Document:

<PAGE>

                                                                    Exhibit 10.1

                              DATED 14th May, 2003

                     INDUSTRIES INTERNATIONAL, INCORPORATED

                                       and

                                    KIT TSUI

           THE SOLE SHAREHOLDER OF LI SUN POWER INTERNATIONAL LIMITED

                                       and

                       LI SUN POWER INTERNATIONAL LIMITED

                                       and

                      WUHAN HANHAI HIGH TECHNOLOGY LIMITED

                                       and

                        WUHAN CITY PUHONG TRADING LIMITED

                                       and

                 SHENZHEN CITY XING ZHICHENG INDUSTRIAL LIMITED

                                       and

                     SHENZHEN KEXUNTONG INDUSTRIAL CO. LTD.

                    -----------------------------------------
              COMPLETION DATE OF THE SALE AND PURCHASE OF SHARES IN
                       LI SUN POWER INTERNATIONAL LIMITED
                   -------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

THIS AGREEMENT is made the 14th day of May, Two Thousand and Three.

BETWEEN:

1.      INDUSTRIES  INTERNATIONAL,  INCORPORATED,  a company incorporated in the
        State of Nevada, USA and listed in the  Over-the-Counter  Bulletin Board
        under the trading symbol of "INDI" (the "PURCHASER").

2.      KIT TSUI,  THE SOLE  SHAREHOLDER OF LI SUN POWER  INTERNATIONAL  LIMITED
        (Holder of Hong Kong Identity Card No. P719321(5)) of 4th Floor, Wondial
        Building,  Keji Road Sth 6, Shenzhen High-Tech  Industrial Park, Shennan
        Blvd, Shenzhen, People's Republic of China (the "VENDOR").

3.      LI SUN  POWER  INTERNATIONAL  LIMITED,  a  company  incorporated  in the
        British  Virgin  Islands  whose  registered  office is situated at Akara
        Bldg., 24 De Castro Street Wickhams Cay I, Road Town,  Tortola,  British
        Virgin Islands (the "BVI COMPANY").

4.      WUHAN HANHAI HIGH  TECHNOLOGY  LIMITED),  a company  incorporated in the
        People's  Republic  of China,  whose  registered  office is  situated at
        Yuejiaju No. 25, Xudong Road,  Wuchang District,  Wuhan City, China (the
        "PRC 1").

5.      WUHAN  CITY  PUHONG  TRADING  LIMITED,  a  company  incorporated  in the
        People's Republic of China, whose registered office is situated at Yudai
        First Village No. 68, Qiaokou District, Wuhan City, China (the "PRC 2").

6.      SHENZHEN CITY XING ZHICHENG INDUSTRIAL  LIMITED, a company  incorporated
        in the People's  Republic of China,  whose registered office is situated
        at No.  4-702,  Hubei  Baofeng  Garden,  14 Xinzhou  Third Road,  Futian
        District, Shenzhen City, China (the "PRC 3").

7.      SHENZHEN  KEXUNTONG  INDUSTRIAL CO. LTD., a company  incorporated in the
        People's  Republic of China,  whose registered office is situated at 4th
        Floor, Wondial Building,  Keji Road Sth 6, Shenzhen High-Tech Industrial
        Park, Shennan Blvd, Shenzhen, People's Republic of China (the "PRC 4").

PRC 1, PRC 2, PRC 3 and PRC 4 are collectively referred to as the ("PRC
COMPANIES").

WHEREAS:

(A)     The  parties  entered  into an  Agreement  for the Sale and  Purchase of
        Shares in the BVI Company dated 10th March 2003 (the "Agreement")

(B)     The parties  entered into an  Supplemental  Agreement for postponing the
        completion date to 31st May 2003 (the "Supplemental Agreement")

NOW IT IS HEREBY AGREED AND DECLARED AS FOLLOWS:

1.      In relation to the Sale and Purchase  stipulated in the  Agreement,  and
        pursuant to the terms and conditions  contained  therein,  the Purchaser
        has  reviewed  the  audited  financial  statements  of the  BVI  Company
        prepared  by Moores  Rowland  Chartered  Accountants  dated May 14, 2003
        (Exhibit A).

--------------------------------------------------------------------------------

<PAGE>

2.      The Purchaser is satisfied  with the result of its due diligence  review
        of the financial and the operational aspects of the BVI Company

3.      The parties  agree that all the closing  conditions  have been met. Both
        parties agree that the Closing of the Sale and Purchase as stipulated in
        the Agreement shall take place on May 14, 2003 ("Completion Date").

4.      Pursuant to the Agreement,  as at the Completion  Date, the Vendor shall
        sell to the  Purchaser  100% of the capital stock of the BVI Company for
        the  consideration  of  15,765,432  shares  of the  common  stock of the
        Purchaser,  based on share  price of  US$0.486  per  share;  and cash of
        USD7,662,000,  which shall be in form of a  promissory  note  payable in
        cash or common stock of the Purchaser.

5.      On Completion,  the Vendor and the BVI Company shall deliver and produce
        to the  Purchaser  the  documents  as  stipulated  in Clause  6.2 of the
        Agreement.

All the  representations,  undertakings,  covenants and  warranties  made by the
Vendor and the BVI Company shall remain effective at the Closing of the Sale and
Purchase.

--------------------------------------------------------------------------------

<PAGE>

As witness the hands of the parties hereto the day and year first above written.

SIGNED BY INDUSTRIES INTERNATIONAL,                  )
INCORPORATED by its director                         )
                                                     )
(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY TSUI KIT, THE SOLE                         )
SHAREHOLDER OF LI SUN POWER                          )
INTERNATIONAL LIMITED                                )

(Holder of Hong Kong Identity Card                   )
No. P719321(5)) in the presence of :                 )

SIGNED BY LI SUN POWER INTERNATIONAL                 )
LIMITED by its director                              )
                                                     )
(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY WUHAN HANHAI HIGH                          )
TECHNOLOGY LIMITED by its director                   )

(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY WUHAN CITY PUHONG                          )
TRADING LIMITED by its director                      )

(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY SHENZHEN CITY XING                         )
ZHICHENG INDUSTRIAL LIMITED                          )
by its director                                      )

--------------------------------------------------------------------------------

<PAGE>

(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY SHENZHEN KEXUNTONG                         )
INDUSTRIAL CO. LTD. by its director                  )
                                                     )
(Holder of                                           )
No.                     ) in the presence of :       )

SIGNED BY COMPANY by its director                    )
                                                     )
(Holder of                                           )
No.                     ) in the presence of :       )

--------------------------------------------------------------------------------

<PAGE>

                                    Exhibit A

AUDITORS' REPORT

To the Directors and Stockholders

LI SUN POWER INTERNATIONAL LIMITED

(Incorporated in the British Virgin Islands)

We have audited the  accompanying  consolidated  balance  sheets of Li Sun Power
International  Limited (the "Company") and its subsidiaries  (the "Group") as of
December  31,  2001  and  2002,  and  the  related  consolidated  statements  of
operations,  consolidated  statements  of  changes in  stockholder's  equity and
consolidated  statements of cash flows for the years ended December 31, 2001 and
2002. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of the Group as of
December  31, 2001 and 2002 and the results of their  operations  and cash flows
for the years ended  December 31, 2001 and 2002 in  conformity  with  accounting
principles generally accepted in the United States of America.

Moores Rowland
Chartered Accountants
Certified Public Accountants
Hong Kong
Date: May 14, 2003

--------------------------------------------------------------------------------

<PAGE>

LI SUN POWER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS
As of December 31, 2001 and 2002
--------------------------------------------------------------------------------
(amount in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                      ---------------------------------------------------
                                                                               2001              2002             2002
                                                             NOTE              RMB               RMB              USD
<S>                                                          <C>           <C>               <C>              <C>
OPERATING REVENUE
    Net sales                                                                70,217           159,455           19,241
    Government grant                                                         12,000               300               36
                                                                      ---------------   ----------------   --------------
                                                                             82,217           159,755           19,277
                                                                      ---------------   ----------------   --------------
OPERATING EXPENSES
    Manufacturing and other costs of sales                                  (42,682)          (98,607)         (11,899)
    Sales and marketing                                                      (2,256)           (6,445)            (778)
    General and administrative                                               (4,176)           (6,341)            (765)
    Research and development                                                 (4,096)           (3,868)            (467)
    Depreciation and amortization                                              (754)           (1,139)            (137)
    Write down of assets to be disposed of                                        -            (2,078)            (251)
    Other operating costs and expenses                                         (810)             (443)             (53)
                                                                      ---------------   ----------------   --------------
                    Total operating expenses                                (54,774)         (118,921)         (14,350)
                                                                      ---------------   ----------------   --------------
OPERATING INCOME                                                             27,443            40,834            4,927
Interest expenses                                                            (2,112)           (3,172)            (383)
Other income, net                                                               903               567               69
                                                                      ---------------   ----------------   --------------
   INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS                         26,234            38,229            4,613
Provision for income taxes                                   14              (1,658)           (4,521)            (546)
                                                                      ---------------   ----------------   --------------
INCOME BEFORE MINORITY INTEREST                                              24,576            33,708            4,067
Minority interest in income of consolidated subsidiaries                    (10,810)          (12,539)          (1,513)
                                                                      ---------------   ----------------   --------------
                       NET INCOME                                            13,766            21,169            2,554
                                                                      ===============   ================   ==============
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.

--------------------------------------------------------------------------------

<PAGE>

LI SUN POWER INTERNATIONAL LIMITED

CONSOLIDATED BALANCE SHEETS
As of December 31, 2001 and 2002
--------------------------------------------------------------------------------
(amount in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                     AS OF DECEMBER 31,
                                                                      --------------------------------------------------
                                                                             2001               2002              2002
                                                         Note                RMB                RMB                USD
<S>                                                      <C>             <C>                <C>                <C>
ASSETS
CURRENT ASSETS
    Cash and cash equivalents                                              62,790             67,400             8,133
    Trade and other receivable                             5               87,842             82,522             9,957
    Due from related parties                              16                  727              2,204               266
    Inventories                                            6                9,379             17,129             2,067
    Assets to be disposed of                                                    -                429                52
    Guaranteed investment contract                         7                    -             10,000             1,207
                                                                      -------------    ---------------    --------------
      Total current assets                                                160,738            179,684            21,682
NON-CURRENT ASSETS
    Property, plant and equipment, net                     8               39,635             39,877             4,812
    Goodwill                                                                  591                591                71
                                                                      -------------    ---------------    --------------
       TOTAL ASSETS                                                       200,964            220,152            26,565
                                                                      =============    ===============    ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
    Trade and other payables                               9               66,297             64,012             7,724
    Debts maturing within one year                        11               41,000             26,000             3,137
    Due to related parties                                16               32,213             33,179             4,003
    Income tax payable                                                      1,389              3,088               373
                                                                      -------------    ---------------    --------------
       Total current liabilities                                          140,899            126,279            15,237
                                                                      -------------    ---------------    --------------
   MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES                         46,299             58,938             7,112
                                                                      -------------    ---------------    --------------
STOCKHOLDER'S EQUITY:
Common stock and paid-in capital, USD 1.00 par value:
    50,000 authorized
    1 issued and outstanding                              12                    -                  -                 -
    Statutory reserves                                    13                2,512              5,881               710
    Retained earnings                                                      11,254             29,054             3,506
                                                                      -------------    ---------------    --------------
       Total stockholder's equity                                          13,766             34,935             4,216
                                                                      -------------    ---------------    --------------
     TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                           200,964            220,152            26,565
                                                                      =============    ===============    ==============
</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements.

--------------------------------------------------------------------------------

<PAGE>

LI SUN POWER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2001 and 2002
--------------------------------------------------------------------------------
(amount in thousands, except share data)

<TABLE>
<CAPTION>
                                           COMMON STOCK
                                 ----------------------------------
                                                                        STATUTORY         RETAINED
                                  NO OF SHARES        AMOUNT            RESERVES          EARNINGS            TOTAL
                                 --------------    -------------   -----------------   --------------   ----------------
                                                                               RMB              RMB               RMB
<S>                                         <C>              <C>             <C>             <C>               <C>
Balance as of January 1, 2001               -                -                   -                -                 -
Issuance of share on
   February 23, 2001                        1                -                   -                -                 -
Net income                                  -                -                   -           13,766            13,766
Transfer to statutory
   reserves                                 -                -               2,512           (2,512)                -
                                 --------------    -------------   -----------------   --------------   ----------------
Balance as of December 31,
   2001                                     1                -               2,512           11,254            13,766
Net income                                  -                -                   -           21,169            21,169
Transfer to statutory
   reserves                                 -                -               3,369           (3,369)                -
                                 --------------    -------------   -----------------   --------------   ----------------
 BALANCE AS OF DECEMBER 31,
            2002                            1                -               5,881           29,054            34,935
                                 ==============    =============   =================   ==============   ================
Balance as of December 31,
   2002 (in USD)                                             -                 710            3,506             4,216
                                                   =============   =================   ==============   ================
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.

--------------------------------------------------------------------------------

<PAGE>

LI SUN POWER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001 and 2002
--------------------------------------------------------------------------------
(amount in thousands)

<TABLE>
<CAPTION>
                                                                                       YEARS ENDED DECEMBER 31,
                                                                            --------------------------------------------
                                                                                    2001           2002            2002
                                                                        NOTE        RMB            RMB             USD
               CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                     <C>       <C>            <C>              <C>
Net income                                                                        13,766         21,169           2,554
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation and amortization                                                   2,467          5,157             622
   (Reversal) Provision for doubtful accounts                                          -            325              39
   Minority interest in income of consolidated subsidiaries                       10,810         12,539           1,513
   Loss (gain) sales or disposal of property, plant and
     equipment, net                                                                  350             (3)              -
   Provision for inventories                                                           -            318              38
   Write down of assets to be disposed of                                              -          2,078             251
Changes in assets and liabilities:
   Trade and other receivable                                                    (16,807)         5,195             627
   Due from related parties                                                         (727)        (1,477)           (178)
   Inventories, net                                                                8,778         (8,067)           (973)
   Trade and other payables                                                        9,394         (2,285)           (276)
   Due to related parties                                                            557            (34)             (4)
   Tax payable                                                                       773          1,699             205
                                                                            -------------  -------------   -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                         29,361         36,614           4,418
                                                                            -------------  -------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of available-for-sale investments                                          -           (200)            (24)
   Purchase of guaranteed investment contract                                          -        (10,000)         (1,207)
   Sales proceeds from property, plant and equipment                                   -             15               2
   Purchase of property, plant and equipment and addition of
     construction in progress, net                                                (6,708)        (7,918)           (955)
   Acquisition of subsidiaries, net of cash disbursed                             41,035              -               -
                                                                            -------------  -------------   -------------
NET CASH USED IN INVESTING ACTIVITIES                                             34,327        (18,103)         (2,184)
                                                                            -------------  -------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution by minority stockholders                                          -            100              12
Borrowings of short-term debts                                                         -          3,000             362
Repayment of short-term debts                                                       (900)       (18,000)         (2,172)
Advance from a related party                                                           1          1,000             120
                                                                            -------------  -------------   -------------
NET CASH USED IN FINANCING                                                          (899)       (13,900)         (1,678)
                                                                            -------------  -------------   -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                         62,789          4,611             556
CASH AND CASH EQUIVALENTS AT BEGINNING OF FISCAL PERIOD                                -         62,789           7,577
                                                                            -------------  -------------   -------------
CASH AND CASH EQUIVALENTS AT END OF FISCAL PERIOD                                 62,789         67,400           8,133
                                                                            =============  =============   =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the fiscal
period for:
   Interest paid                                                                  (2,408)        (3,187)           (384)
   Income tax                                                                       (885)        (2,823)           (340)
                                                                            =============  =============   =============
NON-CASH INVESTING AND FINANCING ACTIVITIES
   Acquisitions of subsidiary                                        15          (48,405)             -               -
                                                                            =============  =============   =============
</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements.

--------------------------------------------------------------------------------

<PAGE>

LI SUN POWER INTERNATIONAL LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS
As of December 31, 2001 and 2002
--------------------------------------------------------------------------------
(amount in thousands, except share data and ratio)

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

     Li Sun Power International Limited ("the Company") was incorporated in the
     British Virgin Islands (the "BVI") on September 19, 2000 as company with
     limited liability. The former name of the Company was Million Star
     International Limited which was changed on March 2, 2001 to Li Sun Power
     International Limited.

     As of December 31, 2002, the authorized capital of the Company is US$50
     consisting of 50,000 shares of common stock, par value USD1.00 each.

     On February 23, 2001, 1 share of common stock par value USD1.00 each was
     allotted to Mr. Tsui Kit.

     The Company is an investment holding company, and the principal activities
     of its subsidiaries are the manufacturing and sales of battery testing
     equipment and batteries. The head office of its subsidiaries is located at
     No. 7 of Guandong Science Park, East Lake Technology Development Zone,
     Wuhan, Hubei Province, the People's Republic of China ("PRC").

2.   BASIS OF CONSOLIDATION

     Pursuant to the share transfer agreement entered into between the Company
     and a shareholder of Wuhan Lixing Power Sources Co. Ltd. ("WLPS") in June
     2001, the Company acquired 60.25% interest in WLPS for a consideration of
     RMB35,000. On July 1, 2001, the Company appointed the existing directors to
     exercise the control in WLPS.

     In December 2001, the Company entered into share transfer agreements with
     Mr. Tsui Kit, the sole stockholder of the Company, and acquired an
     additional 12.59% interest in WLPS for an aggregate consideration of
     RMB13,405.

     As of December 31, 2001 and 2002, the Company owns 72.84% interest in WLPS.

     The Company acts as an investment holding company and is designated by its
     sole stockholder and director, Mr. Tsui Kit, to hold his interest in WLPS.

     As the Company had not commenced operation as of December 31, 2000, no
     statement of operation for the period from September 19, 2000 (date of
     incorporation) to December 31, 2000 is presented in these consolidated
     financial statements.

<PAGE>

     The consolidated financial statements have been prepared using the purchase
     accounting method incorporating the consolidated results of WLPS from July
     1, 2001, the effective date of acquisition. The summary of effect of
     acquisitions of subsidiaries is disclosed as follows:

                                                        YEAR ENDED
                                                 DECEMBER 31, 2001
                                                ------------------
                                                         RMB
         ACQUISITION IN JUNE 2001
Assets acquired
   Cash and cash equivalents                          41,035
   Trade and other receivables                        71,034
   Inventories                                        18,158
   Property, plant and equipment, net                 48,147
                                                    --------
                                                     178,374
                                                    --------
Liabilities assumed
   Trade and other payables                          (40,153)
   Debts maturing within one year                    (41,900)
   Income tax payable                                   (616)
                                                    --------
                                                     (82,669)
                                                    --------
Minority interest                                    (17,033)
                                                    --------
Net assets acquired                                   78,672
Shared by minority interest                          (31,270)
Negative goodwill (Note)                             (12,402)
                                                    --------
Consideration                                         35,000
                                                    --------
ACQUISITION IN DECEMBER 2001
Net assets acquired                                   12,814
Goodwill arising                                         591
                                                    --------
Consideration                                         13,405
                                                    --------
Total consideration of the acquisitions (note 15)     48,405
                                                    ========

Note: Negative goodwill is recorded as a reduction of the cost of leasehold land
and buildings

<PAGE>

The following unaudited pro forma consolidated results of operations reflect the
results  of  operations  for  the  year  ended  December  31,  2001,  as if  the
aforementioned  acquisitions  had  occurred on January 1, 2001 and after  giving
effect to purchase  accounting  adjustments.  These pro forma  results have been
prepared for  comparative  purposes  only and do not purport to be indicative of
what operating results would have been had the acquisitions actually taken place
on January 1, 2001 and may not be indicative of future operating results.

                                                                 YEAR ENDED
                                                          DECEMBER 31, 2001
                                                          ------------------
                                                                      RMB
         PRO FORMA
            Revenue                                               121,560
            Net income                                             22,020

The subsidiaries incorporated in the consolidated financial statements are as
follows:

a)   WLPS  was  incorporated  in the PRC on April  15,  1993 as a  company  with
     limited  liability.  As of December 31, 2001 and 2002,  the capital of WLPS
     was RMB36,787.

     WLPS  principally  engages in  manufacturing  and sales of battery  related
     testing equipment and investment holding. WLPS operates in the PRC.

b)   Wuhan  Lixing  (Torch)  Power  Sources  Company   Limited   ("WLTP")  is  a
     Sino-foreign  equity joint venture  established by WLPS and another foreign
     investor on September  12, 1995 in Wuhan,  the PRC.  WLPS owns 70.7% equity
     interest in WLTP which has a total  registered  capital of  RMB60,000.  The
     joint  venture  period is 30 years  from the date of issue of the  business
     licence on September 12, 1995.

     The  principal  activity  of WLTP is  manufacturing  and  sales of  lithium
     batteries and lithium-ion batteries. WLTP commenced operation in 1995.

<PAGE>

c)   Shenzhen  Chuang  Lixing  Power  Sources   Company  Limited   ("SCLP")  was
     established  on March  28,  2002 in  Shenzhen,  the PRC as a  company  with
     limited liability.

     The total registered  capital of SCLP is RMB1,000.  The business  operation
     period is 20 years from the date of issue of the business  licence on March
     28, 2002. WLPS owns 90% equity interest in SCLP.

     The  principal  activity  of SCLP  is  trading  of  lithium  batteries  and
     lithium-ion batteries.  As of December 31, 2002, SCLP had not yet commenced
     operation.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ACCOUNTING PRINCIPLES

     The consolidated  financial statements and accompanying notes are presented
     in Renminbi  ("RMB") and prepared in  accordance  with  generally  accepted
     accounting principles in the United States of America ("USGAAP").

     PRINCIPLE OF CONSOLIDATION

     The accompanying  consolidated  financial  statements include the financial
     statements of the Company and its  subsidiaries  in which the Company has a
     controlling financial interest.

     All material intercompany balances and transactions have been eliminated on
     consolidation.

     In June 2001, the FASB issued SFAS No. 141, "Business  Combinations".  SFAS
     No. 141 requires all business  combinations  to be accounted  for under the
     purchase method of accounting;  the pooling of interest method is no longer
     permitted,  except  for  the  transaction  between  entities  under  common
     control.  In  addition,   SFAS  No.  141  requires  that  at  the  date  of
     acquisition,  identifiable  intangible assets should be recognized separate
     and apart from goodwill if the intangible assets meet certain criteria.

     SUBSIDIARY

     A  subsidiary  is an  enterprise  controlled  by  an  entity  directly,  or
     indirectly through one or more intermediaries.  The term control (including
     the terms  controlling,  controlled by and under common control with) means
     the  possession,  direct or  indirect,  of the power to direct or cause the
     direction of the management and policies of a person,  whether  through the
     ownership of voting shares, by contract, or otherwise.

     REVENUE RECOGNITION

     Net sales  represent the invoiced value of goods,  net of  value-added  tax
     ("VAT") and returns.  The Group generally  recognizes  product revenue when
     persuasive  evidence of an arrangement exists,  delivery has occurred,  the
     fee is fixed or determinable,  and  collectibility  is probable.  The Group
     adopts a policy of including  handling costs incurred for finished goods in
     the sales and marketing  expenses.  The handling  costs for the years ended
     December 31, 2001 and 2002 were RMB495 and RMB884 (USD107) respectively.

<PAGE>

     RESEARCH AND DEVELOPMENT

     All costs of research and development activities are expensed as incurred.

     ADVERTISING AND PROMOTION COSTS

     Advertising  and  promotion  costs are expensed when the  advertisement  or
     commercial  appears  in  the  selected  media.  Advertising  and  promotion
     expenses  for the years  ended  December  31, 2001 and 2002 were RMB744 and
     RMB2,315  (USD279)  respectively  and are  included in sales and  marketing
     expense in the consolidated statements of operations.

     INCOME TAXES

     Income tax  expense is  computed  based on pre-tax  income  included in the
     consolidated statement of operation. Income taxes have been provided, using
     the liability method, which requires recognition of deferred tax assets and
     liabilities  for  the  expected   future  tax   consequences  of  temporary
     differences   between  the  carrying  amounts  and  tax  bases  assets  and
     liabilities  and their  reported  amounts.  The tax  consequences  of those
     differences  are  classified  as  current  or  non-current  based  upon the
     classification  of the related assets or  liabilities  in the  consolidated
     financial statements.

     CASH EQUIVALENTS

     Cash  equivalents  include all highly liquid  investments,  generally  with
     original maturities of three months or less that are readily convertible to
     known  amount  of  cash  and  are so  near  maturity  that  they  represent
     insignificant  risk of  changes in value  because  of  changes in  interest
     rates.

     INVENTORIES

     All Inventories are stated at the lower of weighted average cost or market.
     Potential losses from obsolete and slow-moving inventories are provided for
     when identified.  Costs of work-in-progress and finished goods are composed
     of  direct  materials,   direct  labor  and  an  attributable   portion  of
     manufacturing overheads.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION

     Property,  plant and equipment are stated at original cost less accumulated
     depreciation and amortization.

     The  cost of an  asset  comprises  its  purchase  price  and  any  directly
     attributable  costs of bringing the asset to its present working  condition
     and location for its intended use.  Expenditures  incurred after the assets
     have been put into operation, such as repairs and maintenance, overhaul and
     minor renewals and betterments,  are normally charged to operating expenses
     in the period in which they are  incurred.  In  situations  where it can be
     clearly  demonstrated  that the  expenditure has resulted in an increase in
     the future  economic  benefits  expected to be obtained from the use of the
     assets, the expenditure is capitalized.

<PAGE>

     When assets are sold or retired,  their costs and accumulated  depreciation
     are eliminated from the consolidated  financial  statements and any gain or
     loss resulting from their disposal is recognized in the year of disposition
     as an element of other income, net.

     Depreciation  is  provided  to write  off the cost of  property,  plant and
     equipment  using  straight-line  method at rates  based on their  estimated
     useful lives of assets from the date on which they become fully operational
     and after taking into account their estimated residual values.

     CONSTRUCTION IN PROGRESS

     Construction  in progress is stated at cost,  less provision for impairment
     loss, which includes all  construction  expenditure and other direct costs,
     including interest costs, attributable to such projects. Costs on completed
     construction works are transferred to the appropriate asset category.

     GOODWILL ON CONSOLIDATION

     Goodwill  represents the excess of the cost of companies  acquired over the
     fair value of their net assets at date of  acquisition  and is evaluated at
     lease annually for impairment.

     In accordance with SFAS No. 142,  "Goodwill and Other  Intangible  Assets."
     SFAS No.  142  requires  that  goodwill  be tested for  impairment  using a
     two-step process. The first step is to identify a potential impairment, and
     the  second  step  measures  the  amount of the  impairment  loss,  if any.
     Goodwill  is deemed to be impaired  if the  carrying  amount of a reporting
     unit  exceeds  its  estimated  fair  value.  SFAS  No.  142  requires  that
     indefinite-lived  intangible  assets  be  tested  for  impairment  using  a
     one-step  process,  which consists of a comparison of the fair value to the
     carrying value of the intangible asset.  Intangible assets are deemed to be
     impaired if the net book value exceeds the estimated fair value.

     The  estimates of future cash flows,  based on reasonable  and  supportable
     assumptions and projections,  require management's judgment. Any changes in
     key  assumptions  about the Company's  businesses and their  prospects,  or
     changes in market  conditions,  could result in an  impairment  change.  No
     impairment loss was recognized as of December 31, 2002.

     ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

     The  long-lived  assets  held  and used by the Group are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of the assets may not be recoverable. It is reasonably possible
that  these  assets  could  become  impaired  as a result of technology or other
industry  changes. Determination of recoverability of assets to be held and used
is  by  comparing the carrying amount of an asset to the future net undiscounted
cash  flows  to  be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed  of are reported at the lower of the carrying amount or fair value less
costs  to  sell.

<PAGE>

     FOREIGN CURRENCIES TRANSLATION

     The Group considers RMB as its functional currency as a substantial portion
     of the Group's business activities are based in RMB.

     Transactions in currencies  other than functional  currency during the year
     are  translated  into the functional  currency at the  applicable  rates of
     exchange  prevailing at the time of the  transactions.  Monetary assets and
     liabilities  denominated in currencies  other than functional  currency are
     translated into functional  currency at the applicable rates of exchange in
     effect at the balance sheet date.  Exchange gains and losses are dealt with
     in the consolidated statement of operation.

     For  the  convenience  of  the  readers  of  these  consolidated  financial
     statements,  translation  of amounts from RMB into USD has been made at the
     exchange  rate  of  RMB1.00  =  US$0.12067  as of  December  31,  2002.  No
     representation  is made that the RMB  amounts  could  have been or could be
     converted  into the United States dollars at the rate or at any other rates
     on December 31, 2002.

     GOVERNMENT GRANTS

     Government  grants,  including  non-monetary  grants  at  fair  value,  are
     recognized when there are no restrictions or conditions  attaching to them,
     and the grants will be received.

     In  July  2001,  the  Group  received  a lump  sum of  unconditional  grant
     amounting to RMB12,000  from the PRC  government to subsidize  spendings on
     certain qualified capital and revenue expenditures of on-going research and
     development  projects  in  lithium  and  lithium-ion  batteries.  The Group
     recognized the grant as revenue when it was received.

     USE OF ESTIMATES

     The preparation of the consolidated financial statements in conformity with
     USGAAP requires the Company's  management to make estimates and assumptions
     that affect the reported  amounts of assets and  liabilities and disclosure
     of contingent  assets and  liabilities at the date of financial  statements
     and the  reported  amounts of revenues  and  expenses  during the  reported
     periods.  Actual amounts could differ from those  estimates.  Estimates are
     used for,  but not limited  to, the  accounting  for certain  items such as
     allowance for doubtful accounts,  depreciation and amortization,  inventory
     allowance, taxes and contingencies.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The  Group  provides  an  allowance  for  doubtful  accounts  equal  to the
     estimated   uncollectable   amounts.  The  Group's  estimate  is  based  on
     historical  collection  experience  and a review of the  current  status of
     trade  accounts  receivable.  It is  reasonably  possible  that the Group's
     estimate of the  allowance  for doubtful  accounts  will  change.  Accounts
     receivable  are  presented  net of an allowance  for  doubtful  accounts of
     RMB9,036  and  RMB9,361  (USD1,130)  as  of  December  31,  2001  and  2002
     respectively.

<PAGE>

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     OPERATING LEASES

     Leases where substantially all the rewards and risks of ownership of assets
     remain with the leasing  company are  accounted  for as  operating  leases.
     Rental  payables  under   operating   leases  are  recognized  as  expenses
     respectively on the straight-line basis over the lease terms.

     RELATED PARTIES

     Parties are considered to be related if one party has the ability, directly
     or indirectly, to control the other party or exercise significant influence
     over the other party in making financial and operating  decisions.  Parties
     are also  considered to be related if they are subject to common control or
     common significant influence.

     RECENTLY ISSUED ACCOUNTING STANDARDS

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     No.  4, 44 and 64,  Amendment  of FASB  Statement  No.  13,  and  Technical
     Corrections."  SFAS No. 145  updates,  clarifies  and  simplifies  existing
     accounting  pronouncements.  The Group is  required  to adopt  SFAS No. 145
     during the first quarter of 2003.  Adoption will not have a material impact
     on the combined financial statements of the Company.

     In June 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 146 "Accounting for Costs Associated with Exit or Disposal Activities".
     SFAS No. 146 requires that a liability  for a cost that is associated  with
     an exit or disposal  activity be recognized when the liability is incurred.
     This  standard  nullifies  the guidance of EITF Issue No. 94-3,  "Liability
     Recognition for Certain  Employee  Termination  Benefits and Other Costs to
     Exit an Activity  (including  Certain Costs Incurred in a  Restructuring)".
     Under EITF Issue No. 94-3,  an entity  recognized  a liability  for an exit
     cost on the date that the entity  committed  itself to an exit plan.  Under
     SFAS No. 146, the FASB  concludes  that an entity's  commitment  to an exit
     plan does not, by itself, create a present obligation to other parties that
     meets the  definition of a liability.  SFAS No. 146 also  establishes  that
     fair value is the objective for the initial  measurement  of the liability.
     SFAS No. 146 will be  effective  for exit or disposal  activities  that are
     initiated  after  December  31,  2002.  The Group does not expect that this
     standard  will  have  a  material  effect  on  its  consolidated  financial
     statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation--Transition and Disclosure--an amendment of FASB Statement No.
     123".  This  Statement  amends SFAS No. 123,  "Accounting  for  Stock-Based
     Compensation", to provide alternative methods of transition for a voluntary
     change  to the fair  value  based  method  of  accounting  for  stock-based
     employee  compensation.  In addition,  this Statement amends the disclosure
     requirements  of SFAS No.  123 to  require  prominent  disclosures  in both
     annual and interim financial  statements about the method of accounting for
     stock-based  employee  compensation  and the effect of the  method  used on
     reported  results.  Certain  provisions  of SFAS No. 148 are  effective for
     fiscal  years

<PAGE>

     ending  after  December 15, 2002 and other  provisions  are  effective  for
     fiscal years  beginning  after  December 15, 2002. The adoption of SFAS No.
     148 will not have a material impact on the Group's  consolidated  financial
     statements.

