirementhealthcare assets ($77 million) and operating receivables ($4,203 million).Segment assets at 31 December 2004 consist of tangible assets ($33,172 million),intangible assets ($2,644 million), biological assets ($374 million),inventories ($3,549 million), pension and post-retirement healthcare assets ($2million) and operating receivables ($4,455 million). (2) Segment liabilities are operating liabilities and consist primarily ofnon-interest bearing current liabilities, restoration and decommissioningprovisions and provisions for post-retirement benefits. (3) Capital expenditure reflects cash payments and accruals in respect ofadditions to tangible assets and intangible assets $3,377 million (2004: $3,631million) and includes additions resulting from acquisitions through businesscombinations $51 million (2004: $4,062 million). Other primary segment items included in the income statement are as follows: Depreciation and (Impairments)/ Other non cash amortisation reversal(1) expense(2)US$ million 2005 2004 2005 2004 2005 2004 Platinum 428 313 - - 55 39Gold 538 398 (96) (1) 50 27Coal 188 150 - - 14 39Base Metals 312 339 1 (120) 68 8Industrial Minerals 248 217 (16) (9) 36 12Ferrous Metals and Industries 300 274 8 155 56 7Paper and Packaging 411 400 (83) - 17 25Exploration - - - - 1 1Corporate Activities 16 16 - - 41 28 2,441 2,107 (186) 25 338 186 (1) See operating special items in note 4. (2) Other non cash expenses include share-based payments andcharges in respect of environmental, rehabilitation provisions and otherprovisions. 1. Segmental information (continued) Secondary reporting format - by geographical segment The Group's geographical analysis of revenue, allocated based on the country inwhich the customer is located, is as follows. The geographical analysis of theGroup's attributable revenue from associates is provided for completeness andconsistency. RevenueUS$ million 2005 2004 Subsidiaries and joint ventures South Africa 5,280 4,768Rest of Africa 505 485Europe 13,629 12,610North America 2,740 3,062South America 1,723 1,355Australia and Asia 5,557 3,988Total subsidiaries and joint ventures 29,434 26,268 AssociatesSouth Africa 169 340Rest of Africa 40 21Europe 1,500 1,476North America 1,768 2,222South America 29 66Australia and Asia 1,532 1,545Total associates 5,038 5,670Total Group operations including associates 34,472 31,938 The Group's geographical analysis of segment assets, liabilities and capitalexpenditure, allocated based on where assets and liabilities are located is: Segment assets Segment liabilities Net segment assets Capital expenditureUS$ million 2005 2004 2005 2004 2005 2004 2005 2004 South Africa 18,965 19,978 (2,689) (2,550) 16,276 17,428 1,890 2,471Rest of Africa 4,142 4,260 (298) (168) 3,844 4,092 261 2,814Europe 10,048 11,319 (1,926) (2,273) 8,122 9,046 658 1,500North America 500 674 (59) (93) 441 581 28 104South America 5,124 4,819 (543) (423) 4,581 4,396 317 501Australia and Asia 3,076 3,146 (587) (467) 2,489 2,679 274 303 41,855 44,196 (6,102) (5,974) 35,753 38,222 3,428 7,693 Additional disclosure of secondary segmental information by origin is asfollows: Operating profit before special items Operating profit and remeasurements after special items Revenue (1) and remeasurementsUS$ million 2005 2004 2005 2004 2005 2004 Subsidiaries and joint ventures South Africa 11,981 10,279 2,651 1,217 2,482 1,117Rest of Africa 1,193 804 63 44 (156) 44Europe 9,748 9,449 694 783 600 774North America 531 1,018 27 21 (11) 175South America 3,873 3,176 1,732 1,418 1,704 1,398Australia and Asia 2,108 1,542 177 158 238 158Total subsidiaries and joint ventures 29,434 26,268 5,344 3,641 4,857 3,666 AssociatesSouth Africa 1,479 1,565 217 170 193 53Rest of Africa 2,138 1,972 468 356 356 356Europe 753 969 47 166 30 166North America - 461 - 32 - 32South America 525 447 189 249 189 249Australia and Asia 143 256 111 83 111 83Total associates 5,038 5,670 1,032 1,056 879 939Total Group operations including associates 34,472 31,938 6,376 4,697 5,736 4,605 (1) Special items and remeasurements are set out in note 4. 2. Profit for the financial year The table below analyses the contribution of each business segment to theGroup's operating profit including operating profit from associates for thefinancial year and its underlying earnings, which the directors consider to be auseful additional measure of the Group's performance. A reconciliation fromprofit for the financial year to underlying earnings is given in note 7. Groupoperating profit including operating profit from associates is reconciled to 'Profit for the financial year' in the table below: 2005 Operating Operating profit before profit after Special items Net special items special items and Net interest, US$ million and and remeasurements: profit on Financing tax and remeasurements remeasurements operating(2) disposals remeasurements minority (1) (2) and other(2) interests Total By business segmentPlatinum 854 854 - - - (371) 483Gold 332 (52) 384 - - (227) 105Diamonds 583 431 152 - - (153) 430Coal 1,019 1,020 (1) - - (295) 724Base Metals 1,678 1,667 11 - - (438) 1,240Industrial Minerals 370 354 16 - - (103) 267Ferrous Metals and 1,456 1,461 (5) - - (699) 757IndustriesPaper and Packaging 495 412 83 - - (199) 296Exploration (150) (150) - - - 35 (115)Corporate Activities (261) (261) - - - (190) (451)Total/Underlying earnings 6,376 5,736 640 - - (2,640) 3,736Underlying earningsadjustments(note 7) (640) 185 42 198 (215)Profit for the financial 3,521year(3) 2004 Net Operating Operating interest, profit before profit after Special items Net Financing tax and special items special items and profit on minorityUS$ million and and remeasurements: disposals remeasurements interests remeasurements remeasurements operating(2) (2) and other(2) Total (1) By business segmentPlatinum 536 536 - - - (296) 240Gold 296 295 1 - - (157) 139Diamonds 573 573 - - - (193) 380Coal 497 497 - - - (140) 357Base Metals 1,276 1,039 237 - - (240) 1,036Industrial Minerals 421 412 9 - - (133) 288Ferrous Metals and 887 1,042 (155) - - (411) 476IndustriesPaper and Packaging 569 569 - - - (202) 367Exploration (120) (120) - - - 29 (91)Corporate Activities (238) (238) - - - (270) (508)Total/Underlying earnings 4,697 4,605 92 - - (2,013) 2,684Underlying earningsadjustments(note 7) (92) 1,025 (112) (4) 817Profit for the financial 3,501year (1) Operating profit includes associates' operating profit which is reconciledto 'Net income from associates' in note 1. (2) Special items and remeasurements are set out in note 4. (3) Profit for the financial year is the amount attributable to equityshareholders. 3. Exploration expenditure US$ million 2005 2004 By business segmentPlatinum 21 13Gold 45 43Coal 13 9Base Metals 50 41Ferrous Metals and Industries 21 14 150 120 4. Special items and remeasurements 'Special items' are those items of financial performance that the Group believesshould be separately disclosed on the face of the income statement to assist inthe understanding of the underlying financial performance achieved by the Groupand its businesses. Such items are material by nature or amount to the period'sresults and require separate disclosure in accordance with IAS 1.86. Specialitems that relate to the operating performance of the business are classified asspecial operating items and include impairment charges and reversals and otherexceptional items including significant legal provisions. Non-operating specialitems include profits and losses on disposals of investments and businesses.The Group believes that items which were previously referred to as 'exceptionalitems' under UK GAAP fall within the scope of special items under IFRS. Remeasurements comprise other items which the Group believes should be reportedseparately to aid an understanding of the underlying performance of the Group.This category includes unrealised gains and losses on non-hedge derivativeinstruments that are recorded in the income statement, and foreign exchangegains and losses on dollar denominated De Beers' preference shares held by aRand functional currency subsidiary of the Group. Remeasurements are defined asoperating, non-operating or financing according to the nature of the underlyingexpense. 4. Special items and remeasurements (continued) 2005 2004 US$ millionSubsidiaries and joint ventures Operating special items Impairment of Corrugated assets, goodwill and restructuring costs (77) - Impairment of Bibiani (38) - Closure of Ergo (31) - Reversal of impairment of Terra Industries Inc - 154Impairment of Black Mountain Mineral Development - (100)Other impairments and write downs (40) (29)Total operating special items (186) 25Taxation 14 6Minority interests 38 (1)Total attributable to equity shareholders (134) 30 Operating remeasurements Unrealised losses on non-hedge derivatives (301) - Taxation 22 - Minority interests 130 - Total attributable to equity shareholders (149) - Financing remeasurements Fair value loss on AngloGold Ashanti convertible bond (32) - Foreign exchange gain/(loss) on De Beers' preference shares 72 (112) Unrealised gains and losses on non-hedge derivatives (5) - Total financing remeasurements 35 (112) Taxation (2) - Minority interests 16 - Total attributable to equity shareholders 49 (112) Profits and (losses) on disposals Formation of Marikana JV 27 - Sale of Acerinox 25 - Disposal of Wendt 21 - Disposal of Boart Longyear 21 - Disposal of Elandsfontein 18 - Sale of Columbus 14 - Disposal of Hope Downs (57) - Part disposal of Mondi Packaging South Africa (12) - Part disposal of Western Areas 14 45Disposal of interest in Gold Fields Ltd - 464Gains on deemed disposal of AngloGold - 415Disposal of remaining interest in FirstRand Limited - 32Disposal of interest in Nkomati - 28Disposal of interest in Avgold - 25Other items 16 6Net profit on disposals 87 1,015 Taxation (26) (44)Minority interests (3) (1)Total attributable to equity shareholders 58 970 Total special items and remeasurements before tax and minority interests (365) 928 Taxation 8 (38)Minority interests 181 (2)Total special items and remeasurements attributable to equity shareholders (176) 888 2005 2004 US$ millionAssociates' special items and remeasurements Operating impairment charge - Palabora Mining Company Limited - (117) Other impairments and restructurings (24) - Share of De Beers' class action payment (113) - Unrealised losses on non-hedge derivatives - operating (16) - Operating special items and remeasurements (153) (117) Unrealised gains on non-hedge derivatives - financing 7 - Disposal of Samancor Chrome 52 - Disposal of Wonderkop joint venture interest 20 - Other items 26 10 Net profit on disposals 98 10 Total associates' special items and remeasurements (48) (107)Taxation 7 36Minority interests 2 -Net associates' special items and remeasurements (39) (71) 4. Special items and remeasurements (continued) Operating special items and remeasurements 2005 2004US$ millionOperating special items (186) 25 Operating remeasurements (301) - (487) 25 Associates' operating special items and remeasurements (153) (117) (640) (92) Operating special charges of $186 million (2004: gain of $25 million) relatesprincipally to impairment and closure costs. Following difficult marketconditions, Paper and Packaging have recorded impairment and restructuring costsof $77 million in relation to the Corrugated division. A review of the expectedlife of mine at AngloGold Ashanti's Bibiani operation has led to a $38 millionspecial charge to operating profit. One-off costs and charges of $31 millionwere incurred following the decision to close AngloGold Ashanti's Ergooperation. Unrealised losses of $301 million on non-hedge derivatives (2004: nil) have beenincluded in operating remeasurements. These unrealised losses were recordedprincipally at AngloGold Ashanti. Associates' operating special items and remeasurements includes $113 million forshare of De Beers' legal settlement. Financing remeasurements AngloGold Ashanti records the option element of its convertible bond at fairvalue in the income statement following the adoption of IAS 32 and IAS 39. As aresult, a charge of $32 million (2004: nil) has been included in financingremeasurements. The Group holds US dollar preference shares issued by De Beers which are held ina Rand functional currency subsidiary of the Group. As a result of the adoptionof IAS 21 and 28, these shares have been reclassified as 'non-currentinvestments' and are retranslated at each period end. As a result, a gain of $72million (2004: loss of $112 million) has been included in financingremeasurements. Profits and losses on disposals Anglo Platinum has entered into the Marikana Pooling and Sharing agreement withAquarius Platinum to jointly mine contiguous properties. A gain of $27 millionarose on transfer of assets to the joint venture. The sale of Boart Longyear's subsidiary Wendt was concluded in March 2005 forproceeds of $62 million, realising a profit on sale of $21 million. In July2005 the remainder of the Boart Longyear Group was sold for $383 million, with aprofit on sale of $21 million. In the first half of the year, proceeds of $116million were received on the sale of Acerinox leading to a profit on disposal of$25 million. Under the terms of an agreement between Kumba Resources Ltd ('Kumba') andHancock Prospecting Pty Limited ('Hancock'), Hancock purchased Kumba's interestin the Hope Downs project on 1 July 2005. The proceeds of $176 million led to aloss on sale of $57 million for the Group owing to value assigned to the HopeDowns project on the acquisition of Kumba by the Group in 2003. 