6JUN200719055495

$550,000,000

Rexam PLC (incorporated with limited liability in England and Wales with registered number 191285)

$550,000,000 6.75% Senior Notes Due 2013

The senior notes due 2013 (the Notes) of Rexam PLC (the Issuer) will bear interest at a rate of 6.75% per year. Interest on the Notes is payable on June 1 and December 1 of each year, commencing on December 1, 2008 until June 1, 2013 (the Maturity Date). The Issuer may redeem the Notes in whole or in part at any time at the redemption prices specified herein. See ‘‘Description of the Notes— Optional Redemption’’. For a more detailed description of the Notes, see ‘‘Description of the Notes’’. Investing in the Notes involves risks. For a discussion of these risks, see ‘‘Risk Factors’’ beginning on page 12. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act), or any state or other securities laws, and the Notes are being offered only to ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the Securities Act (Rule 144A)) (QIBs) under Rule 144A and outside the United States under Regulation S of the Securities Act (Regulation S). Prospective purchasers that are QIBs are hereby notified that the seller of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfer of the Notes, see ‘‘Transfer Restrictions’’. Price for the Notes: 99.563% plus accrued interest, if any, from June 4, 2008 The Initial Purchasers expect to deliver the Notes to purchasers in book-entry form through the facilities of The Depository Trust Company (DTC), Clearstream Banking, soci´et´e anonyme (Clearstream, Luxembourg) and Euroclear Bank S.A./N.V. (Euroclear) on or about June 4, 2008. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the U.K. Listing Authority) for the Notes described in this Offering Memorandum to be admitted to the official list of the U.K. Listing Authority (the Official List) and to the London Stock Exchange plc (the London Stock Exchange) for the Notes to be admitted to trading on the London Stock Exchange’s Regulated Market. References in this Offering Memorandum to Notes being listed (and all related references) shall mean that the Notes have been admitted to trading on the London Stock Exchange’s Regulated Market and have been admitted to the Official List. The London Stock Exchange’s Regulated Market is a regulated market for the purposes of Directive 2004/39/EC (the Markets in Financial Instruments Directive).

Joint Book-Running Managers Barclays Capital Citi RBS Greenwich Capital

May 29, 2008 This Offering Memorandum comprises a prospectus for the purpose of Article 5.3 of Directive 2003/71/EC (the Prospectus Directive) and for the purpose of giving information with regard to the Issuer and the Issuer and its subsidiaries taken as a whole (the Group) and the Notes which, according to the particular nature of the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer. This Offering Memorandum has been prepared by the Issuer solely for use in connection with the offering of the Notes described in this Offering Memorandum, and you are authorised to use this Offering Memorandum solely for the purpose of considering the purchase of the Notes. You should rely only on the information contained in this Offering Memorandum. The Issuer has not authorised anyone to provide you with different information. You should not assume that the information contained in this Offering Memorandum is accurate as at any date other than the date on the front of this Offering Memorandum. This Offering Memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire securities. Distribution of this Offering Memorandum to any other person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorised, and any disclosure of any of its contents, without our prior written consent, is prohibited. Each prospective investor, by accepting delivery of this Offering Memorandum, agrees to the foregoing and to make no photocopies of this Offering Memorandum or any documents referred to in this Offering Memorandum. The Initial Purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Offering Memorandum. Nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation by the Initial Purchasers as to the past or future. The Issuer has furnished the information contained in this Offering Memorandum. The Initial Purchasers have not independently verified all of the information contained herein (financial, legal or otherwise) and assume no responsibility for the accuracy or completeness of any such information. In making an investment decision, prospective investors must rely on their own examination of the Issuer and the terms of the offering, including the merits and risks involved. Prospective investors should not construe anything in this Offering Memorandum as legal, business or tax advice. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the securities under applicable legal investment or similar laws or regulations. The laws of certain jurisdictions may restrict the distribution of this Offering Memorandum and the offer and sale of the Notes. Persons into whose possession this Offering Memorandum or any of the Notes come must inform themselves about, and observe, any such restrictions. This Offering Memorandum does not constitute an offer or an invitation to purchase, any of the Notes in any jurisdiction in which such offer or sale would be unlawful. None of the Issuer, the Initial Purchasers or their respective representatives are making any representation to any offeree or any purchaser of the Notes regarding the legality of any investment in the Notes by such offeree or purchaser under applicable legal investment or similar laws or regulations. Investors also acknowledge that they have not relied, and will not rely, on the Initial Purchasers in connection with their investigation of the accuracy of any information or their decision whether to invest in the Notes. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable state securities laws pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. Please refer to the sections in this Offering Memorandum entitled ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’.

iii Notwithstanding anything in this Offering Memorandum to the contrary, each prospective investor (and each employee, representative or other agent of the prospective investor) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of any offering and all materials of any kind (including opinions and other tax analyses) that are provided to the prospective investor relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws. In this Offering Memorandum, the Issuer relies on and refers to information and statistics regarding its industry. The Issuer obtained this market data from independent industry publications or other publicly available information. Although the Issuer believes that these sources are reliable, the Issuer has not independently verified and does not guarantee the accuracy and completeness of this information. Where information has been sourced from a third party, the Issuer confirms that this information has been accurately reproduced and that as far as it is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Where third party information has been included, its source has been stated. The Issuer accepts responsibility for the information contained in this Offering Memorandum. To the best of the Issuer’s knowledge and belief, having taken all reasonable care to ensure that such is the case, the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. This Offering Memorandum contains summaries of certain documents. Investors should make reference to the actual documents for complete information. Copies of certain documents referred to herein will be made available to prospective investors upon request to the Issuer or the Initial Purchasers. The information set out in the sections of this Offering Memorandum describing clearing and settlement arrangements is subject to any change or reinterpretation of the rules, regulations and procedures of DTC as currently in effect. The information in such sections concerning these clearing systems has been obtained from sources that the Issuer believes to be reliable. The Issuer accepts responsibility only for the correct extraction and reproduction of such information, but not for the accuracy of such information. If you wish to use the facilities of any clearing system you should confirm the applicability of the rules, regulations and procedures of the relevant clearing system. The Issuer will not be responsible or liable for any aspect of the records relating to, or payments made on account of, book-entry interests held through the facilities of any clearing system or for maintaining, supervising or reviewing any records relating to such book-entry interests. In connection with the issuance of the Notes, Citigroup Global Markets Inc. (the Stabilising Manager) (or persons acting on behalf of the Stabilising Manager) may over-allot notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment must be conducted by the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules.

iv NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES This offering is being made in reliance upon an exemption from registration under the Securities Act for offers and sales of securities that do not involve a public offering. By purchasing the Notes, investors are deemed to have made the acknowledgements, representations, warranties and agreements set forth under ‘‘Transfer Restrictions’’. The Notes have not been and will not be registered with, or recommended or approved by, the U.S. Securities and Exchange Commission (the SEC) or any other U.S. federal or state or foreign securities commission or regulatory authority, nor has any such commission or regulatory authority reviewed or passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offence. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable state securities laws pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. See ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’.

NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

SERVICE OF PROCESS AND ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES Rexam is a public limited company registered in England and Wales. All of the directors and executive officers of Rexam, and certain of the experts named in this Offering Memorandum, are not residents of the United States and a substantial portion of the assets of the Group and its directors and officers are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons with respect to matters arising under the Securities Act or to enforce against them judgements of courts of the United States predicated upon civil liability under the Securities Act. The United States and England currently do not have a treaty providing for the reciprocal recognition and enforcement of judgements (other than arbitration awards) in civil and commercial matters. Consequently, a final judgement for payment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon U.S. federal securities laws, would not automatically be enforceable in England. In order to enforce any judgement of a U.S. court in England, proceedings must be initiated by way of an action on the judgement of the U.S. court under common law before a court of competent jurisdiction in England. In such an action, an English court generally will not (subject to the following sentence) re-examine the merits of the original matter decided by a U.S. court and will order summary judgement on the basis that there is no reasonable

v prospect of a defence to the claim for payment. The entry of an enforcement order by an English court is typically conditional upon the following: • the U.S. court having had jurisdiction over the original proceedings according to English conflict of law rules; • the judgement of the U.S. court being final and conclusive on the merits in the court in which the judgement was pronounced; • the judgement of the U.S. court being for a definite sum of money; • the judgement of the U.S. court not being for a sum payable in respect of a tax or other charge, or in respect of a fine or other penalty; • the judgement of the U.S. court not being for multiple damages arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained; • the judgement not having been obtained by the fraud of the party benefiting from it nor having been affected by any fraud of the U.S. court itself; • the judgement not having been obtained in proceedings which breached principles of natural justice; and • the judgement of the U.S. court not otherwise contravening English public policy. Subject to the foregoing, investors may be able to enforce in England judgements in civil and commercial matters obtained from U.S. federal or state courts. However, the Issuer cannot assure you that those judgements will be enforceable. In addition, it is doubtful whether an English court would accept jurisdiction and impose civil liability in an original action commenced in England and predicted solely upon U.S. federal securities laws. Rexam has expressly submitted to the non-exclusive jurisdiction of the state of New York and U.S. federal courts sitting in New York City for the purpose of any suit, action or proceeding arising out of the Notes and has appointed Rexam Inc. at 4201 Congress Street, Charlotte, North Carolina 28203, United States, as its agent to accept service of process in any such action.

AVAILABLE INFORMATION The Issuer is not currently subject to the periodic reporting and other information requirements of the U.S. Exchange Act. If you purchase the Notes from the Initial Purchasers you will be furnished with a copy of this Offering Memorandum and, to the extent provided by the Issuer to the Initial Purchasers for such purposes, any related amendments or supplement to this Offering Memorandum. Where you receive this Offering Memorandum you acknowledge that: • you have been afforded an opportunity to request from us, and to review and have received, all additional information considered by you to be necessary to verify the accuracy and completeness of the information herein; • you have not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with your investigation of the accuracy of such information or your investment decision; and • except as provided pursuant to the first bullet point above, no person has been authorised to give any information or to make any representation concerning the Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorised by the Issuer or the Initial Purchasers.

vi While any Notes remain outstanding, the Issuer will make available, upon request, to any holder and any prospective purchaser of Notes, any information required pursuant to Rule 144A(d)(4) under the Securities Act in order to permit sales under Rule 144A, if, at the time of such request, the Issuer is neither a reporting company pursuant to the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), nor exempt from reporting under the Exchange Act pursuant to Rule 12g3-2(b) thereunder. Any such request should be directed to the Issuer at 4 Millbank, London SW1P 3XR, United Kingdom, attention: Company Secretary, telephone no: +44 (0)20 7227 4100. As of the date of this Offering Memorandum the Issuer is exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act.

vii SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS This Offering Memorandum contains statements that may be considered to be ‘‘forward-looking statements’’ as that term is defined in the U.S. Private Securities Litigation Act of 1995. Forward- looking statements appear in a number of places throughout this Offering Memorandum, including, without limitation, under ‘‘Risk Factors’’, ‘‘Use of Proceeds’’, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’, ‘‘Description of Rexam and its Business’’ and elsewhere in this Offering Memorandum. Forward-looking statements also may be identified by words such as ‘‘believes’’, ‘‘expects’’, ‘‘anticipates’’, ‘‘projects’’, ‘‘intends’’, ‘‘should’’, ‘‘seeks’’, ‘‘estimates’’, ‘‘probability’’, ‘‘risk’’, ‘‘target’’, ‘‘goal’’, ‘‘objective’’, ‘‘future’’ or similar expressions or variations on such expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. The Issuer has identified some of the risks inherent in forward-looking statements under ‘‘Risk Factors’’ in this Offering Memorandum. Other important factors that could cause actual results to differ materially from those in forward-looking statements include, among others: (i) changes or volatility in interest rates, foreign exchange rates, asset prices, commodity prices, inflation or deflation; (ii) the general political, economic and competitive conditions in markets and countries where the Group has operations, including disruptions in the supply chain, competitive pricing pressures, inflation or deflation, and changes in tax rates and laws; (iii) consumer preferences for alternative forms of packaging; (iv) fluctuations in raw material and labour costs; (v) availability of raw materials; (vi) costs and availability of energy; (vii) transportation costs; (viii) the Group’s ability to raise selling prices commensurate with energy and other cost increases; (ix) consolidation among competitors and customers; (x) the Group’s ability to integrate operations of acquired businesses and achieve expected synergies; (xi) unanticipated expenditures with respect to environmental, safety and health laws; (xii) the performance by customers of their obligations under purchase agreements; (xiii) changes in applicable laws and regulations, including taxes, or accounting standards or practices; (xiv) the Group’s ability to hedge certain risks economically and manage operational risks; (xv) the Group’s ability to compete in its business lines and increase or maintain market share; and (xvi) force majeure and other events beyond the Group’s control. Other factors could also adversely affect the Group’s results or the accuracy of forward-looking statements in this Offering Memorandum, and you should not consider the factors discussed here or under ‘‘Risk Factors’’ to be a complete set of all potential risks or uncertainties. Potential investors should not place undue reliance on any forward-looking statements. The Issuer does not have any intentions or obligations to update forward-looking statements to reflect new information, future events or risks that may cause the forward-looking events discussed in this Offering Memorandum not to occur or to occur in a manner different from what was expected.

MARKET, RANKING AND OTHER DATA The data included in this Offering Memorandum regarding markets and ranking, including the size of certain market segments and Rexam’s position within these markets, are based on independent industry publications, reports of government agencies or other published industry sources and Rexam’s estimates based on its management’s knowledge and experience in the market segments in which it operates. Rexam confirms that, where relevant, market information from third parties has been accurately reproduced and that, so far as it is aware, and is able to ascertain from the information published, no facts have been omitted which would render the reproduced information inaccurate or misleading. Rexam’s estimates are based on information obtained from customers, suppliers, trade and business organisations and other contacts in the market segments in which it operates. Rexam has not

viii independently verified any of the data from third-party sources nor has it ascertained the underlying economic assumptions relied upon therein. Rexam believes these estimates to be accurate as of the date of the Offering Memorandum. However, this information may prove to be inaccurate because of the method by which Rexam obtained some of the data for these estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other inherent limitations and uncertainties.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION Rexam has included in this Offering Memorandum: (i) consolidated audited financial statements as at and for the years ended December 31, 2007 and 2006 prepared in accordance with International Financial Reporting Standards as adopted by the European Union. International Financial Reporting Standards as adopted by the European Union differs in certain respects from International Financial Reporting Standards as published by the International Accounting Standards Board (the IASB). Rexam does not believe that the historical financial statements for the periods presented would be materially different had they been prepared in accordance with International Financial Reporting Standards as published by the IASB. References herein to IFRS shall be to International Financial Reporting Standards as adopted by the European Union. IFRS differs in significant respects from accounting principles generally accepted in the United States (U.S. GAAP). The consolidated balance sheet data as at December 31, 2007 and 2006 (restated) and the consolidated income statement data for the years ended December 31, 2007 and 2006 (restated) are derived from Rexam’s consolidated financial statements as at and for the year ended December 31, 2007 included elsewhere in this Offering Memorandum. The consolidated balance sheet data as at December 31, 2006 and 2005 (restated) and the consolidated income statement data for the years ended December 31, 2006 and 2005 (restated) are derived from Rexam’s original 2006 consolidated financial statements (as defined below) included elsewhere in this Offering Memorandum. In 2007, Rexam divested its Glass business. Under IFRS, Rexam is required to record the net results of operations from its discontinued operations, including any capital gains or losses resulting from the disposal thereof, separately from the results of continuing operations. Due to this divestment the results of operations for the year ended December 31, 2006 were restated in the 2007 consolidated financial statements to reflect the continuing operations of Rexam excluding the Glass business. As a result, this Offering Memorandum contains two different presentations of Rexam’s 2006 consolidated income statement: (i) one reflecting the results of the Glass business as results from discontinued operations (the ‘‘restated 2006 consolidated financial statements’’) which is derived from the unaudited comparative column of the 2007 consolidated financial statements and (ii) another reflecting the results of the Glass business as results from continuing operations (the ‘‘original 2006 consolidated financial statements’’) derived from the audited 2006 consolidated financial statements. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Results of Operations—Acquisitions, disposals and restructurings’’ and note 11 to Rexam’s 2007 consolidated financial statements included in this Offering Memorandum. In addition, the underlying results of operations in 2005 in the original 2006 consolidated financial statements was restated to reflect a change in accounting policy on exceptional items, and the balance sheet at December 31, 2006 derived from the 2007 consolidated financial statements and the balance sheet at December 31, 2005 derived from the original 2006 consolidated financial statements were restated to reflect final fair value adjustments on prior acquisitions. Potential investors should be aware that the consolidated financial statements as at and for the year ended December 31, 2007 and the restated 2006 consolidated financial statements are not directly comparable to the original 2006 consolidated financial statements and the consolidated financial

ix statements as at and for the year ended December 31, 2005, which include the Glass business as a continuing operation. Rexam uses certain management financial measures derived from its accounting records, including the ‘‘underlying operating profit’’, ‘‘share of underlying post tax profits of associates and joint ventures’’, ‘‘underlying interest expense’’, ‘‘underlying profit before tax’’ and ‘‘tax on underlying profit’’ line items, among others, which are not recognised by IFRS. These measures reflect the results of operations of continuing operations excluding exceptional items such as the gains and losses on disposal of businesses, the restructuring and integration of businesses, major asset impairments and disposals, significant litigation and tax related claims, the subsequent recognition of acquired deferred tax assets, the amortisation of certain acquired intangible assets, non hedge accounted fair value movements on financing derivatives and significant gains arising on reduction of retiree medical and pension liabilities. Continuing operations reflects total operations excluding any divestments classified as discontinued operations for the relevant year. The results for continuing operations in 2007 and 2006 on a restated basis exclude the discontinued operations of the Glass business. The results for continuing operations in 2006 on an unrestated basis and 2005 on a restated basis reflect the results of total operations as there were no divestments classified as discontinued operations in 2006 or 2005. Ongoing operations reflect underlying business performance excluding businesses that have been disposed (regardless of whether they have been classified as discontinued operations or not) or are held for sale. These measures are presented because management believe that the exclusion of exceptional items aids the comparison of underlying performance of continuing operations. These management measures should be viewed as supplemental information to Rexam’s consolidated IFRS financial statements. All companies do not calculate similarly-titled management measures in the same manner, such that disclosure of similarly- titled management measures by other companies may not be comparable with that of Rexam. These management measures should not be considered in isolation. Investors are advised to review these management measures in conjunction with Rexam’s consolidated financial statements and accompanying notes included elsewhere in this Offering Memorandum and the related discussion thereof set forth in this Offering Memorandum. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for further discussion on the use of management financial measures. Some financial information in this Offering Memorandum has been rounded, and as a result, the numbers shown as totals may vary slightly from the exact arithmetical aggregation of the relevant figures. All references in this document to U.S. dollars, U.S.$ and $ refer to the currency of the United States of America, to Euro and E refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended, to Brazilian Real refer to the currency of Brazil, and to Sterling and £ refer to the currency of the United Kingdom. In this Offering Memorandum, Rexam and the Group refer to Rexam PLC and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. Unless otherwise indicated, Noteholder and Holder refer to the registered holder of any Note and beneficial owner refers to an owner of a beneficial interest in any Note. Unless otherwise indicated, all references in this Offering Memorandum to Initial Purchasers refer to the initial purchasers set forth under ‘‘Plan of Distribution’’ herein.

x TABLE OF CONTENTS

Page Overview ...... 1 The Offering ...... 4 Risk Factors ...... 12 Use of Proceeds ...... 19 Exchange Rates ...... 20 Capitalisation ...... 21 Selected Consolidated Financial Information and Other Data ...... 22 Management’s Discussion and Analysis of Financial Condition and Results of Operations ...... 25 Description of Rexam and its Business ...... 56 Description of the Notes ...... 70 Book-Entry; Delivery and Form ...... 89 U.K. Tax Considerations ...... 94 U.S. Federal Income Tax Considerations ...... 97 Benefit Plan Investor Considerations ...... 99 Plan of Distribution ...... 100 Transfer Restrictions ...... 103 Legal Matters ...... 106 Independent Auditors ...... 107 General Information ...... 108 Index to Financial Statements ...... F-1

xi OVERVIEW The following is a brief overview only and is qualified in its entirety by information contained elsewhere in this Offering Memorandum. This overview may not contain all of the information that prospective investors should consider before deciding to invest in the Notes. Accordingly, any decision by a prospective investor to invest in the Notes should be based on a consideration of this Offering Memorandum as a whole. Prospective investors should read this entire Offering Memorandum carefully, including the financial statements and related notes and the information set forth under the headings ‘‘Risk Factors’’ and ‘‘Special Note On Forward-Looking Statements’’.

Overview Rexam PLC, a public limited liability company incorporated under the laws of England and Wales on July 13, 1923 as Bowater’s Paper Mills Limited, is the holding company of the Rexam group of companies (the Group). The Group’s principal business is the provision of consumer packaging solutions to global and regional customers primarily in the beverage, beauty, home and personal care, pharmaceutical and food segments, and its two principal business operations are beverage cans (Beverage Cans) and rigid plastic packaging (Plastic Packaging). The Group is the world’s second largest consumer packaging company and the world’s leading beverage can maker in terms of revenues. It is also a leading global manufacturer of rigid plastic packaging. The Group has more than 110 manufacturing operations in approximately 20 countries and reported a profit before tax and exceptional items of £245 million on sales revenue of £3,611 million in the year ended December 31, 2007. Rexam’s ordinary shares are listed on the London Stock Exchange and are owned by both institutional and retail investors.

History Rexam has undergone considerable change during its history. Following the demerger in 1984 of the majority of its pulp and paper making activities, it began to divest non-core activities. The divestment programme accelerated following the appointment of Rolf Borjesson¨ as Chief Executive in 1996, as Rexam focused its operations primarily on consumer packaging, and was accompanied by two significant strategic acquisitions: Rexam acquired PLM AB in February 1999, a Swedish-listed European beverage packaging business, for a total consideration (including net borrowings assumed) of £602 million, and in July 2000, Rexam acquired American National Can Group, Inc., headquartered in the United States, for a total consideration (including net borrowings assumed) of £1,517 million. As a result, the Group became, in terms of sales value, one of the world’s largest consumer packaging groups, and at that time, in terms of sales volume, the largest manufacturer of beverage cans in the world. Since 2000, the Group has continued to take steps to become a leading consumer packaging company through further strategic acquisitions and divestments, focusing its business on higher growth, higher margin segments and emerging markets.

Competitive Strengths • Leading position in the beverage can market in terms of revenues and a market leader in other key strategic markets. With more than 110 manufacturing operations in approximately 20 countries, Rexam is the world’s second largest consumer packaging company and the world’s leading beverage can maker in terms of revenues. Rexam is the number one beverage can maker in Europe with more than 40% market share and 15 can plants and four end plants in various European locations. In addition, Rexam is a leading beverage can maker in the Americas,

1 holding the number three position in the United States and more than 65% of the market share in Brazil, the main beverage can market in South America. In Plastic Packaging, Rexam holds leading global or regional positions in the majority of its markets, including the U.S., where it has the leading position in packaging for prescription products. • Proven ability to identify and execute strategic acquisitions and integrate acquired businesses. Rexam’s strategy of careful evaluation and pursuit of strategic opportunities has resulted in its successful growth through acquisitions. Under a strong management team, Rexam has executed a series of successful acquisitions. Recently, Rexam added to both its Beverage Cans and Plastic Packaging businesses. In Beverage Cans, Rexam’s most recent acquisition was Rostar (Rostar) in January 2008, the main beverage can maker in Russia, which was acquired for £149 million. This acquisition complimented Rexam’s continued investment in the growing Russian beverage can market. The acquisition of O-I Plastic Products FTS Inc. (O-I Plastics), a leading U.S. manufacturer of rigid plastic healthcare packaging and plastic closures, in 2007 for $1,825 million gave the Plastic Packaging business meaningful scale and critical mass to turn Rexam into a global leader in rigid plastic packaging. Following the acquisition of Precise Technology, Delta Plastics, Airspray, FangXin and the significant acquisition of O-I Plastics, Rexam restructured its Plastic Packing business to create a portfolio of three customer facing divisions of broadly similar size in revenue terms. These acquisitions and others have resulted in Rexam’s expansion into new and existing markets and are expected to generate significant synergies both in terms of costs and revenues. • Ability to deliver technically advanced solutions. The segments in which Rexam operates are technologically advanced and have significant intellectual property associated with many of the products. Rexam offers a broad range of packaging products and solutions for many consumer facing industries, using different materials and technologies. By investing in people and capabilities, Rexam has become able to engage more deeply with customers and develop new technologies that meet market trends and consumer needs. Rexam works with research organisations to investigate emerging materials and technologies, and its development teams across the world often collaborate on innovative packaging solutions. In addition, the acquisition of O-I Plastics has contributed to Rexam’s strength in new product development and has brought it additional capabilities, as more than 75% of OI Plastics’ closures are based on proprietary designs, and a third of closures sales are from products developed in the last three years. Recent examples of Rexam’s innovative designs include the highly adaptable and aesthetic XD11 fragrance pump and airless skincare packaging developed with L’Oreal´ Paris for its Derma Genese/Skin` Genesis, cans with resealable closures and the aluminium bottle. • Highly experienced management team. Rexam’s management team consists of highly experienced professionals. Many of Rexam’s senior executive officers have demonstrated their ability to manage costs, adapt to changing market conditions and to acquire and successfully integrate new businesses. Rexam’s senior management is incentivised through share ownership in Rexam PLC.

Strategy Rexam’s strategy is to generate profitable growth by consolidating its position in chosen industries, segments and geographic markets, strengthening its relationships with its customers, and leading in operational excellence and product innovation while operating to the highest standards with regard to safety, the environment and its people. • Invest in higher growth, higher margin and emerging markets and consolidate positions in chosen industries, segments and geographic markets. Rexam has in the past completed a number of transactions in order to maintain its competitive position and to increase its presence in higher growth markets, including emerging markets. In order to focus on high growth segments, Rexam

2 acquired O-I Plastics and divested its Glass business in 2007. In addition, while the Group’s operations are concentrated mainly in the world’s major developed economies with its main markets currently in Europe and the United States, it believes that its principal growth opportunities lie in those larger, less developed countries which are adopting consumer goods purchasing patterns similar to those of more developed countries. In order to capitalise on these growth opportunities, Rexam has entered into various strategic investments, including the acquisition of Rostar, an investment in a beverage can joint venture in Guatemala, and the O-I Plastics acquisition, which increased Rexam’s presence in Brazil and opened up new opportunities in Mexico, Singapore and Malaysia. Rexam continues to evaluate opportunities that would add strategic value and expects to continue to grow its business through acquisitions and investments in high growth markets, including emerging markets. In 2007, approximately 20% of its sales were from emerging markets compared with 8% in 2000. • Strengthen relationships with customers. The vast majority of Rexam’s sales are to large multinational consumer products companies who are growing their businesses on a global basis. Rexam has strong and long-standing relationships with its key customers, which include some of the leading North American and European consumer products companies such as Coca-Cola, Red Bull, Heineken, Anheuser-Busch, Carlsberg, InBev, Procter & Gamble, SABMiller, Avon, Colgate-Palmolive, L’Oreal,´ GSK and Pfizer. In order to maintain and strengthen its relationships with its customers, Rexam’s strategy is to work closely with its customers to support their growth plans in established and emerging markets and to deliver consistency in terms of technological capability, service and quality and to be proactive in contributing to innovative solutions to its customers changing needs. Rexam seeks to establish relationships which extend far into the supply chain beyond the pure procurement level, in order to become an integral part of its customers’ businesses. Rexam also strives to ensure that it is the supplier of choice by focusing on innovation and efficient operations in order to achieve lowest cost manufacturer status. • Continue to focus on operational efficiency and aim to lead the industry in terms of execution and operational excellence. Rexam’s focus on operational excellence across the Group delivers substantial savings each year. Its efficiency savings in 2007 totaled £32 million, compared to £28 million in 2006. Plastic Packaging accounted for more than half of the efficiency savings in 2007 due largely to the recent reorganisation of the business and the synergy opportunities presented by recent acquisitions. In addition, Rexam seeks to co-ordinate across its businesses the procurement of primary raw materials and energy for efficiency and economies of scale. Rexam also focuses on efficient manufacturing processes, including the reduction of energy and other utilities and emissions, and works closely with its customers and suppliers to reduce the amount of material it uses in various types of packaging, employing innovative ways to reuse production scrap. Rexam intends to continue to focus its efforts on operational efficiency and operational excellence in order to lead the industry in terms of execution while operating to the highest standards with regard to safety, the environment and its people.

3 The Offering The summary below describes the principal terms of the Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The ‘‘Description of the Notes’’ section of this Offering Memorandum contains a more detailed description of the terms and conditions of the Notes. Terms used in this summary and not otherwise defined herein have the meanings given to them in ‘‘Description of the Notes’’.

Issuer ...... The Issuer, Rexam PLC, is a public limited company incorporated under the laws of England and Wales. Its registered address and the business address of each of its directors is 4 Millbank, London SW1P 3XR, United Kingdom and its telephone number is +44 (0)20 7227 4100. The Issuer’s website, at www.rexam.com, provides additional information about the Issuer. Its website and the information contained on it or connected with it shall not, however, be deemed to be incorporated into this Offering Memorandum. The Issuer had an issued share capital of £413.2 million comprised of 642.7 million ordinary shares with a par value of £0.6429 per share as of May 28, 2008. All shares are fully paid. The Issuer’s statutory annual financial statements are prepared on the basis of a financial year ending on December 31, in each year. Notes Offered ...... $550 million aggregate principal amount of 6.75% Senior Notes due 2013 (the Notes). The Notes will be issued under an Indenture expected to be dated as of June 4, 2008 (the Indenture) between the Issuer, The Law Debenture Trust Corporation p.l.c. (the Trustee) and Citibank, N.A., London Branch (collectively in its capacities as paying agent, transfer agent and registrar, the Agent). Issue Date ...... June 4, 2008. Maturity Date ...... June 1, 2013. Interest Rate ...... The Notes will bear interest from the issue date at the rate of 6.75% per annum, payable semi-annually in arrear. Interest Payment Dates ...... Interest on the Notes will be paid semi-annually in arrear on June 1 and December 1 of each year, beginning on December 1, 2008 (each, an Interest Payment Date). Interest Periods ...... The first interest period for the Notes will be the period from and including the issue date to but excluding the first Interest Payment Date. Thereafter, the interest periods for the Notes will be the periods from and including each Interest Payment Date to but excluding the immediately succeeding Interest Payment Date. The final interest period will be the period from and including the Interest Payment Date immediately preceding the Maturity Date to the Maturity Date.

4 Regular Record Dates for Interest . . . The close of business on May 15 or November 15 (whether or not a Business Day) immediately preceding each Interest Payment Date. Business Day ...... Any day which is not, in London, England or New York City, United States, or any other place of payment, a Saturday, Sunday, legal holiday or a day on which banking institutions are authorised or obligated by law or regulation to close (a Business Day). Day Count Fraction ...... 30/360. Optional Redemption ...... The Issuer may redeem the Notes, in whole or in part, at its option, at any time and from time to time at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) as determined by an Independent Investment Banker, the sum of the present values of the applicable remaining scheduled payments discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months or, in the case of an incomplete month, the number of days elapsed) at the Treasury Rate plus 50 basis points, together with accrued and unpaid interest on the principal amount of the Notes to be redeemed to the Redemption Date. Repurchase Upon a Change of Control Offer ...... If a Change of Control Triggering Event occurs, unless the Issuer has redeemed the Notes in full, it will be required to make an offer (a Change of Control Offer) to each Holder of the Notes to repurchase all or any part (equal to $100,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes on the terms set forth in the Notes. In the Change of Control Offer, the Issuer will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased, to the date of repurchase. Redemption for Tax Reasons ...... In the event of certain tax law changes that would require the Issuer to pay Additional Amounts on the Notes, the Issuer may, under certain conditions, redeem in whole, but not in part, the Notes prior to maturity at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to the date of redemption. Payment of Additional Amounts .... If the Issuer is required by a Relevant Taxing Jurisdiction to deduct or withhold taxes in respect of any payment on the Notes the Issuer will, subject to certain exceptions, pay additional amounts to Noteholders, but may exercise its right to redeem the Notes. Covenants of the Issuer ...... The Issuer has agreed to certain covenants with respect to the Notes, including limitations on liens, on sale and leaseback transactions and on mergers, consolidations, amalgamations

5 and combinations. See ‘‘Description of the Notes—Covenants of the Issuer’’. Ranking of the Notes ...... The Notes will be the Issuer’s unsecured and unsubordinated obligations and will rank pari passu in right of payment among themselves and with the Issuer’s other unsecured and unsubordinated indebtedness (save for certain obligations required to be preferred by law). Because the Issuer is a holding company, its rights and the rights of its creditors, including the Holders of the Notes offered hereby, to participate in the assets of any Subsidiary upon the Issuer’s liquidation or recapitalisation will be subject to the prior claims of such Subsidiary’s creditors, except to the extent that the Issuer itself may be a creditor with recognised claims against such Subsidiary. At December 31, 2007, such Subsidiaries had outstanding third-party indebtedness of £134 million. Denominations, Form and Registration of Notes ...... The Notes will be issued in fully registered form and only in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The Notes will be initially issued as global notes. DTC will act as depositary for the Notes. Except as set forth herein, global notes will not be exchangeable for certificated Notes. Governing Law ...... The State of New York. Listing ...... Application has been made to obtain the listing of the Notes on the Official List of the U.K. Listing Authority and the admission of the Notes to trading on the Regulated Market of the London Stock Exchange. Defeasance ...... The Notes will be subject to defeasance and covenant defeasance provisions in the Indenture. Further Issuances ...... The Issuer may, from time to time, without notice to or the consent of the Holders of the Notes, ‘‘reopen’’ the series of Notes and create and issue additional notes having identical terms and conditions as the Notes (or in all respects except for the issue date, issue price, payment of interest accruing prior to the issue date of such additional notes and/or the first payment of interest following the issue date of such additional notes), so that the additional notes are consolidated and form a single series of notes with the Notes. The Issuer will not issue any additional notes unless such additional notes have no more than a de minimis amount of original issue discount or such issuance would constitute a ‘‘qualified reopening’’ for U.S. federal income tax purposes. Use of Proceeds ...... It is expected that the net proceeds of the offering will be used to repay a portion of the outstanding debt under Rexam’s credit facilities and for general corporate purposes. See ‘‘Use of Proceeds’’.

6 Trustee ...... The Law Debenture Trust Corporation p.l.c. Agent ...... Citibank, N.A., London Branch, collectively in its capacities as paying agent, transfer agent and registrar. Transfer Restrictions ...... The Notes have not been and will not be registered under the Securities Act and are subject to certain restrictions on resale and transfer. Timing and Delivery ...... The Issuer expects delivery of the Notes to occur on June 4, 2008. Ratings ...... It is expected that the Notes will be rated Baa3 by Moody’s Investors Service, Inc. and BBB by Standard & Poor’s, a division of the McGraw-Hill Companies, Inc., subject to confirmation at closing. A security rating is not a recommendation to buy, sell or hold the Notes. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn by the relevant rating agency if, in its judgement, circumstances in the future so warrant. In the event that a rating initially assigned to the Notes is subsequently lowered for any reason, no person or entity is obliged to provide any additional support or credit enhancement with respect to the Notes and the market value of the Notes is likely to be adversely affected. CUSIPs and ISINs ...... The ISIN of the Notes to be sold pursuant to Regulation S under the Securities Act is USG1274KAT28 and the CUSIP number is G1274KAT2. The ISIN of the Notes to be sold pursuant to Rule 144A under the Securities Act is US761655AA78 and the CUSIP number is 761655AA7.

7 Risk Factors Investing in the Notes involves substantial risks. Potential investors are cautioned that the following list of important factors may not contain all of the material factors that are important to an investment decision. Potential investors are urged to read the sections of this offering circular entitled ‘‘Risk Factors’’, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and ‘‘Description of Rexam and its Business’’ for a more complete discussion of the factors that could affect future performance. Risks relating to the Issuer’s business include uncertainty as to: • changes to the cost and availability of raw materials and other input costs; • changes in legislation and applicable regulations; • labour disputes; • national political and economic stability; • competitive pricing pressures; • dependency on key customers; • protection of intellectual property rights; • retirement benefits obligations; • changes in consumer lifestyle, nutritional preferences and health-related concerns; • supply of faulty or contaminated product; • catastrophic loss of one of the Group’s key manufacturing facilities; • failure to manage growth; • risk that acquisitions may not be successful; • interest rate and currency exchange rate fluctuations; • tax risks; and • seasonality. Risks relating to the Notes include: • the absence of a public market for the Notes and restrictions on the transfer of Notes; • the Notes will initially be held in book-entry form and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies; • the Group may incur substantially more debt; • investors in the Notes may have limited recourse against the independent auditors; • the Issuer may be unable to raise funds necessary to finance the change of control repurchase offers required by the Indenture governing the Notes; and • Rexam’s ability to pay principal and interest on the Notes may be affected by its organisational structure, as Rexam is dependent on payments from its subsidiaries, associates and joint ventures to fund payments to Investors on the Notes.

8 Summary Consolidated Financial Information and Other Data The following summary of Rexam’s consolidated financial information and other data should be read in conjunction with, and is qualified by reference to, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’, ‘‘Selected Consolidated Financial Information and Other Data’’, and Rexam’s consolidated financial statements, including the notes thereto, included elsewhere in this Offering Memorandum. The consolidated balance sheet data as at December 31, 2007 and 2006 (restated) and the consolidated income statement data for the years ended December 31, 2007 and 2006 (restated) are derived from Rexam’s consolidated financial statements as at and for the year ended December 31, 2007 included elsewhere in this Offering Memorandum. The consolidated balance sheet data as at December 31, 2006 and 2005 (restated) and the consolidated income statement data for the years ended December 31, 2006 and 2005 (restated) are derived from Rexam’s original 2006 consolidated financial statements included elsewhere in this Offering Memorandum. In 2007, Rexam divested its Glass business. Under IFRS, Rexam is required to record the net results of operations from its discontinued operations, including any capital gains or losses resulting from the disposal thereof, separately from the results of continuing operations. Due to this divestment the results of operations for the year ended December 31, 2006 were restated in the 2007 consolidated financial statements to reflect the continuing operations of Rexam excluding the Glass business. As a result, this Offering Memorandum contains two different presentations of Rexam’s 2006 consolidated income statement: (i) one reflecting the results of the Glass business as results from discontinued operations which is derived from the unaudited comparative column of the 2007 consolidated financial statements and (ii) another reflecting the results of the Glass business as results from continuing operations derived from the audited 2006 consolidated financial statements. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Results of Operations—Acquisitions, disposals and restructurings’’ and note 11 to Rexam’s 2007 consolidated financial statements included in this Offering Memorandum. In addition, the underlying results of operations for the year ended December 31, 2005 derived from the original 2006 consolidated financial statements was restated to reflect a change in accounting policy relating to disclosure of exceptional items. The balance sheet at December 31, 2006 derived from the 2007 consolidated financial statements and the balance sheet at December 31, 2005 derived from the original 2006 consolidated financial statements were restated to reflect final fair value adjustments on prior acquisitions. Potential investors should be aware that the consolidated financial statements for the year ended December 31, 2007 and the restated 2006 consolidated financial statements are not directly comparable to the original 2006 consolidated financial statements and the consolidated financial statements for the year ended December 31, 2005, which include the Glass business as a continuing operation. The audited consolidated financial statements of Rexam as of and for the years ended December 31, 2007 and 2006 have been prepared in accordance with IFRS and have been audited by PricewaterhouseCoopers LLP. IFRS differs in significant respects from U.S. GAAP.

9 Summary Consolidated Income Statement Data Results from continuing operations: For the year ended December 31, 2007 2006(1) 2006 2005(2) (audited) (unaudited) (audited) (unaudited) £m £m £m £m Sales ...... 3,611 3,301 3,738 3,237 Operating expenses ...... (3,240) (2,927) (3,324) (2,817) Operating profit ...... 371 374 414 420 Of which: Underlying operating profit ...... 354 375 415 409 Other operating profit(3) ...... 17 (1) (1) 11 Share of post tax profits of associates and joint ventures . . —997 Of which: Share of underlying post tax profits of associates and joint ventures ...... —113 Share of exceptional post tax profits of associates and joint ventures ...... —884 Retirement benefit obligations net finance cost ...... (14) (22) (23) (29) Interest expense ...... (111) (106) (106) (79) Of which: Underlying interest expense ...... (109) (103) (103) (88) Exceptional interest expense ...... (2) (3) (3) (9) Interest income ...... 14 13 13 12 Profit before tax ...... 260 268 307 331 Of which: Underlying profit before tax ...... 245 264 303 316 Other profit before tax(4) ...... 15 4 4 15 Tax...... (86) (73) (84) (108) Of which: Tax on underlying profit ...... (73) (64) (75) (89) Tax on exceptional items ...... (13) (9) (9) (19) Profit for the financial year ...... 174 195 223 223

(1) Restated to reflect the disposal of the Glass business. (2) Restated to reflect a change in accounting policy on exceptional items. The change had no effect on profit for the financial year or on net assets. (3) Other operating profit consists of operating profit from amortisation of certain acquired intangible assets, retirement benefit obligations exceptional items and other exceptional items. (4) Other profit before tax consists of profit before tax from amortisation of certain acquired intangible assets, retirement benefit obligations exceptional items and all other exceptional items.

10 Summary Consolidated Balance Sheet Data Summary: As at December 31, 2007 2006(1) 2006 2005(2) (audited) (unaudited) (audited) (unaudited) £m £m £m £m Assets Goodwill ...... 1,680 1,399 1,399 1,397 Property, plant and equipment ...... 1,322 1,190 1,191 1,186 Other assets ...... 2,157 1,633 1,633 1,575 Total assets ...... 5,159 4,222 4,223 4,158 Liabilities Borrowings (current) ...... (164) (275) (275) (164) Borrowings (non-current) ...... (1,679) (1,140) (1,140) (1,217) Retirement benefit obligations ...... (249) (514) (514) (783) Other liabilities ...... (1,234) (1,044) (1,045) (985) Total liabilities ...... (3,326) (2,973) (2,974) (3,149) Net assets ...... 1,833 1,249 1,249 1,009 Equity Shareholders’ equity ...... 1,831 1,247 1,247 1,009 Minority interests ...... 2 2 2 — Total equity ...... 1,833 1,249 1,249 1,009

(1) Restated for the final fair value adjustments applied to prior year acquisitions. (2) Restated to reflect final fair value adjustments on acquisition of Precise Technology.

Other Financial Data

For the year ended December 31, 2007 2006(1) 2006 2005 Underlying interest cover(2) ...... 4456

(1) Restated for the disposal of the Glass business. (2) Reflects the ratio of underlying operating profit to net underlying interest expense excluding convertible preference share dividends (for 2006 and 2005) for continuing operations for 2007 and 2006 (restated) and for total operations in 2006 (unrestated) and 2005 (restated). Please refer to the Consolidated Income Statement Data table in this section for a reconciliation of underlying operating profit and underlying interest expense to the Group’s IFRS line items.

11 RISK FACTORS The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. The factors below contain a description of all material risks that may affect the Issuer’s ability to fulfil its obligations to investors and those that are material to the securities to be admitted to trading in order for the investor to assess the market risk associated with the Notes. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but its inability to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons and the Issuer does not represent that the statements below regarding the risks of holding the Notes are exhaustive. Investors should carefully read the risk factors described below and the other information in this Offering Memorandum prior to deciding to invest in the Notes. The trading price of the Notes could decline due to any of these risks, and investors may lose all or part of their investment. This Offering Memorandum also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by Rexam, described below and elsewhere in this Offering Memorandum. Defined terms used in the statements below have the meanings assigned to them elsewhere in this Offering Memorandum, including under ‘‘Description of the Notes’’.

Risks Relating to Rexam’s Business Changes in the cost and availability of raw material and other input costs Steep and prolonged rises in input prices may have a material impact on the Group’s results. One consequence of a substantial rise in material costs could be a change in demand for the Group’s products as customers could change the packaging materials they use. Aluminium is by far Rexam’s most significant raw material cost, but resin costs are increasingly important as the Group builds its Plastic Packaging business. While Rexam has put in place commercial arrangements with certain customers to reduce its exposure to aluminium and resin price increases, changes could occur in these commercial arrangements, exposing Rexam to risk. There can be no assurance that the Group will be able to manage its exposure to price risks effectively, and failure to do so could have a material adverse effect on the Group’s business, financial condition and operating results.

Changes in legislation and applicable regulations Changes in legislation and applicable regulations may have an adverse impact on Rexam’s business, in particular:

Changes in recycling and health and safety regulations Changes in laws and regulations relating to deposits on, and recycling of, beverage containers could adversely affect the business of the Group if implemented on a large scale in the major markets in which the Group operates. Changes to health and food safety regulations could increase costs and may also have a material adverse effect on sales if, as a result, the public’s attitude towards end products for which the Group provides packaging is substantially affected.

12 Environmental laws and regulations Rexam is subject to various environmental laws and regulations that, inter alia, impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage and disposal of solid and hazardous waste and require clean-up of contaminated sites. Although Rexam believes that the environmental laws and regulations promulgated to date have not had a material adverse effect on it, there can be no assurance that future laws or regulations would not have a material adverse effect on the Group. Furthermore, a decline in Rexam’s customers’ preference for certain of its end products due to environmental considerations could have a negative effect on the future operations of the Group.

Labour disputes In 2007, nine of the Group’s U.S. plants experienced a labour strike that lasted approximately three weeks. Following its resolution, Rexam signed a labour agreement with the United Steel Workers for the next five years. Rexam believes that all of its operations have, in general, good relations with their employees and, where applicable, the trade unions that represent those employees. There can, however, be no assurance that the Group’s operations will not be affected by problems in the future. There can also be no assurance that work stoppages or other labour-related developments (including the introduction of new labour regulations in countries where the Group operates) will not adversely affect the business, financial condition or results of operations of the Group.

National political and economic stability The Group is a multinational group of companies operating in countries and regions with very different economic and political conditions and sensitivities. The Group’s operations and earnings may, therefore, be adversely affected by political or economic instability and unrest in some of these countries (including political, social and financial crises; civil unrest, wars and international conflicts; greater and tighter government regulation on cross-border trading, production, pricing and the environment; the taking of property by nationalisation or expropriation without fair compensation; hyperinflation in certain foreign countries; and impositions or increase of investment and other restrictions or requirements by foreign governments).

Competitive pricing pressures The Group operates in competitive markets. In its largest markets the Group competes with multinational corporations with significant resources and capital. Pressures from competitors and producers of alternative forms of packaging have resulted in excess capacity in certain countries in the past and have led to significant pricing pressures in the rigid packaging market. Unexpected or abnormal price aggression from these competitors may cause a reduction in the Group’s sales and margins, which could have a material adverse effect on the Group’s business, financial condition and results of operations.

Dependency on key customers Certain of the Group’s markets are dominated by a few key customers. The Group’s top ten customers account for more than half of its annual sales. The lowering or cessation of orders from some of these key customers could, therefore, adversely impact the Group’s business, financial condition and results of operations.

13 Protection of intellectual property rights In addition to relying on patent and trademark rights, the Group relies on unpatented proprietary know-how and trade secrets, and employs various methods, including confidentiality agreements with its employees and consultants, to protect its know-how and trade secrets. However, this reliance may not afford complete protection for the Group, and there can be no assurance that others will not independently develop the same know-how and trade secrets, or develop better production methods than the Group. Should the Group be unable to respond to such competitive technological advances, its future performance could be adversely affected. The Group’s success depends in part on its ability to obtain, or licence from third parties, patents, trademarks, trade secrets and similar proprietary rights without infringing on the proprietary rights of third parties. Although Rexam believes that its intellectual property rights are sufficient to allow it to conduct its business without incurring liability to third parties, the Group’s products may infringe on the intellectual property rights of such persons. Furthermore, no assurance can be given that the Group will not be subject to claims asserting infringement of intellectual property rights of third parties, seeking damages, the payment of royalties or licensing fees and/or injunctions against the Group’s sale of its products. Any such litigation could be protracted and costly and could have a material adverse effect on the Group’s business, financial condition and results of operations.

Retirement benefits The Group operates a number of pension and other post-retirement benefit plans throughout the world funded by a range of assets which may include property, bonds, equities and derivatives. The value of these assets is heavily dependent on the performance of markets which are subject to volatility. Certain of these plans are unfunded. The liability structure of the obligations to provide such benefits is also subject to market volatility and other economic and demographic factors. Additional significant funding of the Group’s pension and other post-retirement benefit obligations may be required in future if market underperformance is severe, and to fund existing fund deficits, particularly if actuarial valuation assumptions are not borne out.

Changes in consumer lifestyle, nutritional preferences and health-related concerns End products such as carbonated drinks and alcoholic beverages represent a large proportion of the Group’s packaging market. Any far-reaching move away from these product types as a result of lifestyle, nutritional and health considerations could have a significant impact on the Group’s customers and hence on the Group’s business, financial condition and results of operations.

Supply of faulty or contaminated product The Group has control measures and systems in place to ensure the maximum safety and quality of its products is maintained. The consequences of not being able to do so, due to accidental or malicious raw material contamination, or due to supply chain contamination caused by human error or equipment fault, could be severe. Such consequences may include adverse effects on consumer health, loss of market share, financial costs and loss of turnover.

Catastrophic loss of one of the Group’s key manufacturing facilities While the Group manufactures its products in a large number of diversified facilities, and maintains insurance covering these facilities, a catastrophic loss of the use of all or a portion of any of the Group’s key manufacturing facilities due to accident, labour issues, weather conditions, natural disaster or otherwise, whether short or long-term, may have a material adverse effect on the business, financial condition and results of operations of the Group.

14 Failure to manage growth The Group’s strategy may include expansion of its business internationally through acquisitions. Any such acquisitions will require the attention of management which may result in the diversion of other resources away from organic growth. The Group’s ability to effectively integrate and manage acquired businesses and handle any future growth will depend upon a number of factors and failure to manage growth effectively could adversely affect the business, financial condition and results of operations of the Group.

Risk that acquisitions may not be successful The Group has acquired and may seek to acquire additional companies or assets. The acquisition of any company or group of assets is subject to substantial risks, including the failure to identify material problems during due diligence, the risk of over-paying for assets and the inability to arrange financing for an acquisition as may be required or desired. Further, the integration and consolidation of acquisitions requires substantial human, financial and other resources and, ultimately, the Group’s acquisitions may not be successfully integrated. There can be no assurances that any acquisitions will perform as expected or that the returns from such acquisitions will support the indebtedness incurred to acquire them or the capital expenditures needed to develop them.

Interest rate and currency exchange rate fluctuations The Group is subject to the effects of interest rate and currency exchange rate fluctuations on certain of its financing arrangements. Interest rates and currency exchange rates are highly sensitive to many factors beyond the Group’s control, including monetary policies pursued by national governments, domestic and international economic and political conditions and other factors. Changes in market interest rates and currency exchange rates could increase the Group’s indebtedness and have a material adverse effect on the Group’s business, financial condition and results of operations. The Group is exposed to the translation of the results of overseas subsidiaries into Sterling as well as the impact of currency fluctuations on its commercial transactions denominated in foreign currencies. Although the Group engages in currency hedging transactions to reduce exposure to transactional currency fluctuations, there can be no assurance that these currency hedging transactions will be sufficient to protect against adverse exchange rate movements which could have a material adverse effect on its business, financial condition and results of operations.

Tax risk Tax planning complements and is based around the needs of the Group’s operating businesses. In an increasingly complex international tax environment, a degree of uncertainty is inevitable in estimating the Group’s tax liabilities.

The Group is affected by seasonality in certain of its businesses Demand for beverage cans and certain types of plastic packaging, such as beverage closures, may be affected by adverse weather conditions, especially during the summer months when prolonged periods of unseasonably cool or wet weather in a particular market may affect sales volumes and therefore the financial condition and the results of the Group’s operations. See ‘‘Management’s Discussion and Analysis—Overview—Factors Affecting Results of Operations—Seasonality’’.

15 Risks relating to the Notes Absence of a public market for the Notes and restriction on the transfer of Notes The Notes are a new issue of securities for which there is currently no public market. The Issuer has applied for the listing of the Notes on the Regulated Market of the London Stock Exchange, a regulated market. However, the Issuer cannot assure you that the Notes will be listed on any exchange at the time the Notes are delivered to the Initial Purchasers or at any other time. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, Rexam’s performance and other factors. Because the Notes are being sold pursuant to an exemption from registration under applicable securities laws and, therefore, may not be publicly offered, sold or otherwise transferred in any jurisdiction where such registration may be required, no public market for the Notes will necessarily develop. Certain of the Initial Purchasers may make a market in the Notes after this offering is completed. However, they are not obligated to do so, and the Initial Purchasers may cease any such market-making activities at any time. There can be no assurance that an active trading market for the Notes will develop, or if one does develop, that it will be sustained. See ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’. The Notes have not been registered under the U.S. Securities Act or any U.S. state securities laws, and the Issuer has not agreed to and does not intend to register the Notes under the U.S. Securities Act or under any other country’s securities laws. Therefore, you may not offer or sell the Notes, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws. You should read the discussion under the heading ‘‘Transfer Restrictions’’ for further information about the transfer restrictions that apply to the Notes. It is your obligation to ensure that your offers and sales of Notes within the United States and other countries comply with all applicable securities laws.

The Notes will initially be held in book-entry form and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies Unless and until Notes in definitive registered form, or definitive registered notes, are issued in exchange for book-entry interests, owners of book-entry interests will not be considered owners or holders of Notes. DTC, or its nominee, will be the registered holder of the Rule 144A global notes and Regulation S global notes for the benefit of its participants including Euroclear and Clearstream, Luxembourg. After payment to the registered holder, the Issuer will have no responsibility or liability for the payment of interest, principal or other amounts to the owners of book-entry interests. Accordingly, if you own a book-entry interest, you must rely on the procedures of DTC, Euroclear and/or Clearstream, Luxembourg, and if you are not a participant in DTC, Euroclear and/or Clearstream, Luxembourg, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder under the indenture. See ‘‘Book-Entry; Delivery and Form’’. Unlike the Holders of the Notes themselves, owners of book-entry interests will not have any direct rights to act upon the Issuer’s solicitations for consents, requests for waivers or other actions from Holders of the Notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from DTC, Euroclear and/or Clearstream, Luxembourg or, if applicable, from a participant. There can be no assurance that procedures implemented for the granting of such proxies will be sufficient to enable you to vote on any matters on a timely basis. Similarly, upon the occurrence of an event of default under the Indenture, unless and until definitive registered notes are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through DTC, Euroclear and/or Clearstream, Luxembourg. The

16 Issuer cannot assure you that the procedures to be implemented through DTC, Euroclear and/or Clearstream, Luxembourg will be adequate to ensure the timely exercise of rights under the Notes. See ‘‘Book-Entry; Delivery and Form’’.

The Group may be able to incur substantially more debt in the future The Group may be able to incur substantial additional indebtedness in the future, including in connection with future acquisitions, some of which may be secured by some or all of Rexam’s assets. The terms of the Notes will not limit the amount of indebtedness the Group may incur. Any such incurrence of additional indebtedness could exacerbate the related risks that the Group now faces.

Investors in the Notes may have limited recourse against the independent auditors See ‘‘Independent Auditors’’ for a description of the independent auditors’ reports, including language limiting the auditors’ scope of duty in relation to such reports and the consolidated financial statements to which they relate. In particular, the February 20, 2007 and February 22, 2006 reports of PricewaterhouseCoopers LLP with respect to such audited consolidated financial statements, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, provide: ‘‘This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.’’ The SEC would not permit such limiting language to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the Exchange Act. If a U.S. court (or any other court) were to give effect to the language quoted above, the recourse that investors in the Notes may have against the independent auditors based on their reports or the consolidated financial statements to which they relate could be limited.

