Waterford Wedgwood Annual Report 2007 by timharper

From left: Pitcher (2ltr), Citrus Pitcher & Press (1.3ltr), Dinner Plate (30cm), Mixing Bowl (27cm) & Medium Pudding Basin from Terence Conran ‘Blue Chophouse’ by Royal Doulton

The Royal Doulton family – a blend of contemporary design, quintessential English style and opulence for the home – 300 years of excellence to suit any desire. Front cover: Decanter (27cm) & Red Wine Stems (23.5cm) from Siren by Waterford Crystal

Clockwise from top: Coffee Pot (23.5cm), Tall Teacup (9.5cm) & Saucer, Covered Sugar Bowl (6cm), Demitasse Cup (7.5cm) & Saucer from Monkey Tree by Minton

Frog Jug (15cm) from the Gilded Tabletop Collection by Minton

Mardi Gras ‘Carmen’ (30cm) by Royal Doulton

Soup Dish (23cm), Dinner Plate (27cm) & Accent Plate (16cm) from Sweet 60's â&#x20AC;&#x2DC;Jade Plumâ&#x20AC;&#x2122; by Rosenthal Home Designs

Through pioneering alliances with leading designers, scintillating products from Rosenthal are redolent of the best of modern living.

Vase (22cm) from Fast by Rosenthal Studio-line

Clockwise from top: Sugar Bowl 3, Dinner Plate (28cm), Creamer 3, Teapot 3 & Service Plate (38cm), Cup & Saucer 4 low from Tac Dynamic by Rosenthal Studio-line

Cup & Saucer 4 tall from Maria ‘St Germain’ by Rosenthal Classic

Tatami Espresso Cup & Saucer from A la Carte by Rosenthal Studio-line

Sugar Bowl, Cup & Saucer 4 tall, Coffee Pot & Dinner Plate (19cm) from Zauberflöte Platinum by Rosenthal Studio-line

Teacup & Saucer (0.25ltr) from Platinum Striped by Jasper Conran at Wedgwood

Since it was founded in 1759 Wedgwood has always had a desire to provide the good things in life. Thatâ&#x20AC;&#x2122;s almost 250 years of heritage, craftsmanship and quality. Standards which the brand still lives by today allowing us to re-invent classic styles with effor tless elegance and impeccable taste.

Small Mug, Bowl (15cm), Small Plate (20cm) & Plate (25cm) from Peter Rabbit Nurseryware by Wedgwood

Clockwise from top: Butterfly, Polka Dot, Ribbon & Rose, Deco Bloom Cups & Saucers (all 6cm) from The Harlequin Collection by Wedgwood

Egyptian Pastille Burner (19cm) Prestige Jasper by Wedgwood

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2 4 6 8 9

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Andy Warhol by Rosenthal Zandra Rhodes for Royal Albert Barbara Barry for Wedgwood Rosenthal Meets Versace Vera Wang at Wedgwood Marc Jacobs Waterford Jasper Conran at Waterford Crystal Julien Macdonald for Royal Doulton John Rocha at Waterford Crystal

Platters (39cm) from Vintage Garden by Marquis

With generations of master craftsmen bringing their singular ar tistry to every cut and to each exceptional design, Waterford Crystal is unique, beautiful and timeless â&#x20AC;&#x201C; it shines through the centuries.

Bowl (30cm) from Lume by John Rocha at Waterford Crystal

Robert Held Art Nouveau Bowl (28.5cm) & Vase (26.5cm) from Evolution by Waterford Crystal

Footed Decanter (30cm) & Wine Stem from the ‘Marc Jacobs Waterford’ Jean Collection

Castlemartin Bed Linen by W-C Designs

Homes are beautifully enhanced with fashionable soft home products from W-C Designs.

Cardiff Towelling by W-C Designs

Sauteuse (1ltr) from Brigade Premium by Spring

For more than sixty years, Spring has been synonymous with unmatched quality in the kitchen â&#x20AC;&#x201C; for home gourmets and professional chefs alike.

Mixer (1.5ltr) by Spring

Back cover: Vase Collection (from 14cmâ&#x20AC;&#x201C;32cm) from Dedalo Platinum by Rosenthal Meets Versace

This keepsake offers a glimpse of some of the beautiful collections that comprise the Waterford Wedgwood portfolio. It is a testiment to the design and craftsmanship that is inherent in all of our pieces. We hope you enjoy browsing this keepsake, and invite you to visit: waterfordwedgwood.com

Report

Chairman’s statement Royal Doulton Chief Executive’s statement Rosenthal Directors and Company Secretary Wedgwood Report of the Directors Waterford Crystal Corporate Governance W-C Designs Statement of Directors’ responsibilities in relation to accounts Report on Directors’ remuneration Spring Accounts

Waterford Wedgwood plc

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2007 annual report & accounts

Candlesticks from the Glassware Collection by Barbara Barry for Wedgwood

Bolton Canisters from Grafton Street by Waterford Crystal

Marilyn Porcelain Postcard from the Andy Warhol Collection by Rosenthal

Pudding Basins from Terence Conran White by Royal Doulton

Chairman’s statement Last year, I wrote to tell you that Waterford Wedgwood was like a great vessel that had slowly but successfully turned through heavy seas. And now, as we sail to calmer waters, under the command of Peter Cameron, I can assure you that we continue to trim and tune the ship. In the year to March 2007, the year in which we returned to positive earnings before interest, taxation, depreciation and amor tisation, Waterford Wedgwood focused relentlessly on cost control, margin improvement and product development.

While being the low cost operator is critically important for the stability and security of your Company, the Board recognises that the path to recovery requires more than cost reductions alone sales growth is key to returning this business to the first rank of global luxury goods companies.

Sir Anthony O’Reilly Chairman

To this end, we have invested significant effort into contemporising our brands and making them more relevant to today’s market. Our expanded portfolio now includes ranges from contemporary and renowned designers such as Marc Jacobs and thought leaders such as Robert Mondavi. These products have met with resounding success. We will be launching additional ranges this year, including designs from Martha Stewart and Monique Lhuillier. The initial demand for our contemporary offerings has been extremely promising and we are confident that Waterford Wedgwood’s brands will become increasingly popular with the younger generation of consumers in the United States of America, Europe and further afield. Moreover, the Group plans to launch new products including wine, furniture and fragrances which will provide the company with additional sales opportunities. We have also expanded into new and higher margin sales channels such as Amazon.com and Saks Fifth Avenue. Our passion for creating beautiful designs could not be fulfilled without the talent of our highly skilled employees. Our heritage of craftsmanship is key to

Waterford Wedgwood plc

our identity, and we are committed to cultivating this in the face of global challenges. We will never compromise on quality and our operations in Europe, and more recently in Indonesia, are testament to this. I am happy to report that the open offer, which was successfully completed in the first quarter of this financial year, to March 2008, raised its target of €100 million, including in excess of €17 million from shareholders other than Peter John Goulandris, your Deputy Chairman, and myself. The net proceeds of the Open Offer will further the Group’s existing efforts to drive sales and profitability, and I would like to thank our shareholders for their continued support. As with all companies of our scale and reach, Waterford Wedgwood has taken measures to ensure it is as competitive as possible in the global marketplace. This has led to further investment in our superb facility in Indonesia which allows the Group to avail of more favourable labour costs. Strategic change is rarely easy to undertake and necessitates the making of difficult decisions which are not done lightly - I fully appreciate that this has caused some uncertainty amongst our employees in Europe and the Board would like to take this opportunity to thank them for their patience at this time. However, the Board is confident that the steps taken will help to secure a profitable future for the employees and shareholders of Waterford Wedgwood.

2007 annual report & accounts

Teapot & Mug from Bloom by Royal Doulton

Elegance personified

Royal Doulton The Royal Doulton family â&#x20AC;&#x201C; a blend of contemporary design, quintessential English style and opulence for the home â&#x20AC;&#x201C; over 200 years of excellence to suit any desire. 4

Serving Platter, Teapot, Sugar & Mug from Pure White by Royal Doulton

DantĂŠ by Royal Doulton

Espresso Cups & Saucers from Toledo by Minton

Waterford Wedgwood plc

2007 annual report & accounts

Chief Executive’s statement Throughout the past year the Group has maintained a determined focus on the three steps required to return Waterford Wedgwood to a level of profitability consistent with its market -leading brands. The three steps are: to “right-size” the Group, to improve margins and to contemporise its brands through innovative product development and new relationships with designers and trend leaders.

OPEN OFFER AND POSSIBLE PLACING

Peter B. Cameron Chief Executive Officer

The Group has continued to progress on all three fronts but has recognised a need for an injection of capital to complete the return to acceptable profitability. The Group has successfully raised €100 million (before expenses) by way of an “Open Offer” of Convertible Preference Shares to all shareholders. The Chairman of the Group, Sir Anthony O’Reilly, and Deputy Chairman, Mr. Peter John Goulandris, whose interests at the time owned 51.35% of the Existing Issued Share Capital, took up their full entitlement of Preference Shares and a company which they jointly own underwrote the remaining 48.65% of the Open Offer. Additionally, approval has been granted at an Extraordinary General Meeting of shareholders for the Group to place an additional amount of up to €100 million of Preference Shares with new and/or existing investors (“Possible Placing”). RIGHT-SIZING

In May 2005, the Group announced an investment of €90 million in a major cost restructuring programme with the target of achieving ongoing annual benefits of €90 million. Implementation of the programme is virtually complete and is on track to meet its targets.

these opportunities can be realised with the same success. The new programme consists of a range of projects across the Group’s operations worldwide, some of which are already underway. However, the scale and speed of implementation will depend on the extent of funding raised by the Possible Placing of further Preference Shares. MARGIN IMPROVEMENT

The Group’s second focus has been the creation of a margin structure consistent with other luxury goods companies. To accomplish this the Group has withdrawn from inappropriate sales channels and has expanded into full margin distribution channels such as Amazon.com and Saks Fifth Avenue. The price increases implemented in early 2005 have been followed with new rounds of pricing at the start of both 2006 and 2007 and all new products are required to meet high minimum margin targets. These measures, together with the savings from restructuring and from rigorous day-to-day cost management, have had the desired effect: overall Group gross margins in the year to 31 March 2007 were up on the prior year from 41.4% to 47.7%. CONTEMPORISING THE BRANDS

Dinner Plate, Teacup & Saucer from Shagreen Cocoa by Wedgwood

Specifically: – the number of employees in the Group has been reduced by about 2,200 – excess capacity has been removed through the closure of the crystal factory in Dungarvan, Ireland, and of the “Tuscan” china factory near Stoke-onTrent, England – Wedgwood and Royal Doulton manufacturing, warehousing, retail and administrative operations have been integrated – savings of approximately €70 million were achieved in the year to 31 March 2007 – ongoing annual savings of €90 million have been achieved – total implementation costs for all of the above are expected to be approximately €90 million, as budgeted back in May 2005 ADDITIONAL RIGHT-SIZING OPPORTUNITIES

Ocean Dinnerware from ‘Marc Jacobs Waterford’ David Collection

In the course of implementing the 2005 cost restructuring programme, management has conducted a sustained examination of all of the Group’s operating costs and has identified further profit improvement opportunities. This process has led to the preparation of a New Cost Restructuring Programme and the achievements of the 2005 programme supports management’s confidence that

Over the past two years, in parallel with rationalising the cost base through the implementation of the 2005 restructuring and initiating the New Cost Restructuring Programme, the Group has developed an array of new product and marketing initiatives to improve sales performance. The approach to this challenge is twofold. The Group is contemporising its core heritage brands to make products more relevant to today’s consumers. Additionally, the Group is establishing new relationships with outstanding designers, chefs and other trend leaders to take its brands to new consumers and distribution channels. Examples include Waterford’s Lismore Essence (a contemporary version of the classic Lismore pattern which is 35% lighter) and Wedgwood’s Eternity China (a revolutionary formulation giving delicate, translucent fine bone china which is much stronger than traditional china and is microwave/dishwasher compatible). New relationships already launched include Robert Mondavi by Waterford, Marc Jacobs Waterford, Barbara Barry at Wedgwood and Gordon Ramsay and Terence Conran for Royal Doulton. Important initiatives in development include Martha Stewart by Wedgwood, Donna Karan at Rosenthal and Monique Lhuillier for Royal Doulton.

These initiatives have largely arrested the sales declines of previous years and, in recent months, have generated strong growth in demand for the Group’s products. As a result, total orders at 1 June stood at €66 million which was €15 million more than at the same date last year. It is planned, therefore, to apply part of the Open Offer proceeds to provide additional working capital so that this encouragingly robust demand can be converted into improved sales performance. RESULTS

In the year to 31 March, 2007 the Group earned a pre-exceptional profit of €15.0 million at the EBITDA level (earnings before interest, taxes, depreciation and amortisation) compared with a loss of €30.9 million in the prior year. This was the Group’s first positive EBITDA in three years. The Group’s operating loss (before exceptional items) of €14.9 million was reduced by nearly 80% from the prior year. Including exceptional items, the operating loss of €17.1 million was reduced by €113.7 million. The Group’s improved performance reflects its determined focus on the steps required to return the business to financial health.

FINANCIAL OPERATING LOSS

In the year to 31 March, 2007 the Group made an operating loss of €17.1 million, compared with a loss of €130.8 million in the prior year. Excluding exceptional items, there was an operating loss of €14.9 million, compared with a loss of €68.2 million in the prior year. Restructuring savings and rigorous operating cost control account for the improvement year on year. EXCEPTIONAL ITEMS

In the year to 31 March, 2007 there was a net charge of €2.2 million for exceptional items compared with a net charge of €62.6 million in the prior year. The substantial reduction in the charge reflects, in the main, significantly lower charges related to the restructuring programme. Details of the charges and credits for exceptional items are shown in the notes to the financial statements. NET DEBT

Net debt, comprising interest-bearing loans and borrowings, finance lease obligations, less cash and cash equivalents and unamortised debt issue costs, amounted to €412.2 million at 31 March, 2007 compared with €371.8 million at the same date last year.

DIVISIONAL OVERVIEW WATERFORD CRYSTAL

Waterford Crystal achieved a significant turnaround in its profitability in the past year and had positive earnings at both the EBITDA and operating profit levels for the first time in three years. EBITDA (before exceptional items) was €20.7 million compared with a loss of €3.3 million in the prior year and operating profit (before exceptional items) was €12.3 million compared with a loss of €12.3 million in the prior year, an improvement of €24.6 million. The improved performance reflects restructuring savings, margin enhancement and rigorous operating cost control.

The success of these initiatives is being reflected in continuing gains in market share: in the US, its biggest market, Waterford’s market share in the quarter ended 30 April was 38%, a gain of 1.6% points over the same period last year. Waterford has significantly reduced its cost base, arrested its sales decline and is continuing to contemporise its product range. The Board feels that the foundations for continuing profitable growth in the Waterford division have been laid. CERAMICS GROUP

In the year to 31 March, 2007 the Ceramics Group more than halved its operating loss and achieved positive earnings at the EBITDA level for the first time in three years. The operating loss (before exceptional items) was €18 million, or €24.3 million less than in the prior year, and EBITDA (before exceptional items) was positive €3.3 million compared with a loss of €14.2 million in the prior year. Again, these major improvements reflect restructuring savings, margin enhancement and rigorous operating cost control. Ceramics Group sales of €501.5 million were 5% down at prevailing exchange rates and 3% down at constant exchange rates reflecting difficult trading conditions in the UK, Germany and Japan. Wedgwood, Royal Doulton and Rosenthal have implemented major new product initiatives to exploit the breadth and power of their brands. Initiatives already launched include Barbara Barry at Wedgwood, Vera Wang giftware, Wedgwood Eternity, the Gordon Ramsay and Sir Terence Conran ranges for Royal Doulton and Rosenthal’s “A La Carte” collection of contemporary crystal and porcelain tableware. New collaborations in development include collections for Wedgwood by Martha Stewart, one of the most influential authorities on the home and gracious living in the US, and Monique Lhuillier, the California-based bridal designer. As with Waterford Crystal, the Ceramics Group’s order books are strong: at 1 June its total orders stood at €50.6 million, 35% more than at the same date last year. Through restructuring and the integration of Royal Doulton, the Ceramics Group has transformed its cost base. This, together with the sales initiatives in place or in development, paves the way to a profitable future. W-C DESIGNS

& SPRING W-C Designs & Spring sales of €40.6 million were 6% up at prevailing exchange rates and 11% up at constant exchange rates, driven by growth in W-C’s bed linen and towel business. This division incurred an operating loss (before exceptional items) of €1.2 million in the year to 31 March, 2007 compared with a loss of €1.0 million in the prior year. In February 2007 Spring launched a collection of cookware and small appliances endorsed by Dr. Weil, the US healthy cooking and lifestyle expert. Launch costs hit profits in the year to 31 March, 2007 but the new range is expected to improve performance in the current year.

Waterford’s sales of €199.4 million were 3% down at prevailing exchange rates but up 1% at constant exchange rates. Having arrested the sales decline of recent years, Waterford is continuing the contemporisation of its product range. Initiatives already launched and selling well include Robert Mondavi by Waterford, Marc Jacobs, the Ballet Collection of contemporary crystal and china and the Marquis Vintage Garden Collection. Consequently, Waterford’s order book is strong: at 1 June its total orders stood at €15.2 million, 14% more than at the same date last year.

Waterford Wedgwood plc

2007 annual report & accounts

Vase of Phases by Rosenthal Studio-line

Through pioneering alliances with leading designers, scintillating products from Rosenthal are redolent of the best of modern living.

Rosenthal 8

Informing the Avant Garde

Vases from Surface by Rosenthal Studio-line

Angular Plates from Vanity by Rosenthal Meets Versace

Waterford Wedgwood plc

Fire and Ice Porcelain Jewellery by Rosenthal Classic

2007 annual report & accounts

Directors and Company Secretary

Chairman, (aged 71) has been a Director of the Group since 1990 and was appointed Chairman in 1994. He is Chief Executive of Independent News & Media plc.

(Aged 59) joined the Group as a Director in 1996. He is deputy Chairman of the Group and Chairman of Waterford Wedgwood U.K. plc. He was appointed to the Board of the Wedgwood Museum Trust in June 2007. His other directorships include Fitzwilton Limited.

(Aged 57) joined the Group as a Director in 1995. She is also Chairperson of the Irish National Stud Company Limited. She was a Director of the Wedgwood Museum Trust up to June 2007. She is now an Honorary Member of the Trust. She is also Chairperson of the O’Reilly Foundation.

(Aged 60) joined All-Clad as Chief Operating Officer in1998. He became Chief Executive of All-Clad in August 2000 and was appointed a Group Director on 5 September 2001. He was appointed Group Chief Operating Officer in June 2004 and Group Chief Executive Officer on 1 September 2005.

Sir Anthony O’Reilly*

Peter John Goulandris*

Lady O’Reilly*

Peter B. Cameron

Ottmar C Küsel

John Foley

Lord Wedgwood

Patrick J Dowling

(Aged 55) is Chief Executive Officer of Rosenthal AG. He was appointed Director of the Group in 1997. He is Chairman of the Ceramics Industry Association (VKI). He is a member of the main board association of Bavarian Industry and the Chamber of Commerce of Upper Franconia/ Bayreuth. He is also a member of the Advisory Board of the Dusseldorfer Hypotheken Bank AG.

(Aged 55) joined the Group in 1991. He was appointed a Group Director in 2000. He is Chief Executive of Waterford Crystal Limited.

(Aged 52) joined Wedgwood in 1980. He was appointed a Director of the Group in 2000. He is also a Director of Waterford Wedgwood U.K plc. He was a member of the House of Lords from 1975–1999.

Chief Financial Officer and Company Secretary.

(Aged 72) joined the Group as a Director in 1990. He is Chairman of Fitzwilton Limited and Chairman of Waterford Crystal Limited.

(Aged 69) joined the Group as a Director in July 2002. He is Chairman of The Blackrock Clinic and Enterprise Ireland. He retired as Group Chief Executive of Bank of Ireland in 1998 and as Chairman of CRH plc in May 2007.

(Aged 64) joined the Group as a Director in 1985. He was Chief Executive Officer of the Group until his retirement on 31 August 2005. He is a non-executive Director of Greencore plc and Chairman of the Governing Body of the Waterford Institute of Technology.

Kevin C McGoran*

Patrick J Molloy*

P Redmond O’Donoghue*

Board Committees David W Sculley*

Dr F Alan Wedgwood*

(Aged 61) is a partner in the New York based investment firm, Sculley Brothers. He joined the Group as a Director in 1997 and is Chairman of the combined Royal Doulton and Wedgwood operations. He serves on the Board of a number of private companies.

(Aged 70) joined the Group as a Director in 1986 and before that was a Director of Josiah Wedgwood & Sons Limited from 1966. He is also a Director of Waterford Wedgwood U.K. plc.

AUDIT

Kevin C McGoran (Chairman) P Redmond O’Donoghue Patrick J Molloy REMUNERATION AND NOMINATION

Sir Anthony O’Reilly (Chairman) Peter John Goulandris Kevin C McGoran SENIOR INDEPENDENT DIRECTOR

Patrick J Molloy *Non-executive Directors

Waterford Wedgwood plc

2007 annual report & accounts

A pedigree, like no other

Wedgwood

Clockwise from top: Oval Frame, Trinket Box, Cream, Teapot, Round Tray & Sugar from Petal by Wedgwood

Espresso Cups & Saucers from Colours by Jasper Conran at Wedgwood

White on Taupe Wine Ewer Prestige Jasper by Wedgwood

Imogen Bracelet from the Wedgwood Muse Collection

Waterford Wedgwood plc

2007 annual report & accounts

Report of the Directors The Directors present their annual repor t together with the audited financial statements for the year ended 31 March 2007. PRINCIPAL ACTIVITIES

PRINCIPAL RISKS AND UNCERTAINTIES

Waterford Wedgwood is a luxury lifestyle Group. The Group’s business is divided into three primary segments. Waterford Crystal includes the manufacture and distribution of Waterford Crystal, Stuart Crystal, Edinburgh Crystal and Cashs Mail Order products. Ceramics Group includes the manufacture and distribution of ceramics products by Wedgwood, Royal Doulton and Rosenthal and the distribution of crystal products in certain markets. The third segment comprises Spring, a distributor of a range of premium cookware products and W-C Designs, a distributor of linen products including Waterford linens under a licence from Waterford Crystal.

