SIMS LIMITED — Annual Report 2009

Aug 27, 2009

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SIMS METAL MANAGEMENT LIMITED

ABN 69 114 838 630

APPENDIX 4E – PRELIMINARY FINAL REPORT Pursuant to ASX Listing Rule 4.3A

30 JUNE 2009

Sims Metal Management Limited Year ended: 30 June 2009

Previous corresponding period: 30 June 2008

Results for announcement to the market
	Up/	%		Current Period
	Down	Change		A$’000
Revenue from ordinary activities	up	12.7	to	$ 8,641,010
Loss from ordinary activities after tax attributable
to members*	down	134.1	to	$ (150,295)
Net loss for the period attributable to members*	down	134.1	to	$ (150,295)

• Includes A$191.1 million (pre and post tax) non-cash goodwill impairment charge.

Dividends for the year ended 30 June 2009
	Cents per	% Franked per
	Security	Security
Interim dividend	28.0	100%
Final dividend	10.0	100%
Record date		9 October 2009
Payment date	26 October 2009

Net tangible assets
	June	June
	2009	2008
Net tangible asset per security	8.09	7.93

For further explanation of the above figures, please refer to the Directors’ Report, press release and market presentations filed with the Australian Securities Exchange.

The profit after tax for the previous corresponding period has been restated to reflect the retrospective application of the Company’s change in accounting policy for land, buildings and leasehold improvements. Refer to Note 1(b)(vi) in the financial report for the year ended 30 June 2009 for further information.

The remainder of the information required by Listing Rule 4.3A is contained in the financial report.

The financial report is based on accounts which have been audited.

CONTENTS

	Page
Directors’ Report	1
Auditor’s Independence Declaration	22
Consolidated Income Statements	23
Consolidated Balance Sheets	24
Consolidated Statements of Recognised Income and Expense	25
Consolidated Cash Flow Statements	26
Notes to the Consolidated Financial Statements	27
Directors’ Declaration	99
Independent Auditor’s Report	100

Directors’ Report

The Directors of Sims Metal Management Limited (the “Company”) present their Report, together with the Financial Report of the consolidated entity for the financial year ended 30 June 2009 (the “financial year”). The consolidated entity consists of the Company and the entities it controlled at the end of, or during, the financial year (the “Group”).

Names and particulars of Directors

The following persons were Directors of the Company as of the date of this report:

Paul Varello BCE (Civil Engineering) (age 65) Chairman and Independent non-executive Director

Appointed as a Director in November 2005, appointed Vice-Chairman in November 2008 and Chairman in August 2009. Member of the Nomination/Governance Committee and the Finance & Investment Committee. Mr Varello is Chairman of Commonwealth Engineering and Construction (“CEC”), located in Houston, Texas. Prior to founding CEC in 2003, he was Chairman and CEO of American Ref-Fuel Company. He is a registered professional engineer and a member of the American Society of Civil Engineers and the American Institute of Chemical Engineers.

Daniel Dienst JD (age 44) Group Chief Executive Officer

Executive Director and Group Chief Executive Officer since March 2008. Member of the Safety, Health, Environment & Community Committee, Nomination/Governance Committee and Finance & Investment Committee. Mr Dienst was formerly a Director (since June 2001), Chairman (since April 2003), Chief Executive Officer (since January 2004) and President (since September 2004) of Metal Management, Inc which entity merged with the Company on 14 March 2008. From January 1999 to January 2004, he served in various capacities with CIBC World Markets Corp., lastly as Managing Director of the Corporate and Leveraged Finance Group. From 2002-2005, he was Chairman of the Board of Metals USA, Inc., a NASDAQ – listed steel service center company until its sale to a private entity. He is a Director of other Sims Metal Management Limited subsidiaries and associated companies. He is a graduate of Washington University and received a JD from The Brooklyn Law School.

Norman Bobins BS, MBA (age 66) Independent non-executive Director

Appointed as a Director in March 2008. Chairman of the Finance & Investment Committee. He was formerly a Director of Metal Management, Inc (since 2006). From 2008, Mr Bobins is the Chairman of Norman Bobins Consulting LLC. From May 2007 until October 2007, Mr Bobins was the Chairman of the Board of LaSalle Bank Corporation (a financial institution). From 2002 to 2007, he was President and Chief Executive Officer of LaSalle Bank Corporation. From 2006-2007, he was President and Chief Executive Officer of ABN AMRO North America. From 2002-2007, he was Senior Executive Vice President at ABN AMRO Bank N.V., the Dutch parent of LaSalle Bank Corporation. Mr Bobins is the Non Executive Chairman of The PrivateBank and Trust Company. He is also a Director of NICOR, Inc., Transco, Inc., and AAR CORP. He earned his BS from the University of Wisconsin and his MBA from the University of Chicago.

J Michael Feeney B Com (Marketing) (age 63) Independent non-executive Director

Appointed as a Director in September 1991. Chairman of the Remuneration Committee and member of the Risk, Audit & Compliance Committee. Mr Feeney was formerly an Executive Director of Collins Partners Corporate Advisory and prior to that Finance and Strategy Director for Philip Morris, Executive Director, Strategy & Corporate Affairs for Elders IXL and Executive Director, Corporate Strategy of Elders Resources NZFP.

Mike Iwanaga Bachelor of Liberal Arts (age 68) Non-independent non-executive Director

Appointed as a Director in June 2007. He is a member of the Australia & New Zealand Chamber of Commerce in Japan. He joined Mitsui & Co., Ltd in 1963 and worked in various divisions of that company culminating in his appointment, in 1999, as President & Managing Director, Mitsui Iron Ore Development, a position he held until his retirement in 2005.

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Robert Lewon BS (age 66) Independent non-executive Director

Appointed as a Director in March 2008. Member of the Safety, Health, Environment & Community Committee and Finance & Investment Committee. He was formerly a Director (since March 2004) of Metal Management, Inc. Mr Lewon has over 40 years of experience in the scrap metal industry and has served as an executive of scrap companies, including President of Simsmetal USA Corp. He has been active in the Institute of Scrap Recycling Industries, Inc. and its predecessor ISIS, serving as Director and national officer, among other positions. Additionally, he has served as a consultant to scrap metal companies since his retirement from Simsmetal in 1993, and, prior to his appointment as a Director of the Company, he was a long time advisor/consultant to TAMCO, the only steel mill in California.

Paul Mazoudier BA, LLB (Hons) (age 67) Independent Non-executive Director

Appointed as a Director in September 1991 and served as Chairman from January 1999 to August 2009. Member of the Safety, Health, Environment & Community Committee, Remuneration Committee and Risk, Audit & Compliance Committee. Mr Mazoudier was formerly an Executive Director of Sims Consolidated (1974-79) and a former partner and NSW Chairman of Minter Ellison, lawyers. He was a Director of HPAL Limited from 2000 until November 2007.

Gerald Morris BA (age 77) Independent non-executive Director

Appointed as a Director in March 2008. Chairman of the Risk, Audit & Compliance Committee and member of the Remuneration Committee and Nomination/Governance Committee. He was formerly a Director (since January 2004) of Metal Management, Inc. Mr Morris currently serves as President and CEO of Intalite International N.V., a diversified holding company with investments primarily in the metals fabrication industry. He also serves as Chairman and Director of Beacon Trust Company. He previously served as a Director of Metals USA, Inc., Rexel, Inc. and Tivoli Industries, Inc., and as trustee of the Blanchard Group of Funds. He is a Certified Public Accountant.

Chris Renwick AM, FAIM, FAIE, FTSE - BA, LLB (age 66) Independent non-executive Director

Appointed as a Director in June 2007. Chairman of the Safety, Health, Environment & Community Committee and member of the Finance & Investment Committee. Mr Renwick was employed with the Rio Tinto Group for over 35 years rising, in 1997, to Chief Executive, Rio Tinto Iron Ore, a position he held until his retirement in 2004. He is Chairman and Director of Coal and Allied Industries Limited (since 2004), a Director of Downer EDI Limited (since 2004), member of the board of Governors of Ian Clunies-Ross Foundation (since 2005) and chairman of the Rio Tinto Aboriginal Fund (since 2004).

The following persons were Directors during the financial year:

Ross Cunningham – retired 21 November 2008 John DiLacqua – retired 21 November 2008

Jeremy Sutcliffe – agreement terminated by way of redundancy 26 August 2009

Company Secretaries

Frank Moratti B Com, LLB, MBA (Executive)

Mr Moratti was appointed to the position of Company Secretary in 1997. Before joining the Company he held positions of assistant company secretary/legal counsel in a number of publicly listed companies over a period of some 12 years and, prior to that, worked as a solicitor with a major legal practice.

Scott Miller BS, MS, JD, PE

Mr Miller was appointed to the position of Company Secretary in 2008. Since joining the Company in 1997, Mr Miller has held positions as legal counsel and manager for environmental affairs for North American operations. Before joining the Company he held positions at an environmental mediation firm, as an attorney with a major legal practice, and as a consulting engineer.

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Directors Meetings

The following table shows the actual Board and Committee meetings held during the financial year and the number of meetings attended by each Director.

	Board of Directors	Risk, Audit & Compliance Committee	Safety, Health, Environment & Community Committee	Remunerat ion Committee	Finance & Investment Committee	Integration Committee	Nomination/ Governance **Committee3 **
Meetings held	7	7	2	5	2	3	-
PVarello	7	-	-	-	2	3	-
D Dienst	7	-	2	-	2	3	-
NBobins	6	-	-	-	2	3	-
JM Feeney	7	7	-	5	-	-	-
M Iwanaga	5	-	-	-	-	-	-
R Lewon	7	-	2	-	2	-	-
P Mazoudier	7	7	2	5	-	-	-
G Morris	7	7	-	5	-	-	-
C Renwick	7	-	2	-	1	-	-
J Sutcliffe1	7	-	2	-	2	3	-
R Cunningham2	4	-	-	-	-	-	-
J DiLacqua2	3	2	-	2	-	-	-

1 Mr Sutcliffe’s agreement terminated by way of redundancy on 26 August 2009.

2 Messrs Cunningham and DiLacqua retired on 21 November 2008. Mr Cunningham attended all meetings while he was a Director. Mr DiLacqua attended 3 of 4 Board of Directors meetings while he was a Director. 3 There were no matters that required the attention of the Nomination/Governance Committee during the financial year.

Directors’ Interests

As at the date of this report, the interests of the Directors in the shares, options, or performance rights of Sims Metal Management Limited are set forth below. Shares owned by each Director are either in the form of ordinary shares or American Depository Shares (“ADS”).

		Options	Performance
	Shares	over Shares	Rights
P Varello (ADS)	30,825	-	-
D Dienst (ADS)	1,156,872	591,654	61,092
N Bobins (ADS)	54,600	-	-
JM Feeney	26,674	-	-
M Iwanaga	-	-	-
R Lewon (ADS)	-	123,000	-
P Mazoudier	15,201	-	-
G Morris (ADS)	20,000	205,000	-
CRenwick	3,144	-	-

Principal Activities

The Group operates predominantly in the secondary metal recycling industry. Its core business involves ferrous secondary recycling, which comprises the collection, processing and trading of iron and steel secondary raw material; non-ferrous secondary recycling, which comprises the collection, processing and trading of other metal alloys and residues, principally aluminium, lead, copper, zinc and nickel bearing materials; and recycling solutions, which comprises the provision of environmentally responsible solutions to the disposal of post consumer products. It is also involved in secondary processing, which comprises a value added process involving the melting, refining and ingoting of certain non-ferrous metals; the reclamation and reprocessing of plastics; and landfill gas renewable energy.

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Review of Operations

A review of the operations of the Company during the financial year and the results of those operations are set out in the Chairman’s and Group Chief Executive Officer’s Report in the annual report and in the press release announcing the results for the financial year as filed with the Australian Securities Exchange (“ASX”).

Dividends

The Board determined a fully franked final dividend of 10 cents per share for the financial year to be paid on 26 October 2009. The interim dividend for the financial year was 28 cents per share fully franked and was paid on 9 April 2009.

Significant Changes in the State of Affairs

The Directors are not aware of any significant change in the state of affairs of the Company during the financial year other than as set out in the Chairman’s and Group Chief Executive Officer’s Report in the annual report.

Subsequent Events after the Balance Sheet Date

On 26 August 2009, Jeremy Sutcliffe’s agreement was terminated by way of redundancy and he ceased to be an Executive Director of the Company on 26 August 2009. Please refer to Section E - Service Agreements contained in the Remuneration Report.

On 17 August 2009, the Company accepted the resignation of Thomas Bird, Managing Director, UK Metals. Please refer to Section E - Service Agreements contained in the Remuneration Report.

The Directors are not aware of any other matter or circumstance that has arisen since the end of the financial year which will significantly affect, or may significantly affect, the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

Likely Developments

Information as to the likely developments in the operations of the consolidated entity is set out in the Chairman’s and Group Chief Executive Officer’s Report in the annual report.

Environmental Regulation and Greenhouse Gas and Energy Data Reporting Requirements

The Company has licences and consents in place at each of its operating sites as prescribed by environmental laws and regulations that apply in each respective location. Further information on the consolidated entity’s performance in relation to environmental regulation is set out in the annual report.

The Company’s Australian operations are subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act 2007 of Australia. The Energy Efficiency Opportunities Act 2006 requires the Company to assess the energy usage of its Australian operations, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the Company intends to take as a result. As required under this Act, the Company has registered with the Department of Resources, Energy and Tourism as a participant entity and submitted its first assessment plan and reporting schedule prior to 31 December 2008. The assessment is available for review on the Company’s website at www.simsmm.com.

The National Greenhouse and Energy Reporting Act 2007 requires the Company to report its annual greenhouse gas emissions and energy use of its Australian operations. The first measurement period for this Act runs from 1 July 2008 until 30 June 2009. The Company has implemented systems and processes for the collection and calculation of the data required to enable it to prepare and submit its initial report to the Greenhouse and Energy Data Officer by 31 October 2009.

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Insurance and Indemnification of Officers

During the financial year, the Company had contracts in place insuring all Directors and Executives of the Company (and/or any subsidiary companies in which it holds greater than 50% of the voting shares), including Directors in office at the date of this report and those who served on the Board during the year, against liabilities that may arise from their positions within the Company and its controlled entities, except where the liabilities arise out of conduct involving a lack of good faith. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid as such disclosure is prohibited under the terms of the contracts.

Share Options and Rights

Unissued shares

As of the date of this report, there were 2,526,095 share options outstanding and 1,105,102 rights outstanding in relation to the Company’s ordinary shares. Refer to Note 24 of the financial report for further details of the options and rights outstanding as at 30 June 2009. Option and right holders do not have any right, by virtue of the option or right, to participate in any share issue of the Company.

Shares issued as a result of the exercise of options and vesting of rights

During the financial year, there were no exercises of share options. During the financial year, 257,282 ordinary shares were issued in connection with vesting of rights. Refer to Note 24 of the financial report for further details of shares issued pursuant to share-based awards. Subsequent to the financial year, 48,776 ordinary shares were issued in connection with vesting of rights.

Non-audit Services

The Company may decide to employ its external auditor (PricewaterhouseCoopers) on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important.

Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the financial year are set out in Note 26 of the financial report.

The Board has considered the position and, in accordance with advice received from the Risk, Audit & Compliance Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the provision of non-audit services by the auditor, as set forth in Note 26 of the financial report, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Risk, Audit & Compliance Committee to ensure they do not impact the impartiality and objectivity of the auditor

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants .

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22.

Rounding of Amounts

The amounts in this report, where appropriate and unless otherwise stated, have been rounded off to the nearest thousand dollars in accordance with ASIC Class Order 98/100.

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Remuneration Report

Remarks by the Chairman of the Remuneration Committee

Merging two large companies into the largest publicly traded metal recycling business in the world is challenging, especially during a global economic crisis. The Company was faced with the challenge of integrating the executive compensation practices of the two predecessor companies while continuing to attract and retain the best talent in all locations. Throughout this period, the Company continued to demonstrate its commitment to its remuneration philosophy, namely:

• A remuneration structure designed to attract, motivate, and retain high calibre executives in a competitive global industry.

• Demanding financial and non-financial performance criteria focused on delivering short-term and long-term value to shareholders.

• Simplicity and transparency.

Summary of remuneration activity in the financial year:

• Retention of key executives was critical to the success of the merger between the former Sims Group Limited and Metal Management, Inc (the “Merger”). Base salaries of executives were reviewed and adjusted as necessary either to address internal equity issues or external benchmarks related to larger roles resulting from the Merger. For the 2010 financial year, no salary increases are anticipated outside of significant promotions or expansion of roles.

• The Committee supported management’s recommendation for an interim “bridge” payment plan for the first half of the financial year, while a new Short Term Incentive (“STI”) Plan was being designed for the newly merged Sims Metal Management Limited. The “bridge” payment enabled the Company to offer a retention incentive to key executives, and to reward the effort of participants who assisted in the early and smooth integration of the two companies.

• In the second half of the financial year, it was not possible to establish a return on net assets (“RONA”) target that was sufficient to justify an STI program. As a result, no STI plan was adopted and participants received no bonus for the second half of the financial year.

• The Company made Long Term Incentive (“LTI”) Plan awards, in the form of Total Shareholder Return (“TSR”) based Performance Rights (“Rights”) and continuous service based Share Options (“Options”) consistent with the awards made to the Executive Directors and approved by shareholders in November 2008. These awards provide meaningful remuneration based on the Company’s performance, and reflect the importance of retaining its world class management team.

• Integration bonuses were paid to Messrs Dienst and Sutcliffe in accordance with their service agreements. Integration bonuses were also paid to the two North American co-presidents for their roles in bringing together the two companies and their respective cultures, smoothly and within schedule.

• The fee structure for Non-Executive Directors (“NED”) was amended in the financial year to add compensation for committee chairmanship. There was no other increase in the fee structure for NonExecutive Directors, and there is no fee structure increase intended in the 2010 financial year. However, to accommodate one additional NED and to provide for foreign exchange fluctuations in the payment of current fees, an increase in the aggregate Non-Executive Director fee pool will be proposed for adoption in the 2010 financial year.

The Remuneration Committee shares the Board’s confidence in the future of the Company, and believes its remuneration and benefits plans and programs play an integral part in ensuring that the Group’s management team is compensated fairly and in alignment with corporate performance and objectives.

Introduction

The Directors of Sims Metal Management Limited present the Remuneration Report for the Company and the Group for the financial year ended 30 June 2009. The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001 .

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This Remuneration Report forms part of the Directors’ Report and is set out under the following principal headings:

• A. The Remuneration Committee

• B. Principles used to determine the nature and amount of Remuneration

• C. Details of Remuneration

• D. Share-based Remuneration

• E. Service Agreements

A. The Remuneration Committee

The primary role of the Remuneration Committee (“Committee”) is to support and advise the Board on the implementation and maintenance of coherent, fair and responsible remuneration policies which are observed and which enable the Company to attract and retain executives and directors who will create value for shareholders of the Company. The Committee’s charter, which is available on the Company’s website at www.simsmm.com, provides further information on the role of the Committee.

The Committee reviews and makes recommendations to the Board on:

• Executive remuneration policies

• Executives’ remuneration and incentive performance packages

• Introduction and application of equity based schemes

• Overseeing Executive Directors’ annual performance appraisals

• Executive succession planning

• Executive recruitment, retention and termination policies

• Non-executive Directors’ remuneration framework

Committee members during the financial year were:

• Paul Mazoudier – Chairman (from 1 July 2008 to 31 December 2008)

• Michael Feeney – Chairman (from 1 January 2009 to 30 June 2009)

• Gerald Morris - Member (from 1 July 2008 to 30 June 2009)

• John DiLacqua – Member (from 1 July 2008 to 21 November 2008)

B. Principles used to determine the nature and amount of Remuneration

For the Company, key management personnel (“KMP”) consist of the Executive and Non-Executive Directors and other key management personnel who are referred to as “Senior Executives” in this report. These KMP are accountable for planning, directing and controlling the affairs of the Group as defined in Australian Accounting Standards Board (“AASB”) 124, “ Related Party Disclosures ”, and include the five highest remunerated executives of the Group and Company as defined in the Corporations Act.

The following persons were Directors of the Company during the financial year:

Name	Position
Paul Varello	Independent Non-Executive Chairman_(since 1 August 2009)_
Paul Mazoudier	Independent Non-Executive Director (Chairman up to 1 August 2009)
Daniel Dienst	Executive Director and Group Chief Executive Officer
Jeremy Sutcliffe	Executive Director_(terminated by way of redundancy 26 August 2009)_
Norman Bobins	Independent Non-Executive Director
Ross Cunningham	Executive Director_(retired 21 November 2008)_
John DiLacqua	Independent Non-Executive Director_(retired 21 November 2008)_
Michael Feeney	Independent Non-Executive Director
Mike Iwanaga	Non-independent Non-Executive Director
Robert Lewon	Independent Non-Executive Director
Gerald Morris	Independent Non-Executive Director
ChrisRenwick	Independent Non-ExecutiveDirector

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The following persons were Senior Executives of the Company during the financial year:

Name	Position
Thomas Bird	Managing Director – United Kingdom Metals_(resigned 17 August 2009)_
Graham Davy	Chief Executive Officer – European Metals and Sims Recycling
	Solutions, Global Operations
Robert Kelman	President – Commercial North America
Robert Larry	Group Chief Financial Officer
Darron McGree	Managing Director Australia and New Zealand
Alan Ratner	President–Operations North America

Remuneration of Non-Executive Directors

Remuneration for NEDs reflects the Company’s desire to attract, motivate and retain high quality directors and to ensure their active participation in the Company’s affairs for the purposes of corporate governance, regulatory compliance and other matters. The Company aims to provide a level of remuneration for NEDs taking into account, among other things, fees paid for similar roles in comparable companies, the commitment, risk and responsibility accepted by NEDs, and recognition of their commercial expertise and experience.

NED fees are determined within an aggregate directors’ fee pool limit which is periodically recommended for approval by shareholders. The pool limit is currently A$2,500,000, and was approved at the Annual General Meeting of the Company held on 21 November 2007. As a result of the annual review of NED fees, the Committee has recommended that the aggregate fee limit be increased to provide for foreign exchange fluctuation in the payment of current fees to existing NEDs and to enable the appointment of an additional NED during the coming year. An increase in the aggregate fee limit to A$3,000,000 will be proposed for shareholder approval at the Annual General Meeting to be held on 20 November 2009. Should approval for the increase not be given, the proposed payments would be reduced to ensure that aggregate fees paid remain within the existing approved limit.

Remuneration of Executive Directors and Senior Executives

The Committee recognises that the Company operates in a global environment and its performance depends on the quality of its people. The Committee’s remuneration policy for Executive Directors and Senior Executives satisfies the following key criteria for good reward governance practices:

• ⇒ Executive remuneration packages based on competitive market data, and commensurate with employee duties, responsibilities and accountabilities

• ⇒ Structured to attract, motivate and retain high calibre executives

• ⇒ Demanding financial and non-financial performance criteria with a focus on delivering long-term value to shareholders

• ⇒ Simplicity and transparency

• ⇒ Alignment with shareholders’ interests

Certain components of remuneration for Executive Directors and Senior Executives have been designed to closely reflect the long term aspirations of the Company’s shareholders by focusing on:

• ⇒ Sustained growth in shareholder wealth, consisting of dividends and growth in share price ⇒ Superior market performance relative to a relevant group of world-wide competitors

The Committee also recognises that remuneration for Executive Directors and Senior Executives should:

• ⇒ Reward capability and experience

• ⇒ Provide a competitive reward for contribution to growth in shareholder wealth ⇒ Provide a clear structure for earning rewards

• ⇒ Provide recognition for non-financial contribution in areas key to best business practice, e.g. safety, management development, community relations

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The remuneration of Executives is established by the Board, based on the recommendation of the Committee. The Company also undertakes an annual remuneration review to determine its total remuneration positioning against the market. The reward framework for Executive Directors and Senior Executives has three components. These remuneration components, and the factors that determine them, are summarised in the table below:

Component	Provided as	Variables determining reward	Variables determining reward
Fixed Remuneration	Annual salary & benefits	Set with reference to market data for role, experience and performance
Short-term incentives	Cash	Financial performance targets measured by RONA	Non-financial targets, e.g. safety, succession planning, management development, community relations
Long-term incentives	Equity/Cash	Relative TSR targets and Executive retention

(a) Fixed Remuneration

Fixed remuneration comprises base salary and benefits. Base salary is determined on an individual basis, considering experience, performance, the size and scope of the individual’s role, the importance of that role to the Company, and the competitiveness of that role in the market place.

Benefits programs may include health insurance, life and disability insurance, retirement programs (depending on national government and tax regulations) and car allowances.

Fixed remuneration does not vary over the course of a year due to performance. Remuneration packages (including fixed components of base salaries and benefits) are reviewed annually. The Committee examines market-based comparable positions in public surveys and obtains advice from external remuneration consultants where necessary. There are no guaranteed increases to any components of fixed remuneration.

(b) At risk remuneration

At risk remuneration comprises both short term (annual) and long term incentives. “At risk” implies an absence of certainty of collection of a particular component of remuneration in the event agreed-upon performance hurdles or employment conditions are not met during the reporting period. The annual incentive and long term incentive are an integral part of the Company’s approach to competitive performance based remuneration. These at risk components for the Executive Directors and Senior Executives are intended to ensure that an appropriate proportion of the remuneration is linked to growth in shareholder value. The remuneration of Executive Directors and Senior Executives is linked to performance through short and long term incentives as follows:

(b)(1)(i) Short Term Incentive Plan

The new STI Plan designed during the financial year (but not adopted for reasons noted in the following section) provides the opportunity for Executive Directors and Senior Executives to earn an annual cash incentive that is subject to the achievement of targets that are set at the beginning of the financial year. Payments from the STI Plan are determined based on the financial performance of the Group or business unit, and individual performance.

Executive Directors and Senior Executives have approximately 80% of their STI determined by group or business unit financial performance and approximately 20% of their STI determined by individual performance.

Group or business unit performance is based on achievement of RONA targets which have been approved by the Committee on the basis that RONA is a key performance driver of the Group. RONA is computed as Profit Before Interest and Taxes (“PBIT”) divided by Average Controlled Capital Employed (“CCE”). Due to commercial sensitivity, the specific RONA targets are not disclosed.

