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Name | Symbol | Market | Type |
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Chemetall 9%Pf | LSE:CHM | London | Preference Share |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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0.00 | 0.00% | 100.00 | 0 | 01:00:00 |
RNS Number:1669V Chemetall PLC 25 April 2007 Chemetall PLC Report and financial statements 31 December 2006 Company Registration No. 252864 Chemetall PLC Page 1 Report and financial statements 2006 Officers and professional advisers 2 Chairman's report 3 Director's report 4 Statement of directors's responsibility 7 Independent auditor's report - group 8 Consolidated income statement 10 Consolidated statement of recognised income and expense 11 Consolidated balance sheet 12 Consolidated cash flow statement 14 Notes to the accounts 15 Independent auditor's report - company 40 Company balance sheet 41 Notes to the company accounts 42 Chemetall PLC Page 2 Report and financial statements 2006 Officers and professional advisers Kurt Wenzel (age 57) Matthias Stoermer (age 42) Per Vannerberg (age 45). Appointed on 2 January 2006. Michael Watson (age 52). Resigned on 2 January 2006. Rob Rydings (age 53). Appointed on 2 January 2006. Secretary Rob Rydings appointed on 19 April 2005 Registered Office 65 Denbigh Road Bletchley Milton Keynes MK1 1PB Stockbrokers Cazenove & Co. 12 Tokenhouse Yard London EC2R 7AN Principal Bankers Barclays Bank PLC Eagle Point 1 Capability Green Luton LU1 3US Registrars Capita IRG 34 Beckenham Road Beckenham Kent BR3 4TU Solicitors Baker & McKenzie 100 New Bridge Street London EC4V 6JA Auditors Deloitte & Touche LLP Chartered Accountants St Albans Chemetall PLC Page 3 Chairman's report I am pleased to report another good year, with sales showing an increase of over 8% on the previous year. This is an excellent result considering the continuing difficulties in the UK manfacturing sector. The increase comes mainly through sales to aerospace and Middle East customers. We have though maintained sales in traditional sectors with a combination of new accounts and improved service to existing customers. Results and dividends During the year the Group generated a profit on ordinary activities before taxation of #3.2 million (2005: #1.2 million) with a turnover of #18.7 million (2005: #17.3 million). The Group's loan assets, including any exchange movements and interest accrued thereon, totalled #84.6 million at 31 December 2006 (31 December 2005: #40.9 million). Preference dividends continue to be paid on the normal due dates. Board There have been no changes to the Board during the year except as outlined on page 2. Employees On behalf of the board I would like to thank our employees for their continuing commitment to our business. Chemetall PLC continues to invest in both internal and external training and development of all employees. The company has maintained its Investors in People registration. Outlook The volatile world market for raw materials continues to impact our manufacturing costs, but we have taken and will continue to take steps to limit the pressure on margins. We have set ambitious but realistic targets to increase sales over the coming year, particularly in the aerospace sector. In February 2007 we acquired the chemical business of Wirral Fospray Ltd, and this will increase our presence in the aluminium finishing sector. During the year, the company lent #44.5 million in short term loans to fellow group undertakings. Kurt Wenzel Chairman Chemetall PLC Page 4 Director's report The directors present their annual report and the audited financial statements for the year ended 31 December 2006. Activities The principal activities of the Group are the development, manufacture and marketing of specialised industrial chemicals. A review of the year's operations and significant financial aspects of the year's trading, together with an indication of the Group's future prospects, are included in the Chairman's report. The result for the year and the state of affairs of the Group are shown in the accounts and related notes. Dividends No ordinary dividends were paid during the period (31 December 2005: #nil). Preference dividends of #1,080,000 (31 December 2005: #1,080,000) were payable in the period. Key performance indicators The Company observes key financial indicators such as sales, earnings before interest tax depreciation and amortisation (EBITDA), and profit after tax. The Company also uses non-financial indicators in monitoring its business, such as customer satisfaction surveys, delivery on time, and first time pass rate. Significant risks and uncertainties The Company operates in a competitive market place where continuing growth is achieved by increased business at existing customers, by developing new income streams through offering new technologies, and by winning new clients. The Company is confident that it can achieve these objectives and minimise the risk of falling short of its targets by providing sector leading service quality to its customers at competitive prices. Acquisition of company's own preference shares At the end of the year, the directors had the authority to purchase through the market, by tender or by private treaty, at any time the preference shares of the company. The price shall not exceed the average of the middle market quotation during the period of ten business days immediately prior to the purchase, or at the market price provided it is not more than 5% higher than the aforementioned average price. The distributable reserves of the company are sufficient to pay the preference dividends. Policy and practice on payment of creditors The Group has adopted the Confederation of British Industry Code of Practice regarding the payment of suppliers and has a clear and consistent policy to ensure that it honours all its contractual payment terms to suppliers and liaises with suppliers without delay when invoices, or parts of invoices are contested so that a reasonable settlement can be negotiated. Details of the Code of Practice and the Group's policy can be obtained from the Company Secretary at the Company's registered office. At the year end there were 49 days' (31 December 2005: 48 days') purchases in trade creditors. Chemetall PLC Page 5 Director's report Directors and their interests The directors who held office during the year were as follows: MJ Watson Resigned 2 January 2006 MW Stoermer Appointed 12 August 2004 K Wenzel Appointed 19 April 2005 PGM Vannerberg Appointed 2 January 2006 RS Rydings Appointed 2 January 2006 The directors of the Company are covered by Directors' and Officers' Liability insurance. None of the directors who held office at the end of the financial year had any disclosable interest in the shares and debentures of Group companies (31 December 2005: nil). Employees It is the Group's policy not to discriminate against the disabled or racial minorities in recruitment, career development and promotion. There is close consultation between management and other employees on matters of concern. The Group has, over a period of years, established various ways of providing information to its people by the use of regular newsletters and the provision of copies of the annual report and accounts. Political and charitable contributions The group made no political contributions during the period. Donations to UK charities amounted to #1,000 (31 December 2005: #318). ISO accreditation Chemetall PLC has achieved accreditation to ISO 14001-2004 the world recognised environmental management system, continuing the process started in 1996. During 2005 Chemetall PLC received their permit from the Environment Agency under IPPC (integrated pollution, prevention, and control) regulation. In 2004 Chemetall PLC was acredited to the new automotive industry standard TS16949. Taxation The Group's tax credit on profit is #0.1 million. Details of the tax charge are given in note 9. #2.4 million of tax credits associated with prior year's tax losses continue not to be recognised as indicated in note 17. Chemetall PLC Page 6 Director's report Treasury Policies The Group's treasury policies, which are approved by the board, seek to eliminate risk from currency movements affecting sales and purchases denominated in foreign currencies. We use instruments such as forward currency sale or purchase contracts where practical and cost effective. Where appropriate, the Group's financial systems are able to transact business denominated in foreign currencies. No forward contracts were used in the year, and the year end exposure is nil.. Exemption from Corporate Governance disclosures As the Group has only debt securities listed on the London Stock Exchange, it has availed itself of an exemption from the financial services authority's requirement to make corporate governance disclosures and from auditor review thereof. Disclosure of information to auditors Each of the persons who is a director at the date of approval of this report confirms that: so far as the director is aware, there is no relevant audit information of which the company's auditors are unaware; and the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s234A of the Companies Act 1985. Auditors In accordance with Section 384 of the Companies Act 1985, a resolution for the re-appointment of Deloitte & Touche LLP as auditors of the company is to be proposed at the forthcoming Annual General Meeting. Approved by the Board of Directors and signed on behalf of the Board Rob Rydings Director Chemetall PLC Page 7 Statement of director's responsibilities The directors are responsible for preparing the Annual Report and the financial statements. The directors are required to prepare accounts for the group in accordance with International Financial Reporting Standards (IFRSs) and have chosen to prepare company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP). In