Under Irish Company law (Statutory Instrument 116 of 2005 – European Communities (International Financial Reporting Standards and Miscellaneous Amendments) Regulations 2005), the Group is required to give a description of the principal risks and uncertainties which it faces and these are set out below: • The Group operates in markets that are affected by factors beyond the Group’s control including the performance of national economies. Luxury goods are typically discretionary purchases for consumers and so sales are sensitive to trends in the general economy. The recent economic uncertainty in the Group’s principal markets have adversely affected sales as consumers have reduced purchases of luxury items. • We face strong competition in various markets and if we fail to compete successfully market share may decline. Our products face increasing competition from products manufactured in countries with significantly lower labour costs. • A large part of the Group’s activities are in currencies other than the euro, most notably US dollars, UK pounds sterling and Japanese yen. Adverse changes in foreign exchange rates relative to the euro could adversely affect the Group’s competitive position, reported earnings and cash flow. • One of our key competitive advantages is the strength of our brands and hence the protection of the Group’s brand names is extremely important. Our competitive position could be adversely affected if we are unable to protect our intellectual property rights. • The Group needs to manage its portfolio of brands, patterns and designs, including the ongoing introduction of new innovative designs and patterns, on its own and through collaboration and through brand extensions and licensing arrangements. • Our sales are critically dependent on our ability to manage our inventory successfully to ensure that we have the correct products available and to avoid obsolescence. Fluctuations in our inventory levels, factory capacity, raw materials and labour costs could impact the carrying value of our inventory.

RESULT AND DIVIDENDS

The result for the financial year amounts to a loss of €71.2 million (2006: loss €188.9 million). No interim dividend was paid in the financial year ended 31 March, 2007. The Directors do not propose to pay a final dividend. REVIEW OF THE BUSINESS

Shareholders are referred to the Chairman’s Statement and Chief Executive’s Statement that contain a review of operations, the financial performance of the Group including key performance indicators and the outlook for 2008.

Raised Gold on Black Coffee Can & Stand from The Coppers Collection by Minton

• We depend on our suppliers of raw materials and outsourced products to meet our delivery requirements in a timely manner and to achieve our high quality standards. Any problems in either supply or quality could affect our sales and profitability. • In growing sales and reaching new customers we have to continue to develop complementary distribution channels to our traditional department store route. • We depend on efficient and effective management of manufacturing facilities to produce our product to our exacting standards and meet our sales demands. • Our ability to access additional financing to enable new investment in capital expenditure, working capital, acquisitions and dividends is affected by our indebtedness and related covenants. The Group has significant experience of dealing with these risks and achieving its objective of maintaining or developing strong positions in the markets in which it operates. In note 1 to the financial statements the Group sets out details of the current funding plans to ensure that there will be adequate liquidity to achieve these objectives. As a result of our growth, acquisitions and consolidation, we have become one of the leading designers, manufacturers and marketers of high quality crystal and ceramics, and one of the world’s leading luxury lifestyle goods companies.

FINANCIAL RISK MANAGEMENT

The Group recognises the importance of an effective financial risk management programme. The key objectives and policies of the Group in relation to financial risk management, including the use of hedging and the exposure of the Group to credit, liquidity, interest rate and foreign currency risks, are set out in note 28 to the financial statements. EVENTS SINCE THE YEAR-END

There have been no significant events affecting the Group since the year-end, other than those described in the Chief Executive’s statement and note 1 to the accounts. DIRECTORS

The names of the Directors holding office at the date of this report are shown on pages 10 and 11. The Directors retiring by rotation at this year’s Annual General Meeting are PJ Goulandris, Lady O’Reilly, PR O’Donoghue and DW Sculley who, being eligible, offer themselves for re-election. PR O’Donoghue and DW Sculley have consultancy contracts with the Group. During the year, the Company maintained liability insurance for its Directors and officers. Particulars of Directors’ emoluments, service contracts and their interests in the shares and share options of the Company are shown on pages 27 to 29 and note 7 to the financial statements. There were no changes in the Directors’ interests in the ordinary shares between the end of the financial year and 29 July, 2007.

Blue Butterfly Sauce Jug by Jasper Conran at Wedgwood

SUBSTANTIAL HOLDINGS

As at 29 July, 2007 the Company had been notified of the following interests in its issued share capital: Ordinary Shares

Birchfield Holdings Limited Stoneworth Investment Limited *Bank of Ireland Asset Management Araquipa International Limited Albany Hill Limited

Preference Shares

Holding

1,431,774,076 881,749,617 308,971,783 185,314,441 183,039,372

26.7 16.5 5.8 3.5 3.4

5,875,496 1,648,130 – 346,382 342,129

58.8 16.5 – 3.5 3.4

* The Directors have been advised that this shareholding is not beneficially owned but is held on behalf of clients, none of which, so far as the Directors are aware, hold more than 3% of the issued share capital of the Company. Save for the above, no person at that date has reported any material interest of 3% or more in the issued share capital of the Company.

Vases from Twist by Rosenthal Thomas

Waterford Wedgwood plc

2007 annual report & accounts

Report of the Directors continued

SHARE CAPITAL

EMPLOYMENT POLICIES

At 31 March, 2007 the issued share capital of the Group was €399.0 million, comprising 5,354,436,228 ordinary shares and 5,354,436,228 income shares in Waterford Wedgwood U.K. plc. Further details of share capital, changes in share capital and share options are set out in notes 24 and 27 to the financial statements.

The Group consistently endorses practices that demonstrate its commitment to a diverse employment base but which allows each of its businesses to adopt employment processes that reflect the needs of their own business sector. The Group is committed to ensuring that career opportunities are offered without discrimination and that: • All employees receive fair and equal treatment irrespective of gender, ethnic origin, age, nationality, marital status, religion, sexuality or disability; • The working environment is conducive to providing a safe and encouraging arena for all employees to develop at their own pace, to be treated with respect and to be free from sexual harassment and intimidation; • Disabled persons, whether registered or not, have equal opportunities when applying for vacancies, with due regard to their aptitudes and abilities. In addition to complying with legislative requirements, procedures ensure that disabled employees are fairly treated and that their training and career development needs are carefully managed.

RESEARCH AND DEVELOPMENT

The Group maintains design and development departments in its main divisions. Expenditure on design and development in the year amounted to €5.4 million. CORPORATE GOVERNANCE

The Company’s statement on Corporate Governance is set out on pages 20 to 23 and includes the statement on Corporate Social Responsibility. GOING CONCERN

After making appropriate enquiries and on the basis of current financial projections and facilities available and as explained in note 1 to the financial statements, the Directors have a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future and therefore prepared the financial statements on a going concern basis. CHARITABLE AND POLITICAL CONTRIBUTIONS

The Group donated €284,000 in charitable contributions during the year in the communities around the world in which it operates. The Group made no political donations and incurred no items of political expenditure that would require disclosure under the Electoral Act, 1997.

HEALTH AND SAFETY

Group companies actively work to identify and minimise all risks. They ensure that all reasonable precautions are taken to provide and maintain working conditions for employees and visitors alike, which are safe, healthy and in compliance with statutory requirements and appropriate codes of practice. In addition, to ensure that these objectives are met, the Group’s trading divisions employ health and safety advisers and occupational health staff on all major sites and ensure that up to date policies and statements of intent are regularly circulated to all employees and visitors as appropriate. This policy applied throughout the year.

EMPLOYEE INVOLVEMENT

Group companies are intent on motivating and keeping their staff informed on matters that concern them in the context of their employment and involve them through local consultative procedures. In those Group companies where there are recognition agreements with trade unions the consultation process is established through national and local trade union representatives and through joint consultation committees. Information on matters of concern to employees is also disseminated through conferences, meetings, publications and electronic media. AUDITORS

The Auditors, PricewaterhouseCoopers, will continue in office in accordance with Section 160(2) of the Companies Act, 1963. ANNUAL GENERAL MEETING

The notice of the Annual General Meeting accompanies this annual report. It is also available on the Company’s website: www.waterfordwedgwood.com On behalf of the Board:

Sir Anthony O’Reilly Chairman

Water Kettle by Spring

Peter B Cameron Chief Executive Officer 29 July 2007

Emerald/Blue Large Bowl from the ‘Marc Jacobs Waterford’ Peter Collection

Waterford Wedgwood plc

2007 annual report & accounts

Geo by John Rocha at Waterford Crystal

Bella Vase from Evolution by Waterford Crystal

Bolton Bowls from Grafton Street by Waterford Crystal

Footed Bowl, Angled Vase, Red & White Wine Stemware from Aura by Jasper Conran at Waterford Crystal

Juice Pitcher & Red Wine Stemware from Vintage Garden by Marquis

Waterford Crystal

Constantly evolving

Waterford Wedgwood plc

2007 annual report & accounts

Corporate Governance COMPLIANCE WITH THE COMBINED CODE

The Board is committed to maintaining the highest standards of Corporate Governance and supports the principles of Corporate Governance advocated by the Code. In this statement the Board describes its compliance with the Code’s provisions. THE BOARD

At 31 March, 2007 the Board consisted of a Chairman, a Chief Executive plus three executive directors and seven non-executive directors, one of whom, PJ Molloy, is the Senior Independent Director. The Directors are identified on pages 10 and 11 of this report.

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All of the Directors bring independent judgement to bear on issues of strategy, performance, resources, key appointments and standards. The Board has determined that each of the non-executive Directors is independent. In reaching that conclusion, the Board considered the principles relating to independence contained in the Combined Code and the guidance provided by a number of shareholder voting agencies. Those principles and guidance address a number of factors that might appear to affect the independence of Directors, including former service as an executive, extended service on the Board and crossdirectorships. However, they also make clear that a Director may be considered independent notwithstanding the presence of one or more of these factors. This reflects the Board ’s view that independence is determined by a Director’s character, objectivity and integrity. Where relevant, the Board took account of these factors and in each case was satisfied that the Director’s independence was not compromised. PR O’Donoghue, who was Chief Executive Officer of the Group until his retirement on 31 August 2005, has a consultancy contract with the Group. Since his retirement he is considered to be an independent non-executive Director as his contract covers discrete projects and does not extend to general management duties. DW Sculley also has a consultancy contract with the Group which relates to discrete projects mainly in the Ceramic division. The non-executive Directors are appointed for specified terms, the details of their respective appointments being as set out in the Report on Directors’ Remuneration on pages 27 and 28. The Board has a set schedule of meetings each year and may meet more frequently as required. For regular Board meetings, which are typically all-day meetings, the agenda usually comprises reports from the Group Chief Executive, supported by reports from the Chief Executive of each operating division and the Chief Financial Officer. The January Board

meeting focuses on an annual strategy review, the March/April meeting deals with the final sign off of operating budgets for the approaching financial year, while the May/June and November meetings cover the approval of preliminary and interim financial statements respectively. The practice is to have the agenda and supporting papers in Directors’ hands five clear days ahead of each meeting. It is inevitable that there will be occasions when circumstances arise to prevent Directors from attending meetings. In such circumstances, the usual practice is for the absent Director to review the Board papers with the Chairman and convey any views on specific issues. It should also be noted that the time commitment expected of non-executive Directors is not restricted to Board meetings. Time may be spent visiting the Group’s businesses and attending Company conferences. In addition, they are always available for consultation on specific issues falling within their particular fields of expertise. The duties of the Board and its committees are set out in formal terms of reference that are reviewed regularly and state the items specifically reserved for decision by the Board. The Board establishes overall Group strategy, including new activities and withdrawal from existing activities. It approves the Group’s commercial strategy and the operating budget and monitors divisional performance through the receipt of monthly reports and management accounts. The approval of acquisitions is a matter reserved for the Board. Similarly, there are authority levels covering capital expenditure which can be exercised by the Group Chief Executive or by the Chairman and Group Chief Executive jointly. Beyond these levels of authority, projects are referred to the Board for approval. Other matters reserved to the Board include: • Treasury • Control, audit and risk management • Remuneration • Pension Schemes • Corporate Social Responsibility • The appointment or removal of the Company Secretary The division of responsibilities between the Chairman and the Group Chief Executive is clearly established. The Chairman and the Company Secretary work closely together in planning a forward programme of Board meetings and establishing their agendas. As part of this process, the Chairman ensures that the Board is supplied in a timely manner with information in a form and of a quality to enable it to discharge its duties. There is in place a procedure under which the Directors, in furtherance of their duties, are able to take professional advice, if necessary, at the

Company’s expense. The Company Secretary is responsible for ensuring that Board procedures are followed and all Directors have access to his advice and services. The Board regularly reviews the chairmanship of its committees, and while noting suggestions about limits to the periods that a Director should serve, the Board nevertheless considers that in certain circumstances it can be appropriate for a Director to be a member of the same Board committee for more than six years. KC McGoran, who has been a Director since 1990, has been a member of the Audit Committee since his appointment. The Board will make recommendations to shareholders for the reelection of non-executive Directors for terms beyond six years only after careful and deliberate review. Performance appraisal The Senior Independent Director conducts an annual review of the operation and performance of the Board and its committees through discussions with each Director. Performance is assessed against a number of measures, including the ability of the Director to contribute to the development of strategy, to understand the major risks affecting the Group, to contribute to the cohesion of the Board, to commit the time required to fulfill the role, and to listen to and respect the views of other Directors and the management team. DIRECTORS’ INDEPENDENCE AND BOARD BALANCE

At 31 March 2007 there were eleven Directors on the Board, excluding the Chairman, four of whom are executive Directors and seven of whom are nonexecutive Directors determined by the Board to be independent. This satisfies the Combined Code requirement that at least half the Board, excluding the Chairman, should comprise non-executive Directors determined by the Board to be independent. The Board has established a Remuneration and Nomination Committee that leads the process for considering Board appointments and conditions of employment of executive Directors and senior managers. The members of the Committee are Sir Anthony O’Reilly, PJ Goulandris and KC McGoran. The Company Secretary is the Secretary to the committee. The committee’s terms of reference include the following duties in relation to Board appointments: • To review regularly the structure, size and composition (including the skills, knowledge and experience) required of the Board compared to its current position and make recommendations to the Board with regard to any changes; • To give full consideration to succession planning for Directors and other senior executives, taking into account the challenges and opportunities facing the Company; • To be responsible for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise; • To evaluate the balance of skills, knowledge and experience on the Board, before making an appointment.

The committee’s terms of reference in relation to remuneration are set out in the Report on Directors’ Remuneration on pages 27 and 28. The terms and conditions of appointment of non-executive Directors are available for inspection by any person at the Company’s registered office during normal business hours and at the Annual General Meeting (for 15 minutes prior to the meeting and during the meeting). The Group ensures that all Directors receive appropriate induction on joining the Board under an approach that seeks to match the Director’s needs and experience. The Company Secretary is responsible for advising the Board on all corporate governance matters. All Directors are subject to re-election by shareholders at the first opportunity after their appointment and, thereafter, in accordance with the Company’s Articles of Association. This ensures compliance with the Code by providing that all Directors are required to submit themselves for re-election at least every three years. As indicated earlier, the non-executive Directors are appointed for specified terms. The non-executive Directors retiring by rotation this year are PJ Goulandris, Lady O’Reilly, PR O’Donoghue and DW Sculley. Although the Combined Code suggests that non-executive Directors who serve for more than nine years should be subject to annual re-election, the Group considers that its policy of appointment for three years remains appropriate. ACCOUNTABILITY AND AUDIT

It is a requirement of the Code that the Board should present a balanced and understandable assessment of the Company’s position and prospects, a requirement that extends to interim and other price sensitive public reports and to reports to regulators as well as to information required to be presented by statutory requirements. In this context, reference should be made to the Statement of Directors’ Responsibilities on page 26 and to the Independent Auditors’ Report on page 33, which includes a statement by the auditors about their reporting responsibilities. INTERNAL CONTROL

The Board acknowledges that it is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss. Following publication of guidance for Directors on internal control (The Turnbull Guidance) the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group as follows: Risk assessment: • The Group sets out its objectives as part of its medium-term planning process. These objectives are then incorporated as part of the budgeting and planning cycle.

Waterford Wedgwood plc

2007 annual report & accounts

Corporate governance continued

Control environment and control activities: • The Group consists of a number of major trading divisions each with its own management and control structures with established procedures for delegated authority. • The Group has implemented appropriate strategies to deal with risks including not only internal controls but also other approaches such as insurance and specialised treasury instruments. • The divisions operate within a framework of policies and procedures and personnel are required to comply with these procedures. Information and communication: • The Group has a comprehensive system of budgetary control including monthly performance reviews for each major business and division. Monitoring: • A range of procedures is used to monitor the effective application of internal control in the Group including control self-assessment, management confirmation of compliance with standards and internal audit reviews. • The internal audit department’s responsibilities include reporting to the Audit Committee on the effectiveness of internal control systems. The process set out above, which has been the basis for the Board’s annual review of the effectiveness of internal control, was in place for the year ended 31 March 2007 and was also in place at the date of this report.

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The Board has established an Audit Committee consisting of three non-executive Directors considered by the Board to be independent. They are KC McGoran (Chairman), PR O’Donoghue, and PJ Molloy. The committee has at least one member possessing what the revised Code describes as recent and relevant experience. KC McGoran, a chartered accountant, was Group Chief Financial Officer of the Jefferson Smurfit Group. It can also be seen from the Directors’ biographical details appearing on pages 10 and 11, that the other members of the Committee bring to it a wide range of experience. The main role and responsibilities of the committee are set out in written terms of reference which encompass those set out in the revised code, i.e, • To monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance, reviewing significant financial judgments contained therein; • To review the Company’s internal financial controls and its internal controls and risk management systems; • To monitor and review the effectiveness of the Company’s internal audit function; • To make recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and to approve the terms of engagement of the external auditors; • To monitor and review the external auditors’ independence and objectivity and the effectiveness of the external audit process taking into consideration relevant professional and regulatory requirements; • To develop and implement policy on the engagement of the external auditors to supply

non-audit services, taking into account relevant ethical guidance regarding the provision of nonaudit services by the external auditor and to report to the Board. The terms of reference including the committee’s role and the authority delegated to it by the Board were reviewed and updated to reflect more fully the principles and provisions of the revised Combined Code. These are available on request from the Company Secretary. The Audit Committee’s responsibilities are discharged in the following manner: • At its meetings in May and November, the focus falls on a review of the Preliminary Announcement/Annual Report and Financial Statements and the Interim Announcement respectively; • A quarterly report from the Group Internal Auditor is presented at each of the scheduled meetings; • The external auditors present their audit plan at the March meeting; • Group companies may, from time to time, be required to make presentations to the committee. The committee also reviewed the Group’s whistleblowing procedures ensuring that appropriate arrangements were maintained for employees to be able to raise matters of possible impropriety in confidence with suitable follow up action. In addition the committee annually reviews the effectiveness of the Group’s system of internal controls. External auditor As noted above, one of the duties of the Audit Committee is to make recommendations to the Board in relation to the appointment of the external auditor. The committee, in assessing whether to recommend the auditor for re-appointment, takes a number of factors into account. These include: • The quality of the audit work undertaken in terms of planning, execution and reporting to the Audit Committee and the Board; • The quality of advice provided to the Company and the Board; • The level of understanding demonstrated of the Group’s businesses and its sectors; • The objectivity of the auditor’s views on the controls around the Group; • The ability to co-ordinate a global audit working to tight deadlines. In addition, the Audit Committee has an important role to play through its responsibility for and oversight of the auditor relationship and auditor independence. The Committee recognises that auditor independence is an essential part of the audit framework and the assurance it provides. The non-audit fees paid to PricewaterhouseCoopers (PwC) continue to be significant in relation to the audit fee as set out in note 3 to the financial statements, and the committee, while it has approved those services which have been awarded to PwC, recognises a duty to explain to shareholders the processes it has put in place to ensure that the independence of the auditors has not been compromised.

There are guidelines covering the type of non-audit work that can be assigned to auditors and the procedures for approval of fees relating to these services: • Further assurance services – the auditors’ deep knowledge of the Group’s affairs means that they may be best placed to carry out such work. This extends to, but is not restricted to, shareholder and other circulars, regulatory reports, and on occasions, work in connection with acquisitions and disposals; • Taxation services – the auditors’ knowledge of the Group’s affairs often provides significant advantages that other parties would not have; • General – in other circumstances, the decisions to award work are taken on the basis of demonstrable competence and cost effectiveness. The Committee receives regular periodic reports providing details of assignments and related fees carried out by the auditors in addition to their normal work, and these are reviewed against the above guidelines. During the year PwC has provided non-audit services in connection with the new financing arrangements. The external auditors attend the audit planning and post audit meetings. The Group Internal Auditor normally attends all meetings where internal control is discussed. In addition, the committee meets the external auditors without management present. RELATIONS WITH INSTITUTIONAL SHAREHOLDERS

The Company recognises the importance of communicating with its shareholders and does this through its Annual and Interim Reports, at the Annual General Meeting and through the processes described below.

