Document j2NZrr6roR0L8ZYdgKqBGZd9

urn 1 I PLAINTIFF'S EXHIBIT 'CTIr9S8 ,. ' ':'VD -^//3y ) '5_'Ssjy CONFORMED COPY FORM 20-K Tr- : Or, SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 l5 ANNUAL REPORT PURSUANT TO SECTIONS 13 AND 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. :!\/ For the fiscal year ended 31 December lS^S Commission file number 2-53436 IMPERIAL CHEMICAL INDUSTRIES LIMITED (Exact name of registrant as specified in its charter) Imperial Chemical House, Millbanb, London, SWlP 3J7 (Address of principal executive offices) SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None. SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: None. ITEM 1. CHANGES IN OWNERSHIP AND CONTROL ) Describe briefly any material changes, not previous.,y reported, in the ownership or control exercisec by any person or government over the registrant. None. ( ) State the name of any person or government, not previously reported _in this connection, which directly o.r indirectly owns or controls the registrant and describe briefly the nature of such control. None. ITEM 2. CHANGES IN CHARACTER OF BUSINESS Describe briefly any material changes, not previously reported, in the general character of the business done by the registrant and its subsidiaries. None. ITEM 2. CHANGES IN PROPERTY Describe briefly any significant and unusual additions, abandonments or retirements of, or any significant and unusual changes, not previously reported, in the general character and location of principal plants and other important units of the registrant and its subsidiaries. None. ITEM 4. MODIFICATION OF SECURITIES OF REGISTRANT If any material modifications, not previously reported, have been made in any security, a description of which has been previously reported, or have been made in the indenture, charter, or other constituent instrument defining rights of the holders of such security, give the title of he issue and state briefly the general effect of such modifications. None. 1 ITEM 5 (a) LIMITATIONS AFFECTING SECURITY HOLDERS Outline briefly the provisions of any law or decree not previously reported, and any amendment not previously reported to any law or decree previously reported, determining' the extent to which dividends or other payments upon any class of registered securities may be pniu to foreign holders and the withholding of taxe?; from such payments. None. (b) Outline briefly any limitations, not previously reported, imposed either by the law of the country in which the registrant was organized or the charter or other constituent documents of the registrant on the right of foreigners to hold or vote any class of registered securities. None. ITEM 6. SECURITIES OF OTHER ISSUERS GUARANTEED BE REGISTRANT If the registrant has guaranteed any class of securities of any other issuer, furnish the following information: (a) Ouuli.ne briefly any material modifications, not previously reported, in any such contract of guarantee previously reported. None, (b) As to guarantees not previously reported, state the name of the issuer and the title and amount of securities guaranteed and outline briefly the contract of guarantee. Data Amount Description of Transaction January 2, 1976 US$9, 500,000 Guarantee by ICI of 50% of indebtedness of Rubicon Chemicals, Inc., under 3ank Loan Agreement. January 22, 1976 80,000,000 Swiss Francs Guarantee by ICI of public Bond issue of ICI Finance (Netherlands) N.V. under written by Swiss Credit Bank. Swiss Bank Corporation and Dnion Bank of Switzerland. 2 ITEM 7. INCREASES AND DECREASES IN OUTSTANDING ECUITY SECURITIES (a) (b) 'c) (q) Give the following information as to all increases and decreases during the fiscal year in the amount of equity securities of the registrant outstanding: The title of the class of securities invo'ved; The date of the transaction; The amount of securities involved and whether an increase or a decrease; a brief description of the trar.s?ictiorx in which the increase or decrease occurred. If previously reported, the description may be incorporated by a specific reference to the previous filing- (a) Ordinary Stock l units (b) May 16 1976 to June 181976 (c) Increases of 61,759.105 (d) Incorporated by reference to Form 6-K filed for the month of May 1976. Ordinary Stock June IB 1976 3,676,216 Incorporated by reference to Form 6-K 1 units. - filed for the month o June 1976 (e) If the transaction involved a sale of securities which were not registered under the Securities Act of 1933, an indication of the exemption claimed and the facts relied upon to make the exemption available. If previously reported, the information may be incorporated by a specific reference to the previous filing. All such sales were exempt from the registration requirements of the Securities Act of 1933 as amended, as.not involving a public offering or sale in the United States of America. ITEM 8. EXCHANGE CONTROL Describe briefly any material changes, not previously reported, in existing foreign exchange controls or the adoption of new controls in the country under the laws of which the registrant was organized. None. k Aidnu Position with Registrant Lord ,Po lwexth A. Robertson Sir Franc!3 Sandi 1>i~ida A. Spinks J.O. Cousin A.W. Clements 3.J.W. Wintsrbothan D.H. Henderson Sir Cyril Pitts J.A.G. Coates A. Conlong J.P.M. Bell J. Lister D.S. Davies G.S. Roberts H.B. Smith Bank of Scotland, 38 St Andrew Square, Edinburgh !H2 2YR. Director (Hon-Executive) Imperial Ctesdcal House, MHIbark, London SW.P 3J7. Director Ccnsaerciul Union Director (non Assurance Co. Ltd, executive) . St Eelen's, 1 Ondershaft, London 3C3P 3DQ. Imperial Cheat cal House, Millbank, T^ir.dnn SWlP 3JP. Director Imperial Cheat cal House, Millbank, London SWlP 3J7. Secretary Imperial Chemical House, Milliank, London SWlP 3JF- Imperial chemical House, .Mi.Ubank, London Sh'lP 3JT, Imperial Cheatcal Eouse, Millbank, London SWlP 3JF. Treasurer Solicitor General Manager Commercial Imperial Chemical House, Millbank, London SWlP 3J7. General Manager International Co-ordination. Imperial Chemical House, Millbank, London SWlP 3-TP. General Manager In-osrnationai Personnel Co-ordination Imperial Chemical Houser Millbank, London SWlP 3JF. Geneial Manager Investments Imperial Chemical House, Millbank, London SWlp 3JF - General Manager - Personnel -(UK Operations) Imperial Chesri cal House, Millbank, London SWlP 3J"F. General Manager Planning Imperial Chemical ELiuse, Millbank, London SWlP 3JF. General Manager Research and Development. Agricultural Division, Ed. 1J. ogham, Cleveland, TS23 1LB. Fibres Division. SS Knightsbrioge, London SW1X TuS 6 AgxicJLural Division Chat nwin Fibres Division fh)i TTI r rV V-* % ^ \*'VV W> | ? ( f REPORT OF INDEPENDENT ACCOUNTANTS To the Members of Imperial Cnemical Industries Limited We have examined the financial statements expressed in pounds sterling, as listed m the accompanying index,of Imperial Chemical Industries Limited and Imperial Chemical Industries Limited and its subsidiaries. Our examinations of these statements were made in a-.cordaroe with generally accepted auditing standards and accordingl y included such tests of the accounting records and such other auditin S procedures as we considered necessary in the circumstances. We did not examine the financial statements of one operating division, certain consolidated subsidiaries and one principul associated company which reflect net assets constituting approximately 20 per cent of consolidated net assets at December 31, 1976 and December 31 1975 and sales constituting approximately 30 per cent of the related consol idated sales for each of the two years ended December 31, 1976. These statements were examined by other independent accountants whose reports thereon have been furnished to us and our opinion expressed herein, insofar as :t relates to the amounts included for such division, subsidiaries and principal associated company, is based solely upon the reports of the other independent accountants. In our opinion, based on our examinations and the aforementioned reports of other independent accountants, the financial statements referred to m the first paragraph., which have been prepared under the historical cost convention as modified by the revaluation of certain assets, present fairly under that convention, the financial position of Imperial Chemical Industries Limited and of Imperial Chemical Industries Limited and its subsidiaries at December 31, 1976 and December 31, 1975 and the results of their operations and the changes in financial position for the years then ended, in conformity with