     In April 2003,  the FASB issued SFAS No. 149 "Amendment of Statement 133 on
     Derivative Instruments and Hedging Activities". The SFAS No. 149 amends and
     clarifies  financial  accounting and reporting for derivative  instruments,
     including  certain  derivative  instruments  embedded  in  other  contracts
     (collectively  referred to as derivatives) and for hedging activities under
     SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
     Subject to certain  exception,  this  statement is effective  for contracts
     entered into or modified  after June 30, 2003 and for hedging

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     relationships  designated  after June 30, 2003 and all  provisions  of this
     Statement should be applied prospectively. The adoption of SFAS No. 149 has
     no impact on the Group's consolidated financial statement.

     In November  2002,  the FASB  issued  Interpretation  No. 45,  "Guarantor's
     Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
     Guarantees of Indebtedness of Others" (FIN 45). The disclosure requirements
     of FIN 45 are effective for the Group's combined  financial  statements for
     the year ended December 31, 2002. For  applicable  guarantees  issued after
     January 1, 2003, FIN 45 requires that a guarantor recognize a liability for
     the fair value of obligations  undertaken in issuing guarantees.  The Group
     does not expect that this standard will have any significant  effect on its
     combined financial statements.

     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
     Variable  Interest  Entities" (FIN 46), which requires the consolidation of
     variable interest entities,  as defined.  FIN 46 is applicable to financial
     statements  to be issued  after 2002;  however,  disclosures  are  required
     currently  if any variable  interest  entities are expected to be combined.
     The Group  currently has no interests in variable  interest  entities,  and
     therefore  does not expect the  adoption of FIN 46 to have an impact on the
     Group's consolidated financial statements.

4.   OPERATING RISK

     (A)  COUNTRY RISKS

     The Group may be  exposed  to the risks as a result of its sales  operation
     being  related in the PRC.  These  include  risks  associated  with,  among
     others,  the  political,  economic  and  legal  environmental  and  foreign
     currency exchange.  The Group's results may be adversely affected by change
     in the  political  and  social  conditions  in the PRC,  and by  changes in
     governmental    policies   with   respect   to   laws   and    regulations,
     anti-inflationary  measures, currency conversion and remittance abroad, and
     rates and methods of taxation, among other things. The Company's management
     does not believe these risks to be

<PAGE>

     significant. There can be no assurance, however, those changes in political
     and other conditions will not result in any adverse impact.

     The  Group's  result may also be  adversely  affected  by the change in the
     trend of economic condition and growth in the PRC as a result of the recent
     outbreak of Severe Acute Respiratory Syndrome in certain areas in the PRC.

     (B)  FOREIGN EXCHANGE RISK

     The Group's  major sales and  purchases  are made in RMB. In addition,  the
     Group had no significant monetary assets and liabilities held in currencies
     other than RMB and USD. As the  exchange  rate of RMB and USD was steady in
     previous years and is not expected to fluctuate in the foreseeable  future,
     no hedging is considered necessary.

     (C)  INTEREST RATE RISK

     The Group does not incur any  significant  interest  rate risk as the Group
     had no monetary  financial  liabilities with floating  interest rate at the
     balance sheet dates.

     (D)  CREDIT RISK

     The  carrying   amounts  of  cash  and  bank  deposits,   trade  and  other
     receivables,  and amount due from  related  party  represented  the Group's
     maximum exposure to credit risk in relation to financial assets.

<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                         ----------------------------------------------
                                                                                 2001            2002             2002
                                                                                  RMB             RMB              USD
<S>                                                                              <C>           <C>              <C>
        Major customers with revenues of more than 10% of
        the Group's sales
              Sales to major customers                                              -          18,528            2,238
              Percentage of sales                                                   -             12%              12%
              Number                                                                -               1                1
                                                                         =============    ============     ============
</TABLE>

The  major   concentrations   of  credit  risk  arise  from  the  Group's  trade
receivables.   The  Group  generally  does  not  require   collateral  on  trade
receivables.  The Group  maintains a  provision  for  doubtful  debts and actual
losses have been within management's  expectation.  Trade receivables related to
the Group's major customer were 11% of all trade  receivables,  net of allowance
as of December 31, 2002. No other financial asset carries a significant exposure
to credit risk.

     (E)  CASH AND TIME DEPOSITS

<PAGE>

     The Group maintains its cash balances and investments in time deposits with
     various banks and financial institutions located in the PRC. In common with
     local practice,  such amounts are not insured or otherwise protected should
     the financial  institutions be unable to meet their liabilities.  There has
     been no history of credit  losses.  There are neither  material  commitment
     fees nor compensating balance requirements for all outstanding loans of the
     Group.

5.   TRADE AND OTHER RECEIVABLES

<TABLE>
<CAPTION>
                                                                                  AS OF DECEMBER 31,
                                                                  ---------------------------------------------------
                                                                           2001                2002              2002
                                                                            RMB                 RMB               USD
<S>                                                                      <C>                 <C>                <C>
        TRADE RECEIVABLES, NET OF ALLOWANCE                              73,208              69,642             8,403
        OTHER RECEIVABLES
        Prepaid expenses and other current assets                        14,634              12,880             1,554
                                                                  ---------------    ---------------    --------------
                                                                         87,842              80,322             9,957
                                                                  ===============    ===============    ==============
</TABLE>

6.       INVENTORIES

<TABLE>
<CAPTION>

                                                                                   AS OF DECEMBER 31,
                                                                  ---------------------------------------------------
                                                                           2001                2002              2002
                                                                            RMB                 RMB               USD
<S>                                                                      <C>                 <C>                <C>
        Raw materials                                                     5,668               9,462             1,142
        Work-in-progress                                                  1,948               4,707               568
        Finished goods                                                    1,763               2,960               357
                                                                  ---------------    ---------------    --------------
                                                                          9,379              17,129             2,067
                                                                  ===============    ===============    ==============
</TABLE>

         All inventories, apart from those fully provided for of RMB1,261 and
         RMB1,688 (USD204) as of December 31, 2001 and 2002 respectively, are
         stated at cost.

7.   GUARANTEED INVESTMENT CONTRACT

     In September 2002, the Group entered into a guaranteed  investment contract
     (the "contract") with a financial  institution.  The amount of the contract
     is RMB10,000,  with a minimum  guaranteed return rate of 8% per annum and a
     repayment term of one year. As of December 31, 2002, the contract is stated
     at cost.

8.   PROPERTY, PLANT AND EQUIPMENT, NET

<PAGE>

<TABLE>
<CAPTION>
                                                     ESTIMATED
                                                   USEFUL LIVES                    AS OF DECEMBER 31,
                                                   -------------------------------------------------------------------
                                                                            2001              2002               2002
                                                                             RMB               RMB                USD
<S>                                                      <C>               <C>               <C>                 <C>
        COST
        Leasehold land and buildings                     30                16,259            14,823              1,789
        Plant and machinery                             8-10               33,792            40,537              4,891
        Furniture, fixtures and office equipment        8-10                1,986             2,348                283
        Motor vehicles                                  5-8                 2,226             2,545                307
        Construction in progress                        -NA-                1,117               305                 37
                                                                    ---------------  ---------------    --------------
                                                                           55,380            60,558              7,307
        ACCUMULATED DEPRECIATION                                          (15,745)          (20,681)            (2,495)
                                                                    ---------------  ---------------    --------------
                                                                           39,635            39,877              4,812
                                                                    ===============  ===============    ==============
</TABLE>

         The net book value of property, plant and equipment pledged as security
         for liabilities amounted to RMB20,321 and RMB15,209 (USD1,835) as of
         December 31, 2001 and 2002 respectively.

9.       TRADE AND OTHER PAYABLES

                                              AS OF DECEMBER 31,
                                          ------------------------
                                            2001     2002     2002
                                            RMB      RMB       USD
TRADE PAYABLES                            36,773   33,108    3,995
OTHER PAYABLES
Accrued creditors and other creditors     29,524   30,904    3,729
                                          ------   ------   ------
                                          66,297   64,012    7,724
                                          ======   ======   ======

10.  BANKING FACILITIES

     The Group had various lines of credit under banking facilities as follows:

                           AS OF DECEMBER 31,
                         -----------------------
                           2001     2002    2002
                           RMB      RMB      USD
FACILITIES GRANTED
Committed credit lines   41,000   33,000   3,982
                         ======   ======   =====

<PAGE>

UTILIZED
Committed credit lines   41,000   26,000   3,137
                         ======   ======   =====
UNUTILIZED FACILITIES
Committed credit lines       --    7,000     845
                         ======   ======   =====

     There are no significant  commitment fees or requirements  for compensating
     balances associated with any lines of credit.

     Under the banking facilities  arrangements,  the Group's banking facilities
     amounted to RMB5,000 and  RMB10,000  (USD1,207) as of December 31, 2001 and
     2002 respectively  were  collateralized by guarantees of a related company,
     Shenzhen  Wonderland  Communication  Science & Technology  Company  Limited
     ("Wondial"),  details  of  relationship  were  disclosed  in note  16.  The
     interests  on amounts  borrowed  under the various loan  agreements  are at
     market rates.

     The  Group's  banking  facilities   amounted  to  RMB36,000  and  RMB23,000
     (USD2,775)   as  of   December   31,  2001  and  2002   respectively   were
     collateralized by certain Group's fixed assets.

     The remaining Group's banking facilities were not collateralized.

11.  DEBTS MATURING WITHIN ONE YEAR

     Debts maturing within one year represented mainly short-term bank loans and
     were summarized as follows:

                                                     OUTSTANDING DEBTS
                          WEIGHTED-AVERAGE                MATURING
                           INTEREST RATES             WITHIN ONE YEAR
                         -----------------    ------------------------------
                                        %              RMB               USD
 As of December 31,
    2002                             5.91           26,000             3,137

     Amounts of RMB3,000 (USD362) and RMB10,000 (USD1,207) have been falling due
     in January and March 2003  respectively,  and the  remaining  of  RMB13,000
     (USD1,568) will be matured in August 2003.

12.  ISSUED CAPITAL

<PAGE>

     As of December 31, 2001 and 2002, the authorized  capital of the Company is
     US$50 divided into 50,000  shares of common stock,  par value US$1.00 each,
     with one vote of each share.

     On February 23, 2001,  one share of common  stock,  par value US$1.00 each,
     was  allotted to Mr. Tsui Kit for cash.  As of December  31, 2001 and 2002,
     one  share  of  common  stock,  par  value  USD1.00  each  was  issued  and
     outstanding.

13.  RESERVES

     Statutory reserves

     Statutory  reserves of WLPS include the statutory  common  reserve fund and
     the statutory common welfare fund. Pursuant to regulations in the PRC, WLPS
     sets aside 10% of its profit  after tax for the  statutory  common  reserve
     fund  (except  when the  fund  has  reached  50% of the  WLPS's  registered
     capital) and 5% of its profit after tax for the  statutory  common  welfare
     fund.  The  statutory  common  reserve  fund can be used for the  following
     purposes:

     o    to make good losses in previous years; or

     o    to convert into  capital,  provided  such  conversion is approved by a
          resolution at a  shareholders'  general meeting and the balance of the
          statutory  common  reserve  fund  does  not  fall  below  25%  of  the
          registered capital.

     The statutory  common welfare fund,  which is to be used for the welfare of
     the staff and workers of the Company, is of a capital nature.

     Being a sino-foreign joint venture enterprise, WLTP is required to maintain
     a reserve  fund,  an  enterprise  development  fund and a staff welfare and
     bonus fund as a percentage  of profit after tax.  Pursuant to the PRC rules
     and regulations applicable to a sino-foreign joint venture enterprise,  the
     Articles  of   Association   of  WLTP  stipulate  that  the  percentage  of
     appropriations  to these funds  cannot  exceed 20% of its profit after tax,
     and is determined at the  discretion of the board of directors.  The nature
     and purposes of the reserve  fund and the staff  welfare and bonus fund are
     similar to the  statutory  common  reserve  fund and the  statutory  common
     welfare fund respectively. The enterprise development fund is set aside for
     future development of the entity.

14.  INCOME TAXES

     The Group is subject to income taxes on an entity  basis on income  arising
     in or derived from the tax jurisdictions in which it operates.

     The Company

     The Company has no assessable  income in the years ended  December 31, 2001
     and 2002.

<PAGE>

     WLPS

     WLPS is  registered  and approved as a new  technology  enterprise in Wuhan
     East Lake  Technology  Development  Zone,  of which WLPS is  entitled  to a
     preferential tax rate of 15%.

     WLTP

     Pursuant  to the  relevant  income  tax  laws  of the PRC  applicable  to a
     sino-foreign  joint  venture  enterprise,  WLTP is  exempted  from  the PRC
     enterprise income tax ("EIT") for two years starting from the first year of
     profitable  operations after offsetting prior years' losses,  followed by a
     50%  reduction  on the EIT for the next  three  years.  The  first  year of
     profitable  operations  commenced  in the year ended  December 31, 2000 and
     accordingly no provision for income taxes has been made during the 2000 and
     2001 and tax is calculated at the  applicable  tax rate of 7.5% after a 50%
     reduction in 2002.

                       YEARS ENDED DECEMBER 31,
                         -------------------
                          2001    2002  2002
                           RMB     RMB   USD
Current tax - EIT        1,658   4,521   546
                         =====   =====   ===

     There was no  significant  unprovided  deferred  taxation  for the relevant
     years.

     A  reconciliation  between  the  provision  for income  taxes  computed  by
     applying the  standard  PRC income tax rate to income  before taxes and the
     actual provision for income taxes is as follows:

                                                       YEARS ENDED DECEMBER 31,
                                                    ----------------------------
                                                      2001      2002      2002
                                                       RMB       RMB       USD
Tax calculated at the applicable tax rate of 15%     3,935     5,711       689
Adjustment due to the translation from accounting
   profit calculated using the local standards to
   accounting profit calculated using US GAAP          176       (70)       (8)
Adjustment to accounting profit on consolidation       964       (22)       (3)
Non-taxable subsidy from the PRC government         (1,800)       --        --
Non-taxable income of the Company                       (4)       --        --
Loss incurred by the Company                            --         1        --
Loss incurred by the subsidiary                         --        62         8
Exemption of EIT of the subsidiary                  (1,613)       --        --

<PAGE>

50% reduction on the EIT of the subsidiary              --    (1,161)     (140)
                                                    ------    ------    ------
                                                     1,658     4,521       546
                                                    ======    ======    ======

15.  SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

     Analysis of the net cash inflow in respect of the  acquisitions  during the
     following fiscal year

                                                            YEAR ENDED
                                                          DECEMBER 31,
                                                                  2001
                                                          ------------
                                                                  RMB
Cash consideration (note 2)                                    48,405
Settled by advance from related parties (note 16(b))          (18,250)
Unsettled balance                                             (30,155)
Bank balances and cash acquired                                41,035
                                                          ------------

Net cash inflow from the acquisitions                          41,035
                                                          ============

     As the  consideration  was either  unsettled  or  settled by advance  for a
     related  party,  the amount was  disclosed  as non-cash  activities  in the
     consolidated statements of cash flows.

16.  RELATED PARTY TRANSACTIONS

     (a)  Name and relationship of related parties

<TABLE>
<CAPTION>
<S>                                                                 <C>
NAME                                                                Existing relationships with the Company

                                                                    Under common control of the stockholder of the
Shenzhen Kexuntong Industrial Company Limited ("SKI")               Company

Wondial                                                             A subsidiary of SKI
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                 <C>
Wuhan Lixing Power Source Company Limited - battery retail
   shop ("Retail shop")                                             A branch of WLPS

Chang Jiang Economic Joint Development Company Limited, Wuhan
   Branch ("CJEJ")*                                                 A stockholder of WLPS

Zhu Chao Ying                                                       A stockholder of WLPS

Tsui Kit                                                            The sole stockholder of the Company

Shenzhen City Xing Zhicheng Industrial Limited ("SCXZC")            A stockholder of SCLP
</TABLE>

* Direct translation for identification purpose only.

(b) Related party transactions

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                     ---------------------------------------------------
                                                                              2001              2002              2002
<S>                                                                         <C>                <C>                <C>
                                                                               RMB               RMB               USD
Sales of goods to Wondial                                                        -               516                62
Payment made by SKI for the acquisition of subsidiary (note 15)             18,250                 -                 -
                                                                     ===============    ==============    ==============

The management of the Group based on the estimated market value to determine the
transaction price.

(c) Due from related parties
</TABLE>

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                      --------------------------------------------------
                                                            2001               2002              2002
                                                             RMB                RMB               USD
<S>                                                      <C>                <C>               <C>
Retail shop                                                  720              2,197               265
CJEJ                                                           7                  7                 1
                                                      --------------    --------------    --------------
                                                             727              2,204               266
                                                      ==============    ==============    ==============
(d) Due to related parties
    SKI                                                   30,128             30,128             3,636
    Tsui Kit                                               2,085              1,948               235
    Zhu Chao Ying                                              -                103                11
    SCXZC                                                      -              1,000               121
                                                      --------------    --------------    --------------
                                                          32,213             33,179             4,003
                                                      ==============    ==============    ==============
</TABLE>

(e) All amounts due are unsecured and repayable on demand.

<PAGE>

17.  PENSION COSTS

     As  stipulated  by  PRC   regulations,   the  Group   maintains  a  defined
     contribution  retirement plan for all of its employees who are residents of
     PRC. All retired  employees of the Group are entitled to an annual  pension
     equal to their basic annual salary upon retirement.  The Group  contributed
     to a state sponsored  retirement plan approximately 20% of the basic salary
     of its  employees  and has no further  obligations  for the actual  pension
     payments or post-retirement  benefits beyond the annual contributions.  The
     state  sponsored  retirement  plan is  responsible  for the entire  pension
     obligations  payable to all  employees.  The pension  expense for the years
     ended   December   31,  2001  and  2002  were  RMB66  and  RMB521   (USD63)
     respectively.

18.  CONTINGENT LIABILITIES

     As of December 31, 2001 and 2002, the Group had contingent  liabilities not
     provided  for  in the  consolidated  financial  statements  in  respect  of
     guarantee  of a bank loan to company  controlled  by a  stockholder  of the
     Company amounting to RMBNil and RMB23,000 respectively.

19.  POST BALANCE SHEET EVENT

     On March 10,  2003,  the sole  stockholder,  Mr.  Tsui Kit  entered  into a
     conditional agreement for the sale of shares in the Company with Industries
     International,  Incorporated, a company in which Mr. Tsui Kit is a majority
     stockholder.  The agreement  provides for a closing date of the transaction
     in May 2003.

<PAGE>exv10w1

 

Exhibit 10.1

Group profit and loss account

Years ended 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2002	 	2001	 	2000
	 	 	 	 	 	 	 	 	(restated)	 	(restated)
	 	 	 	 	 	 	
	 	
	 	

	 	 	 	 	 	 	Before	 	 	 	 	 	After	 	Before	 	 	 	 	 	After	 	Before	 	 	 	 	 	After
	 	 	 	 	 	 	exceptional	 	Exceptional	 	exceptional	 	exceptional	 	Exceptional	 	exceptional	 	exceptional	 	Exceptional	 	exceptional
	 	 	 	 	 	 	items	 	items	 	items	 	items	 	items	 	items	 	items	 	items	 	items
	 	 	Notes	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Turnover
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Continuing operations
	 	 	 	 	 	 	3,890.8	 	 	 	—	 	 	 	3,890.8	 	 	 	4,159.2	 	 	 	—	 	 	 	4,159.2	 	 	 	3,878.8	 	 	 	—	 	 	 	3,878.8	 
	Acquisitions
	 	 	 	 	 	 	127.1	 	 	 	—	 	 	 	127.1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Turnover, including share of
joint ventures and associates
	 	 	1	 	 	 	4,017.9	 	 	 	—	 	 	 	4,017.9	 	 	 	4,159.2	 	 	 	—	 	 	 	4,159.2	 	 	 	3,878.8	 	 	 	—	 	 	 	3,878.8	 
	Less: Share of turnover of
joint ventures
	 	 	 	 	 	 	324.1	 	 	 	—	 	 	 	324.1	 	 	 	340.0	 	 	 	—	 	 	 	340.0	 	 	 	258.0	 	 	 	—	 	 	 	258.0	 
	Share of turnover of
associates
	 	 	 	 	 	 	36.1	 	 	 	—	 	 	 	36.1	 	 	 	46.3	 	 	 	—	 	 	 	46.3	 	 	 	41.1	 	 	 	—	 	 	 	41.1	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Turnover of subsidiary undertakings
	 	 	 	 	 	 	3,657.7	 	 	 	—	 	 	 	3,657.7	 	 	 	3,772.9	 	 	 	—	 	 	 	3,772.9	 	 	 	3,579.7	 	 	 	—	 	 	 	3,579.7	 
	Cost of sales
	 	 	2	(a)	 	 	(2,089.7	)	 	 	(15.1	)	 	 	(2,104.8	)	 	 	(2,164.2	)	 	 	(44.6	)	 	 	(2,208.8	)	 	 	(2,035.2	)	 	 	(0.6	)	 	 	(2,035.8	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Gross profit
	 	 	 	 	 	 	1,568.0	 	 	 	(15.1	)	 	 	1,552.9	 	 	 	1,608.7	 	 	 	(44.6	)	 	 	1,564.1	 	 	 	1,544.5	 	 	 	(0.6	)	 	 	1,543.9	 
	Net operating expenses
	 	 	2	(a)	 	 	(1,142.4	)	 	 	(58.9	)	 	 	(1,201.3	)	 	 	(1,150.3	)	 	 	(61.1	)	 	 	(1,211.4	)	 	 	(1,104.7	)	 	 	(3.8	)	 	 	(1,108.5	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating profit
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Continuing operations
	 	 	 	 	 	 	421.2	 	 	 	(67.8	)	 	 	353.4	 	 	 	458.4	 	 	 	(105.7	)	 	 	352.7	 	 	 	439.8	 	 	 	(4.4	)	 	 	435.4	 
	Acquisitions
	 	 	 	 	 	 	4.4	 	 	 	(6.2	)	 	 	(1.8	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Operating profit of
subsidiary undertakings
	 	 	 	 	 	 	425.6	 	 	 	(74.0	)	 	 	351.6	 	 	 	458.4	 	 	 	(105.7	)	 	 	352.7	 	 	 	439.8	 	 	 	(4.4	)	 	 	435.4	 
	Share of operating profit of
joint ventures
	 	 	 	 	 	 	63.8	 	 	 	(0.5	)	 	 	63.3	 	 	 	59.0	 	 	 	(2.2	)	 	 	56.8	 	 	 	48.1	 	 	 	—	 	 	 	48.1	 
	Share of operating profit of associates
	 	 	 	 	 	 	10.7	 	 	 	—	 	 	 	10.7	 	 	 	13.2	 	 	 	(0.4	)	 	 	12.8	 	 	 	8.5	 	 	 	—	 	 	 	8.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating profit including
share of joint ventures
and associates
	 	 	1	 	 	 	500.1	 	 	 	(74.5	)	 	 	425.6	 	 	 	530.6	 	 	 	(108.3	)	 	 	422.3	 	 	 	496.4	 	 	 	(4.4	)	 	 	492.0	 
	Loss on termination/disposal of
businesses — continuing operations
	 	 	2	(b)	 	 	—	 	 	 	(20.2	)	 	 	(20.2	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Profit on disposal of health care
discontinued business
	 	 	2	(b)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	12.5	 	 	 	12.5	 
	Profit on disposal of fixed assets
— continuing operations
	 	 	2	(b)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3.6	 	 	 	3.6	 	 	 	—	 	 	 	—	 	 	 	—	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Profit on ordinary activities
before interest
	 	 	 	 	 	 	500.1	 	 	 	(94.7	)	 	 	405.4	 	 	 	530.6	 	 	 	(104.7	)	 	 	425.9	 	 	 	496.4	 	 	 	8.1	 	 	 	504.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	
	 	 	 	 	 
	Interest on net debt
	 	 	3	(a)	 	 	 	 	 	 	 	 	 	 	(103.1	)	 	 	 	 	 	 	 	 	 	 	(123.4	)	 	 	 	 	 	 	 	 	 	 	(111.5	)
	Interest on pension scheme liabilities
	 	 	6	(e)	 	 	 	 	 	 	 	 	 	 	(106.1	)	 	 	 	 	 	 	 	 	 	 	(107.2	)	 	 	 	 	 	 	 	 	 	 	(100.7	)
	Expected return on pension
scheme assets
	 	 	6	(e)	 	 	 	 	 	 	 	 	 	 	139.1	 	 	 	 	 	 	 	 	 	 	 	166.9	 	 	 	 	 	 	 	 	 	 	 	149.5	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Net interest
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(70.1	)	 	 	 	 	 	 	 	 	 	 	(63.7	)	 	 	 	 	 	 	 	 	 	 	(62.7	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Profit on ordinary activities
before tax
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	335.3	 	 	 	 	 	 	 	 	 	 	 	362.2	 	 	 	 	 	 	 	 	 	 	 	441.8	 
	Tax on profit on ordinary activities
	 	 	4	(a)	 	 	 	 	 	 	 	 	 	 	(106.2	)	 	 	 	 	 	 	 	 	 	 	(104.6	)	 	 	 	 	 	 	 	 	 	 	(135.2	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Profit on ordinary activities after tax
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	229.1	 	 	 	 	 	 	 	 	 	 	 	257.6	 	 	 	 	 	 	 	 	 	 	 	306.6	 
	Minority interests — equity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(26.2	)	 	 	 	 	 	 	 	 	 	 	(33.5	)	 	 	 	 	 	 	 	 	 	 	(28.0	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Profit for the financial year
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	202.9	 	 	 	 	 	 	 	 	 	 	 	224.1	 	 	 	 	 	 	 	 	 	 	 	278.6	 
	Dividends
	 	 	12	(a)	 	 	 	 	 	 	 	 	 	 	(186.6	)	 	 	 	 	 	 	 	 	 	 	(180.3	)	 	 	 	 	 	 	 	 	 	 	(170.2	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Retained profit for the financial year
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16.3	 	 	 	 	 	 	 	 	 	 	 	43.8	 	 	 	 	 	 	 	 	 	 	 	108.4	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Earnings per 25p
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Ordinary share, basic
	 	 	2	(d)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	— on published earnings
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	41.36p	 	 	 	 	 	 	 	 	 	 	 	46.03p	 	 	 	 	 	 	 	 	 	 	 	57.19p	 
	— on exceptional items
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14.58p	 	 	 	 	 	 	 	 	 	 	 	11.48p	 	 	 	 	 	 	 	 	 	 	 	(3.66)p	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	— before exceptional items
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	55.94p	 	 	 	 	 	 	 	 	 	 	 	57.51p	 	 	 	 	 	 	 	 	 	 	 	53.53p	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Earnings per 25p
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Ordinary share, diluted
	 	 	2	(d)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	— on published earnings
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	41.21p	 	 	 	 	 	 	 	 	 	 	 	45.87p	 	 	 	 	 	 	 	 	 	 	 	56.90p	 
	— on exceptional items
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14.53p	 	 	 	 	 	 	 	 	 	 	 	11.44p	 	 	 	 	 	 	 	 	 	 	 	(3.64)p	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	— before exceptional items
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	55.74p	 	 	 	 	 	 	 	 	 	 	 	57.31p	 	 	 	 	 	 	 	 	 	 	 	53.26p	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 

All turnover and operating profit arose from continuing operations.

66  The BOC Group plc  Report and accounts 2002

 

Group balance sheet

At 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	2001
	 	 	 	 	 	 	2002	 	(restated)
	 	 	Notes	 	£ million	 	£ million
	 	 	
	 	
	 	

	Fixed assets
	 	 	 	 	 	 	 	 	 	 	 	 
	Intangible assets
	 	 	7	 	 	 	150.7	 	 	 	48.1	 
	Tangible assets
	 	 	8	 	 	 	3,027.4	 	 	 	3,168.6	 
	Investment
in joint ventures
	 	 	 	 	 	 	 	 	 	 	 	 
	— share of gross assets
	 	 	 	 	 	 	616.2	 	 	 	615.2	 
	— share of gross liabilities
	 	 	 	 	 	 	(410.7	)	 	 	(410.4	)
	 
	 	 	 	 	 	 	205.5	 	 	 	204.8	 
	— loans to joint ventures
	 	 	 	 	 	 	111.8	 	 	 	97.6	 
	Investment in associates
	 	 	 	 	 	 	 	 	 	 	 	 
	— share of net assets
	 	 	 	 	 	 	57.5	 	 	 	47.1	 
	— loans to associates
	 	 	 	 	 	 	6.2	 	 	 	9.1	 
	Investment in own shares
	 	 	 	 	 	 	42.5	 	 	 	59.5	 
	Other investments
	 	 	 	 	 	 	45.1	 	 	 	31.7	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Investments
	 	 	9	 	 	 	468.6	 	 	 	449.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	3,646.7	 	 	 	3,666.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Current assets
	 	 	 	 	 	 	 	 	 	 	 	 
	Stocks
	 	 	10	(a)	 	 	260.0	 	 	 	275.2	 
	Debtors falling due within one year
	 	 	10	(b)	 	 	733.8	 	 	 	713.3	 
	Debtors falling due after more than one year
	 	 	10	(c)	 	 	28.3	 	 	 	21.3	 
	Investments
	 	 	 	 	 	 	38.8	 	 	 	43.2	 
	Cash at bank and in hand
	 	 	10	(d)	 	 	185.5	 	 	 	233.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	1,246.4	 	 	 	1,286.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Current liabilities
	 	 	 	 	 	 	 	 	 	 	 	 
	Creditors: amounts falling due within one year
	 	 	 	 	 	 	 	 	 	 	 	 
	Borrowings and finance leases
	 	 	10	(e)	 	 	(390.1	)	 	 	(486.4	)
	Other creditors
	 	 	10	(f)	 	 	(857.8	)	 	 	(795.3	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	(1,247.9	)	 	 	(1,281.7	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Net current (liabilities)/assets
	 	 	 	 	 	 	(1.5	)	 	 	4.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total assets less current liabilities
	 	 	 	 	 	 	3,645.2	 	 	 	3,671.3	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Long-term liabilities
	 	 	 	 	 	 	 	 	 	 	 	 
	Creditors: amounts falling due after more than one year
	 	 	 	 	 	 	 	 	 	 	 	 
	Borrowings and finance leases
	 	 	11	(a)	 	 	(1,121.0	)	 	 	(1,019.9	)
	Other creditors
	 	 	 	 	 	 	(58.0	)	 	 	(59.4	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	(1,179.0	)	 	 	(1,079.3	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Provisions for liabilities and charges
	 	 	11	(b)	 	 	(407.5	)	 	 	(419.2	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total net assets excluding pension assets and liabilities
	 	 	 	 	 	 	2,058.7	 	 	 	2,172.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Pension assets
	 	 	6	(e)	 	 	54.3	 	 	 	107.0	 
	Pension liabilities
	 	 	6	(e)	 	 	(311.0	)	 	 	(56.0	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total net assets including pension assets and liabilities
	 	 	 	 	 	 	1,802.0	 	 	 	2,223.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Capital and reserves
	 	 	 	 	 	 	 	 	 	 	 	 
	Equity called up share capital
	 	 	12	(b)	 	 	124.3	 	 	 	123.6	 
	Share premium account
	 	 	12	(c)	 	 	362.1	 	 	 	335.8	 
	Revaluation reserves
	 	 	12	(c)	 	 	27.8	 	 	 	47.9	 
	Profit and loss account
	 	 	12	(c)	 	 	1,304.8	 	 	 	1,400.3	 
	Pensions reserves
	 	 	12	(c)	 	 	(256.5	)	 	 	47.1	 
	Joint ventures’ reserves
	 	 	12	(c)	 	 	88.1	 	 	 	98.1	 
	Associates’ reserves
	 	 	12	(c)	 	 	33.5	 	 	 	33.4	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Equity shareholders’ funds
	 	 	 	 	 	 	1,684.1	 	 	 	2,086.2	 
	Minority shareholders’ equity interests
	 	 	 	 	 	 	117.9	 	 	 	137.6	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total capital and reserves
	 	 	 	 	 	 	1,802.0	 	 	 	2,223.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 

The financial statements were approved by the board of directors on 22 November
2002 and are signed on its behalf by:

A E Isaac Director R Médori Director

67  The BOC Group plc  Report and accounts 2002

 

Group cash flow statement

Years ended 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	2001	 	2000	 	 
	 	 	 	 	2002	 	(restated)	 	(restated)
	 	 	Notes	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Net cash inflow from operating activities
	 	 	14	(a)	 	 	759.3	 	 	 	787.8	 	 	 	705.0	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Dividends from joint ventures and associates
	 	 
	Dividends from joint ventures
	 	 	 	 	 	 	30.5	 	 	 	19.4	 	 	 	20.0	 
	Dividends from associates
	 	 	 	 	 	 	3.4	 	 	 	4.1	 	 	 	2.1	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Dividends from joint ventures and associates
	 	 	 	 	 	 	33.9	 	 	 	23.5	 	 	 	22.1	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Returns on investments and servicing of finance
	 	 
	Interest paid
	 	 	 	 	 	 	(89.6	)	 	 	(95.4	)	 	 	(124.9	)
	Interest received
	 	 	 	 	 	 	18.5	 	 	 	23.1	 	 	 	27.2	 
	Dividends paid to minorities in subsidiaries
	 	 	 	 	 	 	(13.9	)	 	 	(7.7	)	 	 	(6.1	)
	Interest element of finance lease rental payments
	 	 	 	 	 	 	(5.7	)	 	 	(7.2	)	 	 	(1.4	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Returns on investments and servicing of finance
	 	 	 	 	 	 	(90.7	)	 	 	(87.2	)	 	 	(105.2	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Tax paid
	 	 	 	 	 	 	(96.2	)	 	 	(100.6	)	 	 	(62.8	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Capital expenditure and financial investment
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Purchases of tangible fixed assets
	 	 	 	 	 	 	(352.1	)	 	 	(349.8	)	 	 	(405.8	)
	Sales of tangible fixed assets
	 	 	 	 	 	 	31.6	 	 	 	47.1	 	 	 	24.2	 
	Purchases of intangible fixed assets
	 	 	 	 	 	 	(0.1	)	 	 	(0.3	)	 	 	(0.4	)
	Net sales/(purchases) of current asset investments
	 	 	 	 	 	 	4.3	 	 	 	(6.5	)	 	 	0.9	 
	Purchases of trade and other investments
	 	 	 	 	 	 	(19.7	)	 	 	(10.2	)	 	 	(29.8	)
	Sales of trade and other investments
	 	 	 	 	 	 	11.5	 	 	 	7.8	 	 	 	2.6	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Capital expenditure and financial investment
	 	 	 	 	 	 	(324.5	)	 	 	(311.9	)	 	 	(408.3	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Acquisitions and disposals
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquisitions of businesses
	 	 	15	(a)	 	 	(207.3	)	 	 	(145.9	)	 	 	(32.1	)
	Net overdrafts acquired with subsidiaries
	 	 	 	 	 	 	(7.4	)	 	 	—	 	 	 	—	 
	Disposals of businesses
	 	 	15	(a)	 	 	10.6	 	 	 	2.7	 	 	 	0.4	 
	Investments in joint ventures
	 	 	 	 	 	 	(12.6	)	 	 	—	 	 	 	(33.6	)
	Divestments/repayments from joint ventures
	 	 	 	 	 	 	—	 	 	 	10.8	 	 	 	3.0	 
	Investments in associates
	 	 	 	 	 	 	(0.5	)	 	 	(2.7	)	 	 	(0.7	)
	Divestments/repayments from associates
	 	 	 	 	 	 	1.7	 	 	 	1.5	 	 	 	1.0	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Acquisitions and disposals
	 	 	 	 	 	 	(215.5	)	 	 	(133.6	)	 	 	(62.0	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Equity dividends paid
	 	 	 	 	 	 	(186.6	)	 	 	(180.3	)	 	 	(170.2	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net cash outflow before use of liquid resources and financing
	 	 	 	 	 	 	(120.3	)	 	 	(2.3	)	 	 	(81.4	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Management of liquid resources
	 	 
	Net sales of short-term investments
	 	 	 	 	 	 	52.6	 	 	 	102.8	 	 	 	9.6	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Financing
	 	 
	Issue of shares
	 	 	 	 	 	 	25.0	 	 	 	16.9	 	 	 	10.1	 
	Increase/(decrease) in debt
	 	 	14	(d)	 	 	64.1	 	 	 	(51.3	)	 	 	64.9	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net cash inflow/(outflow) from financing
	 	 	 	 	 	 	89.1	 	 	 	(34.4	)	 	 	75.0	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Increase in cash
	 	 	 	 	 	 	21.4	 	 	 	66.1	 	 	 	3.2	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 

A reconciliation of the increase in cash to the movement in net debt in
the year is given in note 14 b).