the case of UK GAAP accounts, the directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; and state whether applicable accounting standards have been followed; and prepare financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. In the case of IFRS accounts, International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards. Directors are also required to: properly select and apply accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in International Financial Reporting Standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report which complies with the requirements of the Companies Act 1985. Page 8 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC We have audited the group financial statements of Chemetall PLC for the year ended 31 December 2006 which comprise consolidated income statement, the consolidated statement of recognised income and expenses, the consolidated balance sheet, the consolidated cash flow statement and the related notes 1 to 30. These group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the individual company financial statements of Chemetall PLC for the year ended 31 December 2006. This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the annual report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted for use in the European Union are set out in the statement of directors' responsibilities. Our responsibility is to audit the group financial statements in accordance with relevant United Kingdom legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the group financial statements give a true and fair view in accordance with the relevant financial reporting framework and whether the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We report to you if, in our opinion, the directors' report is consistent with the group financial statements. We also report to you if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' transactions with the company and other members of the group is not disclosed. We read the directors' report and the other information contained in the annual report for the above year as described in the contents section and we consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the group financial statements. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the group financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements. Page 9 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC (continued) Opinion In our opinion: the group financial statements give a true and fair view, in accordance with IFRSs as adopted for use in the European Union, of the state of the group's affairs as at 31 December 2006 and of its profit for the year then ended; the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; As explained in Note 1 of the group financial statements, the group, in addition to complying with its legal obligation to comply with IFRSs as adopted for use in the European Union, has also complied with the IFRSs as issued by the International Accounting Standards Board. Accordingly, in our opinion the financial statements give a true and fair view, in accordance with IFRSs, of the state of the group's affairs as at 31 December 2006 and of its profit for the year then ended; and the information given in the Directors' Report is consistent with the group financial statements. Deloitte & Touche LLP Chemetall PLC Page 10 Consolidated income statement Year ended 31 December 2006 Year ended Year ended Note 31 December 2006 31 December 2005 #000 #000 Revenue 3 18,687 17,299 Cost of sales (11,659) (11,079) Gross profit 7,028 6,220 Distribution costs (4,163) (4,220) Administrative expenses (1,710) (2,601) Other operating expenses (84) - Profit/(loss) from operations 5 1,071 (601) Investment revenue 7 3,292 3,062 Finance costs 8 (1,131) (1,292) Profit before tax 3,232 1,169 Tax 9 105 (670) Profit for the year 3,337 499 The results for the current and preceding financial periods are derived from continuing operations. Under Section 230(A) of the Companies Act 1985 the company is exempt from the requirement to present its own income statement. Chemetall PLC Page 11 Consolidated statement of recognised income and expense Year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 #000 #000 Exchange differences on translation of foreign operations (779) (1,103) Actuarial gains on defined benefit pension schemes 1,318 335 Tax on items taken directly to equity (395) (100) Net gain/(loss) recognised directly in equity 144 (868) Profit for the year 3,337 499 Total recognised income and expense for the year 3,481 (369) Chemetall PLC Page 12 Consolidated balance sheet 31 December 2006 Note 31 December 2006 31 December 2005 #000 #000 Non-current assets Goodwill 11 2,475 2,475 Other intangible assets 12 261 413 Property, plant and equipment 13 1,196 1,250 Deferred tax assets 17 4,654 4,051 8,586 8,189 Current assets Inventories 14 1,443 1,346 Trade and other receivables 15 88,292 44,319 Cash and cash equivalents 2,157 43,201 Tax receivable - 17 91,892 88,883 Total assets 100,478 97,072 Current liabilities Trade and other payables 19 (5,815) (5,718) Tax liabilities (1,879) (570) Provisions 20 (197) (241) (7,891) (6,529) Net current assets 84,001 82,354 Chemetall PLC Page 13 Consolidated balance sheet (continued) 31 December 2006 Note 31 December 2006 31 December 2005 #000 #000 Non-current liabilities Interest bearing loans and borrowings 18 (12,000) (12,000) Retirement benefit obligation 27 (7,312) (8,709) Long-term provisions 20 (1,102) (1,142) (20,414) (21,851) Net assets 72,173 68,692 Equity Share capital 21 6,889 6,889 Share premium account 22 29,757 29,757 Translation reserve 24 (1,835) (1,056) Retained earnings 23 37,362 33,102 Total equity 72,173 68,692 The financial statements were approved by the board of directors and authorised for issue on 23 April 2007. They were signed on its behalf by: Rob Rydings Director Chemetall PLC Page 14 Consolidated cash flow statement Year ended 31 December 2006 Note Year ended Year ended 31 December 2006 31 December 2005 #000 #000 Net cash from operating activities 25 825 (409) Investing activities Purchases of property, plant and equipment (130) (172) Net cash used in investing activities (130) (172) Financing activities Interest paid (51) (4) Interest received 3,292 3,062 Amounts (paid to)/received from group undertakings (43,900) 41,504 Preference dividend paid (1,080) (1,080) Net cash from financing activities (41,739) 43,482 Net (decrease)/inc rease in cash and cash equivalents (41,044) 42,901 Cash and cash equivalents at beginning of year 43,201 300 Cash and cash equivalents at end of year 2,157 43,201 Chemetall PLC Page 15 Notes to the accounts Year ended 31 December 2006 1.General information Chemetall PLC is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is given on page 2. The nature of the group's operations and its principal activities are set out in note 4 and in the directors' report. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2. At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in these financial statements, were in issue but not yet effective: IFRS 6 Exploration for and Evaluation of Mineral Resources IFRS 7 Financial Instruments: Disclosures and the related amendments to IAS 1 on capital disclosures IFRS 8 Operating segments IFRIC 4 Determining whether an Arrangement contains a Lease IFRIC 5 Right to Interest Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IFRIC 6 Liabilities Arising from Participating in a specific market - Waste electrical and electronic equipment IFRIC 7 Applying the Restatement approach under IAS 29 Financial Reporting in Hyper inflationary economies IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of embedded derivatives IFRIC 10 Interim Financial reporting and impairment IFRIC 11 IFRS 2 Group treasury share transactions IFRIC 12 Service Concession Arrangements The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the company except for additional disclosures on capital and financial instruments when the relevant standards come into effect for periods commencing on or after 1 January 2007. 2.Significant accounting policies Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), adopted for use in the European Union. The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Chemetall PLC Page 16 Notes to the accounts Year ended 31 December 2006 2.Significant accounting policies (continued) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 6 to the company's separate financial statements. Goodwill Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Sales of goods are recognised when goods are delivered and title has passed. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. Leasing Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term. Chemetall PLC Page 17 Notes to the accounts Year ended 31 December 2006 2.Significant accounting policies (continued) Foreign currencies The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity. Non monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. On consolidation, the assets and liabilities of the group's overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the group's translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. Borrowing costs Borrowing costs are recognised in profit or loss in the period in which they are incurred. Post-retirement benefits The Group accounts for pensions and post-retirement benefits under IAS 19 Employee benefits. For defined benefit plans, obligations are measured at present value, while plan assets are recorded at fair value. The operating and financing costs of such plans are recognised in the income statement. Current service costs are spread systematically over the lives of employees and financing costs are recognised in the periods in which they arise. Actuarial gains and losses are recognised in the period in which they arise in the statement of recognised income and expense. Inventories Inventory and work in progress is valued at the lower of cost, including appropriate overheads, and net realisable value. Provisions are made against excess and obsolete inventories. Intangible assets - patents and trademarks and customer contracts Patents are initially recognised at cost and then amortised in line with the stated life of the patents, between 1 and 20 years. Customer contracts are amortised over 2 years. Chemetall PLC Page 18 Notes to the accounts Year ended 31 December 2006 2.Significant accounting policies (continued) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any provision for impairments in value. Depreciation is provided to write off cost less the estimated residual value of property, plant and equipment by equal instalments over their estimated useful economic lives as follows: Short leasehold property - life of the lease Plant, machinery and equipment - 10-33% per annum Fixtures and fittings - 20% per annum The directors regularly consider the carrying value of property, plant and equipment for impairment. Any reduction in value arising from the impairment of the property, plant and equipment is charged to the income statement for the year. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Chemetall PLC Page 19 Notes to the accounts Year ended 31 December 2006 2.Significant accounting policies (continued) The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised as income immediately, unless the relevant asset is carried at the revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Share capital Preference share capital is classified as a liability as dividend payments are not discretionary. Dividends on the preference shares are disclosed as interest charges and are accounted for on an accrual basis. Other dividends are recognised as a liability only in the period in which they are declared. Interest Interest receivable is recognised in the income statement using the effective interest method as defined in IAS 39 Financial instruments: recognition and measurement. Taxation The tax expense represents the sum of tax currently payable and deferred tax. Provision for taxation is made at the current rate and for deferred taxation at the tax rate expected to apply on all temporary differences between the treatment of certain items for taxation and for accounting purposes. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that sufficient taxable profits will be available to alow all or part of the asset to be recovered. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Chemetall PLC Page 20 Notes to the accounts Year ended 31 December 2006 2. Significant accounting policies (continued) Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Provisions A provision is created and recognised as a liability when the Group has a present obligation (legal or constructive) as a result of a past event and it is expected that a transfer of economic benefits will be required to settle that obligation and a reliable estimate of the amount of the transfer can be made. Vacant leasehold properties A provision is maintained in respect of vacant leasehold properties to take account of the net present value of the residual lease commitments over the remaining term of the lease. In determining the net present value, cash flows have been discounted using an appropriate nominal, risk free, pre-tax rate of return. Critical accounting judgements and key sources of estimation uncertainty In the process of applying the company's accounting policies, which are described in Note 2, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements. Stock and Bad debt provisions The group policy for provisions is noted above. 3. Analysis of revenue All activities are derived from the development, manufacture and marketing of specialised industrial chemicals. All revenue recorded represents sale of goods. 4. Business and geographical segments The primary reporting format is deemed to be business segments. All activities are derived from the development, manufacture and marketing of specialised industrial chemicals. As such, the directors deem that there is only one reportable segment. The secondary reporting format is therefore deemed by the directors to be geographical segments. No separate geographical segment consists of more than 10% of total revenue or total assets, therefore no further analysis of geographical segments is presented. 5. Profit/(loss) from operations Profit/(loss) from operations has been arrived at after charging: 2006 2005 #000 #000 Depreciation of property, plant and equipment 184 218 Amortisation of intangible assets 152 152 Staff costs (see note 6) 4,302 4,832 Auditors' remuneration and other audit services - statutory audit 31 34 Total non-audit fees were #nil (2005:#nil). Chemetall PLC Page 21 Notes to the accounts Year ended 31 December 2006 6. Staff costs The average monthly number of employees (including executive directors) analysed by category was: 2006 2005 Number Number Specialised industrial chemicals 93 94 #000 #000 Their aggregate remuneration comprised: Wages and salaries 3,242 3,624 Social security costs 373 367 Other pension costs 687 841 4,302 4,832 Remuneration of directors Year ended Year ended 31 December 2006 31 December 2005 #000 #000 Wages and salaries 110 122 Social security costs 14 13 Other pension costs 17 22 141 157 Retirement benefits are accruing to one director (31 December 2005: one). 7. Investment revenue 2006 2005 #000 #000 Interest on loans to group undertakings 918 1,653 Interest on cash and other balances 2,374 1,409 3,292 3,062 Chemetall PLC Page 22 Notes to the accounts Year ended 31 December 2006 8. Financial costs 2006 2005 #000 #000 Interest on bank overdrafts - 4 Dividends on preference shares 1,080 1,080 Retirement benefit net interest cost 51 208 1,131 1,292 9. Tax 2006 2005 #000 #000 Current tax: UK corporation tax 978 910 Adjustments related to earlier years (85) (24) 893 886 Deferred tax (note 17): Current year (998) (216) (998) (216) (105) 670 Corporation tax is calculated at 30 % (2005: 30 %) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the year can be reconciled to the profit per the income statement as follows: 2006 2006 2005 2005 #000 % #000 % Profit before tax 3,232 n/a 1,169 n/a Tax at the UK corporation tax rate of 30% 970 30 351 30 (2005: 30%) Tax effect of expenses that are not deductible in determining taxable profit (64) (2) 615 52 Tax effect of utilisation of items previously disallowed for tax (388) (12) (272) (23) Adjustments related to earlier years (85) (3) (24) (1) Preference dividend 324 10 - - Increased recognition of losses (990) (30) - - Tax expense and effective tax rate for the (105) (3) 670 58 year Chemetall PLC Page 23 Notes to the accounts Year ended 31 December 2006 10. Dividends The dividend distributed to the equity holders is nil (2005: nil). The dividend paid at interim to the holders of 9% redeemable preference shares was #540,000 (2005: #540,000). The final dividend proposed is #540,000 (2005: #540,000). Dividends on the 9% redeemable preference shares are presented as financial costs in the income statement in accordance with IAS 32 "Presentation of financial instruments". 11. Goodwill #000 Cost At 1 January 2005, 1 January 2006 and 31 December 2,475 2006 No impairment losses have been recognised on the above goodwill balance. All of the goodwill shown above relates to a single Cash Generating Unit ('CGU'). The group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts from the CGU are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes in selling process and direct costs are based on past practices and expectations of future changes in the market. Chemetall PLC Page 24 Notes to the accounts Year ended 31 December 2006 12. Other intangible assets Patents Customer and contracts trademarks Total #000 #000 #000 Cost At 1 January 2005, 1 January 2006 and 31 December 2006 250 1,108 1,358 Amortisation At 1 January 2005 10 783 793 Charge for the year 120 32 152 At 1 January 2006 130 815 945 Charge for the year 120 32 152 At 31 December 2006 250 847 1,097 Carrying amount At 31 December 2006 - 261 261 At 31 December 2005 120 293 413 The amortisation period for customer contracts is 2 years. Patents and trademarks are amortised over their estimated useful lives, until expiry of legal rights. Chemetall PLC Page 25 Notes to the accounts Year ended 31 December 2006 13. Property, plant and equipment Leasehold Plant and Fixtures Total improvements machinery and #000 #000 equipment #000 #000 Cost At 1 January 2005 2,456 2,224 779 5,459 Additions 25 146 - 171 At 1 January 2006 2,481 2,370 779 5,630 Additions 87 43 - 130 At 31 December 2006 2,568 2,413 779 5,760 Accumulated depreciation and impairment At 1 January 2005 (1,417) (1,981) (764) (4,162) Charge for the year (145) (66) (7) (218) At 1 January 2006 (1,562) (2,047) (771) (4,380) Charge for the year (130) (49) (5) (184) At 31 December 2006 (1,692) (2,096) (776) 4,564 Carrying amount At 31 December 2006 876 317 3 1,196 At 31 December 2005 919 323 8 1,250 14. Inventories 31 December 2006 31 December 2005 #000 #000 Raw materials and consumables 403 355 Work in progress 20 13 Finished goods and goods for resale 1,020 978 1,443 1,346 Chemetall PLC Page 26 Notes to the accounts Year ended 31 December 2006 15. Trade and other receivables 31 December 2006 31 December 2005 #000 #000 Trade receivables 2,995 3,183 Amounts due from group undertakings 85,140 40,857 Prepayments and accrued income 157 279 88,292 44,319 Amounts due from group undertakings are due on or before 31 December 2007 (2005: 31 December 2006) unless those parties agree to extend the terms. An allowance has been made for estimated irrecoverable amounts from the sale of goods of #244,000 (2005: #159,000). This allowance has been determined by reference to past default experience. The average credit period taken on sales of goods/services is 59 days (2005: 60 days). The directors consider that the carrying amount of trade and other receivables approximates to their fair value. 