The Issuer may be unable to raise funds necessary to finance the change of control repurchase offers required by the Indenture governing the Notes Under the Indenture, if a Change of Control Triggering Event occurs, unless the Issuer has redeemed the Notes in full, it will be required to make an offer to each Holder of the Notes to repurchase all or any part of that Holder’s Notes on the terms set forth in the Notes. In the Change of Control Offer, the Issuer will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased, to the date of repurchase. See ‘‘Description of the Notes—Repurchase upon a Change of Control Offer’’. Any requirement to offer to repurchase outstanding Notes may require the Issuer to refinance its other outstanding debt, which it may not be able to do on commercially reasonable terms, if at all.

Rexam’s ability to pay principal and interest on the Notes may be affected by its organisational structure. Rexam is dependent on payments from its subsidiaries, associates and joint ventures to fund payments to Investors on the Notes. The Issuer is a holding company that does not itself conduct any business operations. As a result, the Issuer relies on dividends, royalties, license fees and other payments from its subsidiaries, associates and joint ventures to generate the funds necessary to meet its obligations. To date, the Issuer has funded its obligations with debt and cash flows from dividends royalties and license fees from its operations. The Issuer’s subsidiaries, associates and joint ventures are separate legal entities and are under no obligation, contractual or otherwise, to pay dividends. The ability of the Issuer’s subsidiaries, associates and joint ventures to make such payments to the Issuer are subject to, among other things,

17 the availability of profits or funds, the terms of each entities’ indebtedness, the terms of their articles of association, the terms of their shareholder agreements (if any) and applicable laws, including foreign exchange controls, withholding tax issues and other laws and Central Bank approvals. Because the Issuer is a holding company, its rights and the rights of its creditors, including the Holders of the Notes offered hereby, to participate in the assets of any Subsidiary of the Issuer upon the Subsidiary’s liquidation or recapitalisation will be subject to the prior claims of such Subsidiary’s creditors except to the extent that the Issuer may itself be a creditor with recognised claims against such Subsidiary.

18 USE OF PROCEEDS The proceeds of the issue of the Notes, after deducting underwriting discounts and other estimated expenses payable in connection with the offering, are expected to be approximately $545 million, after deducting certain fees, expenses and issue discounts relating to the offering. Rexam expects to use the net proceeds from the offering to repay a portion of its outstanding debt under its credit facilities, including credit facilities with certain affiliates of the Initial Purchasers, and for general corporate purposes. For more information, see ‘‘Capitalisation’’.

19 EXCHANGE RATES The following table sets forth, for the periods indicated, information concerning the noon buying rate for Sterling, expressed in U.S. dollars per £1.00. The rates set forth below are provided solely for your convenience and were not necessarily used by Rexam in the preparation of its consolidated financial statements included elsewhere in this Offering Memorandum. The ‘‘noon buying rate’’ is the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that Sterling could have been, or could be, converted into U.S. dollars at that rate or at any other rate.

Noon Buying Rate U.S. dollars per £1.00 Period End Average(1) High Low Year: 2003 ...... 1.7842 1.6450 1.7842 1.5500 2004 ...... 1.9160 1.8356 1.9482 1.7544 2005 ...... 1.7188 1.8147 1.9292 1.7138 2006 ...... 1.9586 1.8582 1.9794 1.7256 2007 ...... 1.9909 2.0022 2.1104 1.9235 Month: October 2007 ...... 2.0774 2.0446 2.0777 2.0279 November 2007 ...... 2.0561 2.0701 2.1104 2.0478 December 2007 ...... 1.9909 2.0185 2.0658 1.9974 January 2008 ...... 1.9882 1.9698 1.9895 1.9515 February 2008 ...... 1.9892 1.9638 1.9923 1.9405 March 2008 ...... 1.9875 2.0032 2.0311 1.9823 April 2008 ...... 1.9864 1.9646 1.9923 1.9405 Through May 23, 2008 ...... 1.9818 1.9620 1.9818 1.9451

(1) The average of the noon buying rates for Sterling on the last business day of each full month during the relevant year for yearly averages or each business day during the relevant month (or portion thereof) for monthly averages.

20 CAPITALISATION The table below presents the Group’s consolidated cash and cash equivalents and capitalisation as of December 31, 2007 on an actual basis and as adjusted to reflect the issuance of the Notes (prior to the application of the net proceeds of the offering as discussed under ‘‘Use of Proceeds’’), as if the offering had been completed as of December 31, 2007. You should read this table together with ‘‘Use of Proceeds,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Description of the Notes,’’ and the Group’s financial statements and the notes to those financial statements, which are included elsewhere in this Offering Memorandum. Other than as reflected below, there have been no material changes to the Group’s capitalisation since December 31, 2007.

Actual As adjusted £m £m Cash and cash equivalents(1) ...... 113 388 Bank overdrafts ...... (77) (77) Bank loans ...... (17) (17) Subordinated bonds ...... (24) (24) Medium term loans ...... (37) (37) Finance leases ...... (9) (9) Current borrowings ...... (164) (164) Bank loans ...... (265) (265) Subordinated bonds ...... (540) (540) Medium term loans ...... (870) (870) Finance leases ...... (4) (4) Notes offered hereby(2) ...... — (275) Non-current borrowings ...... (1,679) (1,954) Total borrowings ...... (1,843) (2,118) Total shareholders’ equity ...... (1,831) (1,831) Minority interests ...... (2) (2) Total equity ...... (1,833) (1,833) Total capitalisation ...... (3,676) (3,951)

(1) Actual cash and cash equivalents includes cash at bank and in hand and short-term deposits. Adjusted cash and cash equivalents is calculated by adding to the cash and cash equivalents the estimated net proceeds of the Notes offered hereby of £275 million. (2) Reflects the aggregate principal amount of the Notes, translated into Sterling at $1.9818 = £1.00, the noon buying rate for Sterling on May 27, 2008, net of debt issuance costs and issue discounts. As at April 30, 2008, the Group had further drawn down on existing credit facilities amounts of £149 million to fund the acquisition of Rostar, £366 million to fund the seasonal increase in working capital and £140 million to fund expenditure on fixed assets. On May 23, 2008, Rexam entered into a Note Purchase Agreement under which it agreed to issue and sell $225 million 6.10% Senior Notes due June 9, 2013. The sale is expected to be completed in June 2008.

21 SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA The following selected consolidated financial information and other data should be read in conjunction with, and is qualified by reference to, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and Rexam’s consolidated financial statements, including the notes thereto, included elsewhere in this Offering Memorandum.. The consolidated balance sheet data as at December 31, 2007 and 2006 (restated) and the consolidated income statement data for the years ended December 31, 2007 and 2006 (restated) are derived from Rexam’s consolidated financial statements as at and for the year ended December 31, 2007 included elsewhere in this Offering Memorandum. The consolidated balance sheet data as at December 31, 2006 and 2005 (restated) and the consolidated income statement data for the years ended December 31, 2006 and 2005 (restated) are derived from Rexam’s original 2006 consolidated financial statements included elsewhere in this Offering Memorandum. In 2007, Rexam divested its Glass business. Under IFRS, Rexam is required to record the net results of operations from its discontinued operations, including any capital gains or losses resulting from the disposal thereof, separately from the results of continuing operations. Due to this divestment the results of operations for the year ended December 31, 2006 were restated in the 2007 consolidated financial statements to reflect the continuing operations of Rexam excluding the Glass business. As a result, this Offering Memorandum contains two different presentations of Rexam’s 2006 consolidated income statement: (i) one reflecting the results of the Glass business as results from discontinued operations which is derived from the unaudited comparative column of the 2007 consolidated financial statements and (ii) another reflecting the results of the Glass business as results from continuing operations derived from the audited 2006 consolidated financial statements. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Results of Operations—Acquisitions, disposals and restructurings’’ and note 11 to Rexam’s 2007 consolidated financial statements included in this Offering Memorandum. In addition, the underlying results of operations for year ended December 31, 2005 derived from the original 2006 consolidated financial statements was restated to reflect a change in accounting policy relating to the disclosure of exceptional items. The balance sheet at December 31, 2006 derived from the 2007 consolidated financial statements and the balance sheet at December 31, 2005 derived from the original 2006 consolidated financial statements were restated to reflect final fair value adjustments on prior acquisitions. Potential investors should be aware that the consolidated financial statements for the year ended December 31, 2007 and the restated 2006 consolidated financial statements are not directly comparable to the original 2006 consolidated financial statements and the consolidated financial statements for the year ended December 31, 2005, which include the Glass business as a continuing operation. The audited consolidated financial statements as of and for the years ended December 31, 2007 and 2006 have been prepared in accordance with IFRS and have been audited by PricewaterhouseCoopers LLP. IFRS differs in significant respects from U.S. GAAP.

22 Selected Consolidated Income Statement Data Results from continuing operations: For the year ended December 31, 2007 2006(1) 2006 2005(2) (audited) (unaudited) (audited) (unaudited) £m £m £m £m Sales ...... 3,611 3,301 3,738 3,237 Operating expenses ...... (3,240) (2,927) (3,324) (2,817) Operating profit ...... 371 374 414 420 Of which: Underlying operating profit ...... 354 375 415 409 Other operating profit(3) ...... 17 (1) (1) 11 Share of post tax profits of associates and joint ventures . . —997 Of which: Share of underlying post tax profits of associates and joint ventures ...... —113 Share of exceptional post tax profits of associates and joint ventures ...... —884 Retirement benefit obligations net finance cost ...... (14) (22) (23) (29) Interest expense ...... (111) (106) (106) (79) Of which: Underlying interest expense ...... (109) (103) (103) (88) Exceptional interest expense ...... (2) (3) (3) 9 Interest income ...... 14 13 13 12 Profit before tax ...... 260 268 307 331 Of which: Underlying profit before tax ...... 245 264 303 316 Other profit before tax(4) ...... 15 4 4 15 Tax...... (86) (73) (84) (108) Of which: Tax on underlying profit ...... (73) (64) (75) (89) Tax on exceptional items ...... (13) (9) (9) (19) Profit for the financial year ...... 174 195 223 223

(1) Restated to reflect the disposal of the Glass business. (2) Restated to reflect a change in accounting policy on exceptional items. The change had no effect on profit for the financial year or on net assets. (3) Other operating profit consists of operating profit from amortisation of certain acquired intangible assets, retirement benefit obligations exceptional items and other exceptional items. (4) Other profit before tax consists of profit before tax from amortisation of certain acquired intangible assets, retirement benefit obligations exceptional items and all other exceptional items.

23 Selected Consolidated Balance Sheet Data As at December 31, 2007 2006(1) 2006(2) 2005 (audited) (unaudited) (audited) (unaudited) £m £m £m £m Assets Goodwill ...... 1,680 1,399 1,399 1,397 Property, plant and equipment ...... 1,322 1,190 1,191 1,186 Other assets ...... 2,157 1,633 1,633 1,575 Total assets ...... 5,159 4,222 4,223 4,158

Liabilities Borrowings (current) ...... (164) (275) (275) (164) Borrowings (non-current) ...... (1,679) (1,140) (1,140) (1,217) Retirement benefit obligations ...... (249) (514) (514) (783) Other liabilities ...... (1,234) (1,044) (1,045) (985) Total liabilities ...... (3,326) (2,973) (2,974) (3,149) Net assets ...... 1,833 1,249 1,249 1,009

Equity Shareholders’ equity ...... 1,831 1,247 1,247 1,009 Minority interests ...... 2 2 2 — Total equity ...... 1,833 1,249 1,249 1,009

(1) Restated for the final fair value adjustments applied to prior year acquisitions. (2) Restated to reflect final fair value adjustments on acquisition of Precise Technology.

Other Financial Data For the year ended December 31, 2007 2006(1) 2006 2005 Underlying interest cover(2) ...... 4456

(1) Restated for the disposal of the Glass business. (2) Reflects the ratio of underlying operating profit to net underlying interest expense excluding convertible preference share dividends (for 2006 and 2005) for continuing operations for 2007 and 2006 (restated) and for total operations in 2006 (unrestated) and 2005 (restated). Please refer to the Consolidated Income Statement Data table in this section for a reconciliation of underlying operating profit and underlying interest expense to the Group’s IFRS line items.

24 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read together with the consolidated financial statements, including the accompanying notes, included elsewhere in this Offering Memorandum. The audited consolidated financial statements of Rexam as of and for the years ended December 31, 2007, 2006 and 2005 have been prepared in accordance with IFRS and have been audited by PricewaterhouseCoopers LLP. IFRS differs in significant respects from U.S. GAAP. Some of the information in the discussion and analysis set forth below and elsewhere in this Offering Memorandum includes forward-looking statements that involve risks and uncertainties. See ‘‘Special Note on Forward-Looking Statements’’ and ‘‘Risk Factors’’ for a discussion of important factors that could cause actual results to differ materially from the results described in the forward-looking statements contained in this Offering Memorandum.

OVERVIEW Factors Affecting Results of Operations Acquisitions, disposals and restructurings Acquisitions have been one of the linchpins of Rexam’s strategy for growth. During 2007 Rexam added to both Beverage Cans and Plastic Packaging. In Beverage Cans, Rexam’s most significant acquisition was Rostar, the main beverage can maker in Russia, which was acquired for £149 million (with the transaction completed in January 2008). The acquisition of O-I Plastics for $1,825 million reflects Rexam’s strategy to capture growth in Plastic Packaging. O-I Plastics is a leading U.S. manufacturer of rigid plastic healthcare packaging and plastic closure systems. In addition to acquisitions, Rexam has undertaken a number of portfolio and structural changes in recent years. In 2007, Rexam sold its Glass business to Ardagh Glass Group PLC (Ardagh). The profit on the sale after tax was £48 million. The sale followed a review of the position of the Glass business within Rexam’s consumer packaging portfolio and was consistent with the Group’s strategy to focus on organic growth and acquisitions in higher growth and emerging markets. Proceeds from the sale of the Glass business, net of costs and including borrowings and retirement benefit liabilities disposed, totalled £401 million and were reinvested in the Plastic Packaging and Beverage Can businesses. During 2006, Rexam divested its non barrier thin wall plastics operations in the United Kingdom and Scandinavia for £23 million. Both were relatively low margin businesses where there was little chance of building a sizeable regional or global presence. Rexam also announced its intention to sell Rexam Petainer, its plastic bottle business based in Scandinavia and the Czech Republic.

Capital expenditure During 2006 and 2007, Rexam’s capital expenditure was higher than 2005 and recent prior periods. In Beverage Cans, Rexam continued to invest in new lines for the growing product segment of non-standard beverage cans in its three main markets: North America, Europe and South America. In North America, for example, non standard sizes now account for 14% of Rexam’s volumes. Rexam opened new greenfield beverage can and end plants in Brazil, Austria and Russia in order to satisfy growing demand for beverage cans and is adding an additional line to the new energy can plant in Austria. In Spain, Rexam is installing a further steel line to meet market growth there, in Egypt it is adding a second steel line to the plant acquired in 2006, and in Denmark it is constructing the first beverage can plant in the country. Total capital expenditure attributed to continuing operations

25 on these and other smaller projects in 2007 was £294 million, a significant increase over capital expenditure in 2006 and 2005.

Changes in the cost and availability of raw materials Aluminium The price of aluminium impacted Rexam’s profit performance in the period under review. The price of aluminium remained high during 2007 and spot prices averaged $2,664 per tonne, compared to $2,595 per tonne in 2006. This represented a significant increase over the average spot price for aluminium in 2005, which was $1,900 per tonne. Aluminium accounts for the majority of the raw materials Rexam uses and represents about 45% of its input costs. In 2007, Rexam’s spending on aluminium equalled £1.45 billion, of which £155 million in increased costs was contractually passed through to customers, compared to £1.30 billion in 2006, of which £69 million in increased costs was contractually passed through to customers and £1.08 billion in 2005, of which £52 million in increased costs was contractually passed through to customers. Rexam has put in place measures to eliminate most of its exposure to aluminium volatility in 2008. In the Americas, Rexam is largely unaffected by the cost of aluminium since changes are passed through to customers. In Europe, Rexam has negotiated with a number of its large customers to adopt the pass through model such that approximately 50% of its European metal requirements are now on this basis. Rexam renegotiated about a third of its European contracts for 2008 supply at prices reflecting the higher input costs and also put hedges in place for aluminium. The balance of the exposure is largely covered by existing hedges.

Polymer Resins In 2007, the Group’s total spending on resins significantly increased over its spending on resins in 2006 and 2005. Approximately 80% of plastic packaging sales are now on a pass through basis, but with resin costs now representing an ever increasing part of Rexam’s cost base (owing to the growth of Plastic Packaging), the Group is examining ways to manage the remaining contracts more effectively either by further consolidating resin suppliers, renegotiating outstanding contracts to a pass through basis or using forward contracts (or other such mechanisms).

Energy The cost of oil went up from $57 in 2005 to $65 in 2006 and about $90 per barrel in 2007, which had an impact on Rexam’s freight, resin and energy costs. Rexam’s spend on energy and freight has steadily increased since 2005, and Rexam anticipates increased costs for 2008.

Seasonality Sales of beverage cans and certain types of plastic packaging, such as beverage closures, exhibit a degree of seasonality in demand, with sales volumes in North America and Europe typically being greater in the second and third quarters of the year and volumes in South America typically being greater in the third and particularly the fourth quarters of the year.

Financial risk and hedging activities Hedging activities are used to mitigate the following risks: commodity price and currency transaction risks for commodities, fair value and cash flow interest rate risks associated with Rexam’s borrowings and currency translation of net assets and transactions in overseas subsidiaries.

26 Rexam does not use derivative financial instruments for purposes other than for hedging its exposures. Accounting standard IAS39 was adopted on January 1, 2005, resulting in the recognition at fair value of all derivative financial instruments previously held off balance sheet under UK GAAP. To avoid income statement volatility, and where such benefits outweigh the costs of compliance, Rexam has designated many of its economic hedges as hedging instruments under IAS39. However, for certain effective economic hedging relationships such hedge accounting treatment is not permitted under IFRS. Where hedge accounting is not achieved, fair value movements on derivatives are recorded in the consolidated income statement, which could give rise to earnings volatility. Further details of the Group’s financial risk management and derivative and non-derivative financial instruments are set out in note 24 to the 2007 consolidated financial statements.

Tax risk Tax planning complements and is based around the needs of Rexam’s operating businesses. In an increasingly complex international tax environment, a degree of uncertainty is inevitable in estimating Rexam’s tax liabilities.

Effects of Currency Fluctuation The U.S. dollar and the euro are the principal currencies that impact Rexam’s results. In addition to translation exposure, the Group is also exposed to movements in exchange rates on certain of its transactions. These are principally the U.S. dollar/euro movement and the U.S. dollar/Brazilian Real movement on the European and South American Beverage Can operations respectively. The exposure in Europe is largely hedged and therefore did not impact underlying profit in 2007. The exchange rate movements between the U.S. dollar and Brazilian Real reduced underlying operating profit by about £7 million in 2007, but this exposure has now been hedged for 2008.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 These results are based on the audited financial statements for the year ended December 31, 2007 and exclude the results of operations of the Glass business, which was disposed of in 2007. See ‘‘Factors Affecting Results of Operations—Acquisitions, disposals and restructurings’’ above and note 11 to Rexam’s 2007 consolidated financial statements for information on the impact of these discontinued operations on the financial statements. For the 12 months to December 31, 2007, Rexam delivered a growth of 11%, reporting sales of £3,566 million from ongoing operations and building on the momentum from the previous year. Organic sales growth contributed 11% and acquisitions 5%, reduced 5% by currency translation, mainly relating to the U.S. dollar. Underlying operating profit from ongoing operations was £349 million compared with £369 million the previous year as restated for the sale of Glass in 2007. While Rexam achieved price improvements, cost reductions and better product mix, its business continued to be impacted by high aluminium costs (£65 million (including the £13 million gain realised in 2006 on the renegotiation of a metal supply contract that could not be repeated in 2007)); further weakening of the U.S. dollar and U.S. dollar related currencies (£20 million); start up issues at the new end making plant in Manaus, Brazil (£5 million) as well as a strike in April and May 2007 at nine of its U.S. can making facilities (£13 million). Underlying profit before tax was £245 million compared with £264 million in 2006.

27 Summary The following tables set out an analysis of the results of operations for years ended December 31, 2007 and 2006. The financial review of Rexam’s results is based on what it terms the underlying business performance, as shown in the first column of the tables below, which adjusts for exceptional items.

Underlying business Exceptional performance(1) items Total £m £m £m 2007 Continuing operations: Sales ...... 3,611 — 3,611 Operating profit ...... 354 17 371 Total net finance cost(3) ...... (109) (2) (111) Profit before tax ...... 245 15 260 Profit after tax—continuing operations ...... 172 2 174

Discontinued operations: Profit for the year ...... 66 Total profit for the year ...... 240

Total basic earnings per share(p) ...... 39.0 Underlying earnings per share (p) ...... 28.0 Interim dividend per share (p) ...... 8.3 Final dividend per share (p)(4) ...... 11.7 2006—restated Continuing operations: Sales ...... 3,301 — 3,301 Operating profit/(loss) ...... 375 (1) 374 Share of associates profit after tax ...... 1 8 9 Total net finance cost(3) ...... (112) (3) (115) Profit before tax ...... 264 4 268 Profit/(loss) after tax—continuing operations ...... 200 (5) 195

Discontinued operations: Profit for the year ...... 28 Total profit for the year ...... 223

(1) Underlying business performance is the primary performance measure used by management, who believe that the exclusion of exceptional items aids comparison of underlying performance of continuing operations, which exclude the discontinued Glass business. Exceptional items include the gains and losses on disposal of businesses, the restructuring and integration of businesses, major asset impairments and disposals, significant litigation and tax related claims, the subsequent recognition of acquired deferred tax assets, the amortisation of certain acquired intangible assets, non hedge accounted fair value movements on financing derivatives and significant gains arising on reduction of retiree medical and pension liabilities. (2) Except for per share information, which is expressed in pence. (3) Comprises underlying net interest expense of £95 million (2006: £90 million) and retirement benefit obligations net finance cost of £14 million (2006: £22 million).

28 (4) Payable on June 3, 2008. A summary of underlying business performance from continuing operations is set out below:

2006 2007 restated Change £m £m % Ongoing operations ...... 3,566 3,199 +11 Disposals ...... 45 102 Sales ...... 3,611 3,301 Ongoing operations ...... 349 369 5 Disposals ...... 5 6 Underlying operating profit ...... 354 375 6 Share of associates profit after tax ...... — 1 Underlying total net finance cost ...... (109) (112) Underlying profit before tax ...... 245 264 7 Underlying profit after tax ...... 172 200 14

Results of Operations Sales The following table sets out an analysis of sales movement between the years ended December 31, 2007 and 2006:

Beverage Plastic Total Cans Packaging £m £m £m Sales 2006—restated ...... 3,301 Disposals 2006 ...... (102) Ongoing operations 2006 restated ...... 3,199 2,490 709 Acquisitions 2006 ...... 22 2 20 Currency fluctuations ...... (156) (123) (33) Ongoing operations 2006 (adjusted) ...... 3,065 2,369 696 Acquisition of O-I Plastics ...... 155 — 155 Organic change in sales ...... 346 317 29 Ongoing operations 2007 ...... 3,566 2,686 880 Disposals 2007 ...... 45 Sales 2007 ...... 3,611

Organic sales growth, which excludes the impact of acquisitions, disposals and currency, was £346 million, an increase of 11%, of which £157 million came from pass through of raw material cost increases (principally aluminium in the Beverage Can operations). Organic sales growth also reflected volume gains, predominantly from the European and South American Beverage Can operations, and, to a lesser degree, price increases, primarily from Beverage Can Europe & Asia on renegotiation of its open sales contracts, and Beverage Can North America. Volumes in Beverage Can North America were down due to reduced demand for 12oz carbonated soft drinks cans, a strike at a number of its plants in the first half of the year and production downtime due to conversion of 12oz can lines to higher growth specialty can lines.

29 Plastic Packaging benefited from stronger volumes across its Dispensing Systems and Pharma businesses.

Underlying operating profit movement The table below represents underlying profit movement between the years ended December 31, 2007 and 2006:

Beverage Plastic Total Cans Packaging £m £m £m Underlying operating profit 2006—restated ...... 375 Disposals 2006 ...... (6) Ongoing operations 2006 restated ...... 369 289 80 Acquisitions 2006 ...... 2 — 2 Currency fluctuations ...... (19) (14) (5) Ongoing operations 2006 (adjusted) ...... 352 275 77 Acquisition of O-I Plastics ...... 22 — 22 Organic change in underlying operating profit ...... (25) (31) 6 Ongoing operations 2007 ...... 349 244 105 Disposals 2007(1) ...... 5 Underlying operating profit 2007 ...... 354

(1) Includes the Petainer refillable plastic bottle operations which are classified as assets available for sale. Consequently, no depreciation has been charged in 2007, which has increased reported underlying operating profit by £2 million. The reduction in underlying operating profit, after allowing for the impact of acquisitions, disposals and currency, was £25 million (7%) which reflects continued high input costs and the impact of the strike in the Beverage Can North America business offsetting gains from price changes in the Beverage Can operations as well as volume and mix changes and efficiency and other savings. Within Rexam’s Beverage Can operations, price increases and pass through arrangements recouped the effect of rising aluminium prices. A gain of £13 million realised in 2006 on the renegotiation of a metal supply contract in the United States was not repeated. Rexam estimates that the strike in the Beverage Can North America operation cost £13 million. Overall, the growth in non standard can sizes and energy drinks together with efficiency savings helped to counter the effect of higher conversion costs, U.S. dollar/Brazilian Real exchange rates as well as production start up issues in the new can end manufacturing facility in the Beverage Can South America operation. Plastic Packaging reported an 8% organic improvement in underlying profit. Efficiency savings and good volume growth across most businesses were more than sufficient to cover the rise in resin, energy and other input costs. Although the impact of price increases was negative for the year, it showed a positive trend in the second half of 2007 compared to the first half of 2007; the negative price change noted in the above table relates mainly to pass through to customers of cost reductions in certain types of resin. O-I Plastics, acquired in August 2007, contributed £155 million in sales and £22 million in underlying operating profit for the five month period following acquisition. The net impact of fair value adjustments reduced underlying operating profit for the period by £2 million including a charge relating to finished goods inventory of £4 million.

30 Net finance costs The table below represents net finance costs for the years ended December 31, 2007 and 2006:

2006 2007 restated £m £m Net interest ...... (95) (90) Retirement benefit obligations net finance cost ...... (14) (22) Underlying total net finance cost ...... (109) (112)

The underlying total net finance cost reduced by £3 million compared with the prior year, primarily due to the reduction in retirement benefit obligations net finance cost of £8 million following the significant decrease in liabilities as discussed in ‘‘—Retirement benefits’’ below. The increase in net interest of £5 million is attributed to higher average interest rates (the U.S. dollar and euro rates were up by 10 and 120 basis points respectively) and higher average net borrowings. The latter is a consequence of the acquisition of O-I Plastics and increased capital expenditure, partially offset by proceeds from the disposal of the Glass operations and the share placement, both in June 2007. Overall, the average interest rate during the year was 6.5% compared with 6.2% in 2006. Based on reported underlying operating profit, underlying interest cover was 3.7 times for 2007 compared with 4.8 times for 2006. The reduction is due to lower underlying operating profit. The impact of the latter is to exclude the underlying operating profit of the Glass business but not to recognise the expected reduction in interest cost on the disposal proceeds. Including notional interest attributable to the Glass proceeds, underlying interest cover would have been around 4.3 times. Underlying interest cover is the ratio of underlying operating profit to underlying total net interest expense excluding convertible share preference dividends.

Retirement benefits The retirement benefit obligations net finance cost for continuing operations is analysed as follows:

2006 2007 restated £m £m Defined benefit pension plans: Expected return on plan assets ...... 127 123 Interest on plan liabilities ...... (131) (133) (4) (10) Retiree medical—interest on liabilities ...... (10) (12) Net finance cost ...... (14) (22)

31 Changes to the actuarial value of retirement benefits at the balance sheet date are shown in the statement of recognised income and expense, these changes increased shareholders’ funds by £152 million in 2007 as follows:

2007 £m Defined benefit pension plans: Plan assets—returns higher than expected ...... 81 Plan liabilities—principally higher discount rates ...... 136 Actuarial gains before tax ...... 217 Tax...... (65) Actuarial gains after tax ...... 152

Retirement benefit obligations (net of tax) as at December 31, 2007 were £128 million, a significant reduction from £365 million at December 31, 2006, principally due to a reduction in retiree medical liabilities and higher discount rates which are used to value the liabilities in the defined benefit pension plans. The total cash payments in respect of retirement benefits are as follows:

2006 2007 restated £m £m Defined benefit pension plans ...... 47 44 Other pension plans ...... 8 4 Retiree medical ...... 11 12 Total cash payments ...... 66 60

Cash payments to defined benefit pension plans increased as a result of a higher rate of contribution to the U.K. plan, which includes £21 million (2006: £20 million) to reduce its deficit, and further contributions to the U.S. plan.

Tax The underlying tax charge for 2007 was £73 million (30%) on profit before exceptional items (2006 restated: £64 million (24%)). The 2006 tax rate benefited from provision releases following progress on certain European tax audits. The 2007 rate reflects the mix of territories in which Rexam operates, partially offset by the availability of tax incentives in certain jurisdictions. Cash tax payments in 2007 were £42 million compared with £58 million in 2006. Payments in 2007 were reduced by repayments received, the utilisation of tax losses and tax benefits attributable to the O-I Plastics acquisition.

32 Exceptional items The table below represents exceptional items for the year ended December 31, 2007:

2007 £m Retiree medical gain (net of legal costs) ...... 61 Disposal of subsidiaries ...... 1 Integration of businesses ...... (6) Legacy and other tax based exposures ...... (17) Amortisation of acquired intangible assets ...... (22) Total included in operating profit ...... 17 Financing derivative market value changes ...... (2) Total exceptional items before tax ...... 15 Tax...... (13) Total exceptional items after tax ...... 2

In the second half of 2007 court approval was obtained for a mediated settlement of class action litigation involving retiree medical coverage for retirees who were formerly unionised employees. The changes in the provision of retiree medical benefits resulted in an exceptional gain of £61 million, net of legal costs. The Group completed the disposal of a Personal Care Plastic Packaging business based in the Netherlands and a business engaged in reinsurance activities based in Luxembourg for a combined net gain of £1 million. A £6 million charge was recorded in 2007 relating to the intended closure of two plants in North America and other integration costs. The restructuring and plant closure cost associated with the integration of O-I Plastics is now estimated to be £20 million. The remainder of the restructuring cost is expected to be charged to exceptional items in 2008. Intangible assets, such as technology, patents and customer contracts, are required to be recognised on the acquisition of businesses and amortised over their useful economic life. Amortisation of acquired intangibles amounted to £22 million (2006: £11 million). Rexam operates in a global tax environment, which can give rise to uncertainty over the quantification of some of the Group’s tax liabilities in certain territories. The tax environment in Brazil is complex: interpretation and application of tax law continues to change and claims are usually subject to long judicial processes. In this territory, Rexam has certain indirect tax exposures, some of which relate to periods prior to Rexam’s acquisition of ANC in 2000 and Latasa in 2003. In view of the uncertainty surrounding these Brazilian tax risks, a provision of £17 million in 2007 has been recorded as an exceptional item. The fair value change on financing derivatives for the year was a net loss of £2 million (2006: net gain £7 million). The impact of embedded derivatives and derivatives arising on trading items such as commodities and forward foreign exchange contracts is included within underlying operating profit.

33 Discontinued operations The disposal of Rexam’s Glass business to Ardagh was completed on June 21, 2007. A summary of the performance of discontinued operations is set out below.

2007 2006 £m £m Sales ...... 213 437 Underlying operating profit: Before depreciation and amortisation adjustment(1) ...... 15 40 Depreciation and amortisation adjustment(2) ...... 11 — After depreciation and amortisation adjustment ...... 26 40 Underlying profit before tax ...... 26 39 Underlying profit after tax ...... 18 28 Exceptional gain on disposal (net of tax) ...... 48 — Total profit after tax ...... 66 28

(1) Central overheads, excluded from the above table, previously allocated to the Glass business, have been reallocated to the Beverage Can and Plastic Packaging operations. Had these overheads been allocated for 2007 they would have amounted to £2 million (2006: £4 million). (2) The Glass business was classified as a disposal group on March 12, 2007 and accounting standard IFRS5 requires that depreciation and amortisation is not charged following such classification.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 These results are based on the audited financial statements for the year ended December 31, 2006 and have not been restated for the discontinuance of the Glass business. Sales from ongoing operations increased 17%, 10% of which came from existing businesses and 8% from acquisitions, reduced by 1% from 2005 due to currency translation. Contributors to growth were offset by higher input costs, especially aluminium and energy. Despite price increases in some of Rexam’s businesses, reduction of the Group’s cost base and product mix improvements resulting in £32 million of cost efficiencies, Rexam was unable to fully offset the effects of the increase in input costs. Growth was also affected by higher freight costs, lower beverage can pricing in the U.S. as a result of a long term contract with a major U.S. beverage can customer, and a weak performance from Rexam’s Make Up division. The net effect of currency movements reduced underlying operating profit by £3 million primarily due to the weakening of the U.S. dollar against Sterling. Underlying profit before tax was £303 million, compared with £307 million in 2005. Free cash flow generation was good at £173 million, even allowing for higher interest costs and an increase in capital expenditure to fund the large number of growth projects. Net borrowings were £1.17 billion with underlying interest cover at 4.8 times, higher than Rexam’s target of being above 4.0 times. On a statutory basis, including the effect of acquisitions, disposed businesses and currency, sales were £3,738 million in 2006, up 15% from £3,237 million in 2005. On this basis, profit before tax (including exceptional items) was down 7% at £307 million in 2006, compared with £331 million in 2005. The principal exceptional gain arose from a change in U.S. retirement benefits offset by disposals and restructuring costs within Plastic Packaging.

34 Summary The following tables set out an analysis of the results of operations for years ended December 31, 2006 and 2005. The financial review of Rexam’s results is based on what it terms the underlying business performance, as shown in the first column of the tables below.

Underlying business Exceptional Total performance(1) items statutory £m £m £m 2006: Sales ...... 3,738 — 3,738 Operating profit ...... 415 (1) 414 Share of associates profit after tax ...... 1 8 9 Total net finance cost(3) ...... (113) (3) (116) Profit before tax ...... 303 4 307 Profit after tax ...... 228 (5) 223 Basic earnings per share (p) ...... 39.7 Underlying earnings per share (p) ...... 40.6 Interim dividend per share (p) ...... 7.9 Final dividend per share (p)(4) ...... 11.1 2005—restated: Sales ...... 3,237 — 3,237 Operating profit ...... 409 11 420 Share of associates profit after tax ...... 3 4 7 Total net finance cost(3) ...... (105) 9 (96) Profit before tax ...... 307 24 331 Profit after tax ...... 218 5 223

(1) Underlying business performance is the primary performance measure used by management who believe that the exclusion of exceptional items aids comparison of underlying performance. Exceptional items include the gains and losses on disposal of businesses, the restructuring and integration of businesses, major asset impairments and disposals, significant litigation claims, the subsequent recognition of acquired deferred tax assets, the amortisation of certain acquired intangible assets, non hedge accounted fair value movements on financing derivatives and significant gains arising on reduction of retiree medical and pension liabilities. (2) Except for per share information, which is expressed in pence. (3) Comprises net interest expense and retirement benefit obligations net finance cost. (4) Paid on June 6, 2007.

35 The discussion of the results set out in this section and sections titled ‘‘Net finance costs’’ and ‘‘Tax’’ is based on the first column of the above table, ‘‘Underlying business performance’’. A summary of underlying business performance is set out below.

2005 2006 restated Change £m £m % Ongoing operations ...... 3,647 3,111 +17 Disposals ...... 91 126 Sales ...... 3,738 3,237 Ongoing operations ...... 410 406 +1 Disposals ...... 5 3 Underlying operating profit ...... 415 409 +1 Share of associates profit after tax ...... 1 3 Underlying total net finance cost ...... (113) (105) Underlying profit before tax ...... 303 307 1 Underlying profit after tax ...... 228 218 +5

Sales and underlying operating profit benefited from acquisitions completed in 2005 and 2006, predominantly in Plastic Packaging, offset by currency fluctuations. Pursuant to the Group’s strategy of focusing on higher margin and faster growing markets, a number of businesses were sold or made available for sale and these are shown as ‘‘Disposals’’. The completed transactions include the non barrier thin wall plastic packaging business in 2006 and the UK glass business in 2005.

Results of Operations Sales The following table sets out an analysis of sales movement between the years ended December 31, 2006 and 2005:

Beverage Plastic Total Cans Packaging Glass £m £m £m £m Sales 2005 ...... 3,237 Disposals ...... (126) Ongoing operations 2005 ...... 3,111 2,235 471 405 Acquisitions 2005 ...... 203 — 203 — Currency fluctuations ...... (30) (18) (11) (1) Ongoing operations 2005 (adjusted) ...... 3,284 2,217 663 404 Acquisitions 2006 ...... 59 25 34 — Organic sales growth ...... 304 248 23 33 Ongoing operations 2006 ...... 3,647 2,490 720 437 Disposals ...... 91 Sales 2006 ...... 3,738

36 Sales from ongoing operations increased £536 million, or 17%, from £3,111 million in 2005 compared with £3,647 million in 2006. This increase includes the impact of acquisitions made in 2005 and 2006 offset by currency movements. Organic sales growth, which excludes the impact of acquisitions, disposals and currency, was £304 million in 2006, an increase of 9% from 2005. A significant portion of this growth arose in Beverage Cans, £248 million (8%), of which £69 million can be attributed to the recovery of aluminium cost increases. The growth in Beverage Cans also reflected other price changes, volume and mix gains. Plastic Packaging benefited from stronger volumes across most of its divisions albeit against a competitive sales price background. Glass, operating in a market where capacity was in balance with demand, was able to achieve good price increases and volume gains.

Underlying operating profit movement The table below represents underlying profit movement between the years ended December 31, 2006 and 2005:

Beverage Plastic Total Cans Packaging Glass £m £m £m £m Underlying operating profit 2005—restated ...... 409 Disposals 2005 ...... (3) Ongoing operations 2005 restated ...... 406 313 57 36 Acquisitions 2005 ...... 11 — 11 — Currency fluctuations ...... (3) (3) — — Ongoing operations 2005 (adjusted) ...... 414 310 68 36 Acquisitions 2006 ...... 13 7 6 — Change in operating profit ...... (17) (25) 8 — Ongoing Operations 2006 ...... 410 292 82 36 Disposals 2006 ...... 5 Underlying operating profit 2006 ...... 415

The reduction in underlying operating profit, after allowing for the impact of acquisitions, disposals and currency was £17 million, or 4%, which reflects the challenging environment for the recovery of increased input costs offsetting gains from volume/mix changes and price changes, in each case primarily in Beverage Cans, as well as efficiency and other savings. Within Beverage Cans, price surcharges and a profit of £14 million realised on renegotiation of a metal supply contract in the United States were unable to offset the rapid escalation in aluminium prices, particularly in the second half of 2006. While the U.S. Beverage Can business secured additional significant volumes through a contract announced in October 2006, this contract had an impact on margins in 2006. The Plastic Packaging operation reported a 12% improvement in underlying profit based on a strong performance from the high barrier food plastics business and the successful integration of the 2005 acquisitions. The overall performance was held back by weakness in Rexam’s Make Up division owing to a combination of cancelled product launches and market overcapacity. The rise in resin,

37 energy and other input costs was offset by cost and synergy savings together with volume improvements. The Glass operation was affected by a substantial increase in energy related costs amounting to £19 million. These costs were fully offset by a combination of price increases, volume gains and efficiency savings, leaving the Glass operation flat for the year on underlying profit.

Net finance cost The table below represents net finance costs for the years ended December 31, 2006 and 2005:

2005 2006 restated £m £m Net interest ...... 90 76 Retirement benefit obligations net finance cost ...... 23 29 Underlying total net finance cost ...... 113 105

The underlying total net finance cost increased by £8 million compared with 2005, primarily as a result of higher average borrowings to fund acquisitions made in late 2005 and in the early part of 2006. In addition, interest rates were higher due in part to cancellation of fixed to floating interest rate swaps in March 2005 and the fact that average market interest rates for U.S. dollar and euro borrowings were up by 160 basis points and 90 basis points, respectively, compared with the prior year. The issue of a seven year A700 million medium term note in March 2006 enabled the Group to refinance, in an exchange offer, a substantial portion of the A550 million medium term note due to mature in March 2007, and raised additional finance at interest rates that were lower than the existing medium term note. Overall, the average interest rate during the year was 6.2%, the same as in the prior year. Underlying interest cover was 4.8 times in 2006, compared to 5.8 in 2005. Underlying interest cover is the ratio of underlying operating profit to underlying total net interest expense excluding convertible preference share dividends.

Retirement benefits The analysis of the retirement benefit obligations net finance cost is as follows:

2005 2006 restated £m £m Defined benefit pension plans: Expected return on plan assets ...... 126 125 Interest on plan liabilities ...... (137) (138) (11) (13) Retiree medical interest on liabilities ...... (12) (16) Net finance cost ...... (23) (29)

38 Changes to the actuarial value of retirement benefits at the balance sheet date are shown in the statement of recognised income and expense. These changes increased shareholders’ funds by £107 million in 2006 as follows:

2006 £m Defined benefit pension plans: Plan liabilities—principally higher discount rates ...... 101 Plan assets—returns higher than expected ...... 32 Experience gains ...... 2 135 Retiree medical: Experience gains ...... 15 Plan liabilities—higher discount rates ...... 5 20 Actuarial changes before tax ...... 155 Tax...... (48) Actuarial changes after tax ...... 107

In 2006 the Group introduced revisions to its obligations in respect of retiree medical benefits and defined benefit pensions for certain employees in the United States which reduced liabilities by £39 million and £15 million respectively. There was a further reduction of £3 million in UK defined benefit pensions liabilities arising on the disposal of businesses. The total reduction in liabilities attributable to these changes, after tax, was £37 million (recorded within exceptional items). Cash payments to defined benefit pension plans increased as a result of a higher rate of contribution to the UK scheme, which in 2006 included £20 million to reduce its deficit. The total cash payments in respect of retirement benefits are as follows:

2005 2006 restated £m £m Defined benefit pension plans ...... 44 26 Other pension plans ...... 4 4 Retiree medical ...... 12 18 Total cash payments ...... 60 48

Tax The tax charge for 2006 was £75 million, or 25%, on profit before exceptional items compared with £89 million, or 29%, in 2005. This incorporates the release of provisions held for specific tax exposures following satisfactory progress of tax audits in Europe and the reassessment of the recoverability of certain deferred tax assets. The rate would have been around 31% excluding these adjustments, reflecting the mix of territories in which Rexam operates, partially offset by the availability of tax incentives in certain jurisdictions. Cash tax payments in 2006 were £58 million compared with £47 million in 2005. Payments in 2005 had been reduced by repayments received, following settlement of prior year tax assessments, and by the utilisation of tax losses.

39 Exceptional items The exceptional items arising in 2006 are as follows:

2006 £m U.S. retiree medical and pension gains ...... 53 Restructuring and integration of businesses ...... (29) Amortisation of acquired intangible assets ...... (11) Litigation claim ...... (8) Recognition of deferred tax assets on prior year acquisitions ...... (3) Disposal of businesses ...... (3) Total included in operating profit ...... (1) Sale of land and property by an associate ...... 8 Early redemption of convertible preference shares ...... (10) Financing derivative market value changes ...... 7 Total exceptional items before tax ...... 4 Tax on exceptional items ...... (9) Total exceptional items ...... (5)

In June 2006, a change to the U.S. retiree medical plan was made to co-ordinate prescription drug benefits payable to certain retirees with cover available from the United States government through the Medicare Part D programme. This change resulted in a gain of £38 million, net of associated legal fees of £1 million. In December 2006, changes were made to the United States defined benefit pension plans, giving rise to a gain of £15 million. The principal restructuring cost arose in the Plastic Packaging sector. The decision to exit from the non barrier thin wall plastic packaging business resulted in the rationalisation of one plant and the sale of three further plants. In response to slower demand within part of the Make Up division, especially in the second half of 2006, action was taken to reduce its cost base: in South East Asia, to integrate the existing business with the newly acquired FangXin operations; and in France, to centralise the production of more complex beauty products. The integration programme initiated following the acquisition of Precise Technology, in December 2005, resulted in the closure of four facilities in the United States. In addition, a major restructuring of the administration support function within the European beverage can operation was completed. Intangible assets, such as technology patents and customer contracts, are required to be recognised on the acquisition of businesses and amortised over their useful life. The directors consider that separate disclosure of the amortisation of such acquired intangibles amounting to £11 million (2005: nil) aids comparison of organic growth in underlying profit. Therefore this cost, which may become more significant as the impact of recent and future acquisitions is reflected, should be separately disclosed within exceptional items. Following an appeal ruling in 2006, a provision of £8 million was made in respect of a legacy litigation claim relating to an acquired business. The claim had been initiated before the Group assumed control of that business. Consistent with the disclosure adopted in the 2005 consolidated financial statements, the recognition of deferred tax assets on prior year acquisitions of £3 million (2005: £7 million) has been included in exceptional items owing to their size and because they arise out of the transition to IFRS. They relate to the utilisation of tax losses not recorded at the date of acquisition, which result in a reduction in goodwill and a charge to the income statement.

40 In keeping with the strategy to concentrate the food plastics operations on high margin and faster growing markets, three non barrier thin wall plastic packaging businesses were sold, realising a loss of £3 million. In addition, the Petainer refillable bottle business was made available for sale. The profit of £8 million on the sale of land and property, following the relocation of a manufacturing facility by an associate in Korea, has been included in exceptional items in view of its size and one-off nature. In October 2006, shareholders approved the early conversion into ordinary shares of the convertible preference shares. Following the adoption of IFRS, the convertible preference shares had become financially inefficient; the ‘‘debt’’ element was reclassified from equity to borrowings, the dividend thereon included within interest and no tax deduction was available on that dividend. The enhanced conversion premium of £10 million, including associated costs, has been included in exceptional items due to its size and one-off nature. The fair value of the derivatives arising on financing activities directly relates to changes in interest rates and foreign exchange rates. The fair value will change as the transactions to which they relate mature, as new derivatives are transacted and due to the passage of time. The fair value change on financing derivatives for the year was a net gain of £7 million (2005: £9 million). The impact of embedded derivatives and derivatives arising on trading items such as commodities and forward foreign exchange contracts is included within underlying operating profit.

LIQUIDITY AND CAPITAL RESOURCES Cash Flow Free cash flow was £16 million in 2007 compared with £148 million in 2006. This reduction is largely due to an increase in capital expenditure to support organic growth in strategic and emerging markets.

2006 2007 restated £m £m Continuing operations: Underlying operating profit ...... 354 375 Depreciation and amortisation ...... 136 131 Retirement benefit obligations ...... (42) (31) Change in working capital ...... (11) (7) Other movements ...... (5) (25) Cash generated ...... 432 443 Capital expenditure (net) ...... (288) (154) Net interest and tax paid ...... (128) (144) All other movements ...... — 3 Free cash flow from continuing operations ...... 16 148

Capital Expenditure—Continuing Operations

2006 2007 restated Capital expenditure (£m) ...... 294 168 Depreciation and amortisation (£m) ...... 136 131 Ratio (times) ...... 2.16 1.28

41 Capital expenditure includes computer software that has been capitalised. Amortisation in 2007 excludes £22 million (2006: £11 million) amortised on patents, customer contracts and intangibles other than computer software. Capital expenditure by continuing operations was £294 million, representing 216% of depreciation and amortisation. This increase in expenditure reflects a substantial commitment to investments in strategic and growth projects which in 2007 amounted to £224 million (2006: £102 million). The principal projects were in the Beverage Can business and in the European operations in particular, including new can plants in Austria and Russia and additional can lines to support market growth. The North and South American Beverage Can businesses are converting lines to produce specialty cans to meet market and regional demand. Although the actual amount of the Group’s capital expenditures in future periods will depend on various factors that cannot presently be foreseen, Rexam expects investment will continue in 2008 in growth and strategic projects, particularly within the Beverage Can operations, including the completion of the new plants in Austria, Russia and Denmark, additional lines, conversions and can end capacity within the European operations and further line conversions in North and South America. These projects and a range of smaller projects within Plastic Packaging, generally targeted at new product development, are expected to support profit growth in 2008 and beyond. It is anticipated that capital expenditure in 2008 will be approximately £330 million, depending on a number of factors, including the timing of the projects.

Acquisitions Expenditure on acquisitions in 2007, including net cash assumed, totalled £921 million, as set out below.

2007 £m Plastic Packaging: O-I Plastics ...... 904 Beverage Cans: joint venture in Guatemala ...... 14 Payments in respect of prior year and other acquisitions ...... 3 921

The principal transaction was the acquisition of O-I Plastics in August 2007 for an initial consideration of £905 million (including net cash assumed and accrued costs), which transformed the scale and reach of the Plastic Packaging operations. The structuring of the acquisition is still expected to give rise to tax benefits with an estimated net present value of around £130 million and, therefore, the effective cost for O-I Plastics is £775 million.

Disposals In June 2007 Rexam completed the sale of its Glass business to Ardagh. The profit on sale after tax, reported as an exceptional item within discontinued operations, was £48 million. The sale followed a review of the position of the Glass business within Rexam’s consumer packaging portfolio and was in keeping with the Group’s strategy to focus investment on organic growth and acquisitions in higher growth, higher margin and emerging markets. Proceeds from the disposal of the Glass business, net of costs and including borrowings and retirement benefit liabilities disposed, totalled £401 million. The process to sell Rexam’s Petainer refillable plastic bottle operations in Sweden and the Czech Republic is continuing.

42 Borrowings and Financial Instruments Borrowings The Group has a range of bank borrowings maturing between 2008 and 2067. These facilities may generally be drawn in a range of freely available currencies and are at floating rates of interest. In addition the Group has a subordinated bond and a number of medium term notes in issue. The subordinated bond is denominated in euro with a maturity of 2067. It was issued at a fixed rate of interest but has been swapped to U.S. dollar floating rates of interest through the use of cross currency and interest rate derivatives. The medium term notes are denominated in euro and Sterling with maturities between 2008 and 2013. They were issued at fixed rates of interest although some have been swapped to floating rates of interest in euro and U.S. dollar through the use of cross currency and interest rate derivatives. Those medium term notes not swapped to floating rates of interest are denominated in euro and are issued at a fixed rate of 4.375% per annum. Included within borrowings are secured loans of £10 million (2006: £2 million), the security for which is principally property. The Group’s borrowings as at December 31, 2007 were:

2006 2007 restated £m £m Current liabilities: Bank overdrafts ...... (77) (124) Bank loans ...... (17) (16) Subordinated bond ...... (24) — Medium term notes ...... (37) (128) Finance leases ...... (9) (7) (164) (275)

Non current liabilities: Bank loans ...... (265) (297) Subordinated bond ...... (540) — Medium term notes ...... (870) (830) Finance leases ...... (4) (13) (1,679) (1,140) Total borrowings ...... (1,843) (1,415)

43 2006 2007 restated £m £m Finance lease minimum lease payments: Less than 1 year ...... (9) (7) Between 1 and 5 years ...... (4) (13) Over 5 years ...... (1) (1) Total minimum lease payments ...... (14) (21) Future finance charges ...... 1 1 Present value of finance leases ...... (13) (20) Present value of finance leases: Less than 1 year ...... (9) (7) Between 1 and 5 years ...... (3) (12) Over 5 years ...... (1) (1) (13) (20)

The carrying amounts of total borrowings are denominated in the following currencies: Euro ...... (1,112) (610) Sterling ...... (455) (462) U.S. dollar ...... (195) (259) Other ...... (81) (84) Total ...... (1,843) (1,415)

Financial instruments Carrying amount and fair value of financial assets and liabilities at December 31, 2007 were:

2006 2007 Carrying 2006 Carrying 2007 amount Fair value amount Fair value restated restated £m £m £m £m Financial assets Cash and cash equivalents ...... 113 113 138 138 Trade and other receivables ...... 620 620 549 549 Available for sale financial assets ...... 22 22 23 23 Derivative financial instruments ...... 193 193 148 148 Financial liabilities Trade and other payables ...... (875) (875) (714) (714) Bank overdrafts ...... (77) (77) (124) (124) Bank loans ...... (282) (282) (313) (313) Subordinated bond ...... (564) (500) — — Medium term notes ...... (907) (901) (958) (979) Finance leases ...... (13) (13) (20) (21) Derivative financial instruments ...... (37) (37) (14) (14) Market values have been used to determine the fair values of cash and cash equivalents, available for sale financial assets, cross currency swaps and bank overdrafts and floating rate loans. The carrying value of trade and other receivables and trade and other payables are assumed to approximate their fair values. The fair value of the subordinated bond and medium term notes have been determined by

44 reference to quoted market prices at the close of business on December 31. The fair values of interest rate swaps, fixed rate loans and finance leases have been determined by discounting cash flows at prevailing interest rates. The fair value of forward foreign exchange contracts has been determined by marking those contracts to market against prevailing forward foreign exchange rates. The fair value of forward aluminium commodity contracts has been determined by marking those contracts to market at prevailing forward aluminium prices. The fair value of embedded derivatives has been calculated using valuation models incorporating market commodity prices and foreign exchange rates.

Contractual commitments An analysis of undiscounted contractual maturities for non derivative financial liabilities and derivative financial liabilities and assets is set out below.

Total Within 1 to 2 2 to 5 More than contractual 1 year years years 5 years maturity £m £m £m £m £m At December 31, 2007 Trade and other payables ...... (849) (9) (7) (10) (875) Bank overdrafts ...... (76) — — — (76) Bank loans ...... (27) (16) (254) (16) (313) Subordinated bond ...... (37) (37) (111) (695) (880) Medium term notes ...... (57) (419) (66) (533) (1,075) Finance leases ...... (9) (2) (2) — (13) Derivative contracts—payments ...... (809) (375) (222) (1,308) (2,714) Derivative contracts—receipts ...... 775 529 231 1,359 2,894 Derivative contracts—net settlements ...... (2) 2 2 — 2 Commodity contracts ...... (3) — — — (3) (1,094) (327) (429) (1,203) (3,053)

Other commitments An analysis of other commitments is set out below.

Other contractual obligations At December 31, 2007

Less than More than Total 1 year 1–5 years 5 years Operating Lease Obligations ...... 132 22 51 59

Capital commitments Contracts placed for future capital expenditures not provided in the consolidated financial statements amounted to £88 million (2006: £73 million).

Contingent Liabilities and Off-Balance Sheet Arrangements As at December 31, 2007, the contingent liabilities not included in the balance sheet in respect of guarantees of borrowings amounted to £4 million (December 31, 2006: £7 million). Rexam has no other material off balance sheet arrangements other than those disclosed in this Offering Memorandum.

45 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Rexam’s activities expose it to a variety of financial risks, including currency risk, interest rate risk, commodity price risk, liquidity risk, credit risk and capital risk. The Group does not enter into derivative transactions for speculative purposes. Further details of the Group’s exposure to market risk are set out in note 24 to the 2007 consolidated financial statements.

Currency risk The Group’s currency risk management is used to mitigate the impact of foreign exchange movements between overseas currencies and Sterling arising on the translation of the value of non UK operations into Sterling for reporting purposes. This is achieved by borrowing a proportion of debt, either directly or through the use of cross currency swaps and forward foreign exchange contracts, in currencies which match or are closely linked to the currencies of the overseas businesses. The Group looks to mitigate currency risk arising on cross border trading transactions using forward foreign exchange contracts. None of the foreign exchange derivative instruments at December 31, 2007 related to derivative trading activity. Some fair value gains and losses were taken to the consolidated income statement because IFRS hedge accounting was not applied. Rexam uses foreign exchange derivative instruments for hedging general business exposures in foreign currencies such as the purchase and sale of goods, capital expenditure and dividend flows.