Liquid resources are defined as
short-term deposits.

68  The BOC Group plc Report and accounts 2002

 

 

Total recognised gains and losses

Years ended 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	 	 	2002	 	(restated)	 	(restated)
	 	 	Notes	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Parent1
	 	 	 	 	 	 	26.2	 	 	 	12.1	 	 	 	129.7	 
	Subsidiary undertakings
	 	 	 	 	 	 	170.1	 	 	 	199.8	 	 	 	141.1	 
	Joint ventures
	 	 	 	 	 	 	4.5	 	 	 	10.3	 	 	 	6.5	 
	Associates
	 	 	 	 	 	 	2.1	 	 	 	1.9	 	 	 	1.3	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Profit for the financial year
	 	 	 	 	 	 	202.9	 	 	 	224.1	 	 	 	278.6	 
	Actuarial (loss)/gain recognised on the pension schemes
	 	 	 	 	 	 	(431.2	)	 	 	(464.9	)	 	 	114.2	 
	Movement on deferred tax relating to actuarial loss/(gain) on pensions
	 	 	 	 	 	 	134.0	 	 	 	154.5	 	 	 	(35.2	)
	Unrecognised loss on write down of revaluation reserve
	 	 	 	 	 	 	(11.5	)	 	 	—	 	 	 	—	 
	Exchange translation effect on:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	— results for the year of subsidiaries
	 	 	 	 	 	 	(5.2	)	 	 	(3.9	)	 	 	(2.2	)
	— results for the year of joint ventures
	 	 	 	 	 	 	(2.6	)	 	 	(1.5	)	 	 	0.8	 
	— results for the year of associates
	 	 	 	 	 	 	(0.3	)	 	 	(0.1	)	 	 	0.2	 
	— foreign currency net investments in subsidiaries
	 	 	 	 	 	 	(114.6	)	 	 	(55.8	)	 	 	95.1	 
	— foreign currency net investments in joint ventures
	 	 	 	 	 	 	(11.9	)	 	 	(1.6	)	 	 	7.9	 
	— foreign currency net investments in associates
	 	 	 	 	 	 	(1.7	)	 	 	0.4	 	 	 	6.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total recognised gains and losses for the financial year
	 	 	12	(c)	 	 	(242.1	)	 	 	(148.8	)	 	 	466.2	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Prior year adjustment
	 	 	 	 	 	 	(220.1	)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	Total recognised gains and losses since last annual report
	 	 	 	 	 	 	(462.2	)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 

	1.	 	In accordance with the concession granted under the Companies Act 1985,
the profit and loss account of The BOC Group plc has not been presented
separately in these financial statements.

	2.
	 	There were no material differences between reported profits and losses
and historical cost profits and losses on ordinary activities before tax
for 2002, 2001 and 2000.

	3.
	 	Profit attributable to the parent company includes dividends received
from subsidiaries, joint ventures and associates, often through
intermediate holding companies. These dividends may include the
distribution of earnings of previous periods. As a result, the
relationship of profit between parent, subsidiaries, joint ventures and
associates may show fluctuations from year to year.

	4.
	 	A current tax charge of
£13.5 million (2001: £nil, 2000: £nil) has been
recognised directly in the Group reserves.

Movement in shareholders’ funds

Years ended 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Profit for the financial year
	 	 	202.9	 	 	 	224.1	 	 	 	278.6	 
	Dividends
	 	 	(186.6	)	 	 	(180.3	)	 	 	(170.2	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	16.3	 	 	 	43.8	 	 	 	108.4	 
	Other recognised gains and losses
	 	 	(445.0	)	 	 	(372.9	)	 	 	187.6	 
	Shares issued
	 	 	24.6	 	 	 	16.9	 	 	 	8.9	 
	Credit in relation to share options
	 	 	2.0	 	 	 	4.4	 	 	 	3.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net (decrease)/increase in shareholders’ funds for the financial year
	 	 	(402.1	)	 	 	(307.8	)	 	 	308.5	 
	Shareholders’ funds at 1 October — previously reported
	 	 	2,306.3	 	 	 	2,273.6	 	 	 	2,013.1	 
	Prior year adjustment
	 	 	(220.1	)	 	 	120.4	 	 	 	72.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Shareholders’ funds at 1 October — restated
	 	 	2,086.2	 	 	 	2,394.0	 	 	 	2,085.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Shareholders’ funds at 30 September
	 	 	1,684.1	 	 	 	2,086.2	 	 	 	2,394.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

69  The BOC Group plc Report and accounts 2002

 

 

Balance sheet of The BOC Group plc

At 30 September

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001
	 	 	 	 	2002	 	(restated)
	 	 	Notes	 	£ million	 	£ million
	 	 	
	 	
	 	

	Fixed assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Tangible assets
	 	 	8	(e)	 	 	14.0	 	 	 	18.8	 
	Investments
	 	 	9	(d)	 	 	2,844.4	 	 	 	2,702.0	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	2,858.4	 	 	 	2,720.8	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Current assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Debtors falling due within one year
	 	 	10	(b)	 	 	515.6	 	 	 	408.6	 
	Cash at bank and in hand
	 	 	10	(d)	 	 	–	 	 	 	51.7	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	515.6	 	 	 	460.3	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Current liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	Creditors: amounts falling due within one year

	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings and finance leases
	 	 	10	(e)	 	 	(178.9	)	 	 	(315.6	)
	Other creditors
	 	 	10	(f)	 	 	(953.8	)	 	 	(717.3	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	(1,132.7	)	 	 	(1,032.9	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Net current liabilities
	 	 	 	 	 	 	(617.1	)	 	 	(572.6	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total assets less current liabilities
	 	 	 	 	 	 	2,241.3	 	 	 	2,148.2	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Long-term liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	Creditors: amounts falling due after more than one year

	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings and finance leases
	 	 	11	(a)	 	 	(801.0	)	 	 	(570.4	)
	Other creditors
	 	 	 	 	 	 	(13.0	)	 	 	(16.5	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	(814.0	)	 	 	(586.9	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total net assets
	 	 	 	 	 	 	1,427.3	 	 	 	1,561.3	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Capital and reserves

	 	 	 	 	 	 	 	 	 	 	 	 
	
Equity called up share capital
	 	 	12	(b)	 	 	124.3	 	 	 	123.6	 
	Share premium account
	 	 	12	(d)	 	 	362.1	 	 	 	335.8	 
	Other reserves
	 	 	12	(d)	 	 	113.7	 	 	 	111.7	 
	Profit and loss account
	 	 	12	(d)	 	 	827.2	 	 	 	990.2	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	Total capital and reserves
	 	 	 	 	 	 	1,427.3	 	 	 	1,561.3	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 

The financial statements were approved by the board of directors on 22 November
2002 and are signed on its behalf by:

A E Isaac Director R Médori Director

 

 

 

 

 

70  The BOC Group plc Report and accounts 2002

 

 

Accounting
policies

General

	•
	 	Basis of preparation These accounts are based on the historical cost
accounting convention and comply with all applicable UK accounting
standards.

	
	 	     UK accounting standards differ in certain respects from those generally
accepted in the US and the major effects of these differences in the
determination of profit before tax and shareholders’ funds are shown in note
16 to the financial statements. Disclosure requirements of both the UK and US
are incorporated throughout the notes to these financial statements.

	•
	 	Basis of consolidation The Group accounts include the accounts of the
parent undertaking and of all subsidiaries, joint ventures and associates.

	
	 	     The results of businesses acquired during the year are included from the
effective date of acquisition. The results of businesses disposed of during
the year are included up to the date of relinquishing control. Material,
separately identifiable business segments disposed of are analysed as
discontinued operations and prior years’ analyses are restated to reflect
those businesses as discontinued.

	•
	 	New accounting policies This year, the Group has fully adopted the
following two new accounting standards issued by the UK Accounting
Standards Board:

	
	 	FRS17 – Retirement benefits

	
	 	FRS19 – Deferred tax

	
	 	For the
year ended 30 September 2001, the Group followed the transitional
arrangements permitted by FRS17 under which disclosure on retirement
benefits was given in the notes to the financial statements. For the year
ended 30 September 2002, the standard has been fully adopted and the
accounting impact reflected throughout the financial statements. The
impact of FRS19 is also reflected throughout the financial statements. The
impact is explained further in note 17 to the financial statements.

	
	 	     Comparative figures
have been restated for both FRS17 and FRS19. Changes
to existing policies as a result of adopting these new standards are
described, where appropriate, below.

	•
	 	Exchange Profit and loss and other period statements of the Group’s
overseas operations are translated at average rates of exchange. Assets
and liabilities denominated in foreign currencies are translated at the
rates of exchange ruling at the financial year end. Assets or liabilities
swapped into other currencies are accounted for in those currencies.
Exchange differences are dealt with as a movement in reserves where they
arise from:

	 	i)
	 	the translation of the opening net assets of overseas
operations;

	 	ii)
	 	the retranslation of retained earnings of overseas
operations from average to closing rates of exchange; and

	 	iii)
	 	the
translation or conversion of foreign currency borrowings taken to hedge
overseas assets.

	
	 	All other exchange differences are taken to the profit and loss account. The
principal exchange rates affecting the Group are shown on page 49.

Revenue recognition

Turnover is based on the invoiced value of the sale of goods and services, and
includes the sales value of long-term contracts appropriate to the state of
completion. It excludes sales between Group undertakings, VAT and similar
sales-based taxes. Turnover for goods and services is recognised when delivery
has occurred, title of the goods has passed to the purchaser, and where the
price is fixed or determinable and reflects the commercial substance of the
transaction.
     Profit
on contracts is only recognised close to contract completion and
when profits can be reasonably determined. Provision is made for all losses
incurred together with any foreseeable future losses.

Retirement benefits

Following the full adoption of FRS17, the regular service cost of providing
retirement benefits to employees during the year is charged to operating profit
in the year. The full cost of providing amendments to benefits in respect of
past service is also charged to operating profit in the year.
     A
credit representing the expected return on the assets of the retirement
benefit schemes during the year is included within net interest. This is based
on the market value of the assets of the schemes at the start of the financial
year.
     A
charge representing the expected increase in the liabilities of the
retirement benefit schemes during the year is included within net interest.
This arises from the liabilities of the schemes being one year closer to
payment.
     Differences
between actual and expected returns on assets during the year
are recognised in the statement of total recognised gains and losses in the
year, together with differences arising from changes in assumptions.

Research and development

Revenue expenditure on research and development is written off when incurred.

Operating leases

The cost of operating leases is written off on the straight line basis over the
period of the lease.

 

 

 

71  The BOC Group plc Report and accounts 2002

 

 

Accounting policies

Intangible fixed assets

	•
	 	Goodwill Goodwill arising on the acquisition of a business, being the
excess of the fair value of the purchase price over the fair value of the
net assets acquired, is capitalised and amortised on a straight line basis
over its useful economic life, generally up to a maximum period of 20
years. An impairment review is carried out at the end of the first full
financial year following acquisition. Any impairment in the value of
goodwill, calculated by discounting estimated future cash flows, is dealt
with in the profit and loss account in the period in which it arises.
Negative goodwill, being the excess of the fair value of the net assets
acquired over the fair value of the purchase price, is capitalised and
amortised on a straight line basis, generally over a period equivalent to
the realisation of the non-monetary assets acquired.

	
	 	     Goodwill, both positive and negative, arising on acquisitions before 30
September 1998 was taken to reserves and has not been reinstated on the
balance sheet. This is in line with the relevant accounting standard on
goodwill, FRS10. This goodwill will remain in reserves until such time as it
becomes impaired or the business or businesses to which it relates are
disposed of, at which time it will be taken to the profit and loss account.

	•
	 	Intangibles Other material intangible assets acquired, such as patents
and trademarks, are capitalised and written off on the straight line basis
over their effective economic lives.

Tangible fixed assets

No depreciation is charged on freehold land or construction in progress.
Depreciation is charged on all other fixed assets on the straight line basis
over the effective lives. Straight line depreciation rates vary according to
the class of asset, but are typically:

	 	 	 	 	 
	 	 	per annum
	 	 	

	Freehold property
	 	 	2% – 4%	
	Leasehold property (or at higher rates based on the life of the lease)
	 	 	2% – 4%	
	Plant and machinery
	 	 	3% – 10%	
	Cylinders
	 	 	4% – 10%	
	Motor vehicles
	 	 	7% – 20%	
	Computer hardware and major software
	 	 	15% – 25%	
	 	 	

	•
	 	Until 30 September 1999, land and buildings were revalued periodically.
Following the adoption of FRS15, land and buildings are no longer
revalued. At 1 October 1999, the net book value of assets previously
revalued is regarded as the historical cost.

	•
	 	Interest costs on major fixed asset additions are capitalised during the
construction period and written off as part of the total cost.

	•
	 	Where finance leases have been entered into, the obligations to the
lessor are shown as part of borrowings and the rights in the corresponding
assets are treated in the same way as owned fixed assets.

	•
	 	Any impairment in the value of fixed assets, calculated by discounting
estimated future cash flows, is dealt with in the profit and loss account
in the period in which it arises.

Investments

Investments which are held for the long term and in which the Group has a
participating interest and exercises joint control with one or more other
parties are treated as joint ventures and accounted for on the gross equity
method. Investments which are held for the long term and in which the Group has
a participating interest and exercises significant influence are treated as
associates and accounted for on the equity method. In both cases, the Group’s
share of the results of the investment is included in the profit and loss
account, and the Group’s share of the net assets is included in investments in
the balance sheet. Other investments are shown on the balance sheet at cost
less any provision for impairment.

Stocks

Stocks and work in progress are valued at the lower of cost and net realisable
value. Cost where appropriate includes a proportion of overhead expenses. Work
in progress is stated at cost less progress payments received or receivable.
Cost is arrived at principally on the average and ‘first-in, first-out’ (FIFO)
basis. The amount of long-term contracts, net of amounts transferred to cost of sales and after
deducting foreseeable losses and payments on account, is included in stocks as
long-term contract amounts.

 

 

 

 

 

 

72  The BOC Group plc Report and accounts 2002

 

 

Deferred tax

Following the adoption of FRS19, the Group provides for deferred tax assets and
liabilities arising from timing differences between the recognition of gains
and losses in the financial statements and their recognition for tax purposes.
Deferred tax assets are only recognised where it is more likely than not that
they will be recovered. Deferred tax assets and liabilities are not discounted.

Provisions

Provisions are made when an obligation exists for a future liability in respect
of a past event and where the amount of the obligation can be reliably
estimated. Restructuring provisions are made for direct expenditures of a
business reorganisation where the plans are sufficiently detailed and well
advanced, and where appropriate communication to those affected has been
undertaken at the balance sheet date.

Financial instruments

The Group uses financial instruments, including interest rate and currency
swaps, to raise finance for its operations and to manage the risks arising from
those operations. All transactions are undertaken only to manage interest and
currency risk associated with the Group’s underlying business activities and
the financing of those activities. The Group does not undertake any trading
activity in financial instruments.

	•
	 	Foreign exchange transaction exposures The Group generally hedges actual
and forecast foreign exchange exposures up to two years ahead. Forward
contracts are used to hedge the forecast exposure and any gains or losses
resulting from changes in exchange rates on contracts designated as hedges
of forecast foreign exchange are deferred until the financial period in
which they are realised. If the contract ceases to be a hedge, any
subsequent gains and losses are recognised through the profit and loss
account.

	•
	 	Balance sheet translation exposures A large proportion of the Group’s net
assets are denominated in currencies other than sterling. Where
practicable and cost effective the Group hedges these balance sheet
translation exposures by borrowing in relevant currencies and markets and
by the use of currency swaps. Currency swaps are used only as balance
sheet hedging instruments, and the Group does not hedge the currency
translation of its profit and loss account. Exchange gains and losses
arising on the notional principal of these currency swaps during their
life and at termination or maturity are dealt with as a movement in
reserves. If the swap ceases to be a hedge of the underlying transaction,
any subsequent gains or losses are recognised in the profit and loss
account.

	•
	 	Interest rate risk exposures The Group hedges its exposure to movements
in interest rates associated with its borrowings primarily by means of
interest rate swaps and forward rate agreements. Interest payments and
receipts on these agreements are included with net interest payable. They
are not revalued to fair value or shown on the Group balance sheet at the
balance sheet date.

 

 

 

 

 

 

73  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

1. Segmental information

a) Turnover (including share of joint ventures and
associates)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Continuing operations
	 	 	

	 	 	 	 	 	 	Industrial	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Process Gas	 	and Special	 	BOC	 	Afrox	 	 	 	 	 	Total Group	 	Total Group
	 	 	Solutions	 	Products	 	Edwards	 	hospitals	 	Gist	 	by origin	 	by destination
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	257.1	 	 	 	399.3	 	 	 	150.0	 	 	 	—	 	 	 	263.2	 	 	 	1,069.6	 	 	 	1,055.3	 
	Americas
	 	 	528.1	 	 	 	464.8	 	 	 	298.9	 	 	 	—	 	 	 	—	 	 	 	1,291.8	 	 	 	1,240.1	 
	Africa
	 	 	23.6	 	 	 	158.4	 	 	 	—	 	 	 	259.0	 	 	 	—	 	 	 	441.0	 	 	 	443.3	 
	Asia/Pacific
	 	 	391.8	 	 	 	582.8	 	 	 	239.3	 	 	 	—	 	 	 	1.6	 	 	 	1,215.5	 	 	 	1,279.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Turnover
	 	 	1,200.6	 	 	 	1,605.3	 	 	 	688.2	 	 	 	259.0	 	 	 	264.8	 	 	 	4,017.9	 	 	 	4,017.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	240.2	 	 	 	375.3	 	 	 	157.4	 	 	 	—	 	 	 	229.6	 	 	 	1,002.5	 	 	 	979.6	 
	Americas
	 	 	529.7	 	 	 	464.5	 	 	 	393.3	 	 	 	—	 	 	 	—	 	 	 	1,387.5	 	 	 	1,326.1	 
	Africa
	 	 	25.6	 	 	 	192.2	 	 	 	—	 	 	 	287.8	 	 	 	—	 	 	 	505.6	 	 	 	504.9	 
	Asia/Pacific
	 	 	397.5	 	 	 	541.9	 	 	 	322.4	 	 	 	—	 	 	 	1.8	 	 	 	1,263.6	 	 	 	1,348.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Turnover
	 	 	1,193.0	 	 	 	1,573.9	 	 	 	873.1	 	 	 	287.8	 	 	 	231.4	 	 	 	4,159.2	 	 	 	4,159.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	226.6	 	 	 	357.3	 	 	 	171.3	 	 	 	—	 	 	 	225.3	 	 	 	980.5	 	 	 	948.9	 
	Americas
	 	 	433.3	 	 	 	428.5	 	 	 	378.1	 	 	 	—	 	 	 	—	 	 	 	1,239.9	 	 	 	1,160.6	 
	Africa
	 	 	26.7	 	 	 	181.3	 	 	 	—	 	 	 	292.8	 	 	 	—	 	 	 	500.8	 	 	 	499.9	 
	Asia/Pacific
	 	 	358.6	 	 	 	548.3	 	 	 	249.6	 	 	 	—	 	 	 	1.1	 	 	 	1,157.6	 	 	 	1,269.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Turnover
	 	 	1,045.2	 	 	 	1,515.4	 	 	 	799.0	 	 	 	292.8	 	 	 	226.4	 	 	 	3,878.8	 	 	 	3,878.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

b) Business analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Continuing operations
	 	 	

	 	 	 	 	 	 	Industrial	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Process Gas	 	and Special	 	BOC	 	Afrox	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Solutions	 	Products	 	Edwards	 	hospitals	 	Gist	 	Corporate	 	Total Group
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	185.2	 	 	 	248.0	 	 	 	26.1	 	 	 	29.7	 	 	 	25.5	 	 	 	(14.4	)	 	 	500.1	 
	Operating exceptional items1
	 	 	(24.0	)	 	 	(18.7	)	 	 	(27.5	)	 	 	—	 	 	 	—	 	 	 	(4.3	)	 	 	(74.5	)
	(Loss)/profit on termination/disposal of businesses1
	 	 	(21.3	)	 	 	—	 	 	 	1.1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(20.2	)
	Capital employed2
	 	 	1,831.3	 	 	 	1,058.1	 	 	 	595.3	 	 	 	105.0	 	 	 	22.8	 	 	 	(19.4	)	 	 	3,593.1	 
	Capital expenditure3
	 	 	157.3	 	 	 	123.6	 	 	 	42.0	 	 	 	9.2	 	 	 	19.0	 	 	 	3.2	 	 	 	354.3	 
	Depreciation and amortisation3
	 	 	167.7	 	 	 	96.8	 	 	 	41.1	 	 	 	7.2	 	 	 	16.1	 	 	 	2.0	 	 	 	330.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	156.5	 	 	 	248.8	 	 	 	78.8	 	 	 	32.3	 	 	 	21.3	 	 	 	(7.1	)	 	 	530.6	 
	Operating exceptional items1
	 	 	(52.8	)	 	 	(21.8	)	 	 	(16.1	)	 	 	—	 	 	 	(0.7	)	 	 	(16.9	)	 	 	(108.3	)
	(Loss)/profit on disposal of fixed assets1
	 	 	(0.3	)	 	 	(3.1	)	 	 	(1.3	)	 	 	0.9	 	 	 	—	 	 	 	7.4	 	 	 	3.6	 
	Capital employed2
	 	 	2,004.9	 	 	 	1,152.7	 	 	 	589.9	 	 	 	98.5	 	 	 	81.4	 	 	 	47.1	 	 	 	3,974.5	 
	Capital expenditure3
	 	 	170.6	 	 	 	95.5	 	 	 	53.8	 	 	 	10.3	 	 	 	17.9	 	 	 	4.5	 	 	 	352.6	 
	Depreciation and amortisation3
	 	 	169.4	 	 	 	97.4	 	 	 	37.2	 	 	 	6.7	 	 	 	15.6	 	 	 	3.2	 	 	 	329.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	127.2	 	 	 	254.6	 	 	 	71.1	 	 	 	27.2	 	 	 	18.6	 	 	 	(2.3	)	 	 	496.4	 
	Operating exceptional items1
	 	 	(5.5	)	 	 	(15.8	)	 	 	(4.5	)	 	 	—	 	 	 	1.5	 	 	 	19.9	 	 	 	(4.4	)
	Capital employed2
	 	 	2,120.8	 	 	 	1,374.7	 	 	 	640.5	 	 	 	120.5	 	 	 	128.0	 	 	 	68.7	 	 	 	4,453.2	 
	Capital expenditure3
	 	 	222.2	 	 	 	99.1	 	 	 	59.1	 	 	 	15.5	 	 	 	16.8	 	 	 	1.0	 	 	 	413.7	 
	Depreciation and amortisation3
	 	 	157.9	 	 	 	93.8	 	 	 	33.3	 	 	 	7.2	 	 	 	17.1	 	 	 	4.0	 	 	 	313.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Including share of joint ventures and associates.
	2.	 	Capital employed comprises the
capital and reserves of the Group, its long-term liabilities and all current borrowings net of cash and deposits.
	3.	 	Subsidiary undertakings only.

74  The BOC Group plc Report and accounts 2002

 

 

1. Segmental information continued

c) Regional analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total
	 	 	Europe	 	Americas	 	Africa	 	Asia/Pacific	 	Group
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	155.2	 	 	 	121.3	 	 	 	56.7	 	 	 	166.9	 	 	 	500.1	 
	Operating exceptional items1
	 	 	(38.4	)	 	 	(8.1	)	 	 	(0.4	)	 	 	(27.6	)	 	 	(74.5	)
	(Loss)/profit on termination/disposal of businesses1
	 	 	(1.5	)	 	 	(18.7	)	 	 	—	 	 	 	—	 	 	 	(20.2	)
	Capital employed2
	 	 	944.4	 	 	 	1,244.0	 	 	 	221.2	 	 	 	1,183.5	 	 	 	3,593.1	 
	Capital expenditure3
	 	 	121.4	 	 	 	134.7	 	 	 	25.6	 	 	 	72.6	 	 	 	354.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	165.5	 	 	 	137.2	 	 	 	69.4	 	 	 	158.5	 	 	 	530.6	 
	Operating exceptional items1
	 	 	(42.9	)	 	 	(40.5	)	 	 	—	 	 	 	(24.9	)	 	 	(108.3	)
	(Loss)/profit on disposal of fixed assets1
	 	 	(2.2	)	 	 	4.6	 	 	 	2.6	 	 	 	(1.4	)	 	 	3.6	 
	Capital employed2
	 	 	1,221.1	 	 	 	1,305.5	 	 	 	259.0	 	 	 	1,188.9	 	 	 	3,974.5	 
	Capital expenditure3
	 	 	134.6	 	 	 	108.6	 	 	 	26.4	 	 	 	83.0	 	 	 	352.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating profit before exceptional items1
	 	 	171.3	 	 	 	117.3	 	 	 	66.1	 	 	 	141.7	 	 	 	496.4	 
	Operating exceptional items1
	 	 	22.9	 	 	 	(25.4	)	 	 	(0.6	)	 	 	(1.3	)	 	 	(4.4	)
	Capital employed2
	 	 	1,412.5	 	 	 	1,424.9	 	 	 	328.3	 	 	 	1,287.5	 	 	 	4,453.2	 
	Capital expenditure3
	 	 	127.2	 	 	 	121.9	 	 	 	31.8	 	 	 	132.8	 	 	 	413.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Including share of joint ventures and associates.
	2.	 	Capital employed comprises the
capital and reserves of the Group, its long-term liabilities and all current borrowings net of cash and deposits.
	3.	 	Subsidiary undertakings only.

d) Joint ventures and associates — business analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Joint ventures	 	Associates
	 	 	
	 	

	 	 	 	 	 	 	Industrial	 	 	Industrial	 	 	 	 	 
	 	 	Process Gas	 	and Special	 	BOC	 	Process Gas	 	and Special	 	BOC	 	Afrox
	 	 	Solutions	 	Products	 	Edwards	 	Solutions	 	Products	 	Edwards	 	hospitals
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	119.9	 	 	 	142.7	 	 	 	61.5	 	 	 	10.6	 	 	 	7.9	 	 	 	7.1	 	 	 	10.5	 
	Operating profit before exceptional items1
	 	 	30.9	 	 	 	20.8	 	 	 	12.1	 	 	 	5.0	 	 	 	1.9	 	 	 	1.7	 	 	 	2.1	 
	Operating exceptional items1
	 	 	(0.4	)	 	 	(0.1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Capital employed2
	 	 	93.6	 	 	 	63.8	 	 	 	48.1	 	 	 	40.1	 	 	 	11.9	 	 	 	2.1	 	 	 	3.4	 
	Capital expenditure
	 	 	46.5	 	 	 	7.5	 	 	 	8.0	 	 	 	8.3	 	 	 	1.8	 	 	 	1.5	 	 	 	0.6	 
	Group share
	 	 	23.0	 	 	 	3.7	 	 	 	4.0	 	 	 	2.6	 	 	 	0.6	 	 	 	0.4	 	 	 	0.2	 
	Other partners
	 	 	23.5	 	 	 	3.8	 	 	 	4.0	 	 	 	5.7	 	 	 	1.2	 	 	 	1.1	 	 	 	0.4	 
	Depreciation and amortisation1
	 	 	20.9	 	 	 	8.2	 	 	 	6.1	 	 	 	2.9	 	 	 	0.7	 	 	 	0.1	 	 	 	0.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	122.1	 	 	 	144.4	 	 	 	73.5	 	 	 	9.2	 	 	 	7.7	 	 	 	8.0	 	 	 	21.4	 
	Operating profit before exceptional items1
	 	 	28.2	 	 	 	16.8	 	 	 	14.0	 	 	 	4.1	 	 	 	3.0	 	 	 	2.1	 	 	 	4.0	 
	Operating exceptional items1
	 	 	(0.6	)	 	 	(1.6	)	 	 	—	 	 	 	(0.2	)	 	 	(0.1	)	 	 	(0.1	)	 	 	—	 
	Capital employed2
	 	 	99.3	 	 	 	61.6	 	 	 	43.9	 	 	 	27.4	 	 	 	10.5	 	 	 	2.4	 	 	 	6.8	 
	Capital expenditure
	 	 	55.9	 	 	 	12.0	 	 	 	35.4	 	 	 	2.5	 	 	 	0.4	 	 	 	0.2	 	 	 	3.3	 
	Group share
	 	 	27.8	 	 	 	5.9	 	 	 	17.7	 	 	 	0.7	 	 	 	0.1	 	 	 	0.1	 	 	 	1.0	 
	Other partners
	 	 	28.1	 	 	 	6.1	 	 	 	17.7	 	 	 	1.8	 	 	 	0.3	 	 	 	0.1	 	 	 	2.3	 
	Depreciation and amortisation1
	 	 	20.5	 	 	 	7.9	 	 	 	5.4	 	 	 	2.5	 	 	 	0.5	 	 	 	0.1	 	 	 	0.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	72.4	 	 	 	135.4	 	 	 	50.2	 	 	 	8.3	 	 	 	6.9	 	 	 	5.8	 	 	 	20.1	 
	Operating profit1
	 	 	19.6	 	 	 	16.9	 	 	 	11.6	 	 	 	1.6	 	 	 	2.5	 	 	 	1.2	 	 	 	3.2	 
	Capital employed2
	 	 	96.2	 	 	 	74.8	 	 	 	44.9	 	 	 	25.5	 	 	 	9.7	 	 	 	1.3	 	 	 	7.5	 
	Capital expenditure
	 	 	146.2	 	 	 	36.1	 	 	 	28.6	 	 	 	0.8	 	 	 	1.2	 	 	 	0.4	 	 	 	4.0	 
	Group share
	 	 	49.5	 	 	 	17.9	 	 	 	14.3	 	 	 	0.3	 	 	 	0.3	 	 	 	0.1	 	 	 	1.1	 
	Other partners
	 	 	96.7	 	 	 	18.2	 	 	 	14.3	 	 	 	0.5	 	 	 	0.9	 	 	 	0.3	 	 	 	2.9	 
	Depreciation and amortisation1
	 	 	9.9	 	 	 	10.1	 	 	 	3.8	 	 	 	2.3	 	 	 	0.5	 	 	 	—	 	 	 	0.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Group share.
	2.	 	Capital employed comprises the Group’s share of the net assets of joint
ventures or associates.