accounting principles generally accepted in the United Kingdom which have been consistently applied, after restatement for the change, with which we concur, described in Note B of Notes to Financial State ments . Such principles vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the deterai naticr. of consolidated net income for the two years ended December 31, 1976 to the extent indicated m Note B of Notes to Financial Statements, and would have affected the determination of the consolldated financial position at December 311 1976 and at December 31, 1975 to the extent summarized in Note U of Notes to Financial Statements. PRICE WATERHOUSE i CO London, England March 3, 1977, except as in note 0, which is at June 13, 1977 12 THOMSON McLINTOCK & Co REPORT OP INDEPENDENT ACCOUNTANTS The Board of Directors, Imperial Metal Industries Limited, We have examined the Consolidated Balance Sheet of Imperial Metal Industries Limited (a 62.8 per cent subsidiary of Imperial Chemical Industries Limited) and its subsidiaries at December JlaX, 1976 and 1975 and the related statements of income for the years then ended, which statements are not separately presented in this Form 20-K. Our examinations of these s atements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing proce dures as wo considered necessary in the circumstances. Ve did not examine the financial statements for the aforementioned two years for the following consolidated subsi diary companies, IMI Refinery Holdings Limited, EG Refiners Limited and Wolverhampton Metal Limited, which statements were examined by other independent accountants, whose reports thereon have been fumi3hed to us. Our opinion, expressed on the consolidated statements in so far as it relates to the amounts iricluded for such subsidiaries, is based solely.upon such reports. In our opinion, based upon our examination and the afore mentioned reports of the other independent accountants, the aforementioned consolidated financial statements present fairly the financial position of Imperial Metal Industries limited and its subsidiaries at December 31"*, 1976 and 1975 and the results of its operations for the years then ended in conformity with accounting principles generally accepted in the United Kingdom consistently applied during such two years. Birmingham, England February 18, 1977 PEAT, MARWICK, MITCHELL & CO. r i c i l kn t t ! IMT-ERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT Of INCOME (expressed in US dollars! Sales Year ended December 31 197g 197b (? illiop. except per share amounts! 5,319 7,029 Coat of Sales, exclusive of depreciation Depreciation Selling, general an,. administrative expenses Gain on foreign currency translation Royalty Income Other income (net) 3,5^8 309 975 (49) (24) (32) 4,525 349 1,338 (99) (22) (43) 4,727 6,048 Trading Profit In--estment Income (Note C) Interest Expense (Note D) Employees' prtt-sharing bonus (Note E) Equity in earnings of principal associated companies before taxes 592 66 (124) (29) 505 4l 981 90 (158) (46) 867 51 Income before taxes, minority interests and extraordinary items Taxes cn income less grants (Note F) 546 213 918 364 Income before minority interests and 1 extraordinary items Minority interests 333 41 554 60 Income hefore extraordinary items Extraordinary items (Note G) 292 (2) 494 (78) Net income (Note 3) 290 416 Per l Ordinary Stock outstanding (Notes B and J): Income before extraordinary items Extraordinary items Net income Dividend (Note H) Average Ordinary Stock units outstanding * (millions) adjusted to give effect to the bonus element in the rights issue made in 1976 19 % -59 - % K% . 15) % -59 $ - 78 % .20 % .25 498 535 f i IMPERIAL CHEMICAL INDUSTRIES LIMITED AHD SUBSIDIARIES CONSOLIDATED STATEMENT Or FINANCIAL POSITION Current Assets: Cash Tine deposits Short-term Investments, at co.it which approximates market Receivable*; (Note K.) Inventories (Note L) Totnl Current Assets Current Liabilities: Pavable to EanJcs (Note M) Other Short-term BorroviDgs (Note M) Accounts Payable and Accrued Expenses Taxes Pavable (Note ?') Dividends Payable (Note N) Total Current Liabilities Net Current Assets Other Asuets: Interest in Subsidiary not consolidated (Note 0/ Other Non-current Investments (Note P and Schedule III) Goodvill (Note A (5)) Property, Plant and Equipment (Note Q and Schedules V and VI)(less accumulated depreciation of 1,459m -.1975) and l,743m ( 1976)) Assets Employed *t December 31 1975 197b (A Eli lion) 31 256 29 711 743 100 44 3 Si 925 908 l, 800 2,457 108 U2 523 97 24 794 1,006 125 JO 131 38 1,051 1,4o6 57 245 15 59 306 13 l,4?5 2,748 1,733 3,5 19 Financed by: Long-term Debt (Note R) Deferred Taxes (Note ?) Deferred Liabilities (Note Y) Grants Deferred Equity of Minority Shareholders in Subsidiaries Capital and Reserves: Preference Stock __ Ordinary Stock Premiums in Excess of Par Value of Ordinary Stock Income Retained and Other Reserves 810 212 8o 194 1,296 9 494 117 832 1,452 2,748 1,034 308 26 3? 234 1,687 9 559 258 1,006 1,832 3,519 Connitmentj and Contingent Liabilities (Notes S and T) 20 IMPERIAL CHEMICAL INDUSTRIES LIMI CEO AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FI.L\NCIAL POSITION ( Expr fss <>.d in US dollars) Current Assets: Cash Time Deposits Short-term Investments, at cost which approximates market Receivables (Note X) .'.nver tories (.Note L) Tr.t . i C-'urine Assets At December 31 -c>7? 1 '77 b Sf million) 37 452 49 1.209 1,263 3,060 170 "53 138 1,572 1,544 4,177 Current Liabilities: Payable to S?.nks (Note M) Other Short-term Borrowings (Note M) recount.* Payable and Accrued Expenses Taxes Payable iNote F) Dividends Payable (Note N) 184 71 889 165 41 Total Current Liabilities 1,350 Net Current Assets 1,710 Other Assets: Interest ir* Subsidiary not consolidated (Note 0) Other Non-cui i ent Investments (Note ? and 97 Schedule III) 417 Goodwill (Note A (5-) 26 Property, Plant and Equipment (Note o, and Schedul e V and VlMler.s accumulated depreciation of ?2,430ra (1975) and 22,963m (1976)) 2,422 Assets Employed 4,672 212 51 1,236 22 3 65 1,737 2,390 100 520 26 2,946 5,982 Financed by: I.cng-te.m Debt (Note R) Deterred Taxes (Note F) _ Deferred Liabilities (Note Y) Grants Deferred Equity of Minority Shareholders in Subsidiaries 1,377 360 - 136 330 2,203 Capital and Reserves: Preference Stock Ordinary Stock Premiums in Excess of Par Value of Ordinary Stock 15 840 199 Income Retained and Other Reserves 1,415 2,469 Commitments and Contingent Liabilities (Notes S and T) 4,672 1 1,753 524 44 144 3)8 2,868 15 950 439 1,710 3,114 - 5,982 IMPERIAL CHEMICAL INDUSTRIES LIMITED STATEMENT OF FINANCIAL POSITION - PARENT COMPANY Current Assets: Cash Short-term Investments, approximates market Receivables (Note K) Inventories (Note L) at cost which Total Current Assets Current Liabilities: Payable to Banks (Note M) Accounts Payable and Accrued Expenses Taxes Payable (Note F) Dividends Payable (Note N) Total Current Liabilities Net Current Assets Other Assets: Interestsin Subsidiaries (Note 0) Other Non-current Investments (Note P and Schedule III) Property, Plant and Equipment(Note Q and Schedules V and VT) (less accumulated depreciation of 904m(1975) and 1988m (1976)) Assets Employed At December 31 1975 197b (1 million) 22 22 51 314 65 56 387 389 510 49 218 38 24 329 60 725 73 43 29O 4p 38 421 89 947 88 779 1.637 902 2,026 Financed by: Long-term Debt (Note Deferred Taxes (Note Deferred Liabilities Grants Deferred R) F) (Note Y) 304 164 _ 76 327 237 26 82 544 672 Capital and Reserves: Preference Stock Ordinary Stock Premiums in Excess of Par value of Income Retained and Other Reserves Ordinary -93 494 559 Stock 117 258 473 528 1.093 1,637 1,35*1 2,026 Commitments and Contingent Liabilities (Notes S and T) 22 IMPERIAL CHEMICAL INDUSTRIES LIMITED STATEMENT OF FINANCIAL POSITION - PARENT COMPANY (Expressed in US Dollars) Current Assets: Cash Short-tem Investments, at cost which approximates market Receivables (Note K) Inventories (Note L) Total Current Assets At December 31 1975 197b {$ millionT 3 37 87 534 661 3 ill 95 658 36' Currenr Liabilities: Payable to Banks (Note M) accounts Payable and Acc ued Expenses Taxes Payable (Note.F) Dividends Payable (Note H) Total Current Liabilities 03 371 64 4l 559 Net CurrentAssets 102 Other Assets: Interests in Subsidiaries (Note 0) Other Non-current Investments (Note P and Schedule III) Property, Plant and Equipment (Note Q and Schedules V and VI)(less accumulated depreciation of jSl,537m ( 1973) and i?l,680m (1976)) Assets Employed 1,233 124 1,324 2,783 82 ^93 76 65 716 151 l,6l0 150 1,533 3,444 Financed by: Long-term