ZCCM Investments Holdings Plc and its...

Incorporated in the Republic of Zambia

Certificate of Incorporation No. 771

ZCCM Investments Holdings PLC

2006 ANNUAL REPORT Contents Page Notice of Meeting 1

Directors Report 3-6

Corporate Information 2

Chairman’s Statement 7 An overview of operations of Investee Companies 8-17 Statement of Directors’Responsibilities 18 Report of the Auditors 19 - 20 Consolidated Profit and Loss Account 21 Consolidated and Company Balance Sheets 22 - 23 Consolidated and Company Statements of Changes in Equity 24 - 25 Consolidated Cash Flow Statement 26 Accounting Policies 27 - 35 Notes to the Financial Statements 36 - 54

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Report of the Directors and Financial Statements for the year ended 30th June 2006

ZCCM Investments Holdings Plc and its Subsidiaries

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Seventh Annual General Meeting of members of ZCCM Investments Holdings Plc will be held on Tuesday, 23 November 2010 at Southern Sun Ridgeway Hotel, corner of Church Road and Independence Avenue, Lusaka at 10:00 hours to transact the following business:

(a) To consider and adopt the minutes of the Sixth Annual General Meeting held on Friday, 22 September 2006.

(b) To receive and adopt the Accounts and Reports of the Directors and the Auditors for the financial year ended 30 June 2006.

(c) To receive and adopt the Accounts and Reports of the Directors and the Auditors for the financial year ended 30 June 2007.

(d) To ratify the appointment of Auditors who had filled the casual vacancy left following the retirement of the previous Auditor at the last AGM, to ratify the Auditors remuneration paid for the periods ended 30 June 2006 and 30 June 2007, to appoint Auditors for the ensuing year and authorize Directors to fix their remuneration.

(e) To transact such other business as may properly be transacted at an Annual General Meeting.

A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, to vote in his/her stead. The proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the office of the Company Secretary not less than 48 hours before the time appointed for holding the meeting.

By Order of the Board

Chabby ChabalaCOMPANY SECRETARY

22 October 2010Lusaka, Zambia.

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CORPORATE INFORMATION Registered and Corporate Office Auditors Mukuba Pension House PricewaterhouseCoopers 5309 Dedan Kimathi Road P O Box 30942 P O Box 30048 Lusaka Lusaka 10101, Zambia Zambia UK Registrars CAPITA IRG PLC Bourne House 34 Beckenham Road Beckenham Kent BR3 4TU England Depository for American Shares Principal Bankers JP Morgan Chase & Co. Barclays Bank of Zambia Limited60 Wall Street Standard Chartered Bank Zambia plc New York, NY 10260-0060 Zambia National Commercial Bank Plc USA Joint Brokers: Lusaka Stock Exchange Stockbrokers Zambia Limited 2nd Floor South Wing Exchange Building, Central Park Cairo / Church Road P O Box 38956 Lusaka, Zambia Pangaea/EMI Securities (Zambia) Limited 1st Floor, Lusaka Stock Exchange Building 2A Cairo Road P O Box 30163 Lusaka, Zambia



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DIRECTORS’ REPORT The directors submit their report together with the audited financial statements for the year ended 30 June 2006, which disclose the state of affairs of ZCCM Investments Holdings Plc (‘the Company’) and its subsidiaries (together “the Group”). Investments The holding company had the following interests in the undernoted companies: 1. Ndola Lime Company Limited 100% 2. AHC Mining Municipal Services Limited 100% 3. Konkola Copper Mines plc 20.6% 4. Kansanshi Mining plc 20% 5. Copperbelt Energy Corporation plc 20% 6. Chibuluma Mines plc 15% 7. NFC Africa Mining plc 15% 8. Luanshya Copper Mines plc 15% 9. Chambishi Metals plc 10% 10. Mopani Copper Mines plc 10% 11. Equinox Minerals Limited (Lumwana Copper Project) 4.4% The Company has a conditional future shares election option to take up to 20% shareholding in Konnoco Zambia Limited, a Konkola North Copper Project. AHC-Mining Municipal Services Limited was taken over by Nkana Water and Sewerage Company Limited on 1 January 2006 DIRECTORS

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The directors who held office during the year to 30 June 2006 were;

Mr G K Chibuye - Retired April 2007 (Non Executive Chairman of the Board)Dr S Musokotwane - Retired April 2006 Mr C Evans Chibiliti - Appointed April 2006Mr L NkhataMr G P Mukala (late) Dr D H KalyalyaMrs L I Ng'andweMr E Mutale

The directors who held office as at the date of this Report (18 December 2009) were;

Mr A J Lungu - Non Executive Chairman, Appointed April 2007Mr L Ndalamei - Appointed January 2009Dr G M Beene - Appointed January 2009Mr T J Kasonso - Appointed November 2009Dr D H KalyalyaDr S M Bwalya - Appointed March 2009Mr O B Munyenyembe - Appointed August 2007


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Vacant Chief Executive Officer Mr W S Musama Company Secretary

Mr J K Kaite Legal Investments Manager

Mr Z Zekko Finance and Investments Manager

Mr J M D Patterson Technical Investments Manager

Mr W K Katoto Technical Investments Officer

Mr J Makumba Environmental Manager

Mr K K Mulaisho Financial Analyst Management officials who held office as at 18 December 2009 were; Mr W S Musama Acting Chief Executive Officer Mr C Chabala Acting Company Secretary

Mr J K Kaite Legal Manager

Mr M Mbewe Investments Manager

Mr P Mapani Finance Manager

Mr W K Katoto Technical Managemer

Mr J Makumba Environmental Manager

Mr B F Shamalavu Head-Human Resource and Administration

SHARE CAPITAL The authorised share capital of the Company remained unchanged at K900,000,000 divided as follows:

54,000,000 “A” ordinary shares of K10 each; and 36,000,000 “B” ordinary shares of K10 each.

There were no changes in the issued share capital of 89,296,428 shares with a nominal value of K892, 964,280 during the year which remained as detailed below: Number of

shares Amount Kwacha

At beginning and end of year 89,296,428 892,964,280 The shares are held as follows: Number of

shares Amount Kwacha

“A” shares - Ministry of Finance and National Planning on behalf of the Government of the Republic of Zambia (GRZ)

53,825,808

538,258,080

“B” shares - Ministry of Finance and National Planning on behalf of the Government of the Republic of Zambia (GRZ)

24,329,828

243,298,280

“B” Shares - Others 11,140,792 111,407,920 89,296,428 892,964,280 The 11,140,792 “B” ordinary shares are thinly spread and held as at 30 June 2006 by 2,339 minority shareholders. During stage 2 privatisation, GRZ will dispose of some or all of its 87.6 per cent shareholding in the Company. The timetable for stage 2 privatisation of the Company has yet to be set by GRZ. Principal activities The principal activities of the Company include managing the Zambian Government’s stake in the mining sector. The Company is also charged with the responsibility of environmental restoration arising out of the past operations of ZCCM Ltd.



MANAGEMENT COMMITTEE

Management officials who held office during the year to 30 June 2006 were:

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Functions and Performance of the Company In its transformed state as an investments holding company, the main functions of the Company are as follows:

- to monitor the performance of the privatised companies with respect to production and metal

prices in order to ensure that commitments agreed upon relating to disbursements are actioned on a timely basis.

The Company continued monitoring production and cost levels in the associate Companies. In addition, metal prices in relation to the payment of price participation disbursements have been followed through to payments and as a result all price participation income due was received.

- to anticipate the receipt of deferred sale considerations and ensure that these are received on

a timely basis and in the correct amounts;

The Company followed up all deferred sale considerations and payments were timely paid.

- to ensure that capital investment commitments pledged at the time of privatisation are

fulfilled;

It is pleasing to note that investments commitments relating to recapitalisation of privatised mines specified in the Agreements were met and additional capital were incurred over and above what was pledged.

- to assist the Government, through the Ministry of Mines and Minerals Development, in

monitoring compliance of the resources committed in the Development Agreements, including local Business Development Management and Training, Human Resources and Social Services obligations;

The Company continued to assist GRZ by providing technical advice and assistance on matters relating to Development Agreements post privatisation and the interpretation of existing ones.

- to ensure that ZCCM-IH environmental obligations under the transaction documents are

complied with. All environmental obligations have been attended to through different levels of participation under the Copperbelt Environment Project and significant progress made by the remedial measures undertaken to date.