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Individual performance hurdles are set in several key performance areas, which allow the Group to recognise executive performance with regard to non-financial initiatives which are critical to the success of the business, e.g. safety, succession planning, management development, shareholder relations, community relations.

The STI is expressed as a percentage of fixed remuneration, and determined with reference to market. In the event of outstanding performance by the Company/business unit, an Executive Director or Senior Executive may earn up to a maximum of two-times the target incentive. This is a reduction from three times maximum target used in prior financial years.

(b)(1)(ii) 2009 STI arrangements

As the design and implementation of the new unified remuneration structure was delayed by the complexities of the Merger, management desired to ensure retention of key executives during the integration, as well as reward the extraordinary effort of participants in combining two large companies quickly and smoothly during difficult economic conditions. The Committee approved management’s recommendation for a “bridge” payment, in lieu of a formal STI Plan, for performance over the first half of the financial year. The “bridge” plan covered Executive Directors, Senior Executives and all other employees who received a maximum bonus under the STI Plans of both former companies in the 2008 financial year.

Both Metal Management, Inc and the former Sims Group Limited paid out maximum STI’s to their respective participants in the 2008 financial year. For former Metal Management, Inc participants, the maximum STI payment was two-times target; for former Sims Group Limited participants, the maximum STI payment was three-times target.

To calculate the basis of a participant’s potential “bridge” payment, a two-times target maximum was applied to his or her fixed remuneration at the start of the financial year; the actual “bridge” payment, being only for a six month period, was capped at 50% of the calculated amount.

Payments to participants under the “bridge” plan are scheduled to be made in September 2009. To be eligible to receive an award, a participant had to be in good standing and in the employ of the Company on 30 June 2009,.

By the beginning of the second half of the financial year, it was apparent that there was no reasonable RONA target that would support an STI Plan payout for the balance of the financial year. Therefore, there was no STI Plan established for the second half of the financial year, and no further STI payments beyond the “bridge” payment described above were made to Executive Directors and Senior Executives.

Although the 2009 financial year was challenging from the viewpoints of both Merger integration and the economic environment, the Committee believes the overall STI Plan design is sound, and plans to continue with the design structure described above into the 2010 financial year and beyond.

(b)(1)(iii) Integration bonuses

The service contracts between the Company and each of Messrs Dienst and Sutcliffe included the provision for payment of a one-off integration bonus of up to US$1 million to each of them, payable upon the completion of the transition activities consequent to the Merger. The integration bonuses were originally anticipated to be paid in August 2009, upon the successful completion of integration objectives established by the Integration Committee of the Board of Directors. The Integration Committee determined that the integration objectives were completed successfully and ahead of schedule and, as a result, the Board approved early payment of the maximum integration bonus to each of Messrs Dienst and Sutcliffe on 1 April 2009.

The focus of the integration efforts was in North America, where both the former Sims Group Limited and Metal Management, Inc had important business operations. Key to the success of the integration were the efforts of the CoPresidents of North America, Messrs Kelman and Ratner. In recognition of their contributions, the Board approved a one-off integration bonus, consisting of US$500,000 cash and US$250,000 in ADSs each to Messrs Kelman and Ratner. The payments were made in December 2008.

(b)(2) Long-term Incentives

Long-term incentives are the principal means of delivering equity awards to Executive Directors and Senior Executives. Long-term incentives create a direct link between the value created for shareholders, and the reward earned by Executive Directors and Senior Executives. In addition, they assist in retention of the Executive Directors and Senior Executives and provide a mechanism for them to increase their holding of shares, ensuring better alignment with shareholders’ interests.

10

During the financial year, the Committee made a conscious effort to keep its Executive Directors, Senior Executives and other senior staff focused on the growth opportunities presented by the newly merged Sims Metal Management Limited. One aspect of this effort was to maintain the Company’s commitment to the 2009 LTI Plan even in difficult economic times. Employee retention and the pursuit of excellent business performance are recognised in the LTI Plan.

Grants under the 2009 LTI Plan were in the form of Rights and Options. A Right is a contractual right to acquire an ordinary share for nil consideration. An Option is a contract that gives the holder the right, but not the obligation, to acquire an ordinary share at a fixed price over a specified period of time. Holders of Rights or Options are not entitled to dividends over the term of the relevant vesting period (and in the case of Options, until exercised). US participants may have their Rights and Options settled in ADSs.

Awards to Executive Directors and Senior Executives under the 2009 LTI Plan are divided into two parts. The first part of the award consists of Rights, with vesting dependent on meeting a competitive relative TSR hurdle. The second part of the award consists of Options, which require continuous service in order to vest, and require a higher share price than the exercise price in order to generate value (and hence have an inherent performance hurdle). While it is common practice in Australia for Rights to be issued subject to a relative TSR hurdle, Options are, in the US, more commonly issued based on a continuous service vesting condition only. The Board believes that this structure provides an appropriate balance in terms of ensuring that reward for Executive Directors and Senior Executives are competitive and reflect market practice in both Australia and the US.

The remuneration value of the Options and Rights is determined by an external valuation consultant using a selected option valuation method, for example the Black-Scholes methodology to produce a Monte-Carlo simulation in respect of the Rights, and the Binomial Method in respect of the Options.

The two-part LTI structure is designed to focus on two key aspects of future performance. First, Rights recognise shareholder return performance relative to companies within the Company’s industry as measured by TSR. Second, Options reflect creation of absolute shareholder value, as recognised by growth in the Company’s share price.

Rights

In order for Rights to vest, the Company’s TSR must be at the 51st percentile or higher against a comparator group of companies. Performance is measured with reference to the ASX share performance, during a three year period, starting at the beginning of the financial year of the award. The initial performance period is the three year period from 1 July 2008 through 30 June 2011. A three year vesting period reflects common Australian practice for LTI awards.

Given the cyclical nature of the metal recycling industry, if performance hurdles are not met in full, performance will be re-tested. The Company believes that re-testing is necessary given the volatile nature of the commodity markets and their effect on earnings in the metal recycling industry. In addition, the Company believes that this practice continues to align executive remuneration with shareholders as performance is tested over the entire extended performance period as outlined below. Accordingly, executives are only rewarded when shareholders are similarly rewarded.

• If any Rights remain unvested at the end of year three, they will be re-tested over the four year performance period concluding at the end of year four.

• If any Rights remain unvested at the end of year four, they will be re-tested over the five year performance period concluding at the end of year five.

• Any unvested Rights outstanding after the final re-test will immediately lapse.

The vesting schedule for those Rights measured against relative TSR is set out below:

TSR growth relative to the Comparator Group	Proportion of TSR grant vesting
Less than 51stpercentile	0%
51stpercentile	50%
51stpercentile to 75thpercentile	Pro-rata straight line
75th percentile or higher	100%

Comparator Group

There was considerable change in the Comparator Group for the 2009 LTI Plan. There were two principal reasons for the change. First, the Merger created a Company that was significantly more global in scope than its predecessors, with particular focus in North America. Second, the Merger created a sizable company in the

11

commodities metals market and the largest listed metal recycling company in the world. As a result, the Comparator Group shifted towards international and North American companies, and includes companies of a size that face the same challenges of scale and volatility in the commodities metals markets.

These are the companies selected to comprise the comparator group against which the Company will determine its relative TSR performance:

	Company Name
AK Steel *	Posco*
Allegheny Technologies*	Reliance Steel*
ArcelorMittal*	Schnitzer Steel
BlueScope Steel	Steel Dynamics*
Commercial Metals	The Timken Company*
Gerdau Ameristeel*	Tokyo Steel*
Mueller Industries*	U.S. Steel*
Nucor*	Worthington Industries*
OneSteel

• Added to Comparator Group for the 2009 LTI Plan

As a result of the divergence of geographic focus, size, and level of concentration in the commodities metals markets mentioned above, the following companies (previously considered suitable comparators) were not included in the 2009 Comparator Group:

	Company Name
Adelaide Brighton Limited	GUD Holdings Limited	Waste Management, Inc
BHP Billiton Limited	Gunns Limited	Transpacific Industries
Boral Limited	Hills Industries Limited	United Group Limited
Brickworks Limited	James Hardie Industries N.V.	Wattyl Limited
Capral Aluminium Limited	Leighton Holdings Limited	Wesfarmers Limited
Clough Limited	Pacifica Group Limited	Suez
Crane Group Limited	Reece Australia Limited	Veolia Environnement
CSR Limited	RioTintoLimited	Nufarm Limited

Options

In order for Options to have value, the Company’s share price must increase above the exercise price. This aligns the award to absolute growth in shareholder wealth. The exercise price of Options is set at time of grant, and is equal to the volume weighted average price for the five days preceding the grant date. For US executives, Option awards are not Incentive Stock Options for the purposes of section 422 of the United States Internal Revenue Code.

Options granted to Senior Executives and Executive Directors in the financial year vest in three equal installments over approximately three years. This vesting schedule reflects common US practice. Each installment vests following the date the Company announces its annual financial results to the ASX for its 2009, 2010 and 2011 financial years. Options expire seven years after the date of grant.

The Board approved and granted LTI awards for Executive Directors in November 2008 and for other KMP in April 2009. In order to maintain the annual vesting schedule of executive retention awards, these share option awards continue to observe the vesting schedule above, even though awarded later than usual in the financial year. It is expected that, following the transition activities of the financial year, future financial years’ awards, if any, will revert to the more usual annual schedule.

Share Dealing Policy

The trading by Executive Directors and Senior Executives of securities issued pursuant to the Company’s long term incentive plans is subject to and conditional upon compliance with the terms of the Company’s policy titled “Dealings in Sims Metal Management Limited Securities”. A copy of the Policy is available on the Company’s website at www.simsmm.com.

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Relationship between Company performance and remuneration

The Board believes that, notwithstanding the impact of the more difficult external environment in the financial year, the operational and financial performance of the Company over the last five years has been strong relative to industry benchmarks. The Board is of the view that the financial rewards provided to executives are consistent with the Company’s performance.

The Company’s performance over the last five years is summarised in the table below:

2009 2008	2007 2006 2005
Total revenue (A$’000) 8,641,010 7,670,536 (Loss)/profit after tax (A$’000) (150,295) 440,098 Diluted EPS (cents) (82.9) 307.9 Total dividends (cents) 38.0 130.0 Shareprice at 30 June A$ 26.51 41.69	5,550,897 3,754,509 2,565,603 239,938 184,929 196,010 191.0 163.4 215.0 120.0 105.0 160.0 26.50 20.00 14.84

The TSR graph below compares the Company’s TSR against the Comparator Group (as referenced above) for the 2009 LTI Plan. TSR is the return to shareholders provided by share price appreciation plus dividends (which are assumed to be reinvested in the Company’s shares) expressed as a percentage of the share price at the beginning of the measurement period, adjusted where appropriate for bonus issues, capital consolidation or equivalents. From 1 July 2004 to 30 June 2009, the Company’s cumulative TSR return was 211%. This was significantly above the Comparator Group as shown in the graph below.

==> picture [442 x 289] intentionally omitted <==

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C. Details of Remuneration

Remuneration of Non-Executive Directors

NEDs receive an annual fee, paid monthly or quarterly, for their services. The Committee has recommended no increase for individual NED fees for the 2010 financial year. NED fees are made up of a base fee and fees (as applicable) for chairmanship of Boards and Committees as outlined in the table below.

NED fees in A$ (effective 1 July 2008)
Base fee (Chairman)	433,200
Base fee (Non-executive Director)	195,600
Chairman Risk, Audit & Compliance Committee	60,000
Chairman Safety, Health, Environment & Community Committee	30,000
Chairman Remuneration Committee	30,000
Chairman Finance & Investment Committee	30,000
Chairman Nomination/Governance Committee	-
Chairman IntegrationCommittee (dissolved on31 May2009)	30,000

No fees are payable in respect of membership of other Board Committees. NEDs may participate in the Sims Metal Management Deferred Tax Director and Employee Share Plan (“NED Plan”). Under the NED Plan, a NED agrees to contribute a nominated percentage of the annual fees he receives from the Company to fund the acquisition of shares in the Company by the NED Plan trustee.

NEDs are not currently covered by any contract of employment and therefore have no contract duration, notice period for termination or entitlement to termination payments. NEDs do not participate in any incentive (cash or equitybased) arrangements. NEDs also receive reimbursement for reasonable travel, accommodation and other expenses incurred in travelling to or from meetings of the Board or when otherwise engaged in the business of the Company in accordance with Board policy.

The Company’s NEDs’ Retirement Allowance Scheme was discontinued effective 30 June 2006. The accrued amounts in respect of the remaining NEDs who had participated (Messrs Mazoudier and Feeney) were frozen and have been indexed at 5% per annum until payment. For Australian resident NEDs, the Company withholds 9% of their fees and contributes on behalf of each such NED to a complying superannuation fund, as required by legislation.

14

Details of the fees paid to NEDs are set out below. Fees for the financial year that were paid in US dollars were converted at a rate of A$1 to US$.9626 and fees paid in Japanese Yen were converted at a rate of A$1 to ¥ 101.04, both being the exchange rates set by the Board in July 2008. For NEDs who receive payments in foreign currencies, the tables below reflect the Australian dollar equivalent of the fees paid to each such NED based on the exchange rate at the date of payment.

(A$) Location Year	Short- term benefits Cash Fees4	Post-employment benefits Superannu ation Retirement benefits	Share- based payments NED Share Plan Total
P Varello1 USA 2009 2008	284,897 170,610	- - - -	- 284,897 - 170,610
N Bobins1 USA 2009 2008	284,897 51,435	- - - -	- 284,897 - 51,435
J DiLacqua1,2 USA 2009 2008	87,768 43,744	- - - -	- 87,768 - 43,744
M Feeney Australia 2009 2008	173,504 148,578	17,389 21,096 14,087 20,091	19,708 231,697 7,945 190,701
M Iwanaga3 Japan 2009 2008	293,526 170,610	- - - -	- 293,526 - 170,610
R Lewon1 USA 2009 2008	247,013 43,744	- - - -	- 247,013 - 43,744
P Mazoudier Australia 2009 2008	397,432 361,284	35,769 45,636 32,516 43,463	- 478,837 - 437,263
G Morris1 USA 2009 2008	322,782 59,127	- - - -	- 322,782 - 59,127
C Renwick Australia 2009 2008	167,351 115,052	18,628 - 14,846 -	39,622 225,601 49,899 179,797
G Brunsdon5 Australia 2009 2008	- 65,218	- - 5,870 6,341	- - - 77,429
B Every5 Australia 2009 2008	- 65,218	- - 5,870 -	- - - 71,088
Total 2009 2008	2,259,170 1,294,620	71,786 66,732 73,189 69,895	59,330 2,457,018 57,844 1,495,548

1. Messrs Bobins, DiLacqua, Lewon and Morris were appointed to the Board on 14 March 2008 upon the completion of the MMI Merger. They,

2. along with Mr Varello, are residents of the United States and receive their payments in US dollars.

3. Mr DiLacqua retired from the Board on 21 November 2008.

4. Mr Iwanaga is a resident of Japan and receives his payments in Japanese Yen.

5. Figure shown is after fee sacrifice to either superannuation and/or NED Share Plan.

6. Messrs Brunsdon and Every retired from the Board on 21 November 2007.

Remuneration Detail for Executive Directors and Senior Executives

Certain Executive Directors and Senior Executives (as disclosed below) are not residents of Australia. Their respective remuneration paid in foreign currency has been converted to Australian dollars at an average exchange rate for the year. Both the amount of any remuneration and any movement in comparison to the prior year may be influenced by changes in the respective currency exchange rates.

15

(A$) Location Year	Short-term benefits Cash salary1 Cash bonus2 Other benefits3	Post- employment benefits Pension and superannuation Other long-term benefits4 Termination benefits Share- based payments5 Total
Executive Directors: D Dienst7 USA 2009 2008	1,328,038 2,665,438 195,796 285,926 - 38,308	- 15,915 - 1,357,334 5,562,521 - - - 185,622 509,856
J Sutcliffe9 Australia 2009 2008	1,347,284 2,630,160 144,071 1,335,909 3,317,027 52,336	219,798 43,554 - (613,272) 3,771,595 192,291 38,043 - 3,439,455 8,375,060
R Cunningham6 Australia 2009 2008	255,915 192,545 2,809 660,300 1,316,700 1,000	51,550 26,437 3,130,316 364,243 4,023,815 108,947 28,481 - 1,133,336 3,248,764
Senior Executives: T Bird7, 10 UK 2009 2008	451,112 272,664 41,441 439,136 795,918 42,601	42,631 28,229 - 476,240 1,312,317 52,167 169,373 - 610,735 2,109,930
G Davy7 UK 2009 2008	584,198 440,969 41,441 558,597 1,271,739 42,601	42,631 - - 765,199 1,874,438 52,167 - - 1,031,943 2,957,047
R Kelman7, 8 USA 2009 2008	835,875 1,221,782 43,031 684,593 1,295,107 27,649	15,373 - - 682,840 2,798,901 19,344 - - 318,478 2,345,171
R Larry7 USA 2009 2008	835,875 417,938 50,068 208,875 - 3,874	- 15,915 - 398,833 1,718,629 - - - - 212,749
D McGree Australia 2009 2008	536,651 315,870 17,513 535,178 843,000 1,000	105,772 20,379 - 578,093 1,574,278 89,350 26,250 - 775,930 2,270,708
A Ratner7, 8 USA 2009 2008	835,875 1,434,696 36,683 128,751 - -	- 15,915 - 1,098,471 3,421,640 - - - 127,871 256,622
2009 Total 2008	7,010,823 9,592,062 572,853 4,837,265 8,839,491 209,369	477,755 166,344 3,130,316 5,107,981 26,058,134 514,266 262,147 - 7,623,370 22,285,908

1. Cash salary includes amounts sacrificed in lieu of other benefits at the discretion of the individual.

2. No STI Plan was adopted for the 2009 year. Cash bonus amount for 2009 reflects the amount accrued for the “bridge” bonus for all Executives and the integration bonuses paid to Messrs Dienst, Sutcliffe, Kelman and Ratner.

3. Other short-term benefits include auto allowances, health and life insurance benefits, and amounts accrued for annual leave during the period. The amount for Mr Dienst also includes payments for personal security.

4. Other long-term benefits include amounts accrued for cash-based long term incentive plans, long-service leave and deferred compensation plans.

5. Share-based payments represent the accounting expense (as computed pursuant to AASB 2, “ Share-based Payments ”) recognised by the Company for share-based awards. Certain share-based awards made in the 2007 and 2008 financial years only vest upon satisfaction of non-market based performance hurdles. These performance hurdles are not expected to be achieved and therefore previously recognised share-based payments have been reversed in the 2009 financial year and results in a reduction in total 2009 remuneration for the impacted individuals, consistent with the accounting policy outlined in Note 1(x)(iv) of the financial report.

6. Mr Cunningham retired on 21 November 2008. Termination benefits represent payments for severance, but do not include payments for unused leave as these accruals were previously disclosed as remuneration. In addition, share-based payments for Mr Cunningham in 2009 represent the acceleration of expense for awards which have not yet vested, but contain “good-leaver” provisions.

7. Messrs Dienst, Larry and Ratner were appointed on 14 March 2008 upon the completion of the MMI Merger. They, along with Mr Kelman are residents of the United States and receive their cash payments in US dollars. Messrs Bird and Davy are residents of the United Kingdom and receive their cash payments in pound sterling.

8. Share-based payments for Messrs Kelman and Ratner in 2009 include the value of 30,048 shares of ADSs each that they received as part of their integration bonus.

9. Mr Sutcliffe’s agreement was terminated by way of redundancy on 26 August 2009. Please refer to Section E – Service Agreements for further information on termination benefits due to Mr Sutcliffe.

10. The Company accepted the resignation of Mr Bird on 17 August 2009. Under the terms of his resignation, Mr Bird forfeited any entitlement to an STI “bridge” bonus payment and unvested LTI awards.

16

Analysis of Bonuses included in Remuneration

All of the executive KMP, excluding Messrs Bird and Cunningham, received 50% of the maximum cash bonus, with 50% lapsing. The cash bonus that vested in the financial year represents the “bridge” payment that was authorised to be paid to the participants. The maximum cash bonus that lapsed in the financial year reflects the cash bonus that would have been available had previous STI Plans, capped at two-times target payout, been in effect for the entire financial year. No STI payout was authorized for the second half of the financial year beyond the “bridge” payment. The above percentages exclude the integration bonuses as these were special “one-off” payments.

Mr Bird resigned effective 17 August 2009. Under the terms of his resignation, he forfeited any entitlement to an STI “bridge” bonus. Therefore, 100% of his maximum available cash bonus lapsed.

Mr Cunningham was eligible only for the “bridge” payment, since he retired on 21 November 2008. He received 100% of the maximum cash payment to which he was entitled, pro rata to his retirement date.

Fixed and At Risk remuneration for the financial year

The table below sets out, for both the Executive Directors and Senior Executives, the percentage of their financial year annual remuneration which is At Risk versus Fixed, and the percentage of the value of their remuneration that consists of Options and Rights.

Fixed Remuneration % At Risk Remuneration %	Remuneration consisting of Rights % Remuneration consisting of Options %
Executive Director: D Dienst 28 72 J Sutcliffe1 47 53 R Cunningham2 86 14 Senior Executives: T Bird3 41 59 G Davy 36 64 R Kelman 32 68 R Larry 52 48 D McGree 43 57 A Ratner 26 74	3 22 - 5 9 - 32 5 37 4 19 5 12 11 32 5 28 4

1. Mr Sutcliffe’s agreement was terminated by way of redundancy on 26 August 2009.

2. Mr Cunningham retired from the Board on 21 November 2008.

3. The Company accepted Mr Bird’s resignation on 17 August 2009. Under the terms of his resignation, he forfeited any entitlement to an STI “bridge” bonus payment and unvested LTI awards.

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D. Share-based Remuneration

Options provided as compensation

Details of Options affecting remuneration of Executive Directors and Senior Executives in the previous, this or future reporting periods are as follows. There were no Options granted as compensation in the 2008 financial year. No Options vested, were exercised or lapsed in either the 2008 or 2009 financial years. No Options will vest if the conditions are not satisfied hence the minimum value of unvested awards is nil. The maximum value of the unvested awards has been determined as the amount of the grant date fair value that is yet to be expensed.

Name Grant date Number granted Exercise price Fair value at grant date

Date next tranche can be exercised Expiry date Maximum total value of unvested grant

Ordinary shares (A$) J Sutcliffe1 24 Nov 08 135,435 $ 13.11 $ 2.78 - $ 3.35 T Bird2 2 Apr 09 39,347 $ 17.79 $ 5.12 - $ 6.43 G Davy 2 Apr 09 48,950 $ 17.79 $ 5.12 - $ 6.43 D McGree 2 Apr 09 47,534 $ 17.79 $ 5.12 - $ 6.43 ADS (US$) D Dienst 24 Nov 08 181,654 $ 8.39 $ 2.33 - $ 2.82 R Kelman 2 Apr 09 87,664 $ 12.19 $ 4.11 - $ 5.25 R Larry 2 Apr 09 109,580 $ 12.19 $ 4.11 - $ 5.25 A Ratner 2 Apr 09 87,664 $12.19 $4.11 -$5.25

31 Aug 09 24 Nov 15 240,642 31 Aug 09 2 Apr 16 166,415 31 Aug 09 2 Apr 16 207,030 31 Aug 09 2 Apr 16 201,041 31 Aug 09 24 Nov 15 272,059 31 Aug 09 2 Apr 16 301,815 31 Aug 09 2 Apr 16 377,269 31 Aug09 2 Apr 16 301,815

1. Mr Sutcliffe’s agreement was terminated by was of redundancy on 26 August 2009. Please refer to Section E - Service Agreements for further information relating to “good-leaver” provisions in Mr Sutcliffe’s share grants.

2. The Company accepted Mr Bird’s resignation on 17 August 2009. As a result, the above award was forfeited by Mr Bird.

Rights provided as compensation

Details of Rights affecting remuneration of Executive Directors and Senior Executives in the previous, this or future reporting periods are as follows. For each grant of Rights, the percentage of the available grant that was vested in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria are set out below. No Rights will vest if the conditions are not satisfied hence the minimum value of Rights yet to vest is nil. The maximum value of the Rights yet to vest has been determined as the amount of the grant date fair value that is yet to be expensed.