Debt (Note Deferred Taxes (Note Deferred Liabilities Grants Deferred R) F) (Note Y) 517 279 _ 129 - 925 Capital and Reserves: Preference Stock Ordinary Stock Premiums in Excess of Par Income Retained and Other Value of Reserves Ordinary Stock 15 840 199 8o4 1,358 Commitments and Contingent Liabilities (Notes S and T) 2,783 556 403 44 139 1, 142 15 950 439 898 2,302 3,444 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS Year ended December 11 1975 1976 ( million! Source of funds: Income before extraordinary items Add/(Deauct) - Items not affecting funds: Amount applicable to minority interests Depreciation charged Current and deferred tax movements Government grant movements Equity in undistributed earnings of principal associated companies Other Total funds provided by operations Funds provided by extraordinary items Issues of Ordinary Stock Long-term debt issued Increase in minority interests in subsidiaries Deferred liabilities Application of funds: Dividend:..: 172 24 182 7 3 (9) 8 - 387 9 15 125 - 536 291 35 205 126 5 (4) 13 -- 671 - 206 124 10 26 1,037 ICI shareholders Minority Shareholders Additions to property, plant and equipment Repayments of long-term debt Other investments, including amounts applicable to purchased subsidiaries 59 11 332 26 38 - 466 Increase in Working Capital 70 83 14 438 12 62 -- 609 - 428 Composition of increase in Working Capital: Net liquid resources: Cash Time deposits Short-term investments Short-term borrowings Inventories Receivables Payables 2 17 11 (3D ( l) 67 58 (54) ---------- 70 49 177 52 (5) 273 159 206 (210) -- 428 24 IMPERIAL CHEMICAL INDUSTRIES LIMITED AHD SUBSIDIARIES CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS (Expressed in US dollars) Source of funds: Year ended December 31 1975 197^ (2 million) Income before extraordinary items Add/(Deduct) - Item:: not affecting funds: Amount applicabl e to mincrity -interests Depreciation charged Current and deferred tax movements Government grant movements Equity in undistributed earnings of principal associated companies Other Total funds provided by operations Funds provided by extraordinary items Issues of Ordinary Stock 2f2 4l 309 12 5 (15) 14 658 15 26 495 60 349 2l4 3 (7) 22 1,141 350 Long-cerm debt issued 212 211 Increase in minority interests in subsidiaries Deferred liabilities 9;i 17 ^ 1,763 Application of funds: Dividends: ICI shareholders Minority shareholders Additions to property, plant and equipment Repayments of long-term debt Other investments, including amounts applicable to purchased subsidiaries 100 19 564 44 65 Increase in Working Capital Composition of increase in Working Capital: Net liquid resources - 792 119 Cash Time deposits Short-term investments Short-term borrowings 3 29 19 (53) Inventories Receivables Payables (2) 114 99 (92) 119 l4l 24 745 20 105 1,035 728 83 301 88 (8) 464 271 350 (357) 728 25 IMPERIAL CHEMICAL INDUSTRIES LIMITED STATEMENT OF CHANGES IN CAPITAL STOCK AND PREMIUMS IN EXCESS OF PAR VALUE Authorised Share Capital of ICI at December tl, 1974 vas 522 million (2887 million). Effective April 2, 1975i it was increased to 575 million (978 million). It consisted of issued Ordinary and Prefer ence Stock (1 units) as set out below, the unissued balance at any time being unclassified. Share Premium Issued Stock: Balance at December i97** Issuance of Ordinary Stock in connection with: Employees' Profit-Sharing Plan Balance at December 3*i 1975 Issuance of Ordinary Stock in connection with: Rights Issue of 1 Stock unit for every eight units held Employees' Profit-Sharing Plan Balance at December J1, 1976 110 7 117 135 6 258 Issued Stock: Balance at December 31* 197** Issuance of Ordinary Stock in connection with: Employees' Profit-Sharing Plan Balance at December 31t 1975 Issuance of Ordinary Stock in connection with: Rights Issue of 1 Stock unit for every eight units held Employees' Profit-Sharing Plan Balance at December 31 1976 187 12 T99 2 30 10 439 Issued Capital Preference Stock 5^ Ordinary (now 3.5% Stock plus tax credit) _________________________________ cumulative ( million) 486 9 8 494 9 62 3 559 ($ million) 826 14 Mo _ * 9 15 _ 105 5 950 - - 15 There are no options, warrants or rights outstanding in respect of unissued shares. In the event of liquidation, the Preference Stock is repayable at par plus unpaid dividends accrued. 27 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMFERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS As used m the F itancia] otttements and related Notes, the tertrjs "ICI" and "Parent Company" refer to Imperial Chemical Industries Limited; the term "Group" refers to ICI and its Consolidated Subsidiaries but not to associated companies (see Note A(l))or to Carrington Viyella Limited, a subsidiary company which is not included m the consolidated financial statements (see Note 0). Note A - Accounting Policies The following paragraphs describe the significant accounting policies used in preparing the financial statements. Legislation or local usage precludes some overseas subsidiaries from conforming with certain of these policies and therefore, where appropriate, adjustments have been made on consolidation in order that the Group accounts are presented on a consistent basis . (1) Associated Companies and other Trade Investments An associated company is defined as a company, not being a subsidiary, in which the Group has a substantial interest and on whose commercial and financial policy decisions the Group exercises significant influence. The Group's share of the earnings of the principal associated companies is included in the Consolidated 5.tatement of Income. The earnings so included relate to periods ending not earlier than June 30 and are calculated from the latest available audited accounts adjusted, where the accounting dates are before June 30, by reference to the unaudited results for more recent periods. Earnings of other companies in which the Group has trade investments, including the smaller associated companies, are included only to the extent of dividends received. 28 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) The Group's share of the post-acquisition retained earning.! and reserves of the principal associated companies is included in the nook values of the invest ments in the Group balance sheet. The retained earnings of other ;nmpanies in which the Group has trade investments are included in the book values only to the extent of certain of the amounts of post-acquizition retained earnings capitalized by such companies; such amounts are credited to income retained and other reserves. (2) Composition of the Group The Group accounts consolidate the accounts of ICI and 517 subsidiaries. The only significant exclusions are Carrington Viyella Ltd and its subsidiaries (see Note 0). Owing to seasonal trade or local conditions and to avoid undue delay in the presentation of the Group accounts, the accounts of many subsidiaries (229 in 1976) are consolidated as of dates earlier than December 31. but not earlier than September 30. Comparative income statement figures for 1975 have been restated to include, or. a calendar year basis, the results of those subsidiaries whose accounting date changed m 1975 from 30 September to 31 December. Income before extraordinary items and the cnarge for extraordinary items have each been reduced by 3 million; net income is not affected. The accounts of subsidiaries acquired during any year are included in Group figures from the effective dates of acquisition. All material inter-company transactions, are eliminated on consolidation. (3) Deferred Taxes Deferred taxes are provided fer the difference between tax depreciation calculated at normal rates and actual tax depreciation claimed, the latter including amounts calculated on accelerated bases. 