Although most shareholder contact is with the Group Chief Executive and the Chief Financial Officer, supported by management, it is the responsibility of the Board as a whole to ensure that a satisfactory dialogue with shareholders takes place. All Directors normally attend the Annual General Meeting and are available to answer shareholders’ questions. Voting at the Annual General Meeting is by way of a show of hands by members present at the meeting unless a poll is validly called. Following each vote on a show of hands, the level of proxies lodged on each resolution and the balance for and against the resolution is announced. CORPORATE SOCIAL RESPONSIBILITY

The Company interprets the phrase Corporate Social Responsibility (CSR) to imply taking due regard of society’s expectations of large companies. The range of issues commonly embraced by the term CSR is extremely wide and the principal CSR issues relating to the Group are: • Labour, environmental and social practices in the Group’s supply chain; • Providing a working environment for the recruitment and retention of the widest possible range of talented staff; • Protection of consumer privacy and the proper handling and use of customer information; • Provision of a safe and healthy place of work; • Providing products of the appropriate quality, including product safety and reliability; • Serving customers to their complete satisfaction; • The demands that the Group makes upon the environment, principally through its use of energy and bulk materials; • Opportunities to develop strong community relationships in support of our business objectives. As far as possible, the Company seeks to include the understanding and control of these issues in its mainstream business practice.

Attendance at meetings Board A

Audit B

Sir Anthony O’Reilly

PB Cameron

J Foley

PJ Goulandris

OC Küsel

KC McGoran

PJ Molloy

PR O’Donoghue

Lady O’Reilly

DW Sculley

FA Wedgwood

Lord Wedgwood

Waterford Wedgwood plc

Column A indicates the number of meetings held during the period the Director was a member of the Board and/or Committee Column B indicates the number of meetings attended during the period the Director was a member of the Board and/or Committee The Chief Executive Officer and Chief Financial Officer have also attended Audit Committee meetings by invitation There were no meetings of the Nomination and Remuneration Committee during the year

2007 annual report & accounts

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Waterford Wedgwood plc

2007 annual report & accounts

Statement of Directors’ responsibilities in relation to accounts The Directors are responsible for preparing the annual report and the Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) and IFRIC interpretations endorsed by the European Union and with those parts of the Companies Act, 1963 to 2006 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation. The Directors are also responsible for preparing the parent Company financial statements in accordance with applicable Irish Law and Generally Accepted Accounting Practice in Ireland including the accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland. Irish company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgments and estimates that are reasonable and prudent; • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. In addition the Directors are required to state that the Group financial statements comply with IFRS. The Directors confirm that they have complied with the relevant requirements in preparing the Group and parent Company financial statements.

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The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the parent Company financial statements are prepared in accordance with accounting standards generally accepted in Ireland and with Irish statute comprising the Companies Acts 1963 to 2006 and enable them to ensure that the Group financial statements are prepared in accordance with IFRS and IFRIC interpretations endorsed by the European Union and with those parts of the Companies Act, 1963 to 2006 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The measures taken by the Directors to secure compliance with the Company’s obligation to keep proper books of account are the use of appropriate systems and procedures and employment of competent persons. The books of account are kept at Waterford Wedgwood plc, Barlaston, Stoke-on-Trent, Staffordshire, ST12 9ES, England. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Report on Directors’ remuneration

NOMINATION AND REMUNERATION COMMITTEE

REMUNERATION POLICY

Both the level and structure of executive Directors’ remuneration are decided by the Nomination and Remuneration Committee. The Committee has written terms of reference that are available on request from the Company Secretary. The members of the Committee are Sir Anthony O’Reilly, Peter John Goulandris and Kevin C McGoran. The Chairman, while a member of the Remuneration Committee, is not involved in any discussions on his remuneration. The remuneration of non-executive Directors and the Chairman is a matter reserved for the board as a whole. The Chairman waived his fees in 2007 and 2006. No Director is involved in any discussions as to his or her own remuneration.

The four tenets on which the Group’s remuneration structure is founded are as follows:

The committee’s principal duties in relation to Directors’ remuneration are to: • Determine and agree with the Board the policy for the remuneration of the Group Chief Executive, the Chairman of the Board, the executive Directors, and such other senior executives as are designated appropriate to include. • Set remuneration policy to ensure that members of executive management are provided with appropriate incentives to encourage performance and are rewarded for their individual contributions to the success of the Company in a fair and responsible manner. • Approve the design of, and determine targets for, any performance-related pay schemes operated by the company and approve the total annual payments made under such schemes. • Monitor and approve the total remuneration package of each executive Director, within the terms of the agreed policy. In making its decisions, the committee takes advice from the Group Chief Executive who is invited to attend meetings of the committee as and when appropriate.

• Base pay levels are established on a market competitive basis but no higher than this. • Benefits (for example pensions and cars) are provided on a basis that is appropriate to the local market in which the Director is employed. • Performance related incentives provide the opportunity to deliver substantial rewards for high performance. • Wherever reasonable, pay is aligned to shareholders’ interests. This is reflected in the choice of performance standards applied to incentive awards. Salaries are set on the basis of mid-market practice amongst relevant companies of comparable size. Performance related incentives are targeted at upper quartile levels for outstanding performance to produce a highly leveraged package.

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PERFORMANCE LINKAGES

Each element in the reward package is designed to support the achievement of different corporate objectives. (a) Base salary The base salaries are derived from market rates and from peer group data. Before making a final decision on individual salary awards, the Committee assesses each Director’s contribution to the business, to reflect individual performance. (b) Annual bonus To reward annual performance, executive directors are eligible for an annual incentive for substantially exceeding targets. (c) Pensions and other benefits Pensions are offered in line with local competitive practice. Normal retirement age for Directors varies across the Group between 60 and 65 years. The pension arrangements broadly provide a pension of two thirds of final pensionable salary, life assurance at four times salary and ill health and dependants’ pensions. Incentive payments (such as annual bonuses) are not pensionable. Cars are provided on a basis that is consistent with competitive practice. Executive Directors are eligible to participate in the company’s Savings Related Share Option Scheme.

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(d) Service contracts No executive Directors have service contracts other than OC Küsel. The key terms of his service contract are disclosed below.

Waterford Wedgwood plc

2007 annual report & accounts

Report on Directors’ remuneration continued

DIRECTORS’ EMOLUMENTS , SHARE

COMBINED CODE

OPTIONS AND RETIREMENT BENEFITS

The constitution and operation of the committee is in compliance with the principles of good governance and Code of Best Practice set out in the Listing Rules of the Irish Stock Exchange.

Details of Directors’ emoluments, options granted to executive Directors under the Company’s executive share option schemes and Directors’ retirement benefits are set out in note 7 to the financial statements.

DIRECTORS’ AND COMPANY SECRETARY’S INTERESTS

DIRECTORS’ SERVICE CONTRACTS

OC Küsel has a service contract that expires on 31 December 2010. No other executive Director has a service contract. DW Sculley has, through Wellspring Holdings Inc, a contract to provide consulting services for an annual fee of US$400,000. PR O’Donoghue has a contract to provide consulting services for an annual fee of €150,000.

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The Chairman and the non-executive Directors do not have service contracts and their appointment may be terminated at any time without compensation. Non-executive Directors are appointed for specific terms of three years and the appointment is reviewed at the end of each three-year term.

The beneficial interests of the Directors and of the Company Secretary in the Ordinary and Preference shares of the Company are shown below. The Directors and Company Secretary have no interests in any of the Company’s subsidiaries. Information on share options held by the Directors and Company Secretary can be found in note 7 to the financial statements.

Number of ordinary shares 31 March 2007

31 March 2006

Number of preference shares 29 July 2007

31 March 2007

DIRECTORS

Sir Anthony O’Reilly (note 1) PB Cameron J Foley

–

17,000,000

13,000,000

31,775

–

775,745

630,294

1449

–

PJ Goulandris (note 1)

–

OC Küsel

–

KC McGoran

478,444

388,736

894

–

PJ Molloy

683,517

555,358

1277

–

9,162,624

7,444,634

17,124

–

DW Sculley

2,601,217

–

FA Wedgwood

1,743,190

–

249,421

183,963

406

–

1,680,763

1,371,103

1500

–

PR O’Donoghue Lady O’Reilly (note 1)

Lord Wedgwood

COMPANY SECRETARY

PJ DOWLING

Note 1 – Sir Anthony O’Reilly, Lady O’Reilly and Peter John Goulandris have each disclosed an interest in the shares of the Company pursuant to section 53 of the Companies Act, 1990. • Albany Hill Limited, a company controlled by Sir Anthony O’Reilly, Lady O’Reilly and Peter John Goulandris, has an interest in 183,039,372 shares in the Company. On 26 June 2007, Albany Hill Limited acquired an interest in 342,129 Preference Shares (with Warrants attached) under the Preference Share Open Offer. • Indexia Holdings Limited, a company 100% owned by Sir Anthony O’Reilly, has disclosed an interest in 4,585,872 shares in the Company. On 26 June 2007, Indexia Holdings Limited acquired an interest in 8,571 Preference Shares (with Warrants attached) under the Preference Share Open Offer. • Araquipa International Limited, a company 100% controlled by Peter John Goulandris, has disclosed an interest in 185,314,441 shares of the Company. On 26 June 2007, Araquipa International Limited acquired an interest in 346,382 Preference Shares (with Warrants attached) under the Preference Share Open Offer. • Cressborough Holdings Limited, a company controlled by Peter John Goulandris, has disclosed an interest in 62,885,176 shares in the Company. On 26 June 2007, Cressborough Holdings Limited acquired an interest in 117,542 Preference Shares (with Warrants attached) under the Preference Share Open Offer. • Sir Anthony O’Reilly and Peter John Goulandris disclosed a further interest in shares in the Company derived from the 881,749,617 shares registered in the name of Stoneworth Investment Limited which is owned and controlled by a company owned and controlled by Sir Anthony O’Reilly holding approximately 49% and a company owned and controlled by Peter John Goulandris also holding approximately 49%. On 26 June 2007, Stoneworth Investment Limited acquired an interest in 1,648,130 Preference Shares (with Warrants attached) under the Preference Share Open Offer. • Sir Anthony O’Reilly and Peter John Goulandris disclosed a further interest in shares in the Company derived from the 1,431,774,076 shares registered in the name of Birchfield Holdings Limited, a company in which an entity owned and controlled by Sir Anthony O’Reilly holds 50% and an entity owned and controlled by Peter John Goulandris holds 50%. On 26 June 2007, Birchfield Holdings Limited acquired an interest in 5,875,496 Preference Shares (with Warrants attached) under the Preference Share Open Offer. All of the above interests remained unaltered between 1 April 2007 and 29 July 2007 other than as indicated above.

Waterford Wedgwood plc

2007 annual report & accounts

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Waterford Wedgwood plc

2007 annual report & accounts

Accounts

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33 34 40 41 43 43 44 81 82 82 83

Independent auditors’ report to the members of Waterford Wedgwood plc We have audited the Group and parent Company financial statements of Waterford Wedgwood plc for the year ended 31 March 2007 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Recognised Income and Expense, the Company Statement of total Recognised Gains and Losses and the related notes. These financial statements have been prepared under the accounting policies set out therein.

We read the other information contained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the Report of the Directors, the Chairman’s Statement, the Chief Executive’s Statement, the Statement of Directors’ responsibilities in relation to the accounts, the Report on Directors’ Remuneration and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

These Directors’ responsibilities for preparing the annual report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and for preparing the parent Company financial statements in accordance with applicable Irish law and the accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland), are set out in the Statement of Directors’ Responsibilities.

BASIS OF AUDIT OPINION

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

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 financial statements 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 financial statements.

We report to you our opinion as to whether the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, and have been properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2006 and Article 4 of the IAS Regulation. We report to you our opinion as to whether the parent Company financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, and have been properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2006. We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit, and whether the parent Company financial statements are in agreement with the books of account. We also report to you our opinion as to: • whether the Company has kept proper books of account; • whether the Report of the Directors is consistent with the financial statements; and • whether at the balance sheet date there existed a financial situation which may require the Company to convene an Extraordinary General Meeting of the Company; such a financial situation may exist if the net assets of the Company, as stated in the Company balance sheet, are not more than half of its called-up share capital. We also report to you if, in our opinion, any information specified by law or the Listing Rules of the Irish Stock Exchange regarding Directors’ remuneration and Directors’ transactions is not disclosed and, where practicable, include such information in our report. We review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Irish Stock Exchange, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s Corporate Governance procedures or its risk and control procedures.

Waterford Wedgwood plc

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

OPINION

In our opinion: • the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2007 and of its loss and cash flows for the year then ended; • the Group financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006 and Article 4 of the IAS Regulation; • The parent Company financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of the parent Company’s affairs as at 31 March 2007; • the parent Company financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006. We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The Company balance sheet is in agreement with the books of account. In our opinion the information given in the Report of the Directors is consistent with the financial statements. The net assets of the Company, as stated in the Company balance sheet are more than half of the amount of its called-up share capital and, in our opinion on that basis there did not exist at 31 March 2007 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would require the convening of an Extraordinary General Meeting of the Company. PricewaterhouseCoopers Chartered Accountants and Registered Auditors Dublin 29 July 2007

2007 annual report & accounts

Group accounting policies under IFRS The significant accounting policies adopted by the Group are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. BASIS OF PREPARATION

The consolidated financial statements of Waterford Wedgwood plc have been prepared in accordance with EU adopted International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and with those parts of the Companies Acts 1963 to 2006 applicable to companies reporting under IFRS. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting assumptions. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas requiring a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, relate primarily to accounting for inventory, retirement benefit obligations and indefinite life intangible assets and are documented in the relevant notes. HISTORICAL COST CONVENTION

The consolidated financial statements, which are presented in euro millions to one decimal place, have been prepared under the historical cost convention, except for the measurement, at fair value, of share options and derivative financial instruments. BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of the Company and its subsidiary undertakings. Subsidiary undertakings are included in the consolidated financial statements from the date on which control over the operating and financial policies is obtained and cease to be consolidated from the date on which control is transferred out of the Group. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in determining the existence or otherwise of control. All intra-group balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group.

(i) Sale of goods – wholesale Sales of goods are recognised when a Group entity has delivered the products, the significant risks and rewards of ownership have passed to the customer and the collectibility of the related receivable is reasonably assured. (ii) Sale of goods – retail sales through owned stores, concessions and outlets Sales of goods are recognised when a Group entity sells a product to the consumer, net of sales taxes, discounts and returns. (iii) Retail sales through the internet and mail order catalogue Sales of goods are recognised upon shipment of the product to the consumer, net of sales taxes, discounts and returns. (iv) Royalty income Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements. (v) Interest income Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate over the period of expected maturity. (vi) Property transactions Revenue from the sale of property, plant and equipment is recognised where there is an unconditional and irrevocable contract for sale. FOREIGN CURRENCY TRANSLATION

The financial statements of each of the Group’s entities are measured using the currency that reflects the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in euro, which is the Company’s functional and presentation currency. Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange at the balance sheet date. All translation differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreign entity. The effective portions are taken directly to equity together with the exchange difference on the net investment in the foreign entity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Any ineffectiveness is taken directly to the income statement.

SEGMENT REPORTING

A business segment is a group of assets and operations engaged in providing products that are subject to risks and returns that are different from those of other business segments. A geographic segment is engaged in providing products within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The Group’s primary format for segment reporting is business segments and the secondary format is geographic segments. This is reflected by the Group’s management and organisational structure and the Group’s internal financial reporting systems. The Group’s subsidiaries operate in three business segments: Waterford Crystal, Ceramics Group and W-C Designs & Spring. The Group’s subsidiaries operate in five geographic segments: UK, Europe excluding the UK, North America, Far East and the rest of the world.

On consolidation, the results and cash flows of subsidiary undertakings, whose functional currency is not the euro, are translated into euro at average exchange rates for the year, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. Translation differences arising on translation of the results of noneuro subsidiary undertakings at average rates, and on the restatement of the opening net assets at closing rates, are dealt within a separate foreign currency translation reserve within equity, net of differences on related currency borrowings designated as hedges. All other translation differences are taken to the income statement. The cumulative currency translation differences arising prior to the IFRS transition date (1 April 2004) have been set to zero for the purposes of ascertaining the gain or loss on disposal of a non-euro subsidiary undertaking subsequent to 1 April 2004.

REVENUE AND OTHER INCOME

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services by the Group in the ordinary course of business to external customers for goods and services supplied, exclusive of trade and volume discounts, sales rebates and sales taxes. Revenue and other income is recognised as follows:

INCOME TAX

Current tax Current tax represents the expected tax payable (or recoverable) on the taxable profit or loss for the year using tax rates enacted or substantively enacted at the balance sheet date and taking into account any adjustments arising from prior years. Taxable profit

Group accounting policies under IFRS continued differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. Current tax for the current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount payable, the excess is recognised as an asset.

Deferred income tax Deferred income tax assets/liabilities are provided, using the liability method, on all temporary differences apart from initial recognition exemptions between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Specifically a deferred tax asset is recognised for the carry-forward of unused tax losses and unused tax credits only to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. Deferred income tax assets and liabilities are not subject to discounting and are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred tax is not recognised on the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit. In accordance with IAS 12, “Income Taxes”, deferred income tax assets or liabilities are not recognised for temporary differences associated with investments in subsidiaries, to the extent that the timing of the reversal is controlled by the parent Company, and it is probable that reversal will not occur in the foreseeable future.

which is assessed as at the date of grant. The share options granted by the Company are subject to certain market based vesting conditions as defined in IFRS 2. Non-market vesting conditions are not taken into account when estimating the fair value of share options as at the date of grant; such conditions are taken into account through adjusting the number of equity instruments included in the measurement of the transaction so that, ultimately, the amount recognised equates to the number of equity instruments that actually vest. The expense in the income statement in relation to share options represents the product of the total number of options expected to vest and the fair value of those options. The resulting amount is allocated to accounting periods over the vesting period. Given that the performance conditions underlying the Group’s share options are nonmarket in nature, the cumulative charge to the income statement is reversed only when the performance condition is not met or where an employee in receipt of share options relinquishes service prior to completion of the expected vesting period. The proceeds received by the Company on the exercise of share options are credited to share capital and share premium. In line with the transitional arrangements set out in IFRS 2, “Share-based Payment”, the recognition and measurement principles of this standard have been applied only in respect of share entitlements granted after 7 November 2002 and that had not vested at 1 January 2005. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in IFRS 2. RESEARCH EXPENDITURE

Expenditure on research is charged to the income statement in the year in which it is incurred. BUSINESS COMBINATIONS

Deferred tax income or expense is reported in the income statement if it relates to items that are reported in the income statement. For items that are recognised in equity, the related deferred tax is also recognised in equity. DIVIDENDS

Final dividends are recognised as a liability when the shareholders’ right to receive the payment is established by approval at the Annual General Meeting. Interim dividends are recognised in the Group’s financial statements on a cash-paid basis. SHARE CAPITAL

Ordinary and income shares are classified as equity. Costs directly attributable to the issue of new equity shares or options are shown in equity as a deduction.

The purchase method of accounting is employed by the Group in accounting for the acquisition of subsidiary undertakings. The Group has availed of the exemption under IFRS 1, “First-time Adoption of International Financial Reporting Standards”, whereby business combinations prior to the transition date of 1 April 2004 are not restated. IFRS 3, “Business Combinations”, has been applied with effect from the transition date of 1 April 2004 and goodwill amortisation ceased from that date. The cost of a business combination is measured as the aggregate of the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued in exchange for control, together with any directly attributable expense. In the case of business combinations, the assets and liabilities are measured at their provisional fair values at the date of acquisition. Adjustments to provisional values allocated to assets and liabilities are made within twelve months of the acquisition date and reflected as a restatement of the acquisition balance sheet.

SHARE-BASED PAYMENT TRANSACTIONS

For equity-settled share-based payment transactions (i.e. the granting of share options), the Group measures the services received and the corresponding increase in equity at fair value at the measurement date (which is the grant date) using a recognised valuation methodology for the pricing of financial instruments (Binomial model). Given that the share options granted do not vest until the completion of a specified period of service and are subject to the realisation of certain performance conditions, the fair value is determined on the basis that the services to be rendered by employees as consideration for the granting of share options will be received over the vesting period,

Waterford Wedgwood plc

GOODWILL

Goodwill arising in respect of acquisitions completed prior to 1 April 2004 (“transition date”) is included at its carrying value as recorded under Irish GAAP. In line with the provisions applicable to a first-time adopter under IFRS, the accounting treatment of business combinations undertaken prior to the transition date has not been reconsidered in preparing the opening IFRS balance sheet as at 1 April 2004 and goodwill amortisation has ceased with effect from the transition date. Goodwill written off to reserves under Irish GAAP prior to 1 January 1998, has not been reinstated and is not included in determining any

2007 annual report & accounts

Group accounting policies under IFRS continued subsequent profit or loss on disposal of a subsidiary undertaking. Goodwill on acquisitions is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events, or changes in circumstances, indicate that the carrying value may be impaired. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss of the disposal. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained. INTANGIBLE ASSETS OTHER THAN GOODWILL

An intangible asset is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that it can be measured reliably. (a) Trademarks, brands and mailing lists Trademarks, brands and mailing lists acquired separately are recognised at cost and intangible assets acquired in the course of a business combination are recognised at fair value being their deemed cost at the date of acquisition. Following initial recognition, trademarks, brands and mailing lists, which have a finite life, are carried at cost less any accumulated amortisation and accumulated impairment losses. The useful lives applied are: Trademarks and brands 20 years Mailing lists 5 years (b) Computer software Acquired computer software licences are recognised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of four to six years. Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. The amortisation of intangible assets is calculated to write-off the carrying value of intangible assets over their useful lives, on a straight-line basis, on the assumption of zero residual value. IMPAIRMENT OF ASSETS

Assets that have an indefinite useful life are not subject to amortisation and they are tested for impairment annually and whenever there is an indication that the asset may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment loss recognised is the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Where an asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. If an impairment loss is recognised for a cash generating unit, it is allocated to reduce the carrying amount of the assets of the unit in the following order: (i) first, to reduce the carrying amount of any goodwill allocated to the cash generating unit; and (ii) then, to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. FINANCIAL ASSETS

Financial assets which comprise primarily deposits and receivables are initially recorded at fair value and subsequently measured at amortised cost using the effective interest rate less provision for impairment. Financial assets are reviewed for impairment annually or more frequently if events, or changes in circumstances, indicate that the carrying value may be impaired. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, or deemed cost, less accumulated depreciation and impairment losses. The Group’s properties in the United Kingdom and Ireland were revalued to fair value in 1997 and are measured on the basis of deemed cost being the revalued amount at the date of revaluation less accumulated depreciation up to the date of transition (1 April 2004). Property, plant and equipment, excluding freehold land, are depreciated over their estimated useful economic lives on a straight-line basis at the following lives: Freehold buildings Leasehold buildings Plant and equipment

25 to 50 years Period of the lease 4 to 30 years

The residual value and useful economic lives of property, plant and equipment are reviewed and adjusted, if necessary, at each balance sheet date. The carrying values of the Group’s property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. An impairment loss is recognised through the income statement whenever the carrying value of an asset, or its cash generating unit, exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Subsequent expenditure relating to an existing asset is included in an asset’s carrying value or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the replaced item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the financial period in which they are incurred. The profit or loss on the disposal of an asset is calculated as the difference between the net sale proceeds and the net book value and is included in the income statement in the year the item is sold.