Interest rate risk The objective of the Group’s interest rate risk management is to reduce its exposure to the impact of changes in interest rates in the currencies in which debt is borrowed. This is managed through the issue of fixed rate medium term notes and subordinated bonds and through the use of interest rate derivatives that are used to manage the overall fixed to floating mix of bank and bond debt, which was 32% fixed and 68% floating at December 31, 2007. Cash at bank earns interest at floating rates based on bank deposit rates in the relevant currency. Short term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short term deposit rates. Other floating rate financial instruments are at the appropriate LIBOR interest rates as adjusted by variable margins. Interest on floating rate financial instruments is re-priced at intervals of less than one year. Interest on fixed rate financial instruments is fixed until maturity of the instrument. Some interest rate swaps used to manage the Group’s fixed to floating debt mix, while economically effective, are ineligible for hedge accounting treatment. Fair value gains and losses on these hedges are recognised in the consolidated income statement. In 2007, there was a net loss of £2 million, compared to a net gain of £7 million in 2006, on financing derivatives on which hedge accounting was not applied, which was recorded within exceptional interest in the consolidated income statement.

Commodity price risk The objective of Rexam’s commodity risk management is to identify those businesses that have exposures to commodities traded on commodity markets and to then determine which, if any, commodity market instruments are appropriate for hedging those exposures. To manage such exposures, the Group uses mainly over the counter instruments transacted with banks, which are themselves priced through a recognised commodity exchange, such as the London Metal Exchange.

46 The Group manages the purchase of certain raw materials, including aluminium and energy costs through physical supply contracts which, in the main, relate directly to commodity price indices. The supply contracts may be hedged with appropriate derivative contracts to fix and manage costs. The derivative hedge contracts may extend over several years. The extent of the forward cover taken is judged according to market conditions and prices of futures prevailing at the time. None of the commodity derivative financial instruments at December 31, 2007 are related to derivative trading activity.

Liquidity risk The Group monitors its liquidity to maintain a sufficient level of undrawn committed debt facilities to ensure financial flexibility. As at December 31, 2007, Rexam had £707 million of undrawn committed debt facilities available, compared to £503 million at December 31, 2006. The increase in undrawn committed facilities reflects Rexam’s action to reduce liquidity risk in response to deteriorating conditions in the financial markets during the second half of 2007. The Group looks to mitigate refinancing risk by raising its debt requirements from a range of different sources and with a range of maturity dates. At December 31, 2007, committed debt maturities ranged from less than two years (18% of drawn debt) to 2067 (32% of drawn debt). No more than 32% of drawn debt expires in any one financial year.

Credit risk Credit risk arises from exposures to external counterparties. In order to manage this risk, the Group has strict credit quality measures that are applied to counterparty institutions and also limits on maximum exposure levels to any one counterparty and to counterparties by rating. For exposure purposes, cash deposits are weighted at 100% of the exposure to the counterparty and derivative instruments on a sliding scale based on the type of instrument and length of contract to maturity. Rexam believes that are no significant concentrations of credit risk associated with financial instruments of the Group.

Capital risk The Group’s objective is to minimise its cost of capital by optimising the efficiency of its capital structure. The Group is able to adjust its capital structure through the issue or redemption of either debt or equity and by adjustment to the dividend paid to equity holders. The Group uses a range of financial metrics to monitor the efficiency of its capital structure, and to ensure that its capital structure provides sufficient financial strength to allow it to secure access to debt finance at reasonable cost.

RECENT DEVELOPMENTS AND OUTLOOK Rexam’s Beverage Can business performed well overall in the quarter ended March 31, 2008, supported by good pricing in Europe and strong sales volume growth in Europe and in South America, partially offset by lower sales volumes for soft drinks cans in the United States for both Rexam and the market. After a strong fourth quarter in 2007, sales for Rexam’s specialty cans started quietly in the first quarter of 2008, but it was still early in the season. Good pricing, contractual inflation escalators as well as a continued focus on efficiencies have offset higher input costs. In the Plastic Packaging business, demand for Closures and Home and Personal Care was soft in North America during the period, but Dispensing Systems and Healthcare showed a strong performance. The integration of O-I Plastics continued to progress. While resin prices increased in the first quarter of 2008, the majority of these higher costs were contractually passed through to customers. The stability of the U.S. dollar and, more significantly, the strengthening of the euro benefited the Group’s first quarter results. In the first quarter of 2008, Rexam completed the acquisition of Rostar for £149 million,

47 continued with its growth capex programme and started to build inventory levels for the peak beverage can summer season.

PRINCIPAL ACCOUNTING POLICIES The preparation of Rexam’s financial statements requires management to make a number of judgements, estimates and assumptions that affect the reported amount of assets, liabilities, income and expense in its consolidated financial statements. Various elements of Rexam’s accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, Rexam has identified several accounting policies which, due to the judgements, estimates and assumptions inherent in those policies, and to the sensitivity of the Group’s IFRS financial statements to those judgements, estimates and assumptions, are critical to an understanding of Rexam’s financial statements. Rexam makes estimates and assumptions that affect the reported amounts of assets and liabilities during each financial period. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The most significant principles, accounting standards and valuation policies that have been applied in preparing Rexam’s consolidated financial statements are set out in note 1 to its 2006 consolidated financial statements and 2007 consolidated financial statements. Certain of these are discussed below. The consolidated financial statements have been prepared in accordance with IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments.

Key estimates and assumptions The preparation of consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, ultimately actual results may differ from those estimates. The key estimates and assumptions used in the consolidated financial statements are set out below.

Goodwill impairment testing Goodwill is tested at least annually for impairment, in accordance with the accounting policy for goodwill set out in note 12 to the 2007 consolidated financial statements. Goodwill represents the excess of the cost of an acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the acquiree at the date of acquisition. The recoverable amounts of cash generating units are determined based on value in use calculations. These calculations require the use of estimates which include cash flow projections for each cash generating unit and discount rates based on the Group’s weighted average cost of capital, adjusted for specific risks associated with particular cash generating units. At the date of acquisition, goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill arising on acquisitions on or before December 31, 1997 has been deducted from equity. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold except for any goodwill deducted from equity. Goodwill arising on

48 the acquisition of subsidiaries is presented in goodwill and goodwill arising on the acquisition of associates and joint ventures is presented in investments in associates and joint ventures. Internally generated goodwill is not recognised as an asset.

Retirement benefit obligations The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. There are two principal funded defined benefit pension plans in the United Kingdom and United States and an unfunded retiree medical plan in the United States. The costs and the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the salary progression of current employees, the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities. The Group uses estimates based on previous experience and third party actuarial advice in determining these future cash flows and in determining the discount rate. If the discount rate was to fall by 0.5%, the net liabilities of the plans at December 31, 2007 would rise by approximately £120 million (2006: £160 million). If equity values were to fall by 10% then the plan assets at December 31, 2007 would fall by approximately £90 million (2006: £110 million). Details of the assumptions used for the two principal pension plans and the retiree medical plan are set out in note 25 to the 2007 consolidated financial statements. The accounting policy for retirement benefit obligations is set out below: The Group operates defined benefit pension plans and defined contribution pension plans. A defined benefit pension plan is one that specifies the amount of pension benefit that an employee will receive on retirement. The Group operates both funded defined benefit pension plans, where actuarially determined payments are made to trustee administered funds, and unfunded defined benefit pension plans, where no such payments are made. The asset or liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation less the fair value of plan assets at the balance sheet date. The defined benefit obligation is calculated, at least triennially, by independent actuaries using the projected unit credit method and is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. The current service cost and gains and losses on settlements and curtailments are included in operating expenses in the consolidated income statement. Past service costs are similarly included where the benefits have vested, otherwise they are amortised on a straight line basis over the vesting period. The expected return on assets of funded defined benefits pension plans, less administration expenses of pension plans, and the interest on pension plan liabilities comprise the pension element of the net finance cost in the consolidated income statement. Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included in the consolidated statement of recognised income and expense. A defined contribution plan is one under which fixed contributions are paid to a third party. The Group has no further payment obligations once these contributions have been paid. The contributions are recognised in the consolidated income statement when they are due. Prepaid contributions are recognised in the consolidated balance sheet as an asset to the extent that a cash refund or a reduction in the future payments is likely. The Group also provides post retirement healthcare benefits (retiree medical) to certain of its current and former employees. The entitlement to these benefits is usually conditional on an employee remaining in service up to retirement age and the completion of a minimum service period. The consolidated income statement and consolidated balance sheet treatment with respect to retiree

49 medical is similar to that for defined benefit pension plans. These obligations are valued by independent actuaries, usually on an annual basis.

Valuation of acquired intangible assets Identifiable intangible assets acquired as part of an acquisition of a business must initially be recorded at fair value. The acquisition of O-I Plastics in 2007 resulted in significant customer relationships, technology and patents being recognised by the Group. These intangible assets were valued using the income approach. The underlying premise in applying this approach is that the value of an asset can be measured by the present value of the cash receipts and cash payments to be received over the life of the asset. In applying this methodology certain key judgements and estimates were required to be made in respect of future gross cash flows and the discount rate.

Income taxes Judgment is required in determining the provision for income taxes. There are many transactions and calculations whose ultimate tax treatment is uncertain. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes are likely to be due. The Group recognises deferred tax assets and liabilities based on estimates of future taxable income and recoverability. Where a change in circumstance occurs, or the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax balances in the year in which that change or outcome is known. The accounting policy for income taxes is set out below. The tax expense represents the sum of current tax, non current tax and deferred tax. Current tax and non current tax are based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax arising from initial recognition of an asset or liability in a transaction, other than an acquisition, that at the time of the transaction affects neither accounting nor taxable profit or loss, is not recognised. Deferred tax is measured using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Tax is recognised in the consolidated income statement, unless the tax relates to items recognised directly in equity, in which case the tax is recognised directly in equity through the consolidated statement of recognised income and expense.

Basis of consolidation The consolidated financial statements comprise Rexam PLC and all its subsidiaries, together with the Group’s share of the results of its associates and joint ventures. The financial statements of subsidiaries, associates and joint ventures are prepared as of the same reporting date using consistent accounting policies. Intercompany balances and transactions, including any unrealised profits arising from intercompany transactions, are eliminated in full.

50 Subsidiaries are entities where the Group has the power to govern the financial and operating policies, generally accompanied by a share of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group and are included until the date on which the Group ceases to control them. Associates are entities over which the Group has significant influence but not control, generally accompanied by a share of between 20% and 50% of the voting rights. Joint ventures are entities over which the Group has joint control, whereby the strategic, financial and operating decisions relating to the venture require the unanimous consent of the parties sharing control and are generally accompanied by a 50% share of voting rights. Investments in associates and joint ventures are accounted for using the equity method. If the Group’s share of losses in an associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture. All acquisitions are accounted for by applying the purchase method. The cost of an acquisition is measured as the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity instruments issued by the Group, together with any costs directly attributable to the acquisition. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured initially at fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

Foreign currencies The financial statements for each of the Group’s subsidiaries, associates and joint ventures are prepared using their functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group is Sterling. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the balance sheet date of monetary assets and liabilities denominated in currencies other than the functional currency are recognised directly in the consolidated income statement. Exceptions to this are where the monetary items form part of the net investment in a foreign operation or are designated as hedges of a net investment, or designated as cash flow hedges. Such exchange differences are initially recognised in equity. The balance sheets of foreign operations are translated into Sterling using the exchange rate at the balance sheet date and the income statements are translated into Sterling using the average exchange rate for the year. Where this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, the exchange rate on the transaction date is used. Exchange differences on translation into Sterling arising since January 1, 2004 are recognised as a separate component of equity. On disposal of a foreign operation, any cumulative exchange differences held in equity are transferred to the consolidated income statement. The principal exchange rates against Sterling used in the consolidated financial statements are as follows:

Average Average Closing Closing (2007) (2006) (2007) (2006) U.S. dollar ...... 2.00 1.84 1.99 1.96 Euro ...... 1.46 1.47 1.37 1.49

Revenue recognition Revenue from the sale of goods is measured at the fair value of the consideration, net of rebates and trade discounts. Revenue from the sale of goods is recognised when the Group has transferred the

51 significant risks and rewards of ownership of the goods to the buyer, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group. The Group makes certain advance payments to customers in relation to supply contracts which are charged in the consolidated income statement over the useful economic lives of the contracts.

Exceptional items Items which are exceptional, being material in terms of size and/or nature are presented separately from underlying business performance in the consolidated income statement. The separate reporting of exceptional items helps provide an indication of the Group’s underlying business performance. The principal events which may give rise to exceptional items include significant changes to retirement benefit obligations, gains or losses on the disposal of businesses, the restructuring and integration of businesses, major asset impairments, the subsequent recognition of acquired deferred tax assets, significant litigation and tax claims, the amortisation of certain acquired intangible assets and non hedge accounted fair value movements and hedge ineffectiveness on financing derivative financial instruments.

Share based payment The Group operates various equity settled and cash settled share option schemes. For equity settled share options, the services received from employees are measured by reference to the fair value of the share options. The fair value is calculated at grant date and recognised in the consolidated income statement, together with a corresponding increase in equity, on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest. Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. For cash settled share options, the services received from employees are measured at the fair value of the liability and recognised in the consolidated income statement on a straight line basis over the vesting period. The fair value of the liability is measured at each balance sheet date and at the date of settlement with changes in fair value recognised in the consolidated income statement. IFRS2 ‘‘Share- based Payment’’ has been applied to equity settled share options granted after November 7, 2002 and to all cash settled share options. The Rexam Employee Share Trust holds ordinary shares in Rexam PLC which are presented in the consolidated financial statements as a deduction from equity.

Interest Interest on cash and cash equivalents and borrowings held at amortised cost is recognised in the consolidated income statement using the effective interest method. Interest includes exchange differences arising on cash and cash equivalents and borrowings, where such exchange differences are recognised in the consolidated income statement. Interest includes all fair value gains and losses on derivative financial instruments, and corresponding adjustments to hedged items under designated fair value hedging relationships, where they relate to financing activities and are recognised in the consolidated income statement. Prior to their redemption, interest included dividends paid on convertible preference shares. Interest relating to payments made over an extended period of development of large capital projects is added to the capital cost and amortised over the expected lives of those projects.

Segment reporting The Group’s primary reporting format is business segments and its secondary format is geographic segments. A business segment is a component of the Group that is engaged in providing a group of related products and is subject to risks and returns that are different from those of other business segments. A geographic segment is a component of the Group that operates within a particular

52 economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Non specific central costs are allocated on the basis of net assets excluding investments in associates and joint ventures, net borrowings, deferred tax, current tax and non current tax.

Other intangible assets Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows: Acquired computer software 2 to 3 years Computer software development Up to 7 years Acquired patents, licences and customer contracts Up to 20 years Development projects Up to 5 years The cost of intangible assets acquired in an acquisition is the fair value at acquisition date. The cost of separately acquired intangible assets, including computer software, comprises the purchase price and any directly attributable costs of preparing the asset for use. Computer software development costs that are directly associated with the implementation of major business systems are capitalised as intangible assets. Expenditure on research is recognised as an expense in the consolidated income statement as incurred. Expenditure incurred on development projects is capitalised as an intangible asset if it is probable that the expenditure will generate future economic benefits and can be measured reliably.

Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Cost comprises purchase price and directly attributable costs. Freehold land and assets under construction are not depreciated. For all other property, plant and equipment, depreciation is calculated on a straight line basis to allocate cost less residual value of the assets over their estimated useful lives as follows: Freehold buildings Up to 50 years Leasehold buildings Shorter of 50 years or lease term Manufacturing machinery 7 to 17 years Computer hardware Up to 8 years Fixtures, fittings and vehicles 4 to 10 years Residual values and useful lives are reviewed at least at each financial year.

Impairment of assets At each balance sheet date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use and is determined for an individual asset. If the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, the recoverable amount of the cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.

53 Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on a first in first out or a weighted average cost basis. Cost comprises directly attributable purchase and conversion costs and an allocation of production overheads based on normal operating capacity. Net realisable value is the estimated selling price less estimated costs of completion and selling costs.

Cash and cash equivalents Cash and cash equivalents for the purposes of the consolidated cash flow statement comprise cash at bank and in hand, money market deposits and other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are presented in borrowings within current liabilities in the consolidated balance sheet.

Assets and liabilities classified as held for sale The assets and liabilities classified as held for sale are available for immediate sale in their present condition and a sale is highly probably within one year. Assets and liabilities classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. Non current assets classified as held for sale are not depreciated or amortised and any future write down to fair value less costs to sell will be recognised as an impairment loss.

Grants Grants received in respect of property, plant and equipment are capitalised and released to the consolidated income statement in equal instalments over the estimated useful lives of the related assets.

Leases Leases are classified as finance leases where substantially all the risks and rewards of ownership are transferred to the Group. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the liability and finance charge to produce a constant rate of interest on the finance lease balance outstanding. Assets capitalised under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. Leases other than finance leases are classified as operating leases. Payments made under operating leases are recognised as an expense in the consolidated income statement on a straight line basis over the lease term. Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight line basis.

Provisions Provisions are recognised when a present obligation exists in respect of a past event and where the amount can be reliably estimated. Provisions for restructuring are recognised for direct expenditure on business reorganisations where plans are sufficiently detailed and well advanced, and where appropriate communication to those affected has been undertaken on or before the balance sheet date. Provisions are discounted where the time value of money is considered material.

Dividends Final equity dividends to the shareholders of Rexam PLC are recognised in the period that they are approved by the shareholders. Interim equity dividends are recognised in the period that they are paid.

54 Financial instruments Derivative financial instruments are measured at fair value. Derivative financial instruments utilised by the Group include interest rate swaps, cross currency swaps, forward foreign exchange contracts and forward aluminium and energy commodity contracts. Certain derivative financial instruments are designated as hedges in line with the Group’s risk management policies. Hedges are classified as follows: (i) Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability. (ii) Cash flow hedges where they hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. (iii) Net investment hedges where they hedge exposure to changes in the value of the Group’s interests in the net assets of foreign operations. For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the consolidated income statement. For cash flow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity, with any ineffective portion recognised in the consolidated income statement. When hedged cash flows result in the recognition of a non financial asset or liability, the associated gains or losses previously recognised in equity are included in the initial measurement of the asset or liability For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the consolidated income statement in the same period in which the hedged cash flows affect the consolidated income statement. Any gains or losses arising from changes in fair value of derivative financial instruments not designated as hedges are recognised immediately in the consolidated income statement. Gains and losses on derivative financial instruments related to operating activities are included in operating profit when recognised in the consolidated income statement. Gains and losses on derivative financial instruments related to financing activities are included in interest when recognised in the consolidated income statement. Borrowings are measured at amortised cost except where they are hedged by an effective fair value hedge, in which case the carrying value is adjusted to reflect the fair value movements associated with the hedged risk. Where borrowings are used to hedge the Group’s interests in the net assets of foreign operations, the portion of the exchange gain or loss on the borrowings that is determined to be an effective hedge is recognised in equity. Available for sale financial assets are measured at fair value. Unrealised gains and losses are recognised in equity except for impairment losses, interest and dividends arising from these assets which are recognised in the consolidated income statement. Trade and other receivables are measured at amortised cost less any provision for impairment. Trade and other receivables are discounted when the time value of money is considered material. Trade and other payables are measured at cost.

55 DESCRIPTION OF REXAM AND ITS BUSINESS Introduction Rexam PLC, a public limited liability company incorporated under the laws of England and Wales on July 13, 1923 as Bowater’s Paper Mills Limited, is the holding company of the Rexam group of companies. The Group’s principal business is the provision of consumer packaging solutions to global and regional customers primarily in the beverage, beauty, home and personal care, pharmaceutical and food segments, and its two principal business operations are Beverage Cans and Plastic Packaging. The Group is the world’s second largest consumer packaging company and the world’s leading beverage can maker in terms of sales volumes. It is also a leading global manufacturer of rigid plastic packaging. The Group has more than 110 manufacturing operations in approximately 20 countries and reported a profit before tax and exceptional items of £245 million on sales revenue of £3,611 million in the year ended December 31, 2007 from continuing operations. Rexam’s ordinary shares are listed on the London Stock Exchange and are owned by both institutional and retail investors.

History The Group has undergone considerable change during its history. Following the demerger in 1984 of the majority of its pulp and paper making activities, it began to divest unrelated activities. The divestment programme accelerated following the appointment of Rolf Borjesson¨ as Chief Executive in 1996 as Rexam refocused its operations primarily on consumer packaging and was accompanied by two significant strategic acquisitions. In February 1999, Rexam acquired PLM AB, a Swedish-listed European beverage packaging business for a total consideration (including net borrowings assumed) of £602 million. With major businesses in beverage cans and glass bottles, the acquisition of PLM gave the Group a clear focus on consumer packaging and provided the critical mass and platform for further expansion. In July 2000, Rexam acquired American National Can Group, Inc. headquartered in the United States for a total consideration (including net borrowings assumed) of £1,517 million. As a result of this acquisition, which included beverage can making plants in Europe and the United States as well as in a number of emerging markets, the Group became, in terms of sales value, one of the world’s largest consumer packaging groups, and at that time, in terms of sales volume, the largest manufacturer of beverage cans in the world. Since 2000, the Group has continued to take steps to become a focused and leading consumer packaging company through further strategic acquisitions and divestments. In 2003, the Group expanded its Beverage Cans business in the emerging markets through the acquisition of Latasa (a South American beverage can maker) and the buy-out of its joint venture partners in Mexico and China. In 2006, the Group acquired the Egyptian beverage can maker Ecanco, and in August 2006 the Group formed a joint venture with India’s Hindustan Tin Works to build the first beverage can making plant in India. In January 2008, Rexam acquired Rostar, the Russian beverage can maker, for £149 million from En+ Group Limited, the parent of the Russian aluminium group Rusal. This transaction gives Rexam the leading position in the Russian beverage can market, which grew 12% in 2007. Additionally, Rexam is in the process of constructing a new beverage can plant in Argayash in the Urals, which is proceeding according to plan and is expected to come on stream in the first half of 2008. Rexam has plans to build another new plant in Novosibirsk (south west Siberia) in the near future, in order to meet market growth in the region.

56 In Plastic Packaging, growth has been mainly through acquisition. In June 2003, Rexam acquired Risdon Pharma Development S.A. (Risdon’s plastic pharmaceutical packaging business). This was followed by the acquisition of Plastic Omnium Medical (a pharmaceutical industry supplier) in April 2004, Delta Plastics (a U.S. home care industry supplier) in September 2005, and Precise Technology Inc. (a personal care industry supplier) in December 2005. In 2006, the Group acquired Airspray, a Dutch manufacturer of non aerosol foam dispensing systems, FangXin, a beauty packaging business in China, and TruePack, a manufacturer of plastic primary pharmaceutical packaging in India. In order to focus its business on higher growth, higher margin segments and emerging markets, the Group has divested a number of businesses. In 2003, it completed the sale of its Healthcare Flexibles Sector, sold a number of its thin wall plastic operations and disposed of the last remaining non-packaging subsidiary TBS Engineering. In 2005, the Group divested its 50% share in Interprint Ltda, a joint venture in Brazil. In June 2007, Rexam disposed of its glass operation to Ardagh for a total consideration of £401 million (with the profit on the sale after tax being £48 million). Rexam used the proceeds from this sale to partially fund the acquisition of O-I Plastics, a leading U.S. manufacturer of rigid plastic healthcare packaging and plastic closure systems, from Owens-Illinois Group Inc. for a total consideration of $1,825 million (which includes the benefit of a tax basis step up for certain of the assets acquired). In May 2004, Rolf Borjesson¨ became Chairman. Upon his retirement in May 2008, Mr. Borjesson¨ was succeeded by Peter Ellwood, following shareholder approval at the 2008 annual general meeting. Mr. Ellwood joined the Board as a non-executive director and Chairman Designate in February 2008. In February 2007, Leslie Van de Walle became Chief Executive Officer upon the retirement of Lars Emilson, who had held the position since 2004.

Market and Industry Characteristics Consumer packaging is a global market worth an estimated $388 billion as of December 31, 2007, according to the Packaging Industry Research Association. Beverage and food packaging account for more than two thirds of the total market whilst the other areas of interest to Rexam, for example packaging for pharmaceuticals and beauty/personal care products, account for more than 10%. Consumer packaging is regarded as relatively insensitive to economic cycles as people tend to consume the same amount of food and beverages in a thriving economy as in a downturn. There are a number of other factors linked to social and demographic trends which also have a significant bearing on packaging demand. Population growth and GDP per capita also have a significant influence on demand, as does the ageing of the global population. A number of key social trends have been identified that are having a major impact on developments in packaging. These include the trend towards smaller households and the accompanying rise in demand for smaller pack sizes, rising health awareness among consumers, and the increasing requirement for convenience. The issue of convenience encourages innovation in packaging as consumers seek out efficient alternatives to more traditional packaging. Other key trends include customers’ heightened requirements for brand differentiation in increasingly competitive retail environments, more awareness of environmental issues and the new regulatory requirements on packaging recycling.

Competitive Strengths • Leading position in the beverage can market in terms of revenues and a market leader in other key strategic markets. With more than 110 manufacturing operations in approximately 20 countries, Rexam is the world’s second largest consumer packaging company and the world’s leading beverage can maker in terms of revenues. Rexam is the number one beverage can maker in

57 Europe with more than 40% market share and 15 can plants and four end plants in various European locations. In addition, Rexam is a leading beverage can maker in the Americas, holding the number three position in the United States and more than 65% of the market share in Brazil, the main beverage can market in South America. In Plastic Packaging, Rexam holds leading global or regional positions in the majority of its markets, including the U.S., where it has the leading position in packaging for prescription products. • Proven ability to identify and execute strategic acquisitions and integrate acquired businesses. Rexam’s strategy of careful evaluation and pursuit of strategic opportunities has resulted in its successful growth through acquisitions. Under a strong management team, Rexam has executed a series of successful acquisitions. Recently, Rexam added to both its Beverage Cans and Plastic Packaging businesses. In Beverage Cans, Rexam’s most recent acquisition was Rostar in January 2008, the main beverage can maker in Russia, which was acquired for £149 million. This acquisition complimented Rexam’s continued investment in the growing Russian beverage can market. The acquisition of O-I Plastics, a leading U.S. manufacturer of rigid plastic healthcare packaging and plastic closures, in 2007 for $1,825 million gave the Plastic Packaging business meaningful scale and critical mass to turn Rexam into a global leader in rigid plastic packaging. Following the acquisition of Precise Technology, Delta Plastics, Airspray, FangXin, and the significant acquisition of O-I Plastics, Rexam restructured its Plastic Packing business to create a portfolio of three customer facing divisions of broadly similar size in revenue terms. These acquisitions and others have resulted in Rexam’s expansion into new and existing markets and are expected to generate significant synergies both in terms of costs and revenues. • Ability to deliver technically advanced solutions. The segments in which Rexam operates are technologically advanced and have significant intellectual property associated with many of the products. Rexam offers a broad range of packaging products and solutions for many consumer facing industries, using different materials and technologies. By investing in people and capabilities, Rexam has become able to engage more deeply with customers and develop new technologies that meet market trends and consumer needs. Rexam works with research organisations to investigate emerging materials and technologies, and its development teams across the world often collaborate on innovative packaging solutions. In addition, the acquisition of O-I Plastics has contributed to Rexam’s strength in new product development and has brought it additional capabilities, as more than 75% of OI Plastics’ closures are based on proprietary designs, and a third of closures sales are from products developed in the last three years. Recent examples of Rexam’s innovative designs include the highly adaptable and aesthetic XD11 fragrance pump and airless skincare packaging developed with L’Oreal´ Paris for its Derma Genese/Skin` Genesis, cans with resealable closures and the aluminium bottle. • Highly experienced management team. Rexam’s management team consists of highly experienced professionals. Many of Rexam’s senior executive officers have demonstrated their ability to manage costs, adapt to changing market conditions and to acquire and successfully integrate new businesses. Rexam’s senior management is incentivised through share ownership in Rexam PLC.

Strategy Rexam’s strategy is to generate profitable growth by consolidating its position in chosen industries, segments and geographic markets, strengthening its relationships with its customers, and leading in operational excellence and product innovation while operating to the highest standards with regard to safety, the environment and its people. • Invest in higher growth, higher margin and emerging markets and consolidate positions in chosen industries, segments and geographic markets. Rexam has in the past completed a number of transactions in order to maintain its competitive position and to increase its presence in higher

58 growth markets, including emerging markets. In order to focus on high growth segments, Rexam acquired O-I Plastics and divested its Glass business in 2007. In addition, while the Group’s operations are concentrated mainly in the world’s major developed economies with its main markets currently in Europe and the United States, it believes that its principal growth opportunities lie in those larger, less developed countries which are adopting consumer goods purchasing patterns similar to those of more developed countries. In order to capitalise on these growth opportunities, Rexam has entered into various strategic investments, including the acquisition of Rostar, an investment in a beverage can joint venture in Guatemala, and the O-I Plastics acquisition, which increased Rexam’s presence in Brazil and opened up new opportunities in Mexico, Singapore and Malaysia. Rexam continues to evaluate opportunities that would add strategic value and expects to continue to grow its business through acquisitions and investments in high growth markets, including emerging markets. In 2007, approximately 20% of its sales were from emerging markets compared with 8% in 2000. • Strengthen relationships with customers. The vast majority of Rexam’s sales are to large multinational consumer products companies who are growing their businesses on a global basis. Rexam has strong and long-standing relationships with its key customers, which include some of the leading North American and European consumer products companies such as Coca-Cola, Red Bull, Heineken, Anheuser-Busch, Carlsberg, InBev, Procter & Gamble, SABMiller, Avon, Colgate-Palmolive, L’Oreal,´ GSK and Pfizer. In order to maintain and strengthen its relationships with its customers, Rexam’s strategy is to work closely with its customers to support their growth plans in established and emerging markets and to deliver consistency in terms of technological capability, service and quality and to be proactive in contributing to innovative solutions to its customers changing needs. Rexam seeks to establish relationships which extend far into the supply chain beyond the pure procurement level, in order to become an integral part of its customers’ businesses. Rexam also strives to ensure that it is the supplier of choice by focusing on innovation and efficient operations in order to achieve lowest cost manufacturer status. • Continue to focus on operational efficiency and aim to lead the industry in terms of execution and operational excellence. Rexam’s focus on operational excellence across the Group delivers substantial savings each year. Its efficiency savings in 2007 totaled £32 million, compared to £28 million in 2006. Plastic Packaging accounted for more than half of the efficiency savings in 2007 due largely to the recent reorganisation of the business and the synergy opportunities presented by recent acquisitions. In addition, Rexam seeks to co-ordinate across its businesses the procurement of primary raw materials and energy for efficiency and economies of scale. Rexam also focuses on efficient manufacturing processes, including the reduction of energy and other utilities and emissions, and works closely with its customers and suppliers to reduce the amount of material it uses in various types of packaging, employing innovative ways to reuse production scrap. Rexam intends to continue to focus its efforts on operational efficiency and operational excellence in order to lead the industry in terms of execution while operating to the highest standards with regard to safety, the environment and its people.

Core Businesses The Group operates through subsidiaries in each relevant jurisdiction, with its main subsidiaries often holding operations in more than one specific business sector. Following the disposal of Glass, the Group now has two main business segments: (i) Beverage Cans, which is currently comprised of three geographical divisions: North America, South America and Europe & Asia; and (ii) Plastic Packaging, which is currently comprised of three operating divisions: Healthcare, Closures and Personal Care.

59 Beverage Cans Beverage Cans accounted for approximately 75% of the Group’s total sales from ongoing operations in the year ended December 31, 2007. The Group is the leading beverage can manufacturer in the world with a global market share above 20% (Source: BCME, Abralatas, CMI and Rexam estimates). The cans are used for a wide array of beverages, including beer, carbonated soft drinks, juices, sports and energy drinks, water, wine, spirit mixers and iced tea. Major beverage can customers include The Coca-Cola Company and its associated bottlers, Red Bull, Carlsberg and other leading producers of beer, carbonated soft drinks and energy drinks throughout the world. The Beverage Cans business is essentially a local business operating on a global scale. The Group’s Beverage Cans plants are operated and managed as three divisions: Rexam Beverage Can North America, Rexam Beverage Can South America and Rexam Beverage Can Europe & Asia. Within each region, the business is highly centralised and managed on a lean basis for cost control. The regional businesses are also connected globally so that Rexam can leverage areas such as supply chain, engineering, innovation, research and development activities and marketing intelligence. Operation of a global network of plants with associated logistics infrastructure and the ability to supply international customers on a global basis with local supply has become increasingly important. As a result, Rexam believes that the top four beverage can makers now account for over two-thirds of the world’s beverage can production.

North America Rexam is the number three beverage can maker in the United States (with a 24% market share), with 17 can making plants and two end plants located across the United States, one plant in Mexico, and one in Guatemala. The plant in Guatemala is a joint venture with Envases Universales, a Mexican packaging company. It is anticipated that this joint venture will strengthen Rexam’s presence in the Central American market which is growing at a rate of about 6% per annum. Market conditions in North America mean that Rexam is repositioning the business for margin improvement instead of growth, in contrast to its strategy in Europe and emerging markets. In 2007, market volumes for standard 12oz cans in North America declined, reflecting the maturity of the U.S. market as well as a move towards revenue rather than volume management by the big brand owners who increased their prices to consumers during the year. The 12oz market is mature and represents a major part of Rexam’s North American volumes. While Rexam remains dedicated to managing this part of the business and serving customer needs, during 2007 it continued to realign the business to take advantage of growth opportunities afforded by higher growth, higher margin, non-standard cans. Rexam converted a number of 12oz lines, added a new line for specialty sizes and initiated further optimisation projects on its 24oz lines. Rexam also secured a strategically important long term supply contract with one of the main users of 24oz cans for non alcoholic beverages. Specialty cans now account for 14% of volumes in the United States and grew 19% compared with last year.

South America Rexam is a market leader in beverage can volume in South America, where it now has 11 plants, comprised of seven can making plants and two end plants in Brazil, and one can making plant each in Argentina and Chile. Rexam has approximately 63% of the South American market. Its strategy is to maintain the leadership position by ensuring that it is well positioned geographically to capture growth, particularly in the Brazilian market, which grew 15% in 2007. In 2006, it opened a greenfield plant in Cuiaba, in the fast growing Mato Grosso region. During 2007, it recommissioned a previously decommissioned

60 plant in Jacarei, Brazil, in order to help meet market growth in specialty cans. It has also built a new can end plant in Manaus, in the Amazonas region of Brazil. Although there was a delay in the start up of this plant, which cost Rexam approximately £5 million in costs in 2007 to cover the shortfall in end production, the plant is now operating in line with expectations.

Europe & Asia Rexam is the number one beverage can maker in Europe with more than 40% market share and fifteen can plants and four can end plants in various European locations including the Czech Republic, Austria, France, Germany, Italy, Ireland, Russia, Sweden, Spain, Turkey and the United Kingdom. It has benefited from growth in a number of European countries and the sustained growth of the energy drinks market, whose packages of choice are the 25cl can and, increasingly, the Rexam Sleek can. In 2007, Rexam opened a greenfield can making plant in Austria, dedicated to the production of specialty cans for Red Bull. The plant is the Group’s first new can making facility in Europe for almost ten years. It was completed ahead of schedule and on budget. The continued growth of the energy drinks market has led to the adding of a third line in the new plant in Austria, which will be fully operational by late 2008. In October 2007, Rexam announced the construction of a new aluminium beverage can plant in Denmark. The facility, the first beverage can plant in Denmark, will be operational during the first half of 2009 and initially is expected to have a capacity of just over 1 billion 33cl (12oz) and 50cl (18oz) cans. The new plant will support market needs, and its location is expected to help optimise logistics costs associated with the supply of beverage cans to the Northern European market. Rexam is also installing additional steel beverage can lines to meet local market growth in Spain and in Egypt, which are expected to come on stream in the second quarter of 2008. Each will supply an additional 600 million cans per annum to their respective markets. To strengthen its position in emerging growth markets, in January 2008 Rexam acquired Rostar, the Russian beverage can maker, for £149 million from En+ Group Limited, the parent of the Russian aluminium group Rusal. Rostar had two manufacturing facilities: one near Moscow (which includes an end making facility) and one near St Petersburg (the two plants’ annual capacity is approximately 3 billion beverage cans). As a condition of regulatory approval for the acquisition by the Federal Antimonopoly Service of the Russian Federation, Rexam has undertaken, among other conditions, to invest in Russia to meet beverage can market growth in the region and to cap annual price increases at 15% over the next 10 years (other than in exceptional circumstances). In 2007, approximately 22% of sales came from several emerging market countries. In the Asia Pacific market, Rexam has an established beverage can making plant in China and a joint venture in South Korea. It also has one can making plant in Egypt, which services the growing local and Middle East markets, and a joint venture in India, which produced the first ever two piece beverage can in India in a small but developing market which grew by 50% in 2007 to 200 million cans.

Plastic Packaging Plastic Packaging in Rexam comprises some 45 plants in Europe, North, Central and South America, India, China and Indonesia. It accounted for approximately 25% of the Group’s total sales from ongoing operations in the year ended December 31, 2007. Plastic Packaging has undergone fundamental change in the past two years. The high point in this process of change was the acquisition in August 2007 of O-I Plastics, a leading U.S. manufacturer of rigid plastic healthcare packaging and plastic closure systems which in 2006 had sales of $760 million and a profit before interest of $114 million. As a result of the acquisition, Plastic Packaging was transformed into a global business with turnover in excess of £1.1 billion in 2007 (assuming the O-I

61 Plastics acquisition had taken place at the beginning of 2007). To date, sales, profits and cash generation of the former O-I Plastics businesses have all been in line with Rexam’s expectation at the time of the acquisition. At the time of the O-I Plastics acquisition, Rexam anticipated that it would generate significant value through synergies amounting to approximately £20 million per year by 2010. The synergies were expected to come from purchasing, manufacturing and other efficiencies as well as cross-selling opportunities. Since completion, Rexam has identified further synergy potential and now expects that figure to reach £25 million per year by 2010. Following the acquisition, Plastic Packaging was restructured to create a portfolio of three customer facing divisions of broadly similar size in revenue terms: Healthcare, Closures and Personal Care. The new scale and structure enables the Group to consolidate certain activities and functions at the Plastic Packaging sector level in order to create further efficiency across the global operations. As in Beverage Cans, this includes traditional functions such as human resources and finance, as well as global manufacturing, supply chain, technology and innovation.

Healthcare Healthcare is structured into three subdivisions: Pharma (Rexam’s healthcare business prior to the O-I Plastics acquisition), Primary Packaging and Prescription Products (both acquired with O-I Plastics). The Healthcare business is split mainly between Europe and the United States, but it also has plants in Mexico, Puerto Rico and India. The Healthcare business principally manufactures drug delivery devices and various types of primary and prescription containers. In the United States, the Healthcare business is the market leader in packaging for prescription products. Customers include top pharmaceutical companies such as Abbott, Eli Lilly, GSK, Hospira, McNeil, Pfizer and Schering Plough as well as pharmacies and retailers. The Healthcare business’s main attributes include engineering and manufacturing expertise, strong technology and patent protection as well as a complete solutions offering. The Healthcare market is estimated to be growing currently at 6 to 8% per annum, driven by an ageing population, an increased focus on well-being and economic growth in emerging markets.

Closures Closures is made up of Closures and Containers and High Barrier Food (Rexam’s Closures business prior to the O-I Plastics acquisition) and the closures business acquired with O-I Plastics. The two Closures businesses accounted for 80% of the divisional sales in 2007, with margins for the division as a whole in line with the average level of the Group’s overall business. Products include closures for home, health, food and beverage applications, tamper evident and child resistant closures, as well as high barrier food containers and lids. The business is predominantly based in the United States and key customers include Campbell’s, Clorox, Coca-Cola, Nestle,´ Novartis, PepsiCo and P&G. Its strengths lie in its proprietary moulding technologies and a consistent track record of innovation. The closures market is estimated to be currently growing at 3 to 4% per annum while the high barrier food container market is estimated to be growing at more than 20% per annum.

Personal Care Personal Care is a global business with manufacturing bases in Europe, the U.S., China and Brazil. It also has the added advantage of having its own mould-making facility. It makes a range of largely custom-manufactured products including lipstick cases, compacts, samplers, fragrance and lotion pumps, non-aerosol foam dispensing systems, deodorant sticks and shaving trays. Customers include such global players as Avon, Colgate, Estee´ Lauder, L’Oreal,´ LVMH, Mary Kay, P&G and Unilever. The Personal Care market is estimated to be currently growing at around 2 to 3% per annum.

62 Rexam is one of the global leaders in terms of sales to the packaged beauty products industry. The Group is a leading producer, in terms of sales volumes, of miniature spray samplers and cosmetics pumps (chiefly for perfumes), lipsticks and compacts. Following the acquisition in 2006 of Airspray, a Dutch manufacturer of non-aerosol foam dispensing systems, the Group now has a leading position in the high growth segment of foam pumps. Rexam also has a small plastic beverage container business, which is in the process of being sold. It focuses on the specialised but geographically limited refillable PET/PEN (polyethylene terephthalate/ polyethylene naphthalate) sector. This business is located in Sweden and the Czech Republic and serves the Nordic and German markets.

Disposal of Glass In June 2007, Rexam sold its Glass business to Ardagh for a cash consideration of £401 million. At the time of the sale, Rexam’s Glass division employed 3,600 people in 13 plants: one each in Sweden and Denmark, two in Poland, seven in Germany and two in the Netherlands. Rexam’s Glass division produced about 7 billion glass containers a year, supplying the beverage, food, and pharma markets. The divestment followed a review of the position of the glass business within Rexam’s consumer packaging portfolio and was consistent with Rexam’s strategy to focus investment on organic growth and acquisitions in higher growth and emerging markets. The proceeds were used, in part, to fund Rexam’s acquisition of O-I Plastics and to reduce borrowings.

Resources Rexam’s resources comprise physical assets in the form of facilities and machinery, the operational teams to run and manage these and the sales and marketing people to build long term relationships with customers, suppliers and other key stakeholders. Rexam’s manufacturing operations purchase raw materials, machinery and equipment from largely the same group of suppliers as industry competitors. Rexam’s employees’ ability to extract the most out of these assets in the most efficient manner therefore largely determines Rexams’s success.

Customers The majority of the Group’s sales are to large multinational consumer products companies. Its largest customer is The Coca-Cola Company and its associated bottlers, which represented approximately 30% of consumer packaging sales in 2007, assuming the O-I Plastics acquisition had taken place at January 1, 2007 and excluding the Glass business. In total, the Group’s top 10 customers accounted for more than half of its total consumer packaging sales in 2007 on the basis described above and comprised the following companies: Anheuser-Busch, Cadbury-Schweppes, Carlsberg, Coca-Cola, Heineken, InBev, Pepsi-Cola, Procter & Gamble, Red Bull and F.V. & Sons.

Markets and Competitive Conditions Rexam competes in the sales of beverage cans and plastic packaging principally on the basis of price, reputation, customer service, reliability, quality, product design and innovation. The major markets for Rexam’s Beverage Can business are producers of beer, carbonated soft drinks, juices, sports and energy drinks, water, wine, spirit mixers and iced drinks. The principal competitors producing metal containers and beverage cans are Crown Holdings, Ball Holdings, Alcan-Rio Tinto, Tokyo Seikan, and Alcoa. Additionally, Rexam also faces competition from bottling companies and other beverage and food providers that elect to produce their own containers rather than purchase them from outside sources.

63 In Plastic Packaging, the major markets for Rexam’s business include an array of consumer products such as lipstick cases, fragrance pumps, closures, personal care, home products and health care products. The principal worldwide competitors producing plastic packaging are Alpla, Amcor and Graham. In addition to competing with other established manufacturers in the plastic packaging segment, Rexam also competes with manufacturers of other forms of rigid packaging, principally glass containers.

Raw Materials Rexam uses a variety of raw materials to manufacture its consumer packaging products. These include aluminium, steel and steel alloys, plastic resin and various coatings. In general, to mitigate against the impact of changing raw materials prices on trading Rexam works with suppliers, customers, banks and brokers to hedge against price changes or allows changes in costs to be passed on to customers. Please see ‘‘Management’s Discussion and Analysis of Financial Condition and of Results of Operations—Factors Affecting Results of Operations—Changes in the costs and availability of raw materials’’.

Principal Subsidiaries As at December 31, 2007, Rexam’s principal subsidiaries were as follows:

Country of Principal Area of Nature of Business Subsidiary Undertaking Incorporation Operation Activities Rexam European Holdings Limited* ..... United Kingdom United Kingdom Holding company Rexam Group Holdings Limited ...... United Kingdom United Kingdom Holding company Rexam America Corporation* ...... United States United States Holding company Rexam Beverage Can Americas Inc.* ..... United States United States Holding company Rexam Beverage Can Overseas Co.* ..... United States United States Holding company Rexam Beverage Can Co...... United States United States Holding/Operating Rexam Finance Corporation* ...... United States United States Finance company Nacanco Holdings Europe, SA* ...... France Europe Holding company Nacanco Atlantic Holdings, SA* ...... France Europe Holding company Rexam Overseas Holdings Limited* ...... United Kingdom United Kingdom Holding company Rexam Inc...... United States United States Holding company * Share capital held through intermediate holding companies. Rexam is, directly or indirectly, the ultimate holding company of all the companies in the Group and its assets are substantially comprised of shares in such companies. It does not conduct any other business and is accordingly dependent on the other members of the Group and revenues received by them.

Regulation Rexam’s worldwide operations, in common with those of the industry generally, are subject to extensive laws, ordinances, regulations and other legal requirements relating to environmental protection, including legal requirements governing investigation and clean-up of contaminated properties as well as water discharges, air emissions, waste management and workplace health and safety. A number of governmental authorities in the jurisdictions in which Rexam operates have enacted, or are considering enacting, legal requirements that would mandate certain rates of recycling, the use of recycled materials and/or deposits on certain types of packaging. While aluminium cans are 100%

64 recyclable and therefore less subject to adverse impact by such legislation, some plastic products have been negatively impacted in regions where particularly restrictive deposit legislation has been enacted. On June 1, 2007, REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), a new framework for regulation of chemicals in Europe, came into force. It requires industry participants to register materials and substances that are manufactured in, imported into or used in Europe. With respect to most of the materials used in Rexam’s products, the responsibility for registration lies with suppliers. Rexam has established an internal steering group to ensure that its products and materials remain compliant and it expects to continue to work closely with suppliers as REACH is implemented. Rexam is unable to predict what environmental legal requirements may be adopted in the future, but has made significant expenditures to ensure environmental and regulatory compliance across the Group. The costs associated with environmental legal requirements may continue to result in future additional costs to operations. See ‘‘—Environmental Impact’’ below for further information on our environmental policies.

Environmental Impact Environmental Policy Rexam has had an environmental policy in place since 1991. As part of the policy, Rexam collects environmental data from all of its manufacturing sites using the global web-enabled Rexam Audit System tool. The data that is collected is used to highlight any areas for improvement and support, and to identify best practice for sharing throughout the Group. Rexam has developed measurable targets both to reduce environmental impacts and to capitalise on opportunities. In addition, Rexam has launched and continues to participate in a number of initiatives, internally and with suppliers and customers, to reduce the use of raw materials and minimise the environmental impact of the beverage can manufacturing process.

Air Quality Rexam produces a range of air emissions from its operations but does not use Ozone Depleting Substances (e.g., chlorofluorocarbons, hydrochlorofluorocarbons and hydrofluorocarbons) in its manufacturing processes. As a minimum, Rexam complies with all local regulatory minimum requirements.

Land Quality Land may become contaminated as a result of past practices in the management of materials, for example, through inadequate containment, accidental release or poor disposal practices. Formal environmental management systems in Rexam’s operations provide controls in order to minimise the risk of contamination from existing processes. Rexam regularly investigates potential exposures in order to understand and manage contaminated land issues.

Recycling Rexam works closely with its customers and suppliers to reduce the amount of material used in various types of packaging and to maintain the integrity of contents. The Group is involved in many packaging recycling schemes together with customers, suppliers, retailers and local governments in the countries in which there are operations. Rexam promotes packaging and packaging recycling through trade organisations and through the support of local initiatives.

65 Facilities The principal manufacturing facilities and other material important physical properties of the Group at December 31, 2007 are listed below. In addition to the properties listed below, the Group has its worldwide headquarters and other corporate facilities in London, United Kingdom.

Beverage Cans

North America South America Europe & Asia Birmingham, United States Aguas Claras, Brazil Enzesfeld, Austria Bishopville, United States Brasilia, Brazil Ludesch, Austria Chatsworth, United States Cuiaba, Brazil Zhaoqing, China Chicago, United States Extrema, Brazil Ejpovice, Czech Republic Fairfield, United States Jacarei, Brazil Cairo, Egypt Forest Park, United States Manaus, Brazil, Waterford, Eire Fremont, United States Recife, Brazil Milton Keynes, England Kent, United States Santa Cruz, Brazil Luton, England Longview, United States Buenos Aires, Argentina Tongwell, England Oklahoma, United States Santiago, Chile Wakefield, England Olive Branch, United States Dunkerque, France Phoenix, United States Mont, France St Paul, United States Berlin, Germany Valparaiso, United States Gelsenkirchen, Germany Whitehouse, United States Recklinghausen, Germany Winston Salem, United States Mumbai, India (JV) Guatemala, Guatemala Nogara, Italy Queretaro, Mexico San Martino, Italy Naro Fominsk, Russia Argayash, Russia Dmitrov, Russia Vsevolozhsk, Russia Fosie, Sweden La Selva, Spain Valdermorillo, Spain Manisa, Turkey Kyungnam, Korea (JV)

66 Plastic Packaging

Healthcare Closures Personal Care Offranville, France Deeside, United Kingdom Alkmaar, The Netherlands La Verpilliere, France Gyor, Hungary Lodz, Poland Le Treport, France Malaysia Annecy, France Neuenburg Am Rhein, Germany Singapore Le Creusat, France Bangalore, India Hot Springs, United States Le Treport, France Battleboro, United States Perrysburg, United States Simandre, France Berlin, United States Sorocaba, Brazil Suresnes, France Buffalo Grove, United States Bowling Green, United States Tournus, France Franklin, United States Brookville, United States Shanghai, P R China Greenville, United States Constantine, United States Shenzhen, P R China Nashua, United States Erie, United States Tianjjin, P R China Washington, United States Evansville, United States Surabaya, Indonesia Juarez, Mexico Hamlet, United States Jundai, Brazil Mexico City, Mexico Hattiesburg, United States Anderson, United States Las Piedras, Puerto Rico Madisonville, United States Buffalo Grove, United States Princeton, United States Excelsior Springs, United States Union, United States Holden, United States Mexico City, Mexico (JV) Newark, United States Tlajomulco, Mexico Pompano Beach, United States Sussex, United States Thomaston, United States The Group believes that its facilities are well maintained and currently adequate for its planned production requirements over the next three to five years.

Board of Directors In September 2006, the Group announced that Leslie Van de Walle was to succeed Lars Emilson, upon his retirement, as Chief Executive Officer. He was appointed a director on January 17, 2007 and became Chief Executive Officer on February 1, 2007. On February 1, 2008, Peter Ellwood joined the Board as non-executive director and Chairman Designate and succeeded Rolf Borjesson¨ as Chairman at the Annual Meeting on May 1, 2008.

67 The following table shows the Board of Directors of Rexam as at the date hereof.

Name Position Principal outside directorships, etc. Peter Ellwood ...... Chairman (Non-executive) Previously Chairman of Imperial Chemical Industries PLC and Group Chief Executive of Lloyds TSB Group PLC. Supervisory Board member of Akzo Nobel NV and Chairman of the Royal Parks Charitable Foundation. Leslie Van de Walle .... Chief Executive Officer Non-executive director of Aegis Group PLC. David Robbie ...... Finance Director Non-executive director of the BBC. Graham Chipchase ..... Group Director, Plastic Packaging Bill Barker ...... Group Director, Beverage Cans Michael Buzzacott ..... Non-executive Director Chairman of Earls Nook Limited and non-executive director of Croda International PLC. Carl Symon ...... Senior Independent Director Chairman of HMV Group PLC, the BT Group Equality of Access Board and Clearswift Systems Limited, non-executive director BT Group PLC and Rolls-Royce Group PLC and an advisory board member of Cross Atlantic Capital Partners. Noreen Doyle ...... Non-executive director Non-executive director of Credit Suisse Group, Newmont Mining Corporation and QinetiQ Group PLC and a member of the Advisory Panel for the Macquarie European Infrastructure Fund II. Jean-Pierre Rodier ..... Non-executive director Advisor to Corporate Value Associates, Chairman of Enterprises et Personnel and an associate with Mediobanca Banca di Credito Finanziario. Wolfgang Meusburger . . . Non-executive director Chairman of the non-executive board of Schoellershammer and a non-executive director of BS Group, CCT Reig Group, and Chiquita Fruit Bar and on the board of a number of international consumer goods companies based in Europe.

Employees Approximately 22,000 people are employed in continuing operations by the Group in approximately 25 countries, approximately 7,100 of which are employed by the Beverage Cans operations and approximately 14,900 by Plastic Packaging.

68 In 2007, nine U.S. plants experienced a labour strike that lasted approximately three weeks. Following its resolution, Rexam signed a labour agreement with the United Steel Workers for the next five years. As a result of efficiencies realised across the manufacturing network following the acquisition of O-I Plastics in 2007, Rexam announced its intention to close two plants in the U.S. and divested a plant in Holland, transferring production to a new plant in Poland. The U.S. plants situated in West Lafayette, Indiana and Rossville, Georgia, are currently scheduled for closure in the third and fourth quarters of 2008, respectively. This will further align manufacturing capabilities, improve overall utilisation and help balance industry capacity. In 2006, Rexam also reduced the headcount in its Make Up operation to reduce its cost structure to meet expectations regarding future volumes for the business. Other measures included plant rationalisation and streamlining of resources. In 2007, this restructuring programme led to a turnaround for the Make Up business and an improvement in profitability.

Litigation Rexam is party to various legal proceedings arising in the ordinary course of business. Since legal proceedings are subject to numerous uncertainties, their outcome cannot be predicted with any certainty. However, Rexam believes that the resolution of legal proceedings referred to above will not have a material adverse effect on its results of operations, financial condition, profitability or cash flows.

General Information The business address for the Directors is 4 Millbank, London SW1P 3XR, United Kingdom. There are no potential conflicts of interest between the duties to Rexam of the persons listed under ‘‘—Board of Directors’’ above and their private interests or other duties. The address of the registered office of Rexam is 4 Millbank, London SW1P 3XR, United Kingdom and the telephone number is +44 (0) 207 227 4100. The registration number for Rexam PLC is 191285.

69 DESCRIPTION OF THE NOTES The following is a summary of the material provisions of the Notes and the Indenture (as described below). The summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Notes and the Indenture. It does not restate those agreements in their entirety. A copy of the Indenture will be available for inspection during normal business hours at any time after the initial issuance date of the Notes at the offices of the Trustee at the address below. Any capitalised term used herein but not defined shall have the meaning assigned to such term in the Indenture.