29 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Thus, an adjustment is made each year so that the aaiount charged in the accounts for UK tax represents the figure which would have applied had there been no accelerated tax depreciation deductions. No deferred taxes are provided in respect of the difference between normal tax depreciation and depreciation charred in the accounts." Adjustment is also made for taxes _n respect of income and expenditure dealt with for taxation purposes in a different year from that in which it is included for accounting purposes, including relief for the increased value of inventories (see Note F). Adjustments of a similar nature are made in the accounts of certain overseas subsidiaries. ) Depreciation The Group's policy is to write off the book value cf each fixed asset evenly ever its estimated remaining useful life; annual reviews are made of the residual lives of all productive assets, taking account of commercial and technical obsolescence as well as normal wear and tear. The preliminary results of the review of the residual lives of assets, which is in progress as part of the Company's consideration of the current cost basis of accounting, indicate that such lives may be longer than those at present adopted in the historical cost accounts (see Note 2). Depreciation on assets qualifying for investment grants or regional development grants is calculated on their full cost. Gains and losses on disposal of fixed assets are recognized in income. The cost of oil concessions is capitalized and written off over the expected period of exploration; expenditure on exploration is capitalized and written off immediately. Development expenditure is capitalized and depreciated over the productive life of the field. 30 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) (5) Goodwill On the acquisi tion of a business, fair values are attributed to the net assets acquired. Goodwill arises where the price paid for a business exceeds the values attributable to ouch net assets. Immaterial amounts arising each year on acquisition of minor businesses are written off. Goodwill associated with major acquisitions is copitaxized and retained in the statement of financial position unless it is determined that there is no continuing value, in which case the goodwill is written off. Except for that which arose on the acquisition of Atlas Chemical Indust ries Inc. in 1971 all goodwill arising in the parent company accounts and on consolidation has been written off. (6) Inventory Valuation In general, finished goods are stated at the lower of average cost or net realizable value, raw materials and other inventories at the lower of cost or replacement price. In determining cost for valuation purposes, selling expenses and certain overhead expenses (principaliv central administrative costs) are excluded. In accordance with Statement of Standard Accounting Practice No 9 issued by the UK accountancy bodies depreciation has been included for the first time and certain overhead expenses previously taken into inventory values have now besn excluded. The over all effect of this change is not significant. (7) Investment Grants A system of cash grants was introduced by the 'JK Govern ment in 1966 to replace, as an incentive to invest in new plant and equipment in development and other areeis, the investment and certain other taxation allowances available prior to 1966. 31 i I 1 s i I 1 i 1 I 1 I B I I B B B B B B IMPERIAL Ct.T.M [CA L rNDCSTHIES LIMITED A L' IMPERIAL CilcMITAL I`0!':T RIBS LIMITED A\'D SUBSIDIARIES 1 NOILS 1U FINANCIAL 5 FA TC T-i C VI ? ' c on t i nut* J I ( I1) Hescarcn and. Dr \ u ! n r - r v: 11 (12) Hesearcn find uc\ t;opr,Ci`* expenditure is in gfrneril exner.sod \r. the i: vhicn it is i u\'*irr fv! a l t u.o,i : A >n .i l l .iir.jina,' .wu c .t [> i t : i i 7eU as- pari of the co<i of t, H [jl.Hlt . l r.ui- l.ir ion v f Ci: r r ' *ic i es ::.co.t.c > t at i't.oi: t - m foroLV' currencies are translated irto cterlin-. n * tin* av-.'Cr rate-* anpiicnbl :c he rcs.HCti'.o i'.cccmni:;: [;t*rioris. Assets, and liabilities are : r i: iL a i 1 into = t e r 1: t at rht* rates c f evchmjp t ri ef: ; : i t e ! i t c - _> L the respective ba 1 an- - c ri.ects. D l f f < r ^ c o - .ii'isim fro:", c .ar.ces in c:;c liar. e rates arc included in income m'.itv f 'c relate u current ass<';5 a rid i jin l l ; :o* : net - i i f l c r imic s arlsing on umus Lot .on <j f long term assets and liabilities, including. in '.be parent company '.I'.ance sheer, djustrrents to t.te book values of overseas subsidiaries, arc taken directly to income letamed and other reserves. Note 3 - Net Incur, e: \ r.::d ''v Accounting Principles The finanriul ?i ji oiiiimii s included in ih*s repo-t arc prepared i : a c c r. c e '.'it!: .'.ccountiiig principles Generally accepted in the United Kingdom. Hoover, m preparing such financial statements for the purpc*p of this report, certain changes m presentation have boon made to the accounts* previously presenred to Shareholders. There are some (inferences between accounting principles generally accepted in th.e United rlingdam and* those'generally accepted i;i the United States. The application of V.5. accounting standards would r.ot have materially affected net income, except for the foreign currency translation method estaclisnea in Statement !*aaoer 8 of the (U.2.) Financial Accounting Standards Board- Adoption of this method would nave reeveed 19"6 income before extraordinary itens by E85 million willion), extraordinary items by 11 million ($1? .million), and net income by 7^ million (126 million). Tr.e reduction to net income in 1975 was 25 million (tf'iS million). (See also Note G for treatment of extraordinary items ana Note U for the principal effects cn consolidated capital and reserves). 31 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued' In the financial statements submitted to the Securities and Exchang Commission in respect of the year ended December Jl, 1975> re statement of net income previously reported to shareholders was necessary to give effect to the United itingdom accounting standard relating to the treatment of regional development grants. In the financial statements now submitted for the twc years ended December 31, 1976, no such restatement has been made as the above-aen Cloned accounting standard has been complied with in arriving at net mcom reported to shareholders . Note C - Investment Income Investment income comprises: Intermit , principally on short-term mv es cments Dividends, including amounts from Carrington Vivella Led (see Note 0) 1Q 7" 1076 i.i million; 1Q75 1976 1 $ million) jo 42 51 71 Q 11 39 53 66 19 90 Note D - Interest Exoense Interest expenses is as follows: Long-term debt Short-term borrowing 1975 1976 ( mi ilion) 57 75 16 l8 73 93 1975 1976 {% mi Ilion) 97 127 27 31 124 158 3`t IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIC ti RIES NOTES TO FINANCIAL STATEMENTS (continued) Note E - Employees' Profit-Sharing Bonus The employees of ICI and certain UK subsidiaries are covered by profit-sharing plans under which they may receive an annual bonus. The bonus, which is at the discretion of the Duard cl Directors, is declared as a percentage of each employee's earnings for the year. Employees receive their bonuses largely in the form of Ordinary Stock of ICI, the amount of stock issued being determined on the basis of the average market price. The rate of bonus under the main plan was 5^ for 1973 and for 1976- Note F - Income Taxes Taxes on income, less grants, charged to earnings were as follows: 1975 1976 ( million; 1975 1976 (? millionJ United Kingdom: Corporation tax Foreign tax credits Deferred taxes due to: Accelerated tax depreciation Relief for inventories Other tiaing differences 45 (1M 50 9 11 93 (25) 60 51 (9) 77 (24) 85 15 19 158 (43) 102 87 (15) Overseas: Overseas taxes Deferred taxes 101 35 6 170 48 5 172 59 10 239 82 8 Principal associated companies 142 6 223 13 24l 10 379 22 Taxes before UK grants Less: UK grants Investment grants Regional development grants 148 (18) (5) 236 (14) (8) 251 (3d (8) *101 (24) (13) 125 214 213 364 35 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) UK and overseas taxation has been provided cn the profits earned for the periods covered by the accounts. UK corporation tax is provided each year at estimated rates, the provision being adjusted in the following year in the light of the actual rate payable which normally is set by the UK Government subsequent to the time the Group accounts are closed. The table below relates the current UK corporation tax rate of 52% to the effective rates obtained by computing the tax charge as a percentage of income before taxes. For the purpose of this reconciliation, grants have been included in income before tax and excluded from income tax expense. UK corporation tax rate Excess of tax depreciation over book depreciation Losses not yet relieved Difference in tax rates of overseas companies Gains on foreign currency translation not taxable Under/(Over)-provision of prior years Other Tax charged as percentage of income before taxes after adjusting for grants 1975 52.0% (6.2) 3 .1 1976 52.0% (4.4) .2 (1.5) (.3) (4.3) - 43.1% (5.2) (.5) .2 42 .0% Under the UK Finance Act of 1972, advance corporation tax, which is paid to the Inland Revo: ue in respect of dividends (see Note H) , can be credited against future tax liabilities. Accordingly, in the statement of financial position, advance corporation tax on dividends payable is included as an addition to current taxes payable and as a reduction of deferred taxes. 