Half Year Results-Part 2

Rio Tinto PLC 3 August 2000 Part 2 PROFIT AND LOSS ACCOUNT First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Gross turnover (including share of joint ventures 7,513 6,636 2,915 2,638 and associates) 4,573 4,273 9,310 Share of joint ventures' (1,140) (1,134) (442) (451) turnover (694) (730) (1,508) Share of associates' (439) (391) (170) (156) turnover (267) (252) (605) Consolidated 5,934 5,111 2,303 2,031 turnover 3,612 3,291 7,197 Net operating (4,328) (4,077)(1,679) (1,620) costs (2,634) (2,625) (5,566) Group operating 1,606 1,034 624 411 profit 978 666 1,631 Share of operating profit of: 347 363 134 144 Joint ventures 211 234 508 168 120 65 48 Associates 102 77 190 Profit on ordinary activities before 2,121 1,517 823 603 interest 1,291 977 2,329 Net interest (215) (169) (83) (67) payable (131) (109) (243) Amortisation of discount related to (48) (43) (18) (17) provisions (29) (28) (55) Profit on ordinary activities before 1,858 1,305 722 519 taxation 1,131 840 2,031 (585) (385) (227) (153) Taxation (356) (248) (548) Profit on ordinary activities after 1,273 920 495 366 taxation 775 592 1,483 Attributable to outside shareholders (161) (129) (62) (51) (equity) (98) (83) (201) Profit for the financial period 1,112 791 433 315 (net earnings) 677 509 1,282 Dividends to (429) (351) (166) (140) shareholders (261) (226) (754) Retained profit for the 683 440 267 175 period 416 283 528 Earnings per 81.1c 57.7c 31.6p 23.0p ordinary share 49.4c 37.2c 93.6c Adjusted earnings per ordinary 81.1c 57.7c 31.6p 23.0p share (c) 49.4c 37.2c 93.6c Dividends per share 12.66p 10.39p -Rio Tinto plc 19.0c 16.5c 55.0c 32.68c 25.64c -Rio Tinto Ltd 19.0c 16.5c 55.0c Financial ratios - Profit before interest/ gross turnover 28.2% 22.9% 25.0% - Interest cover (times) 15 9 12 - Tax rate 31.5% 29.5% 27.0% - Adjusted earnings/ average share- holders' funds (d) 18.8% 15.4% 19.0% - Net debt to total capital 28.4% 31.8% 23.7% (a) Diluted earnings per share figures are US0.05 cents (1999: US0.02 cents) lower than the earnings per share figure above. (b) For the purpose of calculating earnings and adjusted earnings per share, the weighted average number of Rio Tinto plc and Rio Tinto Limited shares outstanding during the period was 1,371.3 million, being the average number of Rio Tinto plc shares outstanding (1,061.8 million) plus the average number of Rio Tinto Limited shares outstanding not held by Rio Tinto plc (309.5 million). (c) Adjusted earnings and adjusted earnings per share exclude exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings reflect the underlying performance of the Group. (d) The half year figures for this ratio have been annualised. (e) The results for all periods relate wholly to continuing operations. CASH FLOW STATEMENT First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Cash flow from operating activities 2,166 1,562 841 622 (see below) 1,319 1,006 2,421 Dividends from joint ventures 396 346 154 138 and associates 241 223 594 2,562 1,908 995 760 1,560 1,229 3,015 69 87 27 35 Interest received 42 56 115 (210) (221) (82) (88) Interest paid (128) (142) (294) Dividends paid to outside (168) (96) (65) (38) shareholders (102) (62) (112) Returns on investment and servicing of (309) (230) (120) (91) finance (188) (148) (291) (386) (573) (150) (228) Tax paid (235) (369) (388) Purchase of property, plant and (491) (575) (191) (228) equipment (299) (370) (776) Funding of Group share of joint ventures' and associates' capital (18) (56) (7) (22) expenditure (11) (36) (53) Other funding of joint ventures and associates 30 346 11 138 repaid 18 223 399 Exploration and evaluation (92) (96) (36) (38) expenditure (56) (62) (149) Sale of property, plant and equipment, and other 18 45 7 18 investments 11 29 60 Capital expenditure and financial (553) (336) (216) (132) investment (337) (216) (519) Acquisitions less (1,482) (438) (575) (174) disposals (902) (282) (279) Equity dividends paid - Rio Tinto (843) (755) (327) (300) shareholders (513) (486) (713) Cash (outflow)/inflow before management of liquid resources (1,011) (424) (393) (165) and financing (615) (272) 825 Net cash flow from management of liquid 320 396 124 157 resources 195 255 408 Ordinary shares - 5 - 2 issued for cash - 3 8 (53) - (20) - Shares repurchased (32) - (18) Loans received 636 (331) 247 (131) less repaid 387 (213) (1,389) Management of liquid resources and 903 70 351 28 financing 550 45 (991) Decrease (108) (354) (42) (137) in cash (65) (227) (166) Cash flow from operating activities Group operating profit from continuing 1,606 1,034 624 411 activities 978 666 1,631 Depreciation and 641 592 249 235 amortisation 390 381 807 Exploration and evaluation charged 95 99 37 40 against profit 58 64 136 49 65 19 26 Provisions 30 42 87 Utilisation of (81) (71) (31) (28) provisions (49) (46) (103) Change in 30 (95) 11 (38) inventories 18 (61) 41 Change in accounts receivable and (16) (26) (6) (10) prepayments (10) (17) (34) Change in accounts payable and (38) (25) (15) (10) accruals (23) (16) (48) (120) (11) (47) (4) Other items (73) (7) (96) Cash flow from operating 2,166 1,562 841 622 activities 1,319 1,006 2,421 Net debt at 30 June 2000 of US$3,030 million compares with US$2,429 million at 31 December 1999. The increase of US$601 million comprises the cash outflow before management of liquid resources and financing of US$615 million less other items of US$14 million. BALANCE SHEET First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Intangible fixed assets 338 355 134 149 Goodwill 203 235 221 Tangible fixed assets Property, plant 16,087 14,353 6,378 6,027 and equipment 9,656 9,499 9,588 Exploration and evaluation 220 210 87 88 properties 132 139 138 Investments Share of gross assets of joint 3,847 3,808 1,525 1,599 ventures 2,309 2,520 2,369 Share of gross liabilities of joint (1,694) (1,612) (672) (677) ventures (1,017) (1,067) (1,076) 2,153 2,196 853 922 1,292 1,453 1,293 Investments in associates/other 1,178 1,126 467 473 investments 707 745 537 3,331 3,322 1,320 1,395 Total investments 1,999 2,198 1,830 Total fixed 19,976 18,240 7,919 7,659 assets 11,990 12,071 11,777 Current assets 2,016 2,081 799 874 Inventories 1,210 1,377 1,276 Accounts receivable 2,837 2,763 1,125 1,160 and prepayments 1,703 1,829 1,767 18 319 7 134 Investments 11 211 154 Cash at bank 830 1,009 329 424 and in hand 498 668 635 5,701 6,172 2,260 2,592 3,422 4,085 3,832 Creditors due within one year Short term (3,509) (4,234)(1,391) (1,778) borrowings (2,106) (2,802) (1,759) Accounts payable (2,482) (2,180) (984) (916) and accruals (1,490) (1,443) (1,750) (5,991) (6,414)(2,375) (2,694) (3,596) (4,245) (3,509) Net current (liabilities)/ (290) (242) (115) (102) assets (174) (160) 323 Total assets less current 19,686 17,998 7,804 7,557 liabilities 11,816 11,911 12,100 Creditors due after one year Medium and long term (2,387) (2,396) (946) (1,006) borrowings (1,433) (1,586) (1,459) Provisions for liabilities and (4,543) (4,253)(1,801) (1,786) charges (2,727) (2,815) (2,830) Outside shareholders' (578) (1,010) (229) (423) interests (equity) (347) (667) (715) 12,178 10,339 4,828 4,342 7,309 6,843 7,096 Capital and reserves Share capital 267 252 106 106 - Rio Tinto plc 160 167 171 - Rio Tinto Limited (excluding Rio Tinto plc 1,363 1,364 540 573 interest) 818 903 902 Share premium 2,754 2,522 1,092 1,059 account 1,653 1,669 1,711 197 166 78 70 Other reserves 118 110 129 Profit and loss 7,597 6,035 3,012 2,534 account 4,560 3,994 4,183 Shareholders' 12,178 10,339 4,828 4,342 funds (equity) 7,309 6,843 7,096 (a) In accordance with Financial Reporting Standard 4, all commercial paper is classified as short term borrowings though US$1,200 million is backed by medium term facilities. Under US and Australian GAAP this amount would be grouped with medium term borrowings. (b) At 