Where applicable, the comparative figures as at and for the year ended 31 December 1997 constitute the aggregation of the previously audited financial statements of the participating companies, as if the group had been in existence since 1 January 1997.

The group financial statements incorporate the financial statements of the company, its subsidiaries and its proportionate interest in joint ventures. The method adopted for the combination of the scheme companies on the formation of the AngloGold group is the uniting of interest method for accounting for mergers in terms of International Accounting Standard No. 22 ? Business Combinations. The scheme companies were Eastvaal, Elandsrand, East Rand Gold and Uranium Company Limited, Freegold, Joel, Southvaal Holdings Limited (Southvaal), and Western Deep Levels Limited (Western Deeps). The surplus arising on merger accounting between the nominal share capital and share premium issued by the company and the nominal value of the share capital and share premium of the scheme companies acquired has been reflected as the merger adjustment and set-off against shareholders? equity.

Where an investment in a subsidiary or a joint venture is acquired or disposed of during the financial year, its results are included from, or to the date control became, or ceased to be effective. Where an investment in a subsidiary or a joint venture is made during the financial year, any excess of the purchase price compared with the fair value of the attributable net assets is recognised as goodwill and amortised as an expense over the lesser of its useful life or 20 years.

All intergroup transactions and balances are eliminated on consolidation. Unearned profits that arise between group entities are eliminated.

Associates are long-term investments in which the company holds between 20 per cent and 50 per cent of the equity and thereby has the ability to exercise significant influence over those companies? financial and operating policy decisions. The post-acquisition results of associates are incorporated in the company?s financial statements, using the equity method, from the effective dates of acquisition and up to the effective dates of disposal.

The income statement includes the group?s proportionate share of the results of operations, the attributable share of taxation thereon, and outside shareholders? interest in net income of associates. The equity-accounted retained earnings of associates, which are not available for distribution by way of a dividend to the company?s shareholders, less any provisions, are transferred to a non-distributable reserve.

Results of associates are equity accounted from their most recent audited annual financial statements or unaudited interim statements. Any losses of associates are brought to account until the investment in and loans to such associates are written down to a nominal amount. Thereafter losses are accounted for only insofar as the group is committed to providing financial support to such associates.

The carrying values of the investments in associates represent the cost of each investment, including unamortised goodwill, the share of post-acquisition retained earnings and any other movements in reserves. The carrying value is compared with the associate?s market value or directors? valuation. Where, in the opinion of the directors, the value of an associate has been permanently impaired below its carrying value, or the market value has fallen below the carrying value over a sustained period, a provision is made for such impairment in value.

Mining assets are recorded at cost of acquisition less amortisation and amounts written off. Cost includes preproduction expenditure incurred during the development of the mine. Cost also includes interest capitalised during the construction period where such costs are financed by borrowings.

Mine development costs

Capitalised mine development cost includes expenditure incurred to develop new ore bodies, to define further mineralisation in existing ore bodies and to expand the capacity of the mine. Development costs to maintain production are deferred, where applicable, and expensed against the related production. Amortisation is first charged on new mining ventures from the date on which production reaches commercial quantities. Mine development costs are amortised using the units-of-production method based on estimated proved and probable mineral reserves. Proved and probable reserves reflect estimated quantities of economically recoverable reserves, which can be recovered in future from known mineral deposits.

Mine infrastructure

Plant and equipment are amortised using the lesser of their useful life or units-of-production method based on estimated proved and probable mineral reserves.

Land is not depreciated.

Mineral rights, dumps and other

Mineral rights are amortised using the units-of-production method based on estimated proved and probable mineral reserves. When there is little likelihood of a mineral right being exploited, or the value of an exploitable mineral right has diminished below cost, a write down is effected. The cost of exploration programmes not anticipated to result in additions to the group?s reserves are expensed when incurred.

Leased assets

Assets subject to finance leases are capitalised at cost with the related lease obligation recognised at the same value. Capitalised leases are depreciated over their estimated useful lives. Finance lease payments are allocated, using the effective interest rate method, between the lease finance cost, which is included in interest paid, and the capital repayment, which reduces the liability to the lessor. Operating lease rentals are charged against operating profits in a systematic manner related to the period of use of the assets concerned.

Rehabilitation expenditure and related accrued liabilities, which are based on the group?s environmental management plans, in compliance with the current environmental and regulatory requirements, are accrued and expended over the operating life of the mines using the units-of-production method based on estimated proved and probable mineral reserves. The carrying amount of liabilities is regularly reviewed and adjusted as appropriate for new circumstances or changes in law or technology. Expenditure on ongoing rehabilitation costs is brought to account when incurred.

Annual contributions are made to the group?s Environmental Trust Fund, created in accordance with South African statutory requirements, to provide for the estimated cost of pollution control and rehabilitation during and at the end of the life of the mine. Interest earned on monies paid to the trust fund is accrued on an annual basis and is set off against future liability of the group.

The costs of post-employment benefits are made up of those obligations which the group has towards current and retired employees. These obligations can be separated into the following categories, and are determined as follows:

Defined contribution plans - Retirement and provident funds

Contributions to defined contribution plans in respect of services during a current year are recognised as an expense in that year.

Defined benefit plans - Pension funds

The current service cost in respect of defined benefit plans is recognised as an expense in the current period. Past service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of planned amendments in respect of existing employees are recognised as an expense or income systematically over the expected remaining service period of those employees.

Post-retirement medical aid costs

The post-retirement medical aid liability in respect of existing employees is recognised as an expense systematically over the expected remaining service period of those employees, using the projected unit credit method. The liability in respect of retired employees is recognised immediately as an expense.

The sale of mining products is recognised when the significant risks and rewards of ownership of the products are transferred to the buyer.

Dividends are recognised when the right to receive payment is established.

Interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the group.

Deferred taxation represents the tax effect of all temporary differences and is provided at the current mining cost formula rate using the comprehensive liability method.

The group enters into financial transactions to ensure a degree of price certainty and to guarantee a minimum revenue on a portion of the planned gold production of its gold mines. Financial instruments entered into in pursuit of this objective are specifically designated as hedges of the planned future production of the gold mines.

Gains and losses on gold hedging instruments that effectively establish prices for future production, are recognised in income at the earlier of any cash flow or delivery of the related hedged production.

Hedged positions below current cost of production are recognised in the period in which the loss arises.

Foreign currency derivative financial instruments are translated at contract rates. Gains and losses on these contracts are recognised in income as a component of the related gold transaction.

Foreign currency transactions are recorded at the exchange rate ruling on the transaction date. Assets and liabilities designated in foreign currencies are translated at rates of exchange ruling at the year end and any gains and losses arising are included in earnings. The balance sheets and income statements of foreign subsidiaries are translated on the following bases:

Foreign entities

Foreign entities do not form an integral part of the operations of the group. Assets and liabilities (both monetary and non-monetary) are translated at the closing rate. Income statement items are translated at a weighted average rate of exchange for the period. Exchange differences are taken directly to a foreign currency translation reserve which is included with non-distributable reserves.

Foreign operations

Foreign operations form an integral part of the operations of the group. Monetary items of these operations are translated using the closing rate of exchange. Non-monetary items are translated at the rate of exchange at the historical transaction date. Income statement items are translated at a weighted average rate of exchange for the period. All exchange differences are taken to the income statement for the period.