Adoption of IFRS-Part 2

Anglo American PLC 9 May 2005 PART 2 7. INDEPENDENT REVIEW REPORT TO THE BOARD OF DIRECTORS OF ANGLO AMERICAN PLC ON THE PRELIMINARY FINANCIAL INFORMATION AND PRO FORMA FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2004 In accordance with our engagement letter dated 6th May 2005, we have reviewed: â€¢ the accompanying preliminary International Financial Reporting Standards ("IFRS") consolidated financial information of Anglo American plc for the six months ended 30 June 2004, excluding the impact of IAS 32 and IAS 39, which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, consolidated cash flow statement, the reconciliation of equity, the statement of changes in equity, the statement of recognised income and expense and related notes 1 to 11 (hereinafter referred to as "the preliminary financial information"); and â€¢ the pro forma consolidated financial information, including the impact of IAS 32 and IAS 39, which comprises the consolidated income statement and consolidated balance sheet (hereinafter referred to as "the pro forma financial information"). This preliminary financial information and pro forma financial information is the responsibility of the Company's directors. They have been prepared by management as part of the Company's conversion to IFRS in accordance with the " Basis of Preparation" set out in Section 3, which describes how IFRSs have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and Section 5 which describes the accounting policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 December 2005. In preparing that first complete set of IFRS financial statements management expects to take the option in IFRS 1 not to restate the 2004 comparatives for IAS 32 and IAS 39. However, in order to provide comparable information management has chosen to prepare the pro forma financial information which assumes the application of IAS 32 and IAS 39 to transactions and financial instruments to entities other than those disposed of in 2004 and to contracts other than those containing embedded derivatives that no longer existed as at 1 January 2005 and the application of hedge accounting where management believes it is appropriate to assume the relevant accounting criteria regarding documentation and testing of effectiveness could have been met even though the necessary documentation was not in place. Our responsibility is to express an opinion on this financial information and pro forma financial information based on our review. Our report has been prepared solely for the exclusive use of the directors and solely for the purpose of assisting them in connection with Anglo American plc's conversion of the basis of the preparation of the financial statements to IFRSs. Our work has been undertaken so that we might state to the directors those matters we are required to state to them in a review report and for no other purpose. We do not accept or assume responsibility to anyone other than the directors for our work, for this report, or for the conclusions we have formed. Review work performed We conducted our review in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the preliminary financial information and pro forma financial information and underlying financial data and, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of control and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the preliminary financial information or the pro forma financial information. Emphasis of matter Without modifying our review opinion, we draw attention to the fact that there is a possibility that the accompanying preliminary financial information and pro forma financial information may require adjustment before constituting the final financial information and final pro forma financial information for inclusion in the IFRS interim information for the six months ending 30 June 2005. This is because, as set out in section 1, International Accounting Standards are subject to on going review and possible amendment. Moreover, we draw attention to the fact that, under IFRSs, only a complete set of financial statements comprising an income statement, balance sheet, statement of changes in equity, cash flow statement, together with comparative financial information and explanatory notes, can provide a fair presentation of the group's financial position, results of operations and cash flows in accordance with IFRSs. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the accompanying preliminary financial information and pro forma financial information for the six months ended 30 June 2004 which has been prepared in accordance with the basis set out in the "Basis of preparation" set out in Section 3 and accounting policies set out in Section 5. Deloitte & Touche LLP Chartered Accountants London 9th May 2005 8. INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF ANGLO AMERICAN PLC ON THE PRELIMINARY FINANCIAL INFORMATION AS AT 1 JANUARY 2004 In accordance with our engagement letter dated 6th May 2005, we have audited the accompanying preliminary International Financial Reporting Standards ("IFRS") consolidated financial information of Anglo American plc as at 1 January 2004, excluding the impact of IAS 32 and 39, which comprises the consolidated balance sheet and reconciliation of equity (hereinafter referred to as "the preliminary financial information"). This financial information is the responsibility of the Company's directors. It has been prepared as part of the Company's conversion to IFRS in accordance with the "Basis of Preparation" set out in Section 3, which describes how IFRSs have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and Section 5 which describes the accounting policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 December 2005. Our responsibility is to express an opinion on this financial information based on our audit. Our report has been prepared solely for the exclusive use of the directors and solely for the purpose of assisting them in connection with Anglo American plc's conversion of the basis of the preparation of the financial statements to IFRSs. Our work has been undertaken so that we might state to the directors those matters we are required to state to them in an auditors' report and for no other purpose. We do not accept or assume responsibility to anyone other than the directors for our work, for this report, or for the opinions we have formed. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the preliminary financial information is free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the preliminary financial information. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the preliminary financial information. We believe that our audit provides a reasonable basis for our opinion. Emphasis of matter Without qualifying our audit opinion, we draw attention to the fact that there is a possibility that the accompanying preliminary financial information may require adjustment before constituting the final financial information. This is because, as set out in section 1, International Accounting Standards are subject to on going review and possible amendment. Moreover, we draw attention to the fact that, under IFRS, only a complete set of financial statements comprising an income statement, balance sheet, statement of changes in equity, cash flow statement, together with comparative financial information and explanatory notes, can provide a fair presentation of the Group's financial position, results of operations and cash flows in accordance with IFRSs. Opinion In our opinion, the accompanying preliminary financial information as at 1 January 2004 has been prepared, in all material respects, in accordance with the basis set out in the "Basis of preparation" set out in Section 3 and accounting policies set out in Section 5. Deloitte & Touche LLP Chartered Accountants London 9th May 2005 Appendix I - Pro forma IAS 32 and 39 Financial Information Accounting policies Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Investments Investments, other than investments in joint ventures and associates, are initially recorded at cost. At subsequent reporting dates, financial assets that the Group has the expressed intention and ability to hold to maturity (" held-to-maturity") are measured at amortised cost, less any impairment. The amortisation of any discount or premium on the acquisition of a held-to-maturity investment is recognised in the income statement in each period using the effective interest method. Investments other than those classified as held-to-maturity are classified as either "fair value through profit or loss" which includes investments held for trading as a sub-category or "available-for-sale" investments, other than " held-to-maturity" investments, are measured at each reporting date at fair value. Where investments are held for trading purposes, unrealised gains and losses are included in the income statement account for the period. For available-for-sale investments, unrealised gains and losses are recognised in equity, until the security is disposed or impaired, at which time the cumulative gain or loss previously recognised in equity is included in the income statement account. Financial liability and equity Financial liabilities and equity instruments are classified and accounted for as debt or equity according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Convertible bonds Convertible bonds denominated in the functional currency of the entity issuing the bond, are regarded as compound instruments, consisting of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt and is recorded within borrowings. The difference between the proceeds of issue of the convertible bond and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity. Where the embedded option is in a convertible bond denominated in a currency other than the functional currency of the entity issuing the bond, the option is classified as a liability, in accordance with IFRIC guidance issued in their published update following their April 2005 meeting. The option is marked to market with subsequent gains and losses being recorded through the income statement within "net finance costs". Issue costs are apportioned between the liability and equity components of the convertible bonds where appropriate based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity. The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-convertible debt to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible bond. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct transaction costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis and charged to the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Derivative financial instruments and hedge accounting In order to hedge its exposure to foreign exchange, interest rate and commodity price risk, the Group enters into forward, option and swap contracts. The Group does not use derivative financial instruments for speculative purposes. All derivatives are held at fair value in the balance sheet within "other financial assets" or "other financial liabilities", and are classified as current or non current depending on the maturity of the derivative. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flow are recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement account. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss. For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry in profit or loss. Gains or losses from re-measuring the derivative, or for non-derivatives the foreign currency component of its carrying amount, are recognised in profit or loss. The gain or loss on hedging instruments relating to the effective portion of a net investment hedge is recognised in equity. The ineffective portion is recognised immediately in the income statement account. Gains or losses accumulated in equity are included in the income statement account when the foreign operations are disposed of. Changes in the fair value of any derivative instrument that are not hedge accounted are recognised immediately in the income statement account. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedge transaction is no longer expected to occur, the net cumulative gain or loss previously recognised in equity is included in the income statement of the period. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of their host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement. Appendix I Pro forma IAS 32 and IAS 39 financial information Pro forma consolidated income statement for the year ended 31 December 2004 IAS 32 and 39 IFRS US$ million IFRS(1) adjustments pro forma Group turnover 26,268 57 26,325 Total operating costs (22,627) (185) (22,812) Operating exceptional items 25 (66) (41) Group operating profit 3,666 (194) 3,472 Net income from associates 550 1 551 Total profit from operations and associates 4,216 (193) 4,023 Non-operating exceptional items 1,015 (23) 992 Net finance costs (367) (56) (423) Profit before tax 4,864 (272) 4,592 Income tax expense (923) 78 (845) Profit for the financial year 3,941 (194) 3,747 Attributable to Minority interests 440 (55) 385 Equity shareholders of the Company 3,501 (139) 3,362 Total dividends paid and proposed (827) - (827) Retained profit 2,674 (139) 2,535 (1) Excludes the impact of IAS 32 and IAS 39. Pro forma IAS 32 and IAS 39 consolidated balance sheet as at 31 December 2004 IAS 32 and 39 IFRS US$ million IFRS(1) adjustments pro forma Intangible fixed assets 2,644 - 2,644 Tangible fixed assets 33,172 (153) 33,019 Biological assets 374 - 374 Environmental rehabilitation trust 237 - 237 Investments in associates 3,486 4 3,490 Financial asset investments 1,084 58 1,142 Deferred tax assets 128 (1) 127 Other financial assets (derivatives) - 675 675 Other non current assets 66 - 66 Total non current assets 41,191 583 41,774 Stocks 3,549 - 3,549 Trade and other receivables 5,534 (86) 5,448 Current tax assets 220 - 220 Other financial assets (derivatives) - 670 670 Current asset investments 2 - 2 Cash and cash equivalents 2,955 - 2,955 Total current assets 12,260 584 12,844 Total assets 53,451 1,167 54,618 Short term borrowings 3,383 56 3,439 Trade and other payables 5,368 (78) 5,290 Current tax liabilities 831 (1) 830 Other financial liabilities (derivatives) - 635 635 Total creditors due within one year 9,582 612 10,194 Medium and long term borrowings 7,817 143 7,960 Retirement benefit obligations 1,201 - 1,201 Other financial liabilities (derivatives) - 611 611 Deferred tax liabilities 5,566 (86) 5,480 Provisions for liabilities and charges 1,328 - 1,328 Total long term liabilities 15,912 668 16,580 Total liabilities 25,494 1,280 26,774 Net assets 27,957 (113) 27,844 Equity Called-up share capital 747 - 747 Share premium account 1,633 - 1,633 Other reserves 3,091 222 3,313 Retained earnings 17,898 (187) 17,711 Total shareholders' equity 23,369 35 23,404 Minority interests 4,588 (148) 4,440 Total equity 27,957 (113) 27,844 (1) Excludes the impact of IAS 32 and IAS 39. Pro forma IAS 32 and IAS 39 consolidated income statement for the six months ended 30 June 2004 IAS 32 and 39 IFRS US$ million adjustments pro forma IFRS(1) Group turnover 12,346 11 12,357 Total operating costs (10,588) (90) (10,678) Operating exceptional items - (1) (1) Group operating profit 1,758 (80) 1,678 Net income from associates 330 14 344 Total profit from operations and associates 2,088 (66) 2,022 Non-operating exceptional items 1,005 (18) 987 Net finance costs (161) (20) (181) Profit before tax 2,932 (104) 2,828 Income tax expense (516) 55 (461) Profit for the financial period 2,416 (49) 2,367 Attributable to Minority interests 190 (13) 177 Equity shareholders of the Company 2,226 (36) 2,190 Total dividends paid and proposed (554) - (554) Retained profit 1,672 (36) 1,636 (1) Excludes the impact of IAS 32 and IAS 39. Pro forma IAS 32 and IAS 39 consolidated balance sheet as at 30 June 2004 IAS 32 and 39 IFRS adjustments pro forma US$ million IFRS(1) Intangible fixed assets 2,501 - 2,501 Tangible fixed assets 30,227 (89) 30,138 Biological assets 374 - 374 Environmental rehabilitation trust 182 - 182 Investments in associates 3,386 22 3,408 Financial asset investments 1,197 53 1,250 Deferred tax assets 97 5 102 Other financial assets (derivatives) - 354 354 Total non current assets 37,964 345 38,309 Stocks 3,148 - 3,148 Trade and other receivables 5,041 (12) 5,029 Current tax assets 192 - 192 Other financial assets (derivatives) - 379 379 Current asset investments 75 - 75 Cash and cash equivalents 2,495 - 2,495 Total current assets 10,951 367 11,318 Total assets 48,915 712 49,627 Short term borrowings 3,266 (1) 3,265 Trade and other payables 4,732 6 4,738 Current tax liabilities 679 - 679 Other financial liabilities (derivatives) - 482 482 Total creditors due within one year 8,677 487 9,164 Medium and long term borrowings 8,258 (115) 8,143 Retirement benefit obligations 1,081 - 1,081 Other financial liabilities (derivatives) - 