THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any
doubt about the Offer or the action you should take, you are recommended immediately to seek your own financial
advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised
under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from
another appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all your UCM Shares, please forward this document and the reply-paid
envelope but not the personalised form of acceptance at once to the purchaser or transferee or to the
stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser
or transferee. However, such documents should not be forwarded, transmitted or distributed in or into the
United States, Canada, or into any other jurisdiction if to do so would constitute a violation of the relevant laws
of such other jurisdiction. If you have sold or otherwise transferred only part of your UCM Shares you should
retain these documents.
Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is
acting exclusively for Imerys UK and Imerys S.A. and no-one else in connection with the Offer and will not be
responsible to anyone other than Imerys UK and Imerys S.A. for providing the protections afforded to clients of
Rothschild nor for providing advice in relation to the Offer or any other matters referred to in this document.
Ernst & Young, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is
acting exclusively for UCM and no-one else in connection with the Offer and will not be responsible to anyone
other than UCM for providing the protections afforded to clients of Ernst & Young nor for providing advice in
relation to the Offer or any other matters referred to in this document.
This document should be read in conjunction with the accompanying Form of Acceptance. If you are a CREST
sponsored member, you should refer to your CREST sponsor as only your CREST sponsor will be able to send the
necessary TTE Instructions to CRESTCo to enable you to accept the Offer.


Recommended Cash Offer
by

Imerys UK Limited
(a wholly-owned subsidiary of Imerys S.A.)
for

UCM Group PLC
Your Attention is drawn to the letter from the chairman of UCM containing the unanimous recommendation of the
UCM Directors to accept the Offer, which is set out on pages 4 to 8 of this document.
The procedure for acceptance of the Offer is set out in paragraph 13 of Part II of this document and, in respect
of certificated UCM Shares, in the accompanying Form of Acceptance. Acceptances in respect of certificated
UCM Shares utilising the enclosed Form of Acceptance should be despatched by post or (during normal business
hours only) by hand to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU as soon as possible and, in any event, so as to be received by Capita Registrars not later than
1.00 p.m. on 15 March 2007.
Acceptances in respect of uncertificated UCM Shares should be made electronically through CREST so that the
TTE instruction settles not later than 1.00 p.m. on 15 March 2007 by following the procedure set out in
paragraph 13 of Part II and Part D of Appendix I to this document.
This Offer is not being made, directly or indirectly, in, into or from, or by use of the mails of, or by any means
or instrumentality (including, without limitation, facsimile transmission, telex, telephone or email) of interstate or
foreign commerce of, or by any facility of a national securities exchange of, nor is it being made in, into or
from, the United States, Canada or any other jurisdiction where to do so would constitute a violation of the
relevant laws of such jurisdiction and the Offer will not be capable of acceptance by any such use, means,
instrumentality or facilities. Accordingly, neither this document nor the accompanying Form of Acceptance is
being nor may be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed or sent, in whole
or in part, in, into or from, the United States, Canada or any other jurisdiction if to do so would constitute a
violation of the relevant laws of such jurisdiction and persons receiving such documents (including custodians,
nominees and trustees) must not directly or indirectly mail, transmit or otherwise forward, distribute or send this
document or the Form of Acceptance in, into or from any such jurisdiction as to do so may invalidate any
purported acceptance of the Offer.
The availability of the Offer to UCM Shareholders who are not resident in the United Kingdom may be affected by
the laws of the jurisdiction in which they are resident. Persons who are not resident in the United Kingdom should
inform themselves about, and observe, any applicable legal or regulatory requirements of those jurisdictions.
Any person (including, without limitation, any nominee, trustee or custodian) who would, or otherwise intends to, or
who may have a contractual or legal obligation to, forward this document and/or any related document to any
jurisdiction outside the United Kingdom should read paragraph 12 of Part II and paragraph 6 of Part B of
Appendix I to this document before taking action.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code, if a person is, or becomes, ‘‘interested’’ (directly or indirectly)
in one per cent. or more of any class of ‘‘relevant securities’’ of UCM, all ‘‘dealings’’ in any ‘‘relevant securities’’
of that company (including by means of an option in respect of, or a derivative referenced to, any such ‘‘relevant
securities’’) must be publicly disclosed by no later than 3.30 p.m. on the London business day following the date
of the relevant transaction. This requirement will continue until the date on which the Offer becomes, or is
declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the ‘‘offer period’’
otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal
or informal, to acquire an ‘‘interest’’ in ‘‘relevant securities’’ of UCM, they will be deemed to be a single person
for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all ‘‘dealings’’ in ‘‘relevant securities’’ of UCM by Imerys UK or
UCM, or by any of their respective ‘‘associates’’, must be disclosed by no later than 12.00 noon on the London
business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose ‘‘relevant securities’’ ‘‘dealings’’ should be disclosed,
and the number of such securities in issue, can be found on the Takeover Panel’s website at
www.thetakeoverpanel.org.uk.
‘‘Interests in securities’’ arise, in summary, when a person has long economic exposure, whether conditional or
absolute, to changes in the price of securities. In particular, a person will be treated as having an ‘‘interest’’ by
virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced
to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Panel’s website. If you are in
any doubt as to whether or not you are required to disclose a ‘‘dealing’’ under Rule 8, you should consult the
Panel.
If you are in any doubt as to the application of Rule 8 to you, please contact an independent financial adviser
authorised under the Financial Services and Markets Act 2000, consult the Panel’s website at
www.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0) 20 7638 0129; fax number +44
(0) 20 7236 7013.




2
CONTENTS
PAGE
Part I
4
Letter of recommendation from the Chairman of UCM Group PLC
Part II
Letter from the Board of Imerys UK Limited
1. Introduction 9
2. The Offer 9
3. Background to and reasons for the Offer 10
4. Irrevocable undertakings 10
5. Information on UCM 10
6. Information on Imerys UK and Imerys S.A. 11
7. Directors and employees 11
8. UCM Share Option Scheme 11
9. Financing the Offer 12
10. Inducement fee 12
11. Compulsory acquisition and de-listing 12
12. Overseas Shareholders 12
13. Procedure for acceptance of the Offer 13
14. Settlement 15
15. General 16
16. Taxation 16
17. Further information 17
18. Action to be taken 17
APPENDIX I
Conditions to and further terms of the Offer
PART A: Conditions to the Offer 18
PART B: Further terms of the Offer 23
PART C: Forms of Acceptance 34
PART D: Electronic Acceptance 37
APPENDIX II
Financial and other information relating to UCM
PART A: Financial information on the UCM Group 40
Section 1 – UCM Group’s historical financial information for the year ended 41
31 December 2005
Section 2 – UCM Group’s historical financial information for the year ended 71
31 December 2004
Section 3 – UCM Group’s unaudited interim results for the six months ended 92
30 June 2006
PART B: Profit Forecast for the UCM Group for the year ended 31 December 2006 99
APPENDIX III
103
Financial information relating to Imerys S.A.
PART A: Historical financial information extracted from the accounts of Imerys S.A. 103
for the year ended 31 December 2005
PART B: Historical financial information extracted from the Imerys 2006 annual results 187
press release
APPENDIX IV
201
Additional Information
APPENDIX V
211
Definitions




3
PART I
Letter of recommendation from the Chairman of UCM Group PLC

UCM Group PLC
(registered in England and Wales with Company No. 2720770)



JE Gordon (Non-executive Chairman) Registered Office:
JK Brundell (Chief Executive) Doxey Road
M Fookes (Group Finance Director) Stafford
TG Dughan (Executive Director) ST16 1DZ
I Fisher (Non-executive Director)
C Halpern (Non-executive Director)

22 February 2007


To UCM Shareholders and, for information only, to holders of UCM Share Options under the UCM Share
Option Scheme


Dear Shareholder,
Recommended Cash Offer by Imerys UK
It was announced on 15 February 2007 that the boards of UCM and Imerys UK had reached
agreement on the terms and conditions of a recommended cash offer for all of the issued and to be
issued share capital of UCM. The Offer is being made by Imerys UK, a wholly owned indirect
subsidiary of Imerys S.A. I am writing to you to explain why the UCM Board, which has been so
advised by Ernst & Young, considers the terms of the Offer to be fair and reasonable and is
unanimous in recommending Shareholders to accept the Offer.
The Offer is contained in the letter from the board of Imerys UK set out in Part II of this
document.

1. The Offer
The Offer is being made on the following basis:

for each UCM Share 85p in cash
The Offer values the whole of the issued share capital of UCM at approximately £20.3 million. The
Offer Price represents:
a premium of approximately 30.8 per cent. over the closing middle market share price of a
*

UCM Share of 65p on 14 February 2007, the business day before the Announcement; and
a premium of approximately 49.1 per cent. over the average closing middle market share
*

price of a UCM Share of 57p for the twelve months prior to and including 14 February
2007, the business day before the Announcement.
The UCM Shares to be acquired pursuant to the Offer will be acquired by Imerys UK fully paid and
free from all liens, equities, charges and encumbrances and other third party rights or interests and
together with all rights attaching thereto on or after 15 February 2007, including the right to receive
and retain all dividends and other distributions (if any) declared, made or paid by UCM on or after
such date.
Your attention is drawn to the terms and conditions of the Offer set out in Appendix I to this
document and in the accompanying Form of Acceptance. If you are in any doubt about the terms
and conditions of the Offer, you should consult an independent financial adviser without delay.




4
2. Irrevocable undertakings to accept the Offer
Imerys UK has received irrevocable undertakings:
to accept, or to procure or use all reasonable endeavours to procure acceptance of, the Offer
*

from the UCM Directors and their related parties, in respect of beneficial holdings
amounting, in aggregate, to 2,259,265 UCM Shares, representing approximately 9.4 per cent.
of the existing issued share capital of UCM; and
to accept, or to procure acceptance of the Offer from two former directors of UCM and
*

their related parties, in respect of, in aggregate, 1,829,810 UCM Shares, representing
approximately 7.6 per cent. of the existing issued share capital of UCM.
All of these undertakings continue to be binding even in the event of a competing offer being made
for UCM unless and until the Offer lapses or is withdrawn.
Imerys UK has also received irrevocable undertakings to accept, or procure or use all reasonable or
best endeavours to procure the acceptance of, the Offer in respect of, in aggregate, a further
6,099,879 UCM Shares, representing approximately 25.5 per cent. of the existing issued share capital
of UCM. These undertakings cease to be binding in the event that a competing offer is made for
UCM where the value of such offer is not less than ten per cent. higher than the Offer Price, or if
the Offer lapses or is withdrawn. In addition, Imerys UK has received irrevocable undertakings to
accept the Offer in respect of, in aggregate, a further 1,000,000 UCM Shares, representing
approximately 4.2 per cent. of the existing issued share capital of UCM. These undertakings cease to
be binding in the event that a competing offer is made for UCM where the value of such offer is not
less than five per cent. higher than the Offer Price, or if the Offer lapses or is withdrawn.
In aggregate therefore, Imerys UK has received irrevocable undertakings to accept, or procure or use
all reasonable or best endeavours to procure the acceptance of, the Offer in respect of 11,188,954
UCM Shares, representing approximately 46.8 per cent. of UCM’s existing issued share capital.
Further details of these irrevocable undertakings to accept the Offer are set out in paragraph 4 of
Appendix IV to this document.

3. Background to and reasons for recommending the Offer
Following the completion of the manufacturing reorganisation and restructuring of the business into
two divisions in 2004 and a number of asset write offs at the end of 2005, the UCM Group has
striven to increase its global market presence in the areas of fused zirconia and electrical grade
magnesia.
During 2005, a range of external influences adversely impacted on the profitability of the UCM
Group.
The Magnesia Division has experienced significant increases in energy costs in the UK and increases
in raw material prices in the US. The Magnesia Division has also experienced difficult market
conditions including increased pricing competition, reduced tonnages, the relocation of a number of
customers’ manufacturing bases and fluctuating exchange rates. Several initiatives were implemented
that have significantly increased productivity. However, the markets continue to prove very
demanding for the Magnesia Division, not least in respect of achieving satisfactory price increases.
In respect of the Zirconia Division, with the exception of the second half of 2005 when certain
customers undertook de-stocking exercises, the Zirconia Division has continued to grow sales on a
global basis in the face of significant increases in raw material costs.
The benefit of the initiatives has been seen in improved trading and profitability during 2006. Whilst
the UCM Board believes that the UCM Group has opportunities for growth, it faces a range of
challenges, including the need to increase personnel resources, if it is to maintain and develop further
the business globally, particularly in the Asia Pacific region. These resources are required for both
R&D and sales and marketing. By its nature, any return on this investment would be in the medium
to long term. Further consideration has also to be given to the present small size of the UCM Group
in the context of the costs of servicing its global business together with the costs of maintaining its
listing on the London market.
In consideration of these factors, the UCM Board appointed Ernst & Young as its advisors to assist
it in a detailed review of the strategic options open to the UCM Group. Around that time, an
expression of interest for the UCM Group was received from another party. Subsequent to this, the
UCM Board instructed its advisors to undertake a formal auction process with a number of bona fide

5
potential offerors. The UCM Board considered a number of proposals both for the UCM Group and
for the trading divisions within the UCM Group and, following detailed negotiations with Imerys
UK, granted a period of exclusivity for Imerys UK to complete its due diligence. The UCM Board
has decided to recommend the Offer, as the UCM Directors believe that it provides the best value to
UCM Shareholders.
In addition, the UCM Board believes that the Imerys Group provides a good fit in terms of its broad
portfolio of minerals, in depth understanding of and presence in global markets for minerals and its
capabilities to support the ongoing development of the UCM Group’s products and activities.
Further information on UCM, Imerys UK and Imerys S.A. is set out in the letter from the Board of
Imerys UK contained in Part II of this document.

4. Inducement fee
As part of the negotiations between UCM and Imerys UK, on 14 February 2007, UCM and Imerys
UK entered into an inducement fee agreement. Pursuant to this agreement, a fee of £203,425
(inclusive of irrecoverable VAT), which amounts to one per cent. of the value of the Offer, is payable
by UCM to Imerys UK if, following the date of the Announcement, either the UCM Directors
withdraw or materially and adversely modify their approval or recommendation of the Offer, or the
Offer lapses or is withdrawn and prior thereto a third party offeror unconnected with Imerys UK
announces an offer, for all or not less than 50 per cent. of the issued share capital of UCM, and
such alternative offer subsequently becomes or is declared unconditional in all respects.
Further details of the inducement fee agreement are set out in paragraph 7 of Appendix IV to this
document.

5. Profit forecast, current trading and prospects
On 21 September 2006, UCM announced the unaudited interim results of the UCM Group for the
six months ended 30 June 2006. For that period, UCM reported turnover of £19.6 million (2005:
£17.5 million) and a profit before taxation of £1.35 million (2005: £1.16 million). As at 30 June 2006,
UCM Group had net assets of £13.5 million (2005: £14.5 million) including net debt of £8.9 million
(2005: £10.1 million) and a pension deficit included on the balance sheet of £3.4 million (2005: £4.0
million).
In the interim results statement, it was reported that prospects for the UCM Group remain positive
for the second half of 2006 and this is reflected in the profit forecast (technically termed a ‘‘profit
estimate’’ given that it will be issued after the year end) reported on in Part B of Appendix II to this
document which states that the UCM Directors believe that, in the absence of unforeseen
circumstances, the profit before tax and exceptional items for the UCM Group for the year ended 31
December 2006 will be not less than £1.9 million. Since then, trading has continued to be satisfactory
and in line with the expectations of the Board. The basis and assumptions underlying the profit
forecast are set out in Part B of Appendix II to this document.
On 4 January 2007, UCM announced that Stafford Borough Council had resolved to grant outline
planning permission for residential development on its 20 acre Stafford site. The grant of planning
permission remains subject to the completion of a legal agreement made under Section 106 of the
Planning Act and to conditions attached to the permission. As notified to Shareholders, the UCM
Group has no current plans to develop the site. However, it should be noted that the Company’s
property advisers have confirmed to the UCM Directors that the actual developable area of the 20
acre Stafford site is approximately 5.5 acres.

6. Management and employees
Imerys UK has given assurances to the UCM Board that the existing employment rights, including
pension rights, of all of the employees and management of the UCM Group will be fully
safeguarded.
The other non-executive directors and I have agreed to tender our resignations, immediately upon the
Offer becoming or being declared unconditional in all respects.
Details of the contractual arrangements made or proposed in relation to the UCM Directors’ service
contracts or terms of appointment are set out in paragraph 6 of Appendix IV to this document.
Details of the future plans of Imerys UK for the UCM Group are set out in paragraph 7 of Part II
of this document. On the basis of the information provided to them by Imerys UK, as set out in

6
Part II of this document, the UCM Directors are not aware that Imerys UK’s current plans involve
any material change to the conditions of employment of the UCM Group, nor any changes to the
principal locations of UCM, subject to the result of Imerys UK’s review of the potential development
of UCM’s Stafford site.


7. UCM Share Option Scheme
The Offer extends to any UCM Shares which are unconditionally allotted or issued prior to the date
on which the Offer closes (or such earlier date as Imerys UK may, subject to the City Code or with
the consent of the Panel, determine) including any which are so unconditionally allotted or issued
pursuant to the exercise of options under the UCM Share Option Scheme.

All of the UCM Share Options were granted with an option price in excess of the Offer Price. Imerys
UK will not therefore be making any special proposals to the holders of options under the UCM
Share Option Scheme.


8. United Kingdom taxation
In deciding whether to accept the Offer, UCM Shareholders should take account of their own
individual circumstances, particularly their tax position. Your attention is drawn to paragraph 16 of
the letter from the board of Imerys UK contained in Part II of this document, which contains a
general guide as to the UK taxation implications for UCM Shareholders who accept the Offer. If you
are in any doubt as to your own tax position, or if you are subject to taxation in any jurisdiction
other than the UK, you should consult an independent professional adviser immediately.


9. Compulsory acquisition, de-listing, cancellation of trading and re-registration
If Imerys UK receives acceptances under the Offer in respect of, or otherwise acquires, 90 per cent.
or more of the UCM Shares to which the Offer relates and not less than nine-tenths of the voting
rights carried by those shares and the Offer becomes or is declared unconditional in all respects,
Imerys UK intends to exercise its rights pursuant to the provisions of Schedule 2 to the Takeovers
Directive (Interim Implementation) Regulations 2006 to acquire compulsorily UCM Shares in respect
of which acceptances have not then been received.

Imerys UK has stated that following the Offer becoming or being declared unconditional in all
respects, it intends to procure that UCM will apply for the cancellation of the listing of the UCM
Shares on the Official List and for cancellation of trading in UCM Shares on the London Stock
Exchange’s market for listed securities. It is anticipated that such cancellation will, subject to the rules
of the London Stock Exchange and the Listing Rules take place no earlier than 20 business days
after Imerys UK, by virtue of acceptances of the Offer has acquired or agreed to acquire 75 per cent.
of the voting rights attached to UCM Shares. De-listing is expected to significantly reduce the liquidity
and marketability of any UCM Shares not acquired under the Offer.

It is also proposed that, following the Offer becoming, or being declared, unconditional in all
respects, and after the UCM Shares are de-listed, UCM will be re-registered as a private company
under the relevant provisions of the Act.


10. Action to be taken
Your attention is drawn to the letter from the board of Imerys UK contained in Part II of this
document, the Appendices to this document and (if your UCM Shares are held in certificated form –
that is, not in CREST) the accompanying Form of Acceptance. The procedure for acceptance of the
Offer is set out in paragraph 13 of Part II of this document and, in respect of certificated UCM
Shares, Part C of Appendix I to this document and the accompanying Form of Acceptance.
Acceptances in respect of uncertificated UCM Shares must be made electronically through CREST by
following the procedure set out in paragraph 13 of Part II of, and Part D of Appendix I to, this
document.

In order to accept the Offer, you should complete and return the enclosed Form of Acceptance in
accordance with the instructions printed thereon, so as to be received as soon as possible, but in any
event no later than 1.00 p.m. on 15 March 2007. A reply paid envelope for use in the UK only is
enclosed for your convenience.

7
11. Recommendation
The UCM Directors, who have been so advised by Ernst & Young, consider the terms of the Offer to be
fair and reasonable. In providing advice to the UCM Directors, Ernst & Young has taken into account
the Directors’ commercial assessments.
Accordingly, the UCM Directors unanimously recommend that UCM Shareholders accept the Offer, as
they have irrevocably undertaken to do, or procure or use all reasonable endeavours to procure to be
done, in respect of beneficial holdings of themselves or their related parties amounting, in aggregate, to
2,259,265 UCM Shares, representing approximately 9.4 per cent. of UCM’s existing ordinary issued
share capital.

Yours faithfully




John Gordon
Non-Executive Chairman




8
PART II
Letter from the Board of Imerys UK Limited
Imerys UK Limited
(registered in England and Wales with Company No. 3674799)

Directors Registered office:
Gerard Buffiere
´ ` Par Moor Centre
Christophe Daulmerie Par Moor Road
Jerome Pecresse
´ˆ Par
Thierry Salmona Cornwall PL24 2SQ
Denis Musson
Bernard Vilain
Richard Bown
22 February 2007

To all UCM Shareholders, and, for information only, to holders of UCM Share Options under the UCM
Share Option Scheme

Dear Shareholder,

Recommended cash offer for all of the issued and to be issued share capital of UCM by Imerys UK

1. Introduction
On 15 February 2007, the boards of Imerys UK and UCM announced that they had reached
agreement on the terms of a recommended cash offer, to be made by Imerys UK, for the entire
issued and to be issued share capital of UCM.
The Offer values each UCM Share at 85 pence and the entire issued share capital of UCM at
approximately £20.3 million.
Your attention is drawn to the letter of recommendation from the Chairman of UCM which is contained
in Part I of this document, which explains why the UCM Directors, who have been so advised by Ernst
& Young, consider the terms of the Offer to be fair and reasonable, and accordingly, unanimously
recommend all UCM Shareholders to accept the Offer, as they have irrevocably undertaken to do, or
procure or use reasonable endeavours to procure to be done, in respect of beneficial holdings of
themselves or their related parties, amounting, in aggregate, to 2,259,265 UCM Shares, representing
approximately 9.4 per cent. of the existing ordinary issued share capital of UCM.

2. The Offer
Under the Offer, which is subject to the terms and Conditions set out below and in Appendix I to
this document and the Form of Acceptance, UCM Shareholders will receive:
85 pence in cash for each UCM Share.
The Offer values the entire issued share capital of UCM at approximately £20.3 million.
The Offer price of 85 pence per UCM Share represents:
a premium of approximately 30.8 per cent. to the closing middle market share price of 65 pence
*

per UCM Share on 14 February 2007, being the last dealing day prior to the Announcement;
and
a premium of approximately 49.1 per cent. to the average closing middle market share price of
*

57 pence per UCM Share for the 12 months prior to and including 14 February 2007.
The Offer extends to all UCM Shares unconditionally allotted or issued and fully paid as at the date
of the Offer and any UCM Shares which are unconditionally allotted or issued and fully paid whilst
the Offer remains open for acceptance (or such earlier date as Imerys UK may, subject to the City
Code, and with the consent of the Panel, decide). The UCM Shares to be acquired by Imerys UK
pursuant to the Offer will be acquired with full title guarantee, fully paid and free from all liens,
equities, charges and encumbrances and other third party rights or interests and together with all
rights now or hereafter attaching thereto, including the right to receive and retain all dividends and

9
other distributions (if any) declared, made or paid hereafter. The Conditions to the Offer are set out
in Appendix I to this document.
There are no agreements to which Imerys UK is a party which relate to the circumstances in which it
may or may not invoke a condition of the Offer.
Your attention is drawn to paragraph 13 of this letter, Part C of Appendix I to this document and the
accompanying Form of Acceptance (in respect of certificated UCM Shares) and Part D of Appendix I to
this document (in respect of uncertificated UCM Shares), which set out the procedures for acceptance of
the Offer.

3. Background to and reasons for the Offer
The board of Imerys UK believes that the Offer will:
allow the combined UCM and Imerys Groups to benefit from technical synergies and a wider
*

product offering to the combined group’s customers;
provide enhanced distribution channels for UCM’s existing product range, particularly in the
*

refractories markets; and
enable UCM more readily to access sources of capital to maximise its future growth potential.
*


Following its acquisition by Imerys UK, UCM will form part of the Imerys Group’s Ceramics,
Refractories, Abrasives & Filtration Business Group.
Imerys UK expects that, following the acquisition, Imerys UK and UCM will review ways to
optimise the strategy of UCM, including, if appropriate, external growth and/or options in relation to
the resolution passed by Stafford Borough Council to grant outline planning permission, subject to
certain conditions, to UCM for the potential development of the Stafford site.

4. Irrevocable undertakings
Imerys UK has received irrevocable undertakings:
to accept, or to procure or use all reasonable endeavours to procure acceptance of, the Offer
*

from the UCM Directors and their related parties, in respect of beneficial holdings amounting,
in aggregate, to 2,259,265 UCM Shares, representing approximately 9.4 per cent. of the existing
issued share capital of UCM; and
to accept, or to procure acceptance of the Offer from two former directors of UCM and their
*

related parties, in respect of, in aggregate, 1,829,810 UCM Shares, representing approximately
7.6 per cent. of the existing issued share capital of UCM.
All of these undertakings continue to be binding even in the event of a competing offer being made
for UCM unless and until the Offer lapses or is withdrawn.
Imerys UK has also received irrevocable undertakings to accept, or procure or use all reasonable or
best endeavours to procure the acceptance of, the Offer in respect of, in aggregate, a further
6,099,879 UCM Shares, representing approximately 25.5 per cent. of the existing issued share capital
of UCM. These undertakings cease to be binding in the event that a competing offer is made for
UCM where the value of such offer is not less than ten per cent. higher than the Offer Price, or if
the Offer lapses or is withdrawn. In addition, Imerys UK has received irrevocable undertakings to
accept the Offer in respect of, in aggregate, a further 1,000,000 UCM Shares, representing
approximately 4.2 per cent. of the existing issued share capital of UCM. These undertakings cease to
be binding in the event that a competing offer is made for UCM where the value of such offer is not
less than five per cent. higher than the Offer Price, or if the Offer lapses or is withdrawn.
In aggregate therefore, Imerys UK has received irrevocable undertakings to accept, or procure or use all
reasonable or best endeavours to procure the acceptance of, the Offer in respect of 11,188,954 UCM
Shares, representing approximately 46.8 per cent. of UCM’s existing issued share capital.
Further details of these irrevocable undertakings to accept the Offer are set out in Appendix IV to
this document.

5. Information on UCM
The principal activities of UCM are the manufacture and distribution of ceramic materials including
zirconia and magnesia.

10
In the audited financial statements of the UCM Group for the financial year ended 31 December
2005, UCM reported turnover of £33.3 million (2004: £32.8 million) and a loss on ordinary activities
before taxation of £9,000 (2004: £2.09 million profit). As at 31 December 2005, UCM Group had net
assets of £12.7 million (2004: £13.8 million).
On 21 September 2006, UCM announced the unaudited interim results of the UCM Group for the
six months ended 30 June 2006. For that period, UCM reported turnover of £19.6 million (2005:
£17.5 million) and a profit before taxation of £1.35 million (2005: £1.16 million). As at 30 June 2006,
the UCM Group had net assets of £13.5 million (2005: £14.5 million) including net debt of £8.9
million (2005: £10.1 million) and a pension deficit included on the balance sheet of £3.4 million (2005:
£4.0 million).
On 4 January 2007, UCM announced that Stafford Borough Council had resolved to grant outline
planning permission for residential development on its 20 acre Stafford site. The grant of planning
permission remains subject to the completion of a legal agreement made under Section 106 of the
Planning Act and to conditions attached to the permission. As notified to Shareholders, the UCM
Group has no current plans to develop the site. However, it should be noted that the Company’s
property advisers have confirmed to the UCM Directors that the actual developable area of the 20
acre Stafford site is approximately 5.5 acres.
Further financial and other information relating to UCM is set out in Appendix II to this document.

6. Information on Imerys UK and Imerys S.A.
Imerys UK
Imerys UK is an indirect wholly owned subsidiary of Imerys S.A. With 2006 revenue of
approximately A3.3 billion, the Imerys Group is a world leader in the processing of industrial
minerals.
For the financial year ended 31 December 2005, Imerys UK achieved a turnover of £0.3 million
(2004: £22.6 million) and operating profit (before exceptional items and goodwill amortisation) of £0.3
million (2004: £22.5 million).

Imerys S.A.
For the financial year ended 31 December 2006, Imerys S.A. achieved a turnover of A3,288.1 million
(2005: A3,045.2 million) and current operating income (before other revenue and expenses) of A458.8
million (2005: A434.0 million). As at 31 December 2006, Imerys Group had net assets of A1,646.5
million (2005: A1,686.2 million).
Further financial information relating to Imerys S.A. is set out in Appendix III to this document.

7. Directors and employees
The board of Imerys UK has given assurances to the UCM Board that, following the Offer becoming
or being declared unconditional in all respects, the existing employment rights, including pension
rights, of all employees and management of the UCM Group will be fully safeguarded. Imerys UK’s
current plans do not involve any material change in the conditions of employment of the UCM
Group nor, subject to the result of its review of the potential development of UCM’s Stafford site,
any changes to the principal locations of UCM, nor the redevelopment of the fixed assets of UCM.
UCM’s pension obligations will be complied with and Imerys UK has stated that it has no intentions
to make detrimental changes to the benefits provided under the UCM pension schemes. The directors
of Imerys UK believe that following completion of the Offer, the financial covenant of UCM will be
significantly improved, providing additional comfort to UCM pension scheme members.
All of the non-executive directors of UCM (namely, John Gordon, Ian Fisher and Colin Halpern)
have agreed to resign following the Offer becoming or being declared unconditional in all respects.

8. UCM Share Option Scheme
The Offer extends to any UCM Shares which are unconditionally allotted or issued prior to the date
on which the Offer closes (or such earlier date as Imerys UK may, subject to the City Code or with
the consent of the Panel, determine) including any which are so unconditionally allotted or issued
pursuant to the exercise of options under the UCM Share Option Scheme.

11
All of the UCM Share Options were granted with an option price in excess of the Offer Price. Imerys
UK will not therefore be making any special proposals to the holders of options under the UCM
Share Option Scheme.

9. Financing the Offer
Full acceptance of the Offer will result in a maximum cash consideration of approximately £20.3
million becoming payable by Imerys UK, which will be provided from the Imerys Group’s existing
cash resources. No specific external funding will be required.
Rothschild is satisfied that Imerys UK has sufficient cash resources available to it to satisfy in full the
cash consideration payable by Imerys UK under the Offer.

10. Inducement fee
As part of the negotiations between UCM and Imerys UK, on 14 February 2007, UCM and Imerys
UK entered into an inducement fee agreement. Pursuant to this agreement, a fee of £203,425
(inclusive of irrecoverable VAT), which amounts to one per cent. of the value of the Offer, is payable
by UCM to Imerys UK if, following the Announcement, either the UCM Directors withdraw or
materially and adversely modify their approval or recommendation of the Offer, or the Offer lapses
or is withdrawn and prior thereto a third party offeror unconnected with Imerys UK announces an
offer, for all or not less than 50 per cent. of the issued share capital of UCM, and such alternative
offer subsequently becomes or is declared unconditional in all respects.

11. Compulsory acquisition and de-listing
It is intended that, following the Offer becoming or being declared unconditional in all respects and
subject to any applicable requirements of the London Stock Exchange and/or the UK Listing
Authority, Imerys UK will procure that UCM applies to the London Stock Exchange and the UK
Listing Authority for the cancellation, respectively, of the trading of UCM Shares on the London
Stock Exchange and of the listing of the UCM Shares on the Official List.
It is anticipated that such cancellations will, subject to the rules of the London Stock Exchange and
the Listing Rules, take effect no earlier than 20 business days after Imerys UK, by virtue of
acceptances of the Offer, has acquired or agreed to acquire 75 per cent. of the voting rights attached
to UCM Shares. Imerys UK will make an announcement when the Offer becomes or is declared
unconditional in all respects and such announcement will include a statement of Imerys UK’s
intention regarding the cancellation of trading of UCM’s shares on the London Stock Exchange and
of the listing on the Official List. Such cancellation would significantly reduce the liquidity and
marketability of any UCM Shares in respect of which acceptances of the Offer have not been submitted.
It is further intended that, following the Offer becoming or being declared unconditional in all
respects and following the cancellation of the admission to trading and of the listing referred to
above, Imerys UK will seek to procure the re-registration of UCM as a private company under the
relevant provisions of the Companies Act.
If Imerys UK receives acceptances under the Offer in respect of 90 per cent. or more of the UCM
Shares to which the Offer relates and not less than nine-tenths of the voting rights carried by those
shares and the Offer becomes or is declared unconditional in all respects, Imerys UK intends to
exercise its rights pursuant to the provisions of Schedule 2 to the Takeover Regulations to acquire
compulsorily UCM Shares in respect of which acceptances have not then been received.

12. Overseas Shareholders
The attention of UCM Shareholders who are citizens or residents of jurisdictions outside the United
Kingdom or who are holding shares for such citizens or residents and any person (including, without
limitation, any custodian, nominee or trustee) who may have an obligation to forward any document
in connection with the Offer outside the United Kingdom is drawn to paragraph 6 of Part B,
paragraph (c) of Part C and paragraph 3 of Part D of Appendix I to this document and to the
relevant provisions of the accompanying Form of Acceptance, which they should read before taking
any action.
The Offer is not being made, directly or indirectly, in or into, any Restricted Jurisdiction.
Accordingly, any accepting UCM Shareholder who is unable to give the warranties set out in
paragraph (c) of Part C (if such person holds UCM Shares in certificated form) or paragraph 3 of

12
Part D (if such person holds UCM Shares in uncertificated form) of Appendix I to this document
may be deemed not to have validly accepted the Offer.
The availability of the Offer to UCM Shareholders who are not resident in the United Kingdom may
be affected by the laws of their relevant jurisdiction. Such persons should inform themselves of, and
observe, any applicable legal or regulatory requirements of their jurisdiction. If you remain in any
doubt you should consult an appropriate independent professional adviser in the relevant jurisdiction
without delay.
All UCM Shareholders (including nominees, trustees or custodians) who would, or otherwise intend
to, or may have a legal or contractual obligation to, forward this document and/or the Form of
Acceptance and/or any related documents to any jurisdiction outside the United Kingdom, should
read the further details in this regard, which are contained in paragraph 6 of Part B of Appendix I to
this document before taking any action.
If you are in any doubt as to the procedure for acceptance, please contact Capita Registrars by
telephone on 0870 162 3121 or if calling from outside the UK +44 208 639 2157. You are reminded
that, if you are a CREST sponsored member in respect of your UCM Shares, you should contact your
CREST sponsor before taking any action.

13. Procedure for acceptance of the Offer
UCM Shareholders who hold their UCM Shares in certificated form should read this section in
conjunction with Parts B and C of Appendix I to this document and the accompanying Form of
Acceptance. UCM Shareholders who hold their shares in uncertificated form (that is, through
CREST) should read this section in conjunction with Parts B and D of Appendix I to this document.
The instructions on the Form of Acceptance are deemed to form part of the terms of the Offer.

UCM Shares held in certificated form (that is, not in CREST)

(a) Completion of the Form of Acceptance
To accept the Offer in respect of UCM Shares in certificated form, you must complete the
Form of Acceptance in accordance with the instructions set out below and on the Form of
Acceptance. You should complete separate Forms of Acceptance for UCM Shares held in
certificated form but under different designations. If you have any queries as to how to
complete the Form of Acceptance, please telephone Capita Registrars on 0870 162 3121 or on
+44 208 639 2157 if telephoning from outside the UK. Additional Forms of Acceptance are
available from Capita Registrars upon request.

(i) To accept the Offer in respect of all your UCM Shares in certificated form
To accept the Offer in respect of all your UCM Shares, you must complete Box 1 and
sign Box 3 on the Form of Acceptance. In all cases, you must complete Box 3 of the
enclosed Form of Acceptance in accordance with the instructions printed on the Form of
Acceptance.

(ii) To accept the Offer in respect of less than all your UCM Shares in certificated form
To accept the Offer in respect of less than all your UCM Shares, you must insert in Box 1
on the enclosed Form of Acceptance such lesser number of UCM Shares in respect of
which you wish to accept the Offer in accordance with the instructions printed thereon.
You should then follow the procedure set out in (i) above in respect of such lesser number
of UCM Shares. If you do not insert a number in Box 1 of the Form of Acceptance, or if
you insert in Box 1 a number which is greater than the number of UCM Shares that you
hold and you have signed Box 3, your acceptance will be deemed to be made in respect of
all the UCM Shares held by you.

(b) Return of Form of Acceptance
To accept the Offer in respect of UCM Shares held in certificated form, the completed, signed
and, in the case of individuals, witnessed, Form of Acceptance should be returned by post or by
hand (during normal business hours only) to Capita Registrars, Corporate Actions, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU together with (subject to paragraph
13(c) below) the relevant share certificate(s) and/or other document(s) of title as soon as
possible, and in any event so as to arrive not later than 1.00 p.m. on 15 March 2007. A reply-

13
paid envelope for use in the UK only is enclosed for your convenience. No acknowledgement of
receipt of documents will be given by or on behalf of Imerys UK. The instructions printed on
the Form of Acceptance are deemed to form part of the terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in the United States, Canada or
any other Restricted Jurisdiction or otherwise appearing to Imerys UK or its agents to have
been sent from any of these jurisdictions may be rejected as an invalid acceptance of the Offer.
For further information on overseas shareholders, see paragraph 12 of this Part II above.
The Form of Acceptance is issued only to the addressee(s) and the unique designated account
printed on it. The Form of Acceptance is a personalised form and is not transferable between
different: (i) accounts; or (ii) uniquely designated accounts. Imerys UK and Capita Registrars
accept no liability for any instructions that do not comply with the conditions set out in this
document and the Form of Acceptance. If you require further Forms of Acceptance, you should
contact Capita Registrars at the address referred to above.
(c) Documents of title
If your UCM Shares are in certificated form, a completed, signed and witnessed Form of
Acceptance should be accompanied by the relevant share certificate(s) and/or other document(s)
of title. If for any reason the relevant share certificate(s) and/or other document(s) of title is/are
lost or not readily available, you should nevertheless complete, sign and return the Form of
Acceptance, as stated above, so as to be received by Capita Registrars by no later than 1.00
p.m. on 15 March 2007. You should send with the Form of Acceptance any share certificate(s)
and/or other document(s) of title which you may have available and a letter stating that the
remaining documents will follow as soon as possible or that you have lost one or more of your
share certificate(s) and/or other document(s) of title. No acknowledgement of receipt of
documents will be given. If you have lost your share certificate(s) and/or other document(s) of
title, you should contact as soon as possible UCM’s registrars, Capita Registrars, Corporate
Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU for a letter of
indemnity for lost share certificate(s) and/or other document(s) of title which, when completed in
accordance with the instructions given, should be returned by post or by hand (during normal
business hours only) to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU.
(d) Validity of acceptances
Without prejudice to Part B and Part C of Appendix I to this document, subject to the
provisions of the City Code, Imerys UK reserves the right to treat as valid in whole or in part
any acceptance of an Offer which is not entirely in order or which is not accompanied by the
relevant share certificate(s) and/or other document(s) of title. In that event, no payment of cash
under the Offer will be made until after the relevant share certificate(s) and/or other documents
of title or indemnities satisfactory to Imerys UK have been received.
UCM shares held in uncertificated form (that is, in CREST)
If your UCM Shares are in uncertificated form, to accept the Offer you should take (or procure
the taking of) the action set out below to transfer the UCM Shares in respect of which you
accept the Offer to the appropriate escrow balance(s) specifying Capita IRG (in its capacity as a
CREST participant under its participant ID referred to below) as the Escrow Agent, as soon as
possible and in any event so that the TTE instruction settles not later than 1.00 p.m. on 15
March 2007. Note that the settlement cannot take place on weekends or bank holidays (or other
times at which the CREST system is non-operational) – you should therefore ensure you time the
input of any TTE instructions accordingly.
If you are a CREST sponsored member, you should refer to your CREST sponsor before taking
any action. Only your CREST sponsor will be able to send the TTE instruction(s) to CRESTCo
in relation to your UCM Shares.
After settlement of a TTE instruction, you will not be able to access the UCM Shares
concerned in CREST for any transaction or charging purposes. If the Offer becomes or is
declared unconditional in all respects, the Escrow Agent will transfer the UCM Shares
concerned to itself in accordance with paragraph 4 of Part D of Appendix I to this document.
You are recommended to refer to the CREST Manual issued by CRESTCo for further
information on the CREST procedures outlined below.

14
You should note that CRESTCo does not make available special procedures, in CREST, for any
particular corporate action. Normal system timings and limitations will therefore apply in
connection with a TTE instruction and its settlement. You should therefore ensure that all
necessary action is taken by you (or by your CREST sponsor) to enable a TTE instruction relating
to your UCM Shares to settle prior to 1.00 p.m. on 15 March 2007. In this connection, you are
referred in particular to those sections of the CREST Manual concerning practical limitations of
the CREST system and timings.

(e) To accept the Offer
To accept the Offer in respect of UCM Shares held in uncertificated form, you should send (or,
if you are a CREST sponsored member, procure that your CREST sponsor sends) a TTE
instruction to CRESTCo in respect of such UCM Shares. A TTE instruction to CRESTCo must
be properly authenticated in accordance with CRESTCo’s specifications for transfers to escrow
and must contain, in addition to the other information that is required for a TTE instruction to
settle in CREST, the following details:
– the ISIN number for the UCM Shares. This is GB0009172411;
– the number of UCM Shares in respect of which you wish to accept the Offer (i.e. the
number of UCM Shares to be transferred to an escrow balance);
– your member account ID;
– your participant ID;
– the member account ID of the Escrow Agent. This is IMEUCM01;
– the participant ID of the Escrow Agent for the Offer. This is RA10;
– the intended settlement date. This should be as soon as possible and in any event not later
than 1.00 p.m. on 15 March 2007;
– the corporate action number of the Offer. This is allocated by CRESTCo and will be
available on screen from CREST;
– input with a standard delivery instruction priority of 80; and
– the contact name and telephone number in the share note field.

(f) Validity of acceptances
Holders of UCM Shares in uncertificated form who wish to accept the Offer should note that a
TTE instruction will only be a valid acceptance of that Offer as at the relevant closing date if it
has settled on or before 1.00 p.m. on that date. A Form of Acceptance which is received in
respect of UCM Shares held in uncertificated form will not constitute a valid acceptance and
will be disregarded.
If you are in any doubt as to the procedure for acceptance of the Offer, please contact Capita
Registrars by telephone on 0870 162 3121 or on +44 208 639 2157 if telephoning from outside
the UK or at the address referred to in paragraph 13(b) above. You are reminded that, if you
are a CREST sponsored member, you should contact your CREST sponsor before taking any
action.

14. Settlement
The settlement procedure with respect to the Offer will comply with the rules of the City Code.
Subject to the Offer becoming or being declared unconditional in all respects and provided that the
Form of Acceptance, share certificate(s) and/or other document(s) of title or the Electronic
Acceptance are in order (except as provided in paragraph 6 of Part B of Appendix I to this
document in the case of certain overseas UCM Shareholders), settlement of the consideration to
which any UCM Shareholder is entitled under the Offer will be effected by the despatch of cheques
or CREST messages as applicable: (i) in the case of acceptances received, complete in all respects, by
the date on which the Offer becomes or is declared unconditional in all respects, within 14 days of
such date, or (ii) in the case of acceptances received, complete in all respects, after the date on which
the Offer becomes or is declared unconditional in all respects but while the Offer remains open for
acceptance, within 14 days of such receipt, and in either case in the following manner:

15
(a) UCM Shares in uncertificated form (that is, in CREST)
Where an acceptance relates to UCM Shares in uncertificated form, settlement of any cash
consideration to which the accepting UCM Shareholder is entitled will be paid in pounds
sterling by means of a CREST payment in favour of the accepting UCM Shareholder’s payment
bank in respect of the cash consideration due, in accordance with the CREST payment
arrangements.
Imerys UK reserves the right to settle all or any part of the consideration referred to in this
paragraph (a), for all or any accepting UCM Shareholder(s), in the manner referred to in
paragraph (b) below, if, for any reason, it wishes to do so.
(b) UCM Shares in certificated form (that is, not in CREST)
Where an acceptance relates to UCM Shares in certificated form, settlement of any cash due will
be despatched by first class post by cheque drawn on a branch of a UK clearing bank (or by
such other method as the Panel may approve).

15. General
If the Offer does not become or is not declared unconditional in all respects:
(a) in respect of certificated shares, share certificate(s) and/or other document(s) of title will be
returned by post (or such other method as may be approved by the Panel) within 14 days of
the Offer lapsing, to the person or agent whose name and address is set out in Box 1 or, if
applicable, in Box 2 or Box 4 of the Form of Acceptance or, if none is set out, to the first
named holder at his or her registered address; and
(b) in respect of uncertificated shares, the Escrow Agent will, immediately upon the lapsing of the
Offer (or within such longer period, not exceeding 14 days after the Offer lapsing, as the Panel
may approve), give instructions to CRESTCo to transfer all relevant UCM Shares held in
escrow balances and in relation to which it is the Escrow Agent for the purposes of the Offer to
the original available balances of the UCM Shareholders concerned.
All communications, notices, certificates, documents of title and remittances sent by or to UCM
Shareholders or their appointed agents will be delivered by, sent to or from them, or their appointed
agents, at their own risk.

16. Taxation
The comments below are intended only as a general guide to the current tax position under United
Kingdom law and HM Revenue & Customs’ practice in respect of UCM Shareholders who, unless
express reference is made to non-United Kingdom residents, are resident in the United Kingdom for tax
purposes and who hold their UCM Shares as investments and not on trading account. UCM
Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction
other than the United Kingdom should consult their professional adviser.
(a) Taxation of chargeable gains
UCM Shareholders who are resident or ordinarily resident in the United Kingdom for tax
purposes and who receive cash for their UCM Shares under the Offer will be deemed to have
made a disposal of their UCM Shares for the purposes of United Kingdom taxation of
chargeable gains. Any such disposal may, depending on the UCM Shareholder’s circumstances
and subject to any available exemptions or reliefs (including taper relief), give rise to a liability
to United Kingdom tax on chargeable gains.
UCM Shareholders who are not resident in the United Kingdom for tax purposes should not be
subject to tax in the United Kingdom on the disposal of their UCM Shares under the Offer
provided that they do not carry on a trade, profession or vocation in the United Kingdom
through a branch or agency (or, in the case of a non-resident company, through a permanent
establishment) and have not used, held or acquired the UCM Shares for the purposes of such
trade, profession or vocation or such branch or agency or permanent establishment. Certain
individuals who are temporarily non-resident at the time of disposal may be liable to United
Kingdom tax on chargeable gains upon returning to the UK.
(b) Stamp Duty and Stamp Duty Reserve Tax (‘‘SDRT’’)
No stamp duty or SDRT will be payable by UCM Shareholders as a result of accepting the
Offer.

16
17. Further information
Your attention is drawn to the further information contained in the appendices which form part of
this document, and to the accompanying Form of Acceptance (in relation to certificated UCM
Shares) which should be read in conjunction with this document. The appendices and the Form of
Acceptance contain material information which may not be summarised elsewhere in this document.

18. Action to be taken
To accept the Offer in respect of certificated UCM Shares, the Form of Acceptance must be completed
and returned by post, together with the relevant share certificate(s) and/or other documents of title, in
the enclosed reply-paid envelope or by hand (during normal business hours only) to Capita Registrars,
Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible
and in any event so as to be received no later than 1.00 p.m. on 15 March 2007.
If your UCM Shares are held in uncertificated form, acceptances should be made electronically
through CREST so that the TTE Instruction settles no later than 1.00 p.m. on 15 March 2007 by
following the procedure set out in paragraph 13 of this letter and Parts B and D of Appendix I to
this document. If you are a CREST sponsored member, you should refer to your CREST sponsor as
only your sponsor will be able to send the necessary TTE Instruction to CRESTCo.



Yours faithfully

For and on behalf of
Imerys UK Limited



Gerard Buffiere
´ ` Christophe Daulmerie
Director Director




17
APPENDIX I
Conditions to and further terms of the Offer
PART A: CONDITIONS TO THE OFFER
The Offer is subject to the following Conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by not later than 1.00
p.m. on 15 March 2007 (or such later time(s) and/or date(s) as Imerys UK may, subject to the
rules of the Code, decide) in respect of not less than 90 per cent. (or such lesser percentage as
Imerys UK may decide) in nominal value of the UCM Shares to which the Offer relates and
not less than 90 per cent. (or such lesser percentage as Imerys UK may decide) of the voting
rights carried by the UCM Shares to which the Offer relates, provided that, unless agreed by
the Panel, this condition will not be satisfied unless Imerys UK shall have acquired or agreed to
acquire (whether pursuant to the Offer or otherwise), directly or indirectly, UCM Shares
carrying, in aggregate, over 50 per cent. of the voting rights then normally exercisable at general
meetings of UCM on such basis as may be required by the Panel (including for this purpose, to
the extent (if any) required by the Panel, any voting rights attaching to any shares which are
unconditionally allotted or issued before the Offer becomes or is declared unconditional as to
acceptances, whether pursuant to the exercise of conversion or subscription rights or otherwise);
and for the purpose of this condition (i) the expression ‘‘UCM Shares to which the Offer
relates’’ shall be construed in accordance with Schedule 2 to the Takeover Regulations; and (ii)
for the purposes of the proviso to this condition (a), UCM Shares which have been
unconditionally allotted shall be deemed to carry the voting rights which they will carry on
issue;
(b) Imerys UK having received confirmation in terms reasonably satisfactory to it from the German
Federal Cartel Office that:
(i) the acquisition of UCM contemplated by the Offer (the ‘‘Transaction’’) does not constitute
a concentration requiring to be notified to such office; or
(ii) requiring to be so notified, the German Federal Cartel Office has decided not to oppose
the Transaction, such decision being either unconditional or subject to such conditions as
are acceptable to Imerys UK, acting reasonably; or
the relevant waiting periods having expired without the German Federal Cartel Office having
entered into main examination proceedings or having prohibited the Transaction;
(c) the Austrian Bundeswettbewerbsbehorde or Austrian Bundeskartellanwalt having formally
¨
waived their right to apply for detailed examination of the Transaction or not having applied,
within the statutory time period, for its detailed examination; or examination proceedings in
respect of the Transaction having been commenced and either:
(i) the Austrian Cartel Court (Kartellgericht) or Austrian Cartel Supreme Court
(Kartellobergericht) issuing a final decision declaring that the Transaction is compatible
with the applicable competition legislation, such decision being either unconditional or
subject to such conditions as are acceptable to Imerys UK, acting reasonably; or
(ii) the Austrian Cartel Court (Kartellgericht) terminating the examination proceedings in
relation to the Transaction;
(d) no government or governmental, quasi-governmental, supranational, statutory or regulatory
body, or any court, institution, investigative body, association, trade agency or professional or
environmental body or (without prejudice to the generality of the foregoing) any other person or
body in any jurisdiction (each, a ‘‘Relevant Authority’’) having decided to take, instituted,
implemented or threatened any action, proceedings, suit, investigation or enquiry (and in each
case not having irrevocably withdrawn the same) or enacted, made or proposed any statute,
regulation or order (and in each case not having irrevocably withdrawn the same) or otherwise
taken any other step or done any thing that would or might reasonably be expected to:
(i) prohibit, or in any material respect, restrict, restrain, delay, impose additional conditions
or obligations with respect to, or otherwise interfere in a way which is material in the
context of the Offer with the implementation of, the Offer or the acquisition of any UCM
Shares by Imerys UK or any matters arising therefrom;

18
(ii) result in a material delay in the ability of Imerys UK, or render Imerys UK unable, to
acquire some or all of the UCM Shares;
(iii) require, prevent, materially delay or materially affect the divestiture by Imerys UK or
associated undertakings (including any company of which 20 per cent. or more of the
voting capital is held by Imerys or any of its subsidiary undertakings, or any partnership,
joint venture, firm or company in which any of them may be interested) (together the
‘‘wider Imerys Group’’) or UCM or any of its subsidiaries, subsidiary undertakings or
associated undertakings (including any company of which 20 per cent. or more of the
voting capital is held by the UCM Group or any partnership, joint venture, firm or
company in which any of them may be interested) (together the ‘‘wider UCM Group’’) of
all or any material portion of their businesses, assets or property or of any UCM Shares
or other securities in UCM or impose any material limitation on the ability of any of
them to conduct their respective businesses or own their respective assets or properties or
any material part thereof;
(iv) impose any material limitation on the ability of any member of the wider Imerys Group
to acquire or hold or exercise effectively, directly or indirectly, all rights of all or any of
the UCM Shares (whether acquired pursuant to the Offer or otherwise);
(v) require any member of the wider Imerys Group or the wider UCM Group to offer to
acquire any shares or other securities or rights thereover in any member of the wider
UCM Group owned by any third party;
(vi) make the Offer or its implementation or the proposed acquisition of UCM or any
member of the wider UCM Group or of any UCM shares or any other shares or
securities in, or control of, UCM, illegal, void or unenforceable in or under the laws of
any jurisdiction;
(vii) impose any material limitation on the ability of any member of the wider Imerys Group
or the wider UCM Group to co-ordinate its business, or any material part of it, with the
business of any other member of the wider Imerys Group or the wider UCM Group; or
(viii) otherwise materially and adversely affect any or all of the businesses, assets, prospects or
profits of any member of the wider Imerys Group or the wider UCM Group, in each case
taken as a whole or the exercise of rights of shares of any company in the UCM Group,
and all applicable waiting periods during which such Relevant Authority could institute,
implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or
otherwise intervene having expired, lapsed or been terminated;
(e) all necessary material authorisations, orders, grants, consents, clearances, licences, permissions
and approvals, in any jurisdiction for or in respect of the Offer, the proposed acquisition of any
shares or securities in, or control of, UCM or any member of the wider UCM Group by any
member of the wider Imerys Group or the carrying on of the business of any member of the
wider UCM Group or the wider Imerys Group or any matters arising therefrom being obtained
in terms reasonably satisfactory to Imerys UK from all appropriate Relevant Authorities or
(without prejudice to the generality of the foregoing) from any persons or bodies with whom
any members of the wider UCM Group or the wider Imerys Group has entered into contractual
arrangements and such material authorisations, orders, grants, consents, clearances, licences,
permissions and approvals remaining in full force and effect and there being no intimation of
any intention to revoke or not to renew the same and all necessary filings in connection with
the Offer having been made, all appropriate waiting and other time periods (including extensions
thereto) in respect of the Offer under any applicable legislation and regulations in any
jurisdiction having expired, lapsed or been terminated and all necessary statutory or regulatory
obligations in any jurisdiction in respect of the Offer or the proposed acquisition of UCM by
Imerys UK or of any UCM Shares or any matters arising therefrom having been complied with;
(f) no Relevant Authority or any other party with whom any member of the wider UCM Group
has any contractual or other material business relationship notifying Imerys UK or any member
of the wider UCM Group that the interests held by any member of the wider UCM Group
under licences, leases, consents, permits and other rights will be materially and adversely
amended or otherwise materially and adversely affected by the Offer or the proposed acquisition
of UCM or any matters arising therefrom, or that such licences, leases, consents, permits or

19
other rights will not remain in full force and effect or that there is any intention to revoke or
materially and adversely amend any of the same on the part of such Relevant Authority or
other party;
(g) save as disclosed in any public announcement by UCM and in each case delivered to a
Regulatory Information Service (as defined in the Listing Rules or as otherwise fairly disclosed
in the Data Room or to Imerys UK by UCM in writing (‘‘Disclosed’’) prior to 15 February
2007 (being the date of the Announcement), there being no provision of any agreement,
instrument, permit, licence or other arrangement to which any member of the wider UCM
Group is a party or by or to which it or any material part of its assets may be bound or
subject which, as a consequence of the Offer or the acquisition of UCM or because of a change
in the control or management of UCM or any member of the UCM Group or any matters
arising therefrom or otherwise, could or might reasonably be expected to result in:
(i) any material amount of monies borrowed by, or other material indebtedness, actual or
contingent, of, or material grant available to, any member of the wider UCM Group, in
each case which is not already repayable on demand, becomes or is capable of being
declared repayable immediately or earlier than the repayment date stated in such
agreement, instrument or other arrangement or the ability of any member of the wider
UCM Group to borrow moneys or incur indebtedness is withdrawn or materially
inhibited;
(ii) any mortgage, charge or other security interest is created over the whole or any material
part of the business, property or assets of any member of the wider UCM Group or any
such security (whenever arising) becomes enforceable;
(iii) any such agreement, instrument, permit, licence or other arrangement, or any right,
interest, liability or obligation of any member of the wider UCM Group therein, is
terminated or materially and adversely modified or affected or any material action is
taken or onerous obligation arises thereunder;
(iv) the value of the wider UCM Group taken as a whole or its financial or trading position
is materially and adversely prejudiced or affected;
(v) other than in the ordinary course of business, any material asset of the wider UCM
Group being or falling to be charged or disposed of;
(vi) the rights, liabilities, obligations or interests or business of any member of the wider
UCM Group in or with any other person, firm or company (or any arrangement relating
to such interest or business) is terminated or materially and adversely modified or
affected; or
(vii) any member of the wider UCM Group ceases to be able to carry on business under any
name under which it currently does so;
(h) no member of the UCM Group having since 31 December 2005 (being the date to which the
latest published audited report and accounts of UCM were made up) and save as Disclosed
prior to 15 February 2007 (being the date of the Announcement):
(i) issued or agreed to issue or authorised or proposed the issue of additional shares of any
class or issued or authorised or proposed the issue of or granted securities convertible into
or rights, warrants or options to subscribe for or acquire such shares or convertible
securities or redeemed, purchased or reduced or announced any intention to do so or
made any other change to any part of its share capital;
(ii) recommended, declared, paid or made or proposed to recommend, declare, pay or make
any dividend, bonus or other distribution other than dividends lawfully paid to UCM or
wholly-owned subsidiaries of UCM;
(iii) authorised or proposed or announced its intention to propose any merger or acquisition
or disposal or transfer of shares or any change in its share or loan capital;
(iv) issued or authorised or proposed the issue of any debentures or incurred or increased any
indebtedness or contingent liability in each case to an extent which is material in the
context of the UCM Group, taken as a whole;
(v) disposed of or transferred, mortgaged or encumbered any asset or any right, title or
interest in any asset, other than in the ordinary course of business, or entered into or
varied any contract, commitment or arrangement (whether in respect of capital

20
expenditure or otherwise) which is of a long term or unusual nature or which involves or
could reasonably be expected to involve an obligation of a nature or magnitude which is
material in the context of the UCM Group, taken as a whole (or authorised, proposed or
announced any intention to do so);
(vi) entered into or varied or proposed to enter into or vary any contract, reconstruction,
amalgamation, arrangement or other transaction which is of a long term or unusual or
onerous nature or is otherwise than in the ordinary course of business, which, in any
case, is material in the context of the UCM Group, taken as a whole, or announced any
intention to do so;

(vii) entered into, or materially varied the terms of, any contract or agreement with any of the
directors or senior executives of UCM;
(viii) taken or proposed any corporate action or had any legal proceedings started or
threatened against it for its winding-up, dissolution or reorganisation or for the
appointment of a receiver, administrator, administrative receiver, trustee or similar officer
of all or any of its assets and revenues;

(ix) waived or compromised any claim other than in the ordinary course of business;
(x) made any amendment to its memorandum or articles of association or other incorporation
documents which is material in the context of the Offer;
(xi) made or agreed or consented to:

(A) any significant change which is material in the context of the Offer to:
(I) the terms of the trust deeds constituting the pension scheme(s) established for its
directors, employees or their dependants; or
(II) the benefits which accrue or to the pensions which are payable thereunder; or
(III) the basis on which qualification for, or accrual or entitlement to such benefits
or pensions are calculated or determined; or

(IV) the basis upon which the liabilities (including pensions) of such pension schemes
are funded or made; or

(B) any change which is material in the context of the Offer to the trustees including the
appointment of a trust corporation;
(xii) entered into any contract, transaction or arrangement which is restrictive in a material
respect on the business of any member of the wider UCM Group or the wider Imerys
Group in each case taken as a whole;
(xiii) entered into any contract, commitment or agreement with respect to any of the
transactions or events referred to in this condition (h); or
(xiv) been unable or admitted that it is unable to pay its debts generally or having stopped or
suspended (or threatened to stop or suspend) payment of its debts generally or ceased or
threatened to cease carrying on all or a substantial part of its business;
(i) since 31 December 2005 (being the date to which the latest published audited report and
accounts of UCM were made up) and save as announced publicly and in each case delivered to
a Regulatory Information Service or as otherwise Disclosed prior to 15 February 2007 (being
the date of the Announcement):
(i) no litigation, arbitration, prosecution or other legal proceedings which could reasonably
be expected to have a material impact on the UCM Group, taken as a whole, having
been instituted, announced or threatened or become pending or remained outstanding by
or against any member of the wider UCM Group or to which any member of the wider
UCM Group is or may become a party (whether as plaintiff, defendant or otherwise); and
(ii) no material adverse change having occurred in the business, assets, financial or trading
position, profits or prospects of the wider UCM Group, taken as a whole;

21
(j) save as Disclosed prior to 15 February 2007 (being the date of the Announcement), Imerys UK
not having discovered that:
(i) any business, financial or other information concerning any member of the UCM Group
publicly disclosed at any time by UCM or disclosed in writing by UCM to Imerys UK
during the course of its due diligence in connection with the Offer either contains a
misrepresentation of fact or omits to state a fact necessary to make the information
contained therein not misleading;
(ii) any member of the wider UCM Group is subject to any liability, actual or contingent,
which is not disclosed in the annual report and accounts of UCM for the financial year
ended 31 December 2005 and which is material in the context of the UCM Group, taken
as a whole;
(iii) any past or present member of the wider UCM Group has failed or is currently failing to
comply in all material respects with all applicable legislation or regulations of any
jurisdiction with regard to the storage, disposal, discharge, spillage, leak or emission of
any waste or hazardous substance or any substance likely to impair the environment or to
harm human health or otherwise relating to environmental matters (which non-compliance
might give rise to any liability (whether actual or contingent) on the part of any member
of the wider UCM Group and which liability is material in the context of the UCM
Group, taken as a whole);
(iv) there is or is likely to be any material liability on UCM (whether actual or contingent) to
make good, repair, reinstate or clean up any property now or previously owned, occupied
or made use of by any past or present member of the wider UCM Group or any
controlled waters under any environmental legislation, regulation, notice, circular or order
of any Relevant Authority or third party or otherwise;
(v) that circumstances exist (whether as a result of the making of the Offer or otherwise)
which might reasonably be expected to lead to any Relevant Authority instituting or any
member of the wider UCM Group or the wider Imerys Group might reasonably be
expected to be required to institute, an environmental audit or take any other steps which
in any such case might reasonably be expected to result in any actual or contingent
liability to improve or install new plant or equipment or make good, repair, re-instate or
clean up any land or other asset now or previously owned, occupied or made use of by
any member of the wider UCM Group which in each case is material in the context of
the wider UCM Group, taken as a whole; or
(vi) circumstances exist whereby a person or class of persons might reasonably be expected to
have any material claim or claims in respect of any product or process of manufacture or
materials used therein now or previously manufactured, sold or carried out by any past or
present member of the wider UCM Group.