Group accounting policies under IFRS continued NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

Non-current assets are classified as held for sale if their carrying value will be recovered through a sale transaction rather than through continuing use. This condition is met if the sale is highly probable, the asset is available for immediate sale in its present condition and management is committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of carrying value and fair value less costs of disposal.

borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost employing the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the use of the effective interest rate method. Costs incurred in relation to makewhole payments are recognised in the income statement in the year in which they are incurred. Termination costs are charged in the income statement in the year in which they are incurred.

DISCONTINUED OPERATIONS

A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held for sale, and (a) represents a separate major line of business or geographical area of operations; (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale. CAPITAL AND REVENUE GRANTS

Capital grants are recognised within the financial statements, only when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Capital grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis.

FINANCING COSTS

Financing costs comprises interest on borrowings, interest component of finance leases, bank charges, and amortised debt issue costs. Interest payable on borrowings and the interest expense component of finance lease payments is calculated using the effective interest rate method. Interest receivable on funds invested is calculated on an accruals basis using the effective rate method. LEASES

INVENTORIES

Where property, plant and equipment is financed by leasing arrangements, which transfers substantially all the risks and rewards incidental to ownership (“finance leases”), they are recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present values of the minimum lease payments. The corresponding obligations are shown in the balance sheet as finance lease obligations. Where the Group has entered into lease arrangements on land and buildings, the lease payments are allocated between land and buildings and each is assessed separately to determine whether it is a finance or operating lease.

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost formula. In the case of finished goods and work in progress manufactured by the Group, cost comprises the cost of direct materials, direct labour and a proportion of manufacturing overhead based on normal operating capacity. In the case of other inventories, cost is ascertained by reference to purchase price plus freight and duty where appropriate.

Depreciation on property, plant and equipment is calculated in order to write-off the amounts recognised over the shorter of the estimated useful economic lives of the individual assets or the terms of the lease. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to completion and estimated costs necessary to make the sale.

Profits or losses realised on sale and leaseback transactions are deferred to the balance sheet and are amortised through the income statement over the life of the related finance lease.

TRADE AND OTHER RECEIVABLES

When the unavoidable costs of meeting obligations under a leasehold property contract exceed the economic benefits expected to be received under it, the lease obligation is defined as onerous and the present obligation under the lease is recognised and measured as a provision. Provision is made for management’s best estimate of the net outgoings through to the termination of the lease, discounted at an appropriate discount rate.

Revenue grants that become receivable as compensation for expenses or losses already incurred, or for the purpose of giving immediate financial support to the Group with no further related costs, shall be recognised as income of the period in which it becomes receivable.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. The amount of the provision is the difference between the carrying amount and the present value of future cash flows. Bad debts are written off when identified. CASH AND CASH EQUIVALENTS

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits. Bank overdrafts that are repayable on demand and form part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. BORROWINGS

All loans and borrowings are initially recorded at fair value of the consideration received net of transaction costs associated with the

Waterford Wedgwood plc

Leases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. EXCEPTIONAL ITEMS

Exceptional items are those items of income and expense that the Group considers are material and/or of such a nature that the separate reporting of the exceptional item helps to provide a better indication of the Group’s underlying business performance. Events which may give rise to the classification as exceptional include the restructuring of businesses, gains or losses on disposals of businesses and asset impairments.

2007 annual report & accounts

Group accounting policies under IFRS continued 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, it is probable that an outflow of economic benefits would be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditure expected to be required to settle the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognised as a financing cost. The Group recognises a provision for restructuring when it has a detailed formal plan for the restructuring identifying at least: • the business or part of a business concerned; • the principal locations affected; • the locations, function and approximate number of employees who will be compensated for terminating their services; • the expenditures that will be undertaken; • when a plan will be implemented; and • a valid expectation on those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS

The Group operates a number of defined benefit pension schemes, which require contributions to be made to separately administered funds. The Group’s net obligations in respect of defined benefit pension schemes are calculated separately for each scheme by estimating, using the projected unit method, in accordance with advice from independent qualified actuaries, the amount of future benefits that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value and the fair value of scheme assets is deducted. The discount rate employed in determining the present value of the schemes’ liabilities is determined by reference to market yields at the balance sheet date on high quality corporate bonds of a term and currency consistent with that of the associated employment benefit obligation. The net surplus or deficit arising in the Group’s defined benefit pension schemes are shown within either non-current assets or liabilities on the face of the Group balance sheet. The Group has elected to avail of the option under IAS 19, “Employee Benefits”, to recognise post transition date actuarial gains and losses immediately in the statement of recognised income and expense. The estimated increase in the present value of defined benefit pension schemes’ liabilities expected to arise from employee service during the period is charged to operating loss. The expected return on the schemes’ assets and the interest cost on the present value of the schemes’ liabilities arising are included in finance costs. If the benefits of a defined benefit plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement over the remaining average working lives of the employees concerned or to the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. In addition to defined benefit pension schemes, the Group also operates a number of defined contribution pension schemes where obligations arising are recognised as an expense in the income statement as incurred. The Group also has post-retirement medical aid obligations in respect of certain employees. The expected costs of these benefits are accrued

over the period of employment using an accounting methodology similar to that for defined benefit pension plans and determined by independent qualified actuaries. DERIVATIVE FINANCIAL INSTRUMENTS

The Group uses derivative financial instruments (principally interest rate swaps and forward foreign exchange contracts and options) to hedge its exposure to foreign exchange risks arising from estimated future currency receipts and payments and interest rate risks associated with borrowings. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or received). The gain or loss on re-measurement to fair value is recognised immediately in the income statement unless the derivative qualifies for hedge accounting whereupon the accounting treatment and presentation depends on the nature of the item being hedged (see hedging accounting policy below). The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest and currency exchange rates and the current creditworthiness of the swap counter-parties. The fair value of forward foreign currency exchange contracts is calculated by reference to current forward currency exchange rates at the balance sheet date, being the present value of the quoted forward price. HEDGING

For the purposes of hedge accounting, hedges are classified either as fair value hedges (which entail hedging the exposure to movements in the fair value of a recognised asset or liability) or cash flow hedges (which hedge exposures to fluctuations in future cash flows derived from a particular risk associated with a recognised asset or liability or a highly probable forecast transaction), or hedges of net investments (which hedge against a net investment in a foreign operation). In the case of fair value hedges, which satisfy the conditions for hedge accounting, any gain or loss stemming from the re-measurement of the hedging instrument to fair value is reported in the income statement. In addition, any gain or loss on the hedged item, which is attributable to the hedged risk, is adjusted against the carrying amount of the hedged item and reflected in the income statement. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is amortised to the income statement with the objective of achieving full amortisation by maturity of the hedged items, using the effective interest rate method. Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised as a separate component of equity with the ineffective portion being reported in the income statement. When a highly probable forecast transaction results in the recognition of a non-financial asset or liability, the cumulative gain or loss is removed from equity and included in the initial measurement of the non-financial asset or liability. Otherwise, the associated gains and losses that had previously been recognised in equity are transferred to the income statement as the cash flows of the hedged item effect the income of the hedged transaction. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for special hedge accounting. At that point in time, any cumulative gain or loss on

Group accounting policies under IFRS continued the hedging instrument recognised as a separate component of equity is kept in equity until the forecast transaction occurs. If a hedged transaction is no longer anticipated to occur, the net cumulative gain or loss recognised in equity is transferred immediately to the income statement. Where a derivative financial instrument is used to economically hedge 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 the income statement. Where foreign currency borrowings provide a hedge against a net investment in a foreign operation, foreign exchange differences are taken directly to a foreign currency translation reserve (being a separate component of equity). Cumulative gains and losses remain in equity until disposal of the net investment in the foreign operation at which point the related difference is transferred to the income statement as part of the overall gain or loss on sale.

the Group impairs its inventory for discontinued, slow moving and unmarketable products, based upon assumptions about future demand, market conditions and disposal costs. Determining these assumptions requires estimation of the outcome of future certain events. If actual events are more or less favourable than those projected by management, adjustments to inventory impairments may be required.

Deferred tax Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the unused tax losses and unused tax credits can be utilised. The Group estimates the most probable amount of future taxable profits, taking into consideration applicable tax legislation in the relevant jurisdiction. These calculations require the use of estimates.

The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Hedging derivatives are classified as a current asset or liability as at the balance sheet date. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Preparation of the consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities. These include, but are not limited to, the following areas:

Impairment of intangible assets and property, plant and equipment The Group tests whether intangible assets and property, plant and equipment has suffered any impairment, as required by IAS 36 “Impairment of Assets”. The recoverable amounts of the net asset value of cash generating units have been determined based on value in use calculations. These calculations require the use of estimates. The calculations are inherently judgmental and susceptible to change from period to period because they require the Group to make assumptions about future supply and demand, future sales prices, the achievement of cost savings, applicable exchange rates and an appropriate discount rate. If the Group fails to meet its forecasted sales levels or fails to achieve anticipated cost reductions, or if weak economic conditions prevail in its primary markets, the value in use of a cash generating unit is likely to be adversely affected. In the annual impairment test if a revised discount rate is applied to the cash flows of 3% higher than management’s estimates, the Group would need to reduce the carrying value of goodwill by €6.6 million.

Pensions The actuarial valuation of defined benefit pensions is based on assumptions regarding inflation, discount rates, commutations, the expected return on plan assets, salary increases, pension in payment increases and mortality rates. The assumptions may differ from the actual data as a result of changes in economic and market conditions. Inventory The Group values its manufactured finished goods and work in progress at the lower of cost or net realisable value. If necessary,

Waterford Wedgwood plc

2007 annual report & accounts

Consolidated income statement

Notes

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

Revenue

741.5

772.6

Operating loss before exceptional items Exceptional items Operating loss Finance income and costs Interest receivable and similar income Interest payable and similar charges before exceptional items Exceptional finance costs Loss before income tax Income tax (expense)/income Loss for the year

4 5

(14.9) (2.2) (17.1)

(68.2) (62.6) (130.8)

0.2 (53.9) – (70.8) (0.4) (71.2)

0.5 (49.8) (9.3) (189.4) 0.5 (188.9)

(71.3) 0.1 (71.2)

(190.8) 1.9 (188.9)

6 6 9

(Loss)/profit attributable to: – Equity holders of the Company – Minority interests

Loss per share – Basic and diluted (cents)

Sir Anthony O’Reilly Chairman

Peter B Cameron Chief Executive Officer

(1.41)

(4.96)

Consolidated balance sheet As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

11 12 13 16 21

124.7 154.5 3.4 1.2 1.2 285.0

124.6 174.1 3.6 0.6 1.3 304.2

15 16 14

249.4 115.2 3.3 17.8 385.7

233.7 117.0 1.0 25.8 377.5

670.7

681.7

156.1 3.0 5.3 1.0 11.0 176.4

148.6 3.1 6.0 – 29.0 186.7

24.0 147.8 11.0 11.7 402.0 6.1 602.6

22.7 234.6 11.3 15.0 371.8 7.0 662.4

779.0

849.1

Notes

ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Trade and other receivables Deferred income tax assets Total non-current assets Current assets Inventories Trade and other receivables Derivative financial instruments Cash and cash equivalents Total current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Finance lease obligations Current income tax liabilities Bank overdraft and short term borrowings Provisions for other liabilities and charges Total current liabilities Non-current liabilities Finance lease obligations Retirement benefit obligations Deferred income tax liabilities Provisions for other liabilities and charges Bank borrowings Trade and other payables Total non-current liabilities

17 19

19 23 21 20 22 18

TOTAL LIABILITIES

Waterford Wedgwood plc

2007 annual report & accounts

Consolidated balance sheet continued

Notes

EQUITY Capital and reserves attributable to the Company’s equity holders Equity share capital Share premium account Retained losses Cash flow hedging reserve Other reserves Minority interests TOTAL EQUITY TOTAL EQUITY AND LIABILITIES

Sir Anthony O’Reilly Chairman

Peter B Cameron Chief Executive Officer

24 25 25 25 26 25

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

399.0 201.9 (715.6) 3.3 0.8 (110.6) 2.3 (108.3)

324.1 203.7 (698.8) 1.0 0.3 (169.7) 2.3 (167.4)

670.7

681.7

Consolidated statement of recognised income and expense 12 months to 31 March 2007 € Mils

Items of income and expense recognised directly in equity: Currency translation adjustments Fair value movement on cash flow hedges: – Transferred to Income Statement – Gains taken to equity Actuarial gains on defined benefit pension schemes Net income recognised directly in equity Loss for the year Total recognised income and expense for the year Attributable to: Equity holders of the company Minority interest Total recognised income and expense for the year

12 months to 31 March 2006 € Mils

(1.7)

(0.2)

(1.0) 3.3 69.2 69.8 (71.2) (1.4)

(0.4) 1.0 39.3 39.7 (188.9) (149.2)

(1.4) – (1.4)

(151.2) 2.0 (149.2)

Consolidated cash flow statement Notes

Cash flows from operating activities Cash used in operations Income tax paid Net cash used in operating activities

Cash flows from investing activities Acquisition costs relating to subsidiary undertaking Purchase of property, plant and equipment Purchase of intangible assets Purchase of financial assets Proceeds from sale of property, plant and equipment Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds from issue of shares Expenses relating to the issue of shares Interest paid Interest received Debt issue costs and termination fees Proceeds from borrowings Repayment of borrowings Inception of finance leases Payment of finance lease liabilities Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash, cash equivalents and bank overdrafts at beginning of the year Exchange gains and losses on cash and cash equivalents Cash, cash equivalents and bank overdrafts at the end of the year Waterford Wedgwood plc

34 2007 annual report & accounts

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

(47.3) (1.8) (49.1)

(123.6) (1.2) (124.8)

– (15.5) (0.9) (0.2) 5.3 (11.3)

(0.9) (17.5) – – 31.8 13.4

60.2 (1.8) (41.4) 0.2 (1.0) 54.0 (18.8) 2.2 (1.6) 52.0

101.5 (4.8) (35.9) 0.5 (11.8) 275.0 (207.8) 1.9 (1.6) 117.0

(8.4) 25.8 (0.6) 16.8

5.6 20.0 0.2 25.8 43

Notes to the consolidated financial statements

1 Basis of preparation of Group financial statements The audited financial statements of the parent Company and its subsidiary undertakings, for the year ended 31 March 2007, are incorporated in the Group financial statements. The presentation currency of the Group financial statements is euro and the functional currency and presentation currency of the parent Company, Waterford Wedgwood plc, is euro. On 5 April 2007 the Group announced a fully underwritten offer of cumulative convertible preference shares of €100 million and the potential proposed placing of cumulative convertible preference shares of a further €100 million, the proceeds of which will be used to undertake restructuring and for working capital purposes. The Group’s projections suggest adequate profitability and cash flows to meet its financial needs and obligations. The Directors, having regard to the Group’s budgets and business plans, the current trading position and the proceeds of the convertible share issue, are satisfied that it is appropriate to adopt the going concern basis in preparing the financial statements.

2 Effect of change in accounting estimate and change in classification of certain gains as non-exceptional During the year the Group reviewed the basis of provisioning for slow-moving, obsolete and excess inventory across the Group with the objective of introducing a common basis of calculation. This review resulted in a reduction of provisions against slow moving, obsolete and excess inventory of €9.1 million and this is reflected in the operating loss for the 12 months ended 31 March 2007. Gains of €1.9 million arising on lease exits which were previously reported as exceptional items in the Group’s interim results for the six months ended 30 September 2006 have been reclassified as non-exceptional in the results for the twelve months ended 31 March 2007, as the Directors believe that this better reflects the underlying ongoing nature of the management of the Group’s leasehold retail estate.

3 Analysis of operating loss 12 months to 31 March 2007 Before exceptional items € Mils

Revenue Cost of sales Gross profit/(loss) Selling, marketing and distribution expenses Administrative expenses Other operating expenses Other operating income Operating loss

741.5 (387.5) 354.0 (276.7) (92.6) (2.6) 3.0 (14.9)

Exceptional items € Mils

– (2.4) (2.4) (3.9) (2.0) (11.6) 17.7 (2.2)

Total € Mils

741.5 (389.9) 351.6 (280.6) (94.6) (14.2) 20.7 (17.1)

Notes to the consolidated financial statements

3 Analysis of operating loss continued

12 months to 31 March 2006 Before exceptional items € Mils

Revenue Cost of sales Gross profit/(loss) Selling, marketing and distribution expenses Administrative expenses Other operating expenses Other operating income Operating loss

772.6 (452.6) 320.0 (289.9) (99.5) (1.7) 2.9 (68.2)

Exceptional items € Mils

– (71.6) (71.6) (20.8) (2.7) – 32.5 (62.6)

Total € Mils

772.6 (524.2) 248.4 (310.7) (102.2) (1.7) 35.4 (130.8)

The following items have been included in arriving at operating loss :

Notes

Revenue Less pre-exceptional operating costs: Change in inventories of finished goods Staff costs Intangible asset amortisation Depreciation of property, plant and equipment Operating lease rental – plant and equipment – others Amortisation of capital grants Foreign exchange losses Other operating costs Operating loss before exceptional items Exceptional items Operating loss

11 12

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

741.5

772.6

(12.1) (259.3) (4.0) (25.9) (5.7) (21.0) 0.3 (2.0) (426.7) (14.9) (2.2) (17.1)

(22.7) (284.6) (6.9) (30.4) (4.1) (24.5) 0.3 (1.7) (466.2) (68.2) (62.6) (130.8)

12 months to 31 March 2007 € Mils

Operating loss for the year is stated after charging: Auditors’ remuneration – audit – taxation services – other assurance services Less amounts charged elsewhere in the financial statements*

1.5 0.3 1.1 (0.5) 2.4

12 months to 31 March 2006 € Mils

1.6 0.6 1.6 (0.5) 3.3

* In the 12 months to 31 March 2007, services in the amount of €0.5 million have not been included in operating expenses as they relate to other assurance services provided by the auditors acting as reporting accountants in respect of the Group’s rights issue of €60.2 million in July 2006. The share issue costs have been charged against the share premium account. In the 12 months to 31 March 2006, services in the amount of €0.5 million have not been included in operating expenses as they relate to other assurance services by the auditors acting as reporting accountants in respect of the Group’s rights issue of €101.5 million. The share issue costs have been charged against the share premium account.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

4 Segmental Report The Group’s business is divided into three primary segments. Waterford Crystal includes the manufacture and distribution of Waterford Crystal, Stuart Crystal, Edinburgh Crystal and Cashs Mail Order products. Ceramics Group includes the manufacture and distribution of ceramics products by Wedgwood, Royal Doulton and Rosenthal and the distribution of crystal products in certain markets. Spring includes the distribution of a range of premium cookware products and W-C Designs includes the distribution of linen products including Waterford linens under a licence from Waterford Crystal. Inter-segment transactions are entered into under normal commercial terms and conditions. Operating profit/loss is the segmental measure reviewed by the chief operating decision maker. Unallocated overhead costs such as those incurred by the head office, are included under the heading unallocated costs. Segment assets comprise primarily property, plant and equipment, intangibles assets, inventories, third party and inter-company receivables and operating cash and exclude investments in subsidiary undertakings. Segment liabilities comprise third party and inter-company payables, other payables, taxation, finance lease obligations, retirement benefit obligations and borrowings. BY CLASS OF BUSINESS

12 months to 31 March 2007 Total segment revenue € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated costs

212.6 505.0 41.6 – 759.2

Inter segment revenue € Mils

(13.2) (3.5) (1.0) – (17.7)

Operating (loss)/profit before Revenue exceptional items € Mils € Mils

199.4 501.5 40.6 – 741.5

12.3 (18.0) (1.2) (8.0) (14.9)

Operating Exceptional (loss)/profit after items exceptional items € Mils € Mils

(1.1) (1.1) – – (2.2)

Net finance costs Loss before taxation Income tax Loss for the year

11.2 (19.1) (1.2) (8.0) (17.1) (53.7) (70.8) (0.4) (71.2)

12 months to 31 March 2007 Total assets € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated assets/(liabilities) Intra-group eliminations

500.1 528.0 20.2 897.8 (1275.4) 670.7

Total liabilities € Mils

(495.9) (946.6) (31.1) (580.8) 1275.4 (779.0)

Net assets/(liabilities) € Mils

4.2 (418.6) (10.9) 317.0 – (108.3)

Notes to the consolidated financial statements

4 Segmental Report continued 12 months to 31 March 2007 Property, plant and equipment additions € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring

4.4 11.0 0.1 15.5

Intangible asset Depreciation and additions amortisation € Mils € Mils

0.4 0.4 0.1 0.9

8.4 21.3 0.2 29.9

Impairment of property, plant and equipment € Mils

– 11.6 – 11.6

12 months to 31 March 2007 Operating (loss)/profit before Depreciation and EBITDA before exceptional items amortisation exceptional items € Mils € Mils € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated costs

12.3 (18.0) (1.2) (8.0) (14.9)

8.4 21.3 0.2 – 29.9

20.7 3.3 (1.0) (8.0) 15.0

12 months to 31 March 2006 Total segment revenue € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated costs

Inter segment revenue € Mils

219.2 531.9 39.9 – 791.0

(12.7) (4.1) (1.6) – (18.4)

Operating loss before Revenue exceptional items € Mils € Mils

206.5 527.8 38.3 – 772.6

(12.3) (42.3) (1.0) (12.6) (68.2)

Operating Exceptional loss after items exceptional items € Mils € Mils

(5.8) (56.8) – – (62.6)

Net finance costs Loss before taxation Income tax Loss for the year

(18.1) (99.1) (1.0) (12.6) (130.8) (58.6) (189.4) 0.5 (188.9)

12 months to 31 March 2006 Total assets € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated assets/(liabilities) Intra-group eliminations

455.4 535.6 18.1 834.2 (1161.6) 681.7

Waterford Wedgwood plc

2007 annual report & accounts

Total liabilities € Mils

(475.6) (939.8) (27.1) (568.2) 1161.6 (849.1)

Net assets/(liabilities) € Mils

(20.2) (404.2) (9.0) 266.0 – (167.4)

Notes to the consolidated financial statements

4 Segmental Report continued 12 months to 31 March 2006 Property, plant and equipment additions € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring

6.2 11.1 0.2 17.5

Intangible asset Depreciation and additions amortisation € Mils € Mils

0.1 5.2 – 5.3

9.0 28.1 0.2 37.3

Impairment of property, plant and equipment € Mils

7.3 17.3 – 24.6

12 months to 31 March 2006 Operating loss before Depreciation and EBITDA before exceptional items amortisation exceptional items € Mils € Mils € Mils

By class of business Waterford Crystal Ceramics Group W-C Designs & Spring Unallocated costs

(12.3) (42.3) (1.0) (12.6) (68.2)

9.0 28.1 0.2 – 37.3

(3.3) (14.2) (0.8) (12.6) (30.9)

BY GEOGRAPHICAL SEGMENT

Revenue is allocated based on the country in which the customer is based and total assets, additions to property, plant and equipment and intangible asset additions are based on where the assets are located.