465 465 Deferred tax liabilities 5,049 (23) 5,026 Provisions for liabilities and charges 1,155 (87) 1,068 Total long term liabilities 15,543 240 15,783 Total liabilities 24,220 727 24,947 Net assets 24,695 (15) 24,680 Equity Called-up share capital 746 - 746 Share premium account 1,609 - 1,609 Other reserves 1,300 176 1,476 Retained earnings 16,900 (78) 16,822 Total shareholders' equity 20,555 98 20,653 Minority interests 4,140 (113) 4,027 Total equity 24,695 (15) 24,680 (1) Excludes the impact of IAS 32 and IAS 39. Pro forma IAS 32 and IAS 39 reconciliation with detailed adjustments - consolidated income statement for the year ended 31 December 2004 US$ million IFRS(1) Financial Cash flow Convertible Other IFRS asset fair hedge Derivatives debt adjustments pro forma value (2) Group turnover 26,268 - - 10 - 47 26,325 Total operating costs (22,627) 2 - (140) - (47) (22,812) Operating exceptional items 25 - - (66) - - (41) Group operating profit 3,666 2 - (196) - - 3,472 Net income from associates 550 (4) 15 (10) - - 551 Total profit from operations and 4,216 (2) 15 (206) - - 4,023 associates Non-operating exceptional items 1,015 (51) - - - 28 992 Net finance costs (367) - - (47) (14) 5 (423) Profit before tax 4,864 (53) 15 (253) (14) 33 4,592 Income tax expense (923) 8 1 64 8 (3) (845) Profit for the financial year 3,941 (45) 16 (189) (6) 30 3,747 Attributable to Minority interests 440 1 1 (62) 6 (1) 385 Equity shareholders of the Company 3,501 (46) 15 (127) (12) 31 3,362 Total dividends paid and proposed (827) - - - - - (827) Retained profit 2,674 (46) 15 (127) (12) 31 2,535 (1) Excludes the impact of IAS 32 and IAS 39. (2) Includes any resulting write down to asset carrying values following the recognition of embedded derivatives. Pro forma IAS 32 and IAS 39 reconciliation with detailed adjustments - consolidated net assets as at 31 December 2004 US$ million IFRS(1) Financial Cash Fair Convertible Other IFRS asset fair flow value Derivatives debt adjustments pro forma value hedge hedge (2) Intangible fixed assets 2,644 - - - - - - 2,644 Tangible fixed assets 33,172 - (2) - (151) - -33,019 Biological assets 374 - - - - - - 374 Environmental rehabilitation trust 237 - - - - - - 237 Investments in associates 3,486 2 - - 2 - - 3,490 Financial asset investments 1,084 58 - - - - - 1,142 Deferred tax assets 128 - - - (1) - - 127 Other financial assets (derivatives) - - 187 2 486 - - 675 Other non current assets 66 - - - - - - 66 Total non current assets 41,191 60 185 2 336 - -41,774 Stocks 3,549 - - - - - - 3,549 Trade and other receivables 5,534 - 8 (5) (80) - (9) 5,448 Current tax assets 220 - - - - - - 220 Other financial assets (derivatives) - - 31 4 635 - - 670 Current asset investments 2 - - - - - - 2 Cash and cash equivalents 2,955 - - - - - - 2,955 Total current assets 12,260 - 39 (1) 555 - (9) 12,844 Total assets 53,451 60 224 1 891 - (9) 54,618 Short term borrowings 3,383 - - - 56 - - 3,439 Trade and other payables 5,368 - (12) (1) (64) - (1) 5,290 Current tax liabilities 831 - - - (1) - - 830 Other financial liabilities - - 17 12 614 - (8) 635 (derivatives) Total creditors due within one year 9,582 - 5 11 605 - (9)10,194 Medium and long term borrowings 7,817 - - (11) 288 (134) - 7,960 Retirement benefit obligations 1,201 - - - - - - 1,201 Other financial liabilities - - 481 2 73 55 - 611 (derivatives) Deferred tax liabilities 5,566 3 (103) - (7) 19 2 5,480 Provisions for liabilities and charges 1,328 - - - - - - 1,328 Total long term liabilities 15,912 3 378 (9) 354 (60) 2 16,580 Total liabilities 25,494 3 383 2 959 (60) (7) 26,774 Net assets 27,957 57 (159) (1) (68) 60 (2) 27,844 (1) Excludes the impact of IAS 32 and IAS 39. (2) Includes any resulting write down to asset carrying values following the recognition of embedded derivatives. Pro forma IAS 32 and IAS 39 reconciliation with detailed adjustments - consolidated income statement for the six months ended 30 June 2004 US$ million IFRS(1) Financial Cash flow Embedded Convertible Other IFRS asset fair hedge derivatives debt adjustments pro forma value (2) (3) Group turnover 12,346 - - (13) - 24 12,357 Total operating costs (10,588) 1 - (67) - (24) (10,678) Operating exceptional items - - - - - (1) (1) Group operating profit 1,758 1 - (80) - (1) 1,678 Net income from associates 330 (3) 15 2 - - 344 Total profit from operations and associates 2,088 (2) 15 (78) - (1) 2,022 Non-operating exceptional items 1,005 (48) - - - 30 987 Net finance costs (161) - 3 (41) 21 (3) (181) Profit before tax 2,932 (50) 18 (119) 21 26 2,828 Income tax expense (516) 7 - 39 4 5 (461) Profit for the financial period 2,416 (43) 18 (80) 25 31 2,367 Attributable to Minority interests 190 - - (33) 17 3 177 Equity shareholders of the Company 2,226 (43) 18 (47) 8 28 2,190 Total dividends paid and proposed (554) - - - - - (554) Retained profit 1,672 (43) 18 (47) 8 28 1,636 (1) Excludes the impact of IAS 32 and IAS 39. (2) Includes any resulting write down to asset carrying values following the recognition of embedded derivatives. (3) Primarily comprises $30 million exceptional gain arising on deemed disposal of AngloGold. Pro forma IAS 32 and IAS 39 reconciliation with detailed adjustments - consolidated net assets as at 30 June 2004 US$ million IFRS(1) Financial Cash Fair Embedded Convertible Other IFRS asset fair flow value derivatives debt adjustments pro forma value hedge hedge (2) Intangible fixed assets 2,501 - - - - - - 2,501 Tangible fixed assets 30,227 - - - (89) - - 30,138 Biological assets 374 - - - - - - 374 Environmental rehabilitation trust 182 - - - - - - 182 Investments in associates 3,386 3 - - 18 - 1 3,408 Financial asset investments 