36 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) The following tables summarize the deferred taxes included in the statements of financial position: UK corporation tax payable January 1, 1977 Deferments due to: Accelerated tax depreciation Relief for inventories Other timing differences Advance corporation tax recoverable UK corporation tax payable January 1, 1978 Deferments due to: Accelerated tax depreciation Relief for inventories Other timing differences Advance corporation tax recoverable GrouD ICI ( mi llion) 12 1 Grouo ICI (5 million) 20 4. 159 70 (7) (22) 212 136 54 (14) (13) 164 270 119 (12) (37) 360 231 92 (24) (22) 279 December 31, 1976 GrouD ICI Group ICI ( mi llion) (5 million) 12 2 20 3 231 122 (28) (29) 308 194 92 (31) (20) 237 393 208 (48) (49) 524 330 157 (53) (34) 403 The amount snown in each year above for deferments due to accelerated tax depreciation is, in the case of ICI. the sum of the UK adjustments made each year at the tax rates applicable to those years; the amount shown for the Group includes the sum of the overseas adjustments. Part of the liability for UX Corporation Tax on 1975 and 1976 income is treated as deferred under the provisions of the 1976 Finance Act which granted relief in respect of the increased value of inventories as a result of inflation. The relief is based on the increase in the value of inventories during the period, reduced by 15% of taxable trading income (after deduction of capital allowances). IMPERIAL CHEMICAL INDUSTRIES LIMITED AN'D IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (ccntir.ucd) Not 3 K - Receivables Receivables at December 31, 1975 and 1976 are summarized as follows:- Cure3 ME 1975 1976 Bullion) ICI 1975 . 1976 i million) Trade accounts Less: Amounts set aside for doubtfuJ accounts 596 (22) 787 (29) 10* - 4* - 1 CO 1 Loans to employees Prepaid expenses O^her receivables Due from principal associate d companies 574 10 20 _ _ 14 19 6 8 102 128 30 37 692 907 ^6 49 19 13 5 7 711 925 51 56 Group 1971 '976 (% iui ilton) Trade accounts 1,013 1,338 Less: Amounts set aside for doubtful accounts ( 37) (49; ICI 1975 1976 million) 17' 7- Loans to employees Prepaid expenses Other receivables Due from principal associate;d companies 976 1,289 17 1 33 - - 24 10 13 173 21 51 63 1,176 1,542 78 83 33 JO 9 12 1,209 1,572 87 95 Included in the Group 1976 column above are trade and other accounts maturing more than one year after December 31, 1976 which eujounted to 33 million (56 million). Corresponding figures at December 31> 1975 were l6 million ($27 million). As the result of a factoring agreement entered into with a wholly-owned consolidated UK subsidiary by the parent company and certain other wholly-owned consolidated UK subsidiaries, trade accounts of 207 million (?352 million) at December 31? 1975 and 273 million (?464 million) at December 31? 1976, which have been transferred to that subsidiary sure included with "Interest in Subsidiaries" in the parent company statement of financial position. 40 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) To the extent that dividends from overseas subsidiaries and principal associated companies are expected to result in additional taxes, appropriate amounts have been provided. No taxes have been provided for unrenitted earnings since such amounts are considered permanently re-invested by subsidiaries and in the case of principal associated companies the taxes would net be material. Cumulative unremitted earnings of overseas rubsidiaries, totalled approximately 385 million (#655 million) at December 31, 1976; the remittance of these amounts would incur tax at substantially lower than normal rates after giving effect to foreign tax cradits. NOTE G - Extraordinary Items Tha amounts shown in the table below have been classified as extraordinary items. Under US generally accepted accounting principles the items so classified would have been included in income before extraordinary items. 1975 1976 ( million) Goodwill written off new subsidiaries Provisions against investments Provisions for restructuring of Fibres business in UK and Continental Western Europe Profit on disposal of properties (8) (5) (1) (5) (36) 5 Profit after taxation of certain subsidiaries, mainly in Europe and USA, for the three months to December 31, 1974, dealt with as an extraordinary item following change in accounting date> 4 Other (1) 1975 1976 (5 million) (14) (2) (8) (8) (62) 9 7 (2) (1) (46) (2)_ (78) 38 IMPERIAL CHEMICAL INDUSTRIES LI'CITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TC FINANCIAL STATEMENTS (continue) Note H - Dividends As a result of the United Kingdom Finance Act of 1972, income tax has not been witheld from dividends paid after April 5. 1973- However, the shareholder, when receiving a dividend, receives an imputed tax credit against his personal tax liability. The equivalent gross rates of ICI' s Ordinary dividends were l8.1912p (31c ) in 1975 and 22-739p (39c 1 in 1976. Dividends have been and continue to be subject to limitation under UK counter-inflation legislation. Note I - Pension Expense Pension expense (charged in arriving at trading profit) for the years ended December 31. 1975 and 1976 was 70 million (?119 million) and 77 million (131 million) respectively, including a contribution of 10 million ($17 million) in 1975 to a pension fund for senior employees which was set up in 1973- Note J - Earnings per l Ordi.arv stock Net income and extraordinary items per 1 unit of Ordinary stock have been calculated by dividing amounts applicable to Ordinary shareholders (after deducting dividends on Preference stock of -3 million (?.5 million)) by the weighted average number of Ordinary stock units out.v tanding for each year adjusted to give affect to the bonus element, arising from the fact that the issue price was less than the market price, in the rights issue made in 1976. 39 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued- Note L - Inventories Inventories at December 31, 1975 and 1976 were as follows: Finished goods Raw materials a.id others Finished goods Raw materials and others Group 1975 1976 ' million) ICI 197~ 197b i mi llion) 409 334 495 413 166 202 148 185 743 908 314 387 ($ million) 695 8*42 563 702 1,544 ($ mi llion) 232 343 252 315 534 658 1 r"N | ,C C 1 Certain inventories previously classified as finished goods are now reclassified as raw materials and other inventories. The value of these inventories uas 29 million at December 31, 1975, and comparative figures have been amended accord ingly. Inventories used in computation of cost of sales in the Consolidated Statement of Income were as follows: December 31i December 31, December 31, 1974 197 5 1976 ( million) 676 7^3 908 {$ million) 1,149 1,263 1,544 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Note M - Shc.rt-tem borrowings Of the 125 million ($212 million) payable to banks at December 31, 1976, 15 million ($26 million! was secured by property iri plant (see Note R). Secured borrowings payable to banks at December 31, 197 5 were 12 million ($20 million) out of 103 million ($1S4 million) . Banks Other The average interest rates at December 31, 1975 and 1976 on short-term borrowings were as follows: Group 975 1976 11.5% 14.1% 6.9% 11.4% - ICI 1975 1976 11.8% 15.0% The maximum amount of short-term borrowings outstanding during 1976 was 211 million ($359 million) 'Group) and 60 million ($102 million) (ICI); the average aggregate, based on ronth-end figures, was 168 million ($286 million) (Group) anti 47 million ($80 million) (ICI) at a weighted average interest rate of 12.2% (Group) and 12.7% (ICI). In 1975 the maximum outstanding was 179 million ($304 million) (Group) and 51 million ($87 million) (ICI) ; the average aggregrate was 155 million ($264 million) (Group) and 9 million ($66 million) (ICI) at a weighted average interest rate of 11.5% (Group) and 11.0% (ICI) . Unused lines of credit at December 31, 1976 amounted to approximately 357 million (S607 .lillian) (Group) and 5 million ($9 million) (ICI) . Corresponding figures at December 31, 1975 were 369 million ($627 million) (Group) and 5 million ($9 million) (ICI). Commitment fees ranging from *s% to l*s% were payable on about 7% of lines outstanding at December 31, 1976. 