75  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

1. Segmental information continued

e) Joint ventures and associates — regional analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Joint ventures	 	 	Associates
	 	 	
	 	

	 	 	Americas	 	Asia/Pacific	 	Americas	 	Africa	 	Asia/Pacific
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	85.4	 	 	 	238.7	 	 	 	—	 	 	 	10.5	 	 	 	25.6	 
	Operating profit before exceptional items1
	 	 	21.9	 	 	 	41.9	 	 	 	—	 	 	 	2.1	 	 	 	8.6	 
	Operating exceptional items1
	 	 	—	 	 	 	(0.5	)	 	 	—	 	 	 	—	 	 	 	—	 
	Capital employed2
	 	 	25.2	 	 	 	180.3	 	 	 	13.7	 	 	 	3.4	 	 	 	40.4	 
	Capital expenditure
	 	 	3.4	 	 	 	58.6	 	 	 	5.5	 	 	 	0.6	 	 	 	6.1	 
	Group share
	 	 	1.4	 	 	 	29.3	 	 	 	1.7	 	 	 	0.2	 	 	 	1.9	 
	Other partners
	 	 	2.0	 	 	 	29.3	 	 	 	3.8	 	 	 	0.4	 	 	 	4.2	 
	Depreciation and amortisation1
	 	 	14.6	 	 	 	20.6	 	 	 	—	 	 	 	0.2	 	 	 	3.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	88.5	 	 	 	251.5	 	 	 	—	 	 	 	21.4	 	 	 	24.9	 
	Operating profit before exceptional items1
	 	 	18.5	 	 	 	40.5	 	 	 	—	 	 	 	4.0	 	 	 	9.2	 
	Operating exceptional items1
	 	 	—	 	 	 	(2.2	)	 	 	—	 	 	 	—	 	 	 	(0.4	)
	Capital employed2
	 	 	27.7	 	 	 	177.1	 	 	 	—	 	 	 	6.8	 	 	 	40.3	 
	Capital expenditure
	 	 	35.2	 	 	 	68.1	 	 	 	—	 	 	 	3.3	 	 	 	3.1	 
	Group share
	 	 	17.4	 	 	 	34.0	 	 	 	—	 	 	 	1.0	 	 	 	0.9	 
	Other partners
	 	 	17.8	 	 	 	34.1	 	 	 	—	 	 	 	2.3	 	 	 	2.2	 
	Depreciation and amortisation1
	 	 	14.7	 	 	 	19.1	 	 	 	—	 	 	 	0.6	 	 	 	3.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000 (restated)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Turnover1
	 	 	43.1	 	 	 	214.9	 	 	 	—	 	 	 	20.1	 	 	 	21.0	 
	Operating profit1
	 	 	12.6	 	 	 	35.5	 	 	 	—	 	 	 	3.2	 	 	 	5.3	 
	Capital employed2
	 	 	33.6	 	 	 	182.3	 	 	 	—	 	 	 	7.5	 	 	 	36.5	 
	Capital expenditure
	 	 	120.7	 	 	 	90.2	 	 	 	—	 	 	 	4.0	 	 	 	2.4	 
	Group share
	 	 	36.6	 	 	 	45.1	 	 	 	—	 	 	 	1.1	 	 	 	0.7	 
	Other partners
	 	 	84.1	 	 	 	45.1	 	 	 	—	 	 	 	2.9	 	 	 	1.7	 
	Depreciation and amortisation1
	 	 	6.5	 	 	 	17.3	 	 	 	—	 	 	 	0.5	 	 	 	2.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Group share.
	2.	 	Capital employed comprises the Group’s share of the net assets of joint
ventures or associates.

f) Significant country analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	UK	 	US
	 	 	
	 	

	 	 	 	 	 	 	2001	 	2000	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)	 	2002	 	(restated)	 	(restated)
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Turnover
	 	 	868.7	 	 	 	837.2	 	 	 	835.5	 	 	 	1,065.6	 	 	 	1,167.7	 	 	 	1,082.7	 
	Total operating profit before exceptional items
	 	 	115.2	 	 	 	125.5	 	 	 	136.4	 	 	 	50.5	 	 	 	66.9	 	 	 	77.6	 
	Operating exceptional items
	 	 	(36.5	)	 	 	(41.9	)	 	 	22.7	 	 	 	(25.7	)	 	 	(34.5	)	 	 	(24.8	)
	Exceptional (loss)/profit on disposal of fixed assets
	 	 	—	 	 	 	(1.7	)	 	 	—	 	 	 	—	 	 	 	4.6	 	 	 	—	 
	Capital employed1
	 	 	733.9	 	 	 	928.6	 	 	 	1,180.8	 	 	 	1,091.6	 	 	 	1,231.0	 	 	 	1,275.5	 
	Capital expenditure
	 	 	110.0	 	 	 	126.3	 	 	 	116.8	 	 	 	124.8	 	 	 	99.8	 	 	 	106.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Capital employed comprises the
capital and reserves of the Group, its
long-term liabilities and all current borrowings net of cash and deposits.

2. Profit and
loss

a) Analysis of costs

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	2001	 	 	 	2000	 
	 	 	 	2002	 	 	 	(restated)	 	 	 	(restated)	 
	i) Expense category	 	 	£ million	 	 	 	£ million	 	 	 	£ million	 
	
	 	 	
	 	 	 	
	 	 	 	
	 
	Cost of sales
	 	 	(2,104.8	)	 	 	(2,208.8	)	 	 	(2,035.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Distribution costs
	 	 	(344.1	)	 	 	(339.3	)	 	 	(327.2	)
	Administrative expenses1
	 	 	(861.4	)	 	 	(874.1	)	 	 	(781.9	)
	Income from other fixed asset investments
	 	 	4.2	 	 	 	2.0	 	 	 	0.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net operating expenses
	 	 	(1,201.3	)	 	 	(1,211.4	)	 	 	(1,108.5	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Included in total administrative expenses is research and development
expenditure of £47.0 million (2001:
£59.7 million, 2000: £59.2 million).

76  The BOC Group plc Report and accounts 2002

 

 

2. Profit and loss continued

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Total	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	before	 	 	 	 	 	 	 	 
	 	 	Continuing	 	 	 	 	 	exceptional	 	Exceptional	 
	 	 	operations	 	Acquisitions	 	items	 	items	 	Total
	ii) 2002 analysis	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	

	Cost of sales
	 	 	(1,998.2	)	 	 	(91.5	)	 	 	(2,089.7	)	 	 	(15.1	)	 	 	(2,104.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Distribution costs
	 	 	(332.2	)	 	 	(9.7	)	 	 	(341.9	)	 	 	(2.2	)	 	 	(344.1	)
	Administrative expenses1
	 	 	(783.2	)	 	 	(21.5	)	 	 	(804.7	)	 	 	(56.7	)	 	 	(861.4	)
	Income from other fixed asset investments
	 	 	4.2	 	 	 	—	 	 	 	4.2	 	 	 	—	 	 	 	4.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net operating expenses
	 	 	(1,111.2	)	 	 	(31.2	)	 	 	(1,142.4	)	 	 	(58.9	)	 	 	(1,201.3	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Continuing	 	 	 	 	 	 	 	 
	 	 	operations	 	 	 	 	 	 	 	 
	 	 	before	 	 	 	 	 	 	 	 
	 	 	exceptional	 	Exceptional	 	 	 	 
	 	 	items	 	items	 	Total
	iii) 2001 analysis (restated)	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	

	Cost of sales
	 	 	(2,164.2	)	 	 	(44.6	)	 	 	(2,208.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Distribution costs
	 	 	(338.1	)	 	 	(1.2	)	 	 	(339.3	)
	Administrative expenses1
	 	 	(814.2	)	 	 	(59.9	)	 	 	(874.1	)
	Income from other fixed asset investments
	 	 	2.0	 	 	 	—	 	 	 	2.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net operating expenses
	 	 	(1,150.3	)	 	 	(61.1	)	 	 	(1,211.4	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	iv) 2000 analysis (restated)
	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	(2,035.2	)	 	 	(0.6	)	 	 	(2,035.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Distribution costs
	 	 	(327.2	)	 	 	—	 	 	 	(327.2	)
	Administrative expenses1
	 	 	(778.1	)	 	 	(3.8	)	 	 	(781.9	)
	Income from other fixed asset investments
	 	 	0.6	 	 	 	—	 	 	 	0.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net operating expenses
	 	 	(1,104.7	)	 	 	(3.8	)	 	 	(1,108.5	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Included in total administrative expenses is research and development
expenditure of £47.0 million (2001:
£59.7 million, 2000: £59.2 million).

b) Exceptional items analysis

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	 	 	 
	 	 	2002	 	(restated)	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	(Charged)/credited in arriving at operating profit
	 	 	 	 	 	 	 	 	 	 	 	 
	Restructuring costs
	 	 	(47.2	)	 	 	(35.8	)	 	 	(18.8	)
	Write-down and impairment of assets
	 	 	(21.2	)	 	 	(24.5	)	 	 	—	 
	Write-down
of unproductive assets identified for disposal
	 	 	—	 	 	 	(21.0	)	 	 	—	 
	FRS17 retirement plan benefit amendments
	 	 	—	 	 	 	(16.7	)	 	 	—	 
	Business systems investments
	 	 	—	 	 	 	—	 	 	 	(6.0	)
	Costs of proposed takeover
	 	 	(6.1	)	 	 	(10.3	)	 	 	(45.6	)
	Break fee
	 	 	—	 	 	 	—	 	 	 	66.0	 
	 	 	 	
	 	 	 	
	 	 	 	

	Total operating exceptional items
	 	 	(74.5	)	 	 	(108.3	)	 	 	(4.4	)
	 	 	 	
	 	 	 	
	 	 	 	

 

i) Restructuring costs

The business initiative announced in August 2001 included a number of
restructuring programmes. The major programmes included the restructuring of BOC
Edwards manufacturing capacity, closure of production at the Process Plants
Edmonton site in the UK, investments in information technology and information
management systems, restructuring to deliver operational efficiencies in Process
Gas Solutions and restructuring of operational networks in Industrial and
Special Products. Cash flow from operating activities includes an outflow of
£48.0 million in 2002 in respect of these exceptional items.

ii) Write-downs of assets

In September 2002 BOC and Air Liquide announced a conditional agreement to
merge their industrial and medical gases businesses in Japan to form a combined
company to be called Japan Air Gases. The net assets of OSK (the existing BOC
gases business in Japan), which had included an increase in the value of fixed
assets through property revaluations in the 1980s and early 1990s, have been
reduced to an appropriate amount based on valuations performed ahead of the
merger. This has resulted in a write-down of £32.7 million, of which £11.5
million has been taken against the revaluation reserves, and the balance of
£21.2 million has been charged as an exceptional item in the profit and loss
account in 2002.

The write-downs in 2001 related to the business initiative announced in
August 2001 with the objective of releasing cash tied up in unproductive assets
and improving cash generation.

77  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

2. Profit and loss continued

iii) Costs of proposed takeover and break fee

The final costs associated with the pre-conditional offer for the Group have
been incurred in 2002 in respect of share options and other costs related to
the retention of key employees. There are no further costs to come. The break fee
was received in 2000 from the potential bidders on the failure of the
pre-conditional offer. Cash flow from operating activities includes an outflow
of £4.5 million in 2002 in respect of these exceptional items.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	(Charged)/credited after operating profit

	 	 	 	 	 	 	 	 	 	 	 	 
	Closure of businesses — continuing operations
	 	 	(21.3	)	 	 	—	 	 	 	—	 
	Profit on disposal of businesses — continuing operations
	 	 	1.1	 	 	 	—	 	 	 	—	 
	Profit on disposal of businesses — discontinued business
	 	 	—	 	 	 	—	 	 	 	12.5	 
	Profit on disposal of fixed assets — continuing operations
	 	 	—	 	 	 	13.6	 	 	 	—	 
	Loss on disposal of fixed assets — continuing operations
	 	 	—	 	 	 	(10.0	)	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total non-operating exceptional items
	 	 	(20.2	)	 	 	3.6	 	 	 	12.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

iv) In March 2002 BOC announced plans to merge its Process Plants business with
Linde Engineering in the US to form a new company, Linde BOC Process Plants
LLC. The costs of £21.3 million for closing BOC’s Process Plants business have
been charged as an exceptional item this year. This includes severance costs for
215 employees, the write-down of assets and the costs of winding down the
business. Cash flow from operating activities includes an outflow of £12.5
million in 2002 in respect of these exceptional costs.

     In April 2002 BOC Edwards agreed the sale of its US glass coating
business, resulting in a profit on disposal of £1.1 million.

v) The profit on
disposal of the health care discontinued business in 2000 of £12.5 million
arose from the release of provisions established at the time of disposal in
1998.

vi) In 2001, proceeds from the disposal of fixed assets were £41.2
million. Of this, £39.0 million was from those assets which were sold at a profit
and £2.2 million was from those assets which were sold at a loss.

c) Fees to auditors

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Audit
fees (Parent: £0.3 million, 2001: £0.3  million,
2000: £0.3 million)
	 	 	1.9	 	 	 	2.0	 	 	 	1.8	 
	Non audit fees
	 	 	 	 	 	 	 	 	 	 	 	 
	Tax advice and compliance
	 	 	2.5	 	 	 	1.6	 	 	 	2.3	 
	Expatriate tax administration
	 	 	1.4	 	 	 	0.5	 	 	 	—	 
	Acquisition related work
	 	 	0.8	 	 	 	—	 	 	 	—	 
	Other advice
	 	 	0.4	 	 	 	0.1	 	 	 	1.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total non audit fees
	 	 	5.1	 	 	 	2.2	 	 	 	3.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total fees paid to auditors
	 	 	7.0	 	 	 	4.2	 	 	 	5.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

Tax compliance and expatriate administration work was outsourced following
competitive tender processes. See also page 52 of the corporate governance
report.

d) Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to
Ordinary shareholders by the weighted average number of shares in issue during
the year.

     For
diluted earnings per share, the weighted average number of shares in
issue is adjusted to assume conversion of all dilutive potential
shares. The
company has only one category of dilutive potential shares: those share options
granted to employees where the exercise price is less than the average market
price of the company’s shares during the year and where any performance
conditions have been met at the balance sheet date.

     Earnings per share before exceptional items are presented in order to show the
underlying earnings performance of the Group.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	i) Earnings	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	

	Amounts used in computing the earnings per share
	 	 	 	 	 	 	 	 	 	 	 	 
	Earnings attributable to Ordinary shareholders for the financial year
	 	 	202.9	 	 	 	224.1	 	 	 	278.6	 
	Adjustment for exceptional items1
	 	 	71.4	 	 	 	55.9	 	 	 	(17.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Adjusted earnings before exceptional items
	 	 	274.3	 	 	 	280.0	 	 	 	260.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	This comprises the exceptional items before interest of £(94.7) million
(2001: £(104.7) million, 2000: £8.1 million) adjusted for the impact of tax
of £22.8 million (2001: £46.9 million, 2000: £9.7 million) and minority
interests of £0.5 million (2001: £1.9 million,
2000: £nil).

78  The BOC Group plc Report and accounts 2002

 

2. Profit and loss continued

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	ii) Average number of 25p Ordinary shares	 	million	 	million	 	million
	
	 	
	 	
	 	

	Average issued share capital
	 	 	496.0	 	 	 	493.3	 	 	 	491.5	 
	Less: Average own shares held in trust
	 	 	5.6	 	 	 	6.4	 	 	 	4.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Basic
	 	 	490.4	 	 	 	486.9	 	 	 	487.1	 
	Add: Dilutive share options
	 	 	1.8	 	 	 	1.7	 	 	 	2.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Diluted
	 	 	492.2	 	 	 	488.6	 	 	 	489.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

3. Treasury information

a) Interest on net debt

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Interest payable on borrowings totally repayable within five years
	 	 	47.5	 	 	 	75.1	 	 	 	94.1	 
	Interest payable on all other borrowings
	 	 	55.7	 	 	 	50.1	 	 	 	41.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Interest payable and similar charges
	 	 	103.2	 	 	 	125.2	 	 	 	135.5	 
	Interest capitalised
	 	 	(2.0	)	 	 	(2.5	)	 	 	(7.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Interest payable (net of interest capitalised)
	 	 	101.2	 	 	 	122.7	 	 	 	128.4	 
	Interest receivable and similar income
	 	 	(22.6	)	 	 	(24.2	)	 	 	(27.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Interest (net)
	 	 	78.6	 	 	 	98.5	 	 	 	100.7	 
	Share of interest of joint ventures (net)
	 	 	23.2	 	 	 	22.6	 	 	 	7.9	 
	Share of interest of associates
	 	 	1.3	 	 	 	2.3	 	 	 	2.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total interest on net debt
	 	 	103.1	 	 	 	123.4	 	 	 	111.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Interest payable on finance leases
	 	 	5.3	 	 	 	6.9	 	 	 	4.6	 
	Interest payable on borrowings repayable by instalments
	 	 	19.5	 	 	 	29.1	 	 	 	27.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

Share of interest of joint ventures and associates is after deducting
capitalised interest of £nil (2001: £1.0 million, 2000: £12.9 million). The
interest capitalised in 2000 was mainly in BOC’s joint venture in Mexico.

b) Currency, interest rate and counterparty exposure

The Group’s approach to managing currency and interest rate risk and its use of
swaps in that process is described on pages 45 and 46 in the finance and
treasury review under the heading ‘management of financial risks’.

Interest rate swaps

At 30 September 2002, the Group had entered into six interest rate swap
agreements (2001:five) with notional principal amounts of £420.0 million
(2001: £375.4 million). The swaps’ underlying currencies are sterling, US dollars
and Japanese yen. The following table shows the maturity profile and weighted
average interest rates payable and receivable on interest rate swaps at 30
September:

	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	Maturity profile	 	£ million	 	£ million
	
	 	
	 	

	Beyond five years
	 	 	295.0	 	 	 	68.0	 
	Four to five years
	 	 	—	 	 	 	—	 
	Three to four years
	 	 	—	 	 	 	—	 
	Two to three years
	 	 	—	 	 	 	125.0	 
	One to two years
	 	 	125.0	 	 	 	—	 
	Within one year
	 	 	—	 	 	 	182.4	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	420.0	 	 	 	375.4	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	%	 	 	 	%	 
	Average receivable swap rate
	 	 	5.5	 	 	 	6.0	 
	Average payable swap rate
	 	 	4.8	 	 	 	5.2	 
	 
	 	 	
	 	 	 	
	 

The weighted average receivable/payable swap interest rate is calculated by
applying the notional swap interest received or paid, using rates applicable at
the financial year end, to the notional principal of outstanding swaps at the
financial year end.

79  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

3. Treasury information continued

Currency swaps

     At 30 September
2002, the Group had entered into eight currency swap agreements
(2001: nine) with notional principal amounts of £360.7 million
(2001: £359.6 million). The maturity dates range between one month and 33 months
from the balance sheet date (2001: between one month and 24 months). The
following table illustrates the impact of the currency swaps on the Group’s net
debt at 30 September:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	 	 	 	 	 	 	 	 	Cash at	 	 	 	 	 	 	 	 	 	Capital	 	 	 	 
	 	 	Capital	 	Gross	 	bank and	 	Currency	 	Adjusted net	 	employed	 	Adjusted net
	 	 	employed	 	borrowings	 	in hand	 	swaps	 	borrowings	 	(restated)	 	borrowings
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Sterling
	 	 	781.7	 	 	 	(615.4	)	 	 	13.6	 	 	 	256.6	 	 	 	(345.2	)	 	 	1,103.0	 	 	 	(298.2	)
	US dollar
	 	 	1,190.5	 	 	 	(327.2	)	 	 	8.5	 	 	 	(185.7	)	 	 	(504.4	)	 	 	1,249.6	 	 	 	(469.5	)
	Australian dollar
	 	 	263.1	 	 	 	(35.6	)	 	 	71.2	 	 	 	(79.6	)	 	 	(44.0	)	 	 	268.5	 	 	 	(109.6	)
	South African rand
	 	 	202.5	 	 	 	(46.6	)	 	 	4.4	 	 	 	—	 	 	 	(42.2	)	 	 	218.6	 	 	 	(47.8	)
	Japanese yen
	 	 	237.4	 	 	 	(206.2	)	 	 	51.5	 	 	 	(52.2	)	 	 	(206.9	)	 	 	260.8	 	 	 	(199.2	)
	Canadian dollar
	 	 	85.8	 	 	 	(41.1	)	 	 	1.0	 	 	 	—	 	 	 	(40.1	)	 	 	80.9	 	 	 	(38.5	)
	Thai baht
	 	 	120.6	 	 	 	(64.0	)	 	 	6.3	 	 	 	—	 	 	 	(57.7	)	 	 	73.7	 	 	 	(38.7	)
	Other
	 	 	711.5	 	 	 	(175.0	)	 	 	29.0	 	 	 	60.9	 	 	 	(85.1	)	 	 	719.4	 	 	 	(70.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	3,593.1	 	 	 	(1,511.1	)	 	 	185.5	 	 	 	—	 	 	 	(1,325.6	)	 	 	3,974.5	 	 	 	(1,272.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The average receivable interest rate on currency swaps was 4.0 per cent
(2001: 4.9 per cent) and the average payable interest rate was 2.8 per cent
(2001: 3.5 per cent). The weighted average receivable/payable swap interest rate
is calculated by applying the notional swap interest received or paid, using
rates applicable at the financial year end, to the notional principal of
outstanding swaps at the financial year end.

     The currency and interest rate exposure of the net borrowings of the Group
at 30 September, after taking into account interest rate and currency swaps
entered into by the Group, is given in the table below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	Fixed rate	 	Floating rate	 	Total	 	Fixed rate	 	Floating rate	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Sterling
	 	 	300.0	 	 	 	45.2	 	 	 	345.2	 	 	 	299.0	 	 	 	(0.8	)	 	 	298.2	 
	US dollar
	 	 	225.5	 	 	 	278.9	 	 	 	504.4	 	 	 	241.2	 	 	 	228.3	 	 	 	469.5	 
	Australian dollar
	 	 	35.6	 	 	 	8.4	 	 	 	44.0	 	 	 	35.9	 	 	 	73.7	 	 	 	109.6	 
	South African rand
	 	 	23.7	 	 	 	18.5	 	 	 	42.2	 	 	 	78.0	 	 	 	(30.2	)	 	 	47.8	 
	Japanese yen
	 	 	165.9	 	 	 	41.0	 	 	 	206.9	 	 	 	178.2	 	 	 	21.0	 	 	 	199.2	 
	Canadian dollar
	 	 	—	 	 	 	40.1	 	 	 	40.1	 	 	 	1.0	 	 	 	37.5	 	 	 	38.5	 
	Thai baht
	 	 	52.1	 	 	 	5.6	 	 	 	57.7	 	 	 	30.4	 	 	 	8.3	 	 	 	38.7	 
	Other
	 	 	25.5	 	 	 	59.6	 	 	 	85.1	 	 	 	29.0	 	 	 	41.6	 	 	 	70.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	828.3	 	 	 	497.3	 	 	 	1,325.6	 	 	 	892.7	 	 	 	379.4	 	 	 	1,272.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

Counterparty risk

     The Group is exposed to credit-related losses in the event of non-performance
by counterparties to financial instruments, but does not expect any
counterparties to fail to meet their obligations. There are procedures and
policies in place limiting the Group’s exposure to concentrations of credit or
country risk.

80  The BOC Group plc  Report and accounts 2002

 

3. Treasury information continued

c) Net borrowings and finance leases

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	i) Analysis	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	

	Secured
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Finance leases
	 	 	33.8	 	 	 	45.6	 	 	 	—	 	 	 	—	 
	Other secured borrowings
	 	 	68.0	 	 	 	71.7	 	 	 	—	 	 	 	—	 
	Unsecured
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	12 1/4% Unsecured Loan Stock 2012/2017
	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 
	7 1/4% Notes 2002
	 	 	—	 	 	 	150.0	 	 	 	—	 	 	 	150.0	 
	6 1/4% Notes 2002
	 	 	34.6	 	 	 	33.6	 	 	 	—	 	 	 	—	 
	7.45% Guaranteed Notes 2006
	 	 	159.2	 	 	 	170.0	 	 	 	—	 	 	 	—	 
	Pollution Control and Industrial Bonds
	 	 	19.3	 	 	 	39.2	 	 	 	—	 	 	 	—	 
	European Investment Bank loans
	 	 	82.8	 	 	 	85.1	 	 	 	—	 	 	 	—	 
	6.75% Bonds 2004
	 	 	125.0	 	 	 	125.0	 	 	 	125.0	 	 	 	125.0	 
	1.00% Euroyen Bond 2006
	 	 	130.6	 	 	 	142.8	 	 	 	130.6	 	 	 	142.8	 
	5 7/8% Bonds 2009
	 	 	200.0	 	 	 	—	 	 	 	200.0	 	 	 	—	 
	6.50% Bonds 2016
	 	 	200.0	 	 	 	200.0	 	 	 	200.0	 	 	 	200.0	 
	Medium term notes
	 	 	57.4	 	 	 	—	 	 	 	57.4	 	 	 	—	 
	Commercial paper
	 	 	147.0	 	 	 	94.7	 	 	 	—	 	 	 	36.5	 
	Other borrowings
	 	 	153.4	 	 	 	248.6	 	 	 	166.9	 	 	 	131.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total borrowings and finance leases
	 	 	1,511.1	 	 	 	1,506.3	 	 	 	979.9	 	 	 	886.0	 
	Less: Cash at bank and in hand — due within one year
	 	 	185.5	 	 	 	233.5	 	 	 	—	 	 	 	51.7	 
	— due beyond one year
	 	 	—	 	 	 	0.7	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net borrowings and finance leases
	 	 	1,325.6	 	 	 	1,272.1	 	 	 	979.9	 	 	 	834.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

A reconciliation of net cash flow to the movement in net debt is given in note 14 b).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	ii) Maturity	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	

	Long and medium-term bank loans
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Repayable — beyond five years
	 	 	11.5	 	 	 	7.3	 	 	 	—	 	 	 	—	 
	— two to five years
	 	 	41.8	 	 	 	58.2	 	 	 	—	 	 	 	—	 
	— one to two years
	 	 	36.9	 	 	 	40.0	 	 	 	—	 	 	 	—	 
	Loans other than from banks
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Repayable — beyond five years
	 	 	536.0	 	 	 	618.5	 	 	 	531.3	 	 	 	442.8	 
	— two to five years
	 	 	342.7	 	 	 	159.7	 	 	 	148.8	 	 	 	127.6	 
	— one to two years
	 	 	129.4	 	 	 	101.0	 	 	 	120.9	 	 	 	—	 
	Finance leases
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Repayable beyond one year
	 	 	22.7	 	 	 	35.2	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Borrowings
and finance leases (note 11 a))
	 	 	1,121.0	 	 	 	1,019.9	 	 	 	801.0	 	 	 	570.4	 
	Short-term — repayable within one year
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Bank loans and overdrafts
	 	 	196.7	 	 	 	187.9	 	 	 	178.9	 	 	 	119.1	 
	Loans other than from banks
	 	 	182.3	 	 	 	288.1	 	 	 	—	 	 	 	196.5	 
	Finance leases
	 	 	11.1	 	 	 	10.4	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total borrowings and finance leases
	 	 	1,511.1	 	 	 	1,506.3	 	 	 	979.9	 	 	 	886.0	 
	Less: Cash at bank and in hand — repayable within one year
	 	 	185.5	 	 	 	233.5	 	 	 	—	 	 	 	51.7	 
	— repayable beyond one year
	 	 	—	 	 	 	0.7	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net borrowings and finance leases
	 	 	1,325.6	 	 	 	1,272.1	 	 	 	979.9	 	 	 	834.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	Finance	 	 	 	 	 	 	 	 	 	Finance	 	 	 	 	 	 	 	 
	 	 	leases	 	Borrowings	 	Total	 	leases	 	Borrowings	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Repayment profile of borrowings and finance leases
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term repayable
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	— beyond five years
	 	 	2.0	 	 	 	547.5	 	 	 	549.5	 	 	 	4.3	 	 	 	625.8	 	 	 	630.1	 
	— four to five years
	 	 	2.0	 	 	 	142.5	 	 	 	144.5	 	 	 	2.2	 	 	 	31.6	 	 	 	33.8	 
	— three to four years
	 	 	2.4	 	 	 	179.7	 	 	 	182.1	 	 	 	2.4	 	 	 	33.3	 	 	 	35.7	 
	— two to three years
	 	 	1.7	 	 	 	62.3	 	 	 	64.0	 	 	 	14.5	 	 	 	153.0	 	 	 	167.5	 
	— one to two years
	 	 	14.6	 	 	 	166.3	 	 	 	180.9	 	 	 	11.8	 	 	 	141.0	 	 	 	152.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	22.7	 	 	 	1,098.3	 	 	 	1,121.0	 	 	 	35.2	 	 	 	984.7	 	 	 	1,019.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

81  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

3. Treasury information continued

iii) Short-term interest rates

The average interest rate on commercial paper for the year to 30 September 2002
was 3.4 per cent (2001: 6.4 per cent) and on other short-term borrowings was 9.0
per cent (2001: 11.4 per cent).

iv) Facilities

The Group maintains a number of short and medium-term committed lines of
credit. The main medium-term facilities are multi-currency agreements with a
group of relationship banks, under which the Group may borrow up to US$420.0
million (2001: US$420.0 million) for general corporate purposes. These
facilities were undrawn both at 30 September 2002 and 30 September 2001. The
following table shows the maturity profile of these facilities.

	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	$ million	 	$ million
	 	 	
	 	

	Within one year
	 	 	200.0	 	 	 	—	 
	One to two years
	 	 	220.0	 	 	 	200.0	 
	Two to three years
	 	 	—	 	 	 	220.0	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	420.0	 	 	 	420.0	 
	 
	 	 	
	 	 	 	
	 

Additional committed facilities are maintained by the principal
operating units in the Group.

v) Security

The secured loans, maturing between 2002 and 2019, are principally secured by
charges over the property, plant and machinery, stocks and trade debtors of
certain overseas subsidiaries.

d) Fair value information

i) Fair values of financial instruments

Set out below is a comparison of the carrying amount of the Group’s financial
instruments (excluding short-term debtors and creditors) at 30 September
2002. Further details of the Group’s financial instruments are
given in notes 3 f) i) and ii).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2002	 	2001
	 	 	 	 	 	 	
	 	

	 	 	 	 	 	 	Carrying	 	 	 	 	 	Carrying	 	 	 	 
	 	 	 	 	 	 	amount	 	Fair value	 	amount	 	Fair value
	 	 	Note	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	

	Primary financial instruments
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loans to joint ventures and associates
	 	 	1	 	 	 	118.0	 	 	 	118.0	 	 	 	106.7	 	 	 	106.7	 
	Other fixed asset investments
	 	 	2	 	 	 	45.1	 	 	 	44.0	 	 	 	31.7	 	 	 	32.6	 
	Current asset investments
	 	 	3	 	 	 	38.8	 	 	 	39.5	 	 	 	43.2	 	 	 	44.1	 
	Cash at bank and in hand
	 	 	4	 	 	 	185.5	 	 	 	185.5	 	 	 	234.2	 	 	 	234.2	 
	Borrowings and finance leases (excluding swap agreements)
	 	 	5	 	 	 	(1,530.6	)	 	 	(1,635.7	)	 	 	(1,491.7	)	 	 	(1,563.5	)
	Provisions for liabilities and charges
	 	 	6	 	 	 	(16.9	)	 	 	(16.9	)	 	 	(21.7	)	 	 	(21.7	)
	Derivative financial instruments held to manage the Group’s interest rate and
currency risk profile
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Foreign currency and interest rate swap agreements
	 	 	7	 	 	 	19.5	 	 	 	31.1	 	 	 	(14.6	)	 	 	(8.5	)
	Forward foreign exchange contracts
	 	 	8	 	 	 	—	 	 	 	4.9	 	 	 	—	 	 	 	(9.1	)
	 
	 	 		 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net financial instruments
	 	 	 	 	 	 	(1,140.6	)	 	 	(1,229.6	)	 	 	(1,112.2	)	 	 	(1,185.2	)
	 
	 	 		 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Financial assets
	 	 	 	 	 	 	387.4	 	 	 	 	 	 	 	415.8	 	 	 	 	 
	Financial liabilities9
	 	 	 	 	 	 	(1,528.0	)	 	 	 	 	 	 	(1,528.0	)	 	 	 	 
	 
	 	 		 	 	 	
	 	 	 		 	 	 	
	 	 	 		 
	Net financial instruments
	 	 	 	 	 	 	(1,140.6	)	 	 	 	 	 	 	(1,112.2	)	 	 	 	 
	 
	 	 		 	 	 	
	 	 	 		 	 	 	
	 	 	 		 

	1.	 	For those bearing either no interest or a floating rate of interest it is
deemed that the carrying amount approximates to the fair value. For those
bearing a fixed rate of interest an assessment of the interest rate at
which the Group could make the same loan under current conditions has been
made. Unless this differs significantly from the fixed rate it is also
deemed that the carrying amount approximates to the fair value. Where this
does differ significantly, the fair value is based on the discounted value
of future cash flows.
	2.	 	For equity instruments listed on a recognised stock exchange the fair
value is the quoted market price. For other equity instruments it is deemed
that the carrying amount approximates to the fair value.
	3.	 	The fair value is the quoted market price.
	4.	 	As all bear either no interest or a floating rate of interest it is
deemed that the carrying amount approximates to the fair value.
	5.	 	For those bearing a floating rate of interest it is deemed that the
carrying amount approximates to the fair value. For those bearing a fixed
rate of interest the fair value is either the quoted market price where a
liquid market exists or has been calculated using well established pricing
models.
	6.	 	Both the carrying amount and the fair value are based on current market
prices and interest rates.
	7.	 	The fair value is the estimated amount the Group would receive or pay to
terminate the agreements.
	8.	 	The fair value represents the net effect on the Group of closing out all
outstanding contracts.
	9.	 	Includes foreign currency and interest rate swap agreements.