1,197 54 - - - - (1) 1,250 Deferred tax assets 97 - 4 - 1 - - 102 Other financial assets (derivatives) - - 142 9 203 - - 354 Total non current assets 37,964 57 146 9 133 - - 38,309 Stocks 3,148 - - - - - - 3,148 Trade and other receivables 5,041 - (8) 5 (8) - (1) 5,029 Current tax assets 192 - - - - - - 192 Other financial assets (derivatives) - 1 50 13 315 - - 379 Current asset investments 75 - - - - - - 75 Cash and cash equivalents 2,495 - - - - - - 2,495 Total current assets 10,951 1 42 18 307 - (1) 11,318 Total assets 48,915 58 188 27 440 - (1) 49,627 Short term borrowings 3,266 - - - (1) - - 3,265 Trade and other payables 4,732 - (2) 7 1 - - 4,738 Current tax liabilities 679 - - - - - - 679 Other financial liabilities - - 125 13 344 - - 482 (derivatives) Total creditors due within one year 8,677 - 123 20 344 - - 9,164 Medium and long term borrowings 8,258 - (14) (44) 99 (156) - 8,143 Retirement benefit obligations 1,081 - - - - - - 1,081 Other financial liabilities - - 300 49 74 42 - 465 (derivatives) Deferred tax liabilities 5,049 6 19 2 (74) 24 - 5,026 Provisions for liabilities and charges 1,155 - (72) - (15) - - 1,068 Total long term liabilities 15,543 6 233 7 84 (90) - 15,783 Total liabilities 24,220 6 356 27 428 (90) - 24,947 Net assets 24,695 52 (168) - 12 90 (1) 24,680 (1) Excludes the impact of IAS 32 and IAS 39. (2) Includes any resulting write down to asset carrying values following the recognition of embedded derivatives. Appendix II Reconciliation from UK GAAP to IFRS with detailed adjustments - consolidated income statement for the year ended 31 December 2004 As IAS IAS IAS IAS IAS IAS IFRS De Other Other IFRS(6) previously 10 12 19 21(1) 36(2) 41 2 Beers reclassif-adjustments reported IAS UK GAAP (3) ication (5) under 31 revised (4) US$ million UK GAAP Group turnover 24,930 1,195 26,125 - - - - - - - - - 143 26,268 Total operating (21,869) (749) (22,618) - (30) (1) - 179 (20) (24) - 33 (146) (22,627) costs Operating 25 - 25 - - - - - - - - - - 25 exceptional items Group operating 3,086 446 3,532 - (30) (1) - 179 (20) (24) - 33 (3) 3,666 profit Share of joint 446 (446) - - - - - - - - - - - - ventures' operating profit Share of associates' 948 - 948 - - - - - - - (586)(362) - - operating profit Net income from - - - - 1 (3) - 42 - - 288 229 (7) 550 associates Total profit from operations and associates 4,480 - 4,480 - (29) (4) - 221 (20) (24) (298)(100) (10) 4,216 Non-operating 520 - 520 - - - 30 - (1) - 33 427 6 1,015 exceptional items Net finance costs (359) - (359) - - 5 - - - (26) 9 4 (367) Profit before tax 4,641 - 4,641 - (29) 1 30 221 (21) (24) (291) 336 - 4,864 Income tax expense (1,279) - (1,279) - 69 (1) - - 6 (1) 209 82 (8) (923) Profit for the 3,362 - 3,362 - 40 - 30 221 (15) (25) (82) 418 (8) 3,941 financial year Attributable to Minority interests 449 - 449 - (1) - - 16 6 (4) (13) (5) (8) 440 Equity shareholders 2,913 - 2,913 - 41 - 30 205 (21) (21) (69) 423 - 3,501 of the Company Total dividends paid (1,007) - (1,007) 180 - - - - - - - - - (827) and proposed Retained profit 1,906 - 1,906 180 41 - 30 205 (21) (21) (69) 423 - 2,674 (1) Recycling of CTA on disposal of non USD operations. (2) Reversal of goodwill amortisation. (3) Comprises the translation of US dollar De Beers' preference shares and the reclassification of profit, interest, tax and underlying minority interest on to the one line in accordance with IAS 28. (4) Largely comprises the reclassification of $427 million of unrealised gains through the income statement and change in presentation of associates. (5) Other adjustments include the first time consolidation of a partnership that was previously proportionally consolidated. (6) IFRS restated information excludes the impact of IAS 32 and IAS 39. Reconciliation of UK GAAP to IFRS with detailed adjustments - consolidated net assets as at 31 December 2004 As IAS IAS IAS IAS IAS IAS 36 IAS IFRS De Other IFRS(6) previously 10 12 19 21(1) 36(2) (3) 41 2 Beers adjustments reported IAS UK GAAP (4) (5) under 31 revised US$ million UK GAAP Intangible fixed assets 2,590 17 2,607 - 47 - 21 (239) 179 - - - 29 2,644 Tangible fixed assets 31,155 1,534 32,689 - 819 - - - - (332) - - (4) 33,172 Biological assets - - - - - - - - - 374 - - - 374 Environmental - - - - - - - - - - - - 237 237 rehabilitation trust Investments in 4,346 1 4,347 - (20) (128) - 25 42 - - (770) (10) 3,486 associates Fixed asset investments 889 (21) 868 - (4) - - - - - - 526 (306) 1,084 Deferred tax assets - - - - (5) 32 - - - - 5 - 96 128 Other non current - - - - - 2 - - - - - - 64 66 assets Share of joint ventures 1,496 (1,496) - - - - - - - - - - - - Total non current 40,476 35 40,511 - 837 (94) 21 (214) 221 42 5 (244) 106 41,191 assets Stocks 3,401 137 3,538 - - - - - - (23) - - 34 3,549 Trade and other 5,449 219 5,668 - - (176) - - - - 2 26 14 5,534 receivables Current tax assets 219 1 220 - - - - - - - - - - 220 Current asset 575 - 575 - - - - - - - - - (573) 2 investments Cash and cash 2,086 296 2,382 - - - - - - - - - 573 2,955 equivalents Total current assets 11,730 653 12,383 - (176) - - - (23) 2 26 48 12,260 Total assets 52,206 688 52,894 - 837 (270) 21 (214) 221 19 7 (218) 154 53,451 - - - Short term borrowings 3,333 50 3,383 - - - - - - - - - - 3,383 Trade and other 5,984 129 6,113 (815) - - - - - - (2) - 72 5,368 payables Current tax liabilities 836 15 851 - - - - - - - - (20) 831 Total creditors due 10,153 194 10,347 (815) - - - - - - (2) - 52 9,582 within one year Medium and long term 7,449 368 7,817 - - - - - - - - - - 7,817 borrowings Retirement benefit 753 5 758 - - 448 - - - - - - (5) 1,201 obligations Deferred tax 2,908 130 3,038 - 2,492 (86) - - - 5 (3) - 120 