5. Net finance costs Finance costs and foreign exchange gains/(losses) are presented net of effectivecash flow hedges for respective interest bearing and foreign currencyborrowings. Fair value gains/(losses) on derivatives, presented below, includethe mark-to- market value changes of interest rate and currency derivativesdesignated as fair value hedges, net of fair value changes in the associatedhedged risk; and fair value changes of non-hedge derivatives of non-operatingitems, including the mark-to-market of the conversion option within theAngloGold Ashanti convertible bond. Before After Before AfterUS$ million remeasurements remeasurements remeasurements remeasurements 2005 2005 2004 2004 Investment income Interest and other financial income 227 227 249 249Expected return on defined benefit arrangements 241 241 257 257Foreign exchange gains 20 92 120 120Dividend income from financial/fixed asset 10 10 93 93investmentsTotal investment income 498 570 719 719 Interest expense Amortisation discount relating to provisions (42) (42) (62) (62)Bank loans and overdrafts (320) (320) (394) (394)Other loans (167) (167) (194) (194)Interest paid on convertible bonds (71) (71) (42) (42)Unwinding of discount on convertible bonds (53) (53) - -Interest on defined benefit arrangements (270) (270) (298) (298)Foreign exchange losses (33) (33) (66) (178)Fair value losses on derivatives (19) (24) - -Other fair value losses - (32) - - (975) (1,012) (1,056) (1,168)Less: interest capitalised 49 49 82 82Total interest expense (926) (963) (974) (1,086)Net finance cost (428) (393) (255) (367) The weighted average interest rate applicable to interest on general borrowingscapitalised was 8.7% (2004: 8.4%). Financing remeasurements are set out in note 4. 6. Tax on profit on ordinary activities a) Analysis of charge for the year from continuing operations US$ million 2005 2004 United Kingdom corporation tax at 30% 15 61South Africa taxation 580 253Other overseas taxation 721 347Current tax (excluding tax on special items and remeasurements) 1,316 661Deferred taxation (33) 224Total deferred tax (excluding tax on special items and remeasurements) (33) 224 Total tax on special items and remeasurements (8) 38 Total tax charge 1,275 923 b) Factors affecting tax charge for the year The effective tax rate for the year of 24.5% (2004: 19.0%), after adjustingprofits for the net income from associates, is lower than the standard rate ofcorporation tax in the United Kingdom (30%). The differences are explainedbelow: 2005 2004 including including special items special items US$ million (unless otherwise stated) and and remeasurements remeasurements Profit on ordinary activities before tax 5,208 4,864Tax on profit on ordinary activities calculated at United Kingdomcorporation tax rate of 30% (2004: 30%) 1,562 1,459 Tax effect of net income from associates (197) (165) Tax effects of:Expenses not deductible for tax purposes:Operating special items and remeasurements 110 (14)Exploration costs 45 36Other non-deductible expenses (3) 9Non-taxable income:Profits and losses on disposals and remeasurements (9) (227)Temporary difference adjustments:Changes in tax rates (187) -Movement in tax losses (30) -Other temporary differences (23) (72)Other adjustments:South African secondary tax on companies 240 87Effect of differences between local and UK rates (257) (174)Other adjustments 24 (16)Tax charge for the year 1,275 923 IAS 1 requires income from associates to be presented net of tax on the face ofthe income statement. The associates' tax is no longer included within theGroup's total tax charge. Associates' tax included within 'Net income fromassociates' for the year ended 31 December 2005 is $274 million (2004: $280million). The effective rate of taxation before special items and remeasurements includingshare of associates' tax before special items and remeasurements was 26.5%. Thiswas a decrease from the equivalent effective rate of 27.7% in the year ended 31December 2004. The reduction in the effective tax rate was principally due to areduction in the South African statutory rate from 30% to 29% and a reduction inthe Ghanaian tax rate, which resulted in a $187 million reduction in deferredtax, the benefit of which was taken in 2005. Without this one off benefit theeffective tax rate for the period would have been 29.7%. In future periods it isexpected the effective tax rate, including associates' tax, will remain at orabove current levels. 7. Earnings per shareUS$ million (unless otherwise stated) 2005 2004Profit for the financial year attributable to equity shareholdersBasic earnings per share (US$) 2.43 2.44Diluted earnings per share (US$) 2.36 2.35Headline earnings for the financial year(1):Basic earnings per share (US$) 2.43 1.79Diluted earnings per share (US$) 2.36 1.73Underlying earnings for the financial year(1):Basic earnings per share (US$) 2.58 1.87Diluted earnings per share (US$) 2.50 1.81 (1) Basic and diluted earnings per share are shown based onheadline and underlying earnings, which the directors believe to be usefuladditional measures of the Group's performance. The calculation of the basic and diluted earnings per share is based on thefollowing data:US$ million (unless otherwise stated) 2005 2004EarningsBasic earnings, being profit for the financial year attributable to equity 3,521 3,501shareholdersEffect of dilutive potential ordinary shares:Interest on convertible bonds (net of tax) 29 29Unwinding of discount on convertible bonds (net of tax) 20 -Diluted earnings 3,570 3,530Number of shares (million)Basic number of ordinary shares outstanding(1) 1,447 1,434Effect of dilutive potential ordinary shares(2):Share options 18 18Convertible bonds 48 48Diluted number of ordinary shares outstanding(1) 1,513 1,500 (1) Basic and diluted number of ordinary shares outstandingrepresent the weighted average for the period. The average number of ordinaryshares in issue excludes the shares held by the employee benefittrust. (2) Diluted earnings per share is calculated by adjustingthe weighted average number of ordinary shares in issue on the assumption ofconversion of all potentially dilutive ordinary shares. 'Underlying earnings' is an alternative earnings measure, which the directorsbelieve provides a clearer picture of the underlying financial performance ofthe Group's operations following the adoption of IAS 32 and IAS 39. Underlyingearnings is presented after minority interest and excludes special items andremeasurements (see note 4). Underlying earnings is distinct from 'headlineearnings', which is a Johannesburg Stock Exchange ('JSE Ltd') definedperformance measure. The calculation of basic and diluted earnings per share, based on underlyingearnings, uses the following earnings data: Earnings (US$ million) Basic earnings per share (US$) 2005 2004 2005 2004 Profit for the financial year attributable to equity 3,521 3,501 2.43 2.44shareholdersSpecial items: operating 186 (25) 0.13 (0.02)Net loss/(profit) on disposals (87) (1,015) (0.06) (0.71)Special items: associates (74) 107 (0.05) 0.08Related tax 6 2 - -Related minority interest (36) 2 (0.02) -Headline earnings for the financial year 3,516 2,572 2.43 1.79Unrealised losses on non-hedge derivatives 315 - 0.22 -Fair value loss on AngloGold Ashanti convertible 32 - 0.02 -bondExchange (gain)/loss on DBI preference shares (72) 112 (0.05) 0.08Share of De Beers' legal settlement 113 - 0.08 -Related tax (21) - (0.02) -Related minority interest (147) - (0.10) -Underlying earnings for the financial year 3,736 2,684 2.58 1.87 For information underlying earnings for the 6 months to 30 June 2005 and 30 June2004 is set out in the appendix. 7. Earnings per share (continued) The following instruments are potentially dilutive but have not been included inthe calculation of diluted earnings per share because they are anti-dilutive forthe periods presented: 2005 2004Number of shares (million)Share options - 8Potentially dilutive shares - 8 8. Capital expenditure on fixed assets and biological assets US$ million 2005 2004 Platinum 616 633Gold 722 585Coal 331 218Base Metals 271 367Industrial Minerals 274 304Paper and Packaging 691 758Ferrous Metals and Industries 373 284Other 28 17Purchase of tangible fixed assets 3,306 3,166Investment in biological assets 55 67 3,361 3,233 Capital expenditure shown above comprises cash expenditure on fixed assets andbiological assets. Segmental capital expenditure shown in note 1 also includesaccruals and expenditure on acquisitions and intangible assets, but excludesexpenditure on biological assets. 9. Reconciliation of changes in equity Attributable to equity shareholders of the Company Fair Share- Cumulative valueUS$ million Total based translation and share Retained payment adjustment other Minority Total capital earnings(2) reserve reserve(3) reserves interests equity (1) (3) Balance at 1 January 2004 2,022 15,012 25 - 772 3,365 21,196 Total recognised income and expense - 3,474 - 2,247 - 755 6,476Dividends paid - (827) - - - - (827)Shares issued 358 - - - - - 358Share-based payments - 12 30 - - 3 45Subsidiary shares issued - - - - - 890 890Issue of shares to minority interests - - - - - (402) (402)Dividends paid to minority interests - - - - - (178) (178)Deemed disposal of AngloGold - - - - - 155 155Balance at 31 December 2004 2,380 17,671 55 2,247 772 4,588 27,713 Adoption of IAS 32 and IAS 39 (see note - (231) - - 226 (122) (127)13)Balance at 1 January 2005 2,380 17,440 55 2,247 998 4,466 27,586 Total recognised income and expense - 3,364 - (1,908) (162) 82 1,376Dividends paid - (1,137) - - - - (1,137)Shares issued 4 - - - - - 4Share-based payments - - 100 - - 6 106Disposal of businesses - - - - - (3) (3)Issue of shares to minority interests - - - - - 16 16Dividends paid to minority interests - - - - - (421) (421)Exercise of employee share options - 240 - - - - 240Buy out of minority interests - - - - - (189) (189)Balance at 31 December 2005 2,384 19,907 155 339 836 3,957 27,578 (1) Total share capital comprises called-up share capital $747 million (2004:$747 million) and the share premium account $1,637 million (2004: $1,633million). (2) Retained earnings is stated after deducting $456 million (2004: $622million) of treasury shares. Treasury shares comprise shares of Anglo Americanplc held in the employee benefit trust to meet certain of the Group's employeeshare remuneration schemes. 17,516,652 million of shares ($240 million) (2004:1,600,926 million ($12 million)) were issued from the trust during the year. (3) Other reserves of $1,330 million (2004: $3,074 million) on the balance sheetcomprise share-based payment reserve $155 million (2004: $55 million),cumulative translation adjustment reserve of $339 million (2004: $2,247 million)and fair value and other reserves of $836 million (2004: $772 million). Fairvalue and other reserves are further analysed below. Fair value and other reserves comprise: Total Cash fair Convertible Available flow value and debt for sale hedge Other other US$ million reserve reserve reserve reserves(1) reserves Balance at 1 January 2004 - - - 772 772 Balance at 31 December 2004 - - - 772 772 Adoption of IAS 32 and IAS 39 (see note 128 48 50 - 22613)Balance at 1 January 2005 128 48 50 772 998 Total recognised income and expense 3 6 (171) - (162)Balance at 31 December 2005 131 54 (121) 772 836 (1) Other reserves comprise $685 million (2004: $685 million) legal reserve and$87 million (2004: $87 million) capital redemption reserve. 10. Consolidated cash flow analysis a) Reconciliation of profit before tax to cash inflows from operations US$ million 2005 2004 Profit before tax 5,208 4,864Depreciation and amortisation 2,441 2,107Share option expense 92 50Special items and remeasurements of subsidiaries and joint ventures 365 (928)Net finance costs before remeasurements 428 255Fair value gains before special items and remeasurements (278) -Net income from associates (657) (550)Provisions 113 17Increase in inventories (453) (279)Increase in operating debtors (600) (444)Increase in operating creditors 539 113Other adjustments 67 86Cash inflows from operations 7,265 5,291 b) Cash and cash equivalents US$ million 2005 2004Cash and cash equivalents per balance sheet 3,430 2,955Bank overdrafts (111) (174)Net cash and cash equivalents per cash flow statement 3,319 2,781 c) Movement in net debt Debt due within Debt due after(4) one year one year US$ million Current Cash and financial Total cash Carrying Carrying asset net debt equivalents value(2) Hedge(3) value Hedge(3) investments (5) (1)(2) Balance at 1 January 2004 2,186 (4,143) - (6,997) - 25 (8,929)Cash flow 486 1,830 - (392) - (23) 1,901Acquisitions excluding cash and cashequivalents - (249) - (314) - - (563)Disposals excluding cash and cashequivalents - 6 - 23 - - 29Other non-cash movements - (4) - (15) - - (19)Reclassifications - (309) - 309 - - -Currency movements 109 (340) - (431) - - (662)Balance at 31 December 2004 2,781 (3,209) - (7,817) - 2 (8,243)IAS 32 and IAS 39 adjustments - (63) 55 (144) 302 - 150Balance at 1 January 2005 2,781 (3,272) 55 (7,961) 302 2 (8,093)Cash flow 602 1,356 25 632 - (13) 2,602Acquisition/disposal of business - 2 - 5 - - 7Unwinding of discount of convertible - - - (53) - - (53)debtReclassifications - (300) - 299 - 1 -Movement in fair value - - (67) 12 (302) - (358)Other non-cash movements - - - - - 29 29Currency movements (64) 249 - 703 - (3) 885Closing balance at 31 December 2005 3,319 (1,965) 13 (6,363) - 16 (4,980) (1) The Group operates in certain countries (principally South Africa andVenezuela) where the existence of exchange controls may restrict the use ofcertain cash balances. These restrictions are not expected to have any materialeffect on the Group's ability to meet its ongoing obligations. (2) Excludes overdrafts, which are included as cash and cash equivalents.Short term borrowings on the balance sheet of $2,076 million (2004: $3,383million) include $111 million (2004: $174 million) of overdrafts. (3) Derivatives of net debt items that have been designated as hedged and areeffective are included within this table to give a true reflection of theGroup's net debt position at period end. These derivatives are classifiedwithin other financial assets/(liabilities) (derivatives). (4) Debt due after one year includes convertible debt of $1,975 million (2004:$2,081 million). (5) Net debt as shown on the balance sheet totalling $4,993 million (2004:$8,243 million) excludes the effect of hedge instruments. 