								Maximum
			Fair					total value
			value at			Date next		of
		Number	grant	Vested	Forfeited	tranche	Expiry	unvested
Name	Grant date	granted	date	%	%	vests	date	grant
Ordinary shares	(A$)
J Sutcliffe1	6 Oct 05	23,983	$ 14.08	100	-	-	-	-
	6 Oct 05	23,982	$ 13.32	-	-	31 Oct 09	31 Oct 09	-
	6 Oct 05	23,982	$ 12.61	-	-	31 Oct 10	31 Oct 10	-
	25 Sep 07	58,594	$ 31.62	100	-	-	-	-
	25 Sep 07	62,230	$ 29.78	-	-	31 Aug 09	31 Aug 09	-
	25 Sep 07	59,492	$ 28.04	-	-	31 Aug 10	31 Aug 12	-
	25 Sep 07	44,218	$ 24.03	-	-	31 Aug 10	31 Aug 12	354,039
	24 Nov 08	44,440	$ 9.04	-	-	31 Aug 11	31 Aug 13	274,873
R Cunningham2	18 Nov 05	14,989	$ 14.41	100	-	-	-	-
	25 Sep 07	17,444	$ 31.62	100	-	-	-	-
	25 Sep 07	18,527	$ 29.78	-	-	31 Aug 09	31 Aug 09	-
	25 Sep 07	17,712	$ 28.04	-	-	31 Aug 10	31 Aug 10	-
	25 Sep 07	13,164	$ 24.03	-	-	31 Aug 10	31 Aug 10	-

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Rights provided as compensation (continued)

								Maximum
			Fair					total value
			value at			Date next		of
		Number	grant	Vested	Forfeited	tranche	Expiry	unvested
Name	Grant date	granted	date	%	%	vests	date	grant
Ordinary shares	(A$)
T Bird3	17 Sep 07	21,044	$ 27.28	-	-	30 Apr 10	30 Apr 10	179,381
	25 Sep 07	6,732	$ 31.62	100	-	-	-	-
	25 Sep 07	7,150	$ 29.78	-	-	31 Aug 09	31 Aug 09	-
	25 Sep 07	11,392	$ 28.04	-	-	31 Aug 10	31 Aug 12	-
	25 Sep 07	8,467	$ 24.03	-	-	31 Aug 10	31 Aug 12	67,792
	2 Apr 09	14,720	$ 15.46	-	-	31 Aug 11	31 Aug 13	155,707
G Davy	1 July 07	44,803	$ 22.26	-	-	30 Apr 10	30 Apr 10	293,274
	25 Sep 07	12,903	$ 31.62	100	-	-	-	-
	25 Sep 07	13,703	$ 29.78	-	-	31 Aug 09	31 Aug 09	-
	25 Sep 07	13,100	$ 28.04	-	-	31 Aug 10	31 Aug 12	-
	25 Sep 07	9,737	$ 24.03	-	-	31 Aug 10	31 Aug 12	77,681
	2 Apr 09	18,312	$ 15.46	-	-	31 Aug 11	31 Aug 13	193,702
D McGree	17 Sep 07	21,044	$ 27.28	-	-	30 Apr 10	30 Apr 10	179,381
	25 Sep 07	11,924	$ 31.62	100	-	-	-	-
	25 Sep 07	12,664	$ 29.78	-	-	31 Aug 09	31 Aug 09	-
	25 Sep 07	12,107	$ 28.04	-	-	31 Aug 10	31 Aug 12	-
	25 Sep 07	8,998	$ 24.03	-	-	31 Aug 10	31 Aug 12	72,044
	2 Apr 09	16,313	$ 15.46	-	-	31 Aug 11	31 Aug 13	172,557
ADS (US$)
D Dienst	24 Nov 08	61,092	$ 5.70	-	-	31 Aug 11	31 Aug 13	238,259
R Kelman	1 Nov 05	14,931	$ 10.84	100	-	-	-	-
	1 Nov 05	14,932	$ 10.26	-	-	1 July 09	1 July 09	-
	25 Sep 07	14,137	$ 24.33	-	-	31 Aug 10	31 Aug 12	-
	25 Sep 07	10,507	$ 20.84	-	-	31 Aug 10	31 Aug 12	204,780
	2 Apr 09	38,580	$ 10.32	-	-	31 Aug 11	31 Aug 13	272,415
R Larry	2 Apr 09	48,225	$ 10.32	-	-	31 Aug 11	31 Aug 13	340,519
A Ratner	14 Mar 08	25,625	$ 25.27	33	-	14 Mar 10	14 Mar 11	199,367
	2 Apr 09	38,580	$10.32	-	-	31 Aug11	31 Aug13	272,415

1. Mr Sutcliffe’s agreement was terminated by way of redundancy on 26 August 2009. Please refer to Section E - Service Agreements for further information relating to “good-leaver” provisions in Mr Sutcliffe’s share grants.

2. Mr Cunningham retired from the Board on 21 November 2008. All unvested Rights will continue to vest as a result of good leaver provisions in the applicable grant agreements. As a result, share-based payment expense has been recognised for all awards scheduled to vest.

3. The Company accepted Mr Bird’s resignation on 17 August 2009. As a result, all unvested Rights were forfeited by Mr Bird.

Basis of valuation of equity-based awards

The fair values of Options and Rights in the tables above have been calculated, by Mercer our external valuation consultant, at their grant dates using either a Black-Scholes, Binomial or Monte-Carlo simulation option-pricing model as appropriate for the relevant design. See Note 24 of the financial report for assumptions used in determining the fair value.

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E. Service Agreements

D Dienst, Group Chief Executive Officer

• Term of employment - through 30 June 2012. May be extended thereafter on an annual basis provided that the Company may terminate Mr Dienst’s employment at any time for Cause.

• Based on performance against specified targets set by the Integration Committee, Mr Dienst was entitled to receive a cash bonus of up to US$1 million on 1 August 2009. Due to early completion of the transition targets, the Board of Directors, on the recommendation of the Remuneration Committee, awarded the maximum bonus to Mr Dienst on 1 April 2009.

• Prior to the Merger with the Company, the MMI Board amended certain grants of restricted stock pursuant to Mr Dienst’s previous employment contract with MMI which caused vesting of such restricted stock upon a change of control. The new employment contract with the Company requires that Mr Dienst pays back up to US$3 million (“clawback amount”), reducing over a four year period, should he resign or terminate his agreement other than for good reason, as defined by the agreement. The amortisation of the clawback amount for the 2009 financial year was A$944,071 and has been included as part of Mr Dienst’s remuneration under the heading “Share Based Payments” in the Remuneration Table. As at 30 June 2009, the remaining clawback amount is US$2,022,733.

• If Mr Dienst is terminated involuntarily other than for Cause, then the Company will continue to pay Mr Dienst his base salary and target bonus for 24 months following termination. All unvested share options, share grants, and LTI awards vest upon involuntary termination.

J Sutcliffe, Executive Director

• Agreement was terminated by way of redundancy on 26 August 2009.

• A lump-sum redundancy payment of A$1,551,000, comprising his notice period.

• Salary for three month period of A$337,000.

• Pro-rated STI payment for the 2010 financial year of A$387,000.

• Cash settlement of A$1,273,000 for performance rights scheduled to vest on 31 August 2009.

• Payment of A$700,000 for performance rights scheduled to vest on 31 October 2010, pursuant to employment contract amendment in September 2007.

• All other outstanding equity awards are retained as a result of “good-leaver” provisions which will result in the Company recognising an accelerated share-based payment expense of A$870,000 in the 2010 financial year.

• Statutory entitlements under long service leave and annual leave, and entitlement to defined benefit plans, as if employment continued through 31 October 2009 and 31 October 2010, respectively.

• Based on performance against specified targets set by the Integration Committee, Mr Sutcliffe was entitled to receive a cash bonus of up to US$1 million on 1 August 2009. Due to early completion of the transition targets, the Board of Directors, on the recommendation of the Remuneration Committee, awarded the maximum bonus to Mr Sutcliffe on 1 April 2009.

R Cunningham, Executive Director

• Agreement was terminated by way of redundancy on 21 November 2008.

• Lump-sum redundancy payment of A$3,130,316.

• Outstanding equity awards are retained as a result of “good-leaver” provisions.

• T Bird, Managing Director United Kingdom Metals

• The Company accepted the resignation of Mr Bird on 17 August 2009.

• Under the terms of the Company’s LTI Plans, equity awards that were unvested at the time of his resignation were forfeited by Mr Bird.

• Under the terms of his resignation, Mr Bird also forfeited any entitlement to his STI “bridge” bonus.

G Davy, Chief Executive Officer, European Metals & Sims Recycling Solutions Global Operations

• Term of agreement - two years commencing 1 October 2006, renewing automatically until termination.

• Neither the Company nor Mr Davy may terminate the agreement during the term provided that the Company may terminate Mr Davy’s employment at any time for Cause without payment.

• The Company must provide 12 months prior written notice or payment in lieu of notice to terminate the agreement after the expiry of the term. After the completion of the term, Mr Davy is required to provide three months prior written notice to terminate the agreement.

• Remuneration is reviewed annually by the Remuneration Committee.

• In recognition of Mr Davy’s contribution to the growth of the Company and the Company’s desire to retain his services, a grant of rights in respect of Sims Metal Management shares was provided to Mr Davy on 1

20

July 2007, which will vest in full on 30 April 2010, if he remains in the employ of the Company. The rights will immediately vest in full in the event of a change of control in the Company, under which a party acquires more than 50% of the issued share capital of the Company.

• In the event of redundancy, Mr Davy is entitled to the greater of 12 months notice or payment in lieu or a benefit calculated by reference to the Sims Metal Management Redundancy Policy up to a maximum of 18 months remuneration depending upon years of service.

R Kelman, President, Commercial North America

• Term of agreement - 1 November 2005 through 30 June 2010. Automatic renewal for consecutive one year periods. Either party must provide at least three months written notice of their intention to terminate the agreement on the next expiration date.

• Remuneration is reviewed annually by the Remuneration Committee.

• If terminated by the Company other than Cause, Mr Kelman will receive an amount equal to the greater of his base salary for the period equal to the remainder of the term or 12 months.

R Larry, Group Chief Financial Officer

• Term of employment - through 30 June 2012.

• If Mr Larry’s employment is terminated within twelve months of a result of change in control, he will receive an amount equal to two-times his base salary, and all unvested share awards will vest.

• If Mr Larry’s employment is terminated involuntarily other than for Cause, he will receive 12 months of base salary.

D McGree, Managing Director Australia and New Zealand

• Term of agreement of two years commencing 1 October 2006, renewing automatically until termination.

• Neither the Company nor Mr McGree may terminate the agreement during the term provided that the Company may terminate Mr McGree’s employment at any time for Cause.

• The Company must provide 12 months prior written notice or payment in lieu of notice to terminate the agreement, after the expiry of the term. After the completion of the term, Mr McGree is required to provide three months prior written notice to terminate the agreement.

• Remuneration is reviewed annually by the Remuneration Committee.

• In recognition of Mr McGree’s contribution to the growth of the Company and the Company’s desire to retain his services, a grant of rights in respect of Sims Metal Management shares was provided to Mr McGree on 17 September 2007, which will vest on 30 April, 2010, if he remains in the employ of the Company. The rights will immediately vest in full in the event of a change of control in the Company, under which a party acquires more than 50% of the issued share capital of the Company.

• Mr McGree is also entitled to a payment equivalent to six months total annual remuneration if he remains in the employ of the employer six months after a takeover of the Company (or if he is terminated within six months of such a takeover).

• In the event of redundancy, he is entitled to the greater of 12 months notice or payment in lieu or a benefit calculated by reference to the Sims Metal Management Redundancy Policy up to a maximum of 18 months remuneration depending upon years of service.

A Ratner, President, Operations North America

Mr Ratner does not have a service agreement. No notice of termination is required to be given by either party.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Board of Directors.

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P Varello Chairman Houston

D Dienst Group Chief Executive Officer New York

27 August 2009

27 August 2009

21

PricewaterhouseCoopers ABN 52 780 433 757

Auditor’s Independence Declaration

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999 www.pwc.com/au

As lead auditor for the audit of Sims Metal Management Limited for the year ended 30 June 2009, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• b) no contraventions of any applicable code of professional conduct in relation to the audit .

This declaration is in respect of Sims Metal Management Limited and the entities it controlled during the period.

==> picture [72 x 61] intentionally omitted <==

Andrew J Parker Partner PricewaterhouseCoopers

Sydney 28 August 2009

Liability limited by a scheme approved under Professional Standards Legislation

22

Income Statements

For the year ended 30 June 2009

Revenue Other income Raw materials used and changes in inventories Freight expense Employee benefits expense Depreciation and amortisation expense Repairs and maintenance expense Other expenses Finance costs Goodwill impairment charge Share of pre-tax profit of investments accounted for using the equity method (Loss)/profit before income tax Income tax (expense)/benefit (Loss)/profit for the year attributable to equity holders of the Parent (Loss)/earnings per share: Basic Diluted	Note 4 5 9 6 13 29 7 32 32		Consolidated	2007 A$’000 5,550,897 8,978 (3,847,254) (540,178) (296,421) (74,453) (117,993) (303,312) (30,405) - 7,030 356,889 (116,951 ) 239,938 A¢ 192.1 191.0	Parent	Parent
		2009 A$’000 8,641,010 33,737 (6,272,623) (919,310) (592,380) (170,820) (147,773) (542,209) (21,508) (191,094) 60,808 (122,162) (28,133 ) (150,295 ) A¢ (82.9) (82.9)	2008 A$’000 7,670,536 55,667 (5,324,584) (778,668) (404,873) (95,086) (126,192) (363,047) (34,374) (3,349) 64,573 660,603 (220,505 ) 440,098 A¢ 310.9 307.9		2009 A$’000 232,557 - - - (2,733) - - - - - - 229,824 353 230,177	2008 A$’000
						171,678 - - - (2,777) - - - - - - 168,901 391 169,292

The above income statements should be read in conjunction with the accompanying notes.

23

Balance Sheets As at 30 June 2009

ASSETS Current assets Cash and cash equivalents Trade and other receivables Current tax receivable Inventory Derivative financial instruments Total current assets Non-current assets Receivables Investments accounted for using the equity method Other financial assets Property, plant and equipment Deferred tax assets Goodwill Other intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Payables Borrowings Deferred tax liabilities Provisions Retirement benefit obligations Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity	Note 33 8 9 10 8 29 11 12 7 13 14 15 16 10 17 16 7 17 18 19 20 20	Consolidated 2009 A$’000 2008 A$’000 69,536 133,487 350,309 839,518 96,197 26,583 469,123 1,010,921 713 3,948 985,878 2,014,457 17,482 2,963 400,244 332,226 - - 947,725 784,692 71,636 109,982 1,146,785 1,166,534 238,810 235,622 2,822,682 2,632,019 3,808,560 4,646,476 537,947 1,062,253 811 877 10,464 2,463 5,910 131,363 21,800 28,064 576,932 1,225,020 4,200 2,270 174,333 397,537 148,843 148,168 34,026 34,729 11,179 4,828 372,581 587,532 949,513 1,812,552 2,859,047 2,833,924 2,352,928 2,325,924 166,045 (174,335) 340,074 682,335 2,859,047 2,833,924	Parent	Parent
		2009 A$’000 69,536 350,309 96,197 469,123 713 985,878 17,482 400,244 - 947,725 71,636 1,146,785 238,810 2,822,682 3,808,560 537,947 811 10,464 5,910 21,800 576,932 4,200 174,333 148,843 34,026 11,179 372,581 949,513 2,859,047 2,352,928 166,045 340,074 2,859,047	2009 A$’000 198 - 14,476 - - 14,674 - - 4,026,774 - - - - 4,026,774 4,041,448 284,831 - - - - 284,831 - - - - - - 284,831 3,756,617 3,673,584 38,426 44,607 3,756,617	2008 A$’000
				- 41,147 - - - 41,147 - - 4,026,736 - - - - 4,026,736 4,067,883 343,483 - - 40,756 - 384,239 - - - - - - 384,239 3,683,644 3,646,580 36,141 923 3,683,644

The above balance sheets should be read in conjunction with the accompanying notes.

24

Statements of Recognised Income and Expense For the year ended 30 June 2009

Actuarial (loss)/gain on defined benefit plans, net of tax Changes in fair value of cash flow hedges, net of tax Exchange differences on translation of foreign operations Net income/(expense) recognised directly in equity (Loss)/profit for the year Total recognised income and expense for the year Effect of change in accounting policy: Total equity at the beginning of the financial year Accounting policy change, net of tax Restated total equity at the beginning of the financial year Profit as originally reported Accounting policy change, net of tax Restated profit	Note 18 20 20 1(b)(vi) 1(b)(vi)	Consolidated	Consolidated	2007 A$’000 5,211 9,121 (74,784 ) (60,452) 239,938 179,486 1,183,198 (75,274 ) 1,107,924 239,352 586 239,938	Parent	Parent
		2009 A$’000 (5,473) 998 336,911 332,436 (150,295 ) 182,141 2,833,924 - 2,833,924 - - -	2008 A$’000 (7,827) (9,656) (130,800 ) (148,283) 440,098 291,815 1,279,430 (107,343 ) 1,172,087 433,162 6,936 440,098		2009 A$’000 - - - - 230,177 230,177	2008 A$’000
						- - - - 169,292 169,292

The above statements of recognised income and expense should be read in conjunction with the accompanying notes.

25

Cash Flow Statements For the year ended 30 June 2009

Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid Dividends from associates and jointly controlled entities Insurance recoveries Dividends from wholly-owned entities Income taxes paid Net loans (from)/to subsidiaries Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments on acquisitions of subsidiaries, net of cash acquired Proceeds from sale of property, plant and equipment Proceeds from the sale of subsidiaries Return of capital from jointly controlled entities Net cash outflow from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Fees paid for loan facilities Proceeds from issue of shares Dividends paid Net cash (outflow)/inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year	Note 29 33 12 27 29 21 33	Consolidated	Consolidated	2007 A$’000 5,683,089 (5,183,974) 2,364 (30,405) - - - (135,612) - 335,462 (90,503) (158,914) 8,203 - - (241,214 ) 916,509 (869,825) - 1,872 (120,026 ) (71,470 ) 22,778 15,800 (18 ) 38,560	Parent	Parent
		2009 A$’000 9,232,836 (8,475,440) 2,272 (20,927) 41,458 12,277 - (238,025) - 554,451 (187,474) (76,014) 5,461 39,708 3,584 (214,735 ) 1,847,303 (2,112,610) (1,987) 442 (159,931 ) (426,783 ) (87,067) 133,487 23,116 69,536	2008 A$’000 7,353,894 (6,943,173) 2,876 (34,374) 5,153 7,632 - (144,477) - 247,531 (129,691) (58,517) 2,022 - 48,496 (137,690 ) 815,715 (678,377) - 5,735 (156,589 ) (13,516 ) 96,325 38,560 (1,398 ) 133,487		2009 A$’000 - - - - - - 231,001 (54,428) (16,886 ) 159,687 - - - - - - - - - 442 (159,931 ) (159,489 ) 198 - - 198	2008 A$’000
						- - - - - - 170,205 (40,056) 20,705 150,854 - - - - - - - - - 5,735 (156,589 ) (150,854 ) - - - -

The above cash flow statements should be read in conjunction with the accompanying notes.

26

Notes to the Financial Statements For the year ended 30 June 2009

		Page
1	Summary of significant accounting policies	28
2	Financial and capital risk management	43
3	Critical accounting estimates and judgements	48
4	Revenue	49
5	Other income	50
6	Expenses	50
7	Income tax and deferred tax	51
8	Trade and other receivables	55
9	Inventory	56
10	Derivative financial instruments	57
11	Other financial assets	57
12	Property, plant and equipment	58
13	Goodwill	59
14	Intangible assets	61
15	Trade and other payables	61
16	Borrowings	62
17	Provisions	62
18	Retirement benefit obligations	63
19	Contributed equity	66
20	Reserves and retained profits	67
21	Dividends	68
22	Contingencies	69
23	Commitments	70
24	Share ownership plans	71
25	Key management personnel disclosures	77
26	Remuneration of auditors	81
27	Business combinations and disposals	82
28	Subsidiaries	84
29	Investments in associates and jointly controlled entities	88
30	Related party transactions	90
31	Segment reporting	92
32	Earnings per share	96
33	Cash flow information	96
34	Events occurring after the reporting period	98

27

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies

Sims Metal Management Limited is a company domiciled in Australia. The principal accounting policies adopted in the preparation of this financial report are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. The financial report includes separate financial statements for Sims Metal Management Limited as an individual entity referred to in this financial report as the “Parent” or “Company”. Sims Metal Management Limited and its subsidiaries together are referred to in this financial report as the “Group” or the “Consolidated” entity.

The Parent was incorporated on 20 June 2005. Under the terms of a scheme of arrangement entered into between Sims Metal Management Limited (formerly known as Sims Group Limited from 20 June 2005 to 21 November 2008) and Sims Group Australia Holdings Limited (formerly known as Sims Group Limited prior to 20 June 2005) on 31 October 2005, the shareholders in Sims Group Australia Holdings Limited exchanged their shares in that entity for the shares in Sims Metal Management Limited. As required by Australian Accounting Standards Board (“AASB”) 3, “ Business Combinations ”, Sims Group Australia Holdings Limited was deemed to be the acquirer in this business combination. This transaction has therefore been accounted for as a reverse acquisition under AASB 3. Accordingly the consolidated financial statements of Sims Metal Management Limited have been prepared as a continuation of the consolidated financial statements of Sims Group Australia Holdings Limited. Sims Group Australia Holdings Limited, as the deemed acquirer, has applied purchase accounting for its acquisition of Sims Metal Management Limited as at 31 October 2005.

(a) Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the AASB. The financial report also complies with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

(b) Basis of preparation

(i) Historical cost convention

This financial report has been prepared under the historical cost convention, except for derivative financial instruments, which are measured at fair value.

(ii) Parent entity

As at 30 June 2009, the Parent had current liabilities greater than current assets. The current liabilities represent intercompany balances between entities which are a party to a Deed of Cross Guarantee to which the Parent is also a party. See Note 28.

(iii) Reclassifications and prior period adjustments

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no significant impact effect on the previously reported financial statements.

The Group reclassified outstanding cheques of A$99.4 million which were included within non-current borrowings as at 30 June 2008 to trade and other payables to be consistent with the presentation as at 30 June 2009. The Group also reclassified finance leases of $1.2 million which were included within trade and other payables as at 30 June 2008 to current and noncurrent borrowings to be consistent with the presentation as at 30 June 2009. The reclassifications had no impact on net assets and did not affect the Group’s compliance with any lending covenants.

In connection with the Group’s ongoing efforts to remediate its previously reported material weaknesses and other internal control deficiencies, the Group identified two immaterial adjustments related to the year ended 30 June 2008. These items related to unrealised profits in closing inventories on sales between equity accounted jointly controlled entities and certain Group subsidiaries which had not been eliminated (A$8.8 million pre-tax) and certain share-based payment awards for which the fair values had been understated at the date of grant in the calculation of the annual expense (A$2.4 million pre-tax). The Group concluded that these adjustments were not material to its financial statements for both the 2008 and 2009 financial years. The impact of these adjustments has been reflected in the current financial year.

28

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(b) Basis of preparation (continued)

(iv) Critical accounting estimates

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

(v) Early adoption of accounting standards

Revised AASB 123, “ Borrowing Costs” and AASB 2007-6, “ Amendments to Australian Accounting Standards arising from AASB 123” were early adopted by the Group on 1 July 2008. Revised AASB 123 has removed the option to expense all borrowing costs and requires the capitalisation of all borrowing costs directly attributable to the acquisition, construction or the production of a qualifying asset.

(vi) Change in accounting policy

In the current financial year, the Group revised its accounting policy for the valuation of land, buildings and leasehold improvements from the revaluation method to the historical cost method in accordance with AASB 116, “ Property, Plant and Equipment ” and AASB 108, “Accounting Policies, Changes in Accounting Estimates and Errors ”. The policy change results in the financial report providing reliable and more relevant information about the effects of transactions, other events and conditions on the Group’s financial position and financial performance. This will allow for enhanced comparability among the Group’s peers and also provide a consistent valuation methodology among all fixed asset classes for the benefit of current and prospective investors and for internal financial reporting purposes. The change was also intended to reduce administrative costs in the form of professional fees incurred to accomplish the revaluations. This change in accounting policy has been applied retrospectively in this financial report, with the impact summarised below.

Consolidated Investments accounted for using the equity method Property, plant and equipment Deferred tax assets Current tax liabilities Deferred tax liabilities Reserves Retained profits Consolidated 2008 A$’000 Other income 51,448 Depreciation and amortisation expense (94,557) Other expenses (371,479) Income tax expense (218,668) Profit for the year 433,162 A¢ Earnings per share: Basic (Note 32) 306.0 Diluted (Note 32) 303.0	2008 A$’000 Impact of Policy Change A$’000 Restated 2008 A$’000 335,826 (3,600) 332,226 950,210 (165,518) 784,692 111,360 (1,378) 109,982 131,429 (66) 131,363 190,434 (42,266) 148,168 (39,014) (135,321) (174,335) 675,178 7,157 682,335 Impact of Policy Change & Other A$’000 Restated 2008 A$’000 2007 A$’000 Impact of Policy Change & Other A$’000 4,219 55,667 8,978 - (529) (95,086) (75,177) 724 8,432 (363,047) (303,312) - (1,837) (220,505) (116,813) (138) 6,936 440,098 239,352 586 A¢ A¢ 310.9 191.6 307.9 190.5	Restated 2007 A$’000
		8,978 (74,453) (303,312) (116,951) 239,938 A¢
		192.1 191.0

29

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(c) Principles of consolidation

(i) Subsidiaries

Subsidiaries are entities which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

The results of subsidiaries acquired or disposed of during the financial year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The purchase method of accounting is used to account for the acquisition of subsidiaries. The purchase method of accounting involves allocating the cost of the business combination to the fair value of assets acquired and liabilities assumed at the date of acquisition. See Note 27 for further details.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of the Parent.

(ii) Associates

Associates are entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the Parent’s financial statements using the cost method and in the Group’s financial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. Details relating to associates are set out in Note 29.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the Parent’s income statement, while in the Group’s financial statements they reduce the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed as appropriate to ensure consistency with the policies adopted by the Group.

30

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(c) Principles of consolidation (continued)

(iii) Joint ventures

Joint venture operations

The Group’s proportionate interests in the assets, liabilities, income and expenses of its joint ventures have been incorporated in the consolidated financial statements under the appropriate headings. Details of the joint venture operations are set out in Note 29.

Jointly controlled entities

The Group’s interests in jointly controlled entities are accounted for in the consolidated financial statements using the equity method. Under the equity method, the share of the profits or losses of the jointly controlled entities are recognised in the income statement, and the share of movements in reserves is recognised in reserves in the balance sheet. Details relating to jointly controlled entities are set out in Note 29.

Profits or losses on transactions establishing the joint ventures and transactions with the joint ventures are eliminated to the extent of the Group’s ownership interest until such time as they are realised by the joint venture on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred.

(d) Segment reporting

AASB 8, “ Operating Segments ” was early adopted by the Group in the year ended 30 June 2008. Operating segments are reported in a manner consistent with the internal reporting provided to the Group Chief Executive Officer who is the chief operating decision maker. Details on the Group’s segments are set out in Note 31.

(e) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Australian dollars (“A$”) which is Sims Metal Management Limited’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are included in the fair value reserve in equity.

31

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(e) Foreign currency translation (continued)

(iii) Group companies

The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns and trade allowances.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved.

Details relating to the Group’s revenue are set out in Note 4. Revenue is recognised for the major business activities as follows:

(i) Sales of goods

Revenue from the sale of goods is recognised when there is persuasive evidence, usually in the form of an executed sales agreement at the time of delivery of goods to the customer, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity and quality of the goods has been determined, the price is fixed and generally title has passed.

(ii) Service revenue

Service revenue principally represents revenue earned from the collection of end-of-life post consumer products for the purpose of product recycling. Service revenue is recognised when the services have been provided. Service revenue received in advance of the service being rendered is deferred.