42 .IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Note N - Accounts payable and accrued expenses At December 31, 1975 and 1976, accounts payable and accrued expenses were ccapriseu as follows: Trade accourrts Accrued salaries and wages Accrued interest Other Due to principal associated companies Trade accounts Accrued salaries and wages Accrued interest Other Due to principal associated companies 1975 1976 ( million) 309 33 21 154 403 43 29 246 517 721 66 523 -- 727 -- ($ mi llion) 525 56 36 262 685 73 49 419 379 1,226 10 10 389 1,236 ICI 1S75 1976 ( million) 131 16 8 58 168 15 9 96 213 288 52 218 290 -- ($ Mill ror.) 223 27 14 98 2P6 26 15 163 362 490 93 371 ssmm 493 I* I_ n' **3 \ \ . IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Note 0 - Interest in Subsidiaries Subsidiary nc.t consolidated - Carrington Viyel.'a Ltd. In /iew of undertaking giv2n by ICI to the UK Covernmunt m 1970 that it would not exercise more votes in Carrington Viyella Ltd than it would if its holding were 35 per cent (holding at December J1, 1976 wes 63%, subsequently reduced tc 49'i on May 9, 1977), the accounts of Carrington Viyella Ltd and its subsidiaries have not been consolidated in the Group accounts of ICI. The Group's interest in Carrington Viyellic Ltd at December 31, 1976 amounted to 59 million !?100 million), comprising cost of shares 56 million (395 million) and net indebtedness 3 million (35 million). The net tangible assets attributable to .such shareholding amounted to approximately 41 million (370 million) at December 31. 1976 and the market value of the shares based on Stock Exchange quotation in London at the same date was 19 million (332 million). Corre; ponding figures at December 31, 1975 were Group interest 57 million (397 million) comprising cost of snares 55 million (39*1 million), and net indebtedness 2 million (33 million), net tangible assets approximately 33 million (356 million) and market value 27 million (3*l6 million). Summarized financial information relating to Carrington Viyella Ltd and its subsidiaries is as follows: Sales Ret income Group's equity in net Dividends received by income Group 233 278 25 13 12 396 3 2 2 473 8 5 3 44 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (cor.-: inued) Principal associated companies Other investments GROUP 1975 1976 (2 million) 276 l4l 379 :4i 417 520 ICI 1975 1976 < 2 million) 54 66 70 84 124 150 Summarised combined financial information relating to the principal associated companies, which are accounted for on the equity method, is given below; this is based on the latent available information which in most cases is as of dates earlier than December 31. Sales Income before taxes Group1s equity in income before taxes Net income Group's equity in net income Dividends received by Group 1975 1976 ( million) 935 60 1 , 172 73 24 30 45 44 18 17 8 14 1975 1976 (2 million) 1,539 102 1,992 133 41 51 77 75 31 29 14 Zk Net current assets Property, plant and equipment Other assets Long-term debt Other Ion,'-term liabilities Net assets December 31 1975 1976 ( million) 219 489 52 (236) (81) 226 566 49 (256) (103) 443 482 December 31 1975 1976 million) 372 831 89 (401) (138) 304 962 83 (435) (175) 753 819 Group's equity in net arsets 176 ........ 192 7--'-- 299 -- 326 = At December 31, 1976 income retained and other reserves of the Group included 117million (2199 million) applicable to principal associated companies; the correspording figure at December 31% 1975 was 90 million (2153 million). 46 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Land and Buildings Plant and Equipment Land and Buildings Plant and Equipment GROUP 1975 1976 (1nillion) 92 99 26 26 (.$ million) 156 168 ICI ~1976 ( million) 12 10 12 11 ($ million) 20 17 20 19 The cost or as revalued totals for Land and Buildings at December 31 comprised the following: Freeholds (i.e. owned in fee) Purchased leaseholds Freeholds Purchased leaseholds GROUP 1975 1976 ( million) 5 30 38 638 73 568 711 ICI 1975 1976 ( million) 199 ip 210 10 209 220 GROUP 1975 1976 [$ million) 901 65 1,065 12<4 966 1,209 ICI 1975 1976 r* million) 338 17 355 357 17 374 1.8 TMPEHIAL CHEMICAL INDUSTRIES LfiJTED A\n I IMPERIAL CULM [CAL INUUSiilLL> LIMLIlH AND SL tkr ID I ARIES NOTES TO FINANCIAL STAIEMENIS (continued) Intangible as-u'l j "u !; pa t , n % n 1 I i\i>fc :11a rks are- included in pi jni and euuipr..e:it a: net IjocK I \ jIu*; and are not material m .iT.ouru . Not e R - Lone-torn Debt LOiij-term debt including curie:'.t maturities follows at December I Interest Hate Descriction secured Loans t')75 aJ 1076: . a iiiritie.* .? i'UJ' i^rc? 2 mil 11on ' :'c to n/ L 11 Ltd k l n ;dcm l g to 1 a J ` Australia ft 5 to lb'- Other countries i,: 77/2001 1"'7/:ihi1 --/> - 1l 0 7c ' ' 23 I I'uaeciircd Loans Total Secured Loan Du 100 lr. i t r d Kingdom 1/ ) Loan S t 0 c .< S t 0 c ks L11 a r. r t kj *_ .v I ua 10S loan Stock Loan Stock 3 ; Loan Stock I 5% to lV? Ctner Loans. 77 : r 11 1^ ^ 2 0U\ 1077/200., ' ~i --t 10 so 1J 2u 110 L i3 12 7l 10 SO !*3 2o 18 24 1 I Overseas .). *. ja' Euro-ilol lar bon<i> 1 '>7 /1 `' ; 2 8 _\- Deutsche Mar* bonds -..:2 I ^ 'a b 's Dcutsc.ic Mark Lend* 5torLinc/Ucursche 1'^ * Mark bonds 1977/19co I C:i 7 . , 6 0 Deutsche Mark bonds Deutsche Mark he :dr> I .. 7 7 / 1 ! , , ;; 196 1/ 192-. Swiss Franc loans. 197 9/ 1956 6 f -- a; Deutsche Mark bonds Euro-collar bonds 1973/1992 1975/199. 9.05s L' Dollar bonds 1977/2955 6 5% to 12+S Australia 1977/ 19^ I ?-iS 5 c`= to 79 to 7 '"i Canada Ho 1 land to 9r* USA 1977/116 1977/1965 1977/1990 I 2% to 15W Others 1977/ 1909 1' l*'l to 24 10 - SO 10 _s 49 10 25 10 90 78 48 1 18 25 24 20 23 -5 100 24 *i -- 53 11 55 64 105 102 693 I Total Unsecured Loans 724 934 Total Long-term Debt 810 1,034 _ - - - 1* Ty 59 60 'O 2b 0 207 15 _ - _ - 43 _ - 39 97 304 30*1 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) u.s.Summarv or. table above, expressed in dollars Secured Lc ins * United Kingdom Overseas GROUP 1975 1976 (%million) 2 199 2 168 ICI 197? 1976 l2 million) -- -- Total Secured Loans 196 170 - - Unsecured Loans United Kingdom Overseas Total Unsecured Loans Total Long-term Debt 913 818 1,231 1,377 910 1,178 1,588 1,758 352 165 517 517 352 209 >56 556 These debts and the secured short-term borrowings referred to in Note M were secured by buildings, plant, etc.. with a net book value at December 31, 1976 of 559 million (2950 million) and at December 31, 1975 of 983 million (?821 million). The maturities to 1980 and thereafter are as follows GROUP ICI GROUP ICI 1977 1978 1979 1980 1981 Therafter ( million) 65 30 91 36 82 780 34 2 3 2 47 239 ( % mi llion) in 51 70 61 139 1,326 58 3 5 3 so 907 1,034 327 1.758 556 Note S - Leases Leise payments for the years ended 31 December 1975 and 1976 were 9l million. (270 million) and 51 million (?87 million) respectively. At December 31, 1976 the Group was committed to various non-cancellable leases of buildings, plant and equipment, including transportation equipment, which require aggregate rental payments as follows:- IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Years ending Decern ber T1 Non capitalized Financing Leases Other Leases (i million) Total NonCapitali zed Financing Leases Other Leases ($ million) Tot. 1977 1978 1979 1980 1981 1082 - 1986 1987 - 1991 1992 - 1996 remai nder 14 10 10 6 6 26 1 '"I 43 ; i 25 2k 9 19 17 b 16 17 ; 11 10 4 10 10 5 34 4 4 4 21 29 3 15 20 9 49 77 19 43 15 s * 10 -> *> 8 :8 7 17 19 3S 7 36 5 25 7 39 Substantia iiy all of th e above relates to ICI The impact on net incorn e of tr earing non -capjl talized financing lea:ses as inv estment s in fixed asse'ts and debt would be less than 3% uf the average net income for the three years ended December -31. 