16. Other financial assets Bank balances and cash Bank balances and cash comprise cash held by the group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. Credit risk The group's principal financial assets are bank balances and cash and trade and other receivables, which represent the group's maximum exposure to credit risk in relation to financial assets. The group's credit risk is primarily attributable to its trade and amounts from group undertakings receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the group's management based on prior experience and their assessment of the current economic environment. The group has no significant concentration of credit risk, with exposure spread over a large number of customers. Any new customers are subject to credit checks (in many cases through Dun & Bradstreet credit reports). Chemetall PLC Page 27 Notes to the accounts Year ended 31 December 2006 17. Deferred tax The following are the major deferred tax assets recognised by the group during the current and prior reporting period. Accelerated Short term Retirement Tax Total capital timing benefit losses allowance differences obligations #000 #000 #000 #000 #000 Cost or valuation At 1 January 115 199 2,671 951 3,936 2005 Credit/ (charge) (53) 226 43 - 216 to income Credit/ (charge) - - (101) - (101) to equity At 1 January 62 425 2,613 951 4,051 2006 Credit/ (charge) 65 (33) (24) 990 998 to income Credit/ (charge) - - (395) - (395) to equity At 31 December 127 392 2,194 1,941 4,654 2006 At balance sheet date, the group has unused tax losses of #8,885,000 (2005: #9,447,000) available for offset against future profits. A deferred tax asset has been recognised in respect of #6,470,000 (2005: #3,171,000) of such losses. No deferred tax has been recognised in respect of the remaining #2,415,000 (2005: #6,276,000) due to unpredictability of future profit streams. The tax losses can be carried forward indefinitely. Chemetall PLC Page 28 Notes to the accounts Year ended 31 December 2006 18. Interest bearing loans and borrowings 31 December 2006 31 December 2005 No. #000 No. #000 Authorised Non-equity: 9% redeemable preference shares of #1 each 15,000,000 15,000 15,000,000 15,000 Allotted, called up and fully paid Non equity: 9% redeemable preference shares of #1 each 12,000,000 12,000 12,000,000 12,000 The Company issued 12,000,000 9% redeemable preference shares of #1 each. These preference shares entitle their holders to a fixed cumulative preference dividend at a rate of 9% per annum, per share. On a winding up the preference shareholders are entitled to a sum equal to the nominal capital paid up or credited as paid up, on the preference shares held by them, together with all arrears (if any) of the preference dividend. They carry the right to receive notice of, or attend, or vote at General Meetings only in special circumstances such as when the preference dividend is six months or more in arrears or if redemption has not been made on the due date, or in such cases as a winding up of the Company or a reduction in its share capital. The preference shares have to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are presented as non-current liabilities in the balance sheet and the associated dividend payable as interest expense in the income statement in order to comply with IAS 32 "Presentation of financial instruments". 19. Other financial liabilities Trade and other payables 31 December 2006 31 December 2005 #000 #000 Trade creditors 1,619 1,181 Amounts owed to group undertakings 1,908 1,977 Accruals and deferred income 1,748 2,020 Preference dividend payable 540 540 5,815 5,718 The directors consider that the carrying amount of trade and other payables approximates to their fair value. Policy and practice on the payment of creditors is disclosed in the directors' report. Chemetall PLC Page 29 Notes to the accounts Year ended 31 December 2006 20. Provisions Vacant property Other provision provision Total #000 #000 #000 Cost At 1 January 2006 1,244 139 1,383 Additional provision Provision utilised (33) (51) (84) At 31 December 2006 1,211 88 1,299 31 December 31 December 2006 2005 Included in current liabilities 197 241 Included in non current liabilities 1,102 1,142 1,299 1,383 The vacant property provision represents management's best estimate of the Group's liability to take account of the residual lease commitments over the remaining term of the lease. 21. Share capital 31 December 2006 31 December 2005 No. #000 No. #000 Authorised Equity: Ordinary shares of 10p 91,948,000 9,195 91,948,000 9,195 each Issued and fully paid Equity: Ordinary shares of 10p 68,888,817 6,889 68,888,817 6,889 each The company has one class of ordinary shares which carry no right to fixed income. 22. Share premium account Share premium #000 Balance at 1 January 2005, 31 December 2005 and 31 December 2006 29,757 Chemetall PLC Page 30 Notes to the accounts Year ended 31 December 2006 23. Retained earnings #000 Balance at 1 January 2005 32,368 Actuarial gain on defined benefit pension scheme (net of tax) 235 Net profit for the year 499 Balance at 1 January 2006 33,102 Actuarial gain on defined benefit pension scheme (net of tax) 923 Net profit for the year 3,337 Balance at 31 December 2006 37,362 24. Translation reserve #000 Balance at 1 January 2005 47 Exchange difference on translation of overseas operations (1,103) Balance at 1 January 2006 (1,056) Exchange difference on translation of overseas operations (779) Balance at 31 December 2006 (1,835) 25. Notes to the cash flow statement 31 December 31 December 2005 2006 #000 #000 Profit before taxation 3,232 1,169 Adjustments for: Depreciation of property, plant and equipment 184 218 Amortisation of intangible assets 152 152 Movement in provisions (84) 754 Interest income (3,292) (3,062) Interest expense 1,131 1,084 Operating cash flows before movements in working capital 1,323 315 Movement in inventories (97) (222) Movement in receivables (853) (1,813) Movement in payables 19 1,795 Cash generated by operations 392 75 Income taxes received/(paid) 433 (484) Net cash from operating activities 825 (409) Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank. Chemetall PLC Page 31 Notes to the accounts Year ended 31 December 2006 26. Commitments 31 December 31 December 31 December 31 December 2006 2006 2005 2005 Land and Other Land and Other Buildings #000 Buildings #000 #000 #000 Minimum lease payments under operating leases recognised in the income statement for the year 456 262 234 325 At the balance sheet date, the group had outstanding commitments for future minimum lease payments under non cancellable operating leases, which fall due as follows: Within one year 456 185 456 262 In the second to fifth years inclusive 1,799 173 1,813 236 After five years 2,353 - 2,795 - 4,608 358 5,064 498 27. Retirement benefit schemes The Group operates two funded defined benefit schemes which provide for their liabilities through trustee operated funds. In July 2004, the remaining active members of the Metallgesellschaft Group Pension Scheme were transferred to the Chemetall UK Pension Scheme, which provides benefits based on final pensionable pay, at a cost of #800,000. The Process Ink Scheme is a closed scheme. The assets of both schemes are held separately from those of the Group in a trustee administered fund. The trustees comprise senior group employees and the assets are managed by Legal & General Assurance (Pensions Management) Limited. Contributions to the scheme are charged to the income statement so as to spread the costs of pensions over employees working lives within the Group. The Group does not have any health and medical plans providing post-retirement benefits. The pension costs relating to the Chemetall UK and Process Ink schemes are assessed in accordance with the advice of Aon Limited, the independent actuaries, using, in the case of the Chemetall UK scheme, the projected unit method. Scheme Last Assumed Average Total Funding level value actuarial Investment salary market of assets as valuation Return per increase value of percentage of annum per assets liabilities annum at latest valuation dates Chemetall UK 1 January 6% 4% #14.9m(3) 92% Pension 2005 scheme Process Ink Company Limited Pension and 1 January 9%(1) 4%(2) #2.9m 102% Death 2005 Benefits Plan Chemetall PLC Page 32 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) (1) The rate of return is assumed to reduce to 8% per annum from each member's normal retirement age. (2) This is the assumed rate of revaluation of deferred pensions up to normal retirement date. (3) The market value of the assets includes additional voluntary contributions. The pension increases were assumed to be equal to those specified in the rules of the schemes. Increases in pensions in payment, in line with retail prices but capped at 5% were assumed to be 3% per annum (3 1/2% for the Process Ink Scheme) and pensions increasing in line with retail prices without a cap were assumed to be 3% per annum (4% for the Process Ink Scheme). *For the Chemetall UK scheme, this gives an indication of the extent to which the actuarial value of the assets secure the benefits that have been accrued to members allowing for expected future statutory revaluations to deferred pensions. The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out at 31 December 2004 and updated to 31 December 2006 by AON Consulting. The estimated amount of contributions expected to be paid to the scheme during the current financial year is #697,000. 