(iii) Interest income

Interest income is recognised on a time proportion basis using the effective interest method.

(iv) Dividend income

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

32

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(g) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the income statement on a straight line basis over the expected lives of the related assets.

(h) Income tax

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the Parent is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(i) Tax consolidation legislation

Sims Metal Management Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

The head entity, Sims Metal Management Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Sims Metal Management Limited also recognises the current tax liabilities or assets arising from controlled entities in the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other controlled entities in the tax consolidated group. Details about the tax funding agreement are disclosed in Note 7.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

33

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(i) Leases

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other borrowings. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases as set out in Note 23. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.

(j) Business combinations

The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill and are set out in Note 27. If the cost of acquisition is less than the Group’s share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

When part or the entire amount of purchase consideration is contingent on future events, the cost of the acquisition initially recorded includes a reasonable estimate of the fair value of the contingent amounts expected to be payable in the future. The cost of the acquisition is adjusted when revised estimates are made, with corresponding adjustments made to goodwill until the ultimate outcome is known.

(k) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit (“CGU”), to which the goodwill relates. See Note 13 for information on the Group’s CGUs. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for 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. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

34

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(l) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(m) Trade and other receivables

Trade receivables, which generally have 30 to 60 day terms, are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment.

Collectibility of trade receivables is reviewed on an ongoing basis. Individual debts which are known to be uncollectible are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is recognised when there is objective evidence that the Group will not be able to collect the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is recognised in the income statement as other expenses.

When a trade receivable for which an impairment provision had been recognised becomes uncollectible in a subsequent period, it is written-off against the provision for impairment account. Subsequent recoveries of amounts previously written-off are credited against other expenses in the income statement. Details relating to trade and other receivables are set out in Note 8.

(n) Inventory

Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditures, the latter being allocated on the basis of normal operating capacity. Costs are assigned to inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Details relating to inventory are set out in Note 9.

(o) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits and financial assets that are carried at fair value, which are specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

35

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(o) Non-current assets (or disposal groups) held for sale and discontinued operations (continued)

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement.

(p) Investments and other financial assets

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial assets held for trading are recognised in profit or loss and the related assets are classified as current assets in the balance sheet.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

(iii) Recognition and derecognition

All regular way purchases and sales of financial assets are recognised on the trade date – the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the timeframe established generally by regulation or convention in the market place. The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

(q) Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition and installation of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Details relating to property, plant and equipment are set out in Notes 1(b)(vi) and 12.

Subsequent costs are included in the asset’s carrying amount 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 item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced.

36

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(q) Property, plant and equipment (continued)

All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost net of their residual values, over their estimated useful lives, as follows:

• Buildings - 25-40 years

• Plant and equipment - 3-14 years

• Leasehold improvements - life of the lease

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written-down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount as set out in Note 1(k). Gains and losses on disposals are determined by comparing proceeds with carrying amounts and recognised in the income statement.

(r) Derivatives and hedging activities

The Group is a party to derivative financial instruments in the normal course of business in order to hedge its exposure to currency fluctuations in foreign exchange rates and commodity prices in accordance with the Group’s financial risk management policies which are set out in Note 2.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (i) hedges of the fair value of recognised assets or liabilities or a firm commitment (“fair value hedges”); or (ii) hedges of highly probable forecast transactions (“cash flow hedges”).

Certain derivative instruments do not qualify for hedge accounting, despite being valid economic hedges of the relevant risks. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are included in other income or other expenses and are classified in the balance sheet as a current asset or liability.

The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative financial instruments used for hedging purposes are disclosed in Note 10. Movements in the hedging reserve in equity are shown in Note 20. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity is less than 12 months.

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

37

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(r) Derivatives and hedging activities (continued)

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within other income or other expenses.

Amounts accumulated in equity are recognised in the income statement in the periods when the hedged item affects profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within revenue. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were deferred in equity are immediately transferred to the income statement.

(s) Goodwill and intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of associates is included in investments accounted for under the equity method. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to CGUs for the purpose of impairment testing as set out in Note 13.

(ii) Trade Name

Trade name relates principally to the “Metal Management” trading name. This intangible has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the trade name over its estimated useful life, which is 20 years.

(iii) Supplier relationships and contracts

Supplier relationships and contracts acquired as part of a business combination are recognised separately from goodwill. The supplier relationships are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based on the timing of projected cash flows of the supplier relationships or straight-line method (as appropriate) over their estimated useful lives, which currently vary from 1 to 19 years.

(iv) Permits

Permits acquired as part of a business combination are recognised separately from goodwill. The permits are carried at their fair value at the date of acquisition and are not amortised. Instead, permits are tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

(t) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Details relating to trade and other payables are set out in Note 15.

38

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(u) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised to finance costs on a straight-line basis over the term of the facility.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or finance cost.

Borrowings are classified as current liabilities unless the Group has the unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Details relating to borrowings are set out in Note 16.

(v) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time required to complete and prepare the asset for its intended use. Other borrowing costs are recognised as expenses in the period in which they are incurred.

(w) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Details relating to provisions are set out in Note 17.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(x) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the balance sheet date are recognised in other payables in respect of employees’ services up to the balance sheet date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the balance sheet date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

39

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(x) Employee benefits (continued)

(iii) Superannuation, pensions and other post-retirement benefits

The Group operates or participates in a number of pension (including superannuation) schemes throughout the world. The funding of the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are administered by trustees or management boards.

For defined contribution schemes or schemes operated on an industry-wide basis where it is not possible to identify assets attributable to the participation by the Group’s employees, the cost is calculated on the basis of contributions payable.

For defined benefit schemes, the cost of providing pensions is charged to the income statement so as to recognise current and past service costs, interest cost on defined benefit obligations, and the effect of any curtailments or settlements, net of expected returns on plan assets. Actuarial gains and losses are recognised directly in equity. An asset or liability is consequently recognised in the balance sheet based on the present value of defined benefit obligations, less any unrecognised past service costs and the fair value of plan assets, except that any such asset can not exceed the total of unrecognised past service costs and the present value of refunds from and reductions in future contributions to the plan.

The present value of the defined benefit obligations are calculated by independent actuaries by discounting expected future payments using market yields at the reporting date on high quality corporate bonds in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to national government bonds. In both instances, the bonds are selected with terms to maturity and currency that match, as closely as possible, the estimated future cash flows. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Details relating to retirement benefit obligations are set out in Note 18.

(iv) Share-based payments

Share-based compensation benefits are provided to certain employees via the schemes set out in Note 24. For equity-settled share-based arrangements, the fair value is measured at grant date and recognised as an employee benefit expense with a corresponding increase in equity. For cash-settled share-based arrangements, the fair value is measured at grant date and recognised as an employee benefit expense with a corresponding increase to a liability.

The fair value at grant date is independently determined using either a binomial model or a Monte-Carlo simulation model. The model takes into account the exercise price, the term, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, and the risk-free interest rate for the term of the grant. The fair value is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, earnings per share targets). Non-market vesting conditions are included in assumptions about the number of shares that are expected to become exercisable. At each balance sheet date, the Group revises its estimate of the number of shares that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

(v) Terminations benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to present value.

(y) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Details relating to contributed equity are set out in Note 19.

40

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(z) Dividends

A provision is made for the amount of any dividends declared on or before the end of the financial year but not distributed at the balance sheet date. Details relating to dividends are set out in Note 21.

(aa) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Details relating to earnings per share are set out in Note 32.

(ab) Goods and services or other value-added taxes (“GST”)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(ac) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.

(i) Revised AASB 101, “Presentation of Financial Statements and AASB 2007-8, Amendments to Australian Accounting Standards arising from AASB 101” and AASB 2007-10, “ Further Amendments to Australian Accounting Standards arising from AASB 101”

The revised AASB 101 that was issued in September 2007 is applicable for annual reporting periods beginning on or after 1 July 2009. AASB 101 introduces the notion of a “complete set of financial statements”, and changes the presentation of financial statements so owner changes in equity are disclosed separately from non-owner changes in equity. All non-owner changes in equity are disclosed separately from owner changes in equity. All non-owner changes in equity “comprehensive income” will be presented either in one statement of comprehensive income or in two statements (an income statement and a statement of comprehensive income), instead of being presented in the statement of changes in equity. Additional disclosure will be made of the income tax relating to each component of other comprehensive income, and the titles of the financial statements will change although their use will not be mandatory (“balance sheet” becomes “statement of financial position”; “income statement” becomes part of the “statement of comprehensive income”, unless a separate income statement is provided; “cash flow statement” becomes “statement of cash flows”). AASB 2007-08 contains consequential amendments to disclosures required by other Australian Accounting Standards as a result of the revised AASB 101.

41

Notes to the Financial Statements For the year ended 30 June 2009

Note 1 – Summary of significant accounting policies (continued)

(ac) New accounting standards and interpretations (continued)

(ii) AASB 2008-1, “Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations”

AASB 2008-1 was issued in February 2008 and will become applicable for annual reporting periods beginning on or after 1 January 2009. The revised standard clarifies that vesting conditions are service conditions and performance conditions only and that other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group will apply the revised standard from 1 July 2009, but it is not expected to affect the accounting for the Group’s share-based payments.

(iii) Revised AASB 3, “Business Combinations”, AASB 127, “Consolidated and Separate Financial Statements” and AASB 2008-3, “Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127”

These standards amend the accounting for certain aspects of business combinations and changes in ownership interests in controlled entities. Consequential amendments are made to other standards, AASB 128, “Investments in Associates” and AASB 131, “Interests in Joint Ventures” . Changes include:

• transaction costs are recognised as an expense at the acquisition date, unless the cost relates to issuing debt or equity securities;

• contingent consideration is measured at fair value at the acquisition date (allowing for a 12 month period post-acquisition to affirm fair values) without regard to the probability of having to make future payment, and all subsequent changes in fair value are recognised in profit; and

• changes in control are considered significant economic events, thereby requiring ownership interests to be remeasured to their fair value (and the gain/loss recognised in profit) when control of a controlled entity is gained or lost.

The Group will apply the revised standard from 1 July 2009. Refer to Note 6.

(iv) AASB 2008-08, “Amendment to IAS 39 Financial Instruments: Recognition and Measurement” AASB 2008-08 amends AASB 139, “Financial Instruments: Recognition and Measurement” and must be applied retrospectively in accordance with AASB 108, “ Accounting Policies, Changes in Accounting Estimates and Errors ”. The amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. It is not expected to have a material impact on the Group’s consolidated financial statements.

(v) AASB 2008-05, “Amendments to Australian Accounting Standards arising from the Annual Improvements Project” and AASB 2008-06, “Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project” AASB 2008-05 and AASB 2008-06 are applicable to the Group commencing on 1 July 2009. These standards make various minor amendments to other standards. However, these standards would not result in any changes to historical financial results if they were early adopted and the standards are not expected to have a material impact on the Group’s consolidated financial statements.

(ad) Rounding of amounts

The Group is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

42

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management

Financial risk management

In the normal course of business, the Group’s activities result in exposure to a number of financial risks:

• market risk (including interest rate risk, foreign currency risk and commodity price risk);

• credit risk; and

• liquidity risk.

The Group’s overall financial risk management strategy seeks to mitigate these risks and reduce volatility on the Group’s financial performance.

The Group uses derivative financial instruments in certain circumstances in accordance with Board of Directors (“Board”) approved policies to hedge exposure to fluctuations in foreign exchange rates or commodity prices. Derivative financial instruments are used for hedging purposes and not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include monitoring key movements in interest rates, key transactions affected by foreign exchange and commodity prices, and ageing analysis for credit risk.

Risk management is carried out by a limited number of employees as authorised by the Board. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and the investment of excess liquidity.

(a) Market risks

Market risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices. The market risks to which the Group is exposed are discussed in further detail below.

(i) Interest rate risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate because of changes in market interest rates. The Group does not use any derivative financial instruments to manage its exposure to interest rate risk. Cash deposits and borrowings issued at fixed rates expose the Group to fair value interest rate risk.

The Group’s borrowings are sourced from both domestic and offshore markets and include short-term and long-term maturities. Some of the Group’s borrowings consist of foreign currency denominated borrowings. The Group’s regional operations borrow in the currency of their geographic locations. The Group’s borrowings are managed in accordance with targeted currency, interest rate, liquidity, and debt portfolio maturity profiles.

Specifically, interest rate risk is managed on the Group’s net debt portfolio by:

• providing access to diverse sources of funding;

• reducing risks of refinancing by establishing and managing in accordance with target maturity profiles; and

• negotiating interest rates with the Group’s banks based on a variable pricing matrix which includes a LIBOR rate plus a margin.

43

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management (continued)

(a) Market risks (continued)

(i) Interest rate risk (continued)

The table below shows the Group’s sensitivity to post-tax profit to a 1% increase in the stated interest rates. A sensitivity of 1% is deemed reasonable based on current and past market conditions. The calculations are based on interest-bearing financial instruments with variable interest rates at the balance sheet date.

Consolidated +1% (100 basis points)	Impact on post-tax profit higher/(lower)	Impact on post-tax profit higher/(lower)
	2009 A$’000 (675)	2008 A$’000
		(1,756)

+1% (100 basis points)

A 1% decrease in the stated interest rates would have an equal and opposite effect. The Parent has no exposure.

(ii) Foreign currency risk

Foreign currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The exposure of an entity to transaction risk is minimised by matching local currency income with local currency costs.

The Group seeks to denominate borrowings in the currencies of its principal assets and cash flows. These are primarily denominated in Australian dollars, US dollars, British pounds and Euro.

In accordance with Board approved policies, the Group enters into forward foreign exchange contracts to buy and sell specific amounts of various foreign currencies in the future at pre-determined exchange rates. The contracts are entered into to hedge transactions denominated in currencies which are not the functional currency of the relevant entity. These contracts are hedging highly probable forecasted transactions for the ensuing financial year. The contracts are timed to mature when monies from the forecasted sales are scheduled to be received or when payments for purchases are scheduled to be made. The Group does not hedge its exposure to recognised assets and liabilities.

Financial assets and liabilities

Financial assets and liabilities denominated in currencies other than the functional currency of an entity are periodically restated to their functional currency, and the associated gain or loss is taken to the income statement. The table below shows carrying amount of the Group’s foreign currency denominated financial assets and liabilities at the balance sheet date.

Consolidated Currency US dollar Euro British pound	Net financial assets (liabilities)	Net financial assets (liabilities)
	2009 A$’000 (58,294) (57,482) 49,941	2008 A$’000
		18,456 (69,331) 4,305

The table below shows the impact of a 10% appreciation of the relevant currency for the Group’s net foreign currency denominated financial assets. A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movements.

Consolidated Impact on post-tax profit – higher/(lower) Impact on equity	US dollar 2009 A$’000 2008 A$’000 (3,789) 1,235 28,198 24,464	Euro 2009 A$’000 2008 A$’000 (3,736) (4,638) - -	British pound 2009 A$’000 2008 A$’000 3,246 288 - -
	2009 A$’000 (3,789) 28,198	2009 A$’000 (3,736) -	2009 A$’000 3,246 -

A 10% depreciation of the relevant currency would have an equal and opposite effect. The Parent has no exposure.

44

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management (continued)

(a) Market risks (continued)

(ii) Foreign currency risk (continued)

Forward foreign exchange contracts

The table below shows the Group’s sensitivity to foreign exchange rates on its forward foreign exchange contracts. A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movements.

Consolidated Impact on post-tax profit – higher/(lower) Impact on equity – higher/(lower)	US dollar 2009 A$’000 2008 A$’000 - - 1,703 606	Euro 2009 A$’000 2008 A$’000 - - 383 116	British pound	British pound
	2009 A$’000 - 1,703	2009 A$’000 - 383	2009 A$’000 (3,299) 4,755	2008 A$’000 - 8,803

A 10% depreciation of the stated currencies would have an equal and opposite effect. The Parent has no exposure.

The financial statements for each of the Group’s foreign operations are prepared in local currency being their functional currency. For the purposes of preparing the Group’s consolidated financial information, each foreign operation’s financial statements are translated into Australian dollars using the applicable foreign exchange rates as at the balance date. A translation risk therefore exists on translating the financial statements of the Group’s foreign operations into Australian dollars for the purposes of reporting consolidated financial information. As a result, volatility in foreign exchange rates can impact the Group’s net assets, net profit and the foreign currency translation reserve.

(iii) Commodity price risk

The Group is exposed to risks associated with fluctuations in the market price for both ferrous and non-ferrous metals which are at times volatile. The Group attempts to mitigate commodity price risk by seeking to turn its inventories quickly instead of holding inventories in anticipation of higher commodity prices. Where appropriate, the Group enters into forward commodity contracts matched to purchases or sales of metal and precious metal commitments.

The Group’s normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits and policies approved by the Board and to rigid internal controls and compliance monitoring. The Group’s exposure to commodity prices is to an extent diversified by virtue of its broad commodity base.

At the balance date, none of the Group’s forward commodity contracts qualified for hedge accounting, despite being valid economic hedges of the relevant risk. Accordingly, any movement in commodity rates that impact the fair value of these forward commodity contracts are recorded in the income statement.

At the balance date, the Group’s commodity contracts consisted primarily of copper and nickel contracts. The following table shows the effect on post-tax profit and equity from a 10% appreciation in commodity rates at the balance date based on the outstanding commodity contracts, with all other variables held constant. A 10% sensitivity has been selected as this is considered reasonable given the current level of commodity prices and the volatility observed both on a historical basis and on market expectations for future movements.

Consolidated Impact on post-tax profit – higher/(lower) Impact on equity – higher/(lower)	Copper	prices 2008 A$’000 - (2,796)	Nickel prices	Nickel prices
	2009 A$’000 (4,458) -		2009 A$’000 (401) -	2008 A$’000
				(2,210) -

A 10% depreciation of the stated commodity prices would have an equal and opposite effect. The Parent has no exposure.

45

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management (continued)

(b) Credit risk

Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause a financial loss to the Group. The Group has exposure to credit risk on all financial assets included in the Group’s balance sheet.

The Group establishes credit limits for its customers. Trade and other receivables consist of a large number of customers, spread across the consumer, business and international sectors. The Group does not have any significant credit risk exposure to a single customer or Groups of customers. Ongoing credit evaluation is performed on the financial condition of the Group’s customers and, where appropriate, an impairment provision is raised. The Group does not insure itself against collection risks. Occasionally, the Group will sell a portion of its trade receivables to a third party under an uncommitted facility agreement. For further details refer to Note 8.

The Group is also exposed to credit risk arising from the Group’s transactions in derivative contracts. For credit purposes, there is only a credit risk where the counterparty is liable to pay the Group in the event of a closeout. The Group has policies that limit the amount of credit exposure to any financial institution. Derivative counterparties and cash transactions are limited to financial institutions that meet acceptable credit worthiness criteria. Credit risk further arises in relation to financial guarantees as set out in Note 22.

(c) Liquidity risks

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

Liquidity risk includes the risk that, as a result of the Group’s operational liquidity requirements:

• the Group will not have sufficient funds to settle a transaction on the due date;

• the Group will be forced to sell financial assets at a value which is less than what they are worth;

• the Group may be unable to settle or recover a financial asset at all; or

• the Group may be required to refinance the Group’s borrowing facilities.

The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties.

The Group has access to unsecured global multi-currency/multi-option loan facilities. Unsecured global multi-currency/multioption loan facilities are provided by a number of the Group’s bankers. The loan facilities are subject to annual reviews and have maturities in excess of 1 year and less than 3 years.

The Group had access to the following credit standby arrangements at the balance date.

Unsecured global multi-currency/multi-option loan facilities Amount of credit unused	Consolidated 2009 A$’000 2008 A$’000 1,062,993 1,065,781 856,490 668,584	Parent	Parent
	2009 A$’000 1,062,993 856,490	2009 A$’000 - -	2008 A$’000
			- -

46

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management (continued)

(c) Liquidity risks (continued)

The table below analyses the Group and Parent’s financial assets and liabilities, net and gross settled derivative financial instruments into relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Consolidated Non-derivative financial liabilities: Trade and other payables Payables – non-current Borrowings (including interest payments) Derivatives: Net settled (commodity contracts) Gross settled: - (inflow) - outflow Parent Non-derivative financial liabilities: Trade and other payables		2009	Between 2 and 5 years A$’000 - (2,263) - (2,263 ) - - - - - -	2008 Less than 1 year A$’000 Between 1 and 5 years A$’000 (1,062,253) - - (2,270) (21,983 ) (406,769 ) (1,084,236 ) (409,039 ) (1,699) - (139,236) - 139,450 - (1,485 ) - (343,483 ) - (343,483 ) -
	Less than 1 year A$’000 (537,947) - (9,641 ) (547,588 ) 9,689 (174,728) 174,790 9,751 (284,831 ) (284,831 **) **	Between 1 and 2 years A$’000 - (1,937) (177,916 ) (179,853 ) - - - - - -		Less than 1 year A$’000 (1,062,253) - (21,983 ) (1,084,236 ) (1,699) (139,236) 139,450 (1,485 ) (343,483 ) (343,483 )

For purposes of the above table, interest payments have been projected using interest rates applicable at the balance date on borrowings outstanding at the balance date. The Group’s borrowings fluctuate and are subject to variable interest rates. Future interest payments are therefore subject to borrowings outstanding and the interest applicable at that time.

(d) Fair value estimation

The fair value of financial assets and financial liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

• Cash and cash equivalents - approximates to the carrying amount;

• Receivables less impairment provision and payables - approximates to the carrying amount due to their short-term nature;

• Derivative financial instruments - based on market prices and exchange rates at the balance date.

• • Borrowings - approximates to the carrying amount as bank borrowings have floating interest rates.

All of the fair values of financial assets and liabilities in the Group are equal to their carrying values.

47

Notes to the Financial Statements For the year ended 30 June 2009

Note 2 – Financial and capital risk management (continued)

Capital risk management

The capital structure of the Group consists of net debt and equity. The Group’s objectives when managing capital are to maintain an optimal capital structure and manage effectively the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors its capital structure using the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus net debt. The Group seeks to maintain an optimum gearing ratio.

The Group and Parent’s gearing ratios are set out below.

Total borrowings Less: cash and cash equivalents Net debt Plus: total equity Total capital Gearing ratio	Consolidated 2009 A$’000 2008 A$’000 175,144 398,414 (69,536 ) (133,487 ) 105,608 264,927 2,859,047 2,833,924 2,964,655 3,098,851 3.6% 8.5%	Parent	Parent
	2009 A$’000 175,144 (69,536 ) 105,608 2,859,047 2,964,655 3.6%	2009 A$’000 - (198) (198) 3,756,617 3,756,419 0.0%	2008 A$’000
			- -
			- 3,683,644 3,683,644 0.0%

There have been no breaches of external obligations such as regulatory obligations or bank covenants.

Note 3 – Critical accounting estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.

(i) Inventories

The Group’s inventories primarily consist of ferrous and non-ferrous scrap metals. Quantities of inventories are determined based on various inventory systems used by the Group and are subject to periodic physical verification using estimation techniques, including observation, weighing and other industry methods. Inventories are stated at the lower of cost or net realisable value, with due allowance for excess, obsolete or slow moving items. Net realisable value is based on current assessments of future demand and market conditions. Impairment losses may be recognised on inventory within the next financial year if management needs to revise its estimates in response to changing circumstances. Due to adverse market conditions in the year ended 30 June 2009, there were significant net realisable value adjustments as set out in Note 6.

48

Notes to the Financial Statements For the year ended 30 June 2009

Note 3 – Critical accounting estimates and judgements (continued)

(ii) Taxation

The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unused tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits.

Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.

(iii) Impairment of goodwill and intangibles with indefinite useful lives

The Group determines whether goodwill and intangibles with indefinite useful lives are impaired on at least an annual basis. This requires an estimation of the recoverable amount of the CGUs to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives are detailed in Notes 13 and 14. In the year ended 30 June 2009, the Group impaired goodwill by A$191.1 million.

(iv) Share-based payment transactions

The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date of grant. The fair value is determined independently using a binomial model or a Monte-Carlo simulation model, using the assumptions detailed in Note 24. The accounting estimates and assumptions relating to equitysettled share-based payments (i.e. in relation to the assessments of the probability of achieving non-market based vesting conditions) would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

(v) Defined benefit plans

Various actuarial assumptions are required when determining the Group’s pension schemes. These assumptions and the related carrying amounts are disclosed in Note 18.

(vi) Estimation of useful lives of assets

The estimation of the useful lives of assets has been based on historical experience. In addition, the condition of the assets is assessed at least annually and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

Note 4 – Revenue

Sales of goods Service revenue Total sales revenue Interest income Dividend income Management fees Rental income Total other revenue		Consolidated	2007 A$’000 5,420,590 127,930 5,548,520 2,364 - - 13 2,377 5,550,897	Parent	Parent
	2009 A$’000 8,417,419 218,806 8,636,225 2,272 - - 2,513 4,785 8,641,010	2008 A$’000 7,517,277 148,314 7,665,591 2,876 - - 2,069 4,945 7,670,536		2009 A$’000 - - - - 231,001 1,556 - 232,557 232,557	2008 A$’000
					- - - - 170,205 1,473 - 171,678 171,678

49

Notes to the Financial Statements For the year ended 30 June 2009

Note 4 – Revenue (continued)

As a consequence of the rapid and unprecedented deterioration in economic conditions and the related effects on commodity markets during the first half of the 2009 financial year, the Group renegotiated a number of non-ferrous sales contracts with its customers. Revenue is shown after the impact of these contract renegotiations, which amounted to A$36.0 million.

