13 April 2006 Newcastle United Plc Restatement of financial information under Adopted International Financial Reporting Standards Introduction Newcastle United PLC (the Group) has, historically, prepared its consolidated financial statements under UK Generally Accepted Accounting Practice (UK GAAP). Following the adoption by the European Parliament, in July 2002, of Regulation No 1606/2002 the Group is, with effect from the year ending 31 July 2006, required to prepare its accounts in accordance with International Financial Reporting Standards as adopted by the EU. The Group’s first published information prepared on the basis of adopted IFRS will be in respect of its results for the six months ended 31 January 2006. This document explains how the Group’s reported performance and financial information are affected by the change from UK GAAP to Adopted IFRS. The contents are as follows: Basis of preparation of transitional information under Adopted IFRS Overview of the impact of IFRS adoption Significant changes in accounting policies and impact on the financial statements Appendix 1 Significant accounting policies Appendix 2 Primary financial statements on an Adopted IFRS basis for the 6 months ended 31 January 2005, the year ended 31 July 2005. Appendix 3 Reconciliations of profit and equity for the year ended 31 July 2005 Appendix 4 Reconciliations of profit and equity for the six months ended 31 January 2005 Appendix 5 Reconciliation of equity at 1 August 2004 Appendix 6 Special purpose audit report of KPMG Audit Plc to Newcastle United PLC Basis of preparation of transitional information under Adopted IFRS The financial information has been prepared on the recognition and measurement basis of IFRS adopted by the EU and in accordance with the accounting policies that the Group expects to apply in its first IFRS financial statements. The accounting policies applied are set out in Appendix 1. These are preliminary accounting policies pending finalisation at the year end. The transition balance sheet as at 1 August 2004 and the financial information for the year ended 31 July 2005, prepared under Adopted IFRS, have been audited by KPMG Audit Plc. Their special purpose audit report is attached as Appendix 6. The financial information for the six months ended 31 January 2005 is unaudited. Subject to EU endorsement of outstanding standards and no further changes from the IASB this information is expected to form the basis for comparatives when reporting financial results for 2006, and for subsequent reporting periods. IFRS 1 exemptions IFRS 1 First Time Adoption of International Accounting Standards sets out the procedure that the Group must follow when IFRS is adopted for the first time. It sets out a number of exemptions that are available to the Group to assist in the transition from UK GAAP to Adopted IFRS. No adjustments have been made for any changes in estimates that were made at the time of approval of the UK GAAP financial statements on which the IFRS restatement information is based. The Group has applied the following key exemptions: (a) Financial instruments: the Group has taken the exemption from applying IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement to the comparative information to be presented in the first IFRS consolidated financial statements, and has adopted IAS 32 and IAS 39 with effect from 1 August 2005. As such, information relating to financial instruments for the six months ended 31 January 2005 and year ended 31 July 2005 continues to be presented under UK GAAP. For the year ending 31 July 2006, financial instruments will be presented in accordance with IAS 32 and IAS 39, with adjustments being made at 1 August 2005 to reflect the difference between UK GAAP and Adopted IFRS. -1- (b) Fair value or revaluation as deemed cost: the Group has not taken the option to restate items of property, plant and equipment to their fair value at 1 August 2004. Instead, the deemed cost under Adopted IFRS will be the cost or revalued amount of each asset previously shown under UK GAAP. (c) The Group has not taken advantage of the transitional provisions contained in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, and has applied this standard with effect from 1 August 2004. Overview of the impact of IFRS adoption Adopted IFRS do not affect the underlying business performance of the Group. The analysis below sets out the most significant adjustments made in arriving at the income statements and balance sheets under Adopted IFRS, the impact of which can be seen in the reconciliations at Appendices 3 & 4. There are no differences between the results under UK GAAP and IFRS for Newcastle United PLC, at a company only level, for either the six months ended 31 January 2005 or the twelve months ended 31 July 2005. Based on the accounting policies detailed in the subsequent section, the effect of the transition on key reported results is as follows: 6 months to 31 January 2005 UK GAAP £’000 IFRS £’000 12 months to 31 July 2005 UK GAAP £’000 IFRS £’000 Profit/(loss) from operations * 2,891 12,042 (8,966) 5,854 Profit/(loss) for the period 6,380 7,252 (104) 620 5.0p 5.6p (0.1)p 0.5p 37,391 38,372 28,282 