31 31 31 31 December December December December 2006 2005 2004 2003 #000 #000 #000 #000 Rate of increase in salaries 4.7% 4.5% 4.5% 4.25% Rate of increase in pensions in payment - Ex Brent members pre '97 Nil Nil Nil Nil - Ex Winnets members pre '97 3.0% 3.0% 3.0% 3.0% - Process directors 8.5% 8.5% 8.5% 8.5% - All post '97 3.0% 3.0% 3.0% 2.75% Discount rate 5.1% 4.75% 5.25% 5.75% Inflation 3.2% 3.0% 3.0% 2.75% The rates used have been chosen from a range of possible amounts determined using actuarial assumptions which due to the timescale covered may not necessarily be borne out in practice. Chemetall PLC Page 33 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Scheme assets The fair value of the assets in the schemes (which are not intended to be realised in the short term and may be subject to significant change) and the present value of the schemes liabilities (which are derived from cash flow projections over long periods and thus are inherently uncertain) were: Value at 31 December Value at 31 December Value at 31 December 2006 2005 2004 Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink #000 #000 #000 #000 #000 #000 Market value 22,765 3,148 22,014 3,020 19,016 2,777 of assets Present value of scheme (29,389) (3,836) (29,737) (4,006) (27,156) (3,541) liabilities Deficit in the (6,624) (688) (7,723) (986) (8,140) (764) scheme Related deferred tax 1,987 206 2,317 296 2,442 229 asset Net pension liability (4,637) (482) (5,406) (690) (5,698) (535) Chemetall PLC Page 34 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Operating results and other disclosures 31 December 2006 Chemetall Process Ink Total UK Scheme Pension Scheme #000 #000 #000 Analysis of the amount charged to operating loss Service cost (567) - (567) Past service cost - - - Total operating charge (567) - (567) Analysis of the net return: Expected return on the pension scheme assets 1,370 173 1,543 Interest on pension scheme liabilities (1,407) (187) (1,594) Net charge (37) (14) (51) Actuarial gain recognised in the statement recognised income and expense 1,095 223 1,318 Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 29,737 4,006 33,743 Service Cost 567 - 567 Interest Cost 1,407 187 1,594 Contributions by members 104 - 104 Actuarial (gains) and losses (1,188) (178) (1,366) Benefits paid (1,238) (179) (1,417) Closing defined benefit obligation 29,389 3,836 33,225 Changes in the fair value of Scheme assets are as follows: Opening fair value of Scheme assets 22,014 3,020 25,034 Expected return 1,370 173 1,543 Actuarial gains and (losses) (93) 45 (48) Contributions by employer 608 89 697 Contributions by members 104 - 104 Benefits paid (1,238) (179) (1,417) Closing fair value of Scheme assets 22,765 3,148 25,913 Chemetall PLC Page 35 Note to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Operating results and other disclosures 31 December 2005 Chemetall Process Ink Total UK Scheme Pension Scheme #000 #000 #000 Analysis of the amount charged to operating loss Service cost (567) (10) (577) Past service cost - - - Total operating charge (567) (10) (577) Analysis of the net return: Expected return on the pension scheme assets 1,231 168 1,399 Interest on pension scheme liabilities (1,420) (187) (1,607) Net charge (189) (19) (208) Actuarial gain recognised in the statement recognised income and expense 540 (205) 335 Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 27,156 3,541 30,697 Service Cost 567 10 577 Interest Cost 1,420 187 1,607 Contributions by members 108 2 110 Actuarial (gains) and losses 1,231 391 1,622 Benefits paid (745) (125) (870) Closing defined benefit obligation 29,737 4,006 33,743 Changes in the fair value of Scheme assets are as follows: Opening fair value of Scheme assets 19,016 2,777 21,793 Expected return 1,231 164 1,395 Actuarial gains and (losses) 1,771 192 1,963 Contributions by employer 633 10 643 Contributions by members 108 2 110 Benefits paid (745) (125) (870) Closing fair value of Scheme assets 22,014 3,020 25,034 Chemetall PLC Page 36 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Operating results and other disclosures 31 December 2004 Chemetall Process Ink Total UK Scheme Pension Scheme #000 #000 #000 Analysis of the amount charged to operating loss: Service cost (419) (9) (428) Past service cost - - - Total operating charge (419) (9) (428) Analysis of the net return: Expected return on the pension scheme assets 1,127 156 1,283 Interest on pension scheme liabilities (1,278) (176) (1,454) Net charge (151) (20) (171) Analysis of amount recognised in the statement of recognised income and expense Actual return less expected return on assets 1,042 189 1,231 Experience gains and losses on liabilities (168) (36) (204) Acquisitions (193) - (193) Changes in assumptions (2,856) (328) (3,184) Actuarial gain recognised in the statement of recognised income and expense (2,175) (175) (2,350) Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 21,520 3,110 24,630 Service Cost 419 9 428 Interest Cost 1,278 176 1,454 Contributions by members 89 2 91 Actuarial (gains) and losses 4,571 364 4,935 Benefits paid (721) (120) (841) Closing defined benefit obligation 27,156 3,541 30,697 Changes in the fair value of Scheme assets are as follows: Opening fair value of Scheme assets 15,604 2,543 18,147 Expected return 1,127 156 1,283 Actuarial gains and (losses) 2,396 189 2,585 Contributions by employer 89 7 96 Contributions by members 521 2 523 Benefits paid (721) (120) (841) Closing fair value of Scheme assets 19,016 2,777 21,793 Chemetall PLC Page 37 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Details of experience gain and 31 31 31 31 30 losses in the period: December December December December September 2006 2005 2004 2003 2002 #'000 #'000 #'000 #'000 #'000 Difference between the expected and actual return on assets 104 2,105 1,231 424 (1,561) Percentage of Assets 0% 10% 7% 2% (9)% Experience gains and losses on liabilities (363) 1,348 (204) 402 1,461 Percentage of present value of liabilities (1)% 4% (1)% 2% 6% Total amount recognised in statement of recognised income and expense (1,255) 975 (2,157) 173 298 The analysis of the scheme assets and expected return at the balance sheet date were as follows: Chemetall UK Pension Scheme Return at Value at 31 Return at Value at 31 Return at 31 Value at 31 31 December 31 December December December December 2006 December 2005 2004 2004 2006 2005 #000 #000 #000 Equities 8.10% 8,582 7.95% 9,446 7.75% 9,463 Corporate 5.10% 7,298 4.75% 7,496 5.25% 5,716 bonds Government bonds 4.60% 3,128 4.10% 3,225 4.50% 2,451 Property 8.10% 3,665 7.95% 1,704 7.75% 1,220 Cash 4.60% 92 4.10% 143 4.50% 166 Overall rate 6.70% 22,765 6.25% 22,014 6.50% 19,016 of return Process Ink Scheme Return at Value at 31 Return at Value at 31 Return at 31 Value at 31 31 December 31 December December December December 2006 December 2005 2004 2004 2006 2005 #000 #000 #000 Equities 8.10% 1,398 7.95% 1,322 7.75% 1,188 Corporate 5.10% - 4.75% - 5.25% - bonds Government bonds 4.60% 1,741 4.10% 1,684 4.50% 1,622 Property 8.10% - 7.95% - 7.75% - Cash 4.60% 9 4.10% 14 4.50% (33) Overall rate 6.10% 3,148 5.75% 3,020 6.00% 2,777 of return Chemetall PLC Page 38 Notes to the accounts Year ended 31 December 2006 27. Retirement benefit schemes (continued) Overall expected return on assets The overall expected return on assets is calculated as the weighted average of the expected returns on each individual asset class. Gilts 4.6% pa This is equal to the Gross Redemption Yield on Government Bonds at the end of 2006 at the duration relevant for the liabilities. Bonds 5.10% pa This is equal to the Gross Redemption Yield on AA rated bonds at the end of 2006 at the duration relevant for the liabilities. Cash 4.6% pa This is equal to the long-term return on Gilts which is, in theory, an accumulation of short-term interest rates. Equities 8.10% pa Aon have assumed the long-term return on UK equities by considering the income and capital appreciation elements of total return separately. At 31 December 2006, the net dividend yield on the FTSE all-share index was 2.9%. This provides the estimate of the income element. Aon have estimated the capital appreciation by assuming that UK equity prices will rise 2% pa faster than price inflation (which we assumed to be 3.2% pa). This reflects the fact that UK equity prices tend to increase in line with GDP growth over the long-term and this has historically been some 2%-2.5% pa in excess of price inflation. This leads to an overall assumption of 8.10% pa. Overseas equities and property 8.10% pa This reflects the fact that these assets are usually held to provide some diversification from holding exclusively UK equities. In fact, the expectations of return (in sterling terms) might be slightly higher in some markets (e.g. emerging markets) but due to the fact that the scheme doesn't hold a significant amount in such assets we have assumed that the same return for overseas equities as for UK equities. 