- to liaise with prospective Greenfield investors in the mining and minerals industry who will enter into Agreements with the Government.

The Company has continued to liaise with Greenfield investors and it is pleasing to note that during the year under review, shares were acquired in Equinox Minerals Limited, the sole shareholder of the Lumwana Copper Project,and more opportunities remain to be exploited.


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The Company continued to operate by enforcing good governance practices and observing the separation of powers between the Directors and Management and the Chairman of the Board and the Chief Executive Officer.

Activities were further streamlined by the full utilisation of the existing Audit and Remuneration Committees of the Board whose membership of Non-Executive Directors for the year to 30 June 2006 is indicated below: Audit Committee Remuneration Committee

Mrs L I Ng’andwe (Chairperson) Dr D H Kalyalya (Chairperson) Dr S Musokotwane – Retired April 2006 Mr L Nkhata Mr C E Chibiliti – Appointed April 2006 Mr E Mutale Mr G P Mukala

Membership of the Committees as at the date of this Report (18 December 2009) was as follows: Audit Committee Remuneration Committee Dr S M Bwalya (Chairperson) Dr D H Kalyalya (Chairperson) Mr L Ndalamei Dr G M Beene Dr G M Beene Dr S M Bwalya Mr T J Kansonso Mr O B Munyenyembe Number and remuneration of employees The total remuneration of employees during the year amounted to K26,467 million (2005: K22,769 million) and the number of employees was as follows: Month Number

Month Number

July 2005 864 January 2006 438 August 2005 867 February 2006 433 September 2005 868 March 2006 436 October 2005 862 April 2006 434 November 2005 855 May 2006 430 December 2005 850 June 2006 428

The Group recognises its responsibility regarding the occupational health, safety, and welfare of its employees and has put in place measures to safeguard them. Signed on their behalf by:

A J Lungu Director

S M Bwalya (Dr) Director



Corporate Governance

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CHAIRMAN’S STATEMENT I am pleased to present the Chairman’s Report for the year ended 30 June 2006. The year recorded significant improvements in the Group’s profitability, an increase in investments portfolio and satisfactory implementation of the environmental remedial measures undertaken on the Copperbelt Province and Kabwe town. The year also witnessed a shift in corporate focus towards more emphasis on investments activities. This shift in focus was a deliberate effort aimed at increasing shareholder value. The portfolio in 2006 was enhanced by a new investment in Equinox Minerals Limited which is a Canadian (Toronto) listed company with over 95% interest in the Lumwana Copper Project in North-Western Province of Zambia. When operational, the Lumwana Mine will be the largest open pit mine in Africa with potential to open up a uranium mine in the near future. Performance of the Associate Companies continued to be driven by global commodity market fundamentals mainly influenced by Chinese demand for copper leading to unprecedented high selling or realised prices. The Group achieved total income of K101,305 million (2005: K249,198 million). The Group recorded a profit before tax of K 503,675 million (2005: K194,473 million). The Group however, has a total deficit of K 806,210 million (2005: K1,265,971 million) on its balance sheet. The shareholding of AHC Mine Municipal Services Limited, a wholly owned subsidiary of the Company, was finally transferred on 19 January 2006 to the respective District Councils on the Copperbelt. The transfer of this subsidiary had a significant impact on the Group consolidated financial figures. Consequently any comparison with previous year’s figures needs to take this into account. In accordance with good corporate governance practice, KPMG were subsequent to year end retired as the Company’s auditors having held the office of External Auditors for five years. PricewaterhouseCoopers were engaged to fill the casual vacancy that arose. During the year Mr C Evans Chibiliti, Secretary to the Treasury, joined the Board replacing Dr S Musokotwane who retired from the Board. Finally, I wish to express my gratitude and appreciation to the Directors, Management and all members of staff for their dedication to the affairs of the Company.

A J Lungu Chairman of the Board

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Financial

For the year ended 30 June 2006, revenues were US$ 596.3 million broken down into copper US$ 579.4 million and gold of US$ 16.7 million. Copper revenues comprised US$ 371.5 million from copper cathodes and US$207.8 million from copper concentrates.

Operational

The Company produced 73,683 tonnes of copper cathode and 53,496 of copper concentrate. Included within cathode production were 67,656 tonnes from the (Solvent Extraction and Electrowinning (SX/EW) process and 6,027 tonnes produced from the tolling of copper concentrates at the Mufulira smelter. Production increased by 77% over 2005 as Kansanshi continued to ramp up after achieving commercial production during April 2005, as well as cathode production from the toll treatment of concentrate production commenced in 2006. Concentrate production was up by 91% over 2005 as Kansanshi continued to ramp up after achieving commercial production during April 2005.

During the 2005 year, the world shortage of mining truck tyres had impaired the availability of the Company’s haul trucks at Solwezi. The 34% increase this year, compared with 2005 was reflective of the easing of the tire shortages, accompanied by the improved equipment availability and the larger drilling and haul truck fleet. There was substantial capital programme in the 2006 year. The High Pressure Leach plant was constructed during most of 2006 and will be commissioned in 2007. This will enable the Company to treat it’s own copper concentrates on site. A new SX/EW plant was commissioned in 2006 and new crusher units were installed. Also various housing projects were completed and will be continued in 2007.

Kansanshi Mining Plc Oxygen Plant

AN OVERVIEW OF INVESTEE COMPANIES’ PERFORMANCE

1 Kansanshi Mining plc

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2 Copperbelt Energy Corporation plc

Financial

The year to 30 June 2006 was a challenging one for CEC partly due to negotiations by the majority shareholders - Cinergy and National Grid for the sale of their shareholding to a Zambian Consortium and also the strengthening of the Kwacha. However the turnover amounted to US$127.7 million while the cost of sales was US$88.2 million. The turnover was below budget by US$1.6 million. The operating costs in the sum of US$25.8 million were higher than budget because of exchange losses amounting to US$870 million. Operating costs were higher than budget by US$3.0 million.

The gross profit therefore amounted to US$37.2 million. The profit before interest and tax was US$13.7 million and the net profit amounted to US$8.3 million. A total dividend of US$5.8 million was declared. The Kitwe Chamber of Commerce conferred the award of Best Service Company for the year 2005 on CEC. This is the 4th time CEC has won this award. Operational

In order to accommodate the forecast power demand, the Company embarked on several reinforcement and extension projects on the transmission system. These projects include; the Mufulira Area Project covering MCM’s Mufulira Mine and Smelter, the CEC Northern Area Reinforcement project intended to accommodate KCM’s expansion projects, the CEC/DRC interconnector and the Nkana Area Project at MCM’s Nkana Mine. These Projects are expected to increase the demand for power and hence the revenue.

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Part of CEC Infrastructure



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3 Konkola Copper Mines plc

Financial

For the financial year ended 30 June 2006 a total of 160,056 tonnes of copper was produced. The revenue for the period was US$ 861 million and the company recorded a net profit of US$ 170 million. Operational

Construction of the 500 tonnes per day sulphur burning acid plant at Chingola was completed in the first quarter of 2006 of the financial year and the plant was successfully commissioned to operate at design capacity.

Significant progress was made to the US$ 400 million Konkola Ore Body Expansion (KOBE) Project with the award of major contracts for shaft sinking, underground pump chamber excavation, underground haulage development and surface concentrator plant construction to expand Konkola Mine capacity from 2 million to 6 million tonnes per annum of ore production. The Project is scheduled for completion in 2010. The construction of a new Smelter and Acid Plant at Chingola, which was approved at a cost of US$ 300 million, will have a production capacity of 250,000 tonnes of copper annually and of 1,700 tonnes of acid per day. The Project is scheduled for completion in 2008.

4 Chibuluma Mines plc

Financial

The profit before taxation for the year ended June 2006 was $16.3m generated from copper sales of $43.5m and copper production of 8017 tonnes. The financial year represented the first full year of production at the South Mine and the company achieved its name plate capacity precisely on target in June 2006 with 40,000 tonnes of ore mined. The performance overall benefitted from the increases to the LME copper price averaging $5427 per tonne.The Mine Operating Cost base also increased significantly to $1.1m per month (from $0.6m) reflecting the additional throughput

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together with the appreciation of the Zambian Kwacha to an average of 4748 to the Dollar (prior year average 3699).The copper cost C1 increased to $1.30 (from $1.20) but is planned to decrease in the following financial year when production stabilises at 40,000 tonnes each month.