197b. Note T - Commitments and 'i.tingent Liabilities Contracts placed for future capital expenditure on fixed assets GROUP 1975 '.7:6 l million) 202 190 Commitments to acquire share and loan capital in subsidiary and other companies 0-- cJ 2 227 = 192 ==" (t million) Contracts placed for futu'e capital expenditure on fixed assets Commitments to acquire share and loan 343 43 386 323 3 326 ICI 1975 1976 i million) 160 190 23 4 183 =-- 144 -- million) 272 238 39 311 7 245 51 IMPERIAL CHEMICAL HIDE'S TRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) In addition to -he above commitments, future capital expenditures had been authorized at December 31, 1976 m amounts of 483 million (S 821 million) (Group) and 239 million ($491 million) !ICI) for which contracts had not bem signed. Corresponding figures at December 31, 1975 were 393 million (5668 million) (Group) and 272 million ($462 million) (ICI) . Contingent liabilities existed at December 31, 1975 and 1976 m connection 'with (a) guarantees and uncalled capital relating to subsidiary and other companies, the maximum liability in respect of which at December 31, 1976 would be 67 million ($114 million) for the Group and 587 million ($998 million) for ICI (of which 525 million (S893 million) relates to borrowings by subsidiaries) . At December 31, 1975 corresponding figure; were 31 million ($53 million) for the Group and 419 million ($712 million) for ICI (of which 398 million ($677 million) related to borrowings by subsidiaries), (b) guarantees relating to the solvency of Pension Funds and (c' other guarantees and contingencies arising in the ordinary course of business. usNote Cl - Differences between UK and Accounting Principles further to Note B above, the following are the principal effects on consolidated capital and reserves at December 31, 197 5 and 197 6 of the application of accounting principles generally accepted in the US. 52 .IMPERIAL CHEMICAL INDUSTRIES Llhlia) Aim IMPERIAL CHEMICAL INDUSTRIES LIMITED AHD SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) As presented in this report 1975 1976 (Aillion) 1,452 1,83? .1975 . 197fr ($*illion) 2,469 3,114 Deferred taxes To give effect to full deferred tax accounting (partial basis is adopted by ICI, ** Note AO)) (130) (146) (221) (240) Revaluation of fixed assets To eliminate the effect of revalua tions of fixed assets (the credit for which has -jeen taken direct to reserves by ICI) (36) Translation -of fixed assets non-current investments and inventories To apply historic rates of exchange to fixed' assets, investments and inventories (year-end rates are applied and net differences taken direct to reserves by ICI in the case of fixed assets and investments, and to income in the case of inventories) (118) Marketable investments To carry marketable non-current invest ments, which are not accounted for on the equity basis, at market value (such investments are carried at cost by ICI) (31) (38) (-53) (39) (61) (65) (201) (430) (53) (60) Consolidated capital and reserves after 1,137 1,356 giving effect to the above adjustments 1*933 2,305 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) No-e V - Supplementary Income Statement Information The following amounts were charged to costs and expenses in the Consolidated Statement of Income: Year ended December 31 1973 1976 (mi1lion) Year ended December 31 1975 1976 (tmillion) Maintenance and repairs Research and development Taxes, other than income costs taxes 207 111 78 298 137 109 352 189 133 922 233 17V Depreciation and amortisation of intangible assets, advirtising costs mad royalty expense were each less than 1> of total sales. Note W - Parent Company Statements of Income. Income Retained and Other Reserves, and Source and Application of Funds STATEMENT OF INCOME - PARENT COMPANY Year ended December 31 l'(75 1976 v million) Year ended December 31 1975 19?6 (g million) Sales 1,529 2,012 2,599 3,921 Cost of sales* exclusive of depreciation Depreciation Selling* general and administrative expenses Ro%/aitv income Other income fuet) 970 108 1,259 107 1,699 189 2,132 182 338 (15) ( 10) 937 (21) (13) 579 (26) (17) '793 (36) (22) 1,391 1,769 2,369 2,999 Trading profit Investment income Interest expense Employees' profit-sLaring bonus Income before taxes on income and extraordinary items Taxes on income, less grants 138 75 (22) (15) 176 97 298 103 (27) (29) 235 127 (37) (20) 300 IOO 299 80 922 175 (96) (91) 510 170 Income before extiaordinary items Extraordinary items 129 (6) 200 (93) 219 (10) 390 (158) Net income 123 107 209 182 Investment income consists principally of dividends and interest from consolidated subsidiaries. The low effective tax rate results principally from investment grants and regional develop ment gran.s being reflected as a reduction of the charge for taxes on income. 54 AND IMPERIAL CHEMICAL INDUSTRIES LIKITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued. Extraordinary items coeoriitd tLe following: Provisions against investments including subsidiaries Other provisions Year ended December 31 1975 1976 ( million) Tear ended December 31 1975 1976 (%million) (6) (6) (66) (7) (93) (10) ( 10) (196) ( 12) ( 158) STATEMENT CF INCOME RETAINED AND OTREiL RESERVES .- PARENT COMPANY Balance at beginning of year Net income Less dividend' Income retained Exchange adjustments - net Other movements Balance at end of ytar ' Year ended Dec ember 1975 1976 l million) 395 1 123 59 973 -- 107 83 69 29 13 29 1O **73 528 Year ended December 3 1 1975 1^76 \i million> 671 -- 209 100 809 - 182 191 109 22 - 809 91 99 9 398 55 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) STATEMENT OF SOURCE AND APPLICATION OF FUNDS - 7ARENT COMPANY Source of funds: Income before extraordinary item* Aad/(deduct i items not affecting fund*: Depreciation charged Current and deferred tax movements Gove.-nmunt grant movements Others Year glided December II 1975 1976 (E i Hion) 129 U'8 :b 3 (2) 1C 7 80 6 ? Total funds provided by operations 294 102 Issue* of Ordinary stock Long-term debt issued Deferred liabilities 15 :.0o 25 - 639 oc Cl Year ended December 11 1975 1976 (3 mi 1 lion) 2 lb 3 40 184 95 5 (3) 500 2b 42 - 5bS '.32 * 36 10 lO <j34 350 - 1,078 Application of funds: Dividends Additions to property, plant and equipment Repayment if long-term debt Other investments, including investments 1 n subsidianes Increase in working capital 219 1 (a) 275 59 83 247 266 590 30 100 14 1 373 420 - (7) 452 168 l.Oi; IOC 65 Composition of increase iu vorlting capital Net liquid resources Cash (2) Time deposits (6) Short-term investments 7 Short-term borrowing* ( 17) laves tori> Receivable* Parables U8) 30 (6) 53 59 - 4: 1 44 '5 5 (86) 38 (4) ( 10) 12 (29) (3D 51 ( 10) 90 100 _ 73 75 128 8 ( 146] o5 56 IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERLXL CHEMICAL INDUSTRIES LIMITED AND SUBS 1 L>.'ARIES NOTES TO rIMANCIAL STATEMENTS (continued) Note X - Replacement Coat Data (Unaudited* The replacement cost information contained in th.< note is pi.vidrl in compliance with the rules of the Secui ities and Exchange Comn-i s s i on. The information co.c s the worldvni interests of Imperial Chemical Industries L'mttjd and its consolidated subsidiaries. Depreciation expense and cost of sales in foreign currencies are translated into sterlms at the average rates applicable to the respective accounting periods. Assets are translated into sterling at the rates of exchange in effect at the dates of the respective balance sheets. Buildings. Plant and Equipment The table he in*, snows a cosparu.--. between the gross book, value of Buildings, Pla~t and Equipment all as contained \r. , ,t balance sheet of tie Compjny and its consolidated subsidiaries at December }1, 1976. or.d the approxi.oat , cost of replacing chese insets at the prices existing at this date. Constructior in process has Leen indexed from the respective dates of expenditure. Also shown is the related accumulated depreciation provided on the book value of the assets compared with the accumulated deprtCiar.cn that would have been provided had it been based on such 'eplacement costs. Accumulated depreciation on a replacement cost basis was estimated for the pur ;.uc ;f this dis closure by determining the percentage of historical cost accumulated depreciation r historical cost gross values. This percentage was acplied to th gross values, on a replacement cost bnsis, it De cember 3 t* 1976. Historical Rep lac ement Cost Cost Gross values as at ( million) vi million) December Z 1 , 1 ') 7 6 Buildings Plant and E^uipiaent 3" 4 2,765 1.500 ,7 00 Less: Accumulated depreciation Net values as at December 31* 1V76 Gross values as at December 31 * 197b Bull dings Plant and Equipment 3-339 1.733 l ,6oi (% .million) 976 *<,7)0 ` ,700 4 . OOO 3.720 .? million) 2,550 10,540 Less: Accumulated deprecialion Net values as at December 3** 197^ 5,676 2,954 2,722 13,040 6,300 6,290 The replacement costs shown above have been estimated on the following basis: Buildings. Building" which, due to location and construction have a readily ascertainable open market value, have been shown on this basts Buildings on works sites, special purpose buildings, and other buildings which do not have a readily ascertainable market value have been treated on the same basis ns plant (see below). Plant and Equipment. Replacement costs have been estimated o.i the basis of -op. lacing plant and equipment to serve the same purpose or IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) zive rhe same output. Replacement costs include allowances for 1_han5.es m technology and some rationalisation of plants and sites. The technology adopted is proven and meets with current environment a 1 and safety requirements. Any rationalisation assumed is practicabl realisable, economic and in accord with the approved policy of the Company or subsidiary, as the case may be. Certain minor assets which the Croup does not intend to replace have been included at net realizable values. Depreciation eerpense The fol'.