30 June 2000, Rio Tinto plc had 1,063.3 million ordinary shares in issue and Rio Tinto Limited had 310.5 million shares in issue, excluding those held by Rio Tinto plc. (c) Since the year end the Group has entered into forward contracts to sell 1.3 billion US dollars for 0.5 billion Canadian and 1.6 billion Australian dollars. These relate primarily to planned capital expenditure. RECONCILIATION WITH AUSTRALIAN GAAP First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Net earnings 1,112 791 433 315 under UK GAAP 677 509 1,282 Increase/(decrease) net of tax in respect of: Abnormal increase - (455) - (181) in provisions - (293) (293) Goodwill (122) (129) (47) (51) amortisation (74) (83) (152) 10 - 4 - Taxation 6 - (3) 8 2 3 1 Other 5 1 11 Net earnings under 1,008 209 393 84 Australian GAAP 614 134 845 Earnings per ordinary share under 73.5c 15.3c 28.7p 6.1p Australian GAAP 44.8c 9.8c 61.7c Australian GAAP earnings before abnormal items 1,008 664 393 265 Net earnings 614 427 1,049 Earnings per 73.5c 48.5c 28.7p 19.3p ordinary share 44.8c 31.2c 76.6c Shareholders' funds 12,178 10,339 4,828 4,342 under UK GAAP 7,309 6,843 7,096 Increase/(decrease) net of tax in respect of: 2,459 2,492 975 1,046 Goodwill 1,476 1,649 1,589 (75) (76) (30) (32) Taxation (45) (50) (51) 3 (12) 1 (5) Other 2 (8) 2 Shareholders' funds under Australian 14,565 12,743 5,774 5,351 GAAP 8,742 8,434 8,636 Diluted earnings per share under Australian GAAP are US0.05 cents (1999: US nil cents) less than the above earnings per share figures. The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP), which differ in certain respects from generally accepted accounting principles in Australia (Australian GAAP). These differences relate principally to the following items and the approximate effect of the adjustments to net earnings and shareholders' funds which would be required under Australian GAAP is set out above. Abnormal items Abnormal items of US$204 million arose in 1999 under Australian GAAP reporting, comprising a charge of US$293 million relating to FRS 12 which was recognised in the first half of 1999, and a credit of US$89 million resulting from changes in Australian and South African tax rates. The US$89 million benefit to earnings arose from the restatement of deferred tax balances as a result of reductions in tax rates. The introduction of FRS 12 in 1999, led to changes in the Group's accounting policy under UK GAAP. To minimise differences between accounting policies under UK and Australian GAAPs, the Group applied the new accounting policy under Australian GAAP also. Under UK GAAP the effect of the change was recorded as a prior year adjustment which reduced shareholders' funds by US$293 million. Under Australian GAAP the impact of this change in policy was charged against earnings as an abnormal item. Goodwill For 1997 and prior years, UK GAAP permitted the write off of purchased goodwill on acquisition directly against reserves. Under Australian GAAP goodwill is capitalised and amortised by charges against income over the period during which it is expected to be of benefit, subject to a maximum of 20 years. Goodwill previously written off directly to reserves in the UK GAAP accounts has been reinstated and amortised for the purpose of the reconciliation statements. For acquisitions in 1998 and subsequent years, goodwill is capitalised under UK GAAP, in accordance with FRS 10. Taxation Under UK GAAP, provision is made for deferred tax under the liability method to the extent that, in the opinion of the directors, it is probable that a tax liability will become payable within the foreseeable future. Under Australian GAAP deferred tax is provided for in full. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Profit for the 1,112 791 433 315 period 677 509 1,282 (429) (351) (166) (140)Dividends (261) (226) (754) 683 440 267 175 416 283 528 Adjustment on currency 607 (541) 100 318 translation (287) 156 159 Share capital issued 84 (23) 33 (9) /(repurchased) 51 (15) (10) Goodwill relating to disposals written 54 - 21 - back 33 - - 1,428 (124) 421 484 213 424 677 Opening shareholders' 10,750 10,463 4,407 3,858 funds 7,096 6,419 6,419 Closing shareholders' 12,178 10,339 4,828 4,342 funds 7,309 6,843 7,096 PRIMA FACIE TAX RECONCILIATION First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Profit on ordinary activities before 1,858 1,305 722 519 taxation 1,131 840 2,031 Actual taxation charge for (585) (385) (227) (153) the period (356) (248) (548) Prima facie tax at UK rate of 30% 557 395 216 157 (1999 - 30.25%) 339 254 614 Higher rate of taxation on 48 36 18 14 Australian earnings 29 23 57 Favourable 20 46 7 18 variation 12 29 123 The above variation is explained as follows: Other tax rates applicable outside the UK and (30) (56) (11) (22) Australia (18) (36) (80) Research, development and other investment 7 5 3 2 allowances 4 3 8 Resource depletion and other depreciation 20 47 7 19 allowances 12 30 47 Advance Corporation - 5 - 2 Tax - net recovery - 3 7 Impact of tax rate changes on deferred - 39 - 15 tax balances - 25 107 23 6 8 2 Other 14 4 34 Total favourable variation in 20 46 7 18 taxation charge 12 29 123 EXPLORATION AND EVALUATION PROPERTIES First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m At cost less amounts written off 1,197 1,270 491 468 At 1 January 790 779 779 Adjustment on currency 68 (68) 11 39 translation (31) 18 49 Expenditure in 92 96 36 38 period 56 62 149 Charged against profit for (28) (43) (11) (18) the period (17) (28) (39) Disposals, transfers and other - 14 - 6 movements - 9 (148) 1,329 1,269 527 533 At end of period 798 840 790 Provision/ amortisation (988)(1,084) (405) (399)At 1 January (652) (665) (665) Adjustment on currency (54) 69 (9) (29) translation 27 (8) (38) Charged against profit for the (67) (56) (26) (22) period (41) (36) (97) Disposals, transfers and other - 12 - 5 movements - 8 148 (1,109)(1,059) (440) (445) At end of period (666) (701) (652) Net balance sheet 220 210 87 88 amount 132 139 138 RIO TINTO FINANCIAL INFORMATION BY BUSINESS UNIT Gross Operating Capital US$ millions Group Net Earnings Turnover assets expendi- Interest ture First Half First Half 30 June 30 June First Half % 2000 1999 2000 1999 2000 1999 2000 1999 Iron Ore 100 141 122 508 455 1,256 1,484 28 68 Industrial Minerals 179 189 1,012 1,043 2,561 2,571 142 115 Copper Kennecott Utah Copper 100 16 30 361 314 3,179 3,266 42 63 Escondida 30 45 33 192 165 489 553 27 36 Freeport 15.7 (5) 4 131 125 88 283 7 11 Freeport joint venture 40 20 40 104 122 397 397 18 22 Palabora 46.5 7 16 109 113 352 338 29 36 Somincor 49 4 (8) 30 23 85 78 4 2 87 115 927 862 4,590 4,915 127 170 Aluminium - Comalco (f) 156 52 819 617 2,388 1,719 25 31 Energy Kennecott Energy 100 33 35 388 404 655 739 4 26 Pacific Coal 100 41 39 163 148 414 480 4 3 Kaltim Prima Coal 50 5 13 67 89 24 8 2 8 Coal & Allied 71 30 20 165 178 277 227 3 - Rossing 69 8 8 64 55 100 130 3 10 Other energy - (4) - 8 5 29 - 5 117 111 847 882 1,475 1,613 16 52 Gold & Other Minerals Kennecott Minerals 100 28 35 99 117 213 242 15 9 Kelian 90 (9) (3) 37 60 175 209 - 4 Peak Gold 100 6 1 21 21 37 40 4 2 Rio Tinto Zimbabwe 56 - 2 18 18 8 7 - 3 Brazil 33 9 84 50 164 123 7 8 Rio Tinto Aluminium 12 2 133 105 42 54 - 2 Other gold and minerals 9 4 64 84 131 111 12 5 79 50 456 455 770 786 38 33 Other items 7 (41) 4 (41) 233 (14) - (9) Exploration and evaluation (45) (52) Net interest (44) (37) Less joint ventures and associates (d) (77) (83) Total 677 509 4,573 4,273 13,273 13,074 299 377 Add back outside interests 347 667 Unallocated net current financial items (1,804) (1,830) Total assets less current liabilities 11,816 11,911 (a) Net earnings represent after tax earnings attributable to the Rio Tinto Group. Earnings of subsidiaries are stated before interest charges but after the amortisation of the discount applied in establishing the book value of provisions. Earnings attributable to joint ventures and associates include interest charges. (b) Gross turnover includes 100 per cent of subsidiaries' turnover and the Group's share of the turnover of joint ventures and associates. (c) Operating assets of subsidiaries comprise total assets less cash and current asset investments less current non-financial liabilities and are now net of outside interests but include goodwill. 