Capital expenditure in the year was $8.7m increasing the cumulative investment by Metorex Ltd to $57m.

The first year of production at the South Mine and the generation of the company's first profit enabled the deficit on profit and loss reserves after 9 years of operations to reduce to $33m.

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Operational

The Mine achieved its planned production in June 2006 at 40,000 tonnes of ore.The total for the full financial year was 363,000 at an average grade of 2.67%.The South Mine produces copper concentrates which it sells to Smelters at contractual tolling fees. The Company is contracted to the KCM Smelter at Nkana to December 2008. The Ore Reserve Statement as at 30th June 2006 indicated 6,119,000 tonnes grading at 3.3% providing a 13 year life of mine.

A further deposit within the Mining License area known as “Chifupu” has been identified and will be subject to diamond drilling within the next financial year to establish its commercial viability

5 Luanshya Copper Mines plc

Financial Subsequent to year end, Luanshya Copper Mines Plc concluded negotiations for the Development of the Muliashi Deposit and signed the Development, Price Participation and Sale & Purchase Agreements with the Government of the Republic of Zambia on 21 September 2006. The Agreements envisage capital expenditure of US$90 million to develop a Heap/Agitation Leach and Solvent/Extraction operation to produce 32,000 tpa of copper for a period of at least 15 years.

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Part of Chibuluma South Infrasturcture


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Production of both copper and cobalt was below budget during the period resulting mainly from geotechnical constraints affecting the cut and fill areas. To resolve this problem, conversion of the cut and fill mining method in the flat areas to mechanised open stoping sub level caving (MOS/SLC) mining method was progressed during the year. The Company adopted and implemented an HIV/AIDS policy so as to mitigate the effects of the pandemic on the LCM employees. One fatality arising from rock fall was experienced during the period.

6 NFC Africa Mining Plc

Financial

Construction of the 5000 tpa copper cathode Leach and Solvent Extraction plant together with a 40,000 tpa acid plant continued during the year and commissioning was subsequently undertaken in the month of September 2006. All concentrates produced were exported due to a contractual tolling dispute with KCM.

Operational

Copper production to June 2006 was below budget mainly due to below schedule mined tonnage and headgrades. An upward trend in production was however noted.

Operational

LCM Employees underground

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7 Chambishi Metals plc Financial Generally operations were adversely affected by the 30% appreciation of the Kwacha. Operational Production of both copper and cobalt to end of June 2006 was below budget mainly due to lower than forecast metal content in both Baluba ore and the Nkana slag.

8 Mopani Copper Mines plc

Financial A number of projects were commissioned during the year and prominent on this list were the new Nkana Cobalt Plant Roaster and Acid Plant together with the Oxygen Plant. Operational Production for the year was affected by equipment failures, low copper headgrades and ore arisings to the mill and the on-going remedial work at the Smelter. Subsequent to year end, Phase 1 of the Mufulira Smelter Upgrade Project comprising the Isasmelt Furnace, Matte Settling Electric furnace and associated ancillaries were officially commissioned by the Republican President.

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Chambishi Metals Concentrator



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(B) SUBSIDIARY COMPANIES

1 Ndola Lime Company Limited

Financial

During the year the company-achieved sales of K73,759 million compared to budgeted sales of K88,854 million and K84,314 million achieved during 2004/5 period. In quantity terms, the company achieved sales of quicklime of 136,487 tonnes (2005: 132,870), limestone of 136,487 tonnes (2005: 227,817) and hydrated lime of 11,147 tonnes (2005: 19,889). Total quicklime produced at 157,300 metric tonnes was 2% below the budgeted 161,200 metric tonnes. The below budget production of Quicklime is mainly attributed to lost production of 11,500 tonnes due to lack of demand and a country wide shortage of HFO which resulted into a total shut down of the kilns for 16 days between 27th September and 11 October 2005. Total hydrated lime produced at 23,133 tonnes was 633 metric tonnes below budget. Hydrated lime production was also adversely affected by the shortage of Quicklime feed as a result of the shut down of the kilns due the countrywide shortage of HFO. The below budget sales value recorded during the year is explained by the significant appreciation of the Kwacha and the reduction in the uptake of lime products by mining companies. A total of K10,500 million was lost as a result of the appreciation of the Kwacha against the US Dollar. Reduction in uptake of lime products resulted into revenue loss in the order of K11, 300 million. The company made a loss before tax of K17,202 million compared to the budgeted profit of K8,038 million and a profit before tax of K14,560 million achieved in the previous year. Operational A total of 645,025 metric tonnes of limestone was hauled from the quarry compared to the budget of 858,320 metric tonnes during the year under review. Operations in the quarry recorded negative variances mainly due to a planned suspension of mining activities for 64 days between 14 January 2006 and 19 March 2006. A total of 476,191 metric tonnes was crushed against a budget of 542,844 metric tonnes. The deficit in crushing is mainly attributed to the deliberate suspension of

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crushing operation for 17 days between 1st and 17th March 2006 while running the Rotary kiln in order to reduce on the pre-crushed stockpiled Rotary kiln feed material.


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2 AHC Mining Municipal Services Limited

Ndola Lime Company Limited Vertical Kiln

Financial The MTSP was successfully executed and all the projects completed by December 2005, except for the Four Towns Pumping project which was 68% complete. The Contractor, ERTEC, failed to complete this project in time and the performance guarantee on the project amounting to $266,000 was recalled by the company (AHC-MMS). All the company’s short term obligations, with the exception of ZESCO and ZRA, have since been paid off. Operational The Mine Township Services Project (MTSP), for which AHC Mining Municipal Services Limited (AHC-MMS) was the executing agent, came to an end on 31 December 2005. On 4 May 2005, the Government of the Republic of Zambia announced its decision to have AHC-MMS taken over in its entirety by Nkana Water and Sewerage Company (NWSC) with effect from 1 January 2006 as the exit strategy for the MTSP. The modalities for this take over have since been finalised. At the time of reporting, ZCCM - IH had already issued its deed of gift to the local authorities in the areas where the AHC-MMS operated as the new shareholders in AHC-MMS, based on the value of the company’s assets located in their areas. This is in line with the provisions of the Water and Sanitation Act of 1997. The company intensified its efforts to improve the quality of treated water in Mufulira Chingola and Chililabombwe where NWASCO had imposed some sanctions due to poor raw water quality in these areas. The sanctions were finally lifted in Mufulira and Chililabombwe in September 2005. The water quality in Chingola continued to be a challenge and the tariff embargo was still in force by the end of December 2005.

(C) ENVIRONMENTAL REVIEW

The Government of the Republic of Zambia (GRZ) obtained the support of the World Bank and the Nordic Development Fund for the Copperbelt Environment Project (CEP), to address environmental liabilities and obligations remaining with GRZ/ZCCM-IH following the privatization of mining assets. The Environmental Management Facility (EMF), which is composed of multiple stakeholders, working as the EMF Steering Committee, was established by the Minister of Finance and National Planning, to manage Component 1 of the CEP, for the purpose of prioritizing and approving subprojects of the CEP for funding.

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Disclosure in line with the Environmental Protection and Pollution Control Act Cap 20 of the Laws of Zambia.

The preparation of Consolidated Environmental Management Plans (CEMP) for the Copperbelt Environment Project, identification of priority mitigation measures and subprojects to be funded through the EMF was completed and was awaiting a Public


A team of experts from the World Bank conducted a Mid -Term Review (MTR) of the CEP to assess; the performance of ZCCM-IH in carrying out subprojects under Component 1 of the CEP; progress in meeting the Project’s objectives; and overall Pr oject performance as measured against the performance indicators included in the Development Financing Agreement.