General The $550,000,000 6.75% senior notes due 2013 (the Notes) will be issued in registered form under an Indenture to be dated as of June 4, 2008 (the Indenture) between Rexam PLC (the Issuer), The Law Debenture Trust Corporation p.l.c., Fifth Floor, 100 Wood Street, London EC2V 7EX, United Kingdom, as trustee (the Trustee) and Citibank, N.A., London Branch, Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom, as paying agent, transfer agent and registrar (in each and all such capacities, the Agent). The Indenture is not required to be and will not be qualified under the U.S. Trust Indenture Act of 1939, as amended (the Trust Indenture Act), and will not incorporate by reference the provisions of the Trust Indenture Act. Consequently, the holders of Notes generally will not be entitled to the protections provided under such Act to holders of debt securities issued under a qualified indenture, including those requiring a trustee to resign in the event of certain conflicts of interest and to inform the holders of Notes of certain relationships between it and the Issuer. In this ‘‘Description of the Notes’’, the terms holder, Noteholder and other similar terms refer to a registered holder of Notes, and not to a beneficial owner of a book-entry interest in any Notes, unless the context otherwise clearly requires. For so long as any Notes remain outstanding and are restricted securities within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer will, during any period in which it is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, make available to any holder (or any beneficial owner of a book-entry interest in such Notes designated by the holder thereof) in connection with any sale thereof and to any prospective purchaser of Notes or a book-entry interest in Notes designated by such holder, in each case upon request of such holder, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act. As of the date of this Offering Memorandum the Issuer is exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. The Regulation S Notes will be resold outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

Principal, Maturity and Interest The Notes will be unsecured and unsubordinated obligations of the Issuer. The Notes are initially issuable in aggregate principal amounts not to exceed $550,000,000, and will mature on June 1, 2013. The Notes will bear interest at 6.75% per annum from the date of the initial issuance of the Notes or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semi-annually in arrear on June 1 and December 1 commencing on December 1, 2008 (each, an Interest Payment Date) to the person in whose name any Note is registered at the close of business on May 15 or November 15 (whether or not a Business Day) immediately preceding such Interest Payment Date (each, a Record Date), notwithstanding any transfer or exchange of such Notes subsequent to the Record Date and prior to such Interest Payment Date, except that, if and to the extent the Issuer shall default in the payment of the interest due on such Interest Payment Date and the applicable grace period shall have expired, such defaulted interest may at the option of the Issuer be paid to the

70 persons in whose names Notes are registered at the close of business on a subsequent Record Date (which shall not be less than ten days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the holders (which term means registered holders) of the Notes not less than 15 days preceding such subsequent Record Date. Interest will be computed on the basis of a 360 day year consisting of twelve 30 day months or in the case of an incomplete month, the number of days elapsed. If the date on which any interest payment or principal payment is to be made is not a Business Day in New York City, London, England and the place of payment of such interest or principal, such payment will be made on the next day which is a Business Day in New York City, London, England and the place of payment of such interest or principal without any further interest or other amounts being paid or payable in connection therewith.

Optional Redemption The Issuer may redeem the Notes in whole or in part, at the Issuer’s option, at any time and from time to time at a redemption price equal to the greater of (a) 100% of the principal amount of the Notes to be redeemed and (b) as determined by the Independent Investment Banker, the sum of the present values of the applicable Remaining Scheduled Payments discounted to the date of redemption (the Redemption Date) on a semi-annual basis (assuming a 360 day year consisting of twelve 30 day months or, in the case of an incomplete month, the number of days elapsed) at the Treasury Rate plus 50 basis points together with accrued and unpaid interest on the principal amount of the Notes to be redeemed to the Redemption Date. In connection with such optional redemption the following defined terms apply: • Comparable Treasury Issue means the United States Treasury security selected by the Independent Investment Banker that would be utilised, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. • Comparable Treasury Price means, with respect to any Redemption Date, (a) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding that Redemption Date, as set forth in the daily statistical release designated H.15 (519) (or any successor release) published by the Federal Reserve Bank of New York and designated ‘‘Composite 3.30 p.m. Quotations for U.S. Government Notes’’ or (b) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (i) the average of the Reference Treasury Dealer Quotations for that Redemption Date, after excluding the highest (or, if there is more than one such highest quotation, only one of such quotations) and lowest (or, if there is more than one such lowest quotation, only one of such quotations) of such Reference Treasury Dealer Quotations or (ii) if the Independent Investment Banker for the Notes obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Quotations. • Independent Investment Banker means one of the Reference Treasury Dealers appointed by the Issuer to act as the Independent Investment Banker. • Reference Treasury Dealer means each of Barclays Capital Inc., Citigroup Global Markets Inc. and Greenwich Capital Markets, Inc., their respective successors and two other nationally recognised investment banking firms that are Primary Treasury Dealers specified from time to time by the Issuer; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a Primary Treasury Dealer), the Issuer shall substitute therefor another nationally recognised investment banking firm that is a Primary Treasury Dealer. • Reference Treasury Dealer Quotation means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker,

71 of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3.30 p.m., New York City time, on the third Business Day preceding that Redemption Date. • Remaining Scheduled Payments means, with respect to each Note to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related Redemption Date but for such redemption; provided, however, that if that Redemption Date is not an Interest Payment Date with respect to such Notes, the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to that Redemption Date. • Treasury Rate means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity (computed as of the third Business Day immediately preceding that Redemption Date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that Redemption Date. Notice of any optional redemption will be given in accordance with Notice herein at least 30 days but not more than 60 days before the Redemption Date to each holder of the Notes to be redeemed.

Repurchase Upon a Change of Control Offer If a Change of Control Triggering Event occurs with respect to the Notes, unless the Issuer has exercised its option to redeem the Notes as described above or the Notes have been redeemed in full for tax reasons as described below, the Issuer will be required to make an offer (a Change of Control Offer) to each holder of the Notes to repurchase all or any part (equal to $100,000 or an integral multiple of $1,000 in excess thereof) of that holder’s Notes on the terms set forth in such Notes. In a Change of Control Offer, the Issuer will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to the date of repurchase (a Change of Control Payment). Within 30 days following any Change of Control Triggering Event or, at the Issuer’s option, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, a notice will be mailed to holders of the Notes describing the transaction that constitutes or may constitute the Change of Control Triggering Event and offering to repurchase such Notes on the date specified in the applicable notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed (a Change of Control Payment Date). The notice will, if mailed prior to the date of consummation of the Change of Control, state that the Change of Control Offer is conditioned on the Change of Control Triggering Event occurring on or prior to the applicable Change of Control Payment Date. Upon the Change of Control Payment Date, the Issuer will, to the extent lawful: • accept for payment all Notes or portions of Notes properly tendered and not withdrawn pursuant to the applicable Change of Control Offer; • deposit with the Agent, in its capacity as paying agent, an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and • deliver or cause to be delivered to the Agent, in its capacity as paying and transfer agent, the Notes properly accepted together with an officers’ certificate stating the aggregate principal amount of Notes or portions of Notes being repurchased.

72 The Agent will promptly mail to each Holder of Notes properly tendered the purchase price for the Notes, and will promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder a new note equal in principal amount to any unpurchased portion of any Notes surrendered; provided that each new Note will be in the principal amount of $100,000 or an integral multiple of $1,000 in excess thereof. If the Change of Control Payment Date is on or after an Interest Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest, if any, will be paid to the person in whose name the Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders who tender pursuant to the Change of Control Offer. The Issuer will not be required to make a Change of Control Offer upon the occurrence of a Change of Control Triggering Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Issuer and the third party repurchases all Notes properly tendered and not withdrawn under its offer. In addition, the Issuer will not repurchase any Notes if there has occurred and is continuing on the Change of Control Payment Date an Event of Default under the Indenture, other than a default in the payment of the Change of Control Payment upon a Change of Control Triggering Event. An offer to repurchase the Notes upon a Change of Control Triggering Event may be made in advance of a Change of Control Triggering Event, if a definitive agreement is in place for a Change of Control at the time of the making of such an offer. The Issuer has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Issuer would decide to do so in the future. The Issuer could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalisations, that would constitute a Change of Control, but that could increase the amount of debt outstanding at such time or otherwise affect the Issuer’s capital structure or credit rating. The Change of Control provisions above may deter certain mergers, tender offers and other take-over attempts involving Rexam by increasing the capital required to effectuate such transactions. The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Offer provisions of the Notes, the Issuer will comply with those securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Offer provisions of the Notes by virtue of any such conflict. For purposes of the Change of Control Offer provisions of the Notes, the following terms will be applicable: Change of Control means the occurrence of any of the following: (a) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or more series of related transactions, of all or substantially all of the Issuer’s assets and the assets of its Subsidiaries, taken as a whole, to any person, other than the Issuer or one of its Subsidiaries; (b) the consummation of any transaction (including, without limitation, any merger, consolidation, amalgamation or other combination) the result of which is that any person becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Issuer’s outstanding voting stock or other voting stock into which the Issuer’s voting stock is reclassified, consolidated, exchanged or changed measured by voting power rather than number of shares;

73 (c) the Issuer consolidates with, or merges with or into, any person, or any person consolidates with, or merges with or into, the Issuer, in any such event pursuant to a transaction in which any of the Issuer’s outstanding voting stock or the voting stock of such other person is converted into or exchanged for cash, securities or other property, other than any such transaction where the shares of the Issuer’s voting stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the voting stock of the surviving person or any direct or indirect parent company of the surviving person, immediately after giving effect to such transaction; (d) the first day on which a majority of the members of the Issuer’s Board of Directors are not Continuing Directors; or (e) the adoption of a plan relating to the Issuer’s liquidation or dissolution. Notwithstanding the foregoing, a transaction will not be deemed to involve a Change of Control under clause (b) above if (i) the Issuer becomes a direct or indirect wholly-owned subsidiary of a holding company and (ii)(A) the direct or indirect holders of the voting stock of such holding company immediately following that transaction are substantially the same as the holders of the Issuer’s voting stock immediately prior to that transaction or (B) immediately following that transaction no person (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the voting stock of such holding company. The term person, as used in this definition, has the meaning given thereto in Section 13(d)(3) of the Exchange Act. Change of Control Triggering Event with respect to the Notes means the occurrence of both a Change of Control and a Rating Event with respect to the Notes. Continuing Directors means, as of any date of determination, any member of the Issuer’s Board of Directors who (a) was a member of such Board of Directors on the date the Notes were issued or (b) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Issuer’s notice of annual general meeting in which such member was named as a nominee for election as a director, without objection to such nomination). Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and a rating equal to or higher than BBB- (or the equivalent) by S&P, and a rating equal to or higher than the equivalent investment grade credit rating from any replacement rating agency or rating agencies selected by the Issuer. Moody’s means Moody’s Investors Service, Inc., and its successors. Rating Agencies means (a) each of Moody’s and S&P and (b) if either of Moody’s or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Issuer’s control, a ‘‘nationally recognised statistical rating organisation’’ within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected by the Issuer (as certified by a resolution of its Board of Directors) as a replacement agency for Moody’s or S&P, or both of them, as the case may be. Rating Event means, with respect to the Notes, that on any day during the period (the Trigger Period) commencing 60 days prior to the first public announcement by the Issuer of any Change of Control (or pending Change of Control) and ending 60 days following consummation of such Change of Control (which Trigger Period will be extended following consummation of a Change of Control for so long as any of the Rating Agencies has publicly announced that it is considering a possible ratings change), the Notes cease to have an Investment Grade Rating from both of the two Rating Agencies.

74 S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors. Voting stock means, with respect to any specified person (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person. The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of ‘‘all or substantially all’’ of the Issuer’s assets and those of its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase ‘‘substantially all’’ there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require the Issuer to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of assets and those of its Subsidiaries taken as a whole to another person or group may be uncertain.

Form and Denomination The Notes will be issued in fully registered form and only in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The Notes will be issued initially as global notes.

Further Issues The Issuer may, from time to time, without notice to or the consent of the holders of the Notes, reopen the Notes and create and issue additional notes having identical terms and conditions as the Notes (or in all respects except for the issue date, issue price, payment of interest accruing prior to the issue date of such additional notes and/or the first payment of interest following the issue date of such additional notes) so that the additional notes are consolidated and form a single series of notes with the Notes. The Issuer will not issue any additional notes unless such additional notes have no more than a de minimis amount of original issue discount or such issuance would constitute a ‘‘qualified reopening’’ for U.S. federal income tax purposes.

Status of the Notes The Notes will be unsecured (save for the provisions of ‘‘Covenants of the Issuer—Negative Pledge’’ below) and unsubordinated obligations of the Issuer and will rank pari passu in right of payment among themselves and with all other unsecured and unsubordinated indebtedness of the Issuer (save for certain obligations required to be preferred by law and the provisions of ‘‘Covenants of the Issuer—Negative Pledge’’ below).

Payment of Additional Amounts The Issuer will make payments of, or in respect of, principal, premium (if any) and interest on the Notes without withholding or deduction for or on account of any present or future tax, levy, impost or other governmental charge whatsoever and wherever imposed, assessed, levied or collected (Taxes), unless such withholding or deduction is required by law. If the Issuer is required by or for the account of the United Kingdom or, if and only if the Issuer has consolidated, merged, amalgamated or combined with, or transferred or leased its assets substantially as an entirety to, any person and as a consequence thereof such person becomes the successor obligor to the Issuer in respect of payments on the Notes, by the jurisdiction under the laws of which the successor person in relation to the relevant payment is organised (or any political subdivision thereof or any authority therein or thereof having the power to tax) (a Relevant Taxing Jurisdiction), to deduct or withhold Taxes, the Issuer will pay to a holder of a Note such additional

75 amounts (Additional Amounts) as may be necessary so that the net amount received by such holder will not be less than the amount such holder would have received if such Taxes had not been withheld or deducted; provided, however, that the Issuer shall not be required to pay any Additional Amounts for or on account of: (a) Any Taxes that would not have been so imposed, assessed, levied or collected but for the fact that the holder or beneficial owner of the Note (or a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, trust, partnership or corporation) is or has been a domiciliary, national or resident of, or engaging or having been engaged in a trade or business or maintaining or having maintained a permanent establishment or being or having been physically present in, a Relevant Taxing Jurisdiction or otherwise having or having had some connection with a Relevant Taxing Jurisdiction other than the mere holding or ownership of, or the collection of principal of, and premium (if any) or interest on, a Note; (b) Any Taxes that would not have been so imposed, assessed, levied or collected but for the fact that, where presentation is required in order to receive payment, the Note was presented more than 30 days after the date on which such payment became due and payable or was provided for, whichever is later, except to the extent that the holder or beneficial owner thereof would have been entitled to Additional Amounts had the Note been presented for payment on any day during such 30-day period; (c) Any estate, inheritance, gift, sales, transfer, personal property or similar Taxes; (d) Any Taxes that are payable otherwise than by deduction or withholding from payments on or in respect of the Note; (e) Any Taxes that would not have been so imposed, assessed, levied or collected but for the failure by the holder or the beneficial owner of the Note to comply with a written request to the holders (or any request made in accordance with the procedures set out in the Indenture) (i) to provide any certification, identification, information, documents or other evidence concerning the nationality, residence or identity of the holder or the beneficial owner or its connection with the Relevant Taxing Jurisdiction or (ii) to make any valid or timely declaration or claim or satisfy any other reporting, information or procedural requirements relating to such matters if, in either case, compliance is required by statute, regulation or administrative practice of the Relevant Taxing Jurisdiction as a condition to relief or exemption from such Taxes; (f) Any withholding or deduction imposed on a payment to or for the benefit of an individual that is required to be made pursuant to Council Directive 2003/48/EC or any other Directive on the taxation of savings implementing the conclusion of the ECOFIN council meeting of November 16-27, 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; (g) Any withholding or deduction that is imposed on the Note that is presented for payment, where presentation is required, by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting such Note to another paying agent in a member state of the EU; or (h) Any combination of the Taxes described in (a) through (g) above. In addition, Additional Amounts will not be paid in respect of any payment in respect of the Notes to any holder of the Notes that is a fiduciary, a partnership, a limited liability company or any person other than the sole beneficial owner of such Notes to the extent such payment would be required by the laws of a Relevant Taxing Jurisdiction to be included in the income for tax purposes of a

76 beneficiary or settlor with respect to such fiduciary, a member of such partnership, an interestholder in such limited liability company or a beneficial owner that would not have been entitled to such amounts had such beneficiary, settlor, member, interestholder or beneficial owner been the holder of such Notes. Unless otherwise stated, references in any context to the payment of principal of, and any premium or interest on, any Note, will be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Redemption for Tax Reasons The Notes are also redeemable by the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days’ notice as provided in herein, at 100% of the principal amount of such Notes plus accrued and unpaid interest to the applicable Redemption Date at the Issuer’s option at any time prior to their maturity if due to a Change in Tax Law (as defined below) (a) the Issuer, in accordance with the terms of the Notes, has, or would, become obligated to pay any Additional Amounts to the holders or beneficial owners of Notes; and (b) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; provided, that, (i) no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obligated to pay any such Additional Amounts were a payment in respect of the Notes then due and (ii) at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. Prior to the giving of any such notice of redemption, the Issuer must deliver to the Trustee (A) an officers’ certificate stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (B) an opinion of independent counsel of recognised standing with respect to tax matters of the Relevant Taxing Jurisdiction to the effect that the Issuer has, or would, become obligated to pay such Additional Amounts as a result of such change or amendment. For purposes hereof, Change in Tax Law shall mean (a) any changes in, or amendment to, any law of a Relevant Taxing Jurisdiction (including any regulations or rulings promulgated thereunder but not including, for this purpose, any treaty entered into by the Relevant Taxing Jurisdiction) or any amendment to or change in the application or official interpretation (including judicial or administrative interpretation) of such law, which change or amendment becomes effective or, in the case of an official interpretation, is announced, on or after the Issue Date or (b) if the Issuer consolidates, merges, amalgamates or combines with, or transfers or leases its assets substantially as an entirety to, any person that is incorporated or tax resident under the laws of any jurisdiction other than a Relevant Taxing Jurisdiction and as a consequence thereof such person becomes the successor obligor to the Issuer in respect of Additional Amounts that may become payable (in which case, for purposes of this redemption provision, all references to the Issuer shall be deemed to be and include references to such person), any change in, or amendment to, any law of the jurisdiction of incorporation or tax residence of such person or any successor entity, or any political subdivision or taxing authority thereof or therein for purposes of taxation (including any regulations or rulings promulgated thereunder but not including, for this purpose, any treaty entered into by the Relevant Taxing Jurisdiction) or any amendment to or change in the application or official interpretation (including judicial or administrative interpretation) of such law, which change or amendment becomes effective or, in the case of an official interpretation, is announced, on or after the date of such consolidation, merger, amalgamation, combination or other transaction.

Redemption—General Upon presentation of any Note redeemed in part only, the Issuer will execute and the Agent will authenticate and deliver (or cause to be transferred by book-entry) to or on the order of the holder

77 thereof, at the expense of the Issuer, a new Note or Notes, of authorised denominations, in principal amount equal to the unredeemed portion of the Note so presented. On or before any Redemption Date, the Issuer shall deposit with the Agent money sufficient to pay the redemption price of and accrued and unpaid interest on the Notes to be redeemed on such date. If less than all the Notes are to be redeemed, Trustee will select Notes for redemption pro rata, by lot, or by such other method as Trustee in its sole discretion shall deem fair and appropriate and is consistent with the rules of DTC and/or Euroclear and/or Clearstream, Luxembourg. The redemption price shall be calculated by the Independent Investment Banker and the Issuer, and the Trustee and the Agent shall be entitled to rely on such calculation. On and after any Redemption Date, interest will cease to accrue on the Notes or any portion thereof called for redemption.

Maturity Unless previously purchased or redeemed by the Issuer or any of its Subsidiaries, and cancelled, the principal amount of the Notes will mature and become due and payable on June 1, 2013, in an amount equal to their principal amount, with accrued and unpaid interest to such date.

Reacquisition There is no restriction on the ability of the Issuer or any of its Subsidiaries to purchase or repurchase Notes, provided, that any Notes so repurchased shall be cancelled and not reissued.

Covenants of the Issuer Negative Pledge The Indenture provides that, for so long as any of the Notes remain outstanding neither the Issuer nor any of its Subsidiaries will create any mortgage, charge, pledge, lien or other form of encumbrance or security interest upon the whole or any part of its undertaking, assets or revenues present or future to secure any indebtedness for borrowed money or any guarantee of or indemnity in respect of any indebtedness for borrowed money (other than Permitted Liens or Liens arising by operation of law) unless, at the same time or prior thereto, (i) the Issuer’s obligations under the Notes are secured equally and rateably therewith or (ii) have the benefit of such other security, guarantee, indemnity or other arrangement as shall be approved by holders of a majority of the principal amount of the Notes.

Limitation on Sale and Leaseback Transactions The Indenture provides that, for so long as any of the Notes remain outstanding, neither the Issuer nor any of its Subsidiaries will enter into any arrangement with any person providing for the leasing by the Issuer or Subsidiary for a period, including renewals, in excess of three years, of any of such person’s present or future assets which have been owned by the Issuer or the Subsidiary for more than six months and which has been or is to be sold or transferred by the Issuer or the Subsidiary to such person (a Sale and Leaseback Transaction). This restriction shall not apply to any Sale and Leaseback Transaction if: (a) within a period commencing 12 months after the consummation of such Sale and Leaseback Transaction, the Issuer or the Subsidiary has expended or will expend for any of its present or future assets an amount equal to (i) the net proceeds, after deducing all costs and expenses relating to such transaction, received by the Issuer or the Subsidiary from such Sale and Leaseback Transaction (the Net Proceeds) or (ii) a part of the Net Proceeds and the Issuer or the Subsidiary elects to apply the balance of such Net Proceeds in the manner described in the following clause (b); or

78 (b) the Issuer or the Subsidiary, within 12 months after the consummation of any such Sale and Leaseback Transaction, applies an amount equal to the Net Proceeds (less any amount elected under clause (a) above) to (i) the retirement of indebtedness for borrowed money of the Issuer ranking prior to or on a parity with the Notes or the retirement of up to £100 million of indebtedness for borrowed money of any Subsidiary of the Issuer, (ii) the investment in any assets which is used or will be used or which is held or will be held in the ordinary course of business or (iii) the investment in Permitted Investments, the proceeds from the sale, disposal, realisation, maturity or redemption of which shall be used either for (A) the retirement of indebtedness for borrowed money ranking prior to or on a parity with the Notes, incurred or assumed by the Issuer or any Subsidiary of the Issuer or (B) the investment in any property which is used or will be used or which is held or will be held in the ordinary course of business.

Limitation on Mergers, Consolidations, Amalgamations and Combinations The Indenture provides that, so long as any of the Notes remain outstanding, the Issuer may not consolidate with or merge into any other person or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any person (other than any sale or conveyance by way of a lease in the ordinary course of business), unless (a) any successor person assumes the Issuer’s obligations on the Notes and under the Indenture, (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing, (c) such successor person is organised under the laws of the United States, the United Kingdom (including the Channel Islands) or any other country that is a member of the Organisation for Economic Co-operation and Development as of the date of such succession, (d) such successor person agrees to pay any Additional Amounts imposed by the jurisdiction in which such successor person is incorporated or otherwise a resident for tax purposes and resulting therefrom or otherwise and (e) if as a result of such consolidation or merger or such sale, conveyance, transfer or lease, properties or assets of the Issuer or any Principal Subsidiary would become subject to a mortgage, pledge, security interest, lien or similar encumbrance to secure payment of any indebtedness for borrowed money of the Issuer or any Principal Subsidiary which would not be permitted under the Indenture, the Issuer or any Principal Subsidiary or such successor person, as the case may be, shall take such steps as shall be necessary to effectively secure the Notes equally and ratably with (or prior to) all indebtedness for borrowed money secured thereby. The Notes will not contain covenants or other provisions to afford protection to holders of the Notes in the event of a highly leveraged transaction or a change in control of the Issuer except as provided above. Upon certain mergers or consolidations involving the Issuer, or upon certain sales or conveyances of the properties of the Issuer, the obligations of the Issuer under the Notes shall be assumed by the person formed by such merger or consolidation or which shall have acquired such property and upon such assumptions such person shall succeed to and be substituted for the Issuer and then the Issuer will be relieved from all obligations under the Notes. The term Issuer, as used in the Notes and the Indenture, also refers to any such successors or assigns so substituted.

Certain Definitions Set forth below is a summary of certain of the defined terms used in the Notes and the Indenture. You should refer to the Notes and the Indenture for the full definition of all defined terms as well as any other terms used herein for which no definition is provided. Lien means any mortgage or deed of trust, pledge, lien, charge, encumbrance or similar security interest.

79 Net Assets means, at any time, the gross assets of the Group less the liabilities of the Group at that time excluding (i) assets or liabilities representing the fair value of derivative financial instruments and (ii) any liability or asset in respect of retirement benefits obligations and (iii) any related deferred tax asset or liability, each as determined in accordance with generally accepted accounting principles in the United Kingdom (including IFRS) as applied in connection with the Group’s 2007 financial statements, as calculated by reference to the most recent annual or interim consolidated accounts of the Group. Permitted Investments means (a) investments in any securities either issued directly or fully guaranteed or insured by the government of the United States of America or the United Kingdom or any agency or instrumentality thereof, (b) time deposits and certificates of deposit, from the date of deposit, or United Kingdom bank accepted bills, promissory notes, bills of exchange or other negotiable instruments, of any United States or United Kingdom commercial bank having capital and surplus in excess of $500 million and having outstanding long-term debt rated AA- or better (or the equivalent thereof) by Standard & Poor’s Corporation or Aa3 or better (or the equivalent thereof) by Moody’s Investors Service, Inc., (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any bank meeting the qualifications specified in clause (b) above, and (d) commercial paper rated A-1 (or the equivalent thereof) by Standard & Poor’s Corporation or P-1 (or the equivalent thereof) by Moody’s Investors Service, Inc., and in each case maturing within one year. Permitted Liens of any person at any particular time means: (a) Liens existing on the date of issue of the Notes; (b) Liens arising by operation of law or incidental to the conduct of the business of that person or any Subsidiary of that person or the ownership of their property or assets, that do not materially impair the usefulness or marketability of such property or assets to that person; (c) Liens securing taxes, assessments, governmental charges, levies or claims, which are not yet delinquent or which are being contested in good faith by appropriate proceedings, if adequate reserves or provisions, if any, as shall be required in conformity with applicable generally accepted accounting principles shall have been established or made; (d) Liens in favour of the Issuer or Liens in favour of a Subsidiary securing debt owed by another Subsidiary (other than the Issuer) to such Subsidiary; (e) Liens created upon any property or assets of the person or any shares or stock of a Subsidiary to secure or securing the whole or any part of the purchase price of the property or assets or shares or stock or the whole or any part of the cost of constructing or installing fixed improvements on such property or assets or to secure or securing the repayment of money borrowed to pay the whole or any part of such purchase price or cost or any vendor’s privilege or Lien on that property or assets or shares or stock securing all or any part of the purchase price or cost including title retention agreements and leases in the nature of title retention agreements when recourse is limited solely to such Lien; (f) Liens on property or assets or shares or stock or other equity equivalents existing at the time the property or assets or shares or stock or other equity equivalents were acquired by that person; provided, that those Liens were not incurred or increased in anticipation of the acquisition; (g) Liens on property or assets or shares or stock or other equity equivalents of a corporation or other legal entity existing at the time that corporation or other legal entity becomes a Subsidiary of that person, or is liquidated or merged into, or amalgamated or consolidated with, that person or a Subsidiary of that person or at the time of the sale, lease or other

80 disposition to that person or a Subsidiary of that person of all or substantially all of the properties and assets of that corporation or other legal entity; (h) any Lien created by or relating to legal proceedings so long as that Lien is discharged, vacated or bonded within 90 days of attachment; (i) Liens on any property subject to sale and leaseback transactions not otherwise prohibited under the Indenture; (j) Liens in favour of a governmental entity or holders of securities issued by a governmental entity pursuant to any contract or statute, including (but not limited to) Liens securing or relating to industrial revenue, pollution control or other tax exempt bonds; (k) Liens required in connection with state or local governmental programmes which provide financial tax benefits, as long as substantially all of the obligations secured are in lieu of or reduce an obligation that would have been secured by a Lien otherwise permitted hereunder; (l) rights of financial institutions to offset credit balances in connection with the operation of cash management programmes established for the benefit of the Issuer, or any Subsidiary or Liens in connection with the issuance of letters of credit for the benefit of the Issuer or any Subsidiary; (m) Liens over margin stock, as defined in Regulation U of the Board of Governors of the Federal Reserve System; (n) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, guarantees, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of indebtedness for borrowed money); (o) Liens created over any commodities and/or related contracts or documents in favour of any bank or other financial institution as security for limited recourse finance for the purchase of those commodities by any member of the Issuer or its Subsidiaries; (p) Liens created by any member of the Group (the Depositor) over a cash deposit, financial instrument, right of recovery or other like asset owned or deemed to be owned by the Depositor to the extent that it secures the payment by the Depositor or any other member of the Issuer or its Subsidiaries of amounts by way of principal or interest in respect of a borrowing by the Depositor or other member of the Issuer or its Subsidiaries; provided, that: (i) the value of the asset securing the Lien is equivalent to the amount of the obligation in respect of the borrowing it secures (the Relevant Obligation); (ii) the creditor in respect of the Relevant Obligation has limited its recourse against the Issuer or its Subsidiaries for the Relevant Obligation to the proceeds of the Lien; (iii) the Lien, or the proceeds from its exercise, cannot be applied by the creditor against any obligation owed to it by the Depositor or any other member of the Issuer or its Subsidiaries other than the Relevant Obligation; (iv) the assets securing the Lien are acquired (or are deemed to be acquired) at or about the same time as the borrowing is made and the Lien granted; and (v) arrangements are in place to ensure that the Lien will be released to the extent of any reduction from time to time in the amount of the Relevant Obligation (other than through an exercise or partial exercise of the Lien);

81 (q) Liens on assets transferred to a person or on assets of a person, in either case, incurred in connection with a Qualified Receivables Transaction; (r) any renewal, refunding or extension of any Lien referred to in the foregoing clauses (a) through (q); provided, that the principal amount of indebtedness secured by that Lien after the renewal, refunding or extension is not increased and the Lien is limited to the property or assets originally subject to the Lien and any improvements on the property or assets; and (s) Liens, other than those referred to in the foregoing clauses (a) through (r), not exceeding 15% of the Issuer’s Net Assets. person means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organisation or government or any agency or political subdivision thereof. Principal Subsidiary means a Subsidiary of the Issuer at any relevant date: (a) which has been a Subsidiary of the Issuer for more than 60 days; and (b) whose turnover attributable to the Group for the then latest year or other period in respect of which accounts of such Subsidiary have been prepared for inclusion in the audited consolidated accounts of the Issuer (and as derived by reference to such accounts) represent 10% or more of the consolidated turnover of the Group for the then latest year or other period (or proportionately if the then latest accounting period of the relevant Subsidiary for which turnover is included in consolidated turnover shall have been for a shorter period than the then latest year or other period of the Group) in respect of which consolidated accounts of the Issuer shall have been audited; or (c) whose gross assets as shown by the then latest accounts of such Subsidiary which have been prepared for inclusion in the audited consolidated accounts of the Issuer represent 10% or more of the consolidated gross assets of the Group, as derived by reference to the then latest audited consolidated accounts of the Issuer; or (d) to which has been transferred (whether by one transaction or a series of transactions, related or not) the whole or substantially the whole of the assets of a Subsidiary of the Issuer which immediately prior to those transactions was a Principal Subsidiary. However: (i) a determination of whether a company which becomes a Subsidiary of the Issuer is or is not a Principal Subsidiary may be made at any time after the 60th day following that company becoming a Subsidiary of the Issuer by reference to its latest audited accounts and the latest audited consolidated accounts of the Issuer; and (ii) in the case of paragraph (d) above, the transferring Subsidiary shall, upon the transferee Subsidiary becoming a Principal Subsidiary, cease to be a Principal Subsidiary. A certificate from two Authorised Persons (as defined in the Indenture) that in their opinion a Subsidiary is, or is not, or was, or was not, at any particular time, or throughout any particular period, a Principal Subsidiary may, in the absence of manifest error, be conclusive and binding on all parties. The Indenture provides that the Trustee may rely on certificates or reports from such Authorised Persons in accordance with the provisions of the Indenture. Qualified Receivables Transaction means any transaction or series of transactions that may be entered into by the Issuer or any of its Subsidiaries pursuant to which the Issuer or any of its Subsidiaries may sell, convey or otherwise transfer to any other person, or may grant a security interest in, any Receivables (whether now existing or arising in the future) of the Issuer or any of its

82 Subsidiaries and any assets related thereto including, without limitation, all collateral securing such Receivables, all contracts and all guarantees or other obligations in respect of such accounts receivable, the proceeds of such Receivables and other assets which are customarily transferred, or in respect of which security interests are customarily granted, in connection with asset securitisation involving Receivables; provided, that the aggregate value of all such transactions shall not exceed £200 million. Receivable means a right to receive a payment arising from a sale or lease of goods or the performance of services by a person pursuant to an arrangement with another person pursuant to which such other person is obligated to pay for goods and services under terms that permit the purchase of such goods or services on credit. Subsidiary of any person means a subsidiary within the meaning of Section 736 of the U.K. Companies Act 1985.

Events of Default The following will be Events of Default (each an Event of Default) with respect to the Notes: (a) Non-Payment: default is made for more than 30 days (in the case of interest or Additional Amounts) in the payment on the due date of interest or Additional Amounts in respect of the Notes, or default in the payment of all or any part of the principal or premium, if any, of any Note as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise and continuance of such default for two Business Days; or (b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations under the Notes or the Indenture which is not remedied within 60 days after notice of such default shall have been given to the Issuer by the Trustee; or (c) Cross-Default: (a) any other present or future indebtedness for borrowed money of the Issuer or any of its Principal Subsidiaries becomes due and payable prior to its stated maturity by reason of any default or event of default (howsoever described) and remains unpaid, or (b) any such indebtedness for borrowed money is not paid when due or, as the case may be, within any applicable grace period, or (c) the Issuer or any of its Principal Subsidiaries fails to pay when due and called upon (after the expiry of any applicable grace period) any amount payable by it under any present or future guarantee for, or indemnity in respect of, any indebtedness for borrowed money and which remains unpaid provided that payment of the relevant indebtedness for borrowed money is not being contested in good faith and in accordance with legal advice or the aggregate amount of the relevant indebtedness for borrowed money, guarantees and indemnities in respect of which one or more of the events mentioned above in (a), (b) and (c) has or have occurred and is or are continuing, equals or exceeds £25,000,000 or its equivalent in any other currency of the relevant indebtedness for borrowed money or, if greater, 3% of the Net Assets of the Issuer; or (d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or a substantial part of the property, assets or revenues of the Issuer or any of its Principal Subsidiaries and is not discharged or stayed within 30 days of having been so levied, enforced or sued out; or (e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer or any of its Principal Subsidiaries becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, administrative receiver, manager or other similar person) against all or substantially all of the assets of the Issuer or any of its Principal Subsidiaries and is not discharged within 60 days; or

83 (f) Insolvency: any of the Issuer or its Principal Subsidiaries is insolvent or bankrupt or unable to pay its debts (within the meaning of Sections 123(1)(b) or (e) or Section 123(2) of the U.K. Insolvency Act 1986), stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, proposes or makes a general assignment or an arrangement or composition (otherwise than for the purposes of reconstruction, amalgamation, reorganisation, merger or consolidation or other similar arrangement, or in the case of a Principal Subsidiary, whereby the undertaking and assets of the Principal Subsidiary are transferred to or otherwise vested in the Issuer or another of its Subsidiaries) with or for the benefit of its creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or a material part of the debts of the Issuer or any of its Principal Subsidiaries; or (g) Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution or administration of the Issuer or any of its Principal Subsidiaries, or the Issuer or any of its Principal Subsidiaries shall apply or petition for a winding-up or administration order in respect of itself or ceases or threatens to cease to carry on all or substantially all of its business or operations, in each case except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation or other similar arrangement, or in the case of a Principal Subsidiary, whereby the undertaking and assets of the Principal Subsidiary are transferred to or otherwise vested in the Issuer or another of its Subsidiaries; or (h) Analogous Events: any event occurs that under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the foregoing paragraphs (a) to (g). The Indenture provides that if an Event of Default occurs and is continuing, then and in each and every such case (other than certain Events of Default specified in paragraphs (f) and (g) above with respect to the Issuer), unless the principal of all the Notes shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Issuer (and to the Trustee if given by the holders), may, and the Trustee at the request of such holders shall, subject to its receiving indemnification and/or security to its satisfaction, declare the entire principal amount of all Notes issued pursuant to the Indenture and interest accrued and unpaid thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, without any further declaration or other act on the part of the Trustee or any holder. If certain Events of Default described in paragraphs (f) or (g) above occur with respect to the Issuer and are continuing, the principal amount of and accrued and unpaid interest on all the Notes issued pursuant to the Indenture shall become immediately due and payable, without any declaration or other act on the part of the Trustee or any holder. Under certain circumstances, the holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may waive defaults and rescind and annul declarations of acceleration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impart any right consequent thereon. The holders of a majority in aggregate principal amount of the Notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, subject to certain limitations to be specified in the Indenture. The Indenture provides that no holder of any Note may institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to the Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy under the Indenture (except suits for the enforcement of payment of overdue principal or interest) unless such holder previously shall have given to the Trustee written notice of an Event of

84 Default and continuance thereof and unless the holders of not less than 25% in aggregate principal amount of the Notes then outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as Trustee and shall have offered the Trustee indemnity and/or security satisfactory to the Trustee, the Trustee shall not have instituted any such action or proceeding within 60 days of its receipt of such notice, request and offer of indemnity and/or security and the Trustee shall not have received direction inconsistent with such written request by the holders of a majority in aggregate principal amount of the Notes at the time outstanding. The Indenture will also provide that the Issuer will furnish to the Trustee on or before 30 June in each year (commencing on June 30, 2009), if any Notes are then outstanding, and within 30 days of a written request of a Trustee acting on the instructions of holders of not less than 25% in aggregate principal amount of the Notes then outstanding, a certificate from an officer of the Issuer as to his or her best knowledge of the Issuer’s compliance with all conditions and covenants under the Indenture, which certificate may merely state that such officer has no knowledge of any default.

Defeasance The Indenture will provide that the Issuer will have the option either (a) to be deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Notes and to have satisfied all the obligations under the Indenture (except for certain obligations, including those relating to the defeasance trust and obligations to register the transfer or exchange of Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain paying agencies) on the 91st day after the applicable conditions described below have been satisfied or (b) to cease to be under any obligation to comply with the covenants described above under ‘‘Negative Pledge’’ and ‘‘Limitation on Sale and Leaseback Transactions ,’’ and the condition relating to the absence of any events of default under ‘‘Limitations on Mergers, Consolidations, Amalgamations and Combinations’’ under the Notes, and non-compliance with such covenants and the occurrence of certain events described above under ‘‘Events of Default’’ will not give rise to any Event of Default under the Notes, at any time after the applicable conditions described below have been satisfied. In order to exercise either defeasance option, the Issuer must deposit with the Trustee or with Trustee’s agent as Trustee directs, irrevocably in trust, money or Government Obligations (as defined in the Notes) for the payment of principal of, premium, if any, and interest on the outstanding Notes to and including the Redemption Date irrevocably designated by the Issuer on or prior to the date of deposit of such money or Government Obligations, and must (a) comply with certain other conditions as stated in the Indenture, including delivering to the Trustee an opinion of U.S. counsel, or a ruling received from the United States Internal Revenue Service, to the effect that holders of the Notes will not recognise income, gain or loss for United States federal income tax purposes as a result of the exercise of such option and will be subject to United States federal income tax on the same amount and in the same manner and at the same time as would have been the case if such option had not been exercised and which, in the case of (a) above, such opinion is based on a change of law after the initial issuance of the Notes and (b) pay in full all other amounts due and owing under the Indenture.

Modification and Waiver Without Consent of Noteholders The Indenture will contain provisions permitting the Issuer, without notice to or the consent of the holders of any of the Notes at any time outstanding, from time to time and at any time, to enter into an indenture or indentures supplemental thereto: • to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Notes any property or assets;

85 • to evidence the succession of another person to the Issuer, or successive successions, and the assumption by the successor person(s) of the covenants, agreements and obligations of the Issuer pursuant to the Indenture; • to evidence and provide for the acceptance of appointment of a successor or successors to the Trustee, the Agent and/or any paying agent, transfer agent or registrar, as applicable; • to add to the covenants of the Issuer, such further covenants, restrictions, conditions or provisions as the Issuer and the Trustee shall consider to be for the protection of the holders of the Notes, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default under the Notes permitting the enforcement of all or any of the several remedies provided in the Indenture; provided that, in respect of any such additional covenant, restriction, condition or provision, such supplemental indenture may provide for a particular period of grace after default (which may be shorter or longer than that allowed in the case of other defaults) or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of holders of a majority in aggregate principal amount of the Notes to waive such an Event of Default; • to modify the restrictions on, and procedures for, resale and other transfers of the Notes pursuant to law, regulation or practice relating to the resale or transfer of restricted securities generally; • to cure any ambiguity or to correct or supplement any provision contained in the Indenture which may be defective or inconsistent with any other provision contained therein or to make such other provision in regard to matters or questions arising under the Notes as the Issuer or the Trustee may deem necessary or desirable and which will not adversely affect the interests of the holders of the Notes in any material respect; and • to reopen the series of Notes and create and issue additional notes having identical terms and conditions as the Notes (or in all respects except for the issue date, issue price, payment of interest accruing prior to the issue date of such additional notes and/or the first payment of interest following the issue date of such additional notes) so that the additional notes are consolidated and form a single series with the outstanding Notes.

With Consent of Noteholders The Indenture will contain provisions permitting the Issuer and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), from time to time and at any time, to enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes or of modifying in any manner the rights of the holders of the Notes, provided, that no such indenture may, without the consent of the holder of each of the Notes so affected: • change the stated maturity of, or the date for payment of any principal of, or installment of interest on, any Note; or • reduce the principal amount of or the rate or amount of interest on any Note or Additional Amounts payable with respect thereto or reduce the amount payable thereon in the event of redemption or default; or • change the currency of payment of principal of or interest on any Note or Additional Amounts payable with respect thereto; or

86 • change the obligation of the Issuer to pay Additional Amounts (except as otherwise permitted by such Note); or • impair the right to institute suit for the enforcement of any such payment on or with respect to any Note; or • reduce the percentage of the aggregate principal amount of the Notes outstanding, the consent of whose holders is required for any such supplemental indenture; or • reduce the aggregate principal amount of any Note outstanding necessary to modify or amend the Indenture or any such Note or to waive any future compliance or past default or reduce the quorum requirements or the percentage of aggregate principal amount of any Notes outstanding required for the adoption of any action at any meeting of holders of such Notes or to reduce the percentage of the aggregate principal amount of such Notes outstanding necessary to rescind or annul any declaration of the principal of all accrued and unpaid interest on any Note to be due and payable; provided, that no consent of any holder of any Note shall be necessary to permit the Trustee and the Issuer to execute supplemental indenture as described under ‘‘Modification and Waiver—Without Consent of Noteholders’’ above. Any modifications, amendments or waivers to the Indenture or to the conditions of the Notes will be conclusive and binding on all holders of the Notes, whether or not they have consented to such action or were present at the meeting at which such action was taken, and on all future holders of the Notes, whether or not notation of such modifications, amendments or waivers is made upon such Notes. Any instrument given by or on behalf of any holder of such a Note in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent registered holders of such Note.

Restrictions on Transfer The Initial Purchasers propose to resell the Rule 144A Notes to certain institutions in the United States in reliance upon Rule 144A under the Securities Act. The Rule 144A Notes may not be sold or otherwise transferred except, in the United States, pursuant to registration under the Securities Act or in accordance with Rule 144A or, outside the United States, pursuant to Rule 904 of Regulation S thereunder or, in either case, in a resale transaction that is otherwise exempt from such registration requirements, and each global note representing Rule 144A Notes will bear a legend to this effect. In light of current U.S. securities laws, subject to certain exceptions, an exemption should be available for a sale or transfer of a Rule 144A Note after its Specified Date. The Specified Date means, with respect to any Rule 144A Note, the date following the expiration of the applicable required holding period determined pursuant to Rule 144 of the Securities Act (such period, the applicable holding period) from the later of the date of acquisition of such Rule 144A Note from (i) the Issuer or (ii) an affiliate of the Issuer, and any resale of such Rule 144A Note in reliance on Rule 144 under the Securities Act for the account of either the acquiror or any subsequent holder of such Rule 144A Note, in each case demonstrated to the reasonable satisfaction of the Issuer (which may require delivery of legal opinions). Unless a holder of a Rule 144A Note holds such Rule 144A Note for the entire applicable holding period, such holder may not be able to determine the Specified Date because such holder may not be able to determine the last date on which the Issuer or any affiliate thereof was the beneficial owner of such holder’s Rule 144A Note. The registrars or transfer agents for the Notes will not be required to accept for registration or transfer any Rule 144A Notes, except upon presentation of satisfactory evidence (which may include legal opinions) that the restrictions on transfer have been complied with, all in accordance with such reasonable regulations as the Issuer may from time to time agree with such registrars or transfer agents.

87 Prescription Under New York’s statute of limitations, any legal action upon the Notes in respect of interest or principal must be commenced within six years after the payment thereof is due. Thereafter the Notes will become generally unenforceable.

Notice So long as the Notes are listed on the Official List of the U.K. Listing Authority and admitted to trading on the Regulated Market of the London Stock Exchange, notices regarding the Notes will be given to holders by publication in a leading newspaper having general circulation in London, England (which is expected initially to be the Financial Times) as so required by the rules and regulations of the London Stock Exchange. Notices to holders of Notes will also be given by first-class mail postage prepaid to the last addresses of such holders as they appear in the Notes register. Such notices will be deemed to have been given on the date of such publication or mailing. So long as any global notes representing the Notes are held in their entirety on behalf of a clearing system, or any of its participants, there may be substituted for the publication described above the delivery of the relevant notices to the clearing system, and its participants, for communication by them to the entitled accountholders. Any such notice shall be deemed to have been given to the accountholders on the third day after the day on which the said notice was given to the clearing system, and its participants.

Listing Application has been made to list the Notes on the Official List of the U.K. Listing Authority and for the admission of the Notes to trading on the Regulated Market of the London Stock Exchange, a regulated market. The Issuer has agreed to use its reasonable best efforts to maintain any such listing and admission to trading of the Notes for so long as any of the Notes remain outstanding.

Consent to Service The Issuer will initially designate Rexam Inc. at 4201 Congress Street, Charlotte, North Carolina 28203, United States, as its authorised agent for service of process in any legal suit, action or proceeding arising out of or relating to the performance of its obligations under the Indenture and the Notes brought in any state or federal court in the Borough of Manhattan, the City of New York, and will irrevocably submit (but for those purposes only) to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding.

Governing Law The Notes and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws thereof.

88 BOOK ENTRY; DELIVERY AND FORM The Notes that are initially offered and sold in the United States to QIBs (the Rule 144A Notes) will be represented by beneficial interests in one or more Rule 144A global notes in registered form without interest coupons, which will be deposited on or about the closing date of the offering of the Notes with Citibank N.A., London Branch as custodian (the Custodian) for DTC and registered in the name of Cede & Co. as nominee of DTC. The Notes that are offered and sold in reliance on Regulation S (the Regulation S Notes) will be represented by beneficial interests in one or more Regulation S global notes in registered form without interest coupons, which will be deposited on or about the closing date of the offering of the Notes with the Custodian, and registered in the name of Cede & Co., as nominee of DTC. Investors may hold their interests in the global notes directly through DTC if they are participants in, or indirectly through organisations that are participants in, such systems. Euroclear and Clearstream, Luxembourg will hold interests in the Rule 144A Notes or Regulation S Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries, which are participants in DTC. So long as DTC or its nominee is the registered holder of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the applicable global note for all purposes under the Indenture and the Notes (except as the context otherwise requires in respect of Additional Amounts). The Notes (including beneficial interests in the global notes) will be subject to certain restrictions on transfer set forth therein and in the Indenture and will bear a legend regarding such restrictions as set forth under ‘‘Transfer Restrictions’’. Under certain circumstances, transfers may be made only upon receipt by the Agent, in its capacity as transfer agent, as well as the Trustee and the Issuer, of a written certification (in the form set out in the Indenture).

Transfers within Global Notes Subject to the procedures and limitations described herein, transfers of beneficial interests within a global note may be made without delivery to the Issuer, the Trustee or the Agent of any written certifications or other documentation by the transferor or transferee.

Transfers between Global Notes A beneficial interest in a Rule 144A Note may be transferred to a person who wishes to take delivery of such beneficial interest through the applicable Regulation S Note only upon receipt by the Agent of a written certification (in the form set out in the Indenture) from the transferor to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or, in the case of an exchange occurring following the Specified Date, Rule 144. A beneficial interest in a Regulation S Note may be transferred to a person who wishes to take delivery of such beneficial interest through the applicable Rule 144A Note only upon receipt by the Agent of a written certification (in the form set out in the Indenture) from the transferor to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States and any other jurisdiction. Any beneficial interest in a Rule 144A Note or a Regulation S Note that is transferred to a person who takes delivery in the form of a beneficial interest in the other global note will, upon transfer, cease to be a beneficial interest in such global note and become a beneficial interest in the other global note and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to a beneficial interest in such other global note for so long as such person retains such an interest.

89 Transfers or Exchanges from Global Notes to Definitive Notes No global note representing a Rule 144A Note or Regulation S Note may be exchanged in whole or in part for Notes in definitive registered form (definitive notes) unless: • DTC notifies the Issuer that it is unwilling or unable to hold the applicable global note or DTC ceases to be a clearing agency registered under the Exchange Act, and in each case the Issuer does not appoint a successor depositary that is registered under the Exchange Act within 90 days; or • a payment default has occurred and is continuing; • in the event of a bankruptcy default, the Issuer fails to make payment on the Notes when due; or • the Issuer shall have determined in its sole discretion that the Notes shall no longer be represented by global notes. The holder of a definitive note may transfer such note by surrendering it at the specified office of the Agent. Upon the transfer, exchange or replacement of a Rule 144A definitive note bearing the applicable legend set forth under ‘‘Transfer Restrictions’’ herein, or upon specific request for removal of such legend on a definitive note, the Issuer will deliver only definitive notes that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Agent such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer, that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. Each such definitive note will include terms substantially in the form of those set forth in the Indenture. Except as set forth herein, no global note may be exchanged in whole or in part for definitive notes.

Clearing and Settlement The information set out below in connection with DTC is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC currently in effect. The information about DTC set forth below has been obtained from sources that the Issuer believes to be reliable, but none of the Issuer or any of the Initial Purchasers takes any responsibility for the accuracy of the information. None of the Issuer, the Trustee or any of the Initial Purchasers will have any responsibility or liability for any aspect of the records relating to, or payments made on account of interests in Notes held through, the facilities of any clearing system, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DTC has advised the Issuer as follows: DTC is a limited purpose trust company organised under the laws of the State of New York, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for DTC participants and to facilitate the clearance and settlement of transactions between DTC participants through electronic book entry changes in accounts of DTC participants, thereby eliminating the need for physical movement of certificates. DTC participants include certain of the Initial Purchasers, securities brokers and dealers, banks, trust companies, clearing corporations and may in the future include certain other organisations (DTC participants). Indirect access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly (indirect DTC participants). Under the rules, regulations, and procedures creating and affecting DTC and its operations (the Rules), DTC is required to make book-entry transfers of Notes among DTC participants on whose

90 behalf it acts with respect to Notes accepted into DTC’s book-entry settlement system as described below (the DTC Notes) and to receive and transmit distributions of the nominal amount and interest on the DTC Notes. DTC participants and indirect DTC participants with which beneficial owners of DTC Notes (Owners) have accounts with respect to the DTC Notes similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Owners. Accordingly, although Owners who hold DTC Notes through DTC participants or indirect DTC participants will not possess Notes, the Rules, by virtue of the requirements described above, provide a mechanism by which such Owners will receive payments and will be able to transfer their interests with respect to the Notes. Transfers of ownership or other interests in the Notes in DTC may be made only through DTC participants. Indirect DTC participants are required to effect transfers through a DTC participant. DTC has no knowledge of the actual beneficial owners of the Notes. DTC’s records reflect only the identity of the DTC participants to whose accounts the Notes are credited, which may not be the beneficial owners. DTC participants will remain responsible for keeping account of their holdings on behalf of their customers and for forwarding all notices concerning the Notes to their customers. So long as DTC, or its nominee, is the registered holder of a global note, payments on the Notes will be made in immediately available funds to DTC. DTC’s practice is to credit DTC participants’ accounts on the applicable payment date in accordance with their respective holdings shown on its records, unless DTC has reason to believe that it will not receive payment on that date. Payments by DTC participants to beneficial owners will be governed by standing instructions and customary practices, and will be the responsibility of the DTC participants and not of DTC, or any other party, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment to DTC is the responsibility of the Agent. Disbursement of payments for DTC participants will be DTC’s responsibility, and disbursement of payments to the beneficial owners will be the responsibility of DTC participants and indirect DTC participants. Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants, and because owners of beneficial interests in the Notes holding through DTC will hold interests in the Notes through DTC participants or indirect DTC participants, the ability of the owners of the beneficial interests to pledge Notes to persons or entities that do not participate in DTC, or otherwise take actions with respect to the Notes, may be limited. DTC will take any action permitted to be taken by an Owner only at the direction of one or more DTC participants to whose account with DTC such Owner’s DTC Notes are credited. Additionally, DTC has advised the Issuer that it will take such actions with respect to any percentage of the beneficial interest of Owners who hold Notes through DTC participants or indirect participants only at the direction of and on behalf of DTC participants whose account holders include undivided interests that satisfy any such percentage. To the extent permitted under applicable law and regulations, DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of DTC participants whose account holders include such undivided interests. Ownership of interests in the Rule 144A Notes and the Regulation S Notes will be shown on, and the transfer of that ownership will be effected only through records maintained by, DTC, the DTC participants and the indirect DTC participants, including Euroclear and Clearstream, Luxembourg. Transfers between participants in DTC, as well as transfers between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with DTC rules. Subject to compliance with the transfer restrictions applicable to the Notes, cross-market transfers between DTC, on the one hand, and participants in Euroclear or Clearstream, Luxembourg on the other hand, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, Luxembourg as the case may be. Such cross-market transactions, however, will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the

91 counterparty in such system in accordance with its rules and procedures and within its established deadlines. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to DTC to take action to effect final settlement on its behalf by delivering or receiving payment in accordance with DTC’s Same Day Funds Settlement System. According to DTC, the foregoing information with respect to DTC has been provided to the industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the foregoing procedures in order to facilitate transfers of interests in the global notes among participants of DTC, Euroclear and Clearstream, Luxembourg they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at anytime. None of the Issuer, the Trustee nor the Agent will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective participants or indirect participants, of their respective obligations under the rules and procedures governing their operations.

Initial Settlement in Relation to DTC Notes Upon the issue of a Regulation S Note and/or a Rule 144A Note (a DTC note) deposited with DTC or a custodian therefor, DTC or its custodian, as the case may be, will credit, on its internal system, the respective nominal amount of the individual beneficial interest represented by such relevant DTC note or Notes to the accounts of persons who have accounts with DTC. Such accounts initially will be designated by or on behalf of the relevant Initial Purchasers. Ownership of beneficial interest in a DTC note will be limited to DTC participants, including Euroclear and Clearstream, Luxembourg or indirect DTC participants. Ownership of beneficial interests in DTC notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of DTC participants) and the records of DTC participants (with respect to interests of indirect DTC participants). Investors that hold their interests in a DTC note will follow the settlement procedures applicable to global bond issues. Investors’ securities custody accounts will be credited with their holdings against payment in same day funds on the settlement date.

Secondary Market Trading in Relation to DTC Notes Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date. Although DTC has agreed to the following procedures in order to facilitate transfers of interests in global notes deposited with DTC or a custodian therefor among participants of DTC, DTC is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Issuer nor any agent of the Issuer will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Secondary market trading between DTC participants will be settled using the procedures applicable to global bond issues in same day funds.

Payments So long as any of the Notes remains outstanding, the Issuer will maintain in London, England, so long as the Notes are admitted to trading on the Regulated Market of the London Stock Exchange, an office or agency (a) where the Notes may be presented for payment, (b) in the case of the Issuer, where the Notes may be presented for registration of transfer and for exchange and (c) where notices and demands to or upon the Issuer in respect of the Notes or the Indenture may be served. The Issuer will give the Agent and Trustee written notice of the location of any such office or agency and of any

92 change of location thereof. The Issuer will initially designate the Agent for such purposes. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes or where such notices or demands may be served and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of any obligation to maintain an office or agency in London, England for such purposes; and provided further, however, that the Issuer will, to the extent possible as a matter of law, maintain a paying agent with a specified office in a Member State of the EU that will not be obligated to withhold or deduct tax pursuant to EU Directive 2003/48/EC on the taxation of savings or any law implementing or complying with, or introduced in order to conform to, the Directive. The Issuer shall give written notice to the Agent and Trustee of any such designation or rescission and of any such change in the location of any other office or agency. A holder of Notes may transfer or exchange Notes in accordance with their terms. The Agent will not be required to accept for registration or transfer any Notes, except upon presentation of satisfactory evidence (which may include legal opinions) that the restrictions on transfer have been complied with, all in accordance with such reasonable regulations as the Issuer may from time to time agree with such Agent. Notwithstanding any statement herein, the Issuer reserves the right to impose or remove such transfer, certification, substitution or other requirements, and to require such restrictive legends on the Notes, as they may determine are necessary to ensure compliance with the securities laws of the United States and the states therein and any other applicable laws or as may be required by any stock exchange on which the Notes are listed. The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Notes and any other expenses (including the fees and expenses of the Trustee and/or the Agent). No service charge will be made for any such transaction. The Agent will not be required to exchange or register a transfer of (a) any Notes for a period of 15 days ending the due date for any payment of principal in respect of the Notes or the first mailing of any notice of redemption of Notes to be redeemed or (b) any Notes selected, called or being called for redemption. The Notes will be issued in registered form without coupons and transferable in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The laws of some jurisdictions require that certain persons take physical delivery in definitive form of securities which they own. Consequently, the ability to transfer beneficial interests in the global notes is limited to such extent.