Imerys UK reserves the right to waive all or any of conditions (b) to (j) (inclusive) above, in whole
or in part. Except with the consent of the Panel, the Offer will lapse unless conditions (b) to (j)
(inclusive) of the Offer set out above are fulfilled or, if capable of waiver, waived or, where
appropriate, have been determined by Imerys UK in its opinion to be or to remain satisfied by
midnight on the date which is 21 days after the later of the First Closing Date and the date on which
condition (a) is satisfied. Imerys UK shall be under no obligation to waive or treat as fulfilled or
satisfied any of conditions (b) to (j) (inclusive) by a date earlier than the latest date specified above
for the fulfilment or satisfaction thereof notwithstanding that the other conditions of the Offer may at
such earlier date have been waived or fulfilled or satisfied and that there are at such earlier date no
circumstances indicating that any such conditions may not be capable of fulfilment or satisfaction.

If the Offer lapses, the Offer will cease to be capable of further acceptance and Imerys UK and
holders of UCM Shares shall thereupon cease to be bound by prior acceptances.

If Imerys UK is required by the Panel to make an offer for UCM shares under the provisions of
Rule 9 of the Code, Imerys UK may make such alterations to the conditions as are necessary to
comply with the provisions of that Rule.

The Offer and any acceptances thereunder will be governed by English law.

22
PART B: FURTHER TERMS OF THE OFFER
The following further terms apply, unless the context requires otherwise, to the Offer. Except where
the context requires otherwise, any reference in Part B, Part C and Part D of Appendix I and in the
Form of Acceptance to:
(i) ‘‘acceptance condition’’ means the condition as to acceptances set out in paragraph (a) of Part A
of this Appendix I;
(ii) an ‘‘extension of the Offer’’ shall include an extension of the date by which the acceptance
condition has to be fulfilled;
(iii) ‘‘Offer’’ means the Offer and any revision, variation, renewal or extension thereof;
(iv) ‘‘Offer becoming unconditional’’ includes the Offer being declared unconditional and shall be
construed as a reference to the Offer being declared or becoming unconditional as to
acceptances whether or not any other condition thereof remains to be fulfilled;
(v) ‘‘Offer Document’’ means this document and any other document containing the Offer;
(vi) ‘‘UCM Shareholders’’ means holders of UCM Shares and shall include reference to the person
or persons executing a Form of Acceptance and, in the event of more than one person executing
a Form of Acceptance, the provisions of Part B and Part C of Appendix I shall apply to them
jointly and to each of them. References to the masculine gender shall include the feminine;
(vii) ‘‘UCM Shares’’ means ordinary shares of 5p each in the share capital of UCM.
The following further terms apply to the Offer, unless the context requires otherwise:

1. Acceptance period
(a) The Offer will be open for acceptance until 1.00 p.m. on 15 March 2007. Although no revision
is envisaged, if the Offer (in its original or previously revised form) is revised it will remain
open for acceptance for a period of at least 14 days following the date on which written
notification of the revision is posted to UCM Shareholders. Except with the consent of the
Panel, no revision of the Offer may be made or posted to UCM Shareholders after 9 April 2007
or, if later, the date falling 14 days prior to the last date on which the Offer can become
unconditional.
(b) The Offer, whether revised or not, will not (except with the consent of the Panel) be capable of
becoming unconditional after midnight on 23 April 2007 (or any earlier time and/or date beyond
which Imerys UK has stated that the Offer will not be extended and in respect of which it has
not, where permitted, withdrawn that statement) nor of being kept open for acceptances after
that time and/or date unless it has previously become unconditional. However, Imerys UK
reserves the right, with the consent of the Panel, to extend the Offer to (a) later time(s) and/or
date(s). Except with the consent of the Panel, Imerys UK may not, for the purpose of
determining whether the acceptance condition has been satisfied, take into account acceptances
received, or purchases of UCM Shares made, in respect of which relevant documents have been
received by Capita Registrars after 1.00 p.m. on 23 April 2007 (or any earlier time and/or date
beyond which Imerys UK has stated that the Offer will not be extended and in respect of which
it has not, where permitted, withdrawn that statement) or such later time and/or date as Imerys
UK may, with the permission of the Panel, decide. If the Offer is extended beyond midnight on
23 April 2007, acceptances received and purchases made in respect of which relevant documents
have been received by Capita Registrars after 1.00 p.m. on the relevant date may (except where
the City Code otherwise permits) only be taken into account with the consent of the Panel.
(c) If the Offer becomes unconditional, it will remain open for acceptance for not less than 14 days
from the date on which it would otherwise have expired. If the Offer has become unconditional
and it is stated by or on behalf of Imerys UK that the Offer will remain open until further
notice, then not less than 14 days’ notice in writing will be given to UCM Shareholders prior to
the closing of the Offer.
(d) If a competitive situation (as determined by the Panel) arises after Imerys UK has made a ‘‘no
extension’’ statement and/or a ‘‘no increase’’ statement (as referred to in the City Code) in
relation to the Offer, Imerys UK may (if it has specifically reserved the right to do so at the
time such statement was made, or otherwise with the consent of the Panel) choose not to be

23
bound by or withdraw such statement and be free to revise and/or extend the Offer provided
that in each circumstance it complies with the requirements of the City Code and, in particular,
that:
(i) it announces the withdrawal and that it is free to extend or revise the Offer (as
appropriate) as soon as possible and in any event within four business days after the firm
announcement of the competing offer;
(ii) it notifies UCM Shareholders to that effect in writing at the earliest opportunity or, in the
case of UCM Shareholders with registered addresses outside the United Kingdom or
whom Imerys UK reasonably believes to be nominees, custodians or trustees holding
UCM Shares for such persons, by announcement in the United Kingdom at the earliest
opportunity; and
(iii) any UCM Shareholders who accepted the Offer after the date of the ‘‘no extension’’ or
‘‘no increase’’ statement are given a right of withdrawal as described in paragraph 3(e) of
this Part B. Imerys UK may (if it has reserved the right to do so) choose not to be
bound by the terms of a ‘‘no increase’’ and/or a ‘‘no extension’’ statement if it would
otherwise prevent the posting of an increased or improved Offer (either as to value or
form of consideration or otherwise) which is recommended for acceptance by the board of
UCM, or in other circumstances permitted by the Panel.
(e) For the purpose of determining at any particular time whether the acceptance condition has
been satisfied, Imerys UK shall not be bound (unless otherwise required by the Panel) to take
into account any UCM Shares which have been unconditionally allotted or issued or which arise
as a result of the exercise of subscription or conversion rights before such determination takes
place, unless Capita Registrars on behalf of Imerys UK has received written notice of the
relevant details of such allotment or issue subscription or conversion (including the price
thereof) before that time. Notification by e-mail, telex, facsimile or other electronic transmissions
or copies will not be sufficient to constitute written notice for this purpose.

2. Announcements
(a) By 8.00 a.m. on the business day (the ‘‘relevant day’’) following the day on which the Offer is
due to expire, or becomes unconditional, or is revised or extended, as the case may be (or such
later time(s) and/or date(s) as the Panel may agree), Imerys UK will make an appropriate
announcement and simultaneously inform a Regulatory Information Service (as defined in the
Listing Rules) (a ‘‘Regulatory Information Service’’) of the position. Such announcement will also
state (unless otherwise permitted by the Panel):
(i) the number of UCM Shares for which acceptances of the Offer have been received
(showing the extent, if any, to which such acceptances have been received from persons
acting in concert with Imerys UK or in respect of UCM Shares which were subject to an
irrevocable commitment or a letter of intent procured by Imerys UK or any of its
associates);
(ii) details of any relevant securities of UCM in which Imerys UK or any person acting in
concert with it has an interest or in respect of which has a right to subscribe, in each case
specifying the nature of the interests or rights concerned. Similar details of any short
positions (whether conditional or absolute and whether in the money or otherwise),
including any short position under a derivative, any agreement to sell or any delivery
obligation or right to require another person to purchase or take delivery, must also be
stated;
(iii) details of any relevant securities of UCM in respect of which Imerys UK or any of its
associates has an outstanding irrevocable commitment or letter of intent; and
(iv) details of any relevant securities of UCM which Imerys UK or any person acting in
concert with it has borrowed or lent, save for any borrowed shares which have been
either on-lent or sold,
and will in each case specify the percentages of the UCM Shares represented by these figures.
Any such announcement shall include a prominent statement of the total numbers of UCM
Shares which may count towards satisfaction of the acceptance condition and the percentage of
UCM Shares represented by this figure.

24
(b) Any decision to extend the time and/or date by which the acceptance condition has to be
fulfilled may be made by Imerys UK at any time up to, and will be announced not later than,
8.00 a.m. on the relevant day (or such later time and/or date as the Panel may agree). The
announcement will state the next expiry date (unless the Offer is unconditional, in which case
the announcement may state that the Offer will remain open until further notice).
(c) In computing the number of UCM Shares represented by acceptances and/or purchases, there
may, at the discretion of Imerys UK, be included or excluded for announcement purposes,
acceptances and purchases which are not complete in all respects or are subject to verification
provided that such acceptances or purchases of UCM Shares shall not be included unless they
could be counted towards fulfilling the acceptance condition in accordance with paragraph 5(k)
below.
(d) References in this Part B of Appendix I to the making of an announcement or the giving of
notice, by or on behalf of Imerys UK, include the release of an announcement by public
relations consultants of Imerys UK or by Rothschild to the press, and the delivery by hand or
telephone, e-mail, telex, facsimile or other electronic transmission of an announcement to a
Regulatory Information Service. An announcement made otherwise than to a Regulatory
Information Service shall be notified simultaneously to a Regulatory Information Service (unless
the Panel otherwise permits).

3. Rights of withdrawal
(a) If Imerys UK, having announced the Offer to be unconditional, fails to comply by 3.30 p.m. on
the relevant day (as defined in paragraph 2(a) of this Part B) (or such later time and/or date as
the Panel may agree) with any of the other relevant requirements specified in paragraph 2(a) of
this Part B, an accepting UCM Shareholder may (unless the Panel agrees otherwise) immediately
after that time withdraw his acceptance of the Offer by written notice (signed by the accepting
UCM Shareholder (or his agent duly appointed in writing and evidence of whose appointment
in a form reasonably satisfactory to Imerys UK is produced with the notice) given by post or
by hand (during normal business hours only) to Capita Registrars, Corporate Actions, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU on behalf of Imerys UK.
Alternatively, in the case of UCM Shares held in uncertificated form, withdrawals must be
effected in the manner set out in paragraph 3(h) of this Part B. Subject to paragraph 1(e) of
this Part B, this right of withdrawal may be terminated not less than eight days after the
relevant day by Imerys UK confirming, if such is the case, that the Offer is still unconditional
and complying with the other relevant requirements specified in paragraph 2(a) of this Part B. If
any such confirmation is given, the first period of 14 days referred to in paragraph 1(c) of this
Part B will run from the date of such confirmation and compliance.
(b) If by 1.00 p.m. on 5 April 2007 (or such later time and/or date as the Panel may agree) the
Offer has not become unconditional, an accepting UCM Shareholder may withdraw his
acceptance at any time thereafter by written notice received by Capita Registrars on behalf of
Imerys UK at the address and in the manner referred to in paragraph 3(a) above (or in the case
of UCM Shares held in uncertificated form, in the manner set out in paragraph 3(h) of this Part
B), before the earlier of:
(i) the time when the Offer becomes unconditional; and
(ii) the final time for lodgement of acceptances of the Offer which can be taken into account
in accordance with paragraph 2(b) of this Part B.
(c) If Imerys UK withdraws a ‘‘no extension’’ statement or a ‘‘no increase’’ statement after a
competitive situation in accordance with paragraph 1(d) above, any UCM Shareholder who
accepts the Offer after the date of such statement may withdraw his acceptance thereafter in the
manner referred to in paragraph 3(a) above (or, in the case of UCM Shares in uncertificated
form, in the manner referred to in paragraph 3(h) below) not later than the eighth day after the
date on which notice of the withdrawal of such statement is posted to UCM Shareholders.
(d) Except as provided by this paragraph 3, acceptances and elections will be irrevocable.
(e) If the Panel determines that Imerys UK is not permitted to invoke, or cause or permit Imerys
UK to invoke a condition to the Offer it may instead determine that accepting UCM
Shareholders shall be entitled to withdraw their acceptances on such terms and by such time as
the Panel considers appropriate and notwithstanding that the Offer has become unconditional as
to acceptances. The Panel may also determine that the timetable applicable to the Offer shall be

25
varied in such manner as it may determine. Exercise of such withdrawal rights by accepting
UCM Shareholders could result in the Offer, if it has by then become unconditional as to
acceptances, ceasing to be unconditional as to acceptances.
(f) In this paragraph 3 ‘‘written notice’’ (including any letter of appointment, direction or authority)
means notice in writing bearing the original signature(s) of the relevant accepting UCM
Shareholder(s) or his/their agent(s) duly appointed in writing (evidence of whose appointment in
a form reasonably satisfactory to Imerys UK is produced with the notice). E-mail, telex,
facsimile or other electronic transmission, or copies, will not be sufficient to constitute written
notice. No notice which is postmarked in, or otherwise appears to Imerys UK, its agents or
advisers to have been sent from, a Restricted Jurisdiction will be treated as valid.
(g) To be effective, a written notice of withdrawal must be received on a timely basis by Capita
Registrars to whom the acceptance was originally sent at their respective address and must
specify the name of the person who has tendered the UCM Shares, the number of UCM Shares
to be withdrawn and the name of the registered holder, if different from the name of the person
whose acceptance is to be withdrawn.
(h) In the case of UCM Shares being held in uncertificated form, if withdrawals are permitted
pursuant to paragraphs 3(a), (b) and (e) of this Part B, an accepting UCM Shareholder may
withdraw his acceptance through CREST by sending (or, if a CREST personal member,
procuring that his CREST sponsor sends) a valid ESA instruction to settle in CREST in
relation to each Electronic Acceptance to be withdrawn. Each ESA instruction must, in order
for it to be valid and settle, include the following details:
the number of UCM Shares in uncertificated form to be withdrawn, together with their
*

ISIN number. This is GB0009172411;
the member account ID of the accepting UCM Shareholder;
*


the Participant ID of the accepting UCM Shareholder;
*


the Participant ID of the Escrow Agent. This is RA10;
*


the member account ID of the Escrow Agent. This is IMEUCM01;
*


the CREST Transaction ID of the Electronic Acceptance to be withdrawn to be inserted
*

at the beginning of the shared note field;
input with standard delivery instruction priority of 80;
*


the intended settlement date for the withdrawal;
*


the corporate action number for the Offer, which is allocated by CRESTCo and can be
*

found by viewing the relevant corporate action details in CREST.
Any such withdrawal will be conditional upon Capita Registrars verifying that the withdrawal
request is validly made. Accordingly, Capita Registrars will, on behalf of Imerys UK, reject or
accept the withdrawal by transmitting in CREST a receiving agent reject (AEAD) or receiving
agent accept (AEAN) message.
(i) Immediately (or within such longer period, not exceeding 14 days, as the Panel may determine)
upon a UCM Shareholder validly withdrawing his acceptance in respect of UCM Shares held in
uncertificated form, Capita Registrars will give TFE instructions to CRESTCo to transfer all
UCM Shares held in escrow balances, and in relation to which it is the Escrow Agent for the
purposes of the Offer, to the original available balances of the UCM Shareholder concerned
and, in respect of UCM Shares held in certificated form, Capita Registrars will return all share
certificates and/or other documents of title to the UCM Shareholder concerned.
(j) The UCM Shares in respect of which acceptances have been properly withdrawn in accordance
with this paragraph 3 may subsequently be re-assented to the Offer by following one of the
procedures described in paragraph 13 of the letter from Imerys UK set out in Part II of this
document, at any time while the Offer remains open for acceptance.
(k) Any question as to the validity (including time of receipt) of any notice of withdrawal will be
determined by Imerys UK, whose determination (save as the Panel otherwise determines) will be
final and binding. None of Imerys UK, Rothschild, Capita Registrars or any other person will
be under any duty to give notification of any defect or irregularity in any notice of withdrawal
or will incur any liability for failure to give such notification or for any determination under
this paragraph.

26
4. Revised offer
(a) Although no such revision is envisaged, if the Offer (in its original or any previously revised
form(s)) is revised (either in its terms or conditions or in the value or nature of the
consideration offered or otherwise), and any such revised Offer represents on the date on which
such revision is announced (on such basis as Rothschild may consider appropriate) an
improvement (or no diminution) in the value of the consideration of the Offer as so revised
compared with the value of the consideration or terms previously offered, or in the overall value
received by a UCM Shareholder (under or in consequence of the Offer or otherwise), the benefit
of the revised Offer shall (subject to paragraphs 4(b), 4(c) and 6 of this Part B) be made
available to any UCM Shareholder who has validly accepted the Offer in its original or any
previously revised form(s) and who has not validly withdrawn such acceptance (a ‘‘Previous
Acceptor’’). The acceptance by or on behalf of a Previous Acceptor of the Offer (in its original
or any previously revised form(s)) shall, subject as provided in paragraphs 4(b), 4(c) and 6 of
this Part B, be deemed to be an acceptance of the Offer as so revised and shall also constitute
the appointment of Imerys UK and/or of Rothschild and/or each of their respective directors
and agents as his attorney and/or agent with authority to:
(i) accept any such revised Offer on behalf of such Previous Acceptor;
(ii) if such revised Offer includes alternative forms of consideration, to make on his behalf
elections for and/or accept such alternative forms of consideration on his behalf in such
proportions as such attorney in his absolute discretion thinks fit; and
(iii) to execute on behalf and in the name of such Previous Acceptor all such further
documents (if any) and take such further actions (if any) as may be required to give effect
to such acceptances and/or elections.
In making any such acceptance and/or election, the attorney and/or agent will take into account
the nature of any previous acceptance and/or election made by the Previous Acceptor and such
other facts or matters as he may reasonably consider relevant.
(b) The deemed acceptances and elections referred to in this paragraph 4 shall not apply and the
authorities conferred by this paragraph 4 shall not be exercised by Imerys UK or Rothschild or
any of their respective directors, authorised representatives and agents if, as a result thereof, a
Previous Acceptor would (on such basis as Rothschild may consider appropriate) thereby receive
and/or retain less in aggregate consideration under the revised Offer or otherwise than he would
have received in aggregate as a result of the acceptance of the Offer in the form in which it was
originally accepted by him or on his behalf, having regard to any previous acceptance or
election originally made by him, unless such Previous Acceptor has previously otherwise agreed
in writing. The authorities conferred by paragraph 4(a) above shall not be exercised in respect of
any election available under the revised Offer save in accordance with this paragraph (b).
(c) The deemed acceptances and elections referred to in this paragraph 4 shall not apply and the
authorities conferred by this paragraph 4 shall be ineffective to the extent that a Previous
Acceptor:
(i) in respect of UCM Shares in certificated form, lodges with Capita Registrars in its
capacity as receiving agent at the addresses and in the manner specified in paragraph 3(a)
of this Part B, within 14 days of the posting of the document pursuant to which the
revised Offer referred to in paragraph 4(a) above is made available to UCM Shareholders,
a Form of Acceptance or some other form issued by or on behalf of Imerys UK in which
he validly elects to receive the consideration receivable by him under that revised Offer in
some other manner than that set out in his original acceptance; or
(ii) in respect of UCM Shares in uncertificated form, sends (or, if a CREST personal
member, procures that his CREST sponsor sends) a valid ESA instruction to settle in
CREST in relation to each Electronic Acceptance in respect of which an election is to be
varied. Each such ESA instruction must, in order for it to be valid and settle, include the
following details:
the number of UCM Shares in respect of which the changed election is made,
*

together with the ISIN number. This is GB0009172411;
the member account ID of the Previous Acceptor, together with his participant ID;
*


the member account ID of the Escrow Agent included in the relevant Electronic
*

Acceptance. This is IMEUCM01;

27
the Participant ID of the Escrow Agent. This is RA10;
*


the CREST Transaction ID of the Electronic Acceptance in respect of which an
*

election is to be changed;
the intended settlement date for the changed election;
*


the corporate action number for the Offer,
*


input with standard delivery instruction priority of 80,
*


and in order that the desired change of election can be effected must include:
the member account ID of the Escrow Agent relevant to the new election.
*


Any such change of election in respect of UCM Shares in uncertificated form shall be
conditional upon Capita Registrars verifying that the request is validly made. Accordingly,
Capita Registrars shall, on behalf of Imerys UK, reject or accept the requested change of
election by transmitting in CREST a receiving agent reject (AEAD) or receiving agent accept
(AEAN) message.
(d) The authorities conferred by this paragraph 4 and any acceptance of a revised Offer and/or any
alternative forms of consideration and/or any elections pursuant thereto shall be irrevocable
unless and until the Previous Acceptor becomes entitled to withdraw his acceptance under
paragraph 3 above and duly and validly does so.
(e) Imerys UK and Rothschild reserve the right (subject to paragraphs 3 and 4(a) above) to treat a
valid Form of Acceptance or TTE instruction relating to the Offer (in its original or any
previously revised form(s)) which is received (or dated) after the announcement or the issue of
the Offer in any revised form as a valid acceptance of the revised Offer (and, where applicable,
a valid election for the alternative form(s) of consideration). Such acceptance shall constitute an
authority in the terms of paragraph 4(a) above, mutatis mutandis, on behalf of the relevant
UCM Shareholder.

5. General
(a) Except with the consent of the Panel, the Offer will lapse unless all the conditions to the Offer
have been fulfilled or (if capable of waiver) waived or (where appropriate) have been determined
by Imerys UK to be, and continue to be, satisfied by midnight on 23 April 2007 or by midnight
on the date which is 21 days after the date on which the Offer becomes unconditional as to
acceptances (whichever is the later) or such later date as Imerys UK may, with the consent of
the Panel, decide, provided that Imerys UK shall be under no obligation to waive or treat as
satisfied any condition by a date earlier than the latest date specified above for the satisfaction
thereof notwithstanding that the other conditions of the Offer may at such earlier date have
been waived or fulfilled and that there are, at such earlier date, no circumstances indicating that
any such conditions may not be capable of fulfilment.
(b) The Offer will lapse (unless otherwise agreed with the Panel) if, before the later of 15 March
2007 and the date when the Offer becomes or is declared unconditional as to acceptances:
(i) the Office of Fair Trading has referred the Offer to the Competition Commission; or
(ii) the European Commission pursuant to Council Regulation (EEC) 4064/89 has initiated
proceedings under Article 6(1)(c) thereof or has made a referral to a competent authority
of the United Kingdom under Article 9(1) thereof.
If the Offer lapses, the Offer shall cease to be capable of further acceptance and accepting UCM
Shareholders and Imerys UK will thereupon cease to be bound by prior acceptances submitted
on or before the dates when the Offer so lapses.
(c) No acknowledgement of receipt of any Form of Acceptance, transfer by means of CREST,
share certificate(s) and/or other document(s) of title will be given by, or on behalf of Imerys
UK. All communications, notices, certificates, documents of title, other documents and
remittances to be delivered by, or to or sent to or from, UCM Shareholders (or their designated
agent(s)) or as otherwise directed will be delivered by or to or sent to or from such UCM
Shareholders (or their designated agent(s)) at their own risk.
(d) The expression ‘‘Offer Period’’ when used in this document means the period beginning on and
including 15 February 2007 (the date of the Announcement of the Offer) and ending on
whichever of the following dates shall be the latest:

28
(i) 15 March 2007;
(ii) the time and date on which the Offer lapses or is withdrawn; and
(iii) the time and date on which the Offer becomes or is declared unconditional.
(e) All references in this document and in the Form of Acceptance to 15 March 2007, shall (except
in the definition of Offer Period in paragraph 5(d) above and where the context otherwise
requires) be deemed, if the expiry date of the Offer is extended, to refer to the expiry date of
the Offer as so extended.
(f) Except with the consent of the Panel, settlement of the consideration to which any UCM
Shareholder is entitled under the Offer will be implemented in full in accordance with the terms
of the Offer without regard to any lien, right of set-off, counterclaim or other analogous right
to which Imerys UK or Rothschild may otherwise be, or claim to be, entitled as against such
UCM Shareholder.
(g) The instructions, terms, provisions and authorities contained in or deemed to be incorporated in
the Form of Acceptance constitute part of the terms of the Offer. Words and expressions
defined in this document shall, unless the context otherwise requires, have the same meanings
when used in the Form of Acceptance. The provisions of this Appendix I shall be deemed to be
incorporated into and form part of the Form of Acceptance.
(h) The Offer, the Form of Acceptance and all acceptances and/or all elections and all contracts
made pursuant thereto and action taken or made or deemed to be taken or made under any of
the foregoing shall be governed by and construed in accordance with English law. No parties
other than Imerys UK, Rothschild or UCM Shareholders shall have any right under The
Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Offer. Execution by or
on behalf of a UCM Shareholder of a Form of Acceptance will constitute his irrevocable
submission to the exclusive jurisdiction of the courts of England in relation to all matters arising
out of or in connection with the Offer and the Form of Acceptance, and his agreement that
nothing shall limit the rights of Imerys UK or Rothschild to bring any action, suit or
proceeding arising out of or in connection with the Offer and the Form of Acceptance in any
other manner permitted by law or in any court of competent jurisdiction.
(i) Any omission or failure to (or decision not to) despatch this document or the Form of
Acceptance or any document required to be given under the terms of the Offer and/or any
notice required to be despatched under the terms of the Offer to, or any failure to receive the
same by, any person to whom the Offer is made or should be made shall not invalidate the
Offer in any way or create any implication that the Offer has not been made to any such
person.
(j) Subject to paragraph 5(k) below, Imerys UK and Rothschild reserve the right to treat
acceptances of the Offer and/or elections pursuant thereto as valid if not entirely in order or not
accompanied by the relevant share certificates and/or other relevant documents of title, or if
received by or on behalf of either of them at any place or places or in any manner determined
by them otherwise than as stated in this document or in the Form of Acceptance.
(k) Notwithstanding the right reserved by Imerys UK and Rothschild to treat a Form of
Acceptance as valid (even though not entirely in order as set out in paragraph 5(j) above or not
accompanied by the relevant share certificate(s) and/or other document(s) of title or indemnities
reasonably satisfactory to Imerys UK and Rothschild), except with the consent of the Panel:
(i) an acceptance of the Offer will only be counted towards fulfilling the acceptance condition
if the requirements of Note 4 and, if applicable, Note 6 on Rule 10 of the City Code are
satisfied in respect of it and UCM Shares not falling within Note 8 on Rule 10 of the
City Code will not be counted towards fulfilling the acceptance condition; and
(ii) a purchase of UCM Shares by Imerys UK or its nominee(s) (or, if relevant, any person
acting in concert with Imerys UK, or its nominee(s)) will only be counted towards
fulfilling the acceptance condition if the requirements of Note 5 and, if applicable, Note 6
on Rule 10 of the City Code are satisfied in respect of it;
(iii) the Offer will not become unconditional unless Capita Registrars has issued a certificate
to Imerys UK or Rothschild (or their respective agents) stating the number of UCM
Shares in respect of which acceptances have been received which comply with sub-
paragraph (i) above and the number of UCM Shares otherwise acquired, whether before

29
or during the Offer Period, which comply with sub-paragraph (ii) above, in each case, if
applicable, Note 6 on Rule 10 of the City Code. Rothschild will send a copy of such
certificate to the Panel and to Ernst & Young as soon as possible after it is issued.
(l) All powers of attorney, appointments of agents and authorities conferred by this Appendix I or
in the Form of Acceptance are given by way of security for the performance of the obligations
of UCM Shareholders concerned and are irrevocable (in accordance with section 4 of the
Powers of Attorney Act 1971), except in the circumstances where the donor of such power of
attorney, appointment or authority is entitled to withdraw his acceptance in accordance with
paragraph 3 of this Part B and duly does so.
(m) The Offer extends to persons to whom the Offer is made or should be made but to whom this
document, the Form of Acceptance and any related documents may not be despatched or by
whom such documents may not be received and such persons may collect copies of these
documents from Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU.
(n) Imerys UK and Rothschild reserve the right to notify any matter, including the making of the
Offer, to all or any UCM Shareholders with a registered address outside the United Kingdom
(or whom Imerys UK or Rothschild know to be nominees, trustees or custodians holding UCM
Shares) for persons who are citizens, residents or nationals of jurisdictions outside the United
Kingdom, by announcement in the United Kingdom to the London Stock Exchange, or by paid
advertisement in a daily newspaper published and circulated in the United Kingdom or in the
London Gazette, in which event such notice shall be deemed to have been sufficiently given,
notwithstanding any failure by a UCM Shareholder to receive or see such notice, and all
references in this document to notice in writing, by or on behalf of Imerys UK, Rothschild and/
or their respective agents and/or public relations consultants shall be construed accordingly.
(o) The Offer is made at 1.00 p.m. on 22 February 2007 to all UCM Shareholders and is capable
of acceptance from and after that time. Copies of this document, the Forms of Acceptance and
any other related documents are available for collection from Capita Registrars, Corporate
Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU from that time.
(p) If the Offer does not become unconditional in all respects:
(i) in respect of UCM Shares held in certificated form, Forms of Acceptance, the relevant
share certificates and any other documents of title will be returned by Imerys UK by post
(or by such other method as may be approved by the Panel) within 14 days of the Offer
lapsing or being withdrawn to the person or agent whose name and address outside a
Restricted Jurisdiction, is set out in the relevant box on the Form of Acceptance or, if
none is set out, to the first-named holder at his registered address outside the Restricted
Jurisdiction. No such documents will be sent to an address in a Restricted Jurisdiction;
and
(ii) in respect of UCM Shares held in uncertificated form, Capita Registrars will, immediately
after the lapsing or withdrawal of the Offer (or within such longer period as the Panel
may permit, not exceeding 14 days of the lapsing or withdrawal of the Offer), give
instructions to CRESTCo to transfer all the UCM Shares held in escrow balances and in
relation to which it is the Escrow Agent for the purposes of the Offer to the original
available balances of UCM Shareholders concerned.
(q) If sufficient acceptances under the Offer are received and/or sufficient UCM Shares are otherwise
acquired and in either case Imerys UK acquires sufficient voting rights carried by such Imerys
UK Shares, Imerys UK intends to apply the provisions of Schedule 2 of the Takeover
Regulations to acquire compulsorily any outstanding UCM Shares to which the Offer relates.
(r) In relation to any acceptance of the Offer in respect of a holding of UCM Shares which are in
uncertificated form, Imerys UK reserves the right to make such alterations, additions or
modifications to the terms of the Offer as may be necessary or desirable to give effect to any
purported acceptance of the Offer, whether in order to comply with the facilities or requirements
of CREST or otherwise, provided that such alterations, additions or modifications are consistent
with the requirements of the City Code or are otherwise made with the consent of the Panel.
(s) Imerys UK intends after the Offer is declared wholly unconditional, to procure that UCM
makes an application to cancel the listing of UCM Shares on the Official List and to cancel
admission to trading on the London Stock Exchange’s market for listed securities. It is

30
anticipated that the cancellation of listing on the Official List and admission to trading on the
London Stock Exchange will take effect no earlier than 20 business days after either (i) the date
on which Imerys UK has, by virtue of its shareholdings and acceptances of the Offer, acquired
or agreed to acquire issued share capital carrying 75 per cent. of the voting rights of UCM or
(ii) the first date of issue of compulsory acquisition notices under Schedule 2 of the Takeover
Regulations.

6. Overseas shareholders
(a) The making of the Offer in, or to UCM Shareholders resident in, or citizens or nationals of,
jurisdictions outside the United Kingdom or to nominees of, or custodians, trustees or guardians
for such persons (‘‘Overseas Shareholders’’) may be prohibited or affected by the laws or
regulatory requirements of the relevant overseas jurisdiction. Overseas Shareholders should
inform themselves about and observe any applicable legal requirements. It is the responsibility of
any Overseas Shareholder wishing to accept the Offer to satisfy himself as to the full observance
of the laws and regulatory requirements of the relevant jurisdiction in connection with the Offer,
including the obtaining of any governmental, exchange control or other consents which may be
required and the compliance with other necessary formalities. Any such Overseas Shareholder
will be responsible for the payment of any issue, transfer or other taxes or duties due in that
jurisdiction of whomsoever payable and Imerys UK and Rothschild and any person acting on
their behalf shall be fully indemnified and held harmless by such Overseas Shareholder for any
such issue, transfer or other taxes as such person may be required to pay. If you are an
Overseas Shareholder and you are in doubt about your position, you should consult your
professional adviser in the relevant jurisdiction.
(b) In particular, the Offer is not being made, directly or indirectly, in or into or by the use of the
mails of, or by any means or instrumentality (including, without limitation, e-mail, facsimile
transmission, telex, telephone, the internet or other forms of electronic transmission) of interstate
or foreign commerce, or of any facility of a national securities exchange of a Restricted
Jurisdiction (including the United States and Canada) and the Offer cannot be accepted by any
such use, means, instrumentality or facility from or within a Restricted Jurisdiction (including
the United States and Canada).
(c) Imerys UK will not (unless otherwise determined by Imerys UK in its sole discretion and save
as provided for in paragraph 6(h) below) mail or deliver, or authorise the mailing or delivery of,
this document, the Form of Acceptance or any related Offer document(s) in, into or from a
Restricted Jurisdiction (including the United States and Canada), including, without limitation,
to UCM Shareholders or participants in the UCM Share Option Scheme with registered
addresses in a Restricted Jurisdiction or to persons whom Imerys UK knows to be trustees,
nominees or custodians holding UCM Shares for such persons. Persons receiving such
documents (including, without limitation, trustees, nominees or custodians) must not distribute,
send or mail them in, into or from a Restricted Jurisdiction or use the mails of a Restricted
Jurisdiction or any such means or instrumentality (including, without limitation, telephonically
or electronically) for any purpose, directly or indirectly, in connection with the Offer and doing
so may invalidate any related purported acceptance of the Offer. Persons wishing to accept the
Offer must not use the mails or any such other instrumentality of a Restricted Jurisdiction for
any purpose, directly or indirectly related to acceptance of the Offer or such election. Envelopes
containing Forms of Acceptance should not be postmarked in, or otherwise despatched from, a
Restricted Jurisdiction, and all acceptors must provide addresses outside a Restricted Jurisdiction
for the receipt of the consideration to which they are entitled under the Offer and which is
despatched by post pursuant to paragraph (e)(ii) of Part C of this Appendix I or for the return
of Forms of Acceptance and (in relation to UCM Shares in certificated form) any UCM share
certificate(s) and/or other document(s) of title.
(d) A UCM Shareholder will be deemed not to have validly accepted the Offer if:
(i) he or she puts ‘‘Yes’’ in Box 5 of the Form of Acceptance and thereby does not make
the representations and warranties set out in paragraph (c) of Part C of this Appendix I;
(ii) he or she inserts in Box 2 of the Form of Acceptance a registered address in a Restricted
Jurisdiction, or having a registered address in a Restricted Jurisdiction, he does not insert
in Box 5 of the Form of Acceptance the name and address of a person or agent outside a
Restricted Jurisdiction to whom he wishes the consideration to which he is entitled under
or in consequence of the Offer to be sent;

31
(iii) he or she inserts in Box 2 of the Form of Acceptance a telephone number in a Restricted
Jurisdiction;
(iv) in any case, the Form of Acceptance received from him or her is received in an envelope
postmarked in, or which otherwise appears to Imerys UK or its agents to have been sent
from a Restricted Jurisdiction; or
(v) (in respect of uncertificated UCM Shares), he or she makes a Restricted Escrow Transfer
(as defined in paragraph 6(f)(i) below) pursuant to paragraph (j) below unless he also
makes a related Restricted ESA Instruction (as defined in paragraph 6(f)(ii) below) which
is accepted by Capita Registrars.
Imerys UK reserves the right, in its sole discretion, to investigate, in relation to any acceptance,
whether the representations and warranties set out in paragraph (c) of Part C of this Appendix
I could have been truthfully given by the relevant UCM Shareholder and, if such investigation
is made and, as a result, Imerys UK determines that such representations and warranties could
not have been so given, such acceptance shall not be valid.
(e) If, notwithstanding the restrictions described above, any person (including, without limitation,
custodians, nominees and trustees), whether pursuant to a contractual or legal obligation or
otherwise, forwards this document, the Form of Acceptance or any related offering documents
in, into or from a Restricted Jurisdiction or uses the mails of or any means or instrumentality
(including, without limitation, e-mail, facsimile transmission, telex and telephone) of interstate or
foreign commerce of, or any facility of a national securities exchange of such jurisdictions in
connection with such forwarding, such person should:
(i) inform the recipient of such fact;
(ii) explain to the recipient that such action may invalidate any purported acceptance by the
recipient; and
(iii) draw the attention of the recipient to this paragraph 6.
(f) If an UCM Shareholder holding UCM Shares in uncertificated form is unable to give the
representations and warranties set out in paragraph 3 of Part D of this Appendix I, but
nevertheless can produce evidence satisfactory to Imerys UK that he is able to accept the Offer
in compliance with all legal and regulatory requirements and without Imerys UK or its agents
being in breach of any such requirements, he may only purport to accept the Offer by sending
(or if a CREST sponsored member, procuring that his CREST sponsor sends) both:
(i) a valid TTE instruction to a designated escrow balance detailed below (a ‘‘Restricted
Escrow Transfer’’); and
(ii) one or more valid ESA instructions (each a ‘‘Restricted ESA Instruction’’) which specify
the form of consideration which he wishes to receive (consistent with the alternatives
offered under the Offer).
Such purported acceptance will not be treated as a valid acceptance unless both the Restricted
Escrow Transfer and the Restricted ESA Instruction(s) settle in CREST and Imerys UK decides,
in its absolute discretion, to exercise its right to waive, vary or modify the terms of the Offer
related to Overseas Shareholders to the extent required to permit such acceptance to be made in
each case during the acceptance period set out in paragraph 1 of this Part B of this Appendix I.
If Imerys UK decides to permit such acceptance to be made, Capita Registrars will on behalf of
Imerys UK accept the purported acceptance as an Electronic Acceptance on the terms of this
document as so waived, varied or modified by transmitting in CREST a receiving agent accept
(AEAN) message. Otherwise, Capita Registrars will on behalf of Imerys UK reject the
purported acceptance by transmitting in CREST a receiving agent reject (AEAD) message.
Each Restricted Escrow Transfer must, in order for it to be valid and settle, include the
following details:
(iii) the corporate action ISIN number of the UCM Shares. This is GB0009172411;
(iv) the number of UCM Shares in uncertificated form in respect of which the accepting
holders of UCM Shares wishes to accept the Offer (i.e. the number of UCM Shares in
uncertificated form to be transferred to an escrow balance);
(v) the Participant ID of the accepting holder of UCM Shares;
(vi) the member account ID of the accepting holder of UCM Shares;

32
(vii) the Participant ID of the Escrow Agent. This is RA10;
(viii) the member account ID of the Escrow Agent specific to a Restricted Escrow Transfer.
This is RESTRICT;
(ix) the intended settlement date. This should be as soon as possible and in any event not
later than 1.00 p.m. (London time) in the United Kingdom on 15 March 2007;
(x) the corporate action number for the Offer which is allocated by CRESTCo and can be
found by viewing the relevant corporate action details in CREST;
(xi) input with standard delivery instruction priority of 80; and
(xii) the contact name and telephone number of the accepting holder of Imerys UK Shares
inserted in the shared note field.
Each Restricted ESA Instruction must, in order for it be valid and settle include the following
details:
(xiii) the corporate action ISIN number of UCM Shares. This is GB0009172411;
(xiv) the number of UCM Shares in uncertificated form relevant to that Restricted ESA
Instruction;
(xv) the Participant ID of the accepting holder of UCM Shares;
(xvi) the member ID of the accepting holder of UCM Shares;
(xvii) the Participant ID of the Escrow Agent. This is RA10;
(xviii) the member account ID of the Escrow Agent set out in the Restricted Escrow Transfer.
This is RESTRICT;
(xix) the member account ID of the Escrow Agent relevant to the form of consideration
required in respect of the Offer. This is IMEUCM01;
(xx) the CREST transaction ID of the Restricted Escrow Transfer to which the Restricted
ESA Instruction relates to be inserted at the beginning of the shared note field;
(xxi) the intended settlement date. This should be as soon as possible and in any event not
later than 1.00 p.m. (London time) in the United Kingdom on 15 March 2007;
(xxii) the corporate action number for the Offer; and
(xxiii) input with standard delivery instruction priority of 80.
(g) The provisions of this paragraph 6 supersede any terms of the Offer which are inconsistent with
them. The provisions of this paragraph 6 and/or any other terms of the Offer relating to
Overseas Shareholders may be waived, varied or modified as regards (a) specific UCM
Shareholder(s) or on a general basis by Imerys UK in its absolute discretion but only if Imerys
UK is satisfied that such waiver, variance or modification will not constitute a breach of any
applicable securities or other law.
(h) Neither Imerys UK nor Rothschild nor any agent or adviser or director of Imerys UK or of
Rothschild nor any person acting on behalf of either or both of them shall have any liability to
any person for any loss or alleged loss arising from any decision as to the treatment of
acceptances of the Offer, pursuant to the provisions of this paragraph 6 of Part B of this
Appendix I or otherwise in connection therewith.




33
PART C: FORMS OF ACCEPTANCE
Each UCM Shareholder by whom, or on whose behalf, a Form of Acceptance is executed irrevocably
undertakes, represents, warrants and agrees to and with Imerys UK and Rothschild and their
respective agents (so as to bind him, his personal representatives and his heirs, successors and assigns)
that:
(a) the execution of a Form of Acceptance shall constitute whether or not any boxes are completed:
(i) subject to paragraph 6 of Part B of this Appendix I, an acceptance of the Offer in respect
of the number of UCM Shares in certificated form inserted or deemed to be inserted in
Box 1 of the Form of Acceptance and if no number of UCM Shares is inserted in Box 1
or a number greater than the relevant UCM Shareholder’s registered holding of UCM
Shares held in certificated form appears in Box 1 or the Form of Acceptance is otherwise
completed incorrectly, but the Form of Acceptance is signed, it will be deemed to be an
acceptance by such UCM Shareholder of the basic terms of the Offer in respect of the
total number of UCM Shares registered in his name; and
(ii) an authority to Imerys UK or its agents to execute any further documents, take any
further action and/or give any further assurances which may be required in connection
with his acceptance of the Offer and an undertaking to execute all or any further
documents, take any further action and/or give any such further assurances as may be
required to enable Imerys UK to obtain full benefit of this Part C and/or to perfect any
of the authorities expressed to be given under this Part C,
in each case, on and subject to the terms and conditions set out or referred to in this document
and the Form of Acceptance and that, subject to the rights of withdrawal set out in paragraph
3 and paragraph 4 of Part B of this Appendix I above, each such acceptance and election shall
be irrevocable;
(b) he is irrevocably and unconditionally entitled to transfer the UCM Shares in respect of which
the Form of Acceptance is completed and that the UCM Shares in certificated form in respect
of which the Offer is accepted, or deemed to be accepted, are sold free from all liens, charges,
encumbrances, equities, and any other third party rights or interests together with all rights
attaching thereto on or after 15 February 2007, including the right to receive all dividends and
other distributions declared, paid or made by UCM after such date;
(c) unless ‘‘YES’’ is inserted, or deemed to be inserted, in Box 4 of the Form of Acceptance, such
UCM Shareholder:
(i) (if such UCM Shareholder is a citizen, resident, or national of a jurisdiction outside the
United Kingdom) is not in, or a resident of, a Restricted Jurisdiction and has observed
the laws of the relevant jurisdiction, obtained all requisite governmental, exchange control
and other required consents, complied with all other necessary formalities and paid any
issue, transfer or other taxes or other requisite payments due in any such jurisdiction in
connection with such acceptance and has not taken or omitted to take any action that
will or may result in Imerys UK, Rothschild or any other person acting in breach of the
legal or regulatory requirements of any such jurisdiction in connection with the Offer or
his acceptance thereof; or
(ii) has not received or sent copies or originals of this document, the Form of Acceptance or
any related offer documents in, into or from a Restricted Jurisdiction, or any other
jurisdiction where such actions may constitute a breach of any legal or regulatory
requirements, and has not utilised in connection with the Offer, directly or indirectly, the
mails of, or any means or instrumentality (including, without limitation, facsimile
transmission, telex and telephone) of interstate or foreign commerce of, or any facilities of
a national securities exchange of a Restricted Jurisdiction or such other jurisdiction, is
accepting the Offer from outside a Restricted Jurisdiction and is not an agent or fiduciary
acting on a non-discretionary basis for a principal, unless such agent or fiduciary is an
authorised employee of such principal or such principal has given any instructions with
respect to the Offer from outside a Restricted Jurisdiction;
(d) the execution of the Form of Acceptance and its delivery to Capita Registrars in its capacity as
receiving agent, constitutes, subject to the Offer becoming unconditional in all respects in
accordance with its terms and to the accepting UCM Shareholder not having validly withdrawn
his acceptance in accordance with paragraph 3 and paragraph 4 of Part B of this Appendix I,

34
the irrevocable separate appointment of each of Imerys UK and Rothschild and/or any of their
respective directors or agents as such shareholder’s escrow agent, and an irrevocable instruction
to the attorney and/or agent:
(i) to complete and execute all or any form(s) of transfer and/or other document(s) at the
discretion of the attorney and/or agent in relation to the UCM Shares referred to in
paragraph (a)(i) of this Part C in favour of Imerys UK or such other person or persons
as Imerys UK may direct;
(ii) to deliver such form(s) of transfer and/or renunciation(s) and/or other document(s) at the
discretion of the attorney and/or agent, together with any share certificate(s) and/or other
document(s) relating to such UCM Shares, for registration within six months of the Offer
becoming unconditional in all respects; and
(iii) to execute all such documents and to do all such other acts and things as may in the
opinion of such attorney and/or agent be necessary or expedient for the purpose of, or in
connection with, the acceptance, or deemed acceptance, of the Offer and to vest in Imerys
UK or its nominee(s) or as it may direct such UCM Shares;
(e) the execution of the Form of Acceptance and its delivery to Capita Registrars in its capacity as
receiving agent constitutes, subject to the Offer becoming unconditional in all respects in
accordance with its terms and to the accepting UCM Shareholder not having validly withdrawn
his acceptance, separate irrevocable authorities and requests:
(i) to UCM or its agents, to procure the registration of the transfer of the UCM Shares
pursuant to the Offer and the delivery of the share certificate(s) and/or other document(s)
of title in respect thereof to Imerys UK or as it may direct;
(ii) (subject to the provisions of paragraph 6 of Part B of this Appendix I) to Imerys UK or
Rothschild or their agents, to procure the despatch by post (or by such other method as
may be approved by the Panel) of a cheque drawn on a branch of a UK bank in respect
of any cash consideration to which such UCM Shareholder is entitled under the Offer at
the risk of such holder to the person whose name and address (outside a Restricted
Jurisdiction) is set out in Box 5 of the Form of Acceptance or, if none is set out, the
first-named holder in Box 1 or in Box 2 of the Form of Acceptance with an address
outside a Restricted Jurisdiction); or if none, to such address as is determined by Imerys
UK;
(f) the execution of the Form of Acceptance constitutes a separate authority to any director of
Imerys UK and to any director of Rothschild and/or their respective agents and the irrevocable
appointment of any such director and/or agent as such UCM Shareholder’s attorney and/or
agent within the terms of paragraph 4 of Part B of this Appendix I;
(g) after the Offer becomes or is declared unconditional in all respects (or if the Offer would
become or be declared unconditional in all respects or lapse immediately upon the outcome of
the resolution in question) or if the Panel otherwise gives its consent and pending registration:
(i) Imerys UK or its agents be entitled to direct the exercise of any votes attaching to any
UCM Shares in certificated form in respect of which the Offer has been accepted or is
deemed to have been accepted and such acceptance has not been validly withdrawn and
any other rights and privileges attaching to such UCM Shares, including the right to
requisition a general meeting or separate class meeting of UCM, such votes (where
relevant) to be cast so far as possible to satisfy any outstanding condition of the Offer;
and
(ii) the execution of the Form of Acceptance by a UCM Shareholder constitutes, with regard
to the UCM Shares comprised in such acceptance and in respect of which such
acceptance has not been validly withdrawn:
(a) an authority to UCM and/or its agents from such UCM Shareholder to send any
notice, circular, warrant, document or other communication which may be required
to be sent to him as a member of UCM (including any share certificate(s) or other
document(s) of title issued as a result of a conversion of such UCM Shares into
certificated form) to Imerys UK at its registered office;

35
(b) an authority for Imerys UK or any of its agents to sign any such documents and do
such things as may in the opinion of such person seem necessary or desirable in
connection with the exercise of such votes or other rights or privileges attaching to
such UCM Shares (including, without limitation, an authority to sign any consent to
short notice of a general or separate class meeting on his behalf (and any
adjournment thereof) and/or to execute a form of proxy in respect of such UCM
Shares appointing any person nominated by Imerys UK to attend general or
separate class meetings of UCM or its members or any of them (and any
adjournment thereof) and to exercise the votes attaching to such UCM Shares on his
behalf), such votes (where relevant) to be cast so far as possible to satisfy any
outstanding condition of the Offer; and
(c) the agreement of such UCM Shareholder not to exercise any of such rights without
the consent of Imerys UK and the irrevocable undertaking of such shareholder not
to appoint a proxy or representative for or to attend any such meetings;
(h) he will deliver, or procure the delivery of, to Capita Registrars in its capacity as receiving agent,
at either of the addresses referred to in paragraph 3(a) of Part B of this Appendix I his share
certificate(s) and/or other document(s) of title in respect of the UCM Shares held by him in
certificated form in respect of which the Offer has been accepted, or deemed to be accepted, and
not validly withdrawn, or an indemnity acceptable to Imerys UK in lieu thereof, as soon as
possible and in any event within six months of the Offer becoming unconditional in all respects;
(i) if he accepts the Offer, he shall do all such acts and things as shall, in the opinion of Imerys
UK or Capita Registrars in its capacity as receiving agent, be necessary or expedient to vest in
Imerys UK or its nominees or such other persons as Imerys UK may decide the number of
UCM Shares inserted, or deemed inserted, in Box 1 of the Form of Acceptance and all such
acts and things as may be necessary or expedient to enable Capita Registrars in its capacity as
receiving agent to perform its function for the purposes of the Offer;
(j) the terms and conditions of the Offer shall be incorporated and, deemed to be incorporated, in
and form part of the Form of Acceptance, which shall be read and construed accordingly;
(k) he agrees to ratify each and every act or thing which may be done or effected by Imerys UK,
Rothschild or Capita Registrars in its capacity as receiving agent or by any of their respective
directors or agents or UCM or its agents, as the case may be, in the proper exercise of any of
his or its powers and/or authorities conferred by or referred to in Part B or in this Part C of
Appendix I and to indemnify each such person against any losses arising therefrom;
(l) the execution of the Form of Acceptance constitutes his submission, in relation to all matters
arising out of the Offer and the Form of Acceptance, to the jurisdiction of the courts of
England and his agreement that nothing shall limit the right of Imerys UK or Rothschild to
bring any action, suit or proceeding arising out of or in connection with the Offer or in any
other manner permitted by law or in any court of competent jurisdiction;
(m) if any provision of Part B of Appendix I or of this Part C shall be unenforceable or invalid or
shall not operate so as to afford Imerys UK or Rothschild or Capita Registrars in its capacity
as receiving agent and/or any director or duly authorised representative of any of them, or agent
of either of them, the full benefit of the authorities and powers of attorney expressed to be
given therein, he agrees with all practicable speed do all such acts and things and execute all
such documents as may be required or desirable to enable Imerys UK and Rothschild and/or
any director or agent of either of them to secure the full benefit of such authorities and powers
of attorney; and
(n) on execution the Form of Acceptance shall take effect as a deed.
References in this Part C to a UCM Shareholder shall include references to the person or persons
executing a Form of Acceptance, and in the event of more than one person executing a Form of
Acceptance, the provisions of this Part C shall apply to them jointly and to each of them.