12 months to 31 March 2007

By geographical segment Europe excluding United Kingdom United Kingdom North America Far East Rest of the world Intra-group eliminations

Revenue € Mils

Total assets € Mils

Property, Plant and equipment additions € Mils

194.8 123.2 304.4 73.9 45.2 – 741.5

761.2 393.5 173.5 61.2 17.4 (736.1) 670.7

8.9 2.6 1.3 2.1 0.6 – 15.5

0.9 – – – – – 0.9

Revenue € Mils

Total assets € Mils

Property, Plant and equipment additions € Mils

Intangible asset additions € Mils

215.2 128.3 308.2 78.1 42.8 – 772.6

736.4 428.0 137.6 56.7 14.2 (691.2) 681.7

9.0 4.9 2.0 1.2 0.4 – 17.5

5.3 – – – – – 5.3

Intangible asset additions € Mils

12 months to 31 March 2006

By geographical segment Europe excluding United Kingdom United Kingdom North America Far East Rest of the world Intra-group eliminations

Notes to the consolidated financial statements

5 Exceptional items Exceptional items are those items of income and expense that the Group considers are material and/or of such a nature that their separate disclosure is relevant to a better understanding of the Group’s financial performance. The following exceptional items have been (charged)/credited to the income statement:

Notes

Redundancy and integration costs Other costs associated with the restructuring programme Impairment of property, plant and equipment Gain on sale of property, plant and equipment Pension curtailment Release of surplus restructuring provision Provision for onerous contract Impairment of inventory Exceptional finance costs (note 6) Total exceptional items

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii)

12 months to 31 March 2007 € Mils

(9.6) (0.7) (11.6) 1.8 15.9 2.0 – – (2.2) – (2.2)

12 months to 31 March 2006 € Mils

(58.0) (2.0) (24.6) 32.5 6.0 1.4 (11.9) (6.0) (62.6) (9.3) (71.9)

As part of its continuing initiative to lower operating costs, the Group incurred a charge of €9.6 million (2006: €58.0 million) relating to redundancy and integration costs in its key operating divisions. (ii) Impairment charge of €11.6 million (2006: €24.6 million) arising from a review of the carrying value of plant and equipment at the Group’s manufacturing facilities in the United Kingdom and Ireland. This item is included in the other operating expense line. (iii) Profits arising from property activities amounting to €1.8 million (2006: €32.5 million). (iv) With effect from 30 June 2006, the Wedgwood Group Pension Plan was closed to future benefit accrual. The closure to future benefit accrual has resulted in an exceptional gain of €15.9 million. In the 12 months ended 31 March 2006 exceptional gains of €6.0 million occurred as a result of the curtailment of benefits in certain other Group pension schemes. (v) Release of surplus restructuring provision amounting to €2.0 million (2006: €1.4 million). (vi) Provision for costs of €nil (2006: €11.9 million) to be incurred under an onerous warehousing and distribution contract. (vii) Impairment of inventory of €nil (2006: €6.0 million) associated with the closure of manufacturing facilities in the United Kingdom. (viii) Unamortised financing fees of €nil (2006: €6.0 million) were written off as a result of the negotiation of new finance facilities, together with termination fees of €nil (2006: €3.3 million). (i)

6 Finance costs

Interest payable and similar charges Interest on pension scheme obligations in excess of expected return on pension schemes’ assets Interest element of finance leases payments Interest payable and similar charges before exceptional finance costs Write-off of financing fees Early termination fees Interest payable and similar charges after exceptional finance costs

Waterford Wedgwood plc

2007 annual report & accounts

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

47.2

38.9

4.5 2.2 53.9 – – 53.9

9.4 1.5 49.8 6.0 3.3 59.1

Notes to the consolidated financial statements

7 Loss before income tax Loss before income tax has been arrived at after charging: EXECUTIVE DIRECTORS’ REMUNERATION

The remuneration in relation to Executive Directors who held office for any part of the year is as follows:

12 months to 31 March 2007

PB Cameron J Foley* OC Küsel Lord Wedgwood

Salary €000

Benefits in kind €000

Defined contribution pension payments €000

390 335 350 136 1211

– 16 15 – 31

5 205 – 4 214

Defined benefit pension payments €000

Total €000

– 139 7 – 146

395 695 372 140 1602

* Additional taxation and other costs amounting to €107,000 were incurred during the year in relation to John Foley’s temporary relocation to the United States.

12 months to 31 March 2006

PB Cameron J Foley*** OC Küsel PR O’Donoghue* T O’Reilly Jnr** Lord Wedgwood

Salary €000

Benefits in kind €000

Defined contribution pension payments €000

411 335 336 237 116 143 1578

16 14 14 14 1 – 59

2 205 – 264 – 14 485

Defined benefit Compensation pension for loss payments of office €000 €000

– 141 7 78 8 – 234

– – – – 50 – 50

Other payments €000

Total €000

– – – – 338 – 338

429 695 357 593 513 157 2744

* PR O’Donoghue retired as an executive Director on 31 August 2005. ** T O’Reilly, Jnr resigned as a Director on 1 September 2005. Kildare Consulting Limited, in which T O’Reilly, Jnr has an interest, had a contract to provide consulting services to the Group which ended in February 2006. Total payments made in relation to this consultancy contract amounted to €337,500 and are disclosed in the table above. *** Additional taxation and other costs amounting to €212,000 were incurred during the year in relation to John Foley’s temporary relocation to the United States.

Directors’ remuneration in currencies other than euro is translated at the average rate of exchange prevailing in each of the years. J Foley and OC Küsel are entitled to benefits under defined benefit pension arrangements. PB Cameron, J Foley and Lord Wedgwood are entitled to benefits under defined contribution pension schemes. The Directors’ benefits under the various defined benefit pension schemes in which they are members are as follows: Increase in the accrued pension during the year

J Foley OC Küsel

Transfer value of the increase in accrued pension

Total accrued pension

As at 31 March 2007 €000

As at 31 March 2006 €000

As at 31 March 2007 €000

As at 31 March 2006 €000

As at 31 March 2007 €000

As at 31 March 2006 €000

4 3 7

47 7 54

40 7 47

94 149 243

88 146 234

Notes to the consolidated financial statements

7 Loss before income tax continued NON-EXECUTIVE DIRECTORS’ REMUNERATION

The remuneration in relation to non-executive Directors for any part of the 12 months to 31 March 2007 and 31 March 2006 is as follows:

Fees as a Director

Other remuneration

Total

31 March 2007 €000

31 March 2006 €000

31 March 2007 €000

31 March 2006 €000

31 March 2007 €000

31 March 2006 €000

– – – 22 22 22 – 22 22 110

– 16 – 22 22 13 – 22 22 117

– – – 67 5 162 – 312 8 554

– 16 – 67 5 63 – 328 8 487

– – – 89 27 184 – 334 30 664

– 32 – 89 27 76 – 350 30 604

Sir Anthony O’Reilly GP Dempsey* PJ Goulandris KC McGoran PJ Molloy PR O’Donoghue* Lady O’Reilly DW Sculley FA Wedgwood

Sir Anthony O’Reilly, Lady O’Reilly and PJ Goulandris waived their Directors’ remuneration of €63,000, €29,000 and €34,000 respectively in relation to both these years. * GP Dempsey retired as a non-executive Director on 13 December 2005. PR O’Donoghue was appointed as a non-executive Director on 1 September 2005.

As noted on page 28 in the Report on Directors’ Remuneration, DW Sculley has, through Wellspring Holdings Inc. a contract to provide consulting services for an annual fee of US$400,000 and PR O’Donoghue has a contract to provide consulting services for an annual fee of €150,000. Pensions paid to former Directors other than disclosed earlier in this note amount to €140,000 (2006: €141,000). DIRECTORS’ AND COMPANY SECRETARY’S OPTIONS

Details of Executive share options granted in accordance with the Group Executive Share Option Scheme, the Share Price Recovery Plan and savings related share options (SAYE) held by the Directors and the Company Secretary, are as follows:

Director PB Cameron J Foley OC Küsel PR O’Donoghue Lord Wedgwood Company Secretary PJ Dowling

1 April 2006

Options lapsed the year

As at 31 March 2007

Weighted average exercise price €

OPTIONS SAYE OPTIONS SAYE OPTIONS OPTIONS SAYE OPTIONS SAYE

107,153,349 5037 16,364,303 5160 16,586,456 5,160,652 5160 161,270 19,946

– (5037) (370,921) (5160) – (1,612,704) (5160) – –

107,153,349 – 15,993,382 – 16,586,456 3,547,948 – 161,270 19,946

0.073 – 0.112 – 0.137 0.632 – 0.793 0.139

OPTIONS SAYE

15,227,347 27,165

– (5160)

15,227,347 22,005

0.088 0.133

All of the above options are exercisable above the market price at 31 March 2007 and are exercisable on dates between 1 April 2007 and 15 December 2015. The market price of the Company’s shares at 31 March 2007 was 6.3c and the range for the year to 31 March 2007 was 3.5c to 6.4c. The Company’s register of Directors’ interests (which is open to inspection) contains full details of Directors’ shareholdings and options to subscribe.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

8 Employees

Average number of persons employed: Production Distribution, sales and marketing Administration

Payroll costs of those employees: Wages and salaries Social welfare costs Retirement benefit costs (note 23) Share-based payment

12 months to 31 March 2007 Number

12 months to 31 March 2006 Number

3949 4179 565 8693

4666 4351 589 9606

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

221.3 27.1 (2.6) 2.1 247.9

240.2 29.8 17.0 1.0 288.0

Retirement benefit costs above include an amount of €4.5 million (2006: €9.4 million) which is recorded in finance costs and €15.9 million (2006: €6.0 million) recorded as exceptional income.

9 Income tax 12 months to 31 March 2007 € Mils Current taxation: Based on loss for the year: Overseas taxation Over provision in respect of prior periods: – corporation taxation Deferred tax: On temporary differences Income tax (expense)/income

12 months to 31 March 2006 € Mils

(1.8)

(0.7)

0.9 (0.9)

0.8 0.1

0.5 (0.4)

0.4 0.5

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries, to the extent that the Group has control over the timing of these remittances, as these are reinvested in the business and thus no taxation is expected to be payable on them in the foreseeable future. The overall taxation charge in future years will also be dependent upon any changes in the underlying assumptions made for the recognition of deferred tax assets representing the future value of current taxation losses. The following table reconciles the income tax (expense)/income for the year reported in the income statement to the theoretical income tax (expense)/income that would result from applying the standard rate of Irish corporation tax to the loss before tax:

Notes to the consolidated financial statements

9 Income tax continued 12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

Loss before tax

(70.8)

(189.4)

Notional Irish corporation taxation credit at 12.5% Different taxation rates in overseas operations Impairment of property, plant and equipment Tax losses not utilised Capital allowances Other temporary differences Other permanent differences Over provision in respect of prior periods

8.8 8.9 (2.9) (18.1) (1.8) 6.1 (2.3) 0.9 (0.4)

23.7 19.3 (5.8) (29.8) (1.3) (3.3) (3.1) 0.8 0.5

10 Loss per share 12 months to 31 March 2007 € Mils Loss before exceptional items attributable to equity holders of Waterford Wedgwood plc Exceptional items (note 5) Loss attributable to equity holders of Waterford Wedgwood plc

(69.1) (2.2) (71.3)

12 months to 31 March 2006 € Mils

(118.9) (71.9) (190.8)

Weighted average number of shares in issue during the year Effect of conversion of share options Diluted number of shares

Millions 5040.9 – 5040.9

Millions 3845.3 – 3845.3

Basic and diluted loss per share* Basic and diluted loss per share before exceptional items

€ Cents (1.41) (1.37)

€ Cents (4.96) (3.09)

*In the year to 31 March 2007 and 31 March 2006, none of the share options were dilutive as they would have decreased the loss per share.

On 2 July 2007 the Company announced that the 1 for 535 open offer for 9,995,313 cumulative convertible preference shares of €10 each (with an aggregate 569,732,841 warrants) was closed. The preference shares have no voting rights, except for a right to vote on any variation of rights attaching to the preference shares. The preference shares shall, for a period of five years from the date of initial issue, carry the right to receive dividends by way of a bonus issue of 0.02125 new preference shares for each preference share or new preference share held per quarter in arrears. The Company may elect from five years after the date of initial issue for the dividends to be paid either by bonus issue (as described above) or in cash at €0.2125 per preference share or new preference share per quarter (subject to increase in certain limited circumstances) in arrears, with all preference shares and new preference shares carrying these cumulative preferential dividend rights. Each preference share and new preference share is convertible into 153.8462 new ordinary shares (by reference to the conversion price which is subject to adjustment in certain limited circumstances) at any time at the option of the holders thereof and, on or after the third anniversary of the date of initial issue, in certain situations at the option of the Company. A preference shareholder will, on conversion also be issued with a matching number of new income shares contemporaneously with the new ordinary shares being issued, such that they will hold the same number of new stock units. A new stock unit comprises one new ordinary share and one new income share, which are not listed separately and must be traded together in the form of a stock unit. In limited situations both the preference shareholder and the Company may, from the seventh anniversary of the date of initial issue, at their option redeem the outstanding preference share and new preference shares.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

10 Loss per share continued 57 warrants will be attached to each preference share allocated under the open offer and the placing. The warrants will on exercise, and payment of the exercise price of €0.065 each, entitle the warrantholder to one new ordinary share (which will be twinned with one new income share to form one new stock unit). The exercise price of €0.065 for each warrant is subject to adjustment in certain limited circumstances.

11 Intangible Assets As at 31 March 2007 Goodwill € Mils

Brands and mailing list € Mils

Software € Mils

Other € Mils

Total € Mils

Cost At 1 April 2006 Additions Disposals Translation adjustment At 31 March 2007

108.5 – – 2.8 111.3

59.2 0.4 – 1.1 60.7

13.2 0.4 (0.2) – 13.4

0.1 0.1 – – 0.2

181.0 0.9 (0.2) 3.9 185.6

Accumulated amortisation and impairment At 1 April 2006 Amortisation* Translation adjustment At 31 March 2007

(25.5) – (0.5) (26.0)

(22.1) (2.1) (0.1) (24.3)

(8.8) (1.9) 0.1 (10.6)

– – – –

(56.4) (4.0) (0.5) (60.9)

83.0 85.3

37.1 36.4

4.4 2.8

0.1 0.2

124.6 124.7

Cost At 1 April 2005 Additions Disposals Translation adjustment At 31 March 2006

110.6 – – (2.1) 108.5

60.0 – – (0.8) 59.2

9.4 5.3 (1.5) – 13.2

0.2 – – (0.1) 0.1

180.2 5.3 (1.5) (3.0) 181.0

Accumulated amortisation and impairment At 1 April 2005 Amortisation* Disposals Translation adjustment At 31 March 2006

(25.8) – – 0.3 (25.5)

(19.5) (2.8) – 0.2 (22.1)

(6.0) (4.1) 1.3 – (8.8)

84.8 83.0

40.5 37.1

3.4 4.4

Net book value At 1 April 2006 At 31 March 2007

As at 31 March 2006

Net book value At 1 April 2005 At 31 March 2006

– – – – –

(51.3) (6.9) 1.3 0.5 (56.4)

0.2 0.1

128.9 124.6

*Brands and mailing list amortisation of €2.1 million (2006: €2.8 million) is charged to selling, marketing and distribution overheads. Amortisation of software costs of €1.9 million (2006: €4.1 million) is charged to administrative expenses. The remaining unamortised life of the brands at 31 March 2007 is 18 years.

Notes to the consolidated financial statements

11 Intangible Assets continued CASH-GENERATING UNITS

Goodwill at 31 March 2007 relates to the excess of the consideration paid over the fair value of identifiable net assets/liabilities arising on the acquisition of Royal Doulton in January 2005. The goodwill generated through the Royal Doulton acquisition has been allocated to cash-generating units (“CGU” or “CGUs”) for the purposes of impairment testing that are expected to benefit from the business acquisition. The CGUs represent the lowest level within the group at which the associated goodwill is monitored for internal management purposes and are not larger than the primary and secondary segments determined in accordance with IAS 14 “Segment Reporting”. A summary of the allocation of the carrying value of goodwill by geographic region and within segment is as follows:

Ceramics Group United Kingdom at 31 March

2007 € Mils

2006 € Mils

85.3

83.0

IMPAIRMENT TESTING METHODOLOGY RESULTS

The Group tests goodwill annually for impairment or more frequently if there is an indication that goodwill might be impaired. The recoverable amount of the CGUs is determined based on a value in use computation. Where the value in use exceeds the carrying value of the CGU the asset is not impaired; where the carrying amount exceeds the value in use, a provision for impairment is raised. Estimates used in this process are key judgmental estimates in the financial statements. The cash flow forecasts employed for the value in use computation are extracted from management’s budgets and forecasts for a three year period approved by senior management and the Board of Directors. A growth rate of zero percent has been used in determining value in use beyond the period covered by the budgets and forecasts. This assumption is made based on the difficult trading conditions which the Group continues to experience. The recoverable amount stemming from this exercise represents the present value of the future cash flows inclusive of the terminal value discounted at an appropriate discount rate to the CGU being assessed for impairment; a discount rate of 13% (2006: 11%) was used. Applying the above techniques, no impairment arose in 2007. The values applied to each of the key assumptions are derived from a combination of internal and external factors based on historical experience and take into account the stability of cash flows typically associated with these businesses. Key assumptions include managements’: • • • •

estimates of future profitability, revenues generated from new product initiatives, trade working capital investment needs and benefits of existing restructuring initiatives.

The term of the discounted cash flow model is a significant factor in determining the value in use of the cash-generating units and has been arrived at taking account of the Group’s financial position, its established history of earnings and cash flow generation and its ability to pursue and integrate value-enhancing acquisitions. The Directors are satisfied that, in spite of the trading losses incurred by Waterford Wedgwood plc, the carrying value of the goodwill in the financial statements at 31 March 2007 is appropriate.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

12 Property, plant and equipment As at 31 March 2007 Land and Buildings Freehold € Mils

Long leasehold € Mils

Short leasehold € Mils

Plant and equipment € Mils

Total € Mils

Cost At 1 April 2006 Additions Assets held for sale (note 16) Disposals Translation adjustment At 31 March 2007

116.0 0.6 4.3 (1.3) 0.1 119.7

18.3 – – (0.2) 0.5 18.6

12.2 0.4 – (0.5) (0.9) 11.2

396.8 14.5 – (39.1) (1.2) 371.0

543.3 15.5 4.3 (41.1) (1.5) 520.5

Accumulated depreciation and impairment At 1 April 2006 Depreciation charge Disposals Impairment charge (note 5) Amounts reclassified Translation adjustment At 31 March 2007

(53.4) (2.4) 1.1 – (4.6) (0.2) (59.5)

(2.1) (0.6) 0.2 – – – (2.5)

(9.2) (0.6) 0.5 – – 0.8 (8.5)

(304.5) (22.3) 37.1 (11.6) 4.6 1.2 (295.5)

(369.2) (25.9) 38.9 (11.6) – 1.8 (366.0)

62.6 60.2

16.2 16.1

3.0 2.7

92.3 75.5

174.1 154.5

Net book value At 1 April 2006 At 31 March 2007

As at 31 March 2006 Land and Buildings Freehold € Mils

Long leasehold € Mils

Short leasehold € Mils

Plant and equipment € Mils

Total € Mils

Cost At 1 April 2005 Additions Amounts reclassified Assets held for sale Disposals Translation adjustment At 31 March 2006

121.0 0.5 0.2 (4.3) (1.3) (0.1) 116.0

18.6 – – – – (0.3) 18.3

11.1 0.4 – – – 0.7 12.2

416.6 16.6 (0.2) – (40.2) 4.0 396.8

567.3 17.5 – (4.3) (41.5) 4.3 543.3

Accumulated depreciation and impairment At 1 April 2005 Depreciation charge Impairment charge (note 5) Disposals Translation adjustment At 31 March 2006

(52.4) (2.6) – 1.5 0.1 (53.4)

(1.5) (0.6) – – – (2.1)

(8.1) (0.5) – – (0.6) (9.2)

(291.0) (26.7) (24.6) 39.9 (2.1) (304.5)

(353.0) (30.4) (24.6) 41.4 (2.6) (369.2)

68.6 62.6

17.1 16.2

3.0 3.0

125.6 92.3

214.3 174.1

Net book value At 1 April 2005 At 31 March 2006

No depreciation is charged on freehold land with a book value of €10.6 million (2006: €10.4 million).