93 UK TAX CONSIDERATIONS The following applies only to persons who are the beneficial owners of Notes and is a summary of the Issuer’s understanding of current law and practice in the United Kingdom relating to certain aspects of United Kingdom taxation. Some aspects do not apply to certain classes of person (such as dealers and persons connected with the Issuer) to whom special rules may apply. The United Kingdom tax treatment of prospective Noteholders depends on their individual circumstances and may be subject to change in the future. Prospective Noteholders who may be subject to tax in a jurisdiction other than the United Kingdom or who may be unsure as to their tax position should seek their own professional advice.

Interest on the Notes Payment of interest on the Notes Payments of interest on the Notes may be made without deduction of or withholding on account of United Kingdom income tax provided that the Notes continue to be listed on a ‘‘recognised stock exchange’’ within the meaning of section 1005 of the Income Tax Act 2007 (the Act). The London Stock Exchange is a recognised stock exchange. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List (within the meaning of and in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000) and admitted to trading on the London Stock Exchange. Provided, therefore, that the Notes remain so listed, interest on the Notes will be payable without withholding or deduction on account of United Kingdom tax. Interest on the Notes may also be paid without withholding or deduction on account of United Kingdom tax where interest on the Notes is paid by a company and, at the time the payment is made, the Issuer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the beneficial owner is within the charge to United Kingdom corporation tax as regards the payment of interest, provided that HM Revenue & Customs (HMRC) has not given a direction (in circumstances where it has reasonable grounds to believe that it is likely that the above exemption is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax. In other cases, an amount must generally be withheld from payments of interest on the Notes on account of United Kingdom income tax at the savings rate (currently 20%) or, if the Finance Bill 2008 is enacted in its current form, the basic rate (which would also be 20%). However, where an applicable double tax treaty provides for a lower rate of withholding tax (or for no tax to be withheld) in relation to a Noteholder, HMRC can issue a notice to the Issuer to pay interest to the Noteholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty). Noteholders may wish to note that, in certain circumstances, HMRC has power to obtain information (including the name and address of the beneficial owner of the interest) from any person in the United Kingdom who either pays or credits interest to or receives interest for the benefit of a Noteholder. HMRC also has power, in certain circumstances, to obtain information from any person in the United Kingdom who pays amounts payable on the redemption of Notes which are deeply discounted securities for the purposes of the Income Tax (Trading and Other Income) Act 2005 to or receives such amounts for the benefit of another person, although HMRC published practice indicates that HMRC will not exercise the power referred to above to require this information in respect of amounts payable on the redemption of deeply discounted securities where such amounts are paid on or before April 5, 2009. Information so obtained may, in certain circumstances, be exchanged by HMRC with the tax authorities of the jurisdiction in which the Noteholder is resident for tax purposes.

94 EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).

Further United Kingdom Income Tax Issues Interest on the Notes constitutes United Kingdom source income for tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding. However, interest with a United Kingdom source received without deduction or withholding on account of United Kingdom tax will not be chargeable to United Kingdom tax in the hands of a Noteholder (other than certain trustees) who is not resident for tax purposes in the United Kingdom unless that Noteholder carries on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Notes are attributable (and where that Noteholder is a company, unless that Noteholder carries on a trade in the United Kingdom through a permanent establishment in connection with which the interest is received or to which the Notes are attributable). There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers). The provisions of an applicable double taxation treaty may also be relevant for such Noteholders.

United Kingdom Corporation Tax Payers In general, Noteholders which are within the charge to United Kingdom corporation tax will be charged to tax as income on all returns, profits or gains on, and fluctuations in value of, the Notes (whether attributable to currency fluctuations or otherwise) broadly in accordance with their statutory accounting treatment.

Other United Kingdom Tax Payers Taxation of Chargeable Gains A disposal of Notes by an individual Noteholder who is resident or ordinarily resident in the United Kingdom or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable, may give rise to a chargeable gain or allowable loss for the purposes of the United Kingdom taxation of chargeable gains.

Taxation of discount (if any) The Notes may constitute ‘‘deeply discounted securities’’ for the purposes of Chapter 8 of Part 4 Income Tax (Trading and Other Income) Act 2005. Any gain realised on Notes which are ‘‘deeply discounted securities’’ by a Noteholder who is within the charge to United Kingdom income tax in respect of the Notes will generally be taxable as income but such Noteholder will not be able to claim relief from income tax in respect of costs incurred on the acquisition, transfer or redemption of such Notes or losses incurred on the transfer or redemption of such Notes.

95 Accrued Income Scheme On a disposal of Notes by a Noteholder, any interest which has accrued since the last Interest Payment Date may be chargeable to tax as income under the rules of the accrued income scheme as set out in Part 12 of the Act, if that Noteholder is resident or ordinarily resident in the United Kingdom or carries on a trade in the United Kingdom through a branch or agency to which the Notes are attributable. The Notes may constitute variable rate securities for the purposes of the accrued income scheme. Under the accrued income scheme, on a disposal of Notes by a Noteholder who is resident or ordinarily resident in the United Kingdom or carries on a trade in the United Kingdom through a branch or agency to which the Notes are attributable, the Noteholder may be charged to income tax on an amount of income which is just and reasonable in the circumstances. The Purchaser of such a Note will not be entitled to any equivalent tax credit under the accrued income scheme to set against any actual interest received by the Purchaser in respect of the Notes (which may therefore be taxable in full).

Stamp Duty and Stamp Duty Reserve Tax (SDRT) No United Kingdom stamp duty or SDRT is payable on the issue of the Notes or on a transfer by delivery of the Notes.

96 U.S. FEDERAL INCOME TAX CONSIDERATIONS TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, WE INFORM YOU THAT: (A) ANY DISCUSSION OF US FEDERAL TAX ISSUES IN THIS DOCUMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY TAXPAYERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON, TAXPAYERS UNDER THE INTERNAL REVENUE CODE OF 1986; (B) SUCH DISCUSSION IS INCLUDED HEREIN IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) TAXPAYERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER. The following is a summary of certain U.S. federal income tax consequences to a U.S. Holder of purchasing, owning and disposing of Notes, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to acquire such securities. This discussion only applies to U.S. Holders who hold Notes as capital assets for U.S. federal income tax purposes and acquire such Notes pursuant to this offering at the ‘‘issue price’’, which will equal the first price to the public (not including bond houses, brokers or similar persons or organisations acting in the capacity of initial purchasers, placement agents or wholesalers) at which a substantial amount of the Notes is sold for money. This discussion is for general information only and does not describe all of the U.S. federal income tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as: (i) certain financial institutions; (ii) insurance companies; (iii) dealers and traders in securities or foreign currencies; (iv) persons holding Notes as part of a hedge, straddle, conversion or other integrated transaction; (v) persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; (vi) persons liable for the alternative minimum tax; (vii) tax-exempt organisations; or (viii) persons who have ceased to be United States citizens or resident aliens. This discussion is based on the Internal Revenue Code of 1986 (the Code), its legislative history, administrative pronouncements, published rulings and judicial decisions, and final, temporary and proposed Treasury regulations, all as of the date hereof, all of which are subject to change at any time, possibly on a retroactive basis. Prospective purchasers should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of purchasing, owning and disposing of Notes in their particular circumstances. As used herein, the term U.S. Holder means a beneficial owner of a Note that is, for U.S. federal income tax purposes: (i) an individual citizen or resident of the United States; (ii) a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organised in or under the laws of the United States or any political subdivision thereof; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) such trust has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. The US federal income tax treatment of a partner in a partnership, or other entity treated as a partnership for U.S. federal tax purposes, that holds Notes will depend on the status of the partner and the activities of the partnership.

Payments of Interest It is expected, and the following discussion assumes, that the Notes will be issued with no more than a de minimis amount of original issue discount for U.S. federal income tax purposes. Accordingly, interest paid on a Note (including any Additional Amounts and any amount withheld in respect of

97 United Kingdom taxes) will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with the holder’s method of accounting for U.S. federal income tax purposes. If a Note has de minimis original issue discount, a U.S. Holder must include the de minimis amount in income (generally as capital gain) as stated principal payments are made on the Note, unless the holder makes the election to treat all interest as original issue discount. A U.S. Holder can determine the includible amount with respect to each such payment by multiplying the total amount of the Note’s de minimis original issue discount by a fraction equal to the amount of the principal payment made divided by the stated principal amount of the Note. Interest income paid to a U.S. Holder with respect to a Note will constitute foreign source income for U.S. federal income tax purposes, which may be relevant to a holder in calculating the holder’s foreign tax credit limitation. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. U.S. Holders should consult their tax advisors concerning the foreign tax credit implications of any payment of United Kingdom taxes.

Sale, Exchange or Other Disposition of the Notes Upon the sale, exchange or other disposition of a Note, a U.S. Holder will recognise taxable gain or loss equal to the difference between the amount realised on the sale, exchange or other disposition and the holder’s adjusted tax basis in the Note, which will generally be its cost. For these purposes, the amount realised does not include any amount attributable to accrued interest. Amounts attributable to accrued interest are treated as interest as described under ‘‘—Payments of Interest’’ above. Gain or loss realised on the sale, exchange or other disposition of a Note will generally be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange or other disposition the Note has been held for more than one year. Long-term capital gain may be taxable at reduced rates in the case of a U.S. Holder that is an individual, estate or trust. The deductibility of capital losses is subject to significant limitations. Gain or loss will generally be treated as derived from U.S. sources for purposes of computing a U.S. Holder’s foreign tax credit limitation.

Information Reporting and Backup Withholding Payments of interest and proceeds from the sale of a Note that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and to backup withholding at the applicable statutory rate, unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the holder provides a correct taxpayer identification number, certifies that no loss of exemption from backup withholding has occurred, and otherwise complies with the backup withholding rules. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

98 BENEFIT PLAN INVESTOR CONSIDERATIONS The following is a summary of certain considerations associated with an investment in the Notes by a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA) or Section 4975 of the Code. The following is merely a summary, however, and should not be construed as legal advice or as complete in all relevant respects. Because this summary was written in connection with the marketing of the Notes, it is not intended to be used and cannot be used by any Noteholder for the purpose of avoiding penalties and/or excise tax. All purchasers are urged to consult their legal advisors before investing assets of an employee benefit plan in the Notes and to make their own independent decisions. The Notes may be purchased and held by an employee benefit plan subject to Title I of the ERISA, by an individual retirement account or other plan subject to Section 4975 of the Code, or by an entity whose underlying assets include plan assets by reason of a plan’s investment in such entity (collectively, Plans). A fiduciary of a Plan subject to ERISA must determine that the purchase and holding of a Note is consistent with its fiduciary duties under ERISA. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the ERISA plan. Section 406 of ERISA and Section 4975 of the Code prohibit Plans from engaging in certain transactions involving ‘‘plan assets’’ with persons who are ‘‘parties in interest’’ under ERISA or ‘‘disqualified persons’’ under the Code with respect to such Plan (together, Parties in Interest), unless exemptive relief were available under an applicable administrative or statutory exemption. Parties in Interest that participate in a non-exempt prohibited transaction may be subject to an excise tax under ERISA or the Code. In addition, the persons involved in the prohibited transaction may have to rescind the transaction and pay an amount to the Plan for any losses realised by the Plan or profits realised by such persons and certain other liabilities could result that have a significant adverse effect on such persons. The fiduciary of a Plan, as well as any other prospective investor subject to any similar law, must determine that its purchase and holding of Notes does not result in a non-exempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code or a violation of any similar law. Each purchaser and transferee of a Note who is subject to ERISA and/or Section 4975 of the Code or a similar law will be deemed to have represented by its acquisition and holding of the Note that its acquisition and holding of the Notes does not constitute or give rise to a non-exempt prohibited transaction under ERISA, Section 4975 of the Code or any similar law. Each purchaser and holder of the Notes has exclusive responsibility for ensuring that its purchase and holding of the Notes does not violate the fiduciary or prohibited transaction rules of ERISA, the Code or any similar laws. The sale of any Notes to any Plan is in no respect a representation by the Issuer or any of its affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan.

99 PLAN OF DISTRIBUTION Pursuant to a Purchase Agreement dated May 28, 2008 (the Purchase Agreement), the Initial Purchasers have severally agreed with the Issuer, subject to the satisfaction of certain conditions, to purchase $550,000,000 principal amount of the Notes. The respective principal amount of Notes to be purchased by each of the Initial Purchasers from the Issuer is set forth opposite their respective names below:

Principal Initial Purchaser Amount Barclays Capital Inc...... $183,334,000 Citigroup Global Markets Inc...... 183,333,000 Greenwich Capital Markets, Inc...... 183,333,000 Total ...... $550,000,000

The Purchase Agreement entitles the Initial Purchasers to terminate the purchase of the Notes in certain circumstances prior to payment to the Issuer. The Issuer has agreed to indemnify the Initial Purchasers against certain liabilities in connection with the offer and sale of the Notes, including liabilities under the Securities Act, and may be required to contribute to payments the Initial Purchasers may be required to make in respect thereof. The Initial Purchasers initially propose to offer part or all of the Notes at the offering price set forth on the cover page hereof. After the initial offering of the Notes, the offering price and other selling terms may from time to time be varied by the Initial Purchasers. The Issuer will not for a period of 15 days following the date of the Purchase Agreement, without the prior written consent of Barclays Capital Inc., Citigroup Global Markets Inc. and Greenwich Capital Markets, Inc. (the Representatives) offer, sell, contract to sell, pledge, otherwise dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Issuer or any affiliate of the Issuer or any person in privity with the Issuer or any affiliate of the Issuer), directly or indirectly, or announce the offering, of any debt securities issued or guaranteed by the Issuer (other than the Notes) that are issued in the aggregate principal amount of $250 million or more. The Notes are a new issue of securities with no established trading market. The Notes are expected to be admitted to trading on the Regulated Market of the London Stock Exchange. The Initial Purchasers are not obligated to make a market in the Notes and, accordingly, no assurance can be given as to the liquidity of, or trading market for, the Notes. In connection with the offering, the Representatives may purchase and sell Notes in the open market. These transactions may include over-allotment, syndicate covering transactions and stabilising transactions. Over-allotment involves syndicate sales of Notes in excess of the principal amount of the Notes to be purchased by the Initial Purchasers in the offering, which creates a syndicate short position. Syndicate covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover syndicate short positions. Stabilising transactions consist of certain bids or purchases of Notes made for the purpose of pegging, fixing or maintaining the price of the Notes. The Representatives may impose a penalty bid. Penalty bids permit the Representatives to reclaim selling concessions from a syndicate member when they, in covering syndicate positions or making stabilising purchases, repurchase Notes originally sold by that syndicate member. Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be effected

100 in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time at the sole discretion of the Representatives, as applicable. No action has been or will be taken in any jurisdiction that would permit a public offering of the Notes or the possession, circulation or distribution of any material relating to the Issuer in any jurisdiction where action for such purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, nor may any offering material or advertisement in connection with the Notes (including this document and any amendment or supplement hereto) be distributed or published, in or from any country or jurisdiction, except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. The Initial Purchasers and their affiliates have performed certain investment and commercial banking or financial advisory services for the Issuer and its affiliates from time to time, for which they have received customary fees and commissions, and they expect to provide these services to the Issuer and its affiliates in the future, for which they expect to receive customary fees and commissions. In addition, affiliates of some of the Initial Purchasers are lenders under certain of the Issuer’s credit facilities and may receive a significant portion of the proceeds of the offering.

United States The Notes have not been and will not be registered under the Securities Act and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold only (i) outside the United States in reliance on Regulation S under the Securities Act and (ii) within the United States to ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the Act) (QIBs) in accordance with Rule 144A. Each Initial Purchaser has represented and agreed with the Issuer that, except as permitted by the Purchase Agreement, (i) it has not offered or sold, and will not offer or sell, any Notes within the United States as part of its distribution at any time except (A) to those it reasonably believes to be QIBs or (B) in accordance with Rule 903 of Regulation S, (ii) neither it nor any person acting on its behalf has made or will make offers or sales of the Notes in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States, (iii) in connection with each sale pursuant to (i)(A), it has taken or will take reasonable steps to ensure that the purchaser of such Notes is aware that such sale may be made in reliance on Rule 144A, (iv) neither it, nor any of its affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Notes and (v) it is an ‘‘accredited investor’’ (as defined in Rule 501(a) of Regulation D). Terms used in the preceding two paragraphs have the meanings ascribed to them by Rule 144A and Regulation S under the Securities Act, as applicable. In addition, until 40 days after the commencement of the offering of the Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering of the Notes) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A under the Securities Act.

United Kingdom Each Initial Purchaser has represented and agreed with the Issuer that: • it has communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA) received by it in

101 connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and • it has complied and will comply will all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

102 TRANSFER RESTRICTIONS The Notes have not been and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered, sold or delivered except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Notes offered hereby are being offered and sold only (i) within the United States to qualified institutional buyers (as defined in Rule 144A under the Securities Act) (QIBs) in reliance on Rule 144A under the Securities Act and (ii) outside of the United States in reliance on Regulation S under the Securities Act. Each purchaser of Notes, by its acceptance thereof, will be deemed to have acknowledged, represented to and agreed with the Issuer and the Initial Purchasers as follows: 1. It understands and acknowledges that the Notes have not been and will not be registered under the Securities Act or any other applicable securities law, are being offered for resale in transactions not requiring registration under the Securities Act or any other securities law, including sales pursuant to Rule 144A under the Securities Act, and may not be offered, sold or otherwise transferred within the United States except in compliance with the registration requirements of the Securities Act or any other applicable securities law, pursuant to an exemption therefrom or in any transaction not subject thereto and in each case in compliance with the conditions for transfer set forth in paragraphs (4) and (5) below. 2. It is not an ‘‘affiliate’’ (as defined in Rule 144 under the Securities Act) of the Issuer or acting on the Issuer’s behalf and it is either: • a qualified institutional buyer, or QIB, within the meaning of Rule 144A under the Securities Act and is aware that any sale of Notes to it will be made in reliance on Rule 144A under the Securities Act, of which the acquisition will be for its own account or for the account of another QIB; or • is purchasing the Notes outside of the United States in accordance with Regulation S under the Securities Act. 3. It acknowledges that neither the Issuer nor the Initial Purchasers, nor any person representing the Issuer, its subsidiaries or the Initial Purchasers, has made any representation to it with respect to the offering or sale of any Notes, other than the information contained in this Offering Memorandum, which has been delivered to it and upon which it is relying in making its investment decision with respect to the Notes. It has had access to such financial and other information concerning the Issuer and the Notes as it has deemed necessary in connection with its decision to purchase any of the Notes. 4. It is purchasing the Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any state securities laws, subject to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Notes pursuant to Rule 144A, Regulation S or any other exemption from registration available under the Securities Act. 5. If such a purchaser is a purchaser of Notes issued in reliance on Rule 144A (Rule 144A Notes) it agrees on its own behalf and on behalf of any investor account for which it is purchasing the Notes, and each subsequent holder of the Notes by its acceptance thereof will be deemed to agree, to offer, sell or otherwise transfer such Notes prior to the Specified Date, after which such Notes may be freely transferred pursuant to Rule 144 under the Securities Act, only (i) to the Issuer, (ii) pursuant to a registration statement that has been

103 declared effective under the Securities Act, (iii) for so long as the Notes are eligible pursuant to Rule 144A under the Securities Act, to a person it reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the transfer is being made in reliance on Rule 144A under the Securities Act, (iv) pursuant to offers and sales that occur outside the U.S. in compliance with Regulation S under the Securities Act or (v) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and in compliance with any applicable state securities laws, and any applicable local laws and regulations, and further subject to the Issuer’s, the Trustee’s and the Agent’s rights prior to any such offer, sale or transfer (A) pursuant to clause (v) to require the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them and (B) in each of the foregoing cases, to require that a certificate of transfer in the form appearing on the other side of the security is completed and delivered by the transferor to the Agent. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. 6. Each purchaser acknowledges that each Rule 144A Note will contain a legend substantially to the following effect: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE UNITED STATES IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (‘‘THE SPECIFIED DATE’’) FOLLOWING THE EXPIRATION OF THE APPLICABLE REQUIRED HOLDING PERIOD DETERMINED PURSUANT TO RULE 144 OF THE SECURITIES ACT FROM THE LATER OF THE DATE OF ACQUISITION OF THIS SECURITY FROM (I) THE ISSUER THEREOF OR (II) AN AFFILIATE OF SUCH ISSUER, AND ANY RESALE OF THIS SECURITY IN RELIANCE ON RULE 144 UNDER THE SECURITIES ACT FOR THE ACCOUNT OF EITHER THE ACQUIROR OR ANY SUBSEQUENT HOLDER OF THIS SECURITY (IN EACH CASE DEMONSTRATED TO THE REASONABLE SATISFACTION OF THE ISSUER OF THIS SECURITY) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’), TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR

104 CONTROL AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, AND ANY APPLICABLE LOCAL LAWS AND REGULATIONS AND FURTHER SUBJECT TO THE ISSUER’S, THE TRUSTEE’S AND/OR THE AGENT’S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE AGENT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE SPECIFIED DATE. THE INDENTURE CONTAINES A PROVISION REQUIRING THE AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS. 7. It agrees that it will give to each person to whom it transfers the Notes notice of any restrictions on transfer of such Notes. 8. It acknowledges that until 40 days after the commencement of the offering, any offer or sale of the Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A under the Securities Act. 9. It acknowledges that the Trustee and/or Agent will not be required to accept for registration of transfer any Notes except upon presentation of evidence satisfactory to the Issuer, the Trustee and/or the Agent that the restrictions set forth therein have been complied with. 10. It acknowledges that the Issuer, the Initial Purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements and agrees that if any of the acknowledgements, representations, warranties and agreements deemed to have been made by its purchase of the Notes are no longer accurate, it shall promptly notify the Initial Purchasers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such investor account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such investor account.

105 LEGAL MATTERS The validity of the Notes and certain other matters with respect to the Notes offered hereby will be passed on for the Issuer by Allen & Overy LLP as to matters of English law, U.S. federal law and New York state law. The validity of the Notes and certain other matters with respect to the Notes offered hereby will be passed on for the Initial Purchasers by Davis Polk and Wardwell as to matters of U.S. federal law and New York state law.

106 INDEPENDENT AUDITORS The consolidated financial statements of Rexam as of and for the fiscal years ended December 31, 2007 and December 31, 2006 have been audited by PricewaterhouseCoopers LLP, Chartered Accountants and Registered Auditors, One Embankment Place, London WC2N 6RH, United Kingdom, the Group’s independent auditors. The February 20, 2008 and February 22, 2007 reports of PricewaterhouseCoopers LLP with respect to such audited consolidated financial statements, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, provide: ‘‘This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.’’ Investors in the Notes should understand these statements are intended to disclaim any liability to parties (such as the purchasers of the Notes) other than the Issuer and its shareholders with respect to those reports. In the context of the offering of the Notes, the Issuer’s auditors have reconfirmed to the Issuer that they do not intend their duty of care to extend to any party other than those to whom their reports were originally addressed (i.e., the Issuer and its shareholders). The SEC would not permit the language quoted in the above paragraph to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the Exchange Act. The effect of such language is untested by a U.S. court (or any other court) and thus may or may not be effective to limit the direct liability of the auditors under U.S. law or under any other law to persons such as investors in the Notes. PricewaterhouseCoopers LLP has no material interest in the Issuer.

107 GENERAL INFORMATION The Issuer Rexam PLC, a public limited company incorporated under the laws of England and Wales, was incorporated on July 13, 1923 under registration number 191285. The Issuer’s registered address is 4 Millbank, London, SW1P 3XR, United Kingdom and its telephone number is +44 (0)20 7227 4100.

Share capital The issued share capital of the Issuer is £413.2 million divided into 642.7 million ordinary shares with a par value of £0.6429 per share.

Directors’ interests None of the directors of the Issuer has any conflict of interest between any of their respective duties to the Issuer and their respective private interests and/or other duties. As a matter of English law, each director of the Issuer is under a duty to act honestly and in good faith with regard to the best interests of the Issuer, regardless of any other directorships such director may hold.

Financial statements and auditors’ report The Issuer’s statutory annual financial statements are prepared on the basis of a financial year ended on December 31 of each year, with the last fiscal year ending on December 31, 2007. The Issuer’s audited annual financial statements are available free of charge at the Issuer’s website at www.rexam.com. The website does not form part of this Offering Memorandum.

Authorisation and Consents The Issuer has obtained all necessary consents, waivers, approvals and authorisations in connection with the issue of the Notes. The Notes were issued pursuant to the resolution adopted by the Board of Directors of the Issuer on May 1, 2008.

Listing Application has been made to the U.K. Listing Authority for the Notes to be admitted to the Official List and to the London Stock Exchange for the Notes to be admitted to trading on the London Stock Exchange’s Regulated Market. The admission of the Notes to the Official List will be expressed as a percentage of their aggregate principal amount (excluding accrued interest). It is expected that admission to the Official List and to trading on the London Stock Exchange’s Regulated Market will be granted on or about June 4, 2008, subject only to the issue of the Notes. Prior to official listing, dealings will be permitted by the London Stock Exchange in accordance with its rules. The Issuer expects that total expenses related to the listing and admission of the Notes to trading will be approximately $800,000.

Clearing Systems The global notes representing the Rule 144A Notes and the Regulation S Notes are expected to be accepted for clearance through DTC (which is the entity in charge of keeping the records) and through the facilities of Clearstream, Luxembourg and Euroclear (as indirect participants in DTC). The ISIN of the Notes to be sold pursuant to Regulation S under the Securities Act is USG1274KAT28 and the CUSIP number is G1274KAT2. The ISIN of the Notes to be sold pursuant to Rule 144A under the Securities Act is US761655AA78 and the CUSIP number is 761655AA7.

108 The address of DTC is 55 Water Street, New York, New York 10041, United States, the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg and the address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium.

Significant or Material Adverse Change There has been no significant change in the financial or trading position of the Issuer or the Group and no material adverse change in the prospects of the Issuer or the Group since December 31, 2007, the date of the last published audited financial statements.

Litigation The Group has not been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) which may have or have had in the 12 months preceding the date of this Offering Memorandum, a significant effect on the financial position or profitability of the Issuer and/or the Group.

Interests of Natural and Legal Persons Involved in the Issue Save for any fees payable to the Initial Purchasers, so far as the Issuer is aware, no person involved in the issue of Notes has an interest material to the offering.

Credit Rating As of May 27, 2008, the Issuer’s credit rating was Baa3 from Moody’s Investors Service, Inc. and BBB from Standard & Poor’s, a division of the McGraw-Hill Companies, Inc.

General For the avoidance of doubt, any website referred to in this Offering Memorandum does not form part of the Offering Memorandum prepared in accordance with the proposed offering of the Notes.

Documents on Display Copies of the following documents will be available for inspection at the registered office of the Issuer (4 Millbank, London SW1P 3XR, United Kingdom) and at the specified office of the Agent (Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom) during normal business hours on any weekday (public holidays excepted) for the life of the Offering Memorandum: (i) the Memorandum and Articles of Association of the Issuer; (ii) the audited consolidated annual accounts of the Group in respect of the financial years ended December 31, 2007 and 2006, in each case together with the auditor’s reports; (iii) this Offering Memorandum; and (iv) the Indenture. In addition, this Offering Memorandum will also be available at the website of the Regulatory News Service operated by the London Stock Exchange at www.londonstockexchange.com/engh/ pricenews/marketnews/.

109 INDEX TO FINANCIAL STATEMENTS

Page Audited Consolidated Financial Statements as at and for the Year Ended December 31, 2007 ‘‘Statement of Directors’ Responsibilities on the Consolidated Financial Statements’’ ...... F-2 Independent Auditors’ Report ...... F-3 Consolidated Income Statement ...... F-5 Consolidated Balance Sheet ...... F-6 Consolidated Cash Flow Statement ...... F-7 Consolidated Statement of Recognised Income and Expense ...... F-8 Notes to the Consolidated Financial Statements ...... F-9

Audited Consolidated Financial Statements as at and for the Year Ended December 31, 2006 ‘‘Statement of Directors’ Responsibilities on the Consolidated Financial Statements’’ ...... F-74 Independent Auditors’ Report ...... F-75 Consolidated Income Statement ...... F-77 Consolidated Balance Sheet ...... F-78 Consolidated Cash Flow Statement ...... F-79 Consolidated Statement of Recognised Income and Expense ...... F-80 Notes to the Consolidated Financial Statements ...... F-81

The following financial statements have been extracted without modification from the Annual Report and Accounts of Rexam PLC. There are references in these extracts to page numbers in the Annual Report and Accounts. The table below sets out the page numbers in this Offering Memorandum that correspond to the page numbers referred to in such reports.

Page Offering Reference Memorandum Rexam PLC—period ended December 31, 2007 ...... 76 to 117 F-9 to F-73 Rexam PLC—period ended December 31, 2006 ...... 76 to 112 F-81 to F-137

F-1 Statement of directors’ responsibilities on the consolidated financial statements Company law requires the directors to prepare consolidated financial statements for each financial year that give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those consolidated financial statements the directors are required to: • Select suitable accounting policies and then apply them consistently. • Make judgements and estimates that are reasonable and prudent. • State that the consolidated financial statements comply with IFRSs as adopted by the European Union. • Prepare the consolidated financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business. The directors confirm that they have complied with the above requirements in preparing the consolidated financial statements. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the consolidated financial statements comply with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud. The directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

F-2 Independent auditors’ report to the members of Rexam PLC We have audited the group financial statements of Rexam PLC for the year ended 31 December 2007 which comprise the Consolidated income statement, the Consolidated balance sheet, the Consolidated cash flow statement, the Consolidated statement of recognised income and expense and the related notes. These group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the parent company financial statements of Rexam PLC for the year ended 31 December 2007 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the group financial statements give a true and fair view and whether the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the group financial statements. The information given in the Directors’ Report includes that specific information presented in the Business Review that is cross referred from the Business Review section of the Directors’ Report. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding director’s remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of the Combined Code 2006 specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures. We read other information contained in the Annual Report and consider whether it is consistent with the audited group financial statements. The other information comprises only 2007 summary, Rexam at a glance, more focus..., more innovation..., more efficiency..., more opportunities..., Chairman’s Statement, Business Review, Directors and Officers, Directors’ Report, Corporate Governance Report, the unaudited part of the Remuneration Report, Statement of Directors’ Responsibilities, Five year financial summary and Shareholder information and addresses. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the group financial statements. Our responsibilities do not extend to any other information.

F-3 Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the group financial statements, and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements.

Opinion In our opinion: • the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group’s affairs as at 31 December 2007 and of its profit and cash flows for the year then ended; • the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and • the information given in the Directors’ Report is consistent with the group financial statements.

PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors London 20 February 2008 Notes: (a) The maintenance and integrity of the Rexam PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

F-4 Consolidated income statement

2006 For the year ended 31 December Notes 2007 restated £m £m Continuing operations Sales ...... 2 3,611 3,301 Operating expenses ...... 3 (3,240) (2,927) Underlying operating profit ...... 2 354 375 Retirement benefit obligations exceptional items ...... 6 61 53 Amortisation of acquired intangible assets ...... 6 (22) (11) Other exceptional items ...... 6 (22) (43) Operating profit ...... 2 371 374 Share of underlying post tax profits of associates and joint ventures ...... — 1 Share of exceptional post tax profits of associates and joint ventures ...... 6 — 8 Share of post tax profits of associates and joint ventures ...... 16 — 9 Retirement benefit obligations net finance cost ...... 25 (14) (22) Underlying interest expense ...... (109) (103) Exceptional interest expense ...... 6 (2) (3) Interest expense ...... 7 (111) (106) Interest income ...... 7 14 13 Underlying profit before tax ...... 245 264 Retirement benefit obligations exceptional items ...... 61 53 Amortisation of acquired intangible assets ...... (22) (11) All other exceptional items ...... (24) (38) Profit before tax ...... 260 268 Tax on underlying profit ...... (73) (64) Tax on exceptional items ...... 6 (13) (9) Tax...... 8 (86) (73) Profit for the financial year ...... 174 195 Discontinued operations Profit for the financial year ...... 11 66 28 Total profit for the financial year ...... 27 240 223 Basic earnings per share (pence) ...... 9 Continuing operations ...... 28.3 34.7 Discontinued operations ...... 10.7 5.0 Total ...... 39.0 39.7 Diluted earnings per share (pence) ...... 9 Continuing operations ...... 28.3 34.7 Discontinued operations ...... 10.7 5.0 Total ...... 39.0 39.7 For details of equity dividends paid and proposed see note 10 to the consolidated financial statements. The notes on pages 76 to 117 form part of these consolidated financial statements.

F-5 Consolidated balance sheet

2006 As at 31 December Notes 2007 restated £m £m Assets Non current assets Goodwill ...... 12 1,680 1,399 Other intangible assets ...... 13 524 133 Property, plant and equipment ...... 14 1,322 1,190 Investments in associates and joint ventures ...... 16 53 32 Pension asset ...... 25 68 — Deferred tax assets ...... 8 142 234 Trade and other receivables ...... 19 57 45 Available for sale financial assets ...... 17 21 22 Derivative financial instruments ...... 24 173 116 4,040 3,171 Current assets Inventories ...... 18 392 354 Trade and other receivables ...... 19 563 504 Available for sale financial assets ...... 17 1 1 Derivative financial instruments ...... 24 20 32 Cash and cash equivalents ...... 20 113 138 Assets classified as held for sale ...... 21 30 22 1,119 1,051 Total assets ...... 5,159 4,222 Liabilities Current liabilities Borrowings ...... 23 (164) (275) Derivative financial instruments ...... 24 (32) (13) Current tax ...... (13) (8) Trade and other payables ...... 22 (849) (678) Provisions ...... 26 (13) (18) Liabilities classified as held for sale ...... 21 (12) (9) (1,083) (1,001) Non current liabilities Borrowings ...... 23 (1,679) (1,140) Derivative financial instruments ...... 24 (5) (1) Retirement benefit obligations ...... 25 (249) (514) Deferred tax liabilities ...... 8 (162) (168) Non current tax ...... (84) (82) Other payables ...... 22 (26) (36) Provisions ...... 26 (38) (31) (2,243) (1,972) Total liabilities ...... (3,326) (2,973) Net assets ...... 1,833 1,249 Equity ...... 27 Ordinary share capital ...... 413 375 Share premium account ...... 1,004 759 Capital redemption reserve ...... 351 351 Retained earnings ...... 60 (216) Fair value and other reserves ...... 3 (22) Shareholders’ equity ...... 1,831 1,247 Minority interests ...... 27 2 2 Total equity ...... 1,833 1,249

Approved by the Board on 20 February 2008 Rolf Borjesson,¨ Chairman David Robbie, Finance Director

F-6 Consolidated cash flow statement

For the year ended 31 December 2007 2006 £m £m Cash flows from operating activities Cash generated from operations (note 30) ...... 458 517 Interest paid ...... (99) (101) Tax paid ...... (42) (58) Net cash flows from operating activities ...... 317 358

Cash flows from investing activities Capital expenditure ...... (311) (214) Proceeds from sale of property, plant and equipment ...... 6 9 Acquisition of subsidiaries (note 29) ...... (906) (202) Acquisition of joint venture ...... (14) — Proceeds from sale of discontinued operations (note 11) ...... 259 — Proceeds from sale of other subsidiaries ...... 1 19 Proceeds from sale of associates ...... — 2 Repayment of loan by a joint venture ...... — 3 Sale of properties surplus to requirements ...... — 5 Interest received ...... 12 12 Net cash flows from investing activities ...... (953) (366)

Cash flows from financing activities Movement in borrowings and financing derivatives ...... 503 116 Proceeds from share placing (net of £6m costs) ...... 280 — Proceeds from issue of share capital on options ...... 3 13 Purchase of Rexam shares by Employee Share Trust ...... (2) (4) Dividends paid to equity shareholders ...... (118) (103) Net cash flows from financing activities ...... 666 22

Net increase in cash and cash equivalents ...... 30 14

Cash and cash equivalents at the beginning of the year ...... 14 (4) Exchange differences ...... (7) 3 Transfer to assets and liabilities classified as held for sale ...... (1) 1 Net increase in cash and cash equivalents ...... 30 14 Cash and cash equivalents at the end of the year ...... 36 14

Cash and cash equivalents comprise: Cash at bank and in hand ...... 73 63 Short term bank deposits ...... 40 75 Bank overdrafts ...... (77) (124) 36 14

F-7 Consolidated statement of recognised income and expense

For the year ended 31 December 2007 2006 £m £m Exchange differences ...... 86 (95) Actuarial gains on retirement benefit obligations ...... 217 155 Tax on actuarial gains on retirement benefit obligations ...... (65) (48) Net investment hedges ...... (31) 28 Net investment hedges transferred to the income statement ...... (3) — Cash flow hedges recognised ...... (34) 32 Tax on cash flow hedges ...... 13 4 Cash flow hedges transferred to inventory ...... (8) (44) Cash flow hedges transferred to the income statement ...... — (1) Sale of available for sale financial assets ...... — (2) Net profit recognised directly in equity ...... 175 29 Total profit for the financial year ...... 240 223 Total recognised income and expense for the year attributable to Rexam PLC ...... 415 252

F-8 Notes to the consolidated financial statements

1 Principal accounting policies The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments, share based payments and retirement benefit obligations. The following accounting standards and interpretations were adopted by the Group in 2007. (i) IFRS7 ‘Financial Instruments: Disclosures’ and the complementary amendment to IAS1 ‘Presentation of Financial Statements—Capital Disclosures’. These standards introduce detailed new disclosures relating to financial instruments. IFRS7 does not have any impact on the classification and valuation of the Group’s financial instruments. (ii) IFRIC14 ‘IAS19—The limit on a defined benefit asset, minimum funding requirements and their interaction’. This interpretation provides guidance on assessing the limit in IAS19 ‘Employee Benefits’ on the amount of the surplus that can be recognised as an asset. It also explains how a pension asset or liability may be affected by a statutory or contractual minimum funding requirement. The IFRIC had no impact on the Group. The following accounting standards and amendments to existing standards are not yet effective and have not been early adopted by the Group. (i) IFRS8 ‘Operating Segments’. This new standard requires identification and reporting of operating segments on the basis of internal reports that are regularly reviewed by the Board in order to allocate resources to the segment and assess its performance. The Group is currently in the process of assessing the impact of IFRS8 and intends to adopt it no later than accounting periods beginning on 1 January 2009. (ii) IAS23 (Revised) ‘Borrowing Costs’. This revision of an existing standard requires the capitalisation of borrowing costs directly attributable to an acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The revised standard is not expected to have any impact on the Group. The Group intends to adopt IAS23 no later than accounting periods beginning on 1 January 2009. (iii) IFRS3 (Revised) ‘Business Combinations’. This revision of an existing standard continues to apply the acquisition method to business combinations with certain changes which could impact the Group. For example all payments to purchase a business must be recorded at fair value at the acquisition date with some contingent payments subsequently remeasured at fair value through the consolidated income statement. In addition all transaction costs must be expensed. The Group intends to adopt IFRS3 (Revised) no later than accounting periods beginning on 1 January 2009. In preparing the consolidated financial statements, the following restatements have been made to the comparative amounts: (i) The consolidated financial statements have been restated for the discontinuance of the Glass segment.

F-9 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) (ii) The segment analysis and average number of employees have been restated for the disposal of a Dutch Plastic Packaging business which has moved from ‘Plastic Packaging’ to ‘Disposals and businesses for sale’. (iii) The consolidated balance sheet as at 31 December 2006 has been restated for final fair value adjustments applied to prior year acquisitions.

Key estimates and assumptions The preparation of consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, ultimately actual results may differ from those estimates. The key estimates and assumptions used in these consolidated financial statements are set out below.

Goodwill impairment testing Goodwill is tested at least annually for impairment in accordance with the accounting policy for goodwill set out below and in note 12 to the consolidated financial statements. The recoverable amounts of cash generating units are determined based on value in use calculations. These calculations require the use of estimates which include cash flow projections for each cash generating unit and discount rates based on the Group’s weighted average cost of capital, adjusted for specific risks associated with particular cash generating units.

Valuation of acquired intangible assets Identifiable intangible assets acquired as part of an acquisition of a business must initially be recorded at fair value. The acquisition of OI Plastics in 2007 resulted in significant customer relationships, technology and patents being recognised by the Group. These intangible assets were valued using the income approach. The underlying premise in applying this approach is that the value of an asset can be measured by the present value of the cash receipts and cash payments to be received and made over the life of the asset. In applying this methodology certain key judgements and estimates were required to be made in respect of future gross cash flows and the discount rate.

Retirement benefit obligations The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. There are two principal funded defined benefit pension plans in the UK and US and an unfunded retiree medical plan in the US. The costs and the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the salary progression of current employees, the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities. The Group uses estimates based on previous experience and third party actuarial advice in determining these future cash flows and in determining the discount rate. If the discount rate was to fall by 0.5%, the net liabilities of the plans at 31 December 2007 would rise by approximately £120m (2006: £160m). If equity values were to fall by 10% then the plan assets at 31 December 2007 would fall by approximately £90m (2006: £110m). The accounting policy for retirement benefit obligations is set out below and details of the assumptions used for the two principal

F-10 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) pension plans and the retiree medical plan are set out in note 25 to the consolidated financial statements.

Income taxes Judgement is required in determining the provision for income taxes. There are many transactions and calculations whose ultimate tax treatment is uncertain. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes are likely to be due. The Group recognises deferred tax assets and liabilities based on estimates of future taxable income and recoverability. Where a change in circumstance occurs, or the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax balances in the year in which that change or outcome is known. The accounting policy for income taxes is set out below.

Basis of consolidation The consolidated financial statements comprise Rexam PLC and all its subsidiaries, together with the Group’s share of the results of its associates and joint ventures. The financial statements of subsidiaries, associates and joint ventures are prepared as of the same reporting date using consistent accounting policies. Intercompany balances and transactions, including any unrealised profits arising from intercompany transactions, are eliminated in full. Subsidiaries are entities where the Group has the power to govern the financial and operating policies, generally accompanied by a share of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group and are included until the date on which the Group ceases to control them. Associates are entities over which the Group has significant influence but not control, generally accompanied by a share of between 20% and 50% of the voting rights. Joint ventures are entities over which the Group has joint control, whereby the strategic, financial and operating decisions relating to the venture require the unanimous consent of the parties sharing control and are generally accompanied by a 50% share of voting rights. Investments in associates and joint ventures are accounted for using the equity method. If the Group’s share of losses in an associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture. All acquisitions are accounted for by applying the purchase method. The cost of an acquisition is measured as the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity instruments issued by the Group, together with any costs directly attributable to the acquisition. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured initially at fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

Foreign currencies The financial statements for each of the Group’s subsidiaries, associates and joint ventures are prepared using their functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group is sterling. Foreign currency transactions are translated into the functional currency using exchange rates prevailing

F-11 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) at the dates of the transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the balance sheet date of monetary assets and liabilities denominated in currencies other than the functional currency are recognised directly in the consolidated income statement. Exceptions to this are where the monetary items form part of the net investment in a foreign operation or are designated as hedges of a net investment, or designated as cash flow hedges. Such exchange differences are initially recognised in equity. The balance sheets of foreign operations are translated into sterling using the exchange rate at the balance sheet date and the income statements are translated into sterling using the average exchange rate for the year. Where this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, the exchange rate on the transaction date is used. Exchange differences on translation into sterling arising since 1 January 2004 are recognised as a separate component of equity. On disposal of a foreign operation, any cumulative exchange differences held in equity are transferred to the consolidated income statement. The principal exchange rates against sterling used in these consolidated financial statements are as follows:

Average Closing Average Closing 2007 2007 2006 2006 US dollar ...... 2.00 1.99 1.84 1.96 Euro ...... 1.46 1.37 1.47 1.49

Revenue recognition Revenue from the sale of goods is measured at the fair value of the consideration, net of rebates and trade discounts. Revenue from the sale of goods is recognised when the Group has transferred the significant risks and rewards of ownership of the goods to the buyer, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group. The Group makes certain advance payments to customers in relation to supply contracts which are charged in the consolidated income statement over the useful economic lives of the contracts.

Exceptional items Items which are exceptional, being material in terms of size and/or nature are presented separately from underlying business performance in the consolidated income statement. The separate reporting of exceptional items helps provide an indication of the Group’s underlying business performance. The principal events which may give rise to exceptional items include significant changes to retirement benefit obligations, gains or losses on the disposal of businesses, the restructuring and integration of businesses, major asset impairments, the subsequent recognition of acquired deferred tax assets, significant litigation and tax claims, the amortisation of certain acquired intangible assets and non hedge accounted fair value movements and hedge ineffectiveness on financing derivative financial instruments.

Retirement benefit obligations The Group operates defined benefit pension plans and defined contribution pension plans.

F-12 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) A defined benefit pension plan is one that specifies the amount of pension benefit that an employee will receive on retirement. The Group operates both funded defined benefit pension plans, where actuarially determined payments are made to trustee administered funds, and unfunded defined benefit pension plans, where no such payments are made. The asset or liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation less the fair value of plan assets at the balance sheet date. The defined benefit obligation is calculated, at least triennially, by independent actuaries using the projected unit credit method and is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. The current service cost and gains and losses on settlements and curtailments are included in operating expenses in the consolidated income statement. Past service costs are similarly included where the benefits have vested, otherwise they are amortised on a straight line basis over the vesting period. The expected return on assets of funded defined benefits pension plans, less administration expenses of pension plans, and the interest on pension plan liabilities comprise the pension element of the net finance cost in the consolidated income statement. Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included in the consolidated statement of recognised income and expense. A defined contribution plan is one under which fixed contributions are paid to a third party. The Group has no further payment obligations once these contributions have been paid. The contributions are recognised in the consolidated income statement when they are due. Prepaid contributions are recognised in the consolidated balance sheet as an asset to the extent that a cash refund or a reduction in the future payments is likely. The Group also provides post retirement healthcare benefits (retiree medical) to certain of its current and former employees. The entitlement to these benefits is usually conditional on an employee remaining in service up to retirement age and the completion of a minimum service period. The consolidated income statement and consolidated balance sheet treatment with respect to retiree medical is similar to that for defined benefit pension plans. These obligations are valued by independent actuaries, usually on an annual basis.

Share based payment The Group operates various equity settled and cash settled share option schemes. For equity settled share options, the services received from employees are measured by reference to the fair value of the share options. The fair value is calculated at grant date and recognised in the consolidated income statement, together with a corresponding increase in equity, on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest. Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. For cash settled share options, the services received from employees are measured at the fair value of the liability and recognised in the consolidated income statement on a straight line basis over the vesting period. The fair value of the liability is measured at each balance sheet date and at the date of settlement with changes in fair value recognised in the consolidated income statement. IFRS2 ‘Share- based Payment’ has been applied to equity settled share options granted after 7 November 2002 and to all cash settled share options. The Rexam Employee Share Trust holds ordinary shares in Rexam PLC which are presented in the consolidated financial statements as a deduction from equity.

F-13 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Interest Interest on cash and cash equivalents and borrowings held at amortised cost is recognised in the consolidated income statement using the effective interest method. Interest includes exchange differences arising on cash and cash equivalents and borrowings, where such exchange differences are recognised in the consolidated income statement. Interest includes all fair value gains and losses on derivative financial instruments, and corresponding adjustments to hedged items under designated fair value hedging relationships, where they relate to financing activities and are recognised in the consolidated income statement. Prior to their redemption, interest included dividends paid on convertible preference shares. Interest relating to payments made over an extended period of development of large capital projects is added to the capital cost and amortised over the expected lives of those projects.

Segment reporting The Group’s primary reporting format is business segments and its secondary format is geographic segments. A business segment is a component of the Group that is engaged in providing a group of related products and is subject to risks and returns that are different from those of other business segments. A geographic segment is a component of the Group that operates within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Non specific central costs are allocated on the basis of net assets excluding investments in associates and joint ventures, net borrowings, deferred tax, current tax and non current tax.

Goodwill Goodwill represents the excess of the cost of an acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the acquiree at the date of acquisition. Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment losses. At the date of acquisition, goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill arising on acquisitions on or before 31 December 1997 has been deducted from equity. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold except for any goodwill deducted from equity. Goodwill arising on the acquisition of subsidiaries is presented in goodwill and goodwill arising on the acquisition of associates and joint ventures is presented in investments in associates and joint ventures. Internally generated goodwill is not recognised as an asset.

Other intangible assets Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows:

Acquired computer software ...... 2 to 3 years Computer software development ...... Up to 7 years Acquired customer contracts and relationships, technology and patents ...... Up to 20 years Development projects ...... Up to 5 years

F-14 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) The cost of intangible assets acquired in an acquisition is the fair value at acquisition date. The cost of separately acquired intangible assets, including computer software, comprises the purchase price and any directly attributable costs of preparing the asset for use. Computer software development costs that are directly associated with the implementation of major business systems are capitalised as intangible assets. Expenditure on research is recognised as an expense in the consolidated income statement as incurred. Expenditure incurred on development projects is capitalised as an intangible asset if it is probable that the expenditure will generate future economic benefits and can be measured reliably.

Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Cost comprises purchase price and directly attributable costs. Freehold land and assets under construction are not depreciated. For all other property, plant and equipment, depreciation is calculated on a straight line basis to allocate cost less residual value of the assets over their estimated useful lives as follows:

Freehold buildings ...... Up to 50 years Leasehold buildings ...... Shorter of 50 years or lease term Manufacturing machinery ...... 7 to 17 years Computer hardware ...... Up to 8 years Fixtures, fittings and vehicles ...... 4 to 10 years Residual values and useful lives are reviewed at least at each financial year end.

Impairment of assets At each balance sheet date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use and is determined for an individual asset. If the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, the recoverable amount of the cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.

Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on a first in first out or a weighted average cost basis. Cost comprises directly attributable purchase and conversion costs and an allocation of production overheads based on normal operating capacity. Net realisable value is the estimated selling price less estimated costs of completion and selling costs.

Cash and cash equivalents Cash and cash equivalents for the purposes of the consolidated cash flow statement comprise cash at bank and in hand, money market deposits and other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are presented in borrowings within current liabilities in the consolidated balance sheet.

F-15 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Assets and liabilities classified as held for sale The assets and liabilities classified as held for sale are available for immediate sale in their present condition and a sale is highly probable within one year. Assets and liabilities classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. Non current assets classified as held for sale are not depreciated or amortised and any future write down to fair value less costs to sell will be recognised as an impairment loss.

Grants Grants received in respect of property, plant and equipment are capitalised and released to the consolidated income statement in equal instalments over the estimated useful lives of the related assets.

Leases Leases are classified as finance leases where substantially all the risks and rewards of ownership are transferred to the Group. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the liability and finance charge to produce a constant rate of interest on the finance lease balance outstanding. Assets capitalised under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. Leases other than finance leases are classified as operating leases. Payments made under operating leases are recognised as an expense in the consolidated income statement on a straight line basis over the lease term. Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight line basis.

Income taxes The tax expense represents the sum of current tax, non current tax and deferred tax. Current tax and non current tax are based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax arising from initial recognition of an asset or liability in a transaction, other than an acquisition, that at the time of the transaction affects neither accounting nor taxable profit or loss, is not recognised. Deferred tax is measured using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Tax is recognised in the consolidated income statement, unless the tax relates to items recognised directly in equity, in which

F-16 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) case the tax is recognised directly in equity through the consolidated statement of recognised income and expense.

Provisions Provisions are recognised when a present obligation exists in respect of a past event and where the amount can be reliably estimated. Provisions for restructuring are recognised for direct expenditure on business reorganisations where plans are sufficiently detailed and well advanced, and where appropriate communication to those affected has been undertaken on or before the balance sheet date. Provisions are discounted where the time value of money is considered to be material.

Dividends Final equity dividends to the shareholders of Rexam PLC are recognised in the period that they are approved by the shareholders. Interim equity dividends are recognised in the period that they are paid.

Financial instruments Derivative financial instruments are measured at fair value. Derivative financial instruments utilised by the Group include interest rate swaps, cross currency swaps, forward foreign exchange contracts and forward aluminium and energy commodity contracts. Certain derivative financial instruments are designated as hedges in line with the Group’s risk management policies. Hedges are classified as follows: (i) Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability. (ii) Cash flow hedges where they hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. (iii) Net investment hedges where they hedge exposure to changes in the value of the Group’s interests in the net assets of foreign operations. For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the consolidated income statement. For cash flow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity, with any ineffective portion recognised in the consolidated income statement. When hedged cash flows result in the recognition of a non financial asset or liability, the associated gains or losses previously recognised in equity are included in the initial measurement of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the consolidated income statement in the same period in which the hedged cash flows affect the consolidated income statement. Any gains or losses arising from changes in fair value of derivative financial instruments not designated as hedges and embedded derivatives are recognised immediately in the consolidated income statement.

F-17 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Gains and losses on derivative financial instruments related to operating activities are included in operating profit when recognised in the consolidated income statement. Gains and losses on derivative financial instruments related to financing activities are included in interest when recognised in the consolidated income statement. Borrowings are measured at amortised cost except where they are hedged by an effective fair value hedge, in which case the carrying value is adjusted to reflect the fair value movements associated with the hedged risk. Where borrowings are used to hedge the Group’s interests in the net assets of foreign operations, the portion of the exchange gain or loss on the borrowings that is determined to be an effective hedge is recognised in equity. Available for sale financial assets are measured at fair value. Unrealised gains and losses are recognised in equity except for impairment losses, interest and dividends arising from those assets which are recognised in the consolidated income statement. Trade and other receivables are measured at fair value and subsequently measured at amortised cost less any provision for impairment. Trade and other receivables are discounted when the time value of money is considered material. Trade and other payables are measured at cost.

2 Segment analysis (i) Analysis by business segment 2007

Underlying Underlying operating return Operating Sales profit on sales profit £m £m % £m Continuing operations Beverage Cans ...... 2,686 244 9.1 285 Plastic Packaging ...... 880 105 11.9 80 Disposals and businesses for sale ...... 45 5 11.1 6 3,611 354 9.8 371 Retirement benefit obligations net finance cost ...... (14) Net interest expense ...... (97) Profit before tax ...... 260 Tax...... (86) Profit for the financial year ...... 174 Discontinued operations Profit for the financial year ...... 66 Total profit for the financial year ...... 240

F-18 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued)

Segment Segment Capital Depreciation and assets liabilities expenditure amortisation Impairment £m £m £m £m £m Continuing operations Beverage Cans ...... 2,608 (644) 236 88 — Plastic Packaging ...... 1,952 (282) 70 68 1 Disposals and businesses for sale ...... 30 (12) 2 2 — 4,590 (938) 308 158 1 Associates and joint ventures ...... 53 — — — — Unallocated assets and liabilities ...... 516 (2,388) — — — Total continuing operations ...... 5,159 (3,326) 308 158 1 Discontinued operations ...... —— 178 1 5,159 (3,326) 325 166 2

Segment assets are disclosed after deducting inter segment assets of £4m for Beverage Cans and £4m for Plastic Packaging. Segment liabilities are disclosed after deducting inter segment liabilities of £6m for Beverage Cans and £2m for Plastic Packaging. Of the £53m of assets of associates and joint ventures, £45m are attributable to Beverage Cans and £8m are attributable to Plastic Packaging. Underlying operating profit comprises operating profit before exceptional items. Underlying return on sales comprises underlying operating profit divided by sales. Unallocated assets comprise derivative financial instrument assets, deferred tax assets, pension asset and cash and cash equivalents which are used as part of the Group’s financing offset arrangements. Unallocated liabilities comprise borrowings, derivative financial instrument liabilities, current and non current tax, deferred tax liabilities and retirement benefit obligations.