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A total of Thirty-six (36) Subprojects have been identified to date, and Twenty-six (26) have received approval for implementation by the E MF Steering Committee and the World Bank has only approved sixteen (16) out of the Twenty-six (26) subprojects. The following are the major highlights of subproject implementation during the year:

i The Resettlement Action Plan for A mco residents was under implementation and the house construction for the resettlement of eighty -nine (89) families at Amco in Kitwe had started.

ii The preparation of the Resettlement Action Plan for Zambia Railways residents was completed. Due to poor physical integrity, all the houses at Zambia Railways Compound were demolished and the sixty -five (65) families were provided with temporary accommodation until such time as the construction of the new settlements is complete.

iii All decommissioned Tailings Dams on the Copperbelt wer e sampled for copper

analysis with a view to assess potential for reprocessing and determining which require final closure to safeguard dam stability.

iv A preliminary Risk Assessment of A mco Uranium Tailings was done by International

Atomic Energy Agency t o assess the potential impact on the environment and public health and safety.

v The preparation of the Kabwe Scoping and Design Study (KSDS) and the Site

Rehabilitation and Environmental Management Plan (SREMP) for the rehabilitation of the Kabwe mine site and implementation of the lead risk mitigation programmes in the surrounding settlements was completed.

vi The implementation of the Kabwe Water Supply Project (KWSP) to supply potable

water for lead mitigation in lead impacted communities commenced during the year.

vii The dredging of the Luanshya River which has been impacted by mining operations was completed.

Dredging of Luanshya River

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(D) OTHER INVESTMENTS

1 Konnoco Zambia Limited

Discussions with potential development partners gained momentum during the year and the restructuring of African Rainbow Minerals Subsidiaries into a Canadian listed company (Teal Exploration & Mining Incorporation) was completed. Further work to establish the viability of various mining and processing options will continue in the next financial year. This will be accomplished through re-evaluation of the resources surrounding the existing mine infrastructure and re-categorizing the current resource base in the light of the current economic climate.

2 Equinox Minerals Limited (Lumwana Copper Project) The Company acquired through a private placement 20.06 million shares at a cost of US$30 million in Equinox Minerals Limited, parent company to the Equinox Copper Ventures Limited operating the Lumwana Copper Mine. Due to the strategic importance of Lumwana Mine and in line with majority shareholder policy of full participation by the Company in such enterprises, the Board had decided to participate through Equinox Minerals Limited, being the only vehicle available for acquisition of the shares.

ENVIRONMENTAL REVIEW - Corporate Social Responsibility

The Group recognises its responsibility regarding the occupational health, safety, and

In addition

and carried out the following activities during the year:

a. The renovation of Mufulira, Kitwe and Kabwe Public Libraries to include

Environmental Public Information Centres.

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Rehabilitated Clayton Park, Kabwe under CEP

Mufulira Public Library, Environmental Public Information Centre

welfare of its employees and has put in place measures to safeguard them.the Group activities have increased its level of donation in areas where it operates

STATEMENT OF THE DIRECTORS’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2006

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18 December 2009

The Companies Act requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the company and its subsidiaries as at the end of the financial year and of its profit or loss. It also requires the directors to ensure that the company and its subsidiaries keep proper accounting records that disclose, with reasonable accuracy, the financial position of the Group. They are also responsible for safeguarding the assets of the company and of its subsidiaries. The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and the requirements of the Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company and of its profit or loss. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. As at 30 June 2006 the Group had a total deficit of K 806,210 million (2005 – K 1,265,971 million). The group depends on continued financial support from the Government of the Republic of Zambia. The Directors have obtained an undertaking from the major shareholder, the Government of the Republic of Zambia (GRZ), that the necessary financial and operational support will be made available for the 12 months following the date of signing of the consolidatedfinancial statements Signed on their behalf by: A J Lungu Director

S M Bwalya (Dr) Director

STA

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W S Musama, Acting Chief Executive Officer Lusaka, Zambia

b. Construction of an Environmental Public Information Centre in Katondo township of Kabwe.

PricewaterhouseCoopers

PricewaterhouseCoopers Place

Stand Number 2374 Thabo Mbeki Road

P.O.Box 30942

Lusaka, Zambia

Telephone +260 (211) 256471 / 256472

Facsimile +260 (211) 256474 www.pwc.com/zm

19

Report of the independent auditor to the members of ZCCM Investment Holdings Plc

We have audited the consolidated financial statements of ZCCM Investment Holdings Plc for the year ended 30 June 2006 set out on pages 20 to 52. These financial statements comprise the consolidated and company balance sheets at 30 June 2006, and the consolidated profit and loss account, consolidated and company statements of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes to the consolidated financial statements. Directors’ responsibility for the consolidated financial statements The directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and with the requirements of the Zambia Companies Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an independent opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. Opinion In our opinion the accompanying financial statements give a true and fair view of the state of the Group’s financial affairs at 30 June 2006 and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Zambia Companies Act.


20

Report on other legal requirements The Companies Act requires that in carrying out our audit we consider whether the company has kept the accounting records, other records and registers required by this Act. We confirm that in our opinion the accounting records, other records, and registers required by the Companies’ Act have been kept by the company, so far as appears from ourexamination of those records.

Chartered Accountants 27 January 2010

Lusaka Richard Mazombwe Partner


Consolidated Financial Statements for the year ended 30 June 2006 (all amounts are in millions of kwacha unless otherwise stated)

21

Consolidated Profit and Loss Account

Notes

2006 Restated

2005

Continuing operations Lime sales 73,759 84,180 Cost of lime sales (80,447) (57,065)

Gross (loss)/profit (6,688) 27,115 Other income 15,098 151,315

Grant income 12,178 13,703 Administration expenses (66,168) (81,902) Environmental expenses 11 (12,634) (18,355)

Operating (loss)/profit 5 (58,214) 91,876 Net finance income 6 217,991 32,070 Share of profit of associates 14 343,898 70,527

Profit before income tax 503,675 194,473 Income tax expense 7 (43,129) (9,110) Profit for the year from continuing operations attributable to equity shareholders

460,546

185,363

Discontinued operations : Loss on disposal of AHC 12 (8,701) - Profit/ (loss) for the period from discontinu ed operations 12 7,916 (5,542) Profit for the year 4 59,761 179,821 Earnings per share 8 5,166 2,021



22

Consolidated balance sheet

Notes

2006 2005

restated

Non-current assets Property, plant and equipment 10 13,417 113,807 Investment in associates 14 872,661 528,763 Deferred income tax assets 24 10,620 - Available-for-sale financial assets 15 141,013 19,531 Non-current receivables 17 - 18,987 1,037,711 681,088

Current assets Inventories 18 13,403 21,818 Receivables and prepayments 19 100,408 249,281 Investments in securities – held to maturity 16 82,094 43,778 Cash and cash equivalents 20 1,669 38,857 197,574 353,734

Current liabilities Payables and accrued expenses 21 97,537 138,594 Current income tax 7 712 5,092 Borrowings 23 74,243 3,088 Finance Lease 23 1,238 1,707 Provision for other liabilities and charges 26 7,972 - 181,702 148,481

Net current assets 15,872 205,253 Net assets 1,053,583 886,341

Capital and reserves attributable to the Company’s equity holders

Share capital 22 893 893 Revaluation Reserve 1,812 9,215 Accumulated losses (808,915) (1,276,079) Total deficit (806,210) (1,265,971)

Non-current liabilities Borrowings 23 1,791,273 2,114,848 Deferred income tax 24 60,834 7,687 Retirement benefit 25 5,755 - Finance lease 23 - 1,783 Deferred grant 31 - 25,503 Provisions for liabilities and other charges 26 1,931 2,491 Total non-current liabilities 1,859,793 2,152,312 Total equity and non-current liabilities 1,053,583 886,341

The financial statements on pages 21 to 54 were approved for issue by the board of directors on 18 December 2009 and signed on its behalf by:

………………………… ……………………………. A J Lungu S M Bwalya (Dr) Director Director




23

Company balance sheet Notes 2006 2005 Non-current assets Property, plant and equipment 10 4,965 5,513 Investment in subsidiaries 13 14 20 Investment in associates 14 347,512 347,512 Available for sale financial assets 15 141,013 19,531 Non-current receivable 17 - 21,611

493,504 394,187

Current assets Receivables and prepayments 19 76,250 221,577 Investments in treasury bills 16 82,094 43,778 Cash and cash equivalents 20 1,669 32,723 160,013 298,078

Current liabilities Payables and accrued expenses 21 72,182 89,566 Current income tax 7 712 2,004 Borrowings 23 69,918 - 142,812 91,570 Net current assets 17,201 206,508 Net assets 510,705 600,695

Equity

Share capital 22 893 893 Revaluation reserve 1,369 1,395 Accumulated losses (1,340,792) (1,463,331)