30 June 1999 figures have been restated to deduct outside interests and include goodwill. Capitalised closure costs, which were shown centrally last half year, have been allocated to individual units. For joint ventures and associates, Rio Tinto's net investment is shown. For joint ventures and associates shown above, Rio Tinto's shares of operating assets, defined as for subsidiaries is as follows: Escondida US$776 million (1999:US$781 million), Freeport joint venture US$477 million (1999:US$455 million), Freeport associate US$558 million (1999:US$532 million), Somincor US$137 million (1999:US$149 million), Kaltim Prima US$256 million (1999:US$275 million). (d) Capital expenditure comprises purchases less disposals of property, plant and equipment. The details provided include 100 per cent of subsidiaries' capital expenditure and now include Rio Tinto's share of the capital expenditure of joint ventures and associates. Half year 1999 amounts have been presented on a consistent basis. Amounts relating to joint ventures and associates are deducted before arriving at the total of the capital expenditure column except for amounts specifically funded by Rio Tinto. (e) Business units have been classified above according to the Group's management structure. Generally, this structure has regard to the primary product of each business unit but there are exceptions. The Copper group includes the gold businesses of Kennecott Utah Copper and Freeport (Rio Tinto share); the earnings of Rio Tinto Aluminium are included in Gold & Other Minerals. This summary differs, therefore, from the Product Analysis in which the contributions of individual business units are attributed to several products as appropriate. (f) Rio Tinto's weighted average interest in Comalco for the period was 78 per cent compared with 71 per cent in the first half of 1999. Rio Tinto now owns 100 per cent of the share capital of Comalco Limited. PRODUCT ANALYSIS First First First First First First First First Half Half Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m % % US$m US$m US$m Gross turnover 1,106 814 429 323 14.7 12.3 Copper 673 524 1,324 Gold 590 660 229 262 7.9 9.9 (all sources) 359 425 847 851 724 330 288 11.3 10.9 Iron Ore 518 466 985 1,286 1,283 499 510 17.1 19.3 Coal 783 826 1,672 1,562 1,121 606 446 20.8 16.9 Aluminium 951 722 1,644 Industrial 1,720 1,677 667 667 22.9 25.3 Minerals 1,047 1,080 2,300 398 357 155 142 5.3 5.4 Other products 242 230 538 7,513 6,636 2,915 2,638 100.0 100.0 Total 4,573 4,273 9,310 Net earnings Copper, gold 184 219 71 87 14.8 22.1 and by-products 112 141 322 233 193 91 77 18.7 19.4 Iron ore 142 124 261 179 160 69 64 14.4 16.1 Coal 109 103 201 276 84 108 33 22.1 8.5 Aluminium 168 54 172 Industrial 302 306 118 122 24.2 30.8 Minerals 184 197 423 72 31 28 11 5.8 3.1 Other products 44 20 60 1,246 993 485 394 100.0 100.0 759 639 1,439 Exploration and (74) (81) (29) (32) evaluation (45) (52) (107) (60)(121) (23) (47) Other items (b) (37) (78) (50) 1,112 791 433 315 Total 677 509 1,282 GEOGRAPHICAL ANALYSIS (by country of origin) First First First First First First First First Half Half Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m % % US$m US$m US$m Gross turnover 2,253 2,170 874 862 30.0 32.7 North America 1,371 1,397 2,937 Australia and 3,064 2,458 1,189 977 40.8 37.0 New Zealand 1,865 1,583 3,423 476 390 185 155 6.3 5.9 South America 290 251 555 636 629 247 250 