30,415 Basic Earnings/(Loss) per share Net assets * Under Adopted IFRS, profit or loss on disposal of players’ registrations is now included within Profit or Loss from operations The main areas where Adopted IFRS have impacted upon the results are as follows: Equity dividends are not recorded as a liability until approved by the shareholders Player acquisitions on deferred terms give rise to a notional interest charge over the period of deferral which is only partially offset by a reduced amortisation charge Player registrations regarded as held for sale are reclassified as current assets and amortisation is suspended at the time of reclassification Each of these is discussed in further detail in the following section, and full reconciliations of the UK GAAP to Adopted IFRS figures are shown in Appendices 3 & 4. Significant changes in accounting policies and impact on the financial statements Recognition of Dividends Under IAS 10 Events After the Balance Sheet date dividends are recognised as an appropriation of equity in the period in which they are approved (in the case of a final dividend) or paid (in the case of an interim dividend). Amounts previously accrued in the balance sheet are now removed, resulting in reduced liabilities at the half year ended 31 January 2005 of £1.325m and £2.625m at the year ended 31 July 2005. Intangible assets (i) Acquisition of player registrations Under IAS 38 Intangible assets, players acquired on deferred terms are recorded at the fair value at the date of acquisition. The related creditor is then increased to the settlement value on an effective interest rate basis over the period of deferral, with this value being charged as notional interest within ‘Finance Costs’ in the Income Statement. The -2- net effect is a reduction in the creditor of £0.348m at the half year ended 31 January 2005 and £0.896m at the year ended 31 July 2005. The increased interest is charged to finance costs over the deferral period and amounts to £0.297m for the half year ended 31 January 2005 and £0.594m for the year ended 31 July 2005. The corresponding player registration value is also reduced by the notional interest; the lower intangible asset value results in a reduced charge to operating profit as the intangible asset is amortised over the length of the player’s contract. The net effect on intangible assets is a reduction of £1.491m at 31 January 2005 and £2.439m at 31 July 2005. Operating profit is increased by £0.37m and £0.267m respectively. The differing rate at which the finance costs and amortisation are recognised in the income statement produces a deferred tax credit shown in income tax expense. (ii) Other intangible assets Under IAS 38 Intangible assets, goodwill of £0.642m is reclassified as other intangible assets. Non-current assets held for resale Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations if, at any time, it is considered that the carrying amount of an asset (including a player’s registration) will be recovered principally through sale rather than through continuing use then the value of that asset is required to be reclassified as a ‘Non-current asset held for resale’ and disclosed as such on the balance sheet within current assets. At the time of reclassification the measurement of the asset is the lower of (a) fair value (less costs to sell) and (b) carrying value. Amortisation of the asset is suspended at the time of reclassification, although impairment charges still need to be made if applicable. The net effect is a reclassification from non-current assets to current assets of £6.624m at 31 January 2005 and £3.031m at 31 July 2005. There is a net increase in operating profit of £0.651m for the half year ended 31 January 2005 and £0.908m for the year ended 31 July 2005. These adjustments relate to the cessation of amortisation from the point of reclassification of assets held for sale and also an adjustment to the carrying value of relevant assets in order to measure them at the lower of carrying value and fair value less costs to sell. IAS 32 and 39 Financial instruments The Group has taken advantage of the IFRS 1 exemption from applying IAS 32 and IAS 39 to its comparative results, and the figures for the six months ended 31 January 2005 and year ended 31 July 2005 continue to be presented under UK GAAP. These standards are adopted from 1 August 2005, and the balance sheet at that date has been restated to show their impact. There are two main areas of impact: (i) Interest bearing borrowings Under UK GAAP loans and other interest bearing borrowings were recognised at fair value (which would usually approximate to nominal value) and thereafter, at amortised cost. Under Adopted IFRS the amortised cost is calculated using the effective interest method from the initial issuance of the debt. The associated interest expense is recognised on an accruals basis using the effective interest method. Transaction costs meeting the criteria under IAS 39 are capitalised by debiting the loan balance. The capitalised transaction costs are amortised to the income statement over the life of the transaction using the effective interest method. There is a £0.271m reduction in equity