Total deficit (1,338,530) (1,461,043) Non-current liabilities Borrowings 23 1,791,273 2,058,938 Deferred income tax 24 52,207 282 Retirement benefit 25 5,755 - Deferred grant income 31 - 2,518 Total non-current liabilities 1,849,235 2,061,738 Total equity and non-current liabilities 510,705 600,695

The financial statements on pages 21 to 54 were approved for issue by the board of directors on 18 December 2009 and signed on its behalf by:

…………………………… ……………………………….. A J Lungu S M Bwalya (Dr) Director Director




24


Consolidated statement of changes in equity

Note Share

capitalRevaluation

reserves Accumulated

losses Total equity

Year ended 30 June 2005 At start of year - as previously reported 893 11,398 (1,588,286) (1,575,995) - prior year adjustment 4 - - 129,022 129,022

- as restated 893 11,398 (1,459,264) (1,446,973) Revaluation surplus - 807 - 807 Transfer of excess depreciation - (3,364) - 3,364 - Deferred income tax on transfer - 374 - 374 Profit for the year - - 179,821 179,821 At end of year 893 9,215 (1,276,079) (1,265,971)

Year ended 30 June 2006

At start of year - as previously reported 893 9,215 (1,454,051) (1,443,943) - prior year adjustment 4 129,022 129,022 - prior year adjustment 4 48,950 48,950 - as restated 893 9,215 (1,276,079) (1,265,971) Realisation of reserve on disposal of discontinued operation

- (7,219) 7,219 -

Transfer of excess depreciation - (283) - 283 - Deferred income tax on transfer - 99 (99) - Profit for the year - - 459,761 459,761 At end of year 893 1,812 (808,915) (806,210)

ZCCM Investments Holdings Plc Consolidated Financial Statements for the year ended 30 June 2006 (all amounts are in millions of kwacha unless otherwise stated)

25

Company statement of changes in equity Share

capital Revaluation

reserve Accumulated

losses Total

equity Year ended 30 June 2005 At start of year 893 870 (1,597,220) (1,595,457) Revaluation surplus - 807 - 807 Deferred income tax on revaluation - (282) - (282) Profit for the year - - 133,889 133,889 At end of year 30 June 2005 893 1,395 (1,463,331) (1,461,043)

Year ended 30 June 2006 At start of year 893 1,395 (1,463,331) (1,461,043) Transfer of excess depreciation - (40) 40 -

Deferred tax on transfer - 14 (14) -

Profit for the year - - 122,513 122,513 At end of year 30 June 2006 893 1,369 (1,340,792) (1,338,530)



26

Consolidated cash flow statement Notes 2006 2005 Operating activities Cash generated from operating activities 27 340,235 148,030 Interest income 525 - Interest expense (4,494) 724 Net cash generated from operating activities 336,266 148,754 Investing activities Purchase of property, plant and equipment 10 (26,493) (42,528) Proceeds from disposal of assets - 1,398 Acquisition of equity investments 15 (121,482) - Purchases of government securities (38,316) (14,637) Net cash outflow from investing activities from discontinued operation

(23,079)

(3,560)

Net cash used in investing activities (209,370) (59,327)

Financing activities Proceeds from borrowings 69,918 - Repayments on borrowings (267,655) (73,140) Grant amortisation (15,637) (13,703) Finance lease repayments (469) (2,203) Financing cash flow used in discontinuing operation

17,248

19,086 Net cash used in financing activities (165,321) (69,960) Net (decrease)/increase in cash and cash equivalents (38,425) 18,743 Movement in cash and cash equivalents At start of year 35,769 17,026 (Decrease)/increase (38,425) 18,743 At end of year 20 (2,656) 35,769




27

Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

(a)

Basis of preparation

The consolidated financial statements are prepared in compliance with International Financial Reporting Standards (IFRS).The measurement basis applied is the historical cost basis, except as otherwise stated in the accounting policies below. The consolidated financial statements are presented in kwacha (K), rounded to the nearest million. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2.

Going concern assumption At 30 June 2006, the total deficit of the Group stood at K 806,210 million (30 June 2005:

K1, 265,971 million). The ability of the Company to continue as a going concern is dependent upon the continued support of the Group’s major shareholder, the Government of the Republic of Zambia to enable the Group settle its liabilities as and when they fall due. The Group’s projected cash requirements are to be financed from internally generated funds as well as from government grants and loans. The consolidated financial statements have been prepared on the going concern basis, which assumes that the Company and its subsidiaries will continue in operational existence for the foreseeable future. The Directors have obtained an undertaking from the major shareholder, the Government of the Republic of Zambia (GRZ), that the necessary financial and operational support will be made available for the 12 months following the date of signing of the consolidated financial statements. Based on the foregoing, it is the Directors’ view that it is appropriate for the consolidated financial statements to be prepared on a going concern basis.

(i) Adoption of new and revised standards and interpretations

In 2006 new and revised standards and interpretations became effective for the first time and have been adopted by the Group where relevant to its operations. The adoption of these new and revised standards and interpretations had no material effect on the Group’s accounting policies or disclosures.



28

Accounting policies (continued)

(ii) Standards, interpretations and amendments to published standards not yet effective The following amendment to an existing standard and new standard will be mandatory for the Group’s accounting periods beginning on or after 1 January 2007, but which the Group has not early adopted:

IAS 1 Amendment, Capital Disclosures. The amendment to IAS 1 introduces

disclosures about the level of the Group’s capital and how it manages capital. IFRS 7, Financial Instruments: Disclosures. IFRS 7 introduces new disclosures to

improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

(b) Consolidation (i) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and

operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by

the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit and loss account.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.



29

Accounting policies (continued) (ii) Associates Associates are those enterprises in which the Group has significant influence but not

control over the financial and operating policies of the enterprise, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting. In the holding company, investments in associates are accounted for on a fair value basis in line with International financial reporting standards.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit and loss, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

(c) Functional currency and translation of foreign currencies (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured

using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Zambian kwacha, which is the Company’s functional and presentation currency.

(ii) Transactions and balances in group entities Foreign currency transactions are translated into the functional currency of the

respective entity using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.



30


(d) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

(e) Income Income represents the fair value of the consideration receivable for sales of goods and services,

and is stated net of value-added tax (VAT), rebates and discounts and after eliminating sales within the Group. Income is recognised as follows: Sales of goods are recognised in the period in which the group delivers products to the

customer, the customer has accepted the products and collectbility of the related receivables is reasonably assured.

Interest income is recognised on a time proportion basis using the effective interest

method. Dividends are recognised as income in the period in which the right to receive payment is established.

Copper and cobalt participation fees are computed using formulae specified in the Sales

and Purchase Agreements. The fees are recognised when it is reasonably assured that they are due to the Group

House sales are recognised as income when the group enters into a contract for the sale of

the house



31


(f) Property, plant and equipment All categories of property, plant and equipment are initially recorded at cost. Buildings are

subsequently shown at fair value, based on periodic valuations by external independent valuers, less subsequent depreciation for buildings. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss account during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against the revaluation surplus; all other decreases are charged to the profit and loss account. Each year the difference between depreciation based on the revalued carrying amount of the asset (the depreciation charged to the profit and loss account) and depreciation based on the asset’s original cost is transferred from the revaluation surplus to retained earnings.

Depreciation is charged on straight line basis over the estimated useful lives of the fixed assets concerned. The principal annual rates used for this purpose are:-

Buildings 5% Vehicles 25% Furniture and equipment 20% The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at

each balance sheet date.

An asset’s carrying amount is written down immediately to its estimated recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are included in the profit and loss account. On disposal of revalued assets, amounts in the revaluation reserve relating to that asset are transferred to retained earnings.



32

Accounting policies (continued) (g) Financial assets The Group classifies its financial assets in the following categories: loans and receivables, held-

to-maturity financial assets, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates such designation at every reporting date: (i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

(ii) Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

(iii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Purchases and sales of investments are recognised on the trade date, which is the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available for-sale financial assets are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the profit and loss account as gains and losses from investment securities. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions and to reflect the issuer’s specific circumstances.



33

Accounting policies (continued) (g) Financial assets (continued)

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the profit and loss account.

(h) Accounting for leases Leases of property, plant and equipment where the Group assumes substantially all the risks

and rewards of ownership are classified as finance leases. Assets acquired under finance leases are capitalised at the inception of the lease at the lower of their fair value and the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in non-current liabilities. The interest element of the finance charge is charged to the profit and loss account over the lease period. Property, plant and equipment acquired under finance leases is depreciated over the estimated useful life of the asset.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the profit and loss account on a straight-line basis over the period of the lease.