Note 5 – Other income

Net gain on contribution of assets to SA Recycling LLC (Note 29(d)) Unrealised gain on held for trading derivatives Realised gain on held for trading derivatives Net gain on disposal of property, plant and equipment Insurance recovery Negative goodwill on acquisition (Note 27) Net foreign exchange gains Government grants		Consolidated	2007 A$’000 - - - 401 7,632 - - 945 8,978	Parent	Parent
	2009 A$’000 - - 29,857 864 1,786 399 - 831 33,737	2008 A$’000 38,841 3,901 - - 11,815 - 243 867 55,667		2009 A$’000 - - - - - - - - -	2008 A$’000
					- - - - - - - - -

Note 6 – Expenses

Consolidated 2009 A$’000 2008 A$’000 (a) (Loss)/profit before income tax includes the following specific expenses: Depreciation and amortisation: Buildings 11,443 7,303 Leasehold improvements 4,594 2,765 Plant and equipment 104,706 55,728 120,743 65,796 Amortisation of identified intangible assets 50,077 29,290 170,820 95,086 Finance costs 21,508 34,374 Net loss on disposal of property, plant and equipment - 1,965 Unrealised loss on held for trading derivatives 10,253 - Rental expenses relating to operating leases 71,695 43,883 Net foreign exchange losses 48 - Defined contribution superannuation expense 8,042 6,275 Share-based payment expense 9,258 13,388 Research and development 1,724 2,082	Consolidated	Consolidated	2007 A$’000 4,104 3,686 42,840 50,630 23,823 74,453 30,405 - - 33,489 59 5,949 2,831 2,515	Parent	Parent
		2008 A$’000 expenses: 7,303 2,765 55,728 65,796 29,290 95,086 34,374 1,965 - 43,883 - 6,275 13,388 2,082		2009 A$’000 - - - - - - - - - - - - - -	2008 A$’000
					- - -
					- -
					-
					- - - - - - - -

50

Notes to the Financial Statements For the year ended 30 June 2009

Note 6 – Expenses (continued)
		Consolidated			Parent
	2009	2008	2007		2009	2008
	A$’000	A$’000	A$’000		A$’000	A$’000
(b) (Loss)/profit before income tax includes the	following expenses which are		included due to their size or nature:
Write-down of inventory to net realisable value	119,418	-		-		-	-
Sarbanes-Oxley related professional fees1	9,661	-		-		-	-
Withdrawal liability related to a multi-employer
pension plan2	3,422	-		-		-	-
Impairment provisions for trade receivables3	23,678	590	(436)			-	-
Professional fees and other costs incurred in
connection with Fairless Iron & Metal
acquisition4	2,541	-		-		-	-
Redundancies	5,481	5,605		-		-	-
Loss on sale of subsidiaries (Note 27)	2,577	-		-		-	-
Impairment loss on fire destroyed assets	-	71	6,784			-	-
Asset impairments and yard closure costs5	13,669	4,553		-		-	-
Merger costs6	4,048	1,387		-		-	-

---

1 Represents external professional fees related to the compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (United States).

2 Represents a termination liability associated with the withdrawal from a multi-employer pension plan in the United States.

3 Represents provisions recorded for trade debtors for which the Group believes collectability is in doubt. Refer to Note 1(m).

4 The acquisition of Fairless Iron & Metal was completed on 3 July 2009. As a result, the Group has applied the transitional principles consistent with the revised AASB 3 whereby transaction costs are expensed for all acquisitions prospectively from 1 July 2009. Refer to Note 1(ac)(iii).

5 Amounts represent the write-down of equipment as a result of asset retirements and rationalisation, write-down of an investment and costs related to yard closures.

6 Merger costs include integration bonuses, retention incentives and other associated with the post merger rationalisation of the Sims Metal Management Limited and Metal Management Inc businesses.

Note 7 – Income tax and deferred tax

(a) Income tax expense Current income tax charge/(benefit) Adjustments for prior years Deferred income tax Income tax expense on equity accounted profits (Note 29) Deferred income tax expense included in income tax expense comprises: Decrease/(increase) in deferred tax assets (Decrease)/increase in deferred tax liabilities	Consolidated	Consolidated	2007 A$’000 119,860 176 (5,366 ) 114,670 2,281 116,951 (25,268) 19,902 (5,366 )	Parent	Parent
	2009 A$’000 27,511 (10,284) 8,326 25,553 2,580 28,133 15,503 (7,177 ) 8,326	2008 A$’000 217,056 5,485 (6,197 ) 216,344 4,161 220,505 9,991 (16,188 ) (6,197 )		2009 A$’000 (353) - - (353) - (353 ) - - -	2008 A$’000
					(391) - - (391) - (391 ) - - -

51

Notes to the Financial Statements For the year ended 30 June 2009

Note 7 – Income tax and deferred tax (continued)

Consolidated Parent 2009 A$’000 2008 A$’000 2007 A$’000 2009 A$’000 2008 A$’000 (b) Reconciliation of income tax expense to accounting (loss)/profit before tax Accounting (loss)/profit before income tax (122,162 ) 660,603 356,889 229,824 168,901 Tax at the standard Australian rate of 30% (36,649) 198,181 107,067 68,947 50,671 Adjustments for prior years (10,284) 5,485 176 - - Effect of tax rates in other jurisdictions 12,039 34,407 13,004 - - Non-deductible expenses 3,477 3,588 787 - - Non-assessable gain on formation of jointly controlled entity - (12,983) - - - Non-assessable income (1,059) (6,467) (10) - - Non-deductible goodwill impairment 57,234 - - - - Current year tax losses not previously recognised - (66) (554) - - Dividends received from subsidiaries - - - (69,300) (51,062) Other 3,375 (1,640 ) (3,519 ) - - Income tax expense (benefit) 28,133 220,505 116,951 (353 ) (391 ) (c) Amounts recognised directly to equity Share-based payments 7,744 (6,875) - - - Foreign exchange gain/(loss) on US$ receivable 20,445 (14,451) (9,338) - - Defined benefit plans (2,715) (3,463) 1,512 - - Cash flow hedges (445 ) (4,677) 5,559 - - Total deferred tax debited/(credited) to equity 25,029 (29,466 ) (2,267 ) - - Consolidated Parent (d) Deferred tax assets and liabilities 2009 A$’000 2008 A$’000 2009 A$’000 2008 A$’000 Deferred tax assets The balance comprises temporary difference attributable to: (amounts recognised in profit and loss): Provisions and other accruals 22,235 5,111 - - Employee benefits 9,346 16,722 - - Stores and consumables 5,126 - - - Property, plant and equipment 4,437 7,103 - - Jointly controlled associates 1,152 8,850 - - Foreign exchange losses 1,991 - - - Share-based payments 7,281 20,125 - - Other 12,058 18,538 - - 63,626 76,449 - - (amounts recognised directly in equity): Share-based payments - 6,875 - - Defined benefit plans 4,666 - - - Foreign exchange losses on US$ receivable 3,344 23,789 - - Other - 2,869 - - 8,010 33,533 - -	Consolidated Parent 2009 A$’000 2008 A$’000 2007 A$’000 2009 A$’000 2008 A$’000 (b) Reconciliation of income tax expense to accounting (loss)/profit before tax Accounting (loss)/profit before income tax (122,162 ) 660,603 356,889 229,824 168,901 Tax at the standard Australian rate of 30% (36,649) 198,181 107,067 68,947 50,671 Adjustments for prior years (10,284) 5,485 176 - - Effect of tax rates in other jurisdictions 12,039 34,407 13,004 - - Non-deductible expenses 3,477 3,588 787 - - Non-assessable gain on formation of jointly controlled entity - (12,983) - - - Non-assessable income (1,059) (6,467) (10) - - Non-deductible goodwill impairment 57,234 - - - - Current year tax losses not previously recognised - (66) (554) - - Dividends received from subsidiaries - - - (69,300) (51,062) Other 3,375 (1,640 ) (3,519 ) - - Income tax expense (benefit) 28,133 220,505 116,951 (353 ) (391 ) (c) Amounts recognised directly to equity Share-based payments 7,744 (6,875) - - - Foreign exchange gain/(loss) on US$ receivable 20,445 (14,451) (9,338) - - Defined benefit plans (2,715) (3,463) 1,512 - - Cash flow hedges (445 ) (4,677) 5,559 - - Total deferred tax debited/(credited) to equity 25,029 (29,466 ) (2,267 ) - - Consolidated Parent (d) Deferred tax assets and liabilities 2009 A$’000 2008 A$’000 2009 A$’000 2008 A$’000 Deferred tax assets The balance comprises temporary difference attributable to: (amounts recognised in profit and loss): Provisions and other accruals 22,235 5,111 - - Employee benefits 9,346 16,722 - - Stores and consumables 5,126 - - - Property, plant and equipment 4,437 7,103 - - Jointly controlled associates 1,152 8,850 - - Foreign exchange losses 1,991 - - - Share-based payments 7,281 20,125 - - Other 12,058 18,538 - - 63,626 76,449 - - (amounts recognised directly in equity): Share-based payments - 6,875 - - Defined benefit plans 4,666 - - - Foreign exchange losses on US$ receivable 3,344 23,789 - - Other - 2,869 - - 8,010 33,533 - -	Parent	Parent	Parent
		2009 A$’000 229,824 68,947 - - - - - - - (69,300) - (353 ) - - - - - Parent		2008 A$’000
				168,901 50,671 - - - - - - - (51,062) - (391 ) - - - - -
	2009 A$’000 - - - - - - - - - - - - - -		2008 A$’000
			- - - - - - - - - - - - - -

52

Notes to the Financial Statements For the year ended 30 June 2009

Note 7 – Income tax and deferred tax (continued)

(d) Deferred tax assets and liabilities (continued) Consolidated 2009 A$’000 2008 A$’000 Deferred tax assets (continued) Movements Balance at 1 July 109,982 63,221 Charged to income statement (15,503) (9,991) Adjustments for prior years 8,682 - Transfers to deferred tax liabilities (17,173) - Charged directly to equity (26,115) 24,195 Acquisitions - 38,532 Foreign exchange differences 11,763 (5,975 ) Balance at 30 June 71,636 109,982 Deferred tax assets to be recovered within 12 months 41,410 23,649 Deferred tax assets to be recovered after 12 months 30,226 86,333 71,636 109,982 Deferred tax liabilities The balance comprises temporary differences attributable to: (amounts recognised in profit and loss): Intangibles 65,682 68,485 Property, plant and equipment 76,167 67,198 Other 5,976 10,973 147,825 146,656 (amounts recognised directly in equity): Share-based payments 869 - Cash flow hedges 149 - Defined benefit plans - 1,512 1,018 1,512 Movements Balance at 1 July 148,168 85,516 Charged to income statement (7,177) (16,188) Adjustments for prior years (3,227) - Transfers from deferred tax assets (17,173) - Charged directly to equity (1,088) (5,271) Acquisitions/disposals 942 95,733 Foreign exchange differences 28,398 (11,622 ) Balance at 30 June 148,843 148,168 Deferred tax liabilities to be settled within 12 months 5,976 10,973 Deferred tax liabilities to be settled after 12 months 142,867 137,195 148,843 148,168	Parent	Parent
	2009 A$’000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	2008 A$’000
		- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

53

Notes to the Financial Statements For the year ended 30 June 2009

Note 7 – Income tax and deferred tax (continued)

(e) Tax losses

Deferred tax assets are recognised for carried forward tax losses to the extent that realisation of the related tax benefit through future taxable profits is probable. As at 30 June 2009, the Group has unused tax losses (primarily for states in the United States) of A$55.2 million (2008: A$10.8 million) available for offset against future profits. A deferred tax asset has been recognised in respect of A$2.2 million (2008: A$0.4 million) of such losses.

The benefit of tax losses will only be obtained if (i) the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the losses to be realised; (ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) no changes in tax legislation adversely affects the Group in realising the benefit from the deduction for the losses.

No deferred tax asset has been recognised in respect of the remaining unused tax losses of A$39.9 million (2008: A$20.8 million) due to the unpredictability of future profit streams in the relevant jurisdictions.

(f) Unrecognised temporary differences

As at 30 June 2009, there were no unrecognised temporary differences associated with the Group’s investments in subsidiaries, associates, or jointly controlled entities, as the Group has no liability for additional taxation should unremitted earnings be remitted.

(g) Tax consolidation

Sims Metal Management Limited and its wholly-owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 November 2005. Sims Metal Management Limited is the head entity of the tax consolidated group. Members of the tax consolidated group have entered into a tax sharing and funding agreement that provides for the allocation of income tax liabilities between entities should the head entity default on its tax payment obligations. No amounts have been recognised in the consolidated financial statements in respect of this agreement on the basis that the probability of default is remote.

(h) Tax effect accounting by members of the Australian tax consolidated group

Sims Metal Management Limited as the head entity and the controlled entities in the Australian tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate to members of the Australian tax consolidated group.

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) assumed from controlled entities in the Australian tax consolidated group.

The amounts receivable or payable under the tax sharing agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments.

54

Notes to the Financial Statements For the year ended 30 June 2009

Note 8 – Trade and other receivables

Current: Trade receivables Provision for impairment of receivables Other receivables and deferred expenses Prepayments Net tax-related amounts receivable from subsidiaries Non-current: Trade receivables Other	Consolidated 2009 A$’000 2008 A$’000 286,078 743,006 (8,962 ) (949 ) 277,116 742,057 60,655 84,171 12,538 13,290 - - 73,193 97,461 350,309 839,518 7,777 - 9,705 2,963 17,482 2,963	Parent	Parent
	2009 A$’000 286,078 (8,962 ) 277,116 60,655 12,538 - 73,193 350,309 7,777 9,705 17,482	2009 A$’000 - - - - - - - - - - -	2008 A$’000
			- - - - - 41,147 41,147 41,147 - - -

Occasionally, the Group will sell a portion of its trade receivables to a third party under an uncommitted facility agreement. All credit risk passes to the third party at the time of the assignment, such that the Group has no further exposure to default by the specific trade debtors. The third party is not obliged to accept offers of receivables and the Group is not obligated to make offers or pay commitment fees to the third party. The Group does not generally insure trade receivables.

(a) Movements in provision for impairment of receivables

Balance at 1 July Acquisitions Provision for impairment/(write-back) recognised during the year Receivables written-off during the year as uncollectible Foreign exchange differences Balance at 30 June	Consolidated	Consolidated	2007 A$’000 3,015 - (436) (785) (34 ) 1,760	Parent	Parent
	2009 A$’000 949 - 23,678 (15,098) (567 ) 8,962	2008 A$’000 1,760 145 590 (1,528) (18 ) 949		2009 A$’000 - - - - - -	2008 A$’000
					- - - - - -

The creation and release of the provision for impaired receivables has been included in other expenses in the income statement. Refer to Note 1(m).

55

Notes to the Financial Statements For the year ended 30 June 2009

Note 8 – Trade and other receivables (continued)

(b) Past due but not impaired

As at 30 June 2009, receivables of A$83.5 million (2008: A$260.2 million) were past due but not impaired and the Group does not hold any material collateral in relation to these receivables. These relate to a number of independent customers for whom there is no recent history of default.

The ageing analysis of these receivables are as follows:

Days overdue: 1 – 30 days 31 – 60 days Over 60 days	Consolidated 2009 A$’000 2008 A$’000 51,494 191,382 13,657 50,141 18,374 18,645 83,525 260,168	Parent	Parent
	2009 A$’000 51,494 13,657 18,374 83,525	2009 A$’000 - - - -	2008 A$’000
			- - - -

(c) Other receivables and deferred expenses

Other receivable amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained.

(d) Net tax-related amounts receivable from subsidiaries

Net tax-related amounts receivable from subsidiaries generally arise from the tax funding agreement with the Australian tax consolidated entities.

Note 9 – Inventory

Raw materials at net realisable value Stores and spare parts at net realisable value Finished goods at net realisable value	Consolidated 2009 A$’000 2008 A$’000 101,926 230,934 36,526 29,179 330,671 750,808 469,123 1,010,921	Parent	Parent
	2009 A$’000 101,926 36,526 330,671 469,123	2009 A$’000 - - - -	2008 A$’000
			- - - -

(a) Inventory expense

Inventories recognised as expense during the year ended 30 June 2009 amounted to A$6.4 billion (2008: A$5.4 billion). Writedowns of inventories to net realisable value are disclosed in Note 6.

56

Notes to the Financial Statements For the year ended 30 June 2009

Note 10 – Derivative financial instruments

Current assets: Forward foreign exchange contracts – cash flow hedges Forward commodity contracts – held for trading Forward commodity contracts – cash flow hedges Current liabilities: Forward foreign exchange contracts – cash flow hedges Forward commodity contracts – held for trading Forward foreign exchange contracts – held for trading Forward commodity contracts – cash flow hedge	Consolidated 2009 A$’000 2008 A$’000 713 33 - 3,901 - 14 713 3,948 211 247 9,689 - 564 - - 2,216 10,464 2,463	Parent	Parent
	2009 A$’000 713 - - 713 211 9,689 564 - 10,464	2009 A$’000 - - - - - - - - -	2008 A$’000
			- - -
			-
			- - - -
			-

During the year ended 30 June 2009, a net after tax gain of A$0.4 million (2008: after tax loss of A$0.6 million) resulting from the change in the fair value of derivatives were taken directly to equity in the cash flow hedge reserve. These changes constitute the effective portion of the hedging relationship. Net after tax loss of A$0.6 million (2008: after tax gain of A$9.0 million) recognised in the cash flow hedging reserve were transferred to the income statement during the year ended 30 June 2009.

Note 11 – Other financial assets

Investments in controlled entities (Note 28)	Consolidated 2009 A$’000 2008 A$’000 - -	Parent	Parent
	2009 A$’000 -	2009 A$’000 4,026,774	2008 A$’000
			4,026,736

57

Notes to the Financial Statements For the year ended 30 June 2009

Note 12 – Property, plant and equipment

In the current year, the Group revised its accounting policy for the valuation of land, buildings and leasehold improvements from the revaluation method to the historical cost method in accordance with AASB 116, “ Property, Plant and Equipment ”. The new policy has been applied retrospectively with the impact on comparative information in relation to the 2008 and 2007 financial years disclosed in Note 1(b)(vi).

Consolidated At 30 June 2009 Cost Accumulated depreciation Net book amount Year ended 30 June 2009 Balance at 1 July Additions Disposals Transfers Impairment loss (Note 6) Depreciation expense Acquisition of subsidiaries (Note 27) Disposal of subsidiaries Foreign exchange differences Balance at 30 June At 30 June 2008 Cost Accumulated depreciation Net book amount Year ended 30 June 2008 Balance at 1 July Additions Disposals Impairment loss Transfers Transfer to SA Recycling (Note 29) Depreciation expense Acquisition of subsidiaries Foreign exchange differences Balance at 30 June	Freehold land A$’000 254,506 - 254,506 212,349 6,870 (218) 1,051 - - 3,698 (1,061) 31,817 254,506 212,349 - 212,349 150,103 8,081 (7,153) - 9,716 (31,351) - 98,695 (15,742 ) 212,349	Buildings A$’000 187,006 (33,811 ) 153,195 123,867 20,313 (3,242) 5,714 - (11,443) 4,365 (554) 14,175 153,195 142,013 (18,146 ) 123,867 89,663 2,933 (264) - 17,627 (1,378) (7,303) 29,320 (6,731 ) 123,867	Leasehold improve- ments A$’000 53,808 (17,900 ) 35,908 24,480 13,630 - 1,022 - (4,594) 52 - 1,318 35,908 35,611 (11,131 ) 24,480 26,773 10,747 (51) - 1,224 (10,219) (2,765) 1,114 (2,343 ) 24,480	Plant & equipment A$’000 817,684 (413,070 ) 404,614 368,779 63,459 (1,220) 33,617 (10,021) (104,706) 18,993 (5,443) 41,156 404,614 688,690 (319,911 ) 368,779 239,464 49,116 (234) (71) 13,369 (25,614) (55,728) 165,304 (16,827 ) 368,779	Capital work in progress A$’000 99,502 - 99,502 55,217 83,202 - (42,684) - - - - 3,767 99,502 55,217 - 55,217 35,514 58,814 - - (41,936) (2,874) - 9,320 (3,621 ) 55,217	Total A$’000
						1,412,506 (464,781 ) 947,725 784,692 187,474 (4,680) (1,280) (10,021) (120,743) 27,108 (7,058) 92,233 947,725 1,133,880 (349,188 ) 784,692 541,517 129,691 (7,702) (71) - (71,436) (65,796) 303,753 (45,264 ) 784,692

58

Notes to the Financial Statements For the year ended 30 June 2009

Note 13 – Goodwill

(a) Movements in carrying amounts

Cost Accumulated impairment* Net book value Balance at 1 July Transfer to SA Recycling LLC Impairment charge Acquisition of subsidiaries (Note 27) Fair value adjustments to prior year acquisitions Other Foreign exchange differences Balance at 30 June	Consolidated 2009 A$’000 2008 A$’000 1,312,599 1,169,883 (165,814 ) (3,349 ) 1,146,785 1,166,534 1,166,534 532,240 - (173,652) (191,094) (3,349) 43,999 826,463 (587) - (1,726) - 129,659 (15,168 ) 1,146,785 1,166,534	Parent	Parent
	2009 A$’000 1,312,599 (165,814 ) 1,146,785 1,166,534 - (191,094) 43,999 (587) (1,726) 129,659 1,146,785	2009 A$’000 - - - - - - - - - - -	2008 A$’000
			- -
			-
			- - - - - - -
			-

---

• Accumulated impairment as at 30 June 2008 of $3.3 million related to the Group’s Tyrecycle CGU which was sold on 30 June 2009 (refer to Note 27).

(b) Allocation of Goodwill by segment and CGU grouping

Australasia North America Europe	Consolidated 2009 A$’000 2008 A$’000 20,931 26,870 1,005,620 1,025,617 120,234 114,047 1,146,785 1,166,534	Parent	Parent
	2009 A$’000 20,931 1,005,620 120,234 1,146,785	2009 A$’000 - - - -	2008 A$’000
			- - - -

(c) Goodwill impairment testing

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired as was the case during the year ended 30 June 2009. Due to the current economic environment, changes to the Group’s operating results and forecasts, and a significant reduction in the Group’s market capitalisation, the Group determined a triggering event had occurred and performed a goodwill impairment test during the period.

In accordance with AASB 136, “Impairment of Assets”, the Group performed its goodwill impairment test by comparing the recoverable amount of each CGU with its carrying amount, including goodwill. CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For the purposes of assessing impairment, assets are grouped at the lowest CGU level for which there are separately identifiable cash flows. The recoverable amount of a CGU was determined based on value-in-use calculations.

59

Notes to the Financial Statements For the year ended 30 June 2009

Note 13 – Goodwill (continued)

(d) Key assumptions used for value-in-use calculations

The value-in-use calculations use a 5-year cash flow projection which is based on the 2010 financial budget (as approved by the Board) and a 4-year forecast prepared by management. A terminal value is included in the final year of the cash flow calculation. The cash flows are discounted using a rate for each CGU based on an estimate of the Group’s weighted average cost of capital adapted for the regions and currencies in which the CGUs operate. The after-tax discount rates ranged between 10.5% and 12.0% (2008: 12% for all CGUs). The current year pre-tax discount rates ranged between 12.5% to 17.0%.

The cash flow projections are based on management’s best estimates, with reference to historical results, to determine income, expenses, capital expenditures and cash flows for each CGU. These projections incorporate estimates of volumes, prices and margins. The growth rate assumptions ranged from 1.5% to 3.0% reflecting achievement of a long-term estimate of inflation in the region in which each CGU operates. The assumptions reflect past experience and also factor in current and expected economic conditions.

(e) Impairment charge

As a result of the impairment review, the Group recognised a non-cash impairment charge of A$191.1 million in the year ended 30 June 2009 (2008: A$3.3 million). The charge related to the write-off of goodwill in relation to four CGUs within the North America segment, operating in the ferrous and non-ferrous secondary recycling product groups, and one secondary processing CGU in the Australasia segment. In the event of continued adverse economic conditions in the markets in which the Group operates, the Group will continue to monitor its goodwill, indefinite-lived intangible assets and long-lived assets for possible future impairment.

(f) Impact of possible changes in key assumptions

With regard to the assessment of the value-in-use of each CGU, a sensitivity analysis was conducted on the effect of changes in forecasted cash flows and discount rates. If forecasted cash flows were to decrease by 10% for each CGU, an additional impairment charge of A$19.1 million would be required in respect of one CGU in the North America segment not currently impaired. If discount rates were to increase by 1% for each CGU, an additional impairment charge of A$39.3 million would be required in respect of two CGUs within the North America segment, one of which was impaired during the period, the other is not currently impaired.

60

Notes to the Financial Statements For the year ended 30 June 2009

Note 14 – Intangible assets

Consolidated At 30 June 2009 Cost Accumulated amortisation Net book amount Year ended 30 June 2009 Balance at 1 July Acquisitions Transfers Amortisation charge Foreign exchange differences Balance at 30 June At 30 June 2008 Cost Accumulated amortisation Net book amount Year ended 30 June 2008 Balance at 1 July Acquisitions Transfer to SA Recycling LLC Amortisation charge Acceleration of amortisation Foreign exchange differences Balance at 30 June	Supplier relation- ships A$’000 262,937 (75,316 ) 187,621 189,896 7,044 (3,403) (39,967) 34,051 187,621 219,799 (29,903 ) 189,896 72,287 169,110 (17,804) (20,626) - (13,071 ) 189,896	Trade names A$’000 38,329 (2,481 ) 35,848 31,830 - - (2,077) 6,095 35,848 32,308 (478 ) 31,830 - 34,468 - (487) - (2,151 ) 31,830	Permits A$’000 9,759 - 9,759 4,295 - 3,526 - 1,938 9,759 4,295 - 4,295 7,609 1,682 (3,957) - - (1,039 ) 4,295	Contracts A$’000 33,350 (27,768 ) 5,582 9,478 708 - (8,033) 3,429 5,582 25,499 (16,021 ) 9,478 13,240 5,823 - (6,907) (1,094) (1,584 ) 9,478	Other A$’000 - - - 123 - (123) - - - 195 (72 ) 123 1,038 395 (1,012) (176) - (122 ) 123	Total A$’000 344,375 (105,565 ) 238,810 235,622 7,752 - (50,077) 45,513 238,810 282,096 (46,474 ) 235,622 94,174 211,478 (22,773) (28,196) (1,094) (17,967 ) 235,622

Note 15 – Trade and other payables

Trade payables Other payables Deferred income Amounts payable to subsidiaries (including taxes payable)	Consolidated 2009 A$’000 2008 A$’000 309,626 904,805 219,930 153,634 8,391 3,814 - - 537,947 1,062,253	Parent 2009 A$’000 2008 A$’000 - - 255 72 - - 284,576 343,411 284,831 343,483
	2009 A$’000 309,626 219,930 8,391 - 537,947	2009 A$’000 - 255 - 284,576 284,831

61

Notes to the Financial Statements For the year ended 30 June 2009

Note 16 – Borrowings

Current borrowings Non-current borrowings: Bank loans Other borrowings	Consolidated 2009 A$’000 2008 A$’000 811 877 173,394 397,081 939 456 174,333 397,537	Parent	Parent
	2009 A$’000 811 173,394 939 174,333	2009 A$’000 - - - -	2008 A$’000 - - - -

Bank loans are unsecured but are subject to guarantees/cross guarantees, cross defaults and indemnities (as appropriate) from the Parent and some of its subsidiaries. Further information relating to interest rates, facility arrangements and fair values is set out in Note 2.