Notes to the consolidated financial statements

12 Property, plant and equipment continued Included in property, plant and equipment at net book value are amounts in respect of assets held under finance leases by Group companies as follows:

Long leasehold property Plant and equipment

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

16.1 8.8 24.9

16.2 8.0 24.2

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

2.2

Depreciation in respect of assets held under finance leases by Group companies is as follows:

Depreciation in respect of finance leases

IMPAIRMENT TESTING

The CGUs represent the lowest level within the group at which the associated property, plant and equipment is monitored for internal management purposes and are not larger than the primary and secondary segments determined in accordance with IAS 14 “Segment Reporting”. The Group tests for impairment if there is an indication that assets might be impaired. The recoverable amount of the CGUs is determined based on a value in use computation. Where the value in use exceeds the carrying value of the CGU the asset is not impaired; where the carrying amount exceeds the value in use, a provision for impairment is raised. Estimates used in this process are key judgmental estimates in the financial statements. The cash flow forecasts employed for the value in use computation are extracted from management’s budgets and forecasts for a three year period approved by senior management and the Board of Directors. A growth rate of zero percent has been used in determining value in use beyond the period covered by the budgets and forecasts. This assumption is made based on the difficult trading conditions which the Group continues to experience. The recoverable amount stemming from this exercise represents the present value of the future cash flows inclusive of the terminal value discounted at an appropriate discount rate to the CGU being assessed for impairment; a discount rate of 13% was used. Applying the above techniques, an impairment of property, plant and equipment €11.6 million (2006: €nil) has been recognised relating to Ceramics assets held in the United Kingdom. The values applied to each of the key assumptions are derived from a combination of internal and external factors based on historical experience and take into account the stability of cash flows typically associated with these businesses. Key assumptions include managements’: • • • •

estimates of future profitability, revenues generated from new product initiatives, trade working capital investment needs and benefits of existing restructuring initiatives.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

13 Financial assets

2007 € Mils Balance at 1 April Additions Disposals Translation adjustment Balance at 31 March

2006 € Mils

3.6 0.2 (0.1) (0.3) 3.4

3.4 0.2 – – 3.6

14 Derivative financial instruments

Foreign currency forward contracts

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

3.3

1.0

FOREIGN CURRENCY FORWARD CONTRACTS

The Group is party to foreign currency forward contracts in the management of its exchange rate exposures. These foreign currency forward contracts have been designated as hedging instruments and are effective as cash flow hedges and the fair value thereof is deferred in equity. Gains in equity as at 31 March 2007 will be released to the income statement at various dates up to one year from the balance sheet date. HEDGES OF NET INVESTMENT IN FOREIGN OPERATIONS

The Group uses loans denominated in local currency to hedge the foreign currency exposure associated with its net investment in certain of its foreign operations.

15 Inventories

Raw materials Work in progress Finished goods

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

21.9 38.7 188.8 249.4

21.5 35.5 176.7 233.7

The estimated replacement cost of inventories is not materially different from the above amounts. Impairment of inventories recognised as an expense within exceptional items for the 12 months to 31 March 2007 amounts to €nil (2006: €6.0 million).

Notes to the consolidated financial statements

16 Trade and other receivables As at 31 March 2007 € Mils Due within one year Trade receivables Provision for impairment of trade receivables Other receivables Assets held for sale Prepayments and accrued income

As at 31 March 2006 € Mils

98.9 (5.1) 10.6 – 10.8 115.2

Due after more than one year Trade receivables Other receivables Prepayments and accrued income

92.0 (7.6) 15.1 4.3 13.2 117.0

0.2 0.1 0.9 1.2

– 0.2 0.4 0.6

Assets held for sale comprised surplus properties in the Group. In accordance with IFRS 5 assets previously classified as held for sale have been reclassified as part of property, plant and equipment as the asset has not been disposed of within a twelve month period.

17 Trade and other payables – amounts falling due within one year

Trade payables Payable for taxation and social welfare Other payables Deferred capital grants Accrued liabilities

Payables for taxation and social welfare included above are as follows: Income tax deducted under PAYE Pay related social insurance Value added tax payable Other taxes

Waterford Wedgwood plc

2007 annual report & accounts

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

102.8 7.1 17.7 0.3 28.2 156.1

88.7 8.7 17.2 0.3 33.7 148.6

2.4 1.4 2.8 0.5 7.1

2.2 1.5 4.6 0.4 8.7

Notes to the consolidated financial statements

18 Trade and other payables – amounts falling due after one year

Accruals and deferred income Deferred capital grants Other payables

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

4.5 1.4 0.2 6.1

4.7 1.8 0.5 7.0

19 Finance lease obligations Minimum lease payments As at 31 March 2007 € Mils Amounts payable under finance leases: Within one year Two to five years After five years Less: Future finance charges Present value of minimum lease payments Less: Amounts due for settlement within 12 months (current liabilities) Amounts due for settlement after 12 months (non-current liabilities)

3.3 13.7 41.2 58.2 (31.2) 27.0

Present value of minimum lease payments

As at 31 March 2006 € Mils

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

3.1 10.7 44.6 58.4 (32.6) 25.8

3.0 12.4 11.6 27.0 – 27.0

3.1 10.9 11.8 25.8 – 25.8

(3.0)

(3.1)

24.0

22.7

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

3.0 24.0 27.0

1.7 24.1 25.8

Group lease obligations are denominated in the following currencies:

Euro Sterling

It is the Group’s policy to lease certain assets under finance leases. Lease terms vary from ten to thirty years. Rentals are typically fixed for the first five years, followed by a fixed uplift at the end of the fifth year. Subsequent rent reviews are upwards only and are reviewed every five years. Rental agreements contain the usual tenant repair, maintenance and insurance obligations. For the twelve months to 31 March 2007, the average effective borrowing rate was 8.2% (2006: 8.3%). The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets.

Notes to the consolidated financial statements

20 Provisions for other liabilities and charges As at 31 March 2007

At 1 April 2006 Reclassified to retirement benefit obligation (note 23) Charged to income statement as an exceptional item Credited to income statement as an operating cost Credited to income statement as an exceptional item Utilised during the year Translation adjustment At 31 March 2007 Less: Amounts due for settlement within 12 months (current liabilities) Amounts due for settlement after 12 months (non-current liabilities)

Restructuring provision € Mils

Onerous lease and contract € Mils

Other provisions € Mils

Total € Mils

28.6 – 9.6 – (2.0) (26.4) 0.4 10.2

12.7 – – (1.1) – (0.8) 0.4 11.2

2.7 (1.6) – – – – 0.2 1.3

44.0 (1.6) 9.6 (1.1) (2.0) (27.2) 1.0 22.7

(8.9)

(1.6)

(0.5)

(11.0)

1.3

9.6

0.8

11.7

Restructuring provision € Mils

Onerous lease and contract € Mils

Other provisions € Mils

Total € Mils

17.5 58.0 – (1.4) (44.9) (0.6) 28.6

1.2 11.9 – – – (0.4) 12.7

1.3 – 1.4 – (0.1) 0.1 2.7

20.0 69.9 1.4 (1.4) (45.0) (0.9) 44.0

(27.1)

(1.5)

(0.4)

(29.0)

1.5

11.2

2.3

15.0

As at 31 March 2006

At 1 April 2005 Charged to income statement as an exceptional item Charged to income statement as an operating cost Credited to income statement as an exceptional item Utilised during the year Translation adjustment At 31 March 2006 Less: Amounts due for settlement within 12 months (current liabilities) Amounts due for settlement after 12 months (non-current liabilities)

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

21 Deferred taxation The amount of deferred tax asset/(liability) recognised in respect of each temporary difference is as follows:

Accelerated capital allowances € Mils

Retirement obligations € Mils

6.4

51.5

6.9 (0.3) 13.0 14.4 0.3 27.7

At 1 April 2005 (Charge)/credit to income statement Translation adjustment At 31 March 2006 Credit/(charge) to income statement Translation adjustment At 31 March 2007

Other deferred deductions** € Mils

Tax losses € Mils

(21.5)

41.4

161.6

(250.4)

(11.0)

(4.9) (0.6) 46.0

1.8 (0.4) (20.1)

(17.0) 0.8 25.2

33.7 (1.4) 193.9

(20.1) 2.5 (268.0)

0.4 0.6 (10.0)

(23.6) 1.0 23.4

(0.7) 0.5 (20.3)

(5.0) (1.1) 19.1

26.8 2.3 223.0

(11.4) (3.3) (282.7)

0.5 (0.3) (9.8)

Other deductions* € Mils

Provision € Mils

Total € Mils

* Other deductions arise primarily on finite life intangibles and inventory reserves in the USA. ** Deferred deductions include amounts relating to restructuring provisions and accounts receivable reserves.

The above net deferred tax liability is recorded in the balance sheet as follows: As at 31 March 2007 € Mils Non-current deferred income tax assets Deferred income tax liabilities

1.2 (11.0) (9.8)

As at 31 March 2006 € Mils 1.3 (11.3) (10.0)

As at 31 March 2007 the amount and expiry of unused tax losses reflected in the above analysis is as follows: Amount of tax losses € Mils

Expiry 1 April 2007 to 31 March 2008 Expiry 1 April 2008 to 31 March 2009 Expiry 1 April 2009 to 31 March 2010 Expiry 1 April 2010 to 31 March 2011 Expiry 1 April 2011 to 31 March 2012 Other expiry Indefinite

– 0.5 0.5 2.3 2.7 40.6 832.3 878.9

Potential deferred tax assets of €282.7 million (2006: €268.0 million) arising principally from trading losses, pension deficits and restructuring charges have not been recognised. The Directors believe there is currently insufficient evidence to support the recognition of a deferred tax asset. The majority of losses and charges may be carried forward indefinitely under current laws, but these losses can only be offset against taxable profits generated in the same tax groups and tax jurisdictions in which they were incurred.

Notes to the consolidated financial statements

22 Borrowings As at 31 March 2007 € Mils Repayable as follows: Between one and two years Between two and five years After five years Total long and medium term borrowings Unamortised debt issue costs Split of borrowings between: – Secured – Unsecured

As at 31 March 2006 € Mils

– 413.1 – 413.1 (11.1) 402.0

– 386.3 – 386.3 (14.5) 371.8

371.3 41.8 413.1

345.2 41.1 386.3

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

160.5 44.9 165.5 41.8 0.4 413.1

130.4 49.5 165.3 41.1 – 386.3

The following are included in long and medium term borrowings:

Multi-currency credit facility Mezzanine term loans 9 7/8 % mezzanine notes Subordinated debt Term loan

MULTI-CURRENCY CREDIT FACILITY AND MEZZANINE TERM LOANS

The multi-currency credit facility and the mezzanine term loans provide loan facilities of €200 million and US$60 million respectively. The loans are at variable rates of interest. The multi-currency credit facility is repayable on 10 June 2010 and the mezzanine term loans are repayable on 31 August 2010. The lenders have a fixed charge over certain freehold property, plant and equipment of the Group in Ireland, UK and Germany. At 31 March 2007, €25.8 million of borrowings were secured against these assets. The lenders also have a floating charge over the majority of the Group’s worldwide inventory, trade receivables and certain other assets of the Group. At 31 March 2007, €179.6 million of borrowings were secured against these assets. The multi-currency credit facility and the mezzanine term loans are subject to two financial covenants: ratio of senior debt to EBITDA and minimum trading cash flow. These covenants are tested monthly only when excess availability (fundable assets less debt) falls below €15 million. An amendment to the facility agreement was agreed with the Group’s senior lenders from 18 May 2006 to 31 July 2006 removing this minimum availability requirement. 9 7/8 % MEZZANINE NOTES The 9 7/8 % mezzanine notes are repayable on 1 December 2010 in the amount of €166.0 million. The loans are at a fixed rate of interest. The mezzanine notes have a subordinated security to the multi-currency revolving bank facility and the mezzanine term loans. There are no financial covenants applicable to the 9 7/8 % mezzanine notes. SUBORDINATED DEBT

The subordinated debt from Anglo Irish Bank, provides facilities of €41.8 million (2006: €41.1 million), of which €33.9 million (2006: €33.4 million) is available to Waterford Wedgwood and €7.9 million (2006: €7.7 million) to Rosenthal AG. The loans are at variable rates of interest and are repayable on 18 November 2010. There are no financial covenants applicable to the subordinated debt.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

23 Retirement benefit obligations The Group operates pension schemes in a number of its businesses throughout the world. These schemes are structured to accord with local conditions and practices in each country that they operate in and can include both defined contribution and defined benefit schemes. The assets of the schemes are held, where relevant, in separate trustee administered funds. (a)

(b)

Defined contribution schemes The amount recognised as an expense in the Consolidated Income Statement for defined contribution schemes for the year was €3.3 million (2006: €2.4 million). Defined benefit schemes The Group operates defined benefit pension schemes in a number of countries in which it operates, primarily in Ireland, United Kingdom, Germany, Canada and Japan.

The values used in this disclosure are based on the most recent actuarial valuations and have been updated by the individual schemes’ independent and professionally qualified actuaries to incorporate the requirements of IAS 19 ‘Employee Benefits’ in order to assess the liabilities of the various schemes as at 31 March 2007 using the projected unit credit method. All assets in the schemes have been measured at their fair value at the balance sheet date. Full actuarial valuations are carried out for the Group’s pension schemes at least on a triennial basis. The actuarial reports are not available for public inspection. The most recently completed actuarial valuation of the major schemes were as at 31 December 2004 for the Wedgwood Group Pension Scheme, at 1 January 2004 for the Waterford Crystal Factory and Staff Schemes and 1 January 2005 for the Royal Doulton UK Pension Scheme. The amounts recognised in the income statement in relation to defined benefit and defined contribution pension schemes in the year were as follows:

12 months to 31 March 2007 € Mils Current service cost Gains on curtailments Expected return on pension schemes’ assets Interest on retirement benefit obligations Defined contribution pension scheme charge Net amount (credited)/charged to loss before income tax

12 months to 31 March 2006 € Mils

5.5 (15.9) (44.7) 49.2 3.3 (2.6)

11.2 (6.0) (39.3) 48.7 2.4 17.0

The total amount recognised in the consolidated income statement in relation to defined contribution and defined benefit schemes was (credited)/charged as follows:

12 months to 31 March 2007 € Mils

Cost of sales Selling, marketing and distribution expenses Administrative expenses Finance costs (note 6) Exceptional items (note 5)

We expect to contribute €14.7 million to our defined benefit pension schemes in the 12 months to 31 March 2008.

3.6 1.8 3.4 4.5 (15.9) (2.6)

12 months to 31 March 2006 € Mils

7.0 2.1 4.5 9.4 (6.0) 17.0

Notes to the consolidated financial statements

23 Retirement benefit obligations continued The amounts recognised in the consolidated statement of recognised income and expense were as follows: 12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

Actual return less expected return on pension schemes’ assets Experience gains and losses arising on the schemes’ liabilities Changes in assumptions underlying the present value of the schemes’ liabilities Actuarial gain recognised in the Consolidated Statement of Recognised Income and Expense

5.3 0.9 63.0 69.2

89.7 (2.8) (47.6) 39.3

Actual return on scheme assets

50.0

129.0

The assets and liabilities in the schemes and the expected rates of return were: As at 31 March 2007 Long term rate of return*

Equities Gilts Bonds Property Cash/other Total value of scheme assets Present value of defined benefit obligations Net defined benefit pension liability

5.3%–7.7% 3.9%–4.4% 3.5%–5.3% 5.9%–6.7% 0.8%–5.2%

Value € Mils

433.8 281.0 59.3 37.4 10.1 821.6 (969.4) (147.8)

As at 31 March 2006 Long term rate of return*

5.3%–7.5% 3.6%–3.8% 3.5%–4.5% 5.8%–6.4% 0.8%–4.1%

As at 31 March 2005 Long term rate of return*

Value € Mils

425.1 232.2 65.4 31.0 29.3 783.0 (1017.6) (234.6)

Value € Mils

5.1%–7.6% 3.7%–4.2% 2.9%–5.4% 5.2%–6.2% 0.8%–4.4%

364.5 236.0 47.5 19.3 11.6 678.9 (962.6) (283.7)

* The overall expected rate of return on scheme assets is based on current market long term expectations of each of the categories of assets in the schemes. The long term rate of return on schemes’ assets are disclosed in a range format reflecting the differing returns in each scheme.

The schemes’ deficit at 31 March has been recognised in full in the consolidated balance sheet in non-current liabilities. The principal financial assumptions used by the Group’s actuaries in order to calculate the pension schemes’ liabilities at 31 March, which are disclosed in a range format to reflect the differing assumptions in each scheme, were as follows:

Inflation assumptions Rate of increase in future pensionable salaries Rate of increase for pensions in payment and deferred pensions Rate used to discount scheme liabilities

Waterford Wedgwood plc

2007 annual report & accounts

31 March 2007

31 March 2006

0.0%–3.1% 1.0%–3.5% 0.0%–3.0% 1.8%–5.3%

0.0%–2.9% 1.0%–4.4% 0.0%–2.8% 1.5%–5.3%

Notes to the consolidated financial statements

23 Retirement benefit obligations continued The average life expectancy in years of a pensioner retiring at age 65 is as follows:

Male Female

As at 31 March 2007 Years

As at 31 March 2006 Years

19.6 22.5

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

The movements in the schemes’ defined benefit obligations during the year were as follows:

Present value of defined benefit obligations at the beginning of the year Reclassification from provisions for other liabilities and charges (note 20) Current service cost Gains on curtailments Interest on retirement benefit obligations Employee pension contributions Actuarial (gain)/loss arising on scheme liabilities Benefits paid Translation adjustments Present value of defined benefit obligations at the end of the year

1017.6 1.6 5.5 (15.9) 49.2 2.7 (63.9) (45.0) 17.6 969.4

962.6 – 11.2 (6.0) 48.7 5.5 50.4 (42.8) (12.0) 1017.6

The present value of defined benefit obligations at the end of the year that relates to:

Wholly unfunded plans Wholly or partly funded plans

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

39.7 929.7 969.4

37.9 979.7 1017.6

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

The movements in the schemes’ assets during the year were as follows:

Fair value of schemes’ assets at the beginning of the year Expected return on pension schemes’ assets Employer pension contributions Employee pension contributions Actual return less expected return Benefits paid Translation adjustments Fair value of schemes’ assets at the end of the year

783.0 44.7 16.4 2.7 5.3 (45.0) 14.5 821.6

678.9 39.3 19.8 5.5 89.7 (42.8) (7.4) 783.0

Notes to the consolidated financial statements

23 Retirement benefit obligations continued As at 31 March

Present value of defined benefit obligation Fair value of plan assets Net defined benefit pension liability

2007 € Mils

2006 € Mils

2005 € Mils

(969.4) 821.6 (147.8)

(1017.6) 783.0 (234.6)

(962.6) 678.9 (283.7)

Experience adjustments on plan liabilities

0.9

(2.8)

(0.4)

Experience adjustments on plan assets

5.3

89.7

1.5

24 Share capital As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

957.0

390.0

Stg £ Mils

160.5

65.0

Authorised Waterford Wedgwood plc 15.95 billion (2006: 6.5 billion) ordinary shares of 6c each

Waterford Wedgwood U.K. plc 16.05 billion (2006: 6.5 billion) income shares of Stg 1p each

Ordinary shares of 6c each € Mils

Waterford Wedgwood U.K. plc income Stg 1p each € Mils

Total € Mils

Issued as fully paid At 1 April 2006 (stock units: 4,350,489,725) Issue of shares for cash (ordinary shares: 1,003,946,503) Bonus issue of 1,003,946,503 income shares At 31 March 2007 (stock units: 5,354,436,228)

261.0 60.2 – 321.2

63.1 – 14.7 77.8

324.1 60.2 14.7 399.0

Issued as fully paid At 1 April 2005 (stock units: 2,658,632,610) Issue of shares for cash (ordinary shares: 1,691,857,115) Bonus issue of 1,691,857,115 income shares At 31 March 2006 (stock units: 4,350,489,725)