at 1 August 2005 resulting predominantly from the fact that under FRS 4 Capital Instruments amortisation costs were allocated to periods over the term of the debt at a constant rate on the carrying amount and not on an effective interest basis. (ii) Trade receivables Under IAS 32/39, trade receivables on deferred terms, in particular the proceeds from sales of players’ registrations are recorded at their fair value at the date of sale. As a consequence of these fair value provisions, reserves are reduced at 1 August 2005 by £0.527m. -3- Appendix 1 Significant Accounting Policies The IFRS restatement information (the financial information) has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union. A summary of the significant accounting policies adopted and, except where otherwise stated, consistently applied, in the preparation of the financial information is shown below: (a) Measurement convention The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments. Non current assets and disposal groups held for sale are stated at the lower of previous carrying amount and fair value less costs to sell. (b) Basis of consolidation The consolidated financial statements of the Group include the financial statements of the company and its subsidiaries. Subsidiaries are entities that are controlled, either directly or indirectly, by the Company. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Jointly controlled entities are those entities over which the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group’s share of the total recognised gains and losses of jointly controlled entities on an equity accounted basis, from the date that joint control commences until the date that joint control ceases. (c) Revenue Revenue represents income arising from sales to third parties, and excludes transfer fees receivable and value added tax. (i) Season ticket and corporate hospitality revenue is recognised over the period of the football season as home matches are played. (ii) Fixed elements of FA Premier League central broadcasting contracts are recognised over the period of the football season as league matches (home and away) are played. Appearance fees are accounted for as earned. The merit based payment is recognised at the end of the league season, when the final league position is known. (iii) Sponsorship contracts are recognised over the duration of the contract. (iv) Branded Products and catering revenues are recognised on an earned basis. (d) Intangible assets (i) Acquired players’ registrations The costs associated with the acquisition of players’ registrations are initially recorded at their fair value at the date of acquisition as intangible fixed assets. These costs are fully amortised, on a straight line basis, over the period of the respective players’ contracts. Players’ registrations are written down for impairment when the carrying amount exceeds the amount recoverable through use or sale. Acquired players’ registrations are classified as ‘Assets held for sale’ on the balance sheet if, at any time, it is considered that the carrying amount of a registration will be recovered principally through a sale transaction rather than through continuing use the value of that registration. At the time of reclassification the measurement of the registration is the lower of (a) fair value (less costs to sell) and (b) carrying value. Amortisation of the asset is suspended at the time of reclassification, although impairment charges still need to be made if applicable. (ii) Other intangible assets Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy n). -4- (iii) Amortisation Amortisation is charged to profit or loss on a straight line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite life are systematically tested for impairment at each balance sheet date. (e) Property, plant and equipment (i) Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see accounting policy n). (ii) Leased assets Finance leases are those which transfer substantially all of the risks and rewards of ownership to the lessee. Assets held under finance leases are capitalised as property, plant and equipment and are depreciated over the shorter of the lease term or their useful economic life. The capital elements of future lease obligations are included within borrowings, while the interest elements are charged to the income statement over the period of the lease to produce a constant rate of charge on the balance of capital repayments outstanding. All other leases are operating leases, the rentals on which are charged to the income statement on a straight line basis over the lease term. (iii) Depreciation Depreciation is charged to the income statement, to write off the cost of property, plant and equipment less estimated residual value, on a straight line basis, over their estimated useful lives as follows: Long leasehold property over the shorter of the unexpired term of the lease and 50 years Plant and equipment 3 – 15 years Motor vehicles 4 years No depreciation is provided on freehold land or assets in the course of construction. The residual value is reassessed annually. Interest incurred on borrowings to finance assets in the course of