28. Related party transactions Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the group and other related parties are disclosed below. Trading transactions During the year, group companies entered into the following transactions with related parties who are not members of this group: Sale of goods Purchase of goods Amounts owed by Amounts owed to related parties related parties 2006 2005 2006 2005 2006 2005 2006 2005 #000 #000 #000 #000 #000 #000 #000 #000 Fellow subsidiary undertakings 529 701 2,844 3,070 80 495 1,516 1,977 Sales and purchases of goods to related parties were made at the parent group's usual list prices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. During the year, other services such as licences, IT services and insurance were purchased from Chemetall GmbH in the amount of #413,000 (31 December 2005: #387,000). Chemetall PLC Page 39 Notes to the accounts Year ended 31 December 2006 28. Related party transactions (continued) Non-trading transactions The group has lent money to fellow subsidiaries undertakings. The outstanding loan balances and the interest charged on these loan balances are presented in the table below: Loans to Interest charged to 2006 2005 2006 2005 #000 #000 #000 #000 Fellow subsidiary undertakings 84,626 40,362 918 1,653 Remuneration of key management personnel The remuneration of the directors who are the key management personnel of the group are given in Note 6 29. Ultimate parent company and parent undertaking of larger group The Company is controlled by Chemetall GmbH, the immediate parent Company incorporated in Germany. The ultimate parent undertaking and controlling party is Rockwood Holding Inc, incorporated in USA. The largest group in which the results of the Group are consolidated is that headed by the ultimate parent undertaking. The smallest group in which they are consolidated is that headed by Rockwood Specialties Group Germany GmbH.. The consolidated accounts of Rockwood Specialties Group Germany GmbH are available to the public and may be obtained from Koenigsberger Strasse 1, 60487 Frankfurt amd Main. The consolidated accounts of Rockwood Holding Inc are available to the public and may be obtained from 100 Overlook Centre, Princeton, New Jersey, 08450, USA. 30. Post balance sheet events In February 2007 the company acquired the intellectual property, customer list, assets and inventories of the chemical business of Wirral Fospray Limited. The final cost of the acquisition including both intangible and tangible assets is estimated to be in the region of #950,000. Page 40 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC We have audited the individual company financial statements of Chemetall PLC for the year ended 31 December 2006 which comprise the balance sheet and the related notes 1 to 18. These individual company financial statements have been prepared under the accounting policies set out therein. We have reported separately on group financial statements of Chemetall PLC for the year ended 31 December 2006. This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the annual report and the individual company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the statement of directors' responsibilities. Our responsibility is to audit the individual company financial statements in accordance with relevant United Kingdom legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the individual company financial statements give a true and fair view in accordance with the relevant financial reporting framework and whether the individual company financial statements have been properly prepared in accordance with the Companies Act 1985. We report to you if, in our opinion, the directors' report is consistent with the individual company financial statements. We also report to you if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We read the directors' report and the other information contained in the annual report for the above year as described in the contents section and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the individual company financial statements. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the individual company financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the individual company financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the individual company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the individual company financial statements. Opinion In our opinion: the individual company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 December 2006; the individual company financial statements have been properly prepared in accordance with the Companies Act 1985; and the information given in the Directors' Report is consistent with the parent company financial statements. Deloitte & Touche LLP Chartered Accountants and Registered Auditors St Albans, United Kingdom Chemetall PLC Page 41 Company balance sheet 31 December 2006 Note 31 December 2006 31 December 2005 (restated) #000 #000 #000 #000 Fixed assets Intangible assets 4 2,286 2,588 Tangible assets 5 1,196 1,250 Investments 6 33,022 33,022 36,504 36,860 Current assets Stocks 7 1,443 1,346 Debtors 8 50,140 5,717 Cash at bank and in hand 2,132 43,194 53,715 50,257 Creditors: amounts falling due 9 (7,768) (6,841) within one year Net current assets 45,947 43,416 Total assets less current liabilities 82,451 80,276 Creditors: amounts falling due 10 (12,000) (12,000) after one year Provisions for liabilities and charges 11 (1,299) (1,383) Retirement benefit obligation 16 (4,669) (5,640) Net assets 64,483 61,253 Capital and reserves Called up share capital 12 6,889 6,889 Share premium account 13 29,757 29,757 Revaluation reserve 13 28,582 28,582 Profit and loss account 13 (745) (3,975) Shareholders' funds 14 64,483 61,253 These financial statements were approved by the Board of Directors on 23 April 2007. Signed on behalf of the Board of Directors Rob Rydings Director Chemetall PLC Page 42 Notes to the accounts Year ended 31 December 2006 1. Accounting policies The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The particular accounting policies adopted are described below. Turnover Turnover comprises the amounts receivable for the supply during the year of speciality chemicals and ancillary equipment, excluding value added tax and overseas sales taxes. Foreign Currencies Transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs or at the contracted rate if the transaction is covered by a forward exchange rate contract. Assets and liabilities denominated in a foreign currency are translated at the exchange rate ruling on the balance sheet date or if appropriate at a forward contract rate. Exchange differences are included in the profit and loss account except that, where foreign currency borrowings have been used to finance equity investments in foreign currencies, exchange differences arising on the borrowings are dealt with through reserves to the extent that they are covered by exchange differences arising on the net assets represented by the equity investments. The accounts of overseas subsidiary and associated undertakings are translated into sterling in the consolidated accounts on the following basis: Profit and loss account items are translated at the average rate of exchange for the financial year. Assets and liabilities are translated at the rate of exchange ruling on the balance sheet date. Leases Operating lease rentals are charged to the profit and loss account on a straight line basis over the period of the lease. Provisions A provision is created and recognised as a liability only when the Company has a present obligation (legal or constructive) as a result of a past event and it is expected that a transfer of economic benefit will be required to settle that obligation and a reliable estimate of the amount of that transfer can be made. Vacant leasehold properties A provision is maintained in respect of vacant leasehold properties to take account of the net present value of the residual lease commitments over the long term planning period of five years or, if earlier, the period until which the Directors expect the properties to be sub-let. In determining the net present value, cash flows have been discounted using an appropriate nominal, risk-free, pre-tax rate of return (UK gilt for a 5 year period). Capitalisation of software Purchased software costs are capitalised and included within fixtures, fittings and equipment and depreciated in equal instalments over their estimated useful lives. Tangible fixed assets and depreciation Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over their estimated useful economic lives as follows: Short leasehold property - Life of the lease Plant, machinery and equipment - 10-33% per annum Fixtures and fittings - 20% per annum No depreciation is provided on freehold land. Chemetall PLC Page 43 Notes to the accounts Year ended 31 December 2006 1. Accounting policies (continued) Intangible fixed assets - patents and concessions Patent costs are amortised in line with the stated life of the patents, between 1 and 20 years. Goodwill On acquisition, the fair value of net assets is assessed and adjustments are made to bring the accounting policies of businesses acquired into alignment with those of the Company. The difference between the price paid for new interests and the fair value of identifiable net assets acquired is capitalised and amortised over its useful economic life, depending on the nature of the acquisition for a period not exceeding twenty years. Any costs of integrating the acquired business are taken to the profit and loss account. Goodwill relating to acquisitions prior to 5 April 1998, the date that Financial Reporting Standard No 10: Goodwill and Intangible Assets (FRS 10) became applicable to the company, has been written off to reserves. Goodwill previously eliminated against reserves is charged to the profit and loss account in so far as it relates to disposals in the year. Shares in subsidiary undertakings and fixed asset investments Shares in subsidiary undertakings are included in the Company's balance sheet at directors' valuation. Chemetall PLC Page 44 Notes to the accounts Year ended 31 December 2006 1. Accounting policies (continued) Impairment of fixed assets and goodwill Fixed assets and goodwill are reviewed for impairment if events or changes in circumstances indicate that the carrying value of the fixed assets or goodwill may not be recoverable. The carrying amount is compared to the recoverable amount, defined as the higher of net realisable value and value in use. If the carrying amount exceeds the recoverable amount, the asset is written down accordingly. Pension The company operates pension schemes providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of the company. FRS 17 Retirement Benefits has been adopted during the year and as a result the defined benefit pension liability is now recognised on the balance sheet. Research and development expenditure Expenditure on research and development is written off to the profit and loss account in the year in which it is incurred. Stocks Stocks are stated at the lower of cost and net realisable value. For work in progress and finished goods, cost is taken as production cost, which includes an appropriate proportion of attributable overheads. Work in progress is stated after deduction of any progress payments received. Deferred taxation Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. 