(i) Inventories Inventories are stated in the balance sheet at the lower of cost and net realisable value. Cost is

determined using the weighted average method and includes direct materials and labour costs and also those overheads that have been incurred in bringing the inventories to their present location and condition. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. A provision is made for excess, or slow moving and obsolete items.

(j) Receivables Receivables are recognised initially at fair value and subsequently measured at amortised cost

using the effective interest method. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the profit and loss account.



34


(k) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-

term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities on the balance sheet

(l) Employee benefits (i) Retirement benefit obligations Some of the Group’s employees are on fixed term contracts and are entitled to end of

contract benefits. Provision is made for past service on the basis of contract terms. Some employees within the Group are on defined contributory schemes. The costs relating to such schemes are charged to profit and loss account as incurred.

The Group and all its employees also contribute to the National Pension Scheme Authority which is a defined contribution scheme.

The Group’s contributions to the defined contribution schemes are charged to the profit and

loss account in the year to which they relate. The liability recognised in the balance sheet in respect of defined benefit pension plans is

the present value of the defined benefit obligation at the balance sheet date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

(m) Income tax Income tax expense is the aggregate of the charge to the profit and loss account in respect of

current income tax and deferred income tax.

Current income tax is the amount of income tax payable on the taxable profit for the year determined in accordance with the relevant tax legislation.

Deferred income tax is provided in full, using the liability method, on all temporary differences

arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. However, if the deferred income tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.



35


(n) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method; any differences between proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss account over the period of the borrowings. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(o) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events for which it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and reliable estimate of the amount of the obligation can be made.

(p) Grants

Grants are recognised when there is reasonable assurance that the entity will comply with

conditions relating to the grant and that the grant will be received. Grants that compensate the

group for expenses incurred are recognised as revenue in the income statement on a systematic basis in the same period in which the expenses are incurred.


36

Notes to the consolidated financial statements 1 Financial risk management The Group’s activities expose it to a variety of financial risks, including credit risk and the effects

of changes in equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance.

Risk management is carried out by the Investment Department under policies approved by the board of directors. The board provides written principles for overall risk management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, and investing excess liquidity. Market risk The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities . Credit risk The Group has no significant concentrations of credit risk. It has policies in place to ensure that sales are made to customers with an appropriate credit history. The Group also has policies that limit the amount of credit exposure to any financial institution.

2 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and

other factors, including experience of future events that are believed to be reasonable under the circumstances.

Property, plant and equipment Critical estimates are made by the directors in determining depreciation rates for property, plant and equipment. The rates used are set out in accounting policy (f) above. Receivables Critical estimates are made by the directors in determining the recoverable amount of impaired receivables.

Retirement benefit obligations Critical assumptions are made in determining the present value of retirement benefit obligations. These assumptions are set out in note 25.

Valuation of equity instruments Critical assumptions and estimates are made in determining the fair value of the Group’s equity instruments. These assumptions are set out in Note 15.



37

Notes to the consolidated financial statements (continued) 3 Segment reporting

Segment information is presented in respect of the Group’s business segments. This format is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis. The Group does not operate in more than one geographic segment. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred to acquire segment assets that are expected to be used for more than one period.

The segment results for the continuing operations for the year ended 30 June 2006 were as follows:

Investment holdings

Lime mining

Group

Income 26,959 73,759 100,718 Other income 263 54 317 27,222 73,813 101,035 Segment expenditure (68,260) (90,989) (159,249)

Operating loss (41,038) (17,176)

(58,214)

The segment results for the Group for the year ended 30 June 2005 were as follows

Investment holdings

Lime mining

Group

Income 164,811 84,180 248,991 Other income 146 61 207 164,957 84,241 249,198 Segment expenditure (79,805) (77,517) (157,322)

Operating profit 85,152 6,724

91,876

The segment assets and liabilities and cash flows as at 30 June 2006 were as follows

Investment

holdings Lime

mining

Segment assets 164,978 49,056

Segment liabilities 1,947,988 41,871



38

Notes to the consolidated financial statements (continued) 3 Segment reporting (continued)

Investment

holdings Lime

mining Cash flows(used in)/ from operating activities ( 8,914 ) 2,112 Cash flows used in investing activities (77,455) (2,753) Cash flows from/ (used in) financing activities 55,315 (4,562) Capital expenditure 1,968 2,144

The segment assets and liabilities and cash flows as at 30 June 2005 were as follows

Investment

holdings

Lime mining

Segment assets 692,255 51,569

Segment liabilities 1,284,616 30,271

Investment

holdings Lime

mining Cash flows from/(used in) operating activities 122,901 2,413 Cash flows from/(used in) investing activities 4,822 (1,100) Cash flows(used in)/ from financing activities (109,531) (2,199) Capital expenditure 2,775 1,160

Segment assets comprise primarily property, plant and equipment, intangible assets,

inventories, receivables and operating cash. They exclude deferred tax assets and investments.

Segment liabilities comprise operating liabilities. They exclude current and deferred tax

and corporate borrowings. Capital expenditure comprises additions to property, plant and equipment.



39

Notes to the consolidated financial statements (continued) 4 Prior year adjustment In the year ended 30 June 2005 and other prior periods, the Group did not recognise its share

of profit of its associates in accordance with IAS 28. Dividend income received by the holding company from associates was included as part of group revenue. From 2006 the Group has started accounting for associates in accordance with IAS 28. Accordingly, the financial statements for the earliest period presented have been restated. The effect of the restatement is as follows:

Investment

in associates

Retained earnings

Effects on the financial year ended 30 June 2005 - Group’s share of profit of associates 70,527 (70,527) - Dividend income from associates included in group revenue (21,577) 21,577 48,950 (48,950) Effects on periods prior to the year ended 30 June 2005 - Group’s share of profit of associates 129,022 (129,022) Total effect of prior period adjustment 177,972 (177,972)

5 Operating (loss)/profit The following items have been charged/(credited) in arriving at operating profit from continuing

operations: Group

2006 2005 Depreciation 3,904 3,572 Auditors’ remuneration 263 305 Directors’ emoluments 368 320 Employee expenses 26,467 22,769 Other administration expenses 115,613 103,875 Environmental expenses (Note 11) 12,634 18,355 Grants (12,178) (13,703) Proceeds from house sales (5,193) (1,388)



40

Notes to the consolidated financial statements (continued) 6 Net finance income Group 2006 2005 Interest expense (4,494) - Interest income 525 663 Net foreign exchange gains 221,960 31,407 Net finance income 217,991 32,070

7 Income tax expense Group 2006 2005 Continuing operations Current income tax 602 7,045 Deferred income tax charge(note 24) 42,527 2,065 Income tax expense 43,129 9,110 Tax charge/(credit) from discontinued operation 3 (52) Income tax expense 43,132 9,058 The tax on the Group’s profit before income tax differs from the theoretical amount that would

arise using the statutory income tax rate as follows: 2006 2005 Profit before income tax 503,675 194,473 Less Share of post tax profits from associates (343,898) (70,527) 159,777 123,946 Tax calculated at rates applicable to profits - 35%

(2005 - 35%) (55,922) (43,362)

Tax effect of: Income/(expenses) not deductible for tax purposes 253 (689) Utilisation of previously unrecognised tax losses 12,540 34,826 Tax rate difference on export sales - 115 Income tax expense (43,129) (9,110)

Current income tax movement in the balance sheet Group Company 2006 2005 2006 2005 At start of the year 5,092 2,829 2,004 1,919 Tax charge for the period 602 7,045 411 3,174 Tax paid (4,982) (4,782) (1,703) (3,089) Tax payable 712 5,092 712 2,004



41

Notes to the consolidated financial statements (continued)

8 Earnings per share Basic earn ings per share are calculated by dividing the profit attributable to equity holders of

the Company by the weighted average number of ordinary shares in issue during the year.