construction is capitalised. Once construction has been completed, interest is charged to the income statement. (f) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is based on the estimated selling price in the ordinary course of business. Provision is made for obsolete, slow-moving or defective items where appropriate. (g) Signing on fees Signing on fees are charged, on a straight line basis, to the income statement over the period of the player’s contract. Where a player’s registration is transferred, any signing on fees payable in respect of future periods are charged against the profit/(loss) on disposal of players’ registrations in the period in which the disposal is recognised. (h) Deferred income Deferred income comprises amounts received from capital grants, sponsorship, bond and season ticket income. Capital grants are released to the income statement on a straight line basis over the estimated useful lives of the assets to which they relate. Other deferred income is released to the income statement on a straight line basis over the period to which it relates. (i) Income tax -5- Income tax on the result for each period comprises both current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, on any temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available to utilise the temporary difference. (j) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Foreign currency monetary assets and liabilities at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Nonmonetary assets and liabilities measured at historical cost in a foreign currency are translated into sterling into sterling at the rate of exchange on the date of the transaction. (ii) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. When a derivative financial instrument is used as an economic hedge of the foreign exchange exposure of a recognised monetary asset or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in profit or loss. (k) Interest bearing borrowings Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption being recognised in profit or loss over the period of the borrowings on an effective interest basis. (l) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contributions pension plans are recognised as an expense in the income statement as incurred. (m) Dividends Dividends are recognised as a liability in the period in which they are declared. (n) Impairment The carrying value of the Group’s assets other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. -6- For goodwill, assets that have an indefinite life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. 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. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independently of the cash inflows from other assets or groups of assets. (o) Trade and other payables and receivables Trade and other payables and receivables on normal terms are stated at their nominal value. Other payables on deferred terms, in particular the purchase of players’ registrations, are recorded at their fair value on the date of the transaction and subsequently at amortised cost. Other receivables on deferred terms, in particular the proceeds from sales of players’ registrations are recorded at their fair value at the date of sale and subsequently at amortised cost less allowances for impairment. (p) Financing costs Finance costs comprise interest payable on borrowings, calculated using the effective interest rate method, interest receivable on funds invested and foreign exchange gains and losses. The discounting of the deferred payments for the purchase of player registrations produces a notional interest payable amount and this is charged to finance costs. The discounting of the deferred receipts for sales of player registrations produces a notional interest receivable amount and this is credited to finance income. (q) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment) which is subject to risks and rewards that are different from those of the other segments. (r) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. -7- Appendix 2 Consolidated Income Statement 6 months ended 31 January 2005 £'000 (Unaudited) 31 July 2005 £'000 (Audited) 49,512 86,982 (40,964) (80,965) 8,548 6,017 Amortisation of players' registrations Impairment of players' registrations Profit on disposal of players' registrations (4,863) 8,357 (9,790) (3,754) 13,381 Profit from operations 12,042 5,854 Revenue Operating expenses Profit from operations before player trading and amortisation Finance income 12 months ended 343 484 (2,662) (5,614) 49 (104) 9,772 620 (2,520) - Profit for the period 7,252 620 Earnings per share 5.6p 0.5p Finance expenses Share of profit/(loss) of joint venture Profit on ordinary activities before taxation Income tax expense -8- Appendix 2 Consolidated Balance Sheet Non-current assets Property, plant & equipment Intangible assets Investments in joint ventures Deferred tax assets 31 January 2005 £'000 (Unaudited) 31 July 2005 £'000 (Audited) 94,392 31,725 195 584 93,102 35,587 - 126,896 128,689 1,143 8,099 7,848 6,624 1,520 13,675 17,569 3,031 23,714 35,795 150,610 164,484 (49,360) (5,479) (6,261) (234) (3,104) (49,957) (10,892) (6,081) (553) - (64,438) (67,483) (7,029) (16,495) (16,923) (7,353) (5,123) (25,722) (26,309) (9,432) (47,800) (66,586) (112,238) (134,069) 38,372 30,415 7,111 69,377 831 (38,947) 6,433 69,377 831 (46,226) 38,372 30,415 Current assets Inventories Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total assets Non-current liabilities Interest bearing loans and borrowings Other payables Deferred income Provisions Deferred tax liabilities Current liabilities Interest bearing loans and borrowings Trade and other payables Deferred income Provisions Total liabilities Net assets EQUITY Issued capital Share premium Capital redemption reserve Retained earnings Total equity -9- Appendix 2 Consolidated Cash Flow Statement 6 months ended 31 January 2005 £'000 (Unaudited) 12 months ended 31 July 2005 £'000 (Audited) 7,252 620 2,662 (343) (49) 2,520 5,076 (8,357) 1,806 (46) 170 88 (3,324) (10,297) 5,614 (484) 104 10,325 3,754 (13,381) (5) 3,837 (96) (869) (289) 2,235 (367) Cash flow from operations (2,842) 10,998 Interest paid Interest received (4,337) 364 (4,896) 502 Net cash flow from operating activities (6,815) 6,604 (2,189) (15,143) 15,447 - (2,629) 15 (18,764) 19,308 (681) 2 (1,885) (2,749) Dividends paid Proceeds from borrowings Repayments of borrowings (2,625) 1,500 (8,519) (3,950) 2,800 (11,328) Net cash from financing activities (9,644) (12,478) (18,344) (8,623) 26,192 26,192 7,848 17,569 Cash flows from operating activities Profit for the period Adjustments for: Finance expenses Finance income Share of (loss)/profit of joint venture Income tax expense Amortisation of intangible assets Impairment of intangible assets Profit on disposal of players’ registrations Profit on sale of property, plant and equipment Depreciation of property, plant and equipment Capital grants release Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories (Decrease)/increase in trade and other payables Decrease in deferred income Cash flows from investing activities Acquisitions of property, plant and equipment Proceeds from sale of property, plant and equipment Acquisition of players’ registrations Proceeds from sale of players’ registrations Acquisition of subsidiary undertaking Cash acquired with subsidiary Net cash flow from investing activities Financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year - 10 - Appendix 2 Consolidated Statement of Changes in Equity Attributable to equity holders of the Parent (Unaudited) Balance at 1 August 2004 Profit for the period Dividends on equity shares relating to year ended 31 July 2004 Balance at 31 January 2005 Share Capital Share Premium Capital Redemption Reserve Retained Earnings Total £'000 £'000 £'000 £'000 £'000 7,111 69,377 831 (43,574) 33,745 - - - 7,252 7,252 - - (2,625) (2,625) 7,111 69,377 831 (38,947) 38,372 Attributable to equity holders of the Parent (Audited) Share Capital Share Premium Capital Redemption Reserve Retained Earnings Total £'000 £'000 £'000 £'000 £'000 Balance at 1 August 2004 7,111 69,377 831 (43,574) 33,745 Profit for the period Cancellation of deferred shares Dividend on equity shares relating to year ended 31 July 2004 Interim Dividends on equity shares relating to the year ended 31 July 2005 (678) - - - 620 678 (2,625) 620 (2,625) - - - (1,325) (1,325) Balance at 31 July 2005 6,433 69,377 831 (46,226) 30,415 - 11 - Appendix 3 Consolidated Income Statement Reconciliation of Profit (Audited) UK GAAP to IFRS for the year ended 31 July 2005 Revenue UK GAAP IAS38 Intangible assets IFRS5 Non current assets held for sale IFRS £'000 £'000 £'000 £'000 86,982 Operating expenses 86,982 (80,928) Profit from operations before player trading and amortisation Amortisation of players' registrations Impairment of players' registrations Profit on disposal of players' registrations Profit from operations Finance income Finance expenses Share of loss of joint venture (37) (80,965) 6,054 - (37) 6,017 (11,839) (3,041) 13,505 391 1,658 (713) (124) (9,790) (3,754) 13,381 4,679 267 908 5,854 484 (5,020) (594) 484 (5,614) (104) Profit on ordinary activities before taxation (104) 39 (327) 908 620 Income tax expense (143) 415 (272) - (Loss)/profit for the period (104) 88 636 620 - 12 - Appendix 3 Consolidated Balance Sheet Reconciliation of Equity (Audited) UK GAAP to IFRS at 31 July 2005 UK GAAP IAS 38 Intangible assets £'000 £'000 IFRS5 Non current assets held for resale £'000 IAS10 Events after the Balance sheet date £'000 IFRS £'000 Non-current assets Property, plant & equipment 93,433 (331) 93,102 Intangible assets - Goodwill Intangible assets - Other 642 39,176 (642) (1,797) (1,792) 35,587 133,251 (2,439) (2,123) - - 128,689 Current assets Inventories Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total assets 1,520 13,675 17,569 1,520 13,675 17,569 - 3,031 3,031 32,764 - 3,031 - 35,795 166,015 (2,439) 908 - 164,484 Non-current liabilities Interest bearing loans and borrowings Other payables Deferred income Provisions Deferred tax liabilities (49,957) (11,608) (6,081) (553) (49,957) (10,892) (6,081) (553) 716 (143) 415 (272) (68,342) 1,131 (272) - (67,483) Current liabilities Interest bearing loans and borrowings Trade and other payables Deferred income Provisions Dividends Total