RESOLUCIÓN N.º 894/MAYEPGC/15

The Financial risk management review in Note 4 provides an explanation of the role that financial instruments have had during the prior year. The explanation summarizes the objectives and policies for holding or issuing financial instruments and similar contracts, and the strategies for achieving those objectives that have been followed during the year.

Interest rate profile

The currency and interest rate profile of the Group’s cash, cash equivalents, restricted cash and current financial assets (excluding short-term debtors) as at December 31, 2004 are shown below:

Weighted Weighted Weighted average average average

interest interest interest Financial Financial period rate rate instruments instruments

Fixed rate Floating rate Fixed rate Floating rate Fixed rate Total

Days % % $’000 $’000 $’000 US Dollars 678 2.01 2.05 1,263,166 42,712 1,305,878 Pounds Sterling – 4.11 – 37,789 – 37,789 Euro – 0.30 – 16,803 – 16,803 Canadian Dollars – 2.52 – 97,461 – 97,461 Other – 0.25 – 18 – 18 1,415,237 42,712 1,457,949

The benchmark rates for floating rate assets are primarily: US Dollar seven-day, one-month and three-month London Interbank Bid Rate (LIBID), and Pounds Sterling seven-day LIBID.

The interest rate profile of the Group’s financial liabilities at December 31, 2004 was as follows:

Floating Fixed Interest free Total

Currency $’000 $’000 $’000 $’000

US Dollars

– convertible debt – 116 – 116

– finance leases – 6,546 – 6,546

Notes to the consolidated financial statements

26 Derivatives and other financial instruments (continued)

Currency exposures

The Group aims to minimise currency related exposures arising from its net investments overseas (in other words, its structural currency

exposures). Gains and losses arising from structural currency exposures are recognised in the consolidated statement of total recognised income.

The table below shows the Group’s transactional (or non-structural) currency exposures that give rise to the net currency gains and losses recognised in the income statement. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the functional currency of the operating unit involved, other than certain non-US Dollar borrowings treated as hedges of net investments in overseas operations.

As at December 31, 2004 these exposures were as follows:

Net foreign currency monetary assets/(liabilities)

US Pounds Canadian

Dollars Sterling Euro Dollars Other Total

Functional currency of Group operation $’000 $’000 $’000 $’000 $’000 $’000

US Dollars – 341,790 (38,156) (67) (4) 303,563 Pounds Sterling (907,197) – 21,801 (2) 286 (885,112) Euro (516) (1,004) – – – (1,520) Canadian Dollars 298,264 182,924 38 – – 481,226 (609,449) 523,710 (16,317) (69) 282 (101,843) Borrowing facilities

The Group had no undrawn committed borrowing facilities at December 31, 2004.

Fair values

The quoted market price of the convertible loan stock 2011 as at December 31, 2004 was $100.53 compared with an issue price of $100. If the remaining loan is not converted into equity, it would be repayable at $100 per note. The total fair value of the debt as at December 31, 2004, based on the above quoted market price, was $116,000 compared to a carrying value of $115,000.

In addition at December 31, 2004 the fair value of listed financial assets, based on their quoted market price, was $16 million above carrying value.

There were no other material differences between the carrying values and fair values of all other Group financial assets and liabilities at December 31, 2004.

Gains and losses on foreign exchange contracts

As at December 31, 2004 the Group had two outstanding forward foreign exchange contracts with a total principal amount of $39 million used to manage the risk associated with holding Canadian Dollar financial assets. There were no material gains or losses on these contracts.

27 Trade and other payables

2005 2004

Notes $’000 $’000

Trade payables 70,958 35,009

Other creditors 14,817 27,383

Accruals and deferred income 363,395 289,443

SERP 29 4,591 5,495

Total 453,761 357,330

Less: non-current portion (18,036) (12,963)

Current portion 435,725 344,367

Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade payables is 30 days (2004:18 days). The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Accruals and deferred income includes accrued rebates and sales return reserves, accrued bonuses and other accrued expenses.

Notes to the consolidated financial statements

28 Provisions for other liabilities and charges

Reorganization IDB Loan Other Total $’000 $’000 $’000 $’000

January 1, 2005 12,960 43,161 15,208 71,329

Charge for the year 2,299 – 18,121 20,420

Acquired – – 3,310 3,310

Reversed unutilised – – (5,846) (5,846)

Utilised (7,460) (43,161) (4,668) (55,289)

December 31, 2005 7,799 – 26,125 33,924

Less: Non-current portion (25,401)

Current portion 8,523

Reorganization IDB Loan Other Total

$’000 $’000 $’000 $’000

January 1, 2004 – – 8,887 8,887

Charge for the year 12,960 43,161 10,165 66,286

Reversed unutilised – – (727) (727)

Utilised – – (3,117) (3,117)

December 31, 2004 12,960 43,161 15,208 71,329

Less: Non-current portion (26,232)

Current portion 45,097

Reorganization

The Group began a consolidation of its North American sites in 2004 (see Note 13). The costs recognised as a provision as at December 31, 2005 consist of employee severance and relocation costs of $0.6 million that are expected to be paid in 2006 and costs of duplicate facilities ($7.2 million) that are expected to be paid over the remaining life of the relevant leases, which all expire before October 31, 2012.

IDB Loan See Note 14.

Other

Other provisions relate to long-term bonuses, provisions for guarantees and insurance, and onerous lease provisions in relation to vacated properties. Provisions recognised in relation to long-term bonuses total $9.9 million, of which $5.1 million is expected to be paid in 2006 and the remainder on the maturity of the underlying schemes over the next three years. Provisions for insurance and guarantees totalling $12.9 million are expected to be settled between one and three years. Onerous lease provisions of $3.3 million will be paid over the next three years, the remaining life of the relevant leases.

29 Retirement obligations

The Group has a number of defined contribution retirement plans that together cover substantially all employees. The Group’s contribution is fixed as a set percentage of employee’s base salary. The pension cost charge for the defined contribution schemes for the year was $14.1 million (2004: $9 million). The closing creditor in respect of pension premiums at December 31, 2005 is $1.76 million (2004: $0.23 million).

The Group has two Supplemental Executive Retirement Plans (SERPs), which are defined benefit plans.

The Roberts SERP is for US employees of Roberts Pharmaceutical Corporation (Roberts) who met certain age and service requirements. The Group acquired Roberts in 1999, and the plan was discontinued in 2000; there were no contributions payable in respect of 2005. The Group paid a lump sum of $18 million into the Roberts SERP, which was accounted for as a fair value adjustment on the acquisition of Roberts Pharmaceutical Corporation to make good the deficit on this scheme at the time of acquisition. This lump sum payment has led to the Group having no future liability under the SERP, which has been closed to new members with contributions no longer payable by existing members. Assets are set aside to fund these benefits in a ‘Rabbi Trust’. The legal form of the trust is such that the assets held to cover the pension liabilities are available to the general creditors of the Group on winding up. Accordingly, the assets held by the trust are not plan assets as defined by IAS 19, ‘Employee Benefits’, and are recorded on the balance sheet (see Note 24).

The Shire SERP defined benefit scheme is an unfunded arrangement; the benefits are payable to certain senior US employees as lump sums on leaving the Group’s employment or earlier due to death, disability or termination. The amount of benefit is based on the value of notional contributions increased with ‘earned’ investment returns as if they were invested in investments of the employees’ choice. The entire benefit liability has been recognised on the balance sheet.

Notes to the consolidated financial statements