F-19 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued) (ii) Analysis by business segment 2006—restated

Underlying Underlying operating return Operating Sales profit on sales profit £m £m % £m Continuing operations Beverage Cans ...... 2,490 289 11.6 325 Plastic Packaging ...... 709 80 11.3 46 Disposals and businesses for sale ...... 102 6 5.9 3 3,301 375 11.4 374 Share of post tax profits of associates and joint ventures .... 9 Retirement benefit obligations net finance cost ...... (22) Net interest expense ...... (93) Profit before tax ...... 268 Tax...... (73) Profit for the financial year ...... 195 Discontinued operations Profit for the financial year ...... 28 Total profit for the financial year ...... 223

Segment Segment Capital Depreciation and assets liabilities expenditure amortisation Impairment £m £m £m £m £m Continuing operations Beverage Cans ...... 2,270 (491) 126 87 — Plastic Packaging ...... 912 (179) 48 50 7 Disposals and businesses for sale ...... 28 (12) 3 5 — 3,210 (682) 177 142 7 Associates and joint ventures ...... 32 — — — — Unallocated assets and liabilities ...... 520 (2,201) — — — Total continuing operations ...... 3,762 (2,883) 177 142 7 Discontinued operations ...... 460 (90) 64 39 10 4,222 (2,973) 241 181 17

Share of post tax profits of associates and joint ventures are wholly attributable to Beverage Cans. Segment assets are disclosed after deducting inter segment assets of £11m for Beverage Cans, £5m for Plastic Packaging and £1m for Disposals and businesses for sale. Segment liabilities are disclosed after deducting inter segment liabilities of £15m for Beverage Cans and £2m for Plastic Packaging. Assets of associates and joint ventures are wholly attributable to Beverage Cans.

F-20 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued) (iii) Analysis by geography 2007

Segment Capital Sales assets expenditure £m £m £m Continuing operations UK...... 195 332 9 Germany ...... 107 238 11 France ...... 162 333 30 Other Europe ...... 997 949 129 USA...... 1,450 2,012 86 Brazil ...... 361 420 22 Rest of world ...... 339 306 21 3,611 4,590 308 Associates and joint ventures ...... —53— Unallocated assets ...... — 516 — Total continuing operations ...... 3,611 5,159 308 Discontinued operations ...... 213 — 17 3,824 5,159 325

Segment assets are disclosed after deducting inter segment assets of £73m for UK, £1m for Germany, £8m for France, £18m for Other Europe, £13m for USA, £1m for Brazil and £7m for Rest of world. Assets of associates and joint ventures are wholly attributable to Rest of world.

(iv) Analysis by geography 2006—restated

Segment Capital Sales assets expenditure £m £m £m Continuing operations UK...... 198 302 11 Germany ...... 88 315 27 France ...... 150 267 18 Other Europe ...... 901 771 37 USA...... 1,328 927 53 Brazil ...... 336 357 22 Rest of world ...... 300 271 9 3,301 3,210 177 Associates and joint ventures ...... — 32 — Unallocated assets ...... — 520 — Total continuing operations ...... 3,301 3,762 177 Discontinued operations ...... 437 460 64 3,738 4,222 241

F-21 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued) Segment assets are disclosed after deducting inter segment assets of £67m for UK, £15m for Germany, £9m for France, £22m for Other Europe, £9m for USA, £1m for Brazil and £8m for Rest of world. Assets of associates and joint ventures are wholly attributable to the Rest of world.

3 Operating expenses 2006 2007 Continuing 2006 Continuing 2007 operations Continuing 2006 operations Continuing 2007 underlying operations Continuing 2006 underlying operations Continuing 2007 business exceptional operations Discontinued business exceptional operations Discontinued performance items total operations performance items total operations restated restated restated restated £m £m £m £m £m £m £m £m Raw materials used ...... (1,921) — (1,921) (43) (1,752) — (1,752) (93) Changes in inventories of WIP and finished goods ...... 3— 3 2 10 — 10 (4) Employee benefit expense (note 4) ...... (577) 63 (514) (57) (532) 57 (475) (112) Depreciation of property, plant and equipment ...... (126) — (126) (8) (121) — (121) (38) Amortisation of intangible assets . (10) (22) (32) — (10) (11) (21) (1) Impairment ...... — (1) (1) (1) — (7) (7) (10) Freight costs ...... (158) — (158) (12) (153) — (153) (26) Operating lease rental expense . . (31) — (31) (1) (27) — (27) (3) Operating lease rental income . . 6— 6— 6— 6— Use of grants ...... ——— 1 1— 117 Fair value movements on operating derivatives ...... 3— 3— 1— 1— Other operating expenses ..... (459) (24) (483) (68) (355) (40) (395) (127) Other operating income ...... 13 1 14 — 6— 6— (3,257) 17 (3,240) (187) (2,926) (1) (2,927) (397)

Operating expenses from continuing operations include research and development expenditure of £14m (2006: £14m). Fair value movements on operating derivatives comprise embedded derivatives of £2m (2006: £1m) and forward foreign exchange contracts not hedge accounted of £1m (2006: nil).

4 Employee costs and numbers (i) Employee benefit expense

2006 2007 restated £m £m Continuing operations Wages and salaries ...... (490) (444) Social security ...... (62) (64) Share based payment ...... (3) — Retirement benefit obligations operating profit credit ...... 41 33 Total continuing operations ...... (514) (475) Discontinued operations ...... (57) (112) (571) (587)

F-22 Notes to the consolidated financial statements (Continued)

4 Employee costs and numbers (Continued) (ii) Key management compensation (including directors of Rexam PLC)

2007 2006 £m £m Salaries and short term employee benefits ...... (10) (6) Post employment benefits ...... (2) (2) Termination payments ...... (1) — Share based payment ...... (2) (2) (15) (10)

Key management comprises all Rexam PLC directors and those members of the Rexam PLC Executive Leadership Team who are not Rexam PLC directors. For details of directors’ remuneration see the Remuneration Report.

(iii) Average number of employees

2006 2007 restated Number Number Continuing operations Beverage Cans ...... 7,100 6,700 Plastic Packaging ...... 14,900 13,200 Disposals and businesses for sale ...... 300 700 Total continuing operations ...... 22,300 20,600 Discontinued operations ...... 1,500 3,600 23,800 24,200

2006 2007 restated Number Number Continuing operations UK...... 800 900 Germany ...... 900 900 France ...... 2,700 2,500 Other Europe ...... 2,300 2,400 USA...... 6,700 5,600 Brazil ...... 1,700 1,600 China ...... 5,800 5,600 Rest of world ...... 1,400 1,100 Total continuing operations ...... 22,300 20,600 Discontinued operations ...... 1,500 3,600 23,800 24,200

F-23 Notes to the consolidated financial statements (Continued)

5 Auditors’ remuneration

2007 2006 £m £m Fees payable to PricewaterhouseCoopers LLP for the audit of the consolidated financial statements ...... 0.6 0.6 Statutory audit fees payable to associate members of PricewaterhouseCoopers LLP . . . 2.2 2.1 Total audit fees ...... 2.8 2.7 Other fees in respect of services required by legislation ...... 0.9 0.1 Fees for tax services ...... 0.8 0.6 Fees for other services ...... 0.3 0.1 4.8 3.5

Of the above, £0.1m (2006: £0.3m) of statutory audit fees and £0.2m (2006: £nil) of fees for tax services relate to discontinued operations. Included within other fees in respect of services required by legislation is £0.7m relating to the acquisition of OI Plastics.

6 Exceptional items—continuing operations

2006 2007 restated £m £m Retirement benefit obligations ...... 61 53 Amortisation of acquired intangible assets ...... (22) (11) Other exceptional items Integration and restructuring of businesses ...... (6) (29) Legacy and other tax based exposures ...... (17) — Disposal of subsidiaries ...... 1 (3) Litigation claim ...... — (8) Recognition of deferred tax assets on prior year acquisitions ...... — (3) Exceptional items included in operating profit ...... 17 (1) Exceptional items included in share of post tax profits of associates—sale of land and property of associate ...... — 8 Financing derivative market value changes ...... (2) 7 Early redemption of convertible preference shares ...... — (10) Exceptional items included in interest expense ...... (2) (3) Exceptional items included in profit before tax ...... 15 4 Tax on exceptional items ...... (13) (9) Total exceptional items—continuing operations ...... 2 (5)

In the second half of 2007, court approval was obtained for mediated settlements of a class action litigation involving retiree medical coverage for retirees who were formerly unionised employees. These changes in retiree medical benefits resulted in an exceptional gain of £61m, net of associated legal costs of £2m. In 2006, a change to the US retiree medical plan was made to co-ordinate prescription drug benefits payable to certain retirees with cover available from the US government through the Medicare Part D programme. This change resulted in a gain of £38m, net of associated legal fees of £1m. In

F-24 Notes to the consolidated financial statements (Continued)

6 Exceptional items—continuing operations (Continued) addition, certain changes were implemented to the US defined benefit pension plans that gave rise to a gain of £15m. Intangible assets, such as technology, patents and customer contracts, are required to be recognised on the acquisition of businesses and amortised over their useful lives. The directors consider that separate disclosure of the amortisation of such acquired intangibles amounting to £22m (2006: £11m) aids comparison of organic growth in underlying profit. Therefore this cost, which will become more significant as the impact of recent and future acquisitions is reflected, is separately disclosed within exceptional items. Following the closure of two plants in North America in 2007 and other costs forming part of the integration of OI Plastics, a £6m charge has been made. In 2006, a charge of £8m arose from the integration of the Plastic Packaging acquisitions of Precise Technology and of FangXin and a cost of £21m arose from the restructuring of existing businesses, principally in the Plastic Packaging sector. The Group operates in a global tax environment, which can give rise to uncertainty over the quantification of some of its tax liabilities in certain territories. The tax environment in Brazil is complex: interpretation and application of tax law continues to change and claims are usually subject to long judicial processes. In this territory, the Group has certain indirect tax exposures, some of which relate to periods prior to its acquisition of ANC in 2000 and Latasa in 2003. In view of the uncertainty surrounding these Brazilian tax risks, management has concluded it would be appropriate to record an exceptional provision of £17m in 2007. Notwithstanding the provision, the Group considers that it has defensible positions in most instances and will continue robustly to defend its position on any assessments and claims. Should the risks crystallise, the cash outflows related to this provision are likely to arise over a number of years, although a payment of approximately £4m is anticipated to be made during the first half of 2008. Gains on the disposal of subsidiaries, not classified as discontinued operations, amounted to £1m in 2007 (2006: losses £3m). In 2006, a provision of £8m was made in respect of a legacy litigation claim relating to an acquired business. The claim had been initiated before the Group assumed control of that business. A charge of £3m in 2006 arose from the recognition of deferred tax assets on prior year acquisitions relating to the utilisation of tax losses not recorded at the date of acquisition. Following the relocation of a manufacturing facility, a gain on the sale of land and property of £8m in 2006 was made by the associate in Korea. The fair value of the derivatives arising on financing activities directly relates to changes in interest rates and foreign exchange rates. The fair value will change as the transactions to which they relate mature, as new derivatives are transacted and due to the passage of time. The fair value change on financing derivatives for the year was a net loss of £2m (2006: net gain £7m). In 2006, Rexam shareholders approved the early redemption, into ordinary shares, of the convertible preference shares. The enhanced conversion premium of £10m, including associated costs, was included in exceptional items due to its size and one off nature.

F-25 Notes to the consolidated financial statements (Continued)

7 Interest

2007 2006 £m £m Interest expense Bank overdrafts ...... (18) (19) Bank loans ...... (23) (23) Medium term notes ...... (46) (54) Subordinated bond ...... (18) — Finance leases ...... (1) (2) Net foreign exchange losses ...... (3) (1) Dividends on convertible preference shares ...... — (4) Underlying interest expense ...... (109) (103) Derivative financial instrument fair value changes ...... (2) 7 Early redemption of convertible preference shares ...... — (10) (111) (106) Interest income Cash and cash equivalents ...... 14 13

Analysis of net foreign exchange losses.

2007 2006 £m £m Cash and cash equivalents and borrowings ...... (49) (39) Cross currency swaps—fair value hedges ...... 46 23 Cross currency swaps—not hedge accounted ...... — 15 Total net foreign exchange losses ...... (3) (1)

Analysis of derivative financial instrument fair value changes.

2007 2006 £m £m Interest rate swaps ...... (3) (5) Cross currency swaps ...... 6 (7) Fair value adjustment to borrowings ...... (2) 12 Fair value hedges—total ...... 1 — Interest rate swaps ...... (2) 7 Cross currency swaps ...... (1) — Not hedge accounted—total ...... (3) 7 Total derivative financial instrument fair value changes ...... (2) 7

F-26 Notes to the consolidated financial statements (Continued)

8Tax (i) Tax included in the income statement

2006 2007 Underlying 2006 Underlying 2007 business Exceptional 2006 business Exceptional 2007 performance items Total performance items Total restated restated restated £m £m £m £m £m £m Continuing operations Current tax charge ...... (47) — (47) (49) 2 (47) Adjustment in respect of prior years 6—617 — 17 Current tax ...... (41) — (41) (32) 2 (30) Origination and reversal of temporary differences ...... (32) (12) (44) (36) (13) (49) Benefit from previously unrecognised tax losses and tax credits reducing current tax expense ...... ———224 Benefit from previously unrecognised tax losses and tax credits reducing deferred tax expense ...... ———2—2 Adjustment in respect of prior years — (1) (1) ——— Deferred tax ...... (32) (13) (45) (32) (11) (43) Total continuing operations ...... (73) (13) (86) (64) (9) (73) Discontinued operations ...... (8) (10) (18) (11) — (11) (81) (23) (104) (75) (9) (84)

(ii) Tax included in equity

2007 2006 £m £m Retirement benefit obligations ...... (65) (48) Cash flow hedges ...... 13 4 Deferred tax included in equity ...... (52) (44)

The impact on the charge to equity with respect to retirement benefit obligations due to the change in the UK statutory tax rate from 30% in 2007 to 28%, effective from 1 April 2008, was to reduce it from £66m to £65m.

F-27 Notes to the consolidated financial statements (Continued)

8 Tax (Continued) (iii) Tax reconciliation A reconciliation of the tax charge applicable to the Group’s profit before tax on continuing operations at the UK statutory rate of 30% (2006: 30%) with the tax charge at the Group’s effective rate is set out below.

2006 2007 Underlying 2006 Underlying 2007 business Exceptional 2006 business Exceptional 2007 performance items Total performance items Total restated restated restated £m £m £m £m £m Profit before tax on continuing operations ...... 245 15 260 264 4 268 Tax at the UK statutory rate of 30% (2006: 30%) ...... (73) (5) (78) (79) (1) (80) Utilisation of tax losses and tax credits ...... ———224 Non deductible and non taxable items 2 (5) (3) 3 (8) (5) Higher domestic tax rates on overseas earnings ...... (8) (2) (10) (9) (2) (11) Tax overprovided/(underprovided) in prior years ...... 6 (1) 5 19 — 19 Tax in the income statement on continuing operations ...... (73) (13) (86) (64) (9) (73) Effective rate of tax on continuing operations ...... 30% 33% 24% 27%

F-28 Notes to the consolidated financial statements (Continued)

8 Tax (Continued) (iv) Analysis of deferred tax assets and liabilities

Retirement Other benefit Tax temporary obligations losses differences Total £m £m £m £m Deferred tax assets At 1 January 2007 ...... 146 13 75 234 Exchange differences ...... (2) 1 3 2 Acquisition of subsidiaries ...... 3——3 Disposal of subsidiaries ...... 1 — (7) (6) Charge for the year ...... (33) (5) (7) (45) Charge to equity ...... (65) — — (65) Transfer to deferred tax liabilities ...... 19 — — 19 At 31 December 2007 ...... 69 9 64 142 At 1 January 2006 ...... 233 26 74 333 Exchange differences ...... (15) (1) (6) (22) Acquisition of subsidiaries ...... — — 3 3 Disposal of subsidiaries ...... — — (1) (1) (Charge)/credit for the year ...... (24) (12) 6 (30) Charge to equity ...... (48) — — (48) Transfer to assets classified as held for sale ...... — — (1) (1) At 31 December 2006—restated ...... 146 13 75 234

Retirement Other benefit Accelerated tax temporary obligations depreciation differences Total £m £m £m £m Deferred tax liabilities At 1 January 2007 ...... — (86) (82) (168) Exchange differences ...... — (2) (5) (7) Disposal of subsidiaries ...... —15520 (Charge)/credit for the year ...... — (7) 6 (1) Credit to equity ...... — — 13 13 Transfer from deferred tax assets ...... (19) — — (19) At 31 December 2007 ...... (19) (80) (63) (162) At 1 January 2006 ...... — (69) (89) (158) Exchange differences ...... — 5 6 11 Acquisition of subsidiaries ...... — (1) (9) (10) (Charge)/credit for the year ...... — (21) 6 (15) Credit to equity ...... — — 4 4 At 31 December 2006 ...... — (86) (82) (168)

F-29 Notes to the consolidated financial statements (Continued)

8 Tax (Continued) Deferred tax assets and liabilities are presented as non current in the consolidated balance sheet. Of the total deferred tax assets, £14m (2006: £36m) are recoverable within one year. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balance net. Deferred tax assets have been recognised where it is probable that they will be recovered. In recognising deferred tax assets, the Group has considered if it is more likely than not that sufficient future profits will be available to absorb tax losses and other timing differences. Deferred tax assets of £35m (2006: £30m) have not been recognised in respect of losses, tax credits on dividends and other timing differences due to the uncertainty of the availability of suitable profits in the foreseeable future. The principal items on which no deferred tax assets have been recognised are tax losses of £60m (2006: £30m) and UK tax credits on foreign dividends of £18m (2006: £18m). There is no expiry date on either of these items. Other temporary differences within deferred tax liabilities at 31 December 2007 include £38m (2006: £35m) in respect of goodwill and other intangible assets. No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries and associates. If the earnings were remitted in full, tax of £205m (2006: £175m) would be payable.

9 Earnings per share (i) Basic and diluted earnings per share

Basic Diluted Basic Diluted 2006 2006 2007 2007 restated restated Pence Pence Pence Pence From continuing operations ...... 28.3 28.3 34.7 34.7 From discontinued operations ...... 10.7 10.7 5.0 5.0 Total ...... 39.0 39.0 39.7 39.7

2007 2006 £m £m Profit for the financial year from continuing operations ...... 174 195 Profit for the financial year from discontinued operations ...... 66 28 Total profit for the financial year ...... 240 223

2007 2006 Millions Millions Weighted average number of shares in issue ...... 615.3 561.3 Dilution on conversion on outstanding share options ...... 0.5 0.8 Weighted average number of shares in issue on a diluted basis ...... 615.8 562.1

F-30 Notes to the consolidated financial statements (Continued)

9 Earnings per share (Continued) (ii) Underlying earnings per share

2006 2007 restated Pence Pence Underlying earnings per share ...... 28.0 35.6

2006 2007 restated £m £m Underlying profit before tax ...... 245 264 Tax on underlying profit ...... (73) (64) Underlying profit for the financial year ...... 172 200

Underlying earnings per share is based on underlying profit for the financial year divided by the weighted average number of shares in issue. Underlying profit for the financial year is continuing operations before exceptional items. Underlying earnings per share is included as it is felt that by adjusting basic earnings per share for exceptional items, underlying earnings per share provides a better indication of the Group’s performance.

10 Equity dividends

2007 2006 £m £m Interim dividend for 2007 of 8.3p paid on 6 November 2007 ...... 53 — Final dividend for 2006 of 11.1 p paid on 6 June 2007 ...... 65 — Interim dividend for 2006 of 7.9p paid on 2 November 2006 ...... — 44 Final dividend for 2005 of 10.6p paid on 5 June 2006 ...... — 59 118 103

A final dividend per equity share of 11.7p has been proposed for 2007 and, subject to shareholder approval, is payable on 3 June 2008. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.

11 Discontinued operations On 21 June 2007 Rexam sold its Glass business to Ardagh Glass Group PLC. In accordance with IFRS5 ‘Non Current Assets Held For Sale and Discontinued Operations’ the disposal has been classified as a discontinued operation in these consolidated financial statements. A summary of results, cash flows and profit on disposal are set out below.

F-31 Notes to the consolidated financial statements (Continued)

11 Discontinued operations (Continued) (i) Summary of results

2007 2006 £m £m Sales ...... 213 437 Operating expenses ...... (187) (397) Operating profit ...... 26 40 Retirement benefit obligations net finance cost ...... — (1) Profit before tax ...... 26 39 Tax...... (8) (11) Profit after tax ...... 18 28 Profit on disposal (net of tax of £10m) ...... 48 — Profit for the financial year from discontinued operations ...... 66 28

Glass was classified as a disposal group held for sale from 12 March 2007 (the date of announcement of agreement to sell to Ardagh) up to 21 June 2007 (the date of actual sale). Accounting rules state that depreciation and amortisation should not be charged on a disposal group held for sale. Accordingly, depreciation and amortisation of £11m were not charged with respect to Glass for the period 12 March 2007 to 21 June 2007. Had depreciation and amortisation been charged, operating profit and profit before tax for the six months to 30 June 2007 would have been £15m.

(ii) Summary of cash flows

2007 2006 £m £m Net cash inflow from operating activities ...... 25 71 Net cash outflow from investing activities ...... (17) (46) Net cash outflow from financing activities ...... (5) (15) Net cash flow ...... 3 10

(iii) Summary of profit on disposal

2007 £m Gross proceeds (net of costs of £8m) ...... 271 Cash and cash equivalents disposed ...... (12) Net cash inflow in the cash flow statement ...... 259 Net assets disposed ...... (213) Net investment hedges transferred on disposal ...... 3 Translation reserve transferred on disposal ...... (1) Profit on disposal ...... 48

F-32 Notes to the consolidated financial statements (Continued)

11 Discontinued operations (Continued)

2007 £m Goodwill ...... 71 Property, plant and equipment ...... 235 Working capital ...... 91 Borrowings ...... (142) Retirement benefit obligations ...... (29) Deferred tax ...... (12) Other net liabilities ...... (1) Net assets disposed ...... 213

12 Goodwill

2007 2006 £m £m Cost and carrying value At 1 January ...... 1,399 1,397 Exchange differences ...... 43 (93) Acquisition of subsidiaries (note 29) ...... 309 107 Disposal of subsidiaries ...... (71) (9) Recognition of deferred tax assets on prior year acquisitions ...... — (3) At 31 December ...... 1,680 1,399

Goodwill acquired through acquisitions has been allocated to cash generating units or groups of cash generating units for impairment testing as set out below.

2006 2007 restated £m £m Europe ...... 567 537 USA...... 284 288 Brazil ...... 152 154 Mexico ...... 6 6 Egypt ...... 27 27 India ...... 3 3 Beverage Cans ...... 1,039 1,015 Personal Care ...... 177 170 Healthcare ...... 242 94 Closures ...... 222 49 Plastic Packaging ...... 641 313 Discontinued operations ...... — 71 Total carrying value of goodwill ...... 1,680 1,399

F-33 Notes to the consolidated financial statements (Continued)

12 Goodwill (Continued) The cash generating units or groups of cash generating units for Plastic Packaging have been restated for 2006, principally as a result of the acquisition of Ol Plastics, into the three divisions: Personal Care, Healthcare and Closures. This change was deemed appropriate since each division has a managing director and management team reporting to the Group Director of Plastic Packaging and resources are managed on this basis to gain maximum benefits from the enlarged segment. The recoverable amounts of all cash generating units or groups of cash generating units were determined based on value in use calculations. The cash flow projections used in these calculations were based on the financial budget for 2008 and the plans for 2009 and 2010 (together the budget projections), approved by senior management. Cash flows beyond the three year period have been extrapolated using a zero real growth rate. Key assumptions used in the recoverable amount calculation include: (i) Sales and margins. Forecasts are based on sector level analyses of sales, markets, costs and competitors for the budget projections. Consideration was given to past experience and knowledge of future contracts. (ii) Raw materials and energy price inflation. Forecasts for aluminium are based on forward prices at the time the budget projections were prepared and take into account pass through of costs and hedging. Forecasts for other raw materials and energy are based on inflation forecasts and supply and demand factors. (iii) Exchange rates. Forecasts are based on analysis by management of factors likely to affect exchange rates for the budget projections including interest rates and economic growth rates. The pre tax discount rates used for the cash generating units for which the carrying amount of goodwill is significant in comparison with the total Group were as set out below.

2007 2006 %% Beverage Cans Europe ...... 11 11 Beverage Cans USA ...... 11 11 Beverage Cans Brazil ...... 14 14 Plastic Packaging ...... 11 11

F-34 Notes to the consolidated financial statements (Continued)

13 Other intangible assets

Computer Customer Computer software Technology contracts and Emission software internally and patents relationships rights Other acquired generated acquired acquired acquired intangibles Total £m £m £m £m £m £m £m Cost At 1 January 2007 ...... 64 10 22 81 13 5 195 Exchange differences ...... 31 4 7——15 Acquisition of subsidiaries ...... — — 121 287 — — 408 Additions ...... 61— — 119 Disposal of subsidiaries ...... (5) (1) — — (11) — (17) Disposals ...... (3) — — — — — (3) Utilisation to settle obligation ..... — — — — (3) — (3) At 31 December 2007 ...... 65 11 147 375 — 6 604 Accumulated amortisation At 1 January 2007 ...... (35) (5) (2) (9) (10) (1) (62) Exchange differences ...... (1) — — (1) — (1) (3) Disposal of subsidiaries ...... 3 1 — — 11 — 15 Disposals ...... 3— — — —— 3 Amortisation for the year ...... (8) (1) (7) (15) — (1) (32) Impairment ...... — — — — (1) — (1) At 31 December 2007 ...... (38) (5) (9) (25) — (3) (80) Carrying value at 31 December 2007 ...... 27 6 138 350 — 3 524 Cost At 1 January 2006 ...... 57 16 1 59 9 3 145 Exchange differences ...... (3) (1) — (7) — 1 (10) Acquisition of subsidiaries ...... — — 21 29 — — 50 Additions ...... 6 1 — — 17 1 25 Disposals ...... (2) — — — (3) — (5) Utilisation to settle obligation ..... — — — — (10) — (10) Reclassifications ...... 6 (6) — — — — — At 31 December 2006 ...... 64 10 22 81 13 5 195 Accumulated amortisation At 1 January 2006 ...... (30) (2) — — — — (32) Exchange differences ...... 2 (1) — — — — 1 Disposals ...... 1 — — — — — 1 Amortisation for the year ...... (8) (2) (2) (9) — (1) (22) Impairment ...... — — — — (10) — (10) At 31 December 2006 ...... (35) (5) (2) (9) (10) (1) (62) Carrying value at 31 December 2006 ...... 29 5 20 72 3 4 133

Impairment of £1m (2006: £10m) related to emission rights in the discontinued Glass segment following a fall in the market price of carbon dioxide emission rights.

F-35 Notes to the consolidated financial statements (Continued)

14 Property, plant and equipment

Plant and Assets under Property equipment construction Total £m £m £m £m Cost At 1 January 2007 ...... 398 1,624 93 2,115 Exchange differences ...... 14 70 6 90 Acquisition of subsidiaries ...... 31 110 12 153 Additions ...... 15 90 211 316 Disposal of subsidiaries ...... (78) (394) (5) (477) Disposals ...... (7) (16) — (23) Capitalisation of interest ...... —1 — 1 Reclassifications ...... 33 101 (134) — At 31 December 2007 ...... 406 1,586 183 2,175 Accumulated depreciation At 1 January 2007 ...... (74) (851) — (925) Exchange differences ...... (6) (42) — (48) Disposal of subsidiaries ...... 8 233 — 241 Disposals ...... —14— 14 Depreciation for the year ...... (14) (120) — (134) Impairment ...... — (1) — (1) At 31 December 2007 ...... (86) (767) — (853) Carrying value at 31 December 2007 ...... 320 819 183 1,322 Cost—restated At 1 January 2006 ...... 408 1,633 48 2,089 Exchange differences ...... (27) (108) (6) (141) Acquisition of subsidiaries ...... 18 29 9 56 Additions ...... 6 77 133 216 Disposal of subsidiaries ...... (5) (36) (1) (42) Disposals ...... (1) (22) — (23) Transfers to assets classified as held for sale ...... (9) (31) — (40) Reclassifications ...... 8 82 (90) — At 31 December 2006 ...... 398 1,624 93 2,115 Accumulated depreciation At 1 January 2006 ...... (68) (835) — (903) Exchange differences ...... 7 65 — 72 Disposal of subsidiaries ...... 1 26 — 27 Disposals ...... — 17 — 17 Depreciation for the year ...... (16) (143) — (159) Impairment ...... (1) (6) — (7) Transfer to assets classified as held for sale ...... 3 25 — 28 At 31 December 2006 ...... (74) (851) — (925) Carrying value at 31 December 2006—restated ...... 324 773 93 1,190

F-36 Notes to the consolidated financial statements (Continued)

14 Property, plant and equipment (Continued) The carrying value of property, plant and equipment includes finance leased assets of £33m (2006: £32m) in respect of property and £4m (2006: £7m) in respect of plant and equipment. The impairment of £1m in 2007 relates to a Plastic Packaging business in the United States. The impairment of £7m in 2006 related to a £5m write down of assets in the UK following the decision to exit the non barrier thin wall plastic packaging business and a £2m write down of assets following the decision to reduce the cost base for Make Up in France. The impairments were measured by determining the fair values of the assets, being market value less selling costs. Interest capitalised in the carrying value of property, plant and equipment relates to the construction of a Beverage Cans plant in Austria.

15 Investments in subsidiaries The principal subsidiaries, all of which are wholly owned, are shown below. Save as indicated with an asterisk, the capital is wholly owned by Rexam PLC. Subsidiaries incorporated in the UK are registered in England and Wales.

Country of Principal area of Identity of capital Nature of business incorporation operation held activities Subsidiaries Rexam Beverage Can Company* . . . USA USA Common stock Consumer packaging Rexam Beverage Can South America SA* ...... Brazil South America Common stock Consumer packaging Rexam do Brazil Ltda* ...... Brazil South America Quotas Consumer packaging Rexam European Holdings Limited* UK UK Ordinary shares Holding company Rexam France SA* ...... France France Ordinary shares Consumer packaging Rexam Group Holdings Limited . . . UK UK Ordinary shares Holding company Rexam Holdings AB* ...... Sweden Continental Europe Ordinary shares Consumer packaging Rexam Inc* ...... USA USA Common stock Holding company Rexam Overseas Holdings Limited* UK UK Ordinary shares Holding company Rexam Plastic Packaging Inc* ..... USA USA Common stock Holding company Rexam Plastic Packaging Inc was formerly known as Ol Plastic Products FTS, Inc.

F-37 Notes to the consolidated financial statements (Continued)

16 Investments in associates and joint ventures The principal associates and joint ventures are shown below.

Country Group share of operation Associates Hanil Can Company Limited ...... 40% Korea Guala Closures Mexicana SA de CV* ...... 49.9% Mexico Joint ventures Kemsley Fields Limited ...... 43.2% UK Controladora Envases Universales Rexam SA* ...... 50% Guatemala Rexam Mega SA de CV* ...... 50% Mexico Rexam Pavisa SA de CV* ...... 50% Mexico

* Acquired during 2007.

Joint Associates ventures Total £m £m £m At 1 January 2007 ...... 32 — 32 Exchange differences ...... (1) — (1) Acquisition of businesses ...... 61622 At 31 December 2007 ...... 37 16 53 At 1 January 2006 ...... 26 3 29 Exchange differences ...... (1) — (1) Disposals ...... (2) — (2) Share of post tax profits ...... 9 — 9 Dividends paid ...... — (3) (3) At 31 December 2006 ...... 32 — 32

Sales, (loss)/profit after tax, assets and liabilities on a 100% basis for all associates are £104m, £(2)m, £139m and £50m respectively (2006: £101m, £21m, £128m and £47m). Sales, profit after tax, assets and liabilities on a 100% basis for all joint ventures are £15m, £1m, £46m and £14m respectively (2006: £24m, £1m, £2m and £1m).

F-38 Notes to the consolidated financial statements (Continued)

17 Available for sale financial assets

2007 2006 £m £m At 1 January ...... 23 30 Exchange differences ...... 1 (3) Income for the year ...... 1 — Cash received ...... — 1 Disposal of subsidiaries ...... (1) — Disposal of life insurance policies ...... — (3) Transfer to retirement benefit obligations ...... (2) (2) At 31 December ...... 22 23 Non current assets ...... 21 22 Current assets ...... 1 1 At 31 December ...... 22 23

Available for sale financial assets at 31 December 2007 include £21m (2006: £21m) of investments used to satisfy certain US retirement obligations, of which £21m (2006: £20m) comprises fixed rate listed investments, the fair value of which are determined directly by reference to published price quotations in an active market, and £nil (2006: £1m) comprises cash and cash equivalents. Also included in available for sale financial assets at 31 December 2007 are unlisted investments of £1m (2006: £2m). The carrying amounts of available for sale financial assets are denominated in the following currencies, which are the functional currency of the respective subsidiaries.

2007 2006 £m £m US dollar ...... 21 21 Euro ...... 1 2 22 23

18 Inventories

2007 2006 £m £m Raw materials, stores and consumables ...... 148 137 Work in progress ...... 13 13 Finished goods ...... 231 204 392 354

F-39 Notes to the consolidated financial statements (Continued)

18 Inventories (Continued) Analysis of provisions against inventories.

2007 2006 £m £m At 1 January ...... (38) (42) Exchange differences ...... (1) 3 Disposal of subsidiaries ...... 15 — Charge for the year ...... (5) (6) Released in the year ...... 4 3 Utilised ...... 4 4 At 31 December ...... (21) (38)

Provisions released in the year comprise £1m (2006: £nil) relating to sales of spare parts in Beverage Cans, £1m (2006: £nil) relating to various small provisions in Plastic Packaging and £2m (2006: £3m) on sale of glass containers to an independent customer at original cost and for the use of consumables that were fully provided in the discontinued Glass segment.

19 Trade and other receivables

2006 2007 restated £m £m Non current assets Trade receivables ...... 3 2 Provision for impairment ...... (3) (2) Net trade receivables ...... — — Prepayments ...... 4 7 Other receivables ...... 53 38 57 45 Current assets Trade receivables ...... 443 424 Provision for impairment ...... (3) (4) Net trade receivables ...... 440 420 Prepayments ...... 10 13 Other receivables ...... 113 71 563 504 Total trade and other receivables ...... 620 549

F-40 Notes to the consolidated financial statements (Continued)

19 Trade and other receivables (Continued) Analysis of provision for impairment of trade and other receivables.

2007 2006 £m £m At 1 January ...... (6) (11) Disposal of subsidiaries ...... 1 — Impairment in the year ...... (1) (1) Released in the year ...... — 1 Utilised ...... — 5 At 31 December ...... (6) (6)

Analysis of total trade and other receivables which are past due but not impaired.

2006 2007 restated £m £m Not yet due ...... 569 464 Past due less than 1 month ...... 42 73 Between 1 and 2 months ...... 6 5 Between 2 and 3 months ...... 2 5 Between 3 and 6 months ...... 1 1 Over 6 months ...... — 1 620 549

The maximum amount of credit risk with respect to customers is represented by the carrying amount on the balance sheet. Customer credit facilities for new customers must be approved by designated managers at business level or by senior sector management. Credit limits are set with reference to trading history and reports from credit rating agencies. Customer credit facilities are reviewed at the sales order entry stage and at the time of shipment so not to exceed customer limits. Overdue accounts are regularly reviewed and impairment provisions are created where necessary. As a matter of policy, all outstanding trade balances greater than 90 days are fully provided except as approved by senior sector management and with due regard to the historical risk profile of the customer. The Group has extremely low historical levels of customer credit defaults, due in part to the blue chip multinational nature of many of its customers and the long term relationships it has with them. There were no new customers in 2007 where the Group considered there was a risk of significant credit default. There are no trade and other receivables that would otherwise be past due or impaired whose terms have been renegotiated.

F-41 Notes to the consolidated financial statements (Continued)

19 Trade and other receivables (Continued) The carrying amounts of total trade and other receivables are denominated in the following currencies, which in most instances are the functional currency of the respective subsidiaries.

2006 2007 restated £m £m US dollar ...... 232 170 Euro ...... 191 220 Brazilian real ...... 99 70 Sterling ...... 27 21 Swedish krona ...... 20 28 Chinese renminbi ...... 19 19 Other ...... 32 21 620 549

20 Cash and cash equivalents

2007 2006 £m £m Cash at bank and in hand ...... 73 63 Short term bank deposits ...... 40 75 113 138

The carrying amounts of cash and cash equivalents are denominated in the following currencies. 2007 2006 £m £m Brazilian real ...... 44 56 US dollar ...... 31 28 Sterling ...... 12 11 Other ...... 26 43 113 138

21 Assets and liabilities classified as held for sale The Petainer plastic bottle business is in the process of being sold. At 31 December 2007, offers were received for the business in excess of its carrying value and advanced discussions are now being held with a preferred bidder. In accordance with IFRS5 ‘Non Current Assets Held for Sale and Discontinued Operations’, the related assets and liabilities of the business are separately classified in

F-42 Notes to the consolidated financial statements (Continued)

21 Assets and liabilities classified as held for sale (Continued) the consolidated balance sheet as held for sale and no depreciation or amortisation has been charged for the year. An analysis of the assets and liabilities at 31 December is set out below. 2007 2006 £m £m Property, plant and equipment ...... 15 12 Deferred tax assets ...... 1 1 Inventories ...... 9 4 Trade receivables ...... 5 5 Total assets ...... 30 22 Borrowings ...... — (1) Trade payables ...... (11) (7) Retirement benefit obligations ...... (1) (1) Total liabilities ...... (12) (9) Net assets ...... 18 13

22 Trade and other payables

2006 2007 restated £m £m Current liabilities Trade payables ...... (579) (468) Social security and other taxes ...... (43) (48) Accrued expenses ...... (151) (113) Other payables ...... (76) (49) (849) (678) Non current liabilities Accrued expenses ...... (9) (8) Other payables ...... (17) (28) (26) (36) Total trade and other payables ...... (875) (714)

The carrying amounts of total trade and other payables are denominated in the following currencies, which in most instances are the functional currency of the respective subsidiaries. 2006 2007 restated £m £m US dollar ...... (463) (296) Euro ...... (240) (252) Brazilian real ...... (77) (67) Sterling ...... (54) (44) Other ...... (41) (55) (875) (714)

F-43 Notes to the consolidated financial statements (Continued)

23 Borrowings

2007 2006 £m £m Current liabilities Bank overdrafts ...... (77) (124) Bank loans ...... (17) (16) Subordinated bond ...... (24) Medium term notes ...... (37) (128) Finance leases ...... (9) (7) (164) (275) Non current liabilities Bank loans ...... (265) (297) Subordinated bond ...... (540) — Medium term notes ...... (870) (830) Finance leases ...... (4) (13) (1,679) (1,140) Total borrowings ...... (1,843) (1,415)

The Group has a range of bank borrowings maturing between 2009 and 2012. These facilities may generally be drawn in a range of freely available currencies and are at floating rates of interest. In addition the Group has a subordinated bond and a number of medium term notes in issue. The subordinated bond is denominated in euros with a maturity of 2067. It was issued at a fixed rate of interest but has been swapped to US dollar floating rates of interest through the use of cross currency and interest rate derivatives. The medium term notes are denominated in euros and sterling with maturities between 2008 and 2013. They were issued at fixed rates of interest although some have been swapped to floating rates of interest in euro and US dollar through the use of cross currency and interest rate derivatives. Those medium term notes not swapped to floating rates of interest are denominated in euro and are issued at a fixed rate of 4.375% per annum.

2007 2006 £m £m Finance lease minimum lease payments: Less than 1 year ...... (9) (7) Between 1 and 5 years ...... (4) (13) Over 5 years ...... (1) (1) Total minimum lease payments ...... (14) (21) Future finance charges ...... 1 1 Present value of finance leases ...... (13) (20) Present value of finance leases: Less than 1 year ...... (9) (7) Between 1 and 5 years ...... (3) (12) Over 5 years ...... (1) (1) (13) (20)

F-44 Notes to the consolidated financial statements (Continued)

23 Borrowings (Continued) The carrying amounts of total borrowings are denominated in the following currencies.

2007 2006 £m £m Euro ...... (1,112) (610) Sterling ...... (455) (462) US dollar ...... (195) (259) Other ...... (81) (84) (1,843) (1,415)

Included within borrowings are secured loans of £10m (2006: £2m), the security for which is principally property.

24 Financial instruments (i) Carrying amount and fair value of financial assets and liabilities at 31 December

2006 2006 2007 2007 Carrying Fair Carrying Fair amount value amount value restated restated £m £m £m £m Financial assets Cash and cash equivalents ...... 113 113 138 138 Trade and other receivables ...... 620 620 549 549 Available for sale financial assets ...... 22 22 23 23 Derivative financial instruments ...... 193 193 148 148 Financial liabilities Trade and other payables ...... (875) (875) (714) (714) Bank overdrafts ...... (77) (77) (124) (124) Bank loans ...... (282) (282) (313) (313) Subordinated bond ...... (564) (500) —— Medium term notes ...... (907) (901) (958) (979) Finance leases ...... (13) (13) (20) (21) Derivative financial instruments ...... (37) (37) (14) (14)

Market values have been used to determine the fair values of cash and cash equivalents, available for sale financial assets, cross currency swaps and bank overdrafts and floating rate loans. The carrying value of trade and other receivables and trade and other payables are assumed to approximate their fair values. The fair value of the subordinated bond and medium term notes have been determined by reference to quoted market prices at the close of business on 31 December. The fair values of interest rate swaps, fixed rate loans and finance leases have been determined by discounting cash flows at prevailing interest rates. The fair value of forward foreign exchange contracts has been determined by marking those contracts to market against prevailing forward foreign exchange rates. The fair value of forward aluminium commodity contracts has been determined by marking those contracts to market at prevailing forward aluminium prices. The fair value of embedded derivatives has been calculated using valuation models incorporating market commodity prices and foreign exchange rates.

F-45 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) (ii) Financial risk management The Group bases its financial risk management on sound economic objectives and good corporate practice. Group Treasury operations are carried out under strict policies and parameters defined by the Rexam Board and supervised by its Finance Committee. Group Treasury is not operated as a separate profit centre nor does it enter into any transactions for speculative purposes. The Group’s major operational hedges comply with IAS39 and hedge accounting treatment is applied. Some smaller trading exposures are hedged on an economic basis and hedge accounting treatment is not applied where the compliance burden is deemed to be unduly onerous and the income statement volatility arising is not expected to be significant.

(a) Market risk: currencies The Group seeks to mitigate the impact of foreign exchange movements between overseas currencies and sterling arising on the translation of the value of non UK operations into sterling for reporting purposes. This is achieved by borrowing a proportion of debt, either directly or through the use of cross currency swaps and forward foreign exchange contracts, in currencies which match or are closely linked to the currencies of the overseas businesses. This approach also provides some protection against the foreign exchange translation of overseas earnings as it matches the currency of earnings to the currency of the interest expense. These amounts are included in the consolidated financial statements by translation into sterling at the balance sheet date and, where hedge accounted, offset in equity against the translation movement in net assets. The Group looks to mitigate currency risk arising on cross border trading transactions using forward foreign exchange contracts. Generally, the Group will hedge a higher proportion of shorter term, contractually committed transactions, but does also hedge some longer term contracts into the medium term. None of the foreign exchange derivative instruments at 31 December 2007 related to derivative trading activity, although some fair value gains and losses were taken to the consolidated income statement because IAS39 hedge accounting treatment was not applied. Foreign exchange derivative instruments are used for hedging general business exposures in foreign currencies such as the purchase and sale of goods, capital expenditure and dividend flows. Group businesses are required to report their foreign exchange risks against their functional currency to Group Treasury and these risks are then hedged in accordance with the Group’s policy on foreign exchange management. Foreign exchange risks are hedged by Rexam Treasury unless it is a legal requirement in the country where the foreign exchange risk arises that hedging is carried out locally. In this case, hedging is carried out by the individual responsible for treasury within the local business, but still operating within the overall Group policy on foreign exchange management.

(b) Market risk: interest rates The objective of the Group’s interest rate risk management is to reduce its exposure to the impact of changes in interest rates in the currencies in which debt is borrowed. Interest rate risk is managed through the issue of fixed rate medium term notes and subordinated bonds and through the use of interest rate derivatives that are used to manage the overall fixed to floating mix of bank and bond debt, which was 32% fixed and 68% floating at 31 December 2007 (2006: 49% and 51%). Group Treasury operates within a broad framework in respect of the mix of fixed and floating rate debt, as the optimum blend will vary depending on the mix of currencies and the Group’s view of the debt markets

F-46 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) at any point in time. The Group will generally look to keep between 20% and 80% of its overall debt at fixed rates. Cash at bank earns interest at floating rates based on bank deposit rates in the relevant currency. Short term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short term deposit rates. Other floating rate financial instruments are at the appropriate LIBOR interest rates as adjusted by variable margins. Interest on floating rate financial instruments is re-priced at intervals of less than one year. Interest on fixed rate financial instruments is fixed until maturity of the instrument. Some interest rate swaps used to manage the Group’s fixed to floating debt mix, while economically effective, are ineligible for hedge accounting treatment. Fair value gains and losses on these hedges are recognised in the consolidated income statement. In 2007, there was a net loss of £2m (2006: gain of £7m) on financing derivatives on which hedge accounting was not applied, recorded within exceptional interest in the consolidated income statement.

(c) Market risk: commodity prices The objective of commodity risk management is to identify those businesses that have exposures to commodities traded on commodity markets and to then determine which, if any, commodity market instruments are appropriate for hedging those exposures. To manage such exposures, the Group uses mainly over the counter instruments transacted with banks, which are themselves priced through a recognised commodity exchange, such as the London Metal Exchange. The Group manages the purchase of certain raw materials, including aluminium and energy costs through physical supply contracts which, in the main, relate directly to commodity price indices. The supply contracts may be hedged with appropriate derivative contracts to fix and manage costs. The derivative hedge contracts may extend over several years. Usually a higher proportion of short term exposures are hedged than those further forward. The extent of the forward cover taken is judged according to market conditions and prices of futures prevailing at the time. None of the commodity derivative financial instruments at 31 December 2007 related to derivative trading activity, although some fair value gains and losses were taken to the consolidated income statement because IFRS hedge accounting was not applied. The commodity hedges mainly relate to contracted and expected future purchases of aluminium but can also include energy and other tradeable commodities.

(d) Market risk: sensitivities A sensitivity analysis for financial assets and liabilities affected by market risk is set out below. Each risk is analysed separately and shows the sensitivity of financial assets and liabilities when a certain risk is changed. The sensitivity analysis has been performed on balances at 31 December each year and therefore is not representative of transactions throughout the year. The rates used are based on historical trends and, where relevant, projected forecasts. Key methods and assumptions made when performing the sensitivity analysis (net of hedging): (a) For the floating rate element of interest rate swaps, the sensitivity calculation is performed based on the floating rates as at 31 December each year and the number of days since the last interest rate reset date. (b) The translation impact of overseas subsidiaries is not included in the sensitivity analysis.

F-47 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) (c) The sensitivity analysis ignores any tax implications.

Currencies The two tables set out below show the impact at 31 December each year on profit before tax and equity of changing the relative values of currency pairs significant to Rexam by a realistic percentage. The impact of the sensitivities disclosed is shown gross for each currency pair. They do not include the effect of any offsetting reductions that are created through the use of forward foreign exchange contracts to manage currency balances. Therefore, the sensitivities disclosed are, in overall terms, larger than would be expected to arise taking into consideration all factors.

(i) Profit before tax

2007 2007 2006 2006 Currency pair Reason for impact Change Impact +/ Change Impact +/ %£m%£m Sterling/US dollar . US dollar intercompany loans in sterling business 51442 Euro/US dollar . . . Forward foreign exchange contracts not hedge accounted 5124— Sterling/euro ..... Euro debt in sterling business 243— Brazilian real/US dollar ...... Real denominated net assets in US 7363 dollar business

(ii) Equity

2007 2007 2006 2006 Currency pair Reason for impact Change Impact +/ Change Impact +/ %£m%£m Euro/US dollar . . . Cash flow hedges of inventory 51346 Sterling/euro ..... Net investment hedges 27316 Euro/Swedish krona ...... Cash flow hedges of income 4232 Sterling/US dollar . Net investment hedges 5—48 The impact of currency risk on net investment hedges is offset by the translation of overseas subsidiaries on consolidation.

Interest rates At 31 December 2007, if the US dollar interest rate was changed by 1% with all other held variables constant, profit before tax for 2007 would change by £4m (2006: 1% and £1m), mainly as a result of US dollar denominated floating rate debt. There was no significant interest rate risk relating to equity in either year.

F-48 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) Commodity prices There was no significant price risk relating to the income statement since the majority of the commodity derivatives are treated as cash flow hedges, with movements being reflected in equity. At 31 December 2007, if the aluminum price was changed by 10% with all other variables held constant, equity for 2007 would change by £27m (2006: 11% and £15m).

Equity prices The Group is not subject to any significant equity price risk.

(e) Liquidity risk The Group monitors its liquidity to maintain a sufficient level of undrawn committed debt facilities thereby ensuring financial flexibility. As at 31 December 2007, Rexam had £707m of undrawn committed debt facilities available, (2006: £503m). The increase in undrawn committed facilities reflects Rexam’s action to reduce liquidity risk in response to deteriorating conditions in the financial markets during the second half of 2007. Group Treasury mitigates refinancing risk by raising its debt requirements from a range of different sources and with a range of maturity dates. As at 31 December 2007, committed debt maturities ranged from less than two years (18% of drawn debt) (2006: less than two years 12% of drawn debt) to 2067 (32% of drawn debt) (2006: 2013, (33% of drawn debt)). No more than 32% of drawn debt (2006: 33% of drawn debt) expires in any one financial year. An analysis of undiscounted contractual maturities for non derivative financial liabilities and derivative financial liabilities and assets is set out below.

Total Within 1 to 2 2 to 5 More than contractual 1 year years years 5 years maturity £m £m £m £m £m At 31 December 2007 Trade and other payables ...... (849) (9) (7) (10) (875) Bank overdrafts ...... (76) — — — (76) Bank loans ...... (27) (16) (254) (16) (313) Subordinated bond ...... (37) (37) (111) (695) (880) Medium term notes ...... (57) (419) (66) (533) (1,075) Finance leases ...... (9) (2) (2) — (13) Derivative contracts—payments ...... (809) (375) (222) (1,308) (2,714) Derivative contracts—receipts ...... 775 529 231 1 ,359 2,894 Derivative contracts—net settlements ...... (2) 2 2 — 2 Commodity contracts ...... (3) — — — (3) (1,094) (327) (429) (1,203) (3,053)

F-49 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued)

Total Within 1 to 2 2 to 5 More than contractual 1 year years years 5 years maturity £m £m £m £m £m At 31 December 2006 Trade and other payables ...... (678) (20) (7) (9) (714) Bank overdrafts ...... (124) — — — (124) Bank loans ...... (31) (19) (326) (29) (405) Medium term notes ...... (140) (54) (459) (517) (1,170) Finance leases ...... (7) (9) (4) (1) (21) Derivative contracts—payments ...... (408) (64) (333) — (805) Derivative contracts—receipts ...... 404 63 423 — 890 Derivative contracts—net settlements ...... (7) 4 5 1 3 Commodity contracts ...... 24 12 — — 36 (967) (87) (701) (555) (2,310)

(f) Credit risk The maximum credit risk exposure of the Group’s financial assets at 31 December is represented by the amounts reported under the corresponding balance sheet headings. There are no significant concentrations of credit risk associated with financial instruments of the Group. Credit risk arises from exposures to external counterparties. In order to manage this risk, the Group has strict credit quality measures that are applied to counterparty institutions and also limits on maximum exposure levels to any one counterparty. For exposure purposes, cash deposits are weighted at 100% of the exposure to the counterparty and derivative instruments on a sliding scale based on the type of instrument and length of contract to maturity. To manage credit risk, the maximum limits for Group bank exposures held under company policy are set out below by counterparty rating. These limits are used when making investments and for the use of derivative instruments. The table also sets out the Group’s exposure at 31 December in percentage terms for each counterparty credit rating category.

Exposure Counterparty Exposure Counterparty Credit rating 2007 limit 2007 2006 limit 2006 %£m%£m AA+...... 11 80 to 100 — 80 to 100 AA...... 8 70 to 90 45 70 to 90 AA-...... 51 60 to 80 11 60 to 80 A+...... 8 50 to 70 2 50 to 70 A ...... 11 40 to 60 13 40 to 60 A-...... 2 20 to 40 5 20 to 40 BBB+ and below ...... 9 10 to 30 24 10 to 30

(g) Capital risk management The Group’s objective is to minimise its cost of capital by optimising the efficiency of its capital structure, being the balance between equity and debt. This objective is subject always to an overriding principal that capital must be managed to ensure the Group’s ability to continue as a going concern in

F-50 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) order to provide returns for shareholders and benefits for other stakeholders. The Group is able to adjust its capital structure through the issue or redemption of either debt or equity and by adjustment to the dividend paid to equity holders. The Group uses a range of financial metrics to monitor the efficiency of its capital structure, including its weighted average cost of capital and net debt to EBITDA and ensures that its capital structure provides sufficient financial strength to allow it to secure access to debt finance at reasonable cost. At 31 December 2007, the Group’s net debt to EBITDA for financial covenant purposes was 2.2 times (2006: 2.2 times). The Group aims to keep this ratio within the range 1.25 times to 3.5 times. For this purpose net debt is broadly net borrowings adjusted to exclude interest accruals, certain derivative financial instruments and an equity portion of the subordinated bond and to reflect non sterling amounts at average exchange rates. EBITDA is underlying operating profit from continuing operations after adding back depreciation and amortisation of computer software and adjusted to include acquisitions on a pro forma basis and exclude disposed businesses.

(iii) Derivative financial instruments The net fair values of the Group’s derivative financial instruments designated as fair value or cash flow hedges and those not designated as hedging instruments is set out below.

2007 2006 £m £m Fair value hedges Interest rate swaps ...... 2 3 Cross currency swaps ...... 146 80 148 83 Cash flow hedges Forward foreign exchange contracts ...... (7) (5) Forward aluminium commodity contracts ...... (3) 36 (10) 31 Not hedge accounted Cross currency swaps ...... 20 22 Forward foreign exchange contracts ...... (2) — Embedded derivatives ...... — (2) 18 20 Total net fair value of derivative financial instruments ...... 156 134

Fair value hedges The Group has designated interest rate swaps and the interest element of cross currency swaps as fair value hedges whereby interest is receivable at fixed interest rates varying from 4.4% to 7.1% (2006: 4.4% to 7.1%). These swaps hedge the exposure to changes in the fair value of medium term notes which mature in 2009 and 2013 (2006: 2009 and 2013). The cross currency swaps hedge changes in the fair value of US dollar intercompany loans which mature in 2009 and changes in the fair value of the euro subordinated bond which matures in 2067. Ineffectiveness gains of £1m were included in interest in 2007 (2006: £nil).

F-51 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) Cash flow hedges The Group has designated forward foreign exchange, aluminium commodity and energy contracts as cash flow hedges. The aluminium commodity and energy contracts hedge anticipated future purchases of aluminium and energy respectively and mature between 2008 and 2009 (2006: between 2007 and 2008). Forward foreign exchange contracts hedge foreign currency transaction risk and mature between 2008 and 2009 (2006: between 2007 and 2009).