82  The BOC Group plc  Report and accounts 2002

 

3. Treasury information continued

ii) Hedges

As explained on pages 45 and 46 of the finance and treasury review under the
heading ‘management of financial risks’, the Group’s policies are to use
forward foreign exchange contracts to hedge transactional currency exposures
(principally arising through anticipated sales and purchase transactions) and
swap agreements to manage interest rate risks and hedge structural currency
exposures.

     Currency swaps are only held to change the currency of the Group’s
borrowings to match better its net investments in its overseas subsidiaries. In
accordance with the Group’s accounting policies, the assets and liabilities
arising from these swap agreements are translated into sterling at the spot
rate ruling at the balance sheet date. The resulting exchange gains or losses
are recognised in the statement of total recognised gains and losses (to match
the exchange gains or losses on the net investments in the overseas
subsidiaries).

     The carrying amount of the swap agreements (as shown in note 3 d) i)) is
the result of the exchange gains and losses recognised in the statement of
total recognised gains and losses, and is analysed in the deferred gains and
losses table shown below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Swap agreements
	 	 	

	 	 	Gains	 	Losses	 	Net
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Deferred gains and losses
	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred gains and losses on hedges at 1 October 2001
	 	 	7.3	 	 	 	(21.9	)	 	 	(14.6	)
	Gains and losses on hedges maturing in 2002
	 	 	(5.0	)	 	 	12.1	 	 	 	7.1	 
	Deferred gains and losses on hedges recognised in the
statement of total recognised gains and losses in 2002
	 	 	23.6	 	 	 	3.4	 	 	 	27.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Deferred gains and losses on hedges at 30 September 2002
	 	 	25.9	 	 	 	(6.4	)	 	 	19.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

The unrecognised difference between the carrying amount and the fair value of
the forward foreign exchange contracts and the swap agreements (as shown in
note 3 d) i)) is analysed in the unrecognised gains and losses table below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Forward foreign	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	exchange contracts	 	Swap agreements
	 	 	
	 	

	 	 	Gains	 	Losses	 	Gains	 	Losses	 	Net total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	

	Unrecognised gains and losses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Unrecognised gains and losses on hedges at 1 October 2001
	 	 	1.7	 	 	 	(10.8	)	 	 	12.3	 	 	 	(6.2	)	 	 	(3.0	)
	Gains and losses arising in previous years that were recognised in 2002
	 	 	(1.5	)	 	 	7.8	 	 	 	(4.3	)	 	 	0.1	 	 	 	2.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Gains and losses arising before 2002 that were not recognised in 2002
	 	 	0.2	 	 	 	(3.0	)	 	 	8.0	 	 	 	(6.1	)	 	 	(0.9	)
	Gains and losses arising in 2002 that were not recognised in 2002
	 	 	5.4	 	 	 	2.3	 	 	 	14.1	 	 	 	(4.4	)	 	 	17.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Unrecognised gains and losses on hedges at 30 September 2002
	 	 	5.6	 	 	 	(0.7	)	 	 	22.1	 	 	 	(10.5	)	 	 	16.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Of which
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gains and losses expected to be recognised in 2003
	 	 	5.2	 	 	 	(0.7	)	 	 	0.8	 	 	 	(0.5	)	 	 	4.8	 
	Gains and losses expected to be recognised in 2004 or later
	 	 	0.4	 	 	 	—	 	 	 	21.3	 	 	 	(10.0	)	 	 	11.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

e) Currency exposures

As outlined on page 45 in the finance and treasury review under the heading
‘currency risk’, it is the Group’s policy to hedge against the potential impact
on its profit and loss account of the currency gains and losses arising from
monetary assets and liabilities not denominated in the operating or functional
currency of the operating unit involved.

     After taking account of the hedging transactions, there was no significant
net profit and loss account exposure to currency gains and losses arising from
monetary assets and liabilities at 30 September 2002.

f) Financial instruments

i) Financial assets

The interest rate and currency profile of the Group’s financial assets
(excluding short-term debtors) at 30 September 2002 is shown below. The
categories of the Group’s financial assets are shown in note
3 d) i).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	 	 	 	 	 	 	 	 	Financial	 	 	 	 	 	 	 	 	 	 	 	 	 	Financial	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	assets on	 	 	 	 	 	 	 	 	 	 	 	 	 	assets on	 	 	 	 
	 	 	Floating rate	 	Fixed rate	 	which no	 	Total	 	Floating rate	 	Fixed rate	 	which no	 	Total
	 	 	financial	 	financial	 	interest is	 	financial	 	financial	 	financial	 	interest is	 	financial
	 	 	assets	 	assets	 	received	 	assets	 	assets	 	assets	 	received	 	assets
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Sterling
	 	 	28.1	 	 	 	11.5	 	 	 	1.7	 	 	 	41.3	 	 	 	65.8	 	 	 	10.0	 	 	 	2.3	 	 	 	78.1	 
	US dollar
	 	 	10.4	 	 	 	123.4	 	 	 	21.3	 	 	 	155.1	 	 	 	13.9	 	 	 	115.8	 	 	 	21.2	 	 	 	150.9	 
	Australian dollar
	 	 	82.4	 	 	 	—	 	 	 	—	 	 	 	82.4	 	 	 	20.6	 	 	 	—	 	 	 	—	 	 	 	20.6	 
	South African rand
	 	 	9.0	 	 	 	—	 	 	 	1.6	 	 	 	10.6	 	 	 	44.4	 	 	 	—	 	 	 	2.3	 	 	 	46.7	 
	Japanese yen
	 	 	51.5	 	 	 	—	 	 	 	6.7	 	 	 	58.2	 	 	 	26.5	 	 	 	—	 	 	 	7.7	 	 	 	34.2	 
	Other
	 	 	39.2	 	 	 	—	 	 	 	0.6	 	 	 	39.8	 	 	 	85.2	 	 	 	—	 	 	 	0.1	 	 	 	85.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	220.6	 	 	 	134.9	 	 	 	31.9	 	 	 	387.4	 	 	 	256.4	 	 	 	125.8	 	 	 	33.6	 	 	 	415.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

83  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

3. Treasury information continued

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	Fixed rate financial assets	 	Fixed rate financial assets
	 	 	
	 	

	 	 	 	 	 	 	Weighted	 	 	 	 	 	Weighted
	 	 	 	 	 	 	average	 	 	 	 	 	average
	 	 	Weighted	 	period for	 	Weighted	 	period for
	 	 	average	 	which rate is	 	average	 	which rate is
	 	 	interest rate	 	fixed	 	interest rate	 	fixed
	 	 	%	 	years	 	%	 	years
	 	 	
	 	
	 	
	 	

	Sterling
	 	 	6.7	 	 	 	2.1	 	 	 	6.1	 	 	 	2.9	 
	US dollar
	 	 	10.3	 	 	 	4.8	 	 	 	10.1	 	 	 	5.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

Financial assets on which no interest is received comprise £30.3 million
(2001: £31.7 million) of non-redeemable equity instruments in other companies
and £1.6 million (2001: £1.9 million) of loans to joint ventures and associates
which have no fixed date of repayment.

     The floating rate financial assets, which principally comprise cash and
deposits and loans to joint ventures and associates, carry interest based on
different benchmark rates depending on the currency of the balance.

     The principal benchmark rates for floating rate financial assets are LIBOR
for sterling balances, US LIBOR for US dollar balances, Australian bank bill
rate for Australian dollar balances, South African prime rate for South African
rand balances and Japanese yen LIBOR for Japanese yen balances.

ii) Financial liabilities

The interest rate and currency profile of the Group’s financial liabilities
including swaps (excluding short-term creditors) at 30 September 2002 is shown
below. The categories of the Group’s financial liabilities are
shown in note 3 d) i).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	 	 	 	 	 	 	 	 	Financial	 	 	 	 	 	 	 	 	 	 	 	 	 	Financial	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	liabilities on	 	 	 	 	 	 	 	 	 	 	 	 	 	liabilities on	 	 	 	 
	 	 	Floating rate	 	Fixed rate	 	which no	 	Total	 	Floating rate	 	Fixed rate	 	which no	 	Total
	 	 	financial	 	financial	 	interest	 	financial	 	financial	 	financial	 	interest	 	financial
	 	 	liabilities	 	liabilities	 	is paid	 	liabilities	 	liabilities	 	liabilities	 	is paid	 	liabilities
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Sterling
	 	 	58.8	 	 	 	300.0	 	 	 	—	 	 	 	358.8	 	 	 	66.6	 	 	 	299.0	 	 	 	1.9	 	 	 	367.5	 
	US dollar
	 	 	304.3	 	 	 	225.5	 	 	 	—	 	 	 	529.8	 	 	 	257.9	 	 	 	241.2	 	 	 	—	 	 	 	499.1	 
	Australian dollar
	 	 	79.6	 	 	 	35.6	 	 	 	—	 	 	 	115.2	 	 	 	83.4	 	 	 	35.9	 	 	 	—	 	 	 	119.3	 
	South African rand
	 	 	22.9	 	 	 	23.7	 	 	 	—	 	 	 	46.6	 	 	 	8.3	 	 	 	78.0	 	 	 	—	 	 	 	86.3	 
	Japanese yen
	 	 	92.5	 	 	 	165.9	 	 	 	—	 	 	 	258.4	 	 	 	47.5	 	 	 	178.2	 	 	 	—	 	 	 	225.7	 
	Canadian dollar
	 	 	41.1	 	 	 	—	 	 	 	—	 	 	 	41.1	 	 	 	39.3	 	 	 	1.0	 	 	 	—	 	 	 	40.3	 
	Thai baht
	 	 	11.9	 	 	 	52.1	 	 	 	—	 	 	 	64.0	 	 	 	11.5	 	 	 	30.4	 	 	 	—	 	 	 	41.9	 
	Other
	 	 	88.6	 	 	 	25.5	 	 	 	—	 	 	 	114.1	 	 	 	118.9	 	 	 	29.0	 	 	 	—	 	 	 	147.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	699.7	 	 	 	828.3	 	 	 	—	 	 	 	1,528.0	 	 	 	633.4	 	 	 	892.7	 	 	 	1.9	 	 	 	1,528.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	Fixed rate financial liabilities	 	Fixed rate financial liabilities
	 	 	
	 	

	 	 	 	 	 	 	Weighted	 	 	 	 	 	Weighted
	 	 	 	 	 	 	average	 	 	 	 	 	average
	 	 	Weighted	 	period for	 	Weighted	 	period for
	 	 	average	 	which rate is	 	average	 	which rate is
	 	 	interest rate	 	fixed	 	interest rate	 	fixed
	 	 	%	 	years	 	%	 	years
	 	 	
	 	
	 	
	 	

	Sterling
	 	 	8.3	 	 	 	13.9	 	 	 	8.4	 	 	 	14.9	 
	US dollar
	 	 	7.1	 	 	 	4.2	 	 	 	7.1	 	 	 	5.2	 
	Australian dollar
	 	 	6.2	 	 	 	0.2	 	 	 	6.2	 	 	 	1.3	 
	South African rand
	 	 	11.9	 	 	 	3.9	 	 	 	12.4	 	 	 	2.9	 
	Japanese yen
	 	 	0.9	 	 	 	3.8	 	 	 	1.0	 	 	 	4.2	 
	Thai baht
	 	 	4.0	 	 	 	1.8	 	 	 	6.2	 	 	 	0.4	 
	Other
	 	 	9.7	 	 	 	2.8	 	 	 	10.2	 	 	 	3.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The floating rate financial liabilities principally comprise debt which carries
interest based on different benchmark rates depending on the currency of the
balance.

     The principal benchmark rates for floating rate financial liabilities are
LIBOR for sterling balances, US LIBOR for US dollar balances, Australian bank
bill rate for Australian dollar balances, South African prime rate for South
African rand balances and Japanese yen LIBOR for Japanese yen balances.

     The maturity profile
of the net borrowings is set out in note 3 c) ii). Other floating rate financial liabilities are mainly employee incentive
provisions. These are expected to be utilised over the period to 2004 depending
on the future choices of the relevant employees.

84  The BOC Group plc  Report and accounts 2002

 

4. Tax

a) Tax on profit on ordinary activities

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Current tax:
	 	 	 	 	 	 	 	 	 	 	 	 
	Payable in the UK
	 	 	 	 	 	 	 	 	 	 	 	 
	Corporation tax at 30% (2001: 30%, 2000: 30%)
	 	 	51.7	 	 	 	60.4	 	 	 	54.8	 
	Double tax relief
	 	 	(19.7	)	 	 	(17.0	)	 	 	(16.3	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	32.0	 	 	 	43.4	 	 	 	38.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Payable overseas
	 	 	 	 	 	 	 	 	 	 	 	 
	US
— Federal tax at 35% (2001: 35%, 2000: 35%)
	 	 	(1.0	)	 	 	—	 	 	 	2.1	 
	— State and local taxes
	 	 	0.6	 	 	 	1.3	 	 	 	1.6	 
	— Prior year tax
	 	 	—	 	 	 	(2.2	)	 	 	(1.1	)
	Australia
at 30% (2001: 34%, 2000: 36%)
	 	 	14.6	 	 	 	14.0	 	 	 	18.2	 
	South
Africa at 30% (2001: 30%, 2000: 30%)
	 	 	18.0	 	 	 	15.2	 	 	 	14.5	 
	Japan
at 42% (2001: 42%, 2000: 48%)
	 	 	8.3	 	 	 	12.7	 	 	 	11.2	 
	Other countries
	 	 	30.9	 	 	 	27.3	 	 	 	20.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	71.4	 	 	 	68.3	 	 	 	66.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total current tax
	 	 	103.4	 	 	 	111.7	 	 	 	105.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Deferred tax:
	 	 	 	 	 	 	 	 	 	 	 	 
	Origination and reversal of timing differences
	 	 	3.4	 	 	 	(7.1	)	 	 	29.9	 
	Effect of change in tax rate on opening liability
	 	 	(0.6	)	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total deferred tax
	 	 	2.8	 	 	 	(7.1	)	 	 	29.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Tax on profit on ordinary activities
	 	 	106.2	 	 	 	104.6	 	 	 	135.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Analysis of charge in the period by entity type
	 	 	 	 	 	 	 	 	 	 	 	 
	Subsidiary undertakings
	 	 	100.3	 	 	 	97.6	 	 	 	121.6	 
	Share of joint ventures
	 	 	3.6	 	 	 	4.3	 	 	 	11.5	 
	Share of associates
	 	 	2.3	 	 	 	2.7	 	 	 	2.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Tax on profit on ordinary activities
	 	 	106.2	 	 	 	104.6	 	 	 	135.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

The tax charge includes a credit of £15.3 million for the operating exceptional
charges (2001: £48.8 million, 2000: £12.4 million) and a credit of £7.5 million
for the non-operating exceptional charges (2001: £1.9 million charge, 2000: £2.7
million charge). The effective rate of tax excluding exceptional items was 30.0
per cent (2001: 32.5 per cent, 2000: 33.4 per cent).

b) Deferred tax

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	i) Deferred tax UK GAAP	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	

	Analysis
	 	 	 	 	 	 	 	 	 	 	 	 
	Arising from accelerated depreciation allowances
	 	 	362.1	 	 	 	344.8	 	 	 	326.5	 
	Other timing differences
	 	 	(53.5	)	 	 	(32.5	)	 	 	(20.7	)
	Tax losses and other credits available
	 	 	(24.7	)	 	 	(26.4	)	 	 	(18.5	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	283.9	 	 	 	285.9	 	 	 	287.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Movement during the year
	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	285.9	 	 	 	287.3	 	 	 	256.8	 
	Exchange adjustment
	 	 	(8.6	)	 	 	(7.3	)	 	 	10.6	 
	Arising
during the year1
	 	 	9.5	 	 	 	(3.1	)	 	 	23.7	 
	Transfers to current tax
	 	 	0.8	 	 	 	3.3	 	 	 	2.3	 
	Other movements
	 	 	(3.7	)	 	 	5.7	 	 	 	(6.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 20022
	 	 	283.9	 	 	 	285.9	 	 	 	287.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Subsidiary undertakings only.
	2.	 	The balance at 30 September 2002 represents deferred tax assets of £7.9
million (2001: £8.4 million, 2000: £8.5 million) and deferred tax liabilities
of £291.8 million (2001: £294.3 million, 2000: £295.8 million).

85  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

4. Tax continued

ii) Deferred tax — US GAAP

For US GAAP reporting, the Group follows SFAS109, Accounting for Income Taxes,
in respect of deferred taxation. SFAS109 requires deferred tax to be fully
provided on all temporary differences.

     The table below provides a reconciliation of deferred taxes from a UK GAAP
basis to a US GAAP basis at 30 September 2002.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Adjustments	 	 	 	 
	 	 	UK GAAP	 	to US GAAP	 	US GAAP
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Accelerated capital allowances
	 	 	362.1	 	 	 	—	 	 	 	362.1	 
	Other temporary differences
	 	 	(53.5	)	 	 	72.7	 	 	 	19.2	 
	Tax losses and other credits available
	 	 	(24.7	)	 	 	—	 	 	 	(24.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	283.9	1	 	 	72.7	 	 	 	356.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	The UK deferred tax balance of £283.9 million does not include the
deferred tax asset of £106.4 million relating to the Group’s net pension
liabilities. As required by the applicable UK GAAP accounting
standard, FRS17, this asset is set against the relevant retirement benefit
liability to show the net position (see note 6 e)). If it was included
above, it would be wholly reversed in the adjustments to US GAAP.

	 	 	 	 	 
	 	 	US GAAP
	 	 	£ million
	 	 	

	Movement during the year
	 	 	 	 
	At 1 October 2001
	 	 	333.8	 
	Exchange adjustment
	 	 	(7.2	)
	Arising during the year
	 	 	37.5	 
	Transfers from current tax
	 	 	0.8	 
	Other movements
	 	 	(8.3	)
	 
	 	 	
	 
	At 30 September 2002
	 	 	356.6	 
	 
	 	 	
	 

The components of deferred tax assets/(liabilities) at 30 September 2002 were:

	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	£ million	 	£ million
	 	 	
	 	

	Long-term
	 	 	 	 	 	 	 	 
	Asset
	 	 	130.4	 	 	 	44.8	 
	Liability
	 	 	(507.0	)	 	 	(399.3	)
	 
	 	 	
	 	 	 	
	 
	Net liability
	 	 	(376.6	)	 	 	(354.5	)
	 
	 	 	
	 	 	 	
	 
	Short-term

	 	 	 	 	 	 	 	 
	
Asset
	 	 	25.5	 	 	 	22.8	 
	Liability
	 	 	(5.5	)	 	 	(2.1	)
	 
	 	 	
	 	 	 	
	 
	Net asset
	 	 	20.0	 	 	 	20.7	 
	 
	 	 	
	 	 	 	
	 
	Total deferred tax assets
	 	 	155.9	 	 	 	67.6	 
	Total deferred tax liabilities
	 	 	(512.5	)	 	 	(401.4	)
	 
	 	 	
	 	 	 	
	 
	 
	 	 	(356.6	)	 	 	(333.8	)
	 
	 	 	
	 	 	 	
	 

86  The BOC Group plc  Report and accounts 2002

 

4. Tax continued

c) Factors affecting the current and Group effective tax charge for the period

The table set out below provides a reconciliation between the UK corporation
tax rate and the Group’s effective tax rate, excluding exceptional items,
computed by taking the various elements of the tax reconciliation as a
percentage of the profit before tax, excluding exceptional items.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	 	 	%	 	%	 	%
	 	 	
	 	
	 	

	UK corporation tax rate
	 	 	30.0	 	 	 	30.0	 	 	 	30.0	 
	Difference in tax rates of overseas subsidiaries, joint ventures and associates
	 	 	0.5	 	 	 	1.3	 	 	 	1.2	 
	Excess of tax depreciation over book depreciation
	 	 	(3.9	)	 	 	(3.7	)	 	 	(3.2	)
	Other timing differences
	 	 	2.7	 	 	 	(1.5	)	 	 	(2.0	)
	State and local taxes
	 	 	0.5	 	 	 	0.7	 	 	 	1.0	 
	Net utilisation of losses
	 	 	(1.1	)	 	 	(0.7	)	 	 	(0.7	)
	Investment tax credits
	 	 	(2.4	)	 	 	(1.1	)	 	 	(1.8	)
	Prior year tax
	 	 	0.9	 	 	 	(0.6	)	 	 	(1.3	)
	Permanent items and other items with less than a 5% net effect
	 	 	0.1	 	 	 	1.1	 	 	 	2.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Effective current tax rate before exceptional items
	 	 	27.3	 	 	 	25.5	 	 	 	25.7	 
	Timing differences
	 	 	2.7	 	 	 	7.0	 	 	 	7.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Effective Group tax rate before exceptional items
	 	 	30.0	 	 	 	32.5	 	 	 	33.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

Profit on ordinary activities before tax (including
exceptional items), as shown
in the consolidated profit and loss account, is analysed over its component
parts as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	UK
	 	 	66.6	 	 	 	86.4	 	 	 	148.1	 
	Overseas
	 	 	268.7	 	 	 	275.8	 	 	 	293.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	335.3	 	 	 	362.2	 	 	 	441.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

d) Factors that may affect future tax charges

The total charge in future periods will be affected by any changes to the
corporation tax rates in force in the countries in which the Group operates.
The current tax charges will also be affected by changes in the excess of tax
depreciation over book depreciation and the use of tax credits.

e) Unused tax credits

On a consolidated basis, the Group has net operating loss carryforwards of
£44.4 million. If not offset against taxable income, these losses will expire
as follows:

	 	 	 	 	 
	 	 	Net
	 	 	operating loss
	Year	 	£ million
	
	 	

	2003
	 	 	—	 
	2004
	 	 	11.7	 
	2005
	 	 	—	 
	2006
	 	 	—	 
	2007
	 	 	—	 
	Thereafter, or no expiry date
	 	 	32.7	 
	 
	 	 	
	 

For US Federal tax purposes, the Group has investment tax credits and general
business tax credits to carry forward of approximately £12.9 million, which are
available to reduce income taxes otherwise payable. These do not expire until
2003 or thereafter.

     In addition, the Group has alternative minimum tax credits for US Federal
income tax purposes of approximately £27.7 million which can be carried forward
to reduce regular tax liabilities of future years. There is no expiration date
on these credits.

     Investment tax credits are accounted for by the flow-through method
whereby they reduce income taxes currently payable and the provision for income
taxes in the period in which the assets giving rise to such credits are placed
in service. Deferred tax assets, subject to the need for a valuation allowance,
are recognised to the extent that the investment tax credits are not currently
utilised.

87  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

5. Directors

Directors’ remuneration and interests are given in the report on remuneration
on pages 56 to 63.

6. Employees

a) Subsidiaries

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2002	 	 	 	 	 	2001
	 	 	
	 	 	
	 	 
	 	 	Year end	 	Average	 	Year end	 	Average
	 	 	
	 	
	 	
	 	

	i) Employees by business
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Process Gas Solutions
	 	 	5,806	 	 	 	5,979	 	 	 	6,037	 	 	 	6,076	 
	Industrial and Special Products
	 	 	15,266	 	 	 	14,681	 	 	 	14,369	 	 	 	14,201	 
	BOC Edwards
	 	 	5,367	 	 	 	5,186	 	 	 	4,830	 	 	 	4,916	 
	Afrox hospitals
	 	 	14,152	 	 	 	13,934	 	 	 	12,833	 	 	 	12,804	 
	Gist
	 	 	5,302	 	 	 	5,100	 	 	 	4,774	 	 	 	4,284	 
	Corporate
	 	 	387	 	 	 	376	 	 	 	328	 	 	 	296	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	46,280	 	 	 	45,256	 	 	 	43,171	 	 	 	42,577	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	ii) Employees by region
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	13,213	 	 	 	12,739	 	 	 	12,173	 	 	 	11,750	 
	Americas
	 	 	7,243	 	 	 	7,312	 	 	 	7,305	 	 	 	7,262	 
	Africa
	 	 	17,435	 	 	 	17,213	 	 	 	16,120	 	 	 	16,137	 
	Asia/Pacific
	 	 	8,389	 	 	 	7,992	 	 	 	7,573	 	 	 	7,428	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	46,280	 	 	 	45,256	 	 	 	43,171	 	 	 	42,577	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	b) Joint ventures and associates
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Joint ventures
	 	 	3,570	 	 	 	3,596	 	 	 	3,595	 	 	 	3,874	 
	Associates
	 	 	742	 	 	 	728	 	 	 	712	 	 	 	684	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	4,312	 	 	 	4,324	 	 	 	4,307	 	 	 	4,558	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

c) Employment costs

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001	 	2000
	 	 	2002	 	(restated)	 	(restated)
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Wages and salaries
	 	 	813.9	 	 	 	758.8	 	 	 	729.5	 
	Social security costs
	 	 	77.7	 	 	 	74.0	 	 	 	64.3	 
	Other pension costs
	 	 	66.3	 	 	 	76.0	 	 	 	54.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	957.9	 	 	 	908.8	 	 	 	848.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

Other pension costs includes an exceptional charge of £nil (2001: £16.7
million, 2000: £nil). See also note 2 b).

88  The BOC Group plc  Report and accounts 2002

 

6. Employees continued

d) Option and incentive schemes

BOC operates share option schemes for both
executives and employees. The
features of these are given in the report on remuneration and the employees
report.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Executive
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	share award
	 	 	Employee options	 	Executive options1	 	plan2
	 	 	
	 	
	 	

	 	 	Number of	 	 	 	 	 	Weighted	 	Number of	 	 	 	 	 	Weighted	 	Number of
	 	 	shares	 	Range of	 	average	 	shares	 	Range of	 	average	 	shares
	i) Summary of movements in share options	 	million	 	option prices	 	option price	 	million	 	option prices	 	option price	 	million
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Outstanding at 1 October 1999
	 	 	6.1	 	 	 	489p-882p	 	 	 	776p	 	 	 	16.7	 	 	 	532p-1119p	 	 	 	847p	 	 	 	—	 
	Granted
	 	 	1.3	 	 	 	870p	 	 	 	870p	 	 	 	6.7	 	 	 	937p	 	 	 	937p	 	 	 	0.8	 
	Exercised
	 	 	(1.1	)	 	 	489p-762p	 	 	 	692p	 	 	 	(0.6	)	 	 	536p-980p	 	 	 	670p	 	 	 	—	 
	Lapsed
	 	 	(0.4	)	 	 	489p-882p	 	 	 	797p	 	 	 	(1.2	)	 	 	722p-1119p	 	 	 	904p	 	 	 	—	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Outstanding at 30 September 2000
	 	 	5.9	 	 	 	610p-882p	 	 	 	810p	 	 	 	21.6	 	 	 	532p-1119p	 	 	 	877p	 	 	 	0.8	 
	Granted
	 	 	1.2	 	 	 	894p	 	 	 	894p	 	 	 	4.4	 	 	 	986p-1034p	 	 	 	994p	 	 	 	—	 
	Exercised
	 	 	(0.4	)	 	 	610p-894p	 	 	 	765p	 	 	 	(2.5	)	 	 	532p-980p	 	 	 	740p	 	 	 	—	 
	Lapsed
	 	 	(1.0	)	 	 	610p-894p	 	 	 	830p	 	 	 	(1.8	)	 	 	722p-993p	 	 	 	929p	 	 	 	(0.1	)
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Outstanding at 30 September 2001
	 	 	5.7	 	 	 	610p-894p	 	 	 	835p	 	 	 	21.7	 	 	 	627p-1119p	 	 	 	914p	 	 	 	0.7	 
	Granted
	 	 	1.2	 	 	 	914p	 	 	 	914p	 	 	 	5.5	 	 	 	1016p-1079p	 	 	 	1016p	 	 	 	—	 
	Exercised
	 	 	(1.0	)	 	 	610p-914p	 	 	 	787p	 	 	 	(3.1	)	 	 	627p-980p	 	 	 	868p	 	 	 	(0.7	)
	Lapsed
	 	 	(0.5	)	 	 	610p-914p	 	 	 	857p	 	 	 	(0.6	)	 	 	742p-1119p	 	 	 	957p	 	 	 	—	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Outstanding at 30 September 2002
	 	 	5.4	 	 	 	650p-914p	 	 	 	855p	 	 	 	23.5	 	 	 	677p-1119p	 	 	 	943p	 	 	 	—	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Number of participants at 30 September 2002
	 	 	6,100	 	 	 	 	 	 	 	 	 	 	 	1,097	 	 	 	 	 	 	 	 	 	 	 	—	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 
	Options exercisable:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 30 September 2002
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8.6	 	 	 	677p-1119p	 	 	 	877p	 	 	 	—	 
	At 30 September 2001
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2.0	 	 	 	627p-742p	 	 	 	705p	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Fair value of options granted during:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year ended 30 September 2002
	 	 	289p	 	 	 	 	 	 	 	 	 	 	 	242p	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year ended 30 September 2001
	 	 	264p	 	 	 	 	 	 	 	 	 	 	 	232p	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 

	1.	 	Executive options include share options and rights and long-term share
incentive units.
	2.	 	The executive share award plan was granted at an option price of £nil.

The weighted average fair value of options granted during the year was
calculated using the Black-Scholes option pricing model. Details of the
assumptions used are given in (ii) below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Employee options	 	Executive options3
	 	 	
	 	

	 	 	Number of	 	Weighted	 	Normal	 	Number of	 	Weighted	 	Normal
	 	 	shares	 	average	 	exercisable	 	shares	 	average	 	exercisable
	ii) Analysis of share options	 	thousand	 	option price	 	date	 	thousand	 	option price	 	date
	
	 	
	 	
	 	
	 	
	 	
	 	

	Outstanding at 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date of grant
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1993
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	242	 	 	 	742p	 	 	 	1996-2003	 
	1994
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	361	 	 	 	678p	 	 	 	1997-2004	 
	1995
	 	 	5	 	 	 	650p	 	 	 	2002-2003	 	 	 	712	 	 	 	722p	 	 	 	1999-2005	 
	1996
	 	 	270	 	 	 	827p	 	 	 	2001-2004	 	 	 	1,110	 	 	 	915p	 	 	 	1999-2006	 
	1997
	 	 	258	 	 	 	882p	 	 	 	2002-2005	 	 	 	1,276	 	 	 	981p	 	 	 	2000-2007	 
	1998
	 	 	843	 	 	 	823p	 	 	 	2001-2006	 	 	 	2,100	 	 	 	915p	 	 	 	2001-2008	 
	1999
	 	 	779	 	 	 	766p	 	 	 	2002-2007	 	 	 	2,809	 	 	 	860p	 	 	 	2002-2009	 
	2000
	 	 	1,090	 	 	 	870p	 	 	 	2003-2008	 	 	 	5,384	 	 	 	937p	 	 	 	2003-2010	 
	2001
	 	 	1,037	 	 	 	894p	 	 	 	2004-2009	 	 	 	4,126	 	 	 	994p	 	 	 	2004-2011	 
	2002
	 	 	1,147	 	 	 	914p	 	 	 	2005-2010	 	 	 	5,353	 	 	 	1016p	 	 	 	2005-2012	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	5,429	 	 	 	 	 	 	 	 	 	 	 	23,473	 	 	 	 	 	 	 	 	 
	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 

	3.	 	Executive options include share options and rights and long-term share
incentive units.

89  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

6. Employees continued

Executive options are granted at the market price of the company’s shares at
the time of the grant and consequently there is no compensation expense under
UK GAAP. The Group also takes advantage of the exemption granted under
UITF 17, Employee Share Schemes, whereby no compensation expense need be recorded
for employee schemes.

     For US reporting
purposes the company applies APB Opinion 25, Accounting
for Stock Issued to Employees and related interpretations in accounting for its
plans. By applying this statement the employee share schemes are deemed
non-compensatory and therefore do not result in an expense for financial
reporting purposes. Under the executive schemes, grants of share options are at
the market price of the company’s shares at the time of grant.

     If compensation cost for the Group’s share option plans had been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of US SFAS123, Accounting for Stock Based
Compensation, the Group’s profit before tax under US GAAP would have been
charged with an additional cost of £6.3 million (2001:
£9.7 million, 2000: £8.3
million), basic earnings per share would have been 51.18p
(2001: 46.71p, 2000: 53.99p) and diluted earnings per share would have been 50.99p
(2001: 46.54p, 2000: 53.72p).