36
PART D: ELECTRONIC ACCEPTANCE
Each UCM Shareholder who holds UCM Shares in uncertificated form by whom, or on whose
behalf, an Electronic Acceptance is made irrevocably undertakes, represents, warrants and agrees to
and with Imerys UK and Capita Registrars so as to bind him and his personal representatives, heirs,
successors and assigns that:
1. The Electronic Acceptance shall constitute:
(a) subject to paragraph 5 of Part B of this Appendix I, an acceptance of the Offer in respect
of the number of UCM Shares in uncertificated form to which a TTE instruction relates;
(b) an undertaking to execute any further documents and give any further assurances which
may be required to enable Imerys UK to obtain the full benefits of the terms of this Part
D and/or to perfect any authorities expressed to be given thereunder; and
(c) a representation and warranty that he is the beneficial owner of the number of UCM
Shares to which a TTE instruction relates or, if he is not, he is irrevocably and
unconditionally entitled to transfer such UCM Shares in uncertificated form and that the
entire beneficial interest therein will be acquired under the Offer, on and subject to the
terms and conditions set out or referred to in this document and that, subject to
paragraphs 3 and 4 of Part B of this Appendix I, such acceptance and/or election shall be
irrevocable.
2. UCM Shares in uncertificated form in respect of which the Offer is accepted or deemed to be
accepted are sold fully paid and free from all liens, charges, encumbrances, equities and any
other third party rights or interests together with all rights now or hereafter attaching thereto
on or after 15 February 2007 including the right to receive all dividends and other distributions
declared, made or paid by UCM after such date.
3. (a) Such UCM Shareholder has not received or sent copies or originals of the Offer
Document, the Form of Acceptance or any other documents relating to the Offer in, into
or from a Restricted Jurisdiction and has not otherwise utilised in connection with the
Offer, directly or indirectly, the use of mails of, or any means or instrumentality
(including, without limitation, facsimile transmission, email, telex, telephone and the
internet) of interstate or foreign commerce of, or any facility of a national securities
exchange of, a Restricted Jurisdicton, at the time of the input and settlement of the
relevant TTE instruction(s), and in respect of UCM Shares in uncertificated form to
which an Electronic Acceptance relates, he is not an agent or fiduciary acting on a non-
discretionary basis for a principal, unless such agent or fiduciary is an authorised
employee of such principal or such principal has given all instructions with respect to the
Offer from outside a Restricted Jurisdiction and no TTE instruction has been sent from a
Restricted Jurisdiction and such UCM Shareholder is accepting the Offer from outside a
Restricted Jurisdiction;
(b) if such UCM Shareholder is not resident in the UK, he is not in, or a resident of, a
Restricted Jurisdiction and has observed the laws of all relevant territories, obtained any
requisite governmental or other consents, complied with all requisite formalities and paid
any issue, transfer or other taxes due from him, in connection with such acceptance in
any territory, and that he has not taken or omitted to take any action which will or may
result in Imerys UK, Rothschild or any other person acting in breach of any legal or
regulatory requirements of any territory in connection with the Offer or his acceptance
thereof provided that the warranties and representations above shall be deemed not to be
given if such UCM Shareholder purports to accept the Offer by sending (or, if a CREST
sponsored member, procuring that his CREST sponsor sends) a Restricted Escrow
Transfer and a Restricted ESA Instruction pursuant to paragraph 7(f) of Part B of this
Appendix I.
4. The Electronic Acceptance constitutes, subject to the Offer becoming or being declared wholly
unconditional in accordance with its terms and to the relevant UCM Shareholder not having
validly withdrawn his acceptance, the irrevocable appointment of Imerys UK and/or any of
Imerys UK’s directors or agents as such UCM Shareholder’s agent and/or attorney and an
irrevocable instruction and authorisation to the agent and/or attorney to do all such acts and
things as may in the opinion of such agent and/or attorney be necessary or expedient for the

37
purposes of, or in connection with, the acceptance of the Offer to vest in Imerys UK or its
nominee(s) the UCM Shares in uncertificated form referred to in his acceptance (the ‘‘Electronic
Acceptance Shares’’).
5. The Electronic Acceptance constitutes the irrevocable appointment of Capita Registrars as the
UCM Shareholder’s agent and/or attorney and an irrevocable instruction and authority to the
agent and/or attorney, subject to the Offer becoming or being declared unconditional in
accordance with its terms and to such accepting UCM Shareholder not having validly
withdrawn his acceptance, to transfer to itself (or to such other person or persons as Imerys UK
or its agents may direct) by means of CREST all or any of the Electronic Acceptance Shares
and, if the Offer does not become or is not declared unconditional, to give TFE instructions to
CRESTCo, immediately after the lapsing of the Offer (or within such longer period as the Panel
may permit, not exceeding 14 days after the lapsing of the Offer), to transfer all the Electronic
Acceptance Shares to the original available balance of the accepting UCM Shareholder.
6. The Electronic Acceptance constitutes, subject to the Offer becoming or being declared
unconditional in all respects in accordance with its terms and to an accepting UCM Shareholder
not having validly withdrawn his acceptance, an irrevocable authority and request, subject to the
provisions of paragraph 5 of Part B of this Appendix I, to Imerys UK or its agents to procure
the making of a CREST payment in favour of the accepting UCM Shareholder’s payment bank
in accordance with the CREST payment arrangements in respect of any cash consideration to
which such accepting UCM Shareholder is entitled, provided that Imerys UK may (if for any
reason it wishes to do so) determine that all or any part of such cash consideration shall be
paid by cheque, despatched by post and, if the accepting UCM Shareholder is a CREST
member whose registered address is in the Restricted Jurisdiction, any cash consideration to
which he is entitled shall in any case be paid by cheque despatched by post and in either case
all such cheques shall be despatched at the risk of such UCM Shareholder to the first-named
holder at an address outside a Restricted Jurisdiction stipulated by such holder or as otherwise
determined by Imerys UK.
7. The Electronic Acceptance constitutes a separate authority to any Imerys UK Director or
Imerys UK’s agents within the terms of paragraph 4 of Part B of this Appendix I in respect of
the Electronic Acceptance Shares.
8. The Electronic Acceptance constitutes the same undertakings, acceptances, acknowledgements
and authorities as set out in paragraph (d) of Part C of this Appendix I as if the same had
been restated in this Part D mutatis mutandis.
9. After the Offer becomes or is declared wholly unconditional (or if the Offer would become
unconditional or lapse depending upon the outcome of the resolution in question) and in such
other circumstances as Imerys UK may request and the Panel may permit and pending
registration:
(a) Imerys UK or its agents shall be entitled to direct the exercise of any votes attaching to
any uncertificated UCM Shares in respect of which the Offer is accepted or deemed to
have been accepted and such acceptance has not been validly withdrawn and any and all
other rights and privileges attaching to such Electronic Acceptance Shares, including the
right to requisition the convening of a general meeting or separate class meeting of Imerys
UK; and
(b) an Electronic Acceptance by a UCM Shareholder constitutes in respect of uncertificated
UCM Shares comprised in such acceptance and in respect of which such acceptance has
not been validly withdrawn:
(i) an authority to UCM and/or its agents from such UCM Shareholder to send any
notice, warrant, document or other communication which may be required to be
sent to him as a member of UCM (including any share certificate(s) or other
document(s) of title issued as a result of a conversion of such UCM Shares into
certificated form) to Imerys UK at its registered office;
(ii) an authority to Imerys UK and/or its directors, attorneys or agents to sign any
documents and do such things as may in the opinion of them seem necessary or
desirable in connection with the exercise of such votes or other privileges, including
without limitation any consent to short notice on his behalf and/or attend and/or
execute a form of proxy in respect of such UCM Shares appointing any person

38
nominated by Imerys UK to attend general meetings and separate class meetings of
UCM or its members (or any of them) (and any adjournments thereof) and to
exercise the votes attaching to such shares on his behalf, where relevant, such votes
to be cast so far as possible to satisfy any outstanding condition of the Offer; and
(iii) the agreement of such UCM Shareholder not to exercise any of such rights without
the consent of Imerys UK and the irrevocable undertaking of such UCM
Shareholder not to appoint a proxy to attend any such general meeting or separate
class meeting.
10. If, for any reason, any UCM Shares in respect of which a TTE instruction has been effected in
accordance with paragraph 13 of the letter from Imerys UK contained in Part II of this
document are converted to certificated form, he will (without prejudice to sub-paragraph 1(a)
above) immediately deliver or procure the immediate delivery of the share certificate(s) or other
documents of title in respect of all such UCM Shares as so converted to Capita Registrars at
the address referred to in paragraph 3(a) of Part B of this Appendix I or to such address as
Imerys UK or its agent may direct; and he shall be deemed upon conversion to undertake,
represent, warrant and agree to the terms set out in Part C of the Appendix I in relation to
such UCM Shares.
11. The creation of a CREST payment obligation in favour of his payment bank in accordance with
the CREST payment arrangements referred to in paragraph 6(a) above shall, to the extent of
the obligations so created, discharge in full any obligation of Imerys UK to pay him the cash
consideration to which he is entitled pursuant to the Offer.
12. If he accepts the Offer and does not validly withdraw such acceptance, he shall do all such acts
and things as shall be necessary or expedient to vest in Imerys UK or its nominee(s) or such
other persons as it may decide the UCM Shares aforsaid and all such acts and things as shall
be necessary or expedient to enable Capita Registrars to perform its functions as Escrow Agent
for the purposes of the Offer.
13. He agrees to ratify each and every act or thing which may be lawfully done or effected by
Imerys UK or by Capita Registrars or their respective directors, agents or attorneys, as the case
may be, in the proper exercise of any of his powers and/or authorities hereunder.
14. If any provision of this Part D shall be unenforceable or invalid or shall not operate so as to
afford Imerys UK or Capita Registrars and/or their respective directors and agents the full
benefit of authorities and powers of attorney expressed to be given in this Part D he shall with
all practicable speed do such acts or things and execute all such documents as may be required
to enable Imerys UK or Capita Registrars and/or any of their respective directors or agents to
secure the full benefits of such authorities and powers of attorney.
15. The making of an Electronic Acceptance constitutes his submission, in relation to all matters
arising out of the Offer and the Electronic Acceptance, to the jurisdiction of the courts of
England and his agreement that nothing shall limit the rights of Imerys UK and/or any of
Imerys UK’s directors or agents to bring any action, suit or proceeding arising out of or in
connection with the Offer and the Electronic Acceptance in any other manner permitted by law
or in any court of competent jurisdiction.
16. By virtue of the Regulations the making of an Electronic Acceptance constitutes an irrevocable
power of attorney by the relevant holder of UCM Shares in the terms of the powers and
authorities expressed to be given by this Part D to Imerys UK and any of Imerys UK’s
directors or agents.
A reference in this Part D to a holder of UCM Shares shall include references to the person or
persons making an Electronic Acceptance and, in the event of more than one person making an
Electronic Acceptance, the provisions of this Part D shall apply to them jointly and severally.




39
APPENDIX II
Financial and other information relating to UCM
PART A
Financial Information on the UCM Group
Throughout this Part A, UCM Group PLC and its subsidiaries are referred to as the ‘‘Group’’.
The financial information contained in this Part A does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act. The statutory accounts for the Group in respect of
the financial years ended 31 December 2003, 2004 and 2005 have been delivered to the Registrar of
Companies. In respect of each of those accounts, the Group’s auditors KPMG Audit Plc, gave
reports which were unqualified and did not contain a statement under Section 237(2) or (3) of the
Act.
The financial information set out in Section 1 of this Part A for the two years ended 31 December
2005 has been extracted, without material adjustment, from the Group’s audited consolidated financial
statements for the year ended 31 December 2005 in which the comparatives for the year ended 31
December 2004 were restated to comply with the International Financial Reporting Standards
(‘‘IFRS’’) as adopted for use in the European Union (‘‘Adopted IFRS’’) following the Group’s
transition from reporting under UK GAAP to reporting under IFRS from 1 January 2004.
The financial information set out in Section 2 of this Part A for the two years ended 31 December
2004 has been extracted, without material adjustment, form the Group’s audited consolidated financial
statements for the year ended 31 December 2004.
The audited financial information in Section 1 of this Part A has been prepared in accordance with
IFRS. The audited financial information in Section 2 of this Part A has been prepared in accordance
with UK GAAP. A reconciliation from UK GAAP to Adopted IFRS for the Group’s profit before
taxation, profit attributable to equity shareholders and basic earnings per share from continuing and
discontinued operations for the year ended 31 December 2004 and for its net assets as at 1 January
2004 and 31 December 2004 is provided in Note 26 to Section 1 of Part A of Appendix II to this
document.




40
Section 1 – UCM Group’s historical financial information
for the year ended 31 December 2005 prepared in accordance with IFRS
Consolidated income statement
for the year ended 31 December 2005

2005 2004
Total Total
Note £000 £000
Continuing operations
2 33,333 32,808
Revenue
Cost of sales
(27,326) (25,264)

6,007 7,544
Gross profit
Distribution expenses (218) (236)
Administration expenses (5,196) (4,683)

3 593 2,625
Operating profit
Financial income 6 37 —
Financial expenses 6 (639) (531)

(602) (531)
Net finance cost

2 (9) 2,094
(Loss)/profit before tax
Taxation 7 (362) (656)

(Loss)/profit for the period
attributable to equity holders
21 (371) 1,438
of the Company

Earnings per ordinary share
Basic and diluted 9 (1.6p) 6.0p




41
Consolidated balance sheet
as at 31 December 2005

Note 2005 2004
£000 £000
Non current assets
Intangible assets 10 30 446
Property, plant and equipment 11 15,610 16,399
Deferred tax asset 13 289 —

15,929 16,845

Current assets
Stocks 14 8,091 8,105
Trade and other receivables 15 6,377 6,329
Current tax receivable — 109
Cash and cash equivalents 865 815

15,333 15,358

31,262 32,203
Total assets

Current liabilities
Financial liabilities 18 10,407 10,366
Trade and other payables 16 3,001 3,318
Current tax payable 216 72

13,624 13,756

Non current liabilities
Financial liabilities 18 202 518
Post employment benefits 17 4,744 3,973
Deferred tax liabilities 13 — 146

4,946 4,637

12,692 13,810
Net assets

Equity
Share capital 21 1,196 1,196
Share premium account 21 8,402 8,402
Retained earnings 21 (747) 1,475
Other reserves 3,841 2,737

12,692 13,810
Total equity




42
Consolidated statement of cash flows
for the year ended 31 December 2005

2005 2004
£000 £000
Cash flows from operating activities
(Loss)/profit for the year (371) 1,438
Adjustment for:
Depreciation 1,733 1,691
Amortisation 150 92
Impairment 735 —
Interest 602 531
Income tax 362 656

3,211 4,408
Operating profit before changes in working capital and provisions
Decrease/(increase) in trade and other receivables 350 (358)
Decrease/(increase) in stocks 527 (873)
(Decrease)/increase in trade and other payables (451) 241
(Decrease) in provisions and employee benefits (542) (613)

3,095 2,805
Cash generated from the operations
Interest received 37 —
Interest paid (637) (526)
Income tax paid (179) (426)

2,316 1,853
Net cash from operating activities

Cash flows from investing activities
Acquisition of property, plant and equipment (672) (613)

(672) (613)
Net cash flow from investing activities

Cash flow from financing activities
New loans — 76
(Repayment)/increase of amounts borrowed (375) 768
Payment of finance lease liabilities (284) (264)
Dividends paid (1,077) (1,071)

(1,736) (491)
Net cash from financing activities

Net (decrease)/increase in cash and cash equivalents (92) 749
Cash and cash equivalents at 1 January 815 92
Effect of exchange rate fluctuations on cash held 142 (26)

865 815
Cash and cash equivalents at year end




43
Statement of recognised income and expense (SORIE)
for the year ended 31 December 2005

Group Company Group Company
2005 2005 2004 2004
£000 £000 £000 £000
(Loss)/profit for the financial year (371) (4,329) 1,438 (130)
Currency translation adjustment 1,189 — (691) —
Revaluation of tangible fixed assets — — 1,589 1,478
Loan to employee share ownership trust — — (379) (379)
Actuarial losses on defined benefit scheme (1,237) (372) (249) (40)
Tax on items taken directly to equity 378 112 77 12

Total recognised income and expenses attributable
(41) (4,589) 1,785 941
to equity shareholders




44
Notes on the financial statements
(forming part of the financial statements)

1. Accounting policies
Basis of preparation
UCM Group Plc is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its subsidiaries (together
referred to as the ‘‘Group’’). The Company financial statements present information about the
Company as a separate entity and not its Group.
Both the Company financial statements and the Group financial statements have been prepared and
approved by the Directors in accordance with International Financial Reporting Standards as adopted
for use in the EU (‘‘Adopted IFRS’’) and have been prepared on the historical cost basis except that
derivative financial instruments are carried at fair value and certain fixed assets are carried at
revalued amounts. On publishing the Company financial statements here together with the Group
financial statements, the Company is taking advantage of the exemption in s230 of the Companies
Act 1985 not to present its individual income statement and related notes that form a part of these
approved financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these consolidated financial statements and in preparing an opening IFRS
balance sheet at 1 January 2004 for the purposes of the transition to Adopted IFRS.

Basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the Group has the power,
directly or indirectly, to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that are currently exercisable or
convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control
ceases.

Transition to Adopted IFRS
Both the Group and the Company are preparing their financial statements in accordance with
Adopted IFRS for the first time and consequently both have applied IFRS 1. An explanation of how
the transition to Adopted IFRS has affected the reported financial position, and financial performance
of the Group and the Company is provided in note 26.
In addition to exempting companies from the requirement to restate comparatives for IAS 32 and
IAS 39, IFRS 1 grants certain exemptions from the full requirements of IFRS in the transition
period. The following exemptions have been taken in these financial statements:
Business combinations – Business combinations that took place prior to 1 January 2004 have
*

not been restated.
Employee benefits – All cumulative actuarial gains and losses on defined benefit plans have been
*

recognised in equity at 1 January 2004.
Cumulative translation differences – Cumulative translation differences for all foreign operations
*

have been set to zero at 1 January 2004.

Non-adoption of IAS 32 and IAS 39
The group has taken advantage of the transitional arrangements in IFRS 1 not to restate
corresponding amounts in accordance with IAS 32 and IAS 39. Instead the following policies were
applied in respect of financial instruments issued or held by the group;
In the comparative period, other than the following exceptions, all financial assets and financial
liabilities were carried at cost (amortised as appropriate) less, in the case of financial assets, provision
for any permanent diminution in value. Derivative financial instruments held in the form of foreign
exchange contracts were not recognised on balance sheet and the gains and losses were therefore not
recognised in the income statement. On recognition of hedged transactions gains and losses were then
recognised in either the income statement or combined in the carrying value of the associated asset.

45
Adjustments were made as necessary to implement the revised policy on the first day of the current
period. However as these only related to the recognition on balance sheet of a small number of
foreign exchange contracts the impact was not material to the financial statements as a whole.
The main effects on the primary statements in the comparative year had IAS 32 and IAS 39 been
adopted would have been similar to those noted above and, in the view of the directors, would not
have been material.

Intangible assets
Intangible assets, including licences and certain development costs, are recognised at cost and then
amortised on a straight line basis over their expected useful life.
Rates are typically:
Development costs – 10% per annum
Licence agreement – period of agreement

Research and development expenditure
Expenditure on research and development is charged to the income statement in the year in which it
is incurred. The exception to this is that, in accordance with IAS 38 where development expenditure
is incurred on separately identifiable projects that are recoverable against future additional revenues
arising on those projects then such expenditure is capitalised and amortised over the project’s
expected useful life.

Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the spot exchange
rate, at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated using the rate of exchange ruling at the balance sheet date and the gains or losses
arising are included in the income statement.
The financial statements of foreign subsidiaries are translated in accordance with IAS 21. In each case
the respective local currency is their functional currency. The assets and liabilities of such subsidiary
undertakings are translated at the closing exchange rates. Revenues and expenses of such
undertakings are consolidated at the average rates of exchange during the year. Exchange differences
arising on these translations are taken to reserves.

Property plant and equipment
Depreciation is provided to write off the cost or valuation less estimated residual value of fixed assets
by equal instalments over their anticipated useful economic lives. Rates are typically;
Freehold and long leasehold buildings – 5% per annum
Leasehold land – period of lease
Plant and machinery – 10% per annum
Motor vehicles – 20-25% per annum
Computer hardware – 25% per annum
Computer software – 50% per annum
No depreciation is provided on freehold land.


The Group’s land and buildings are valued by external advisors, on a three year rolling basis. Where
appropriate the carrying value of these assets are adjusted accordingly.
All tangible fixed assets are reviewed for impairment in accordance with IAS 36 ‘‘Impairment of
Fixed Assets’’ when there are indications that such impairment may have occurred.

Stocks
Stocks are stated at the lower of cost and net realisable value. In determining the cost of raw
materials, consumables and goods purchased for resale, the FIFO method is used. For work in
progress and finished goods manufactured by the Group, cost is taken as production cost, which
includes an appropriate proportion of attributable overheads.

46
Financial instruments
Following the adoption of IAS 32 and IAS 39 on 1 January 2005, financial instruments issued by the
Group are treated as equity only to the extent that they include no contractual obligations upon the
Company (or the Group) to deliver cash or other financial assets or financial liabilities under
conditions that are potentially favourable or unfavourable to the Company (or Group).

Investments in subsidiaries are carried at cost less impairment.
Derivative financial instruments are recognised at fair value. The gain or loss on re measurement to
fair value is recognised immediately in the income statement. The fair value of forward exchange
contracts is their quoted market price at the balance sheet date, being the present value of the quoted
forward price.

Income tax
Taxation is fully recognised in accordance with IAS 12.
Tax is recognised in the income statement except to any extent that it relates to items recognised
directly in equity, in which case it also is recognised in equity. The tax charge or credit included in
the income statement comprises both current and deferred tax. Current tax reflects the expected tax
payable on the taxable income for the year, using tax rates enacted at the balance sheet date.
Deferred tax reflects the movement in temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for tax purposes, and is provided
at the tax rates that are expected to apply when the liability is settled or the asset is realised.
Deferred tax is provided using the balance sheet liability method, recognising deferred tax liabilities in
respect of all taxable temporary differences and deferred tax assets to the extent that it is probable
that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it becomes no longer probable that sufficient profits will be available to allow for the full
recovery of the asset.
Tax assets and liabilities are offset against each other when there is a legal right of set off and the
Company intends to settle net.

Revenue
Revenue represents the amounts (excluding sales tax) derived from the provision of goods and
services.
The products sold by the Group can be identified to two base chemistries namely magnesia and
zirconia.

Leases
Assets purchased under finance leases are capitalised at amounts equal to their original cost and
depreciation is provided on the basis of the Group’s depreciation policies. The capital elements of
future obligations under finance leases are included as liabilities in the balance sheet and the current
year’s interest element is charged to the income statement.
For operating leases, rentals are charged to the income statement on a straight line basis over the life
of the lease.

Pensions
As permitted by the standard, the Group has adopted IAS 19 (revised) early.
In respect of defined benefit plans, obligations are measured at discounted present value (using the
projected unit method) whilst plan assets are recorded at fair value. The service and finance costs of
such plans are recognised separately in the income statement. All actuarial gains and losses are
recognised immediately in the Statement of Recognised Income and Expense.
Payments to defined contribution schemes are recognised as an expense as they fall due.

Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and call deposits.

47
Impairment
The carrying amount of the Group’s assets are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If such indication exists, the asset’s recoverable
amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or
its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the
income statement.

Accounting standards in issue not yet adopted
IFRS 7 – Financial instruments: disclosure
This standard is applicable for years commencing on or after 1 January 2007 but was available for
early adoption. The application of IFRS 7 in the current year would not have affected the balance
sheets or income statement as the standard is only concerned with disclosure. The Group plans to
adopt it for the year ending 31 December 2007.
IAS 39 Financial Instruments: Recognition and Measurement
IFRS 4 Insurance Contracts
The Company has not adopted amendments to IAS 39 and IFRS 4 in relation to financial guarantee
contracts which will apply for periods commencing on or after 1 January 2006.
Where the Company enters into financial cross guarantee contracts to guarantee the indebtedness of
other companies within its Group, the Company considers there to be insurance arrangements, and
accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent
liability until such time that it becomes probable that the Company will be required to make a
payment under the guarantee.
The Company does not expect the amendments to have any impact on the financial statements for
the period commencing 1 January 2006.
Amendments to IAS 1 – Presentation of Financial Statements
The above amendment requires a Company to disclose information that enables users of its financial
statements to evaluate its objectives, policies and processes for managing capital.
The application of this amendment is for periods commencing on or after 1 January 2007, and will
have a disclosure impact only.
There is not expected to be any impact from any other standards which are available for early
adoption, but have not yet been adopted.

2. Segmental information
The disclosure requirements of IAS 14 – Segment Reporting requires the Group to identify its primary
and secondary segments, with differing levels of information disclosed according to this classification.
The Board have determined that its primary segments are its divisions, magnesia and zirconia, with
its secondary segments being geography.
Group corporate costs which are not directly attributable to a segment are shown separately. Inter
divisional sales are not material in relation to total Group revenue, whether analysed by division or
by geographical location of operations.




48
2005 2004
Group Group
Corporate Corporate
Magnesia Zirconia Costs Total Magnesia Zirconia Costs Total
£000 £000 £000 £000 £000 £000 £000 £000
Revenue 17,929 15,404 — 33,333 18,675 14,133 — 32,808
Operating profit –
continuing
operations (9) 2,425 (1,008) 1,408 1,692 2,107 (1,174) 2,625
Exceptional costs (754) — (61) (815) — — — —
Financial income 37 —
Financial
expenses (639) (531)

(Loss)/profit
before tax (9) 2,094

Segment assets 13,372 11,703 5,033 30,108 14,503 11,690 5,086 31,279
Deferred tax asset 289 —
Current tax
receivable — 109
Cash 865 815

Total assets 31,262 32,203

Segment liabilities 1,683 1,200 118 3,001 2,118 914 286 3,318
Financial
liabilities 10,407 10,366
Current tax
payable 216 72

Total current
liabilities 13,624 13,756

Capital
expenditure 380 276 — 656 375 270 — 645
Depreciation and
amortisation 964 789 130 1,883 917 742 124 1,783


2005 2004
Revenue Assets Asset Revenue Assets Asset
by by addition by by by addition by
customer location of location of customer location of location of
location operation operation location operation operation
£000 £000 £000 £000 £000 £000
United Kingdom 2,270 15,228 106 2,383 16,315 230
North America 9,291 14,880 550 9,376 14,964 415
Continental Europe 12,581 — — 12,949 — —
Central and South
America 989 — — 788 — —
Asia 7,693 — — 6,672 — —
Rest of World 509 — — 640 — —

33,333 30,108 656 32,808 31,279 645


Impairment of intangibles and asset write down relating to the magnesia division amounted to
£735,000 (2004: nil).




49
3. Results on ordinary activities before taxation

2005 2004
£000 £000
Results on ordinary activities before taxation is stated after charging/
(crediting):
Fees of the auditors and its associates:
Audit – Company 6 6
– Rest of Group 44 45

50 51

Other services 102 61

Exceptional costs:
Licence agreement impairment 462 —
Plant and machinery impairment 273 —
Professional fees relating to planning application 61 —
Redundancy costs 19 —

815 —

Depreciation and other amounts written off tangible fixed assets:
Owned 1,522 1,484
Leased 211 207
Amortisation of capitalised development costs 20 20
Amortisation of licence agreement costs 130 72
Hire of equipment – plant 83 101
Operating lease rentals – other assets 116 136
Research and development expenditure 151 154
Exchange differences (23) 8
In accordance with IAS 36 – Impairment of Fixed Assets, the carrying value of the licence agreement
has been reviewed at 31 December 2005 and accordingly an impairment loss has been recognised in
the Group’s income statement.

4. Remuneration of directors

2005 2004
£000 £000
Directors’ emoluments 674 793

Company contributions to money purchase pension schemes 82 51


The emoluments of the highest paid director were £171,637 (2004: £200,862), and Company pension
contributions of £36,960 (2004: £9,995) were made to a money purchase scheme on his behalf.
Retirement benefits were accruing to 3 directors under money purchase schemes at the end of 2005.




50
5. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year,
analysed by category, was as follows:

Group
Number of employees
2005 2004
Technical 27 28
Administration 35 39
Manufacturing 181 196

243 263


The aggregate payroll costs of these persons were as follows:

Group

2005 2004
£000 £000
Wages and salaries 6,104 6,236
Social security costs 572 564
Other pension costs – (note 17)
Defined benefit schemes
UK 42 86
US 54 54
Defined contribution schemes
UK 284 225
US 106 86
486 451

7,162 7,251


6. Finance income and expense

2005 2004
£000 £000
Finance income
Bank deposits 37 —

Finance expense
Bank loans and overdrafts 614 484
Finance leases 25 47

639 531




51
7. Taxation

2005 2004
£000 £000
UK Corporation tax
Current tax on income for the period 265 284
Adjustments in respect of prior periods in respect of the carrying value of tax
assets 120 (38)
Foreign tax
Current tax on income for the period (3) 240
Adjustments in respect of prior periods in respect of the carrying value of tax
assets 39 15

421 501
Total current tax

Deferred taxation (see note 13)
Origination and reversal of temporary differences (59) 205
Adjustments in respect of prior periods — (50)

(59) 155
Total deferred tax

362 656
Total tax expense in income statement


Reconciliation of effective tax rate
The total tax expense is higher (2004: lower) than the average rate borne by the Group of 31.6%
(2004: 31.6%). The differences are explained below:

2005 2004
£000 £000
(Loss)/profit before tax (9) 2,094
Tax on (loss)/profit at the average rate of 31.6% (3) 662
Effects of:
Permanently disallowed/non taxable items 47 69
US state tax adjustments 10 23
Movement on temporary differences (8) (75)
Prior year items 159 (23)
Losses not utilised 157 —

Total tax expense in income statement 362 656


8. Company result for the financial year

2005 2004
£000 £000
Loss for the financial year (4,329) (130)


9. Earnings per share
Earnings per ordinary share is calculated with reference to the loss attributable to ordinary
shareholders of £371,000 (2004: profit £1,438,000) and the weighted average number of ordinary
shares in issue during the year of 23,932,373 (2004: 23,932,373). There is no dilution in the earnings
per share in both the reporting period and the comparative year of 2004.




52
10. Intangible assets

Licence Development
agreement costs Total
£000 £000 £000
Group
Cost
Balance at 1 January 2004 520 202 722
Additions 27 — 27
Currency translation adjustments (37) (13) (50)

Balance at 31 December 2004 510 189 699

Balance at 1 January 2005 510 189 699
Additions 171 — 171
Currency translation adjustments 71 22 93

Balance at 31 December 2005 752 211 963

Amortisation and impairment
Balance at 1 January 2004 45 132 177
Charge for year 72 20 92
Currency translation adjustments (6) (10) (16)

Balance at 31 December 2004 111 142 253

Balance at 1 January 2005 111 142 253
Charge for year 130 20 150
Impairment 462 — 462
Currency translation adjustments 49 19 68

Balance at 31 December 2005 752 181 933



Net book value
At 1 January 2004 475 70 545

At 31 December 2004 and 1 January 2005 399 47 446

— 30 30
At 31 December 2005




53
11. Property, plant and equipment

Long
leasehold Plant
Freehold Freehold land and and
land buildings buildings equipment Total
£000 £000 £000 £000 £000
Group
Cost or valuation
Balance at 1 January 2004 1,376 3,162 1,007 20,858 26,403
Additions — — — 618 618
Disposals — — — (7) (7)
Transfer to revaluation reserve 743 (243) 531 — 1,031
Currency translation adjustment (8) (94) — (658) (760)

Balance at 31 December 2004 2,111 2,825 1,538 20,811 27,285

Balance at 1 January 2005 2,111 2,825 1,538 20,811 27,285
Additions — — — 485 485
Currency translation adjustment 13 149 — 1,112 1,274

Balance at 31 December 2005 2,124 2,974 1,538 22,408 29,044

Depreciation and impairment
At 1 January 2004 — 318 60 9,666 10,044
Charge for year — 152 32 1,507 1,691
Disposals — — — (7) (7)
Transfer to revaluation reserve — (466) (92) — (558)
Currency translation adjustment — (4) — (280) (284)

Balance at 31 December 2004 — — — 10,886 10,886

Balance at 1 January 2005 — — — 10,886 10,886
Charge for year — 150 44 1,539 1,733
Impairment — — — 273 273
Currency translation adjustment — 5 — 537 542

Balance at 31 December 2005 — 155 44 13,235 13,434



Net book value
At 1 January 2004 1,376 2,884 947 11,192 16,359

At 31 December 2004 at 1 January
2005 2,111 2,825 1,538 9,925 16,399

2,124 2,819 1,494 9,173 15,610
At 31 December 2005


The net book value of plant and machinery includes £547,000 (2004: £801,000) in respect of assets
held under finance leases.


Plant and equipment in the course of construction, and therefore not depreciated during the year is
£233,000 (2004: £73,000). This is included in the above net book values.


Valuations were carried out during 2004 on land and buildings which had a net book value of
£4,885,000. They indicated that the market value of these properties was £1,589,000 above the net
book value. The revaluations have been incorporated in book values as at the year end. There was
no effect on the depreciation charge for the year.

54
The United Kingdom properties were revalued by Dunlop Heywood Lorenz, Consultant Surveyors,
on the basis of existing use value. The United States of America properties were revalued by
Kirkland and Co., using an open market valuation method.
The net book value of these properties as at 31 December 2005, based upon historical cost would
have been £3,281,000 after impairment. The difference between the historical cost depreciation charge
and the actual depreciation charge calculated on the revalued amounts is £7,000.

12. Fixed assets investments
Investments of the Company comprise:

Shares Loans to
in subsidiary subsidiary
undertakings undertakings Total
£000 £000 £000
Cost
At beginning of year 1,000 9,052 10,052
Loans impaired — 4,556 4,556

At end of year 1,000 4,496 5,496


Certain loans to subsidiary undertakings have been cancelled during the year.

Country of Class of
Subsidiary undertakings incorporation share held Parent Subsidiary
Choicewise Limited Great Britain Ordinary 100%
Universal Ceramic Materials US Inc USA Ordinary — 100%
Muscle Shoals Minerals Inc USA Ordinary — 100%
Universal America Inc USA Ordinary — 100%
UCM China Inc USA Ordinary — 100%
Universal Abrasives Limited Great Britain Ordinary 100%
Electro Furnace Products Limited Great Britain Ordinary 100%
Unitec Ceramics Limited Great Britain Ordinary 100%
Universal Ceramic Materials Limited Great Britain Ordinary 100%
Choicewise Limited and Universal Ceramic Materials US Inc are investment holding companies.
Muscle Shoals Minerals Inc, Universal America Inc, Electro Furnace Products Limited and Unitec
Ceramics Limited are engaged in the manufacture and distribution of ceramic materials.
UCM China Inc. is engaged in the distribution of ceramic materials.
Neither Universal Abrasives Limited or Universal Ceramic Materials Limited traded during the
period.

13. Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities – Group

Assets Assets Liabilities Liabilities Net Net
2005 2004 2005 2004 2005 2004
£000 £000 £000 £000 £000 £000
Property, plant and
equipment — — 1,385 1,387 (1,385) (1,387)
Employee benefits 1,453 1,217 — — 1,453 1,217
Provisions 6 — — 55 6 (55)
Tax value of loss
carry-forward 215 79 — — 215 79

Net tax assets
(liabilities) 1,674 1,296 1,385 1,442 289 (146)




55
Movement in deferred tax during the year

1st 31st
January Recognised Recognised December
2005 in income in equity 2005
£000 £000 £000 £000
Property, plant and equipment (1,387) 4 — (1,383)
Employee benefits 1,217 (142) 378 1,453
Provisions (55) 61 — 6
Tax value of loss carry-forward 79 136 — 215
Exchange translation adjustment — — (2) (2)

(146) 59 376 289


Movement in deferred tax in prior period

1st 31st
January Recognised Recognised December
2004 in income in equity 2004
£000 £000 £000 £000
Property, plant and equipment (1,163) (224) — (1,387)
Employee benefits 1,299 (19) (63) 1,217
Provisions (105) 50 — (55)
Tax value of loss carry-forward 41 38 — 79

72 (155) (63) (146)


At 31 December 2005 there is an unrecognised deferred tax asset of £157,000 (2004: £nil) in respect
of certain temporary differences on overseas intangible assets as the reversal of these timing
differences cannot be predicted with sufficient certainty.

14. Stocks

Group
2005 2004
£000 £000
Raw materials and consumables 2,329 2,021
Work in progress 2,344 2,817
Finished goods and goods for resale 3,418 3,267

8,091 8,105


15. Trade and other receivables


Group
2005 2004
£000 £000
Trade debtors 5,586 5,516
Amounts owed by subsidiary undertakings — —
Other debtors 42 75
Prepayments and accrued income 749 738

6,377 6,329




56
16. Trade and other payables
Group
2005 2004
£000 £000
Trade creditors 2,286 2,396
Amounts owed to subsidiary undertakings — —
Other taxes and social security 230 237
Accruals and deferred income 485 685

3,001 3,318


17. Employee Benefits
The Group operates six pension schemes, three in the United Kingdom, and three in the United
States of America.
The assumptions used by the actuaries are the best estimates chosen from a range of possible
actuarial assumptions, which, due to the timescale covered, may not necessarily be borne out in
practice.
It should be further noted that the fair value of the respective scheme’s assets, as shown, are not
intended to be realised in the short term and may be subject to significant change before they are
realised. The present value of the respective scheme’s liabilities is derived from cash flow projections
over long periods and is thus inherently uncertain.
Group
2005 2004 2003
£000 £000 £000
Present value of funded obligations -
31 December (17,293) (14,340) (13,558)
Present value of plan assets -
31 December 12,549 10,367 9,314

(4,744) (3,973) (4,244)

Interest on obligation 776 743 792
Expected return on plan assets (774) (683) (626)

Expense recognised in income statement 2 60 166


Group
2005 2004 2003
£000 £000 £000
Opening liability 3,973 4,244 5,324
Expense 2 60 166
Contributions paid (586) (572) (570)
Current Service Cost 42 36 40
Past Service Cost — — 70
Actuarial loss/(gain) 1,237 249 (718)
Exchange rate adjustment 76 (44) (68)

Closing liability 4,744 3,973 4,244

Expected return on plan assets 774 683 626
Actuarial gain/(loss) on plan assets 1,398 246 987

Actual return on plan assets 2,172 929 1,613



United Kingdom
The Group operates a defined benefit scheme and two defined contributions schemes.

57
Defined Benefit Scheme
This plan is funded by the payment of contributions to a separate trustee administered fund. The
scheme is funded by the payment of contributions to a separate trustee administered fund. The plan
was closed on 5 April 2002.
The United Kingdom pension charge for the year ended 31 December 2005 was £42,000 (2004:
£72,000).
The pension cost relating to the scheme is assessed in accordance with the advice of a qualified
independent actuary. The last formal valuation was as at 5 April 2002. At that valuation it was
assumed that future investment returns would be 9%, reducing to 8% per annum after retirement,
deferred pensions in excess of GMP would increase at 4% per annum and pension increases would be
3.5% per annum in relation to benefits accruing after 5 April 1997 and 3% per annum for other
benefits in excess of GMP. Pensions already in payment were valued by discounting future payments
at 5.2% per annum. A valuation of the Plan as at 5 April 2005 is in progress.
The results of the valuation have been adjusted on the advice of a qualified actuary to take account
of the requirements of IAS 19 Revised – Employee Benefits in order to assess the liabilities of the
scheme as at 31 December 2005.

The major assumptions used by the actuary at 31 December were:

2005 2004 2003
31 December
Rate of increase to pensions in payment 3.0% 2.8% 2.7%
Discount rate 4.8% 5.3% 5.4%
Inflation assumption 3.0% 2.8% 2.7%
The mortality tables used were as follows:
Deferred pensioners
Pre retirement PA92 (C=2010) PA(90)-2 PA(90)-2
Post retirement PA92 (C=2020) PA(90)-2 PA(90)-2
Pensioners PA92 (C=2010) PA(90)-2 PA(90)-2
The assets of the plan and the expected rate of return were:
2005 2004 2003
% £000 % £000 % £000
Equities 7.5 10,590 7.5 8,530 7.5 7,730
Cash 4.5 540 4.7 660 4.0 500

Total market value of assets 11,130 9,190 8,230
Actuarial value of liability (15,130) (12,540) (11,840)

Deficit (4,000) (3,350) (3,610)


The value of assets and liabilities exclude benefits that have been fully secured through the purchase
of insurance policies and money purchase benefits relating to additional voluntary contributions.

Amount credited/(charged) to other finance cost

2005 2004
£000 £000
Expected return on pension plan assets 680 597
Interest on pension plan liabilities (670) (640)

Net return 10 (43)


There would have been no amounts charged to operating profit either in 2005 or 2004.




58
Amount recognised in SORIE
% of % of % of
assets/ 2005 assets/ 2004 assets/ 2003
liabilities £000 liabilities £000 liabilities £000
Actual return less expected
return 13 1,420 3 230 11 900
Experience gains and losses on
liabilities — — — — 7 860
Changes in assumptions (17) (2,520) (3) (370) (9) (1,010)

Actuarial (loss)/gain
recognised in SORIE (1,100) (140) 750

Movement in deficit during the year
2005 2004
£000 £000
Deficit in plan at the beginning of year (3,350) (3,610)
Movements in year
Contributions 440 443
Other finance costs 10 (43)
Actuarial (loss)/gain (1,100) (140)

Deficit in plan at end of year (4,000) (3,350)


The last actuarial valuation highlighted that the plan was in deficit on the MFR basis. In the light of
this, the Company agreed a schedule of contributions under which annual contributions of £443,000
are payable. When the valuation of the plan as at 5 April 2005 has been concluded a revised schedule
of contributions will be agreed with the Trustees.

Defined Contribution Schemes
These schemes were incepted after the closure of the defined benefit scheme. Pension costs in respect
of these schemes for the year ended 31 December 2005 were £284,000 (2004: £225,000).

United States of America
The Group operates two defined benefit schemes and one defined contribution scheme.

Defined Benefit Schemes
These schemes principally cover the hourly paid employees at Muscle Shoals Minerals Inc. (‘‘MSM’’)
and Universal America Inc. (‘‘UAI’’). The schemes are funded by payments of contributions to
separate trustee-administered funds. The pension costs relating to them are assessed in accordance
with the advice of a qualified independent actuary using the projected unit method.
Pension charges in the United States of America subsidiary undertakings, in respect of these schemes,
for the year ended 31 December 2005 were US$99,000 (2004: US$103,000).
At MSM the last formal valuation was at 1 January 2005. At that valuation it was assumed that
future investment returns would be 7.5% per annum. At UAI the last formal valuation was as at 1
April 2005, and again it was assumed that future investment returns would be 7.5% per annum. The
schemes benefits are not related to salary and neither are pension payments increased after
commencement accordingly no assumptions are needed regarding salary or pension increases.
The valuation results have been updated on the advice of a qualified actuary in order to assess the
liabilities of the scheme as at 31 December 2005.




59
The major assumptions used by the actuary at 31 December were:
2005 2004 2003
Discount Rate 5.50% 5.75% 6.25%
Inflation assumption 2.50% 2.50% 2.50%
The mortality table used for the schemes was the 1983 Group Annuity Mortality Table, for each of
the years 2005, 2004 and 2003.

The assets of the schemes and the expected rates of return were:
2005 2004 2003
MSM % US$000 % US$000 % US$000
Equities 9.1 1,122 8.9 1,027 8.7 912
Bonds 5.0 695 5.0 566 5.0 421

Total market value of assets 1,817 1,593 1,333
Actuarial value of liability (2,687) (2,515) (2,244)

Deficit (870) (922) (911)

2005 2004 2003
UAI % US$000 % US$000 % US$000
Equities 8.9 363 8.9 390 8.4 389
Bonds 5.5 256 5.5 277 6.0 219

Total market value of assets 619 667 608
Actuarial value of liability (1,025) (943) (832)

Deficit (406) (276) (224)

The employer’s funding policy is to contribute an amount each year that falls between the legally
required minimum cash contribution and the maximum tax-deductible contribution. Contributions,
during the year, to the MSM scheme were $205,000 (2004: $213,000) and to the UAI scheme $58,000
(2004: $28,000).
The amounts which have been recognised in the primary statements, in the year ended 31 December
2005, are;

Amount charged to operating profit
MSM UAI
2005 2004 2005 2004
US$000 US$000 US$000 US$000
Current service cost (50) (44) (27) (22)
Amount (charged)/credited to other finance cost
MSM UAI
2005 2004 2005 2004
US$000 US$000 US$000 US$000
Expected return on pension plan assets 125 107 46 45
Interest on pension plan liabilities (142) (138) (51) (51)

Net Return (17) (31) (5) (6)




60
Amount recognised in SORIE
% of % of % of
assets/ 2005 assets/ 2004 assets/ 2003
MSM liabilities US$000 liabilities US$000 liabilities US$000
Actual return less expected
return (1) (26) 1 16 11 144
Experience gains and losses on
liabilities 1 24 — 7 (4) (88)
Changes in assumptions (3) (84) (7) (172) (5) (102)

Actuarial (loss) recognised in
SORIE (86) (149) (46)

% of % of % of
assets/ 2005 assets/ 2004 assets/ 2003
UAI liabilities US$000 liabilities US$000 liabilities US$000
Actual return less expected
return (2) (14) 2 13 12 71
Experience gains and losses on
liabilities (10) (107) — (2) — 1
Changes in assumptions (3) (36) (7) (62) (9) (79)

Actuarial (loss) recognised in
SORIE (157) (51) (7)

Movement in deficit during the year
MSM UAI
2005 2004 2005 2004
US$000 US$000 US$000 US$000
Deficit in plan at the beginning of year (922) (911) (275) (224)
Movements in year
Current service cost (50) (44) (27) (22)
Contributions 205 213 58 28
Other finance costs (17) (31) (5) (6)
Actuarial loss (86) (149) (157) (51)

Deficit in plan at end of year (870) (922) (406) (275


Defined Contribution Scheme
The members of this scheme are primarily salaried employees of both US subsidiaries. Pension cost in
respect of this scheme for the year ended 31 December 2005 was US$193,000 (2004: US$158,000).
The rates of exchange used to convert US$ amounts are US$1.8216/£ (2004: US$1.8326/£, 2003:
US$1.6352) being the average rate during the respective year and US$1.7168/£ (2004: US$1.9199/£,
2003: US$ 1.7901/£) being the closing rate at the respective year ends.


18. Financial instruments
The disclosures in this note describe the Group’s financial assets and liabilities as required by
International Accounting Standard 32 – Disclosure and Presentation and International Accounting
Standard 39 – Recognition and Measurement.
Comparative figures have been stated having applied UK GAAP.

Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchases and borrowings that are
denominated in a currency other than Pounds Sterling. The currencies giving rise to this risk are
primarily Euro, US Dollar and Japanese Yen. Where appropriate the net position relating to foreign
currency exposure, if material, is hedged using forward contracts. Most of the forward contracts have

61
maturities of less than one year. Where necessary, forward exchange contracts are rolled over at
maturity.
The unhedged currency exposures reflected in the Group’s foreign currency monetary assets and
liabilities are summarised below:

Functional currency Functional currency
of group operations Total of group operations Total
Sterling US Dollar Sterling US Dollar
2005 2005 2005 2004 2004 2004
£000 £000 £000 £000 £000 £000
US Dollar 118 — 118 331 — 331
Euro 361 45 406 303 133 436
Yen — 389 389 2 317 319

479 434 913 636 450 1,086


The directors believe that the fair values of the financial instruments carried at cost approximates to
their carrying value.

Interest rate risk
The Group has a floating interest rate exposure to its committed revolving credit facility. This is
periodically monitored in order to establish the appropriateness of entering hedging contracts in order
to convert part of such exposure to a fixed rate.
Finance contracts are contracted at a fixed rate.
Obligations under bank loans and finance contracts are repayable as follows:
Finance contracts Bank loan
2005 2004 2005 2004
£000 £000 £000 £000
Within one year 344 339 10,063 10,027
Between one and two years 76 339 — —
Between two and five years 126 179 — —

546 857 10,063 10,027


Group Company
2005 2004 2005 2004
£000 £000 £000 £000
Within one year 10,407 10,366 5,076 5,199

Between one and two years 76 339 — —
Between two and five years 126 179 — —

202 518 — —

Total financial liabilities 10,609 10,884 5,076 5,199


In respect of the Company all financial liabilities relate to bank loans.




62
At 31 December 2005 the Group had cash deposits of £865,000 (2004: £815,000). The Group’s
financial liabilities comprise of fixed and floating rate instruments and are detailed below, together
with a maturity profile.

Fixed Floating Total Fixed Floating Total
2005 2005 2005 2004 2004 2004
£000 £000 £000 £000 £000 £000
Bank Loan — 10,063 10,063 — 10,027 10,027
Finance Contracts 546 — 546 857 — 857

546 10,063 10,609 857 10,027 10,884


The floating interest rate exposure relates to the Group’s committed revolving credit facility of £12.3
million, which is available until 30 June 2007. The interest on the loans, borrowed against the facility,
is payable at LIBOR plus an additional cost rate, which has ranged during the year between 1% and
1.125% and is secured by fixed and floating charges over the property and other assets of the Group.
Of this exposure the amount attributable to the Company is £5,076,000 (2004: £5,199,000).
The sterling denominated finance contract is fixed at a rate of 7.52% and matures on 28 November
2006, the US denominated finance contract is fixed at a rate of 2.75% and matures on 15 September
2009.
The Group sells into numerous international markets trading with its customers on a variety of terms
including open terms, letters of credit and settlement prior to delivery. The Group manages its own
credit risk by assessing customer history, political territory, stability of industry, financial strength and
ability to obtain relevant insurances

19. Called up share capital
2005 2004
£000 £000
Authorised – equity
35,000,000 (2004: 35,000,000) ordinary shares of 5p each 1,750 1,750

Allotted, called up and fully paid – equity
23,932,373 (2004: 23,932,373) ordinary shares of 5p each 1,196 1,196


20. Share options
Under the terms of the UCM Group PLC Executive Share Option Scheme, the following options to
purchase ordinary shares of the Company were granted:

Options at
31 Dec 2004 and
Contract Date granted 31 Dec 2005 Option price Exercise date Expiry date
2 28 April 1997 47,000 114p 28 April 2000 27 April 2007
31 October 31 October 30 October
3 2000 57,000 96.5p 2003 2010
The options are conditional upon the Group attaining an earnings per share growth of 6% above the
growth in the Retail Price Index over a three year period, and are awarded based upon appropriate
performance achievements.




63
21. Capital and reserves
Capital
redemption Translation Revaluation Retained
Share Share
reserve reserve surplus earnings Total
capital premium
£000 £000 £000 £000 £000 £000 £000
At 1 January 2004 1,196 8,402 218 — 1,689 1,591 13,096
Profit for the financial
year — — — — — 1,438 1,438
Actuarial losses — — — — — (249) (249)
Currency translation
adjustment — — — (691) — — (691)
Tax on items taken
directly to reserves — — — — — 77 77
Loan to employee share
ownership trust — — — — — (379) (379)
Revaluation of tangible
fixed assets — — — — 1,589 — 1,589
Dividends — — — — — (1,071) (1,071)
Transfer — — — — (68) 68 —

At 31 December 2004 1,196 8,402 218 (691) 3,210 1,475 13,810

At 1 January 2005 1,196 8,402 218 (691) 3,210 1,475 13,810
Loss for the financial
year — — — — — (371) (371)
Actuarial losses — — — — — (1,237) (1,237)
Currency translation
adjustment — — — 1,189 — — 1,189
Tax on items taken
directly to reserves — — — — — 378 378
Dividends — — — — — (1,077) (1,077)
Transfer — — — — (85) 85 —

At 31 December 2005 1,196 8,402 218 498 3,125 (747) 12,692




64
22. Commitments
(i) Capital commitments at the end of the financial year for which no provision has been made are
as follows:

Group
2005 2004
£000 £000
Contracted 10 14


(ii) Annual commitments under non-cancellable operating leases are as follows:

2005
Land and
buildings Other
£000 £000
Operating leases which expire:
Within one year — 78
In second to fifth years inclusive — 105

— 183


23. Contingent liabilities
Group
The Group has contingent liabilities in respect of guarantees given in the ordinary course of business
of £280,000 (2004: £280,000).

Company
The Company has guaranteed the overdrafts and loans of its subsidiary undertakings, the amount
outstanding at the year end was £5,237,000 (2004: £5,338,000).

24. Significant estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that effects the application of policies and reported amounts
of assets and liabilities, income and expenses. The estimates and underlying assumptions are reviewed
on an ongoing basis. Judgements made by the directors, in the application of the accounting policies
that have a significant effect on the financial statements are:
Note 3 contains information about the impairment of assets in the current year.
Note 18 contains information about the foreign exchange exposure of the Group and risks in relation
to foreign exchange.
Note 17 sets out the key assumptions applied by the directors in the valuation of the defined benefit
pension scheme.

25. Related parties
Group
In respect of the Group, related parties are considered to be the directors who served during the year.

Transactions with Directors
As at 31 December 2005 Directors of the Company and their immediate relatives control 11.8 per
cent (2004: 17.8 per cent) of the voting shares of the Company. There were no transactions during
the year with these Directors.

Company
In respect of the Company, related parties are considered to be those subsidiary undertakings as set
out in note 12.

65
Transactions with key management personnel
As at 31 December 2005 Directors of the Company and their immediate relatives control 11.8 per cent
(2004: 17.8 per cent) of the voting shares of the Company. There were no transactions during the year with
these Directors.

Other related party transactions
Management services amounting to £833,000 (2004: £914,000) were recharged to wholly owned
subsidiaries by the Company, and in addition, rental income in respect of properties of £122,000
(2004: £116,000), was received from UK subsidiaries, together with interest amounting to £397,000
(2004: £391,000) received from subsidiaries, in respect of amounts owed.

26. Explanation of transition to Adopted IFRS
As stated in note 1, these are the Group’s first consolidated financial statements in accordance with
Adopted IFRS.
The accounting policies set out in note 1 have been applied in preparing the financial statements for
the year ended 31 December 2005, the comparative information presented in these financial statements
for the year ended 31 December 2004 and in the preparation of an opening IFRS balance sheet at 1st
January 2004.
In preparing its opening IFRS balance sheet, the Group has adjusted amounts previously reported in
financial statements prepared in accordance with its previous basis of accounting (UK GAAP). An
explanation of how the transition from UK GAAP to Adopted IFRS has affected the Group’s
financial position and financial performance is set out in the following tables and the notes that
accompany the tables.
The adoption of IFRS is an accounting change only, and does not affect the underlying operations or
cash generation of the Group.

Group
Reconciliation of profit
for the year ended 31 December 2004
(Restated
Foreign
Employee
(Reported
Exchange for Adopted
Benefits
under UK
IFRS)
IAS 21
IAS 19
GAAP)
£000 £000 £000 £000
32,808 — — 32,808
Revenue
Cost of Sales (25,264) — — (25,264)

7,544 — — 7,544
Gross Profit
Distribution costs (236) — — (236)
Administration costs (4,746) 58 5 (4,683)

2,562 58 5 2,652
Operating Profit
Finance costs (531) — — (531)

2,031 58 5 2,094
Profit before tax
Taxation (656) — — (656)

1,375 58 5 1,438
Profit for the period attributable to equity holders




66
Reconciliation of equity
as at 31 December 2004

(Reported Income Foreign (Restated
under UK Dividends Pensions Taxes Exchange for Adopted
GAAP) IAS 10 IAS 19 IAS 12 IAS 21 IFRS)
£000 £000 £000 £000 £000 £000
Non current assets
Intangible assets 446 — — — — 446
Property, plant and
equipment 16,399 — — — — 16,399

16,845 — — — — 16,845

Current assets
Stocks 8,105 — — — — 8,105
Trade and other
receivables 6,566 — (238) — 1 6,329
Current tax
receivables — — — 109 — 109
Cash and cash
equivalents 815 — — — — 815

15,486 — (238) 109 1 15,358

32,331 — (238) 109 1 32,203
Total assets

Current liabilities
Financial liabilities 10,366 — — — — 10,366
Trade and other
payables 3,916 (598) — — — 3,318
Current tax payable 122 — — (50) — 72

14,404 (598) — (50) — 13,756

Non current liabilities
Financial liabilities 518 — — — — 518
Post employment
benefits — — 3,973 — — 3,973
Deferred tax liabilities 1,363 — — (1,217) — 146

1,881 — 3,973 (1,217) — 4,637

16,046 598 (4,211) 1,376 1 13,810
Net assets

Equity
Share capital 1,196 — — — — 1,196
Share premium
account 8,402 — — — — 8,402
Retained earnings 3,050 598 (4,211) 1,376 662 1,475
Other reserves 3,398 — — — (661) 2,737

16,046 598 (4,211) 1,376 1 13,810
Total equity




67
Reconciliation of equity
as at 1 January 2004

(Restated
Foreign
Income
(Reported
Exchange for Adopted
Taxes
under UK Cash Dividends Pensions Presentation
IFRS)
IAS 21
IAS 12
GAAP IAS 7 IAS 10 IAS 19 IAS 1
£000 £000 £000 £000 £000 £000 £000 £000
Non current assets
Intangible assets 545 — — — — — — 545
Property, plant and
equipment 16,359 — — — — — — 16,359
Deferred tax asset — — — — — 101 — 101

16,904 — — — — 101 — 17,005

Current assets
Stocks 7,556 — — — — — — 7,556
Trade and other
receivables 6,455 — — — — — (4) 6,451
Current tax
receivables — — — — 132 — — 132
Cash and cash
equivalents 130 (38) — — — — — 92

14,141 (38) — — 132 — (4) 14,231

31,045 (38) — — 132 101 (4) 31,236
Total assets

Current liabilities
Financial liabilities 9,774 (38) — — — — — 9,736
Trade and other
payables 3,723 — (598) — — — — 3,125
Current tax
payable 49 — — — 132 — — 181

13,546 (38) (598) — 132 — — 13,042



(Restqted
Foreign
Income
(Reported
Exchange for Adopted
Taxes
under UK Cash Dividends Pensions Presentation
IFRS)
IAS 21
IAS 12
GAAP IAS 7 IAS 10 IAS 19 IAS 1
£000 £000 £000 £000 £000 £000 £000 £000
Non current
liabilities
Financial liabilities 825 — — — — — — 825
Post employment
benefits — — — 4,244 — — — 4,244
Deferred tax
liabilities 1,227 — — — — (1,198) — 29
Other liabilities 176 — — (176) — — — —

2,228 — — 4,068 — (1,198) — 5,098

15,271 — 598 (4,068) — 1,299 (4) 13,096
Net assets

Equity
Share capital 1,196 — — — — — — 1,196
Share premium
account 8,402 — — — — — — 8,402
Retained earnings 3,766 — 598 (4,068) — 1,299 (4) 1,591
Other reserves 1,907 — — — — — — 1,907

15,271 — 598 (4,068) — 1,299 (4) 13,096
Total equity




68
Company
Reconciliation of profit
for the year ended 31 December 2004
(Reported Employee (Restated
under UK Benefits for Adopted
GAAP IAS 19 IFRS)
£000 £000 £000
Loss for the period attributable to equity holders (128) (2) (130)

Reconciliation of equity
as at 31 December 2004
(Reported Income (Restated
under UK Dividends Pensions Taxes for Adopted
GAAP) IAS 10 IAS 19 IAS 12 IFRS)
£000 £000 £000 £000 £000
Non current assets
Property, plant and equipment 5,119 — — — 5,119
Investments in subsidiaries 10,052 — — — 10,052

15,171 — — — 15,171

Current assets
Trade and other receivables 3,982 (707) (52) — 3,223
Current tax receivable 20 — — 15 35

4,002 (707) (52) 15 3,258

19,173 (707) (52) 15 18,429
Total assets

Current liabilities
Financial liabilities 5,199 — — — 5,199
Trade and other payables 1,049 (598) — — 451

6,248 (598) — — 5,650

Non current liabilities
Post-employment benefits — — 560 — 560
Deferred tax liabilities 290 — — (168) 122

290 — 560 (168) 682

12,635 (109) (612) 183 12,097
Net assets


(Restated
(Reported Income
Taxes for Adopted
under UK Dividends Pensions
IAS 12 IFRS)
GAAP) IAS 10 IAS 19
£000 £000 £000 £000 £000
Equity
Share capital 1,196 — — — 1,196
Share premium account 8,402 — — — 8,402
Retained earnings 79 (109) (612) 183 (459)
Other reserves 2,958 — — — 2,958

12,635 (109) (612) 183 12,097
Total equity




69
Reconciliation
as at 1 January 2004
(Reported Income (Restated
under UK Dividends Pensions Taxes for Adopted
GAAP) IAS 10 IAS 19 IAS 12 IFRS)
£000 £000 £000 £000 £000
Non current assets
Property, plant and equipment 3,759 — — — 3,759
Investments in subsidiaries 10,052 — — — 10,052

13,811 — — — 13,811

Current assets
Trade and other receivables 4,478 (952) — — 3,526

18,289 (952) — — 17,337
Total assets

Current liabilities
Financial liabilities 5,339 — — — 5,339
Trade and other payables 742 (598) — — 144
Current tax payable 97 — — — 97

6,178 (598) — — 5,580

Non current liabilities
Post-employment benefits — — 570 — 570
Deferred tax liabilities 283 — — (171) 112

283 — 570 (171) 682

11,828 (354) (570) 171 11,075
Net assets

Equity
Share capital 1,196 — — — 1,196
Share premium account 8,402 — — — 8,402
Retained earnings 703 (354) (570) 171 (50)
Other reserves 1,527 — — — 1,527

11,828 (354) (570) 171 11,075
Total equity




70
Section 2 – UCM Group’s historical financial information for the year ended 31 December
2004 prepared in accordance with UK GAAP
Consolidated profit and loss account
for the year ended 31 December 2004

2004 2003
Notes £000 £000
Continuing Operations
2 32,808 31,956
Turnover
Cost of sales
(including exceptional costs Nil – 2003: £240,000) (25,264) (25,141)

7,544 6,815
Gross profit
Distribution costs (236) (247)
Administrative expenses
(including exceptional costs Nil – 2003: £332,000) (4,746) (4,856)

2,562 1,712
Operating profit
Interest payable and similar charges 6 (531) (471)

3-5 2,031 1,241
Profit on ordinary activities before taxation
Taxation on ordinary activities 7 (656) (379)

1,375 862
Profit for the financial year
Dividends paid and proposed 9 (1,071) (1,077)

Retained profit /(loss) for
22 304 (215)
the financial year

10
Earnings per ordinary share
Basic and diluted 5.7p 3.6p

Before exceptional items
Basic and diluted 5.7p 5.3p




71
Consolidated balance sheet
as at 31 December 2004

2004 2003
Notes £000 £000 £000 £000
Fixed assets
Intangible assets 11 446 545
Tangible assets 12 16,399 16,359

16,845 16,904
Current assets
Stocks 14 8,105 7,556
Debtors 15 6,566 6,455
Cash at bank and in hand 815 130

15,486 14,141
Creditors: amounts falling due
within one year 16 (14,404) (13,546)

1,082 595
Net current assets

17,927 17,499
Total assets less current liabilities
Creditors: amounts falling due after
more than one year 17 (518) (825)
19 (1,363) (1,403)
Provisions for liabilities and charges

16,046 15,271
Net assets

Capital and reserves
Called up share capital 20 1,196 1,196
Share premium account 22 8,402 8,402
Capital redemption reserve 22 218 218
Revaluation reserve 22 3,180 1,689
Profit and loss account 22 3,050 3,766

16,046 15,271
Shareholders’ funds – equity




72
Consolidated cash flow statement
for the year ended 31 December 2004

2004 2003
Notes £000 £000 £000 £000
Net cash inflow from operating
26 2,805 2,777
activities
Returns on investments and servicing
of finance
Interest paid (526) (470)
Taxation
UK corporation tax (paid) (417) (360)
Overseas tax (paid) (9) (114)

(426) (474)
Capital expenditure
Payments for intangible fixed assets (27) (270)
Payments for tangible fixed assets (586) (1,574)
Receipts from sale of tangible fixed
assets — 36

(613) (1,808)
(1,071) (1,676)
Equity dividends paid

Cash inflow/(outflow) before
financing 169 (1,651)
Financing
Issue of ordinary share capital — 3
New loans 76 —
Repayment of amounts borrowed (324) (293)
Short term borrowings 828 2,019

Net cash inflow from financing 580 1,729

27 749 78
Increase in cash in the year




73
Consolidated statement of total recognised gains and losses
for the year ended 31 December 2004

Group
2004 2003
£000 £000
1,375 862
Profit for the financial year
Currency translation adjustment taken directly to reserves (739) (1,199)
Revaluation of tangible fixed assets 1,589 —
Loan to employee share ownership trust (379) —

1,846 (337)
Total recognised gains and losses relating to the year




Reconciliation of movement in shareholders’ funds
for the year ended 31 December 2004

Group
2004 2003
£000 £000
1,375 862
Profit for the financial year
Dividends (1,071) (1,077)

304 (215)
Retained profit /(loss) for the financial year
Currency translation adjustment (739) (1,199)
Revaluation of tangible fixed assets 1,589 —
Loan to employee share ownership trust (379) —
New share capital subscribed — 3

775 (1,411)
Net addition / (reduction) to shareholders’ funds

15,271 16,682
Opening shareholders’ funds

16,046 15,271
Closing shareholders’ funds




74
Notes on the financial statements
1. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are
considered material in relation to the Group’s financial statements.

Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and
under the historical cost accounting rules, modified to include the revaluation of land and buildings.

Basis of consolidation
The Group financial statements consolidate the financial statements of UCM Group PLC and all its
subsidiary undertakings, all of which are made up to 31 December.
Unless otherwise stated the acquisition method of accounting has been adopted. Under this method,
the results of subsidiary undertakings acquired or disposed of in the year are included in the
consolidated profit and loss account from the date of acquisition or up to the date of disposal. On
the acquisition of a business, fair values are attributed to the net tangible assets. Where the fair value
of the consideration exceeds the values attributable to such net assets, the difference is treated as
purchased goodwill.
Purchased goodwill (both positive and negative) arising on consolidation in respect of acquisitions
before 1 January 1998, when FRS 10 Goodwill and intangible assets was adopted, was written off to
reserves in the year of acquisition. When a subsequent disposal occurs any related goodwill previously
written off to reserves is written back through the profit and loss account as part of the profit or loss
on disposal.
Purchased goodwill (representing the excess of the fair value of the consideration given and associated
costs over the fair value of the separable net assets acquired) arising on consolidation in respect of
acquisitions since 1 January 1998 is capitalised. Positive goodwill is amortised to nil by equal annual
instalments over its estimated useful life, normally 20 years.
On the subsequent disposal or termination of a business acquired since 1 January 1998, the profit or
loss on disposal or termination is calculated after charging (crediting) the unamortised amount of any
related goodwill (negative goodwill).
In the Company’s financial statements, Investments In subsidiary undertakings are stated at cost less
provision for any impairment in value.
In accordance with Section 230(4) of the Companies Act 1985 UCM Group PLC is exempt from the
requirement to present its own profit and loss account. This has been approved by the Board. Its
profit for the financial year is shown in note 8 to the financial statements.

Fixed assets and depreciation
Depreciation is provided to write off the cost or valuation less estimated residual value of fixed assets
by equal instalments over their anticipated useful economic lives. Rates are typically;
Freehold and long leasehold buildings – 5%
Leasehold land – period of lease
Plant and machinery – 10% per annum
Motor vehicles – 20–25% per annum
Computer hardware – 25% per annum
Computer software – 50% per annum
Development costs – 10% per annum
Licence agreement – period of agreement
No depreciation is provided on freehold land.
The Group’s land and buildings are valued by external advisors, on a three year rolling basis. Where
appropriate the carrying value of these assets are adjusted accordingly.

Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the
transaction or, if hedged forward, at the rate of exchange under the related forward currency
contract. Monetary assets and liabilities denominated in foreign currencies are translated using the

75
rate of exchange ruling at the balance sheet date and the gains or losses arising are included in the
profit and loss account.
For consolidation purposes, the assets and liabilities of overseas subsidiary undertakings are translated
at the closing exchange rates. Profit and loss accounts of such undertakings are consolidated at the
average rates of exchange during the year. Exchange differences arising on these translations are
taken to reserves, net of exchange differences arising on related foreign currency borrowings.

Leases
Assets purchased under finance leases are capitalised at amounts equal to their original cost and
depreciation is provided on the basis of the Group’s depreciation policies. The capital elements of
future obligations under finance leases are included as liabilities in the balance sheet and the current
year’s interest element is charged to the profit and loss account.
For operating leases, rentals are charged to the profit and loss account on a straight line basis over
the life of the lease.

Pension costs
The Group operates defined benefit and contribution pension schemes. Contributions to the Group’s
defined benefit schemes are charged to the profit and loss account so as to spread the cost of
pensions over employees’ working lives with the Group in accordance with the advice of the scheme’s
independent actuaries. Any difference between the charge to the profit and loss account and the
actual contributions paid to the schemes is included as an asset or liability in the balance sheet.
Costs in respect of the defined contribution schemes are charged to the profit and loss account as
incurred.

Research and development expenditure
Expenditure on research and development is charged to the profit and loss account in the year in
which it is incurred, except where development expenditure is incurred on seperately identifiable
projects that is recoverable against future additional revenues arising on those projects. In such cases,
the development expenditure is capitalised and amortised against the future revenue of the projects.

Stocks
Stocks are stated at the lower of cost and net realisable value. In determining the cost of raw
materials, consumables and goods purchased for resale, the FIFO method is used. For work in
progress and finished goods manufactured by the Group, cost is taken as production cost, which
includes an appropriate proportion of attributable overheads.

Taxation
The charge for taxation is based upon the profit for the year and takes into account taxation deferred
because of timing differences between the treatment of certain items for taxation and accounting
purposes.
Deferred taxation is recognised, without discounting, in respect of all timing differences between the
treatment of certain items for taxation and accounting purposes which have arisen but not reversed
by the balance sheet date, except as otherwise required by FRS 19.

Turnover
Turnover represents the amounts (excluding sales tax) derived from the provision of goods and
services.
The products sold by the Group can be identified to three core products namely magnesia, standard
zirconia and advanced ceramic materials. These products are sold into six market sectors being
Domestic and Industrial Appliances, Steelmaking, Automotive, Investment Casting, Engineered
Ceramics and Other Industrials.




76
2. Segmental information

Continuing Continuing
operations operations
2004 2003
£000 £000
Turnover can be analysed as follows:
by destination
United Kingdom 2,383 2,851
North America 9,376 8,940
Continental Europe 12,949 12,852
Central and South America 788 591
Asia 6,672 5,981
Rest of World 640 741

32,808 31,956

by origin
United Kingdom 15,047 18,648
North America 17,761 13,308

32,808 31,956

by market
Domestic & Industrial Appliances 16,822 17,779
Steelmaking 6,736 6,009
Automotive 6,893 5,554
Investment Casting 42 38
Engineered Ceramics 855 944
Other Industrials 1,460 1,632

32,808 31,956

Net assets can be analysed as follows:
by origin
United Kingdom 14,123 14,102
North America 13,837 13,688

27,960 27,790
Non operating liabilities (11,914) (12,519)

16,046 15,271



Continuing Continuing
operations operations
by market
2004 2003
£000 £000
Domestic & Industrial Appliances 13,497 14,079
Steelmaking 6,293 4,441
Automotive 6,101 5,885
Investment Casting 35 20
Engineered Ceramics 979 1,094
Other Industrials 1,055 2,271

27,960 27,790
Non operating liabilities (11,914) (12,519)

16,046 15,271


77
Non-operating liabilities include net cash/(borrowings), taxation balances, pension balances and
dividends payable.

Results
In the opinion of the Directors, the disclosure of results by market and geographical origin would be
seriously prejudicial to the interest of the Group.

3. Results on ordinary activities before taxation

2004 2003
£000 £000
Results on ordinary activities before taxation is stated after charging/(crediting):
Fees of the auditors and its associates:
Audit – Company 6 6
– Rest of Group 45 51

51 57

Other services 61 62

Depreciation and other amounts written off tangible fixed assets:
Owned 1,484 1,343
Leased 207 203
Amortisation of capitalised development costs 20 23
Amortisation of licence agreement costs 72 49
Hire of equipment – plant 101 135
Operating lease rentals – other assets 136 174
Research and development expenditure 154 85
Exchange differences 8 (88)
Exceptional costs relating to production re-organisation — 572

4. Remuneration of directors

2004 2003
£000 £000
Directors’ emoluments 793 548

Company contributions to money purchase pension schemes 51 42


The emoluments of the highest paid director were £200,862 (2003: £143,640).
Retirement benefits are accruing to 5 directors under money purchase schemes.

5. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year,
analysed by category, was as follows:

Number of employees
2004 2003
Technical 28 28
Administration 39 45
Manufacturing 196 212

263 285




78
The aggregate payroll costs of these persons were as follows:

2004 2003
£000 £000
Wages and salaries 6,236 6,707
Social security costs 564 596
Other pension costs 528 424

7,328 7,727


6. Interest payable and similar charges

2004 2003
£000 £000
Bank loans and overdrafts 484 407
Finance leases 47 64

531 471


7. Taxation

2004 2003
£000 £000
UK Corporation tax
Current tax on income for the period 284 315
Adjustments in respect of prior periods (38) —
Foreign tax
Current tax on income for the period 240 (110)
Adjustments in respect of prior periods 15 —

501 205
Total current tax

Deferred taxation (see note 19)
Origination and reversal of timing differences 205 165
Adjustments in respect of prior periods (50) 9

155 174
Total deferred tax

656 379
Tax on profit on ordinary activities


Factors affecting the tax charge for the current period
The current tax assessed is lower than the average rate borne by the Group of 31.6% (2003: 28.1%).
The differences are explained below:

2004 2003
£000 £000
Profit on ordinary activities before tax 2,031 1,241
Tax on profit on ordinary activities at the average rate of 31.6% 641 349
Effects of:
Permanently disallowed/non taxable items 69 10
US state tax adjustments 23 (6)
Movement on timing differences (209) (165)
Prior year items (23) —
Losses not utilised — 17

501 205
Total current tax


79
8. Parent company result for the financial year
2004 2003
£000 £000
Profit for the financial year 779 1,032


9. Dividends
2004 2003
£000 £000
Equity
Ordinary shares:
Interim
Paid – 2.0p per ordinary share (2003: 2.0p) 479 479
Final
Proposed – 2.5p per ordinary share (2003: 2.5p) 598 598

1,077 1,077
Final 2003
Waived 6 —

1,071 1,077


10. Earnings per ordinary share
Earnings per ordinary share is calculated with reference to the profit attributable to ordinary
shareholders of £1,375,000 (2003: £862,000) and the weighted average number of ordinary shares in
issue during the year of 23,932,373 (2003: 23,932,373). There is no dilution in the earnings per share
in both the reporting period and the comparative year of 2003.

Before exceptional items
Earnings per ordinary share is calculated with reference to the profit attributable to ordinary
shareholders, before exceptional items, of £1,375,000 (2003: £1,260,000) and the weighted number of
ordinary shares in issue during the year of 23,932,373 (2003: 23,932,373). There is no dilution in the
earnings per share in both the reporting period and the comparative year of 2003.




80
11. Intangible fixed assets
Licence Development
agreement costs Total
£000 £000 £000
Group
Cost
At beginning of year 520 202 722
Additions 27 — 27
Currency translation adjustments (37) (13) (50)

At end of year 510 189 699

Amortisation
At beginning of year 45 132 177
Charge for year 72 20 92
Currency translation adjustments (6) (10) (16)

At end of year 111 142 253

Net book value
At 31 December 2004 399 47 446

At 31 December 2003 475 70 545



12. Tangible fixed assets

Long
Plant
leasehold
and
land and
Freehold
Freehold
machinery Total
buildings
buildings
land
£000 £000
£000
£000
£000
Group
Cost or valuation
At beginning of year 1,376 3,162 1,007 20,858 26,403
Additions — — — 618 618
Disposals — — — (7) (7)
Transfer to revaluation reserve 743 (243) 531 — 1,031
Currency translation adjustment (8) (94) — (658) (760)

At end of year 2,111 2,825 1,538 20,811 27,285

Depreciation
At beginning of year — 318 60 9,666 10,044
Charge for year — 152 32 1,507 1,691
Disposals — — — (7) (7)
Transfer to revaluation reserve — (466) (92) — (558)
Currency translation adjustment — (4) — (280) (284)

At end of year — — — 10,886 10,886

Net book value
At 31 December 2004 2,111 2,825 1,538 9,925 16,399

At 31 December 2003 1,376 2,844 947 11,192 16,359



The net book value of plant and machinery includes £801,000 (2003: £1,031,000) in respect of assets
held under finance leases.

81
Plant and machinery in the course of construction, and therefore not depreciated during the year is
£73,000 (2003: £3,047,000). This is included in the above net book values.
Valuations were carried out during the year on land and buildings which had a bet book value of
£4,885,000. They indicated that the market value of these properties was £1,589,000 above the net
book value. The revaluations have been incorporated in book values as at the year end. There was
no effect on the depreciation charge for the year.
The United Kingdom properties were revalued by Dunlop Heywood Lorenz, Consultant Surveyors,
on the basis of existing use value. The United States of America properties were revalues by Kirkland
and Co. using an open market valuation method.
The net book value of these properties as at 31 December 2004, based upon historical cost would
have been £3,476,000 after impairment. The difference between the historical cost depreciation charge
and the actual depreciation charge calculated on the revalued amounts is £2,000.

13. Fixed assets investments
Investments of the parent company comprise:

Shares in in Loans to
subsidiary subsidiary
undertakings undertakings Total
£000 £000 £000
Cost
At the beginning of the year 1,000 9,052 10,052



Country of Class of share
Subsidiary undertakings incorporation held Parent Subsidiary
Choicewise Limited Great Britain Ordinary 100%
Universal Ceramic Materials US Inc USA Ordinary — 100%
Muscle Shoals Minerals Inc USA Ordinary — 100%
Universal America Inc USA Ordinary — 100%
UCM China Inc USA Ordinary — 100%
Universal Abrasives Limited Great Britain Ordinary 100%
Electro Furnace Products Limited Great Britain Ordinary 100%
Unitec Ceramics Limited Great Britain Ordinary 100%
Universal Ceramic Materials Limited Great Britain Ordinary 100%
Choicewise Limited and Universal Ceramic Materials US Inc are investment holding companies.
Muscle Shoals Minerals Inc, Universal America Inc, Electro Furnace Products and Unitec Ceramics
Limited are engaged in the manufacture and distribution of ceramic materials.
UCM China Inc. is engaged in the distribution of ceramic materials.
Neither Universal Abrasives Limited or Universal Ceramic Materials Limited traded during the
period.

14. Stocks

Group
2004 2003
£000 £000
Raw materials and consumables 2,021 1,715
Work in progress 2,817 2,738
Finished goods and goods for resale 3,267 3,103

8,105 7,556




82
15. Debtors

Group
2004 2003
£000 £000
Amounts falling due within one year
Trade debtors 5,515 5,458
Amounts owed by subsidiary undertakings — —
Other debtors 75 151
Prepayments and accrued income 976 846

6,566 6,455


16. Creditors: amounts falling due within one year
Group
2004 2003
£000 £000
Bank loans and overdrafts (see note 18) 10,027 9,470
Obligations under finance leases (see note 18) 339 304
Trade creditors 2,396 2,364
Other creditors including taxation and social security:
Corporation tax 122 49
Other taxes and social security 237 195
Accruals and deferred income 685 566
Dividends proposed 598 598

14,404 13,546


17. Creditors: amounts falling due after more than one year
Group
2004 2003
£000 £000
Obligations under finance leases (see note 18) 518 825


18. Financial instruments
The disclosures in this note describe the Group’s financial assets and liabilities as required by
Financial Reporting Standard 13. In accordance with the standard certain financial assets have been
excluded, including investments in subsidiary companies and, with the exception of currency
disclosures, short-term debtors and creditors.

Policy
It is the policy of the Group to seek to reduce the risks arising from currency exposure. Speculation
is not part of the Group’s treasury activities. Where appropriate the net position relating to foreign
currency exposure, if material, is hedged using forward contracts.

Treasury operations
At 31 December 2004 the group had cash deposits of £815,000 (2003: £130,000). The Group’s
financial liabilities comprise of fixed and floating rate instruments and are detailed below, together
with a maturity profile.

Fixed Floating Total Fixed Floating Total
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Bank loan — 10,027 10,027 — 9,470 9,470
Finance contracts 857 — 857 1,129 — 1,129

857 10,027 10,884 1,129 9,470 10,599


83
Finance contracts are denominated in sterling with the exception of £347,000 (2003: £374,000), which
is denominated in US dollars.
Obligations under bank loans and finance contracts are repayable as follows:

Finance contracts Bank loan
2004 2003 2004 2003
£000 £000 £000 £000
Within one year 339 304 10,027 9,470
Between one and two years 339 320 — —
Between two and five years 179 452 — —
After more than five years — 53 — —

857 1,129 10,027 9,470


The floating interest rate exposure relates to the Group’s committed revolving credit facility of £12.3
million, which is available until 30 June 2007. The interest on the loans, borrowed against the facility,
is payable at LIBOR plus and additional cost, which has ranged during the year between 1% and
1.125%, and is secured by fixed and floating charges over the property and other assets of the Group.
The sterling denominated finance contract is fixed at a rate of 7.52% and matures on 28 November
2006, the US denominated finance contract is fixed at a rate of 2.75% and matures on 15 September
2009.

Currency
The unhedged currency exposures reflected in the Group’s foreign monetary assets and liabilities are
summarised below:

Functional currency Functional currency
of group operations Total of group operations Total
Sterling US Dollar Sterling US Dollar
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Sterling — — — — 62 62
US Dollar 331 — 331 245 — 245
Euro 303 133 436 870 99 969
Yen 2 317 319 17 36 53

636 450 1,086 1,132 197 1,329


Fair values
The difference between the fair values and book values of the Group’s financial assets and liabilities
is not material.

19. Provisions for liabilities and charges
Deferred
taxation
Group
£000
At beginning of year 1,227
Charge for the year in the profit and loss account 155
Currency translation adjustments (19)

At 31 December 2004 1,363

At 31 December 2003
Deferred tax 1,227
Pensions 176

1,403


84
No provision has been released or applied for any purpose other than that for which it was
established.
The amounts provided for deferred taxation are set out below:
Group
2004 2003
£000 £000
Difference between accumulated depreciation and
amortisaton and capital allowances 1,050 972
Other timing differences 55 (3)
Capital gain 258 258

Undiscounted provision 1,363 1,227


20. Called up share capital
2004 2003
£000 £000
Authorised – equity
35,000,000 (2003: £35,000,000) ordinary shares of 5p each 1,750 1,750

Allotted, called up and fully paid – equity
£23,932,373 (2003: £23,932,373) ordinary shares of 5p each 1,196 1,196


21. Share options
Under the terms of the UCM Group PLC Executive Share Option Scheme, the following options to
purchase ordinary shares of the Company were granted:
Options Options
Date at 31 Dec at 31 Dec Option Exercise Expiry
Contract granted 2003 Relinquished 2004 price date date
1 11 May 1995 38,000 5,000 33,000 89p 11 May 1998 10 May 2005
2 28 April 1997 59,000 12,000 47,000 114p 28 April 2000 27 April 2007
3 31 October 2000 57,000 — 57,000 96.5p 31 October 2003 30 October 2010

The options are conditional upon the Group attaining an earnings per share growth of 6% above the
growth in the Retail Price Index over a three year period, and are awarded based upon appropriate
performance achievements.

22. Capital and reserves

Profit
Capital
and loss
Revaluation
redemption
Share
Share
account Total
reserve
reserve
premium
capital
£000 £000
£000
£000
£000
£000
Group
At beginning of year 1,196 8,402 218 1,689 3,766 15,271
Profit for the financial year — — — — 304 304
Loan to employee share
ownership trust — — — — (379) (379)
Currency translation
adjustment — — — (30) (709) (739)
Asset revaluation — — — 1,589 — 1,589
Transfer — — — (68) 68 —

At end of year 1,196 8,402 218 3,180 3,050 16,046




85
23. Commitments
(i) Capital commitments at the end of the financial year for which no provision has been made are
as follows:

Group Group
2004 2003
£000 £000
Contracted 14 97


(ii) Annual commitments under non-cancellable operating leases are as follows:

2004 2003
Land and Land and
buildings Other buildings Other
£000 £000 £000 £000
Operating leases which expire:
Within one year — 73 — 103
In second to fifth years inclusive — 105 — 157

— 178 — 260


24. Contingent liabilities
Group
The Group has contingent liabilities in respect of guarantees in the ordinary course of business of
£280,000 (2003: £280,000).

25. Pension schemes
The Group operates six pension schemes, three in the United Kingdom, and three in the United
States of America.
Whilst the company continues to account for pension costs in accordance with Statement of Standard
Accounting Practice 24 ‘‘Accounting for Pension Costs’’, under FRS 17 ‘‘Retirement Benefits’’ the
transitional disclosures as set out in this note are required.
The assumptions used by the actuaries are the best estimates chosen from a range of possible
actuarial assumptions, which, due to the timescale covered, may not necessarily be borne out in
practice.
It should be further noted that the fair value of the respective scheme’s assets, as shown, are not
intended to be realised in the short term and may be subject to significant change before they are
realised. The present value of the respective scheme’s liabilities is derived from cash flow projections
over long periods and is thus inherently uncertain.

United Kingdom
The Group operates a defined benefit scheme and two defined contribution schemes.

Defined Benefit Scheme
This plan is funded by the payment of contributions to separate trustee administered fund. The
pension cost is assessed in accordance with the advice of a qualified independent actuary using the
projected unit method.
The United Kingdom pension charge for the year ended 31 December 2004 was £72,000 (2003:
£107,000) and the amount of the related prepayment at that date was £238,000 (2003 provision:
£176,000).
The last formal valuation was as at 5 April 2002. At that valuation it was assumed that future
investment returns would be 9%, reducing to 8% per annum after retirement, deferred pensions in
excess of GMP would increase at 4% per annum and pension increases would be 3.5% per annum in
relation to benefits accruing after 5 April 1997 and 3% per annum for other benefits in excess of
GMP. Pensions in payment were valued by discounting future payments at 5.2% per annum. The
values were then adjusted to reflect investment conditions at the time.

86
The valuation results have been updated on the advice of a qualified actuary to take account of the
requirements of FRS 17 in order to asses the liabilities of the scheme as at 31 December 2004. The
plan was closed, for new entrants and the accrual of future benefits, as at 5 April 2002.
The major assumptions used by the actuary at 31 December were:

2004 2003 2002
At 31 December
Rate of increase to pensions in payment 2.8% 2.7% 2.3%
Discount rate 5.3% 5.4% 5.6%
Inflation assumption 2.8% 2.7% 2.3%
The assets of the plan and the expected rate of return were:

2004 2003 2002
% £000 % £000 % £000
Equities 7.5 8,530 7.5 7,730 7.6 7,100
Cash 4.7 660 4.0 500 4.0 300

Total market value of assets 9,190 8,230 7,400
Actuarial value of liability 12,540 11,840 12,200

(Deficit) (3,350) (3,610) (4,800)
Related deferred tax credit 1,000 1,080 1,400

Net pension liability (2,350) (2,530) (3,400)


The value of assets and liabilities exclude benefits that have been fully secured through the purchase
of insurance policies and money purchase benefits relating to additional voluntary contributions.
In accordance with the disclosure requirements of FRS 17, the amounts which would have been
recognised in the primary statements, in the years ended 31 December 2004 and 2003, had the
standard been fully implemented were:
Amount charged to other finance cost

2004 2003
£000 £000
Expected return on pension plan assets 597 550
Interest on pension plan liabilities (640) (680)

Net charge (43) (130)


There would have been no amounts charged to operating profit, in either of 2003 or 2004.
Amount recognised in total recognised gains and losses (STRGL)

% of 2004 % of 2003 % of 2002
assets/ £000 assets/ £000 assets/ £000
liabilities liabilities liabilities
Actual return less expected return 3 230 11 900 (40) (2,960)
Experience gains and losses on
liabilities — — 7 860 — —
Changes in assumptions (3) (370) (9) (1,010) (1) (100)

(140) (750) (3,060)




87
Movement in deficit during the year

2004 2003
£000 £000
(Deficit) in plan at the beginning of year (3,610) (4,800)
Movements in year:
Current service cost — —
Contributions 443 570
Past service cost — —
Settlements and curtailments — —
Other finance costs (43) (130)
Actuarial (loss)/gain (140) 750

(Deficit) in plan at the end of year (3,350) (3,610)


The last actuarial valuation highlighted that the plan was in deficit on the MFR basis. In the light of
this, the company agreed a schedule of contributions under which annual contributions of £443,000
are payable in the coming year.

Defined Contribution Schemes
These schemes were incepted after the closure of the defined benefit scheme. Pension costs in respect
of these schemes for the year ended 31 December 2004 were £225,000 (2003: £150,000).
United States of America
The Group operates two defined benefit schemes and one defined contribution scheme.

Defined Benefit Scheme
These schemes principally cover the hourly paid employees at Muscle Shoals Minerals Inc. (‘‘MSM’’)
and Universal Inc. (‘‘UAI’’). The schemes are funded by payments of contributions to separate
trustee-administered funds. The pension costs relating to them are assessed in accordance with the
advice of a qualified independent actuary using the projected unit method.
Pension charges in the United States of America subsidiary undertakings, in respect of the these
schemes, for the year ended 31 December 2004 were US$265,000 (2003: US$105,000).
At MSM the last formal valuation was at 1 January 2004. At that valuation it was assumed that
future investment returns would be 7.5% per annum. At UAI the last formal valuation was as at 1
April 2004, and again it was assumed that future investment returns would be 7.5% per annum. The
schemes benefits are not related to salary and neither are pension payments increased after
commencement accordingly no assumptions are needed regarding salary or pension increases.
The valuation results have been updated on the advice of a qualified actuary in order to assess the
liabilities of the scheme as at 31 December 2004, enabling the company to comply with the disclosure
requirements of FRS 17, which are set out below.
The major assumptions used by the actuary at 31 December were:

2004 2003 2002
Discount rate 5.75% 6.25% 7.00%
Inflation assumption 2.50% 2.50% 3.00%




88
The assets of the schemes and the expected rate of return at 31 December were:
MSM

2004 2003 2002
% US$000 % US$000 % US$000
Equities 8.9 1,027 8.7 912 8.5 707
Bonds 5.0 566 5.0 421 6.0 463

Total market value of assets 1,593 1,333 1,170
Actuarial value of liability (2,515) (2,244) (1,827)

(Deficit) (922) (911) (657)


UAI

2004 2003 2002
% US$000 % US$000 % US$000
Equities 8.9 390 8.4 389 8.2 318
Bonds 5.5 277 6.0 219 6.5 210

Total market value of assets 667 608 528
Actuarial value of liability (943) (832) (714)

(Deficit) (276) (224) (186)


The employer’s funding policy is to contribute an amount each year that falls between legally
required minimum cash contribution and the maximum tax-deductible contribution. Contributions,
during the year, to the MSM scheme were $213,000 (2003: Nil) and to the UAI scheme $28,000
(2003: Nil).
In accordance with the disclosure requirements of FRS 17 the amounts which would have been
recognised in the primary statements, in the year ended 31 December 2004, had the standard been
fully implemented were:
Amount charged to operating profit

MSM UAI
2004 2003 2004 2003
US$000 US$000 US$000 US$000
Current service cost (44) (45) (22) (21)
Past service cost — (114) — —
Settlements and curtailments — — — —

Total (44) (159) (22) (21)


Amount (charged)/credited to other finance cost

MSM UAI
2004 2003 2004 2003
US$000 US$000 US$000 US$000
Expected return on pension plan assets 107 85 45 39
Interest on pension plan liabilities (138) (134) (51) (49)

Net Return (31) (49) (6) (10)




89
Amount recognised in total recognised gains and losses (STRGL)
MSM

% of 2004 % of 2003 % of 2002
assets/ £000 assets/ £000 assets/ £000
liabilities liabilities liabilities
Actual return less expected return 1 16 11 144 (14) (166)
Experience gains and losses on
liabilities — 7 (4) (88) 3 50
Changes in assumptions (7) (172) (5) (102) (9) (157)

Actuarial (loss) recognised in
STRGL (149) (46) (273)


UAI

% of 2004 % of 2003 % of 2002
assets/ £000 assets/ £000 assets/ £000
liabilities liabilities liabilities
Actual return less expected return 2 13 12 71 (24) (126)
Experience gains and losses on
liabilities — (2) — 1 (1) (5)
Changes in assumptions (7) (62) (9) (79) (9) (66)

Actuarial (loss) recognised in
STRGL (51) (7) (197)


Movement in deficit during the year

MSM UAI
2004 2003 2004 2003
US$000 US$000 US$000 US$000
(Deficit) in plan at the beginning of year (911) (657) (224) (186)
Movements in year
Current service cost (44) (45) (22) (21)
Contributions 213 — 28 —
Past service cost — (114) — —
Settlements and curtailments — — — —
Other finance costs (31) (49) (6) (10)
Actuarial (loss) (149) (46) (51) (7)

(Deficit) in plan at end of year (922) (911) (275) (224)


Defined Contribution Scheme
The members of this scheme are primarily salaried employees of both US subsidiaries.
Pension cost in respect of this scheme for the year ended 31 December 2004 was US$158,000 (2003:
US$168,000).




90
26. Reconciliation of operating profit to net cash inflow from operating activities

2004 2003
£000 £000
Operating profit 2,562 1,712
Exceptional costs — 212
Loan to an employee share ownership trust (379) —
Depreciation and amortisation 1,783 1,618
(Profit) on sale of tangible assets — (17)
Movement in provision for liabilities and charges (176) (509)
(Increase) in stocks (873) (468)
(Increase)/decrease in debtors (353) 162
Increase in creditors 241 67

Net cash inflow from operating activities. 2,805 2,777


27. Reconciliation of net cash flow to movement in net debt

2004 2003
£000 £000
Increase in cash in the year 749 78
Net cash flow from (increase) in bank loans due within one year (828) (1,019)
Net cash flow from decrease in other debt due within one year 302 293
Net cash flow from (increase) in other debt due after more than one year (54) —

Change in net debt resulting from cash flows 169 (1,648)
Currency translation adjustments 231 325

Movement in net debt 400 (1,323)
Net debt at beginning year (10,469) (9,146)

Net debt at end of year (10,069) (10,469)


28. Analysis of movement in net debt

At Currency At
1 January Cash Other translation 31 December
2004 flows changes adjustments 2004
£000 £000 £000 £000 £000
Cash at bank and in hand 130 712 — (27) 815
Bank loans due within one year (9,470) (791) — 234 (10,027)
Other debt due within one year (304) 302 (343) 6 (339)
Other debt due after one year (825) (54) 343 18 (518)

Total (10,469) 169 — 231 (10,069)




91
Section 3 – UCM Group’s unaudited interim results for the six months ended 30 June 2006
The following is the text of UCM Group PLC’s Interim Report which was published on 20
September 2006:



‘‘CHAIRMAN’S STATEMENT
Dear Shareholder

Results for the six months ended 30 June 2006
The first six months of 2006 have seen an improvement in both sales and profits from the
comparative period in 2005. Profit before taxation for the six months ended 30 June 2006 amounted
to £1,352,000 (2005: £1,164,000) on turnover of £19,601,000 (2005: £17,479,000). Earnings per share
for the period were 3.8p per share (2005: 3.3p).

Dividend
The directors have approved an interim dividend payment of 1.0p but have decided that it is prudent
to await the results for the full year before defining dividend policy. For the 2005 financial year there
was an interim payment of 2.0p with no final payment at the year end.

Trading
Zirconia division
Sales of standard zirconia products have increased during the period. A large part of this
improvement reflects gains in market share and important new customers being won by the division.
Sales of advanced ceramic materials, based upon zirconia chemistry, have also increased compared to
the corresponding period in 2005.
Magnesia division
The Magnesia division’s sales have remained stable compared to the corresponding period of 2005.
Actions taken to reduce the cost base of the plants, in the face of higher energy and raw material
costs, have been effective and higher selling prices have been secured with a number of key
customers, returning the business to profitability.

Property
The Group has been investigating, with its advisors, the possibility of residential development of its
freehold site at Stafford. At present most of the site is surplus to the operational needs of the
Company and an application for outline planning consent has been made to the Local Authority. If
successful, it is anticipated that a surplus to the book value of the property could be realised, after
providing for the cost of relocating the activities currently operating on the site.

Outlook
Prospects for the Group remain positive for the second half of 2006.
Historically, the pattern of planned plant shut-downs, both at our own and at customer’s plants, in
the second half of the year has resulted in lower sales and profits than in the first half year. In 2005
this effect was magnified by poor market conditions and exceptional cost increases so that the Group
recorded a loss in the second half of 2005. The Board anticipates that the Group will remain
profitable for the second half, albeit not to the extent recorded in the six months to 30 June 2006. If
achieved, this will enable the Board to consider a final dividend.
Yours sincerely



John Gordon
Chairman
20 September 2006



92
Consolidated interim income statement
for the period ended 30 June 2006

Unaudited Unaudited Audited
six six year ended 31 December 2005
months months
ended 30 ended 30 Pre- Exceptional Continuing
June June exceptional costs operations
2006 2005
£000 £000 £000 £000 £000
19,601 17,479 33,333 — 33,333
Revenue
Cost of sales (15,349) (13,480) (27,034) (292) (27,326)

4,252 3,999 6,299 (292) 6,007
Gross profit
Distribution expenses (110) (109) (218) — (218)
Administration expenses (2,475) (2,421) (4,673) (523) (5,196)

1,667 1,469 1,408 (815) 593
Operating profit / (loss)

Financial income 14 — 37
Financial expenses (329) (305) (639)

(315) (305) (602)
Net finance cost

1,352 1,164 (9)
Profit / (loss) before tax
Taxation (450) (379) (362)

Profit / (loss) for the period
attributable to equity holders of
902 785 (371)
the company

Earnings per ordinary share
Basic and diluted 3.8p 3.3p (1.6p)




93
Consolidated interim balance sheet
as at 30 June 2006

Unaudited Unaudited Audited 31
30 June 30 June December
2006 2005 2005
£000 £000 £000
Non current assets
Intangible assets 19 597 30
Property, plant and equipment 14,574 16,139 15,610
Deferred tax asset — — 289

14,593 16,736 15,929

Current assets
Stocks 7,992 9,161 8,091
Trade and other receivables 7,207 6,720 6,377
Cash and cash equivalents 800 581 865

15,999 16,462 15,333

30,592 33,198 31,262
Total assets

Current liabilities
Financial liabilities 9,541 10,158 10,407
Trade and other payables 3,459 3,569 3,001
Current tax payable 420 253 216

13,420 13,980 13,624

Non current liabilities
Financial liabilities 147 489 202
Post employment benefits 3,413 4,040 4,744
Deferred tax liabilities 103 149 —

3,663 4,678 4,946

13,509 14,540 12,692
Net assets

Equity
Share capital 1,196 1,196 1,196
Share premium account 8,402 8,402 8,402
Retained earnings 871 1,509 (747)
Other reserves 3,040 3,433 3,841

13,509 14,540 12,692
Total equity




94
Consolidated interim statement of cash flows
for the period ended 30 June 2006

Unaudited Unaudited Audited
six months six months year
ended ended ended
31
30 June 30 June December
2006 2005 2005
£000 £000 £000
Cash flows from operating activities
Profit/(loss) for the period 902 785 (371)
Adjustments for:
Depreciation 852 853 1,733
Amortisation 10 52 150
Impairment — — 735
Interest 315 305 602
Income tax 450 379 362

2,529 2,374 3,211
Operating profit before changes in working capital and provisions
(Increase)/decrease in trade and other receivables (1,109) (142) 350
(Increase)/decrease in inventories (245) (705) 527
Increase/(decrease) in trade and other payables 693 156 (451)
(Decrease) in provisions and employee benefits (314) (265) (542)

1,554 1,418 3,095
Cash generated from the operations
Interest received 18 — 37
Interest paid (339) (298) (637)
Income tax paid (141) (29) (179)

1,092 1,091 2,316
Net cash from operating activities

Cash flows from investing activities
Acquisition of property, plant and equipment (369) (329) (672)

Cash flow from financing activities
Repayment of amounts borrowed (545) (331) (375)
Payment of finance lease liabilities (170) (139) (284)
Dividends paid — (598) (1,077)

(715) (1,068) (1,736)
Net cash from financing activities

Net increase/(decrease) in cash and cash equivalents 8 (306) (92)
Cash and cash equivalents at 1 January 865 815 815
Effect of exchange rate fluctuations on cash held (73) 72 142

Cash and cash equivalents at period end 800 581 865




95
Statement of recognised income and expense (SORIE)
for the period ended 30 June 2006

Unaudited Unaudited Audited
six months six months year
ended ended ended
31
30 June 30 June December
2006 2005 2005
£000 £000 £000
Profit/(loss) for the period 902 785 (371)
Currency translation adjustment (758) 739 1,189
Actuarial gains/(losses) on defined benefit scheme 971 (287) (1,237)
Tax on items taken directly to equity (298) 91 378

Total recognised income and expenses attributable
to equity shareholders 817 1,328 (41)




96
Reconciliation of movements in equity
for the period ended 30 June 2006 – unaudited

Capital
Share Share redemption Translation Revaluation Retained Total
capital premium reserve reserve surplus earnings equity
£000 £000 £000 £000 £000 £000 £000
Total equity as at
1,196 8,402 218 (691) 3,210 1,475 13,810
1 January 2005
Movements for the
period:
Recognised income and
expenses — — — 739 (43) 632 1,328
Dividends to
shareholders — — — — — (598) (598)

Total equity as at
1,196 8,402 218 48 3,167 1,509 14,540
30 June 2005

Total equity as at
1 January 2005 1,196 8,402 218 (691) 3,210 1,475 13,810
Movements for the
period:
Recognised income and
expenses — — — 1,189 (85) (1,145) (41)
Dividends to
shareholders — — — — — (1,077) (1,077)

Total equity as at
1,196 8,402 218 498 3,125 (747) 12,692
31 December 2005

Total equity as at
1 January 2006 1,196 8,402 218 498 3,125 (747) 12,692
Movements for the
period:
Recognised income and
expenses — — — (758) (43) 1,618 817

Total equity as at
1,196 8,402 218 (260) 3,082 871 13,509
30 June 2006




97
Notes to the accounts
1. Basis of preparation
This interim financial information has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group’s published consolidated accounts for
the year ended 31 December 2005.
The comparative figures for the year ended 31 December 2005 are not the statutory accounts for that
financial year. Those accounts have been reported on by the auditors and delivered to the registrar of
companies. The report of the auditors was unqualified and did not contain statements under section
237 (2) or (3) of the Companies Act 1985.

2. Segmental reporting

Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31
June June December
2006 2005 2005
£000 £000 £000
Revenue by market
Domestic & Industrial Appliances 8,690 8,407 15,988
Steelmaking 5,785 4,261 7,768
Automotive 4,105 3,528 7,269
Investment casting 28 28 43
Engineered ceramics 639 627 1,223
Other industrials 354 628 1,042

19,601 17,479 33,333

Revenue by customer location
United Kingdom 1,356 1,230 2,270
North America 6,545 4,804 9,291
Continental Europe 6,943 6,801 12,581
Asia 3,950 3,927 7,693
Central & South America 646 459 989
Rest of World 161 258 509

19,601 17,479 33,333


3. Earnings per share
Earnings per share for the period have been calculated on profit for the period divided by 23,932,373
being the weighted average number of ordinary shares of 5p each in issue during the period (2005
half year and 2005 full year weighted average 23,932,373).

4. Taxation
Taxation has been provided at the estimated effective rate for the full year.’’




98
PART B
Profit Forecast for the UCM Group for the year ended 31 December 2006
1. Forecast
On 27 July 2006, UCM issued a trading update which included a profit forecast for the year ended
31 December 2006. Included in the trading update was a statement that:
‘‘… Overall the half year trading performance has been encouraging with the restoration of a good
foundation for the Group going forward. The Group is making solid progress and while it is too
early to make forecasts, the Board now believes that UCM is well placed to exceed current market
expectations for the full year.’’
Immediately prior to the time of this statement, market expectation for the UCM Group’s profit
before tax and exceptional items, for the year ended 31 December 2006, was approximately £1.3
million. The UCM Directors have considered this statement and also the current market expectation
for the UCM Group’s profit before tax and exceptional items for the year ended 31 December 2006,
which is approximately £1.8 million.
As of today’s date the UCM Directors believe that, in the absence of unforeseen circumstances and
on the basis of the assumptions outlined below, the UCM Group will achieve profit before tax and
exceptional items for the year ended 31 December 2006 of not less than £1.9 million. The statement
set out above is a profit forecast (technically termed a ‘‘profit estimate’’ given that it is issued after
the year end) by the UCM Directors (the ‘‘UCM Profit Estimate’’) for the purposes of Rule 28.6 of
the City Code.

2. Basis of preparation
The UCM Profit Estimate is based upon:
(a) the published unaudited interim financial statements of the UCM Group for the six months
ended 30 June 2006 (see Part A of this Appendix II); and
(b) the unaudited management accounts of the UCM Group for the six months ended 31 December
2006.
Adjustment has been made for estimated year end adjustments. The UCM Profit Estimate is based on
profit before tax for the year ended 31 December 2006 but excludes exceptional items. Exceptional
costs may arise in respect of professional fees relating to the strategic review and sale process.
The UCM Profit Estimate has been prepared on a basis consistent with accounting policies adopted
by the UCM Group in its annual financial statements for the year ended 31 December 2005.

3. Principal assumptions
The UCM Profit Estimate has been prepared on the basis of the principal assumptions set out below:
(a) It is assumed that debtors not already provided for within the UCM Profit Estimate will
subsequently discharge the debt owing to the UCM Group as at 31 December 2006.
(b) There will be no material uninsured costs arising from the technical failure of products which
the UCM Group is not yet aware.
(c) It is assumed that there will be no material unprovided costs arising from environmental
exposures of which the UCM Group is not yet aware.
(d) The estimate has been based upon the accounting concept of going concern and therefore
assumes that the continuing support of the UCM Group’s bankers will be available. The UCM
Directors are not aware of any reason why banking facilities should not be available to the
UCM Group for the foreseeable future on terms at least as favourable as those which currently
exist.
(e) There will be no material retrospective change in relevant legislation, governmental policy or
other regulatory requirement which would affect the results of the UCM Group.

4. Letters relating to the UCM Profit Estimate
The UCM Directors, who are solely responsible for the UCM Profit Estimate, have received the
following letters from KPMG Audit Plc and Ernst & Young relating to the UCM Profit Estimate.



99
Letter from KPMG Audit Plc relating to the UCM Group Profit Forecast


KPMG
KPMG Audit Plc
St James Square
Manchester
M2 6DS
Private & confidential United Kingdom
The Directors
UCM Group PLC
Doxey Road
Stafford
ST16 1DZ

Ernst & Young LLP
1 More London Place
London
SE1 2AF


22 February 2007

UCM Group PLC
We report on the profit forecast (technically termed ‘‘profit estimate’’ given that it is issued after the
year end) comprising profit before tax and exceptional items of UCM Group PLC (the ‘‘Company’’)
and its subsidiaries (the ‘‘Group’’) for the year ended 31 December 2006 (the ‘‘Profit Estimate’’). The
Profit Estimate and the basis on which it is prepared is set out on page 99 of the Offer Document
(the ‘‘Offer Document’’) relating to the Company dated 22 February 2007. This report is required by
Rule 28.3(b) of The City Code on Takeovers and Mergers (the ‘‘City Code’’) and is given for the
purpose of complying with that rule and for no other purpose.
Accordingly, we assume no responsibility in respect of this report to the offeror or any person
connected to, or acting in concert with, the offeror to any other person who is seeking or may in
future seek to acquire control of the Company (an ‘‘Alternative Offeror’’) or to any other person
connected to, or acting in concert with, an Alternative Offeror.

Responsibilities
It is the responsibility of the directors of the Company to prepare the Profit Estimate in accordance
with the requirements of the City Code. In preparing the Profit Estimate the directors of the
Company are responsible for correcting errors that they have identified which may have arisen in the
unaudited financial results and unaudited management accounts used as a basis of preparation for the
Profit Estimate.
It is our responsibility to form an opinion as required by the City Code as to the proper compilation
of the Profit Estimate and to report that opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly
addressed and which we may have to the Company’s shareholders as a result of the inclusion of this
report in the Offer Document, to the fullest extent permitted by law we do not assume any
responsibility and will not accept any liability to any other person for any loss suffered by any such
other person as a result of, arising out of, or in connection with this report or our statement,
required by and given solely for the purposes of complying with Rule 28.4 of the City Code,
consenting to its inclusion in the Offer Document.
KPMG Audit Plc, a company incorporated under the UK
Companies Acts, is a member of KPMG International, a Registered in England No 3110745
Swiss cooperative Registered office: 8 Salisbury Square, London EC4Y 8BB



100
Basis of preparation of the Profit Estimate
The Profit Estimate has been prepared on the basis stated on page 99 of the Offer Document and is
based on the unaudited interim financial results for the six months ended 30 June 2006 and the
unaudited management accounts for the 6 months ended 31 December 2006 as adjusted for estimated
year end adjustments. The Profit Estimate is required to be presented on a basis consistent with the
accounting policies of the Company.

Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the
Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which
the historical financial information for the 12 months to 31 December 2006 included in the Profit
Estimate has been prepared and considering whether the Profit Estimate has been accurately
computed using that information and whether the basis of accounting used is consistent with the
accounting policies of the Company.
We planned and performed our work so as to obtain the information and explanations we considered
necessary in order to provide us with reasonable assurance that the Profit Estimate has been properly
compiled on the basis stated.
However, the Profit Estimate has not been audited. The actual results reported, therefore, may be
affected by revisions required to accounting estimates due to changes in circumstances, the impact of
unforeseen events and the correction of errors in the management accounts. Consequently, we can
express no opinion as to whether the actual results achieved will correspond to those shown in the
Profit Estimate and the difference may be material.

Opinion
In our opinion the Profit Estimate so far as the accounting policies and calculations are concerned
has been properly compiled on the basis stated and the basis of accounting used is consistent with the
accounting policies of the Group.

Yours faithfully




KPMG Audit Plc




101
Letter from Ernst & Young relating to the UCM Group Profit Forecast

Ernst & Young LLP
1 More London Place
London SE1 2AF


The Directors
UCM Group PLC
Doxey Road
Stafford
ST16 1DZ
22 February 2007
Dear Sirs

UCM Group PLC (‘‘UCM’’)
We refer to the profit forecast (the ‘‘UCM Profit Estimate’’) of UCM Group PLC and its subsidiary
undertakings for the year ended 31 December 2006, together with the basis upon which the UCM
Profit Estimate is made, set out in this Part B of Appendix II to the document relating to the Offer
(as defined therein) to UCM Shareholders dated 22 February 2007 (the ‘‘Offer Document’’).
We have discussed the UCM Profit Estimate, together with the basis and assumptions upon which it
has been made, with you and KPMG Audit Plc (‘‘KPMG’’), UCM’s auditors.
We have also considered the letter dated 22 February 2007 to you and us from KPMG regarding the
accounting policies and calculations underlying the UCM Profit Estimate and discussed such report
with KPMG.
This letter is provided in compliance with Rule 28.3 of the City Code on Takeovers and Mergers and
may be included in the Imerys UK Limited (‘‘Imerys’’) Offer Document solely for the purposes of
that Rule. Accordingly we assume no responsibility in respect of this report to Imerys or any person
connected to, or acting in concert with, Imerys or to any other person who is seeking or may in
future seek to acquire control of the UCM (an ‘‘Alternative Offeror’’) or to any other person
connected to, or acting in concert with, an Alternative Offeror.
On the basis of these discussions and having regard to the aforementioned letter we consider that the
UCM Profit Estimate, for which the directors of UCM are solely responsible, has been compiled with
due care and consideration.
Yours faithfully,

Ernst & Young LLP




The UK firm Ernst & Young LLP is a limited liability
partnership registered in England and Wales with registered
number OC300001 and is a member practice of Ernst &Young
Global. A list of members’ names is available for inspection at
the above address which is the firm’s principal place of business
and its registered office.

102
APPENDIX III
Financial information relating to Imerys S.A.
PART A – Historical financial information extracted from the accounts of Imerys S.A.
for the year ended 31 December 2005
The financial information set out below on pages 104 to 186 of this Appendix III has been extracted
without material adjustment from the published, audited accounts of Imerys S.A. for the year ended
31 December 2005, and has been prepared under IFRS.




103
3.1 Consolidated Financial Statements
Consolidated income statement

(A millions) Notes 2005 2004
Sales 5 3,045.2 2,870.5
Other revenue from operations 20.3 20.4

6 3,065.5 2,890.9
Revenue

Raw materials and consumables used 7 (1,055.4) (1,016.0)
Change in W.I.P. and finished goods inventories and assets
produced by the entity 8 36.9 11.5
External expenses 9 (762.5) (681.1)
Staff expenses 10 (621.2) (568.1)
Taxes and duties (39.9) (38.3)
Amortization, depreciation and impairment losses 16 – 17 (185.3) (163.0)
Net change in operating provisions 22.4 2.5
Other operational revenue and expenses 11 (26.5) (16.6)

Current operating income 434.0 421.8

Other operating revenue 93.5 —
Other operating expenses (96.2) (45.6)

12 (2.7) (45.6)
Other operating revenue and expenses

Operating income 431.3 376.2

Revenue from securities 5.2 4.3
Gross financial debt expense (48.0) (38.6)

(42.8) (34.3)
Net financial debt expense

Other financial revenue and expenses 13 (4.5) (5.1)

Financial income (47.3) (39.4)

Income taxes 29 (76.5) (97.5)
Share in net income of associates 19 4.6 3.4

Net income 312.1 242.7

Minority interests (2.7) (2.7)

Net income, Group share 14 309.4 240.0

of which :
Current operating income, Group share 14 287.6 261.2
Other net operating revenue and expenses, Group share 12 21.8 (21.2)


(in A)
Net earnings per share from current operations 4.3 4.53 4.12
Net earnings per share 4.3 4.88 3.79
Diluted net earnings per share 4.3 4.83 3.76

Average exchange rate euro/USD 1.2447 1.2426




104
Consolidated balance sheet

(A millions) Notes 2005 2004
CONSOLIDATED ASSETS
Goodwill 15 815.3 560.1
Intangible assets 16 35.8 29.0
Mining assets 17 497.2 459.0
Property, plant and equipment 17 1,276.6 1,053.4
Investments in associates 19 31.9 25.9
Available-for-sale financial assets 20 16.0 13.8
Other financial assets 20 10.3 11.7
Other receivables and other assets 22 13.9 19.7
Deferred tax assets 30 34.6 30.0

2,731.6 2,202.6
Total non-current assets

Inventories 23 475.8 399.5
Trade accounts receivable 24 590.3 494.5
Derivative instrument assets 32 – 37 – 38 66.7 63.2
Marketable securities and other financial assets 20 – 32 61.0 96.3
Cash and cash equivalents 21 – 31 – 32 134.7 66.6
Other receivables and other assets 22 99.1 91.6

1,427.6 1,211.7
Total current assets

4,159.2 3,414.3
TOTAL CONSOLIDATED ASSETS

CONSOLIDATED LIABILITIES AND SHAREHOLDERS’
EQUITY
Capital 25 127.9 126.9
Share capital premiums 219.5 204.9
Reserves 1,015.2 781.7
Net income 309.4 240.0

1,672.0 1,353.5
Shareholders’ equity, Group share

14.2 9.1
Minority interests

1,686.2 1,362.6
Shareholders’ equity

Provisions for employee benefits 26 237.1 195.5
Other provisions 27 161.0 150.0
Loans and financial debts 31 – 32 943.1 940.6
Other debts 28 33.2 24.2
Deferred tax liabilities 30 76.4 83.2

1,450.8 1,393.5
Total non-current liabilities

Other provisions 27 12.8 12.0
Trade accounts payable 313.1 273.7
Payable income taxes 13.8 10.0
Derivative instrument liabilities 32 – 37 – 38 23.1 9.7
Loans and financial debts 31 – 32 423.0 144.0
Bank overdrafts 21 – 31 13.6 20.6
Other debts 28 222.8 188.2

1,022.2 658.2
Total current liabilities

TOTAL CONSOLIDATED LIABILITIES AND
4,159.2 3,414.3
SHAREHOLDERS’ EQUITY

31 – 32 1,140.0 889.8
Net financial debt

Closing exchange rate euro/USD 1.1797 1.3621

105
Consolidated cash flow statement

(A millions) 2005 2004
Cash flow from operating activities
Cash flow generated by current operations (appendix 1) 587.8 582.8
Paid interests (60.1) (51.3)
Income taxes on current operating income and financial income (105.5) (131.1)
Dividends received 1.9 1.5
Cash flow generated by other operating revenue and expenses (appendix 2) (30.4) (18.3)

393.7 383.6
Cash flow from operating activities

Cash flow from investing activities
Acquisitions of property, plant and equipment and intangible assets (251.0) (194.3)
Acquisitions of investments in consolidated entities after deduction of cash
acquired (271.0) (50.2)
Acquisitions of available-for-sale financial assets — —
Disposals of property, plant and equipment and intangible assets 25.8 13.6
Disposals of investments in consolidated entities after deduction of cash
disposed of 144.5 13.1
Disposals of available-for-sale financial assets 1.5 0.1
Net change in financial assets 4.7 (0.2)
Paid-in interests 3.8 2.1

(341.7) (215.8)
Cash flow from investing activities

Cash flow from financing activities
Capital increases 15.6 18.2
Capital decreases — (31.3)
Disposals (acquisitions) of treasury shares (38.2) 6.3
Dividends paid to shareholders (95.0) (79.3)
Dividends paid to minority interests (1.4) (0.5)
Loan issues 2.9 354.4
Loan repayments (100.9) (171.7)
Net change in other debts and marketable securities 235.7 (267.5)

18.7 (171.4)
Cash flow from financing activities

70.7 (3.6)
Change in cash and cash equivalents

46.0 50.9
Cash and cash equivalents at the beginning of the period
Change in cash and cash equivalents 70.7 (3.6)
Impact of changes due to exchange rate fluctuations 4.4 (1.3)

121.1 46.0
Cash and cash equivalents at the end of the period

Cash and cash equivalents 134.7 66.6
Bank overdrafts (13.6) (20.6)

121.1 46.0
Cash and cash equivalents at the end of the period




106
Appendix 1

(A millions) 2005 2004
312.1 242.7
Net income

Adjustments for:
Income taxes 76.5 97.5
Share in net income of associates (4.6) (3.4)
Impairment losses on goodwill 4.5 4.1
Other operating revenue and expenses (1.8) 41.5
Net operating amortization and depreciation 181.9 159.6
Net operating impairment losses on assets (2.3) (0.5)
Net operating provisions (14.5) 0.9
Dividends received (0.1) —
Net interests of revenue and expenses 43.5 50.2
Revaluation gains and losses 4.7 2.8
Income from current disposals of property, plant and equipment and
intangible assets (9.6) (3.3)

(2.5) (9.3)
Change in the working capital requirement
Inventories (42.4) (13.6)
Trade accounts receivable, advances and down payments received (20.2) (26.8)
Trade accounts payable, advances and down payments paid 44.5 4.3
Other receivables and debts 15.6 26.8

587.8 582.8
Cash flow generated by current operations



Appendix 2

(A millions) 2005 2004
(2.7) (45.6)
Other operating revenue and expenses

Adjustments for:
Impairment losses on goodwill (note 18) 4.5 4.1
Other net operating amortization and depreciation 33.8 (0.2)
Other net operating provisions 12.5 22.9
Income from non-current disposals of property, plant and equipment and
intangible assets 13.1 1.7
Income from disposals of consolidated investments and available-for-sale
financial assets (93.5) —
Income taxes paid on other operating revenue and expenses 1.9 (1.2)

(30.4) (18.3)
Cash flow generated by other operating revenue and expenses




107
Consolidated statement of changes in shareholders’ equity
Total
Other
share-
Total
Total
reserves and
Fair value of
Share
holders’
minority
Group
financial Translation accumulated
capital Treasury
(A millions) equity
interests
share
income
shares instruments reserve
premiums
Capital
Shareholders’ equity as of
December 31, 2003 in French
127.0 218.1 1.0 — — 1,055.2 1,401.3 9.0 1,410.3
GAAP

Fair value of financial
instruments — — — (0.2) — — (0.2) — (0.2)
Reclassification of treasury
shares recognized as
marketable securities — — (5.9) — — — (5.9) — (5.9)
Finance lease adjustment — — — — — (0.9) (0.9) — (0.9)
Adjustment of provisions for
major repairs — — — — — 2.7 2.7 — 2.7
Actuarial differences of
employee benefits — — — — — (134.8) (134.8) — (134.8)
Fair value of mineral reserves — — — — — (10.4) (10.4) — (10.4)
Approach by components of
property, plant and
equipment — — — — — (2.8) (2.8) — (2.8)
Reclassification of negative
goodwill — — — — — 2.1 2.1 — 2.1
Reclassification of minority
interests on IFRS
adjustments — — — — — (0.2) (0.2) 0.2 (0.0)

Shareholders’ equity as of
127.0 218.1 (4.9) (0.2) — 910.9 1,250.9 9.2 1,260.1
January 1, 2004 in IFRS

Dividends (A1.25 per share) — — — — — (79.3) (79.3) (0.5) (79.8)
Variation of the translation
reserve — — — — (50.6) — (50.6) 0.2 (50.4)
Capital decreases (1.3) (30.0) — — — — (31.3) — (31.3)
Capital increases 1.2 16.8 — — — — 18.0 0.2 18.2
Impact on minority interests of
perimeter changes and
capital increases — — — — — — — (2.7) (2.7)
Change in fair value of financial
instruments — — — 0.4 — — 0.4 — 0.4
Transactions on treasury shares — — 6.3 — — — 6.3 — 6.3
Cost of share options — — — — — 2.2 2.2 — 2.2
Complement. amortization
goodwill of Imerys Ltd 1999-
2003 further to deferred tax
adjustment — — — — — (3.1) (3.1) — (3.1)
2004 net income — — — — — 240.0 240.0 2.7 242.7

Shareholders’ equity as of
126.9 204.9 1.4 0.2 (50.6) 1,070.7 1,353.5 9.1 1,362.6
January 1, 2005

Dividends (A1.50 per share) — — — — — (95.0) (95.0) (1.4) (96.4)
Variation of the translation
reserve — — — — 124.4 — 124.4 0.8 125.2
Capital increases 1.0 14.6 — — — — 15.6 — 15.6
Impact on minority interests of
perimeter changes and
capital increases — — — — — — — 3.0 3.0
Change in fair value of financial
instruments — — — (1.3) — — (1.3) — (1.3)
Transactions on treasury shares — — (38.3) — — — (38.3) — (38.3)
Cost of share options — — — — — 3.7 3.7 — 3.7
2005 net income — — — — — 309.4 309.4 2.7 312.1

Shareholders’ equity as of
127.9 219.5 (36.9) (1.1) 73.8 1,288.8 1,672.0 14.2 1,686.2
December 31, 2005

Capital decrease of January 17,
2006 (1.3) (36.9) 38.2 — — — — —
Proposed dividends (A1.65 per
share) — — — — — (104.6) (104.6) — (104.6)

Shareholders’ equity after
allocation as of January 1,
126.6 182.6 1.3 (1.1) 73.8 1,184.2 1,567.4 14.2 1,581.6
2006




108
1. Accounting policies and methods
1 – ACCOUNTING REFERENTIAL
1.1. Referential applied until December 31, 2004
The Imerys financial statements published before 2005 were prepared in compliance with the French
accounting policies and methods applicable to consolidated financial statements approved by the
decree of June 22, 1999 enforcing the 99-02 regulation modified by the 2004-03 regulation of the
Comite de la Reglementation Comptable, the French Accounting Regulation Committee. Imerys used
´ ´
to apply the benchmark treatments recommended by the 99-02 regulation.
1.2. Referential applied from January 1, 2005
In accordance with the 1606/2002 European regulation of July 19, 2002, the Imerys financial
statements for 2005 and subsequent periods are prepared in compliance with IFRSs (International
Financial Reporting Standards) adopted within the European Union at the balance sheet date. The
details of a first-time adoption are presented in part 7, Reconciliation of financial statements in French
GAAP and IFRS.