2006 2005

Profit attributable to equity holders of the group (K millions) from continuing operations

460,546

185,363

Profit/(loss) attributable to equity holders of the Company from discontinued operations

(785)

(5,542 )

Weighted average number of ordinary shares in issue (millions) 89 89 Basic earnings per share from continuing operations 5,175 2,083

Basic earnings/(loss) per share from discontinued operations (9) (62)

Basic earnings per share (K) 5,166 2,021

There were no potentially dilutive shares outstanding at 30 June 2006 or 2005. Diluted earnings per share are therefore the same as basic earnings per share.

9 Dividends per share

No dividends were declared in respect of the year ended 30 June 2006 (2005 : nil )



42


10 Property, plant and equipment

Buildings

Plant, equipment furniture &

software

Work in progress

Total (a) Group Year ended 30 June 2005 Cost or valuation Opening net book amount 4,521 23,187 52,912 80,620 Additions 17 6,344 36,167 42,528 Revaluation 807 - - 807 Transfers from WIP 621 4,933 (5,554) - Disposals - (10) - (10) Depreciation charge (183) (9,955) - (10,138) Closing net book amount 5,783 24,499 83,525 113,807 At 30 June 2005 Cost or valuation 6,896 53,513 83,525 143,934 Accumulated depreciation 1,113 29,014 - 30,127 Net book amount 5,783 24,499 83,525 113,807

Year ended 30 June 2006 Opening net book amount 5,783 24,499 83,525 113,807 Additions 72 2,647 23,774 26,493 Transfers from WIP 11,841 46,488 (58,329) - Disposals - (144) - (144) Depreciation charge (96) (3,808) - (3,904) Assets disposed with discontinued

operation (14,916) (60,262) (47,657) (122,835)

Closing net book amount 2,684 9,420 1,313 13,417 At 30 June 2006 Cost or valuation 3,367 27,040 1,313 31,720 Accumulated depreciation (683) (17,620) - (18,303) Net book amount 2,684 9,420 1,313 13,417



43

10 Property, plant, and equipment (continued) (b) Company

Buildings Plant,

equipment furniture &

software

Work in progress

Total Year ended 30 June 2005 Cost or valuation Opening net book amount 848 2,319 522 3,689 Additions 17 1,793 158 1,968 Revaluation 807 - - 807 Transfers from WIP 621 (621) - Disposals - (10) - (10) Depreciation charge (28) (913) - (941) Closing net book amount 2,265 3,189 59 5,513 Year ended 30 June 2006 Opening net book amount 2,265 3,189 59 5,513 Reclassification Additions 73 542 - 615 Transfers from WIP - 18 (18) - Depreciation charge (49) (1,114) - (1,163) Closing net book amount 2,289 2,635 41 4,965

At 30 June 2005 Cost or valuation 2,328 5,256 59 7,643 Accumulated depreciation (63) (2,067) (2,130) - Net book amount 2,265 3,189 59 5,513

At 30 June 2006 Cost or valuation 2,400 5,808 41 8,249 Accumulated depreciation (111) (3,173) - (3,284) Net book amount 2,289 2,635 41 4,965

Buildings were last revalued during 2004, by the Government Valuation Department. Valuations

were made on the basis of the open market value. The book values of the properties were adjusted to the revaluations and the resultant surplus net of deferred income tax was credited to the revaluation surplus in shareholders’ equity.

The register showing the details of property, as required by section 193 of the Zambia

Companies Act, is available during business hours at the registered office of the Company.



44

Notes to the consolidated financial statements (continued) 11 Environmental expenses

Environmental expenses represent expenditures incurred in respect of meeting environmental remedial obligations arising from the operations of ZCCM Limited.The expenditure is financed through a loan from the World Bank and Nordic Development Fund as well as through internally generated funds.

Group

2006 2005 Tailing dumps 471 1,574 Resettlement Act expenditure 643 278 Kabwe environmental expenses 214 182 Consultancy 8,535 16,293 Hazardous chemicals 10 28 Sundry remedial works 2,761 -

12,634

18,355

12 Discontinued Operations

On 4 May 2005, the Government of the Republic of Zambia announced that ownership and management of AHC Mining Municipal Services Limited (“AHC”), the Group’s entire Municipal Division, would be eventually taken over by Nkana Water & Sewerage Company Limited (“NWSC”) on the 31 December 2005, under a deed of gift. An analysis of the result of discontinued operations is as follows:-

2006 2005 Revenue 19,823 38,604 Expenses (11,904) (44,094) Profit/(loss) before tax of discontinued operation 7,919 (5,490) Tax expense (3) (52) Profit/(loss) after tax of discontinued operations 7,916 (5,542)



The following table summarises the carrying value of assets and liabilities of AHC Mining Municipal Services Limited (“AHC” at the date of disposal):

Assets Property, plant and equipment 117,616 Accounts receivable and prepayments 5,156

Inventory 1,547 Cash and cash equivalents 62 Total assets 124,381 Liabilities Borrowings 41,287 Grants 33,933 Accounts payable 35,130 Deferred income tax 5,330 Total liabilities 115,680 Net assets 8,701

Net assets disposed 8,701 Cash proceeds - Loss on disposal (8,701)

45Report of the Directors and Financial Statements for the year ended 30th June 2006


46


13 Investment in subsidiaries The Group’s interest in its subsidiaries, all of which are unlisted were as foll ows: Company Country of % interest 2006 2005

incorporation held Ndola Lime Company Limited Zambia 100 12 12 ZAL Holdings Ltd (Liquidation) United Kingdom 100 1 1 ZCCM(UK) Ltd in Liquidation United Kingdom 100 1 1 AHC Municipal Services Zambia - 6

14 20

The holding Company’s investment in its subsidiaries, which were previously stated at cost, were measured at fair value by an independent third party using the discounted cash flow technique. The resultant fair value gain was credited a non distributable reserve.

14 Investment in associates 2006 2005 As previously stated 528,763 350,791 Prior year adjustment to periods prior to 30 June 2005 ( Note 4) - 129,022 Reversal of 2005 dividend income from associate included in 2005

consolidated profit and loss

-

(21,577) Share of profit for the year ; - share of profit for the year 349,819 92,104 - dividend (5,921) (21,577)

- net share of profit for the year 343,898 70,527 At end of year 872,661 528,763



47

Notes to the consolidated financial statements (continued) 14 Investment in associates (continued)

The Group’s share of the profit or loss of its associates has been recognised in the Group’s profit and loss account. Distributions received from associates, in the form of dividends have reduced the carrying amount of the investment.

15 Available for sale financial assets Group Company 2006 2005 2006 2005 At start of year 19,531 19,531 19,531 19,531 Acquisition 121,482 - 121,482 - At end of year 141,013 19,531 141,013 19,531

Country of % interest

held incorporation 2006 2005

Chibuluma Mines Plc Zambia 15 15 NFC Africa Mining Plc Zambia 15 15 Luanshya Copper Mines Plc Zambia 15 15 Chambishi Metals Plc Zambia 10 10 Mopani Copper Mines Plc Zambia 10 10 Equinox (acquisition) Canada 5 -

The investments are being carried at cost because there is no active market for the investments. None of the financial assets is impaired.

16 Investment securities - held to maturity

The movement in investments in government securities is as follows:

Group Company

2006 2005 2006 2005 At start of year 43,778 29,141 43,778 29,141 Additions 38,316 14,637 38,316 14,637

At end of year 82,094 43,778 82,094 43,778



48

Notes to the consolidated financial statements (continued) 17 Non-current receivables and prepayments

Group Company

2006 2005 2006 2005 Non-current receivables - 18,987 - 18,987

The non current receivables related to the privatisation revenue receivable from Mopani

Copper Mines. 18 Inventories Group Company 2006 2005 2006 2005 Raw materials 3,721 4,484 - - Work in progress 9,670 571 - - Finished goods 12 16,763 - - 13,403 21,818 - -

19 Receivables and prepayments Group Company 2006 2005 2006 2005 Trade receivables 24,158 14,984 - - Other receivables 76,250 234,297 76,250 221,577 100,408 249,281 76,250 221,577

Other receivables include US $ 4.25 million due from Lunsemfwa hydro power station. This relates to the balance of proceeds from the sale of Kabwe Power Station.