     The Black-Scholes model was used to measure the compensation expense under
US SFAS123. The assumptions used for grants in 2002 included a dividend yield of
4.0 per cent (2001: 4.0 per cent, 2000: 3.3 per cent), expected share price
volatility of 31.0 per cent (2001: 30.0 per cent, 2000: 24.6 per
cent), a weighted
average expected life of 5.0 years (2001: 4.2 years, 2000: 4.2 years) and a
weighted average interest rate of 4.9 per cent (2001:5.1 per cent, 2000: 5.9 per
cent). The weighted average interest rate is based on UK Gilts on the date of
grant with a maturity similar to the related options.

e) Retirement benefits

i) UK GAAP FRS17 Retirement benefits — Group

The Group operates a number of pension schemes throughout the world. The
majority of the schemes are self-administered and the schemes’ assets are held
independently of the Group’s finances. Pension costs are assessed in accordance
with the advice of independent, professionally qualified actuaries.

     The Group operates defined benefit schemes in Europe, Americas, Africa and
Asia/Pacific. The largest schemes are located in the UK, US, South Africa and
Australia. The UK and South African schemes are based on final salary and the
US on annual salary. With effect from 1 January 1998 the Australian scheme
changed to operate primarily as a defined contribution scheme, although it
retains some defined benefit guarantees. The geographical split of the pension
schemes has been amended in 2002 to be consistent with the segmental analysis.

     The most recent actuarial valuations have been updated by an independent
qualified actuary to take account of the requirements of FRS17 in order to
assess the liabilities of the schemes at 30 September 2002. Scheme assets are
stated at their market value at 30 September 2002.

     On the advice of the actuaries, company contributions to the principal UK
scheme will resume from 1 October 2002 at a rate of 14.4 per cent of payroll.
In accordance with South African legislation, contributions recommenced on 7
December 2001 at rates ranging from 10.5 per cent to 12 per cent. Contribution
rates were increased in June 2002 and now range from 14.9 per cent to 19.5 per
cent. As the South African schemes and the defined benefit guarantees of the
Australian scheme are closed schemes, the current service cost as a percentage
of pensionable salaries under the projected unit method will increase as the
members approach retirement. Contributions recommenced to the Australian scheme
on 1 October 2001 at rates ranging from 11 per cent to 17 per cent. In the
US, company contributions to the pension plan remain suspended.

     During the year, the
Pension Funds Second Amendment Act, 2001 was passed in
South Africa. Under this Act, surpluses in pension funds have to be used in a
manner specified under Regulations to the Act to improve current and former
members’ benefits prior to the employer obtaining any benefit from the
surpluses. Consequently, it is considered unlikely that the company will obtain
any benefit from the surpluses in the South African schemes. Therefore the
surpluses at 30 September 2002 have been written off in the statement of total
recognised gains and losses in accordance with FRS17.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Main assumptions for FRS17 purposes	 	Europe	 	Americas	 	Africa	 	Asia/Pacific
	
	 	
	 	
	 	
	 	

	Date of latest actuarial valuation	 	31 Mar 02	 	1 Jan 01	 	30 Jun 01	 	31 Dec 00
	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rate of increase in salaries
	 	 	3.9	%	 	 	3.75	%	 	 	9.5	%	 	 	3.5	%
	Rate of increase in pensions in payment
	 	 	2.4	%	 	 	—	 	 	 	6.8	%	 	 	2.5	%
	Discount rate
	 	 	5.5	%	 	 	6.5	%	 	 	12.0	%	 	 	6.1	%
	Inflation
	 	 	2.4	%	 	 	2.5	%	 	 	7.0	%	 	 	2.5	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rate of increase in salaries
	 	 	4.55	%	 	 	4.75	%	 	 	7.5	%	 	 	4.0	%
	Rate of increase in pensions in payment
	 	 	2.5	%	 	 	—	 	 	 	4.8	%	 	 	3.0	%
	Discount rate
	 	 	6.1	%	 	 	7.25	%	 	 	10.0	%	 	 	5.75	%
	Inflation
	 	 	2.5	%	 	 	3.75	%	 	 	7.5	%	 	 	3.0	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rate of increase in salaries
	 	 	5.0	%	 	 	4.85	%	 	 	12.5	%	 	 	3.5	%
	Rate of increase in pensions in payment
	 	 	3.0	%	 	 	—	 	 	 	9.4	%	 	 	3.5	%
	Discount rate
	 	 	6.2	%	 	 	7.75	%	 	 	15.0	%	 	 	6.25	%
	Inflation
	 	 	3.0	%	 	 	3.75	%	 	 	12.5	%	 	 	2.5	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The assumptions used for the US health care benefits for FRS17 purposes are a
discount rate of 6.5 per cent (2001: 7.25 per cent, 2000: 7.75 per cent) and an
ultimate health care cost trend rate of 4.5 per cent (2001: 4.75 per
cent, 2000: 5.25 per cent).

     Contributions to non defined benefit schemes in the year were £9.6 million
(2001: £6.3 million,2000: £5.5 million) and are included in note 6 c).

90  The BOC Group plc  Report and accounts 2002

 

6. Employees continued

The assets in the schemes and the expected rates of return were:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Equities	 	Bonds	 	Other	 	Total
	 	 	
	 	
	 	
	 	

	Long-term rate of return expected at 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	8.5	%	 	 	4.9	%	 	 	4.0	%	 	 	—	 
	Americas
	 	 	9.5	%	 	 	6.0	%	 	 	—	 	 	 	—	 
	Africa
	 	 	14.0	%	 	 	12.0	%	 	 	8.5	%	 	 	—	 
	Asia/Pacific
	 	 	7.7	%	 	 	4.7	%	 	 	5.7	%	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Value at 30 September 2002 (£ million)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	686.2	 	 	 	235.0	 	 	 	18.8	 	 	 	940.0	 
	Americas
	 	 	289.2	 	 	 	51.0	 	 	 	—	 	 	 	340.2	 
	Africa
	 	 	49.6	 	 	 	15.3	 	 	 	5.4	 	 	 	70.3	 
	Asia/Pacific
	 	 	89.8	 	 	 	16.3	 	 	 	16.7	 	 	 	122.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	1,114.8	 	 	 	317.6	 	 	 	40.9	 	 	 	1,473.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Long-term rate of return expected at 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	8.5	%	 	 	5.2	%	 	 	4.6	%	 	 	—	 
	Americas
	 	 	9.5	%	 	 	6.0	%	 	 	—	 	 	 	—	 
	Africa
	 	 	12.0	%	 	 	10.0	%	 	 	8.4	%	 	 	—	 
	Asia/Pacific
	 	 	7.4	%	 	 	5.1	%	 	 	6.1	%	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Value at 30 September 2001 (£ million)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	897.6	 	 	 	226.8	 	 	 	18.8	 	 	 	1,143.2	 
	Americas
	 	 	345.0	 	 	 	70.7	 	 	 	—	 	 	 	415.7	 
	Africa
	 	 	54.7	 	 	 	18.2	 	 	 	6.3	 	 	 	79.2	 
	Asia/Pacific
	 	 	92.3	 	 	 	18.0	 	 	 	17.3	 	 	 	127.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	1,389.6	 	 	 	333.7	 	 	 	42.4	 	 	 	1,765.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Long-term rate of return expected at 30 September 2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	7.5	%	 	 	5.0	%	 	 	6.0	%	 	 	—	 
	Americas
	 	 	9.0	%	 	 	6.0	%	 	 	—	 	 	 	—	 
	Africa
	 	 	15.5	%	 	 	13.5	%	 	 	12.2	%	 	 	—	 
	Asia/Pacific
	 	 	7.5	%	 	 	5.4	%	 	 	5.9	%	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Value at 30 September 2000 (£ million)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Europe
	 	 	1,162.0	 	 	 	250.1	 	 	 	17.2	 	 	 	1,429.3	 
	Americas
	 	 	469.2	 	 	 	70.1	 	 	 	—	 	 	 	539.3	 
	Africa
	 	 	74.8	 	 	 	21.3	 	 	 	6.8	 	 	 	102.9	 
	Asia/Pacific
	 	 	111.7	 	 	 	18.4	 	 	 	18.9	 	 	 	149.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	1,817.7	 	 	 	359.9	 	 	 	42.9	 	 	 	2,220.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The following amounts at 30 September 2002 were measured in accordance with the
requirements of FRS17:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total market value of assets
	 	 	940.0	 	 	 	340.2	 	 	 	—	 	 	 	70.3	 	 	 	122.8	 	 	 	1,473.3	 
	Present value of scheme liabilities
	 	 	(1,331.6	)	 	 	(250.4	)	 	 	(50.1	)	 	 	(59.3	)	 	 	(134.0	)	 	 	(1,825.4	)
	Irrecoverable surplus
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11.0	)	 	 	—	 	 	 	(11.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	(Deficit)/surplus in the scheme
	 	 	(391.6	)	 	 	89.8	 	 	 	(50.1	)	 	 	—	 	 	 	(11.2	)	 	 	(363.1	)
	Related deferred tax asset/(liability)
	 	 	117.5	 	 	 	(35.5	)	 	 	19.8	 	 	 	—	 	 	 	4.6	 	 	 	106.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net
pension (liabilities)/assets1
	 	 	(274.1	)	 	 	54.3	 	 	 	(30.3	)	 	 	—	 	 	 	(6.6	)	 	 	(256.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total market value of assets
	 	 	1,143.2	 	 	 	415.7	 	 	 	—	 	 	 	79.2	 	 	 	127.6	 	 	 	1,765.7	 
	Present value of scheme liabilities
	 	 	(1,172.0	)	 	 	(258.2	)	 	 	(52.0	)	 	 	(66.4	)	 	 	(130.8	)	 	 	(1,679.4	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	(Deficit)/surplus in the scheme
	 	 	(28.8	)	 	 	157.5	 	 	 	(52.0	)	 	 	12.8	 	 	 	(3.2	)	 	 	86.3	 
	Related deferred tax asset/(liability)
	 	 	8.6	 	 	 	(62.2	)	 	 	20.5	 	 	 	(3.9	)	 	 	1.7	 	 	 	(35.3	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net pension (liabilities)/assets1
	 	 	(20.2	)	 	 	95.3	 	 	 	(31.5	)	 	 	8.9	 	 	 	(1.5	)	 	 	51.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total market value of assets
	 	 	1,429.3	 	 	 	539.3	 	 	 	—	 	 	 	102.9	 	 	 	149.0	 	 	 	2,220.5	 
	Present value of scheme liabilities
	 	 	(1,161.9	)	 	 	(233.0	)	 	 	(43.7	)	 	 	(70.8	)	 	 	(146.6	)	 	 	(1,656.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Surplus/(deficit) in the scheme
	 	 	267.4	 	 	 	306.3	 	 	 	(43.7	)	 	 	32.1	 	 	 	2.4	 	 	 	564.5	 
	Related deferred tax (liability)/asset
	 	 	(80.2	)	 	 	(121.0	)	 	 	17.3	 	 	 	(9.6	)	 	 	(0.1	)	 	 	(193.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net pension assets/(liabilities)1
	 	 	187.2	 	 	 	185.3	 	 	 	(26.4	)	 	 	22.5	 	 	 	2.3	 	 	 	370.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Included in the net pension (liabilities)/assets are assets of £54.3 million
(2001: £107.0 million, 2000: £402.0 million) and liabilities of £311.0 million
(2001: £56.0 million, 2000: £31.1 million).

91  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

6. Employees continued

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	Analysis of the amount charged to operating profit	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	
	 	

	Year to 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current service cost
	 	 	(33.5	)	 	 	(12.8	)	 	 	(1.6	)	 	 	(1.7	)	 	 	(7.2	)	 	 	(56.8	)
	Past
service cost2
	 	 	(0.6	)	 	 	0.7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating charge
	 	 	(34.1	)	 	 	(12.1	)	 	 	(1.6	)	 	 	(1.7	)	 	 	(7.2	)	 	 	(56.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current service cost
	 	 	(35.8	)	 	 	(8.6	)	 	 	(1.3	)	 	 	(2.2	)	 	 	(4.7	)	 	 	(52.6	)
	Past service cost
	 	 	(0.4	)	 	 	(16.7	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating charge
	 	 	(36.2	)	 	 	(25.3	)	 	 	(1.3	)	 	 	(2.2	)	 	 	(4.7	)	 	 	(69.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current service cost
	 	 	(31.1	)	 	 	(8.0	)	 	 	(1.0	)	 	 	(2.5	)	 	 	(4.7	)	 	 	(47.3	)
	Past service cost
	 	 	(1.6	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating charge
	 	 	(32.7	)	 	 	(8.0	)	 	 	(1.0	)	 	 	(2.5	)	 	 	(4.7	)	 	 	(48.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	2.	 	Two amendments have been made to the US pension plan in 2002 relating to the
allocation of the interest credit to plan members, both retrospectively and in
the future. The net impact of the amendments is a £0.7 million credit against
past service cost in the year.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	Analysis of the amount included in net interest	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	
	 	

	Year to 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expected return on pension scheme assets
	 	 	87.4	 	 	 	36.2	 	 	 	—	 	 	 	7.2	 	 	 	8.3	 	 	 	139.1	 
	Interest on pension scheme liabilities
	 	 	(71.1	)	 	 	(18.6	)	 	 	(3.7	)	 	 	(5.6	)	 	 	(7.1	)	 	 	(106.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net interest on FRS17 pension schemes
	 	 	16.3	 	 	 	17.6	 	 	 	(3.7	)	 	 	1.6	 	 	 	1.2	 	 	 	33.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expected return on pension scheme assets
	 	 	99.3	 	 	 	46.7	 	 	 	—	 	 	 	11.9	 	 	 	9.0	 	 	 	166.9	 
	Interest on pension scheme liabilities
	 	 	(71.9	)	 	 	(18.1	)	 	 	—	 	 	 	(9.7	)	 	 	(7.5	)	 	 	(107.2	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net interest on FRS17 pension schemes
	 	 	27.4	 	 	 	28.6	 	 	 	—	 	 	 	2.2	 	 	 	1.5	 	 	 	59.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expected return on pension scheme assets
	 	 	88.7	 	 	 	38.4	 	 	 	—	 	 	 	13.0	 	 	 	9.4	 	 	 	149.5	 
	Interest on pension scheme liabilities
	 	 	(69.4	)	 	 	(13.7	)	 	 	—	 	 	 	(10.3	)	 	 	(7.3	)	 	 	(100.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net interest on FRS17 pension schemes
	 	 	19.3	 	 	 	24.7	 	 	 	—	 	 	 	2.7	 	 	 	2.1	 	 	 	48.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	Analysis of the amount recognised in the statement	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	of total recognised gains and losses	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	
	 	

	Year to 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Actual return less expected return on pension scheme assets
	 	 	(246.4	)	 	 	(71.6	)	 	 	—	 	 	 	3.0	 	 	 	(13.6	)	 	 	(328.6	)
	Experience gains and losses arising on the scheme liabilities
	 	 	(9.7	)	 	 	6.7	 	 	 	5.8	 	 	 	(3.9	)	 	 	(1.3	)	 	 	(2.4	)
	Changes in assumptions underlying the present value of the
scheme liabilities
	 	 	(91.7	)	 	 	(2.2	)	 	 	(5.9	)	 	 	—	 	 	 	5.5	 	 	 	(94.3	)
	Irrecoverable surplus
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11.6	)	 	 	—	 	 	 	(11.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Actuarial (loss) recognised in the statement
of total recognised gains and losses3
	 	 	(347.8	)	 	 	(67.1	)	 	 	(0.1	)	 	 	(12.5	)	 	 	(9.4	)	 	 	(436.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Actual return less expected return on pension scheme assets
	 	 	(346.2	)	 	 	(156.4	)	 	 	—	 	 	 	(11.9	)	 	 	(13.3	)	 	 	(527.8	)
	Experience gains and losses arising on the scheme liabilities
	 	 	(7.6	)	 	 	(0.9	)	 	 	(6.9	)	 	 	(0.3	)	 	 	10.7	 	 	 	(5.0	)
	Changes in assumptions underlying the present value of the
scheme liabilities
	 	 	64.0	 	 	 	—	 	 	 	—	 	 	 	(2.9	)	 	 	—	 	 	 	61.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Actuarial (loss) recognised in the statement
of total recognised gains and losses3
	 	 	(289.8	)	 	 	(157.3	)	 	 	(6.9	)	 	 	(15.1	)	 	 	(2.6	)	 	 	(471.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Actual return less expected return on pension scheme assets
	 	 	109.0	 	 	 	57.2	 	 	 	—	 	 	 	8.5	 	 	 	9.0	 	 	 	183.7	 
	Experience gains and losses arising on the scheme liabilities
	 	 	22.2	 	 	 	(30.9	)	 	 	(17.8	)	 	 	3.9	 	 	 	(11.8	)	 	 	(34.4	)
	Changes in assumptions underlying the present value of the
scheme liabilities
	 	 	(32.4	)	 	 	—	 	 	 	3.0	 	 	 	—	 	 	 	—	 	 	 	(29.4	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Actuarial gain/(loss) recognised in the statement
of total recognised gains and losses3
	 	 	98.8	 	 	 	26.3	 	 	 	(14.8	)	 	 	12.4	 	 	 	(2.8	)	 	 	119.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	3.	 	Included in the actuarial gain/(loss) for the year is £(5.7) million in
respect of minority interests (2001: £(6.8) million, 2000: £5.7 million).

92  The BOC Group plc  Report and accounts 2002

 

6. Employees continued

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	Movement in (deficit)/surplus during the year	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	
	 	

	Year to 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(Deficit)/surplus in scheme at 1 October
	 	 	(28.8	)	 	 	157.5	 	 	 	(52.0	)	 	 	12.8	 	 	 	(3.2	)	 	 	86.3	 
	Movement in the year:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current service cost
	 	 	(33.5	)	 	 	(12.8	)	 	 	(1.6	)	 	 	(1.7	)	 	 	(7.2	)	 	 	(56.8	)
	Past service cost
	 	 	(0.6	)	 	 	0.7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.1	 
	Contributions
	 	 	2.8	 	 	 	—	 	 	 	3.9	 	 	 	1.8	 	 	 	6.3	 	 	 	14.8	 
	Other finance income
	 	 	16.3	 	 	 	17.6	 	 	 	(3.7	)	 	 	1.6	 	 	 	1.2	 	 	 	33.0	 
	Actuarial (loss)
	 	 	(347.8	)	 	 	(67.1	)	 	 	(0.1	)	 	 	(12.5	)	 	 	(9.4	)	 	 	(436.9	)
	Exchange adjustment
	 	 	—	 	 	 	(6.1	)	 	 	3.4	 	 	 	(2.0	)	 	 	1.1	 	 	 	(3.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	(Deficit)/surplus in scheme at 30 September
	 	 	(391.6	)	 	 	89.8	 	 	 	(50.1	)	 	 	—	 	 	 	(11.2	)	 	 	(363.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Surplus/(deficit) in scheme at 1 October
	 	 	267.4	 	 	 	306.3	 	 	 	(43.7	)	 	 	32.1	 	 	 	2.4	 	 	 	564.5	 
	Movement in the year:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current service cost
	 	 	(35.8	)	 	 	(8.6	)	 	 	(1.3	)	 	 	(2.2	)	 	 	(4.7	)	 	 	(52.6	)
	Past service cost
	 	 	(0.4	)	 	 	(16.7	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17.1	)
	Contributions
	 	 	2.4	 	 	 	—	 	 	 	3.7	 	 	 	—	 	 	 	—	 	 	 	6.1	 
	Other finance income
	 	 	27.4	 	 	 	28.6	 	 	 	—	 	 	 	2.2	 	 	 	1.5	 	 	 	59.7	 
	Actuarial (loss)
	 	 	(289.8	)	 	 	(157.3	)	 	 	(6.9	)	 	 	(15.1	)	 	 	(2.6	)	 	 	(471.7	)
	Exchange adjustment
	 	 	—	 	 	 	5.2	 	 	 	(3.8	)	 	 	(4.2	)	 	 	0.2	 	 	 	(2.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	(Deficit)/surplus in scheme at 30 September
	 	 	(28.8	)	 	 	157.5	 	 	 	(52.0	)	 	 	12.8	 	 	 	(3.2	)	 	 	86.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Americas	 	Americas	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	pensions	 	health care	 	Africa	 	Asia/Pacific	 	Total
	History of experience gains and losses	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	
	 	
	 	

	Year to 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Difference between the expected and actual return on scheme assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(246.4	)	 	 	(71.6	)	 	 	—	 	 	 	3.0	 	 	 	(13.6	)	 	 	(328.6	)
	Percentage of scheme assets
	 	 	(26.2%	)	 	 	(21.0%	)	 	 	—	 	 	 	4.3%		 	 	(11.1%	)	 	 	(22.3%	)
	Experience gains and losses on scheme liabilities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(9.7	)	 	 	6.7	 	 	 	5.8	 	 	 	(3.9	)	 	 	(1.3	)	 	 	(2.4	)
	Percentage of the present value of scheme liabilities
	 	 	(0.7%	)	 	 	2.7%		 	 	11.6%		 	 	(6.6%	)	 	 	(1.0%	)	 	 	(0.1%	)
	Total amount recognised in the statement of total recognised
gains and losses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(347.8	)	 	 	(67.1	)	 	 	(0.1	)	 	 	(12.5	)	 	 	(9.4	)	 	 	(436.9	)
	Percentage of the present value of scheme liabilities
	 	 	(26.1%	)	 	 	(26.8%	)	 	 	(0.2%	)	 	 	(21.1%	)	 	 	(7.0%	)	 	 	(23.9%	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Difference between the expected and actual return on scheme assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(346.2	)	 	 	(156.4	)	 	 	—	 	 	 	(11.9	)	 	 	(13.3	)	 	 	(527.8	)
	Percentage of scheme assets
	 	 	(30.3	%)	 	 	(37.6	%)	 	 	—	 	 	 	(15.0	%)	 	 	(10.4	%)	 	 	(29.9	%)
	Experience gains and losses on scheme liabilities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(7.6	)	 	 	(0.9	)	 	 	(6.9	)	 	 	(0.3	)	 	 	10.7	 	 	 	(5.0	)
	Percentage of the present value of scheme liabilities
	 	 	(0.6	%)	 	 	(0.3	%)	 	 	(13.3	%)	 	 	(0.4	%)	 	 	8.2	%	 	 	(0.3	%)
	Total amount recognised in the statement of total recognised
gains and losses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	(289.8	)	 	 	(157.3	)	 	 	(6.9	)	 	 	(15.1	)	 	 	(2.6	)	 	 	(471.7	)
	Percentage of the present value of scheme liabilities
	 	 	(24.7	%)	 	 	(60.9	%)	 	 	(13.3	%)	 	 	(22.7	%)	 	 	(2.0	%)	 	 	(28.1	%)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Year to 30 September 2000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Difference between the expected and actual return on scheme assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	109.0	 	 	 	57.2	 	 	 	—	 	 	 	8.5	 	 	 	9.0	 	 	 	183.7	 
	Percentage of scheme assets
	 	 	7.6	%	 	 	10.6	%	 	 	—	 	 	 	8.3	%	 	 	6.0	%	 	 	8.3	%
	Experience gains and losses on scheme liabilities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	22.2	 	 	 	(30.9	)	 	 	(17.8	)	 	 	3.9	 	 	 	(11.8	)	 	 	(34.4	)
	Percentage of the present value of scheme liabilities
	 	 	1.9	%	 	 	(13.3	%)	 	 	(40.7	%)	 	 	5.5	%	 	 	(8.0	%)	 	 	(2.1	%)
	Total amount recognised in the statement of total recognised
gains and losses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amount (£ million)
	 	 	98.8	 	 	 	26.3	 	 	 	(14.8	)	 	 	12.4	 	 	 	(2.8	)	 	 	119.9	 
	Percentage of the present value of scheme liabilities
	 	 	8.5	%	 	 	11.3	%	 	 	(33.9	%)	 	 	17.5	%	 	 	(1.9	%)	 	 	7.2	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

93  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

6. Employees continued

ii) UK GAAP FRS17 Retirement benefits — parent company

The pension rights of UK BOC Group employees are dealt with through a
self-administered scheme, the assets of which are held independently of the
Group’s finances. The scheme is a defined benefit scheme that is funded partly
by contributions from members and partly by contributions from Group
undertakings at rates advised by independent professionally qualified
actuaries. Acting on the advice of the actuaries, company contributions to the
principal UK scheme will resume from 1 October 2002.

     The company accounts for pension costs in accordance with UK Financial
Reporting Standard 17 (FRS17) on retirement benefits. In accordance with the
standard, the company treats contributions to the pension scheme as if it were
a defined contribution scheme. This is because the underlying assets and
liabilities of the scheme cover a number of UK BOC Group undertakings and
cannot readily be split between each Group undertaking on a consistent and
reliable basis.

iii) Pensions — US GAAP

For the purposes of US GAAP, the pension costs of the largest schemes have been
restated in the following tables in accordance with the requirement of
SFAS132. The changes in projected benefit obligation, plan assets and details of
the funded status of these retirement plans, together with the changes in the
accumulated other post-retirement benefit obligations of the Group’s US
business, are given below. The measurement date for UK and US pension plans is
30 June. The difference between the UK and US GAAP information, disclosed in
note 6 e) i) and ii) is included in note 16.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Pension benefits	 	Other benefits1
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Change in benefit obligation
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Projected benefit obligation at 1 October
	 	 	1,599.5	 	 	 	1,666.0	 	 	 	52.0	 	 	 	47.1	 
	Change due to re-measurement
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3.4	)
	Exchange adjustment
	 	 	(27.3	)	 	 	(7.6	)	 	 	(3.4	)	 	 	0.3	 
	Service cost
	 	 	54.6	 	 	 	54.0	 	 	 	1.6	 	 	 	1.2	 
	Interest cost
	 	 	102.9	 	 	 	107.5	 	 	 	3.6	 	 	 	3.3	 
	Plan participants’ contributions
	 	 	12.9	 	 	 	14.6	 	 	 	—	 	 	 	—	 
	Actuarial losses/(gains)
	 	 	44.7	 	 	 	(151.1	)	 	 	0.2	 	 	 	7.2	 
	Benefits paid
	 	 	(91.9	)	 	 	(86.6	)	 	 	(3.9	)	 	 	(3.7	)
	Other (income) less expenses
	 	 	0.6	 	 	 	2.3	 	 	 	—	 	 	 	—	 
	Curtailments, settlements, termination benefits
	 	 	0.6	 	 	 	0.4	 	 	 	—	 	 	 	—	 
	Plan amendments2
	 	 	(0.7	)	 	 	—	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Projected benefit obligation at 30 September
	 	 	1,695.9	 	 	 	1,599.5	 	 	 	50.1	 	 	 	52.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Change in fair value of assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fair value of assets at 1 October
	 	 	1,995.7	 	 	 	2,203.4	 	 	 	—	 	 	 	—	 
	Exchange adjustment
	 	 	(39.8	)	 	 	(24.9	)	 	 	—	 	 	 	—	 
	Actual return on plan assets
	 	 	(180.4	)	 	 	(115.5	)	 	 	—	 	 	 	—	 
	Employer contributions
	 	 	8.9	 	 	 	2.4	 	 	 	—	 	 	 	—	 
	Plan participants’ contributions
	 	 	12.9	 	 	 	14.6	 	 	 	—	 	 	 	—	 
	Other income less (expenses)
	 	 	0.6	 	 	 	2.3	 	 	 	—	 	 	 	—	 
	Benefits paid
	 	 	(91.9	)	 	 	(86.6	)	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Fair value of assets at 30 September
	 	 	1,706.0	 	 	 	1,995.7	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Funded status and unrecognised (gains)/losses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Funded status
	 	 	10.1	 	 	 	396.2	 	 	 	(50.1	)	 	 	(52.0	)
	Unrecognised net transition asset
	 	 	(26.1	)	 	 	(42.9	)	 	 	—	 	 	 	—	 
	Unrecognised prior service cost/(credit)
	 	 	23.9	 	 	 	28.9	 	 	 	(3.4	)	 	 	(4.1	)
	Unrecognised net loss/(gain)
	 	 	195.5	 	 	 	(191.2	)	 	 	9.3	 	 	 	10.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Prepaid/(accrued) pension cost
	 	 	203.4	 	 	 	191.0	 	 	 	(44.2	)	 	 	(46.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Amounts recognised in the statement of financial position consist of:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Prepaid benefit cost
	 	 	183.0	 	 	 	191.0	 	 	 	 	 	 	 	 	 
	Accrued benefit liability
	 	 	(1.5	)	 	 	—	 	 	 	 	 	 	 	 	 
	Intangible asset
	 	 	0.7	 	 	 	—	 	 	 	 	 	 	 	 	 
	Accumulated other comprehensive income
	 	 	21.2	 	 	 	—	 	 	 	 	 	 	 	 	 
	 
	 	 	
	 	 	 	
	 	 	 	 	 	 	 	 	 
	Prepaid pension cost
	 	 	203.4	 	 	 	191.0	 	 	 	 	 	 	 	 	 
	 
	 	 	
	 	 	 	
	 	 	 	 	 	 	 	 	 

	1.	 	Other benefits relate to post retirement medical benefits.
	2.	 	Plan amendments relate to changes made to the US pension plan.

The fair value of plan assets exceeds the accumulated benefit obligation for
all plans except the Australian plan, where the accumulated benefit obligation,
projected benefit obligation and fair value of plan assets were £110.6
million, £110.6 million and £109.1 million respectively (2001: £108.4
million, £108.4 million and £112.5 million).

94  The BOC Group plc  Report and accounts 2002

 

6. Employees continued

The main assumptions are as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Europe	 	Americas	 	Africa	 	Asia/Pacific
	 	 	
	 	
	 	
	 	

	At 30 September 2002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discount rate
	 	 	5.8	%	 	 	7.0	%	 	 	12.0	%	 	 	7.0	%
	Expected return on plan assets
	 	 	7.7	%	 	 	9.0	%	 	 	12.0	%	 	 	8.0	%
	Rate of compensation increase
	 	 	3.9	%	 	 	3.75	%	 	 	9.5	%	 	 	3.5	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discount rate
	 	 	6.2	%	 	 	7.25	%	 	 	10.0	%	 	 	5.75	%
	Expected return on plan assets
	 	 	7.4	%	 	 	9.0	%	 	 	10.0	%	 	 	6.5	%
	Rate of compensation increase
	 	 	4.75	%	 	 	4.75	%	 	 	7.5	%	 	 	3.0	%
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

For the post retirement medical benefits plan at 30
September 2002, the initial
health care cost trend rates for valuing the medical benefits and drug benefits
were 10.0 per cent (2001:9.0 per cent) and 2.4 per cent (2001:2.0 per cent)
respectively. These rates are assumed to reduce gradually to 4.5 per cent in
2009 (2001:4.75 per cent in 2009) for valuing medical benefits but no reduction
is assumed for valuing the drug benefits.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Pensionable benefits	 	Other benefits3
	 	 	
	 	

	 	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Service cost net of employees’ contributions
	 	 	54.6	 	 	 	54.0	 	 	 	51.1	 	 	 	1.6	 	 	 	1.2	 	 	 	1.0	 
	Interest cost on projected benefits obligation
	 	 	102.9	 	 	 	107.5	 	 	 	99.5	 	 	 	3.6	 	 	 	3.3	 	 	 	1.8	 
	Expected return on assets
	 	 	(156.7	)	 	 	(158.8	)	 	 	(141.1	)	 	 	—	 	 	 	—	 	 	 	—	 
	Amortisation of net transition asset
	 	 	(14.7	)	 	 	(15.2	)	 	 	(15.3	)	 	 	—	 	 	 	—	 	 	 	—	 
	Amortisation of prior service cost/(credit)
	 	 	3.5	 	 	 	2.6	 	 	 	5.7	 	 	 	(0.5	)	 	 	(0.5	)	 	 	(0.4	)
	Amortisation of net (gain)/loss
	 	 	(7.2	)	 	 	(2.7	)	 	 	—	 	 	 	0.3	 	 	 	—	 	 	 	(0.7	)
	Cost of special termination benefits
	 	 	0.6	 	 	 	0.4	 	 	 	1.6	 	 	 	—	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net periodic pension (credit)/cost
	 	 	(17.0	)	 	 	(12.2	)	 	 	1.5	 	 	 	5.0	 	 	 	4.0	 	 	 	1.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	3.	 	Other benefits relate to post retirement medical benefits.