Note 17 – Provisions

Current: Employee entitlements Other Non-current: Employee entitlements Environmental compliance Contingent consideration – business combinations Other	Consolidated 2009 A$’000 2008 A$’000 14,794 21,004 7,006 7,060 21,800 28,064 12,158 10,307 5,259 6,875 14,244 17,547 2,365 - 34,026 34,729	Parent	Parent
	2009 A$’000 14,794 7,006 21,800 12,158 5,259 14,244 2,365 34,026	2009 A$’000 - - - - - - - -	2008 A$’000 - - - - - - - -

The environmental compliance provision is an estimate of costs for property remediation that will be required in the future.

The contingent consideration provision is an estimate of final consideration payable in respect of business combinations likely to be paid in the future. The amounts are typically based on the future profitability of the businesses acquired. Refer to Note 1(j).

(a) Movements in carrying amounts

Consolidated Balance at 1 July Reclassifications/transfers Additional provisions recognised Payments Purchase accounting adjustment Foreign exchange differences Balance at 30 June	Current Other A$’000 7,060 (1,281) 1,907 (758) - 78 7,006		Non-current
		Contingent consider- ation A$’000 17,547 (1,967) 1,641 - (3,535) 558 14,244	Environ- mental compliance A$’000 6,875 - - (3,144) - 1,528 5,259	Other A$’000
				- 1,967 233 (198) - 363 2,365

62

Notes to the Financial Statements For the year ended 30 June 2009

Note 18 – Retirement benefit obligations

The Group operates various defined benefit plans for certain employees. The plans provide benefits based on years of service and/or final average salary.

The following sets out details in respect of the defined benefits sections only. The expense recognised in relation to the defined contribution plans is disclosed in Note 6.

(a) Balance sheet amounts

The amounts recognised in the balance sheet are determined as follows:

Present value of the defined benefit obligation Fair value of defined benefit plan assets Net liability in the balance sheet	Consolidated 2009 A$’000 2008 A$’000 73,410 81,559 (62,231 ) (76,731 ) 11,179 4,828	Parent	Parent
	2009 A$’000 73,410 (62,231 ) 11,179	2009 A$’000 - - -	2008 A$’000 - - -

The Group has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. The Group intends to continue to contribute to the defined benefit plans based on recommendations from its actuaries.

(b) Reconciliations

Reconciliation of the present value of the defined benefit obligation, which is partly funded: Balance at 1 July Current service cost Interest cost Actuarial gains Benefits paid Contributions paid by members Acquired in business combinations Plan changes Foreign exchange differences Balance at 30 June Reconciliation of the fair value of plan assets: Balance at 1 July Expected return on plan assets Actuarial losses Contributions by Group Contributions paid by members Benefits paid Acquired in business combinations Foreign exchange differences Balance at 30 June	Consolidated 2009 A$’000 2008 A$’000 81,559 69,976 2,167 2,012 5,001 3,933 (8,679) (535) (9,725) (3,333) 471 496 - 14,002 231 - 2,385 (4,992) 73,410 81,559 76,731 77,430 5,522 5,466 (16,867) (11,825) 3,815 2,147 471 496 (9,725) (3,333) - 12,468 2,284 (6,118 ) 62,231 76,731	Parent	Parent
	2009 A$’000 81,559 2,167 5,001 (8,679) (9,725) 471 - 231 2,385 73,410 76,731 5,522 (16,867) 3,815 471 (9,725) - 2,284 62,231	2009 A$’000 - - - - - - - - - - - - - - - - - - -	2008 A$’000 - - - - - - - - - - - - - - - - - - -

63

Notes to the Financial Statements For the year ended 30 June 2009

Note 18 – Retirement benefit obligations (continued)

(c) Amounts recognised in the income statement

Current service cost Interest cost Curtailment/settlement gain Expected return on plan assets Total included in employee benefits expense Actual return on plan assets	Consolidated	Consolidated	2007 A$’000 2,663 3,921 (1,726) (4,968 ) (110 ) 8,922	Parent 2009 A$’000 2008 A$’000 - - - - - - - - - - - -	Parent 2009 A$’000 2008 A$’000 - - - - - - - - - - - -
	2009 A$’000 2,167 5,001 - (5,522 ) 1,646 (11,345 )	2008 A$’000 2,012 3,933 - (5,466 ) 479 (6,359 )			2008 A$’000 - - - - - -

(d) Amounts recognised in statements of recognised income and expense

Actuarial (loss)/gain recognised in the year Deferred tax Defined benefit plan actuarial (loss)/gain, net of tax Cumulative actuarial (losses)/gains (gross of tax) recognised in the statement of recognised income and expense		Consolidated	2007 A$’000 6,723 (1,512) 5,211 5,537	Parent	Parent
	2009 A$’000 (8,188) 2,715 (5,473 ) (13,941 )	2008 A$’000 (11,290) 3,463 (7,827 ) (5,753 )		2009 A$’000 - - - -	2008 A$’000 - -
					-
					-

(e) Categories of plan assets

The major categories of plan assets are as follows:

Cash Equity instruments Debt instruments Property Other assets Total plan assets	Consolidated 2009 A$’000 2008 A$’000 15,504 18,816 36,360 41,498 7,022 9,675 3,345 6,005 - 737 62,231 76,731	Parent	Parent
	2009 A$’000 15,504 36,360 7,022 3,345 - 62,231	2009 A$’000 - - - - - -	2008 A$’000 - - - - - -

64

Notes to the Financial Statements For the year ended 30 June 2009

Note 18 – Retirement benefit obligations (continued)

(f) Principal actuarial assumptions

Australia Discount rate Expected rate of return on plan assets Future salary increases United Kingdom Discount rate Expected rate of return on plan assets Future salary increases United States Discount rate Expected rate of return on plan assets Future salary increases	Consolidated	Consolidated
	2009 % 4.6 8.0 3.0 6.2 6.1 4.0 6.5 8.0 3.5	2008 % 5.5 8.0 5.0 6.2 6.4 5.0 6.0 8.0 3.5	2007 %
			5.3 8.0 5.0 5.8 5.8 4.8 - - -

The expected rate of return on plan assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories. This resulted in the selection of the weighted average returns of plan assets for each of the defined benefit plans as set out above.

(g) Employer contributions

Employer contributions to the defined benefit section of the plans are based on recommendations by the plan’s actuaries. Actuarial assessments are made at no more than one year intervals, and the last such assessment was made as at 30 June 2009. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuaries have adopted a method of funding benefits known as the aggregate funding method. This funding method seeks to have benefits funded by means of a total contribution which is expected to be a constant percentage of members' salaries over their working lifetimes.

Using the funding method described above and particular actuarial assumptions as to the plan’s future experience, the actuaries recommended, in their review as at 30 June 2009, a contribution amount that would be sufficient to meet the Group’s obligations to the defined benefit scheme. Total employer contributions expected to be paid by Group companies for the 2010 financial year is A$4.3 million for Australia, A$0.7 million for United Kingdom, and A$0.2 million for the United States.

(h) Historic summary

Consolidated Defined benefit plan obligation Plan assets Deficit/(surplus) Experience adjustments arising on plan liabilities Experience adjustments arising on plan assets	2009 A$’000 73,410 (62,231) 11,179 (8,679 ) 16,867	2008 A$’000 81,559 (76,731 ) 4,828 (535 ) 11,825	2007 A$’000 69,976 (77,430 ) (7,454 ) (2,769 ) (3,954 )	2006 A$’000 87,062 (82,232 ) 4,830 (2,602 ) (3,319 )	2005 A$’000
					82,913 (60,720 ) 22,193 9,687 (2,580 )

65

Notes to the Financial Statements For the year ended 30 June 2009

Note 19 – Contributed equity

(a) Share capital

Ordinary shares – fully paid	Consolidated 2009 A$’000 2008 A$’000 2,352,928 2,325,924	Parent	Parent
	2009 A$’000 2,352,928	2009 A$’000 3,673,584	2008 A$’000
			3,646,580

Ordinary shares trade on the Australian Securities Exchange (“ASX”) and entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. Voting rights attaching to the ordinary shares are, on a show of hands, one vote for every person present as a member, proxy, attorney or representative thereof and, on a poll, one vote per share for every member present in person or by proxy, attorney or representative. Ordinary shares have no par value. The Company’s shares also trade on the New York Stock Exchange in the form of American Depositary Shares (“ADS”) with one ordinary share equaling one ADS. ADSs have the same rights as ordinary shares including participation in dividends and voting rights.

Refer to the accounting policy in Note 1 relating to the basis of preparation for the Parent entity.

(b) Movements in ordinary shares

Balance at 1 July 2007 Issued under long-term incentive plans Issued under the employee share plan recognised as issued following repayment of associated employee loans Issued on acquisition of Metal Management Inc Issued under the dividend reinvestment plan Issued on exercise of share options Balance at 30 June 2008 Issued under long-term incentive plans Issued under the employee share plan recognised as issued following repayment of associated employee loans Issued under the dividend reinvestment plan Shares issued to employees for integration bonus Balance at 30 June 2009 for accounting purposes Issue of ordinary shares under the employee share scheme deemed to be options for accounting purposes Balance at 30 June 2009 per share register	Number of Shares 125,851,663 176,142 82,659 53,473,817 617,417 215,250 180,416,948 257,282 27,838 1,384,554 60,096 182,146,718 80,851 182,227,569	Consolid- ated A$’000 811,976 - 1,491 1,490,090 18,123 4,244 2,325,924 - 442 26,562 - 2,352,928 - 2,352,928	Parent A$’000
			2,132,632 - 1,491 1,490,090 18,123 4,244 3,646,580 - 442 26,562 - 3,673,584 - 3,673,584

(c) Employee share scheme and other share ownership plans

Further details on the employee share scheme as well as other share ownership plans are set out in Note 24.

(d) Dividend reinvestment plan

The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by issue of new ordinary shares rather than by being paid cash. Shares issued in the year ended 30 June 2009 under the plan were at a 2.5% discount to the market price.

66

Notes to the Financial Statements For the year ended 30 June 2009

Note 20 – Reserves and retained profits

(a) Reserves Share-based payments reserve Cash flow hedging reserve Foreign currency translation reserve (b) Movements in reserves Share-based payments reserve Balance at 1 July Share-based payment expense Shares issued to employees for integration bonus Share options assumed from Metal Management Inc Deferred tax on current year movements Balance at 30 June Hedging reserve – cash flow hedges Balance at 1 July Revaluation Deferred tax on revaluation Transfer to net profit – gross Deferred tax on transfer to net profit Balance at 30 June Foreign currency translation reserve Balance at 1 July Currency translation differences arising during the year Balance at 30 June	Consolidated 2009 A$’000 2008 A$’000 38,426 36,141 391 (607) 127,228 (209,869 ) 166,045 (174,335 ) 36,141 5,355 9,258 13,388 771 - - 10,523 (7,744 ) 6,875 38,426 36,141 (607) 9,049 540 (13) (149) (594) 13 (14,320) 594 5,271 391 (607 ) (209,683) (79,069) 336,911 (130,800 ) 127,228 (209,869 )	Parent	Parent
	2009 A$’000 38,426 391 127,228 166,045 36,141 9,258 771 - (7,744 ) 38,426 (607) 540 (149) 13 594 391 (209,683) 336,911 127,228	2009 A$’000 38,426 - - 38,426 36,141 9,258 771 - (7,744 ) 38,426 - - - - - - - - -	2008 A$’000
			36,141 - - 36,141 5,355 13,388 - 10,523 6,875 36,141 - - - - - - - - -

(c) Nature and purpose of reserves

(i) Share-based payment reserve

The share-based payments reserve is used to recognise the fair value of share-based awards issued to employees.

(ii) Hedging reserve

The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in Note 1(r). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

(iii) Foreign currency translation reserve

Exchange differences arising on translation of investment in the net assets of foreign controlled entities are taken to the foreign currency translation reserve, as described in Note 1(e). The reserve is recognised in profit and loss when the net investment is disposed or borrowings forming part of the net investment are repaid.

67

Notes to the Financial Statements For the year ended 30 June 2009

Note 20 – Reserves and retained profits (continued)

(d) Retained profits

Balance at 1 July Effect of accounting policy change Restated balance at 1 July (Loss)/profit after tax Dividends paid Actuarial loss on defined benefit plans, net of tax Balance at 30 June	Consolidated 2009 A$’000 2008 A$’000 682,335 420,734 - 4,042 682,335 424,776 (150,295) 440,098 (186,493) (174,712) (5,473 ) (7,827 ) 340,074 682,335	Parent	Parent
	2009 A$’000 682,335 - 682,335 (150,295) (186,493) (5,473 ) 340,074	2009 A$’000 923 - 923 230,177 (186,493) - 44,607	2008 A$’000
			6,343 - 6,343 169,292 (174,712) - 923

Note 21 – Dividends

(a) Recognised amounts Declared and paid during the year Interim dividend 2009 paid at 28 cents per share franked 100% at a 30% tax rate Final dividend 2008 paid at 75 cents per share franked 23% at a 30% tax rate Interim dividend 2008 paid at 55 cents per share franked 47% at a 30% tax rate Final dividend 2007 paid at 60 cents per share franked 51% at a 30% tax rate Interim dividend 2007 paid at 60 cents per share franked 57% at a 30% tax rate Final dividend 2006 paid at 60 cents per share franked 51% at a 30% tax rate Total dividends paid Shares issued under the dividend reinvestment plan Total cash dividends paid	Consolidated	Consolidated	2007 A$’000 - - - - 75,240 74,782 150,022 (29,996 ) 120,026	Parent	Parent
	2009 A$’000 50,924 135,569 - - - - 186,493 (26,562 ) 159,931	2008 A$’000 - - 99,013 75,699 - - 174,712 (18,123 ) 156,589		2009 A$’000 50,924 135,569 - - - - 186,493 (26,562 ) 159,931	2008 A$’000
					- - 99,013 75,699 - - 174,712 (18,123 ) 156,589

(b) Dividends not recognised at year end

Since the end of the year, the Directors have determined the payment of a final dividend of 10 cents per share franked at 100% based on a 30% tax rate. The aggregate amount of the proposed dividend expected to be paid on 26 October 2009 out of consolidated retained profits as at 30 June 2009, but not recognised as a liability at year end is A$18.2 million (2008: A$135.4 million; 2007: A$75.7 million).

68

Notes to the Financial Statements For the year ended 30 June 2009

Note 21 – Dividends (continued)

(c) Franked dividends

The franked portions of the final dividends recommended after 30 June 2009 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2010.

Franking credits available for the subsequent financial year based on tax rate of 30% (2008: 30%)	Parent	Parent
	2009 A$’000 27,515	2008 A$’000
		47,786

The above amounts represent the balances of the franking accounts at year end, adjusted for:

• franking credits that will arise from the payment of income tax payable as at 30 June 2009;

• franking debits that will arise from the payment of dividends recognised as a liability as at the reporting date; and

• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

The impact on the franking account of the dividend determined by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of A$7.8 million (2008: A$13.4 million).

Note 22 – Contingencies

Details of contingent liabilities for which no amounts are recognised in the consolidated financial statements are detailed below.

(a) Guarantees

Bank guarantees – subsidiaries Borrowing guarantee – SA Recycling LLC Total guarantees	Consolidated 2009 A$’000 2008 A$’000 64,274 22,869 83,880 129,857 148,154 152,726	Parent	Parent
	2009 A$’000 64,274 83,880 148,154	2009 A$’000 54,752 83,880 138,632	2008 A$’000
			22,869 129,857 152,726

The Parent entity, subsidiaries, joint venture operations, jointly controlled entities and associated companies have given a number of guarantees in respect of the performance of contracts and workers compensation insurance entered into in the ordinary course of business.

(b) Environmental claims

The Group is subject to comprehensive environmental requirements relating to, among others, the acceptance, storage, treatment, handling and disposal of solid waste and hazardous waste, the discharge of materials into air, the management and treatment of wastewater and storm water, and the remediation of soil and groundwater contamination. As a consequence, the Group has incurred and will continue to incur environmental costs and liabilities associated with site and facility operation, closure, remediation, monitoring and licensing. Provisions have been made in respect of estimated environmental liabilities where obligations are known to exist and can be reasonably measured. However, additional liabilities may emerge due to a number of factors including changes in environmental laws and regulations in each of the jurisdictions in which the Group operates or has operated. The Group cannot predict the extent to which it may be affected in the future by any such changes in legislation or regulation.

69

Notes to the Financial Statements For the year ended 30 June 2009

Note 22 – Contingencies (continued)

(c) Legal claims

Various Group companies are parties to legal actions and claims that arise in the ordinary course of their business. While the outcome of such legal proceedings cannot be readily foreseen, the Group believes that they will be resolved without material effect on its financial position. Provision has been made for known obligations where the existence of the liability is probable and can be reasonably estimated.

(d) Tax audits

The Group files income tax returns in many jurisdictions throughout the world. Various tax authorities are currently reviewing or auditing the Group’s income tax returns. Tax returns contain matters that could be subject to differing interpretations of applicable tax laws and regulations. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate that there will be any material impact upon the Group’s financial position.

(e) Subsidiaries

Under the terms of a Deed of Cross Guarantee entered into in accordance with ASIC Class Order 98/1418 (as amended by Class Orders 98/2107, 00/0321, 01/1087, 02/0248 and 02/1017), the Parent entity has undertaken to meet any shortfall which might arise on the winding up of controlled entities which are party to the deed as described in Note 28. The controlled entities are not in liquidation and there is no indication that they will be wound up.

Note 23 – Commitments

(a) Capital commitments

Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

Payable within 1 year Payable later than 1 year but not later than 5 years	Consolidated 2009 A$’000 2008 A$’000 34,197 24,624 465 935 34,662 25,559	Parent 2009 A$’000 2008 A$’000 - - - - - -
	2009 A$’000 34,197 465 34,662	2009 A$’000 - - -

The capital commitments included above also include the Group’s share relating to joint venture operations, jointly controlled entities and associates.

(b) Lease commitments

The Group has entered into various operating leases on property, plant and equipment. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Lease commitments for operating leases are as follows:

Not later than one year Later than one, but not later than three years Later than three, but not later than five years Later than five years Total lease commitments not recognised as liabilities	Consolidated 2009 A$’000 2008 A$’000 69,806 60,010 107,516 90,661 53,163 39,841 127,855 61,695 358,340 252,207	Parent 2009 A$’000 2008 A$’000 1,140 - 3,908 - 3,908 - 50,387 - 59,343 -
	2009 A$’000 69,806 107,516 53,163 127,855 358,340	2009 A$’000 1,140 3,908 3,908 50,387 59,343

The above amounts include the Group’s share of joint ventures, jointly controlled entities and associates.

70

Notes to the Financial Statements For the year ended 30 June 2009

Note 23 – Commitments (continued)

(b) Lease commitments (continued)

Parent lease commitment

On 29 May 2009, the Parent entered into a lease agreement for property in the United States. The property will be sub-leased to a Group subsidiary in the United States. Lease payments will not commence until the 2010 financial year as the lessor is making improvements to the property.

Note 24 – Share ownership plans

The Company has a number of share ownership plans in operation which are designed to link the rewards of eligible employees to the long-term performance of the Company and the returns generated for shareholders. The maximum number of shares that can be outstanding at any time under the share ownership plans is limited to 5% of the Company’s issued capital. Grants under the various share ownership plans can be in the form of options, performance rights (“Rights”) or restricted share units (“RSUs”). Certain share ownership plans also provide for cash-settled rights which are determined by the Board or employee at the date of grant.

An option is a contract that gives the holder the right, but not the obligation to acquire the Company’s shares at a fixed or determinable price for a specified period of time. Rights and RSUs are a contractual right to acquire the Company’s shares for nil consideration. Holders of options, Rights or RSUs are not entitled to dividends or voting rights.

(a) Non-executive Director (“NED”) Share Plan

Participation in the NED Share Plan is voluntary and all NED’s are eligible to participate. Under the NED Share Plan, NED’s elect to sacrifice all or part of their director fees in return for an allocation of fully paid ordinary shares of equivalent value. The NED Share Plan therefore does not involve any additional remuneration for participating NED’s.

Shares are allocated quarterly and are either issued as new shares or purchased on the ASX at the prevailing market price. In the year ended 30 June 2009, 2,640 shares (2008: 1,674 shares) were allocated to participating NED’s.

(b) 2009 Long Term Incentive Plan (“2009-LTIP”)

Under the 2009-LTIP, eligible employees may be invited to receive an award of options, Rights or RSUs. Options have an exercise price based on the prevailing market price of the Company’s ordinary shares (or ADSs) at the time of grant. Awards under the 2009-LTIP may vest either based on continuous service or based on performance conditions. Refer to the Remuneration Report for further information on the terms of the grants made in the year ended 30 June 2009 pursuant to the 2009-LTIP.

71

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(b) 2009 Long Term Incentive Plan (continued)

Details of the awards outstanding under the 2009-LTIP are as follows:

Grant date Expiry date Exercise price Ordinary shares: Options: 24 Nov 08 24 Nov 15 A$13.11 2 Apr 09 2 Apr 16 A$17.79 17 Jun 09 17 Jun 16 A$25.22 Total Weighted average exercise price Rights: 24 Nov 08 30 Jun 13 - 2 Apr 09 30 Jun 13 - 23 Jun 09 1 Jul 12 - Total ADS: Options: 24 Nov 08 24 Nov 15 US$8.39 2 Apr 09 2 Apr 16 US$12.19 17 Jun 09 17 Jun 16 US$20.73 Total Weighted average exercise price Rights: 24 Nov 08 30 Jun 13 - 2 Apr 09 30 Jun 13 - 30 Jun 09 1 Apr 12 - Total	Balance at start of the year - - - - A$ 0.00 - - - - - - - - US$ 0.00 - - - -	Granted during the year 135,435 135,831 287,526 558,792 A$20.48 44,440 49,345 5,000 98,785 181,654 284,908 715,910 1,182,472 US$16.78 61,092 125,385 11,562 198,039	Exercised during the year - - - - A$ 0.00 - - - - - - - - US$ 0.00 - - - -	Forfeited during the year - - - - A$ 0.00 - - - - - - - - US$ 0.00 - - - -	Balance at end of the year 135,435 135,831 287,526 558,792 A$20.48 44,440 49,345 5,000 98,785 181,654 284,908 715,910 1,182,472 US$16.78 61,092 125,385 11,562 198,039	Vested and exercisable at end of the year
						- - - - A$ 0.00 - - - - US$ 0.00

The weighted average remaining contractual life of total options outstanding as at 30 June 2009 was 6.82 years.

The fair value of options granted were independently determined using a Binomial method which allowed for the effects of an early exercise for vested options assuming the share price exceed one and a half times the exercise price. The fair value of Rights granted were independently determined using a Black-Scholes method to produce a Monte-Carlo simulation model which allows for the incorporation for a Total Shareholder Return (“TSR”) performance condition that must be met before the Rights vest.

72

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(b) 2009 Long Term Incentive Plan (continued)

The following weighted average assumptions were used to determine the fair value of options and Rights granted:

2009: Risk-free interest rate Dividend yield Volatility Expected life (years) Share price at grant date Fair Value	Options Ordinary shares ADS 4.7% 3.0% 3.9% 3.9% 46.3% 55.7% 4.3 4.3 A$20.10 US$16.07 A$6.27 US$5.48	Rights	Rights
		Ordinary shares 4.1% 4.0% 44.6% 5.0 A$15.48 A$12.42	ADS
			2.5% 4.0% 54.0% 5.0 US$11.78 US$8.81

(c) 2008 Long Term Incentive Plan (“2008-LTIP”)

Rights were issued to eligible employees in the year ended 30 June 2008. The Rights vest in line with achievement of continuous service and, in respect of 50% of an award of Rights, market based performance criteria and, for the remaining 50%, non-market based performance criteria. The continuous service criterion is met if the participant is an employee of the Group at vesting, generally three years from the date of grant. Market based performance criteria are satisfied if the Group’s TSR over the three financial years from 1 July 2007 is at the 51st percentile or higher against a comparator group of companies. Non-market based performance criteria are satisfied if the growth in diluted earnings per share (“EPS”) of the Group over the three financial years from 1 July 2007 is between 5% and 10% when assessed against the Group’s EPS for the year ended 30 June 2007.

Special one-time Rights were also granted to certain employees who were employees of the Group in the 2003 financial year so that they were not disadvantaged in transitioning to the 2008-LTIP. These Rights vest in three tranches, with the first two tranches vesting one year and two years, respectively, from the grant date, and subject to the Group achieving EPS growth of between 5% and 10% over the five financial years from 1 July 2003 to 30 June 2008 for the first tranche and from 1 July 2004 to 30 June 2009 for the second tranche respectively. The third tranche vests in accordance with the criteria outlined in the paragraph above.

Rights granted to employees within the Sims Recycling Services (“SRS”) division have 50% of their award subject to an SRS Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) performance hurdle in lieu of an EPS hurdle. The EBITDA performance hurdle is determined by reference to SRS’ cumulative compound EBITDA growth for the three financial years from 1 July 2007 (which must be at least 15%, and is then pro-rated between 15% and 25%) when assessed against SRS’ EBITDA in the year ended 30 June 2007. If any of these rights remain unvested at the end of year three for the first and second tranche, then they will be retested over the four year performance period concluding at the end of year four. If any Rights remain unvested at the end of year four, they will be retested over the five year performance period concluding at the end of year five. There are no additional grants being made pursuant to the 2008-LTIP.