liabilities Net assets (5,123) (25,902) (26,309) (9,432) (5,123) (25,722) (26,309) (9,432) 180 (2,625) 2,625 - (69,391) 180 - 2,625 (66,586) (137,733) 1,311 (272) 2,625 (134,069) 28,282 (1,128) 636 2,625 30,415 EQUITY Issued capital Share premium Capital redemption reserve Retained earnings Total equity 6,433 69,377 831 (48,359) (1,128) 636 2,625 6,433 69,377 831 (46,226) 28,282 (1,128) 636 2,625 30,415 - 13 - Appendix 4 Consolidated Income Statement Reconciliation of Profit (Unaudited) UK GAAP to IFRS for the six months ended 31 January 2005 Revenue Operating expenses Profit from operations before player trading and amortisation UK GAAP IAS 38 Intangible assets £'000 £'000 IFRS5 Non current assets held for sale £'000 IFRS £'000 49,512 49,512 (40,964) (40,964) 8,548 - - 8,548 Amortisation of players' registrations Profit on disposal of players' registrations (5,706) 8,179 192 178 651 (4,863) 8,357 Profit from operations 11,021 370 651 12,042 Finance income Finance expenses 343 (2,365) (297) Share of profit of joint venture 343 (2,662) 49 Profit on ordinary activities before taxation Income tax expense Profit for the period - 14 - 49 9,048 73 651 9,772 (2,668) 343 (195) (2,520) 6,380 416 456 7,252 Appendix 4 Consolidated Balance Sheet Reconciliation of Equity (Unaudited) UK GAAP to IFRS at 31 January 2005 UK GAAP IAS 38 Intangible assets £'000 £'000 IFRS5 Non current assets held for resale £'000 (1,491) (5,973) (1,491) (5,973) IAS10 Events after the Balance sheet date £'000 IFRS £'000 Non-current assets Property, plant & equipment Intangible assets Investments in joint ventures Deferred tax assets 94,392 39,189 195 584 134,360 94,392 31,725 195 584 - 126,896 Current assets Inventories Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total assets 1,143 8,099 7,848 1,143 8,099 7,848 6,624 6,624 17,090 - 6,624 - 23,714 151,450 (1,491) 651 - 150,610 Non-current liabilities Interest bearing loans and borrowings Other payables Deferred income Provisions Deferred tax liabilities (49,360) (5,498) (6,261) (234) (3,252) 343 (195) (64,605) 362 (195) (49,360) (5,479) (6,261) (234) (3,104) 19 - (64,438) 1,325 (7,029) (16,495) (16,923) (7,353) - Current liabilities Interest bearing loans and borrowings Trade and other payables Deferred income Provisions Dividends Total liabilities Net assets (7,029) (16,824) (16,923) (7,353) (1,325) 329 (49,454) 329 - 1,325 (47,800) (114,059) 691 (195) 1,325 (112,238) 37,391 (800) 456 1,325 38,372 EQUITY Issued capital Share premium Capital redemption reserve Retained earnings Total equity 7,111 69,377 831 (39,928) (800) 456 1,325 7,111 69,377 831 (38,947) 37,391 (800) 456 1,325 38,372 - 15 - Appendix 5 Consolidated Balance Sheet Reconciliation of Equity (Audited) UK GAAP to IFRS at 1 August 2004 UK GAAP IAS 38 Intangible assets £'000 £'000 IFRS5 Non current assets held for resale £'000 93,907 34,890 147 (1,458) (4,643) 128,944 (1,458) (4,643) IAS10 Events after the Balance sheet date £'000 IFRS £'000 Non-current assets Property, plant & equipment Intangible assets Investments in joint ventures 93,907 28,789 147 - 122,843 Current assets Inventories Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total assets 1,231 9,945 26,192 1,231 9,945 26,192 4,643 4,643 37,368 - 4,643 - 42,011 166,312 (1,458) - - 164,854 Non-current liabilities Interest bearing loans and borrowing Other payables Deferred income Provisions (52,672) (6,335) (27,080) (216) (52,672) (6,175) (27,080) (216) 160 (86,303) 160 - - (86,143) Current liabilities Interest bearing loans and borrowing Trade and other payables Deferred income Provisions Dividends Total liabilities Net assets (10,674) (19,524) (6,447) (8,403) (2,625) (10,674) (19,442) (6,447) (8,403) 82 2,625 (47,673) 82 - 2,625 (44,966) (133,976) 242 - 2,625 (131,109) 32,336 (1,216) - 2,625 33,745 2,625 7,111 69,377 831 (43,574) 2,625 33,745 EQUITY Issued capital Share premium Capital redemption reserve Retained earnings Total equity 7,111 69,377 831 (44,983) (1,216) 32,336 (1,216) - 16 - - Appendix 6 Special Purpose Audit Report of KPMG Audit Plc to Newcastle United PLC (the Company) on its preliminary International Financial Reporting Standards (IFRS) Financial Information for the year ended 31 July 2005 and on its preliminary opening IFRS balance sheet as at 1 August 2004 In accordance with the terms of our engagement letter dated 21 November 2005 we have audited the accompanying consolidated preliminary IFRS balance sheet of Newcastle United PLC as at 31 July 2005, and the related consolidated statements of income, changes in equity and cash flows for the year then ended and the related accounting policy notes (“the preliminary IFRS financial information”) set out on pages 4 to 13. Also in accordance with the terms of our engagement letter dated 21 November 2005 we have audited the accompanying preliminary opening consolidated IFRS balance sheet and related notes of Newcastle United Plc as at 1 August 2004 (“the opening IFRS balance sheet”) as set out on page 16. Respective responsibilities of directors and KPMG Audit Plc The directors of the Company have accepted responsibility for the preparation of the preliminary IFRS financial information and the opening IFRS