It is estimated that a one per cent change in the weighted average health care
costs trend would have the following effects on the accumulated benefit
obligation and net periodic pension cost at 30 September 2002:

	 	 	 	 	 	 	 	 	 
	 	 	One percentage point
	 	 	

	 	 	increase	 	decrease
	 	 	
	 	

	Accumulated benefit obligation
	 	 	6.0	 	 	 	(5.5	)
	Net periodic pension cost
	 	 	0.9	 	 	 	(0.8	)
	 
	 	 	
	 	 	 	
	 

95  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

7. Fixed assets — intangible assets

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Negative	 	Other	 	 	 	 
	 	 	Goodwill	 	Goodwill	 	intangibles	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Gross book value
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	73.1	 	 	 	(20.4	)	 	 	6.0	 	 	 	58.7	 
	Exchange adjustment
	 	 	(6.7	)	 	 	(0.8	)	 	 	(0.1	)	 	 	(7.6	)
	Acquired during the year
	 	 	117.3	 	 	 	(5.0	)	 	 	0.6	 	 	 	112.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	183.7	 	 	 	(26.2	)	 	 	6.5	 	 	 	164.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Amortisation
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	8.8	 	 	 	(1.1	)	 	 	2.9	 	 	 	10.6	 
	Exchange adjustment
	 	 	(0.8	)	 	 	—	 	 	 	(0.1	)	 	 	(0.9	)
	Impairment
	 	 	—	 	 	 	(3.8	)	 	 	—	 	 	 	(3.8	)
	Provided during the year
	 	 	8.8	 	 	 	(2.0	)	 	 	0.6	 	 	 	7.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	16.8	 	 	 	(6.9	)	 	 	3.4	 	 	 	13.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net book value
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	64.3	 	 	 	(19.3	)	 	 	3.1	 	 	 	48.1	 
	At 30 September 2002
	 	 	166.9	 	 	 	(19.3	)	 	 	3.1	 	 	 	150.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The increase in positive goodwill represents the excess of the fair value of
the purchase price over the provisional fair value of the net assets of
businesses acquired. The increase in negative goodwill represents the excess of
the provisional fair value of the net assets of businesses acquired over the
fair value of the purchase price. The most significant amounts are as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Positive	 	Negative	 	Amortisation
	 	 	Goodwill	 	Goodwill	 	period
	Business acquired	 	£ million	 	£ million	 	Years
	
	 	
	 	
	 	

	2002
	 	 	 	 	 	 	 	 	 	 	 	 
	Seiko Instruments Inc — turbomolecular pumps business
	 	 	60.2	 	 	 	—	 	 	 	20	 
	Unique Gas and Petrochemicals Public Company Limited
	 	 	17.5	 	 	 	—	 	 	 	20	 
	Enron Teesside Operations Limited — industrial assets
	 	 	9.6	 	 	 	—	 	 	 	15	 
	Hydromatix Inc
	 	 	5.6	 	 	 	—	 	 	 	15	 
	Semco
	 	 	4.4	 	 	 	—	 	 	 	15	 
	Minorities in Osaka Sanso Kogyo KK
	 	 	—	 	 	 	(5.0	)	 	 	10	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	2001
	 	 	 	 	 	 	 	 	 	 	 	 
	Remaining 50 per cent of joint ventures in Venezuela and Chile
	 	 	7.5	 	 	 	—	 	 	 	12	 
	UK Fluorogas
	 	 	8.2	 	 	 	—	 	 	 	15	 
	Minorities in Osaka Sanso Kogyo KK
	 	 	—	 	 	 	(20.4	)	 	 	10	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	2000
	 	 	 	 	 	 	 	 	 	 	 	 
	Kachina Semiconductor Services
	 	 	7.9	 	 	 	—	 	 	 	15	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	1999
	 	 	 	 	 	 	 	 	 	 	 	 
	Chemical management division of FSI International Inc
	 	 	16.4	 	 	 	—	 	 	 	15	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

Amortisation periods are those over which it is estimated that the value of the
business acquired will exceed the value of the identifiable net assets of the
business acquired.

96  The BOC Group plc  Report and accounts 2002

 

8. Fixed assets — tangible assets

a) Group summary

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Plant,	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Land and	 	machinery	 	 	 	 	 	Construction	 	 	 	 
	 	 	buildings1	 	and vehicles	 	Cylinders	 	in progress	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	

	Gross book value
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	704.8	 	 	 	4,437.3	 	 	 	606.7	 	 	 	308.1	 	 	 	6,056.9	 
	Exchange adjustment
	 	 	(33.5	)	 	 	(222.0	)	 	 	(38.4	)	 	 	(18.5	)	 	 	(312.4	)
	Capital expenditure2
	 	 	17.8	 	 	 	143.1	 	 	 	45.4	 	 	 	148.0	 	 	 	354.3	 
	Disposals
	 	 	(26.8	)	 	 	(106.1	)	 	 	(20.2	)	 	 	(0.1	)	 	 	(153.2	)
	Transfers
	 	 	9.5	 	 	 	218.1	 	 	 	9.3	 	 	 	(236.9	)	 	 	—	 
	Acquisitions/disposals of businesses
	 	 	42.9	 	 	 	19.2	 	 	 	17.3	 	 	 	0.3	 	 	 	79.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	714.7	 	 	 	4,489.6	 	 	 	620.1	 	 	 	200.9	 	 	 	6,025.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Depreciation
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	222.8	 	 	 	2,390.1	 	 	 	275.4	 	 	 	—	 	 	 	2,888.3	 
	Exchange adjustment
	 	 	(5.5	)	 	 	(112.5	)	 	 	(16.6	)	 	 	—	 	 	 	(134.6	)
	Provided during the year
	 	 	35.3	 	 	 	242.6	 	 	 	45.6	 	 	 	—	 	 	 	323.5	 
	Impairment
	 	 	37.4	 	 	 	7.2	 	 	 	—	 	 	 	—	 	 	 	44.6	 
	Disposals
	 	 	(13.4	)	 	 	(89.8	)	 	 	(16.0	)	 	 	—	 	 	 	(119.2	)
	Disposals of businesses
	 	 	(0.4	)	 	 	(4.3	)	 	 	—	 	 	 	—	 	 	 	(4.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	276.2	 	 	 	2,433.3	 	 	 	288.4	 	 	 	—	 	 	 	2,997.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net book value at 1 October 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Owned assets
	 	 	448.4	 	 	 	2,038.1	 	 	 	295.5	 	 	 	308.1	 	 	 	3,090.1	 
	Leased assets
	 	 	33.6	 	 	 	9.1	 	 	 	35.8	 	 	 	—	 	 	 	78.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	482.0	 	 	 	2,047.2	 	 	 	331.3	 	 	 	308.1	 	 	 	3,168.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net book value at 30
September 20023
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Owned assets
	 	 	407.4	 	 	 	2,047.8	 	 	 	299.8	 	 	 	200.9	 	 	 	2,955.9	 
	Leased assets4
	 	 	31.1	 	 	 	8.5	 	 	 	31.9	 	 	 	—	 	 	 	71.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	438.5	 	 	 	2,056.3	 	 	 	331.7	 	 	 	200.9	 	 	 	3,027.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Net book value of land and buildings at cost was £405.4 million
(2001: £407.6 million).
	2.	 	Subsidiary undertakings only. Capital expenditure of joint ventures and
associates is given in note 1.
	3.	 	Net book value includes net interest capitalised of £63.8 million
(2001: £67.7 million). The tax effect of this is included in the deferred
tax provision.
	4.	 	Leased assets are shown net of accumulated depreciation of £111.0 million
(2001: £105.6 million).

b) Depreciation and operating lease rentals

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Depreciation on leased assets included above
	 	 	8.5	 	 	 	6.8	 	 	 	6.7	 
	Amortisation of capitalised interest included above
	 	 	4.2	 	 	 	3.0	 	 	 	4.0	 
	Operating lease rentals
	 	 	 	 	 	 	 	 	 	 	 	 
	— hire of plant and machinery
	 	 	7.7	 	 	 	15.0	 	 	 	8.1	 
	— property rent
	 	 	23.1	 	 	 	25.0	 	 	 	26.4	 
	— other
	 	 	14.0	 	 	 	11.9	 	 	 	10.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

c) Regional analysis

The Group has numerous manufacturing, distribution and office facilities which
are located in some 50 countries. At 30 September 2002, the Group’s property,
plant and equipment, comprising land and buildings, plant, machinery, vehicles
and cylinders was located regionally as follows:

	 	 	 	 	 	 	 	 	 
	 	 	£ million	 	%
	 	 	
	 	

	Europe (mainly the UK)
	 	 	1,024.7	 	 	 	34	 
	Americas (mainly the US)
	 	 	978.4	 	 	 	32	 
	Africa
	 	 	178.3	 	 	 	6	 
	Asia/Pacific
	 	 	846.0	 	 	 	28	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	3,027.4	 	 	 	100	 
	 
	 	 	
	 	 	 	
	 

The above amounts are stated at cost net of accumulated depreciation.

97  The BOC Group plc  Report and accounts 2002

 

Notes to the financial statements

8. Fixed assets — tangible assets continued

d)  Asset revaluations

Following the adoption of FRS15 — Tangible fixed
assets in 2000, land and
buildings are no longer revalued (see Accounting policies on page
72). The net
book value of properties revalued in earlier years was £136.4 million.
Properties not revalued were £302.1 million.

e)  Parent summary

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Plant,	 	 
	 	 	Land and	 	machinery	 	 
	 	 	buildings	 	and vehicles	 	Total
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Gross book value
	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	14.3	 	 	 	18.9	 	 	 	33.2	 
	Capital expenditure
	 	 	—	 	 	 	0.1	 	 	 	0.1	 
	Disposals
	 	 	—	 	 	 	(3.3	)	 	 	(3.3	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	14.3	 	 	 	15.7	 	 	 	30.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Depreciation
	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	3.3	 	 	 	11.1	 	 	 	14.4	 
	Provided during the year
	 	 	0.4	 	 	 	1.3	 	 	 	1.7	 
	Disposals
	 	 	—	 	 	 	(0.1	)	 	 	(0.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	3.7	 	 	 	12.3	 	 	 	16.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net book value
	 	 	 	 	 	 	 	 	 	 	 	 
	At 1 October 2001
	 	 	11.0	 	 	 	7.8	 	 	 	18.8	 
	At 30 September 2002
	 	 	10.6	 	 	 	3.4	 	 	 	14.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

f)  Net book value of land and buildings at 30 September 2002

	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	£ million	 	£ million
	 	 	
	 	

	Freehold property
	 	 	407.4	 	 	 	10.6	 
	Leasehold property — long-term
	 	 	27.4	 	 	 	–	 
	                               — short-term
	 	 	3.7	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	438.5	 	 	 	10.6	 
	 
	 	 	
	 	 	 	
	 

g)  Capital commitments

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Against which orders had been placed
	 	 	33.3	 	 	 	96.0	 	 	 	—	 	 	 	2.5	 
	Authorised but not committed
	 	 	66.7	 	 	 	80.4	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	100.0	 	 	 	176.4	 	 	 	—	 	 	 	2.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The Group’s share of its joint ventures’ and associates’ capital commitments
was:

	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	£ million	 	£ million
	 	 	
	 	

	Against which orders had been placed
	 	 	3.1	 	 	 	2.4	 
	Authorised but not committed
	 	 	8.6	 	 	 	4.0	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	11.7	 	 	 	6.4	 
	 
	 	 	
	 	 	 	
	 

98  The BOC Group plc Report and accounts 2002

 

9. Fixed assets — investments

a)  Group

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Group	 	Group	 	Group	 	 	 	 	 	Provisions	 	 
	 	 	 	 	share of	 	share of	 	loans to	 	Other	 	Own	 	against	 	 
	 	 	Goodwill	 	net assets of	 	net assets of	 	joint ventures	 	investments	 	shares	 	other	 	 
	 	 	of associates	 	joint ventures	 	associates	 	and associates	 	at cost	 	at cost	 	investments	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	At 1 October 2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	— previously reported
	 	 	—	 	 	 	212.2	 	 	 	47.1	 	 	 	106.7	 	 	 	33.5	 	 	 	59.5	 	 	 	(1.8	)	 	 	457.2	 
	Prior year adjustment
	 	 	—	 	 	 	(7.4	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7.4	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 1 October 2001 — restated
	 	 	—	 	 	 	204.8	 	 	 	47.1	 	 	 	106.7	 	 	 	33.5	 	 	 	59.5	 	 	 	(1.8	)	 	 	449.8	 
	Exchange adjustment
	 	 	(0.6	)	 	 	(12.7	)	 	 	(4.1	)	 	 	(7.8	)	 	 	(2.8	)	 	 	0.1	 	 	 	0.4	 	 	 	(27.5	)
	Acquisitions/additions
	 	 	8.7	 	 	 	10.1	 	 	 	6.0	 	 	 	20.9	 	 	 	21.6	 	 	 	—	 	 	 	—	 	 	 	67.3	 
	Associates becoming subsidiaries
	 	 	—	 	 	 	—	 	 	 	(3.2	)	 	 	(1.1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4.3	)
	Disposals/repayments
	 	 	—	 	 	 	—	 	 	 	(0.3	)	 	 	(0.7	)	 	 	(6.9	)	 	 	(17.1	)	 	 	(0.2	)	 	 	(25.2	)
	Increase in net assets
	 	 	—	 	 	 	3.3	 	 	 	3.8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7.1	 
	Other
	 	 	—	 	 	 	—	 	 	 	0.1	 	 	 	—	 	 	 	1.8	 	 	 	—	 	 	 	(0.5	)	 	 	1.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	8.1	 	 	 	205.5	 	 	 	49.4	 	 	 	118.0	 	 	 	47.2	 	 	 	42.5	 	 	 	(2.1	)	 	 	468.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

i) Joint ventures

The cost of investment in joint ventures was £116.9 million
(2001: £107.6
million) and the attributable profit before tax was
£40.1 million (2001: £34.2
million, 2000: £40.2 million). There were no significant fair value adjustments on
acquisitions.

ii) Associates

The cost of investment in associates was £15.1 million
(2001: £8.3 million) and
the attributable profit before tax was £9.4 million (2001: £10.5
million, 2000: £5.6 million).
     Goodwill
of associates arose on the combination of the BOC Process Plants
business with Linde Engineering. This represents the difference between the
fair value of the consideration paid and the provisional fair value of the net
assets acquired. This goodwill will be amortised over a period of 15
years. There were no significant fair value adjustments on acquisitions.

iii) Own shares

For share-based incentive schemes which do not use new issue shares, options
are satisfied by the transfer of shares held in trust for the purpose. At 30
September 2002, options over 5.4 million shares were outstanding under these
schemes, for which 4.6 million shares in the company were held pending
exercise.
     Loans
and advances for the purchase of shares in trust have been made
either by the company or its subsidiaries. If the value of shares in trust is
insufficient to cover the loans, the company and its subsidiaries will bear any
loss. The company also bears administrative costs on an accruals basis.
     Based
on the company’s share price at 30 September 2002 of
867.0p, the
market value of own shares held in trust was £39.5 million. This compares with
the acquisition cost shown above.
     Own
shares are shown as fixed asset investments for accounting purposes, in
accordance with FRS5 and UITF Abstract 13. Information on share option schemes
appears in the report on remuneration and in notes 6 and 12.
     Dividends
waived on the shares held in trust amounted to £1.8 million
(2001: £1.2 million, 2000: £1.5 million).

iv) Related parties

During the year, interest income of £8.3 million (2001:
£6.9 million, 2000: £6.5
million) was received from the Cantarell joint venture, a related party.

99  The BOC Group plc Report and accounts 2002

 

Notes to the financial statements

9.  Fixed assets — investments continued

b) Valuation

	 	 	 	 	 	 	 	 	 	 
	 	 	 	2002	 	2001
	 	 	 	£ million	 	£ million
	 	 	 	
	 	

	Listed on stock exchanges in the UK and overseas
	 	 	91.1	 	 	 	112.5	 
	Unlisted
	— equity at directors’ valuation	 	 	244.9	 	 	 	237.1	 
	 	— other at directors’ valuation
	 	 	132.6	 	 	 	107.6	 
	 
	 	 	
	 	 	 	
	 
	Total book value
	 	 	468.6	 	 	 	457.2	 
	 
	 	 	
	 	 	 	
	 
	Market value of listed investments
	 	 	123.1	 	 	 	152.7	 
	 
	 	 	
	 	 	 	
	 

c) Income

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	2002	 	2001	 	2000
	 	 	 	£ million	 	£ million	 	£ million
	 	 	 	
	 	
	 	

	Listed securities
	 	 	7.5	 	 	 	6.0	 	 	 	2.2	 
	Unlisted securities
	 	 	30.6	 	 	 	19.5	 	 	 	20.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	38.1	 	 	 	25.5	 	 	 	22.7	 
	Less:
	Dividends receivable from joint ventures	 	 	30.5	 	 	 	19.4	 	 	 	20.0	 
	 	Dividends receivable from associates
	 	 	3.4	 	 	 	4.1	 	 	 	2.1	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Income from other fixed asset investments
	 	 	4.2	 	 	 	2.0	 	 	 	0.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

d) Parent

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Amounts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Investments	 	Investments	 	due from	 	Own	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	in subsidiary	 	in related	 	subsidiary	 	shares	 	Other	 	 	 	 	 	 	 	 
	 	 	undertakings	 	undertakings	 	undertakings	 	at cost	 	investments	 	Provisions	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	At 1 October 2001
	 	 	1,142.8	 	 	 	250.1	 	 	 	1,278.8	 	 	 	44.9	 	 	 	—	 	 	 	(14.6	)	 	 	2,702.0	 
	Additions
	 	 	345.3	 	 	 	8.7	 	 	 	396.3	 	 	 	—	 	 	 	13.9	 	 	 	(1.9	)	 	 	762.3	 
	Disposals/repayments
	 	 	(18.0	)	 	 	(250.1	)	 	 	(343.2	)	 	 	(8.6	)	 	 	—	 	 	 	—	 	 	 	(619.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	1,470.1	 	 	 	8.7	 	 	 	1,331.9	 	 	 	36.3	 	 	 	13.9	 	 	 	(16.5	)	 	 	2,844.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

10.  Net current assets/(liabilities)

a) Stocks

	 	 	 	 	 	 	 	 	 
	 	 	Group
	 	 	

	 	 	2002	 	2001
	 	 	£ million	 	£ million
	 	 	
	 	

	Raw materials
	 	 	67.8	 	 	 	81.2	 
	Work in progress
	 	 	47.8	 	 	 	59.5	 
	Gases and other finished goods
	 	 	159.0	 	 	 	164.7	 
	Payments on account
	 	 	(14.6	)	 	 	(30.2	)
	 
	 	 	
	 	 	 	
	 
	 
	 	 	260.0	 	 	 	275.2	 
	 
	 	 	
	 	 	 	
	 

Amounts relating to long-term contracts included in work in progress were £0.2
million (2001: £1.3 million). There were no stocks held on the balance sheet of
The BOC Group plc at either 30 September 2002 or 30 September 2001.

100  The BOC Group plc Report and accounts 2002

 

 

10. Net current assets/(liabilities) continued

b) Debtors falling due within one year

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	 	 	 	 	2001	 	 	 	 	 	2001
	 	 	2002	 	(restated)	 	2002	 	(restated)
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Trade debtors
	 	 	601.2	 	 	 	589.5	 	 	 	—	 	 	 	—	 
	Amounts due from subsidiary undertakings
	 	 	—	 	 	 	—	 	 	 	485.8	 	 	 	382.1	 
	Amounts due from joint ventures and associates
	 	 	1.4	 	 	 	4.3	 	 	 	1.4	 	 	 	3.2	 
	Other debtors
	 	 	100.0	 	 	 	92.1	 	 	 	21.7	 	 	 	13.5	 
	Prepayments and accrued income
	 	 	31.2	 	 	 	27.4	 	 	 	6.7	 	 	 	9.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	733.8	 	 	 	713.3	 	 	 	515.6	 	 	 	408.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

At 30 September 2002, trade debtors of
£23.8 million (2001: £25.7 million) in
subsidiary undertakings had been factored to third parties with limited
recourse.

c) Debtors falling due after more than one year

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Group	 	Parent
	 	 	 	
	 	

	 	 	 	 	 	 	 	2001	 	 	 	 	 	2001
	 	 	 	2002	 	(restated)	 	2002	 	(restated)
	 	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	 	
	 	
	 	
	 	

	Deposits
	 	 	—	 	 	 	0.7	 	 	 	—	 	 	 	—	 
	Deferred tax
	 	 	7.9	 	 	 	8.4	 	 	 	—	 	 	 	—	 
	Other debtors
	 	 	20.4	 	 	 	12.2	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	28.3	 	 	 	21.3	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	d) Cash at bank and in hand
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deposits
	 	 	20.5	 	 	 	70.6	 	 	 	—	 	 	 	51.7	 
	Cash at bank and in hand
	 	 	165.0	 	 	 	162.9	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	185.5	 	 	 	233.5	 	 	 	—	 	 	 	51.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	e) Borrowings and finance leases1
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Bank loans and overdrafts
	 	 	196.7	 	 	 	187.9	 	 	 	178.9	 	 	 	119.1	 
	Loans other than from banks
	 	 	182.3	 	 	 	288.1	 	 	 	—	 	 	 	196.5	 
	Finance leases
	 	 	11.1	 	 	 	10.4	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	390.1	 	 	 	486.4	 	 	 	178.9	 	 	 	315.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	

	1.          Details of borrowings and finance
leases are given in note 3.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	f) Other creditors
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deposits and advance payments by customers
	 	 	41.5	 	 	 	46.0	 	 	 	—	 	 	 	—	 
	Trade creditors
	 	 	367.3	 	 	 	318.4	 	 	 	—	 	 	 	—	 
	Amounts due to subsidiary undertakings
	 	 	—	 	 	 	—	 	 	 	906.6	 	 	 	639.9	 
	Taxation — UK
	 	 	69.0	 	 	 	63.9	 	 	 	—	 	 	 	—	 
	— Overseas
	 	 	78.5	 	 	 	75.0	 	 	 	—	 	 	 	—	 
	Other taxes and social security payable
	 	 	27.3	 	 	 	25.5	 	 	 	—	 	 	 	—	 
	Other creditors
	 	 	130.0	 	 	 	128.4	 	 	 	2.0	 	 	 	38.6	 
	Accruals and deferred income
	 	 	144.2	 	 	 	138.1	 	 	 	45.2	 	 	 	38.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	857.8	 	 	 	795.3	 	 	 	953.8	 	 	 	717.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

101  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

11. Long-term liabilities

a) Borrowings and finance leases1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Loans other than from banks
	 	 	1,008.1	 	 	 	879.2	 	 	 	801.0	 	 	 	570.4	 
	Bank loans
	 	 	90.2	 	 	 	105.5	 	 	 	—	 	 	 	—	 
	Finance leases
	 	 	22.7	 	 	 	35.2	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	1,121.0	 	 	 	1,019.9	 	 	 	801.0	 	 	 	570.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	1.	 	Details of borrowings and finance
leases are given in note 3.

b) Provisions for liabilities and charges

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Incentive	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	and other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Deferred	 	employee	 	Uninsured	 	Restructuring	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	tax	 	provisions	 	losses	 	provisions	 	Environmental	 	Other	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	At 1 October 2001 – previously reported
	 	 	37.0	 	 	 	84.2	 	 	 	23.9	 	 	 	11.6	 	 	 	26.9	 	 	 	21.7	 	 	 	205.3	 
	Prior year adjustment
	 	 	257.3	 	 	 	(43.4	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	213.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 1 October 2001 – restated
	 	 	294.3	 	 	 	40.8	 	 	 	23.9	 	 	 	11.6	 	 	 	26.9	 	 	 	21.7	 	 	 	419.2	 
	Exchange adjustment
	 	 	(8.6	)	 	 	(2.7	)	 	 	(0.1	)	 	 	(0.2	)	 	 	(1.7	)	 	 	(0.5	)	 	 	(13.8	)
	Provided in the year
	 	 	9.5	 	 	 	4.6	 	 	 	—	 	 	 	5.0	 	 	 	0.9	 	 	 	12.6	 	 	 	32.6	 
	Released in the year
	 	 	—	 	 	 	(1.1	)	 	 	(3.9	)	 	 	—	 	 	 	—	 	 	 	(2.4	)	 	 	(7.4	)
	Utilised in the year
	 	 	—	 	 	 	(4.8	)	 	 	(0.5	)	 	 	(7.9	)	 	 	(3.3	)	 	 	(2.8	)	 	 	(19.3	)
	Other movements
	 	 	(3.4	)	 	 	0.3	 	 	 	—	 	 	 	(0.8	)	 	 	—	 	 	 	0.1	 	 	 	(3.8	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	291.8	 	 	 	37.1	 	 	 	19.4	 	 	 	7.7	 	 	 	22.8	 	 	 	28.7	 	 	 	407.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

     Provision for uninsured losses covers third party liabilities or claims. Due to
the time frame that is often involved in such claims, a significant part of
this provision is subject to actuarial valuation. Where this is not
appropriate, other external assessments are used.
     The
restructuring provision represents expenditure to be incurred on major
reorganisations. This year £48.0 million was spent of which £4.2 million was
provided for at 30 September 2001 and £3.7 million was provided for at 30
September 2000. The provisions remaining at 30 September 2002 consist mainly of
redundancy costs and will be spent during 2003.
     Incentive
and other employee provisions include long-term share incentive
units and deferred compensation plans. Note 6 d) contains further details of
the long-term share incentive units.
     Environmental
provisions have been set aside to cover the costs of
remediation for a number of hazardous waste sites. The costs are expected to be
incurred between 2002 and 2030. Due to the period over which this expenditure is
likely to be incurred, the provision has been discounted at a rate of four per
cent. The effect of discounting is £6.7 million.
     Other
provisions are principally for warranty
and legal costs.
     Further
information on
deferred tax is disclosed in note 4.

12. Dividends and equity

a) Dividends

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Per share	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000
	 	 	pence	 	pence	 	pence	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Ordinary
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	First interim
	 	 	15.5	 	 	 	15.5	 	 	 	15.5	 	 	 	75.8	 	 	 	75.5	 	 	 	75.6	 
	Second interim
	 	 	22.5	 	 	 	21.5	 	 	 	19.5	 	 	 	110.8	 	 	 	104.8	 	 	 	94.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	38.0	 	 	 	37.0	 	 	 	35.0	 	 	 	186.6	 	 	 	180.3	 	 	 	170.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

102  The BOC Group plc Report and accounts 2002

 

 

12.  Dividends and equity continued

b) Share capital

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of shares	 	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2002	 	2001
	i) Analysis at 30 September	 	million	 	million	 	£ million	 	£ million
	
	 	
	 	
	 	
	 	

	Equity capital:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issued capital — Ordinary shares of 25p each, called up and fully paid
	 	 	497.3	 	 	 	494.4	 	 	 	124.3	 	 	 	123.6	 
	Unissued capital — unclassified shares of 25p each
	 	 	92.7	 	 	 	95.6	 	 	 	23.2	 	 	 	23.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Authorised
	 	 	 	 	 	 	 	 	 	 	147.5	 	 	 	147.5	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Number
	ii) Share issues	 	 	 	 	 	 	 	 	 	 	 	 	 	million
	
	 	 	 	 	 	 	 	 	 	 	 	 	 	

	Issues of Ordinary shares of 25p each during the year were:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Under the savings related share option scheme
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 
	Under the senior executives share option scheme
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.9	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 

c) Group reserves

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Share	 	 	 	 	 	 	 	 	 	 	 	 	 	Joint	 	 	 	 	 	 	 	 
	 	 	premium	 	Revaluation	 	Profit and	 	Pensions'	 	ventures'	 	Associates'	 	 	 	 
	 	 	account	 	reserves	 	loss account	 	reserves	 	reserves	 	reserves	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	At 1 October 2001 — previously reported
	 	 	335.8	 	 	 	47.9	 	 	 	1,660.1	 	 	 	—	 	 	 	105.5	 	 	 	33.4	 	 	 	2,182.7	 
	Prior year adjustment
	 	 	—	 	 	 	—	 	 	 	(259.8	)	 	 	47.1	 	 	 	(7.4	)	 	 	—	 	 	 	(220.1	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At
1 October 2001 — restated
	 	 	335.8	 	 	 	47.9	 	 	 	1,400.3	 	 	 	47.1	 	 	 	98.1	 	 	 	33.4	 	 	 	1,962.6	 
	Total recognised gains and losses for the year
	 	 	–	 	 	 	(20.1	)	 	 	91.5	 	 	 	(303.6	)	 	 	(10.0	)	 	 	0.1	 	 	 	(242.1	)
	Share options
	 	 	—	 	 	 	—	 	 	 	2.0	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2.0	 
	Dividends
	 	 	—	 	 	 	—	 	 	 	(186.6	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(186.6	)
	Premium on share issues (net)
	 	 	26.3	 	 	 	—	 	 	 	(2.4	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	23.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	362.1	 	 	 	27.8	 	 	 	1,304.8	 	 	 	(256.5	)	 	 	88.1	 	 	 	33.5	 	 	 	1,559.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The undistributed profits of Group undertakings may be liable to overseas
and/or UK tax (after allowing for double tax relief) if distributed as
dividends.
     There
are no material exchange control restrictions on the remittance of funds
to the UK.
     Goodwill
written off against reserves in respect of continuing businesses
acquired prior to 30 September 1998 amounts to £166.2 million (2001:£173.6
million). The movement in the year reflects exchange.
     At
30 September 2002, in accordance with the Group’s accounting policy,
unrealised exchange gains (net of losses) on net borrowings at 30 September
2002 included in reserves amounted to £10.2 million (2001:£18.0 million).
     There
are no non-equity shareholders’ interests in the share
capital and reserves of the Group.

d) Parent reserves

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Share	 	 	 	 	 	Profit	 	 	 	 
	 	 	premium	 	Other	 	and loss	 	 	 	 
	 	 	account	 	reserves	 	account	 	Total
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	At 1 October 2001 — previously reported
	 	 	335.8	 	 	 	111.7	 	 	 	1,042.2	 	 	 	1,489.7	 
	Prior year adjustment
	 	 	—	 	 	 	—	 	 	 	(52.0	)	 	 	(52.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 1 October 2001 — restated
	 	 	335.8	 	 	 	111.7	 	 	 	990.2	 	 	 	1,437.7	 
	Profit for the financial year
	 	 	—	 	 	 	—	 	 	 	26.2	 	 	 	26.2	 
	Share options
	 	 	—	 	 	 	2.0	 	 	 	—	 	 	 	2.0	 
	Dividends
	 	 	—	 	 	 	—	 	 	 	(186.8	)	 	 	(186.8	)
	Premium on share issues (net)
	 	 	26.3	 	 	 	—	 	 	 	(2.4	)	 	 	23.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	At 30 September 2002
	 	 	362.1	 	 	 	113.7	 	 	 	827.2	 	 	 	1,303.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The premium on share issues represents amounts paid to The BOC Group plc for
the issue of shares under the Group’s share option schemes. Employees paid
£23.9 million. The Group paid the balance of £2.4 million to a qualifying
employee share ownership trust (Quest).

103  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

13.  Commitments and contingent liabilities

a) Annual operating lease commitments

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001
	 	 	
	 	

	 	 	 	 	 	 	Other	 	 	 	 	 	Other
	 	 	Property	 	operating	 	Property	 	operating
	 	 	leases	 	leases	 	leases	 	leases
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	On leases expiring:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Within one year
	 	 	2.9	 	 	 	1.3	 	 	 	2.4	 	 	 	1.3	 
	Between one and two years
	 	 	1.8	 	 	 	6.5	 	 	 	3.9	 	 	 	1.5	 
	Between two and five years
	 	 	5.7	 	 	 	8.5	 	 	 	7.8	 	 	 	13.2	 
	Over five years
	 	 	7.0	 	 	 	1.9	 	 	 	7.1	 	 	 	3.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	17.4	 	 	 	18.2	 	 	 	21.2	 	 	 	19.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 
	 	 	Operating
	 	 	leases
	 	 	£ million
	 	 	

	Rentals are due under operating leases from
1 October 2002 to completion as follows:
	 	 	 	 
	Year to 30 September 2003
	 	 	35.6	 
	Year to 30 September 2004
	 	 	29.8	 
	Year to 30 September 2005
	 	 	23.7	 
	Year to 30 September 2006
	 	 	19.4	 
	Year to 30 September 2007
	 	 	16.5	 
	Thereafter
	 	 	96.1	 
	 
	 	 	
	 
	 
	 	 	221.1	 
	 
	 	 	
	 

b) Contingent liabilities, legal proceedings and bank guarantees

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Group	 	Parent
	 	 	
	 	

	 	 	2002	 	2001	 	2002	 	2001
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Guarantees of joint ventures’ borrowings
	 	 	119.3	 	 	 	152.1	 	 	 	119.3	 	 	 	152.1	 
	Guarantees of subsidiaries’ borrowings
	 	 	—	 	 	 	—	 	 	 	558.1	 	 	 	607.3	 
	Other guarantees and contingent liabilities
	 	 	38.7	 	 	 	37.9	 	 	 	22.3	 	 	 	20.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	158.0	 	 	 	190.0	 	 	 	699.7	 	 	 	779.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The guarantees of joint ventures’ borrowings predominately represents
guarantees of the borrowings of BOC’s joint venture company which supplies
nitrogen to the Mexican oil company, Pemex. These borrowings are scheduled to
be repaid over the next eight years.
     Various
Group undertakings are parties to legal actions and claims, some
of which are for substantial amounts. While the outcome of some of these
matters cannot readily be foreseen, the directors believe that they will be
disposed of without material effect on the net asset position as shown in these
financial statements.
     The
Group is committed to make future purchases under take-or-pay
contracts. Obligations under such contracts in effect at 30 September 2002 are
as follows:

	 	 	 	 	 
	Year ending 30 September	 	£ million
	
	 	

	2003
	 	 	67.8	 
	2004
	 	 	66.6	 
	2005
	 	 	64.9	 
	2006
	 	 	62.9	 
	2007
	 	 	63.9	 
	Thereafter
	 	 	195.4	 
	 
	 	 	
	 
	 
	 	 	521.5	 
	 
	 	 	
	 

For the years ended 30 September 2002,2001 and 2000 total purchases made
relating to these contracts amounted to £58.2 million,£53.5 million and £51.5
million respectively.