2. Profit of the company The company has taken advantage of Section 230 of the Companies Act 1985 and consequently the profit and loss account of the parent company is not presented as part of these financial statements. The profit of the parent company for the financial year amounted to #2,352,000 (2005: profit #2,317,000). Chemetall PLC Page 45 Notes to the accounts Year ended 31 December 2006 3. Staff numbers and costs The average number of persons employed by the company (including directors) during the period, analysed by category, was as follows: Number of employees Year ended Year ended 31 December 2006 31 December 2005 Specialised Industrial Chemicals 93 94 The aggregate payroll costs of these persons were as follows: Year ended 31 December 2006 Year ended 31 December 2005 #000 #000 Wages and salaries 3,242 3,624 Social security costs 373 367 Other pension costs 657 801 4,272 4,792 Chemetall PLC Page 46 Notes to the accounts Year ended 31 December 2006 4. Intangible fixed assets Customer Patents and contracts concessions Goodwill Total #000 #000 #000 #000 Cost At 1 January 2006 and 31 December 2006 250 1,108 3,000 4,358 Amortisation At 1 January 2006 (130) (815) (825) (1,770) Charged in year (120) (32) (150) (302) At 31 December 2006 (250) (847) (975) (2,072) Net book value at 31 December 2006 - 261 2,025 2,286 Net book value at 31 December 2005 120 293 2,175 2,588 Patents and trademarks are amortised over their estimated useful lives, until expiry of legal rights. Historically, #10,597,000 of goodwill has been written off directly to the profit and loss reserve as a matter of accounting policy. 5. Tangible fixed assets Leasehold Fixtures, land and Plant and fittings, tools Total buildings machinery and equipment #000 #000 #000 #000 Cost At 1 January 2006 2,481 2,370 779 5,630 Additions 87 43 - 130 At 31 December 2,568 2,413 779 5,760 2006 Depreciation At 1 January 2006 (1,562) (2,047) (771) (4,380) Charge for the (130) (49) (5) (184) year At 31 December (1,692) (2,096) (776) (4,564) 2006 Net book value At 31 December 876 317 3 1,196 2006 At 31 December 919 323 8 1,250 2005 Chemetall PLC Page 47 Notes to the accounts Year ended 31 December 2006 6. Fixed asset investments Shares in Group Undertaking #000 Company Cost or valuation and net book value At beginning and end of year 33,022 Investments are carried at directors' valuation. The original cost of the investments was #4,440,000 with the revaluation surplus of #28,582,000 being taken to the revaluation reserve. The undertakings in which the Company's interest at the period end is more than 20% are as follows: Country of Principal Voting Class and percentage of incorporation activity power shares held held Company Subsidiary undertakings AM Craig Ltd England Holding 100% 100% ordinary company Brent International BV The Netherlands Investment 100% 100% ordinary company 7. Stocks 31 December 2006 31 December 2005 #000 #000 Raw materials and consumables 403 355 Work in progress 20 13 Finished goods and goods for resale 1,020 978 1,443 1,346 Chemetall PLC Page 48 Notes to the accounts Year ended 31 December 2006 8. Debtors 31 December 2006 31 December 2005 #000 #000 Amounts falling due within one year: Trade debtors 2,995 3,183 Amounts due from group undertakings 44,533 822 Prepayments and accrued income 151 274 Deferred tax (see below) 2,461 1,438 50,140 5,717 Amounts due from group undertakings are due on or before 31 December 2007 (2005: 31 December 2006), unless those parties agree to extend the terms. Deferred taxation The amounts provided for deferred taxation and the amounts not provided are set out below: 31 December 2006 31 December 2005 Recognised Unrecognised Recognised Unrecognised #000 #000 #000 #000 Accelerated capital allowances 127 - 62 - Short-term timing differences 393 - 425 - Tax losses carried forward 1,941 725 951 2,155 2,461 725 1,438 2,155 Retirement benefit obligations * 2,000 - 2,418 - Deferred tax asset 4,461 725 3,856 2,155 *The deferred tax asset in respect of retirement benefit obligations has been offset against the liability. 9. Creditors: amounts falling due within one year 31 December 2006 31 December 2005 #000 #000 Trade creditors 1,619 1,181 Amounts owed to group undertakings 2,693 2,764 Taxation 1,172 343 Accruals and deferred income 1,744 2,013 Preference dividend 540 540 7,768 6,841 Chemetall PLC Page 49 Notes to the accounts Year ended 31 December 2006 10. Creditors: amounts falling due after one year 31 December 2006 31 December 2005 No. #000 No. #000 Authorised Non-equity: 9% redeemable preference shares of #1 each 15,000,000 15,000 15,000,000 15,000 Allotted, called up and fully paid Non equity: 9% redeemable preference shares of #1 each 12,000,000 12,000 12,000,000 12,000 The Company issued 12,000,000 9% redeemable preference shares of #1 each. These preference shares entitle their holders to a fixed cumulative preference dividend at a rate of 9% per annum, per share. On a winding up the preference shareholders are entitled to a sum equal to the nominal capital paid up or credited as paid up, on the preference shares held by them, together with all arrears (if any) of the preference dividend. They carry the right to receive notice of, or attend, or vote at General Meetings only in special circumstances such as when the preference dividend is six months or more in arrears or if redemption has not been made on the due date, or in such cases as a winding up of the Company or a reduction in its share capital. The preference shares have to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are presented as "Creditors: amounts falling due after one year" in the balance sheet to comply with FRS 25 "Financial Instruments: Disclosure And Presentation". 11. Provisions for liabilities and charges Vacant property provision Other provision Total #000 #000 #000 At 1 January 2006 1,244 139 1,383 Utilisation in the year (33) (51) (84) At 31 December 2006 1,211 88 1,299 12. Called up share capital 31 December 2006 31 December 2005 No. #000 No. #000 Authorised Equity: Ordinary shares of 10p 91,948,000 9,195 91,948,000 9,195 each Allotted, called up and fully paid Equity: Ordinary shares of 10p 68,888,817 6,889 68,888,817 6,889 each The 9% redeemable preference shares are presented as "Creditors: amounts falling due after one year" in the balance sheet to comply with FRS 25 "Financial Instruments: Disclosure And Presentation". Chemetall PLC Page 50 Notes to the accounts Year ended 31 December 2006 13. Share premium and reserves Revaluation Share Profit reserve premium and loss #000 account account #000 #000 At 1 January 2006 28,582 29,757 (3,975) Retained profit for the year - - 2,352 Retirement benefit obligations - - 878 At 31 December 2006 28,582 29,757 (745) Cumulative goodwill resulting from acquisitions made prior to 31 December 1998 of #10,597,000 has been written off to the profit and loss account reserve of the Company as at 31 December 2004 and 31 December 2003. At 31 December 2006, the realised distributable reserves of the company amounted to #4,210,000 (2005: #1,510,000). 14. Reconciliation of movements in shareholders funds 31 December 31 December 2005 2006 #000 #000 At 1 January 61,253 76,447 Reclassification of preference shares as a financial liability - (12,000) Retirement benefit obligations - (6,233) At 1 January 61,253 58,214 Profit for the year 2,352 2,317 Retirement benefit obligations 878 722 At 31 December 64,483 61,253 The amounts were restated in 2005 to show the effect of the following changes: Preferrence shares of #12,000,000 were re-classed in previous year from equity to liabilities in line with FRS 25. Retirement benefit obligation was reclassified in line with FRS 17. Chemetall PLC Page 51 Notes to the accounts Year ended 31 December 2006 15. Commitments Annual commitments under non-cancellable operating leases are as follows: 31 December 31 December 31 December 31 December 2006 2006 2005 2005 Land and Other Land and Other Buildings #000 Buildings #000 #000 #000 Operating leases which expire: Within one year - 55 4 263 In the second to fifth years inclusive 14 99 35 236 Over five years 442 - 441 - 456 154 480 499 16. Pension scheme The company operated two funded defined benefit schemes which provide for their liabilities through trustee operated funds. In July 2004, the remaining active members of the Metallgesellschaft Group Pension Scheme were transferred to the Chemetall UK Pension Scheme, which provides benefits based on final pensionable pay, at a cost of #800,000. The assets of the scheme are held separately from those of the company in a trustee administered fund. The trustees comprise senior group employees and the assets are managed by Legal & General Assurance (Pensions Management ) Limited. Contributions to the scheme are charged to the profit and loss account so as to spread the costs of pensions over employees working lives within the company. The company does not have any health and medical plans providing post-retirement benefits. The pension costs relating to the Chemetall UK and Process Ink schemes are assessed in accordance with the advice of Aon Limited, the independent actuaries, using, in the case of the Chemetall UK scheme, the projected unit method. The table below illustrates that, under the Minimum Funding Requirement (MFR), the Process Ink Scheme (which is a paid-up scheme from 30 June 1999, with the exception of one member who is in receipt of ill health benefits and as a result continues to accrue pension benefits) has deficits in relation to current accrued benefits. This deficit is being funded by monthly contributions (up to 19 November 