-'Wiuz figures compare tne depreciation expense as shown in the i neeme---i__ a t ement of the Company and its consolidated subsidiaries for the year ended December 31. 1976, with the depreciation expense computed on tie replacement costs shown m 1 above. Depreciation expense on a replacement cost basis was estimated for the purpose of ch's disclosure ay determining the percentage of historical cost depreciation to historical cost gross values. This percentage was applied to the average of the gross values, on a replacement cost basis, at the beginning and end of the year. Depreciation expense - for year ended December 31 > 1976 Historical Cost ( million; (. $ million) 205 3^6 Replacement Cost, ( million) $ million) ^25 722 Asset lives For the purpose of an exposure draft for a UK accounting standard published on November 30, 197b the total and remaining lives of all assets are being re-assessed taking into account technical and commercial obsolescence and physical condition. Normal main tenance is veing assumed and consideration given to raw materials, ma-ket safety and the environment. The preliminary results of this re-assessment indicate tnat the lives may be longer than those currently adopted in the historical co3t accounts, but it is considered that it would be premature at this stage for these longer lives to be used for the purpose of accumulated depreciation and annual depreciation expense in the above replacement cost disclosures. The management has not yet examined the results in detail, but preliminary estimates given to shareholders in the report for the year ended December , 1976 showed that, if the extended asset lives indicated by the re-assessment referred to above were applied to the replacement cost, shown in 1 above, the net values at December 31, 1976 on a replacement cost basis would be approximately ^,000 million ($6,800 million) and depreciation expense for the year ended December }1, 1976 on a replacement cost basis would be approximately 335 million ($570 million). Inventories The replacement cost of inventories as at December Jl, 1976, has been calculated on the basis of costs and prices existing at the end of the accounting period. Replacement cost depreciation has been included where appropriate. In the case of finished goods, net realizable value has been included in the inventory where this value is lower than replacement coat. IMPERIAL CHEMICAL INDUSTRIES LIMITED AND IMPERIAL CHEMICAL INDUSTRIES LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) Inventories - as at December 31. 1976 Historical Replacement Cost________________________________ _________________Cost ( million) (Z oillion) ( niliion) l? million! 908 1,544 960 1,632 Cost of sales The cost of sales (excluding depreciation), 13 appearing in the consolidate! statement of income, has been recalculated to show the replacement cost at tne time of- sale. For the majority of items in the inventory, tire calculation to convert cost of sales to a replacement cost basis recognizes specific price movements. Minor items are converted using prices indices. Historical Replacement CostCost ( million) l % million.- ( million! (Z million) Cost of sales (excluding dspreciation) - for the year ended December 31, 1976 2,662 4,52? 2,730 4,691 6. General This note in no way implies that the Group has present plans to replace the assets for which replacement costs have been presented or that future replacement would .ike place in the form and manner assumed in these estimates. Replacement can only take place over a period of years at prices then ruling-, these could be significantly different from the prices embodied in these estimates. Differences between the historical costs and the replacement costs of assets indicate the additional capital that would have to be invested if the assets in question were to be replaced at December 3*, 1976: they must not be taken as representing an increment to the value of the Company's Ordinary stock. The replacement cost information presented in this document, is confined to inventories, buildings, plant and equipment. It is not required to reflect all the effects of inflation and other economic factors on the correct costs of operating the business. This information cannot therefore be used alone to impute the total .effect of inflation on net income as reported. It should also be noted that the effect on net income of any operating savings arising from the utilisation of the most up-to-date technology in plant design and operation and the rationalisation in location assumed in the fixed asset replacements have not been assessed. The following table reconciles the historical cost amounts for which replacement costs are provided with the related totals shown in the consolidated financial statements. 59 60 Schedule V IMPERIAL CHEMICil '.'DUSTRIES LIMITED AN*J SUBSIDIARIES SCHEDULE 'ilCPERTT , PLANT AND Ef"I?MENT ( million) ^COLUMN A T---------------------------------------------------------- B ^976 COLUMN 3 COLUMN C COLUMN b COLUMN E COLUMN F Ba]ance Addi ti onii January 1 at cobt Retirements Other Balance Chans'?(a ) jecer.bei 3 - Land .................................................. SBuildings ................................. Plant and Equipment. 1 total .......................... .... 2,384 33 361 438 2 10 (45) (33) 8 k6 133 is? -37 57 4 2,765 3 i L7b 975 Land ................................................. . . . . (Building s.................................... Plant and Equipment --------- a TOTAL 3- U'U 1,997 2,305 \k 293 332 (2) (3) (45) (55) 7 24 71 102 94 474 2.316 2 ,SC4 t (column a s IMPERIAL CHEMICAL INDUSTRIES LIMITED - PARENT COMPANY SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT ( mi 111 or.) COLUMN 3 COLUMN C COLUMN D COLUMN E CCLUMN / Balance Additions January 1 at cost Retire ments Other Balance ChangesJ a )December J1 97b ll-and .................................................. Buildings 6Plant and .................. Equipment --------- TOTAL .......................... s 1975 (Land.................................................. Buildings; ................................ Plant and Equipment ---------- | TOTAL ......................... 1,474 1,291 - 14 233 247 1 13 204 218 _ (2) ( 38) (40) (H - V 21; 1 1,670 - 1,890 - 1 (21) (20) _ 10 - 199 " 1,474 - 1,683 I (a) Other changes represent exchange movements 66 Schedule IMPERIAL CHEMICAL INDUSTRIES LIMITED AND STBS I DIARIES SCHEDULE VI. - OCTI-'L _ a . ZD DEPRECIATION, DEPLETION AND AMORTIZATION 0.- PROPERTY, PLANT AND EQUIPMENT ( C million) I gOLUMN A I COLUMN 3 COLUMN C COLUMN D COLUMN E Balance January 1 AdcLi 11 ons charged to costs and Retireexpenses ments Other Changes COLUMN F Balance December 3 * [976 Buildings .......................... .Plant and Equipment LOCAL ............................. 1,459 205 HI (a) 1,7*0 |9-5 Buildings jPlant and ....................................... Equipment................ 172 1,100 TOTAL ....................... 1,272 182 ( 38) O (b) 1,459 IMPERIAL CHEMICAL INDUSTRIES LIMITED - PARENT COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION -A,D AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT COLUMN A ( million) COLUMN 3 COLUMN C COLUMN D Balance Januarv 1 Addj `.ions char'jed to co* 5 and Retireexoer.se a xents COLUMN E Other Chances COLUMN T Balance December 31 576 [Buildings ................................. Plant and Equipment 103 801 l TOTAL........... 1975 I Buildings .................................................. Plant and Equipment ............... 904 9u5 724 107 '.27) 8 100 (23) 4 (c) 988 103 - 801 TOTAL 819 10o (23) - 904 (a) Includes 27 million charged as an extraordinary item I and 86 million for exchange movements. (b) Includes 5 million charged as an extraordinary item due to the change in accounting dates. The balance of 38 million represents exchange I movements. (c) Includes 4 million charged as an extraordinary item. 67 I SCHEDULE XII IMPERIAL CHEMICAL INDUSTRIES LIMITED 1J5 Limited Allowance for doubtful Iaccounts llowanc e for losses (deducted from inveatbenta } 1 k2 h Li mi ted and Subsidiaries Allowance for doubtful fcccounta 18 llowanc s for losses Ideducted from investents) 13 ! I 7 7 7 k 11 69 1 ^9 l ^9 3 22 17 3 39