2 – ACCOUNTING POLICIES AND METHODS
2.1. Financial statements
The objective of financial statements is to present a true and fair view of the financial position, of the
financial performance and of the cash flows of Imerys. They are established on a going concern basis.
The presentation conventions are identical from one period to the other to ensure comparability, and
are modified only if the change is required by standard or interpretation, or results in more reliable
and more relevant information. Items of similar nature or function are aggregated in separate
positions in accordance with their materiality. Assets and liabilities on the one hand, and revenue and
expenses on the other are not compensated unless required by standard or interpretation. Assets and
liabilities are classified by increasing liquidity and payability, distinguishing between non-current and
current items, when these shall be recovered or settled in more or less than twelve months after the
balance sheet date. Period revenue and expenses are presented by nature in the profit or loss
statement of the period. They are only included in the cost of an asset or a liability when required by
standard or interpretation.
The operating income includes the current operating income and other operating revenue and
expenses. The current operating income reflects the performance of the Group’s ordinary activities.
The other operating revenue and expenses correspond to items of revenue and expenses resulting from
a limited number of well identified, non-recurring and significant events, such as the incidence of a
restructuring or the disposal of shares in a consolidated entity. The financial income mainly includes
the cost of indebtedness, foreign exchange differences (paragraph 2.7), the interest cost related to the
unwinding of the discount of provisions for environment, assets dismantling and mine sites restoration
(paragraph 2.20) and impairment losses on financial assets. The interest cost related to the unwinding
of the discount of provisions for employee benefits is recognized in the current operating income
(paragraph 2.21).
Imerys publishes annual financial statements as of December 31 and interim financial statements as of
June 30. Transactions whose incidence relates to the interim closing are recognized and measured in
accordance with the same rules as those of annual financial statements. However, materiality is
considered with respect to the interim financial results, and not annual financial results.
2.2. Segment information
The primary segments reported by Imerys correspond to four business segments: Specialty Minerals,
Pigments for Paper, Materials & Monolithics and Refractories, Abrasives & Filtration. Each of these
segments is engaged in the production and rendering of related goods and services, presenting
homogeneous risks, returns and long-term financial performances. Besides, Imerys reports five
geographical segments with respect to secondary information: France, Other European countries,
North America, Asia-Oceania and Other countries. These geographical segments represent
homogeneous areas in terms of economic environments and risks, returns and long-term financial
performances for the Group activities.
2.3. Earnings per share
The Imerys financial statements disclose basic earnings per share and diluted earnings per share. The
basic earnings per share is equal to the net income attributable to holders of ordinary shares divided

109
by the weighted average number of ordinary shares outstanding over the current period. The
denominator excludes treasury shares (paragraph 2.18). As Imerys is granting share options
(paragraph 2.19), the weighted average number of ordinary shares defined above is increased, for the
calculation of the diluted earnings per share, by the weighted average number of ordinary shares that
would be issued if all dilutive options would be exercised at the balance sheet date. The number of
dilutive options is calculated by comparison between the number of shares that would result from the
exercise of the share options, and the number of shares that would be issued at the period average
market price for an issue of the same amount. The excess of the number of shares from share options
over the number of shares issued under market conditions is the number of dilutive shares.
2.4. Accounting policies, errors and estimates
A change in accounting policies is applied only if it is required by standard or interpretation, or
results in more reliable and more relevant information. Changes in accounting policies are accounted
for retrospectively, unless required by the specific transition provisions of the standard or
interpretation. The financial statements concerned by the change in accounting policies are modified
for all reported periods, as if the new policy had always been applied. An error, when discovered, is
also adjusted retrospectively.
Uncertainties inherent to business require the use of estimates for the preparation of financial
statements. Estimates result from judgments intended to provide a reasonable assessment of the latest
reliable information available. An estimate is revised to reflect changes in circumstances, new
information available and effects related to experience. Changes in estimates are accounted for
prospectively: they have an impact on the period over which they were performed, and where
required, over subsequent periods.
The main estimates carried out for the preparation of the financial statements relate in particular to
the hypotheses retained for the calculation of impairment losses (paragraph 2.12), to provisions for
employee benefits (paragraph 2.21), to deferred taxes (paragraph 2.23), to the measurement of
available-for-sale financial assets (paragraph 2.13), to provisions (paragraphs 2.20) and to certain
financial instruments (paragraph 2.24). The information provided in relation to potential assets and
liabilities is also the subject of estimates. The estimates used are detailed in the corresponding notes.
2.5. Events after the balance sheet date
Events occurring between the balance sheet date and the authorization of issue of the financial
statements by the Board of Directors result in an adjustment only if they reveal, specify or confirm
situations that existed at the balance sheet date.
2.6. Consolidation
Entities included in the scope of consolidation are those over which Imerys exercises control or
significant influence, and are respectively consolidated under the full consolidation and equity
methods. No entity is consolidated under the proportionate consolidation method. Negative minority
interests of entities consolidated under the full consolidation method are allocated against the Group
share. The incidence of intra-group transactions on all positions of the financial statements is
eliminated.
2.7. Monetary conversion
The Imerys financial statements are stated in euro. The accumulated incidence of the translation of
financial statements of entities in foreign currencies is recognized in the consolidated equity. Assets
and liabilities of foreign entities are converted at the closing rate, and their revenue and expenses at
the average rate of the current period.
Non-monetary assets and liabilities related to transactions in foreign currencies which are measured at
historical cost are converted at the rate of the initial transaction. Except for derivatives (paragraph
2.24), monetary assets and liabilities related to transactions in foreign currencies are converted at the
closing rate. The foreign exchange differences are recognized in the financial income, except for those
generated by financial assets and liabilities qualified as net investments in a foreign operation, which
are recognized in the consolidated equity. When a foreign entity is sold, the accumulated incidence of
the conversion of its financial statements, as well as the financial assets and liabilities qualified as
hedges are accounted for in the profit or loss statement.
2.8. Goodwill
Goodwill is measured as the excess paid by Imerys over the fair value of a business combination.
Determined upon the date of acquisition, it represents the capacity of the combination to generate

110
future cash flows beyond that fair value. It includes the fair value of identifiable assets, liabilities and
contingent liabilities of the business combination. Its measurement is finalized over the twelve months
following the date of acquisition. Any excess of the fair value of a business combination over the cost
of acquisition is credited to the profit or loss statement of the period of acquisition. The previously
described treatments also apply to every increase in interest realized after the date of acquisition.
Goodwill related to foreign business combinations is accounted for in the foreign currency, and
converted in the Group financial statements in accordance with the rules applicable to the translation
of financial statements of foreign entities (paragraph 2.7). Goodwill is not depreciable. It is allocated
to the groups of Cash-Generating Units that benefit from the synergies of the combination, and is
subject to a first impairment test (paragraph 2.12) before the balance sheet date of the acquisition
period, and subsequently to annual tests or more frequently if there is an indication that it may be
impaired.

2.9. Intangible assets
Intangible assets controlled by Imerys are recognized as assets over their useful lives. They are
measured at the acquisition cost, decreased by accumulated amortization and any impairment loss.
Expenditures related to the Group research teams to improve the quality and properties of products,
and satisfy the customers’ requirements at the lowest cost generally do not meet the recognition
criteria of a development intangible asset as defined by IAS 38 on intangible assets, and are
recognized as expenses as incurred. As the greenhouse gases allowances attributed to Imerys exceed
the Group’s actual emissions, the rights received are recognized as intangible assets for a carrying
amount of zero. The cost of intangible assets is amortized on a straight-line basis over the useful lives
indicated hereafter:
Trademarks, patents and licenses 5 to 20 years
*

Software 1 to 5 years
*



Where the carrying amount of an intangible asset ceases to be recoverable, it is written-down to its
recoverable amount on the basis of an impairment test (paragraph 2.12).

2.10. Mining assets
After the legal rights to explore in a geographical area have been obtained, exploration expenditures,
i.e. the research of new knowledge on the mineral producing potential, technical feasibility and
commercial viability of the area are recognized as expenses as incurred.
Extraction rights are recognized as intangible assets. They are measured at the acquisition cost,
decreased by accumulated amortization and any impairment loss. The cost of these rights is amortized
on the basis of extracted quantities.
Mineral reserves are recognized as property, plant and equipment. They are measured initially at the
acquisition cost excluding subsoil, increased by drilling expenditures incurred to determine the tonnage
of ore present in the deposit. Overburden works performed to enable access to the deposit are
recognized as property, plant and equipment. Their initial measurement incorporates their production
cost and the discounted value of restoration or dismantling obligations resulting from damages caused
by the construction of these assets (paragraph 2.20). Mining assets recognized as property, plant and
equipment are subsequently measured at cost decreased by accumulated depreciation calculated on the
basis of extracted quantities. Subsoil is not depreciated.
Mining assets recognized as intangible assets and property, plant and equipment are allocated to
Cash-Generating Units as other assets of the Group, and are subject to the same impairment tests
(paragraph 2.12).

2.11. Property, plant and equipment
Property, plant and equipment is recognized as assets if it is controlled as a result of a title of
ownership, or of a finance lease contract that transfers the risks and rewards incident to ownership.
Property, plant and equipment is measured initially at acquisition or production cost. The initial cost
of items under finance lease is the lower of the fair value of the asset and the discounted value of
future minimum payments.
The cost of borrowings that finance the construction of property, plant and equipment is recorded as
an expense. The cost of property, plant and equipment is decreased, where applicable, by the amount
of government grants that finance their acquisition or construction. Maintenance and repair
expenditures are accounted for as expenses, unless they contribute to an increase in future economic

111
benefits or in the level of performance. The cost of property, plant and equipment incorporates, in
particular for industrial facilities, the discounted value of restoration or dismantling obligations, where
a real obligation exists (paragraph 2.20).
Property, plant and equipment is subsequently measured at cost, decreased by accumulated
depreciation and any impairment loss. It is depreciated on a straight-line basis over the useful lives
indicated hereafter. These ranges reflect, where appropriate, the useful lives of the components
included in property, plant and equipment:
Office buildings 10 to 50 years
*

Industrial buildings 10 to 30 years
*

Improvements to office and industrial buildings 5 to 15 years
*

Machinery, tooling, facilities and equipment 5 to 20 years
*

Vehicles 2 to 5 years
*



Land is not depreciated. Where the carrying amount of an item of property, plant and equipment
ceases to be recoverable, it is written-down to its recoverable amount on the basis of an impairment
test (paragraph 2.12).

2.12. Impairment tests
The Cash-Generating Units (CGUs) are the smallest identifiable groups of assets whose continuing
use generates cash inflows that are largely independent from the cash inflows of other assets or
groups of assets. CGUs at Imerys correspond to a segmentation of N-2 level of the four primary
business segments reported with respect to segment information (paragraph 2.2). These divisions of
the Specialty Minerals, Pigments for Paper, Materials & Monolithics and Refractories, Abrasives &
Filtration business groups represent the analysis structure followed each month by the Imerys General
Management in its business reporting. All assets within the Group including goodwill, are allocated to
a CGU, except for the property, plant and equipment of Imerys in Paris.
An impairment test is performed every twelve months on all CGUs. In addition to this annual test,
impairment indicators may require the immediate performance of a test in case of an unfavorable
evolution. The main indicators are significant changes in the entities’ activities, significant variations
in interest rates, technological level, obsolescence and level of performance of assets. Besides, every
division manager, under the supervision of business group controllers, ensures that no asset within a
CGU individually presents any impairment loss issue. An impairment loss is recognized as soon as
the recoverable amount of an asset or a group of assets of a CGU becomes inferior to its carrying
amount.
The impairment test consists in comparing the carrying amount of these assets to their recoverable
amount. The latter is the higher between the fair value net of disposal costs, and the value in use,
which corresponds to an estimate of the discounted value of future cash flows generated by the
continuous use of assets, and by their final disposal. The cash flows retained are the free operating
cash flows. The discount rate is the Weighted Average Cost of Capital (WACC) as assessed by some
financial analysts with respect to the Imerys investment, increased by a country-market risk premium
ranging from 0.5% to 2.0%. The terminal value of assets is assessed as 7.5 times the EBITDA, a
multiple resulting from a consensus of the same analysts on the value of the Group.

2.13. Investments and other financial assets
Investments in entities over which Imerys exercises neither control nor significant influence, and which
the Group does not intend to sell in the short run, are designated as available-for-sale financial assets.
They are recognized as assets at the transaction date, i.e. the date of the purchase commitment, and
are maintained at a carrying amount that is representative of their fair value, the changes of the
latter being recognized in the consolidated shareholders’ equity.
Investments in marketable securities with a view to short-term disposal are designated as financial
assets at fair value through profit or loss. They are recognized as assets between the purchase and
sales transaction dates and the changes in fair value are recognized in the financial income according
to market prices published at the end of the period.
Loans and receivables are measured at amortized cost. When after its initial recognition, a loan or
receivable proves to be partially or fully irrecoverable, it is written-down to its recoverable value
according to the conditions existing at the balance sheet date.

112
2.14. Non-current assets held for sale and discontinued operations
When at the balance sheet date, it is highly probable that non-current assets or groups of directly
related assets and liabilities shall be disposed of, they are designated as non-current assets or groups
of assets held for sale. Their sale is considered as highly probable if, at the balance sheet date, a plan
designed to sell them at a price that is reasonable with respect to their fair value has been initiated to
identify a buyer and to conclude definitively the sale within a maximum of one year. Non-current
assets or groups of assets held for sale are presented in separate positions in the financial statements.
They cease to be depreciated and are measured at the lower of their carrying amount and their fair
value net of disposal costs. Non-current assets or groups of assets that are to be closed rather than
sold are non-current assets that are to be abandoned, and not held for sale.
Where non-current assets held for sale or to be abandoned correspond to one or several CGUs
(paragraph 2.12) and are to be abandoned as part of a single co-ordinated plan, they qualify as
discontinued operations and their related flows are disclosed separately in the profit or loss statement
and in the cash flow statement.

2.15. Inventories
Inventories are recognized at the date of transfer of risks and rewards, and control. Upon the sale, an
expense is recognized at the date the related revenue is accounted for. Inventories are measured at the
lower of the cost of production and net realizable value. The cost of production of inventories
presenting similar characteristics is assessed either according to the first-in, first-out (FIFO) or the
weighted average cost formulas. Where the cost of production is not recoverable, it is written-down to
its net realizable value according to the conditions existing at the balance sheet date.

2.16. Trade receivables
A trade receivable is recognized with respect to a sale of goods upon transfer of the risks and
rewards, and control. A receivable is recognized with respect to the rendering of services to the extent
of the percentage of completion of services at the balance sheet date. Besides, both for sales of goods
and for rendering of services, a receivable is recognized only if it is recoverable and the amount of
the transaction and that of the costs necessary to complete the transaction can be measured reliably.
Sales of goods and rendering of services are measured at the fair value of the transaction, decreased
by trade and volume rebates, as well as discounts for early payment. After their initial recognition,
trade receivables are recorded at their amortized cost. If a receivable proves to be partially or fully
irrecoverable, it is written-down to its recoverable amount according to the conditions existing at the
balance sheet date.

2.17. Cash and cash equivalents
Cash includes cash on hand, demand deposits and cash equivalents. The latter are highly liquid short-
term investments whose equivalent amount in cash is known or subject to insignificant uncertainty. In
the consolidated cash flow statement, cash and cash equivalents also include bank overdrafts
presented as liabilities.

2.18. Treasury shares
Imerys shares purchased by the Group in the framework of the shares repurchase program authorized
by the Shareholders’ General Meeting are accounted for at their acquisition cost as a decrease in
equity. No result is recorded upon any subsequent disposal, and the corresponding gain or loss is
accounted for directly in equity.

2.19. Share options
The fair value of services rendered against the grant of Imerys share options is measured under the
Black & Scholes pricing model by reference to the fair value of options at the grant date. This
measurement takes into consideration the exercise price and life of options, the underlying share price,
the volatility of the Imerys share, as well as the turnover rate of beneficiaries. In the majority of
cases, the acquisition of rights is subject to a condition of duration of service, and the fair value of
services rendered is amortized as staff expenses over the vesting period of rights, against an increase
in equity. The accounting treatment is identical where, in addition to the duration of service
condition, the acquisition of rights is subject to the achievement of pre-determined Group economic
performance conditions. The assumptions related to the probability of acquisition of rights are revised
at each balance sheet date.

113
2.20. Provisions
A provision is recognized as soon as it becomes probable that a present obligation resulting from a
past event shall require a settlement whose amount can be measured reliably. Provisions are
recognized against the profit or loss statement except for provisions for assets dismantling and some
provisions for mine sites restoration whose counterpart is incorporated in the cost of the related
assets, especially for industrial buildings and mining overburden works (paragraphs 2.10 and 2.11).
The measurement of a provision reflects the best estimate of the amount required to settle the
obligation. Provisions whose settlement is expected within twelve months after the balance sheet date
or whose settlement may occur at any time are not discounted. Provisions whose settlement is
expected after twelve months after the balance sheet date are discounted. The discount rates of such
provisions are calculated at each balance sheet date by reference to the rates of bonds issued by
companies rated AA, and if unavailable, by reference to the rates of Government bonds. A discount
rate is determined by country for each type of provision, taking into consideration the timing of
settlement of each type of obligation: environment, assets dismantling, mine sites restoration and
provisions for defined employee benefits (paragraph 2.21). Changes in discounted provisions due to a
revision of the amount of the obligation, of its timing or of its discount rate, are accounted for
against the current operating income, or, for provisions recognized against assets, as an adjustment of
the cost of the latter. The incidence of the unwinding of the discount reflecting the passage of time is
recognized as a debit in the financial income of the period (paragraph 2.1).
2.21. Employee benefits
Imerys contributes, according to the laws and customs of each country, to the constitution of reserves
for the retirement of its employees by paying, either on a mandatory or voluntary basis, contributions
to third parties institutions such as pension funds, insurance companies or financial institutions. These
plans, without guaranteeing the level of benefits returns, are defined contribution plans. Besides, some
entities have granted retirement and medical benefits to their employees, that they themselves manage
or outsource. These plans, by which the Group is committed to a level of benefits on a legal,
regulatory or contractual basis, are defined benefit plans.
Plan obligations are measured according to the Projected Unit Credit Method and use financial and
demographic actuarial assumptions. These are used to measure the present value of services rendered
over the period on the basis of an estimated salary at retirement date. Provisions (or assets)
recognized in the balance sheet correspond to the discounted value of the obligation, decreased by the
fair value of plan assets, unrecognized past service cost, and unrecognized actuarial differences. The
periodic cost of defined benefit plans is accounted for against the current operating income, except for
the incidence of curtailments caused by a restructuring, which are recorded against the other
operating revenue and expenses (paragraph 2.1).
Unrecognized past service cost is progressively incorporated in the measurement of provisions (or
assets) recognized in the balance sheet by a straight-line amortization against the current operating
income over an estimation of the average vesting period of the rights. Actuarial differences are
reflected in the provisions (or assets) recognized in the balance sheet as soon as their accumulated
unrecognized amount exceeds 10% of the higher between the obligation and asset’s fair value. The
fraction of actuarial differences that exceeds the higher of these thresholds is recognized by a straight-
line amortization against the current operating income over an estimation of the average remaining
working lives of beneficiaries. The incidence of the unwinding of the discount reflecting the passage of
time is recognized as a debit to the current operating income (paragraph 2.1). The incidence of any
plan curtailment or settlement is recorded as other operating revenue and expenses as occurred.
2.22. Loans and other financial liabilities
Loans are initially measured at fair value of the amount received, less direct transaction costs. They
are subsequently measured at amortized cost by using the effective interest rate method. Trade
accounts payable and other financial liabilities are measured at amortized cost.
2.23. Income taxes
Current tax results in the recognition of a liability to the extent it is unpaid, and of an asset where
the amount already paid exceeds the amount due or if a tax loss can be carried back.
Deferred tax assets and liabilities are accounted for with respect to all temporary taxable differences
between the tax and accounting values of assets and liabilities in the consolidated balance sheet,
except mainly for differences related to the initial recognition of goodwill and, in the case of taxable
temporary differences between the accounting and tax values of investments, where the Group is in a

114
position to control the date of reversal of the temporary difference and it is probable that the
temporary difference shall not reverse in a foreseeable future. A deferred tax asset is recognized with
respect to taxable temporary differences, tax losses and tax credits only if it is probable that a future
taxable profit shall be set against these elements, or there are taxable temporary differences in the
same tax entity, that come to maturity in the period over which these elements remain recoverable.
Tax rates and laws used are those that are enacted or substantively enacted at the balance sheet date,
and shall be applicable over the period of reversal of the timing difference. Deferred taxes are not
discounted. In the consolidated balance sheet, deferred tax assets and liabilities are compensated by
tax entity, i.e. by legal entity or tax consolidation group (see notes 29 and 30).
2.24. Derivative financial instruments and hedging instruments
Imerys uses financial instruments to reduce its exposure to foreign exchange, interest and energy risks.
This hedging policy, centrally defined and operated by the Group Central Treasury Department, is
subject to periodic approval by the Board of Directors and takes no speculative position. Hedging
instruments are negotiated on over-the-counter markets with first-rank banking institutions.
The foreign exchange risk is hedged by currency forwards, currency swaps and foreign exchange
options. These instruments are used to hedge receivables, debts, firm commitments in foreign
currencies and net investments in foreign operations (paragraph 2.7). Besides, in order to reduce their
exposure to the foreign exchange transaction risk, Group entities issue, to the extent it is possible, the
invoices related to their trade activity in their functional currencies. Where this is not the case, the
exchange risk associated to trade receivables and debts may be subject to hedging on an individual
basis. The interest rate risk is hedged by interest rate swaps and interest rate options. Energy risks
are hedged by forward and option contracts.
The exclusive purpose of the financial instruments used by Imerys is to hedge economic risks to
which the Group is exposed. Financial instruments are recognized at the transaction date, i.e. at the
subscription date of the hedging contract. However, only financial instruments that meet the criteria
of hedge accounting defined by IAS 39 on financial instruments follow the accounting treatment
described hereafter. The changes in fair value of financial instruments that do not qualify for hedge
accounting are immediately recorded in the financial income of the period.
All transactions qualified as hedge accounting are documented by reference to the hedging strategy by
identifying the hedged risk, the hedged item, the hedging instrument, the hedging relationship and the
measurement method of the hedge relationship effectiveness. The measurement of the hedge
effectiveness is reviewed at each balance sheet date. Derivatives are measured at fair value upon initial
recognition. Subsequently, the fair value is re-measured at each balance sheet date by reference to
market terms. Accounting for a hedge derivative depends upon its designation as either fair value
hedge, or cash flow hedge or hedge of a net investment in a foreign operation:
fair value hedge: the hedged item and the hedging instrument are re-measured symmetrically
*

against the profit or loss statement at each balance sheet date. The incidence in the profit or
loss statement is limited to the ineffective portion of the hedge;
cash flow hedge: at each balance sheet date, the effective portion of the hedge is recorded in
*

equity, and the ineffective portion in the profit or loss statement. When the effect of the hedged
transaction is recognized in the profit or loss statement, the effective portion recognized in
equity is recycled in the profit or loss statement, symmetrically to the recognition of the hedged
item;
hedge of a net investment in a foreign operation: at each balance sheet date, the effective
*

portion of the hedge is recorded in equity, and the ineffective portion in the profit or loss
statement. Upon disposal of the foreign operation, the effective portion recognized in equity is
recycled in the profit or loss statement.

3 – STANDARDS AND INTERPRETATIONS EFFECTIVE AFTER THE BALANCE SHEET DATE
Standards and interpretations indicated hereafter are adopted within the European Union at the date
of authorization of issue of the financial statements by the Board of Directors and are likely to apply
to the recognition and measurement of transactions, events or conditions existing within the Group.
However these standards and interpretations are not effective at the balance sheet date and the
Group did not elect to apply them earlier.
IFRS 6, Exploration for and Evaluation of Mineral Resources. The application of this standard
*

will have no incidence on the recognition and measurement of mining assets.

115
IFRIC 4, Determining whether an Arrangement contains a Lease. The application of this
*

interpretation is likely to result in modifications in the recognition and measurement of a
restricted number of purchase contracts of specific mineral resources.
IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental
*

Rehabilitation Funds. The application of this interpretation will have a limited incidence.
IFRIC 6, Liabilities arising from Participating in a Specific Market – Waste Electrical and
*

Electronic Equipment. The application of this interpretation will have a limited incidence.

4 – INFORMATION SPECIFIC TO THE DECEMBER 31, 2005 CLOSING
4.1. Evolution of the scope of consolidation
Specialty Minerals
*


After having integrated the kiln furniture activity of IKF Hungary in the first half of 2004, the
business group strengthened its positions in the first half of 2005 in ground calcium carbonate (GCC)
by investments in Gran Bianco Carrara and Blancs Mineraux de Tunisie. In the second half of 2005,
´
the acquisition of Denain-Anzin Mineraux provided the business group with two minerals which it
´
did not have at its disposal in Europe, feldspar and mica, and consolidated its position in kaolin for
ceramic applications and fibreglass.

Pigments for Paper
*


The 2005 results of the business group no longer include the trading activity of the Swedish entity
CDM, disposed of in the second half of 2004.

Materials & Monolithics
*


The 2005 results of the business group take into consideration the acquisition of Rivereau in the
second half of 2004 and the sale of the building materials trading activity Lariviere in the first half of
`
2005. Moreover, the business group consolidated the activities of Lafarge Refractories and QA
Refractories since the first half of 2005.

Refractories, Abrasives & Filtration
*

After having ended its trading activity of refractory minerals in the first half of 2005 by the disposal
of American Minerals, the business group integrated the results of the minerals for filtration activity
of World Minerals in the second half of 2005.
4.2. Currency rates used
The rates of the main foreign currencies used for the preparation of the consolidated financial
statements are indicated hereafter:
(A) 2005 2004
Countries Foreign currencies 12.31 Average 12.31 Average
Argentina ARS 3.5990 3.6384 4.0500 3.6543
Australia AUD 1.6109 1.6323 1.7459 1.6894
Brazil BRL 2.7613 3.0407 3.6156 3.6352
Canada CAD 1.3725 1.5095 1.6416 1.6166
China CNY 9.5620 10.2009 11.2171 10.2900
Denmark DKK 7.4605 7.4518 7.4388 7.4400
United States USD 1.1797 1.2447 1.3621 1.2426
United Kingdom GBP 0.6853 0.6839 0.7051 0.6784
Hungary HUF (100) 2.5284 2.4802 2.4597 2.5170
Japan JPY (100) 1.3891 1.3687 1.3965 1.3437
New Zealand NZD 1.7270 1.7663 1.8871 1.8728
Republic of South Africa ZAR 7.4642 7.9187 7.6897 8.0112
Czech Republic CZK 28.9998 29.7823 30.4640 31.9080
Sweden SEK 9.3885 9.2807 9.0206 9.1262
Switzerland CHF 1.5551 1.5483 1.5429 1.5442
Thailand THB 48.6074 50.0651 52.7415 50.0490

4.3. Earnings per share
The figures disclosed hereafter incorporate the division by 4 of the par value of the Imerys share
approved by the Ordinary and Extraordinary Shareholders’ General Meeting of May 3, 2004. No

116
significant transaction has changed the number of ordinary shares and potential ordinary shares
between the balance sheet date and the authorization of issue of the financial statements by the Board
of Directors.

(A millions) 2005 2004
Numerator
Current net income attributable to ordinary equity holders 287.6 261.2
Incidence of financial income on share options 2.6 2.1
Current net income attributable to ordinary equity holders used for the
calculation of the diluted earnings per share 290.2 263.3

Net income attributable to ordinary equity holders 309.4 240.0
Incidence of financial income on share options 2.6 2.1
Net income attributable to ordinary equity holders used for the calculation of
the diluted earnings per share 311.9 242.1

Denominator
Weighted average of shares used for the calculation of the basic earnings per
share 63,426,126 63,363,013
Impact of share option conversion 1,094,147 1,016,108
Weighted average of shares used for the calculation of the diluted earnings per
share 64,520,273 64,379,121

Earnings per share (*) (in A)
Net earnings per share from current operations 4.53 4.12
Net earnings per share 4.88 3.79

Diluted net earnings per share from current operations 4.50 4.09
Diluted net earnings per share 4.83 3.76

(*) Group share




117
2. Notes to the consolidated income statement
5 – SALES
Consolidated sales evolution
Consolidated sales amount to A3,045.2 million for the period against A2,870.5 million for the previous
period, i.e. an increase of +6.1%, including a neutral effect due to foreign currency variations. At
comparable structure, the Group’s sales increased by +3.0%.

Geographic origins of consolidated sales

(A millions) 2005 2004
France 761.8 838.6
Other European countries 1,223.8 1,087.8
North America 722.1 680.1
Asia – Oceania 212.0 170.3
Other countries 125.5 93.8

3,045.2 2,870.5
Total


6 – REVENUE

(A millions) 2005 2004
Sales of goods 2,716.3 2,572.8
Rendering of services 328.9 297.7

3,045.2 2,870.5
Sales

Other revenue 20.3 20.4

3,065.5 2,890.9
Total


7 – RAW MATERIALS AND CONSUMABLES USED
The breakdown is as follows:

(A millions) 2005 2004
Raw materials (360.4) (356.5)
Energy (301.4) (244.2)
Chemicals (72.8) (56.1)
Other raw materials (146.8) (126.4)
Merchandises (188.9) (242.6)
Change in inventories 14.9 9.8

(1,055.4) (1,016.0)
Total


8 – CHANGE IN W.I.P. AND FINISHED GOODS INVENTORIES AND ASSETS PRODUCED BY
THE ENTITY
The breakdown is as follows:

(A millions) 2005 2004
Variation of work in progress and finished goods 28.0 3.7
Property, plant and equipment produced by the entity 8.9 7.8

36.9 11.5
Total




118
9 – EXTERNAL EXPENSES

(A millions) 2005 2004
Freight (350.6) (320.9)
Operating leases (44.1) (41.5)
Subcontracting (73.3) (64.8)
Maintenance and repair (81.1) (70.2)
Fees (58.1) (40.3)
Other external expenses (155.3) (143.4)

(762.5) (681.1)
Total


10 – STAFF EXPENSES

(A millions) 2005 2004
Salaries (477.7) (420.6)
Social contributions (89.5) (84.1)
Contributions to defined benefit plans (18.6) (23.3)
Contributions to defined contribution plans (13.4) (14.6)
Other employee benefits (5.6) (4.4)
Profit-sharing (16.4) (21.1)

(621.2) (568.1)
Total


Salaries include valorized stock option plan costs according to paragraph 2.19 of the accounting
policies and methods note. The breakdown is as follows:
Fair value
of the
option Costs of 2004 costs 2005 costs
Average (Black & each plan of the of the
Number of Strike Turnover dividend Scholes) on 3 years plans plans
price (A) (A) (A millions)
Plans options Maturity Volatility rate rate
2003 747,720 28.31 5 years 20.0% 20.0% 3.25% 5.51 (3.3) (1.1) (1.1)
2004 640,000 48.88 5 years 20.0% 20.0% 3.25% 7.13 (3.7) (0.8) (1.2)
2004 200,000 48.88 5 years 20.0% 16.7% 3.25% 7.13 (1.2) — (0.4)
2005 635,000 57.58 6 years 20.0% 20.0% 3.20% 8.36 (4.2) (0.3) (1.0)

Cost of plans recognized as staff expenses (2.2) (3.7)



11 – OTHER CURRENT OPERATIONAL REVENUE AND EXPENSES

(A millions) 2005 2004
Gains and losses on current disposals of assets 9.6 3.6
Grants received 1.4 1.2
Other revenue 0.8 0.5
Other expenses (38.3) (21.9)

(26.5) (16.6)
Total




119
12 – OTHER OPERATING REVENUE AND EXPENSES

(A millions) 2005 2004
Gains and losses on disposals of consolidated investments 93.5 —
Gains and losses on non-current disposals of assets (13.1) (1.7)
Restructuring expenses (32.3) (17.1)
Impairment losses on property, plant and equipment and intangible assets (46.3) (22.7)
Impairment losses on goodwill (4.5) (4.1)

Other operating revenue and expenses – gross (2.7) (45.6)

Income taxes on other revenue and expenses (note 29) 24.5 24.4

Other operating revenue and expenses – net, Group share 21.8 (21.2)

In 2005, the main investment disposals relate to the trading activity of building materials, Lariviere.
`
The revenue received in cash from the disposal totals A125.9 million. The amount of cash and cash
equivalents of the entity disposed of amounted to -A1.8 million.
The disposals of assets relate to one floor of the office building 5 Tour Montparnasse 4 in Paris
and to real estate and mining assets in Malaysia.
Restructuring expenses and impairment losses, including impairment losses on goodwill, represent
expenses net of income taxes of A58.6 million and concern:
for A30 million the Specialty Minerals business group which actively carried out restructurings in
*

Cornwall (United Kingdom) and Devon in England in order to rationalize its production
capacity and reduce costs as well as in North America where a small GCC plant was closed in
Wyoming and where rationalization programs were carried out in Dry Branch and in
Sandersville in Georgia;
for A20.7 million the Pigments for Paper business group which had to recognize a depreciation
*

on tax receivables other than income taxes in Brazil and which carried out restructuring
programs of its industrial facilities in Cornwall in order to face up to increasing energy costs;
for A7.9 million the Materials & Monolithics business group which recorded an impairment loss
*

on the assets of Ardoisieres d’Angers as well as restructuring costs which accompanied the
`
integration of Lafarge Refractories into the Monolithics division of Imerys.
These expenses and impairment losses have been recorded in the framework of the Group’s
reorganization programs and after having recognized events which modify the recoverable values of
the related assets. Where, in some cases, impairment tests have been carried out, an average discount
rate of 8% has been used.

13 – OTHER FINANCIAL REVENUE AND EXPENSES

(A millions) 2005 2004
Dividends 0.1 —
Net exchange rate differences 3.9 —
Net movements of provisions (2.8) 0.3
Expenses and revenue on financial instruments (1.3) 1.6
Unwinding expense (3.0) (3.1)
Other financial revenue and expenses (1.4) (3.9)

(4.5) (5.1)
Total




120
14 – NET INCOME, GROUP SHARE

(A millions) 2005 2004
Current operating income 434.0 421.8
Financial income (47.3) (39.4)
Current operating income taxes (note 29) (101.0) (121.9)
Share in net income of associates 4.6 3.4
Minority interests (2.7) (2.7)

Current operating income, Group share 287.6 261.2

Effective tax rate on current operating income 26.1% 31.8%

(A millions) 2005 2004
Current operating income, Group share 287.6 261.2
Net income of discontinued operations or held for sale — —
Other operating revenue and expenses – net (note 12) 21.8 (21.2)

Net income, Group share 309.4 240.0




121
3. Notes to the consolidated balance sheet

15 – GOODWILL

(A millions) 2005 2004
Opening balance
Gross amount 564.1 527.5
Impairment losses (4.0) —

560.1 527.5
Net amount

Acquisitions 226.2 31.1
Disposals (5.1) (8.8)
Adjustments and reclassifications 5.4 26.8
Impairment losses of the period (5.1) (4.2)
Foreign exchange differences 33.8 (12.3)

815.3 560.1
Net amount

Closing balance
Gross amount 823.8 564.1
Impairment losses (8.5) (4.0)

815.3 560.1
Net amount


In 2004, the adjustments and reclassifications mainly (A26 million) come from the complementary
goodwill on Imerys Minerals Limited further to a deferred tax liabilities correction.
The 2004 external growth transactions relate to a kiln furniture activity in Hungary purchased from
the German group Burton and to trading entities of building materials in France. The 2005 external
growth transactions are presented hereafter.


Lafarge Refractories
*


On January 6, 2005, Imerys acquired from the Materis group 100% of the entities’ voting rights of
the French group Lafarge Refractories. This group is one of the European leaders in the production
and sale of monolithic refractories for the steel, ferrous and non-ferrous metals and casting industries
and other thermal applications.
As the Lafarge Refractories acquisition was effective retrospectively from January 1, 2005, the
goodwill was completed for the 2005 closing.
Over the 2005 period, the Lafarge Refractories acquisition contributed to the Group sales growth for
A206.3 million and to the consolidated net income for A16.6 million.


World Minerals
*


On July 14, 2005, Imerys finalized the acquisition of 100% of the entities’ voting rights of the
American group World Minerals (WM) from Alleghany Corporation. World Minerals is the world
leader in the production and sale of filtration minerals for beverages (diatomite and perlite).
The goodwill recognized as of December 31, 2005 is determined provisionally and will be completed
in 2006, particularly to reflect the fair value measurement of intangible assets and property, plant and
equipment. This provisional goodwill mainly results from the recognition of the provisions for
employee benefits and site restoration.
The sales generated by World Minerals from July 14, 2005, as part of the Group consolidated sales,
amount to A111.0 million. In addition, World Minerals contributed for A4.3 million to the
consolidated net income of the Group.
If the acquisition had been effective as of January 1, 2005, the contributive revenue would have
reached A235.7 million and the consolidated net income would have been a net loss of A2.9 million.

122
Denain-Anzin Mineraux
´
*


On October 28, 2005, Imerys acquired 99.97% of the entities’ voting rights of the French group
Denain-Anzin Mineraux (DAM) from the Nord-Est group. DAM operates in Europe in the specialty
´
minerals market and more specifically as a producer of kaolin, feldspar mica and quartz, mainly for
ceramic applications.
As of December 31, 2005, the goodwill is determined provisionally and will be completed in 2006
after the asset valuation currently in progress will have been received.
Over the last two months of the period, DAM contributed for A12.5 million to the consolidated sales
of the Group and for A0.8 million to the consolidated net income of the Group.
If the acquisition had been effective as of January 1, 2005, the contributive revenue would have
reached A81.4 million and the net loss would have amounted to A1.7 million.

Other acquisitions
*


The external growth of the Group was also sustained by the acquisition of several other entities of
lesser importance, such as QA Refractories (South Africa) and Gran Bianco Carrara (Italy).
Furthermore, the Group increased its share of interest in some of its entities.
For all these 2005 acquisitions, no financial statements existed for these entities for prior periods
published in IFRSs.




123
At their respective dates of acquisition, the fair values of assets, liabilities and contingent liabilities of
the acquired entities is represented hereafter:

Lafarge World Denain-Anzin Other 2005
(A millions) Refractories Minerals Mineraux
´ acquisitions Total
Assets – non-current
Intangible assets 2.5 9.5 0.8 0.7 13.5
Property, plant and
equipment 22.2 95.2 48.9 4.5 170.8
Other financial assets 1.9 1.3 0.9 — 4.1
Other receivables and other
assets — 0.4 — — 0.4
Deferred tax assets 2.3 2.2 3.4 — 7.9
Assets – current
Inventories 23.7 37.1 8.1 1.3 70.2
Trade accounts receivable 42.9 46.3 20.3 3.2 112.7
Marketable securities and
other financial assets 1.3 11.7 0.4 — 13.4
Cash and cash equivalents 19.9 18.6 3.8 8.4 50.7
Other receivables and other
assets 4.0 7.6 4.0 0.5 16.1

120.7 229.9 90.6 18.6 459.8
Total Assets

Minority interests 0.7 1.0 0.6 1.6 3.9
Liabilities – non-current
Provisions for employee
benefits 7.9 28.9 2.9 0.1 39.8
Other provisions 4.4 6.6 6.0 — 17.0
Loans and financial debts 69.8 60.7 24.6 2.2 157.3
Other debts — 2.7 0.1 — 2.8
Deferred tax liabilities 5.4 5.1 1.9 1.9 14.3
Liabilities – current
Trade accounts payable 26.1 16.8 12.1 2.0 57.0
Payable income taxes 1.9 2.5 0.4 — 4.8
Derivative instrument
liabilities 0.1 — — — 0.1
Loans and financial debts 18.0 5.0 0.9 1.1 25.0
Bank overdrafts 0.2 0.2 — 0.7 1.1
Other debts and other
liabilities 13.2 20.4 7.0 1.4 42.0

147.7 149.9 56.5 11.0 365.1
Total Liabilities

Fair value of the acquired net
equity (27.0) 80.0 34.1 7.6 94.7
Goodwill 87.9 104.3 23.1 8.4 223.7

Cost of business
combinations 60.9 184.3 57.2 16.0 318.4




124
The following table reconciles the line Goodwill of the above table and the line Acquisitions of the
first table of note 15, Goodwill.

(A millions) 2005
Goodwill of 2005 business combinations 223.7
Adjustment of the cost of business combinations prior to 2005 1.2
Goodwill on 2005 increases in shares of interest 1.3

Goodwill – Acquisitions 226.2

The net cash flow related to the acquisitions of the period can be broken down as follows:

Increases in
shares of
interest and
purchase
Denain-
price
Lafarge World Anzin Other 2005
(A millions) adjustments Total
Refractories Minerals Mineraux
´ acquisitions
Cost of business combinations (60.9) (184.3) (57.2) (16.0) (20.8) (339.2)
Payables related to business
2.1 8.3 0.0 0.0 8.0 18.4
combinations of the period

Cash paid (58.8) (176.0) (57.2) (16.0) (12.8) (320.8)

19.7 18.4 3.8 7.8 0.1 49.8
Cash from acquired entities

Acquisition of investments in
consolidated entities after
deduction of cash acquired (39.1) (157.6) (53.4) (8.2) (12.7) (271.0)




125
16 – INTANGIBLE ASSETS

Trademarks,
patents and Mining and
(A millions) Software licences use rights Others Total
Opening balance: January 2004
Gross amount 26.6 8.1 — 34.1 68.9
Amortization (9.5) (5.6) — (19.8) (34.9)

17.1 2.5 — 14.4 34.0
Net amount

Acquisitions of the period 2.3 0.2 — 0.9 3.4
Acquisitions resulting from business
combinations 0.1 — — 0.0 0.1
Disposals of the period — (0.1) — (0.6) (0.7)
Net increases in amortization (5.6) (0.4) — (0.5) (6.5)
Impairment losses recognized in net income — — — (0.3) (0.3)
Foreign exchange differences (0.4) — — 0.0 (0.4)
Reclassification and other 2.7 — — (3.3) (0.6)

Opening balance: January 2005
Gross amount 29.8 6.3 — 26.0 62.2
Amortization (13.6) (4.1) — (15.4) (33.2)

16.2 2.2 10.6 29.0
Net amount

Acquisitions of the period 1.2 0.4 — 1.7 3.3
Acquisitions resulting from business
combinations 2.8 2.2 4.8 3.7 13.5
Disposals of the period (1.2) — — (0.5) (1.7)
Net increases in amortization (7.5) (0.6) — (0.6) (8.7)
Impairment losses recognized in net income — (1.3) — (0.2) (1.5)
Foreign exchange differences 1.1 0.1 — 0.4 1.6
Reclassification and other 4.7 1.8 — (6.2) 0.3

Closing balance: December 2005
Gross amount 43.4 12.6 5.4 22.1 83.5
Amortization (26.1) (7.8) (0.6) (13.2) (47.7)

17.3 4.8 4.8 8.9 35.8
Net amount


For its only production activity of roof tiles and bricks of the business group Materials &
Monolithics, Imerys is in the scope of the European directive no. 2003/87/CE dated October 13, 2003
which establishes within the Community a market for emission rights of greenhouse gases. At the end
of the first year of the first three-year period of the European market (2005 – 2007), Imerys used
95.5% of the greenhouse gas emission quotas granted to the sites concerned in France, Spain and
Portugal. According to paragraph 2.9, Intangible assets of the note on accounting policies and methods,
no liability has been recognized and the rights received have been accounted for as intangible assets
for a carrying amount of zero.




126
17 – PROPERTY, PLANT AND EQUIPMENT

Down
payments
and assets
Mining Land and Plant and under
(A millions) assets buildings equipment construction Others Total
Opening balance: January 2004
Gross amount 535.0 447.0 2,063.0 47.9 210.7 3,303.6
Depreciation (32.7) (167.3) (1,436.6) — (166.9) (1,803.5)

502.3 279.7 626.4 47.9 43.8 1,500.1
Net amount

Acquisitions of the period 15.6 8.9 59.3 119.0 17.9 220.7
Acquisitions resulting from
business combinations — 9.2 16.9 0.7 1.3 28.1
Disposals of the period (0.6) (11.7) (15.6) (1.3) (1.5) (30.7)
Net increases in depreciation (26.5) (13.6) (100.0) — (12.9) (153.0)
Impairment losses recognized in
net income 1.1 (3.0) (5.6) — (0.9) (8.4)
Impairment losses reversed in net
income — 2.3 3.5 — — 5.8
Foreign exchange differences (16.2) (8.6) (21.2) (2.5) (0.9) (49.4)
Reclassification and other (16.7) 0.1 71.7 (58.8) 2.9 (0.8)

Opening balance: January 2005
Gross amount 516.8 475.3 2,011.6 105.0 182.1 3,290.8
Depreciation (57.8) (212.0) (1,376.2) — (132.4) (1,778.4)

459.0 263.3 635.4 105.0 49.7 1,512.4
Net amount

Acquisitions of the period 21.3 11.8 80.5 101.2 9.1 223.9
Acquisitions resulting from
business combinations 30.0 39.9 83.2 8.5 9.2 170.8
Disposals of the period (18.7) (26.0) (11.6) (0.8) (5.3) (62.4)
Net increases in depreciation (29.1) (14.9) (113.4) (2.0) (14.6) (174.0)
Impairment losses recognized in
net income (4.4) (1.3) (27.4) — (0.2) (33.3)
Impairment losses reversed in net
income — 1.0 1.0 — — 2.0
Foreign exchange differences 39.7 21.8 56.9 5.5 2.2 126.1
Reclassification and other (0.6) (3.5) 93.0 (78.5) (2.1) 8.3

Closing balance: December 2005
Gross amount 604.1 517.0 2,412.8 141.4 202.4 3,877.7
Depreciation (106.9) (224.9) (1,615.2) (2.5) (154.4) (2,103.9)

497.2 292.1 797.6 138.9 48.0 1,773.8
Net amount


Property, plant and equipment controlled as a result of a finance lease contract are recognized in the
balance sheet for an amount of A10.5 million as of December 31, 2005 (A16.4 million as of December
31, 2004). It essentially relates to freight material. Commitments for future rent payments amount to
A2.3 million for 2006, A5.7 million from 2007 to 2010 and A1.8 million beyond.

18 – IMPAIRMENT LOSSES
Every year, Imerys carries out impairment tests on all CGUs according to the terms of paragraph
2.12, Impairment tests of the note on accounting policies and methods. This approach is applied
systematically insofar as goodwill is present in all the Group’s CGUs. The future cash flows used for
the calculation of the assets’ value in use are measured after income taxes and are based on the last
update of the Five-Year Plan validated by the General Management. The average discount rate used
is of 8% after income taxes. It is based on a weighted average capital cost of 7.5% as assessed by
independent financial analysts in Paris, increased by a country-market risk premium ranging from
0.5% to 2% depending on the CGUs. The results obtained from this calculation after income taxes

127
are identical to those which would have been obtained with cash flows and rates before income taxes
as required by IAS 36 on impairment of assets.
In 2004, these tests lead the Specialty Minerals business group to impair in full the industrial and
mining assets of its Vermiculite activity of the Advanced Solutions division located in Zimbabwe. In
2005, the industrial and mining assets of Ardoisieres d’Angers of the Materials & Monolithics
`
business group were subject to an impairment loss of A4.5 million. The tests carried out in 2005 on
the other CGUs are satisfactory.
These impairment tests complete the exhaustive review carried out by the Group division managers
during which impairment losses may be recognized on individual assets. This is more particularly the
case at the time of restructurings of industrial facilities as described in the note 12, Other operating
revenue and expenses. The related amounts are presented in specific lines of the statements of changes
in the related assets (notes 15 to 17).

19 – INVESTMENTS IN ASSOCIATES

(A millions) 2005 2004
Fair value at the beginning of the period 25.9 29.2

Of which carrying amount of goodwill 1.6 1.6
Disposals of the period (1.0) —
Aquisitions of the period 2.4 —
Income 4.6 3.3
Dividends paid (1.8) (1.5)
Other 1.8 (5.1)

Fair value at the end of the period 31.9 25.9

Of which carrying amount of goodwill 1.6 1.6

Main associates

Share in capital held Share in net shareholder’s
equity (A millions)
(in %)
Entities 2005 2004 2005 2004
MST Mineralien Schiffahrt 50.0% 50.0% 20.2 17.6
Plibrico S.A. (Spain) 49.9% 49.9% 4.2 3.8
Dalian Jinsheng Fine Chemicals 50.0% n.a. 2.4 n.a.
Other investments — — 5.1 4.5

— — 31.9 25.9
Total


Imerys only has a significant influence on the decisions of financial and operational management of
the above entities, their ordinary activities being controlled by the other associates.

(A millions) Share in net income Total sales Total balance sheet
Entities 2005 2004 2005 2004 2005 2004
MST Mineralien
Schiffahrt 3.1 2.1 63.4 45.7 95.3 94.2
Plibrico S.A. (Spain) 0.6 0.5 17.6 16.6 14.5 13.9
Dalian Jinsheng Fine
Chemicals 0.3 n.a. 1.8 n.a 6.4 n.a.
Other investments 0.6 0.8 — — — —

4.6 3.4 — — — —
Total




128
20 – CURRENT AND NON-CURRENT FINANCIAL ASSETS

Available- Other non- Other
for-sale current current
financial financial financial Marketable
(A millions) assets assets assets securities Total
15.2 11.4 0.6 8.4 35.6
Opening balance: January 2004

Increases of the period 8.3 9.6 — 93.2 111.1
Decreases of the period (4.5) (6.5) — (5.9) (16.9)
Impairment losses 2.8 0.5 — — 3.3
Exchange rate differences (0.6) (0.3) — — (0.9)
Other (7.4) (3.0) — — (10.4)

13.8 11.7 0.6 95.7 121.8
Opening balance: January 2005

Increases of the period 20.2 3.4 2.0 11.4 37.0
Decreases of the period (0.5) (4.5) (1.7) (46.5) (53.2)
Impairment losses — (0.1) (0.6) — (0.7)
Exchange rate differences (0.5) 0.3 0.2 — 0.0
Other (17.0) (0.5) (0.1) — (17.6)

16.0 10.3 0.4 60.6 87.3
Closing balance: December 2005

Other current and non-current financial assets correspond to loans and deposits for A5.4 million, to
defined benefit plan assets for A0.3 million, and to assets related to the financing of employee benefits
which do not meet the qualification criteria of IAS 19 on employee benefits for A5.0 million.
Marketable securities amount to A60.6 million as of December 31, 2005 (A95.7 million as of December
31, 2004). They are measured at their fair value obtained from banking institutions.

21 – CASH AND CASH EQUIVALENTS

(A millions) 2005 2004
Cash 130.6 66.6
Short-term deposits 4.1 —

Total cash and cash equivalents 134.7 66.6

Bank overdrafts (13.6) (20.6)

121.1 46.0
Total net cash


22 – OTHER RECEIVABLES AND OTHER ASSETS – NON-CURRENT AND CURRENT

(A millions) 2005 2004
Other receivables and other assets – non-current 31.5 20.8
Depreciation (17.6) (1.1)

13.9 19.7
Total non-current




129
The greater part of the depreciation on other non-current receivables and assets relates to tax
receivables other than income taxes in Brazil.

(A millions) 2005 2004
Other receivables and other assets – current 104.5 96.2
Depreciation (5.4) (4.6)

99.1 91.6
Total current


23 – INVENTORIES

2005 2004
Gross Write- Carrying Gross Write- Carrying
(A millions) amount down amount amount down amount
Raw materials 168.3 (7.7) 160.6 129.6 (6.3) 123.3
Work in progress 46.7 (0.2) 46.5 32.6 (0.1) 32.5
Finished goods 236.4 (6.9) 229.5 176.5 (5.3) 171.2
Merchandises 40.6 (1.4) 39.2 75.0 (2.5) 72.5

492.0 (16.2) 475.8 413.7 (14.2) 399.5
Total


24 – TRADE ACCOUNTS RECEIVABLE

(A millions) 2005 2004
Trade accounts receivable 613.0 512.6
Depreciation (22.7) (18.1)

590.3 494.5
Total


Variation of depreciation on trade receivables

(A millions) 2005 2004
Opening balance (18.1) (21.0)

Increases (5.9) (4.6)
Decreases 6.6 7.1
Change in the scope of consolidation (3.8) (0.4)
Exchange rate differences (1.2) 0.4
Others (0.3) 0.4

(22.7) (18.1)
Closing balance


25 – CAPITAL
On December 31, 2005, the share capital was increased by a nominal amount of A1 million as a result
of the exercise during the year of 521,845 subscription options giving the right to the same number of
shares. Consequently, Imerys’ fully paid-up share capital was A127.9 million as on that date; it was
divided into 63,971,865 shares of A2 in par value; 17,406,243 shares benefited from a double voting
right pursuant to article 22 of Imerys’ by-laws. The total number of voting rights attached to existing
shares was 80,729,938.
On January 17, 2006, the Board of Directors cancelled 640,000 shares held in the Company that were
directly acquired on the market by the Company in 2005. These were set aside in their entirety for
the purposes of cancellation provided under the stock buyback program approved by the Ordinary &
Extraordinary Shareholders’ General Meeting of May 3, 2005. This cancellation of shares held by the
Company in itself led to a reduction of its capital by a nominal amount of A1.3 million.
Consequently, as of January 17, 2006, Imerys’ share capital totaled A126.7 million; it was divided into
63,331,865 shares of A2 in par value each, to which were attached a total of 80,693,064 voting rights.
Shareholders should use these numbers, which were notified in the required legal and regulatory

130
publications (published in Bulletin des Annonces Legales Obligatoires on January 25, 2006; Euronext
´
notice no. 2006-356 dated February 6, 2006), when calculating the percentage of the Company’s share
capital and voting rights that they hold.
Share capital did not change and the number of voting rights did not change significantly between
January 17, 2006 and the date of the present annual report.
Taking into account the 2,987,703 stock options granted to certain employees and executives of the
Company and not yet exercised as of December 31, 2005, and the absence of any other securities that
grant access to share capital, Imerys’ potential share capital – with all rights exercised – was A133.9
million as of January 1, 2006 and A132.6 million as of January 17, 2006.
No directly registered shares have been pledged by the Company.

26 – PROVISIONS FOR EMPLOYEE BENEFITS

(A millions) 2005 2004
Retirement plans 212.5 174.4
Medical plans 18.8 16.3
Other long-term benefits 4.7 4.5
Termination benefits 1.1 0.3

237.1 195.5
Total


The main actuarial assumptions used for the measurement of defined benefit plans (retirement and
medical plans as well as other long-term benefits) are indicated hereafter. These data constitute the
weighted average of the amount of obligations or assets, depending on whether the assumptions enter
the calculation of obligations or assets.

Other European
Countries France countries North America Asia – Oceania Others
(in %) 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
Discount rates 4.00 4.50 4.77 5.36 5.68 6.01 3.31 3.42 8.12 10.50
Expected rates
of return on
plan assets 4.69 5.00 6.45 6.99 7.98 8.17 3.47 6.70 8.75 11.00
Expected rates
of salary
increases 3.01 4.00 3.20 3.21 3.10 2.78 3.32 2.95 7.23 7.50
Medical cost
trend rates — — — — 10.25 9.75 — — 6.65 7.00
As of December 31, 2005, the amounts contributed to external organizations to finance some defined
benefit plans are invested as indicated hereafter:

Types of investments 2005
Shares 69.8%
Bonds 28.4%
Monetary 1.6%
Real estate 0.2%

100.0%
Total




131
Net expense

Other long-term
Retirement Medical employee benefits Total
(A millions) 2005 2004 2005 2004 2005 2004 2005 2004
Interest cost 47.3 44.8 1.1 1.2 0.2 0.1 48.6 46.1
Current service cost 14.4 16.2 0.3 0.2 0.4 0.4 15.1 16.8
Expected return on plan assets (48.5) (44.0) — — — — (48.5) (44.0)
Amortization of past service
cost 0.7 0.1 0.2 (0.2) (0.3) 0.3 0.6 0.2
Amortization of actuarial
(gains) losses — 0.6 — — (0.3) 0.6 (0.3) 1.2
Curtailments and settlements (2.2) (1.7) — — — — (2.2) (1.7)

Recognized net expense 11.7 16.0 1.6 1.2 0.0 1.4 13.3 18.6

Effective return on plan assets (117.8) (62.2) (117.8) (62.2)


Change in the discounted value of obligations

Other long-term
Retirement Medical employee benefits Total
(A millions) 2005 2004 2005 2004 2005 2004 2005 2004
Opening discounted value of
820.7 785.4 16.7 18.1 4.5 2.1 841.9 805.6
defined benefit obligations

Incoming entities 85.2 — 0.4 — 1.4 1.1 87.0 1.1
Outgoing entities (0.8) (2.2) — — — — (0.8) (2.2)
Interest cost 47.6 44.9 1.1 1.2 0.2 0.1 48.9 46.2
Current service cost 14.7 16.2 0.2 0.2 0.4 0.4 15.3 16.8
Benefit payments (46.5) (40.5) (1.9) (2.3) (0.2) (0.1) (48.6) (42.9)
Employee contributions 3.5 2.9 — — — — 3.5 2.9
Plan amendments 12.5 0.3 0.4 — — 0.2 12.9 0.5
Curtailments and settlements (2.4) (1.3) — — (0.3) — (2.7) (1.3)
Actuarial (gains) losses of the
period 88.0 23.3 1.8 0.6 (0.3) 0.6 89.5 24.5
Transfers 1.1 — — — (1.0) 0.1 0.1 0.1
Exchange rate differences 36.7 (8.3) 2.5 (1.1) — — 39.2 (9.4)

Closing discounted value of
1,060.3 820.7 21.2 16.7 4.7 4.5 1,086.2 841.9
defined benefit obligations

of which funded defined benefit
obligations 993.9 771.9 — — — — 993.9 771.9
of which unfunded defined
benefit obligations 66.4 48.8 21.2 16.7 4.7 4.5 92.3 70.0




132
Change in fair value of plan assets

Other long-term
Retirement Medical employee benefits Total
(A millions) 2005 2004 2005 2004 2005 2004 2005 2004
Opening fair value of plan
assets 644.4 603.5 — — — — 644.4 603.5

Incoming entities 49.1 — — — — — 49.1 0.0
Expected return on plan assets 49.2 44.4 — — — — 49.2 44.4
Benefit payments (46.5) (40.5) (1.9) (2.3) (0.2) (0.1) (48.6) (42.9)
Employer contributions 16.8 22.8 1.9 2.3 0.2 0.1 18.9 25.2
Employee contributions 3.5 2.9 — — — — 3.5 2.9
Plan amendments 13.4 — — — — — 13.4 0.0
Curtailments and settlements (0.2) 18.1 — — — — (0.2) 18.1
Actuarial (gains) losses of the
period 69.3 — — — — — 69.3 0.0
Exchange rate differences 29.7 (6.8) — — — — 29.7 (6.8)

828.7 644.4 0.0 0.0 0.0 0.0 828.7 644.4
Closing fair value of plan assets


The expected amount of contributions for the 2006 period is of A34.2 million.