2012) of #300. The Chemetall UK scheme was sufficiently funded under the MFR. Chemetall PLC Page 52 Notes to the accounts Year ended 31 December 2006 16. Pension scheme (continued) Scheme Last Assumed Average Total Funding level value actuarial Investment salary market of assets as valuation Return per increase per value of percentage of annum annum assets liabilities at latest valuation dates Chemetall UK 1 January 6% 4% #14.9m(3) 92% Pension 2005 scheme Process Ink Company Limited Pension and 1 January 9%(1) 4%(2) #2.9m 102% Death 2005 Benefits Plan (1) The rate of return is assumed to reduce to 8% per annum from each member's normal retirement age. (2) This is the assumed rate of revaluation of deferred pensions up to normal retirement date. (3) The market value of the assets includes additional voluntary contributions. The pension increases were assumed to be equal to those specified in the rules of the schemes. Pension increases in payment in line with retail prices but capped at 5% were assumed to be 3% per annum (31/2% for the Process Ink Scheme) and pensions increasing in line with retail prices without a cap were assumed to be 3% per annum (4% for the Process Ink Scheme). *For the Chemetall UK scheme, this gives an indication of the extent to which the actuarial value of the assets secure the benefits that have been accrued to members allowing for expected future statutory revaluations to deferred pensions. Chemetall PLC Page 53 Notes to the accounts Year ended 31 December 2006 16. Pension scheme (continued) Included in the balance sheet at 31 December 2006 is a pension accrual of #nil (31 December 2005: #126,000) in respect of a deferred pensioner who, under the terms of the severance agreement, had the option to retire before the normal retirement dates on enhanced benefits. The major assumptions used in the FRS 17 valuation were: 31 31 31 December December December 2004 2006 2005 #000 #000 #000 Rate of increase in salaries 4.7% 4.5% 4.5% Rate of increase in pensions in payment - Ex Brent members pre '97 Nil Nil Nil - Ex Winnets members pre '97 3.0% 3.0% 3.0% - Process directors 8.5% 8.5% 8.5% - All post '97 3.0% 3.0% 3.0% Discount rate 5.1% 4.75% 5.25% Inflation assumptions 3.2% 3.0% 3.0% The rates used have been chosen from a range of possible amounts determined using actuarial assumptions which due to the timescale covered may not necessarily be borne out in practice. Scheme assets The fair value of the assets in the schemes (which are not intended to be realised in the short term and may be subject to significant change) and the present value of the schemes liabilities (which are derived from cash flow projections over long periods and thus inherently uncertain) were: Value at 31 December Value at 31 December Value at 31 December 2006 2005 2004 Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink #000 #000 #000 #000 #000 #000 Market value 22,765 3,148 22,014 3,020 19,016 2,777 of assets Present value of scheme (28,746) (3,836) (29,086) (4,006) (27,156) (3,541) liabilities Deficit in the (5,981) (688) (7,072) (986) (8,140) (764) scheme Related deferred tax 1,794 206 2,122 296 2,442 229 asset Net pension liability (4,187) (482) (4,950) (690) (5,698) (535) Chemetall PLC Page 54 Notes to the accounts Year ended 31 December 2006 16. Pension scheme (continued) Operating results and other disclosures Chemetall Process Ink 31 UK Scheme December Pension 2006 Scheme #000 Total #000 #000 Analysis of the amount charged to operating profit: Service cost (567) - (567) Past service cost - - - Total operating charge (567) - (567) Analysis of the net return: Expected return on the pension scheme assets 1,370 173 1,543 Interest on pension scheme liabilities (1,407) (187) (1,594) Net charge (37) (14) (51) Analysis of amount recognised in the statement of total recognised gains and losses: Actual return less expected return on assets 59 45 104 Experience gains and losses on liabilities (315) (48) (363) Changes in assumptions 1,288 226 1,514 Actuarial loss recognised in the statement of total recognised gains and losses 1,032 223 1,255 Movement in deficit during the period: Deficit at 31 December 2005 (7,072) (986) (8,058) Movement in the period: Current service cost (553) - (553) Contributions 608 89 697 Net interest cost 4 (14) (10) Actuarial gain 1,032 223 1,255 Deficit at 31 December 2006 (5,981) (688) (6,669) Details of experience gain and losses in the period: Difference between the expected and actual return on assets 59 45 104 Percentage of Assets 0% 1% 0% Experience gains and losses on liabilities (315) (48) (363) Percentage of present value of liabilities (1)% (1)% (0)% Total amount recognised in statement of total recognised gains and losses 1,032 223 1,255 Percentage of present value of liabilities 4% 6% 4% Chemetall PLC Page 55 Notes to the accounts Year ended 31 December 2006 16. Pension scheme (continued) Operating results and other disclosures Chemetall Process Ink 31 UK Scheme December 2005 Pension #000 Total Scheme #000 #000 Analysis of the amount charged to operating loss: Service cost (554) (10) (564) Past service cost - - - Total operating charge (554) (10) (564) Analysis of the net return: Expected return on the pension scheme assets 1,231 164 1,395 Interest on pension scheme liabilities (1,420) (183) (1,603) Net charge (189) (19) (208) Analysis of amount recognised in the statement of total recognised gains and losses: Actual return less expected return on assets 1,913 192 2,105 Experience gains and losses on liabilities 1,405 (57) 1,348 Changes in assumptions (2,140) (338) (2,478) Actuarial gain/(loss) recognised in the statement of total recognised gains and losses 1,178 (203) 975 Movement in deficit during the period: Deficit at 31 December 2004 (8.140) (764) (8,904) Movement in the period: Current service cost (554) (10) (564) Contributions 633 10 643 Net interest cost 189 19 208 Actuarial gain/(loss) 1,178 (203) 975 Deficit at 31 December 2005 (7,072) (986) (8,058) Details of experience gain and losses in the period: Difference between the expected and actual return on assets 1,913 192 2,105 Percentage of Assets 9% 6% 10% Experience gains and losses on liabilities 1,405 (57) 1,348 Percentage of present value of liabilities 5% (1)% 4% Total amount recognised in statement of total recognised gains and losses 1,178 (203) 975 Percentage of present value of liabilities 4% (5)% 3% Chemetall PLC Page 56 Notes to the accounts Year ended 31 December 2006 16.Pension scheme (continued) Operating results and other disclosures Chemetall Process Ink 31 UK Scheme December 2004 Pension #000 Total Scheme #000 #000 Analysis of the amount charged to operating profit: Service cost (419) (9) (428) Past service cost - - - Total operating charge (419) (9) (428) Analysis of the net return: Expected return on the pension scheme assets 1,127 156 1,283 Interest on pension scheme liabilities (1,278) (176) (1,454) Net charge (151) (20) (171) Analysis of amount recognised in the statement of total recognised gains and losses: Actual return less expected return on assets 1,042 189 1,231 Experience gains and losses on liabilities (168) (36) (204) Changes in assumptions (2,856) (328) (3,184) Actuarial (loss)/gain recognised in the statement of total recognised gains and losses (1,982) (175) (2,157) Movement in deficit during the period: Deficit at 31 December 2003 (5,916) (567) (6,483) Movement in the period: Current service cost (419) (9) (428) Contributions 521 7 528 Net interest cost (151) (20) (171) Aquisitions (193) - (193) Actuarial (loss)/gain (1,982) (178) (2,157) Deficit at 31 December 2004 (8,140) (764) (8,904) Chemetall PLC Page 57 Notes to the accounts Year ended 31 December 2006 16. Pension scheme (continued) Details of experience gain and 31 31 31 31 30 losses in the period: December December December December September 2006 2005 2004 2003 2002 #'000 #'000 #'000 #'000 #'000 Difference between the expected and actual return on assets 104 2,105 1,231 424 (1,561) Percentage of Assets 0% 10% 7% 2% (9)% Experience gains and losses on liabilities (363) 1,348 (204) 402 1,461 Percentage of present value of liabilities (1)% 4% (1)% 2% 6% Total amount recognised in statement of recognised income and expense (1,255) 975 (2,157) 173 298 The analysis of the scheme assets and expected return at the balance sheet date were as follows: Chemetall UK Pension Scheme Return at Value at Return at Value at Return at Value at 31 December 31 31 December 31 31 December 31 2006 December 2005 December 2004 December 2006 2005 2004 #000 #000 #000 Equities 8.1% 8,582 7.95% 9,446 7.75% 9,643 Corporate 5.1% 7,298 4.75% 7,496 5.25% 5,716 bonds Government bonds 4.6% 3,128 4.10% 3,225 4.50% 2,451 Property 8.1% 3,665 7.95% 1,704 7.75% 1,220 Cash 4.6% 92 4.10% 143 4.50% 166 Overall rate 6.7% 22,765 6.25% 22,014 6.50% 19,016 of return Process Ink Scheme Return at Value at Return at Value at Return at Value at 31 December 31 31 December 31 31 December 31 2006 December 2005 December 2004 December 2006 2005 2004 #000 #000 #000 Equities 8.1% 1,398 7.95% 1,322 7.75% 1,188 Corporate 5.1% - 4.75% - 5.25% - bonds Government bonds 4.6% 1,741 4.10% 1,684 4.50% 1,622 Property 8.1% - 7.95% - 7.75% - Cash 4.6% 9 4.10% 14 4.50% (33) Overall rate 6.1% 3,148 5.75% 3,020 6.00% 2,777 of return Chemetall PLC Page 58 Notes to the accounts Year ended 31 December 2006 17. Ultimate parent company The Company is controlled by Chemetall GmbH, the immediate parent Company incorporated in Germany. The ultimate parent undertaking and controlling party is Rockwood Holding Inc, incorporated in USA. 18. Related party transactions The company has taken the exemption in FRS 8 "Related party transactions" and therefore no transaction with group undertakings has been disclosed. This information is provided by RNS The company news service from the London Stock Exchange END FR BDGDSSBBGGRC
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