8.5 9.5 Africa 387 405 943 557 551 216 219 7.4 8.3 Indonesia 339 355 840 Europe and 527 438 204 175 7.0 6.6 other countries 321 282 612 7,513 6,636 2,915 2,638 100.0 100.0 Total 4,573 4,273 9,310 Net earnings 225 289 87 115 19.0 34.1 North America 137 186 379 Australia and 642 373 249 148 54.2 44.0 New Zealand 391 240 608 199 45 77 18 16.8 5.3 South America 121 29 70 66 102 25 41 5.5 12.1 Africa 40 66 139 15 73 6 29 1.2 8.6 Indonesia 9 47 103 Europe and 37 (34) 17 (13) 3.3 (4.1) other countries 23 (22) 66 1,184 848 461 338 100.0 100.0 721 546 1,365 (72) (57) (28) (23) Net interest (b) (44) (37) (83) 1,112 791 433 315 Total 677 509 1,282 (a) The above analyses include the Rio Tinto share of the results of joint ventures and associates including interest. (b) The amortisation of discount related to provisions is included in the applicable product category and geographical area. All other financing costs of subsidiaries are included in 'other items' within the product analysis and in 'net interest' within the geographical analysis. RECONCILIATION WITH US GAAP First First First First First First Half Half Half Half Half Half Year 2000 1999 2000 1999 2000 1999 1999 A$m A$m £m £m US$m US$m US$m Net earnings 1,112 791 433 315 under UK GAAP 677 509 1,282 Increase/(decrease) net of tax in respect of: Goodwill (89) (95) (34) (38) amortisation (54) (61) (112) (3) - (1) - Asset write-downs (2) - (58) Provision against - - - - receivable - - (49) 10 - 4 - Taxation 6 - (3) (5) 6 (2) 2 Other (3) 4 (45) Income before cumulative effect of change in accounting 1,025 702 400 279 principle 624 452 1,015 Cumulative effect of change in accounting principle - (89) - (35) for start-up costs - (57) (57) Net income under 1,025 613 400 244 US GAAP 624 395 958 Basic earnings per ordinary share under US GAAP Before cumulative effect of change in accounting 74.8c 51.2c 29.2p 20.4p principle 45.5c 33.0c 74.1c After cumulative effect of change in accounting 74.8c 44.7c 29.2p 17.8p principle 45.5c 28.8c 69.9c Shareholders' funds 12,178 10,339 4,828 4,342 under UK GAAP 7,309 6,843 7,096 Increase/(decrease) net of tax in respect of: 3,322 3,241 1,317 1,361 Goodwill 1,994 2,145 2,103 (75) (76) (30) (32) Taxation (45) (50) (51) 435 341 172 143 Proposed dividends 261 226 528 160 236 63 99 Asset write-downs 96 156 98 Reversal of additional provisions under 402 443 159 186 FRS 12 241 293 248 (108) (86) (43) (36) Start-up costs (65) (57) (65) (45) (17) (18) (7) Other (27) (11) (29) Shareholders' funds under 16,269 14,421 6,448 6,056 US GAAP 9,764 9,545 9,928 Diluted earnings per share under US GAAP are US0.05 cents (1999:US0.01 cents) less than the above earnings per share figures. The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP), which differ in certain respects from those in the United States (US GAAP). The approximate effect of adjusting net earnings and shareholders' funds for the following differences in treatment under US GAAP is set out above. Financial Reporting Standard 12 (FRS 12) In 1999, changes in accounting policy on introduction of FRS 12 led to a prior year adjustment under UK GAAP. This reduced shareholders' funds by US$293 million. There was no corresponding change in US accounting standards. The prior year adjustment is therefore reversed in the calculation of shareholders' funds under US GAAP. Under US GAAP, receivables whose recovery is considered probable are recognised in the balance sheet. Under UK accounting standard FRS 12, certain receivables may only be recognised when their recovery is virtually certain. This can result in timing differences in the recognition and de-recognition of such receivables. Goodwill For 1997 and prior years UK GAAP permitted the write off of purchased goodwill on acquisition directly against reserves. Under US GAAP goodwill is capitalised and amortised by charges against income over the period during which it is expected to be of