Assets / liabilities in the balance sheet

Other long-term
Retirement Medical employee benefits Total
(A millions) 2005 2004 2005 2004 2005 2004 2005 2004
Discounted value of funded
defined benefit obligations (993.9) (771.9) — — — — (993.9) (771.9)
Fair value of plan assets 828.7 644.4 0.0 0.0 0.0 0.0 828.7 644.4

(165.2) (127.5) 0.0 0.0 0.0 0.0 (165.2) (127.5)
Funded status

Discounted value of unfunded
defined benefit obligations (66.4) (48.8) (21.2) (16.7) (4.7) (4.5) (92.3) (70.0)
Unrecognized past service cost (1.0) (0.1) (0.1) (0.3) — — (1.1) (0.4)
Closing unrecognized actuarial
differences 24.5 5.0 2.5 0.7 — — 27.0 5.7
Unrecognized assets due to a
limit on prepaid assets (4.1) (3.0) — — — — (4.1) (3.0)

Assets (provisions) in the
(212.2) (174.4) (18.8) (16.3) (4.7) (4.5) (235.7) (195.2)
balance sheet

of which provisions (212.5) (174.4) (18.8) (16.3) (4.7) (4.5) (236.0) (195.2)
of which assets 0.3 — — — — — 0.3 —


27 – OTHER PROVISIONS

(A millions) 2005 2004
Other non-current provisions 161.0 150.0
Other current provisions 12.8 12.0

173.8 162.0
Total




133
The other provisions can be analyzed as follows:
Environmental
Provisions for provisions and
management provisions for Provisions for Other
(A millions) risks site restoration restructuring provisions Total
27.6 52.7 28.1 26.8 135.2
Opening balance: January 2004

Increases of the period 15.6 27.7 7.9 26.1 77.3
Utilization of provisions (7.0) (7.5) (6.7) (17.4) (38.6)
Non-utilized decreases (0.9) (7.5) (0.9) (3.0) (12.3)
Change in the scope of
consolidation 0.4 — 0.5 0.5 1.4
Unwinding expense — 3.1 — — 3.1
Exchange rate differences (1.9) (0.5) (0.4) (0.6) (3.4)
Reclassification and other 15.8 3.5 (6.1) (13.9) (0.7)

49.6 71.5 22.4 18.5 162.0
Opening balance: January 2005

Increases of the period 6.0 0.5 14.3 10.7 31.5
Utilization of provisions (12.6) (7.6) (10.7) (8.1) (39.0)
Non-utilized decreases (0.2) (0.4) (5.3) (3.3) (9.2)
Change in the scope of
consolidation 3.3 8.6 0.2 4.2 16.3
Unwinding expense — 3.0 — (0.2) 2.8
Exchange rate differences 3.4 4.0 1.3 1.9 10.6
Reclassification and other (0.1) 6.9 (5.0) (3.0) (1.2)

49.4 86.5 17.2 20.7 173.8
Closing balance: December 2005


The Group is exposed to litigation and claims arising from its ordinary activities. These risks relate to
allegations of personal or financial injury caused by third parties implicating the civil liability of the
Group’s entities, the potential breach of some of their contractual obligations or employee, property
and environmental law issues. The Group also has certain contractual indemnity obligations
attributable to disposals of assets in the past.
The Imerys legal department, with the assistance of designated local lawyers, manages all contentious
claims implicating the Group. It draws up a synthesis whose conclusions, reviewed by the finance
department and the Group’s auditors, are outlined by the Legal Manager during the Audit
Committee as part of its half-yearly examination of the risks the Group is confronted with. The
amount recorded as provisions against such management risks equals A49.4 million as of December
31, 2005 (A49.6 million as of December 31, 2004). These provisions have a probable maturity between
2006 and 2010.
In addition, Imerys records provisions intended to cover environmental risks resulting from the
Group’s industrial activity as well as provisions for the restoration of mine sites at the end of their
exploitation. These provisions amount to A86.5 million as of December 31, 2005 (A71.5 million as of
December 31, 2004). The corresponding obligations have probable maturities between 2006 and 2010
for A67.4 million, between 2011 and 2020 for A13.2 million and for A5.9 million from 2021 onwards.
Provisions recorded for the restructuring of Group activities and other provisions have a probable
maturity between 2006 and 2010.




134
28 – OTHER DEBTS
Other non-current debts
(A millions) 2005 2004
Payable income taxes 6.7 7.9
Tax debts 5.1 6.1
Social debts 0.9 1.6
Others 20.5 8.6

33.2 24.2
Total


Other current debts
(A millions) 2005 2004
Capital expenditure payables 45.8 53.4
Tax debts 25.1 13.0
Social debts 99.3 86.8
Others 52.6 35.0

222.8 188.2
Total


29 – INCOME TAXES
Imerys SA and the majority of its French entities are included in a tax consolidation system which
notably enables the Group to compensate within the integrated group potential profits and losses.
In 2005, two entities left the tax consolidation perimeter (Lariviere and Boitel) and three joined it
`
(Marcel Rivereau, Parnasse 22 and Parnasse 23). The tax consolidation perimeter included 25 entities
as of December 31, 2005.
Tax consolidation perimeters also exist in other countries, mainly in the United States, the United
Kingdom, in Spain, Germany and, since this period, in Italy.

Income taxes for the period
The breakdown of income taxes for the period is as follows:
(A millions) 2005 2004
Payable income taxes of the period (101.9) (100.6)
Payable income taxes – Prior period adjustments 5.1 (0.2)

(96.8) (100.8)
Payable income taxes

Deferred taxes due to temporary difference variations 20.5 3.0
Deferred taxes due to rate variations (0.2) 0.3

20.3 3.3
Deferred taxes

(76.5) (97.5)
Total



(A millions) 2005 2004
Current payable income taxes (98.7) (99.6)
Current deferred taxes (2.3) (22.3)

(101.0) (121.9)
Income taxes on current income

Payable income taxes on other operating revenue and expenses 1.9 (1.2)
Deferred taxes on other operating revenue and expenses 22.6 25.6

24.5 24.4
Income taxes on other operating revenue and expenses

(76.5) (97.5)
Total


135
Reconciliation between the legal income tax rate in France and the effective income tax rate
The effective tax rate on the current operating income, which is the most significant one, is of 26.1%
decreasing by 5.7 points in comparison to 2004 (31.8%), of which two points can be explained by the
variation of the net deferred tax position of the entity IRCC in Brazil, mainly due to the increase of
the Brazilian Real.
The reconciliation with the legal rate in France for this period and the previous one can be analyzed
as follows:

2005 2004
Legal tax rate in France (including surtax and contribution) 34.9% 35.4%
Impact of national rate differences (1.4%) (1.6%)
Impact of permanent differences and tax incentives (4.3%) (2.8%)
Impact of unrecognized tax losses utilized (1.2%) (0.7%)
Other income taxes at different rates and bases and impact of rate changes on
deferred taxes 1.3% 0.8%
Other (miscellaneous tax credits, tax losses created and unrecognized, prior
period adjustments) (3.2%) 0.7%

Effective tax rate on current operating income(1) 26.1% 31.8%


(1) Current income taxes A101.0 million divided by the sum of the current operating income A434.0 million and the net financial
income -A47.3 million
(2) Income taxes A76.5 million divided by the sum of the operating income A431.3 million and the net financial income -A47.3 million


When taking into account the tax on other operating revenue and expenses, the effective tax rate(2)
amounts to 19.9% compared to 28.9% in 2004. The low tax rate in 2005 can mainly be explained by
the impact of the Lariviere disposal, the realized gain having been charged to the Group’s available
`
long-term losses which did not give rise to any tax payment.

30 – INCOME TAXES – BALANCE SHEET
Breakdown of the net deferred tax position

(A millions) 2005 2004
Deferred tax assets 34.6 30.0
Deferred tax liabilities (76.4) (83.2)

(41.8) (53.2)
Net deferred tax position


In the consolidated balance sheet of Imerys, deferred tax assets and liabilities are compensated by tax
entity (legal entity or tax consolidation group).
Change in deferred taxes

(A millions) 2005 Income Translation Perimeter 2004
Deferred tax assets 34.6 (21.0) 15.3 10.3 30.0
Deferred tax liabilities (76.4) 41.3 (15.8) (18.7) (83.2)

Net deferred tax
(41.8) 20.3 (0.5) (8.4) (53.2)
position




136
Deferred tax analysis by nature
The breakdown by temporary differences nature of deferred tax assets and liabilities and deferred
income taxes is as follows:

Balance sheet Income
Deferred
tax
expense
(A millions) 2005 2004 2005
Deferred tax assets
Provisions for retirement 55.0 51.7 (3.1)
Other provisions 32.0 28.6 (3.2)
Property, plant and equipment 48.5 60.7 (13.6)
Intangible assets 2.1 1.4 0.8
Financial assets 5.2 3.3 1.2
Current assets and liabilities 7.5 16.2 0.9
Tax losses carried forward 9.5 7.5 0.5
Others 27.2 6.1 2.3

187.0 175.5 (14.2)
Total

Deferred tax liabilities
Property, plant and equipment (197.2) (209.5) 38.0
Intangible assets (0.1) — (0.2)
Financial assets (10.4) (9.4) 0.4
Current assets and liabilities (4.3) (3.7) 0.3
Others (16.8) (6.1) (4.0)

(228.8) (228.7) 34.5
Total

(41.8) (53.2)
Net deferred tax position

20.3
Net deferred tax revenue

Deferred tax assets are recognized as carried forward tax losses when they are assessed as recoverable.
As of December 31, 2005, these deferred tax assets come to A9.5 million and mainly correspond to
the recoverable losses of the entity IRCC in Brazil. On the other hand, tax losses and credits not
having been recognized as deferred tax assets due to their uncertain recovery, come to respectively
A121 million and A31 million as of December 31, 2005, of which A93 million and A30 million expire
after 2010 or can be carried forward without any time limit.
Deferred taxes are calculated by using effective rates over the period in question in accordance with
the tax laws in force in each concerned country.

31 – LOANS, DEBTS AND FINANCIAL RESOURCES
Financial resources are the financing capacities available to the Group. These capacities exist either as
drawn financial borrowings or as financing commitments granted by first-class leading banks.
Financial loans and debts represent the effective utilizations of the Group, obtained either on capital
markets, or with banks or financial institutions.

Financial resources
Imerys manages the amount of its financial resources by comparing them regularly with the amount
of its utilizations in order to measure, from the difference, the financial liquid borrowings to which it
may have access.
The robustness of financial resources is assessed on the basis of their amounts and average maturity.




137
The tables below list resources by their due maturity and nature.

(A millions) 2005 2004
Maturity less than one year — —
Maturity from one to five years 989.1 1,700.5
Maturity beyond five years 1,244.5 524.9

2,233.6 2,225.4
Total financial resources

Average life span (years) 5.5 5.3


(A millions) 2005 2004
Eurobond / EMTN 609.7 609.7
Private investments / (EMTN and others) 294.5 274.9

904.2 884.6
Bond resources

Average life span (years) 6.4 7.4

June 2004 / July 2005 syndicated credit 750.0 750.0
Miscellaneous bilateral facilities 579.4 590.8

1,329.4 1,340.8
Bank resources

Average life span (years) 4.9 3.9

2,233.6 2,225.4
Total financial resources

Average life span (years) 5.5 5.3

Over the past three years, Imerys has sought to maintain the amount of its financial resources at
approximately A2 billion (A2,026.9 million as of December 31, 2003, A2,225.4 million as of December
31, 2004 and A2,233.6 million as of December 31, 2005), and to lengthen their maturity.
The main new financial resources acquired in 2005 are as follows:
*


On July 22, 2005, Imerys amended the June 2009 syndicated credit in order to lengthen its
maturity by two years (new maturity July 2011).
Imerys also renegotiated most of its bilateral facilities in order to lengthen their maturity.
These renegotiations enabled Imerys to slightly modify the financial ratios of these facilities in order
to take into consideration the IFRS impact on the balance sheet.
The various bilateral bank credit facilities, the June 2004 syndicated credit as well as certain
*

bond issues in the form of private offerings contain the following terms and conditions:
purpose: general corporate financing requirements;
*


obligations in terms of financial ratio compliance:
*


1) net Financial Debt / Consolidated Net Worth ratio below 1.75 (for bond issues under
private offerings), 1.60 (for bilateral bank credit facilities and syndicated credit of
July 2005) at each half-yearly closing of consolidated accounts (the ratio as of
December 31, 2005 was 0.67);
2) net Financial Debt / Consolidated EBITDA ratio below 3.80 at each half-yearly
closing of consolidated accounts, the consolidated EBITDA being calculated for the
last 12 months (the ratio as of December 31, 2005 was 1.91);
3) absence of any lien in favour of lenders;
4) the failure to comply with the obligations of each loan would lead to the cancellation
of its available amount and make outstanding advances and bonds under the contract
immediately callable.

138
Loans and debts
The table below describes the Group’s loans and debts by maturity date. This analysis does not
provide for an assessment of the stability of the loans and debts, which is described in the ‘‘financial
resources’’ paragraph above. Medium-term financial resources provided by bilateral or syndicated
bank credit facilities may be used for very short drawing periods (3 months) while remaining available
for longer maturities (5 years).

(A millions) 2005 2004
Maturity less than one year 426.2 119.0
Maturity from one to five years 428.9 376.3
Maturity beyond five years 466.9 536.8

1,322.0 1,032.1
Total gross financial debt

Cash, cash equivalents and marketable securities (182.0) (142.3)

1,140.0 889.8
Total net financial debt


The table below describes the loans and debts by nature:

(A millions) 2005 2004
Eurobond / EMTN 609.7 609.7
Private investments (EMTN and others) 294.5 274.9
Accrued interests 6.5 4.1

910.7 888.7
Bond issues

380.2 110.0
Commercial papers issues

June 2004 syndicated credit — —
Miscellaneous bilateral facilities — —
Miscellaneous facilities due within one year 31.1 33.4

31.1 33.4
Draw-downs on bank facilities

1,322.0 1,032.1
Total gross financial debt

Cash, cash equivalents and marketable securities (182.0) (142.3)

1,140.0 889.8
Total net financial debt


Bond issue programs on capital markets
In 2005, Imerys did not legally update its Euro Medium Term Note program (EMTN), preferring to
wait for the final evolutions of the European stock-exchange regulation and considering that this
update was not essential for the correct management of its bond financings. However, the total
amount of the program is A1 billion. Subject to its legal update, it would be used to issue notes
(considered as ordinary bonds under French law) of a minimum maturity of 1 month and a
maximum maturity of 30 years. As of December 31, 2005, outstanding securities total A460.1 million.
As of December 31, 2005, Imerys also has a French commercial paper program (‘‘billets de
tresorerie’’) limited to A800 million. The program is rated P-2 by Moody’s. As of December 31, 2005,
´
outstanding securities total A380.2 million and are slightly increasing in comparison with December
31, 2004 (A110 million). As of December 31, 2005, Imerys has access to A1,329.4 million of available
bank facilities, part of which secures the A380.2 million commercial paper issue in accordance with
the financial policy of the Group.

Available financial resources
The table below can be used to measure the amount of available financial resources after the
repayment of financing from uncommitted resources. It measures the Group’s real exposure to an
illiquidity crisis on both financial and banking markets.

139
2005 2004
(A millions) Resources Utilization Available Resources Utilization Available
Bonds 904.2 904.2 — 884.6 884.6 —
Commercial papers — 380.2 (380.2) — 110.0 (110.0)
Committed bank facilities 1,329.4 — 1,329.4 1,340.8 — 1,340.8
Bank facilities and accrued
interest — 37.6 (37.6) — 37.5 (37.5)

Resources, utilizations and
2,233.6 1,322.0 911.6 2,225.4 1,032.1 1,193.3
available amounts

As of December 31, 2005, available financial resources, after repayment of uncommitted resources,
total A911.6 million (A1,193.3 million as of December 31, 2004), which gives the Group substantial
room to manuvre and is a guarantee of financial stability.

32 – FINANCIAL DEBT ANALYSIS
The net financial debt is an indicator used for the calculation of financial ratios which the Group has
to respect due to financing agreements with financial markets (note 31). The link between this
indicator and the consolidated balance sheet is the following:

(A millions) 2005 2004
Derivative instrument assets (66.7) (63.2)
– less hedging instruments on energy 5.8 1.8
Marketable securities and other financial assets (61.0) (96.3)
Cash and cash equivalents (134.7) (66.6)
Loans and financial debts – non-current 943.1 940.6
Derivative instrument liabilities 23.1 9.7
– less hedging instruments on energy (6.2) (0.8)
Loans and financial debts – current 423.0 144.0
Bank overdrafts 13.6 20.6

1,140.0 889.8
Net financial debt


Financial net debt distribution between floating and fixed rate by currency as of December 31, 2005

Other
British Japanese foreign
(A millions) currencies Total
Euro US Dollar Pound Yen
Debt at fixed rate on issue 609.7 144.1 — 50.4 — 804.2
Swap fixed rate into floating
rate (609.7) (144.1) — (50.4) — (804.2)

0.0 0.0 0.0 0.0 0.0 0.0
Total debt at fixed rate

Debt at floating rate on issue 491.4 7.7 5.7 1.7 11.3 517.8
Net cash (92.7) (29.5) (16.6) (3.4) (39.8) (182.0)
Swap fixed rate into floating
rate 609.7 144.1 — 50.4 — 804.2
Exchange rate swap (249.7) 186.1 4.1 (27.0) 86.5 0.0

758.7 308.4 (6.8) 21.7 58.0 1,140.0
Total debt at floating rate

758.7 308.4 (6.8) 21.7 58.0 1,140.0
Total net financial debt




140
Financial net debt distribution on issue by due dates

2012 and
2006 2007-2011 later
less than 1 beyond 5
(A millions) year 1 to 5 years years Total
Debt at fixed rate on issue — 309.7 494.5 804.2
Swap fixed rate into floating rate on issue 804.2 (309.7) (494.5) 0.0
Debt at floating rate on issue 517.8 — — 517.8
Net cash (182.0) — — (182.0)

1,140.0 0.0 0.0 1,140.0
Total net financial debt


Distribution of interest rate hedging operations December 2005 – December 2006 by currency

Other
US British Japanese foreign
(A millions) Euro Dollar Pound Yen currencies Total
Exposure at floating
758.7 308.4 (6.8) 21.7 58.0 1,140.0
rate before hedging

Fixed rate hedges (479.0) 0.0 0.0 0.0 0.0 (479.0)
Swap at average rate
of: 2.58% — — — —
Capped rate hedges (471.2) (164.4) 0.0 0.0 0.0 (635.6)
Cap at average rate of: 3.00% 4.50% — — —

Exposure at floating
(191.5) 144.0 (6.8) 21.7 58.0 25.4
rate after hedging

Distribution of interest rate hedging operations in 2006 and later by due dates
2012 and
later
beyond 5
2006 less 2007-2011
(A millions) years
than 1 year 1 to 5 years
1,140.0 1,140.0 1,140.0
Total exposure before hedging

Hedges at fixed rates (479.0) (118.3) —
Swap at average rate of: 2.58% 2.52% —
Hedges at capped rates (635.6) (338.5) —
Cap at average rate of: 3.39% 2.81% —

25.4 683.2 1,140.0
Total exposure after hedging


Sensitivity
As of December 31, 2005, interest rate variations are unlikely to substantially affect the Group’s
financial result in 2006. A 1% rise across all interest rate curves would have a negative impact of only
A5 million on the Group’s financial expense in 2006 (assuming a stable amount of debt and that
every fixed-rate debt is replaced at its term by a floating-rate debt).


33 – EXCHANGE RATE RISK
The Group is exposed to different types of exchange rate risks:

the balance sheet exchange rate risk resulting from variations in its net assets in other currencies
*

than the euro (mainly in US Dollar);

the transactional exchange rate risk resulting from variations in trade receivables and payables
*

in foreign currencies.

141
Balance sheet exchange rate risk
Imerys manages the balance sheet exchange rate risk through the proportion of its financial debts
stated in currencies other than the euro. In this way, any exchange rate fluctuation affecting net assets
in these currencies is, to a certain extent, offset by a symmetrical effect resulting from the exchange
rate fluctuation concerning its financial debts in the corresponding currencies.
In that framework, Imerys carried out foreign exchange rate swaps for a notional amount revalued at
A249.7 million as of December 31, 2005. The table below describes the financial debt before and after
the impact of these rate swaps.

2005 2004
Before After Before After
exchange Exchange exchange exchange Exchange exchange
(A millions) rate swap rate swap rate swap rate swap rate swap rate swap
Euro 1,101.1 (249.7) 851.4 823.2 (398.7) 424.5
US Dollar 151.8 186.1 337.9 143.2 300.5 443.7
British Pound 5.7 4.1 9.8 5.9 67.5 73.4
Other currencies 63.4 59.5 122.9 59.8 30.7 90.5

1,322.0 0.0 1,322.0 1,032.1 0.0 1,032.1
Total


The portion of the financial debt in each currency, after swaps, is as follows:

US British Other
(A millions) Euro Dollar Pound currencies Total
Financial debts 851.4 337.9 9.8 122.9 1,322.0
Cash and cash equivalents and
marketable securities (92.7) (29.5) (16.6) (43.2) (182.0)

758.7 308.4 (6.8) 79.7 1,140.0
Net financial debt


Transactional exchange rate risk
To keep exchange rate risks arising from the Group’s commercial activity to a minimum, as far as
possible, entities invoice their sales or are invoiced for their purchases in their operating currency.
Whenever this is not the case, the transactional exchange rate risk may be hedged on a case-by-case
basis. Overall, the Group’s exposure to transactional exchange rate risks remains relatively low and as
of December 31, 2005, there is no centralized policy for managing this risk.
The revenue and the Group’s production costs are stated in a large number of foreign currencies,
particularly the US Dollar, the Brazilian Real and the British Pound.

Sensitivity
Overall, the depreciation of the US Dollar against the euro has a negative impact on the Group’s
operating income mainly due to the conversion effect of the income generated in this currency.
However, this negative impact in terms of operating income is compensated to a certain extent by the
associated reduction in the Group’s financial expense. In fact, approximately 27% of Imerys’ financial
net debt is stated in US Dollars.

34 – INTEREST RATE RISK
Management process: policy, framework and resources
The interest rate risk is managed for the Group’s consolidated net financial debt with the primary
objective of guaranteeing its medium-term cost.
To do so, Imerys manages this risk centrally, based on trends in the Group’s consolidated net
financial debt. Knowledge of this debt is provided by a regular reporting that describes the financial
debt of each entity and indicates its various components and characteristics.
Every year, the Group Treasury Department draws up a management policy document approved by
the Financial Department and the Board of Directors. Reporting is reviewed monthly by the

142
Financial Department and quarterly by the Board of Directors. This enables the situation to be
monitored and the management policy to be adjusted as necessary.
As part of that management process, the Group Treasury Department works with leading banks and
obtains data from leading financial information providers.

Management principles
The Group’s policy is to obtain financing mainly in euros, the most accessible and least costly
financial resource, at a floating rate. Medium-term fixed-rate bond issues are converted to floating
rates using interest rate swaps.
In the framework of its general management policy, the Group defined the various derivative
instruments to be used solely to hedge risks on firm and highly probable commitments. These
products include interest rate swaps, options – including caps, floors, swaptions and futures. The
Group does not authorize the use of derivatives for speculative purposes.
Finally, given trends in 12-18 month interest rates in 2005, the Group fixed the interest rate for part
of its future financial debt (2006-2007) on various terms (note 32).

35 – ENERGY PRICE RISKS
Like any industrial group, Imerys is exposed to the risk of fluctuating prices for the various energy
sources – mainly natural gas and electricity (and coal to a lesser extent) – that enter into its activities’
production cycle. The Group’s geographical locations and energy supply sources remain diversified,
but a general and strong increase in energy prices may have, as was the case in 2005, a significant
impact on the operational profitability. In this type of situation, the Group makes important efforts
to pass on energy price increases to the selling price of its products.
As energy supplies are sourced regionally, some local markets may be subject to significant but non-
recurring price variations. The present situation is highly volatile.
Furthermore since the end of 2003, management of the natural gas risk, in both Europe and the
United States, has been centralized. The Group Treasury Department is responsible for implementing
the framework and resources needed for the application of a common management policy, which
includes appropriate use of the financial instruments available in those markets.
In the United States, the Group consumes slightly over 5.8 million MMBTU (BTU: British Thermal
Unit) of natural gas with supply contracts based on the NYMEX Henry Hub index listed in New
York.
As part of the management of its natural gas risk in the United States, the Group had as of
December 31, 2005 various hedging options covering 2006.
All transactions on gas in the United States as of December 31, 2005 are described in the table
below:

Net notional
amount in MMBTU Maturity
5,800,000
Underlying position

Management transactions
Swaps — — —
Options — — —
Purchases of Puts (590,000) 512 months
Sales of Puts 2,030,000 512 months
Purchases of Calls 4,460,000 512 months
Sales of Calls (2,730,000) 512 months
Futures Purchases of Futures 250,000 512 months

In the United Kindgom, the Group consumes approximately 58 million therms with supply contracts
based on the UK Natural Gas IPE index listed in London and electricity contracts.




143
All transactions on gas in the United Kingdom as of December 31, 2005 are described in the table
below:

Amount in therms Maturity
57,900,000
Underlying position

Management transactions
Swaps — — —
Options — — —
Purchases of Puts (6,672,000) 512 months
Sales of Puts 20,232,000 512 months
Purchases of Calls 23,144,000 512 months
Sales of Calls (15,780,000) 512 months
Futures Sales of Futures (7,560,000) 512 months
Forwards — — —

In France, the Group consumes approximately 1,650 MWH of gas with supply contracts at fixed or
variable prices based on the barrel price of Brent listed in London (equivalent of 613,000 barrels).
All Brent transactions as of December 31, 2005 are described in the table below:

Amount in barrels Maturity
613,000
Underlying position

Management transactions
Swaps — — —
Options — — —
Purchases of Puts — —
Sales of Puts — —
Purchases of Calls 264,000 512 months
Sales of Calls (264,000) 512 months
Futures — — —
Forwards — — —

36 – HEDGES
Fair value hedges
As of December 31, 2005, the Group held interest rate swaps intended to hedge the exposure to
changes in fair value of the different loans. The hedged loans as well as the interest rate swaps
present the same characteristics.

Notional amount
Currency (in millions) Fixed rate received Floating rate paid
Japanese Yen 7,000 2.39% Libor Yen 6 months
Euro 58 2.81% Euribor 3 months
Euro 252 5.00% Euribor 3 months
Euro 200 4.32% Euribor 3 months
Euro 100 4.33% Euribor 3 months
US Dollar 140 4.88% Libor USD 3 months
US Dollar 30 5.28% Libor USD 3 months




144
As of December 31, 2005, the Group also held an electricity swap in Great Britain intended to hedge
the exposure to changes in fair value of the underlying physical contract. The swap and the
underlying contract present the same characteristics.

Notional amount in Fixed price received in
Currency MWh GBP/MWh Floating price paid
IPE Electricity
British Pound 84,092 35.63 Baseload

Cash flow hedges
As of December 31, 2005, the Group held a certain number of exchange rate instruments intended to
hedge its future sales or purchases on the 2005 period. The amount recognized in the shareholders’
equity comes to A+0.1 million and relates to transactions which will occur in 2006.
As of December 31, 2005, the Group held a certain number of interest rate instruments intended to
hedge part of its debt at floating rate. The amount recognized in the shareholders’ equity comes to
A+1.6 million and mainly relates to a rate swap due on June 16, 2010.
As of December 31, 2005, the Group held a certain number of instruments intended to hedge the
Group’s gas consumption in the United States, in Great Britain and in France. The amount
recognized in the shareholders’ equity comes to A+1.5 million and relates to transactions which will
occur in 2006.

Net investment hedging in foreign entities
Imerys hedges part of its net investments in foreign entities by loans or exchange rate swaps. These
transactions aim at hedging the Group’s exposure to the exchange rate risks on these investments.
Exchange gains or losses on these transactions are recorded in the shareholders’ equity in order to
compensate all exchange gains or losses of net investments in these entities.
As of December 31, 2005, the main loans and exchange rate swaps hedging net investments in foreign
entities are the following: USD60.4 million, CHF45 million and JPY1,000 million.

37 – FAIR VALUE OF DERIVATIVE INSTRUMENTS
All derivative instruments on the various financial markets were revalued on the basis of December
31, 2005 prices, provided by third parties that are active on those markets. The fair value for each
type of instrument as of December 31, 2005 amounts to:

2005 2004
Balance sheet market
Balance sheet market
value including accrued
value including accrued
(A millions) interest interest
Interest rate instruments
Forward contracts 44.4 40.2
Options 1.2 3.0

Foreign exchange instruments
Forward contracts (1.6) 9.1
Options 0.1 0.9

Energy risk instruments
Forward contracts (3.4) 0.0
Options 2.9 1.0




145
38 – MARKET VALUE OF BONDS
For listed bonds, the market value is equal to the closing price as of December 31, 2005.
For unlisted bonds, the market value is obtained by updating the future flows at market rates
without risk.

(A millions) listed / Effective Market Balance
value in A
Description of the bond unlisted tax rate sheet value
Bond JPY7 billion 3.40% maturity 9/16/2033 unlisted 3.47% 61.6 51.0
Bond USD140 million 4.88% maturity 8/6/2013 unlisted 4.98% 121.1 114.6
Bond USD30 million 5.28% maturity 8/6/2018 unlisted 5.38% 26.8 24.9
Bond A309.7 million 5.125% maturity 4/25/2014 listed 5.42% 344.3 345.0
Bond A300 million 6.00% maturity 5/7/2007 listed 6.04% 322.2 317.3




146
4. Notes to the cash flow statement
39 – RECONCILIATION CURRENT NET INCOME/OPERATING CASH FLOW BEFORE
WORKING CAPITAL CHANGES
(A millions) 2005 2004
287.6 261.2
Current net income, Group share
Amortization, depreciation and impairment losses 185.3 163.0
Net change in operating provisions (22.4) (2.5)
Rents of leased assets (3.4) (3.5)
Provisions for mining assets (0.3) 0.1
Financial impairment losses and unwinding of the discount 6.0 2.9
Current deferred taxes 2.3 23.6
Minority interests on current income 2.7 2.7
Share in net income of associates (4.6) (3.4)
Dividends received from associates and other 1.8 1.6

Current operating cash flow before working capital changes 455.0 445.7


40 – OPERATING CASH FLOW BEFORE TAXES (EBITDA)
(A millions) 2005 2004
Current operating income 434.0 421.8
Amortization, depreciation and impairment losses 185.3 163.0
Net change in operating provisions (22.4) (2.5)

Operating cash flow before taxes (EBITDA) 596.9 582.3

Rents of leased assets (3.4) (3.5)
Provisions for mining assets (0.3) 0.1
Notional taxes on current operating income (113.4) (134.3)
Effective tax rate on current operating income (26.1)% (31.8)%

Current net operating cash flow 479.8 444.6


41 – CURRENT FREE OPERATING CASH FLOW
(A millions) 2005 2004
Current net operating cash flow (note 40) 479.8 444.6

Intangible assets (3.3) (3.4)
Property, plant and equipment (202.9) (202.6)
Overburden mining assets (23.3) (16.6)
Debts on acquisitions (21.5) 28.3

(251.0) (194.3)
Paid capital expenditures

Increases in asset amortization and depreciation 180.5 159.1
Recognized capital expenditures / asset depreciation ratio 127.1% 139.9%

8.7 13.7
Carrying amount of current asset disposals

(18.1) (36.1)
Change in the operational working capital requirement

Of which:
Inventories (42.4) (13.6)
Trade accounts receivable (20.2) (26.8)
Trade accounts payable 44.5 4.3

Current free operating cash flow 219.4 227.9


147
From 1991 to 2005, the Group sales increased on average by +9.5% per year, the current operating
income by +13.5% and the net income from current operations by +14.7% per year. This increase
resulted from:
an ambitious industrial investing policy which focuses on the modernization and rationalization
*

of production capacities as well as on new product launches: capital expenditures total A581
million for the three last periods, i.e. 120% of amortization and depreciation;
a sustained external growth in the Group’s activities. After having acquired English China Clays
*

(ECC) in 1999, when the Group devoted more than A1.5 billion to external growth, the Group
devoted A1,120 million to its acquisitions from 2000 to the end of 2005.
This development by acquisitions meets:
simple objectives: complete the range of products, enlarge the markets supplied, open up
*

new geographical zones; and
permanent principles: acquire a leadership position due to a lasting competitive advantage
*

(reserves, know-how, etc.), be able to valorize first-rate products and services supplied to
customers by an adapted price policy, respect the profitability criteria fixed for each Group
investment.
2005 was a very active year as far as development is concerned. The Group devoted A440 million to
acquisitions, the highest amount since the acquisition of ECC. This amount includes A168.6 million of
debts acquired on the occasion of these acquisitions. Moreover, industrial capital expenditures
remained important with an amount of A229.5 million. This record amount in the Group’s history
includes the capital expenditures realized in the recently acquired entities. It represents 127% of
amortization and depreciation, i.e. a higher ratio in 2005 than the historical average ratio for Imerys.
Whereas in 2004 the Group’s capital expenditures were strongly concentrated on the Pigments for
Paper business group and on the development of its calcium carbonate activities, they were largely
shared out in 2005 between the four business groups:
the Specialty Minerals business group mainly concentrated on the optimization of their
*

industrial facilities, particularly in Cornwall (United Kingdom) and the United States;
the Pigments for Paper business group continued its development of calcium carbonates, notably
*

with the capacity extension of its plant in Lixhe (Belgium);
in the Materials & Monolithics business group, strategic projects of capacity extension for clay
*

roof tiles and bricks in France have been conducted with success;
in the Refractories, Abrasives & Filtration business group, the production capacity extension of
*

certain specialty corundum products continues.




148
42 – CURRENT FREE CASH FLOW
(A millions) 2005 2004
219.4 227.9
Current free operating cash flow

Net interest and investment income (47.3) (39.4)
Financial impairment losses and unwinding of the discount 6.0 2.9
Variation of the paid / received interest (13.0) 1.0
Tax on net interest and investment income 12.4 12.6
Tax debt variation on current income (6.8) (33.0)
Current deferred tax variation on current income 2.3 23.6
Variation of other working capital accounts 15.6 26.8
Change in fair value 4.7 2.8
Gain on current asset disposal 0.0 (3.3)
Dividends received from associates 1.8 1.4

Current free cash flow 195.1 223.3


(A millions) 2005 2004
Operating cash flow before working capital changes (note 39) 455.0 445.7

Paid capital expenditures (note 41) (251.0) (194.3)
Change in the working capital requirement (2.5) (9.2)
Variation of the paid / received interest (13.0) 1.0
Tax debt variation on current income (6.8) (33.0)

Working capital requirement sub-total (22.3) (41.2)

Change in fair value 4.7 2.8
Carrying amount of current asset disposals 8.7 10.3

Current free cash flow 195.1 223.3




149
5. Segment information
43 – PRIMARY SEGMENT INFORMATION
43.1. Consolidated income statement by segments

As of December 31, 2005
Refractories, Inter- Total
Specialty Pigments Materials & Abrasives & segment Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings eliminations group
External sales 784.5 751.8 920.4 587.3 1.2 — 3,045.2
Inter-segment sales 30.4 3.2 2.0 11.0 23.8 (70.4) 0.0

Sales 814.9 755.0 922.4 598.3 25.0 (70.4) 3,045.2

819.2 763.2 924.9 602.2 35.4 (79.4) 3,065.5
Revenue

Current operating
95.2 73.8 197.8 95.4 (28.2) — 434.0
income

Operating income 56.6 32.7 186.8 88.0 67.2 — 431.3
Net financial income (47.3)
Share in net income of
associates — 3.4 0.6 0.6 — — 4.6
Income taxes (76.5)

Net income 312.1


Other elements included in the income statement
Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Net increase in operating
amortization and depreciation (54.1) (63.7) (36.1) (28.7) (2.7) (185.3)
Net increase in operating
provisions 6.2 8.5 3.1 3.1 1.5 22.4
Impairment losses on goodwill (3.3) — — (1.8) — (5.1)
Decreases in impairment losses on
goodwill — — 0.2 0.4 — 0.6


Headcount
Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Management 449 205 547 341 83 1,625
Employees, technicians,
supervisors 1,259 823 936 640 19 3,677
Workers 3,452 1,996 2,139 3,045 — 10,632

Headcount 5,160 3,024 3,622 4,026 102 15,934




150
As of December 31, 2004
Refractories, Inter- Total
Specialty Pigments Materials & Abrasives & segment Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings eliminations group
External sales 765.7 757.5 849.6 494.6 3.1 — 2,870.5
Inter-segment sales 29.4 1.7 1.1 7.9 15.9 (56.0) 0.0

Sales 795.1 759.2 850.7 502.5 19.0 (56.0) 2,870.5

800.8 766.7 852.3 507.6 22.0 (58.5) 2,890.9
Revenue

Current operating
93.4 97.3 168.3 76.7 (13.9) — 421.8
income

Operating income 70.8 79.0 176.0 69.5 (19.1) — 376.2
Net financial income (39.4)
Share in net income of
associates — 2.1 0.5 0.8 — — 3.4
Income taxes (97.5)

Net income 242.7


Other elements included in the income statement
Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Net increase in operating
amortization and depreciation (48.9) (57.6) (31.9) (23.5) (1.1) (163.0)
Net increase in operating
provisions 5.8 1.5 (4.2) (0.4) (0.2) 2.5
Impairment losses on goodwill (3.3) — — (0.7) (0.1) (4.1)


Headcount
Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Management 437 230 556 263 107 1,593
Employees, technicians,
supervisors 1,342 931 936 638 25 3,872
Workers 3,185 1,888 1,468 2,082 — 8,623

Headcount 4,964 3,049 2,960 2,983 132 14,088




151
43.2. Consolidated balance sheet by segments

December 31, 2005
Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Intangible assets, property, plant
and equipment and financial
assets 906.6 771.6 404.7 533.3 8.7 2,624.9
Inventories 116.7 106.7 93.3 159.4 (0.3) 475.8
Trace accounts receivable 170.4 96.9 204.0 117.7 1.3 590.3
Other receivables and other assets
– current and non-current 30.2 33.8 17.0 19.7 12.3 113.0

1,223.9 1,009.0 719.0 830.1 22.0 3,804.0
Capital employed – Assets

Cash and cash equivalents 26.4 35.5 30.3 34.7 7.8 134.7

Segment assets 1,250.3 1.044.5 749.3 864.8 29.8 3,938.7
Investments in associates 1.2 26.0 4.2 0.5 — 31.9
Unallocated assets — — — — — 188.6

Total assets 4,159.2

Trade accounts payable 85.5 74.0 101.5 57.1 (5.0) 313.1
Other debts and other liabilities –
current and non-current 64.0 70.3 90.5 41.8 (10.6) 256.0

149.5 144.3 192.0 98.9 (15.6) 569.1
Capital employed – Liabilities
Provisions 61.8 46.6 58.1 64.0 180.4 410.9
Bank overdrafts 1.3 1.9 2.6 0.7 7.1 13.6

Segment liabilities 212.6 192.8 252.7 163.6 171.9 993.6

Payable income taxes (capital
employed) — — — — — 13.8
Other unallocated liabilities — — — — — 1,465.6

Total current and non-current
liabilities 2,473.0

Acquisitions of property, plant
and equipment and intangible
assets (77.7) (85.2) (57.0) (27.2) (3.9) (251.0)

1,074.4 864.7 527.0 731.2 37.6 3,221.1
Total capital employed




152
December 31, 2004

Refractories, Total
Specialty Pigments Materials & Abrasives & Imerys
(A millions) Minerals for Paper Monolithics Filtration Holdings group
Intangible assets, property, plant
and equipment and financial
assets 759.0 718.7 302.2 311.7 9.9 2,101.5
Inventories 92.9 88.1 106.8 111.7 — 399.5
Trace accounts receivable 140.0 94.7 184.7 74.2 0.9 494.5
Other receivables and other assets
– current and non-current 25.8 42.2 17.2 15.5 10.6 111.3

1,017.7 943.7 610.9 513.1 21.4 3,106.8
Capital employed – Assets

Cash and cash equivalents 18.2 20.9 8.7 11.8 7.0 66.6

Segment assets 1,035.9 964.6 619.6 524.9 28.4 3,173.4

Investments in associates — 20.9 3.8 1.2 — 25.9
Unallocated assets — — — — — 215.0

Total assets 3,414.3

Trade accounts payable 64.6 59.8 113.7 39.1 (3.5) 273.7
Other debts and other liabilities –
current and non-current 58.3 50.2 93.6 19.9 (9.6) 212.4

122.9 110.0 207.3 59.0 (13.1) 486.1
Capital employed – Liabilities

Provisions 50.0 51.6 49.6 31.0 175.3 357.5
Bank overdrafts 5.3 0.2 4.8 0.9 9.4 20.6

Segment liabilities 178.2 161.8 261.7 90.9 171.6 864.2

Payable income taxes (capital
employed) — — — — — 10.0
Other unallocated liabilities — — — — — 1,177.5

Total current and non-current
liabilities 2,051.7

Acquisitions of property, plant
and equipment and intangible
assets (46.1) (100.1) (26.8) (19.8) (1.5) (194.3)

894.8 833.7 403.6 454.1 34.5 2,610.7
Total capital employed


44 – SECONDARY SEGMENT INFORMATION

Revenue by geographical destination
The revenue presented below is analyzed according to the customers’ geographical location.

(A millions) 2005 2004
France 670.6 787.7
Other European countries 1,180.6 1,021.1
North America 718.2 685.0
Asia-Oceania 302.1 248.4
Other countries 173.7 128.3

3,045.2 2,870.5
Total


153
Segment assets
(A millions) 2005 2004
France 788.7 651.3
Other European countries 1,427.0 1,265.3
North America 1,085.4 763.1
Asia-Oceania 237.9 185.0
Other countries 399.6 308.7

3,938.6 3,173.4
Total

Investments in associates 31.9 25.9
Unallocated assets 188.7 215.0

4,159.2 3,414.3
Total assets


Acquisitions of property, plant and equipment and intangible assets

(A millions) 2005 2004
France (65.5) (30.4)
Other European countries (88.7) (76.0)
North America (59.8) (46.0)
Asia-Oceania (8.4) (21.0)
Other countries (28.6) (20.9)

(251.0) (194.3)
Total


Headcount
2005 2004
France 3,433 3,590
Other European countries 5,600 5,046
North America 3,192 2,512
Asia-Oceania 1,648 944
Other countries 2,061 1,996

15,934 14,088
Total




154
6. Other information

45 – RELATED PARTIES
External related parties of Imerys
The related parties of Imerys are the Canadian group Power and the Belgian group Frere-CNP. `
These groups are the ultimate controlling parties of Imerys. They exercise joint control on the Swiss
group Pargesa that controls Imerys through a direct investment and an indirect investment in the
Belgian group GBL; in this respect, Pargesa is a related party. The GBL group is a related party as
it exercises a direct significant influence on Imerys. The amount recognized as an expense in 2005 as a
compensation for the strategic assistance services provided by the Pargesa group totals A0.8 million
(A0.8 million in 2004). The amount remaining as a liability as of December 31, 2005 totals A0.4
million (A0.4 million as of December 31, 2004).

Key management personnel of Imerys
The management mode of the Company changed in 2005; the Managing Board (with its Supervisory
Board) was replaced by a Chief Executive Officer (with a separation of the office as Chairman of the
Board of Directors) assisted by an Executive Committee.
Due to this change, the Group retained as main executives those in office as of December 31 of each
period, i.e.:
for 2004: the 4 members of the Managing Board in office as of December 31;
*


for 2005: the 9 members of the Executive Committee (including the Chief Executive Officer who
*

is also Director of the Company) in office as of December 31.
Remuneration and assimilated benefits granted to the main executives which have been recognized as
expenses for the concerned period are the following:

(A millions) Notes 2005 2004
Short-term benefits 1 3.5 2.5
Long-term benefits 0.0 0.0
Directors’ fees 2 0.6 0.6
Post employment benefits 3 0.5 0.4
Termination benefits 0.0 0.0
Share-based payments 4 1.1 0.7

5.7 4.2
Total


1) Short-term benefits – These amounts include the fixed part of the remuneration paid for the period as well as the variable one owed
for the period but paid the following period.
2) Directors’ fees – Board of Directors in 2005 and Supervisory Board in 2004
3) Post-employment benefits – Defined retirement benefit plans exist within the Group for the main executives of the Group’s French
entities who meet the required restrictive conditions. The chief executive officer as well as some of the main executives mentioned
above (3 for 2004 and 6 for 2005) are among the beneficiaries of this benefit plan to which the Group contributed in 2004.
The maximum amount of the life annuity which can be paid to the beneficiaries of this plan as from the liquidation of their
retirement rights is calculated in order to guarantee:
* a life annuity of a total gross annual amount (after recognition of pensions from obligatory and complementary pension
plans) of 60% of their salary of reference, this salary of reference being limited to 8 times the annual limit of the French
national health and pensions organization;
* subject to a payment limit of 25% of the above mentioned salary of reference of the last 12 calendar months preceding the
withdrawal from the Group’s headcount.
4) Share-based payments – This amount corresponds to expenses recognized as Imerys share options attributed to the concerned
main executives as determined previously according to IFRS 2 and according to the terms described in paragraph 2.19 of the
accounting principles and methods.


Post employment benefits for Imerys employees
The post-employment benefit plans for the benefit of Imerys employees are related parties. The
amount of the contributions to external funds recognized as an expense in 2005 totals A12.9 million
(A18.5 million in 2004), of which A8.6 million (A6.8 million in 2004) to Imerys UK Pension Fund
Trustees Ltd. / ECC Combined Investment Fund (United Kingdom) and A2.0 million (A10.1 million in
2004) to Sun Trust Bank (United States).

155
46 – COMMITMENTS GIVEN
The Group’s off balance sheet commitments include asset securities (mortgages, pledges etc.) given on
the Group’s assets, and the guarantees granted by Imerys and its entities, net of recognized liabilities.
The main commitments given by the Group are as follows:

(A millions) 2005 2004
Assets given as guarantee 29.0 12.9
Avals, sureties, guarantees 16.4 6.8
Other commitments 96.8 73.1

142.2 92.8
Total off balance sheet commitments


Additionally, some of the Group’s entities have operating lease commitments, in particular for offices,
rail cars and lorries. Commitments for future rent payments amount to A25.5 million for 2006, A70.9
million from 2007 to 2010 and A135.2 million beyond.

47 – COMMITMENTS RECEIVED

(A millions) 2005 2004
Assets received as guarantee 6.5 9.6
Avals, sureties, guarantees 1.1 8.3
Other commitments 51.5 3.2

59.1 21.1
Total


48 – COUNTRY RISKS
Due to their mining activity and the variety of their final markets, the Group’s entities are located in
numerous countries. Imerys thus can be exposed to certain risks peculiar to these countries which
may have in the future a certain impact on its financial situation, its financial performance and its
cash flow.
In order to identify high-risk countries, Imerys uses the grading system @rating of the Coface, the
main French insurance company specialized in export credit insurances, which measures to what
extent an economic and financial commitment of an entity is influenced by the economic, financial
and political prospects of the concerned countries.
The grading system of the Coface consists of 7 categories from A1 to D, with an increasing order of
importance of the assessed risks. The last two categories corresponding to the highest risks include
notably Argentina, Ukraine, Venezuela and Zimbabwe where the Group is present. The sales of the
entities located in these countries represent 0.8% of the Group sales and 0.5% of the current
operating income. The balance sheet total of these entities represents 0.2% of the consolidated balance
sheet total of Imerys and 0.8% of the consolidated shareholders’ equity, Group share.
The fact that most of the Group’s supply sources and final markets are located in developed
countries limits the exposure to these country risks.

49 – EVENTS AFTER THE BALANCE SHEET DATE
The annual consolidated financial statements as of December 31, 2005 were closed by the Board of
Directors on March 7, 2006.
On February 28, 2006, Imerys completed the acquisition of 99.34% of the voting rights of Pargemine,
a holding which owns the calcined clays activity, mainly for refractory and sanitary applications, of
the group AGS (France).

50 – FINANCIAL STATEMENTS OF IMERYS SA
The financial statements of the parent company Imerys SA stand alone as of December 31, 2005 and
show sales of A25.7 million and a net income of A100 million. This result does not accurately reflect
the Group’s economic and financial reality.




156
7. Reconciliation of financial statements in French GAAP and IFRS
51 – SYNTHESIS OF TRANSITION ADJUSTMENTS
This note presents a synthesis of the principles and impacts of the transition adjustments from French
GAAP to IFRSs. For a more detailed information, the reader is invited to refer to chapter 3.2,
Conversion to IFRSs published in the 2004 annual report.
51.1. IFRS 1, First-Time Adoption of IFRSs
As an IFRS first-time adopter, Imerys presents an opening balance sheet as of January 1, 2004 that
integrates a retrospective application of IFRSs, limited by some optional exemptions applied by
Imerys:

Not
IFRS 1 Optional Exemptions Applied applied
1. Business combinations 4
2. Fair value or revaluation as deemed cost 4
3. Employee benefits 4
4. Cumulative translation differences 4
5. Compound financial instruments 4
6. Assets and liabilities of subsidiaries, associates and joint ventures 4
7. Designation of previously recognized financial instruments 4
8. Share-based payment transactions 4
9. Insurance contracts 4
10. Decommissioning liabilities included in the cost of property, plant
and equipment 4
11. Leases 4
12. Fair value measurement of financial assets or liabilities at initial
recognition 4

As a result of the four exemptions applied as of January 1, 2004:
Business combinations have not been adjusted. The goodwill of the entities Sans, Gelis and
´
*

Financiere d’Angers have been maintained in the consolidated reserves where they had been
`
recognized in 1989 as the acquisitions of these entities had been financed by the issue of
convertible bonds. Besides, some intangible assets that did not comply with the version revised
in 2004 of IAS 38 on intangible assets have been reclassified to goodwill for A27 million (A10.3
million as of December 31, 2004).
The carrying amount of property, plant and equipment has not been adjusted except for mineral
*

reserves and resources, which are measured at fair value. The independent valuations performed
in accordance with the European Mining Code on 74% of mineral reserves and resources have
globally confirmed the quantities as of January 1, 2004 and agreed on a revaluation of the
historical unit price of reserves. As the unit price of resources is derived from that of reserves
by a discount calculation, the adjustment net of income taxes recognized in the consolidated
reserves amounts to -A10,4 million (-A13,3 million as of December 31, 2004).
Unrecognized actuarial differences of defined benefit plans have been recognized in the
*

consolidated reserves. The incidence of this adjustment on consolidated reserves amounts to
-A134.8 million (-A132.5 million as of December 31, 2004). It results in the cancellation of assets
for A63.6 million (A63.9 million as of December 31, 2004), the recognition of provisions for
A132.3 million (A128.2 million as of December 31, 2004) and the recognition of deferred tax
assets for A42.4 million (A38.7 million as of December 31, 2004) and A18.7 million (A20.9 million
as of December 31, 2004) of deferred tax liabilities.
Translation differences of consolidated foreign entities have been reclassified in the consolidated
*

reserves. Translation differences prior to January 1, 2004 have been reclassified as non-
distributed accumulated profit and will not be recognized in the income statement upon any
subsequent disposal or liquidation of the related foreign entities.
51.2. IAS 1, Presentation of financial statements
Balance sheet. A9.1 million corresponding to various asset elements have been reclassified from
*

current to non-current and A312.9 million corresponding mainly to commercial papers have been
reclassified in the liabilities from non-current to current. Besides, the decompensation of some

157
assets and liabilities resulted in an increase of the balance sheet total of A21.5 million. Finally,
the mine sites overburden works presented as current assets under French GAAP have been
reclassified as property, plant and equipment for A10 million.
Income statement. The income statement no longer shows exceptional items. Revenue and
*

expenses resulting from a limited number of well identified, non-recurring and significant events
are recognized as other operating income and expenses, after the current operating income and
before the operating income.
Cash flow statement. The cash flow statement published by Imerys under French GAAP
*

reconciled the opening and closing net debt. The IFRS cash flow statement analyzes the
variation of cash and cash equivalents between the opening and closing of the period. Besides, it
distinguishes the cash flows related to operating, investing and financing activities. Unlike the
previous treatment, IFRS investing activities exclude the flows related to finance leases.

51.3. IFRS 2, Share-based payment
Share options granted after November 2002 and not vested on January 1, 2005 have been measured
in accordance with the Black & Scholes model, considering the strike price, the duration of the
option, the underlying share price, the volatility and the turnover rate of beneficiaries calculated over
five years of historical data. Only the plans of May 2003 and May 2004 have had an impact on the
income of the 2004 period (chapter 6, paragraph 6.4.3, Details of option plans in force). The
recognition of these plans represented an expense of A2.3 million in 2004 and was recognized as staff
expenses against the consolidated shareholders’ equity.

51.4. IFRS 3, Business combinations
The negative goodwill remaining as of January 1, 2004 have been reclassified in the consolidated
reserves and goodwill ceased to be amortized. Goodwill amortization recognized in 2004 under
French GAAP amounted to A30.3 million.

51.5. IAS 8, Accounting policies, changes in accounting estimates and errors
The goodwill of Imerys Minerals Ltd. has been subject to a correction of error at January 1, 2004 in
relation to the recognition of deferred tax liabilities. The adjustment of accumulated amortization to
that date recognized in the income statement under French GAAP has been reclassified against the
IFRS shareholders’ equity for A3.2 million

51.6. IAS 16, Property, plant and equipment
The implementation of the component approach on some items of property, plant and equipment
resulted in an additional depreciation of A3.7 million as of January 1, 2004. The provisions for major
repairs that were recognized under French GAAP in anticipation of the replacement of these
components have been cancelled for an amount of A4.2 million as of January 1, 2004. Besides, some
spare part inventories considered as property, plant and equipment under IFRS have been reclassified
for an amount of A1 million.

51.7. IAS 17, Leases
Further to a detailed review of lease contracts, mainly for leases of heavy equipment (trucks, rail
cars, mining equipment), A9.9 million of assets and A11.3 million of financial debts have been
recognized, the scope of IAS 17 on leases being broader than under French GAAP. This adjustment
results in a decrease in external expenses and an increase in amortization and financial expenses. The
impact net of income taxes of this adjustment on the Group’s consolidated income is inferior to A0.1
million.

51.8. IAS 18, Revenue
Discounts for early payment have been reclassified as a reduction of revenue for A2.2 million in 2004.

51.9. IAS 28, Investments in associates
Goodwill related to investments consolidated under the equity method have been included in the same
line as these investments for an amount of A1.6 million.

51.10. IAS 32, Financial instruments: disclosure and presentation
As Imerys decided to apply the version revised in December 2003 as well as the March 2004
amendments of IAS 39 on the recognition and measurement of financial instruments, the Group also
applied IAS 32 on the disclosure and presentation of financial instruments. As a consequence, Imerys’

158
shares recognized as marketable securities under French GAAP have been cancelled in IFRS against
the shareholders’ equity for A5.9 million as of January 1, 2004.
51.11. IAS 39, Financial instruments: recognition and measurement
In order to improve the quality of comparative information, Imerys decided to apply the version
revised in December 2003 as well as the March 2004 amendments of IAS 39 on the recognition and
measurement of financial instruments. The impacts related to the application of this standard mainly
affect the balance sheet and resulted in:
an increase in financial instrument assets resulting on the one hand from their remeasurement at
*

fair value for A36.6 million as of January 1, 2004 (A37.0 million as of December 31, 2004) and
on the other hand, a reclassification of accrued interests as required by the standard for A16.2
million as of January 1, 2004 (A21.3 million as of December 31, 2004);
an increase in financial debts corresponding to the remeasurement at fair value of the hedged
*

debt for A26.8 million as of January 1, 2004 (A30.0 million as of December 31, 2004) as well as
a reclassification of accrued interests and bond issue costs for A14.8 million as of January 1,
2004 (A12.3 million as of December 31, 2004);
an increase in financial instrument liabilities corresponding on the one hand to their
*

remeasurement at fair value for A10.4 million as of January 1, 2004 (A6.6 million as of
December 31, 2004) and on the other hand to a reclassification of accrued interests for A3.1
million at December 31, 2004.