5,566 liabilities Provisions for 1,325 (9) 1,316 - - (4) - - - - 11 - 5 1,328 liabilities and charges Total long term 12,435 494 12,929 - 2,492 358 - - - 5 8 - 120 15,912 liabilities Total liabilities 22,588 688 23,276 (815) 2,492 358 - - - 5 6 - 172 25,494 Net assets(7) 29,618 - 29,618 815 (1,655) (628) 21 (214) 221 14 1 (218) (18) 27,957 (1) Retranslation of non USD goodwill acquired post 1 January 2004. (2) Net adjustment of goodwill impairment and write back of negative goodwill on transition. (3) Reversal of goodwill amortisation. (4) Comprises the reclassification of the US dollar De Beers' preference shares as a fixed asset investment and the currency loss recognised on their translation. (5) Other adjustments include the first time consolidation of a partnership that was previously proportionally consolidated, the reclassification of certain current asset investments as cash equivalents and the reclassification of funds held to cover environmental rehabilitation costs from fixed asset investments. (6) IFRS restated information excludes the impact of IAS 32 and IAS 39. (7) Excludes minority interests previously reported under UK GAAP as under IFRS these are presented within equity. Reconciliation from UK GAAP to IFRS with detailed adjustments - consolidated income statement for the six months ended 30 June 2004 As IAS IAS IAS IAS IAS IFRS 2 De Other Other IFRS previously 10 12 19 36(1) 41 Beers reclass- adjustments restated reported IAS UK GAAP ification (4) under 31 revised (2) (3) US$ million UK GAAP Group turnover 11,786 496 12,282 - - - - - - - - 64 12,346 Total operating costs (10,279) (329) (10,608) - (1) 9 92 (5) (20) - 11 (66) (10,588) Operating exceptional items - - - - - - - - - - - - - Group operating profit 1,507 167 1,674 - (1) 9 92 (5) (20) - 11 (2) 1,758 Share of joint ventures' 167 (167) - - - - - - - - - - - operating profit Share of associates' 574 - 574 - - - - - - (350) (224) - - operating profit Net income from associates - - - - - 2 20 - - 165 143 - 330 Total profit from operations and associates 2,248 - 2,248 - (1) 11 112 (5) (20)(185) (70) (2) 2,088 Non-operating exceptional 535 - 535 - - - - (1) - 42 424 5 1,005 items Net finance costs (191) - (191) - - - - - 11 18 1 (161) Profit before tax 2,592 - 2,592 - (1) 11 112 (6) (20) (132) 372 4 2,932 Income tax expense (686) - (686) - 5 (3) - 1 2 122 43 - (516) Profit for the financial 1,906 - 1,906 - 4 8 112 (5) (18) (10) 415 4 2,416 period Attributable to Minority interests 197 - 197 - 2 - 8 (1) (4) (5) (6) (1) 190 Equity shareholders of the Company 1,709 - 1,709 - 2 8 104 (4) (14) (5) 421 5 2,226 Total dividends paid and (273) - (273) (281) - - - - - - - - (554) proposed Retained profit 1,436 - 1,436 (281) 2 8 104 (4) (14) (5) 421 5 1,672 (1) Reversal of goodwill amortisation. (2) Largely comprises the reclassification of $424 million of unrealised gains through the income statement and the change in presentation of associates. (3) Other adjustments include the first time consolidation of a partnership that was previously proportionally consolidated. (4) IFRS restated information excludes the impact of IAS 32 and IAS 39. Reconciliation of UK GAAP to IFRS with detailed adjustments - consolidated net assets as at 30 June 2004 As IAS IAS IAS IAS IAS IAS IFRS 2 De Other IFRS previously 10 12 19 36(1) 36(2) 41 Beers adjustments (5) reported IAS UK GAAP (3) (4) under 31 revised US$ million UK GAAP Intangible fixed assets 2,600 14 2,614 - 24 - (239) 92 - - - 10 2,501 Tangible fixed assets 28,227 1,544 29,771 - 793 - - - (343) - - 6 30,227 Biological assets - - - - - - - - 374 - - - 374 Environmental - - - - - - - - - - - 182 182 rehabilitation trust Investments in 4,217 (9) 4,208 - (19)(156) 25 20 - - (697) 5 3,386 associates Fixed asset investments 844 17 861 - - - - - - - 525 (189) 1,197 Deferred tax assets - - - - 14 30 - - - 6 - 47 97 Share of joint ventures 1,371 (1,371) - - - - - - - - - - - Total non current 37,259 195 37,454 - 812 (126) (214) 112 31 6 (172) 61 37,964 assets Stocks 2,986 131 3,117 - - - - - 3 - - 28 3,148 Trade and other 5,034 122 5,156 - - (165) - - - 6 29 15 5,041 receivables Current tax assets 191 1 192 - - - - - - - - - 192 Current asset 1,393 4 1,397 - - - - - - - - (1,322) 75 investments Cash and cash 1,039 134 1,173 - - - - - - - - 1,322 2,495 equivalents Total current assets 10,643 392 11,035 - - (165) - - 3 6 29 43 10,951 Total assets 47,902 587 48,489 - 812 (291) (214) 112 34 12 (143) 104 48,915 Short term borrowings 3,196 70 3,266 - - - - - - - - - 3,266 Trade and other 4,908 107 5,015 (349) - 1 - - - 5 - 60 4,732 payables Current tax liabilities 677 6 683 - 3 - - - - - (7) 679 Total creditors due 8,781 183 8,964 (349) - 4 - - - 5 - 53 8,677 within one year Medium and long term 7,966 290 8,256 - - - - - - - - 2 8,258 borrowings Retirement benefit 703 6 709 - - 371 - - - - - 1 1,081 obligations Deferred tax 2,606 99 2,705 - 2,364 (77) - - 10 (2) - 49 5,049 liabilities Provisions for 1,155 9 1,164 - - (4) - - - (5) - - 1,155 liabilities and charges Total long term 12,430 404 12,834 - 2,364 290 - - 10 (7) - 52 15,543 liabilities Total liabilities 21,211 587 21,798 (349) 2,364 294 - - 10 (2) - 105 24,220 Net assets(6) 26,691 - 26,691 349 (1,552) (585) (214)112 24 14 (143) (1) 24,695 (1) Net adjustment of goodwill impairment and write back of negative goodwill on transition. (2) Reversal of goodwill amortisation. (3) Comprises the reclassification of the US dollar De Beers' preference shares as a fixed asset investment and the currency loss recognised on their translation. (4) Other adjustments include the first time consolidation of a partnership that was previously proportionally