20 Cash and cash equivalents Group Company 2006 2005 2006 2005 Cash at bank and in hand 1,669 38,857 1,669 32,723

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

Group 2006 2005 Cash and bank balances as above 1,669 38,857 Bank overdrafts (note 23) (4,325) (3,088) (2,656) 35,769



49

Notes to the consolidated financial statements (continued) 21 Payables and accrued expenses Group Company 2006 2005 2006 2005 Trade payables 25,355 17,516 - - Other payables 72,182 121,078 72,182 89,566 97,537 138,594 72,182 89,566

The carrying amount of the payables and accrued expenses approximate to their values 22 Share capital 2006 2005 Authorised 90,000,000 ordinary shares of K10 each 900,000,000 900,000,000

Issued and fully paid 89,296,428 ordinary shares of K10 892,964,280 892,964,280

23 Borrowings Group Company 2006 2005 2006 2005 The borrowings are made up as follows: Non-current ZESCO loan 64,957 85,192 64,957 85,192 GRZ Loan 642,076 842,091 642,076 842,091 GRZ/World Bank Loan 206,474 309,799 206,474 253,879 ERIPTA Loan 12,321 12,321 12,321 12,321 Subordinated loan 865,445 865,445 865,445 865,445 1,791,273 2,114,848 1,791,273 2,058,928 Finance leases - 1,783 - - 1,791,273 2,116,631 1,791,273 2,058,928 Current Bank overdraft 4,325 3,088 - - Bank borrowings 69,918 - 69,918 - 74,243 3,088 69,918 - Finance leases 1,238 1,707 - - 75,481 4,795 69,918 -

Total borrowings 1,866,754 2,121,426 1,861,191 2,058,928



50

Notes to the consolidated financial statements (continued) 23 Borrowings (continued)

The terms of the long term borrowings are as detailed below: ZESCO loan

The loan arises from the assumption by ZCCM-IH (under an agreement dated 28 February 2002 between ZCCM-IH, ZESCO and CEC) of debts due from Ramcoz .

GRZ loan

The GRZ loan represents amounts received from the Government to enable ZCCM-IH discharge pre-privatisation liabilities. All such receipts from the Government are credited to the loan account pending a decision by the Government regarding the final disposal of these balances.

GRZ/World Bank loans Under the protocol signed on 14 January 1999, between GRZ and the Company, an amount of up to US$68.5 million became available to the Company for the purpose of retrenching surplus employees and meeting environmental remedial obligations. This amount was initially received by GRZ from IDA and on lent to the Company.

Economic Recovery and Investment Promotion Technical Assistance (ERIPTA) loan

The Economic Recovery and Investment Promotion Technical Assistance (ERIPTA) loan was supposed to be taken over by the Government in 2001 and arises from the period prior to the disposal of ZCCM’s mining assets. This loan was intended to assist the Government in carrying out its economic reform under its Privatisation and Industrial Reform Programme and Economic Programme. The loan has not been removed from ZCCM-IH books due to the absence of an agreement between GRZ, ZCCM-IH and the financing partner regarding the takeover of the loan by GRZ.

Subordinated loan

Since 1983 amounts due to certain of the company’s lenders became payable to GRZ following arrangements between GRZ and the Governments of the countries in which those lenders are situated. These amounts described as the Paris Club loans were reported in the financial statements of ZCCM Limited up to 31 March 1998 as long term borrowings and as deferred liabilities. In February 1999, the Company and GRZ entered into an agreement whereby the Paris Club loans totalling US $311.3 million were consolidated into one loan denominated in Kwacha due to GRZ. Previously the loans were denominated in US Dollars, French Francs and Pounds Sterling. The agreement with GRZ provided for the subordination of the new loan to all other creditors of the Company. Following agreements with GRZ, no interest has been accrued on the loan. Accordingly at 30 June 2006 an amount of K865, 445 million (30 June 2005: K865,445 million) was separately reported as a subordinated loan..



51

Notes to the consolidated financial statements (continued) 23 Borrowings (continued)

Finance Leases The present value of finance lease liabilities may be analysed as: Group 2006 2005 Not later than 1 year 1,238 1,707 Later than 1 year and not later than 5 years - 1,783 1,238 3,490

24 Deferred income tax Deferred income tax is calculated using the enacted income tax rate of 35% (2005: 35%). The

movement on the deferred income tax account is as follows: Group Company 2006 2005 2006 2005 At start of year 7,687 6,084 282 - Charge to profit and loss account (note 7) 42,527 1,321 51,925 -

Charge to reserves - 282 - 282 At end of year 50,214 7,687 52,207 282

The above amounts are disclosed in the balance sheet as follows : Group Company 2006 2005 2006 2005

Deferred income tax assets 10,620 - 8,627 - Deferred income tax liabilities (60,834) (7,687) (60,834) (282)

(50,214) (7,687) (52,207) (282)

Group deferred income tax assets and liabilities are attributable to the following items : Group Company 2006 2005 2006 2005 Deferred income tax liabilities Property, plant and equipment - on historical basis (645) (7,687) (645) (282) Unrealised exchange gains (60,189) - (60,189) -

Total deferred income tax liabilities (60,834) (7,687) (60,834) (282) Deferred income tax assets Tax losses carried forward 10,620 8,627 - Net deferred income tax liability (50,214) (7,687) (52,207) (282)



52

Notes to the consolidated financial statements (continued) 25 Retirement benefit obligations The amounts recognised in the balance sheet are determined as follows: Company 2006 2005 Present value of retirement benefits 5,755 - Liability in the balance sheet 5,755 -

This represents the statutory obligation for retirement benefits for permanent and pensionable

employees. Group 2006 2005 Current service cost 5,755 - Net charge for the year included in employee benefit expense 5,755 - Contributions paid - - Movement in the liability in the balance sheet 5,755 -

The principal actuarial assumptions used were as follows: 2006 2005 % % - discount rate 14.73 - - - future pension increases 11.5% -

26 Provisions for liabilities and charges

The year end provision represents a restoration, rehabilitation and environmental provision for Ndola Lime Company Limited. The provision represents the net present value of the best estimate of the expenditure required to settle the obligations to rehabilitate environmental disturbances caused by mining operations. These costs are expected to be incurred over a period in excess of 20 years from the balance sheet date.

At start of year 2,491 Additional provisions 21,218 Balance 23,709 Less AHC Restructuring provision (13,806) 9,903 Disclosed as : Current portion 7,972 Non-current portion 1,931 9,903



53

Notes to the consolidated financial statements (continued) 27 Cash generated from operations Reconciliation of profit before income tax to cash generated from operations: Group 2006 2005 Profit for the year 503,675 194,421 Adjustments: Depreciation 3,904 10,138 Environmental provision charge 7,412 - Share of profit from associates (343,898) (70,527) Exchange differences - 31,947 Employee benefit provision charge 5,755 - Changes in working capital: Decrease in non current receivables 21,611 82,416 Decrease/(increase) in inventories 8,419 (13,638) Decrease/(increase) in receivables 148,873 (94,665) Decrease in current payables (31,947) 11,293 (Decrease)/increase in long term payables - 40 Income tax paid (4,982) (4,782) Interest income (525) 663 Interest expense 4,494 - Net operating cash flows from discontinued operation 17,444 724 Net cash flow from operating activities 340,235 148,030 28 Related party transactions The Group is controlled by the Government of the Republic of Zambia through the Ministry

of Finance and National Planning which owns 88% of the Company’s shares. No material sales or purchases of goods or services occurred with related parties during the year under review

Key management compensation 2006 2005 Salaries and other short-term employment benefits 4,770 3,942 Other long-term benefits 1,247 986 6,017 4,928



54

Notes to the consolidated financial statements (continued) 29 Contingent liabilities The Company is defending a number of cases involving ZCCM’s former employees and

suppliers. Due to a large number of cases there is likelihood that some could involve a material liability. However, for some of these cases the quantum of this can not be determined at their respective stages in the litigation processes. The Company is yet to make a full assessment of the total expenditure on environmental remedial obligations which may have to be incurred in respect of the Company’s past operations. However, in the conditions precedent to the privatisation sales agreements, the Government has given an undertaking to fund the residual environmental liabilities relating to the Company’s past operations.

30 Commitments There was no capital expenditure contracted for at the balance sheet date but not recognised in

the financial statements. 31 Deferred grant Group Company 2006 2005 2006 2005 At 1 July 2005 25,503 14,526 2,518 2,518 Grant received 12,718 40,702 12,718 13,703 Amortisation (37,681) (29,725) (14,696) (13,703) At 30 June 2006 - 25,503 - 2,518

The grant relates to funds made available by the World Bank for the purpose of meeting environmental remedial obligations.



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