159
52 – BALANCE SHEET RECONCILIATION AS OF JANUARY 1, 2004

French
(A millions) Notes GAAP Adjustments IFRS
CONSOLIDATED ASSETS
Goodwill 51.1 – 51.9 501.4 26.0 527.4
Intangible assets 51.1 61.0 (27.0) 34.0
Mining assets 51.1 518.1 (15.7) 502.4
Property, plant and equipment 51.6 – 51.7 990.7 7.1 997.8
Investments in associates 51.9 27.6 1.6 29.2
Other financial assets 51.1 90.2 (63.6) 26.6
Other receivables and other assets 9.7 (0.5) 9.2
Deferred tax assets 8.6 49.7 58.3

2,207.3 (22.4) 2,184.9
Total non-current assets

Inventories 393.4 (1.6) 391.8
Trade accounts receivable 589.1 (0.2) 588.9
Derivative instrument assets 51.11 — 52.8 52.8
Marketable securities and other financial assets 51.10 14.3 (5.9) 8.4
Cash and cash equivalents 67.0 — 67.0
Other receivables and other assets 51.11 20.4 (0.9) 19.5

1,084.2 44.2 1,128.5
Total current assets

3,291.5 21.8 3,313.3
TOTAL CONSOLIDATED ASSETS


CONSOLIDATED LIABILITIES AND SHAREHOLDERS’ EQUITY
Capital 127.0 — 127.0
Share capital premiums 218.1 — 218.1
Reserves 1,056.2 (150.3) 905.9

1,401.3 (150.3) 1,251.0
Shareholders’ equity, Group share

9.0 0.2 9.2
Minority interests

1,410.3 (150.1) 1,260.2
Shareholders’ equity

Provisions for employee benefits 51.1 73.5 132.3 205.8
Other provisions 51.4 – 51.6 140.9 (5.7) 135.2
Loans and financial debts 51.7 – 51.11 749.3 49.9 799.2
Other debts 5.4 1.1 6.5
Deferred tax liabilities 107.2 (18.7) 88.5

1,076.3 158.9 1,235.2
Total non-current liabilities

Trade accounts payable 445.5 (0.4) 445.1
Payable income taxes 38.5 — 38.5
Derivative instrument liabilities 51.11 — 10.4 10.4
Loans and financial debts 51.7 19.1 3.0 22.1
Bank overdrafts 299.2 — 299.2
Other debts 2.6 — 2.6

804.9 13.0 817.9
Total current liabilities

TOTAL CONSOLIDATED LIABILITIES AND
3,291.5 21.8 3,313.3
SHAREHOLDERS’ EQUITY


160
53 – BALANCE SHEET RECONCILIATION AS OF DECEMBER 31, 2004
The balance sheet reconciliation as of December 31, 2004 between French GAAP and IFRS differs
from the version published in the 2004 annual report due to the finalization of two adjustments. As
of December 31, 2004, the impact of these adjustments on the 2004 net income amounts to A2.6
million and to A5.5 million on the shareholders’ equity, of which A2.9 million correspond to
translation differences on these adjustments:

(A millions) 2004
(1)
2004 IFRS net income published in the 2004 annual report 237.4
Mining reserves(2) 2.5
Cost of share option plans(3) 0.1

2004 IFRS net income published in 2005(1) 240.0


(1) Group share
(2) See note 51.1
(3) See note 51.3

(A millions) 2004
2004 IFRS shareholders’ equity published in the 2004 annual report(1) 1,348.0
Allocation of mining reserve restatements to entities 5.5

2004 IFRS shareholders’ equity published in 2005(1) 1,353.5


(1) Group share

(A millions) 2004
Total 2004 IFRS balance sheet published in the 2004 annual report 3,452.2
Above adjustments on shareholders’ equity 5.5
Deferred tax offset according to tax perimeters (43.4)

Total 2004 IFRS balance sheet published in 2005 3,414.3




161
Balance sheet reconciliation as of December 31, 2004
French
(A millions) Notes GAAP Adjustments IFRS
CONSOLIDATED ASSETS
Goodwill 51.1 – 51.4 –
51.5 – 51.9 521.1 39.0 560.1
Intangible assets 51.1 39.3 (10.3) 29.0
Mining assets 51.1 475.7 (16.7) 459.0
Property, plant and equipment 51.7 1,043.3 10.1 1,053.4
Investments in associates 51.9 24.3 1.6 25.9
Available-for-sale financial assets 13.8 — 13.8
Other financial assets 51.1 75.6 (63.9) 11.7
Other receivables and other assets 19.7 — 19.7
Deferred tax assets 24.6 5.4 30.0

2,237.4 (34.8) 2,202.6
Total non-current assets

Inventories 400.5 (1.0) 399.5
Trade accounts receivable 493.5 1.1 494.6
Derivative instrument assets 51.11 4.9 58.3 63.2
Marketable securities and other financial assets 51.10 96.6 (0.3) 96.3
Cash and cash equivalents 66.5 — 66.5
Other receivables and other assets 51.11 97.5 (5.9) 91.6

1,159.5 52.2 1,211.7
Total current assets

3,396.9 17.4 3,414.3
TOTAL CONSOLIDATED ASSETS

CONSOLIDATED LIABILITIES AND
SHAREHOLDERS’ EQUITY
Capital 126.9 — 126.9
Share capital premiums 204.9 — 204.9
Reserves 925.0 (143.3) 781.7
Net income 209.4 30.6 240.0

1,466.2 (112.7) 1,353.5
Shareholders’ equity, Group share

8.9 0.2 9.1
Minority interests

1,475.1 (112.5) 1,362.6
Shareholders’ equity

Provisions for employee benefits 51.1 67.3 128.2 195.5
Other provisions 150.0 — 150.0
Loans and financial debts 51.7 – 51.11 916.7 23.9 940.6
Other debts 23.2 1.0 24.2
Deferred tax liabilities 147.2 (64.0) 83.2

1,304.4 89.1 1,393.5
Total non-current liabilities

Other provisions 12.0 — 12.0
Trade accounts payable 273.7 — 273.7
Payable income taxes 10.0 — 10.0
Derivative instrument liabilities 51.11 — 9.7 9.7
Loans and financial debts 51.7 – 51.11 112.4 31.6 144.0
Bank overdrafts 20.6 — 20.6
Other debts 188.7 (0.5) 188.2

617.4 40.8 658.2
Total current liabilities

TOTAL CONSOLIDATED LIABILITIES AND
3,396.9 17.4 3,414.3
SHAREHOLDERS’ EQUITY

Net financial debt 882.3 7.5 889.8


162
54 – INCOME STATEMENT RECONCILIATION AS OF DECEMBER 31, 2004

French
(A millions) Notes GAAP Adjustments IFRS
Sales 51.8 2,872.7 (2.2) 2,870.5
Other revenue from operations 20.3 0.1 20.4

Revenue 2,893.0 (2.1) 2,890.9

Raw materials and consumables used (1,015.8) (0.2) (1,016.0)
Change in W.I.P. and finished goods inventories
and assets produced by the entity 11.5 — 11.5
External expenses 51.7 (685.1) 4.0 (681.1)
Staff expenses 51.3 (565.9) (2.2) (568.1)
Taxes and duties (38.3) — (38.3)
Amortization, depreciation and impairment losses 51.1 – 51.7 (158.3) (4.7) (163.0)
Net change in operating provisions 51.1 4.5 (2.0) 2.5
Other operational revenue and expenses (19.8) 3.2 (16.6)

Current operating income 425.8 (4.0) 421.8

Other operating revenue and expenses 51.4 – 51.5 (71.8) 26.2 (45.6)

Operating income 354.0 22.2 376.2

Revenue from securities 5.3 (1.0) 4.3
Gross financial debt expense 51.7 – 51.8 (39.3) 0.7 (38.6)

(34.0) (0.3) (34.3)
Net financial debt expense

Other financial revenue and expenses (11.1) 6.0 (5.1)

Net financial income (45.1) 5.7 (39.4)

Income taxes (100.2) 2.7 (97.5)
Share in net income of associates 3.4 — 3.4

Net income 212.1 30.6 242.7

Minority interests (2.7) — (2.7)

Net income, Group share 209.4 30.6 240.0

of which :
Current operating income, Group share 259.8 1.4 261.2
Other net operating revenue and expenses, Group
share (50.4) 29.2 (21.2)




163
55 – CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Share
capital Consolidated
(A millions) Notes Capital premiums reserves Total
Shareholders’ equity, Group share as
of December 31, 2003 in French
GAAP 127.0 218.1 1,056.2 1,401.3
Fair value of financial instruments 51.11 — — (0.2) (0.2)
Reclassification of treasury shares as
marketable securities 51.10 (5.9) (5.9)
Finance lease adjustments 51.7 — — (0.9) (0.9)
Adjustments of provisions for major
repairs 51.6 — — 2.7 2.7
Actuarial differences of employee
benefits 51.1 — — (134.8) (134.8)
Fair value of mineral reserves 51.1 — — (10.4) (10.4)
Approach by components of property,
plant and equipment 51.6 — — (2.8) (2.8)
Reclassification of negative goodwill 51.4 — — 2.1 2.1
Reclassification of minority interests
on IFRS adjustments — — (0.1) (0.1)

Shareholders’ equity, Group share as
of January 1, 2004 in IFRS 127.0 218.1 905.9 1,251.0
Dividends (A1.25 per share) — — (79.3) (79.3)
Variation of the translation reserve — — (50.6) (50.6)
Capital decreases (1.3) (29.9) — (31.2)
Capital increases 1.2 16.7 — 17.9
Fair value of financial instruments 51.11 — — 0.4 0.4
Transactions on treasury shares 51.10 — — 6.3 6.3
Cost of share options 51.3 — — 2.2 2.2
Complement. amortization goodwill of
Imerys Ltd 1999-2003 following
deferred tax adjustment 51.5 — — (3.2) (3.2)
Share of shareholders in 2004 net
income — — 240.0 240.0

Shareholders’ equity, Group share as
of December 31, 2004 126.9 204.9 1,021.7 1,353.5
Proposed dividends — — (95.2) (95.2)

Shareholders’ equity, Group share after
distribution as of January 1, 2005 126.9 204.9 926.5 1,258.3




164
3.2 Statutory financial statements
Financial commentary
The financial statements of Imerys (the ‘‘Company’’) are those that are submitted to the Shareholders’
Meeting for approval. However, they provide a very partial view of the Group’s economic and
financial position, which is reflected only in the consolidated financial statements.
In 2005, the net income of the Company comes to A100 million whereas the 2004 net income reached
A283 million.
The main factors for the period were:
The evolution of Group investment securities held directly or indirectly by the Company
*

through the following transactions:
the disposal on April 18, 2005 by Imerys of Lariviere, a company specialized in the
`
*

distribution of roofing products;
the subscription to the capital increase of Imerys USA on the occasion of the acquisition
*

of World Minerals Inc. on July 14, 2005, a company specialized in minerals for beverage
filtration;
the acquisition by Imerys on October 28, 2005 of Denain-Anzin Mineraux, actively
´
*

involved in Europe in minerals for ceramics. Denain-Anzin Mineraux was then sold to
´
Mircal in December 2005;
in January 2005, the Group equally acquired Lafarge Refractories.
*


During the period, the net value of the shares held by Imerys thus decreased by A71 million,
coming to A2,470 million as of December 31, 2005. The Company received A121,2 million of
dividends in 2005, no dividend had been received in 2004.
The increase of financial resources:
*


in order to ensure the realization of the acquisitions, the financial debts of Imerys SA
*

increased by A452 million in 2005;
the structure of financing means has however not been modified.
*


The incidence of the Group’s development on the operating income:
*


the operating expenses of the Company increase by A10 million in 2005. This increase has
*

been invoiced, as far as rendered services are concerned, to the subsidiaries as part of the
assistance contracts, which explains the growth in sales, increasing by A4 million and
reaching A26 million in 2005.
The relocation of the Imerys headquarters on February 7, 2005 from 33 avenue du Maine,
*

75755 Paris Cedex 15 to 154 rue de l’Universite, 75007 Paris.
´
The return to a mode of management of a Board of Directors approved by the Shareholders’
*

General Meeting of May 3, 2005; the Company had been managed since 1998 by an Executive
Board and a Supervisory Board.




165
Income statement

(A thousands) Notes 2005 2004 2003
Operating revenue 26,997 22,032 26,279
Rendering of services 25,665 21,373 22,510
Decreases in provisions and transfer of expenses 1,332 659 3,769
Operating expenses (52,887) (42,796) (36,383)
Purchases and external services (35,933) (28,099) (22,562)
Taxes and duties (1,469) (1,379) (1,403)
Staff expenses (12,829) (10,941) (10,887)
Amortization, depreciation and provisions (2,013) (1,752) (878)
Other expenses (643) (625) (653)

Operating income (25,890) (20,764) (10,104)

Financial income 10 72,646 (19,200) 164,909
Revenue from subsidiaries and affiliates 121,175 — 126,924
Net financial expenses (31,803) (29,974) (24,200)
Increases and decreases in provisions 11,026 3,548 3,125
Exchange rate gains and losses (27,752) 7,226 59,060

Current income 46,756 (39,964) 154,805

Exceptional income 11 29,004 304,092 1,465
Exceptional revenue 190,672 869,660 581,195
Exceptional expenses (161,668) (565,568) (579,730)
Income taxes 12 24,236 18,488 (4,968)

Net income 99,996 282,616 151,302




166
Balance sheet

(A thousands) Notes 2005 2004 2003
ASSETS
Intangible assets 13 3,313 2,898 2,077
Accumulated amortization 13 (1,416) (892) (658)

Net intangible assets 1,897 2,006 1,419

Property, plant and equipment 13 8,671 11,478 9,535
Accumulated depreciation 13 (3,577) (5,900) (5,210)

5,094 5,578 4,325
Net property, plant and equipment

Investments 14 2,473,432 2,544,133 2,201,433
Provisions 14 – 20 (3,003) (2,896) (2,896)

2,470,429 2,541,237 2,198,537
Net investments

Loans related to investment securities 15 – 17 1,005,561 472,972 557,832
Provisions 20 (613) — —

1,004,948 472,972 557,832
Loans related to investment securities – net value

Other financial investments 16 – 17 41,065 2,884 2,279

Non-current assets 3,523,433 3,024,677 2,764,392

Other receivables 17 32,307 40,627 22,184
Derivative instruments 6,904 4,861 —
Marketable securities 18 59,900 90,913 12,255
Cash and cash equivalents 1,953 1,485 3,170

Current assets 101,064 137,886 37,609

17 7,445 21,261 16,450
Regularization accounts

3,631,942 3,183,824 2,818,451
TOTAL ASSETS

LIABILITIES AND SHAREHOLDERS’ EQUITY
Share capital 127,944 126,900 126,966
Additional paid-in capital 219,453 204,873 218,094
Revaluation reserve — – –
Reserves 956,678 961,666 961,666
Retained earnings 425,113 232,633 165,604
Net income for the period 99,996 282,616 151,302

19 1,829,184 1,808,688 1,623,632
Shareholders’ equity

20 25,483 36,807 35,089
Provisions for risks and charges

Financial debts 21 1,740,098 1,288,308 1,126,585
Other debts 21 17,981 21,795 19,021
Derivative instruments 21 3,487 3,882 719

1,761,566 1,313,985 1,146,325
Debts

21 15,709 24,344 13,405
Regularization accounts

TOTAL LIABILITIES AND SHAREHOLDERS’
3,631,942 3,183,824 2,818,451
EQUITY




167
Cash Flow Statement

(A thousands) 2005 2004 2003
Cash flow from operating activities
Net income 99,996 282,616 151,302
Expenses and revenue with no impact on cash flow
Amortization and depreciation 2,549 1,403 715
Provisions (10,600) (3,666) (48,865)
Income on disposal of assets (30,361) (307,544) 12,181

61,584 (27,191) 115,333
Operating cash flow before working capital changes
5,054 (10,608) (22,161)
Change in working capital requirement

Cash flow from operating activities 66,638 (37,799) 93,172

Cash flow from investing activities
Acquisitions of assets
Intangible assets and property, plant and equipment (3,792) (2,764) (1,242)
Financial (investments and related assets) (124,202) (894,874) (532,407)
Disposals of assets
Intangible assets and property, plant and equipment 7,573 — 1
Financial (investments and related assets) 181,342 859,664 530,615

Cash flow from investing activities 60,921 (37,974) (3,033)

Cash flow from financing activities
Change in financial debts 453,823 164,886 (171,012)
Change in loans and other financial assets (532,590) 80,432 134,927

Cash flow from financing activities (78,767) 245,318 (36,085)

Capital operations
Capital increase 15,624 17,957 30,734
Capital reduction by cancellation of treasury shares — (31,244) (22,495)
Dividends paid (94,961) (79,285) (67,529)

Cash flow from operations on equity (79,337) (92,572) (59,290)

Change in cash and cash equivalents (30,545) 76,973 (5,236)

Cash and cash equivalents at the beginning of period(1) 92,398 15,425 20,661
Cash and cash equivalents at the end of period(1) 61,853 92,398 15,425

Change in cash and cash equivalents (30,545) 76,973 (5,236)


Detail of movements on treasury shares

(A thousands) 2005 2004 2003
Purchases of treasury shares 38,159 31,244 26,180
Sales of treasury shares — — (2,563)
Treasury shares allocated to the Employee Shareholding Plan — — (1,122)
Capital reduction by cancellation of treasury shares — (31,244) (22,495)

Gross amount of treasury shares booked as investments as of
December 31 38,159 0 0



(1) The cash is composed of marketable securities and cash and cash equivalents in the assets of the balance sheet.




168
Attachment
Unless otherwise indicated, all values in the tables are in thousands of euros.


1. Accounting policies and methods
The annual accounts are established in accordance with the current French accounting regulations.
The methodology generally used is the historical cost method for the items recorded in the books
(with the exception of certain revalued assets).
In accordance with the French CRC regulation no. 2004-06 related to assets, Imerys SA carried
forward the net carrying amount of trademark registering costs created internally indicated in the
opening balance sheet. Henceforth, trademark registering costs will be recorded in the expenses of the
period. The first application of this regulation constitutes a change in the method of the period. The
Company also applies the CRC regulation no. 2002-10 on assets; the first application did not have
any impact on the financial statements of the 2005 period.

1 – INTANGIBLE ASSETS
Intangible assets are valued at original cost. Software is depreciated over 3 years using the straight-
line method.
The first application of the CRC regulation no. 2004-06 related to assets resulted in a decrease of the
gross amounts of intangible assets of A428 thousand and a correlative amortization decrease of A180
thousand corresponding to the amounts indicated in the opening balance sheet.

2 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are assessed at original cost or at their contribution value.
The depreciation methods used, straight-line or degressive, are representative of economic
depreciation; therefore, no excess tax depreciation was recorded under liabilities in the balance sheet.
Depreciation methods and periods are as follows:

Buildings – Offices straight-line method from 20 to 30 years
*



Machinery and equipment straight-line method over 10 years
*



Other property, plant and equipment
*

Equipment and office furniture straight-line method over 5 and 10 years
*

Office equipment straight-line method over 5 years
*

IT equipment straight-line method over 3 years
*




3 – LONG TERM INVESTMENTS
The long term investments are valued at original cost, excluding ancillary expenses.
Investment securities and other long-term investments are estimated at their value in use. The value in
use is evaluated according to the value of the company, based notably on its previous results, its
profitability prospects, to the portion of converted equity owned for these investments and to the net
asset value. When this value is higher than the carrying amount recorded in the balance sheet, the
latter is not modified. On the contrary, a provision for depreciation of the investment is recorded.
Unrealized losses generated from the fluctuations of foreign currencies in which the long term
investments are denominated are not aimed to materialize. Therefore, unrealized exchange losses do
not constitute in themselves sufficient criteria to justify systematically a provision for depreciation.

4 – RECEIVABLES AND DEBTS IN FOREIGN CURRENCIES
Receivables and debts in foreign currencies are converted at closing rate.

5 – GLOBAL POSITION OF CHANGE
When operations in foreign currencies result in the symmetrical book-keeping of an asset and a
liability presenting close deadlines, the related exchange rate impacts that they generate are
neutralized reciprocally until the deadline of the operations. In this case, the exchange risk cannot

169
materialize and assets and liabilities incline towards a global position that is compensated. The
amount of the provision for the currency exchange loss on the asset is limited to the portion of
unrealized losses exceeding unrealized gains.

6 – MARKETABLE SECURITIES
Their value in use is assessed at their average trading price of the last month of the fiscal year for the
listed stocks, at the last known redemption price for the SICAV’s (money market funds) and at their
net asset value for the FCP’s (equity funds). Unrealized losses of value are subject to a provision for
depreciation, the unrealized gains are not recorded.

7 – PROVISIONS
Provisions for risks
The provisions for risks cover identified risks and are determined in the following method:
provisions for operational risks include notably litigation in progress related to the current
*

activities;
provisions for restructuring that concern reorganization plans officially decided and initiated
*

before the end of the period;
provisions pertaining to changes in the value of certain equity interests, determined according to
*

the last financial information available and the evolution prospects.
Provisions for charges
They mainly include:
provisions for the supplementary pension plan and pensions for the former salaried employees;
*


charge for retirement indemnities calculated according to the retrospective method.
*


Imerys applies the recommendation no. CNC 2003-R01 concerning the valuation and accounting for
pension commitments and similar advantages.

8 – RISKS PERTAINING TO FINANCIAL MARKETS
As a holding company and head of the Group, the Company implements the management of
financial market risks identified within the Group (exchange rate risk, interest rate risk, energy price
risk).
The main instruments and risks are described hereafter:
The derivative instruments used to cover the exchange rate risk are mainly forward buying and
*

selling foreign currency contracts as well as change options. A global position of change is
established when operations in foreign currencies (hedged elements and hedging instruments)
result in the symmetrical book-keeping of an asset and a liability presenting close characteristics.
For those options conforming to the Group’s risk management policy, but not being qualified as
hedging options, a provision for risks and charges is registered when the market value is inferior
to the original contract value. The unrealized gains are not recognized.
The Company implements swaps and options in order to cover the exchange rate risk. The
*

expenses and products concerning the hedging instruments are recorded in the income statement
in a symmetrical way to the expenses and products of hedged elements.
In order to cover energy price risks which affect its participations, the Company uses option
*

contracts as well as forward buying and selling contracts. The expenses and products concerning
hedging instruments are recorded in the income statement in a symmetrical way to the expenses
and products of hedged elements. For those options conforming to the Group’s risk
management policy, but not being qualified as hedging options, a provision for risks and
charges is registered when the market value is inferior to the original contract value. The
unrealized gains are not registered.




170
9 – TAX CONSOLIDATION
Since 1993, the Imerys company and some of its French subsidiaries have been assessed under Article
223 A of the French Tax Code in respect of group taxation. Two entities left the tax consolidation
perimeter in 2005: Lariviere and Boitel (both have been disposed of) and three joined the tax
`
consolidation perimeter: Marcel Rivereau, Parnasse 22, Parnasse 23. The tax consolidation perimeter
included 25 entities as of December 31, 2005 mentioned below:
Imerys Marcel Rivereau
* *

Ardoisieres d’Angers
` Minemet Holding
* *

Ceradel Socor Mircal
* *

Ceratera SAS
´´ Mircal Bresil
´
* *

Cesar
´ Mircal Europe
* *

Charges Minerales du Perigord
´ ´ Parimetal
* *

Damrec Parnasse 16
* *

Imerys Kiln Furniture France Parnasse 17
* *

Imerys Mineraux France
´ Parnasse 21
* *

Imerys Services Parnasse 22
* *

Imerys Tableware France Parnasse 23
* *

Imerys TC Setac
* *

KPCL KVS
*


Within the fiscal group headed by Imerys, the relations are governed by a convention whose
principles are summarized below:
the tax consolidated entities benefit from a situation identical to the one that they would have
*

had in the absence of tax consolidation;
all supplementary charges are recorded at Imerys which benefits in counterpart from any
*

potential savings generated by this system.




171
2. Notes to the income statement
10 – FINANCIAL RESULTS

(A thousands) 2005 2004 2003
Financial revenue
Revenue from subsidiaries and affiliates (1) 121,175 — 126,924
Other investment income – net (1) 88,738 60,942 53,778
Decreases in provisions and transfer of expenses 16,790 19,770 16,917
Exchange rate gains 44,232 59,916 213,129

270,935 140,628 410,748

Financial expenses
(2)
Financial interest and expenses on derivative instruments 120,541 90,916 77,978
Increases in financial provisions 5,765 16,222 13,792
Exchange rate losses 71,983 52,690 154,069

198,289 159,828 245,839

Financial income 72,646 (19,200) 164,909
(1)
of which revenue related to controlled entities 23,958 12,939 140,733
(2)
of which expenses related to controlled entities 7,240 5,073 3,814

In 2005, the Company received A121.2 million of dividends.
Moreover, the Company consented debt abandonments for an amount of A6.5 million on the
occasion of the restructuring of the subsidiaries of the group Lafarge Refractories.
As a holding company, Imerys manages its balance sheet exchange rate risk, notably linked to the
foreign net assets held directly or indirectly by the Company and also resulting from the loans and
advances granted to the subsidiaries and entities controlled by the Company in accordance with the
intra-group treasury contracts. Therefore, the proportion of the financial indebtedness drawn in other
foreign currencies than the euro is adjusted. In 2005, Imerys recorded a net exchange loss of A27.8
million (a gain of A7.2 million was realized in 2004 and a gain of A59.1 million in 2003) mainly due
to the hedging of foreign investments by Imerys. These assets are not subject to revaluation based on
the closing rate, in absence of revaluation of the investment securities in the balance sheet.

11 – EXCEPTIONAL INCOME

(A thousands) 2005 2004 2003
Gains and losses on disposals of assets 30,360 307,544 (12,181)
Other exceptional revenue 1 7,600 1,680
Decreases in provisions 1,234 2,396 47,410
Increases in provisions (1,996) (1,995) (1,971)
Other exceptional expenses (595) (11,453) (33,473)

Exceptional income 29,004 304,092 1,465

The exceptional gains result from the disposal of the Lariviere shares as well as from the disposal of
`
part of the Montparnasse real estate where the former headquarters of Imerys were located.

12 – INCOME TAXES

(A thousands) 2005 2004 2003
Taxes on long-term capital gains — — —
Income taxes 24,236 18,488 (4,968)

24,236 18,488 (4,968)
Total


172
Breakdown of the tax charge of the Company

Result Result
(A thousands) before taxes Taxes after taxes
Current income 46,756 — 46,756
Exceptional income 29,004 — 29,004
Impact of the tax consolidation — 24,236 24,236

75,760 24,236 99,996
Total

In accordance with the terms of the tax conventions signed by each company of the Group, the tax
charge or revenue recorded in the accounts of Imerys is composed of:
the tax charge of the Company, calculated as if it was not fiscally consolidated;
*


the net amount of complementary charges and revenue resulting from the tax consolidation.
*


In this context, Imerys recorded a revenue of A24,236 thousand for the 2005 period.
As regards Imerys, it registers in 2005 a loss of A63.0 million which has been used by the
consolidated group following the rules of tax consolidation. At the end of the 2005 period, the
balance of carried forward short-term losses is of A171.9 million.
The tax consolidation structure headed by the Imerys company has long-term losses of A25.4 million
and no short-term losses.

Variation of deferred taxes (deferred tax basis)

As of As of
(A thousands) December December
31, 2005 31, 2004
Description Assets Liabilities Assets Liabilities
Temporary differences
Deductible next year — 5,136 — 18,146
Deductible later — 10,887 — 9,789
Deducted expenses or taxed revenue not yet
recognized 1,514 15,405 15,524 24,379

1,514 31,428 15,524 52,314
Total

Potentially taxable items
273,471(1)
Special reserve for long-term capital gains — — 273,471
Others — — — —

— 273,471 — 273,471
Total


(1) According to article no. 39 of the Financial Rectification Law 2004 (‘‘Loi de Finance Rectificative’’), an amount of A200 million
were transferred from the special reserves of long-term gains to an account of ordinary reserves after approval of the Shareholders’
General Meeting of May 3, 2005. This transfer was already taken into account in the potential taxation elements published in the
2004 annual report.




173
3. Notes to the balance sheet
13 – VARIATIONS OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

Gross Gross
amount amount
(A thousands) 12.31.2004 Acquisitions Disposals 12.31.2005
2,898 843 428 3,313
Intangible assets

Land 560 — 258 302
Buildings 3,549 — 1,580 1,969
Other property, plant and equipment 7,369 2,213 3,182 6,400

11,478 2,213 5,020 8,671
Property, plant and equipment

Total gross intangible assets and property, plant
14,376 3,056 5,448 11,984
and equipment



Amortization Amortization
and and
depreciation depreciation
as of as of
(A thousands) 12.31.2004 Increases Decreases 12.31.2005
892 704 180 1,416
Amortization on intangible assets

Depreciation of buildings 2,153 87 961 1,279
Depreciation of property, plant and equipment 3,747 779 2,228 2,298

5,900 866 3,189 3,577
Depreciation of property, plant and equipment

Total amortization and depreciation of intangible
6,792 1,570 3,369 4,993
assets and property, plant and equipment



14 – CHANGES IN THE VALUE OF INVESTMENT SECURITIES
The gross value of equity interest decreases by A70,701 thousand.
The main acquisitions and sales concern the following entities:
the disposal of Lariviere shares for a gross amount of A101,299 thousand;
`
*


the subscription to the capital increase of Imerys USA for A30,599 thousand.
*


Depreciation allowances come to A3,003 thousand, increasing by A107 thousand compared to 2004.

15 – LOANS RELATED TO INVESTMENT SECURITIES
The amount of loans related to investment securities increased by A532,589 thousand. These
receivables correspond to intra-group credit agreements aimed at optimizing the cash management. A
provision for depreciation has been accrued in 2005 for A613 thousand.

16 – OTHER FINANCIAL INVESTMENTS
During the 2005 period, 640,000 Imerys shares have been repurchased in the framework of the Share
Buy-back Program for which the Shareholders’ General Meeting of May 3, 2005 renewed the
authorization. These shares in process of cancellation are registered in other financial investments for
A38,159 thousand as of December 31, 2005 (note 19).




174
17 – OTHER RECEIVABLES

Maturity Maturity Maturity
Gross less than from one to beyond five
(A thousands) amount one year five years years
1,005,561 597,608 407,340 613
Receivables from investment securities
41,065 38,214 42 2,809
Other financial investments
Other receivables
Operating receivables 30,910 30,910 — —
Bond issuance premium 1,397 191 664 542

32,307 31,101 664 542
Total other receivables

Regularization account
Prepaid expenses 3,608 1,486 1,886 236
Expenses to be amortized over several periods 2,323 271 1,040 1,013
Unrealized exchange rate losses 1,514 1,514 — —

7,445 3,271 2,926 1,249
Total regularization account

1,086,378 670,194 410,972 5,213
Total



18 – MARKETABLE SECURITIES – NET VALUES

(A thousands) 2005 2004 2003
(1)
SICAV’s and mutual funds 59,405 90,605 —
Treasury shares (1) 495 253 5,863
Deposit for liquidity provider contract — 55 6,392
Certificates of deposit and negotiable bonds — — —
Obligations — — —

59,900 90,913 12,255
Total



(1) Inventory of marketable securities as of December 31, 2005

Average Average
cost price rate
per unit December
(A) 2005 (A)
Nature Quantity
SICAV Natexis Securite Jour 693 49,683.00 49,683.00
SICAV Dresdner Eurocash 4,141 6,031.11 6,031.11
Imerys shares (liquidity provider contract) 8,170 61.08 60.63




175
19 – BREAKDOWN IN CHANGES OF SHAREHOLDERS’ EQUITY
Share Income
Reserves(1) Retained for
Number capital
(A thousands) of shares Capital premiums Legal Regulated Other earnings the year Total
Shareholders’ equity as of 01/01/03
before allocation of net income 15,751,950 126,016 210,804 12,725 473,471 475,470 72,711 160,423 1,531,620
Allocation of 2002 income — — — — — — 92,893 (160,423) (67,530)
Movements of the period:
Cancellation of 153,639 shares of A8 (153,639) (1,230) (21,265) — — — — — (22,495)
Subscription of 272,434 shares by
exercise of options 272,434 2,180 28,555 — — — — — 30,735

15,870,745 shares of A8 15,870,745 126,966 218,094 12,725 473,471 475,470 165,604 0 1,472,330

Net income as of 12/31/03 151,302 151,302

Shareholders’ equity as of 01/01/04
before allocation of net income 15,870,745 126,966 218,094 12,725 473,471 475,470 165,604 151,302 1,623,632
Allocation of 2003 income — — — — — — 72,017 (151,302) (79,285)

Movements of the period:
Split of the nominal : shares of A2 63,482,980 — — — — — — — —
Cancellation of 640,000 shares of A2 (640,000) (1,280) (29,964) — — — — — (31,244)
Subscription of 607,040 shares by
exercise of options 607,040 1,214 16,743 — — — — — 17,957
Exceptional tax on Regulated
Reserves — — — — — (4,988) (3) — (4,988)

63,450,020 shares of A2 63,450,020 126,900 204,873 12,725 473,471 475,470 232,633 0 1,526,072

Net income as of 12/31/04 — — — — — — — 282,616 282,616

Shareholders’ equity as of 01/01/05
before allocation of net income 63,450,020 126,900 204,873 12,725 473,471 475,470 232,633 282,616 1,808,688
Allocation of 2004 income — — — — — — 187,655 (282,616) (94,961)

Movements of the period:
Subscription of 521,845 shares by
exercise of options 521,845 1,044 14,580 — — — — — 15,624
200,000(3) — — 0
Reclassification of regulated reserves — — — — (200,000)
Tax on regulated reserves (long-term
4,988(3) — 0
gains) — — — — — (4,988)
(163)(4) — (163)
Change in method CRC 04-06 — — — — — —

63,971,865 shares of A2 63,971,865 127,944 219,453 12,725 273,471 670,482 425,113 0 1,729,188

Net income as of 12/31/05 99,996 99,996

Shareholders’ equity as of 01/01/06
before allocation of net income 63,971,865 127,944 219,453 12,725 273,471 670,482 425,113 99,996 1,829,184
Cancellation of 640,000 actions of
A2(5) (640,000) (1,280) (36,879) — — — — — (38,159)

Proposition for allocation of
income(6) 63,331,865 — — — — — (4,502) (99,996) (104,498)

Shareholders’ equity as of 01/17/06
with proposition for allocation of
income 63,331,865 126,664 182,574 12,725 273,471 670,482 420,611 0 1,686,527




(1) Imerys’ shareholders’ equity does not include revaluation differences.
(2) According to the Shareholders’ General Meeting on May 3, 2004.
(3) According to article no. 39 of the Financial Rectification Law 2004 (‘‘Loi de Finance Rectificative’’) concerning special reserves of
long-term gains, Imerys registered on December 31, 2004 the exceptional tax on special reserves and thus diminished the position
‘‘retained earnings’’ for an amount of A4,988 thousand. By decision of the Shareholders’ General Meeting of May 3, 2005, this
amount has been allocated to reserves and A200 million have thus been transferred from special reserves of long-term gains to
ordinary reserves.
(4) In accordance with the CRC regulation no. 2004-06, the cost of trademark registering included in the assets of January 1, 2005
have been registered for their value net of taxes by diminishing the retained earnings.
(5) Proposed for the approval of the Board of Directors on January 17, 2006
(6) Proposed to the Shareholders’ General Meeting on May 2, 2006.




176
The Shareholders’ General Meeting on May 3, 2004 approved the proposition to reduce the nominal
of the Imerys share to A2 per share. Since then, the nominal of the Imerys share is of A2.
In 2005, 521,845 shares were created as a result of exercised options. Detailed information is available
in paragraph 5.2 of the annual report.

Stock option subscription plans in force as of December 31, 2005

Position Position
as of Grant Exercised Cancellations, as of
12/31/2004 of options options regularizations 12/31/2005
Plan 1998 34,796 25,000 9,796
Plan 1999 171,000 94,700 76,300
Plan 2000 165,900 41,680 (2,860) 127,080
Employee Shareholder Plan 2000 48,116 10,120 120 37,876
Plan 2001 367,920 171,425 (5,360) 201,855
Employee Shareholder Plan 2001 69,704 15,456 120 54,128
Plan 2002 487,000 161,000 2,000 324,000
Employee Shareholder Plan 2002 68,048 2,284 100 65,664
Plan 2003 688,720 38,660 650,060
Employee Shareholder Plan 2003 37,424 180 37,244
Plan 2004 834,600 55,900 778,700
Plan 2005 635,000 10,000 625,000

2,973,228 635,000 521,845 98,680 2,987,703

2,987,703
Number of potential ordinary shares by exercise of share options

See the more detailed table in paragraph 6.4.3 of the present document.

Number of shares

63,450,020
Position as of December 31, 2004

Number of shares created in 2005 by exercise of options with a nominal amount of A2 521,845
Cancellation of shares in 2005 with a nominal amount of A2 —

63,971,865
Position as of December 31, 2005

Number of shares liable to be created 2,987,703
Total number of potential ordinary shares as of December 31, 2005 66,959,568

Cancellation of shares with a nominal amount of A2 – Board of Directors of January 17, 2006 (640,000)
Total number of potential ordinary shares as of January 17, 2006 66,319,568

After the cancellation of the 640,000 treasury shares bought back by the Company during the 2005
period, the exercise of all granted share options would dilute the share capital by 4.51%.




177
20 – PROVISIONS
Amount
Amount
at the
at the
beginning
(A thousands) end of
of the Increases Decreases
the period
period Operating Financial Exceptional Operating Financial Exceptional
Type of provisions
Provisions for depreciation of assets
Investments 2,896 — 107 — — — — 3,003
Receivables from investment securities — — 613 — — — — 613
Non-consolidated investments — — — — — — — —
Bond issuance premium 189 — 191 — — — — 380
Marketable securities — — 4 — — — — 4

3,085 — 915 — — — — 4,000
Total

Provisions for risks
Management risks 6,607 — — 903 — — — 7,510
(15,524)(2)
Provisions for exchange rate losses 15,524 — 1,514 — — — 1,514
(558)(1)
Staff-related risks 1,558 — — 733 — — 1,733
(676)(1)
Environmental risks 7,372 — 1,134 — — — 7,830
(598)(2) — 1,413
Financial instruments 598 — 1,413 — —
Risks on subsidiaries and investments — — — 360 — — — 360

31,659 — 4,062 1,996 — (16,122) (1,234) 20,360
Subtotal

Provisions for charges
(19)(3)
Pensions 20 — — — — — 1
(450)(1) — — 2,455
Future employee benefits 2,461 444 — —
Other social contributions and tax
expenses 2,667 — — — — — — 2,667

5,148 444 — — (469) — — 5,123
Subtotal

36,807 444 4,062 1,996 (469) (16,122) (1,234) 25,483
Total

39,892 444 4,977 1,996 (469) (16,122) (1,234) 29,483
Grand Total



(1) Provisions decreased in accordance with used amounts for A1,684 thousand.
(2) Provisions decreased in accordance with the last available financial elements.
(3) The other decreases in provisions result from a better evaluation of the risks of December 31, 2005 and to the expiration of other
risks.

As head of the group, Imerys registers management risk and environmental provisions. They
particularly relate to environmental liability guarantees following the disposal of certain investments.
As of December 31, 2005, a provision for financial risks has been registered in order to take into
consideration the unrealized loss on financial instruments, concerning hedging transactions on foreign
currencies and on energy prices. Some of these instruments, in accordance with the Group’s financial
risk management policy, are, in fact, not recognized as hedging instruments at Imerys SA. The
financial instruments held as of December 31, 2005 are described in note 25 and following.
The provision for future employee benefits mainly represents commitments on defined benefit plans,
after taking into consideration the value of assets invested at a rate of 4.69% in 2005. In 2005, the
retained hypotheses for the calculation of retirement obligations are a discount rate of 4% and an
average wage increase of 3%. Actuarial differences are recognized according to the ‘‘corridor’’
method.




178
Net expense

Other long-term
Retirement employee benefits Total
(A thousands) 2005 2004 2005 2004 2005 2004
Interest cost 183 176 — — 183 176
Current service cost 351 276 — — 351 276
Expected return on plan assets (37) (58) — — (37) (58)
Amortization of past service cost (4) (4) — — (4) (4)
Amortization of actuarial (gains)
losses 12 — — — 12 —
Curtailments and settlements — — — — — —

505 390 — — 505 390
Recognized net expense

Return on plan assets (211) (68) — — (211) (68)


Change in the discounted value of obligations

Other long-term
Retirement employee benefits Total
(A thousands) 2005 2004 2005 2004 2005 2004
Opening discounted value of defined
4,610 3,553 47 47 4,657 3,600
benefit obligations

Interest cost 183 176 — — 183 176
Current service cost 351 276 — — 351 276
Benefit payments — (9) — — — (9)
Employee contributions — — — — — —
Plan amendments 0 — — — 0 —
Actuarial (gains) losses 104 634 — — 104 634

Closing discounted value of defined
5,248 4,630 47 47 5,295 4,677
benefit obligations

of which funded defined benefit
obligations 4,804 4,238 — — 4,804 4,238
of which unfunded defined benefit
obligations 444 392 47 47 491 439


Change in fair value of plan assets

Other long-term
Retirement employee benefits Total
(A thousands) 2005 2004 2005 2004 2005 2004
1,279 1,167 — — 1,279 1,167
Opening fair value of plan assets

Expected return on plan assets 37 58 — — 37 58
Benefit payments — (9) — — — (9)
Employer contributions 536 53 — — 536 53
Employee contributions — — — — — —
Plan amendments — — — — — —
Actuarial (gains) losses of the
period 174 10 — — 174 10

2,026 1,279 — — 2,026 1,279
Closing fair value of plan assets




179
Assets / liabilities in the balance sheet

Other long-term
Retirement employee benefits Total
(A thousands) 2005 2004 2005 2004 2005 2004
Discounted value of funded
defined benefit obligations (4,804) (4,238) — — (4,804) (4,238)
Fair value of plan assets 2,026 1,279 — — 2,026 1,279

(2,778) (2,959) — — (2,778) (2,959)
Funded status

Discounted value of unfunded
defined benefit obligations (444) (392) (47) (47) (491) (439)
Unrecognized past service cost (28) (32) — — (28) (32)
Closing unrecognized actuarial
differences 841 949 — — 841 949
Unrecognized assets due to a limit
on prepaid assets — — — — — —

Assets (provisions) in the balance
(2,409) (2,434) (47) (47) (2,456) (2,481)
sheet

of which provisions for retirement (1) (20) — — (1) (20)
of which provisions for future
employee benefits (2,408) (2,414) (47) (47) (2,455) (2,461)


21 – DEBTS AND REGULARIZATION ACCOUNTS AS OF DECEMBER 31, 2005

Maturity
Maturity
Maturity
beyond five
from one to
less than
(A thousands) years
five years
one year
Amount
Financial debts 1,740,098 835,941 409,657 494,500
Other debts 21,468 19,024 2,444 —
Deferred revenue 304 304 — —
Unrealized exchange rate gains 15,405 15,405 — —

1,777,275 870,674 412,101 494,500
Total


The various bank overdrafts and the syndicate loan do not include any grants or guarantees from the
Company to the benefit of the lending banks.

The financial debts per foreign currency share out as follows:

(A thousands) Amount
Euro 1,521,372
US Dollar 149,520
British Pound 5,919
Japanese Yen 50,914
Other foreign currencies 12,373

1,740,098
Total




180
The analysis of the net external debt by nature and maturity is the following:
Maturity Maturity Maturity
less than from one to beyond five
(A thousands) Amount one year five years years
Bonds 904,157 — 409,657 494,500
Commercial papers 380,200 380,200 — —
Group financial current accounts 439,052 439,052 — —
Bank overdrafts and accrued interest 16,689 16,689 — —

1,740,098 835,941 409,657 494,500
Total


22 – ACCRUED RECEIVABLES AND PAYABLES
The following items are included in ‘‘other receivables’’ and ‘‘other debts’’:
Accrued Accrued
(A thousands) receivables payables
Operating — 2,373
25,447(1)
Financial 5,412

25,447 7,785
Total


(1) accrued interests on swaps




181
4. Other information

23 – OFF BALANCE SHEET COMMITMENTS
The significant off balance sheet commitments of the Company are detailed in notes 23 to 27.
The syndicated credit renewed on July 22, 2005 for an authorized amount of A750 million is not
guaranteed by the Company. It was neither used at December 31, 2004, nor at December 31, 2005.
The amount of bilateral multi-currencies credit lines confirmed, unutilized and available for the benefit
of Imerys, is A537 million as of December 31, 2005.

Other commitments given
For the benefit of
Other
Equity controlled
(A thousands) Subsidiaries interest entities Other Total
Avals, sureties, guarantees 103,634 — 56,933 20,529 181,096


Other commitments received
Received from
Other
Equity controlled
(A thousands) Subsidiaries interest entities Other Total
Avals, sureties, guarantees — — 6,500 2,596 9,096


The off balance sheet commitments received from controlled entities consist in redemption clauses
which were included in the debt abandonments consented by the Company in 2005.

24 – OTHER COMMITMENTS IN RELATION TO SUBSIDIARIES
In 2005, the Company has granted new letters of intent for A102.1 million. Consequently and
considering the commitments which came to maturity in 2005, the amount of the global commitment
increased from A25.1 million as of December 31, 2004 to A114.6 million as of December 31, 2005.

25 – COMMITMENTS ON EXCHANGE RATE RISKS
As of December 31, 2005, the Company had net commitments regarding forward purchases and sales
against euros divided up by foreign currencies as follows:
Forward
net position
exchange
Forward Forward Forward
value in A
Foreign currency (in thousands) purchases sales net position

Australian Dollar 11,300 — (11,300) (7,015)
Canadian Dollar — 22,684 22,684 16,528
Swiss Franc — 45,095 45,095 28,998
British Pound — 2,825 2,825 4,122
Japanese Yen 3,751,000 — (3,751,000) (27,005)
Mexican Peso 24,450 — (24,450) (1,940)
Danish Krone 1,275 — (1,275) (160)
Swedish Krona — 407,345 407,345 43,388
Czech Koruna — 13,200 13,200 455
Thai Baht — 337,000 337,000 6,933
South African Rand 84,000 — (84,000) (11,254)
US Dollar — 225,535 225,535 191,180

244,230
Total


182
These transactions have been carried out in order to hedge the exchange rate risk generated by intra-
group financing and investments in foreign currencies.

26 – COMMITMENTS ON INTEREST RATE RISK
As part of its interest rate risk management policy, the Company set up the following hedging
instruments (in thousands of euros) as of December 31, 2005:

Average Average
liability at liability at
capped rate
fixed rate
(or options in Average fixed (option not in Average fixed
the currency) rate the currency) rate
Currency
US Dollar — — 164.4 4.50%
Euro 479.0 2.58% 471.2 3.00%

As of December 31, 2005 the hedges by nature and in notional amounts could be analyzed as
follows:
Maturity Maturity Maturity
less than from 1 to 5 beyond
1 year years 5 years
A millions
*

Swaps paying at fixed rate 350 268 —
Swaps receiving at fixed rate — 458 300
Caps purchased 275 350 —
Caps sold 125 150 —

USD millions
*

Swaps paying at fixed rate — — —
Swaps receiving at fixed rate — — 170
Caps purchased 200 — —
Floors purchased — — —
Floors sold 200 — —
Caps sold 200 — —

JPY millions
*

Swaps paying at fixed rate — — —
Swaps receiving at fixed rate — — 7,000

All hedging instruments in place correspond to identified risks as of December 31, 2005 at Imerys.




183
27 – ELEMENTS CONCERNING ENERGY PRICE RISKS
Following its policy to manage centrally energy price risks which affect its participations, the
Company has implemented different hedging options concerning the identified risks as of December
31, 2005 at Imerys:

Hedging of energy price risks in the United States

Net notional amounts in
millions of MMBTU Maturity
Management transactions
*

Swaps
Options
Purchases of Puts (590,000) 512 months
Sales of Puts 2,030,000 512 months
Purchases of Calls 4,460,000 512 months
Sales of Calls (2,730,000) 512 months
Futures Purchases of Futures 250,000 512 months
Forwards — — —

Hedging of energy price risks in the United Kingdom

Net notional amounts
in therms Maturity
Management transactions
*

Swaps
Options
Purchases of Puts (6,672,000) 512 months
Sales of Puts 20,232,000 512 months
Purchases of Calls 23,144,000 512 months
Sales of Calls (15,780,000) 512 months
Futures Sales of Futures (7,560,000) 512 months
Forwards — — —

Hedging of energy price risks in the France

Net notional amounts
in barrels Maturity
Management transactions
*

Swaps
Options
Purchases of Puts
Sales of Puts
Purchases of Calls 264,000 512 months
Sales of Calls (264,000) 512 months
Futures — — —
Forwards — — —

The above-mentioned transactions mainly cover natural gas risks for 2006.




184
28 – ELEMENTS RECORDED UNDER MORE THAN ONE BALANCE SHEET ITEM (NET
VALUE)

Of which
controlled
(A thousands) entities(1)
Total
Investment securities 2,470,429 2,470,039
Receivables from investment securities 1,004,948 1,004,948
Other investments 41,065 —
Other receivables 30,910 25,141
Financial debts 1,740,098 436,991
Other debts 21,468 3,153


(1) The controlled entities are those that can be consolidated by full integration into the same group.


29 – PRINCIPAL SHAREHOLDERS

Number of % of % of voting
rights(1)
as of December 31, 2005 shares interest
Pargesa Netherlands BV 17,141,712 26.80% 42.47%
Groupe Bruxelles Lambert 16,744,028 26.17% 20.74%
Group employees 216,355 0.34% 0.41%
Owned by the Group 648,170 1.01% 0.00%
Public 29,221,600 45.68% 36.38%

63,971,865 100.00% 100.00%
Total


(1) Total voting rights : 80,729,938.

Imerys’ consolidated financial statements are included in the consolidation structure of the companies
Pargesa Netherlands BV and Groupe Bruxelles Lambert.

30 – HEADCOUNT AS OF DECEMBER 31, 2005

Non-
Employees of the entity executives Executives Total
Full-time 22 65 87
Part-time 3 — 3

25 65 90
Total


31 – REMUNERATION FOR SENIOR MANAGEMENT

(A thousands) 2005 2004 2003
Board of Directors(1) (2) 624 622 607
General management(3) 1,092 1,981 2,745

Total 1,716 2,603 3,352


(1) Director’s fees.
(2) Supervisory Board until May 3, 2005 and Board of Directors from May 3, 2005 to December 31, 2005
(3) Including the only corporate representatives, i.e. the members of the Managing Board until May 3, 2005 and the Managing
Director from May 3, 2005 to December 31, 2005




185
32 – POST CLOSING EVENTS
On January 17, 2006, the Board of Directors of the Company approved the capital reduction by
cancellation of 640,000 treasury shares held by the Company itself as of December 31, 2005. After
this transaction, the share capital of Imerys SA is of A126,663,730. It consists of 63,331,865 shares
with a nominal of A2.
On February 28, 2006, the Group made the acquisition of the French group AGS located in Clerac
´
(Charente-Maritime).

33 – TABLE OF SUBSIDIARIES AND EQUITY INTERESTS AS OF DECEMBER 31, 2005
Inventory of marketable securities

Local units (thousands)
Shareholders’
equity other
Capital than share Number of
as of capital as of shares held
12.31.2005 12.31.2005 by Imerys Type of securities
1 – Subsidiaries (at least 50% of equity held by Imerys)
shares of A2
Imerys TC 161,228 585,386 80,613,850
Lariviere (sold on April 18, 2005)
` — — — —
shares of A15
Mircal 526,615 89,776 35,107,681
Imerys USA 367,000 386,480 1,000 shares of USD0,01
shares of A15
Imerys Services 38 98 2,499
shares of A453
Imerys Nederland BV 12,110 3,758 1,225
shares of A1
Mircal Europe 56,365 581,605 56,365,195

(A thousands)
Loans and
% of Gross Net advances Borrowings Dividends
interest amount of amount of granted by taken up by Sureties collected 2005 net
held by securities securities Imerys and Imerys and avals given by Imerys income or
Imerys held held not repaid not repaid by Imerys in 2005 2005 sales loss
1 – Subsidiaries (at least 50% of equity held by Imerys)
Imerys TC 100.00 758,369 758,369 — 134,637 — 95,124 447,500 105,231
Lariviere (sold on April 18,
`
2005) — — — — — — 25,676 — —
Mircal 100.00 630,692 630,692 159,859 — — — — 24,131
Imerys USA 100.00 513,530 513,530 141,661 — 103,634 — 2,506 (19,644)
Imerys Services 99.96 38 38 — 2,456 — — 12,821 8
Imerys Nederland BV 4.58 1,696 1,696 — 3,504 — — 1,040 1,968
Mircal Europe 100.00 565,483 565,483 — 69,376 — — 25,715

2 – Equity interests (10 to 50% of equity held by Imerys)
50 50 — — — — — —

3 – Miscellaneous equity interests (in non significant French entities)
3,574 571 — 225 — 375 — —

2,473,432 2,470,429 301,520 210,198 103,634 121,175 463,867 137,409
Total




186
PART B – Historical financial information extracted from the Imerys 2006
annual results press release
The financial information set out below on pages 187 to 200 of this Appendix III has been extracted
without material adjustment from the published Imerys 2006 annual results press release. The
consolidated income statement, balance sheet, cash flow statement and statement of changes in
financial position of Imerys Group have been prepared under IFRS.

2006 RESULTS
15th Consecutive Year of Growth in
Net Income from Recurring Operations: +7.2%
Proposed Dividend A1.80, up +9.1%
The Board of Directors of Imerys, meeting under the chairmanship of Aimery Langlois-Meurinne,
examined the definitive financial statements for 2006 as presented by Chief Executive Officer Gerard
´
Buffiere. The statements will be put to the Shareholders’ General Meeting on May 2, 2007 for
`
approval.

(millions of euros) 2006 2005 % change
Consolidated results
Sales 3,288.1 3,045.2 +8.0%
Current operating income(1) 458.8 434.0 +5.7%
Net income from current operations, Group’s share(2) 308.3 287.6 +7.2%
Net income, Group’s share 187.4 309.4 -39.4%

Financing
Current operating cash flow(3) 522.1 479.8 +8.8%
Capital expenditure 217.0 251.0 -13.5%
Shareholders’ equity 1,646.5 1,686.2 -2.4%
Net financial debt 1,086.1 1,140.0 -4.7%

DATA PER SHARE (average weighted number) 63,475,098 63,426,126
A4.86 A4.53
Net income from current operations, Group’s share(2) +7.1%
A1.80 A1.65
Proposed dividend +9.1%


(1) Operating income before other income and expense.
(2) Net income before other income and expense, net.
(3) Current operating income plus net depreciation expense and provisions, minus tax on current operating income.

Imerys’ markets showed contrasting trends throughout 2006. The Pigments for Paper and Specialty
Minerals business groups were affected by restructuring in the paper and ceramics industries.
However, business remained firm in Building Materials in France and in Refractories. Abrasives
markets were stable and the Filtration sector grew slightly. Rises in variable costs were particularly
sharp in the 1st half of the year but slowed down in the 2nd half. Finally, the 4th quarter was affected
by a slump on US construction markets.
In that context, the Group continued to grow and post significantly higher performance, proving its
reactive ness and its adaptability. Sale increased +8.0% (+3.2% at comparable Group structure and
exchange rates) and current operating income +5.7%. Net income from current operations, up +7.2%,
grew for the fifteenth year running.
After a particularly active year in terms of external growth in 2005, the Group continued to integrate
its acquisitions successfully in 2006. It also began a major restructuring program in kaolin for paper
with the aim of setting up a competitive cost platform over the long term in the United Kingdom for
filler kaolins and in particular, in Brazil for coating kaolins. Capital expenditure remained high.
CEO Gerard Buffiere commented, ‘‘In 2006 our net income from current operations rose for the 15th
´ `
straight year. This growth was achieved despite tough conditions on some markets and adverse trends in
external factors such as energy. It is the result of great efforts by the Group’s people. Thanks to them,
the acquisitions made in 2005 have been successfully integrated, the product offering has improved and
fixed costs remain under control. Moreover, high cash flow generation further improved our financial
strength and our ability to seize acquisition opportunities. 2006 was a year of discipline and good

187
management, as well as of major decisions including the restructuring undertaken in kaolins, which will
give the Group a competitive cost base from 2008.
Finally, to create new synergies, we decided to organize the Group around three business groups from
January 1, 2007. An Innovation Department was also set up and will help boost our growth.’’
At the Shareholders’ General Meeting on May 2, 2007, the Board of Directors will propose payout of
a dividend of A1.80 per share, compared with A1.65 for 2005 (up +9.1%). The total amount of
approximately A114.0 million represents 37.0% the Group share of net income from current
operations. The divided will be paid on May 15, 2007.

DETAILED COMMENTARY ON THE GROUP’S RESULTS
The consolidated income statement, statement of changes in financial position and balance sheet are
presented in appendix to this press release.
2006 was characterized by the following trends on the Group’s main markets.
Specialty Minerals: the business group’s markets showed contrasting conditions. Performance
*

mineral markets (paint, plastics, adhesives, etc.) decreased sharply in the United States towards
the end of the year; ceramic markets remained difficult in Western Europe and North America.
Pigments for Paper: the world printing and writing paper market grew in 2006, mainly in Asia
*

and Europe. Paper production in North America, on the other hand, decreased slightly.
Materials & Monolithics: the business group’s markets were healthy overall with slight growth in
*

new single-family housing start-ups in France and a firm renovation sector. The Monolithic
refractories market particularly benefited from a dynamic steel industry.
Refractories, Abrasives & Filtration: during the year, the business group’s general market
*

environment evolved favorably. Refractory markets were buoyant, abrasive markets were stable
over the period and filtration markets grew slightly, especially in emerging countries.

Sales: up +8.0% to A3,288.1 million
This increase reflects the substantial impact of changes in Group structure (+A160.8 million, i.e.
+5.3%), which include two opposing items:
The major positive sales contribution for the period (+A253.4 million) of the acquisitions made
*

in 2005 (chiefly World Minerals and Denain-Anzin Mineraux) and in 2006 (mainly AGS);
´
The negative effect (-A92.6 million) of the divestments made in the 1st half of 2005 (American
*

Minerals and Lariviere).
`
Exchange rates had a negative impact of -A16.6 million, i.e. -0.5%, due to the depreciation of the US
dollar against the euro in the 4th quarter.
At comparable Group structure and exchange rates, sales increased +3.2% (+4.6% in the 1st half;
+1.9% in the 2nd), reflecting:
An increase in the price/mix component (+4.0%), resulting from an improved product offering
*

and efforts to pass through external cost rises;
Slight erosion in sales volumes (-0.7%), mainly recorded in the 4th quarter.
*



Current operating income: up +5.7% to A458.8 million
For the second year running, the Group was faced with high inflation in its variable costs, primarily
energy. In that context, growth in current operating income results from:
The contribution of acquisitions for the year, with impact +A20.9 million, net of divestments;
*


The negative effect of exchange rates for the year (-A7.0 million).
*


At comparable Group structure and exchange rates, the increase was A10.9 million, with the increase
in the price/mix component (+A122.5 million) making up for inflation in external costs (-A88.6 million)
and the negative impact of volumes (-A17.8 million). Fixed costs remained under strict control (-A1.7
million).
Over the year, the decrease of Specialty Minerals performance was more than offset by improvement
in the three other business groups. In total, operating margin remained high (14.0% in 2006 vs. 14.3%
(1)
Current operating income divided by average capital invested (including goodwill)

188
1
in 2005) and return on investment (ROI)( ) remained healthy at 14.5% in 2006, compared with 14.9%
in 2005.

Net income from current operations, Group share: up +7.2% to A308.3 million
This improvement takes into account:
Stable financial expense (-A46.7 million vs. -A47.3 million in 2005, including non-recurring
*

positive impact from foreign exchange transactions;
A current tax charge of -A106.4 million, compared with -A101.0 million in 2005), which
*

represents a slight decrease in the effective tax rate to 25.8% from 26.1% in 2005.
At A4.86 compared with A4.53 in 2005, net income from current operations per share increased +7.1%
over the period, while the average weighted number of outstanding shares increased slightly from
63,426,126 in 2005 to 63,475,098 in 2006.

Net income, Group share
The Group’s share of net income totaled A187.4 million compared with A309.4 million the previous
year. In 2005, net income included +A21.8 million in other income and expense, net (including capital
gains on the divestment of the Lariviere distribution network). In 2006, it includes -A120.9 million net
`
of tax in other income and expense, mostly without impact on the Group’s cash flow, from:
Provisions for industrial asset deprecation, site restoration and restructuring expenses relating to
*

the major reorganization program for kaolin production in Great Britain, for a total amount of
-A85.9 million;
Other expenses for -A45.9 million with respect to asset depreciations and cost reduction actions
*

taken across the Group;
Sales of non-industrial assets for +A10.9 million.
*



Further improvement in the Group’s financial solidity
2
The year was marked by even higher generation of current operatingcash flow.( ) At A522.1 million
compared with A479.8 million in 2005, it takes into account:
3
A643.5 million in EBITDA( ) (A596.9 million in 2005), which represents a +7.8% increase;
*


A notional tax charge on current operating income of -A118.4 million (-A113.4 million in 2005).
*


4
Current free operating cash flow( ) totaled A245.8 million (A219.4 million in 2005) with:
Capital expenditure that remained high over the period, despite decreasing slightly from the
*

previous year (representing 110% of depreciation expense in 2006 vs. 126% in 2005). The A217.0
million paid in capital expenditure (A251.0 million in 2005), was spread among the different
business groups;
Negative change in operating working capital for -A66.8 million (-A18.1 million in 2005),
*

reflecting growth in sales.
After taking into account financial expense net of tax (-A34.7 million after tax vs. -A34.9 in 2005),
other working capital items and non-cash items, for a total of -A12.6 million compared with +A10.6
5
million in 2005, current free cash flow( ) remained high at A198.5 million (A195.1 million in 2005).
External growth operations had cash impact of -A33.0 million (mainly the acquisition in late
*

February of AGS, France) compared with -A439.6 million in 2005.
Asset sales amounted to +A17.9 million, compared with A183.9 million in 2005, and mainly
*

concern disposals of property.
Imerys continues to enjoy good financial flexibility. Consolidated net financial debt decreased to
A1,086.1 million as on December 31, 2006, compared with A1,140.0 million at the end of 2005. This
represents 66.0% of shareholders’ equity and 1.7 times EBITDA (vs. 67.6% and 1.9, respectively, in
2005).
(2)
EBITDA minus tax on current operating income.
(3)
Earnings before income tax, depreciation and amortization.
(4)
Current operating cash flow minus paid capital expenditure and changes in operating working capital.
(5)
Current operating free cash flow minus financial expense net of tax and change in other working capital items and non-cash items
(deferred taxes and financial provisions).

189
As on December 31, 2006, the Group’s financial resources totaled A2,208.4 billion, i.e. twice the
amount of its net financial debt. The average maturity of those resources is 4.5 years, compared with
5.5 years as on December 31, 2005. They remain balanced between bank and bond resources, with
repayment dates that are spread out over time.
Consequently, Imerys’ financial structure remains extremely robust. The Group has further improved
its ability to seize any new acquisition opportunities that may arise in 2007.

COMMENTARY BY BUSINESS GROUP
% change on
comparable
(millions of euros) 2006 2005 % change basis
3,288.1 3,045.2 +8.0% +3.2%
Sales
Specialty Minerals 891.9 809.3 +10.2% +1.0%
Pigments for Paper 762.7 755.0 +1.0% +1.4%
Materials & Monolithics 893.0 922.4 -3.2% +6.4%
Refractories, Abrasives & Filtration 787.8 603.9 +30.5% +3.6%
Holding Company & Eliminations (47.4) (45.3) n.s. n.s.

(millions of euros) 2006 2005 % change
458.8 434.0 +5.7%
Current operating income
Specialty Minerals 92.3 94.8 -2.6%
Pigments for Paper 76.7 73.8 +3.9%
Materials & Monolithics 208.9 197.8 +5.6%
Refractories, Abrasives & Filtration 110.8 95.8 +15.7%
Holding Company & Eliminations (29.9) (28.3) n.s.