11. EBITDA by business segment US$ million 2005 2004 By business segmentPlatinum 1,282 853Gold 871 694Diamonds 655 655Coal 1,243 687Base Metals 1,990 1,625Industrial Minerals 618 638Ferrous Metals and Industries 1,779 1,231Paper and Packaging 916 978Exploration (150) (120)Corporate Activities (245) (210)EBITDA 8,959 7,031 EBITDA is stated before special items and is reconciled to 'Total profit from operations andassociates' as follows: US$ million 2005 2004Total profit from operations and associates 5,601 5,231Special items (including associates) 633 92Net profit on disposals (including associates) (185) (1,025)Depreciation and amortisation: subsidiaries and joint ventures 2,441 2,107Share of associates' interest, tax, depreciation, amortisationand underlying minority interest 469 626EBITDA 8,959 7,031 EBITDA is reconciled to cash inflows from operations as follows: US$ million 2005 2004 EBITDA(1) 8,959 7,031Share of operating profit of associates, before special items (1,032) (1,056)Underlying depreciation and amortisation in associates (142) (227)Share option expense 92 50Fair value gains before remeasurements (278) -Provisions 113 17Increase in inventories (453) (279)Increase in operating debtors (600) (444)Increase in operating creditors 539 113Other adjustments 67 86Cash inflows from operations 7,265 5,291 (1) EBITDA is operating profit before special items and remeasurements plusdepreciation and amortisation in subsidiaries and joint ventures and share ofEBITDA of associates: US$ million 2005 2004 Operating profit includes associates' operating profit beforespecial items and remeasurements 6,376 4,697Depreciation and amortisation Subsidiaries and joint ventures 2,441 2,107 Associates 142 227 8,959 7,03112. Reconciliation between UK GAAP and IFRS Reconciliation of equity The Group published financial information in accordance with IFRS for 2004, asrequired by IFRS 1, on 9 May 2005 in its news release entitled 'International Financial ReportingStandards (IFRS) restatements for 2004 and update on adoption of IFRS'. The newsrelease is published on the Company's website, www.angloamerican.co.uk, andincludes explanations of the significant UK GAAP to IFRS differences andreconciliations for: • total equity as at 1 January 2004 (date of transition to IFRS), 30 June 2004 and 31 December 2004;• profit attributable to shareholders for the period ended 30 June 2004 and the year ended 31 December 2004; and• pro forma IAS 32 and IAS 39 information for the period ended 30 June 2004 and the year ended 31 December 2004. The news release also included detailed IFRS accounting policies andsupplementary notes to provide more information for understanding therestatements. A summary of the detailed information presented in the newsrelease is provided below: As at As at 01.01.04 31.12.04US$ million Total equity presented under UK GAAP 19,772 24,998Reclassification of UK GAAP minority interests within 3,396 4,620equityProposed dividend adjustment 622 815Recognition of deferred tax on fair value adjustments(1) (1,712) (1,899)Defined benefit pension obligations (576) (628)Translation of goodwill arising post 1 January 2004 - 21Treatment of De Beers' preference shares (130) (218)Net impairment of goodwill (214) (214)Reversal of goodwill amortisation - 221Fair value of biological assets 26 14Share-based payments 6 1Net impact of other IFRS adjustments 6 (18)Total equity and reserves presented under IFRS 21,196 27,713 Reconciliation of profit attributable to equity shareholders of the Company Year endedUS$ million 31.12.04 Attributable profit under UK GAAP 2,913Reclassification of unrealised gains 427Deferred tax on fair value adjustments 41Defined benefit schemes -Recycling of currency translation adjustments 30Treatment of De Beers' preference shares (69)Reversal of goodwill amortisation 205Fair value of biological assets (21)Share-based payments (21)Net impact of other IFRS adjustments (4)Attributable profit under IFRS 3,501 (1) Since the release of the Group's restated IFRS information on 9 May 2005,an additional deferred tax liability of $227 million (£126 million) has beenrecognised on transition to IFRS in respect of underlying fair valueadjustments. This adjustment was taken to opening retained earnings inaccordance with IFRS 1. Reconciliation of cash flows The material adjustments made to the presentation of the Group's consolidatedcash flow statement were the inclusion of cash flows from joint venture entitieson a line-by-line basis in accordance with proportionate consolidation rules setout in IAS 31; and the inclusion of short term cash investments maturing within90 days of deposit previously disclosed as current asset investments as cashequivalents in accordance with IAS 7 Cash Flow Statements. Explanation of reconciling items between UK GAAP and IFRS The more significant areas of accounting change are: IAS 1 - Reclassification of UK GAAP minority interest within equity Minority interests were reclassified from long term liabilities to equity inaccordance with IAS 1. Although this increased reported net assets by $4.6billion at 31 December 2004 and $3.4 billion at 1 January 2004, it has no impacton total shareholders' equity. IAS 1 - Reclassification of unrealised gains The international accounting framework provides no distinction betweenunrealised and realised gains for financial reporting. As such, all unrealisedgains, with the exception of actuarial gains or losses on post-retirementschemes and currency translation differences, are recorded through the incomestatement and not through the statement of total recognised gains and losses, aswas required under UK GAAP. Although this reclassification has increased reported profit for the year to 31December 2004 by $0.4 billion, there is no change to net assets. 12. Reconciliation between UK GAAP and IFRS (continued) IAS 10 - Proposed dividend adjustment Dividends proposed are recognised in the period in which they are formallyapproved for payment. This is also in accordance with the Companies Act 1985(International Accounting Standards and Other Accounting Amendments) Regulations2004, which is effective for financial years commencing on or after 1 January2005. The change in timing of recognising proposed dividends and the related taxthereon increased reported net assets of the Group as at 31 December 2004 by$815 million, being the final 2004 proposed dividends to the Group'sshareholders and its minority interests and by $622 million as at 1 January2004, being the final 2003 proposed dividends. IAS 12 - Recognition of deferred tax on fair value adjustments Deferred tax is recognised at acquisition as part of the assessment of the fairvalue of assets and liabilities acquired and is provided on balances previouslyexcluded from provision under UK GAAP such as revaluations of tangible fixedassets. The largest temporary difference requiring additional deferred taxprovision on transition arose between the carrying value of mineral reserves andthe respective tax base. Upon adoption of IFRS, the Group recognised a deferred tax liability of $1.7billion in respect of additional temporary differences arising on previousacquisitions. In accordance with IFRS 1 the Group took the exemption fromrestating acquisitions prior to 1 January 2004, and as such this adjustment wasmade to reserves at 1 January 2004. Deferred tax provided on temporarydifferences for acquisitions made after 1 January 2004 either increases thevalue attributed to mineral reserves or goodwill, depending on the nature of thetemporary difference giving rise to it. Any deferred tax raised will unwind through the consolidated income statement asthe underlying temporary difference is amortised. The net impact from therecognition of additional temporary differences on acquisitions was to increaseprofit after tax by $41 million for the year ended 31 December 2004. IAS 19 - Defined benefit pension obligation IAS 19 requires companies to recognise the full deficit (or surplus, subject torestrictions) of post-retirement benefits under defined benefit arrangements onthe balance sheet. The Group adopted the amendment to IAS 19 and has recognisedall actuarial gains or losses directly through equity. This accounting change reduced consolidated net assets by approximately $0.6billion (net of deferred tax) as at 31 December 2004 and 1 January 2004, as thefull actuarial gains and losses of defined benefit arrangements are nowreflected in reserves. There is no material impact on net profit for the yearended 31 December 2004. IAS 21 - Recycling of currency translation adjustment IAS 21 requires cumulative currency translation adjustments (CTA) arising ontranslation of a foreign operation to be recycled through the income statementwhen that entity is disposed of. Previously, under UK GAAP, the CTA was notincluded in the gain or loss calculated if that operation was sold. Inaccordance with IFRS 1, the Group took the exemption from recycling foreigncurrency gains or losses arising before 1 January 2004. The accounting policy change increased reported profit on disposal of non USdollar operations by $30 million for the year to 31 December 2004 whichrepresented recycled CTA gains arising since 1 January 2004. This accounting change had no impact on consolidated net assets, as it iseffectively recycling gains and losses reported previously in reserves backthrough the income statement. IAS 21 - Translation of goodwill arising post 1 January 2004 In accordance with IFRS 1, the Group translates non US dollar goodwill arisingon acquisitions after 1 January 2004 to the closing US dollar exchange rate.This accounting adjustment increased net assets at 31 December 2004 by $21million. The resulting foreign exchange gain arising on consolidation has beentaken to the CTA reserve. IAS 28 and IAS 21 - Translation of De Beers' preference shares Previously, under UK GAAP, US dollar preference shares held in De Beers with aredemption value of $701 million were considered part of the Group's long termequity ownership in the entity. As such, the preference shares were held athistorical cost and included in the total carrying value of the associate in theconsolidated balance sheet. Under IFRS, the US dollar preference shares, which are held by a Rand functionalcurrency entity and are redeemable by 2010, no longer qualify as quasi-equityand consequently were reclassified as non-current financial asset investments:equity, and retranslated at each period end. The resulting Rand:US dollarforeign exchange gains and losses are reported through the income statement.Under IAS 21 a currency loss of $112 million was recorded for the year ended 31December 2004. Consequently the 2004 $44 million exceptional currency lossrecognised on the partial redemption of the preference shares under UK GAAPreporting was reversed. The net impact from this accounting policy difference also reduced net assets by$130 million as at 1 January 2004. After the partial redemption in June 2004 of 25% of the shares, the residualcarrying value of the remaining US dollar preference shares held as at 31December 2004 was $526 million. IAS 36 - Replacement of goodwill amortisation with an annual impairment test andelimination of centrally held goodwill IFRS does not permit the amortisation of goodwill, but requires the carryingamount to be supported by an annual impairment test. 12. Reconciliation between UK GAAP and IFRS (continued) For the purposes of impairment testing, goodwill is allocated to cash-generatingunits (CGUs), or groups of CGUs, that are expected to benefit from the synergiesof the combination. The group of CGUs to which the goodwill is allocatedrepresents the lowest level at which the goodwill is monitored for internalmanagement purposes and is not larger than a geographical or business segment. On transition to IFRS as at 1 January 2004, approximately $260 million ofstrategic goodwill arising on the formation of Anglo American plc in 1999 waseliminated. In accordance with FRS 11, this goodwill reflected the increase infuture shareholder value arising from the merger of the AACSA and Minorcocompanies and not the intrinsic value of Minorco assets existing at the date ofrestructure and was held centrally. IFRS, however, requires that all goodwill isallocated to cash generating units. The cash generating units to which thisstrategic goodwill would have been allocated to on formation of the Group didnot support its carrying value, due to disposals or impairments made since 1999up to IFRS transition date. As a result, the goodwill was written off throughretained earnings at transition date. In addition, approximately $50 million of negative goodwill was written back inaccordance with IFRS 3 in the opening balance sheet. Together these adjustmentsgive rise to a net reduction to the carrying value of goodwill on transition of$0.2 billion. The replacement of goodwill amortisation with an annual impairment test hasincreased reported profits for the Group by $0.2 billion for the year to 31December 2004. This accounting change does not impact headline earnings, asheadline earnings were stated before goodwill amortisation for UK GAAP. IAS 32 and IAS 39 - Financial instruments In accordance with the exemption provided under IFRS 1, the Group has adoptedIAS 32 and IAS 39 prospectively from 1 January 2005. As such, the financialinformation presented for the year ended 31 December 2004 excludes anyadjustments required from adoption of these two standards. Details of therestatement and the more significant changes is set out in note 13 Adoption ofIAS 32 and IAS 39. IAS 41 - Fair value of biological assets Afforestation and other agricultural assets, primarily forests within our Paperand Packaging business, were previously held at historical cost. These assetsare now recorded at fair value in accordance with IAS 41, with fair valuechanges reported through the income statement up until the point at which theassets are harvested. The historical cost of such assets was previouslyclassified within fixed assets. This accounting change has resulted in the reclassification of afforestation andother agricultural asset costs from tangible assets to the separate assetcategory biological assets, and the resultant fair value has increased netassets by $14 million as at 31 December 2004 and $26 million as at 1 January2004. The effect of recognising fair value gains from growing afforestation and otheragricultural assets earlier than under UK GAAP has reduced reported net profitfor the year ended 31 December 2004 by approximately $21 million. IFRS 2 - Share-based remuneration schemes IFRS 2 Share-based payments requires options granted by the Group to employees,for example under Employee Share Option Schemes and Save As You Earn schemes, tobe fair valued at grant date using an option pricing model and charged throughthe income statement over the vesting period of the options. UK GAAP required the intrinsic valuation method to be applied whereby a chargewas made if the exercise price of the option at grant date was below the marketprice. This accounting change reduced consolidated net profit by $21 million for theyear to 31 December 2004. Group employee remuneration schemes have now replaced option schemes with shareschemes. Consequently the impact of this accounting policy change will diminish. 13. Adoption of IAS 32 and IAS 39 The Group took the exemption not to restate its comparative information for IAS32 and IAS 39 and adopted the standards prospectively from 1 January 2005. The consolidated balance sheet as at 31 December 2004 has been adjusted to applyIAS 32 and IAS 39 prospectively from 1 January 2005 as set out below: Pro forma Effect of restated adoption of IAS IFRS 32 IFRSUS$ million Footnotes 31.12.04 and IAS 39 01.01.05 Intangible assets 2,644 - 2,644Tangible assets (1) 33,172 (173) 32,999Biological assets 374 - 374Environmental rehabilitation trusts 237 - 237Investments in associates 3,486 4 3,490Fixed asset investments (2) 1,084 (1,084) -Financial asset investments (2) - 1,142 1,142Deferred tax assets 128 (1) 127Other financial assets (derivatives) (3) - 675 675Other non-current assets 66 - 66Total non-current assets 41,191 563 41,754Inventories 3,549 - 3,549Trade and other receivables 5,534 (86) 5,448Current tax assets 220 - 220Other current financial assets (3) - 670 670(derivatives)Current asset investments (2) 2 (2) -Current financial asset investments (2) - 2 2Cash and cash equivalents 2,955 - 2,955Total current assets 12,260 584 12,844Total assets 53,451 1,147 54,598 Short term borrowings (4) (3,383) (63) (3,446)Trade and other payables (5,368) 78 (5,290)Current tax liabilities (831) 1 (830)Other current financial liabilities (3) - (628) (628)(derivatives)Total current liabilities (9,582) (612) (10,194)Medium and long term borrowings (4) (7,817) (144) (7,961)Retirement benefit obligations (1,201) - (1,201)Other financial liabilities (derivatives) (3) - (610) (610)Deferred tax liabilities (5,810) 92 (5,718)Provisions (1,328) - (1,328)Total non-current liabilities (16,156) (662) (16,818)Total liabilities (25,738) (1,274) (27,012)Net assets 27,713 (127) 27,586EquityCalled-up share capital 747 - 747Share premium account 1,633 - 1,633Other reserves 3,074 226 3,300 Cash flow hedge reserve (3) - 50 50 Convertible debt reserve (5) - 128 128 Available for sale reserve (2) - 48 48 Other 3,074 - 3,074Retained earnings (5) 17,671 (231) 17,440Equity attributable to equity shareholdersof the Company 23,125 (5) 23,120Minority interests 4,588 (122) 4,466Total equity 27,713 (127) 27,586 13. Adoption of IAS 32 and IAS 39 (continued) The IFRS news release issued on 9 May 2005 set out a detailed reconciliation byadjustment type on adoption of IAS 32 and IAS 39. The pro forma informationpresented in the news release however assumed application of IAS 32 and IAS 39from 1 January 2004. As such, it is slightly different to the informationrestated here, for statutory purposes, which applies the standards prospectivelyfrom 1 January 2005. The detailed accounting policies for the Group's financialinstruments are set out in note 14. The key changes in accounting policy on adoption of IAS 32 and IAS 39 are: • recognition and fair value of derivatives, including embedded derivatives;• fair value of investments that were previously cost accounted; and• the separation of the equity conversion option within convertible debt instruments. The following notes explain the material adjustments made at 1 January 2005 tothe Group's balance sheet at 31 December 2004 to reflect the adoption of IAS 32and IAS 39. (1) The reduction in tangible fixed assets was largely due to a $171million impairment triggered by the recognition of an embedded derivative. Thederivative was in a commercial purchase contract in a Base Metals' operation andthe resulting financial asset increased the carrying value of total assets overtheir recoverable amount, being their value in use. The value in use of theBase Metals operation was calculated using forecast cash flows discounted usinga pre-tax discount rate equivalent to a real post-tax discount rate of six percent, adjusted for any risks that were not reflected in the underlying cashflows. The resulting impairment provision, net of deferred tax, was takenthrough retained earnings as at 1 January 2005 in accordance with transitionalprovisions set out in IFRS 1. (2) On adoption of the two standards, loans and equity investments thatwere previously classified as fixed asset investments were reclassified asfinancial asset investments and accounted for as available for sale, fair valuethrough profit or loss, held to maturity or loans and receivables as defined byIAS 39. On transition, equity investments meeting the definition of availablefor sale were restated to their fair values. The respective $58 millionadjustment, being the difference in carrying values between fixed assetinvestments and the reclassified financial asset investments, was taken to theavailable for sale reserve, net of deferred tax of $10 million. No items wereclassified as fair value through profit or loss or as held to maturity. The Group's $526 million investment in DBI 10% non-cumulative,redeemable preference shares were reclassified from equity to loans andreceivables as they meet the definition of debt within IAS 32. No furtheradjustment was required on reclassification of all other loans to loans andreceivables, as their carrying value under UK GAAP was equivalent to amortisedcost under IAS 39. (3) All outstanding derivatives, other than commodity contracts which meetthe normal sale exemption criteria of IAS 39, are now recognised on the balancesheet at their mark-to-market value and are disclosed within other financialassets (derivatives) or other financial liabilities (derivatives). Derivativesdesignated as hedges are classified as current or non-current depending on thematurity of the derivative. Derivatives not designated as hedges are classifiedas current in accordance with IAS 1. Derivative financial instruments that weredesignated and effective as hedges of future cash flows as at 1 January 2005were fair valued through the cash flow hedge reserve at that date. Derivativesnot designated as cash flow hedges as at 1 January 2005 were fair valued throughretained earnings. (4) The $63 million increase in short term borrowings follows the separatepresentation of foreign currency derivatives within other financial assets/(liabilities) (derivatives). The net $144 million increase in medium and longterm borrowings is due to the separate presentation of foreign currencyderivatives and the inclusion of the fair value of the interest rate risk thatis being hedged, in the carrying amount of the debt. This is partially offset bya $143 million reduction in liabilities following the separation of theconversion option from the Group's convertible debt instruments. (5) The conversion option within the convertible bond issued by theCompany was fair valued at the date of issue and is included in equity, net ofdeferred tax. The conversion option within the convertible bond issued byAngloGold Ashanti is classified as a liability within other financialliabilities (derivatives). This accounting treatment follows recent IFRICguidance. Notes to financial information 14. Basis of preparation 14.1 The financial information set out herein does not constitute the Company'sstatutory accounts for the year ended 31 December 2005, but is derived from those accounts which were approved by the board of directors on 21 February 2006. Statutory accounts for the year ended 31 December 2004 have been delivered to the Registrar of Companies, and those for 2005 will be delivered following the Company's annual general meeting convened for 25 April 2006. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 14.2 Accounting policies The financial information has been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and IFRIC interpretations for the firsttime and with those parts of the Companies Act 1985 applicable to companiesreporting under IFRS. The disclosure required by IFRS 1 First-time adoption ofInternational Financial Reporting Standards concerning the transition from UKGAAP to IFRSs is given in notes 12 and 13. Accordingly the Group complies withall IFRSs including those adopted for use in the EU. The financial informationhas been prepared under the historical cost convention as modified by therevaluation of biological assets and certain financial instruments. A summary ofthe principal Group accounting policies is set out below, together with anexplanation of where changes have been made to previous IFRS policies on theadoption of new accounting standards in the year. The preparation of financial information in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialinformation and the reported amounts of revenues and expenses during thereporting period. Although these estimates are based on management's bestknowledge of the amount, event or actions, actual results ultimately may differfrom those estimates. Early adoption of standards The Group, as a first-time IFRS reporter, has adopted early with effect from 1January 2004 the following standards and interpretations as at 31 December 2005,the reporting date of the Group's first IFRS financial statements. • IAS 19 Employee Benefits amendments• IFRS 6 Exploration for and Evaluation of Mineral Resources• IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities• IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments• IFRIC 4 Determining Whether an Arrangement Contains a Lease• IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds We note that IFRS 6 does not impact the Group's existing policy for explorationand evaluation expenditure. Changes in accounting policies The following IFRS accounting policy changes have been made with effect from 1January 2005: 1) Financial instruments; and2) Held for sale assets and discontinued operations. 