benefit, subject to a maximum of 40 years. Goodwill previously written off directly to reserves in the UK GAAP accounts has been reinstated and amortised for the purpose of the reconciliation statements. For acquisitions in 1998 and subsequent years, goodwill is capitalised under UK GAAP, in accordance with FRS 10. Proposed dividends Under UK GAAP, ordinary dividends are provided for in the financial period in respect of which they are paid. Under US GAAP, such dividends are not provided for until formally declared by the board of directors or approved by the shareholders. Start-up costs The US pronouncement SOP 98-5, Reporting on the Costs of Start-Up Activities, requires that costs of start-up activities be expensed as incurred. The cumulative effect of the change in accounting principle in adopting SOP 98-5 was recorded in 1999. Under UK GAAP some of these start- up costs qualify for capitalisation and are amortised over the economic lives of the relevant assets. Asset write-downs Following the implementation of FRS 11 in 1998, impairment of fixed assets under UK GAAP is recognised and measured by reference to the discounted value of the cash flows expected to be generated by the asset. Under US GAAP, impairment is recognised only when the anticipated undiscounted cash flows are insufficient to recover the carrying value of the asset. Where an asset is found to be impaired under US GAAP, the amount of such impairment is generally similar under US GAAP to that computed under UK GAAP. ACCOUNTING PRINCIPLES The financial information included in this report has been prepared in accordance with United Kingdom Accounting Standards and an Order under section 340 of the Australian Corporations Law issued by the Australian Securities Commission on 12 January 1998. Except as noted below, the financial information is drawn up on the basis of accounting policies consistent with those applied in the accounts for the year to 31 December 1999. FRS 15 - Tangible Fixed Assets and FRS 16 - Current Tax have been implemented in the period but did not have a material effect on the financial position, results of operations or cash flows of the Group. Accordingly comparative figures have not been restated. PRIOR YEAR FINANCIAL INFORMATION Results for the year 1999 have been extracted from the full accounts prepared on the historical cost basis as filed with the Registrar of Companies. The auditors' report on the accounts for the year ended 31 December 1999 was unqualified and did not contain statements under section 237 (2) of the United Kingdom Companies Act 1985 (regarding adequacy of accounting records and returns), or under section 237(3) (regarding provision of necessary information and explanations). INDEPENDENT REVIEW REPORT TO RIO TINTO PLC AND RIO TINTO LIMITED Introduction We have been instructed by the companies to review the financial information set out on this page and pages 13 to 19 and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority in the United Kingdom require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. PricewaterhouseCoopers PricewaterhouseCoopers Chartered Accountants Chartered Accountants London Melbourne METAL PRICES AND EXCHANGE RATES First First Half Half Change Year Metal prices 2000 1999 1h00 v 1h99 1999 Average for the period were: Copper - US cents/lb 80c 65c 23% 72c Aluminium - US cents/lb 71c 57c 25% 62c Gold - US$/troy oz US$285 US$280 2% US$279 Average exchange rates in US$ Sterling 1.57 1.62 (3%) 1.62 Australia 0.61 0.64 (5%) 0.65 Canada 0.68 0.67 1% 0.67 South Africa 0.15 0.16 (6%) 0.16 Period end exchange rates in US$ Sterling 1.51 1.58 (4%) 1.61 Australia 0.60 0.66 (9%) 0.66 Canada 0.67 0.68 (1%) 0.69 South Africa 0.15 0.17 (12%) 0.16 CIRCULATION TO SHAREHOLDERS This report will be circulated in full to shareholders of Rio Tinto plc and is available on the Rio Tinto website.

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