Not hedge accounted Derivatives are not used for trading purposes. However, under IAS39 some derivatives may not qualify for hedge accounting, or are specifically not designated as a hedge where natural offset is more appropriate.

Net investment hedges In addition, the fair values of the Group’s non derivative financial instruments at 31 December designated as net investment hedges with respect to its subsidiaries in the Eurozone and USA are set out below.

2007 2006 £m £m Bank loans ...... (11) (140) Medium term notes ...... (350) (538) (361) (678)

F-52 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) Analysis of the notional amounts and maturity dates for the derivatives financial instruments.

Maturity 2007 2006 £m £m Fair value hedges Interest rate swaps Sterling ...... 2009 120 120 Euro ...... 2013 146 134 Cross currency swaps Sterling ...... 2009 to 2017 (255) 250 Euro ...... 2017 547 — US dollar ...... 2009 (179) (182) Cash flow hedges Forward foreign exchange contracts Euro ...... 2008 to 2009 (18) (122) US dollar ...... 2008 to 2009 29 251 Swedish krona ...... 2008 to 2009 (55) (85) Forward aluminium commodity contracts US dollar ...... 2008 to 2009 282 107 Not hedge accounted Cross currency swaps Sterling ...... 2009 to 2017 625 120 US dollar ...... 2009 to 2017 (603) (99) Interest rate swaps US dollar ...... 2009 179 182 For forward foreign exchange contracts there are other currencies traded, but have been excluded based on the fair valuation of these trades being immaterial.

F-53 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (i) Summary

Gross Defined retirement benefit Other Total Retiree benefit pensions pensions pensions medical obligations £m £m £m £m £m At 1 January 2007 ...... (326) (22) (348) (163) (511) Exchange differences ...... — (1) (1) 3 2 Acquisition of subsidiaries ...... (7) — (7) (1) (8) Current service cost ...... (15) (6) (21) (1) (22) Exceptional items ...... — — — 63 63 Total included in operating profit—continuing operations ...... (15) (6) (21) 62 41 Net finance cost—continuing operations ...... (4) — (4) (10) (14) Current service cost ...... (1) (1) (2) — (2) Adjustment on sale ...... 24 5 29 — 29 Total—discontinued operations ...... 23 4 27 — 27 Actuarial changes ...... 217 — 217 — 217 Cash contributions and benefits paid ...... 47 8 55 11 66 Transfers ...... 2— 2— 2 At 31 December 2007 ...... (63) (17) (80) (98) (178)

At 1 January 2006 ...... (514) (23) (537) (244) (781) Exchange differences ...... 21 1 22 24 46 Current service cost ...... (20) (2) (22) (2) (24) Exceptional items ...... 18 — 18 39 57 Total included in operating profit—continuing operations ...... (2) (2) (4) 37 33 Net finance cost—continuing operations ...... (10) — (10) (12) (22) Current service cost ...... (2) (2) (4) — (4) Net finance cost ...... (1) — (1) — (1) Total discontinued operations ...... (3) (2) (5) — (5) Actuarial changes ...... 135 — 135 20 155 Cash contributions and benefits paid ...... 44 4 48 12 60 Transfers ...... 3 — 3 — 3 At 31 December 2006 ...... (326) (22) (348) (163) (511)

Exceptional items from continuing operations in 2007 comprise a past service credit of £63m on retiree medical. Exceptional items from continuing operations in 2006 comprised curtailment gains on defined benefit pensions of £3m arising from disposal of businesses and £15m arising from US pension plan changes and a curtailment gain of £39m on retiree medical.

F-54 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) Deferred tax on gross retirement benefit obligations is set out below.

2007 2006 £m £m Gross retirement benefit obligations ...... (178) (511) Deferred tax ...... 50 146 Net retirement benefit obligations ...... (128) (365)

Analysis of net retirement benefit obligations included in the consolidated balance sheet.

2007 2006 £m £m Pension asset ...... 68 — Deferred tax assets ...... 69 146 Other receivables receivable in more than one year ...... 3 3 Retirement benefit obligations ...... (249) (514) Deferred tax liabilities ...... (19) — Net retirement benefit obligations ...... (128) (365)

Rexam pays the retiree medical costs on behalf of certain disposed businesses which are subsequently reimbursed by those businesses. The £3m (2006: £3m) included in other receivables represents the actuarial value of the total amount that is reimbursable.

(ii) Defined benefit pension plans The Group operates various defined benefit pension plans throughout the world, the largest being in the UK and USA. With respect to the UK, a full actuarial valuation by a qualified actuary was carried out as at 31 March 2005 and updated to 31 December 2007. With respect to the USA, a full

F-55 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) actuarial valuation by a qualified actuary was carried out as at 1 January 2007 and updated to 31 December 2007.

Other Total UK USA Other Total UK USA 2006 2006 2007 2007 2007 2007 2006 2006 restated restated £m £m £m £m £m £m £m £m (a) Amounts recognised in the consolidated balance sheet Fair value of plan assets ...... 1,491 861 9 2,361 1,388 856 69 2,313 Present value of funded obligations ...... (1,423) (931) (10) (2,364) (1,514) (970) (74) (2,558) Funded defined benefit pension plans ..... 68 (70) (1) (3) (126) (114) (5) (245) Present value of unfunded obligations ..... — (31) (29) (60) — (32) (49) (81) Net asset/(liability) ...... 68 (101) (30) (63) (126) (146) (54) (326) (b) Amounts recognised in the consolidated income statement Continuing operations Current service cost ...... (10) (3) (2) (15) (10) (8) (2) (20) Exceptional items ...... ———— 2151 18 Employee benefit expense ...... (10) (3) (2) (15) (8) 7 (1) (2) Expected return on plan assets ...... 90 37 — 127 80 43 — 123 Interest cost ...... (75) (55) (1) (131) (72) (60) (1) (133) Net finance credit/(charge) ...... 15 (18) (1) (4) 8 (17) (1) (10) Total—continuing operations ...... 5 (21) (3) (19) — (10) (2) (12) Discontinued operations Current service cost ...... — — (1) (1) —— (2)(2) Expected return on plan assets ...... ——22—— 3 3 Interest cost ...... — — (2) (2) —— (4)(4) Net finance cost ...... —————— (1)(1) Adjustment on sale—discontinued operations ...... 10—1424——— — Total—discontinued operations ...... 10—1323—— (3)(3) (c) Amounts recognised in the statement of recognised income and expense Actuarial gains/(losses) on plan assets ..... 37 44 — 81 36 (5) 1 32 Actuarial gains on retirement benefit obligations ...... 112 11 13 136 48 41 14 103 Total recognised in the statement of recognised income and expense ...... 149 55 13 217 84 36 15 135

F-56 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued)

Other Total UK USA Other Total UK USA 2006 2006 2007 2007 2007 2007 2006 2006 restated restated £m £m £m £m £m £m £m £m (d) Changes in the fair value of plan assets At 1 January ...... 1,388 856 69 2,313 1,296 997 64 2,357 Exchange differences ...... — (13) 2 (11) — (110) (2) (112) Expected return on plan assets—continuing operations ...... 90 37 — 127 80 43 — 123 Expected return on plan assets— discontinued operations ...... ——22—— 3 3 Adjustment on sale—discontinued operations ...... — — (65) (65) ——— — Actuarial gains/(losses) ...... 37 44 — 81 36 (5) 1 32 Employer contributions ...... 30 13 1 44 27 11 3 41 Plan participant contributions ...... 2—132— 2 4 Benefits paid ...... (56) (76) (1) (133) (53) (80) (2) (135) At 31 December ...... 1,491 861 9 2,361 1,388 856 69 2,313 %%%%%%% % (e) Major categories of plan assets Equities ...... 53 17 72 39 73 8 48 48 Bonds ...... 45 83 24 59 25 92 47 50 Cash ...... 2—422— 5 2

F-57 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) (f) Changes in the fair value of defined benefit pension obligations

Other Total UK USA Other Total UK USA 2006 2006 2007 2007 2007 2007 2006 2006 restated restated £m £m £m £m £m £m £m £m At 1 January ...... (1,514) (1,002) (123) (2,639) (1,533) (1,203) (135) (2,871) Exchange differences ...... — 15 (4) 11 — 131 2 133 Acquisition of subsidiaries ...... — (7) — (7) ——— — Current service cost—continuing operations (10) (3) (2) (15) (10) (8) (2) (20) Exceptional items—continuing operations . . ———— 2151 18 Interest cost—continuing operations ...... (75) (55) (1) (131) (72) (60) (1) (133) Current service cost—discontinued operations ...... — — (1) (1) —— (2)(2) Interest cost—discontinued operations .... — — (2) (2) —— (4)(4) Adjustment on sale—discontinued operations 10—7989——— — Actuarial gains ...... 112 11 13 136 48 41 14 103 Plan participant contributions ...... (2) — (1) (3) (2) — (2) (4) Benefits paid ...... 56 77 3 136 53 80 5 138 Transfer from available for sale financial assets ...... —2—2—2—2 Transfer to liabilities classified as held for sale ...... ———— —— 1 1 At 31 December ...... (1,423) (962) (39) (2,424) (1,514) (1,002) (123) (2,639)

(g) Principal actuarial assumptions

UK USA Other UK USA Other 2007 2007 2007 2006 2006 2006 %%%%%% Future salary increases ...... 4.80 4.00 3.05 4.40 4.50 2.89 Future pension increases ...... 3.30 — 2.00 3.00 — 1.95 Discount rate ...... 5.60 6.00 5.08 5.00 5.75 4.46 Inflation rate ...... 3.30 2.50 2.00 3.00 2.50 1.95 Expected return on plan assets (net of administration expenses): Equities ...... 7.87 7.34 7.15 7.37 7.24 6.88 Bonds ...... 4.62 4.70 3.65 4.62 4.37 4.08 Cash ...... 5.37 3.16 3.35 4.87 2.96 4.05 To develop the expected return on plan assets assumptions, the Group considered the current level of expected returns on risk free investments, primarily government bonds, the historical level of the risk premium associated with the asset class concerned and the expectations for future returns of the asset class. The resulting returns for equities, bonds and cash were then reduced to allow for administration expenses. The mortality assumptions used in valuing the liabilities of the UK pension plan in 2007 and 2006 are based on the standard tables PA92 as published by the Institute and Faculty of Actuaries. These

F-58 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) tables are adjusted to reflect the circumstances of the plan membership. The life expectancy assumed for male pensioners aged 65 is 19.6 years (2006: 19.6 years) and for female pensioners aged 65 is 22.4 years (2006: 22.4 years). The mortality assumptions used in valuing the liabilities of the US pension plans in 2007 are based on the RP2000 combined active and retiree mortality table projected to 2007 (2006: RP2000 combined active and mortality table projected to 2006) weighted 70% blue collar and 30% white collar. The life expectancy assumed for male pensioners aged 65 is 17.8 years (2006: 17.8 years) and for female pensioners aged 65 is 20.2 years (2006: 20.2 years).

(h) Historic information on defined benefit plans

2007 2006 2005 2004 £m £m £m £m Fair value of plan assets ...... 2,361 2,313 2,357 2,089 Present value of defined benefit obligations ...... (2,424) (2,639) (2,871) (2,566) Net liability ...... (63) (326) (514) (477) Cumulative actuarial gains/(losses) ...... 253 36 (99) (79)

2007 2006 2005 2004 Experience gains/(losses) arising on defined benefit obligations: Amount (£m) ...... 136 103 (165) (142) Percentage of present value of defined benefit obligations (%) ..... 6 4 (6) (6) Experience gains arising on plan assets: Amount (£m) ...... 81 32 145 63 Percentage of plan assets (%) ...... 3 163 The Group expects to contribute £51m in cash to its defined benefit pension plans in 2008.

(iii) Other pension plans The Group operates a number of defined contribution plans, included as part of other pensions in (i) above, for which the charge in the consolidated income statement for the year was £6m (2006: £1m) and cash contributions were £6m (2006: £1m).

F-59 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) (iv) Retiree medical Certain current and former employees in the USA are provided with cover for medical costs and life assurance, referred to in these consolidated financial statements as retiree medical. These unfunded benefits are assessed with the advice of a qualified actuary.

2007 2006 £m £m (a) Amounts recognised in the consolidated balance sheet Present value of the retiree medical obligation ...... (98) (163) (b) Amounts recognised in the consolidated income statement Current service cost ...... (1) (2) Past service credit—exceptional item ...... 63 39 Employee benefit credit ...... 62 37 Interest cost (including administration costs of £1m (2006: £1m)) ...... (10) (12) 52 25 (c) Amounts recognised in the statement of recognised income and expense Actuarial gains ...... — 20 (d) Changes in the present value of the retiree medical obligation At 1 January ...... (163) (244) Exchange differences ...... 3 24 Acquisition of subsidiaries ...... (1) — Current service cost ...... (1) (2) Past service credit—exceptional item ...... 63 39 Interest cost ...... (10) (12) Actuarial gains ...... — 20 Benefits paid ...... 11 12 At 31 December ...... (98) (163)

(e) Principal actuarial assumptions

2007 2006 %% Discount rate ...... 6.00 5.75 Healthcare cost trend rate ...... 9 in 2007 13 in 2003 reducing to 5 reducing to 5 over 7 years over 10 years The mortality assumptions used in valuing the liabilities of retiree medical for 2007 are based on the RP2000 combined active and retiree blue collar table projected to 2007 (2006: RP2000 combined active and retiree blue collar table projected to 2006). The life expectancy assumed for male pensioners aged 65 is 16.8 years (2006: 16.8 years) and for female pensioners aged 65 is 19.6 years (2006: 19.6 years).

F-60 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) Assumed healthcare cost trend rates can have a significant effect on amounts reported for retiree medical. A one percentage point change in assumed rates would have the impact as set out below.

2007 2006 £m £m 1% increase—Service cost and interest cost combined increase ...... (1) (2) 1% increase—Retiree medical obligation increase ...... (3) (13) 1% decrease—Service cost and interest cost combined reduction ...... 1 1 1% decrease—Retiree medical obligation reduction ...... 4 11

(f) Historic information on retiree medical

2007 2006 2005 2004 Present value of retiree medical obligation (£m) ...... (98) (163) (244) (269) Cumulative actuarial gains/(losses) (£m) ...... 15 15 (5) (13) Experience gains/(losses) arising on retiree medical obligation: Amount (£m) ...... — 20 8 (13) Percentage of present value of retiree medical obligation (%) ..... — 12 3 (5)

26 Provisions

Environmental Restructuring Incentives compliance Other Total £m £m £m £m £m At 1 January 2007 ...... (10) (2) (22) (15) (49) Exchange differences ...... (1) 1 — 1 1 Charge for the year ...... (5) — (1) (14) (20) Released in the year ...... —— — 11 Utilised ...... 8— 2—10 Utilisation to settle obligation ...... —— — 33 Disposal of subsidiaries ...... —— 3—3 At 31 December 2007 ...... (8) (1) (18) (24) (51) At 31 December 2007 Current liabilities ...... (7) (1) (3) (2) (13) Non current liabilities ...... (1) — (15) (22) (38) (8) (1) (18) (24) (51) At 31 December 2006 Current liabilities ...... (10) (2) (3) (3) (18) Non current liabilities ...... — — (19) (12) (31) (10) (2) (22) (15) (49)

The provision for restructuring relates primarily to amounts set aside for various reorganisations within the Group including £3m for the integration of OI Plastics. Most of the utilisation of these provisions is likely within the next year. Incentives relate to the cash settled phantom share option scheme. This provision is short term, with the timing of its utilisation being dependent on various

F-61 Notes to the consolidated financial statements (Continued)

26 Provisions (Continued) performance criteria being met. For further details of the phantom share option scheme see note 28. Environmental compliance mainly relates to the USA and is long term in nature with the timing of utilisation unknown due to the need to complete remedial investigations, to negotiate remedial plans with local authorities and to implement agreed plans. Other provisions comprise the following amounts: A provision of £14m (2006: £nil) relating to indirect tax exposures in Brazil, as explained in note 6. A provision of £8m (2006: £8m) in respect of a legacy litigation claim relating to an acquired business where the amount of the final liability and timing of payment, if any, is dependent upon the outcome of the litigation. A provision of £2m (2006: £3m) in respect of onerous property contracts in the UK, the timing of the utilisation of which is in accordance with those contracts. A provision of £nil (2006: £3m) in respect of emission rights of the discontinued Glass segment utilised in the year and a provision of £nil (2006: £1m) in respect of business disposals.

27 Equity (i) Total equity

Attributable to equity shareholders of Rexam PLC Ordinary Share Capital Fair value share premium redemption Retained and other Minority Total capital account reserve earnings reserves interests equity £m £m £m £m £m £m £m At 1 January 2007 ...... 375 759 351 (216) (22) 2 1,249 Exchange differences ...... — — — — 86 — 86 Actuarial gains on retirement benefit obligations ...... — — — 217 — — 217 Tax on actuarial gains on retirement benefit obligations ...... — — — (65) — — (65) Net investment hedges ...... — — — — (31) — (31) Net investment hedges transferred to the income statement ...... — — — — (3) — (3) Cash flow hedges recognised ...... — — — — (34) — (34) Tax on cash flow hedges ...... — — — — 13 — 13 Cash flow hedges transferred to inventory ...... — — — — (8) — (8) Net profit recognised directly in equity . . . — — — 152 23 — 175 Total profit for the financial year ...... — — — 240 — — 240 Total recognised profit for the year ...... — — — 392 23 — 415 Placing of Rexam PLC shares (net of £6m costs) ...... 38 242 — — — — 280 Share options value of services provided . . —— — 4—— 4 Share options proceeds from shares issued —3————3 Purchase of Rexam PLC shares by Employee Share Trust ...... — — — (2) — — (2) Transfer on disposal of subsidiaries ...... —— — — 2— 2 Dividends paid ...... — — — (118) — — (118) At 31 December 2007 ...... 413 1,004 351 60 3 2 1,833

F-62 Notes to the consolidated financial statements (Continued)

27 Equity (Continued)

Attributable to equity shareholders of Rexam PLC Ordinary Convertible Deferred Share Capital Fair value share preference share premium redemption Retained and other Minority Total capital share capital capital account reserve earnings reserves interests equity £m £m £m £m £m £m £m £m £m At 1 January 2006 ..... 356 1 — 748 279 (431) 56 — 1,009 Exchange differences . . — — — — — — (95) — (95) Actuarial gains on retirement benefit obligations ...... — — — — — 155 — — 155 Tax on actuarial gains on retirement benefit obligations ...... — — — — — (48) — — (48) Net investment hedges . — — — — — — 28 — 28 Cash flow hedges recognised ...... — — — — — — 32 — 32 Tax on cash flow hedges ...... — — — — — — 4 — 4 Cash flow hedges transferred to inventory ...... — — — — — — (44) — (44) Cash flow hedges transferred to the income statement . . . — — — — — — (1) — (1) Sale of available for sale financial assets . — — — — — — (2) — (2) Net profit/(loss) recognised directly in equity ...... — — — — — 107 (78) — 29 Total profit for the financial year ...... — — — — — 223 — — 223 Total recognised profit/ (loss) for the year .... — — — — — 330 (78) — 252 Share options value of services provided .... — — — — — 1 — — 1 Share options proceeds from shares issued . . . 2 — — 11 — — — — 13 Purchase of Rexam PLC shares by Employee Share Trust ...... — — — — — (4) — — (4) Early redemption of convertible preference shares ...... 17 (1) 72 — — (9) — — 79 Redemption of deferred shares ...... — — (72) — 72 — — — — Increase in minority interests ...... — — — — — — — 2 2 Dividends paid ...... — — — — — (103) — — (103) At 31 December 2006 . . . 375 — — 759 351 (216) (22) 2 1,249

F-63 Notes to the consolidated financial statements (Continued)

27 Equity (Continued) (ii) Fair value and other reserves

Available for Net Total fair sale financial Cash flow investment value and Translation assets hedge hedge other reserve reserve reserve reserve reserves £m £m £m £m £m At 1 January 2007 ...... (77) (3) 23 35 (22) Exchange differences ...... 86 — — — 86 Net investment hedges ...... — — — (31) (31) Net investment hedges transferred to the income statement ...... — — — (3) (3) Cash flow hedges recognised ...... — — (34) — (34) Tax on cash flow hedges ...... — — 13 — 13 Cash flow hedges transferred to inventory . . — — (8) — (8) Transfer on disposal of subsidiaries ...... 2———2 At 31 December 2007 ...... 11 (3) (6) 1 3

At 1 January 2006 ...... 18 (1) 32 7 56 Exchange differences ...... (95) — — — (95) Net investment hedges ...... — — — 28 28 Cash flow hedges recognised ...... — — 32 — 32 Tax on cash flow hedges ...... — — 4 — 4 Cash flow hedges transferred to inventory . . — — (44) — (44) Cash flow hedges transferred to the income statement ...... — — (1) — (1) Sale of life insurance policies ...... — (2) — — (2) At 31 December 2006 ...... (77) (3) 23 35 (22)

The balance of £3m (2006: £3m) on the available for sale financial assets reserve represents an unrealised loss on investments used to satisfy certain US retirement obligations.

(iii) Details of share capital

Ordinary Unclassified Ordinary shares of shares of shares of 642⁄7p642⁄7p 0.0001p issued and fully authorised authorised Number of shares paid Thousands Thousands Billions At 1 January 2007 ...... 583,328 820,614 72,462 Shares issued on placing ...... 58,355 — — Shares issued on employee share option schemes ...... 907 — — Consolidation of unclassified shares into ordinary shares ...... — 112,719 (72,462) At 31 December 2007 ...... 642,590 933,333 —

F-64 Notes to the consolidated financial statements (Continued)

27 Equity (Continued)

Convertible Non voting preference deferred Convertible Non voting shares of shares of Ordinary preference deferred Unclassified Ordinary 1284⁄7p 0.0001p shares of shares of shares of shares of shares of 642⁄7p issued and issued and 642⁄7p 1284⁄7p 0.0001p 0.0001p issued and fully fully paid cancelled authorised authorised authorised authorised Number of shares paid Thousands Thousands Billions Thousands Thousands Billions Billions At 1 January 2006 ...... 553,590 69,397 — 794,534 69,399 — — Shares issued on employee share option schemes . . 3,771 — — — — — — Conversion of convertible preference shares ..... 23 (66) — 132 (66) — — Early redemption of convertible preference shares ...... 25,944 (69,331) 72,462 25,948 (69,333) 72,462 — Redemption and redesignation of deferred shares ...... — — (72,462) — — (72,462) 72,462 At 31 December 2006 .... 583,328 — — 820,614 — — 72,462

2 On 14 June 2007, 58,354,700 new ordinary shares of 64 /7p each were placed in the market at 490p per share. This raised £280m net of £6m expenses, resulting in £38m being credited to share capital and £242m being credited to share premium account. The proceeds were used to partly finance the acquisition of OI Plastics. At the AGM 2007, shareholders approved the consolidation of the 72,462 billion authorised unclassified shares of 0.0001 p into 112,718,793 authorised ordinary shares of 2 64 /7p each ranking equally as one class of shares with the existing authorised ordinary shares. In 2006, shareholders approved the compulsory conversion of all the issued convertible preference shares into new ordinary shares. As part of the conversion process the difference in value between the aggregate nominal value of the convertible preference shares prior to conversion and the aggregate nominal value of the new ordinary shares was redesignated into deferred shares of 0.0001p each. The deferred shares were redeemed on 31 December 2006 and the related authorised share capital was redesignated as unclassified share capital. The rights and obligations attaching to the ordinary shares and the provisions relating to the transfer of ordinary shares are as governed by law and in accordance with the Company’s Articles of Association. Holders of ordinary shares are entitled to receive all shareholder documents, to attend, speak and exercise voting rights, either in person or by proxy, on resolutions proposed at general meetings and participate in any distribution of income or capital. The directors may refuse to register a transfer of ordinary shares where such transfer documents are not lodged by acceptable means or proof of title is required. Ordinary shares are held by the Rexam Employee Share Trust (Trust) for the satisfaction of options granted through the Long Term Incentive Schemes (LTIP), Deferred Bonus Incentive Scheme (DBIS) and the Executive Share Option Scheme (ESOS). The independent trustee of the Trust has the same rights as any other shareholder. The options granted under the Company’s other share incentive schemes are satisfied from the issue of new ordinary shares; therefore employees do not hold any voting rights until the date of exercise. There are no restrictions on the voting rights of holders of ordinary shares nor any known agreements between holders of ordinary shares under which financial rights are held by any person other than the registered holder, or voting rights or the transfer of ordinary shares are restricted.

F-65 Notes to the consolidated financial statements (Continued)

28 Share based payment Rexam’s equity settled share based payment schemes comprise the LTIP, DBIS, ESOS and the Savings Related Share Option Schemes (SAYE). Rexam’s cash settled share based payment scheme is the Phantom Stock Plan (Phantoms).

LTIP Annual grants of options over ordinary shares are made to executive directors and certain senior executives. The Total Shareholder Return (TSR) of Rexam is measured and compared to a comparator group of listed companies. The percentage of share options that actually vest is dependent upon Rexam’s comparative TSR over a three year measurement period, commencing on 1 January of the year in which the option is granted. If performance targets are met, share options vest on 1 January, three years after the start of the measurement period and can be exercised at a nominal cost to the employee. The expiry date is six years and eleven months after the grant date.

DBIS A grant of options was made during 2007 to an executive director. The number of shares that vest was measured over 2007 against a non market based condition relating to an OI Plastics operating profit target. If the target is achieved or exceeded by up to 1 0%, the option will vest on a straight line basis. Subject to vesting, the option may be exercised at nominal cost to the participant for a period of three months from 1 January 2010 and will expire on 31 March 2010.

ESOS Annual grants of options over ordinary shares are made to certain senior management. For grants up to and including 2006, shares vest if a performance target (annual growth rate of pre determined economic profit) is met over the three year measurement period. No performance target was set for the 2007 grant and the option will vest three years after the grant date provided the participant is still employed by Rexam. Share options are exercisable three years after grant date and expire ten years after grant date. The exercise price is set at market value using the market price of a Rexam ordinary share at the grant date.

SAYE All employee SAYE schemes are open to eligible employees resident in the UK and Ireland. Annual grants of options over ordinary shares are currently made at an exercise price of 80% of the market value of Rexam shares at grant date. Share options vest three, five or seven years after the commencement of the savings contract, depending on the term selected by the employee at grant and expire six months after vesting.

Phantoms This scheme operates in the same way as the ESOS with the same terms and conditions, but grants are made to senior management located outside the UK and Europe and are settled in cash.

F-66 Notes to the consolidated financial statements (Continued)

28 Share based payment (Continued)

The employee benefit expense recognised in relation to share based payment is set out below.

2007 2006 £m £m Continuing operations LTIP, DBIS, ESOS and SAYE equity settled schemes ...... 3 1 Phantoms cash settled scheme ...... — (1) Discontinued operations ...... 1 — Total employee benefit expense ...... 4 —

The intrinsic value of phantoms that had vested but had not been exercised at 31 December 2007 was £nil (2006: £1m). The fair values of the share options granted during the year were calculated using the models set out below.

Valuation model ITIP ...... Monte Cando/Binomial DBIS...... Black-Scholes ESOS...... Binomial SAYE...... Black-Scholes Phantoms ...... Binomial The number of options and weighted average exercise prices of all share option schemes.

2007 Weighted 2006 Weighted 2007 average exercise 2006 average exercise Number of price Number of price options Pence options Pence Outstanding at 1 January ...... 17,508,128 299.6 21,829,872 272.2 Granted ...... 5,950,556 245.6 4,938,792 313.9 Forfeited ...... (5,521,649) 275.4 (3,174,632) 101.6 Exercised ...... (1,151,909) 356.5 (6,085,904) 316.2 Expired ...... (371,486) 519.7 —— Outstanding at 31 December ...... 16,413,640 279.2 17,508,128 299.6 Exercisable at 31 December ...... 1,459,131 340.9 2,024,787 336.9

F-67 Notes to the consolidated financial statements (Continued)

28 Share based payment (Continued) The exercise prices and average remaining contractual lives of share options by scheme.

2007 Weighted 2006 Weighted 2007 average 2006 average Options 2007 Range of remaining Options 2006 Range of remaining outstanding exercise prices contractual life outstanding exercise prices contractual life Number Pence Years Number Pence Years LTIP...... 6,568,776 0.0 to 0.1 5.3 5,833,788 0.1 5.2 DBIS...... 91,760 — 2.2 ——— ESOS..... 5,386,659 196.9 to 552.7 7.6 7,047,050 196.9 to 552.7 7.6 SAYE..... 1,054,782 184.7 to 435.0 3.0 1,123,629 184.7 to 435.0 2.8 Phantoms . . 3,311,663 239.8 to 552.7 8.1 3,503,661 239.8 to 552.7 8.0 The key assumptions used in valuing share

2007 2006 Expected dividend growth (%) ...... 3.6 to 4.6 3.1 to 3.7 Expected and historical volatility (%) ...... 17.2 to 29.6 17.4 to 30.2 Risk free interest rate (%) ...... 4.8 to 5.6 4.3 to 4.6 Expected life of LTIP options (years) ...... 3 3 Expected life of ESOS options (years) ...... 5 5 Expected life of SAYE options (3 year, 5 year and 7 year contracts) (years) ...... 3.2, 5.2 and 7.2 3.2, 5.2 and 7.2 Expected life of DBIS options (years) ...... 2.3 — Expected life of phantoms options (years) ...... 3 to 10 3 to 10 Weighted average share price (pence) ...... 495 521 Weighted average fair value of options granted (pence) ...... 54 121 Weighted average exercise price (pence) ...... 244 317 The assumptions made to incorporate the effects of expected early exercise have been included by assuming an expected option life based on historical exercise patterns for each option scheme. Historical volatilities are arrived at using a period comparable with the expected life of the option. The correlation coefficient for the LTIP is calculated using the correlation matrix for the TSR simulation using three year daily historical stock price series for each company in the comparator group, including Rexam, from the beginning of the measurement date. A ten year life is initially assumed to calculate the fair value of phantoms. As the fair value is updated at each subsequent valuation the expected life is reduced for each year until exercise.

Rexam Employee Share Trust The Group operates an employee share trust, the Rexam Employee Share Trust (the Trust), that 2 owns 463,910 ordinary shares of 64 /7p in Rexam PLC at 31 December 2007 (2006: 203,198) acquired at an average cost of £5.15 (2006: £5.03) and included in the consolidated balance sheet within retained earnings at a cost of £2m (2006: £1m). The shares are used to satisfy LTIP, DBIS and certain ESOS share option exercises. The purchases are funded by a combination of cash contributions from participating companies and interest free loans from Rexam PLC. Dividends receivable during the year have been waived. The administration expenses of the Trust are borne by the Trust. Shares are allocated by the Trust when relevant options under the schemes are exercised. The market value of the shares at 31 December 2007 was £2m (2006: £1m).

F-68 Notes to the consolidated financial statements (Continued)

29 Acquisition of subsidiaries (i) Summary of acquisitions

Percentage of Date of acquisition equity acquired Nature of activity OI Plastic Products FTS, Inc...... 1 August 2007 100% Plastic Packaging

2006 2006 2007 As previously Final fair value 2006 OI Plastics reported adjustments As restated £m £m £m £m Cash ...... 905 197 2 199 Accrued costs ...... 1 2(2)— Deferred ...... — 3(2)1 Consideration ...... 906 202 (2) 200

Carrying values at acquisition ...... 202 63 — 63 Fair value adjustments ...... 395 32 (2) 30

Fair value of net assets acquired ...... 597 95 (2) 93 Goodwill ...... 309 107 — 107

Consideration ...... 906 202 (2) 200 Net (cash)/borrowings assumed ...... (1) 13 — 13 Gross consideration ...... 905 215 (2) 213

Goodwill represents the value of synergies and the workforce. (ii) Fair value table for the acquisition of OI Plastics

Carrying values Fair value Fair value of net at acquisition adjustments assets acquired £m£m £m Intangible assets ...... 7 401 408 Property, plant and equipment ...... 157 (4) 153 Investment in associates and joint ventures ...... 8— 8 Deferred tax assets ...... —3 3 Inventories ...... 31 6 37 Trade and other receivables ...... 43 — 43 Cash and cash equivalents ...... 2— 2 Borrowings ...... (1) — (1) Trade and other payables ...... (45) (3) (48) Retirement benefit obligations ...... — (8) (8) Net assets ...... 202 395 597

Due to the timing of the acquisition, fair values are provisional and will be finalised in 2008. The provisional fair value adjustments comprise the following. The largest adjustments relate to intangible assets and comprise the recognition of customer relationships of £287m and technology and patents of £121m, after writing off the carrying values at acquisition of £7m. Other adjustments include the

F-69 Notes to the consolidated financial statements (Continued)

29 Acquisition of subsidiaries (Continued) downward revaluation of property, plant and equipment of £4m, an upward adjustment from LIFO to FIFO for inventories of £7m, the upward revaluation of finished goods inventories of £4m, inventory provisions of £5m, the recognition of retirement benefit obligations of £8m net of deferred tax of £3m and £3m of other various working capital adjustments. Underlying operating profit for OI Plastics included in the consolidated income statement for 2007 was £22m. After deducting the amortisation of intangible assets of £9m this reduced to an operating profit of £13m. Pro forma sales, underlying operating profit and operating profit for OI Plastics assuming it was acquired on 1 January 2007 would have been £392m, £59m and £37m respectively.

(iii) Cash flows arising from acquisitions

2006 2007 restated £m £m Cash consideration ...... 905 199 Cash and cash equivalents acquired ...... (2) — Cash payments for prior year acquisitions and other costs ...... 3 3 Net cash outflow in the consolidated cash flow statement ...... 906 202

F-70 Notes to the consolidated financial statements (Continued)

30 Reconciliation of profit before tax to cash generated from operations

2007 2006 £m £m Continuing operations Profit before tax ...... 260 268 Adjustments for: Net interest expense ...... 97 93 Share of post tax profits of associates and joint ventures ...... — (9) Depreciation of property, plant and equipment ...... 126 121 Amortisation of intangible assets ...... 32 21 Impairment ...... 1 7 Movement in provisions ...... 9 10 Changes in working capital ...... (11) (7) Movement in retirement benefit obligations ...... (91) (63) Other adjustments ...... 9 2 Cash generated from continuing operations ...... 432 443 Discontinued operations Profit before tax ...... 26 39 Adjustments for: Depreciation of property, plant and equipment ...... 8 38 Amortisation of intangible assets ...... — 1 Impairment ...... 1 10 Movement in grants ...... (1) (18) Changes in working capital ...... (9) 1 Other adjustments ...... 1 3 Cash generated from discontinued operations ...... 26 74 Cash generated from operations ...... 458 517

31 Movement in net borrowings

Cash and cash Financing equivalents derivative and bank Bank Subordinated Medium Finance financial Net overdrafts loans bond term notes leases instruments borrowings £m £m £m £m £m £m £m At 1 January 2007 ...... 14 (313) — (958) (20) 105 (1,172) Acquisition of subsidiaries ...... — (1) — — — — (1) Disposal of subsidiaries ...... — 142 — — — — 142 Cash flow movements ...... 30 (76) (498) 142 8 5 (389) Non cash movements ...... (8) (34) (66) (91) (1) 58 (142) At 31 December 2007 ...... 36 (282) (564) (907) (13) 168 (1,562)

F-71 Notes to the consolidated financial statements (Continued)

31 Movement in net borrowings (Continued)

Cash and cash Financing equivalents Convertible derivative and bank Bank preference Medium Finance financial Net overdrafts loans shares term notes leases instruments borrowings £m £m £m £m £m £m £m At 1 January 2006 ...... (4) (369) (70) (815) (36) 74 (1,220) Acquisition of subsidiaries ...... — (13) — — — — (13) Disposal of subsidiaries ...... — 4 — — — — 4 Cash flow movements ...... 14 60 5 (113) 15 (4) (23) Redemption of convertible preference shares ...... — — 69 — — — 69 Non cash movements ...... 4 5 (4) (30) 1 35 11 At 31 December 2006 ...... 14 (313) — (958) (20) 105 (1,172)

Financing derivative financial instruments are those that relate to underlying items of a financial nature. In both 2007 and 2006 these comprised interest rate swaps and cross currency swaps. For further details on derivative financial instruments see note 24.

32 Commitments (i) Operating lease commitments The Group leases offices and warehouses under non cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group also leases plant and equipment under cancellable operating leases. An analysis of the total future minimum lease payments under non cancellable operating leases is set out below.

Plant and Plant and Property equipment Property equipment 2007 2007 2006 2006 £m £m £m £m Less than 1 year ...... 20 2 23 3 Between 1 and 5 years ...... 48 3 44 4 Over 5 years ...... 59 — 64 — Total ...... 127 5 131 7

Total future minimum sublease receipts under non cancellable operating leases are £9m (2006: £8m).

F-72 Notes to the consolidated financial statements (Continued)

32 Commitments (Continued) (ii) Capital commitments

2007 2006 £m £m Contracts placed for future capital expenditure not provided in the consolidated financial statements Property, plant and equipment ...... 88 72 Intangible assets ...... — 1 88 73

33 Contingent liabilities

2007 2006 £m £m Guarantees of borrowings ...... 47 In an international group a variety of claims arise from time to time; some have little or no foundation in law or in fact and others cannot be quantified. The claims include litigation against Group companies, investigations by regulatory and fiscal authorities and obligations arising under environmental legislation. Provision has been made in these consolidated financial statements against those claims which the Board considers are likely to result in significant liabilities.

34 Post balance sheet events The completion of the acquisition of Rostar, the Russian beverage can maker, for £149m was completed on 31 January 2008. As at 20 February 2008 the process for finalising the completion accounts is ongoing and it is therefore impractical at this stage to set out the acquired assets and liabilities and their fair values.

F-73 Statement of directors’ responsibilities on the consolidated financial statements Company law requires the directors to prepare consolidated financial statements for each financial year that give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those consolidated financial statements the directors are required to: (i) Select suitable accounting policies and then apply them consistently. (ii) Make judgements and estimates that are reasonable and prudent. (iii) State that the consolidated financial statements comply with IFRS as adopted by the European Union. (iv) Prepare the consolidated financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business. The directors confirm that they have complied with the above requirements in preparing the consolidated financial statements. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the consolidated financial statements comply with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud. The directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

F-74 Independent auditors’ report to the members of Rexam PLC We have audited the group financial statements of Rexam PLC for the year ended 31 December 2006 which comprise the Consolidated income statement, the Consolidated balance sheet, the Consolidated cash flow statement, the Consolidated statement of recognised income and expenses and the related notes. These group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the parent company financial statements of Rexam PLC for the year ended 31 December 2006 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the group financial statements give a true and fair view and whether the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the group financial statements. The information given in the Directors’ Report includes that specific information presented in the Business Review that is cross referred from the Business Review section of the Directors’ Report. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding director’s remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of the Combined Code 2003 specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures. We read other information contained in the Annual Report and consider whether it is consistent with the audited group financial statements. The other information comprises only What we do, What is our strategy?, 2006 in summary, Chairman’s Statement, Business Review, Directors and officers, Directors’ Report, Corporate Governance Report, the unaudited part of the Remuneration Report, Statement of Directors’ Responsibilities, Five year financial summary and Shareholder information. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the group financial statements. Our responsibilities do not extend to any other information.

F-75 Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the group financial statements, and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements.

Opinion In our opinion: • the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group’s affairs as at 31 December 2006 and of its profit and cash flows for the year then ended; • the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and • the information given in the Directors’ Report is consistent with the group financial statements. PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors London 20 February 2007 Notes: (a) The maintenance and integrity of the Rexam PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

F-76 Consolidated income statement For the year ended 31 December

2005 Notes 2006 restated £m £m Sales ...... 2 3,738 3,237 Operating expenses ...... 3 (3,324) (2,817) Underlying operating profit ...... 2 415 409 Retirement benefit obligations exceptional items ...... 6 53 45 Restructuring and integration of businesses ...... 6 (29) (7) Other exceptional items ...... 6 (25) (27) Operating profit ...... 2 414 420 Share of underlying post tax profits of associates and joint ventures ...... 1 3 Share of exceptional post tax profits of associates and joint ventures ...... 6 8 4 Share of post tax profits of associates and joint ventures ...... 15 9 7 Retirement benefit obligations net finance cost ...... 25 (23) (29) Underlying interest expense ...... (103) (88) Early redemption of convertible preference shares ...... 6 (10) — Financing derivative market value changes ...... 6 7 9 Interest expense ...... 7 (106) (79) Interest income ...... 7 13 12 Underlying profit before tax ...... 303 307 Retirement benefit obligations exceptional items ...... 53 45 Restructuring and integration of businesses ...... (29) (7) All other exceptional items ...... (20) (14) Profit before tax ...... 307 331 Tax on underlying profit ...... (75) (89) Tax on exceptional items ...... 6 (9) (19) Tax...... 8 (84) (108) Profit for the financial year attributable to Rexam PLC ...... 223 223

Earnings per share (pence) ...... 9 Basic ...... 39.7 40.4 Diluted ...... 39.7 39.4

For details of equity dividends paid and proposed see note 10 to the consolidated financial statements. The notes on pages 76 to 112 form part of these consolidated financial statements.

F-77 Consolidated balance sheet As at 31 December

2005 Notes 2006 restated £m £m ASSETS Non current assets Goodwill ...... 11 1,399 1,397 Other intangible assets ...... 12 133 113 Property, plant and equipment ...... 13 1,191 1,186 Investments in associates and joint ventures ...... 15 32 29 Deferred tax assets ...... 8 233 333 Trade and other receivables ...... 18 45 35 Available for sale financial assets ...... 16 22 26 Derivative financial instruments ...... 23 116 92 3,171 3,211 Current assets Inventories ...... 17 354 364 Trade and other receivables ...... 18 505 449 Available for sale financial assets ...... 16 1 4 Derivative financial instruments ...... 23 32 43 Cash and cash equivalents ...... 19 138 87 Assets classified as held for sale ...... 20 22 — 1,052 947

Total assets ...... 4,223 4,158

LIABILITIES Current liabilities Borrowings ...... 22 (275) (164) Derivative financial instruments ...... 23 (13) (20) Current tax ...... (8) (22) Trade and other payables ...... 21 (679) (607) Provisions ...... 26 (18) (18) Liabilities classified as held for sale ...... 20 (9) — (1,002) (831) Non current liabilities Borrowings ...... 22 (1,140) (1,217) Derivative financial instruments ...... 23 (1) — Retirement benefit obligations ...... 25 (514) (783) Deferred tax liabilities ...... 8 (168) (158) Non current tax ...... (82) (90) Other payables ...... 21 (36) (36) Provisions ...... 26 (31) (34) (1,972) (2,318)

Total liabilities ...... (2,974) (3,149)

Net assets ...... 1,249 1,009

EQUITY Ordinary share capital ...... 27 375 356 Convertible preference share capital ...... 27 — 1 Share premium account ...... 27 759 748 Capital redemption reserve ...... 27 351 279 Retained earnings ...... 27 (216) (431) Fair value and other reserves ...... 27 (22) 56 Shareholders’ equity ...... 1,247 1,009 Minority interests ...... 27 2 — Total equity ...... 1,249 1,009

Approved by the Board on 20 February 2007 Rolf Borjesson,¨ Chairman David Robbie, Finance Director

F-78 Consolidated cash flow statement For the year ended 31 December

2006 2005 £m £m Cash flows from operating activities Profit before tax ...... 307 331 Adjustments for: Net interest expense ...... 93 67 Share of post tax profits of associates and joint ventures ...... (9) (7) Depreciation of property, plant and equipment ...... 159 162 Amortisation of intangible assets ...... 22 10 Impairment ...... 17 5 Disposal of subsidiaries ...... 3 25 Movement in provisions ...... 10 1 Movement in grants ...... (18) (9) Equity settled share options ...... 1 6 Changes in working capital ...... (6) (36) Recognition of deferred tax assets on prior year acquisitions ...... 3 7 Profit on disposal of property, plant and equipment ...... (3) (7) Movement in retirement benefit obligations ...... (63) (37) Other adjustments ...... 1 (6) Cash generated from operations ...... 517 512 Interest paid ...... (101) (70) Tax paid ...... (58) (47) Net cash flows from operating activities ...... 358 395

Cash flows from investing activities Capital expenditure ...... (214) (176) Proceeds from sale of property, plant and equipment ...... 9 14 Acquisition of subsidiaries, net of cash and cash equivalents acquired (note 29(iv)) ...... (202) (106) Proceeds from sale of subsidiaries, net of cash and cash equivalents disposed (note 30(ii)) ...... 19 5 Proceeds from sale of associates ...... 2 10 Repayment of loan by a joint venture ...... 3 — Sale of properties surplus to requirements ...... 5 1 Dividends received from associates ...... — 1 Interest received ...... 12 13 Net cash flows from investing activities ...... (366) (238)

Cash flows from financing activities Proceeds from borrowings and financing derivatives ...... 179 47 Repayment of borrowings ...... (63) (124) Proceeds from issue of share capital ...... 13 9 Purchase of Rexam shares by Employee Share Trust ...... (4) (3) Dividends paid to equity shareholders ...... (103) (97) Net cash flows from financing activities ...... 22 (168)

Net increase/(decrease) in cash and cash equivalents ...... 14 (11)

Cash and cash equivalents at the beginning of the year ...... (4) (2) Non cash movements ...... 4 9 Net increase/(decrease) in cash and cash equivalents ...... 14 (11) Cash and cash equivalents at the end of the year ...... 14 (4)

Cash and cash equivalents comprise: Cash at bank and in hand ...... 63 37 Short term bank deposits ...... 75 50 Bank overdrafts ...... (124) (91) 14 (4)

F-79 Consolidated statement of recognised income and expense For the year ended 31 December

2006 2005 £m £m Exchange differences ...... (95) 26 Actuarial gains/(losses) on retirement benefits ...... 155 (12) Tax on actuarial (gains)/losses on retirement benefits ...... (48) 4 Net investment hedges ...... 28 7 Cash flow hedges recognised ...... 32 60 Tax on cash flow hedges ...... 4 (9) Cash flow hedges transferred to inventory ...... (44) (31) Cash flow hedges transferred to the income statement ...... (1) — Sale of available for sale financial assets ...... (2) — Net profit recognised directly in equity ...... 29 45 Profit for the financial year ...... 223 223 Total recognised income and expense for the year attributable to Rexam PLC ...... 252 268

F-80 Notes to the consolidated financial statements

1 Principal accounting policies The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments. In preparing the consolidated financial statements, the following restatements have been made to the comparative amounts: (i) The consolidated income statement presentation and exceptional items have been restated to comply with the revised accounting policy on exceptional items set out below. (ii) The consolidated balance sheet has been restated for the final fair value adjustments applied to the Precise Technology acquisition. (iii) The segment analysis has been restated for the disposal of the non barrier thin wall plastic packaging business and the proposed disposal of the Petainer refillable bottle business which have been moved from ‘‘Plastic Packaging’’ to ‘‘Disposals and businesses for sale’’. (iv) Auditors’ remuneration has been restated to comply with Statutory Instrument 2005/241 7 which became effective in 2006. New accounting standards and amendments to existing standards that have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2007 or later periods but which the Group has not early adopted, are as follows: (i) IFRS7 ‘‘Financial Instruments: Disclosures’’, and amendment to IAS1 (Presentation of Financial Statements) ‘‘Capital Disclosures’’. IFRS7 introduces new disclosures about financial instruments. It requires the disclosure of information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces the disclosure requirements in IAS32. The amendment to IAS1 introduces disclosures about the level of an entity’s capital and how it manages capital. The Group has assessed the impact of IFRS7 and the amendment to IAS1 and concluded that the main additional disclosures will be the sensitivity analysis and the capital disclosures. Due to the onerous nature of these disclosures the Group has chosen not to adopt IFRS7 and the amendment to IAS1 until annual periods beginning on 1 January 2007. (ii) IFRS8 ‘‘Operating Segments’’ requires identification and reporting of operating segments on the basis of internal reports that are regularly reviewed by the Board in order to allocate resources to the segment and assess its performance. The Group assessed the impact of IFRS8 and concluded that it will not be material. The Group intends to adopt IFRS8 not later than accounting periods beginning on 1 January 2009. The following mandatory amendments to published accounting standards had no impact on the consolidated financial statements in 2006. (i) IAS39 (Amendment), ‘‘Cash Flow Hedge Accounting of Forecast Intragroup Transactions’’. (ii) IAS39 (Amendment), ‘‘The Fair Value Option’’.

F-81 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) (iii) IAS39 and IFRS4 (Amendments), ‘‘Financial Guarantee Contracts’’.

Key estimates and assumptions The preparation of consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, ultimately actual results may differ from those estimates. The key estimates and assumptions used in these consolidated financial statements are set out below.

Goodwill impairment testing Goodwill is tested at least annually for impairment in accordance with the accounting policy for goodwill set out below and in note 11 to the consolidated financial statements. The recoverable amounts of cash generating units are determined based on value in use calculations. These calculations require the use of estimates which include cash flow projections for each cash generating unit and discount rates based on the Group’s weighted average cost of capital, adjusted for specific risks associated with particular cash generating units.

Retirement benefit obligations The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. There are two principal funded defined benefit pension plans in the UK and US and an unfunded retiree medical plan in the US. The costs and the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the salary progression of current employees, the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities. The Group uses estimates based on previous experience and third party actuarial advice in determining these future cash flows and in determining the discount rate. If the discount rate was to fall by 0.5%, the net liabilities of the plans at 31 December 2006 would rise by approximately £160m. If equity returns were to fall by 10% then the plan assets at 31 December 2006 would fall by approximately £110m. The accounting policy for retirement benefit obligations is set out below and details of the assumptions used for the two principal pension plans and the retiree medical plan are set out in note 25 to the consolidated financial statements.

Income taxes Judgement is required in determining the provision for income taxes. There are many transactions and calculations whose ultimate tax treatment is uncertain. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes are likely to be due. The Group recognises deferred tax assets and liabilities based on estimates of future taxable income and recoverability. Where a change in circumstance occurs, or the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax balances in the year in which that change or outcome is known. The accounting policy for income taxes is set out below.

F-82 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Basis of consolidation The consolidated financial statements comprise Rexam PLC and all its subsidiaries, together with the Group’s share of the results of its associates and joint ventures. The financial statements of subsidiaries, associates and joint ventures are prepared as of the same reporting date using consistent accounting policies. Intercompany balances and transactions, including any unrealised profits arising from intercompany transactions, are eliminated in full. Subsidiaries are entities where the Group has the power to govern the financial and operating policies, generally accompanied by a share of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group and are included until the date on which the Group ceases to control them. Associates and joint ventures are entities over which the Group has significant influence but not control, generally accompanied by a share of between 20% and 50% of the voting rights. Investments in associates and joint ventures are accounted for using the equity method. If the Group’s share of losses in an associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture. All acquisitions are accounted for by applying the purchase method. The cost of an acquisition is measured as the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity instruments issued by the Group, together with any costs directly attributable to the acquisition. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured initially at fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

Foreign currencies The financial statements for each of the Group’s subsidiaries, associates and joint ventures are prepared using their functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group is sterling. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the balance sheet date of monetary assets and liabilities denominated in currencies other than the functional currency are recognised directly in the consolidated income statement. Exceptions to this are where the monetary items form part of the net investment in a foreign operation or are designated as hedges of a net investment, or designated as cash flow hedges. Such exchange differences are initially recognised in equity. The balance sheets of foreign operations are translated into sterling using the exchange rate at the balance sheet date and the income statements are translated into sterling using the average exchange rate for the period. Where this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, the exchange rate on the transaction date is used. Exchange differences on translation into sterling arising since 1 January 2004 are recognised as a separate component of equity. On disposal of a foreign operation, any cumulative exchange differences held in equity are transferred to the consolidated income statement.

F-83 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) The principal exchange rates against sterling used in these consolidated financial statements are as follows:

Average Average Closing Closing 2006 2005 2006 2005 US dollar ...... 1.84 1.82 1.96 1.74 Euro ...... 1.47 1.46 1.49 1.46

Revenue recognition Revenue from the sale of goods is measured at the fair value of the consideration, net of rebates and trade discounts. Revenue from the sale of goods is recognised when the Group has transferred the significant risks and rewards of ownership of the goods to the buyer, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group. Dividend income is recognised when the right to receive payment is established.

Exceptional items Items which are exceptional, being material in terms of size and/or nature are presented separately from underlying business performance in the consolidated income statement. The separate reporting of exceptional items helps provide an indication of the Group’s underlying business performance. The principal events which may give rise to exceptional items include significant changes to retirement benefit obligations, gains or losses on the disposal of businesses, the restructuring and integration of businesses, major asset impairments, the subsequent recognition of acquired deferred tax assets, significant litigation claims, the amortisation of certain acquired intangible assets and non hedge accounted fair value movements and hedge ineffectiveness on financing derivative financial instruments. The above accounting policy on exceptional items is a change in accounting policy from that used in 2005. The change resulted from a reassessment of which transactions comprise exceptional items and from a change to the presentation of the consolidated income statement, from a columnar format to a single column format using boxes. The directors consider the change in accounting policy provides relevant information by more closely reflecting current accounting practice. The change had no impact on profit for the 2005 financial year or on net assets at 31 December 2005.

Retirement benefit obligations The Group operates defined benefit pension plans and defined contribution pension plans. A defined benefit pension plan is one that specifies the amount of pension benefit that an employee will receive on retirement. The Group operates both funded defined benefit pension plans, where actuarially determined payments are made to trustee administered funds, and unfunded defined benefit pension plans, where no such payments are made. The liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation less the fair value of plan assets at the balance sheet date. The defined benefit obligation is calculated, at least triennially, by independent actuaries using the projected unit credit method and is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. The current service cost and gains and losses on settlements and curtailments are included in operating expenses in the

F-84 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) consolidated income statement. Past service costs are similarly included where the benefits have vested, otherwise they are amortised on a straight line basis over the vesting period. The expected return on assets of funded defined benefits pension plans, less administration expenses of pension plans, and the interest on pension plan liabilities comprise the pension element of the net finance cost in the consolidated income statement. Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included in the consolidated statement of recognised income and expense. A defined contribution plan is one under which fixed contributions are paid to a third party. The Group has no further payment obligations once these contributions have been paid. The contributions are recognised in the consolidated income statement when they are due. Prepaid contributions are recognised in the consolidated balance sheet as an asset to the extent that a cash refund or a reduction in the future payments is likely. The Group also provides post retirement healthcare benefits (retiree medical) to certain of its current and former employees. The entitlement to these benefits is usually conditional on an employee remaining in service up to retirement age and the completion of a minimum service period. The consolidated income statement and consolidated balance sheet treatment with respect to retiree medical is similar to that for defined benefit pension plans. These obligations are valued by independent actuaries, usually on an annual basis.

Share based payment The Group operates various equity settled and cash settled share option schemes. For equity settled share options, the services received from employees are measured by reference to the fair value of the share options. The fair value is calculated at grant date and recognised in the consolidated income statement, together with a corresponding increase in equity, on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest. Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. For cash settled share options, the services received from employees are measured at the fair value of the liability and recognised in the consolidated income statement on a straight line basis over the vesting period. The fair value of the liability is measured at each balance sheet date and at the date of settlement with changes in fair value recognised in the consolidated income statement. IFRS2 ‘‘Share- based Payment’’ has been applied to equity settled share options granted after 7 November 2002 and to all cash settled share options. The Rexam Employee Share Trust holds ordinary shares in Rexam PLC which are presented in the consolidated financial statements as a deduction from equity.

Interest Interest on cash and cash equivalents and borrowings held at amortised cost is recognised in the consolidated income statement using the effective interest method. Interest includes exchange differences arising on cash and cash equivalents and borrowings, where such exchange differences are recognised in the consolidated income statement. Interest includes all fair value gains and losses on derivative financial instruments, and corresponding adjustments to hedged items under designated fair value hedging relationships, where they relate to financing activities and are recognised in the consolidated income statement. Prior to their redemption, interest included dividends paid on convertible preference shares.