1) Financial instruments The Group has taken the exemption under IFRS 1 to apply IAS 32 FinancialInstruments: Disclosure and Presentation and IAS 39 Financial Instruments:Recognition and Measurement prospectively from 1 January 2005. As such, thefinancial information presented for the year ended 31 December 2004 excludes anyadjustments required from adoption of these two standards. As set out in note 13, the consolidated balance sheet as at 31 December 2004 hasbeen adjusted to apply IAS 32 and IAS 39 prospectively from 1 January 2005. Theaccounting policies for financial instruments are set out below. 2) Held for sale assets and discontinued operations The Group has applied IFRS 5 Non-Current Assets Held for Sale and DiscontinuedOperations prospectively from 1 January 2005. Application of the policy changeis in accordance with transitional provisions set out in the standard. Previously, the Group applied IAS 35 Discontinuing Operations which required therestatement of comparative information once an operation was identified asdiscontinuing. Non-current assets (and disposal groups) are classified as held for sale iftheir carrying amount will be recovered through a sale transaction rather thanthrough continuing use. This condition is regarded as met only when the sale ishighly probable and the asset (or disposal group) is available for immediatesale in its present condition. Management must be committed to the sale, whichshould be expected to qualify for recognition as a completed sale within oneyear from the date of classification. Non-current assets (and disposal groups) and associated liabilities held forsale are measured at the lower of carrying amount and fair value less costs tosell. Any resulting impairment is reported through the income statement as aspecial item. On classification as held for sale, the assets are no longerdepreciated. Comparative amounts are not adjusted. Discontinued operations are classified as held for sale and are either aseparate major line of business or geographical area of operations that havebeen sold or are part of a single co-ordinated plan to be disposed of, or is asubsidiary acquired exclusively with a view to sale. Once an operation has beenidentified as discontinued, or is reclassified as continuing, the comparativeinformation is restated. Notes to financial information (continued) 14. Accounting policies (continued) $757 million of assets and $283 million of liabilities associated with disposalgroups were reclassified as held for sale during the year. These disposal groupswere sold prior to year end and no new disposal groups were identified as at 31December 2005. Impairment charges of $36 million, after tax and minority assets,were recorded on the reclassification of these assets. Basis of consolidation The financial information incorporates a consolidation of the financialinformation of the Company and entities controlled by the Company (itssubsidiaries) made up to 31 December each year. Control is achieved where theCompany has the power to govern the financial and operating policies of aninvestee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the results of subsidiaries, jointventures and associates to bring their accounting policies into line with thoseused by the Group. Intra-group transactions, balances, income and expenses areeliminated on consolidation, where appropriate. The interest of minority shareholders is initially stated at the minority'sproportion of the fair values of the assets and liabilities recognised onacquisition. Subsequently, any losses applicable to the minority interest inexcess of the minority interest are allocated against the interests of theparent. Associates Associates are investments over which the Group is in a position to exercisesignificant influence, but not control or joint control, through participationin the financial and operating policy decisions of the investee. Typically theGroup owns between 20% and 50% of the voting equity of its associates.Investments in associates are accounted for using the equity method ofaccounting except when classified as held for sale. Any excess of the cost of acquisition over the Group's share of the fair valuesof the identifiable net assets of the associate at the date of acquisition isrecognised as goodwill. Where the Group's share of the fair values of theidentifiable net assets of the associate at the date of acquisition exceeds thecost of the acquisition, the surplus, which represents the discount on theacquisition, is credited to the income statement in the period of acquisition. The Group's share of associates' profit or loss is based on their most recentaudited financial statements or unaudited interim statements drawn up to theGroup's balance sheet date. The total carrying values of investments in associates represent the cost ofeach investment including the carrying value of goodwill, the share ofpost-acquisition retained earnings, any other movements in reserves and any longterm debt interests which in substance form part of the Group's net investment.The carrying values of associates are reviewed on a regular basis and if animpairment in value has occurred, it is written off in the period in which thosecircumstances are identified. The Group's share of an associate's losses inexcess of its interest in that associate is not recognised unless the Group hasan obligation to fund such losses. Joint venture entities A joint venture entity is an entity in which the Group holds a long terminterest and shares joint control over the strategic, financial and operatingdecisions with one or more other venturers under a contractual arrangement. The Group's share of the assets, liabilities, income, expenditure and cash flowsof jointly controlled entities are accounted for using proportionateconsolidation. Proportionate consolidation combines the Group's share of theresults of the joint venture entity on a line by line basis with similar itemsin the Group's financial information. Joint venture operations The Group has contractual arrangements with other participants to engage injoint activities other than through a separate entity. The Group includes itsassets, liabilities, expenditure and its share of revenue in such joint ventureoperations with similar items in the Group's financial statements. Revenue recognition Revenue is derived principally from the sale of goods and is measured at thefair value of consideration received or receivable, after deducting discounts,volume rebates, value added tax and other sales taxes. A sale is recognised whenthe significant risks and rewards of ownership have passed. This is when titleand insurance risk has passed to the customer, and the goods have been deliveredto a contractually agreed location. Revenue from metal mining activities is based on the payable metal sold.Revenues from the sale of material by-products are included within revenue. Where a by-product is not regarded as significant, revenue may be creditedagainst the cost of sales. The amount credited to cost of sales for the yearended 31 December 2005 was $76 million and $81 million for the year ended 31December 2004 and relates principally to AngloGold Ashanti which creditsuranium, silver and acid to cost of sales in accordance with the Gold IndustryStandard on production costs. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable. Notes to financial information (continued) 14. Accounting policies (continued) Dividend income from investments is recognised when the shareholders' rights toreceive payment have been established. Business combinations and goodwill arising thereon At the date of acquisition, the identifiable assets, liabilities and contingentliabilities of a subsidiary, joint venture entity or an associate which can bemeasured reliably are recorded at their provisional fair values at the date ofacquisition. Any excess of the cost of acquisition over the fair values of theidentifiable net assets acquired is attributed to goodwill. Provisional fairvalues are finalised within 12 months of the acquisition date. Goodwill in respect of subsidiaries and joint ventures is included withinintangible fixed assets. Goodwill relating to associates is included within thecarrying value of the associate. Where the fair values of the identifiable net assets acquired exceeds the costof the acquisition, the surplus, which represents the discount on theacquisition, is credited to the income statement in the period of acquisition. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP carrying value subject to being tested forimpairment at that date. Subsequent impairment tests are performed in accordancewith the impairment policy set out below. Goodwill that was eliminated againstreserves under UK GAAP prior to 1998 has not been reinstated and will not beincluded in determining any profit or loss on disposal. Negative goodwill arising on acquisitions prior to 31 December 2003 has beeneliminated against retained earnings at that date. Tangible assets Mining properties and leases include the cost of acquiring and developing miningproperties and mineral rights. Mining properties are depreciated down to their residual values using theunit-of-production method based on proven and probable reserves. Depreciation ischarged on new mining ventures from the date that the mining property is capableof commercial production. When there is little likelihood of a mineral rightbeing exploited, or the value of the exploitable mineral right has diminishedbelow cost, a write-down to the recoverable amount is charged to the incomestatement. Stripping costs incurred during the production phase to remove additionaloverburden or waste ore are deferred when they give access to future economicbenefits and charged to operating costs using the expected average strippingratio over the average life of the area being mined. The average stripping ratiois calculated as the number of tonnes of waste material expected to be removedduring the life of mine, per tonne of ore mined. The average life of mine costper tonne is calculated as the total expected costs to be incurred to mine theorebody divided by the number of tonnes expected to be mined. The average lifeof mine stripping ratio and the average life of mine cost per tonne isrecalculated annually in light of additional knowledge and changes in estimates.The cost of stripping in any period will therefore be reflective of the averagestripping rates for the orebody as a whole. Changes in the life of minestripping ratio are accounted for prospectively as a change in estimate. Land and properties in the course of construction are carried at cost, less anyrecognised impairment. Depreciation commences when the assets are ready fortheir intended use. Buildings and plant and equipment are depreciated down totheir residual values at varying rates, on the straight-line basis over theirestimated useful lives or the life of mine, whichever is shorter. Estimateduseful lives normally vary from up to 20 years for items of plant and equipmentto a maximum of 50 years for buildings. Residual values and useful economic lives are reviewed at least annually. Assets held under finance leases are depreciated over the shorter of the leaseterm and the expected useful lives of the assets. Licences and other intangibles Licences and other intangibles are measured initially at purchase cost and areamortised on a straight line basis over their estimated useful lives. Estimateduseful lives vary between 3 and 5 years. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets are impaired. If any such indication exists, the recoverable amountof the asset is estimated in order to determine the extent of the impairment (ifany). Where the asset does not generate cash flows that are independent fromother assets, the Group estimates the recoverable amount of the cash-generatingunit to which the asset belongs. An intangible asset with an indefinite usefullife is tested for impairment annually and whenever there is an indication thatthe asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset (orcash-generating unit) is reduced to its recoverable amount. An impairment isrecognised immediately as an expense. Where an impairment subsequently reverses, the carrying amount of the asset (orcash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment been recognised for theasset (or cash-generating unit) in prior years. A reversal of an impairment isrecognised as income immediately. Notes to financial information (continued) 14. Accounting policies (continued) Impairment of goodwill Goodwill arising on business combinations is allocated to the group ofcash-generating units that are expected to benefit from the synergies of thecombination and represents the lowest level at which goodwill is monitored bythe Group's board of directors for internal management purposes. The recoverableamount of the group of cash-generating units to which goodwill has beenallocated is tested for impairment annually on a consistent date during eachfinancial year, or when such events or changes in circumstances indicate that itmay be impaired. Any impairment is recognised immediately in the income statement. Impairments ofgoodwill are not subsequently reversed. Research and exploration expenditure Research and exploration expenditure is written off in the year in which it isincurred. When a decision is taken that a mining property is economicallyfeasible and should be developed for commercial production, all further directlyattributable, pre-production expenditure is capitalised