159.5 101.5 – 261.0

37.6 – 25.5 63.1

197.1 101.5 25.5 324.1

On 5 April 2007, the Company announced a proposal to raise €100 million by way of open offer of Cumulative convertible preference shares. The proceeds will provide increased working capital and will fund a new cost restructuring programme. Authority was also sought from shareholders to allow the issue of a further €100 million in cumulative convertible preference shares. On 2 July 2007, the Company announced that the 1 for 535 open offer of preference shares at €10 per preference shares to raise approximately €100 million gross of expenses, has closed. 9,995,313 preference shares (with an aggregate 569,732,841 warrants attached) were offered to qualifying stockholders pursuant to the open offer. In June 2006, the Company announced an open offer for 1,003,946,503 ordinary shares of €0.06 per ordinary share to raise €60.2 million before expenses. The net proceeds of the issue of €58.4 million have been used to fund restructuring costs and for the working capital requirements of the Group. In May 2005, the Company announced a rights issue of 1,691,857,115 ordinary shares of €0.06 per ordinary share to raise €101.5 million before expenses. The net proceeds of the issue of €96.7 million have been used to fund restructuring costs and for funding the working capital requirements of the Group. Income shares in Waterford Wedgwood U.K. plc, a subsidiary of Waterford Wedgwood plc incorporated in England, are non voting Stg 1p shares which entitle shareholders to elect to receive dividends paid from UK sourced profit. Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

25 Reconciliation of changes in equity Attributable to equity holders of the Company

At 1 April 2006 Currency translation adjustments Fair value movement on cash flow hedges: – Transferred to income statement – Gains taken to equity Actuarial gains on defined benefit pension schemes (Loss)/profit for the year Issue of share capital Bonus issue of income shares Expenses relating to the issue of shares Share-based payment At 31 March 2007 At 31 March 2005 Adoption of IAS 32 and IAS 39 At 1 April 2005 Currency translation adjustments Fair value movement on cash flow hedges – Transferred to income statement – Gains taken to equity Actuarial gains on defined benefit pension schemes (Loss)/profit for the year Issue of share capital Bonus issue of income shares Expenses relating to the issue of shares Share-based payment At 31 March 2006

Share capital € Mils

Share premium account € Mils

Retained losses € Mils

Cash flow hedging reserve € Mils

Other reserves note 26 € Mils

Sub total € Mils

Minority Interests € Mils

Total equity € Mils

324.1 –

203.7 –

(698.8) –

1.0 –

0.3 (1.6)

(169.7) (1.6)

2.3 (0.1)

(167.4) (1.7)

– – – – 60.2 14.7 – – 399.0

– – – – – – (1.8) – 201.9

– – 69.2 (71.3) – (14.7) – – (715.6)

(1.0) 3.3 – – – – – – 3.3

– – – – – – – 2.1 0.8

(1.0) 3.3 69.2 (71.3) 60.2 – (1.8) 2.1 (110.6)

– – – 0.1 – – – – 2.3

(1.0) 3.3 69.2 (71.2) 60.2 – (1.8) 2.1 (108.3)

197.1 – 197.1 –

208.5 – 208.5 –

(522.6) 0.8 (521.8) –

– 0.4 0.4 –

(0.4) – (0.4) (0.3)

(117.4) 1.2 (116.2) (0.3)

0.3 – 0.3 0.1

(117.1) 1.2 (115.9) (0.2)

– – – – 101.5 25.5 – – 324.1

– – – – – – (4.8) – 203.7

– – 39.3 (190.8) – (25.5) – – (698.8)

(0.4) 1.0 – – – – – – 1.0

– – – – – – – 1.0 0.3

(0.4) 1.0 39.3 (190.8) 101.5 – (4.8) 1.0 (169.7)

– – – 1.9 – – – – 2.3

(0.4) 1.0 39.3 (188.9) 101.5 – (4.8) 1.0 (167.4)

26 Other reserves

Translation reserve € Mils

Share-based payment € Mils

Capital conversion reserve € Mils

Total other reserves € Mils

At 1 April 2006 Currency translation adjustments Share-based payment At 31 March 2007

(4.0) (1.6) – (5.6)

1.7 – 2.1 3.8

2.6 – – 2.6

0.3 (1.6) 2.1 0.8

At 1 April 2005 Currency translation adjustments Share-based payment At 31 March 2006

(3.7) (0.3) – (4.0)

0.7 – 1.0 1.7

2.6 – – 2.6

(0.4) (0.3) 1.0 0.3

Notes to the consolidated financial statements

27 Share-based payment The Group operates equity settled share option schemes and savings related share option schemes. Equity settled share based payments for share option schemes granted after 7 November 2002 are measured at fair value (excluding the effect on non market-based vesting conditions) at the date of grant. Fair value is measured using the binomial option pricing model. No equity settled share options were granted in the 12 months to 31 March 2007. The Group recognised total expenses of €2.1 million (2006: €1.0 million) related to equity settled share-based payment transactions. Key terms of the Group’s share price recovery plan are detailed below; Options granted under the Share Price Recovery Incentive Plan may be exercised between the third and tenth anniversary of grant, only if the following performance conditions are met: • With respect to options granted over one third of the total number of shares granted, each option shall not become exercisable unless and until the earnings per share for an accounting period completed after the date of grant is at least €0.005 per share. • With respect to options granted over the remaining two thirds of the total number of options granted one of the following performance conditions shall apply: (i) (ii) (iii)

Options granted over 22.22% of the total number of shares over which options are granted shall not become exercisable unless and until the average market value over sixty consecutive business days completed after the grant date is equal to or exceeds €0.09; Options granted over 22.22% of the total number of shares over which options are granted shall not become exercisable unless and until the average market value over sixty consecutive business days completed after the grant date is equal to or exceeds €0.12; and Options granted over 22.22% of the total number of shares over which options are granted shall not become exercisable unless and until the average market value over sixty consecutive business days completed after the grant date is equal to or exceeds €0.15.

Details of the movement in share options during the year are as follows: 31 March 2007 Weighted Number of average exercise share options price €

Outstanding at the beginning of the year Granted in the year Forfeited in the year Expired in the year Outstanding at the end of the year

276,615,066 – (16,439,767) (4,332,658) 255,842,641

0.11 – 0.20 0.66 0.10

31 March 2006

Number of share options

32,525,825 248,406,803 (4,317,562) – 276,615,066

Weighted average exercise price €

0.60 0.06 0.61 – 0.11

The following table summarises information about the above share options outstanding at 31 March 2007: Options outstanding

Range of exercise price 6c to 40c 40.01c to 60c 60.01c to 75c 75.01c to 93c

Number outstanding at 31 March 2007

Weighted average remaining contractual life years

240,670,874 8,302,029 5,662,446 1,207,292 255,842,641

8.6 2.9 4.1 1.5 8.3

Waterford Wedgwood plc

Weighted average exercise price €

0.07 0.59 0.71 0.88 0.10

2007 annual report & accounts

Options exercisable

Number exercisable at 31 March 2007

Weighted average exercise price €

– 8,302,029 156,592 1,207,292 9,665,913

– 0.59 0.75 0.88 0.63

Notes to the consolidated financial statements

27 Share-based payment continued The following table summarises information about the above share options outstanding at 31 March 2006: Options outstanding

Range of exercise price 6c to 40c 40.01c to 60c 60.01c to 75c 75.01c to 93c

Number outstanding at 31 March 2006

Weighted average remaining contractual life years

253,610,462 11,985,120 9,491,176 1,528,308 276,615,066

9.6 3.3 3.3 2.3 9.1

Weighted average exercise price €

0.07 0.58 0.70 0.85 0.11

Options exercisable

Number exercisable at 31 March 2006

Weighted average exercise price €

– 11,985,120 3,985,322 1,528,308 17,498,750

– 0.58 0.70 0.85 0.64

Details of the movement in the number of options under savings related share option schemes are as follows: 31 March 2007 Weighted Number of average exercise share options price € Outstanding at the beginning of the year Forfeited in the year Expired in the year Outstanding at the end of the year

19,439,995 (2,284,412) (5,343,837) 11,811,746

0.16 0.14 0.22 0.14

31 March 2006

Number of share options 32,083,104 (5,419,929) (7,223,180) 19,439,995

Weighted average exercise price € 0.19 0.20 0.47 0.16

The following table summarises information about the above share options outstanding at 31 March 2007: Options outstanding

Number outstanding at 31 March 2007 Range of exercise price 10c to 20c

11,811,746

Weighted average remaining contractual life years

0.5

Weighted average exercise price €

0.14

Options exercisable

Number exercisable at 31 March 2007

Weighted average exercise price €

11,811,746

0.14

The following table summarises information about the above share options outstanding at 31 March 2006: Options outstanding

Range of exercise price 10c to 20c 20.01c to 30c

Number outstanding at 31 March 2006

Weighted average remaining contractual life years

14,096,158 5,343,837 19,439,995

1.5 0.3 1.2

Weighted average exercise price €

0.13 0.22 0.16

Options exercisable

Number exercisable at 31 March 2006

Weighted average exercise price €

– 5,343,837 5,343,837

– 0.22 0.22

Notes to the consolidated financial statements

28 Derivatives and other financial instruments – objectives, polices and strategies TREASURY MANAGEMENT AND FINANCIAL INSTRUMENTS

The Group’s treasury operations are managed by the Group Treasury function within parameters formally defined and reviewed by the Treasury Risk Management Group comprising executive and non-executive Directors supplemented by procedures and bank mandates. The Group Treasury function operates as a centralised service managing interest rate, foreign currency and financing risk and its activities are routinely reported to members of the Board. Consistent with Group policy, Group Treasury does not engage in speculative activity. Financial instruments, including derivatives, are used to raise finance and to manage interest rate and foreign currency risk arising from the Group’s operations. The Directors set out their views on the key financial risks below. FOREIGN CURRENCY RISK MANAGEMENT

The majority of the Group’s business operations and its assets and liabilities are transacted and held in four principal currencies: Euro, Sterling, US Dollar and Yen. It is the Group’s policy to protect income and expenditure, where appropriate, by means of forward currency contracts. Business trading flows are netted by currency and, where considered appropriate, hedged up to three years ahead. Taking into account the Group’s view on the four principal currencies, hedging in place at 31 March 2007 for the coming 12 months is as follows: 95% of the Group’s US$/€ exposure and 75% of the Group’s Yen/Stg£ exposure. The Group’s policy is to use foreign currency borrowings and forward foreign currency contracts to hedge part of the impact on the Group’s balance sheet of exchange rate movements on foreign currency denominated assets and liabilities. LIQUIDITY RISK MANAGEMENT

The Group’s policy is to finance its operations by a combination of cash flow generated from operations, short-term bank borrowings, long term debt, equity funding and leasing and to achieve a balance between certainty of funding and a flexible, cost effective borrowing structure. As part of this strategy, the Group raised €60.2 million through an open offer in June 2006. To further rationalise and restructure the Group’s operations, on 5 April 2007, the Group announced the issue of €100 million of cumulative, convertible preference shares with an option of placing a further €100 million as noted in note 1. The Group ensures continuity of funding by maintaining a broad portfolio of debt, diversified by source and maturity, and by maintaining facilities sufficient to cover peak anticipated borrowing requirements, with a minimum of 20% having a maturity in excess of five years at any point in time and the remainder having a maturity of no less than six months. At 31 March 2007: 3% (2006: 3%) of total financial liabilities had a maturity of greater than five years. A breakdown of the maturity profile of the Group’s net borrowings is shown later in this note. CREDIT RISK MANAGEMENT

The Group’s potential concentrations of credit risk consist principally of short-term cash investments and trade receivables. The Group only deposits short-term cash surpluses with high quality banks and institutions. Trade receivables comprise a large, widespread customer base with no significant concentrations of credit risk. INTEREST RATE RISK MANAGEMENT

The interest rate exposure of the Group arising from its borrowings and deposits is managed by the use of fixed rate debt, interest rate swaps and interest rate collars. The objectives for the mix between fixed and floating rate borrowings are set to reduce the impact of an upward change in interest rates while enabling some benefits to be enjoyed if interest rates fall. Thus the Group’s interest rate risk management policy is to fix between 20% and 60% of the interest cost on outstanding debt. At 31 March 2007: 37.4% (2006: 40.0%) of debt was fixed at an average rate of 9.88% (2006: 9.88%) for a weighted average maturity of 3.7 years (2006: 4.7 years). The effective rate of interest paid during the year to 31 March 2007 was 8.61% (2006: 8.22%). A 1% rise in market rates would increase the loss before income tax for the year to 31 March 2007 by €2.3 million (2006: €1.9 million). The Group has no interest rate swaps or collars at 31 March 2007.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

28 Derivatives and other financial instruments – objectives, polices and strategies continued INTEREST RATE AND CURRENCY OF FINANCIAL LIABILITIES

The currency and interest rate exposure of the financial liabilities of the Group was: Fixed rate financial liabilities

Currency At 31 March 2007 Euro Sterling US$ Yen

At 31 March 2006 Euro Sterling US$ Yen

Weighted average interest rate %

Weighted average time for which rate is fixed Years

Total € Mils

Fixed rate financial liabilities € Mils

Floating rate financial liabilities € Mils

243.5 88.9 87.2 9.4 429.0

160.5 – – – 160.5

83.0 88.9 87.2 9.4 268.5

9.88 – – – 9.88

3.7 – – – 3.7

255.0 52.4 77.5 12.7 397.6

159.0 – – – 159.0

96.0 52.4 77.5 12.7 238.6

9.88 – – – 9.88

4.7 – – – 4.7

Interest rates on floating rate borrowings are based on national LIBOR equivalents in the relevant currencies. MATURITY PROFILE OF THE GROUP’S FINANCIAL LIABILITIES

The following table analyses the Group’s financial liabilities, which are repayable as follows: Total financial liabilities As at 31 March 2007 € Mils On demand or within 1 year Within four years Within five years After five years Unamortised debt issue costs

(3.0) (425.9) – (11.2) 11.1 (429.0)

As at 31 March 2006 € Mils (3.1) – (397.2) (11.8) 14.5 (397.6)

Net debt As at 31 March 2007 € Mils

13.8 (425.9) – (11.2) 11.1 (412.2)

Net debt comprises gross borrowings and finance lease obligations less cash at bank and in hand and unamortised debt issue costs. There are no loans repayable by instalments, where any instalment is due after five years.

As at 31 March 2006 € Mils 22.7 – (397.2) (11.8) 14.5 (371.8)

Notes to the consolidated financial statements

28 Derivatives and other financial instruments – objectives, polices and strategies continued As at 31 March 2007 € Mils Split of gross borrowings and finance lease obligations between: Secured Unsecured Total gross borrowings and finance lease obligations

(398.3) (41.8) (440.1)

As at 31 March 2006 € Mils

(371.0) (41.1) (412.1)

Subordinated debt of €32.5 million was provided by Anglo Irish Bank Corporation plc (“Anglo Irish”) to the Company and subordinated debt of €7.5 million was provided by Anglo Irish to Rosenthal A.G. (a German company in which the Company has a majority interest) by term loan agreements dated 28 May 2004 and 25 June 2004 respectively. By agreement dated 28 May 2004 and 25 June 2004 between Anglo Irish and Lionheart Ventures (Overseas) Limited, a Cyprus incorporated company controlled by Sir Anthony O’Reilly (“Lionheart”), Anglo Irish has options to put these loans at par plus accrued interest to Lionheart. Sir Anthony O’Reilly and Mr Peter John Goulandris have entered into undertakings dated 28 May 2004, 25 June 2004 and 12 December 2005 in favour of Anglo Irish pursuant to which they severally undertake as to one half of any amount required (i) to pay to Lionheart sufficient funds to ensure that Lionheart is in a position to discharge its obligations under the put options or (ii) to pay to Anglo Irish, in discharge of Lionheart’s obligations, the amount of the obligations of Lionheart under the put options. Effective from 1 January 2006, Fairfield Holdings Limited, a company controlled by Sir Anthony O’Reilly was substituted for Lionheart in the aforementioned arrangements. By agreement dated 20 December 2005 the repayment date for the €32.5 million loan provided to Waterford Wedgwood and the €7.5 million loan provided to Rosenthal AG was extended to 18 November 2010. MATURITY ANALYSIS OF UNDRAWN COMMITTED BORROWING FACILITIES

Maturity analysis of undrawn committed borrowing facilities Within one year Between one and two years After two years

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

– – 28.7 28.7

– – 44.3 44.3

FAIR VALUES OF FINANCIAL INSTRUMENTS

Set out below is a year end comparison of book and fair values of the financial instruments by category. Fair values of financial assets and financial liabilities are as follows: As at 31 March 2007 Book value € Mils

Cash, cash equivalents and bank overdrafts Borrowings Derivative financial instruments

16.8 (440.1) 3.3

Fair value € Mils

16.8 (438.1) 3.3

As at March 2006 Book value € Mils

Fair value € Mils

25.8 (412.1) 1.0

25.8 (407.8) 1.0

The carrying value of trade receivables and trade payables approximate their fair value. The fair values of non-listed debt are measured by discounting cash flows at prevailing interest and exchange rates. The fair value of derivative financial instruments are measured using market values. The carrying value of cash and cash equivalents approximates to their fair value. An amount of €1.0 million (2006: €0.4 million) has been transferred from equity to the consolidated income statement in respect of forward foreign exchange contracts maturing in the year.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

29 Foreign currency The Group uses forward currency contracts in the normal course of business to hedge exchange risk on anticipated foreign currency transactions and translation. The Group had the following forward sales commitments all maturing within the next 12 months:

US dollars Japanese Yen

As at 31 March 2007

As at 31 March 2006

US$119.0m ¥3,000.0m

US$72.5m –

During the year, arising from the Group’s cash flow hedging activities, the exchange rate on its major overseas trading cash flows was as follows:

12 months to 31 March 2007

1.23 236.35

US$/€ ¥/Stg£

12 months to 31 March 2006 1.28 186.11

CURRENCY EXPOSURE OF THE GROUP’S NET MONETARY ASSETS/(LIABILITIES)

The table below shows the Group’s currency exposures, being those 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. These exposures were as follows:

Stg£ € Mils At 31 March 2007 Functional currency of Group operation Euro Stg£ Other

At 31 March 2006 Functional currency of Group operation Euro Stg£ Other

US$ € Mils

Yen € Mils

Other € Mils

Total € Mils

0.1 – (0.8) (0.7)

(30.0) 8.4 (0.4) (22.0)

(9.5) 13.2 – 3.7

1.3 (6.3) 1.8 (3.2)

(38.1) 15.3 0.6 (22.2)

1.7 – 1.1 2.8

(24.8) (5.0) (0.2) (30.0)

(11.0) 14.6 – 3.6

2.1 3.2 0.7 6.0

(32.0) 12.8 1.6 (17.6)

Notes to the consolidated financial statements

30 Contingent assets and liabilities (i)

Grants Under certain circumstances, grants amounting to €5.6 million (2006: €5.7 million) could become repayable by the Group.

(ii)

Litigation The Group, from time to time, is party to various legal proceedings. It is the opinion of the Directors that losses, if any, arising in connection with these matters will have no material adverse impact on the financial position of the Group.

(iii)

Taxation In calculating the taxation creditor at 31 March 2007, the Directors have taken into account the ability to utilise tax losses to offset certain trading gains. In the event that the tax losses cannot be offset, additional taxation liabilities of up to €6.3 million may become payable.

31 Capital commitments

Contracted for, but not provided

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

1.2

1.0

All of the above relates to property, plant and equipment.

32 Operating lease commitments At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

No later than one year Between two and five years After five years

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

22.8 55.2 38.2 116.2

30.1 66.7 53.9 150.7

The total of future minimum sublease payments to be received under non-cancellable subleases at 31 March 2007 were €27.6 million (2006: €44.2 million). The majority of the operating lease commitments relate to the rental of property under long-term rental contracts. The outstanding term of the operating leases at 31 March 2007 ranges from less than one year to twenty three years. Property rentals are typically fixed for a period of five years, with other rentals fixed for the term of the contract.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the consolidated financial statements

33 Reconciliation of operating loss before exceptional items to net cash used in operating activities 12 months to 31 March 2007 € Mils Operating loss before exceptional items Depreciation and amortisation Non-cash share-based payment Adjustment for gains on disposal of assets Unrealised foreign exchange movements Restructuring spend Loss from operations before changes in working capital and provisions Increase in inventories Increase in operating receivables Decrease in operating payables Cash used in operations

(14.9) 29.9 2.1 (1.2) (1.7) (26.4) (12.2) (19.0) (4.8) (11.3) (47.3)

12 months to 31 March 2006 € Mils (68.2) 37.3 1.0 – (0.3) (44.9) (75.1) (16.4) (8.0) (24.1) (123.6)

34 Analysis of net debt

Cash, cash equivalents and bank overdrafts Finance lease obligations Unamortised debt issue costs Long term loans

Cash flow € Mils

Movement in unamortised debt issue costs € Mils

Exchange movements € Mils

(8.4) (0.6) – (35.2) (44.2)

– – (3.4) – (3.4)

(0.6) (0.6) – 8.4 7.2

As at 1 April 2005 € Mils

Cash flow € Mils

Movement in unamortised debt issue costs € Mils

Exchange movements € Mils

As at 31 March 2006 € Mils

20.0 (25.8) 15.8 (315.2) (305.2)

5.6 (0.3) – (67.2) (61.9)

– – (1.3) – (1.3)

0.2 0.3 – (3.9) (3.4)

25.8 (25.8) 14.5 (386.3) (371.8)

As at 1 April 2006 € Mils 25.8 (25.8) 14.5 (386.3) (371.8)

As at 31 March 2007 € Mils 16.8 (27.0) 11.1 (413.1) (412.2)

Notes to the consolidated financial statements

35 Principal subsidiary companies Listed below are the principal subsidiary companies that comprise the Waterford Wedgwood Group: Name

Registered office and country of incorporation

Issued capital

Nature of business

*Waterford Crystal Ltd

Kilbarry, Waterford, Ireland

Crystal glass manufacturer and distributor

Josiah Wedgwood & Sons Ltd

Barlaston, Stoke-on-Trent, England

10,000 €1.25 Ord. shares 1,858,500 8.5% Cum.Red.Pref. €0.01 shares 60,000 Stg.£1 Ord. shares

Rosenthal AG

Selb, Germany

960,000 shares of no par value

PT Doulton

Tangerang, Indonesia

8,000 US$1,000 Ord. shares

*Stuart & Sons Ltd Waterford Wedgwood Australia Ltd Waterford Wedgwood Canada Inc.