104  The BOC Group plc Report and accounts 2002

 

 

14.  Cash flow

a) Net cash inflow from operating activities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	2001	 	2000
	 	 	 	 	 	 	2002	 	(restated)	 	(restated)
	 	 	Notes	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Total operating profit before exceptional items
	 	 	 	 	 	 	500.1	 	 	 	530.6	 	 	 	496.4	 
	Depreciation and amortisation
	 	 	 	 	 	 	330.9	 	 	 	329.5	 	 	 	313.3	 
	FRS17 retirement benefits charge
	 	 	 	 	 	 	49.9	 	 	 	53.0	 	 	 	48.9	 
	Operating profit before exceptional items of joint ventures
	 	 	 	 	 	 	(63.8	)	 	 	(59.0	)	 	 	(48.1	)
	Operating profit before exceptional items of associates
	 	 	 	 	 	 	(10.7	)	 	 	(13.2	)	 	 	(8.5	)
	Change in stocks
	 	 	 	 	 	 	13.7	 	 	 	8.8	 	 	 	(40.9	)
	Change in debtors
	 	 	 	 	 	 	(38.4	)	 	 	39.5	 	 	 	(24.5	)
	Change in creditors
	 	 	 	 	 	 	57.3	 	 	 	(20.9	)	 	 	(10.3	)
	Exceptional cash flows
	 	 	 	 	 	 	(67.3	)	 	 	(51.8	)	 	 	0.5	 
	Other
	 	 	 	 	 	 	(12.4	)	 	 	(28.7	)	 	 	(21.8	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net cash inflow from operating activities
	 	 	 	 	 	 	759.3	 	 	 	787.8	 	 	 	705.0	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	b) Reconciliation of net cash flow to movement in net debt
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Increase in cash
	 	 	 	 	 	 	(21.4	)	 	 	(66.1	)	 	 	(3.2	)
	Increase/(decrease) in debt
	 	 	14	(d)	 	 	64.1	 	 	 	(51.3	)	 	 	64.9	 
	Decrease in liquid resources
	 	 	 	 	 	 	52.6	 	 	 	102.8	 	 	 	9.6	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Change in net debt resulting from cash flows
	 	 	 	 	 	 	95.3	 	 	 	(14.6	)	 	 	71.3	 
	Net borrowings assumed at acquisition
	 	 	 	 	 	 	0.5	 	 	 	—	 	 	 	21.8	 
	Inception of finance leases
	 	 	 	 	 	 	0.4	 	 	 	0.5	 	 	 	0.1	 
	Exchange adjustment
	 	 	 	 	 	 	(42.7	)	 	 	(22.2	)	 	 	76.7	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Movement in net debt in the year
	 	 	 	 	 	 	53.5	 	 	 	(36.3	)	 	 	169.9	 
	Net debt at 1 October
	 	 	 	 	 	 	1,272.1	 	 	 	1,308.4	 	 	 	1,138.5	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net debt at 30 September
	 	 	 	 	 	 	1,325.6	 	 	 	1,272.1	 	 	 	1,308.4	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 	 	 	
	 

c) Analysis of net debt

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Acquisitions/	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	disposals	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	At	 	 	 	 	 	(excluding	 	Other	 	 	 	 	 	At
	 	 	1 October	 	 	 	 	 	cash and	 	non-cash	 	Exchange	 	30
September
	 	 	2001	 	Cash flow	 	overdrafts)	 	changes	 	adjustment	 	2002
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Deposits and cash due within one year
	 	 	233.5	 	 	 	(43.5	)	 	 	—	 	 	 	14.3	 	 	 	(18.8	)	 	 	185.5	 
	Deposits due beyond one year
	 	 	0.7	 	 	 	0.5	 	 	 	13.1	 	 	 	(14.3	)	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	234.2	 	 	 	(43.0	)	 	 	13.1	 	 	 	—	 	 	 	(18.8	)	 	 	185.5	 
	Borrowings and finance leases due within one year
	 	 	(486.4	)	 	 	208.8	 	 	 	(0.1	)	 	 	(141.4	)	 	 	29.0	 	 	 	(390.1	)
	Borrowings and finance leases due beyond one year
	 	 	(1,019.9	)	 	 	(261.1	)	 	 	(13.5	)	 	 	141.0	 	 	 	32.5	 	 	 	(1,121.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net borrowings and finance leases
	 	 	(1,272.1	)	 	 	(95.3	)	 	 	(0.5	)	 	 	(0.4	)	 	 	42.7	 	 	 	(1,325.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

d) Increase/(decrease) in debt

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	5 7/8% Bonds 2009
	 	 	200.0	 	 	 	—	 	 	 	—	 
	7 1/4% Notes 2002
	 	 	(150.0	)	 	 	—	 	 	 	—	 
	Medium term notes
	 	 	59.7	 	 	 	—	 	 	 	—	 
	6.50% Bonds 2016
	 	 	—	 	 	 	200.0	 	 	 	—	 
	1.00% Euroyen Bond 2006
	 	 	—	 	 	 	147.0	 	 	 	—	 
	5 7/8% Notes 2001
	 	 	—	 	 	 	(138.9	)	 	 	—	 
	European Investment Bank loans
	 	 	(5.0	)	 	 	10.3	 	 	 	(5.7	)
	Pollution Control and Industrial Bonds
	 	 	(18.5	)	 	 	(2.4	)	 	 	(5.3	)
	Net issues/(repayment) of commercial paper
	 	 	59.5	 	 	 	(212.5	)	 	 	68.6	 
	Other (net)
	 	 	(81.6	)	 	 	(54.8	)	 	 	7.3	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Increase/(decrease) in debt
	 	 	64.1	 	 	 	(51.3	)	 	 	64.9	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

105  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

14.  Cash flow continued

e) Consolidated cash flow statement:US format

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Net cash provided by operating activities
	 	 	620.2	 	 	 	631.2	 	 	 	565.2	 
	Net cash used by investing activities
	 	 	(540.0	)	 	 	(445.5	)	 	 	(470.3	)
	Net cash used by financing activities
	 	 	(122.7	)	 	 	(225.6	)	 	 	(71.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net (decrease)/increase in cash and cash equivalents
	 	 	(42.5	)	 	 	(39.9	)	 	 	23.0	 
	Cash and cash equivalents at 1 October
	 	 	259.0	 	 	 	305.6	 	 	 	277.4	 
	Exchange and other movements
	 	 	(34.6	)	 	 	(6.7	)	 	 	5.2	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Cash and cash equivalents at 30 September
	 	 	181.9	 	 	 	259.0	 	 	 	305.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

The Group cash flow statement on page 68 has been prepared in accordance with
UK accounting standard FRS1, the objectives and principles of which are similar
to those set out in US accounting principle SFAS95, Statement of Cash Flows. The
principal differences between the standards relate to classification of items
within the cash flow statement and with regard to the definition of cash and
cash equivalents.
     Under
FRS1, cash flows are presented separately for: a) operating
activities; b) dividends from joint ventures and associates; c) returns on
investments and servicing of finance; d) tax paid; e) capital expenditure and
financial investment; f) acquisitions and disposals; g) equity dividends paid;
h) management of liquid resources; and i) financing. Under SFAS95, however, only
three categories of cash flow activity are reported: a) operating activities;
b) investing activities; and c) financing activities. Dividends from joint
ventures and associates, cash flows from returns on investments and servicing
of finance (excluding dividends paid to minorities) and tax paid under FRS1
would be included in operating activities under SFAS95; capital expenditure and
acquisitions and disposals would be included in investing activities under
SFAS95; equity dividends would be included as a financing activity under SFAS95.
     Under
FRS1, cash is defined as cash in hand and deposits repayable on
demand with any qualifying financial institution, less overdrafts from any
qualifying financial institution repayable on demand. Under SFAS95, cash is
defined as cash in hand and deposits but also includes cash equivalents which
are short-term, highly liquid investments. Generally only investments with
original maturities of three months or less come within this definition.
     Set
out above, for illustrative purposes, is a summary consolidated statement
of cash flows under SFAS95.

15.  Acquisitions and disposals

a) Cash flow

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	
	 	
	 	

	 	 	Acquisitions	 	Disposals	 	Acquisitions	 	Disposals	 	Acquisitions	 	Disposals
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	

	Cash flow arising on the acquisition and disposal of businesses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Intangible fixed assets
	 	 	(0.5	)	 	 	0.2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Tangible fixed assets
	 	 	(85.7	)	 	 	1.3	 	 	 	(34.8	)	 	 	1.1	 	 	 	(37.9	)	 	 	—	 
	Joint ventures, associates and other fixed asset investments
	 	 	(12.4	)	 	 	0.2	 	 	 	20.7	 	 	 	0.4	 	 	 	7.3	 	 	 	—	 
	Stocks
	 	 	(20.9	)	 	 	2.4	 	 	 	(2.4	)	 	 	0.5	 	 	 	(3.7	)	 	 	0.6	 
	Debtors
	 	 	(37.5	)	 	 	0.7	 	 	 	(16.7	)	 	 	1.1	 	 	 	(14.4	)	 	 	0.9	 
	Cash at bank and in hand
	 	 	(13.5	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(2.2	)	 	 	—	 
	Creditors including taxation
	 	 	55.7	 	 	 	(1.2	)	 	 	4.7	 	 	 	(0.4	)	 	 	13.6	 	 	 	(1.1	)
	Borrowings
	 	 	21.4	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	24.0	 	 	 	—	 
	Minorities
	 	 	(8.6	)	 	 	7.8	 	 	 	(117.5	)	 	 	—	 	 	 	(6.5	)	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net assets (acquired)/disposed of
	 	 	(102.0	)	 	 	11.4	 	 	 	(146.0	)	 	 	2.7	 	 	 	(19.8	)	 	 	0.4	 
	Goodwill on acquisitions
	 	 	(112.3	)	 	 	—	 	 	 	(3.3	)	 	 	—	 	 	 	(14.0	)	 	 	—	 
	Surplus over book value on disposals
	 	 	—	 	 	 	2.5	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	(Acquisition)/disposal price
	 	 	(214.3	)	 	 	13.9	 	 	 	(149.3	)	 	 	2.7	 	 	 	(33.8	)	 	 	0.4	 
	Deferred payments
	 	 	7.0	 	 	 	(3.3	)	 	 	3.4	 	 	 	—	 	 	 	1.7	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	(207.3	)	 	 	10.6	 	 	 	(145.9	)	 	 	2.7	 	 	 	(32.1	)	 	 	0.4	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The Group purchased the vacuum and pressure business of the Smiths Group in
December 2001. It also purchased Hydromatix Inc in January 2002 and the Semco
business in April 2002. In March 2002 the Group acquired the turbomolecular
pumps business of Seiko Instruments Inc. Purchases of products from Seiko
Instruments Inc in the period from 1 October 2001 to the date of acquisition
were approximately £3.0 million.
     In
May 2002 the Group purchased 79 per cent of Unique Gas and
Petrochemicals Public Company Limited and acquired a further 20 per cent before
the end of the year. In July 2002 the Group purchased the industrial assets of
Enron Teesside Operations Limited.
     During
2002 the Group acquired an additional three per cent of the minority
interests in Osaka Sanso Kogyo KK.
     The
acquisitions in the BOC Edwards line of business contributed £55.5
million to turnover and £(0.8) million to operating profit before exceptional
items. Acquisitions in the other lines of business did not have a material
impact on turnover or operating profit before exceptional items.
     Of
the total acquisition expenditure, £48.1 million was in the Process Gas
Solutions business, £57.3 million was in the Industrial and Special Products
business, £86.2 million was in the BOC Edwards business and £15.7 million was in
the Afrox hospitals business.
     Businesses
disposed of are detailed in note 2 b).

106  The BOC Group plc Report and accounts 2002

 

 

15.  Acquisitions and disposals continued

b) Fair value of acquisitions

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Unique	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Gas and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Petrochemicals	 	Seiko	 	 	 	 	 	Total book	 	 	 	 	 	Total fair
	 	 	Smiths	 	Public	 	Instruments	 	 	 	 	 	value of	 	 	 	 	 	value of
	 	 	Group	 	Company Ltd	 	Inc	 	Other	 	businesses	 	Total	 	businesses
	 	 	book value	 	book value	 	book value	 	book value	 	acquired	 	adjustments	 	acquired
	 	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Intangible assets
	 	 	—	 	 	 	—	 	 	 	(0.5	)	 	 	—	 	 	 	(0.5	)	 	 	—	 	 	 	(0.5	)
	Tangible fixed assets
	 	 	(9.0	)	 	 	(25.3	)	 	 	(2.9	)	 	 	(44.9	)	 	 	(82.1	)	 	 	(3.6	)	 	 	(85.7	)
	Joint ventures, associates and other investments
	 	 	—	 	 	 	(0.6	)	 	 	(0.1	)	 	 	(12.3	)	 	 	(13.0	)	 	 	0.6	 	 	 	(12.4	)
	Stocks
	 	 	(11.5	)	 	 	(1.5	)	 	 	(9.2	)	 	 	(3.8	)	 	 	(26.0	)	 	 	5.1	 	 	 	(20.9	)
	Debtors
	 	 	(12.6	)	 	 	(9.7	)	 	 	(4.6	)	 	 	(11.1	)	 	 	(38.0	)	 	 	0.5	 	 	 	(37.5	)
	Cash at bank and in hand
	 	 	—	 	 	 	(11.7	)	 	 	(1.3	)	 	 	(0.5	)	 	 	(13.5	)	 	 	—	 	 	 	(13.5	)
	Creditors including taxation
	 	 	12.4	 	 	 	35.8	 	 	 	3.8	 	 	 	9.2	 	 	 	61.2	 	 	 	(5.5	)	 	 	55.7	 
	Borrowings
	 	 	7.7	 	 	 	0.3	 	 	 	0.1	 	 	 	13.3	 	 	 	21.4	 	 	 	—	 	 	 	21.4	 
	Minorities
	 	 	—	 	 	 	0.2	 	 	 	—	 	 	 	(8.8	)	 	 	(8.6	)	 	 	—	 	 	 	(8.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net (assets)/liabilities acquired
	 	 	(13.0	)	 	 	(12.5	)	 	 	(14.7	)	 	 	(58.9	)	 	 	(99.1	)	 	 	(2.9	)	 	 	(102.0	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Consideration
	 	 	6.6	 	 	 	39.7	 	 	 	72.1	 	 	 	88.9	 	 	 	207.3	 	 	 	—	 	 	 	207.3	 
	Deferred consideration
	 	 	—	 	 	 	—	 	 	 	2.4	 	 	 	4.6	 	 	 	7.0	 	 	 	—	 	 	 	7.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	6.6	 	 	 	39.7	 	 	 	74.5	 	 	 	93.5	 	 	 	214.3	 	 	 	—	 	 	 	214.3	 
	Goodwill on acquisitions
	 	 	—	 	 	 	(17.5	)	 	 	(60.2	)	 	 	(34.6	)	 	 	(112.3	)	 	 	—	 	 	 	(112.3	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	6.6	 	 	 	22.2	 	 	 	14.3	 	 	 	58.9	 	 	 	102.0	 	 	 	—	 	 	 	102.0	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

The following fair value adjustments were made to the book value of the assets
and liabilities of the businesses acquired:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Unique	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Gas and	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Petrochemicals	 	Seiko	 	 	 	 
	 	 	Smiths	 	Public	 	Instruments	 	Total
	 	 	Group	 	Company Ltd	 	Inc	 	adjustments
	 	 	£ million	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	
	 	

	Valuations
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tangible fixed assets
	 	 	—	 	 	 	(0.6	)	 	 	—	 	 	 	(0.6	)
	Joint ventures, associates and other investments
	 	 	—	 	 	 	0.6	 	 	 	—	 	 	 	0.6	 
	Alignment of accounting policies
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tangible fixed assets
	 	 	1.5	 	 	 	(4.5	)	 	 	—	 	 	 	(3.0	)
	Stocks
	 	 	4.8	 	 	 	—	 	 	 	0.3	 	 	 	5.1	 
	Debtors
	 	 	0.1	 	 	 	0.4	 	 	 	—	 	 	 	0.5	 
	Taxation
	 	 	—	 	 	 	2.2	 	 	 	—	 	 	 	2.2	 
	Other
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Creditors
	 	 	—	 	 	 	(7.8	)	 	 	0.1	 	 	 	(7.7	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	 	6.4	 	 	 	(9.7	)	 	 	0.4	 	 	 	(2.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 

Fair value adjustments include some amounts which are provisional. No
significant fair value adjustments were required in 2001 or 2000.

107  The BOC Group plc Report and accounts 2002

 

 

Notes to the financial statements

16.  US accounting information

a) Summary of differences between UK and US
generally accepted accounting principles and other US accounting information

The financial statements of The BOC Group plc are prepared in accordance with
accounting principles generally accepted in the UK (UK GAAP), which differ in
certain significant respects from accounting principles generally accepted in
the US (US GAAP).
     Set
out below is a summary of the more significant adjustments which would
be required if US GAAP had been applied, together with the reconciliation of
profit before tax and shareholders’ funds from UK GAAP to US GAAP, presentation
of net income, earnings per share and comprehensive income on a US GAAP basis,
and a statement of movement in shareholders’ funds under US GAAP.

Goodwill

Under UK GAAP, goodwill arising on acquisitions before 1998 accounted for under
the purchase method has been eliminated against shareholders’ funds.
Additionally, UK GAAP requires that on subsequent disposal or closure of a
business, any goodwill previously taken directly to shareholders’ funds is then
charged against income. The Group adopted FRS10 in 1999, which requires goodwill
on subsequent acquisitions to be capitalised and amortised over a period not
exceeding 20 years.
     Under
US GAAP, goodwill arising on acquisitions prior to 30 June 2001 was
capitalised and then amortised over the expected useful life, not exceeding 40
years, as a charge against income. Goodwill arising on acquisitions since 1
July 2001 is capitalised but no amortisation is charged, in accordance with the
transitional provisions of SFAS142. Specific provision is made if there is a
permanent impairment to the carrying value of capitalised goodwill.

Deferred tax

The Group adopted FRS19 (Deferred tax) in 2002 for UK GAAP purposes. This
requires that full provision for deferred tax is recognised in the financial
statements. The adoption of FRS19 has eliminated most of the differences that
previously existed between UK GAAP and US GAAP. As a result, the adjustment now
primarily relates to the deferred tax effect of other US GAAP adjustments.

Revaluation of fixed assets

UK GAAP allowed for the periodic revaluation of land and buildings with
depreciation then being calculated on the revalued amount. Any surplus or
deficit (to the extent that the revaluation reserve was in surplus) on the
revaluation was then taken directly to shareholders’ funds. With the Group’s
adoption of FRS15 in 2000, the Group no longer revalues fixed assets. Under US
GAAP, revaluations of fixed assets are generally not permitted and, as a
result, the reconciliation restates fixed assets to historical cost and the
depreciation charge and any write downs of previously revalued assets are
adjusted accordingly.

Restructuring costs

Under UK GAAP, when a decision has been taken to restructure, the necessary
provisions are made for impairment of asset values together with severance and
other costs. Under US GAAP, the requirements for charging restructuring costs
to income are more prescriptive and all significant actions arising from the
restructuring plan and their completion dates must be identified by the balance
sheet date. Accordingly, the charge for restructuring costs has been adjusted
to meet US GAAP requirements.

Pensions

For UK GAAP reporting (FRS17 — Retirement benefits), the pension asset or
liability in the balance sheet represents the difference between the market
value of pension scheme assets at the balance sheet date and the present value
of pension scheme liabilities at that date, net of deferred tax.
     Under
US GAAP (SFAS87), plan assets are valued by reference to
market-related value at the date of the financial statements. Liabilities are
assessed using the rate of return obtainable on fixed or inflation-linked
bonds.
     There
is a significant difference in the treatment of actuarial gains and
losses arising during the accounting period. UK GAAP recognises the actuarial
gains and losses in full in the year in which they arise in the statement of
total recognised gains and losses. Under US GAAP, the actuarial gains and
losses which exceed ten per cent of the value of the assets or liabilities at
the start of the accounting period are amortised over the remaining service
lives of scheme members.
     FRS17
requires that past service costs are recognised in full in the
period in which they become vested. SFAS87 requires past service costs to be
amortised over the remaining service lives of the employees to whom the
amendments relate.
     Where
an additional minimum liability exists under US GAAP, (ie where the
amount provided for any scheme does not cover the unfunded accumulated benefit
obligation for that scheme), this must be recognised under SFAS87.

Securities investments

Under UK GAAP, current asset investments (of all types) are stated at the lower
of cost and net realisable value. Fixed asset investments are stated at cost,
or alternatively, at market value or at directors’ valuation.
     Under
US GAAP, securities which are determined to be ‘available-for-sale’
are stated at fair value and any unrealised gains or losses included as a
separate component of shareholders’ funds. The deferred tax consequences of
unrealised gains or losses are also charged or credited to shareholders’ funds.

Employee share option plans (ESOPs)

Under UK GAAP, shares held by the ESOPs are recorded as fixed asset investments
at cost. Realised and unrealised gains or losses on subsequent issues of shares
are charged or credited to the profit and loss account in the year to which
they relate. Under US GAAP, these shares and other shares held in trust are
recorded at cost in the balance sheet as a deduction from shareholders’ funds.
Gains or losses on subsequent issues of shares are recorded as adjustments to
the share premium account.

108  The BOC Group plc Report and accounts 2002

 

 

16. US accounting information continued

Financial instruments

The Group enters into a number of currency swaps, interest rate swaps and
forward foreign exchange contracts to hedge its exposure to currency and
interest rate risks. Under UK GAAP, such instruments are shown at their
carrying value. Under US GAAP, these instruments are marked to market and any
change in value is recognised in either the income statement or through
comprehensive income in accordance with SFAS133 depending on whether a
derivative is designated as part of a hedge transaction, and if it is, the type
of hedge transaction.

Accounting for swaps

Under UK GAAP, gains or losses on closing out interest rate swap contracts
taken to hedge the Group’s fixed/floating interest rate position can be taken
to profit immediately. US GAAP requires any gain or loss to be deferred over
the remaining hedge period.

Share of results and net assets of joint ventures and associates

The Group’s share of the results and net assets of its joint ventures and
associates (as calculated under UK GAAP) is shown within fixed asset
investments. For the purposes of the reconciliations set out below, the Group’s
share of the results and net assets of its joint ventures and associates has
been adjusted to recognise a difference in the method of reporting profits
under US GAAP.

Other

Other adjustments principally comprise sale and leaseback transactions,
depreciation and certain executive incentive schemes.
     Under
UK GAAP, any profit or loss on the sale and operating leaseback of
fixed assets can generally be taken to profit immediately. US GAAP requires any
gain or loss to be deferred over the contract lease period.
     Prior
to 2001, under UK GAAP, it was acceptable for depreciation to be
charged on an annuity basis. The Group no longer charges depreciation on an
annuity basis. Under US GAAP, annuity depreciation is not allowed.
Under US GAAP, executive incentive schemes are accounted for under APB Opinion
25.

Comprehensive income

In June 1997, the US Financial Accounting Standards Board issued
SFAS130. This
establishes requirements for the reporting of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of general
purpose financial statements. Components of comprehensive income for the Group
determined on a UK GAAP basis include profit for the financial year, pension
actuarial gains and losses, and foreign currency translation gains and losses.
Information regarding the Group’s foreign currency translation gains and losses
is included in the statement of total recognised gains and losses under UK GAAP
on page 69.

b) Reconciliation of profit before tax

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	2001	 	2000
	 	 	 	2002	 	(restated)	 	(restated)
	Years ended 30 September	 	£ million	 	£ million	 	£ million
	 	 	
	 	
	 	

	Profit before tax in the Group profit and loss account under UK GAAP
	 	 	335.3	 	 	 	362.2	 	 	 	441.8	 
	Pensions
	 	 	35.4	 	 	 	24.9	 	 	 	(0.7	)
	Post retirement medical costs
	 	 	0.3	 	 	 	(2.7	)	 	 	(0.7	)
	Revaluations realised on asset disposals
	 	 	6.0	 	 	 	1.1	 	 	 	—	 
	Write-down of previously revalued assets
	 	 	21.2	 	 	 	—	 	 	 	—	 
	Depreciation of revalued fixed assets
	 	 	1.2	 	 	 	4.1	 	 	 	0.2	 
	Amortisation of goodwill — previously charged to reserves
	 	 	(7.2	)	 	 	(7.9	)	 	 	(7.9	)
	 	— non-amortisation on acquisitions since 30 June 2001
	 	 	3.5	 	 	 	—	 	 	 	—	 
	Share of results of joint ventures and associates
	 	 	—	 	 	 	(4.8	)	 	 	—	 
	Interest rate swaps
	 	 	1.9	 	 	 	1.9	 	 	 	1.8	 
	Financial instruments
	 	 	19.5	 	 	 	8.5	 	 	 	(10.7	)
	Restructuring costs
	 	 	—	 	 	 	(6.5	)	 	 	(7.9	)
	ESOPs and other shares held in trust
	 	 	0.2	 	 	 	(3.8	)	 	 	0.1	 
	Other
	 	 	(3.4	)	 	 	0.1	 	 	 	1.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Profit before tax under US GAAP
	 	 	413.9	 	 	 	377.1	 	 	 	417.7	 
	UK tax charge
	 	 	(106.2	)	 	 	(104.6	)	 	 	(135.2	)
	Deferred income tax
	 	 	(25.6	)	 	 	(11.3	)	 	 	16.8	 
	Share of taxation in joint ventures and associates
	 	 	—	 	 	 	0.6	 	 	 	(4.6	)
	Minority interests
	 	 	(26.7	)	 	 	(27.6	)	 	 	(25.9	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Profit for the financial year under US GAAP
	 	 	255.4	 	 	 	234.2	 	 	 	268.8	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Represented by:
	 	 	 	 	 	 	 	 	 	 	 	 
	Profit from continuing operations
	 	 	255.4	 	 	 	234.2	 	 	 	256.3	 
	Profit from discontinued operations
	 	 	—	 	 	 	—	 	 	 	12.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

 

 

Notes to the financial statements

16.  US accounting information continued

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	Average number of 25p Ordinary shares	 	million	 	million	 	million
	 	 	
	 	
	 	

	Basic
	 	 	490.4	 	 	 	486.9	 	 	 	487.1	 
	Diluted
	 	 	492.2	 	 	 	488.6	 	 	 	489.6	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2001	 	2000
	 	 	pence	 	pence	 	pence
	 	 	
	 	
	 	

	Earnings per share
	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	 	 	 	 	 	 	 	 	 	 	 
	Profit from continuing operations
	 	 	52.08	 	 	 	48.10	 	 	 	52.62	 
	Profit for the financial year
	 	 	52.08	 	 	 	48.10	 	 	 	55.18	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Diluted
	 	 	 	 	 	 	 	 	 	 	 	 
	Profit from continuing operations
	 	 	51.89	 	 	 	47.93	 	 	 	52.35	 
	Profit for the financial year
	 	 	51.89	 	 	 	47.93	 	 	 	54.90	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 

c) Reconciliation of shareholders’ funds

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	2001
	 	 	2002	 	(restated)
	At 30 September	 	£ million	 	£ million
	 	 	
	 	

	Shareholders’ funds reported in the Group balance sheet under UK GAAP
	 	 	1,684.1	 	 	 	2,086.2	 
	UK minority interests
	 	 	117.9	 	 	 	137.6	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	1,802.0	 	 	 	2,223.8	 
	Pensions
	 	 	408.6	 	 	 	112.5	 
	Post retirement medical costs
	 	 	(13.9	)	 	 	(14.5	)
	Revaluations of fixed assets
	 	 	(33.1	)	 	 	(72.6	)
	Goodwill — previously charged to reserves
	 	 	80.4	 	 	 	90.6	 
	                — non-amortisation on acquisitions since 30 June 2001
	 	 	3.5	 	 	 	—	 
	Write-down of previously revalued assets
	 	 	21.2	 	 	 	—	 
	Interest rate swaps
	 	 	(6.6	)	 	 	(9.0	)
	Share of net assets of joint ventures and associates
	 	 	(14.4	)	 	 	(4.1	)
	Securities investments — gross unrealised gains
	 	 	36.7	 	 	 	39.8	 
	Securities investments — gross unrealised losses
	 	 	(1.7	)	 	 	—	 
	Financial instruments
	 	 	16.5	 	 	 	(3.0	)
	ESOPs and other shares held in trust
	 	 	(42.5	)	 	 	(59.5	)
	Other
	 	 	(6.1	)	 	 	(2.8	)
	Deferred tax
	 	 	(72.7	)	 	 	(47.9	)
	Minority interests
	 	 	(116.9	)	 	 	(114.4	)
	 
	 	 	
	 	 	 	
	 
	Shareholders’ funds under US GAAP
	 	 	2,061.0	 	 	 	2,138.9	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	 	 
	d) Movements in shareholders’ funds on a US GAAP basis
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shareholders’ funds at 1 October
	 	 	2,138.9	 	 	 	2,139.9	 
	Net income for the year
	 	 	255.4	 	 	 	234.2	 
	Dividends
	 	 	(186.6	)	 	 	(180.3	)
	Shares issued
	 	 	24.6	 	 	 	16.9	 
	Other recognised gains and losses
	 	 	(171.3	)	 	 	(71.8	)
	 
	 	 	
	 	 	 	
	 
	Shareholders’ funds at 30 September
	 	 	2,061.0	 	 	 	2,138.9	 
	 
	 	 	
	 	 	 	
	 

110  The BOC Group plc Report and accounts 2002

 

 

16.  US accounting information continued

e) Recently issued accounting pronouncements (US
GAAP)

The effects on the Group of recently issued accounting pronouncements are
summarised below.

SFAS141 — Business combinations

In June 2001, the US Financial Accounting Standards Board issued
SFAS141. The
standard prohibits the use of pooling-of-interest accounting for all
acquisitions made subsequent to 30 June 2001. The Group did not previously use
the pooling-of-interest method of accounting and as a result management do not
believe there will be any impact on Group results in this respect. The standard
also addresses the initial recognition and measurement of goodwill and
intangible assets in business combinations, accounted for using the purchase
method, that are completed after 30 June 2001.

SFAS142 — Goodwill and other intangible assets

In June 2001, the US Financial Accounting Standards Board issued
SFAS142. The
standard removes the requirement to amortise goodwill, and certain other
intangible fixed assets, on all acquisitions subsequent to 30 June
2001. Annual
impairment reviews will need to be carried out to assess the recoverability of
such assets. For fiscal years commencing after 15 December 2001, all existing
goodwill, and certain intangible assets, will no longer be amortised. This will
require a thorough initial impairment review, followed by annual impairment
reviews thereafter. At this time, management is still assessing the impact of
adopting the standard.

SFAS143 — Accounting for asset retirement obligations

In June 2001, the US Financial Accounting Standards Board issued
SFAS143. This
statement requires that the fair value of a liability for an asset retirement
obligation be recognised in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalised as part of the carrying amount of the long-lived asset. This
statement is effective for fiscal years beginning after 15 June 2002. At this
time, management is still assessing the impact of adopting the standard.

SFAS144 — Accounting for the impairment or disposal of long-lived assets

In June 2001, the US Financial Accounting Standards Board issued
SFAS144. This
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. The statement establishes a single accounting
model for long-lived assets to be disposed of and addresses implementation
issues related to SFAS121. This statement is effective for fiscal years
beginning after 15 December 2001. At this time, management is still assessing
the impact of adopting the standard.

SFAS145 — Recession of FAS8
Statements No.4, 44 and 64, Amendment of FAS8
Statement No.13 and Technical Corrections

In April 2002, the US Financial Accounting Standards Board issued
SFAS145. This
statement amends several existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The statement is applicable for fiscal years beginning
after 15 May 2002, although certain sections are effective for transactions
occurring after 15 May 2002.

SFAS146 — Accounting for costs associated with exit or disposal activities

In June 2002, the US Financial Accounting Standards Board issued
SFAS146. This
statement addresses financial reporting and accounting for costs associated
with exit or disposal activities. The statement requires that a liability for a
cost associated with an exit or disposal activity be recognised when the
liability is incurred, at the fair value of the liability. This statement is
effective for exit or disposal activities that are initiated after 31 December
2002. At this time, management is assessing the likely impact of adopting the
standard.

f) Other information

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make significant estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

17.  Comparative information

The adoption of FRS17 (Retirement benefits) has resulted in

a)     an increase
in the pension charge, within employee costs, of £73.1 million in 2001
(2000: £64.2 million) 

b)     an increase in exceptional employee costs of £16.7
million in 2001 (2000: £nil) 

c)     a decrease in the net interest charge of
£59.7 million in 2001 (2000: £48.8 million) 

d)     a decrease in the tax charge
of £2.4 million in 2001 (2000: increase of £1.4 million) 

e)     a decrease in the profit for the year
of £29.2 million in 2001 (2000: £18.0 million) 
f)     a
decrease in the recognised gains and losses of £312.3 million in 2001
(2000: increase of £95.8 million)

The adoption of FRS19 (Deferred tax) has resulted in a decrease in the tax
charge of £2.6 million in 2001 (2000: increase of £30.1 million) and an increase
in the profit for the year of £1.0 million in 2001 (2000: decrease of £29.8
million).
     The
impact of adopting FRS17 and FRS19 on the balance sheet of the Group
has been to reduce capital employed at 30 September 2001 by £12.2 million.
     The
impact of adopting FRS17 and FRS19 on the parent company has been to
reduce profit after tax for the year ended 30 September 2001 by £4.1 million
(2000: £9.5 million).
     As
FRS17 and FRS19 use different measurement bases than the previously
adopted standards, the impact on the current year has not been quantified as it
is impractical to do so.

111  The BOC Group plc Report and accounts 2002

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