within tangible assets.Capitalisation of pre-production expenditure ceases when the mining property iscapable of commercial production. Capitalised pre-production expenditure prior to commercial production isassessed for impairment in accordance with the Group accounting policy statedabove. Biological assets: afforestation and other agricultural activity Afforestation and other agricultural assets are measured at their fair valuesless estimated selling costs during the period of biological transformation,from initial recognition up to the point of harvest. The fair values aredetermined based on current market prices for the assets in their presentlocation and condition. Changes in fair value are recognised in the income statement within other gainsand losses for the period between planting and harvest. At point of harvest, thecarrying value of afforestation and other agricultural assets is transferred toinventory. Directly attributable costs incurred during the period of biologicaltransformation are capitalised and presented within cash flows from investingactivities in the cash flow statement. Inventory Inventory and work-in-progress are valued at the lower of cost and netrealisable value. The production cost of inventory includes an appropriateproportion of depreciation and production overheads. Cost is determined on thefollowing bases: • raw materials and consumables are valued at cost on a first-in, first-out (FIFO) basis;• finished products are valued at raw material cost, labour cost and a proportion of manufacturing overhead expenses;• metal and coal stocks are included within finished products and are valued at average cost. Retirement benefits The Group operates both defined benefit and defined contribution schemes for itsemployees as well as post retirement medical plans. For defined contributionschemes the amount charged to the income statement is the contributions paid orpayable during the year. For defined benefit pension and post-retirement medical plans, full actuarialvaluations are carried out every three years using the projected unit creditmethod and updates are performed for each financial year end. The averagediscount rate for the plans' liabilities is based on AA rated corporate bonds ofa suitable duration and currency. Pension plans' assets are measured usingperiod end market values. The Group has adopted the amendment to IAS 19 and as such actuarial gains andlosses, which can arise from differences between expected and actual outcomes orchanges in actuarial assumptions, are recognised immediately in the consolidatedstatement of recognised income and expense. Any increase in the present value ofplan liabilities expected to arise from employee service during the period ischarged to operating profit. The expected return on plan assets and the expectedincrease during the period in the present value of plan liabilities are includedin investment income and interest expense. Past service cost is recognised immediately to the extent that the benefits arealready vested and otherwise is amortised on a straight-line basis over theaverage period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents thepresent value of the defined benefit obligation as adjusted for unrecognisedpast service costs and as reduced by the fair value of scheme assets. Any assetresulting from this calculation is limited to past service cost, plus thepresent value of available refunds and reductions in future contributions to theplan. Taxation The tax expense represents the sum of the current tax charge and the movement indeferred tax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are not taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Notes to financial information (continued) 14. Accounting policies (continued) Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax basis used in the computation of taxableprofit and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifferences arise from the initial recognition of goodwill or an asset orliability in a transaction (other than in a business combination) that affectsneither the tax profit nor accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries, joint ventures, and associates, exceptwhere the Group is able to control the reversal of the temporary difference andit is probable that the temporary difference will not reverse in the foreseeablefuture. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and is adjusted to the extent that it is no longer probable that sufficienttaxable profit will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsotaken directly to equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis. Leases Rental costs under operating leases are charged to the income statement in equalannual amounts over the lease term. Assets held under finance leases are recognised as assets of the Group oninception of the lease at the lower of fair value or the present value of theminimum lease payments derived by discounting at the interest rate implicit inthe lease. The interest element of the rental is charged against profit so as toproduce a constant periodic rate of interest on the remaining balance of theliability, unless it is directly attributable to qualifying assets, in whichcase it is capitalised in accordance with the Group's general policy onborrowing costs (see below). Discontinuing operations (pre 1 January 2005) Discontinuing operations are significant, distinguishable components of anenterprise that have been sold, abandoned or are the subject of formal plans fordisposal or discontinuance. Once an operation has been identified as discontinuing, or is reclassified ascontinuing, the comparative information is restated. Non-current assets held for sale and discontinued operations (post 1 January 2005) Non-current assets (and disposal groups) classified as held for sale aremeasured at the lower of carrying amount and fair value less costs to sell. Non-current assets (and disposal groups) are classified as held for sale iftheir carrying amount will be recovered through a sale transaction rather thanthrough continuing use. This condition is regarded as met only when it is highlyprobable and the asset (or disposal group) is available for immediate sale inits present condition. Management must be committed to the sale which should beexpected to qualify for recognition as a completed sale within one year from thedate of classification. Non-current assets are classified as held for sale from the date theseconditions are met and are measured at the lower of carrying amount and fairvalue less costs to sell. Any resulting impairment is reported through theincome statement as a special item. On classification as held for sale theassets are no longer depreciated. Comparative amounts are not adjusted. Discontinued operations are classified as held for sale and are either aseparate major line of business or geographical area of operations that havebeen sold or are part of a single co-ordinated plan to be disposed of, or is asubsidiary acquired exclusively with a view to sale. Once an operation has beenidentified as discontinued, or is reclassified as continuing, the comparativeinformation is restated. Restoration, rehabilitation and environmental costs An obligation to incur restoration, rehabilitation and environmental costsarises when environmental disturbance is caused by the development or ongoingproduction of a mining property. Such costs arising from the installation ofplant and other site preparation work, discounted to their net present value,are provided for and capitalised at the start of each project, as soon as theobligation to incur such costs arises. These costs are charged against profitsover the life of the operation, through the depreciation of the asset and theunwinding of the discount on the provision. Costs for restoration of subsequentsite damage which is created on an ongoing basis during production are providedfor at their net present values and charged against profits as extractionprogresses. Changes in the measurement of a liability relating to the decommissioning ofplant or other site preparation work that result from changes in the estimatedtiming or amount of the cash flow, or a change in the discount rate, are addedto, or deducted from, the cost of the related asset in the current period. If adecrease in the liability exceeds the carrying amount of the asset, the excessis recognised immediately in the income statement. If the asset value isincreased and there is an indication that the revised carrying value is notrecoverable, an impairment test is performed in accordance with the accountingpolicy above. Notes to financial information (continued) 14. Accounting policies (continued) For some South African operations annual contributions are made to dedicatedenvironmental rehabilitation trusts to fund the estimated cost of rehabilitationduring and at the end of the life of the relevant mine. The Group exercises fullcontrol of these trusts and therefore the trust is consolidated. The trusts'assets are recognised separately on the balance sheet as non-current assets atfair value. Interest earned on funds invested in the environmentalrehabilitation trusts are accrued on a time proportion basis and recognised asinterest income. Foreign currency transactions and translation Foreign currency transactions by Group companies are booked in their functionalcurrencies at the exchange rate ruling on the date of transaction. At eachbalance sheet date, monetary assets and liabilities that are denominated inforeign currencies are retranslated at the rates prevailing on the balance sheetdate. Gains and losses arising on retranslation are included in profit or lossfor the period and are classified as either operating or financing depending onthe nature of the monetary item giving rise to them. On consolidation, the assets and liabilities of the Group's overseas operationsare translated into the presentation currency of the Group at exchange ratesprevailing on the balance sheet date. Income and expense items are translated atthe average exchange rates for the period where these approximate the rates atthe dates of transactions. Exchange differences arising, if any, are classifiedwithin equity and transferred to the Group's currency translation reserve. TheGroup elected to set the currency translation reserve to zero at 1 January 2004in accordance with IFRS 1. Exchange differences on foreign currency loans thatform part of the Group's net investment in these foreign operations are offsetin the currency translation reserve. Cumulative translation differences arising after the transition date to IFRS arerecognised as income or as expenses in the period in which the operation theyrelate to is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets of the foreign entity and translated at the closingrate. Where applicable, the Group has elected to treat goodwill arising onacquisitions before the date of transition to IFRS as US dollar denominatedassets. Borrowing costs Interest on borrowings directly relating to the financing of qualifying capitalprojects under construction is added to the capitalised cost of those projectsduring the construction phase, until such time as the assets are substantiallyready for their intended use or sale which, in the case of mining properties, iswhen they are capable of commercial production. Where funds have been borrowedspecifically to finance a project, the amount capitalised represents the actualborrowing costs incurred. Where the funds used to finance a project form part ofgeneral borrowings, the amount capitalised is calculated using a weightedaverage of rates applicable to relevant general borrowings of the Group duringthe period. All other borrowing costs are recognised in profit or loss in the period inwhich they are incurred. Share-based payments The Group has applied the requirements of IFRS 2 Share-based payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that had not vested as at 1January 2005. The Group makes equity-settled share-based payments to certain employees, whichare measured at fair value at the date of grant. For those share schemes whichdo not include non-market vesting conditions, the fair value is determined usingthe Monte Carlo method at the grant date and expensed on a straight-line basisover the vesting period, based on the Group's estimate of shares that willeventually vest. The fair value of share options issued with non-market vestingconditions has been calculated using the Black Scholes model. For all othershare awards, the fair value is determined by reference to the market value ofthe share at the date of grant. For all share schemes with non-market relatedvesting conditions, the likelihood of vesting has been taken into account whendetermining the relevant charge. Vesting assumptions are reviewed during eachreporting period to ensure they reflect current expectations. Employee benefit trust The carrying value of shares held by the employee benefit trust are recorded astreasury shares, shown as a reduction in retained earnings within shareholders'equity. Presentation currency As permitted by UK company law, the Group results are presented in US dollars,the currency in which most of its business is conducted. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, togetherwith short term, highly liquid investments that are readily convertible to aknown amount of cash and that are subject to an insignificant risk of changes invalue. Bank overdrafts are also included as a component of cash and cashequivalents. Bank overdrafts are shown within short term borrowings in currentliabilities on the balance sheet. Cash and cash equivalents in the cash flowstatement are shown net of overdrafts. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Notes to financial information (continued) 14. Accounting policies (continued) Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. Investments (pre 1 January 2005) Investments, other than investments in subsidiaries, joint ventures andassociates, are fixed asset investments and are included at cost less provisionfor any impairment in value. Hedging transactions (pre 1 January 2005) In order to hedge its exposure to foreign exchange, interest rate and commodityprice risks, the Group enters into forward, option and swap contracts. Gains andlosses on these contracts are recognised in the period to which the gains andlosses of the underlying transactions relate. Net income or expense associatedwith interest rate swap agreements is recognised on the accrual basis over thelife of the swap agreements as a component of interest. Where commodity optioncontracts hedge anticipated future production or purchases, the Group amortisesthe option premiums paid over the life of the option and recognises any realisedgains and losses on exercise in the period in which the hedged production issold or commodity purchases are made. Convertible debt (pre 1 January 2005) Convertible bonds are recorded entirely as liabilities, irrespective of theprobability of future conversion, until either converted or redeemed. Investments (post 1 January 2005) Investments, other than investments in subsidiaries, joint ventures andassociates, are financial asset investments and are initially recorded at fairvalue. At subsequent reporting dates, financial assets that the Group has theexpressed intention and ability to hold to maturity ('held-to-maturity') as wellas 'loans and receivables' are measured at amortised cost, less any impairment.The amortisation of any discount or premium on the acquisition of aheld-to-maturity investment is recognised in the income statement in each periodusing the effective interest method. Investments other than those classified as held-to-maturity or loans andreceivables are classified as either fair value through profit or loss, whichincludes investments held for trading, or available for sale investments. Bothsub categories are measured at each reporting date at fair value. Whereinvestments are held for trading purposes, unrealised gains and losses for theperiod are included in the income statement for the period within other gainsand losses. For available for sale investments, unrealised gains and losses arerecognised in equity until the security is disposed or impaired, at which timethe cumulative gain or loss previously recognised in equity is included in theincome statement. Current financial asset investments (post 1 January 2005) Current financial asset investments consist mainly of bank term deposits andfixed and floating rate debt securities. Debt securities that are intended to beheld to maturity are recorded on the amortised cost basis. Debt securities thatare not intended to be held to maturity are recorded at the lower of cost andmarket value. Convertible debt (post 1 January 2005) Convertible bonds denominated in the functional currency of the entity issuingthe shares are regarded as compound instruments, consisting of a liability andan equity component. At the date of issue, the fair value of the liabilitycomponent is estimated using the prevailing market interest rate for similarnon-convertible debt and is recorded within borrowings. The difference betweenthe proceeds of issue of the convertible bond and the fair value assigned to theliability component, representing the embedded option to convert the liabilityinto equity of the Group, is included in equity. Where the embedded option is in a convertible bond denominated in a currencyother than the functional currency of the entity issuing the shares, the optionis classified as a liability, in accordance with IFRIC guidance issued in theirpublished update following their April 2005 meeting. The option is marked tomarket with subsequent gains and losses being recorded through the incomestatement within net finance costs. Issue costs are apportioned between the liability and equity components of theconvertible bonds where appropriate based on their relative carrying amounts atthe date of issue. The portion relating to the equity component is chargeddirectly against equity. The interest expense on the liability component is calculated by applying theeffective interest rate for similar non-convertible debt to the liabilitycomponent of the instrument. The difference between this amount and the interestpaid is added to the carrying amount of the convertible bond. Financial liabilities and equity instruments (post 1 January 2005) Financial liabilities and equity instruments are classified and accounted for asdebt or equity according to the substance of the contractual arrangementsentered into. An equity instrument is any contract that evidences a residualinterest in the assets of the group after deducting all of its liabilities. Bank borrowings Interest bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct transaction costs. Finance charges, including premiumspayable on settlement or redemption and direct issue costs, are accounted for onan accruals basis and charged to the income statement using the effectiveinterest method. They are added to the carrying amount of the instrument to theextent that they are not settled in the period in which they arise. Notes to financial information (continued) 14. Accounting policies (continued) Derivative financial instruments and hedge accounting (post 1 January 2005) In order to hedge its exposure to foreign exchange, interest rate and commodityprice risk, the Group enters into forward, option and swap contracts. The Groupdoes not use derivative financial instruments for speculative purposes.Commodity based (normal purchase or normal sale) contracts that meet therequirements of IAS 39 are recognised in earnings when they are settled byphysical delivery. All derivatives are held at fair value in the balance sheet within otherfinancial assets (derivatives) or other financial liabilities (derivatives),and, when designated as hedges, are classified as current or non-currentdepending on the maturity of the derivative. Derivatives that are not designatedas hedges are classified as current, in accordance with IAS 1, even when theiractual maturity is expected to be greater than one year. Changes in the fair value of derivative financial instruments that aredesignated and effective as hedges of future cash flows are recognised directlyin equity. The gain or loss relating to the ineffective portion is recognisedimmediately in the income statement. If the cash flow hedge of a firm commitmentor forecasted transaction results in the recognition of a non-financial asset ora liability, then, at the time the asset or liability is recognised, theassociated gains or losses on the derivative that had previously been recognisedin equity are included in the initial measurement of the asset or liability. Forhedges that do not result in the recognition of a non-financial asset or aliability, amounts deferred in equity are recognised in the income statement inthe same period in which the hedged item affects profit or loss. For an effective hedge of an exposure to changes in fair value, the hedged itemis adjusted for changes in fair value attributable to the risk being hedged withthe corresponding entry in profit or loss. Gains or losses from remeasuring theassociated derivative are recognised in profit or loss. The gain or loss on hedging instruments relating to the effective portion of anet investment hedge is recognised in equity. The ineffective portion isrecognised immediately in the income statement. Gains or losses accumulated inequity are included in the income statement when the foreign operations aredisposed of. Changes in the fair value of any derivative instruments that are not hedgeaccounted are recognised immediately in the income statement and are classifiedwithin other gains and losses or net finance costs or income depending on thetype of risk the derivative relates to. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated, exercised, revoked, or no longer qualifies for hedge accounting. Atthat time, any cumulative gain or loss on the hedging instrument recognised inequity is retained in equity until the forecast transaction occurs. If a hedgetransaction is no longer expected to occur, the net cumulative gain or losspreviously recognised in equity is included in the income statement of theperiod. Derivatives embedded in other financial instruments or other host contracts aretreated as separate derivatives when their risks and characteristics are notclosely related to those of their host contracts and the host contractsthemselves are not carried at fair value with unrealised gains or lossesreported in the income statement. Production statistics The figures below include the entire output of consolidated entities and the Group's share of joint ventures, jointarrangements and associates where applicable, except for Collahuasi in Base Metals which is quoted on a 100% basis. 2005 2004 Anglo Platinum (troy ounces)(1)(2)Platinum 2,502,000 2,498,200Palladium 1,376,700 1,331,800Rhodium 333,500 258,600Platinum Group Metals (PGM's) 4,212,200 4,088,600Nickel (tonnes) 20,900 22,700 AngloGold Ashanti (gold in troy ounces)(2)South Africa 2,676,000 2,857,000(3)Argentina 211,000 211,000Australia 455,000 410,000Brazil 346,000 334,000Ghana 680,000 485,000Guinea 246,000 83,000Mali 528,000 475,000Namibia 81,000 66,000Tanzania 613,000 570,000USA 330,000 329,000Zimbabwe - 9,000 6,166,000 5,829,000 Gold Fields (gold in troy ounces)(4)Gold - 207,000 Anglo Coal (tonnes)South Africa:Eskom 34,327,900 33,668,300Trade - Thermal 20,281,100 18,648,600Trade - Metallurgical 2,268,800 2,143,700 56,877,800 54,460,600Australia:Thermal 16,710,300 17,378,800Metallurgical 9,390,300 8,203,800 26,100,600 25,582,600South America:Thermal 10,066,000 9,589,600 93,044,400 89,632,800Anglo Coal (tonnes)South Africa:Bank 3,202,200 2,733,100Greenside 2,730,000 2,754,800 Goedehoop 6,298,600 6,462,100Isibonelo 1,358,300 - Kriel 12,030,900 11,059,500 Kleinkopje 4,483,500 4,691,600 Landau 3,682,900 3,474,100New Denmark 4,139,400 4,975,800New Vaal 17,100,000 17,312,000Nooitgedacht 794,400 676,600Mafube 1,057,600 321,000 56,877,800 54,460,600 (1) Includes Anglo Platinum's share of Northam Platinum Limited, 48,800 ounces (2004: 44,500 ounces). (2) See the published results of Anglo American Platinum Limited, Northam Limited, AngloGold Ashanti Limitedand Gold Fields Limited for further analysis of production information. (3) Excludes production at Ergo which has been closed. Production statistics (continued) 2005 2004Anglo Coal (tonnes) (continued)Australia:Callide 9,500,000 9,355,300Drayton 4,099,000 4,278,800Dartbrook 1,495,500 2,268,100German Creek 3,560,000 4,047,600Jellinbah East 851,100 925,200Moranbah 3,432,800 1,125,900Dawson Complex 3,162,200 3,581,700 26,100,600 25,582,600South America:Carbones Del Guasare 1,409,700 1,677,600Carbones Del Cerrejon 8,656,300 7,912,000 10,066,000 9,589,600 Anglo Base MetalsCopper(1)Collahuasi100% basis (Anglo American 44%)Ore mined tonnes 40,705,000 50,342,000Ore processed Oxide tonnes 6,461,000 6,610,000 Sulphide tonnes 36,659,000 34,844,000Ore grade processed Oxide % Cu 0.9 0.9 Sulphide % Cu 1.0 1.3Production Copper concentrate dmt 1,234,000 1,280,400 Copper cathode tonnes 60,700 58,200 Copper in concentrate tonnes 366,400 422,800Total copper production for Collahuasi tonnes 427,100 481,000Minera Sur Andes Los Bronces mineOre mined tonnes 22,146,000 20,995,000Marginal ore mined tonnes 27,936,000 29,187,000Las Tortolas concentrator Ore processed tonnes 21,034,000 20,572,000 Ore grade processed % Cu 1.0 1.1 Average recovery % 88.3 89.5Production Copper concentrate dmt 510,000 549,000 Copper cathode tonnes 38,800 31,800 Copper in concentrate tonnes 188,500 199,800 Total tonnes 227,300 231,600El Soldado mineOre mined Open pit - ore mined tonnes 2,907,000 4,971,000 Open pit - marginal ore mined tonnes 384,000 1,061,000 Underground (sulphide) tonnes 1,996,000 2,687,000 Total tonnes 5,287,000 8,719,000Ore processed Oxide tonnes 665,000 661,000 Sulphide tonnes 7,004,000 6,976,000Ore grade processed Oxide % Cu 1.3 1.4 Sulphide % Cu 1.1 1.1Production Copper concentrate dmt 210,500 216,700 Copper cathode tonnes 6,500 8,100 Copper in concentrate tonnes 60,000 60,700 Total tonnes 66,500 68,800 (1) 2005 copper production figures exclude Palabora and Hudson Bay.Production statistics (continued) 2005 2004Anglo Base Metals (continued)Chagres SmelterCopper concentrate smelted tonnes 144,800 170,400Production Copper blister/anodes tonnes 138,100 165,000 Acid tonnes 371,900 440,500Total copper production for 293,800Minera Sur Andes group tonnes 300,400 Mantos BlancosMantos