balance sheet, both of which have been prepared as part of the Company’s conversion to IFRS. Our responsibilities, as independent auditor, are established in the United Kingdom by the Auditing Practices Board, our profession’s ethical guidance and the terms of our engagement. Under the terms of engagement we are required to report to you our opinion as to whether the preliminary IFRS financial statements have been properly prepared, in all material respects, in accordance with the accounting policies note to the preliminary IFRS financial statements. We report to you if, in our opinion, we have not received all the information and explanations we required for our audit. We read the other information accompanying both the preliminary IFRS financial information and the opening IFRS balance sheet and consider whether it is consistent with the preliminary IFRS financial information and opening IFRS balance sheet. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the preliminary IFRS financial information and with the opening IFRS balance sheet. Our report has been prepared for the Company solely in connection with the Company’s conversion to IFRS. Our report was designed to meet the agreed requirements of the Company determined by the Company’s needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Company for any purpose or in any context. Any party other than the Company who chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG Audit Plc will accept no responsibility or liability in respect of our report to any other party. Basis of audit opinion We conducted our audit having regard to Auditing Standards issued by the UK Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the preliminary IFRS financial information and in the opening IFRS balance sheet. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the preliminary IFRS financial information and opening IFRS balance sheet, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the preliminary financial and opening IFRS balance sheet are free from material misstatement , whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the preliminary IFRS financial information and opening IFRS balance sheet. Emphasis of matters Without qualifying our opinion, we draw your attention to the following matters: The basis of preparation to the preliminary IFRS financial information and opening IFRS balance sheet explains why the accompanying preliminary IFRS financial information may require adjustment before their inclusion and before its use as comparative information in the IFRS financial statements for the year ending 31 July 2006 when the Company prepares its first IFRS financial statements. - 17 - As described in the basis of preparation to the preliminary IFRS financial information, as part of its conversion to IFRS, the Company has prepared the preliminary IFRS financial information for the year ended 31 July 2005 to establish the financial position, results of operations and cash flows of the Company necessary to provide the comparative financial information expected to be included in the Company’s first complete set of IFRS financial statements for the year ending 31 July 2006. The preliminary IFRS financial information and the opening IFRS balance sheet do not themselves include comparative financial information for the prior period. In respect of the opening IFRS balance sheet, under IFRS only a complete set of consolidated financial statements comprising a balance sheet, income statement, statement of changes in equity and cash flow statement, together with comparative financial information and explanatory notes, can achieve a fair presentation of the Company’s financial position, results of operations and cash flows in accordance with IFRS. As explained in the basis of preparation, in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards, no adjustments have been made for any changes in estimates made at the time of approval of the UK Generally Accepted Accounting Practices financial statements on which the preliminary IFRS financial information and the opening IFRS balance sheet are based. As permitted by IFRS 1, IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement have not yet been applied and there has been no related restatement of the opening IFRS balance sheet or the 31 July 2005 balance sheet. Any adjustments that arise from the application of those standards will be shown as an equity movement on 1 August 2005. Opinion In our opinion, the accompanying preliminary IFRS financial information for the year ended 31 July 2005 and the opening IFRS balance sheet as at 1 August 2004 have been prepared, in all material respects, in accordance with the basis set out in the basis of preparation, which describes how IFRS have been applied under IFRS 1, including the assumptions made by the directors of the Company about the standards and interpretations expected to be effective, and the policies expected to be adopted, when they prepare the first complete set of consolidated IFRS financial statements of the Company for the year ending 31 July 2006. KPMG Audit Plc Chartered Accountants Quayside House 110 Quayside Newcastle Upon Tyne NE1 3DX 13 April 2006 - 18 -