73

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(c) 2008 Long Term Incentive Plan (continued)

Details of the Rights outstanding are as follows:

Grant date 2009: 25 Sept 07 25 Sept 07 25 Sept 07 Totals – 2009 Totals – 2008	Expiry date 1 Sept 08 1 Sept 09 1 Sept 12	Fair value per share at grant date A$ $31.62 $29.78 $24.02 - $28.04	Balance at start of the year 159,016 167,822 480,122 806,960 -	Granted during the year - - - - 806,960	Vested during the year (156,969) - - (156,969 ) -	Forfeited during the year (2,047) (4,146) (21,401 ) (27,594 ) -	Balance at end of the year
							- 163,676 458,721 622,397 806,960

The fair value of the Rights with market based performance conditions was independently determined using a Black-Scholes methodology to produce a Monte-Carlo simulation model which allows for the incorporation for a TSR performance condition that must be met before the Rights vest. Rights with non-market based performance conditions do not take into account the performance condition. Key assumptions included expected volatility of 32%, a dividend yield of 6.0%, a risk free rate of 6.38%, an expected life of 1 to 5 years and a share price at valuation date of A$33.10.

(d) Former Executive Long Term Incentive Plan (“Former LTIP”)

Prior to 30 June 2008, share awards were pursuant to the Former LTIP. The Former LTIP had three components: (i) employee share plan; (ii) RSUs; and (iii) Rights. No further grants are being made pursuant to the Former LTIP.

(i) Employee share plan

Offers of shares under the employee share plan were made to eligible Australian based employees in the 2006 and 2007 financial years. The Company provided financial assistance in the form of a share secured non-interest bearing employee loan. The loan is repayable in full within five years after the financial assistance is provided or such longer period and in such a manner as the Company may determine.

The beneficial ownership of the shares vest with employees in line with achievement of continuous service and non-market based performance criteria. The continuous service criterion is met if the “Participant” is an employee of the Group at vesting. Periods of continuous service vary from one to three years, while non-market based performance criteria are satisfied if the growth in EPS of the Group of between 5% and 10% is achieved over periods which vary between three and five years. There is no reward if less than 5% EPS growth is achieved. Holders of these shares are entitled to dividends over the term of the relevant vesting period.

Set out below is a summary of the employee share plan:

Grant date Expiry date Exercise price A$ 2009: 22 Jul 05 22 Jul 10 $14.99 28 Jul 06 28 Jul 11 $18.73 Totals - 2009 Weighted average exercise price	Balance at start of the year 44,286 64,403 108,689 $17.21	Granted during the year - - - $0.00	Exercised during the year (21,081) (6,757 ) (27,838 ) $15.90	Forfeited during the year - - - $0.00	Balance at end of the year 23,205 57,646 80,851 $17.66	Vested and exercisable at end of the year 23,205 23,626 46,831 $16.88
Totals - 2008 Weighted average exercise price	191,348 $17.56	- $0.00	(82,659 ) $18.03	- $0.00	108,689 $17.21	46,818 $17.42

74

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(d) Former Executive Long Term Incentive Plan (continued)

(ii) Restricted share units

RSUs were issued to eligible US based employees. For RSUs issued on 28 July 2006, the vesting is based on both continuous service and non-market based performance criteria. Non-market based performance criteria are satisfied if the growth in EPS of the Group is between 5% and 10% over the period of three financial years commencing on 1 July 2006. There is no reward if less than 5% EPS growth is achieved. All other RSUs granted vest based on continuous service which is generally 3 years. Holders of RSUs are not entitled to dividends over the term of the relevant vesting period.

Set out below is a summary of RSUs granted under the Former LTIP:

Grant date Expiry date Fair value per share at grant date A$ 2009: 1 Nov 05 1 Jul 09 $14.72 28 Jul 06 1 Sep 09 $ 7.66 3 Mar 08 31 Aug 11 $29.81 Totals - 2009 Totals - 2008	Balance at start of the year 107,506 11,028 13,735 132,269 232,011	Granted during the year - - - - 53,552	Vested during the year (58,730) - - (58,730 ) (123,431 )	Forfeited during the year - (2,380) - (2,380) (29,863 )	Balance at end of the year
					48,776 8,648 13,735 71,159 132,269

The fair value of the RSUs granted on 3 March 2008 was based on the Company’s share price on the date of grant and was discounted by the Company’s dividend yield of 4.2%.

(iii) Performance rights

For the Rights granted on 1 July 2007 and 17 September 2007, the vesting is based on continuous service until 30 April 2010. For all other Rights, vesting is based on continuous service and achieving non-market based performance criteria. Continuous service varies from one to three years, while non-market based performance criteria are satisfied if the growth in EPS of the Group is between 5% and 10% over periods which vary between three and five years.

Set out below is a summary of Rights issued pursuant to the Former LTIP:

Grant date 2009: 31 Oct 05 18 Nov 05 10 Jul 06 28 Jul 06 1 Jul 07 17 Sep 07 Totals - 2009 Totals - 2008	Expiry date 30 Oct 10 30 Oct 08 30 Jun 09 1 Sep 09 30 Apr 10 30 Apr 10	Fair value per share at grant date A$ $16.68 $16.68 $19.15 $7.66 $22.26 $27.27	Balance at start of the year 71,947 14,989 7,833 3,579 44,803 42,088 185,239 152,711	Granted during the year - - - - - - - 86,891	Vested during the year (23,983) (14,989) (2,611) - - - (41,583 ) (52,711 )	Forfeited during the year - - (5,222) - - - (5,222 ) (1,652 )	Balance at end of the year
							47,964 - - 3,579 44,803 42,088
							138,434
							185,239

The fair value of the Rights granted in the year ended 30 June 2008, which vest only based on continuous service, was based on the Company’s share price on the date of grant and was discounted by the Company’s dividend yield of 6.0%.

75

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(e) Transition Incentive Share Plan related to the Metal Management Inc Merger

In accordance with the terms and conditions of the merger agreement with Metal Management Inc, the Sims Group Limited Transition Incentive Plan (“SGLTIP”) was established. The SGLTIP assumed the rights and obligations of Metal Management Inc under its former plan (“MMI Plan”). The Group assumed both options and restricted shares from the MMI Plan. No additional grants can be made under the SGLTIP.

(i) Share options

The options assumed were held by the former directors of Metal Management Inc who became Directors of the Company on the merger date. Each outstanding share option under the MMI Plan was converted into 2.05 options of the Company. Each option represents the right to acquire one ADS. In addition, the exercise price of each outstanding option under the MMI Plan was converted at the same exchange ratio. All the options assumed were fully vested and therefore the fair value was recorded as a component of the purchase price for Metal Management Inc.

Set out below is a summary of options under the SGLTIP:

Grant date Expiry date Exercise price US$ 2009: 14 Mar 08 16 Jan 14 $8.57 14 Mar 08 16 Apr 14 $8.76 14 Mar 08 16 Jan 14 $12.81 14 Mar 08 7 Apr 11 $15.29 14 Mar 08 16 Jan 14 $17.08 14 Mar 08 28 Apr 12 $22.55 Totals - 2009 Weighted average exercise price	Balance at start of the year 61,500 20,500 205,000 123,000 205,000 123,000 738,000 $15.54	Assumed during the year - - - - - - - $0.00	Exercised during the year - - - - - - - $0.00	Forfeited during the year - - - - - - - $0.00	Balance at end of the year 61,500 20,500 205,000 123,000 205,000 123,000 738,000 $15.54	Vested and exercisable at end of the year 61,500 20,500 205,000 123,000 205,000 123,000 738,000 $15.54
Totals - 2008 Weighted average exercise price	- $0.00	953,250 $16.31	(215,250 ) $34.58	- $0.00	738,000 $15.54	738,000 $15.54

No options were exercised during the year ended 30 June 2009. For options exercised during the year ended 30 June 2008, the weighted average share price was US$34.58. The weighted average remaining contractual life of options outstanding as at 30 June 2009 was 3.80 years (2008: 4.80 years).

The weighted average fair value of options assumed was A$11.04 per share and was calculated taking into account the value of an ordinary share on the merger date, the exercise price of each option and the remaining term of each option. Other key assumptions included the risk free interest rate, which ranged from 5.99% to 6.15%, a dividend yield of 4.2%, and a volatility of 34%.

76

Notes to the Financial Statements For the year ended 30 June 2009

Note 24 – Share ownership plans (continued)

(e) Transition Incentive Share Plan related to the Metal Management Inc Merger (continued)

(ii) Restricted shares

The restricted shares assumed were held by former employees of Metal Management Inc who are now employed by the Group. The restricted shares vest evenly over three years based on continuous service. The holder of the restricted share is entitled to dividends and voting rights during the period of restriction. Each unvested restricted share at the merger date was converted into 2.05 restricted ADS of the Company. The fair value of restricted shares assumed was based on the value of an ordinary share of the Company on the merger date.

Set out below is a summary of restricted shares under the SGLTIP:

Grant date Expiry date Fair value per share at grant date US$ 2009: 14 Mar 08 14 Mar 09 $25.27 14 Mar 08 14 Mar 10 $25.27 14 Mar 08 14 Mar 11 $25.27 Totals - 2009 Totals - 2008	Balance at start of the year 83,150 83,159 83,176 249,485 -	Assumed during the year - - - - 256,250	Vested during the year (78,025) - - (78,025 ) -	Forfeited during the year (5,125) (12,027) (12,027) (29,179 ) (6,765 )	Balance at end of the year
					- 71,132 71,149
					142,281
					249,485

(f) Effect of share-based payments on profit and loss

The expense recognised in the income statement in relation to share-based payments is disclosed in Note 6. The carrying amount of liabilities for cash-settled share-based arrangements as at 30 June 2009 was A$144,000 (2008: $282,000).

Note 25 – Key management personnel disclosures

Key management personnel are those persons defined as having authority and responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly, including any director (executive or non-executive). Please refer to the Directors Report for information regarding each key management person.

(a) Key management personnel compensation

Short-term benefits Long-term benefits Post-employment benefits Termination benefits Share-based payments	Consolidated 2009 A$ 2008 A$ 19,434,908 15,180,745 166,344 262,147 616,273 657,350 3,130,316 - 5,167,311 7,681,214 28,515,152 23,781,456	Parent	Parent
	2009 A$ 19,434,908 166,344 616,273 3,130,316 5,167,311 28,515,152	2009 A$ 2,733,303 - - - - 2,733,303	2008 A$
			2,777,023 - - - - 2,777,023

The Company has taken advantage of the relief provided by Australian Securities and Investments Commission Class Order 06/50 and has transferred the detailed remuneration disclosures to the Remuneration Report, which is presented in the Directors’ Report.

77

Notes to the Financial Statements For the year ended 30 June 2009

Note 25 – Key management personnel disclosures (continued)

(b) Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options

Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in the remuneration report.

(ii) Share holdings

The number of shares in the Company held during the financial year by each Director and other key management personnel, including their personally related parties, are set out below.

2009 Name Non-Executive Directors: N Bobins (ADS) M Feeney P Mazoudier G Morris (ADS) C Renwick P Varello (ADS) Executive Directors: D Dienst (ADS) R Cunningham1 J Sutcliffe2 Senior Executives: T Bird3 G Davy R Kelman (ADS)4 R Larry (ADS) D McGree A Ratner (ADS)4 Total	Balance at 1 July 2008 54,600 25,734 14,639 20,000 1,444 6,225 1,156,872 - 52,255 - 3,003 - 90,972 - 74,316 1,500,060	Received on exercise of options or rights - - - - - - - 32,433 82,577 6,732 12,903 14,931 - 11,924 - 161,500	Purchases /(Sold) - 940 562 - 1,700 24,600 - (14,989) (102,255) (6,732) (12,903) (14,931) - - (3,115 ) (127,123 **) **	Other changes during the year - - - - - - - (17,444) - - - 30,048 - - 30,048 42,652	Balance at 30 June 2009
					54,600 26,674 15,201 20,000 3,144 30,825 1,156,872 - 32,577 - 3,003 30,048 90,972 11,924 101,249
					1,577,089

_______

1 Mr Cunningham and Mr DiLacqua retired from the Board on 21 November 2008. Other changes for Mr Cunningham represent his share holdings on the date of his retirement.

2 Mr Sutcliffe’s service agreement was terminated by way of redundancy on 26 August 2009.

3 The Company accepted Mr Bird’s resignation on 17 August 2009.

4 Other changes for Messrs Kelman and Ratner represent shares they each received as part of an integration bonus.

78

Notes to the Financial Statements For the year ended 30 June 2009

Note 25 – Key management personnel disclosures (continued)

(b) Equity instrument disclosures relating to key management personnel (continued)

(ii) Share holdings (continued)

2008 Name Non-Executive Directors: N Bobins (ADS) G Brunsdon2 J DiLacqua1(ADS) B Every2 M Feeney P Mazoudier G Morris (ADS) C Renwick P Varello (ADS) Executive Directors: D Dienst3(ADS) R Cunningham1 J Sutcliffe4 Senior Executives: T Bird5 G Davy R Kelman (ADS) R Larry3(ADS) D McGree A Ratner (ADS)3 Total	Balance at 1 July 2007 - 3,497 - 4,000 25,504 14,082 - - 4,600 - - 15,517 - - - - - - 67,200	Received on exercise of options or rights 123,000 - 61,500 - - - 30,750 - - - 25,408 60,721 2,788 3,003 29,863 - 8,185 - 345,218	Purchases /(Sold) (68,400) - (61,500) - 230 557 (10,750) 1,444 1,625 - (25,408) (23,983) (2,788) - (29,863) - (8,185) - (227,021 )	Other changes during the year - (3,497) - (4,000) - - - - - 1,156,872 - - - - - 90,972 - 74,316 1,314,663	Balance at 30 June 2008
					54,600 - - - 25,734 14,639 20,000 1,444 6,225 1,156,872 - 52,255 - 3,003 - 90,972 - 74,316
					1,500,060

---

1 Messrs Cunningham and DiLacqua retired from the Board on 21 November 2008.

2 Messrs Brunsdon and Every retired from the Board on 21 November 2007.

3 Other changes for Messrs Dienst, Larry and Ratner represent their respective shareholdings after the merger with Metal Management Inc. Amount for Mr Ratner also includes 25,625 restricted share awards which will vest over 3 years subject to employment conditions.

4 Mr Sutcliffe’s service agreement was terminated by way of redundancy on 26 August 2009.

5 The Company accepted Mr Bird’s resignation on 17 August 2009.

79

Notes to the Financial Statements For the year ended 30 June 2009

Note 25 – Key management personnel disclosures (continued)

(b) Equity instrument disclosures relating to key management personnel (continued)

(iii) Option holdings

The numbers of options over ordinary shares or ADS in the Company held during the financial year by each Director and other key management personnel, including their personally related parties, are set out below.

2009 Name Non-Executive Directors: R Lewon (ADS) G Morris (ADS) Executive Directors: D Dienst (ADS) J Sutcliffe3 Senior Executives: T Bird4 G Davy R Kelman (ADS) R Larry (ADS) D McGree A Ratner (ADS) Total 2008 Name Non-Executive Directors: N Bobins (ADS) J DiLacqua2(ADS) R Lewon (ADS) G Morris (ADS) Executive Directors: D Dienst (ADS) R Cunningham2 J Sutcliffe3 D McGree Total	Balance at 1 July 2008 123,000 205,000 410,000 - - - - - - - 738,000 Balance at 1 July 2007 - - - - - 10,417 36,738 8,185 55,340	Granted as compen- sation - - 181,654 135,435 39,347 48,950 87,664 109,580 47,534 87,664 737,828 Granted as compen- sation - - - - - - - - -	Exercised - - - - - - - - - - - Exercised (123,000) (61,500) - (30,750) - (10,417) (36,738) (8,185 ) (270,590 )	Other changes - - - - - - - - - - - Other changes1 123,000 61,500 123,000 235,750 410,000 - - - 953,250	Balance at 30 June 2009 123,000 205,000 591,654 135,435 39,347 48,950 87,664 109,580 47,534 87,664 1,475,828 Balance at 30 June 2008 - - 123,000 205,000 410,000 - - - 738,000	Vested 123,000 205,000 410,000 - - - - - - - 738,000 Vested - - 123,000 205,000 410,000 - - - 738,000	Unvested
							- - 181,654 135,435 39,347 48,950 87,664 109,580 47,534 87,664 737,828
							Unvested
							- - - - - - -
							-

---

1 Options were assumed as a result of the Metal Management Inc merger.

2 Mr Cunningham and Mr DiLacqua retired from the Board on 21 November 2008.

3 Mr Sutcliffe’s service agreement was terminated by way of redundancy on 26 August 2009.

4 The Company accepted Mr Bird’s resignation on 17 August 2009.

80

Notes to the Financial Statements For the year ended 30 June 2009

Note 25 – Key management personnel disclosures (continued)

(b) Equity instrument disclosures relating to key management personnel (continued)

(iv) Rights and award holdings

The numbers of rights to ordinary shares or ADS in the Company held during the financial year by each Director and other key management personnel, including their personally related parties, are set out below.

Name Executive Directors: D Dienst (ADS) R Cunningham1 J Sutcliffe2 Senior Executives: T Bird3 G Davy R Kelman (ADS) R Larry (ADS) D McGree A Ratner (ADS) Total	Balance at 1 July 2007 - 29,978 95,930 2,788 3,003 59,725 - - - 191,424	Granted as compen- sation - 66,847 224,534 54,785 94,246 24,644 - 66,737 25,625 557,418	Vested - (14,989) (23,983) (2,788) (3,003) (29,863) - - - (74,626 )	Balance at 30 June 2008 - 81,836 296,481 54,785 94,246 54,506 - 66,737 25,625 674,216	Granted as compen- sation 61,092 - 44,440 14,720 18,312 38,580 48,225 16,313 38,580 280,262	Vested - (32,433) (82,577) (6,732) (12,903) (14,931) - (11,924) (8,541) (170,041 )	Balance at 30 June 2009
							61,092 49,403 258,344 62,773 99,655 78,155 48,225 71,126 55,664 784,437

---

1Mr. Cunningham retired from the Board on 21 November 2008. Balance as at 30 June 2009 represents awards that will vest in future periods based on satisfaction of performance criteria as a result of “good-leaver” provisions in his share-based awards. 2 Mr Sutcliffe’s service agreement was terminated by way of redundancy on 26 August 2009. 3The Company accepted Mr Bird’s resignation on 17 August 2009.

(c) Other transactions with key management personnel

Transactions entered into with any Directors or other key management personnel of the Company, including their personally related parties, are at normal commercial terms. During the year ended 30 June 2009, a company related to Paul Varello was paid US$9,145 for safety consulting services (2008: US$6,000).

Note 26 – Remuneration of auditors

It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally for tax advice and due diligence on acquisitions, or where PricewaterhouseCoopers are awarded assignments on a competitive basis. All audit and non-audit services provided by PricewaterhouseCoopers are subject to pre-approval by the Group’s Risk, Audit and Compliance Committee in accordance with the Group Independence Policy.

81

Notes to the Financial Statements For the year ended 30 June 2009

Note 26 – Remuneration of auditors (continued)

During the year, the following fees were paid and payable for services provided by the auditor of the Parent, its related practices and non-related audit firms:

Consolidated 2009 A$’000 2008 A$’000 PricewaterhouseCoopers – Australian Firm: Audit of financial reports 4,066 2,166 Sarbanes-Oxley readiness advice 1,705 - Taxation services 213 427 Acquisition due diligence and other 110 1,132 6,094 3,725 Related practices of PricewaterhouseCoopers – Australian Firm: Audit of financial reports 4,319 2,194 Sarbanes-Oxley readiness advice 506 - Taxation services 710 138 Acquisition due diligence and other 31 79 5,566 2,411 Total remuneration for PricewaterhouseCoopers 11,660 6,136

Parent 2009 A$’000 2008 A$’000 - - - - - - - - - - - - - - - - - - - - - -

2009 A$’000 - - - - - - - - - - -

Note 27 – Business combinations and disposals

(a) Summary of acquisitions

During the year ended 30 June 2009, the Group acquired the following businesses:

• On 29 July 2008, the purchase of the assets and business of C Herring & Son Ltd. The business is a small established ferrous and non-ferrous metal recycler and is based in Hartlepool, United Kingdom.

• On 15 September 2008, the purchase of the assets and business of Weinert Recycling Co Inc. The business is a regional ferrous and non-ferrous metal recycler and operates in two locations in Middletown and Ferndale, New York.

• On 3 October 2008, the purchase of the issued capital of Global Investment Recovery Inc. The business is a multi-state electronic recycling and asset recovery service provider in the United States, with operating facilities in Florida, South Carolina, Nevada, Louisiana and Arizona.

• On 17 February 2009, the purchase of the assets and business of All Metal Recovery Limited. The business is a small ferrous and non-ferrous metal recycler and is based in Birmingham, United Kingdom.

• On 27 May 2009, the purchase of the assets and business of Global Environment Recycling Co. Limited. The business is an electronic recycler located in Liverpool, United Kingdom.

Aggregate revenue and aggregate net profit contribution by the above acquisitions to the Group post acquisition was not significant.

82

Notes to the Financial Statements For the year ended 30 June 2009

Note 27 – Business combinations and disposals (continued)

(b) Purchase consideration and assets and liabilities acquired

Details of the aggregate purchase consideration and the fair value of assets and liabilities acquired during the year ended 30 June 2009 are presented below.

Purchase consideration: Cash Direct costs relating to acquisitions Total purchase consideration Cash Trade and other receivables Prepayments Inventories Property, plant and equipment (Note 12) Identified intangibles (Note 14) Trade and other creditors Deferred tax liability Current tax liabilities Net assets Negative goodwill recognised (Note 5) Goodwill on acquisition (Note 13) Total purchase consideration Cash acquired Net cash outflow	A$’000 75,878 1,795 77,673 Acquiree’s carrying amount A$’000 1,659 18,631 1,630 2,918 20,998 - (24,490) (714) (193 ) 20,439	Fair value A$’000
		1,659 18,631 1,630 2,918 27,108 7,752 (24,490) (942) (193 ) 34,073 (399) 43,999 77,673 (1,659 ) 76,014

The initial accounting for the acquisitions has only been provisionally determined for those acquisitions completed in the last twelve months. The goodwill is attributable to several factors including, site locations, synergies existing in the operations acquired and the assembled workforce which together contribute to the profitability of the acquired businesses. Negative goodwill relating to an acquisition in the United Kingdom was recognised in the income statement under the heading other income.

(c) Prior year acquisition

Acquisition of Metal Management Inc

On 14 March 2008, the Company purchased the issued capital of Metal Management Inc for A$1.5 billion. The consideration comprised 53,473,817 ordinary shares (in the form of American Depository Shares) with a fair value of A$1.5 billion, the assumption of outstanding share options with a fair value of A$10.5 million and transaction costs of A$19.5 million. Metal Management Inc was one of the largest full service scrap metal recyclers in the United States with 50 locations in 17 states. The acquisition was consummated to expand the Group’s presence in the North American scrap recycling market. The acquisition was complementary as Sims’ operations in North America were primarily export-focused while those of Metal Management Inc were primarily domestic-focused and included a large non-ferrous recycling business. Additionally, both companies had significantly overlapping businesses in the United States.

If the acquisition of Metal Management Inc occurred on 1 July 2007, revenues and net profit of the Company would have been A$10.2 billion and A$493.0 million, respectively, for the year ended 30 June 2008. These amounts have been calculated using the Company’s accounting policies and by adjusting the results of Metal Management Inc to reflect additional depreciation and amortisation expense that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 July 2007, together with the consequential tax effects.

83

Notes to the Financial Statements For the year ended 30 June 2009

Note 27 – Business combinations and disposals (continued)

(d) Disposals

On 30 June 2009, the Company sold the issued capital of Tyrecycle Pty Limited and a related parcel of land for A$8.5 million in cash. The sale was part of the Company’s announced strategy of disposing of its non-core businesses. There was a loss on the disposal of A$2.6 million as set out in Note 6. The sale agreement includes a net asset adjustment which amounted to A$0.7 million and is included in “other payables” on the balance sheet.

Note 28 – Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 1.

Name of entity Sims Metal Management Limited Sims Group Australia Holdings Limited (i) PNG Recycling Limited Sims Aluminium Pty Limited (i) Sims E-Recycling Pty Limited Sims E-Recycling (NZ) Limited Sims Group Canada Holdings Limited Sims Group Mauritius Limited Trishyiraya Recycling India Private Ltd Sims Tyrecycle Properties Pty Ltd Sims Tyrecycle Pty Ltd (iii) Simsmetal Holdings Pty Limited Sims Metal Management Asia Limited (formerly Sims Asia Holdings Limited) Sims Energy Pty Limited Sims Industrial Pty Limited Simsmetal Industries Limited Simsmetal Services Pty Limited (i) Sims Manufacturing Pty Limited Simsmetal Executive Staff Superannuation Pty Limited Sims Superannuation Management Pty Limited Universal Inspection and Testing Company Pty Limited Sims Recycling Solutions Pte Limited Simsmetal Staff Equity Pty Limited Sims Group UK Holdings Limited Sims Group UK Intermediate Holdings Limited Sims Group UK Limited C Herring & Son Limited (ii) Life Cycle Services Limited (ii) All Metal Recovery Limited (ii) All Metal Recovery Cradley Heath Limited (ii) ER Coley (Steel) Limited ER Coley (Cast) Limited Evans & Mondon Limited Mirec BV Sims Recycling Solutions NV Recommit Limited Sims Cymru Limited Sims Group German Holdings GmbH	Country of Incorporation Australia PNG Australia Australia New Zealand Canada Mauritius India Australia Australia Australia Hong Kong Australia Australia New Zealand Australia Australia Australia Australia Australia Singapore Australia UK UK UK UK UK UK UK UK UK UK The Netherlands Belgium UK UK Germany	Equity holding	Equity holding
		2009 % 100% 100% 100% 90% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%	2008 %
			100% 100% 100% 90% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - - - 100% 100% 100% 100% 100% 100% 100% 100%

84

Notes to the Financial Statements For the year ended 30 June 2009

Note 28 – Subsidiaries (continued)

Note 28 – Subsidiaries (continued)
Name of entity Sims M+R GmbH Sims Recycling Solutions AB (formerly Mirec AB) Sims Group Recycling Solutions Canada Ltd Accu-Shred Limited Sims Recycling Solutions SARL (ii) Sims Recycling Solutions Inc (formerly United Refining and Smelting) Sims Recycling Solutions Holdings Inc (formerly Sims Recycling Solutions Inc) Global Investment Recovery Inc (ii) Sims Recycling Solutions UK Holdings Limited Sims Recycling Solutions UK Group Limited Sims Recycling Solutions UK Limited United Castings Limited Sims Group UK Pension Trustees Limited Sims Group Holdings 1 Pty Ltd Sims Group Holdings 2 Pty Ltd Sims Metal Management USA GP Sims Group USA Holdings Corporation SHN Co LLC HNW Recycling LLC HNE Recycling LLC Dover Barge Company North Carolina Resource Conservation LLC Simsmetal East LLC Sims Municipal Recycling of New York LLC Schiabo Larovo Corporation Simsmetal West LLC Sims Group Global Trade Corporation Sims Group USA Corporation Metal Management Inc MM Metal Dynamics Holdings Inc Metal Dynamics LLC Metal Dynamics Detroit LLC Metal Dynamics Indianapolis LLC Metal Management Midwest Inc CIM Trucking Inc Metal Management Indiana Inc Metal Management Memphis LLC Metal Management Ohio Inc SMM – North America Trade Corporation (formerly Metal Management S&A Holdings Inc) Metal Management Pittsburgh Inc Metal Management Aerospace Inc Metal Management West Coast Holdings Inc Metal Management West Inc Metal Management Arizona LLC Proler Southwest GP Inc Metal Management Proler Southwest Inc Proler Southwest LP Metal Management Alabama Inc Metal Management Mississippi Inc	Country of Incorporation Germany Sweden Canada Canada France USA USA USA UK Scotland Scotland UK UK Australia Australia USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA	Equity holding
		2009 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%	2008 %
			100% 100% 100% 100% - 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

85

Notes to the Financial Statements For the year ended 30 June 2009

Note 28 – Subsidiaries (continued)

Name of entity Naporano Iron & Metal Inc Metal Management Northeast Inc Metal Management Connecticut Inc New York Recycling Ventures Inc Metal Management New Haven Inc Reserve Iron & Metal Limited Partnership	Country of Incorporation USA USA USA USA USA USA	Equity holding	Equity holding
		2009 % 100% 100% 100% 100% 100% 100%	2008 %
			100% 100% 100% 100% 100% 100%

_______ (i) These subsidiaries and the Parent are parties to a Deed of Cross Guarantee under which each entity guarantees the debts of the others. The above entities represent a Closed Group and an Extended Closed Group for the purposes of the relevant Australian Securities & Investments Commission Class Order.