SPECIALTY MINERALS
The business group’s markets showed contrasting trends in 2006.
Performance minerals markets (paint, plastics, adhesives, etc.) were healthy in Europe,
*

particularly thanks to a firm construction sector in the region. North American markets were
buoyant in the 1st half but slumped in the 4th quarter;
Fine ceramic markets were marked by capacity reductions in Western Europe and North
*

America and by the transfer of ceramic production to Eastern Europe, Latin America and Asia.
As these markets are also related to the construction sector, they slowed down significantly in
the 4th quarter;
Graphite markets were dynamic, while the kiln furniture sector began a downturn in the 2nd
*

quarter with harsher competition.
In that context, with several soft markets and sharp inflation in energy costs, restructuring efforts
were stepped up across the business group through:
Implementation early in the year of an administrative cost reduction plan in line with the
*

integration of Denain-Anzin Mineraux (DAM), which was acquired in late October 2005;
´
Shutdown of kiln furniture manufacturing on the Lamotte-Beuvron (Loir-et-Cher, France) site in
*

October and the transfer of production to the business group’s Spanish, Thai and Hungarian
sites;
The announcement in early July of the project to end kaolin mining and refining activities in
*

Devon in early 2008 to focus British production of kaolin for ceramics and performance
minerals on Cornwall;
The decision made in late 2006 to close the precipitated calcium carbonate (PCC) plant in Arcos
*

(Brazil) and transfer production to the Bras Cubas site to benefit from more modern and
energy-efficient production tools.
Capital expenditure amounted to A61.3 million, i.e. 100% of depreciation expense, compared with
A71.8 million in 2005. It mainly concerned productivity improvements and selective capacity increases.

190
In performance minerals, optimization of ground calcium carbonate (GCC) production
*

continued in the United States with capital expenditure at the Sylacauga (Alabama) plant. In
Brazil, the Limeira PCC plant benefited from a capacity debottlenecking program.
In minerals for ceramics, production capacity was increased in Thailand to support substantial
*

development by major sanitaryware customers in the country. Furthermore, kaolin for porcelain
reserves in New Zealand are being extended.
In graphite, a new furnace using an innovative graphitizing procedure is under construction.
*


Furthermore, the business group continued to strengthen its positions in GCC for performance
minerals with the acquisition in early July of a 70% stake in Mikro Minerals (Turkey), which achieves
annual sales of A3.5 million, mainly in the paint market.

The business group’s sales totaled A891.9 million (up +10.2% from 2005). This increase takes into account:
The impact of changes in structure for +8.9%, reflecting the acquisitions made during the
*

previous year (primarily Denain-Anzin Mineraux in late October 2005);
´
Virtually neutral effect of exchange rates (+0.3%).
*


At comparable structure and exchange rates, sales rose +1.0% over the year (+3.1% in the 1st half, -
1.0% in the 2nd), with the improvement in the price/mix component offsetting the drop in volumes in
the 2nd half of the year, particularly in Performance Minerals and Minerals for Ceramics in the
United States and in Kiln Furniture.

Current operating income amounted to A92.3 million (down -2.6%).
Changes in structure account for +A6.1 million of this figure. Over the period, a greater price/mix
component and tight control over fixed costs limited the impact of higher variable costs and lower
sales volumes. This trend comes with a lower operating margin (10.4% vs. 11.7% in 2005), partly as a
result of the integration of Denain-Anzin Mineraux.
´

PIGMENTS FOR PAPER
2006 was marked by estimated +2.4% growth in world printing and writing paper. Despite this,
production overcapacity in some market segments, particularly in Europe, led the major papermakers
to announce a series of machine or mills shutdowns. This program should lead to better utilization of
European papermaking capacities.
Trends by geographic zone were as follows.
In Europe, paper production increased (+2.7%) with an overall rise in underlying demand and
*

the return to a normal production rate in Finland after the seven-week strike that affected the
country’s paper industry in 2005;
In North America, paper production decreased slightly (-2.0%), reflecting overall weak demand
*

and the impact of lock-outs at some manufacturers;
In Asia, the paper markets were healthy (+5.2%) with a significant increase in demand and the
*

start-up of major production capacities.
Capital expenditure totaled A60.9 million (i.e. 88% of depreciation expense), compared with A75.6
million the previous year. It mainly corresponds to the continued implementation of the Group’s
development strategy in calcium carbonates. The new carbonate plants that came on stream in 2005
in Sweden, India and China reached satisfactory utilization levels.
Towards the end of 2006, a new precipitated calcium carbonate (PCC) for paper plant went into
service in Sumatra (Indonesia) as part of a joint venture in which the Group has a majority stake
(51%), alongside April, a major Asian papermaker.
Furthermore, in early July 2006 Imerys announced a major reorganization project for its kaolin for
paper production. One of the project’s main goals is to limit the Group’s exposure to energy costs in
Great Britain. This project, which will be supported by a capital expenditure program totaling
approximately A100 million, mainly provides for:
The shutdown in late 2007 of manufacturing of coating kaolins, the most energy-intensive paper
*

products, in Cornwall. The corresponding tonnage will be transferred to Brazil (Imerys RCC)
where production capacities will be increased accordingly;

191
The concentration of British kaolin for paper production capacities on fillers in order to adapt
*

facilities to the nature of local mineral reserves. Drying techniques will be modified and adjusted
in line with the new energy situation.
Approximately 800 jobs will be reduced from early 2006 to late 2007 when the reorganization is
completed. The Group will then have a competitive cost base for both filler kaolins in Great Britain
and for coating kaolins in Brazil.

Sales totaled A762.7 million in 2006 (up +1.0% from 2005).
Excluding the effects of changes in structure (+0.7%), corresponding to the acquisition of Yen Bai
Banpu in Vietnam in July 2005 and exchange rates (-1.1%), sales rose +1.4% (+3.7% in the 1st half, -
0.8% in the 2nd). This trend reflects:
A significant improvement in the price/mix component;
*


A decrease in sales volumes, particularly in the 2nd half, relating to plant shutdowns by some
*

major European papermakers and by the industrial unrest that affected North American
customers.

Current operating income totaled A76.7 million (up +3.9%).
This trend reflects the business group’s ability to absorb higher variable costs (particularly energy)
and lower sales volumes through an improved price/mix component and lower fixed costs and general
expenses. Overall, the business group’s operating margin improved slightly to 10.1% (vs. 9.8% in
2005).

MATERIALS & MONOLITHICS
The business group took full advantage of positive market trends in 2006.
The French building materials market continued to grow. The roofing segment rose 3% with a
*

slight increase in single-family housing start-ups (+1%) and a dynamic renovation market. In
wall bricks, clay products continued to grow (+13%) with market share gains;
The monolithic refractories market benefited from sound business, especially in the steel
*

industry.
The production rationalization program in Building Materials in France continued in 2006. The new
roof tile line that came on stream in late 2005 in Sainte-Foy-l’Argentiere (Rhone) was used at full
` ˆ
capacity in 2006, which enabled production to be rebalanced between that unit and Pargny sur Saulx
(Marne), Saint-Germer-de-Fly (Oise), Quincieux (Rhone) and Commenailles (Jura). In southwestern
ˆ
France, production was adapted to local demand with the start-up in September 2006 of a renovated
line in Saint-Geours d’Auribat (Landes). Energy cost reduction efforts also continued. In bricks, the
new wall brick manufacturing line in Mably (Loire), which went into service towards the end of 2005,
was gradually ramped up in 2006.
In Monolithic Refractories, industrial and commercial optimization continues. The Scheuerfeld
(Germany) plant was closed and production focused on the division’s two other sites in the country.
In China, the new plant built near Shanghai came on stream on schedule in late 2006 to supply the
steelmaking and casting markets.
These various projects account for most of the A45.7 million in capital expenditure committed during
the year (130% of depreciation expense), compared with A52.1 million in 2005.
Sales totaled A893.0 million, down -3.2% from 2005. This trend results from the sale of Lariviere, a
`
specialized distribution network, in April 2005 (-A81.4 million, i.e. -8.8%). At comparable structure,
sales grew +6.4% (+6.5% in the 1st half, +6.3% in the 2nd). This increase reflects the combined
impact, in both Building Materials and Monolithic Refractories, of the rise in sales volumes and
improvement in the price/mix component.
At A208.9 million compared with A197.8 million in 2005, current operating income increased +5.6%
despite the sale of Lariviere. Reprocessed to allow for the effect of changes in structure and exchange
`
rates, the increase was A14.2 million. The business group took full advantage of growth on its
markets, with a greater price/mix component offsetting the negative impact of higher energy costs.
Operating margin again improved, at 23.4% compared with 21.4% in 2005.

192
REFRACTORIES, ABRASIVES & FILTRATION
Over the period, the business group’s market environment was favorable as a whole.
Refractory markets were buoyant, with overall growth in steel production and a number of
*

projects in aluminum;
Abrasive markets were stable, with a soft automotive sector offset by firm business in other
*

applications (construction, aerospace, etc.);
Filtration markets showed slight growth over the period, particularly in emerging countries.
*


On February 28, 2006, Imerys acquired the French group AGS, which achieves sales of
approximately A50 million from the production of chamottes and metakaolins. This operation
broadens the division’s product lines, enhances its European market presence in refractories and
sanitary ceramics and makes future commercial and industrial synergy possible within the division. In
May 2006, a new brown fused alumina production unit with 10,000 tons annual fusion capacity was
also acquired in China (Kaili).
Capital expenditure totaled A55.7 million, i.e. 146% of depreciation expense, compared with A27.5
million in 2005. This increase is due to the major industrial projects carried out during the period.
In Minerals for Refractories, the Group continued to modernize and improve the operating
*

efficiency of its production units. More specifically, action plans were implemented in all units in
order to soften the short and medium-term impact of energy cost increases;
The new ultrafine abrasive powders market in Villach (Austria) went into service on schedule in
*

late 2006;
In Minerals for Filtration, the integration of World Minerals comes with a major capital
*

expenditure program designed to improve productivity, extend capacities and rebalance
production among plants. Begun in 2006 in the United States, Mexico, Europe and China, the
program should be completed in the 2nd half of 2007. In parallel, a perlite production unit was
shut down in mid-2006 in Utah (USA) and the decision was made to transfer perlite production
from El Ejido (Spain) to the Alicante (Spain) plant.

Sales totaled A787.8 million (up +30.5% from 2005). This very substantial increase includes:
+28.0% impact of changes in structure (A169.2 million), reflecting the contributions of World
*

Minerals and AGS from July 2005 and March 2006, respectively, net of the sale of American
Minerals (March 2005);
-1.1% negative effect of exchange rates.
*


At comparable structure and exchange rates, sales increased 3.6% (+4.4% in the 1st half; +2.7% in the
2nd), with an improved price/mix component. Sales volumes were stable overall year-on-year.
Current operating income, at A110.8 million compared with A95.8 million in 2005, increased
significantly. This trend takes into account the net effect of changes in structure for +A16.5 million.
The increase in the price/mix component and productivity gains made up for cost inflation, mostly in
variable factors. Volumes were stable compared with the previous year. The operating margin worked
out at 14.1% compared with 15.9% in 2005. This trend results from margin levels in recent
acquisitions (World Minerals and AGS). The optimization plans in progress should help to improve
that margin.

ADJUSTMENT OF OPERATING STRUCTURES
As of January 1, 2007, it was decided to center operating organization on three business groups to
boost growth and optimize synergy in terms of costs, resources and processes between the Group’s
various divisions.
An Innovation Department was also created. Under the management of Thierry Salmona, previously
in charge of the Specialty Minerals business group, its role is to speed up the generation of organic
growth projects by fostering and coordinating the joint mobilization of several divisions. A number of
projects are in the examination and validation process and involve the Group’s expertise in high-
temperature technologies, ceramics, rheology, crushing and calcination.
The diagram below shows how the divisions from the Specialty Minerals business group are assigned
and how the Group is organized into three business groups:

193
Performance Minerals are grouped together with the divisions from the Pigments for Paper
*

business group to leverage operating synergy in carbonates and kaolin;
Minerals for Ceramics and Graphite & Carbon businesses are grouped together with the
*

Refractories, Abrasives & Filtration activities to respond more effectively to the major changes
affecting the sector;
Kiln Furniture activities have joined the Materials & Monolithics business group.
*




The Group’s results will take the new organization into account as from the publication of its results
to March 30, 2007 on May 2 (the (non-audited) breakdown of sales and current operating income for
the past three financial years is presented in the appendix).

RECENT EVENTS
A highlight of early 2007 was the signing of agreements for the acquisition of:
A 65% stake in Yilong and Xinlong, two Chinese sister companies that produce vermiculite and
*

andalusite. With the Group’s existing production based in Zimbabwe and Australia, this
operation will give the Group critical size in vermiculite (used in construction and horticulture).
It will also give Imerys access to a high-quality andalusite reserve that is being developed to
serve the Chinese refractories market, in addition to its current bases in South Africa and
France. Yilong and Xinlong together achieved sales of approximately A11 million in 2006.
An 85% stake in Baoutu Jing Yuang Graphite Co Ltd, a Chinese producer that is small in size
*

but manufactures high-performance natural graphite used locally for mobile energy.
Additional high quality marble reserves in China to support the development of its local
*

activities (GCC).
These operations remain subject to various conditions precedent, notably the approval of the relevant
authorities, and should be finalized during the 1st half of 2007.
Furthermore, Imerys today announced the launch of a friendly bid for UCM Group PLC, a British
group listed on the London Stock Exchange. UCM Group PLC’ board of directors has unanimously
recommended that its shareholders accept the offer. With market estimated sales of A55 million in
2006, two sites in Great Britain and two in the United States, UCM Group PLC is one of the
world’s leading producers of fused zirconia for the refractories, advanced ceramics and automotive
industries, and fused magnesia, which is primarily used in the manufacture of electrical heating
elements. This acquisition would enable Imerys to broaden its range of fused minerals, a segment in
which it is already active through its subsidiary Treibacher.

194
Launched on the basis of 85 pence per share, the public purchase bid values UCM Group PLC at
A48 million, i.e. 7.4 times its market estimated 2006 EBITDA.

HUMAN RESOURCES AND SUSTAINABLE DEVELOPMENT
As at year-end 2006, the Group had 15,776 employees (compared with 15,934 at the end of 2005).
To support its growth and prepare for the future, Imerys strives to recruit, develop and promote
high-quality teams and talented, mobile managers. The Group is strengthening its central teams in
geology, auditing, health and safety and seeking to develop its future managers. In-house promotion
is favored and mobility is heavily encouraged. 50% of vacancies for experienced personnel were filled
by existing employees in 2006.
In parallel, whenever it has to carry out restructuring operations, the Group strives to provide all
possible internal and external placement solutions, backed up by training and personalized support.
This is the case, of course, for the plans currently announced and implemented in France, Great
Britain and Brazil.
In 2006, the Group kept up its Sustainable Development process. An EHS charter was defined in
2005 and application procedures were added in 2006. An EHS audit program (57 audits completed
from 2005 to 2006) regularly assesses units’ compliance with Group regulations and procedures and
guides continuous improvement.
During the year, Imerys also published a new Code of Ethics and Business Conduct that sets out the
principles that all its employees must apply to ensure that Imerys’ business is conducted with integrity
and in compliance with the law.
Imerys considers that ensuring the health and safety of its employees is essential and has taken a
great many initiatives to improve Safety culture in the Group. In 2006, every operation set up a
Safety plan. The management team reviews the plan’s results every quarter. These efforts have
resulted in a -34% decrease in lost-time workplace accidents.
Publication of the Group’s second Sustainable Development report, covering a significantly larger
scope, and the organization of the second in-house Sustainable Development challenge designed to
reward the different business groups’ initiatives, were other highlights of the year.

CORPORATE GOVERNANCE
As regards governance, following the appointment of Gilbert Milan as a new Director replacing
Patrick Kron, half the members of the Board of Directors are recognized as independent. This
proportion would be maintained if shareholders at the next General Meeting approved the Board’s
proposal to renew the positions of the members whose terms of office are nearing expiry and to
appoint Jean Monville as a new Director to replace Yves Rene Nanot, whose term of office could
´
not continue for statutory reasons.
The committees that support the Board in its missions were particularly active in 2006.
Furthermore, Imerys strives to comply strictly with new requirements in terms of transparency and
communication. Shorter production times for consolidated financial statements, with a view to
meeting new obligations concerning publication, are an example of this.
The Group continued to improve its risk management processes by factoring in regulatory changes,
best practices and the suggestions of the workgroup organized by French market regulator AMF, in
which Imerys took part. A new map of the Group’s main risks is being drawn up. The study is being
initiated at Division level as this is the core of Imerys’ management structure.
An analysis of internal control practices has also been undertaken. It should eventually cover all the
processes likely to generate material risks for the Group.

***
The world leader in adding value to minerals, Imerys is active in 45 countries through over 250
locations. The Group achieved A3.3 billion in sales in 2006. Imerys mines and processes minerals from
reserves with rare qualities in order to develop solutions that improve its customers’ product performance
and manufacturing efficiency. The Group’s products have a great many applications in everyday life,
including construction, personal care, paper, paint, plastic, ceramics, telecommunications and beverage
filtration.


195
IMERYS
2006 sales
(non-audited)
Appendix

% % % %
(millions of euros) Q4 Q4 current comparable current comparable
change(1) change(1)
IFRS 2006 2005 change 2006 2005 change
Specialty Minerals 211.6 214.6 -1.4% -2.5% 891.9 809.3 +10.2% +1.0%
Pigments for Paper 187.1 197.6 -5.3% -2.1% 762.7 755.0 +1.0% +1.4%
Materials & Monolithics 224.2 214.4 +4.6% +5.2% 893.0 922.4 -3.2% +6.4%
Refractories, Abrasives &
Filtration 199.1 186.4 +6.8% +3.9% 787.8 603.9 +30.5% +3.6%
Eliminations (11.2) (11.7) n.s. n.s. (47.4) (45.3) n.s. n.s.

810.9 801.3 +1.2% +1.2% 3,288.1 3,045.2 +8.0% +3.2%
TOTAL


(1) Change at comparable Group structure and exchange rates.
% foreign %
% current % structure exchange comparable
change effect effect change (*)
Change in consolidated sales
+8.0% +5.3% -0.5% +3.2%
Total Group


Quarterly comparable change
2006 vs. 2005 Q1 ‘06 Q2 ‘06 Q3 ‘06 Q4 ‘06
+6.3% +2.9% +2.8% +1.2%

2005 vs. 2004 (reminder) Q1 ‘05 Q2 ‘05 Q3 ‘05 Q4 ‘05
+6.0% +1.0% +2.0% +3.3%


Quarterly change H1 ‘06 Q3 ‘06 Q4 ‘06 H2 ‘06 20 ’06
+12.1% +7.1% +1.2% +4.1% +8.0%
Imerys Group – current change
Imerys Group – comparable
+4.6% +2.8% +1.2% +1.9% +3.2%
change of which:
Specialty Minerals +3.1% +0.7% -2.5% -1.0% +1.0%
Pigments for Paper +3.7% +0.8% -2.1% -0.8% +1.4%
Materials & Monolithics +6.5% +7.3% +5.2% +6.3% +6.4%
Refractories, Abrasives & Filtration +4.4% +2.0% +3.9% +2.7% +3.6%
Sales by geographic destination 2006 2005
France 20% 22%
Europe (excluding France) 40% 39%

60% 61%
Total Europe

North America 24% 24%
Other 16% 15%

100% 100%
Total


Sales by business group 2006 2005
Specialty Minerals 26% 26%
Pigments for Paper 23% 25%
Materials & Monolithics 27% 30%
Refractories, Abrasives & Filtration 24% 19%

100% 100%
Total


196
Sales and current operating income, new organization
(for information, non audited)

(millions of euros) 2006 2005 2004
3,288.1 3,045.2 2,870.5
Sales
Performance Minerals & Pigments 1,138.1 1,109.0 1,099.5
Materials & Monolithics 935.1 967.9 893.2
Ceramics, Refractories, Abrasives & Filtration 1,235.3 989.2 894.2
Holding & Eliminations (20.4) (20.9) (16.4)

(millions of euros) 2006 2005 2004
458.8 434.0 421.8
Current operating income
Performance Minerals & Pigments 103.7 103.9 129.0
Materials & Monolithics 214.3 205.8 175.1
Ceramics, Refractories, Abrasives & Filtration 170.9 151.8 131.6
Holding & Eliminations (30.1) (27.6) (14.0)




197
APPENDIX

Imerys – 2006 Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT

(A millions) 2006 2005
3,288.1 3,045.2
Revenue

Raw materials and consumables used (1,119.0) (1,055.4)
Change in W.I.P. and finished goods inventories and assets produced by the
entity 16.9 36.9
External expenses (827.4) (762.5)
Staff expenses (680.9) (621.2)
Taxes and duties (48.6) (39.9)
Amortization, depreciation and impairment losses (206.7) (185.3)
Net change in operating provisions 22.1 22.4
Other operational revenue and expenses 14.3 (6.2)

458.8 434.0
Current operating income

Gains and losses on disposals of consolidated investments 1.4 93.5
Impairment losses and restructuring (177.2) (96.2)

(175.8) (2.7)
Other operating revenue and expenses

283.0 431.3
Operating income

Revenue from securities 4.6 5.2
Gross financial debt expense (53.9) (48.0)

(49.3) (42.8)
Net financial debt expense

Other financial revenue and expenses 2.6 (4.5)

(46.7) (47.3)
Net financial income

Income taxes (51.5) (76.5)
Share in net income of associates 5.2 4.6

190.0 312.1
Net income

Minority interests (2.6) (2.7)

Net income, Group share 187.4 309.4

of which :
Current operating income, Group share 308.3 287.6
Other operating income, Group share (120.9) 21.8

Net earnings per share from current operations 4.86 4.53
Net earnings per share 2.95 4.88
Diluted net earnings per share 2.96 4.83

Average exchange rate euro/USD 1.2557 1.2447




198
CONSOLIDATED BALANCE SHEET
CONSOLIDATED ASSETS (A millions) 2006 2005
Goodwill 793.1 815.3
Other net intangible assets 22.8 35.8
Mining assets 437.8 497.2
Other net property, plant and equipment 1,175.0 1,276.6
Investments in associates 34.1 31.9
Available-for-sale financial assets 12.8 16.0
Other financial assets 11.3 10.3
Other receivables and other assets 18.9 13.9
Deferred tax assets 49.3 34.6

2,555.1 2,731.6
Total non-current assets

Inventories 490.6 475.8
Trade accounts receivable 614.7 590.3
Derivative instrument assets 41.6 66.7
Marketable securities and other financial assets 4.1 61.0
Cash and cash equivalents 181.2 134.7
Other receivables and other assets 113.7 99.1

1,445.9 1,427.6
Total current assets

4,001.0 4,159.2
TOTAL CONSOLIDATED ASSETS


2006 2005
CONSOLIDATED LIABILITIES AND SHAREHOLDERS’ EQUITY
Capital 126.7 127.9
Share capital premiums 158.9 219.5
Reserves 1,157.1 1,015.2
Net income 187.4 309.4

1,630.1 1,672.0
Shareholders’ equity, Group share

16.3 14.2
Minority interests

1,646.4 1,686.2
Shareholders’ equity

Provision for employee benefits 199.2 237.1
Other provisions 200.3 161.0
Loans and financial debts 892.8 943.1
Other debts 27.1 33.2
Deferred tax liabilities 52.4 76.4

1,371.8 1,450.8
Total non-current liabilities

Provisions 18.4 12.8
Trade accounts payables 296.8 313.1
Payable income taxes 24.9 13.8
Derivative instrument liabilities 19.4 23.1
Loans and financial debts 360.7 423.0
Bank overdrafts 44.7 13.6
Other debts and other liabilities 217.9 222.8

982.8 1,022.2
Total current liabilities

TOTAL CONSOLIDATED LIABILITIES AND SHAREHOLDERS’
4,001.0 4,159.2
EQUITY

1,086.1 1,140.0
Net debt

Closing exchange rate euro/USD 1.3170 1.1797

199
CONSOLIDATED CASH FLOW STATEMENT

(A millions) 2006 2005
Cash flow from operating activities
Cash flow generated by current operations 549.5 587.8
Paid interests (54.2) (60.1)
Income taxes on current operating income and financial income (107.0) (105.5)
Dividends received 2.1 1.9
Cash flow generated by other operating revenue and expenses (31.2) (30.4)

359.2 393.7
Cash flow from operating activities

Cash flow from investing activities
Acquisitions of property, plant and equipment and intangible assets (217.0) (251.0)
Acquisitions of investments in consolidated entities after deduction of cash
acquired (21.5) (271.0)
Acquisitions of available-for-sale financial assets (1.0) —
Disposals of property, plant and equipment and intangible assets 39.9 25.8
Disposals of investments in consolidated entities after deduction of cash
disposed of 10.3 144.5
Disposals of available-for-sale financial assets 0.1 1.5
Net change in financial assets 1.1 4.7
Paid-in interests 3.5 3.8

(184.6) (341.7)
Cash flow from investing activities

Cash flow from financing activities
Capital increase (decrease) (60.8) 15.6
Disposals (acquisitions) of treasury shares 39.2 (38.2)
Dividends paid to shareholders (104.8) (95.0)
Dividends paid to minority interests (1.3) (1.4)
Loan issues 3.8 2.9
Loan repayments (37.5) (100.9)
Net change in other debts and marketable securities 8.5 235.7

(152.9) 18.7
Cash flow from financing activities

21.7 70.7
Change in cash and cash equivalents

121.1 46.0
Cash and cash equivalents at the beginning of the period
Change in cash and cash equivalents 21.7 70.7
Impact of changes due to exchange rate fluctuations (6.3) 4.4

136.5 121.1
Cash and cash equivalents at the end of the period

Cash and cash equivalents 181.2 134.7
Bank overdrafts (44.7) (13.6)

136.5 121.1
Cash and cash equivalents at the end of the period




200
APPENDIX IV
Additional Information
1. Responsibility
The UCM Directors, whose names are set out in paragraph 2(b) below, accept responsibility for the
information contained in this document relating to UCM and its subsidiaries, themselves and their
immediate families. The Imerys UK Directors, whose names appear in paragraph 2(a) below, accept
responsibility for the information contained in this document (other than information relating to
UCM, its subsidiaries, the UCM Directors and their immediate families). To the best of the
knowledge and belief of the Imerys UK Directors and the UCM Directors (who have taken all
reasonable care to ensure that such is the case) the information contained herein for which they are
respectively responsible is in accordance with the facts and does not omit anything likely to affect the
import of such information.

2. Directors
(a) The Imerys UK Directors are as follows:
Gerard Buffiere
´ `
Christophe Daulmerie
Jerome Pecresse
´ˆ
Thierry Salmona
Denis Musson
Bernard Vilain
Richard Bown
The registered office of Imerys UK and the business address of each of the Imerys UK
Directors are at:
Par Moor Centre
Par Moor Road
Par
Cornwall PL24 2SQ
(b) The UCM Directors are as follows:
JE Gordon (Non-executive Chairman)
JK Brundell (Chief Executive)
M Fookes (Group Finance Director)
TG Dughan (Executive Director)
I Fisher (Non-executive Director)
C Halpern (Non-executive Director)
The registered office of UCM and the business address of each of the UCM Directors are at:
Doxey Road
Stafford
ST16 1DZ.

3. Disclosure of interests and dealings
For the purposes of paragraphs 3 and 4 of this Appendix IV:
(a) ‘‘acting in concert’’ with a party means any such person acting or deemed to be acting in
concert with that party for the purposes of the City Code and/or the Offer;
(b) ‘‘arrangement’’ includes indemnity or option arrangements, and any agreement or understanding,
formal or informal, of whatever nature, relating to relevant securities which may be an
inducement to deal or refrain from dealing;
(c) ‘‘associate’’ of any company has the meaning given in the City Code and includes (without
limitation):
(i) parent, subsidiaries and fellow subsidiaries of Imerys UK or UCM and their associated
companies and companies of which any such subsidiaries or associated companies are
associated companies (‘‘relevant companies’’ and together ‘‘Category 1 Associates’’). For this
purpose, ownership or control of 20 per cent. or more of equity share capital of a
company is regarded as the test of associated company status;

201
(ii) connected advisers and persons controlling, controlled by or under the same control of any
such connected advisers;
(iii) the Imerys UK Directors or UCM Directors or any relevant company (together in each
case with their close relatives and related trusts);
(iv) the pension funds of Imerys UK or UCM or any relevant company;
(v) an investment company, unit trust or other person whose investments an associate (as
otherwise defined in this paragraph (c) manages on a discretionary basis, in respect of the
relevant investment accounts;
(vi) an employee benefit trust of Imerys UK or UCM or a relevant company; and
(vii) a company having a material trading arrangement with Imerys UK or UCM;
(d) ‘‘connected adviser’’ means:
(i) in relation to any person, the organisation which is advising that person in relation to the
Offer, and if that person is Imerys UK or UCM, the corporate broker to that person
(other than any corporate broker which is unable to act in connection with the Offer
because of a conflict of interest);
(ii) in relation to a person who is acting in concert with Imerys UK or UCM, an organisation
which is advising that person either in relation to the Offer or in relation to the matter
which is the reason for that person being a member of the relevant concert party; and
(iii) in relation to the person who is an associate of Imerys UK or UCM by virtue of
paragraph (i) of the definition of associate above, an organisation which is advising that
person in relation to the Offer (other than any corporate broker which is unable to act in
connection with the Offer because of a conflict of interest);
(e) ‘‘connected person’’ has the meaning attributed to it in section 346 of the Companies Act;
(f) ‘‘control’’ means a holding, or aggregate holdings, of shares carrying 30 per cent. or more of the
voting rights attributable to the share capital of a company which are currently exercisable at a
general meeting, irrespective of whether the holding or aggregate holdings gives de facto control;
(g) ‘‘dealing’’ or ‘‘dealt’’ includes the following:
(i) the acquisition or disposal of securities, of the right (whether conditional or absolute) to
exercise or direct the exercise of the voting rights attaching to the securities, or of general
control of securities;
(ii) the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise
(by either party) or variation of an option (including traded option contract) in respect of
any securities;
(iii) subscribing or agreeing to subscribe for securities;
(iv) the exercise or conversion, whether in respect of new or existing securities, of any securities
carrying conversion or subscription rights;
(v) the acquisition of, or disposal of, entering into, closing out, exercise (by either party) or
variation of, a derivative referenced, directly or indirectly, to securities;
(vi) entering into, terminating or varying the terms of any agreement to purchase or sell
securities; and
(vii) any other action resulting, or which may result, in an increase or decrease in the number
of securities in which a person is interested or in respect of which he has a short position;
(h) ‘‘derivative’’ includes any financial product whose value in whole or in part is determined,
directly or indirectly, by reference to the price of an underlying security;
(i) ‘‘disclosure date’’ means 21 February 2007 (being the latest practicable date prior to the posting
of this document);
(j) ‘‘disclosure period’’ means the period commencing on 15 February 2006 (being the date 12
months prior to the commencement of the Offer Period) and ending on 21 February 2007 (being
the latest practicable date prior to the posting of this document);

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(k) a person is treated as ‘‘interested’’ in securities if he has long economic exposure, whether
absolute or conditional, to changes in the price of those securities (and a person who only has a
short position in securities is not treated as interested in those securities). In particular, a person
is treated as ‘‘interested’’ in securities if:

(i) he owns them;

(ii) he has a right (whether conditional or absolute) to exercise or direct the exercise of the
voting rights attaching to them or has general control of them;

(iii) by virtue of any agreement to purchase, option or derivative, he:

(A) has the right or option to acquire them or call for their delivery; or

(B) is under an obligation to take delivery of them,

whether the right, option or obligation is conditional or absolute and whether it is in the
money or otherwise; or

(iv) he is a party to any derivative:

(A) whose value is determined by reference to their price; and

(B) which results, or may result, in his having a long position in them; and

(l) ‘‘relevant securities’’ includes: (1) UCM Shares and any other securities of UCM conferring
voting rights; (2) equity share capital of UCM or, as the context requires, Imerys UK; and (3)
any securities convertible into or rights to subscribe for the securities of UCM, or as the context
requires, Imerys UK, described in (1) and (2) above and securities convertible into, rights to
subscribe for, options (included traded options) in respect of and derivatives referenced to any
of the foregoing.


Interests and dealings in UCM Shares

(a) Interests in UCM Shares
(i) As at the disclosure date, the interests of UCM Directors, their respective immediate
families, related trusts and (so far as UCM Directors are aware) connected persons with
UCM Directors, all of which are beneficial unless otherwise stated, in the relevant
securities of UCM were as follows:

Number of % of issued
UCM Shares UCM share
Name capital
John E Gordon 121,500 0.51
500,0001
Jamie K Brundell 2.09
Terence G Dughan 1,142,920 4.78
Mrs S M Dughan 19,440 0.08
Melvyn Fookes 423,100 1.77
Ian Fisher 85,000 0.36

Note:
1. Jamie K Brundell is the joint beneficial owner of 500,000 UCM Shares held by Hill Samuel Offshore Trust
Company Limited (as trustee of the UCM Group No. 1 Employees’ Share Trust) pursuant to a UCM Group
Executive Share Ownership Plan joint ownership agreement dated 20 July 2004. The other joint beneficial owner of
the 500,000 UCM Shares is Hill Samuel Offshore Trust Company (BVI) Limited (as trustee of the UCM Group No.
2 Employees’ Share Trust). Jamie Brundell has an interest in the net proceeds of the sale of these UCM Shares after
deduction of the acquisition costs in respect of such UCM Shares.

(ii) As at the disclosure date, no options over any UCM Shares had been granted to UCM
Directors.

(iii) As at the disclosure date, the Company’s broker, Evolution Securities Limited and its
associates have non beneficial interests in respect of, in aggregate, 10,000 UCM Shares.

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(b) Dealings in UCM Shares
(i) During the disclosure period, dealings in UCM Shares (including the exercise of options
under UCM Share Option Scheme) by UCM Directors and their respective immediate
families and related trusts were as follows:
Number
Nature of of UCM Price per
Date Name transaction Shares share (p)
15 January 2007 Mrs S M Dughan Disposal 582,000 Nil
15 January 2007 Terence Graham Dughan Acquisition 582,000 Nil
19 December 2006 G R Fookes Disposal 200,000 Nil
19 December 2006 Melvyn Fookes Acquisition 200,000 Nil

(ii) The following dealings for value in UCM Shares by the Company’s broker, Evolution
Securities Limited, have taken place during the period between the start of the Offer
Period and the disclosure date:

Number of
Nature of UCM Price per
Date of Dealing Company Dealing Transaction Shares Share (p)
20/02/2007 Evolution Securities Ltd Purchase 1,366 82.5
19/02/2007 Evolution Securities Ltd Purchase 1,737 82.15
15/02/2007 Evolution Securities Ltd Sale 75,000 82.5
15/02/2007 Evolution Securities Ltd Purchase 45,000 81.5
15/02/2007 Evolution Securities Ltd Purchase 5,000 82.2
15/02/2007 Evolution Securities Ltd Purchase 2,911 82.2
15/02/2007 Evolution Securities Ltd Purchase 4,000 82.3
(c) General
(i) As at the last day of the disclosure period, neither Imerys UK, nor any of the Imerys UK
Directors, nor any members of their immediate families, nor any person acting in concert
with Imerys UK, nor any person with whom Imerys UK or any person acting in concert
with Imerys UK has an arrangement, had an interest or a right to subscribe for any
relevant securities of UCM or had any short position in relation to relevant securities of
UCM (whether conditional or absolute and whether in the money or otherwise), including
any short position under a derivative, any agreement to sell or any delivery obligations or
right to require another person to purchase or take delivery of, nor had any of the
foregoing dealt in any relevant securities of UCM during the disclosure period.
(ii) Save as disclosed in this paragraph 3, as at the last day of the disclosure period, none of
UCM, the UCM Directors, or any members of their immediate families had an interest in
or a right to subscribe for any relevant securities of Imerys UK, or had any short position
in relation to the relevant securities of Imerys UK (whether conditional or absolute and
whether in the money or otherwise), including any short position under a derivative, any
agreement to sell or any delivery obligation or right to require another person to purchase
or take delivery, nor had any of the foregoing dealt in any relevant securities of Imerys
UK during the period between the start of the Offer Period and the disclosure date.
(iii) Save as disclosed in paragraph 3, as at the last day of the disclosure period, none of the
UCM Directors nor any member of their immediate families, nor any company which is a
Category 1 Associate of UCM, nor any connected adviser to UCM or to a company
which is a Category 1 Associate of UCM or to a person acting in concert with UCM nor
any person controlling, controlled by, or under the same control as such connected adviser
(other than any exempt principal trader or exempt fund manager), nor any pension fund
or employee benefit trust of UCM or of a company which is a Category 1 Associate of
UCM had an interest in or a right to subscribe for any relevant securities of UCM
(whether conditional or absolute and whether in the money or otherwise), including any
short position under a derivative, any agreement to sell or any delivery obligation or right
to require another person to purchase or take delivery, nor had any of the foregoing dealt
in any relevant securities of UCM during the period between the start of the Offer Period
and the disclosure date.

204
(iv) UCM has not redeemed or purchased any UCM Shares or any securities convertible into,
rights to subscribe for or options in respect of, derivatives to, UCM Shares during the
disclosure period.
(v) At the last day of the disclosure period, neither Imerys UK nor any person acting in
concert with it has borrowed or lent any relevant securities in UCM.
(vi) At the last day of the disclosure period, neither UCM nor any person acting in concert
with it has borrowed or lent any relevant securities in UCM.
(vii) Save for the irrevocable undertakings referred to in paragraph 4 below, neither Imerys UK
nor any person acting in concert with Imerys UK for the purposes of the Offer has any
arrangement with any person in relation to any relevant securities. For these purposes,
‘‘arrangement’’ includes any indemnity or option arrangement and any agreement or
understanding, formal or informal, of whatever nature, relating to relevant securities which
may be an inducement to deal or refrain from dealing.
(viii) Save as disclosed in this document, neither UCM nor any person acting in concert with
UCM for the purposes of the Offer nor, as far as UCM is aware, any associate of UCM,
has any arrangement with any person in relation to relevant securities. For these purposes
‘‘arrangement’’ includes any indemnity or option arrangement and any agreement or
understanding, formal or informal, of whatever nature, relating to relevant securities which
may be an inducement to deal or refrain from dealing.

4. Irrevocable undertakings
(a) As at the last day of the disclosure period, irrevocable undertakings to accept, or to procure or
use all reasonable endeavours to procure acceptance of, the Offer have been given by the
following UCM Directors and their connected persons in respect of the following numbers of
UCM Shares in which they are interested:
Number of UCM Shares
Name irrevocably committed
Brundell, J K Esq. 500,000
Dughan, T G Esq. 1,136,595
Dughan, S M Mrs. 11,070
Fisher, I Esq. 85,000
Fookes, M Esq. 423,100
Gordon, J E Esq. 103,500

These undertakings will continue to be binding even in the event of a competing offer being
made for UCM unless and until the Offer lapses or is withdrawn.
(b) As at the last day of the disclosure period, irrevocable undertakings to accept, or to procure
acceptance of, the Offer have been given by the following two former directors of UCM and
their connected persons in respect of the following numbers of UCM Shares in which they are
interested:
Number of UCM Shares
Name irrevocably committed
Hughes, R Esq. 360,427
Hughes, D M Mrs 528,263
Johnson, W R Esq. 941,120

These undertakings will continue to be binding even in the event of a competing offer being
made for UCM unless and until the Offer lapses or is withdrawn.
(c) As at the last day of the disclosure period, irrevocable undertakings to accept, or procure or use
all reasonable or best endeavours to procure the acceptance of, the Offer have been given by the
following UCM shareholders in respect of the following numbers of UCM Shares in which they
are interested:
Number of UCM Shares
Name irrevocably committed
Rights & Issues Investment Trust PLC 2,500,000

205
Number of UCM Shares
Name irrevocably committed
Discretionary Unit Fund Managers Ltd 1,535,511
AXA Framlington Investment Management Limited 2,064,368

These undertakings will cease to be binding in the event that a competing offer is made for
UCM where the value of such offer is not less than ten per cent. higher than the Offer Price, or
if the Offer lapses or is withdrawn.
(d) As at the last day of the disclosure period, an irrevocable undertaking to accept the Offer has
been given by the following UCM shareholder in respect of the following number of UCM
Shares in which it is interested:
Number of UCM Shares
Name irrevocably committed
Progressive Value Management Limited 1,000,000

This undertaking will cease to be binding in the event that a competing offer is made for UCM
where the value of such offer is not less than five per cent. higher than the Offer Price, or if the
Offer lapses or is withdrawn.

5. Market Quotations
The following table shows the Closing Prices of UCM Shares, on:
(a) the first business day of each month of the six months immediately prior to the date of this
document;
(b) 14 February 2007 (being the last business day before the commencement of the Offer Period);
and
(c) 21 February 2007 (being the latest available date before the publication of this document):
Middle Market Quotation
Date UCM Shares
1 September 2006 59.0p
2 October 2006 66.5p
1 November 2006 68.5p
1 December 2006 66.0p
2 January 2006 63.5p
1 February 2007 65.0p
14 February 2007 65.0p
21 February 2007 83.0p

6. Directors’ service contracts
(a) (i) The following UCM Directors (referred to together as the ‘‘Executive Directors’’) have
service contracts with UCM or one of its subsidiaries, particulars of which are set out
below:
Date of Annual Employing
Director contract Notice period remuneration company
Jamie Keith Brundell 25/11/2003 12 months’ £164,320 UCM
written notice
Terence Graham 22/06/1994 12 months’ £113,880 UCM
Dughan written notice
Melvyn Fookes 23/06/1994 12 months’ £110,760 UCM
written notice

(ii) In addition to their remuneration set out above, the Company makes a contribution of
20% of the Executive Directors’ pensionable salary into Inland Revenue approved schemes
in respect of Melvyn Fookes and Terence Graham Dughan. Jamie Keith Brundell receives
a sum of 20% of pensionable salary as a contribution to his pension arrangements.

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(iii) Each of Ian Fisher, John Gordon and Colin Halpern (referred to together as the ‘‘Non-
Executive Directors’’) were appointed as non-executive directors of the Company pursuant
to appointment letters dated 21 July 1995 in the case of Ian Fisher, 13 May 1996 in the
case of John Gordon and 18 February 2004 in the case of Colin Halpern.
The Non-Executive Directors are currently entitled to receive the following fees:

Name Fee
Ian Fisher £29,917
John Gordon £43,306
Colin Halpern £29,045
In addition to the fees set out above, the Non Executive Directors are also entitled to be
paid for additional days which they are required to work, in excess of the contracted
number of days which they are required to devote to the Company.
(iv) Each Non-Executive Director has agreed to resign upon the Offer becoming or being
declared wholly unconditional and, as damages for early termination of their appointments,
will each receive a payment equal to twelve months’ fees.
(v) Save for the salary and contractual benefits payable during the notice periods set out
above, there are no other provisions for compensation payable upon early termination of
the service contracts of the Executive Directors or the appointment letters of the Non-
Executive Directors. Jamie Keith Brundell’s service contract provides for a guaranteed
severance payment to be made to him if his employment is terminated on a change of
control of UCM. The maximum amount of such payment is a sum equivalent to his salary
and contractual benefits for the notice period set out above. Other than as specified below,
there are no commission or profit-sharing arrangements in respect of the UCM Directors.
(vi) The Executive Directors are each entitled to receive certain non-pensionable benefits,
including the provision of a company car (or a car allowance in the case of Jamie Keith
Brundell), permanent health insurance, life assurance and private medical health insurance.
(vii) In addition to their basic salary as set out above, the Executive Directors are eligible for a
performance-related bonus. The maximum bonus payable to each of them is equal to 50%
of their basic salary for the year in question.
The following performance-related bonuses were paid to the Executive Directors in the
financial year ended 31 December 2006:
Jamie Keith Brundell – £79,000 (50% of gross salary);
Melvyn Fookes – £26,625 (25% of gross salary); and
Terence Graham Dughan – £27,375 (25% of gross salary).
(viii) Subject to the Offer becoming or being declared wholly unconditional and subject to
specific terms and conditions having been met, the Executive Directors would be entitled to
receive, within 28 days of the Offer becoming or being declared wholly unconditional, an
additional bonus in respect of additional duties which the Executive Directors have
undertaken in relation to the Offer and the prior negotiations in relation to the Offer. Part
of which is discretionary. The maximum possible aggregate amount of this additional
bonus for all the Executive Directors would be £366,797, part of which is discretionary.
(ix) The following are particulars of service contracts between the Executive Directors and
UCM or any of its subsidiaries which have been replaced or amended within six months of
the date of this document:

Previous salary
Executive Director (2006) Revised salary Effective from
Melvyn Fookes £106,500 £110,760 1 January 2007
Terence Graham Dughan £109,500 £113,880 1 January 2007
Jamie Keith Brundell £158,000 £164,320 1 January 2007
(b) Save as disclosed herein:
(i) there are no service agreements in force between any UCM Director or proposed UCM
Director and UCM or any of its subsidiaries; and

207
(ii) there are no service agreements which were entered into within six months of the date of
this document nor have any amendments been made to any of such service agreements
during that period.

7. Material contracts
(a) The following are the only material contracts (not being contracts entered into in the ordinary
course of business) which have been entered into by Imerys UK or any of its subsidiaries since
15 February 2005 (being the date two years before the commencement of the Offer Period):
(i) inducement fee agreement between UCM and Imerys UK dated 14 February 2007.
Pursuant to this agreement, a fee of £203,425 (inclusive of irrecoverable VAT), which
amounts to one per cent. of the value of the Offer, is payable by UCM to Imerys UK if,
following 14 February 2007 either the directors of UCM withdraw or materially and
adversely modify their approval or recommendation of the Offer, or the Offer lapses or is
withdrawn and prior thereto a third party offeror unconnected with Imerys UK announces
an offer, for all or not less than 50 per cent. of the issued share capital of UCM, and such
alternative offer subsequently becomes or is declared unconditional in all respects; and
(ii) share purchase agreement between Imerys UK and Mircal (S.A.) (a French company)
dated 30 November 2006. Pursuant to this agreement, Imerys UK purchased the entire
share capital of PL Refractories UK Ltd (company registration number 4132198) from its
fellow subsidiary Mircal (S.A) (a French company), which is a wholly owned direct
subsidiary of Imerys S.A. The consideration, which was payable at completion, was
£4,000,000.
(b) The following contracts (not being contracts entered into in the ordinary course of business)
have been entered into by UCM or any of its subsidiaries since 15 February 2005 (being the
date two years before the announcement of the Offer Period) and are or may be material:
(i) the inducement fee agreement, details of which are set out in paragraph 7(a)(i) above;
(ii) a deed of agreement and guarantee between Imerys S.A., UCM and T. G. Dughan and
others (as trustees of the UCM Pension Plan) dated 14 February 2007. Pursuant to this
agreement, conditional on the Offer becoming or being declared wholly unconditional,
UCM will increase the level of its monthly contributions to the UCM Pension Plan with
effect from the date when the Offer becomes or is declared unconditional in all respects
until such time as a new schedule of contributions is agreed pursuant to a revised actuarial
valuation. UCM’s obligations under this agreement will be guaranteed by Imerys S.A.; and
(iii) a deed of amendment between UCM and T. G. Dughan and others (as trustees of the
UCM Pension Plan) dated 14 February 2007. Pursuant to this agreement, UCM and the
trustees of the UCM Pension Plan agree, conditional on the Offer becoming or being
declared wholly unconditional, to a variation to the trust deed and rules dated 30 March
2005 in respect of the UCM Pension Plan, which removes the trustees’ unilateral ability to
wind up the UCM Pension Plan without UCM’s prior consent.

8. Financing of the Offer
8.1 Full acceptance of the Offer will result in a maximum cash consideration of approximately £20.3
million becoming payable by Imerys UK, which will be provided from the Imerys Group’s
existing cash resources. No specific external funding will be required.
8.2 Imerys UK does not intend that the payment of interest on, repayment of or security for any
liability (contingent or otherwise) will depend to any significant extent on the business of UCM.
8.3 Rothschild is satisfied that Imerys UK has sufficient cash resources available to it to satisfy in
full the cash consideration payable by Imerys UK under the Offer.

9. Directors and employees
Imerys UK has given assurances to the UCM Board that, following the Offer becoming or being
declared unconditional in all respects the existing employment rights, including pension rights, of all
employees and management of the UCM Group will be fully safeguarded.

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10. Other information
(a) Imerys UK is the holding company of the significant majority of the UK operations of the
Imerys Group.
(b) Save as disclosed in this document, no agreement, arrangement or understanding (including any
compensation arrangement) exists between Imerys UK or any party acting in concert with
Imerys UK and any of the directors, or recent directors, shareholders or recent shareholders of
UCM having any connection with or dependence upon the Offer.
(c) There is no agreement, arrangement or understanding whereby the beneficial ownership of any
of the UCM Shares acquired by Imerys UK in pursuance of the Offer will be transferred to any
other person, save that Imerys UK reserves the right to transfer any such shares to any of its
subsidiaries.
(d) The total emoluments of the current directors of Imerys UK will not be affected by the
acquisition of UCM or by any other associated transactions.
(e) Rothschild has given and has not withdrawn its written consent to the issue of this document
with the inclusion herein of the references to its name in the form and context in which it
appears.
(f) Ernst & Young has given and has not withdrawn its written consent to the issue of this
document with the inclusion herein of the references to its name and of its report in the form
and context in which they are included.
(g) KPMG Audit Plc has given and has not withdrawn its written consent to the issue of this
document with the inclusion herein of the references to its name and of its report in the form
and context in which they are included.
(h) Save as disclosed in this document, there has been no material change in the financial or trading
position of Imerys S.A. since 31 December 2005 (the date to which the last audited accounts of
Imerys S.A. were prepared).
(i) The Directors of Imerys UK believe that the Imerys Group is well placed to improve on its
financial and trading position in the future.
(j) Save as disclosed in this document, there has been no material change in the financial or trading
position of UCM since 31 December 2005 (the date to which the last audited accounts of UCM
were prepared).

11. Bases and sources
(a) The value placed by the Offer on the whole of the existing issued share capital of UCM is
based on the number of UCM Shares in issue as at 21 February 2007, being the latest
practicable date prior to the posting of this document, being 23,932,373.
(b) The Closing Price of a UCM Share referred to in this document is derived from the Daily
Official List published by the London Stock Exchange.
(c) The amount of the cash payment in respect of full acceptance of the Offer is calculated based
upon the number of UCM Shares in issue (as described above) and assuming that as from the
date of this document there will be no further issue of UCM Shares to satisfy options
exercisable under the UCM Share Option Scheme (on the basis that all such options were
granted with an exercise price in excess of the Offer Price).
(d) Financial information in respect of UCM contained in this document relating to the three years
ended 31 December 2005 has been extracted or derived, without material adjustment, from the
2004 and 2005 annual report and accounts of UCM and/or other public statements made by
UCM.
(e) Financial information in respect of UCM contained in this document relating to the six months
ended 30 June 2006 has been extracted or derived, without material adjustment, from the
unaudited 2006 interim report and accounts of UCM for the six months ended 30 June 2006
and/or other public statements made by UCM.
(f) Financial information in respect of Imerys UK contained in this document relating to the two
years ended 31 December 2005 has been extracted or derived, without material adjustment, from
the 2005 audited accounts of Imerys UK.

209
(g) Financial information in respect of Imerys S.A. contained in this document relating to the two
years ended 31 December 2006 has been extracted or derived, without material adjustment, from
the audited 2006 results announcement of Imerys S.A. on 15 February 2007 and/or other public
statements made by Imerys S.A.

12. Documents available for inspection
Copies of the following documents will be available for inspection during normal business hours
on any business day at the offices of Ashurst, Broadwalk House, 5 Appold Street, London
EC2A 2HA while the Offer remains open for acceptance:
(a) the memorandum and articles of association of Imerys UK;
(b) the memorandum and articles of association of UCM;
(c) the audited consolidated accounts of Imerys S.A. for the two financial years ended 31 December
2005;
(d) the consolidated income statements, balance sheet, cash flow statements of Imerys S.A. and
statement of changes in financial position for the financial year ended 31 December 2006;
(e) the audited consolidated accounts of UCM for the two years ended 31 December 2004 and
2005;
(f) the rules of the UCM Share Option Scheme;
(g) the service agreements and letters of appointment of UCM Directors referred to in paragraph 6
above;
(h) the material contracts referred to in paragraph 7 above;
(i) the written consents referred to in paragraph 10(e) – (g) above;
(j) copies of irrevocable undertaking(s) to accept the Offer given by UCM Directors and referred to
in the letter from Imerys UK and in paragraph 4 above;
(k) the profit forecast report prepared by KPMG Audit Plc set out in Part B of Appendix II to this
document; and
(l) the profit forecast report prepared by Ernst & Young set out in Part B of Appendix II to this
document.

22 February 2007




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APPENDIX V
Definitions
In this document, the following words and expressions shall, except where the context requires
otherwise, have the following meanings:
the announcement dated 15 February 2007 made by Imerys UK
‘‘Announcement’’
and UCM whereby Imerys UK announced its firm intention to
make an offer for UCM
a day on which banks are open for business in London (excluding
‘‘business day’’
Saturdays, Sundays and public holidays)
a trading name of Capita IRG Plc
‘‘Capita Registrars’’
in relation to a share or other security, title to which is recorded in
‘‘certificated’’ or ‘‘in certificated
the relevant register of the share or other security as being held in
form’’
certificated form (that is, not in CREST)
the City Code on Takeovers and Mergers
‘‘City Code’’ or ‘‘Code’’
the middle market price of an UCM Share at the close of business
‘‘Closing Price’’
on the day to which such price relates, as derived from the London
Stock Exchange Daily Official List for that day
the Companies Act 1985 (as amended)
‘‘Companies Act’’
the conditions set out in Part A of Appendix I to this document
‘‘Conditions’’
The relevant system as defined in the Regulations in respect of
‘‘CREST’’
which CRESTCo is the operator
CRESTCo Limited, a company incorporated under the laws of
‘‘CRESTCo’’
England and Wales
the CREST manual issued by CRESTCo dated 9 July 2004
‘‘CREST Manual’’
a person who is, in relation to CREST, a system member (as
‘‘CREST member’’
defined in the Regulations)
a person who is, in relation to CREST, a system participant (as
‘‘CREST participant’’
defined in the Regulations)
a receiving agent as defined in the CREST Manual
‘‘CREST Receiving Agent’’
a CREST member admitted to CREST as a sponsored member
‘‘CREST sponsored member’’
under the sponsorships of a CREST sponsor
collectively, the documents and other information relating to the
‘‘Data Room’’
Company and its subsidiaries made available to Imerys UK and its
advisers prior to 15 February 2007, being the date the
Announcement
has the meaning specified in section (g) of Part A of Appendix I to
‘‘Disclosed’’
this document
has the meaning specified in section 1 of Part D of Appendix I to
‘‘Electronic Acceptance’’
this document
has the meaning specified in section 4 of Part D of Appendix I to
‘‘Electronic Acceptance Shares’’
this document
Ernst & Young LLP
‘‘Ernst & Young’’
ESCROW Account Adjustment Input (AESN), transaction type
‘‘ESA’’
‘‘ESA’’ as described in the CREST manual
Capita Registrars (in its capacity as CREST participant under ID:
‘‘Escrow Agent’’
RA10)
has the meaning set out in section 6 of Appendix IV to this
‘‘Executive Director’’
document
the date which is 21 days after the day of posting of this document
‘‘First Closing Date’’

211
the form of acceptance and authority relating to the Offer which
‘‘Form of Acceptance’’
accompanies this document
Imerys S.A. and its subsidiary undertakings
‘‘Imerys Group’’
Imerys UK Limited, a private company incorporated in England
‘‘Imerys UK’’
and Wales with registered number 3674799
the directors of Imerys UK
‘‘Imerys UK Directors’’
Imerys S.A., a societe anonyme incorporated in France with
´´
‘‘Imerys S.A.’’
registered number 562008151 RCS PARIS
the rules and regulations made by the FSA in its capacity as UK
‘‘Listing Rules’’
Listing Authority under Part VI of the Financial Services and
Markets Act 2000
London Stock Exchange plc
‘‘London Stock Exchange’’
the electrical grade Magnesia business of the UCM Group
‘‘Magnesia Division’’
the recommended cash offer to be made by Imerys UK for the
‘‘Offer’’
entire issued and to be issued share capital of UCM on the terms
and subject to the Conditions set out in this document and the
Form of Acceptance that accompanies this document, including,
where the context requires, any subsequent revision, variation,
extension or renewal thereof
has the meaning set out in Part B of Appendix I of this document
‘‘Offer Document’’
has the meaning set out in paragraph 5(d) of Part B of Appendix I
‘‘Offer Period’’
to this document
85 pence per UCM Share
‘‘Offer Price’’
the Official List of the UK Listing Authority
‘‘Official List’’
has the meaning set out in paragraph 6(a) of Part B of Appendix I
‘‘Overseas Shareholders’’
to this document
the Panel on Takeovers and Mergers
‘‘Panel’’
has the meaning set out in paragraph 4(a) of Part B of Appendix I
‘‘Previous Acceptor’’
to this document
the Uncertificated Securities Regulations 2001 (SI 2001/3755)
‘‘Regulations’’
has the meaning set out in paragraph 2(a) of Part B of Appendix I
‘‘Regulatory Information Service’’
to this document
has the meaning set out in paragraph (d) of Part A of Appendix I to
‘‘Relevant Authority’’
this document
has the meaning set out in section 2(a) of Part B of Appendix I to
‘‘relevant day’’
this document
has the meaning set out in paragraph 6(f) of Part B of Appendix I
‘‘Restricted ESA Instruction’’
to this document
has the meaning set out in paragraph 6(f) of Part B of Appendix I
‘‘Restricted Escrow Transfer’’
to this document
the United States, Canada or any other jurisdiction where extension
‘‘Restricted Jurisdiction’’
or acceptance of the Offer would violate the law of that jurisdiction
N M Rothschild & Sons Limited
‘‘Rothschild’’
has the meaning set out in paragraph 16 of Part II of this document
‘‘SDRT’’
the Takeovers Directive (Interim Implementation) Regulations
‘‘Takeover Regulations’’
2006
a Transfer from ESCROW instruction (as described in the CREST
‘‘TFE instruction’’
manual)
a Transfer to ESCROW instruction (as described in the CREST
‘‘TTE instruction’’
manual)

212
has the meaning set out in paragraph (b) of Part A of Appendix I to
‘‘Transaction’’
this document
UCM Group PLC, a public limited company incorporated in
‘‘UCM’’ or ‘‘the Company’’
England and Wales with registered number 2720770
the board of directors of UCM at the date of this document
‘‘UCM Board’’
the directors of UCM at the date of this document
‘‘UCM Directors’’
UCM and its subsidiaries and subsidiary undertakings
‘‘UCM Group’’
a holder of UCM Shares
‘‘UCM Shareholder’’ or
‘‘Shareholder’’
includes:
‘‘UCM Shares’’
(i) the existing issued or unconditionally allotted and fully paid
(or credited as fully paid) ordinary shares of 5 pence each in
the share capital of UCM; and
(ii) any further such shares which are unconditionally allotted or
issued while the Offer remains open for acceptance or, subject
to the provisions of the City Code, by such earlier date as
Imerys UK may determine not being earlier than the date
(subject to the City Code) on which the Offer becomes or is
declared unconditional as to acceptances
share options granted pursuant to the UCM Share Option Scheme
‘‘UCM Share Options’’
The UCM Group Executive Share Option Scheme 1994
‘‘UCM Share Option Scheme’’
the United Kingdom of Great Britain and Northern Ireland
‘‘UK’’ or ‘‘United Kingdom’’
the Financial Services Authority in its capacity as a competent
‘‘UK Listing Authority’’
authority under Part VI of the Financial Services and Markets Act
2000
the United States of America, its territories and possessions, any
‘‘United States’’ or ‘‘US’’
state of the United States of America and the District of Columbia
has the meaning set out in section d(iii) of Part A of Appendix I to
‘‘wider Imerys Group’’
this document
has the meaning set out in section d(iii) of Part A of Appendix I to
‘‘wider UCM Group’’
this document
the fused Zirconia division of the UCM Group
‘‘Zirconia Division’’
the lawful currency for the time being in the UK
‘‘sterling’’, ‘‘£’’, ‘‘p’’ or ‘‘pence’’
‘‘C’’ the currency introduced at the start of the third stage of the
European economic and monetary union pursuant to the Treaty
establishing the European Community as amended
For the purposes of this document, ‘‘parent undertaking’’, ‘‘subsidiary undertaking’’, ‘‘associated
undertaking’’ and ‘‘undertaking’’ have the meanings given by the Act.
All times referred to are London time unless otherwise stated.




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