Barlaston, Stoke-on-Trent, England Barlaston, Stoke-on-Trent, England Toronto, Canada

Waterford Wedgwood USA Inc. Waterford Wedgwood Japan Ltd Waterford Wedgwood Retail Ltd Josiah Wedgwood & Sons (Exports) Ltd Josiah Wedgwood (Malaysia) Sdn Bhd Waterford Wedgwood Trading Singapore Pte. Ltd Waterford Wedgwood (Taiwan) Ltd Wedgwood GmbH W/C Imports Inc.

New York, USA Tokyo, Japan Barlaston, Stoke-on-Trent, England Barlaston, Stoke-on-Trent, England Kuala Lumpur, Malaysia

471,333 Stg.£1 Ord. shares 485,240 Stg.£1 Ord. shares 110 Class A shares 363 Class B shares 20 US$1 Common shares 4,000 ¥50,000 shares 100 Stg.£1 Ord. shares 499 Stg.£1 Ord. shares 2 Rml Ord. shares

*Spring Switzerland GmbH Spring U.S.A. Corporation Cashs Mail Order Limited Royal Doulton (UK) Limited Royal Doulton Australia Pty Limited Royal Doulton Canada Limited

Switzerland Delaware, USA Kilbarry, Waterford, Ireland Barlaston, Stoke-on-Trent, England Sydney, Australia Toronto, Canada

Royal Doulton Hong Kong Limited Royal Doulton Japan KK Royal Doulton USA Inc

Hong Kong Tokyo, Japan New Jersey, USA

248 S$50,000 shares 13,600,000 NT$10 Ord. shares 1 €25,565 share 50,000 Common shares of no par value 100 Chf 1,000 shares 166 US$0.01 shares 2 €1.25 Ord. shares 32,971,000 Stg.£1 Ord. shares 1,531,985 A$1 Ord. shares 38,500 Common shares of no par value 8,000,000 HK$1 Ord. shares 2,000 ¥50,000 Common shares 400 US$100 Common shares

Barlaston, Stoke-on-Trent, England

50,000 Stg.£1 Ord. shares

Finance

*Waterford Wedgwood U.K. plc

Barlaston, Stoke-on-Trent, England

Subsidiary holding company

Wedgwood Ltd Waterford Wedgwood Inc. *Waterford Glass Research and Development Ltd *Dungarvan Crystal Ltd

Barlaston, Stoke-on-Trent, England Delaware, USA

181,601,769 Stg.25p Ord. shares 5,454,084,984 Stg.1p Income shares 46,195,052 Stg.25p Ord. shares 430 shares of no par value

Kilbarry, Waterford, Ireland Kilbarry, Waterford, Ireland

2 €1.25 Ord. shares 100,000 €1.25 ‘A’ Ord. shares 80,000 €12.50 ‘B’ Ord. shares 20,000 €12.50 ‘C’ Ord. shares

Research and development Dormant

*Waterford Wedgwood Employee Share Ownership Plan (Jersey) Ltd Waterford Wedgwood GmbH *Waterford Wedgwood Linens Inc. Ashling Corporation

St. Helier, Jersey Selb, Germany Delaware, USA California, USA

Trustee company Subsidiary holding company Subsidiary holding company Subsidiary holding company

Royal Doulton Ltd

Barlaston, Stoke-on-Trent, England

* +Ballygunner Holdings * +Ballytruckle Holdings

Dublin, Ireland Dublin, Ireland

9 Stg.£1 Ord. shares 1 €5,603,000 share 1,000 US$0.01 Common shares 1,225,000 Common shares of no par value 83,091,092 Stg.£0.99 Deferred shares 332,364,288 Stg.£0.01 Ord. shares 15,631 €1,000 Ord. shares 102 €1,000 Ord. shares

MANUFACTURING

Ceramic tableware/ giftware manufacturer Ceramic tableware/ giftware manufacturer Ceramic tableware/ giftware manufacturer

DISTRIBUTION

Singapore Taipei, Taiwan Selb, Germany California, USA

Distributor Distributor Distributor Distributor Distributor Retailer Exporter Retailer Distributor Distributor Sales office Linen distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor

FINANCE

Statum Limited OTHER

Waterford Wedgwood plc

2007 annual report & accounts

Subsidiary holding company Subsidiary holding company

Subsidiary holding company Subsidiary holding company Subsidiary holding company

Notes to the consolidated financial statements

35 Principal subsidiary companies continued Immediate subsidiaries of Waterford Wedgwood plc are marked*. The other subsidiaries comprising the Group are included in the financial statements in accordance with Regulation 4(1)(d) of the European Communities (Companies: Group Accounts) Regulations, 1992. With the exception of Rosenthal AG where the Group owns 89.8%, Ashling Corporation where the Group owns 86.5%, Spring U.S.A. Corporation where the Group owns 60% and PT Doulton where the Group owns 95%, all subsidiary companies are 100 per cent owned. All companies operate primarily in their country of incorporation with the exception of Waterford Wedgwood Australia Limited which operates in Australia. +Unlimited liability companies.

36 Waterford Wedgwood plc Waterford Wedgwood plc is a public limited liability company domiciled and incorporated in the Republic of Ireland. The registered office address is: Kilbarry Waterford Ireland Its principal activity is as a holding company. The Company’s subsidiaries are engaged in the manufacture, marketing and distribution of luxury lifestyle products through four major international brands, Waterford Crystal, Wedgwood, Royal Doulton and Rosenthal.

37 Related party transactions CASH SUPPORT (“CS”) Under the terms of the multi-currency credit facility agreement, CS for an amount of €25 million was provided by, or on behalf of, Sir Anthony O’Reilly and Peter John Goulandris and is capable of being drawn by the lenders in certain circumstances to reduce amounts owing under the facility. The amount of availability under the availability tests in the facility is increased euro for euro by the amount of the CS. The CS can be released subject to the achievement of certain performance criteria. STANDBY LETTERS OF CREDIT

On 27 December 2006 and 5 February 2007, The Bank of Nova Scotia provided standby letters of credit in an aggregate amount of €30 million to Bank of America as additional support for the banking facilities which they provide to the Group. The Bank of Nova Scotia in turn has received security support from entities owned by Sir Anthony O’Reilly and Peter John Goulandris. The standby letters of credit lapse in September 2007. 2007 UNDERWRITING AGREEMENT On 5 April 2007 Waterford Wedgwood plc (“the Company”), Birchfield Holdings Limited (a company in which Sir Anthony O’Reilly and Peter John Goulandris each control 50%) and Davy Stockbrokers entered into the 2007 underwriting agreement. This provided that, subject to the fulfilment of certain conditions, Birchfield Holding Limited (“Birchfield”) would act as sole underwriter of the 2007 open offer. In consideration of its agreement to underwrite the 2007 open offer, Birchfield is to be paid a commission of €1.1 million. In addition the Company agreed to pay all costs and expenses incurred by Birchfield in connection with the 2007 open offer. 2005 UNDERWRITING AGREEMENT On 20 June 2005 Waterford Wedgwood plc (“the Company”), Birchfield Holdings Limited (a company in which Sir Anthony O’Reilly and Peter John Goulandris each control 50%) and Davy Stockbrokers entered into the 2005 underwriting agreement. This provided that subject to the fulfilment of certain conditions, Birchfield Holdings Limited (“Birchfield”) would act as sole underwriter of the 2005 rights issue. In consideration of its agreement to underwrite the 2005 rights issue, Birchfield was paid a commission of €1.9 million. In addition the Company agreed to pay all costs and expenses incurred by Birchfield in connection with the 2005 rights issue. DIRECTORS’ AND COMPANY SECRETARY’S INTERESTS IN THE ORDINARY AND PREFERENCE SHARES OF THE COMPANY

Details of Directors’ and company secretary’s interests in the ordinary and preference shares of the Company are set out in the Report on Directors’ Remuneration. At 31 March 2007 the combined holdings of Sir Anthony O’Reilly and Peter John Goulandris and the corporate entities through which the interests of Sir Anthony O’Reilly and Peter John Goulandris in the Company are held, represents 51.35% of the issued ordinary shares of the Company and at 29 July 2007, 83.42% of the preference shares of the Company.

Notes to the consolidated financial statements

37 Related party transactions continued KEY MANAGEMENT PERSONNEL

Key management personnel comprises the Board of Directors, the Chief Executive Officers of Wedgwood Group and Royal Doulton, the Chief Financial Officer, Vice-President – Operations and the Group Treasurer. The remuneration of key management personnel was as follows:

Short-term benefits Post-retirement benefits Share-based payment

12 months to 31 March 2007 € Mils

12 months to 31 March 2006 € Mils

3.4 0.5 1.5 5.4

4.1 0.8 0.5 5.4

For key management where share option data is not disclosed in note 7, these amounted to €0.4 million (2006: €0.1 million)

38 Standards, interpretations and amendments to published standards that are not yet effective Certain new Standards, Interpretations and Amendments to Published Standards have been published that are mandatory for the Group’s accounting periods beginning on or after 1 April 2007 or later periods but which the Group has not early adopted are as follows: • IFRS 7, Financial Instruments: Disclosures and a complementary amendment to IAS 1, Presentation of Financial Statements – Capital disclosures (effective 1 January 2007). • IFRS 8, Operating Segments (effective 1 January 2009). • IAS 23, (Revised) Borrowing Costs (effective 1 January 2009). • IFRIC 8, Scope of IFRS 2 (effective 1 May 2006*). • IFRIC 9, Reassessment of Embedded Derivatives (effective 1 June 2006*). • IFRIC 10, Interim Financial Reporting and Impairment (effective 1 November 2006*). • IFRIC 11, Group and Treasury Share Transactions (effective 1 March 2007). • IFRIC 12, Service Concession Arrangements (effective 1 January 2008). • IFRIC 13, Customer Loyalty programmes (effective 1 July 2008). • IFRIC 14, The limit on a defined Benefit Asset, Minimum Funding Requirements and Interaction (effective 1 January 2008). * annual reporting periods beginning on or after that date.

Having carried out a preliminary review of the relevance of the above new Standards, Interpretations and Amendments to Published Standards, the Group believes that they will not have a material impact on the Group except for the following: (i)

IFRS 7, Financial Instruments: Disclosures and a complementary amendment to IAS 1, Presentation of Financial Statements – Capital Disclosures, which will introduce new disclosure requirements. (ii) IFRS 8, Operating Segments, which will introduce new disclosure requirements.

39 Approval of consolidated financial statements The Directors approved the consolidated financial statements on 29 July 2007.

Waterford Wedgwood plc

2007 annual report & accounts

Waterford Wedgwood plc Company Financial Statements

Company accounting policies under Irish GAAP The significant accounting policies adopted by the Company are as follows: BASIS OF PREPARATION

The financial statements have been prepared in accordance with accounting standards accepted in Ireland and Irish statute comprising the Companies Acts, 1963 to 2006. Accounting standards generally accepted in Ireland in preparing financial statements giving a true and fair view are those issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland.

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company are measured using the currency that reflects the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in euro, which is the Company’s functional and presentation currency. Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange at the balance sheet date. SHARE-BASED PAYMENT

HISTORICAL COST CONVENTION

The financial statements are prepared under the historical cost convention. – ACQUIRED BRANDS Brands separately acquired are recognised at cost. Brands,which have a finite life, are carried at cost less accumulated amortisation. Brands are amortised over a period of 20 years. INTANGIBLE ASSETS

FINANCIAL ASSETS

Financial assets comprising investments in subsidiary undertakings are valued at the lower of amortised cost or net realisable value. Net realisable value is deemed to be the underlying net assets of the subsidiary undertaking at the year end. Where the underlying net assets of the subsidiary undertaking are lower than cost, the difference is charged to the profit and loss account during the year. CASH AND CASH EQUIVALENTS

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits. SHARE CAPITAL

Ordinary shares are classified as equity. Costs directly attributable to the issue of new equity shares are shown as a deduction from the share premium account. DEBTORS AND OTHER RECEIVABLES

Debtors and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of debtors and other receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivable. The amount of the provision is the difference between the carrying amount and the present value of future cash flows. The Company’s debtors primarily comprise intercompany amounts which have no fixed maturing dates and are repayable on demand. BORROWINGS

All loans and borrowings are initially recorded at fair value of the consideration received net of transaction costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost employing the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Gains and losses are recognised in the profit and loss account when the liabilities are derecognised, as well as through the amortisation process. FINANCING COSTS

Financing costs comprises interest on borrowings, bank charges, and amortised debt issue costs. Interest payable on borrowings is calculated using the effective interest rate method. Interest receivable on funds invested is calculated on an accruals basis using the effective rate method. Waterford Wedgwood plc

For equity-settled share-based payment transactions (i.e. the granting of share options), the Company measures the cost at fair value at the measurement date (which is the grant date) using a recognised valuation methodology for the pricing of financial instruments (Binomial model). The share options granted by the Company grants rights to its equity instruments direct to its subsidiaries’ entities’ employees. These are accounted for as equity settled transactions. The share options granted do not vest until the completion of a specified period of service and are subject to the realisation of certain performance conditions. The fair value is determined on the basis that the services to be rendered by employees as consideration for the granting of share options will be received over the vesting period, which is assessed as at the date of grant. The share options granted by the Company are subject to certain market based vesting conditions as defined in FRS 20. Non-market vesting conditions are not taken into account when estimating the fair value of share options as at the date of grant; such conditions are taken into account through adjusting the number of equity instruments included in the measurement of the transaction so that, ultimately, the amount recognised equates to the number of equity instruments that actually vest. The expense in the income statement is recognised in the subsidiaries’ financial statements as the compensation charge. This represents the product of the total number of options expected to vest and the fair value of those options. The resulting amount is allocated to accounting periods over the vesting period. This is accounted for as a capital contribution in the company. The proceeds received by the Company on the exercise of share options are credited to share capital and share premium. In line with the transitional arrangements set out in FRS 20, “Sharebased Payment”, the recognition and measurement principles of this standard have been applied only in respect of share entitlements granted after 7 November 2002. The Company does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in FRS 20. FINANCIAL GUARANTEE CONTRACTS

Financial guarantee contracts are issued to banking institutions by the Company as part of cross guarantee arrangements throughout the Waterford Wedgwood plc Group. The Company and the subsidiaries engage in ongoing financing arrangements with these banking institutions. The Company is a guarantor and a borrower under certain of the Group’s facilities. Under the terms of FRS 26 “Financial Instruments: Measurement” financial guarantee contracts are required to be recognised at fair value at inception and subsequently measured as a provision under FRS 12 “Provisions, Contingent Liabilities and Contingent Assets” on the company balance sheet. There was no impact on the result for the year.

2007 annual report & accounts

Company balance sheet As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

1 2

3.3 223.3 226.6

3.5 197.0 200.5

3 4

483.6 (151.3) 332.3 558.9 (188.2) 370.7

464.9 (153.6) 311.3 511.8 (184.3) 327.5

321.2 201.9 (158.8) 3.8 2.6 370.7

261.0 203.7 (141.5) 1.7 2.6 327.5

Notes Fixed assets Intangible assets – acquired brands Financial assets Current assets Debtors Creditors (amounts falling due within one year) Net current assets Total assets less current liabilities Creditors (amounts falling due after more than one year) Capital and reserves Called up share capital Share premium account Profit and loss account Share-based payment Capital conversion reserve fund Shareholders’ funds

6 7 7 7 7

Company statement of total recognised gains and losses

Notes Loss for the year Total recognised losses relating to the year

Sir Anthony O’Reilly Chairman

Peter B Cameron Chief Executive Officer

12 months to 31 March 2007 € Mils (17.3) (17.3)

12 months to 31 March 2006 € Mils (148.5) (148.5)

Notes to the company balance sheet

1 Intangible assets – acquired brands 2007 € Mils

2006 € Mils

Cost At 1 April 2006 and 1 April 2005

4.4

Accumulated amortisation At 1 April 2006 and 1 April 2005 Amortisation At 31 March

(0.9) (0.2) (1.1)

(0.7) (0.2) (0.9)

3.3

3.5

Net book value at 31 March

2 Financial assets The Company’s investments in its subsidiaries were as follows; € Mils As at 31 March 2007 Cost At 1 April 2006 Additions At 31 March 2007

454.4 16.8 471.2

Provision for impairment At 1 April 2006 Write back of impairment charge At 31 March 2007

(257.4) 9.5 (247.9)

Net book value At 1 April 2006 At 31 March 2007

197.0 223.3

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the company balance sheet

2 Financial assets continued € Mils As at 31 March 2006 Cost At 1 April 2005 Additions At 31 March 2006

428.0 26.4 454.4

Provision for impairment At 1 April 2005 Impairment charge At 31 March 2006

(148.1) (109.3) (257.4)

Net book value At 1 April 2005 At 31 March 2006

279.9 197.0

3 Debtors

Other receivables Amounts owed by subsidiary undertakings

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

0.3 483.3 483.6

0.2 464.7 464.9

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

144.7 6.6 151.3

146.8 6.8 153.6

4 Creditors (amounts falling due within one year)

Amounts owed to subsidiary undertakings Other payables

Notes to the company balance sheet

5 Creditors (amounts falling due after more than one year)

Long term debt

As at 31 March 2007 € Mils

As at 31 March 2006 € Mils

188.2

184.3

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company is managed as part of the Group’s financial risk management procedures. These objectives and policies are set out on note 28 to the Group financial statements. There is no specific foreign currency risk, liquidity risk, credit risk or interest rate risk inherent in the Company that differs from the objectives and policies noted. The company does not have any cash flow, fair value or hedges of net investments. Details of the facilities, including maturity profile, interest rate and covenants under which the Company’s long term debt (which comprises subordinated debt and 97/8 mezzanine notes) is drawn down is set out in note 22 to the Group financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS

Set out below is a year end comparison of book and fair values of the financial instruments by category. Fair values of financial assets and financial liabilities are as follows: As at 31 March 2007

Inter-company debtors Inter-company creditors Borrowings

As at March 2006

Book value € Mils

Fair value € Mils

Book value € Mils

Fair value € Mils

483.3 144.7 188.2

483.3 144.7 184.9

464.7 146.8 184.3

464.7 146.8 181.8

The fair values of non-listed debt are measured by discounting cash flows at prevailing interest and exchange rates. The carrying value of inter-company debtors and inter-company creditors approximates to their fair value. Interest income amounted to €nil (2006: €0.2 million) and interest expense amounted to €22.9 million (2006: €32.4 million).

6 Share capital As at 31 March 2007

As at 31 March 2006

€ Mils

Number of shares

€ Mils

Number of shares

Authorised Ordinary shares of €0.06 each

957.0

15,950,000,000

390.0

6,500,000,000

Issued and fully paid At 1 April Issue of shares for cash At 31 March

261.0 60.2 321.2

4,350,489,725 1,003,946,503 5,354,436,228

159.5 101.5 261.0

2,658,632,610 1,691,857,115 4,350,489,725

In June 2006, the Company announced an open offer for 1,003,946,503 ordinary shares of €0.06 per ordinary share to raise €60.2 million before expenses. The net proceeds of the issue of €58.4 million have been used to fund restructuring costs and for the working capital requirements of the Group.

Waterford Wedgwood plc

2007 annual report & accounts

Notes to the company balance sheet

6 Share capital continued In May 2005, the Company announced a rights issue of 1,691,857,115 ordinary shares of €0.06 per ordinary share to raise €101.5 million before expenses. The net proceeds of the issue of €96.7 million have been used to fund restructuring costs and for funding the working capital requirements of the Waterford Wedgwood plc Group. On 5 April 2007, the company announced a proposal to raise €100 million by way of open offer of cumulative convertible preference shares. The proceeds will provide increased working capital and will fund a new cost restructuring programme. Authority was also sought from shareholders to allow the issuance of a further €100 million in cumulative convertible preference shares. On 2 July 2007, the company announced that the 1 for 535 open offer of preference shares at €10 per preference shares to raise approximately €100 million gross of expenses, has closed. 9,995,313 preference shares (with an aggregate 569,732,841 warranted attached) were offered to qualifying stockholders pursuant to the open offer.

7 Equity reserves Share premium account € Mils At 1 April 2006 Expenses relating to the issue of shares Share-based payment Loss for the year At 31 March 2007

203.7 (1.8) – – 201.9

Share premium account € Mils At 1 April 2005 Expenses relating to the issue of shares Share-based payment Loss for the year At 31 March 2006

208.5 (4.8) – – 203.7

Profit and loss account € Mils (141.5) – – (17.3) (158.8)

Profit and loss account € Mils 7.0 – – (148.5) (141.5)

Capital conversion reserve fund € Mils

Share-based payment € Mils

2.6 – – – 2.6

1.7 – 2.1 – 3.8

Capital conversion reserve fund € Mils

Share-based payment € Mils

2.6 – – – 2.6

0.7 – 1.0 – 1.7

In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual profit and loss account to the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s loss for the financial year determined in accordance with Irish GAAP is €17.3 million (2006: €148.5 million).

Notes to the company balance sheet

8 Contingent liabilities The Company has guaranteed the borrowings of subsidiary undertakings:

Guarantees

As at 31 March 2007 â&#x201A;Ź Mils

As at 31 March 2006 â&#x201A;Ź Mils

205.8

179.9

9 Approval of the Company financial statements The Directors approved the Company financial statements on 29 July 2007.

Waterford Wedgwood plc

2007 annual report & accounts