Blancos mineOre processed Oxide tonnes 4,535,000 4,476,000 Sulphide tonnes 3,954,000 4,103,000 Marginal ore mined tonnes 5,337,000 9,359,000Ore grade processed Oxide %Cu (soluble) 0.8 0.7 Sulphide %Cu (insoluble) 1.1 1.0 Marginal ore %Cu (soluble) 0.4 0.4Production Copper concentrate dmt 105,300 94,400 Copper cathode tonnes 48,600 58,200 Copper in concentrate tonnes 39,100 36,700 Total tonnes 87,700 94,900Mantoverde mineOre processed Oxide tonnes 9,439,000 9,017,000 Marginal ore tonnes 3,625,000 7,028,000Ore grade processed Oxide %Cu (soluble) 0.7 0.7 Marginal ore %Cu (soluble) 0.3 0.3Production Copper cathode tonnes 62,000 60,100Black Mountain and Hudson Bay tonnes 3,200 79,500Other tonnes - 19,400Total attributable copper production tonnes 634,600 766,000Nickel, Niobium and Mineral SandsNickelCodeminOre mined tonnes 528,600 403,000Ore processed tonnes 521,400 521,300Ore grade processed % Ni 2.1 1.4Production tonnes 9,600 6,500Loma de NiquelOre mined tonnes 1,317,000 1,265,000Ore processed tonnes 1,169,000 1,204,000Ore grade processed % Ni 1.6 1.7Production tonnes 16,900 17,400Other tonnes - 100Total attributable nickel production tonnes 26,500 24,000NiobiumCatalaoOre mined tonnes 723,100 568,100Ore processed tonnes 672,300 572,500Ore grade processed Kg Nb/tonne 11.00 11.04Production tonnes 4,000 3,500Mineral SandsNamakwa SandsOre mined tonnes 18,100,000 18,618,000Production Ilmenite tonnes 316,100 320,600 Rutile tonnes 29,100 23,700 Zircon tonnes 128,600 119,100Smelter production Slag tapped tonnes 164,400 169,300 Iron tapped tonnes 105,400 105,900 Production statistics (continued) 2005 2004Anglo Base Metals (continued)Zinc and LeadBlack MountainOre mined tonnes 1,413,000 1,518,000Ore processed tonnes 1,350,000 1,500,000Ore grade processed Zinc % Zn 3.3 2.7 Lead % Pb 3.7 3.0 Copper % Cu 0.4 0.5Production Zinc in concentrates tonnes 32,100 28,200 Lead in concentrates tonnes 42,200 37,500 Copper in concentrates tonnes 3,200 5,200Hudson BayOre mined tonnes - 2,484,000Ore processed tonnes - 2,419,000Ore grade processed Copper % Cu - 2.2 Zinc % Zn - 5.2Concentrate treated Copper tonnes - 274,900 Zinc tonnes - 216,500Production (domestic) Copper tonnes - 40,000 Zinc tonnes - 105,200Production (total) Copper tonnes - 74,300 Zinc tonnes - 107,000 Gold ounces - 73,400 Silver ounces - 1,020,900LisheenOre mined tonnes 1,527,000 1,475,000Ore processed tonnes 1,461,000 1,460,000Ore grade processed Zinc % Zn 12.0 11.7 Lead % Pb 2.0 1.8Production Zinc in concentrate tonnes 159,300 156,300 Lead in concentrate tonnes 20,800 17,200SkorpionOre mined tonnes 1,199,000 1,304,000Ore processed tonnes 1,280,000 1,187,000Ore grade processed Zinc % Zn 12.4 12.3Production Zinc tonnes 132,800 119,200Total attributable zinc production tonnes 324,200 410,700 Anglo Industrial Minerals (tonnes)Aggregates 83,333,400 70,448,300Lime products 1,428,100 1,185,700Concrete (m3) 8,353,200 8,310,800Sodium tripolyphosphate 106,000 115,700Phosphates 1,036,200 1,169,300 Production statistics (continued) 2005 2004 Anglo Paper and PackagingMondi Packaging Packaging papers tonnes 2,705,691 2,600,291 Corrugated board and boxes m m2 2,253 2,103 Paper sacks m units 3,282 3,251 Coating and release liners m m2 1,688 1,661 Pulp - external tonnes 170,420 153,045Mondi Business Paper Uncoated wood free paper tonnes 1,890,079 1,881,851 Newsprint tonnes 186,929 182,351 Pulp - external tonnes 127,745 53,142 Wood chips green metric tonnes 1,747,290 2,125,858Mondi Packaging South Africa Packaging papers tonnes 372,992 365,557 Corrugated board and boxes m m2 330 335Newsprint Joint Ventures Newsprint (attributable share) tonnes 316,459 368,635 Anglo Ferrous Metals and Industries (tonnes)Kumba Resources LimitedIron ore productionLump 18,747,000 18,248,000Fines 12,240,000 11,864,000Total iron ore 30,987,000 30,112,000CoalPower station coal 14,573,000 14,017,000Coking coal 2,273,000 2,409,000Steam coal 2,993,000 3,018,000Total coal 19,839,000 19,444,000Zinc metal 119,000 116,000Heavy minerals(1)Ilmenite 356,000 498,000Scaw MetalsRolled products 386,500 458,000Cast products 133,900 110,000Grinding media 461,400 429,000Highveld SteelRolled products 684,000 674,013Continuous cast blocks 874,900 922,477Vanadium slag Samancor 66,800 67,587 Manganese ore (mtu m) Manganese alloys 88 106Tongaat- Hulett 309,000 321,100 Sugar 861,000 756,000Aluminium 192,000 162,000Starch and glucose 595,000 576,000Hippo ValleySugar 194,000 200,000 (1) Further details of heavy minerals production are available in Kumba's annual report. Reconciliation of subsidiaries' and associates' headline earnings to theunderlying earnings included in the consolidated financial statements For the year ended 31 December 2005Note only key reported lines are reconciled AngloGold Ashanti Limited 2005 US$ million IFRS adjusted headline earnings (published) 200Exploration 45Other adjustments 1 246Minority interest (121)Depreciation on assets fair valued on acquisition (net of tax) (20)Contribution to Anglo American plc underlying earnings 105 Anglo Platinum Limited 2005 US$ million IFRS headline earnings (US$ equivalent of published) 664Exploration 21Other adjustments (2) 683Minority interest (173)Depreciation on assets fair valued on acquisition (net of tax) (51)Impact of change in South African corporate tax rate on assets fair valued on 24acquisitionContribution to Anglo American plc underlying earnings 483 DB Investments (DBI) 2005 US$ million DBI headline earnings before class action payment (100%) 824Adjustments(1) 34DBI headline earnings before class action payment - AA plc basis (100%) 858AA plc's 45% ordinary share interest 386Income from preference shares 44Contribution to Anglo American plc underlying earnings 430 (1) Adjustments include the reclassification of the actuarial gains and losses booked to theincome statement by Dbsa under the corridor mechanism of IAS 19. As AA plc has early adoptedthe amended version of IAS 19, this charge has been included in the deficit booked toreserves in prior years. Kumba Resources Limited 2005 US$ million IFRS headline earnings (US$ equivalent of published) 373Depreciation on assets fair valued on acquisition (net of tax) (16)Impact of change in South African corporate tax rate on assets fair valued on 10acquisitionExploration 21Other adjustments (6) 382Minority interest (130)STC credit on special dividends 9Contribution to Anglo American plc underlying earnings 261 Reconciliation of subsidiaries' and associates' headline earnings to theunderlying earnings included in the consolidated financial statements(continued) Highveld Steel and Vanadium Corporation Limited 2005 US$ million IFRS headline earnings (US$ equivalent of published) 270Other adjustments 4 274Minority interest (57)STC credit on special dividends 15Contribution to Anglo American plc underlying earnings 232 The Tongaat-Hulett Group Limited 2005 US$ million IFRS headline earnings (US$ equivalent of published) 73Other adjustments 11 84Minority interest (40) 44Add AA plc's share of Hulett Aluminium 5Contribution to Anglo American plc underlying earnings 49 Exchange rates and commodity prices US$ exchange rates 2005 2004 Average spot prices for the yearSouth African rand 6.37 6.44Sterling 0.55 0.55Euro 0.80 0.80Australian dollar 1.31 1.36Chilean peso 559 609Closing spot pricesSouth African rand 6.35 5.65Sterling 0.58 0.52Euro 0.85 0.74Australian dollar 1.36 1.28Chilean peso 512 556 Commodity prices Average market prices for the year 2005 2004 Gold - US$/oz 445 409Platinum - US$/oz 897 847Palladium - US$/oz 201 231Rhodium - US$/oz 2,056 991Copper - US cents/lb 167 130Nickel - US cents/lb 668 628Zinc - US cents/lb 63 48Lead - US cents/lb 44 40European eucalyptus pulp price (CIF) - US$/tonne 582 520 Key financial data US$ million (unless stated otherwise) 2005 2004Group revenue including associates 34,472 31,938Less: share of associates' revenue (5,038) (5,670)Group revenue 29,434 26,268Operating profit including associates before special items and remeasurements 6,376 4,697Special items and remeasurements (447) 1,030Net financing, taxation and minority interests of (328) (496)associatesTotal profit from operations and 5,601 5,231associatesNet finance costs (393) (367)Profit before tax 5,208 4,864Income tax expense (1,275) (923)Profit for the financial year 3,933 3,941Minority interests (412) (440)Profit attributable to equity shareholders of the Company 3,521 3,501Underlying earnings(1) 3,736 2,684Earnings per share ($) 2.43 2.44Underlying earnings per share ($) 2.58 1.87Ordinary dividend per share (US cents) 90.0 70.0Special dividend per share (US cents) 33.0 -Weighted average number of shares outstanding 1,447 1,434(million)EBITDA(2) 8,959 7,031EBITDA interest cover(3) 20.0 18.5Operating margin (before special items and 18.5% 14.7%remeasurements)Ordinary dividend cover (based on 2.9 2.7underlying earnings) Balance SheetIntangible and tangible fixed assets 33,368 35,816Other non-current assets and 5,375 5,375investmentsWorking capital 3,719 3,715Other net current liabilities (1,473) (611)Other non-current liabilities and (8,418) (8,339)obligationsNet debt (4,993) (8,243)Net assets 27,578 27,713Minority interests (3,957) (4,588)Equity attributable to the equity shareholders of the Company 23,621 23,334Total capital(4) 32,571 35,945Cash inflows from operations 7,265 5,291Dividends received from associates and investments 470 396Return on capital employed(5) 19.2% 14.6%EBITDA/average total capital 26.0% 21.2%Net debt to total capital(6) 17.0% 25.4% (1) Underlying earnings is net profit attributable to equity shareholders,adjusted for the effect of special items and remeasurements, and any related taxand minority interests. (2) EBITDA is operating profit before exceptional items plus depreciation andamortisation in subsidiaries and share of EBITDA of joint ventures andassociates. (3) EBITDA interest cover is EBITDA divided by net finance costs, excludingother net financial income, exchange losses and gains on monetary assets andliabilities and special items and financial remeasurements but including shareof associates' net interest expense. (4) Total capital is the sum of net assets and net debt. (5) Return on capital employed is calculated as total operating profit beforeimpairments for the year divided by the average total capital less otherinvestments and adjusted for impairments. (6) Net debt to total capital is calculated as net debt divided by net assetsplus net debt less investment in associates. Summary by business segment Turnover(1) EBITDA(2) Operating profit/(loss) Underlying earnings/ (3) (loss) US$ million 2005 2004 2005 2004 2005 2004 2005 2004 Platinum 3,714 3,120 1,282 853 854 536 483 240 Gold 2,644 2,409 871 694 332 296 105 139 Diamonds 3,316 3,177 655 655 583 573 430 380 Coal 3,349 2,382 1,243 687 1,019 497 724 357South Africa 1,441 1,109 519 299 463 252 329 163Australia 1,383 840 451 183 316 78 221 78South America 525 433 273 205 240 167 174 116 Base Metals 3,647 3,320 1,990 1,625 1,678 1,276 1,240 1,036Copper 2,597 2,154 1,590 1,252 1,381 1,048 983 855Collahuasi 712 611 468 412 397 346 257 280Minera Sur Andes 1,306 991 824 608 724 512 529 413Mantos Blancos 579 464 299 225 261 195 195 163Palabora and other - 88 (1) 7 (1) (5) 2 (1)Nickel, Niobium, MineralSands 609 528 296 272 249 224 202 177Catalao 49 44 20 28 18 26 17 29Codemin 136 89 75 48 69 44 68 27Loma de Niquel 249 247 153 158 132 137 92 108Namakwa Sands 175 146 48 37 30 16 25 12Nkomati and other - 2 - 1 - 1 - 1Zinc 441 638 157 131 102 38 100 37Black Mountain 80 49 12 2 10 (3) 10 3Hudson Bay - 405 - 78 - 37 - 31Lisheen 147 111 62 29 50 17 54 15Skorpion 214 73 83 22 42 (13) 36 (12)Other - - (53) (30) (54) (34) (45) (33) Industrial Minerals 4,073 3,858 618 638 370 421 267 288Tarmac 3,784 3,596 570 556 340 354 256 259Copebras 289 262 48 82 30 67 11 29 Ferrous Metals andIndustries 6,773 6,663 1,779 1,231 1,456 887 757 476Kumba 1,936 1,416 734 328 568 203 261 80Highveld Steel 1,127 775 472 223 436 169 232 93Scaw Metals 1,029 910 145 110 121 85 85 59Samancor Group 634 817 164 265 144 241 103 157Tongaat-Hulett 1,423 1,267 188 114 131 69 49 25Boart Longyear 618 872 87 103 67 72 35 37Terra - 598 - 92 - 55 - 29Other 6 8 (11) (4) (11) (7) (8) (4) Paper and Packaging 6,956 6,919 916 978 495 569 296 367Mondi Packaging 3,798 3,751 528 530 293 297 194 193Mondi Business Paper 2,050 2,028 310 320 163 180 100 123Other 1,108 1,140 78 128 39 92 2 51 Exploration - - (150) (120) (150) (120) (115) (91) Corporate(4) - 90 (245) (210) (261) (238) (451) (508) 34,472 31,938 8,959 7,031 6,376 4,697 3,736 2,684 (1) Turnover includes share of turnover of joint ventures and associates. BaseMetals' turnover is shown after deduction of treatment charges and refiningcharges (TC/RCs). (2) EBITDA is operating profit before special items plus depreciation andamortisation in subsidiaries and share of EBITDA of joint ventures andassociates. (3) Operating profit includes operating profit before special items andremeasurements from subsidiaries and joint ventures and share of operatingprofit (before interest, tax, minority interest, special items andremeasurements) of associates. (4) Includes Gold Fields. The Group disposed of its holdings in Gold Fields inMarch 2004. This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW

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