consolidated, the reclassification of certain current asset investments as cash equivalents and the reclassification of funds held to cover environmental rehabilitation costs from fixed asset investments. (5) IFRS restated information excludes the impact of IAS 32 and IAS 39. (6) Excludes minority interests previously reported under UK GAAP as under IFRS these are presented within equity. Reconciliation of UK GAAP to IFRS with detailed adjustments - consolidated net assets as at 1 January 2004 US$ million As De Other previously Beers adjustments reported UK GAAP (2) under UK revised GAAP IAS 31 IAS 10 IAS 12 IAS 19 IAS 36 IAS IFRS 2 IFRS (1) 41 (3) Intangible fixed assets 2,267 127 2,394 - - - (239) - - - 15 2,170 Tangible fixed assets 24,379 1,700 26,079 - - - - (286) - - 3 25,796 Biological assets - - - - - - - 346 - - - 346 Environmental - - - - - - - - - - 190 190 rehabilitation trust Investments in associates 4,804 44 4,848 - (20) (158) 25 - - (866) 9 3,838 Fixed asset investments 772 9 781 - - - - - - 701 (200) 1,282 Deferred tax assets - - - - 14 29 - - 8 - 49 100 Share of joint ventures 1,630 (1,630) - - - - - - - - - - Total non current assets 33,852 250 34,102 - (6) (129) (214) 60 8 (165) 66 33,722 Stocks 2,744 125 2,869 - - - - (23) - - 22 2,868 Trade and other receivables 4,334 146 4,480 - - (166) - - - 35 12 4,361 Current tax assets 49 - 49 - - - - - - - - 49 Current asset investments 1,032 - 1,032 - - - - - - -(1,007) 25 Cash and cash equivalents 1,094 116 1,210 - - - - - - - 1,007 2,217 Total current assets 9,253 387 9,640 - - (166) - (23) - 35 34 9,520 Total assets 43,105 637 43,742 - (6) (295) (214) 37 8 (130) 100 43,242 - Short term borrowings 4,094 80 4,174 - - - - - - - - 4,174 Trade and other payables 4,777 123 4,900 (622) - - - - - - 52 4,330 Current tax liabilities 447 5 452 - - - - - - - (8) 444 Total creditors due within 9,318 208 9,526 (622) - - - - - - 44 8,948 one year Medium and long term 6,665 330 6,995 - - - - - - - 2 6,997 borrowings Retirement benefit 681 6 687 - - 358 - - - - 1 1,046 obligations Deferred tax liabilities 2,330 80 2,410 - 1,479 (73) - 11 (1) - 48 3,874 Provisions for liabilities 943 13 956 - - (4) - - 3 - (1) 954 and charges Total long term liabilities 10,619 429 11,048 - 1,479 281 - 11 2 - 50 12,871 Total liabilities 19,937 637 20,574 (622) 1,479 281 - 11 2 - 94 21,819 Net assets(4) 23,168 - 23,168 622 (1,485) (576) (214) 26 6 (130) 6 21,423 (1) Net adjustment of goodwill impairment and write back of negative goodwill on transition. (2) Other adjustments include the first time consolidation of a partnership that was previously proportionally consolidated, the reclassification of certain current asset investments as cash equivalents and the reclassification of funds held to cover environmental rehabilitation costs from fixed asset investments. (3) IFRS restated information excludes the impact of IAS 32 and IAS 39. (4) Excludes minority interests previously reported under UK GAAP as under IFRS these are presented within equity. Reconciliation from UK GAAP to IFRS with detailed adjustments - operating profit for the year ended 31 December 2004 US$ million As IAS 36 De IFRS(3) previously (1) IFRS 2 Beers reported UK GAAP IAS 12 IAS 19 IAS 41 Other under revised adjust- ments UK GAAP IAS 31 (2) Platinum 529 - 529 (3) - 17 - (14) - (2) 527 Gold 203 59 262 (27) - 43 - - - 17 295 Coal 315 - 315 - 5 - (2) - 3 321 Base Metals 812 347 1,159 - (1) 2 - (1) - 1 1,160 Industrial Minerals 314 18 332 - 16 60 - (1) - - 407 Ferrous Metals and Industries 745 8 753 - (15) 5 4 (2) - 1 746 Paper and Packaging 551 14 565 - - 27 (24) (1) - 8 575 Exploration (120) - (120) - - - - - - - (120) Corporate Activities (263) - (263) - (1) 20 - (3) - 2 (245) Operating profit - subsidiaries and 3,086 446 3,532 (30) (1) 179 (20) (24) - 30 3,666 joint ventures Platinum 8 - 8 - - - - - - 1 9 Gold - - - - - - - - - - - Diamonds 586 - 586 - 2 35 - - (50) - 573 Coal 172 - 172 - - 3 - - - 1 176 Base Metals (121) - (121) - - - - - - - (121) Industrial Minerals 5 - 5 - - - - - - - 5 Ferrous Metals and Industries 297 - 297 1 (5) 4 - - - (1) 296 Paper and Packaging (6) - (6) - - - - - - - (6) Corporate Activities 7 - 7 - - - - - - - 7 Operating profit - associates 948 - 948 1 (3) 42 - - (50) 1 939 Total operating profit(4) 4,034 446 4,480 (29) (4) 221 (20) (24) (50) 31 4,605 (1) Reversal of goodwill amortisation. (2) Other adjustments include the reclassification of certain operating costs to interest. (3) IFRS restated information excludes the impact of IAS 32 and IAS 39. (4) Total operating profit is stated after exceptional items (see 4.1.7 note 3). Reconciliation from UK GAAP to IFRS with detailed adjustments - operating profit for the six months ended 30 June 2004 As previously reported UK GAAP US$ million under revised Other UK GAAP IAS 12 IAS 19 IAS 36 IAS 41 IFRS 2 De adjust- IFRS(3) (1) Beers ments (2) Platinum 314 - 314 - - 8 - (14) - - 308 Gold 107 26 133 (1) - 21 - - - 3 156 Coal 112 - 112 - - 3 - (1) - 1 115 Base Metals 446 127 573 - 2 1 - (1) - 1 576 Industrial Minerals 136 7 143 - 7 30 - (1) - - 179 Ferrous Metals and Industries 258 2 260 - 1 4 - (1) - 2 266 Paper and Packaging 309 5 314 - (1) 15 (5) (1) - - 322 Exploration (56) - (56) - - - - - - - (56) Corporate Activities (119) - (119) - - 10 - (1) - 2 (108) Operating profit - subsidiaries and 1,507 167 1,674 (1) 9 92 (5) (20) - 9 1,758 joint ventures Platinum 6 - 6 - - - - - - - 6 Gold - - - - - - - - - - - Diamonds 350 - 350 - 2 17 - -(29) - 340 Coal 84 - 84 - - 1 - - - 1 86 Base Metals (8) - (8) - - - - - - - (8) Industrial Minerals 2 - 2 - - - - - - - 2 Ferrous Metals and Industries 127 - 127 - - 2 - - - (1) 128 Paper and Packaging 6 - 6 - - - - - - - 6 Corporate Activities 7 - 7 - - - - - - - 7 Operating profit - associates 574 - 574 - 2 20 - -(29) - 567 Total operating profit(4) 2,081 167 2,248 (1) 11 112 (5) (20)(29) 9 2,325 (1) Reversal of goodwill amortisation. (2) Other adjustments include the reclassification of certain operating costs to interest. (3) IFRS restated information excludes the impact of IAS 32 and IAS 39. (4) Operating profit is stated after exceptional items (see 4.2.7 note 3). Reconciliation from UK GAAP to IFRS with detailed adjustments - EBITDA for the year ended 31 December 2004 US$ million As previously IAS 19 IAS 41 IFRS 2 Other IFRS(2) reported under adjustments UK GAAP (1) Platinum 867 - - (14) - 853 Gold 701 - - - (7) 694 Diamonds 688 2 - - (35) 655 Coal 686 - - (2) 3 687 Base Metals 1,626 (1) - (1) 1 1,625 Industrial Minerals 624 16 - (1) (1) 638 Ferrous Metals and 1,249 (20) 4 (2) - 1,231 Industries Paper and Packaging 996 - (24) (1) 7 978 Exploration (120) - - - (120) Corporate Activities (207) (1) - (3) 1 (210) Total EBITDA(3) 7,110 (4) (20) (24) (31) 7,031 (1) Other adjustments include the change in treatment of De Beers' US dollar preference shares. The shares no longer qualify as quasi-equity and the return on these shares is now reflected as interest. (2) IFRS restated information excludes the impact of IAS 32 and IAS 39. (3) EBITDA is defined as operating profit before exceptional items plus depreciation and amortisation of subsidiaries and joint ventures and share of EBITDA of associates. Reconciliation from UK GAAP to IFRS with detailed adjustments - EBITDA for the six months ended 30 June 2004 US$ million As IAS 19 IAS 41 IFRS 2 Other IFRS(2) previously adjustments reported (1) under UK GAAP Platinum 479 - - (14) - 465 Gold 317 - - - 2 319 Diamonds 395 3 - - (23) 375 Coal 286 - - (1) 1 286 Base Metals 718 2 - (1) 1 720 Industrial Minerals 281 7 - (1) - 287 Ferrous Metals and Industries 562 1 - (1) 2 564 Paper and Packaging 532 (1) (5) (1) (2) 523 Exploration (56) - - - - (56) Corporate Activities (81) (1) - (1) - (83) Total EBITDA(3) 3,433 11 (5) (20) (19) 3,400 (1) Other adjustments include the change in treatment of De Beers' US dollar preference shares. The shares no longer qualify as quasi-equity and the return on these shares is now reflected as interest. (2) IFRS restated information excludes the impact of IAS 32 and IAS 39. (3) EBITDA is defined as operating profit before exceptional items plus depreciation and amortisation of subsidiaries and joint ventures and share of EBITDA of associates. Reconciliation from UK GAAP to IFRS with detailed adjustments - headline earnings for the year ended 31 December 2004 As previously reported Other under IAS 12 IAS 19 IAS 41 IFRS 2 adjustments IFRS(2) US$ million UK GAAP De Beers (1) Platinum 239 17 - - (9) - (7) 240 Gold 158 (1) - - - - (18) 139 Diamonds 381 - 2 - - (112) (3) 268 Coal 351 6 - - (1) - 1 357 Base Metals 1,042 (4) (1) - (1) - - 1,036 Industrial Minerals 267 7 14 - (1) - 1 288 Ferrous Metals and Industries 480 6 (14) 3 (2) - 3 476 Paper and Packaging 381 10 - (23) (1) - - 367 Exploration (91) - - - - - - (91) Corporate Activities (519) - (1) - (6) - 18 (508) Total headline earnings 2,689 41 - (20) (21) (112) (5) 2,572 Reconciliation of profit attributable to equity shareholders to headline earnings US$ million As previously IFRS reported adjustments IFRS(2) under UK GAAP Profit attributable to equity 2,913 588 3,501 shareholders Operating exceptionals(3) 92 - 92 Non-operating exceptionals(3) (520) (505) (1,025) Tax on exceptionals (1) 3 2 Minority interest on - 2 2 exceptionals Amortisation of goodwill 221 (221) - Minority interest on goodwill (16) 16 - amortisation Total headline earnings 2,689 (117) 2,572 (1) Other adjustments include the remeasurement of some provisions and the recognition of a deferred tax asset in respect of dividend tax credits available in Corporate South Africa. (2) IFRS restated information excludes the impact of IAS 32 and IAS 39. (3) See section 4.1.7 note 3 for analysis. Reconciliation from UK GAAP to IFRS with detailed adjustments - headline earnings for the six months ended 30 June 2004 As previously reported De Beers Other under IAS 12 IAS 19 IAS 41 IFRS 2 adjustments US$ million UK GAAP (1) IFRS(2) Platinum 139 9 - - (9) - (2) 137 Gold 66 1 - - - - - 67 Diamonds 217 - 2 - - (49) (1) 169 Coal 147 2 - - (1) - - 148 Base Metals 455 (20) - - (1) - - 434 Industrial Minerals 114 3 7 - (1) - (3) 120 Ferrous Metals and Industries 207 4 1 - (1) - (3) 208 Paper and Packaging 226 3 (1) (3) (1) - (1) 223 Exploration (42) - - - - - - (42) Corporate Activities (225) - (1) - - - 10 (216) Total headline earnings 1,304 2 8 (3) (14) (49) - 1,248 Reconciliation of profit attributable to equity shareholders to headline earnings US$ million As previously IFRS reported adjustments IFRS(1) under UK GAAP Profit attributable to equity 1,709 517 2,226 shareholders Operating exceptionals(3) - - - Non-operating exceptionals(3) (535) (472) (1,007) Tax on exceptionals 30 2 32 Minority interest on (4) 1 (3) exceptionals Amortisation of goodwill 112 (112) - Minority interest on goodwill (8) 8 - amortisation Total headline earnings 1,304 (56) 1,248 (1) Other adjustments include the remeasurement of some provisions and the recognition of a deferred tax in respect of dividend tax credits available in Corporate South Africa. (2) IFRS restated information excludes the impact of IAS 32 and IAS 39. (3) See section 4.2.7 note 3 for analysis. This information is provided by RNS The company news service from the London Stock Exchange

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