(ii) These subsidiaries were acquired or incorporated during the year.

(iii) These subsidiaries were sold, de-registered or liquidated during the year.

The voting power held in each subsidiary is proportionate to the equity holdings.

Deed of Cross Guarantee

Sims Metal Management Limited, Sims Group Australia Holdings Limited, Sims Aluminium Pty Limited and Simsmetal Services Pty Limited are parties to a deed of cross guarantee under which each Group guarantees the debts of the others. Sims Tyrecycle Pty Limited was a party to the deed until its sale on 30 June 2009. By entering into the deed, the wholly-owned entities have been relieved from the requirements to prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities & Investments Commission.

The above companies represent a “Closed Group” for the purposes of the Class Order. As there are no other parties to the Deed of Cross Guarantee that are controlled by Sims Metal Management Limited, they also represent the “Extended Closed Group”.

Set out below is a condensed consolidated income statement, a summary of movements in consolidated retained profits and a consolidated balance sheet for the Closed Group.

(i) Consolidated income statement Profit before income tax Income tax expense Profit after tax (ii) Summary of movements in consolidated retained profits Balance at 1 July Effect of accounting policy change (Note 1(b)(vi)) Profit for the year Actuarial (loss)/gain on defined benefit plan, net of tax Dividends provided for or paid Balance at 30 June	2009 A$’000 244,295 (1,423 ) 242,872 113,634 - 242,872 2,859 (186,493 ) 172,872	2008 A$’000 253,376 (51,374 ) 202,002 84,709 6,465 202,002 (4,830) (174,712 ) 113,634	2007 A$’000
			202,236 (40,778 ) 161,458 71,607 - 161,458 1,666 (150,022 ) 84,709

86

Notes to the Financial Statements For the year ended 30 June 2009

Note 28 – Subsidiaries (continued)

Deed of Cross Guarantee (continued)

(iii) Consolidated balance sheet ASSETS Current assets Cash and cash equivalents Trade and other receivables Current tax receivable Inventory Derivative financial instruments Other financial assets Total current assets Non-current assets Receivables Investments accounted for using the equity method Other financial assets Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Deferred tax liabilities Provisions Retirement benefit obligations Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity	2009 A$’000 19,317 274,935 16,624 82,274 - 3,092 396,242 2,346 18,522 2,303,038 101,471 15,411 15,832 2,456,620 2,852,862 266,494 775 - 12,190 279,459 - 4,439 8,790 6,070 19,299 298,758 2,554,104 2,352,928 28,304 172,872 2,554,104	2008 A$’000 1,546 332,179 - 112,012 47 3,803
		449,587 150 13,636 2,302,999 102,781 16,677 18,546
		2,454,789
		2,904,376
		304,376 1,897 33,942 16,098 356,313 60,138 6,511 9,045 3,317
		79,011
		435,324
		2,469,052
		2,325,924 29,494 113,634 2,469,052

87

Notes to the Financial Statements For the year ended 30 June 2009

Note 29 – Investments in associates and jointly controlled entities

(a) Carrying amounts of associates and jointly controlled entities

Name of associates or jointly controlled entities Principal activity Country of incorpor- ation SA Recycling LLC Metal Recycling USA Metal Management Nashville LLC Metal Recycling USA Rondout Iron & Metal LLC Metal Recycling USA Port Albany Ventures LLC Stevedoring and Marine Services USA Richmond Steel Recycling Limited Metal Recycling Canada LMS Generation Pty Ltd Landfill gas management Australia Australia Refined Alloys Pty Limited Metal Recycling Australia Extruded Metals Limited Metal Recycling New Zealand (b) Movements in carrying amounts: Balance at 1 July Additions from acquisition of businesses during the year Additions from formation of SA Recycling Share of profits before tax Associates share of income tax expense Accretion of deferred gain to equity accounted profits Deferral of gain on formation of SA Recycling LLC Dividends received Return of capital from SA Recycling LLC Return of capital from other jointly controlled entities Other Foreign exchange differences Balance at 30 June (c) Share of associates and jointly controlled entities profits: Profit before income tax Associates share of income tax expense Profit after income tax recognised in equity accounted investment Jointly controlled entities income tax expense* Associates and jointly controlled entities profit after tax	Ownership	Ownership	interest Consolidated carrying amount 2008 2009 A$’000 2008 A$’000 50% 329,895 271,330 50% 22,301 20,368 50% 643 1,082 50% 6,647 5,791 50% 21,648 19,485 50% 18,509 13,611 50% 13 13 33% 588 546 400,244 332,226 Consolidated	Consolidated carrying amount	Consolidated carrying amount	Consolidated carrying amount
	2009 50% 50% 50% 50% 50% 50% 50% 33%					2008 A$’000
						271,330 20,368 1,082 5,791 19,485 13,611 13 546 332,226
			2009 A$’000 332,226 - - 57,638 (2,580) 3,170 - (41,458) (3,343) (241) 1,726 53,106 400,244 60,808 (2,580) 58,228 (19,184 ) 39,044		2008 A$’000
					25,945 27,440 342,336 62,334 (4,161) 2,239 (38,840) (5,153) (46,083) (2,413) - (31,418 ) 332,226 64,573 (4,161 ) 60,412 (19,331 ) 41,081

---

• The jointly controlled entities to which this relates are “pass through” entities for taxation purposes. As such, the Group incurs the income tax expense and associated tax liability on its share of the profits and includes this amount as part of its income tax expense (see Note 7).

88

Notes to the Financial Statements For the year ended 30 June 2009

Note 29 – Investments in associates and jointly controlled entities (continued)

(d) SA Recycling LLC

On 1 September 2007, the Group completed the merger of its Southern Californian metal recycling assets with those of Adams Steel LLC. The newly created jointly controlled entity, SA Recycling LLC, operates within a territory encompassing Southern California, Arizona, Southern Nevada and Northern Mexico and combines Sims’ deep water facility at the Port of Los Angeles with Adams Steel’s two inland shredding operations and extensive network of inland feeder yards.

In accordance with AASB 128, “Investments in Associates” and AASB 131, “Interests in Joint Ventures” the SA Recycling LLC is a jointly controlled entity accounted for under the equity method. The fair values of assets and liabilities contributed to SA Recycling LLC at 1 September 2007 were as follows:

Property, plant and equipment Goodwill and intangible assets Non-current provisions	Book value A$’000 71,436 196,425 (3,206 ) 264,655	Fair value A$’000 79,872 265,670 (3,206 ) 342,336	Non-cash gain A$’000
			(8,436) (69,245) - (77,681 )

In accordance with Urgent Issues Group (“UIG”) 113, “Jointly Controlled Entities – Non-Monetary Contributions by Venturers”, the portion of the non-cash gain attributable to the equity interest of the other venturer, in this instance 50%, was recognised immediately on contribution of assets to the SA Recycling LLC jointly controlled entity. This has been recognised as other income, see Note 5. The remaining 50% of the non-cash gain for goodwill and intangibles has been allocated to reduce the cost of the equity accounted investment and will be recognised progressively over the remaining useful life of the assets to which it relates. The remaining 50% of the non-cash gain for property, plant and equipment has been allocated to reduce the cost of the equity accounted investment and will be recognised if the land to which the gain relates is sold.

(e) Summarised financial information of associates and jointly controlled entities

Group’s share of assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Group’s share of revenue, expenses and results Revenues Expenses Profit before income tax	Consolidated 2009 A$’000 2008 A$’000 92,132 190,129 313,421 370,966 405,553 561,095 34,152 203,493 102,213 12,628 136,365 216,121 269,188 344,974 Consolidated	Consolidated 2009 A$’000 2008 A$’000 92,132 190,129 313,421 370,966 405,553 561,095 34,152 203,493 102,213 12,628 136,365 216,121 269,188 344,974 Consolidated
	2009 A$’000 92,132 313,421 405,553 34,152 102,213 136,365 269,188
	2009 A$’000 814,216 (756,578 ) 57,638	2008 A$’000 699,865 (637,531 ) 62,334	2007 A$’000
			101,224 (94,194 ) 7,030

(f) Contingent liabilities and capital commitments

The Group’s share of the contingent liabilities of associates and jointly controlled entities is disclosed in Note 22. The Group’s share of the capital commitments and other expenditure commitments of associates and jointly controlled entities is disclosed in Note 23.

89

Notes to the Financial Statements For the year ended 30 June 2009

Note 29 – Investments in associates and jointly controlled entities (continued)

(g) Jointly controlled operations

The Group has a 50% interest in Sims Pacific Metals Joint Venture which is accounted for under the proportionate consolidation method. Sims Pacific Metals Joint Venture is an unincorporated joint venture based in New Zealand and its principal activity is metal recycling.

The Group’s interest in the jointly controlled operation is included in the balance sheet under the classifications shown below:

Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets	Consolidated	Consolidated
	2009 A$’000 10,186 7,578 17,764 10,121 3,248 13,369 4,395	2008 A$’000
		25,146 11,884 37,030 21,681 241 21,922 15,108

The Group’s share of the jointly controlled operation’s contingent liabilities and capital expenditure commitments is included in Notes 22 and 23.

Note 30 – Related party transactions

(a) Parent

The Parent of the consolidated group is Sims Metal Management Limited.

(b) Subsidiaries

Interests held in subsidiaries are set out in Note 28.

(c) Key management personnel

Disclosures relating to key management personnel are set out in Note 25.

(d) Outstanding balances arising from transactions with related entities

The following balances are outstanding at the reporting date in relation to transactions with related parties:

Tax funding agreement receivable (payable) Subsidiaries	Consolidated 2009 A$’000 2008 A$’000 - -	Parent	Parent
	2009 A$’000 -	2009 A$’000 (14,123)	2008 A$’000
			41,147

No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

90

Notes to the Financial Statements For the year ended 30 June 2009

Note 30 – Related party transactions (continued)

(e) Transactions with related parties

The following transactions occurred with related parties:

Tax consolidation legislation Current tax receivable (payable) assumed from wholly-owned tax consolidation entities Dividend revenue Received from subsidiaries Management fee Received from subsidiaries Operating expenses Paid by subsidiaries Superannuation contributions Contributions to superannuation funds on behalf of employees	Consolidated 2009 A$’000 2008 A$’000 - - - - - - - - 7,653 8,386	Parent	Parent
		2009 A$’000 14,123 231,001 1,556 2,733 -	2008 A$’000
			(41,147) 170,205 1,473 2,777 -

(f) Transactions with associates and jointly controlled entities

Sales Purchases Management fees and commissions Other costs	Consolidated 2009 A$’000 2008 A$’000 70,654 8,341 1,139,622 689,634 11,477 10,011 353 276	Parent	Parent
	2009 A$’000 70,654 1,139,622 11,477 353	2009 A$’000 - - - -	2008 A$’000
			- - - -

(g) Outstanding balances arising from transactions with associates and jointly controlled entities

Current receivables Current payables	Consolidated 2009 A$’000 2008 A$’000 16,313 4,603 18,790 169,074	Parent	Parent
	2009 A$’000 16,313 18,790	2009 A$’000 - -	2008 A$’000
			- -

91

Notes to the Financial Statements For the year ended 30 June 2009

Note 30 – Related party transactions (continued)

(h) Loans from related parties

Loans from related parties balance at 1 July Net reduction in loan Loans from related parties balance at 30 June*	Consolidated 2009 A$’000 2008 A$’000 - - - - - -	Parent 2009 A$’000 2008 A$’000 343,411 362,638 (58,835 ) (19,227) 284,576 343,411	Parent 2009 A$’000 2008 A$’000 343,411 362,638 (58,835 ) (19,227) 284,576 343,411
	2009 A$’000 - - -	2009 A$’000 343,411 (58,835 ) 284,576
			343,411

______ * Other than for cash transactions to fund and pay dividends, all other cash receipts and payments of the Parent are conducted through a subsidiary. The net reduction reflects the aggregate impact of these transactions during the year.

No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

(i) Terms and conditions

The terms and conditions of the tax funding agreement are set out in Note 7. Loans from subsidiaries are at call and bear no interest. All other transactions were made on normal commercial terms and conditions and at market rate.

Note 31 – Segment reporting

(a) Operating segments

The Group is principally organised geographically and then by line of business. While the Chief Executive Officer evaluates results in a number of different ways, the geographical areas of operation is the primary basis for which the allocation of resources and financial results are assessed. The major geographic areas of operations are as follows:

• North America - comprising the United States of America and Canada.

• Australasia - comprising Australia, New Zealand, Papua New Guinea and Asia.

• Europe - comprising United Kingdom, Sweden, Holland and Germany.

The Group also reports revenues by the following product groups:

• Ferrous secondary recycling - comprising the collection, processing and trading of iron and steel secondary raw material.

• Non-ferrous secondary recycling - comprising the collection, processing and trading of other metal alloys and residues, principally aluminum, lead, copper, zinc and nickel bearing materials.

• Secondary processing - comprising value added process involving the melting, refining and ingoting of certain nonferrous metals and the reclamation and reprocessing of plastics.

• Recycling solutions - comprising the provision of environmentally responsible solutions for the disposal of post consumer electronic products, including IT assets recycled for commercial customers. The Company offers fee for service business opportunities in the environmentally responsible recycling of negative value materials including refrigerators, electrical and electronic equipment.

92

Notes to the Financial Statements For the year ended 30 June 2009

Note 31 – Segment reporting (continued)

(b) Segment information

2009 Total sales revenue Other revenue/income Total segment revenue Segment EBITDA Depreciation and amortisation Goodwill impairment charge Segment EBIT Interest income Finance costs Loss before income tax Segment total assets Segment total liabilities Net assets Other segment information: Share of pre-tax profit of investments accounted for using the equity method Investments in associates and jointly controlled entities Acquisitions of property, plant and equipment 2008 Total sales revenue Other revenue/income Total segment revenue Segment EBITDA Depreciation and amortisation Goodwill impairment charge Segment EBIT Interest income Finance costs Profit before income tax	North America A$’000 6,368,489 2,750 6,371,239 224,416 122,754 190,207 (88,545 ) 2,769,992 465,926 2,304,066 55,255 381,134 106,416 4,607,898 2,293 4,610,191 471,409 55,683 - 415,726	Australasia A$’000 1,158,619 1,536 1,160,155 40,943 21,360 887 18,696 485,495 175,429 310,066 5,553 19,110 39,751 1,745,109 1,182 1,746,291 202,314 16,601 3,349 182,364	Europe A$’000 1,109,117 499 1,109,616 (6,371) 26,706 - (33,077 ) 553,073 308,158 244,915 - - 41,307 1,312,584 1,470 1,314,054 116,813 22,802 - 94,011	Consolidated A$’000
				8,636,225 4,785 8,641,010 258,988 170,820 191,094 (102,926) 2,272 (21,508 ) (122,162 ) 3,808,560 949,513 2,859,047 60,808 400,244 187,474 7,665,591 4,945 7,670,536 790,536 95,086 3,349 692,101 2,876 (34,374 ) 660,603

93

Notes to the Financial Statements For the year ended 30 June 2009

Note 31 – Segment reporting (continued)

(b) Segment information (continued)

2008 (continued) Segment total assets Segment total liabilities Net assets Other segment information: Share of pre-tax profit of investments accounted for using the equity method Investments in associates and jointly controlled entities Acquisitions of property, plant and equipment 2007 Total sales revenue Other revenue/income Total segment revenue Segment EBITDA Depreciation and amortisation Segment EBIT Interest income Finance costs Profit before income tax Segment total assets Segment total liabilities Net assets Other segment information: Share of pre-tax profit of investments accounted for using the equity method Investments in associates and jointly controlled entities Acquisitions of property, plant and equipment	North America A$’000 3,372,061 767,379 2,604,682 60,271 318,056 59,987 2,938,245 512 2,938,757 204,331 40,761 163,570 1,109,507 295,879 813,628 4,446 14,029 42,684	Australasia A$’000 597,168 526,897 70,271 4,302 14,170 32,589 1,465,384 1,155 1,466,539 167,716 13,533 154,183 450,874 222,753 228,121 2,584 11,916 25,019	Europe A$’000 677,247 518,276 158,971 - - 37,115 1,144,891 710 1,145,601 87,336 20,159 67,177 496,990 366,652 130,338 - - 22,800	Consolidated A$’000
				4,646,476 1,812,552 2,833,924 64,573 332,226 129,691 5,548,520 2,377 5,550,897 459,383 74,453 384,930 2,364 (30,405 ) 356,889 2,057,371 885,284 1,172,087 7,030 25,945 90,503

94

Notes to the Financial Statements For the year ended 30 June 2009

Note 31 – Segment reporting (continued)

(c) Sales to external customers

Australia China Malaysia USA Turkey South Korea Other	2009 A$’000 475,814 1,320,597 449,143 2,045,890 1,352,907 643,508 2,348,366 8,636,225	2008 A$’000 773,050 600,101 663,990 1,175,386 1,072,729 412,093 2,968,242 7,665,591	2007 A$’000
			576,722 638,674 599,228 529,534 400,731 354,939 2,448,692 5,548,520

(d) Intersegment sales

Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an “arm’s-length” basis and are eliminated on consolidation.

(e) Revenue by product

Ferrous metal recycling Non-ferrous metal recycling Secondary processing Recycling solutions	2009 A$’000 6,642,694 1,193,397 221,624 578,510 8,636,225	2008 A$’000 5,421,102 1,324,123 361,159 559,207 7,665,591	2007 A$’000
			3,587,925 1,264,402 262,347 433,846 5,548,520

(f) Material non-current assets

Material non-current assets (excluding financial instruments, deferred tax assets and retirement benefit assets) are held in the following countries:

Australia USA United Kingdom Benelux Germany Canada New Zealand Other	2009 A$’000 189,141 2,238,260 170,637 65,248 44,746 23,243 7,805 11,966 2,751,046	2008 A$’000
		179,961 2,054,268 148,109 42,366 50,901 21,131 8,263 17,038 2,522,037

95

Notes to the Financial Statements For the year ended 30 June 2009

Note 32 – Earnings per share

The Group calculates both basic and diluted earnings per share. Basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares outstanding during the period plus the dilutive effect of share options and rights outstanding during the period.

(Loss)/profit used in calculating earnings per share (A$’000) (Loss)/earnings per share (in cents) Basic Diluted Weighted average number of shares used in the denominator (‘000) Number of shares for basic earnings per share Dilutive effect of share-based awards Number of shares for diluted earnings per share	2009 (150,295 ) (82.9) (82.9) 181,247 - 181,247	2008 440,098 310.9 307.9 141,574 1,374 142,948	2007
			239,938 192.1 191.0 124,916 704 125,620

Due to the loss after tax for the year ended 30 June 2009, the dilutive effect of share-based awards, which was 899,000 shares, was not included as the result would have been anti-dilutive.

Share awards granted to employees are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. Details relating to share awards are set out in Note 24.

Note 33 – Cash flow information

(a) Reconciliation of cash

Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statements of financial position as follows:

Cash at bank and on hand Short term deposits Cash and cash equivalents	Consolidated	Consolidated	2007 A$’000 31,404 7,156 38,560	Parent	Parent
	2009 A$’000 59,123 10,413 69,536	2008 A$’000 112,944 20,543 133,487		2009 A$’000 198 - 198	2008 A$’000
					- - -

96

Notes to the Financial Statements For the year ended 30 June 2009

Note 33 – Cash flow information (continued)

(b) Reconciliation of (loss)/profit after income tax expense to net cash inflow

(Loss)/profit for the year Adjustments for non-cash items: Depreciation and amortisation Net gain on contribution of assets to SA Recycling LLC Unrealised (gain)/loss on held for trading derivatives Impairment of goodwill Impairment of property, plant and equipment Net loss/(profit) on disposal of non-current assets Loss on sale of subsidiaries Share-based payment Non-cash pension expense Non-cash compensation Negative goodwill recognised on acquisition Equity accounted profits net of dividends received Other Change in operating assets and liabilities, excluding the effects of acquisitions and disposals of entities: Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories Decrease in prepayments (Decrease)/increase in provisions (Decrease)/increase in income taxes Increase/(decrease) in deferred taxes (Decrease)/increase in trade and other payables Net cash inflow from operating activities	Consolidated	Consolidated	2007 A$’000 239,938 74,453 - - - 6,784 (401) - 2,831 (110) - - (4,749) - 42,275 (16,650) 3,758 (16,391) 3,928 (20,889) 20,685 335,462	Parent 2009 A$’000 2008 A$’000 230,177 169,292 - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,490 - - - - - - (55,232) (28) - - (15,258) (19,900 ) 159,687 150,854
	2009 A$’000 (150,295) 170,820 - 10,253 191,094 10,021 (864) 2,577 9,258 1,646 771 (399) (16,770) 419 492,794 543,440 1,720 (10,213) (194,811) 38,808 (545,818 ) 554,451	2008 A$’000 440,098 95,086 (38,841) (3,901) 3,349 71 1,894 - 13,388 479 - - (55,259) 282 (176,650) (407,604) 18,562 24,220 80,298 (11,195) 263,254 247,531		2009 A$’000 230,177 - - - - - - - - - - - - - - - - - (55,232) - (15,258) 159,687

(c) Non-cash investing and financing activities

• (i) During the year ended 30 June 2009, dividends of A$26.6 million (2008: A$18.1 million; 2007: A$30.0 million) were paid via the issue of ordinary shares pursuant to the dividend reinvestment plan. Refer to Note 21.

• (ii) On 14 March 2008, the Company acquired 100% of the share capital of Metal Management Inc for A$1,500.6 million. The consideration given comprised of 53,473,817 ordinary shares in Sims Metal Management Limited with a fair value of A$1,490.1 million and A$10.5 million of fully vested share options assumed at fair value. Refer to Note 27.

• (iii) On 1 September 2007, the Group completed the merger of its Southern Californian metal recycling assets with those of Adams Steel LLC amounting to an investment of A$342.3 million. For details of the assets and liabilities contributed to the SA Recycling joint venture, refer to Note 29.

97

Notes to the Financial Statements For the year ended 30 June 2009

Note 34 – Events occurring after the reporting period

On 3 July 2009, the Group acquired the assets of Fairless Iron & Metal, LLC (“Fairless”) based in Morrisville, Pennsylvania on the East Coast of the United States. Fairless, a full-service ferrous and non-ferrous recycler, operates two principal facilities including a state-of-the-art mega-shredder, non-ferrous recovery systems and a deep water port export facility. The acquisition price of Fairless was not significant to the Group. The assets of Fairless were not combined with those of the Group for the year ended 30 June 2009.

On 17 August 2009, the Company accepted the resignation of Thomas Bird, Managing Director – United Kingdom.

On 26 August 2009, the service agreement for Jeremy Sutcliffe, Executive Director, was terminated by way of redundancy. Refer to the Directors Report for additional information.

98

Directors’ Declaration

In the Directors’ opinion:

• a) the Directors declare that the financial statements and notes set out on pages 23 to 98 are in accordance with the Corporations Act 2001 , including:

• i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• ii) giving a true and fair value view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the financial year ended on that date, and

• b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in Note 28 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 28.

The directors have been given the declarations by the Group Chief Executive Officer and the Group Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Directors.

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P Varello Chairman Houston 27 August 2009

D Dienst Group Chief Executive Officer

New York 27 August 2009

99

PricewaterhouseCoopers ABN 52 780 433 757

Independent auditor’s report to the members of Sims Metal Management Limited

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999

Report on the financial report

We have audited the accompanying financial report of Sims Metal Management Limited (the company), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of recognised income and expense and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Sims Metal Management Limited and the Sims Metal Management Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1a, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Liability limited by a scheme approved under Professional Standards Legislation

100

Independent auditor’s report to the members of Sims Metal Management Limited (continued)

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

• (a) the financial report of Sims Metal Management Limited is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001, and

• (b) the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1a.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 6 to 21 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the Remuneration Report of Sims Metal Management Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001 .

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PricewaterhouseCoopers

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Andrew J Parker Partner

Sydney 28 August 2009

101