F-85 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Segment reporting The Group’s primary reporting format is business segments and its secondary format is geographic segments. A business segment is a component of the Group that is engaged in providing a group of related products and is subject to risks and returns that are different from those of other business segments. A geographic segment is a component of the Group that operates within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Non specific central costs are allocated on the basis of net assets excluding investments in associates and joint ventures, net borrowings, deferred tax, current tax and non current tax.

Goodwill Goodwill represents the excess of the cost of an acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the acquiree at the date of acquisition. Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment losses. At the date of acquisition, goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill arising on acquisitions on or before 31 December 1997 has been deducted from equity. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold except for any goodwill deducted from equity. Goodwill arising on the acquisition of subsidiaries is presented in goodwill and goodwill arising on the acquisition of associates and joint ventures is presented in investments in associates and joint ventures. Internally generated goodwill is not recognised as an asset.

Other intangible assets Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows:

Acquired computer software ...... 2 to 3 years Computer software development ...... Up to 7 years Acquired patents, licences and customer contracts ...... Up to 20 years Development projects ...... Up to 5 years The cost of intangible assets acquired in an acquisition is the fair value at acquisition date. The cost of separately acquired intangible assets, including computer software, comprises the purchase price and any directly attributable costs of preparing the asset for use. Computer software development costs that are directly associated with the implementation of major business systems are capitalised as intangible assets. Expenditure on research is recognised as an expense in the consolidated income statement as incurred. Expenditure incurred on development projects is capitalised as an intangible asset if it is probable that the expenditure will generate future economic benefits and can be measured reliably. The accounting policy for emission rights is set out below.

Emission rights Emission rights are initially recognised as intangible assets at fair value. Where they are acquired at less than fair value the difference between the amount paid and fair value is recognised as a government grant. Emission rights are not revalued or amortised but are tested for impairment at least

F-86 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) annually or where there is any indication of impairment. Any government grant element is amortised in the consolidated income statement over the period to which the corresponding emission rights relate. A provision is made for the liability to deliver emission allowances equal to the emissions that have been made. Emission rights and associated provisions are derecognised when these rights are delivered, sold or lapsed. Any profit or loss on disposal is taken to the consolidated income statement.

Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Cost comprises purchase price and directly attributable costs. Freehold land and assets under construction are not depreciated. For all other property, plant and equipment, depreciation is calculated on a straight line basis to allocate cost less residual value of the assets over their estimated useful lives as follows:

Freehold buildings ...... Up to 50 years Leasehold buildings ...... Shorter of 50 years or lease term Manufacturing machinery ...... 7 to 17 years Glass furnaces ...... Up to 12 years Computer hardware ...... Up to 8 years Fixtures, fittings and vehicles ...... 4 to 10 years Residual values and useful lives are reviewed at least at each financial year end.

Impairment of assets At each balance sheet date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use and is determined for an individual asset. If the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, the recoverable amount of the cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.

Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on a first in first out or a weighted average cost basis. Cost comprises directly attributable purchase and conversion costs and an allocation of production overheads based on normal operating capacity. Net realisable value is the estimated selling price less estimated costs of completion and selling costs.

Cash and cash equivalents Cash and cash equivalents for the purposes of the consolidated cash flow statement comprise cash at bank and in hand, money market deposits and other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are presented in borrowings within current liabilities in the consolidated balance sheet.

F-87 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Assets and liabilities classified as held for sale The assets and liabilities classified as held for sale are available for immediate sale in their present condition and a sale is highly probably within one year. Assets and liabilities classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. Non current assets classified as held for sale are not depreciated or amortised and any future write down to fair value less costs to sell will be recognised as an impairment loss.

Grants Grants received in respect of property, plant and equipment are capitalised and released to the consolidated income statement in equal instalments over the estimated useful lives of the related assets.

Leases Leases are classified as finance leases where substantially all the risks and rewards of ownership are transferred to the Group. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the liability and finance charge to produce a constant rate of interest on the finance lease balance outstanding. Assets capitalised under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. Leases other than finance leases are classified as operating leases. Payments made under operating leases are recognised as an expense in the consolidated income statement on a straight line basis over the lease term. Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight line basis.

Income taxes The tax expense represents the sum of current tax, non current tax and deferred tax. Current tax and non current tax are based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax arising from initial recognition of an asset or liability in a transaction, other than an acquisition, that at the time of the transaction affects neither accounting nor taxable profit or loss, is not recognised. Deferred tax is measured using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Tax is recognised in the consolidated income statement, unless the tax relates to items recognised directly in equity, in which

F-88 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) case the tax is recognised directly in equity through the consolidated statement of recognised income and expense.

Provisions Provisions are recognised when a present obligation exists in respect of a past event and where the amount can be reliably estimated. Provisions for restructuring are recognised for direct expenditure on business reorganisations where plans are sufficiently detailed and well advanced, and where appropriate communication to those affected has been undertaken on or before the balance sheet date. Provisions are discounted where the time value of money is considered material.

Dividends Final equity dividends to the shareholders of Rexam PLC are recognised in the period that they are approved by the shareholders. Interim equity dividends are recognised in the period that they are paid.

Financial instruments Derivative financial instruments are measured at fair value. Derivative financial instruments utilised by the Group include interest rate swaps, cross currency swaps, forward foreign exchange contracts and forward aluminium and energy commodity contracts. Certain derivative financial instruments are designated as hedges in line with the Group’s risk management policies. Hedges are classified as follows: (a) Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability. (b) Cash flow hedges where they hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. (c) Net investment hedges where they hedge exposure to changes in the value of the Group’s interests in the net assets of foreign operations. For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the consolidated income statement. For cash flow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity, with any ineffective portion recognised in the consolidated income statement. When hedged cash flows result in the recognition of a non financial asset or liability, the associated gains or losses previously recognised in equity are included in the initial measurement of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the consolidated income statement in the same period in which the hedged cash flows affect the consolidated income statement. Any gains or losses arising from changes in fair value of derivative financial instruments not designated as hedges are recognised immediately in the consolidated income statement.

F-89 Notes to the consolidated financial statements (Continued)

1 Principal accounting policies (Continued) Gains and losses on derivative financial instruments related to operating activities are included in operating profit when recognised in the consolidated income statement. Gains and losses on derivative financial instruments related to financing activities are included in interest when recognised in the consolidated income statement. Borrowings are measured at amortised cost except where they are hedged by an effective fair value hedge, in which case the carrying value is adjusted to reflect the fair value movements associated with the hedged risk. Where borrowings are used to hedge the Group’s interests in the net assets of foreign operations, the portion of the exchange gain or loss on the borrowings that is determined to be an effective hedge is recognised in equity. On 16 October 2006 the convertible preference shares were redeemed as described in note 27 to the consolidated financial statements. Prior to redemption, they were split into a liability component and an equity component. On issue, the fair value of the liability component was determined using a market rate for an equivalent non convertible bond and recognised in borrowings on an amortised cost basis until extinguished on conversion or redemption. The remainder of the proceeds of the issue was allocated to the conversion option that was recognised in equity. The change in value of the conversion option, other than on conversion or redemption, in subsequent accounting periods was not recognised in the consolidated financial statements. Dividends on convertible preference shares were charged as interest in the consolidated income statement. Available for sale financial assets are measured at fair value. Unrealised gains and losses are recognised in equity except for impairment losses, interest and dividends arising from these assets which are recognised in the consolidated income statement. Trade and other receivables are measured at amortised cost less any provision for impairment. Trade and other receivables are discounted when the time value of money is considered material. Trade and other payables are measured at cost.

2 Segment analysis (i) Analysis by business segment 2006

Underlying Underlying operating return on Operating Sales profit sales profit £m £m % £m Beverage Cans ...... 2,490 292 11.7 328 Plastic Packaging ...... 720 82 11.4 48 Glass ...... 437 36 8.2 36 Disposals and businesses for sale ...... 91 5 5.5 2 3,738 415 11.1 414 Share of post tax profits of associates and joint ventures .... 9 Retirement benefit obligations net finance cost ...... (23) Net interest expense ...... (93) Profit before tax ...... 307 Tax...... (84) Profit for the financial year ...... 223

F-90 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued)

Depreciation Segment Segment Capital and assets liabilities expenditure amortisation Impairment £m £m £m £m £m Beverage Cans ...... 2,271 (494) 126 87 — Plastic Packaging ...... 921 (184) 48 50 7 Glass ...... 458 (86) 64 39 10 Disposals and businesses for sale ...... 22 (9) 3 5 — 3,672 (773) 241 181 17 Associates and joint ventures ...... 32 — — — — Unallocated assets and liabilities ...... 519 (2,201) — — — 4,223 (2,974) 241 181 17

Share of post tax profits of associates and joint ventures are wholly attributable to Beverage Cans. Segment assets are disclosed after deducting inter segment assets of £10m for Beverage Cans, £4m for Plastic Packaging, £2m for Glass and £1m for Disposals and businesses for sale. Segment liabilities are disclosed after deducting inter segment liabilities of £12m for Beverage Cans, £1m for Plastic Packaging and £4m for Glass. Assets of associates and joint ventures are wholly attributable to Beverage Cans. If the disposal of the non barrier thin wall plastic packaging business and the proposed disposal of the Petainer refillable bottle business had been included as part of the Plastic Packaging segment rather than in Disposals and businesses for sale, sales, underlying operating profit and operating profit of that segment would have been £811m, £87m and £50m respectively (2005: £571m, £63m and £62m). Capital expenditure includes £17m in Glass relating to emission rights. Underlying operating profit comprises operating profit before exceptional items. Underlying return on sales comprises underlying operating profit divided by sales. Unallocated assets comprise derivative financial instrument assets, deferred tax assets and cash and cash equivalents which are used as part of the Group’s financing offset arrangements. Unallocated liabilities comprise borrowings, derivative financial instrument liabilities, current and non current tax, deferred tax liabilities and retirement benefit obligations.

F-91 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued) (ii) Analysis by business segment 2005—restated

Underlying Underlying operating return on Operating Sales profit sales profit £m £m % £m Beverage Cans ...... 2,235 313 14.0 345 Plastic Packaging ...... 471 57 12.1 56 Glass ...... 405 36 8.9 36 Disposals and businesses for sale ...... 126 3 2.4 (17) 3,237 409 12.6 420 Share of post tax profits of associates and joint ventures .... 7 Retirement benefit obligations net finance cost ...... (29) Net interest expense ...... (67) Profit before tax ...... 331 Tax...... (108) Profit for the financial year ...... 223

Depreciation Segment Segment Capital and assets liabilities expenditure amortisation Impairment £m £m £m £m £m Beverage Cans ...... 2,241 (433) 81 84 5 Plastic Packaging ...... 805 (147) 40 36 — Glass ...... 469 (97) 54 43 — Disposals and businesses for sale ...... 59 (18) 8 9 — 3,574 (695) 183 172 5 Associates and joint ventures ...... 29 — — — — Unallocated assets and liabilities ...... 555 (2,454) — — — 4,158 (3,149) 183 172 5

Share of post tax profits of associates and joint ventures are attributable to Beverage Cans £3m and Disposals and businesses for sale £4m. Segment assets are disclosed after deducting inter segment assets of £7m for Beverage Cans, £1m for Plastic Packaging, £1m for Glass and £1m for Disposals and businesses for sale. Segment liabilities are disclosed after deducting inter segment liabilities of £5m for Beverage Cans, £1m for Plastic Packaging, £3m for Glass and £1m for Disposals and businesses for sale. Assets of associates and joint ventures are wholly attributable to Beverage Cans. If the disposal of the UK Glass business had been included as part of the Glass segment rather than in Disposals and businesses for sale, sales, underlying operating profit and operating profit of that segment in 2005 would have been £431m, £33m and £8m respectively. Capital expenditure includes £9m in Glass relating to emission rights.

F-92 Notes to the consolidated financial statements (Continued)

2 Segment analysis (Continued) (iii) Analysis by geography 2006

Segment Capital Sales assets expenditure £m £m £m UK...... 209 302 11 Germany ...... 265 530 52 France ...... 167 267 18 Other Europe ...... 1,132 1,016 76 USA...... 1,328 927 53 Brazil ...... 336 357 22 Rest of world ...... 301 273 9 3,738 3,672 241 Associates and joint ventures ...... —32— Unallocated assets ...... — 519 — 3,738 4,223 241

Segment assets are disclosed after deducting inter segment assets of £67m for UK, £15m for Germany, £9m for France, £20m for Other Europe, £9m for USA, £1m for Brazil and £8m for Rest of world. Assets of associates and joint ventures are wholly attributable to Rest of world.

(iv) Analysis by geography 2005—restated

Segment Capital Sales assets expenditure £m £m £m UK...... 220 287 11 Germany ...... 251 479 53 France ...... 162 269 20 Other Europe ...... 1,012 869 39 USA...... 1,136 1,125 44 Brazil ...... 289 377 8 Rest of world ...... 167 168 8 3,237 3,574 183 Associates and joint ventures ...... — 29 — Unallocated assets ...... — 555 — 3,237 4,158 183

Segment assets are disclosed after deducting inter segment assets of £55m for UK, £11m for Germany, £5m for France, £8m for Other Europe, £5m for USA, £8m for Brazil and £4m for Rest of world. Assets of associates and joint ventures are attributable to UK £3m and Rest of world £26m.

F-93 Notes to the consolidated financial statements (Continued)

3 Operating expenses

2006 2005 Underlying 2006 Underlying 2005 business Exceptional 2006 business Exceptional 2005 performance items Total performance items Total £m £m £m £m £m £m Raw materials ...... (1,845) — (1,845) (1,501) — (1,501) Changes in inventories of WIP and finished goods . 6—613 — 13 Employee benefit expense (note 4) ...... (644) 57 (587) (591) 52 (539) Depreciation of property, plant and equipment .... (159) — (159) (162) — (162) Amortisation of intangible assets ...... (11) (11) (22) (10) — (10) Impairment ...... (10) (7) (17) — (5) (5) Freight costs ...... (179) — (179) (145) — (145) Operating lease rental expense ...... (30) — (30) (25) — (25) Operating lease rental income ...... 6—65—5 Use of grants ...... 18 — 18 10 — 10 Discontinuance of cash flow hedge accounting ...... ———1—1 Other operating expenses . . (481) (40) (521) (430) (41) (471) Other operating income . . . 6—67512 (3,323) (1) (3,324) (2,828) 11 (2,817)

Operating expenses include research and development expenditure of £14m (2005: £12m). Impairment of £10m in underlying business performance related to the impairment of emission rights in Glass following a significant fall in the market price of carbon dioxide emission rights during 2006. This impairment was offset by income of £10m, included in use of grants, from government grants that had been issued in respect of emission rights.

4 Employee costs and numbers (i) Employee benefit expense

2006 2005 £m £m Wages and salaries ...... (536) (481) Social security ...... (80) (74) Share based payment ...... — (8) Retirement benefit obligations operating profit credit ...... 29 24 (587) (539)

F-94 Notes to the consolidated financial statements (Continued)

4 Employee costs and numbers (Continued) (ii) Key management compensation (including directors of Rexam PLC)

2006 2005 £m £m Salaries and short term employee benefits ...... (6) (7) Post employment benefits ...... (2) (2) Share based payment ...... (2) (4) (10) (13)

Key management comprises all Rexam PLC directors and those members of the Rexam PLC Group Management Committee who are not Rexam PLC directors. For details of the Group Management Committee see Directors and Officers and the Corporate Governance Report. For details of directors’ remuneration see the Remuneration Report.

(iii) Average number of employees 2005

2005 2006 restated Number Number Beverage Cans ...... 6,700 6,500 Plastic Packaging ...... 13,200 10,900 Glass ...... 3,600 3,900 Disposals and businesses for sale ...... 700 400 24,200 21,700

2006 2005 Number Number UK...... 900 1,300 Germany ...... 2,700 2,700 France ...... 2,500 2,500 Other Europe ...... 4,200 4,100 USA...... 5,600 3,600 Brazil ...... 1,600 1,700 China ...... 5,600 4,800 Rest of world ...... 1,100 1,000 24,200 21,700

F-95 Notes to the consolidated financial statements (Continued)

5 Auditors’ remuneration

2005 2006 restated £m £m Fees payable to PricewaterhouseCoopers LLP for the audit of the consolidated financial statements ...... 0.6 0.5 Statutory audit fees payable to associate members of PricewaterhouseCoopers LLP . . 2.1 1.7 Total audit fees ...... 2.7 2.2 Other fees in respect of services required by legislation ...... 0.1 0.1 Fees for tax services ...... 0.6 0.4 Fees for other services ...... 0.1 1.1 3.5 3.8

6 Exceptional items

2005 2006 restated £m £m Exceptional items included in operating profit: Retirement benefit obligations ...... 53 45 Restructuring and integration of businesses: Restructuring of existing businesses ...... (21) (7) Integration of new businesses ...... (8) — (29) (7) Other exceptional items: Amortisation of acquired intangible assets ...... (11) — Litigation claim ...... (8) — Disposal of businesses ...... (3) (25) Recognition of deferred tax assets on prior year acquisitions ...... (3) (7) Profit on disposal of land ...... — 5 (25) (27) Exceptional items included in share of post tax profits of associates: Sale of land and property of associate ...... 8 — Disposal of associate ...... — 4 8 4 Exceptional items included in interest expense: Early redemption of convertible preference shares ...... (10) — Financing derivative market value changes ...... 7 9 (3) 9 Total exceptional items included in profit before tax ...... 4 24 Tax on exceptional items ...... (9) (19) Total exceptional items ...... (5) 5

F-96 Notes to the consolidated financial statements (Continued)

6 Exceptional items (Continued) In June 2006, a change to the US retiree medical plan was made to co-ordinate prescription drug benefits payable to certain retirees with cover available from the US government through the Medicare Part D programme. This change resulted in a gain of £38m, net of associated legal fees of £1m. In December 2006, certain changes were implemented to the US defined benefit pension plans giving rise to a gain of £15m. The gain of £45m (net of associated legal costs of £1m) in 2005 related to changes implemented to the Group’s obligations in respect of US retiree medical benefits. A cost of £21m arises from the restructuring of existing businesses, principally in the Plastic Packaging sector. The decision to exit from the non barrier thin wall plastic packaging business resulted in the rationalisation of a plant. In response to slower demand within part of the Make Up division, action was taken to reduce the cost base in France and Asia. In addition, a major restructuring of the administration support function within the European beverage can operation has been completed. A cost of £8m arises from the integration of new businesses initiated following the Plastic Packaging acquisitions of Precise Technology (that resulted in the closure of four facilities in the US) and of FangXin. The restructuring in 2005 arose in the European Beverage Can operation following conversion of two of its plants from steel to aluminium can production. Intangible assets, such as technology, patents and customer contracts, are required to be recognised on the acquisition of businesses and amortised over their useful life. The directors consider that separate disclosure of the amortisation of such acquired intangibles aids comparison of organic growth in underlying profit and therefore this cost of £11m (2005: £nil) is separately disclosed within exceptional items. Following a recent appeal ruling, a provision of £8m has been made in respect of a legacy litigation claim relating to an acquired business. The claim had been initiated before Rexam assumed control of that business. Losses on the disposal of businesses amounted to £3m. In keeping with the strategy to concentrate the food plastics operations on high margin and faster growing markets, three non barrier thin wall plastic packaging businesses were sold and the Petainer refillable bottle business was made available for sale. The loss on disposal in 2005 of £25m related to the sale of the UK Glass business. A charge of £3m (2005: £7m) arises from the recognition of deferred tax assets on prior year acquisitions relating to the utilisation of tax losses not recorded at the date of acquisition. This charge is treated as exceptional due to size and because it arises out of the transition to IFRS. A gain on the sale of land and property of £8m, following the relocation of a manufacturing facility, by the associate in Korea has been included in exceptional items in view of its size and one off nature. The gain on disposal of an associate of £4m in 2005 related to the sale of Rexam’s interest in a non core printing business. In October 2006, Rexam shareholders approved the early redemption into ordinary shares of the convertible preference shares. Following the adoption of IFRS, the convertible preference shares had become financially inefficient; the debt element was reclassified from equity to borrowings, the dividend thereon included within interest and no tax deduction was available on that dividend. The enhanced conversion premium of £10m, including associated costs, has been included in exceptional items due to its size and one off nature. The fair value of the derivatives arising on financing activities directly relates to changes in interest rates and foreign exchange rates. The fair value will change as the transactions to which they relate mature, as new derivatives are transacted and due to the passage of time. The fair value change on financing derivatives for the year gave rise to a net gain of £7m (2005: £9m).

F-97 Notes to the consolidated financial statements (Continued)

7 Interest

2006 2005 £m £m Interest expense: Bank overdrafts ...... (19) (13) Bank loans ...... (23) (15) Medium term notes ...... (54) (49) Finance leases ...... (2) (2) Dividends on convertible preference shares ...... (4) (5) Net foreign exchange losses ...... (1) (4) Underlying interest expense ...... (103) (88) Early redemption of convertible preference shares ...... (10) — Derivative financial instrument value changes ...... 7 9 (106) (79) Interest income: Cash and cash equivalents ...... 13 12

Interest on medium term notes in 2006 includes accrued interest income of £6m (2005: £10m) on interest rate and cross currency swaps designated as hedging instruments and accrued interest expense of £4m (2005: £6m) on interest rate and cross currency swaps not designated as hedging instruments. Net foreign exchange losses in 2006 comprise losses of £39m (2005: gains £33m) on borrowings and cash and cash equivalents, gains of £23m (2005: losses £20m) on derivatives designated as hedging instruments and gains of £15m (2005: losses £17m) on derivatives not designated as hedging instruments. Derivative foreign exchange losses arise on translation of cross currency swap principal amounts and on the settlement of forward foreign exchange contracts which hedge net borrowings. Derivative financial instrument value changes in 2006 comprise a loss of £12m (2005: gain £2m) on hedging instruments and a corresponding gain of £12m (2005: loss £2m) to the value of medium term notes under a designated fair value hedging relationship, losses of £nil (2005: £2m) on other derivatives designated as hedging instruments and gains of £7m (2005: £11m) on derivatives not designated as hedging instruments.

F-98 Notes to the consolidated financial statements (Continued)

8Tax

2005 2006 Underlying 2005 Underlying 2006 business Exceptional 2005 business Exceptional 2006 performance items Total performance items Total restated restated restated £m £m £m £m £m £m Included in the consolidated income statement: Current tax: Current tax charge ...... (58) 2 (56) (50) (3) (53) Adjustment in respect of prior years ...... 17 — 17 —11 (41) 2 (39) (50) (2) (52) Deferred tax: Origination and reversal of temporary differences ...... (38) (13) (51) (49) (17) (66) Benefit from previously unrecognised tax losses and tax credits reducing current tax expense ...... 22410 — 10 Benefit from previously unrecognised tax losses and tax credits reducing deferred tax expense ...... 2—2——— (34) (11) (45) (39) (17) (56) (75) (9) (84) (89) (19) (108) UK tax included in the total above is £15m (2005: £13m). Included in equity: Deferred tax: Retirement benefit obligations ...... (48) — (48) 4—4 Cash flow hedges ...... 4—4(9) — (9) (44) — (44) (5) — (5)

F-99 Notes to the consolidated financial statements (Continued)

8 Tax (Continued) A reconciliation of the tax charge applicable to the Group’s profit before tax at the UK statutory rate of 30% (2005: 30%) with the tax charge at the Group’s effective rate is set out below.

2005 2006 Underlying 2005 Underlying 2006 business Exceptional 2005 business Exceptional 2006 performance items Total performance items Total restated restated restated £m £m £m £m £m £m Profit before tax ...... 303 4 307 307 24 331

Tax at the UK statutory rate of 30% (2005: 30%) ...... (91) (1) (92) (92) (7) (99) Utilisation of tax losses and tax credits .... 22410 — 10 Non deductible and non taxable items ..... 3 (8) (5) 2 (11) (9) Higher domestic tax rates on overseas earnings ...... (8) (2) (10) (9) (2) (11) Tax overprovided in prior years ...... 19 — 19 —11 Tax in the consolidated financial statements . (75) (9) (84) (89) (19) (108)

Effective rate of tax ...... 25% 27% 29% 33%

The movements in deferred tax assets and liabilities during the year are set out below.

Retirement Other benefit temporary obligations Tax losses differences Total £m £m £m £m Deferred tax assets: At 1 January 2006 ...... 233 26 74 333 Exchange differences ...... (15) (1) (6) (22) Acquisition of subsidiaries ...... —— 22 Disposal of subsidiaries ...... — — (1) (1) Charge for the year ...... (24) (12) 6 (30) Charge to equity ...... (48) — — (48) Transfer to assets classified as held for sale ...... — — (1) (1) At 31 December 2006 ...... 146 13 74 233

At 1 January 2005 ...... 228 42 75 345 Exchange differences ...... 16 3 6 25 Acquisition of subsidiaries ...... — — 1 1 Charge for the year ...... (15) (19) (8) (42) Credit to equity ...... 4 — — 4 At 31 December 2005—restated ...... 233 26 74 333

F-100 Notes to the consolidated financial statements (Continued)

8 Tax (Continued)

Other Accelerated tax temporary depreciation differences Total £m £m £m Deferred tax liabilities: At 1 January 2006 ...... (69) (89) (158) Exchange differences ...... 5611 Acquisition of subsidiaries ...... (1) (9) (10) Charge for the year ...... (21) 6 (15) Credit to equity ...... —44 At 31 December 2006 ...... (86) (82) (168)

At 1 January 2005 ...... (63) (39) (102) Exchange differences ...... (2) 2 — Acquisition of subsidiaries ...... — (34) (34) Disposal of subsidiaries ...... 1 — 1 Charge for the year ...... (5) (9) (14) Charge to equity ...... — (9) (9) At 31 December 2005—restated ...... (69) (89) (158)

Deferred tax assets and liabilities are presented as non current in the consolidated balance sheet. Of the total deferred tax assets, £36m (2005: £64m) are recoverable within one year. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balance net. Deferred tax assets have been recognised where it is probable that they will be recovered. In recognising deferred tax assets, the Group has considered if it is more likely than not that sufficient future profits will be available to absorb tax losses and other timing differences. Deferred tax assets of £30m (2005: £37m) have not been recognised in respect of losses, tax credits on dividends and other timing differences due to the uncertainty of the availability of suitable profits in the foreseeable future. The principal items on which no deferred tax assets have been recognised are tax losses of £30m (2005: £30m) and UK tax credits on foreign dividends of £18m (2005: £15m). There is no expiry date on either of these items. No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries and associates. If the earnings were remitted in full, tax of £175m (2005: £165m) would be payable.

F-101 Notes to the consolidated financial statements (Continued)

9 Earnings per share

2005 2006 restated Pence Pence Basic earnings per share ...... 39.7 40.4 Diluted earnings per share ...... 39.7 39.4 Underlying earnings per share ...... 40.6 39.5

£m £m Underlying profit before tax ...... 303 307 Tax on underlying profit ...... (75) (89) Profit attributable to equity shareholders before exceptional items ...... 228 218 Exceptional items after tax ...... (5) 5 Profit attributable to equity shareholders ...... 223 223 Dilution on conversion of convertible preference shares ...... — 5 Profit attributable to equity shareholders on a diluted basis ...... 223 228

2006 2005 Number Number millions millions Weighted average number of shares in issue for the year ...... 561.3 551.8 Dilution on exercise of outstanding share options ...... 0.8 3.1 Dilution on conversion of preference shares ...... — 24.4 Weighted number of shares on a diluted basis ...... 562.1 579.3

Number of shares in issue at 31 December ...... 583.3 553.6

10 Equity dividends

2006 2005 £m £m Interim dividend for 2006 of 7.9p paid on 2 November 2006 ...... 44 — Final dividend for 2005 of 10.6p paid on 5 June 2006 ...... 59 — Interim dividend for 2005 of 7.52p paid on 1 November 2005 ...... — 41 Final dividend for 2004 of 10.09p paid on 1 June 2005 ...... — 56 103 97

A final dividend per equity share of 11.1p has been proposed for 2006 and, subject to shareholder approval, is payable on 6 June 2007. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.

F-102 Notes to the consolidated financial statements (Continued)

11 Goodwill

2005 2006 restated £m £m Cost and carrying value: At 1 January ...... 1,397 1,252 Exchange differences ...... (93) 47 Acquisition of subsidiaries (note 29) ...... 107 112 Disposal of subsidiaries ...... (9) (7) Recognition of deferred tax assets on prior year acquisitions ...... (3) (7) At 31 December ...... 1,399 1,397

Goodwill acquired through acquisitions has been allocated to cash generating units or groups of cash generating units for impairment testing as set out below.

2005 2006 restated £m £m Beverage Cans: Europe ...... 537 547 USA...... 288 327 Brazil ...... 154 174 Mexico ...... 6 7 Egypt ...... 27 — India ...... 3 — 1,015 1,055 Plastic Packaging: Dispensing Systems ...... 38 43 Make Up ...... 30 34 Pharma ...... 73 75 Delta ...... 48 54 Precise Technology ...... 52 56 Airspray ...... 60 — FangXin ...... 8 — India ...... 4 — Thin wall plastics Scandinavia ...... — 9 313 271

Glass ...... 71 71

Total carrying value of goodwill ...... 1,399 1,397

The recoverable amounts of all cash generating units or groups of cash generating units were determined based on value in use calculations. The cash flow projections used in these calculations were based on the financial budget for 2007 and the plans for 2008 and 2009 (together the budget projections), approved by senior management. Cash flows beyond the three year period have been extrapolated using a zero real growth rate.

F-103 Notes to the consolidated financial statements (Continued)

11 Goodwill (Continued) Key assumptions used in the recoverable amount calculation include: (i) Sales and margins. Forecasts are based on sector level analyses of sales, markets, costs and competitors for the budget period. Consideration was given to past experience, knowledge of future contracts and the expected improvements following capital expenditure projects. (ii) Raw materials and energy price inflation. Forecasts for aluminium are based on forward prices at the time the budget period projections were prepared and take into account pass through of costs and hedging. Forecasts for other raw materials and energy are based on inflation forecasts and supply and demand factors. (iii) Exchange rates. The forecast is based on analysis by management of factors likely to affect exchange rates during the budget period including interest rates and economic growth rates. The pre tax discount rates used for the cash generating units for which the carrying amount of goodwill is significant in comparison with the total Group were as set out below.

2006 2005 %% Beverage Cans Europe ...... 11 11 Beverage Cans USA ...... 11 11 Beverage Cans Brazil ...... 14 14 Plastic Packaging ...... 11 11

F-104 Notes to the consolidated financial statements (Continued)

12 Other intangible assets

Computer Customer Computer software Technology contracts and Emission software internally and patents relationships rights Other acquired generated acquired acquired acquired intangibles Total £m £m £m £m £m £m £m Cost: At 1 January 2006 ...... 57 16 1 59 9 3 145 Exchange differences ...... (3) (1) — (7) — 1 (10) Acquisition of subsidiaries ...... — — 21 29 — — 50 Additions ...... 6 1 — — 17 1 25 Disposals ...... (2) — — — (3) — (5) Utilisation to settle obligation ..... — — — — (10) — (10) Reclassifications ...... 6 (6) — — — — — At 31 December 2006 ...... 64 10 22 81 13 5 195

Accumulated amortisation: At 1 January 2006 ...... (30) (2) — — — — (32) Exchange differences ...... 2 (1) — — — — 1 Disposals ...... 1— — — —— 1 Amortisation for the year ...... (8) (2) (2) (9) — (1) (22) Impairment ...... — — — — (10) — (10) At 31 December 2006 ...... (35) (5) (2) (9) (10) (1) (62)

Carrying value at 31 December 2006 ...... 29 5 20 72 3 4 133

Cost—restated: At 1 January 2005 ...... 52 8 — — — 2 62 Exchange differences ...... 1 — — — — — 1 Acquisition of subsidiaries ...... — — 1 59 — — 60 Additions ...... 5 8 — — 9 1 23 Disposals ...... (1) — — — — — (1) At 31 December 2005 ...... 57 16 1 59 9 3 145 Accumulated amortisation: At 1 January 2005 ...... (21) (1) — — — — (22) Exchange differences ...... (2) — — 1 — — (1) Disposals ...... 1 — — — — — 1 Amortisation for the year ...... (8) (1) (1) — — (10) At 31 December 2005 ...... (30) (2) — — — — (32)

Carrying value at 31 December 2005—restated ...... 27 14 1 59 9 3 113

Emission rights acquired in 2006 were initially recognised at a fair value of £17m. The emission rights were subject to impairment testing during 2006 and an impairment loss of £10m for the year was included in operating expenses.

F-105 Notes to the consolidated financial statements (Continued)

13 Property, plant and equipment Plant and Assets under Property equipment construction Total £m £m £m £m Cost: At 1 January 2006 ...... 408 1,633 48 2,089 Exchange differences ...... (27) (108) (6) (141) Acquisition of subsidiaries ...... 18 30 9 57 Additions ...... 6 77 133 216 Disposal of subsidiaries ...... (5) (36) (1) (42) Disposals ...... (1) (22) — (23) Transfers to assets classified as held for sale ...... (9) (31) — (40) Reclassifications ...... 8 82 (90) — At 31 December 2006 ...... 398 1,625 93 2,116

Accumulated depreciation: At 1 January 2006 ...... (68) (835) — (903) Exchange differences ...... 765— 72 Disposal of subsidiaries ...... 126— 27 Disposals ...... —17— 17 Depreciation for the year ...... (16) (143) — (159) Impairment ...... (1) (6) — (7) Transfer to assets classified as held for sale ...... 325— 28 At 31 December 2006 ...... (74) (851) — (925)

Carrying value at 31 December 2006 ...... 324 774 93 1,191

Cost—restated: At 1 January 2005 ...... 378 1,524 46 1,948 Exchange differences ...... 9 34 3 46 Acquisition of subsidiaries ...... 27 40 2 69 Additions ...... 5 67 88 160 Disposal of subsidiaries ...... (18) (76) (2) (96) Disposals ...... (1) (34) (1) (36) Transfers ...... (2) — — (2) Reclassifications ...... 10 78 (88) — At 31 December 2005 ...... 408 1,633 48 2,089

Accumulated depreciation: At 1 January 2005 ...... (59) (732) — (791) Exchange differences ...... — (16) — (16) Disposal of subsidiaries ...... 5 37 — 42 Disposals ...... — 28 — 28 Depreciation for the year ...... (14) (148) — (162) Impairment ...... — (5) — (5) Transfers ...... 1 — — 1 Reclassifications ...... (1) 1 — — At 31 December 2005 ...... (68) (835) — (903)

Carrying value at 31 December 2005—restated ...... 340 798 48 1,186

F-106 Notes to the consolidated financial statements (Continued)

13 Property, plant and equipment (Continued) The carrying value of property, plant and equipment includes finance leased assets of £32m (2005: £25m) in respect of property and £7m (2005: £13m) in respect of plant and equipment. The impairment of £7m in 2006 relates to a £5m write down of assets in the UK following the decision to exit the non barrier thin wall plastic packaging business and a £2m write down of assets following the decision to reduce the cost base for Make Up in France. The impairment was measured by determining the fair values of the assets, being market value less selling costs. The impairment of £5m in 2005 related to a write down of assets following the conversion of certain Beverage Can lines from steel to aluminium in Europe. The impairment was measured by determining the fair value of the assets, being market value less selling costs. There are no borrowing costs capitalised included in the carrying value of property, plant and equipment (2005: £nil).

14 Investments in subsidiaries The main subsidiaries, all of which are wholly owned, are shown below. Save as indicated with an asterisk, the capital is wholly owned by Rexam PLC. Subsidiaries incorporated in the UK are registered in England and Wales.

Country of Principal area Identity of Nature of Subsidiary incorporation of operation capital held business activities Rexam Beverage Can Company* ...... United States United States Common stock Consumer packaging Rexam Beverage Can South America SA* . Brazil South America Common stock Consumer packaging Rexam do Brazil Ltda* . Brazil South America Quotas Consumer packaging Rexam European Holdings Limited* . . UK UK Ordinary shares Holding company Rexam France SA* . . . France France Ordinary shares Consumer packaging Rexam Group Holdings Limited . . . UK UK Ordinary shares Holding company Rexam Holdings AB* . Sweden Continental Europe Ordinary shares Consumer packaging Rexam Inc* ...... United States United States Common stock Holding company Rexam Overseas Holdings Limited* . . UK UK Ordinary shares Holding company

F-107 Notes to the consolidated financial statements (Continued)

15 Investments in associates and joint ventures

Joint Associates venture Total £m £m £m At 1 January 2006 ...... 26 3 29 Exchange differences ...... (1) — (1) Share of post tax profits ...... 9—9 Disposals ...... (2) — (2) Repayment of loan ...... — (3) (3) At 31 December 2006 ...... 32 — 32

At 1 January 2005 ...... 26 3 29 Exchange differences ...... 4 — 4 Share of post tax profits ...... 7 — 7 Additions ...... — 3 3 Disposals ...... (10) (3) (13) Dividends paid ...... (1) — (1) At 31 December 2005 ...... 26 3 29

At 31 December 2006 and at 31 December 2005, the principal associates and joint ventures are a Korean associate, Hanil Can Company Limited, in which Rexam holds a 40% share and a UK joint venture, Kemsley Fields Limited, in which Rexam holds a 43.2% share. Sales, profit after tax, assets and liabilities on a 100% basis for all associates and joint ventures are £125m, £22m, £130m and £48m respectively (2005: £152m, £8m, £138m and £76m).

16 Available for sale financial assets

2006 2005 £m £m At 1 January ...... 30 28 Exchange differences ...... (3) 3 Income for the year ...... — 1 Cash received ...... 1 — Disposal of life insurance policies ...... (3) — Transfer to retirement benefit obligations ...... (2) (2) At 31 December ...... 23 30

Non current assets ...... 22 26 Current assets ...... 1 4 At 31 December ...... 23 30

Available for sale financial assets at 31 December 2006 include £21m (2005: £25m) of investments used to satisfy certain US pension obligations, of which £20m (2005: £21m) comprises listed investments, the fair value of which are determined directly by reference to published price quotations in an active market, and £1m (2005: £4m) comprises cash and cash equivalents. Also included in available for sale financial assets at 31 December 2006 are unlisted investments of £2m (2005: £2m). At 31 December 2005 there were life insurance policies of £3m which were sold during 2006 as detailed further in note 27.

F-108 Notes to the consolidated financial statements (Continued)

17 Inventories

2005 2006 restated £m £m Raw materials, stores and consumables ...... 137 128 Work in progress ...... 13 14 Finished goods ...... 204 222 354 364

Provisions of £6m (2005: £3m) recognised in operating expenses were made against inventories. In addition, provision releases of £3m (2005: £1m) were made relating to sales of glass containers to an independent customer at original cost and for the use of consumables that were fully provided.

18 Trade and other receivables

2005 2006 restated £m £m Non current assets: Trade receivables ...... 2 2 Provision for impairment ...... (2) (1) Net trade receivables ...... — 1 Prepayments ...... 7 2 Other receivables ...... 38 32 45 35

Current assets: Trade receivables ...... 424 391 Provision for impairment ...... (4) (10) Net trade receivables ...... 420 381 Prepayments ...... 13 10 Other receivables ...... 72 58 505 449

The carrying value of trade and other receivables also represents their fair value. Provision for impairment of £1m (2005: £nil) recognised in operating expenses were made against receivables. In addition, impairment releases of £1m (2005: £nil), recognised in operating expenses, were made relating to the collection of previously impaired receivables for Beverage Cans and £5m of provisions were utilised by writing down the gross value of receivables.

F-109 Notes to the consolidated financial statements (Continued)

19 Cash and cash equivalents

2006 2005 £m £m Cash at bank and in hand ...... 63 37 Short term bank deposits ...... 75 50 138 87

20 Assets and liabilities classified as held for sale The Petainer refillable bottle business is currently in the process of being sold. Indicative offers have been received for the business in excess of its carrying value at 31 December 2006, and other parties have expressed interest in acquiring it. It is expected that the sale will complete during 2007. In accordance with IFRS5 ‘‘Non-Current Assets Held for Sale and Discontinued Operations’’, the related assets and liabilities of the business are separately classified in the consolidated balance sheet as held for sale. An analysis of the assets and liabilities at 31 December 2006 is set out below.

£m Property, plant and equipment ...... 12 Deferred tax assets ...... 1 Inventories ...... 4 Trade receivables ...... 5 Total assets ...... 22

Borrowings ...... (1) Trade payables ...... (7) Retirement benefit obligations ...... (1) Total liabilities ...... (9) Net assets ...... 13

21 Trade and other payables

2005 2006 restated £m £m Current liabilities: Trade payables ...... (468) (397) Social security and other taxes ...... (48) (41) Accrued expenses ...... (113) (132) Other payables ...... (50) (37) (679) (607)

Non current liabilities: Accrued expenses ...... (8) (11) Other payables ...... (28) (25) (36) (36)

F-110 Notes to the consolidated financial statements (Continued)

22 Borrowings

2006 2005 £m £m Current liabilities: Bank overdrafts ...... (124) (91) Bank loans ...... (16) (7) Medium term notes ...... (128) (50) Finance leases ...... (7) (16) (275) (164)

Non current liabilities: Bank loans ...... (297) (362) Medium term notes ...... (830) (765) Finance leases ...... (13) (20) Convertible preference shares ...... — (70) (1,140) (1,217) Finance lease minimum lease payments: Less than 1 year ...... (7) (17) Between 1 and 5 years ...... (13) (20) Over 5 years ...... (1) (2) Total minimum lease payments ...... (21) (39) Future finance charges ...... 1 3 Present value of finance leases ...... (20) (36)

Present value of finance leases: Less than 1 year ...... (7) (16) Between 1 and 5 years ...... (12) (19) Over 5 years ...... (1) (1) (20) (36)

23 Derivative financial instruments

2006 2005 £m £m Non current assets ...... 116 92 Current assets ...... 32 43 Current liabilities ...... (13) (20) Non current liabilities ...... (1) — Total derivative financial instruments ...... 134 115

See note 24 for further details of derivative financial instruments.

F-111 Notes to the consolidated financial statements (Continued)

24 Financial instruments (i) Financial risk management Rexam bases its financial risk management on sound economic objectives and good corporate practice. Group treasury operations are carried out under strict policies and parameters defined by the Rexam Board of Directors and supervised by its Finance Committee. Rexam treasury is not run as a profit centre nor does it enter into any transactions for speculative purposes. All derivative financial instruments are measured at fair value at the balance sheet date. The Group’s major operational hedges comply with IAS39 and hedge accounting treatment is applied. Some smaller trading exposures are hedged on an economic basis and hedge accounting treatment is not applied where the compliance burden is deemed to be unduly onerous and the income statement volatility arising is not expected to be significant. In addition, some interest rate swaps used to manage Rexam’s fixed/floating debt mix, while economically effective, are ineligible for hedge accounting treatment. Fair value gains and losses on these hedges are recognised in the consolidated income statement. In 2006, there was a net gain of £7m (2005: £9m) on financing derivatives on which hedge accounting was not applied, recorded within exceptional interest in the consolidated income statement.

Interest rate risk The objective of Rexam’s interest rate risk management is to reduce the Group’s exposure to the impact of changes in interest rates in the currencies in which debt is borrowed. The detailed interest rate risk profile is shown in section (iv) below. Interest rate risk is managed through the issue of long term fixed rate bonds in both euros and sterling under Rexam’s medium term note programme and through the use of interest rate derivatives that are used to manage the overall fixed/floating mix of bank and bond debt.

Refinancing risk Rexam treasury mitigates refinancing risk by raising its debt requirements from a range of different sources and with a range of maturity dates. As at 31 December 2006, debt maturities ranged from less than one year (19% of drawn debt) to 2013 (33% of drawn debt). No more than 33% of drawn debt at 31 December 2006 expires in any one financial year.

Foreign exchange translation risk The Group seeks to mitigate the impact of foreign exchange movements between overseas currencies and sterling arising on the translation of the value of non UK operations into sterling for reporting purposes. This is achieved by borrowing a proportion of debt, either directly or through the use of cross currency swaps and forward foreign exchange contracts, in currencies which match or are closely linked to the currencies of the overseas businesses. This approach also provides some protection against the foreign exchange translation of overseas earnings as it matches the currency of earnings to the currency of the interest expense. These amounts are included in the consolidated financial statements by translation into sterling at the balance sheet date and, where hedge accounted, offset in equity against the translation movement in net assets.

F-112 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) Foreign exchange transaction risk The Group looks to mitigate currency risk arising on cross border trading transactions using a range of derivative instruments. Generally, the Group will hedge a higher proportion of shorter term, contractually committed transactions, but does also hedge some longer term contracts into the medium term. None of the foreign exchange derivative instruments at 31 December 2006 related to derivative trading activity, although some fair value gains and losses were taken to the consolidated income statement because IFRS hedge accounting treatment was not applied. Foreign exchange derivative instruments are used for hedging general business exposures in foreign currencies such as the purchase and sale of goods, capital expenditure and dividend flows. Where IFRS hedge accounting treatment is obtained, gains or losses on the derivative hedges are held in equity and recognised in the consolidated income statement when the losses or gains on the hedged transactions are recognised in the consolidated income statement.

Commodity risk The objective of commodity risk management is to identify those businesses that have exposures to commodities traded on commodity markets and to then determine which, if any, commodity market instruments are appropriate for hedging those exposures. To manage such exposures, the Group uses mainly over the counter instruments transacted with banks, which are themselves priced through a recognised commodity exchange, such as the London Metal Exchange. In addition, the Group makes use of physical supply contracts which effectively pass commodity risks through to customers. Rexam manages the purchase of certain raw materials, including aluminium and energy costs through physical supply contracts which, in the main, relate directly to commodity price indices. The supply contracts may be hedged with appropriate derivative contracts to fix and manage costs. The derivative hedge contracts may extend over several years. Usually a higher proportion of short term exposures are hedged than those further forward. The extent of the forward cover taken is judged according to market conditions and prices of futures prevailing at the time. None of the commodity derivative financial instruments at 31 December 2006 related to derivative trading activity, although some fair value gains and losses were taken to the consolidated income statement because IFRS hedge accounting was not applied. The commodity hedges relate to contracted and expected future purchases of aluminium and energy. Where IFRS hedge accounting treatment is obtained, gains or losses on the derivative hedges are held in equity and recognised in the consolidated income statement when the losses or gains on the hedged transactions are recognised in the consolidated income statement.

Embedded derivatives Certain supply contracts entered into by Group companies include embedded derivatives, normally used as part of the pricing mechanisms agreed with customers or suppliers. Under IFRS these embedded derivatives cannot be reported as being part of a hedging relationship, so fair value gains and losses are taken to the consolidated income statement. The effect of fair valuing these embedded derivatives is generally to recognise at the reporting date the impact, at prevailing market prices, of the pricing mechanism’s embedded derivative on the expected future supplies to be made under the contracts, even where a contract is in profit or would not otherwise require its future financial effects to be recognised.

F-113 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) (ii) Carrying amount and fair value of financial assets and liabilities at 31 December:

2006 2006 2005 2005 Carrying Fair Carrying Fair amount value amount value £m £m £m £m Financial assets: Cash and cash equivalents ...... 138 138 87 87 Available for sale financial assets ...... 23 23 30 30 Derivative financial instruments ...... 148 148 135 135 Financial liabilities: Borrowings: Bank overdrafts ...... (124) (124) (91) (91) Bank loans ...... (313) (313) (369) (369) Medium term notes ...... (958) (979) (815) (845) Finance leases ...... (20) (21) (36) (38) Convertible preference shares ...... ——(70) (76) Derivative financial instruments ...... (14) (14) (20) (20) Market values have been used to determine the fair values of cash and cash equivalents, available for sale financial assets, cross currency swaps and bank borrowings. The fair value of the medium term notes has been determined by reference to their quoted market prices at the close of business on 31 December. The fair value of the liability component of the convertible preference shares was determined using a market rate for an equivalent non convertible bond. The fair values of interest rate swaps, fixed rate loans and finance leases have been determined by discounting their cash flows at prevailing interest rates. The fair value of forward foreign exchange contracts has been determined by marking those contracts to market against prevailing forward foreign exchange rates. The fair value of forward aluminium commodity contracts has been determined by marking those contracts to market at prevailing forward aluminium prices. The fair value of embedded derivatives has been calculated using valuation models incorporating market commodity prices and foreign exchange rates.

F-114 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) (iii) Hedging activities The net fair values of the Group’s derivative financial instruments designated, and not designated, as hedging instruments are set out below. Net Total Non hedge Fair value Cash flow investment net fair accounted hedges hedges hedges value £m £m £m £m £m At 31 December 2006 Interest rate swaps ...... —3——3 Cross currency swaps ...... 22 80 — — 102 Forward foreign exchange contracts ...... — — (5) — (5) Forward aluminium commodity contracts ...... — — 36 — 36 Embedded derivatives ...... (2) — — — (2) 20 83 31 — 134

At 31 December 2005 Interest rate swaps ...... (8) 8 — — — Cross currency swaps ...... 4 64 — 6 74 Forward foreign exchange contracts ...... 1 — 4 — 5 Forward aluminium commodity contracts ...... 1 — 41 — 42 Embedded derivatives ...... (6) — — — (6) (8) 72 45 6 115

The fair values of the Group’s non derivative financial instruments at 31 December designated as hedging instruments are set out below. 2006 2005 £m £m Bank loans ...... (140) (106) Medium term notes ...... (538) (410) (678) (516)

The principal amounts of derivative financial instruments not hedge accounted and hedge accounted are set out below.

Net Non hedge Fair value Cash flow investment accounted hedges hedges hedges £m £m £m £m At 31 December 2006 Interest rate swaps with interest payable at fixed rates .... 524 — — — Interest rate swaps with interest receivable at fixed rates . . . 346 254 — — Cross currency swaps ...... 120 432 — — Forward foreign exchange contracts ...... 154 — 331 — Forward aluminium commodity contracts ...... 7 — 107 — Forward energy contracts ...... 2— 8— Embedded derivatives ...... 15 — — —

F-115 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) Fair value hedges The Group has designated interest rate swaps and the interest element of cross currency swaps as fair value hedges whereby interest is receivable at fixed interest rates varying from 4.4% to 7.1%. These swaps hedge the exposure to changes in the fair value of medium term notes which mature in 2009 and 2013. The cross currency swap element of swaps referred to above hedge changes in the fair value of US dollar intercompany loans which mature in 2009.

Cash flow hedges The Group has designated forward foreign exchange, aluminium commodity and energy contracts as cash flow hedges. The aluminium commodity and energy contracts hedge anticipated future purchases of aluminium and energy respectively and mature between 2007 and 2008. Forward foreign exchange contracts hedge foreign currency transaction risk and mature between 2007 and 2009. The associated fair value gains and losses on cash flow hedges are transferred to inventory in the period in which the underlying hedged transactions occur.

Net investment hedges The Group has designated foreign currency borrowings as hedges of net investments in its subsidiaries in the Eurozone and the USA.

(iv) Interest rate risk The following table sets out the carrying amount, by maturity, of the Group’s non derivative financial instruments that are exposed to interest rate risk.

Effective Total interest Within 1 to 2 to 3 to 4 to More than carrying rate 1 year 2 years 3 years 4 years 5 years 5 years amount % £m£m£m£m£m£m£m At 31 December 2006 Fixed rate: Bank loans ...... 10.5 (6) (1) (1) (1) — — (9) Medium term notes ...... 5.4 (128) — (368) — — (456) (952) Finance leases ...... 7.5 (7) (2) (2) (1) (1) — (13) (141) (3) (371) (2) (1) (456) (974) Floating rate: Cash and cash equivalents ...... 138———— — 138 Bank overdrafts ...... (124) ———— —(124) Bank loans ...... (10) (3) (3) (2) (273) (13) (304) Medium term notes ...... — (6) — — — — (6) Finance leases ...... — (7) — — — — (7) 4 (16) (3) (2) (273) (13) (303)

F-116 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued)

Effective Total interest Within 1 to 2 to 3 to 4 to More than carrying rate 1 year 2 years 3 years 4 years 5 years 5 years amount % £m£m£m£m£m£m£m At 31 December 2005 Fixed rate: Bank loans ...... 4.6 (3) (1) (1) — — — (5) Medium term notes ...... 6.9 (40) (388) — (370) — — (798) Finance leases ...... 7.5 (16) (7) (3) (1) (1) (1) (29) Convertible preference shares ...... 8.0 ————— (70)(70) (59) (396) (4) (371) (1) (71) (902) Floating rate: Cash and cash equivalents ...... 87———— — 87 Bank overdrafts ...... (91) ———— — (91) Bank loans ...... (4) (3) (3) (3) (339) (12) (364) Medium term notes ...... (10) — (7) — — — (17) Finance leases ...... — — (7) — — — (7) (18) (3) (17) (3) (339) (12) (392)

Cash at bank earns interest at floating rates based on daily bank deposit rates in the relevant currency. Short term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short term deposit rates. Other floating rate financial instruments are at the appropriate LIBOR interest rates as adjusted by variable margins. Interest on floating rate financial instruments is re-priced at intervals of less than one year. Interest on fixed rate financial instruments is fixed until maturity of the instrument. The effect of interest rate swaps and cross currency swaps, including principal amounts only, is to modify the amounts and interest rates of medium term notes as set out below.

Effective Total interest Within 1 to 2 to 3 to 4 to More than carrying rate 1 year 2 years 3 years 4 years 5 years 5 years amount % £m£m£m£m£m£m£m At 31 December 2006 Fixed rate ...... 5.5 (124) — (182) — — (322) (628) Floating rate ...... (4) (6) (99) — — (133) (242) Medium term notes after effects of hedging . (128) (6) (281) — — (455) (870) Principal amounts of cross currency swaps . . — — (88) — — — (88) Medium term notes before effects of hedging ...... (128) (6) (369) — — (455) (958) At 31 December 2005 Fixed rate ...... 7.2 (40) (384) — (205) — — (629) Floating rate ...... (10) (4) (7) (111) — — (132) Medium term notes after effects of hedging . . (50) (388) (7) (316) — — (761) Principal amounts of cross currency swaps . . — — — (54) — — (54) Medium term notes before effects of hedging . (50) (388) (7) (370) — — (815)

F-117 Notes to the consolidated financial statements (Continued)

24 Financial instruments (Continued) (v) Currency risk Non derivative financial instruments that create potentially significant currency exposures, since they are denominated in currencies other than the functional currency of the entities which hold them, are set out below.

2006 2005 £m £m Borrowings denominated in Brazilian reais by entities in Brazil with a US dollar functional currency ...... (26) (25) Borrowings denominated in US dollars by an entity in Sweden ...... (13) (13) Cash denominated in local currencies held by entities in South America with a US dollar functional currency ...... 52 13 Intercompany deposit denominated in US dollars by an entity in the UK with a euro functional currency ...... 59 34 Borrowings denominated in sterling by an entity in the UK with a euro functional currency ...... — (5) In addition, there are minor balances in currency bank accounts held by various entities for operational reasons, instruments in local currency hedged back to the entity’s functional currency and currency borrowings used to fund loans to overseas subsidiaries in their functional currency or to provide net investment hedges. These financial instruments do not generate significant currency exposures.

(vi) Credit risk The maximum credit risk exposure of the Group’s financial assets at 31 December 2006 is represented by the amounts reported under the corresponding balance sheet headings. There are no significant concentrations of credit risk associated with financial instruments of the Group.

(vii) Collateral Included within borrowings are secured loans of £2m (2005: £1m), the security for which is principally property.

F-118 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (i) Summary

Gross Net Defined retirement retirement benefit Other Total Retiree benefit Deferred benefit pensions pensions pensions medical obligations tax obligations £m £m £m £m £m £m £m At 1 January 2006 ...... (514) (23) (537) (244) (781) 233 (548) Exchange differences ...... 21 1 22 24 46 (15) 31 Current service cost ...... (22) (4) (26) (2) (28) 6 (22) Exceptional items (see below) ...... 18 — 18 39 57 (20) 37 Total included in operating profit ...... (4) (4) (8) 37 29 (14) 15 Net finance cost ...... (11) — (11) (12) (23) 8 (15) Actuarial changes ...... 135 — 135 20 155 (48) 107 Cash contributions and benefits paid ..... 44 4 48 12 60 (18) 42 Transfers ...... 3— 3— 3 — 3 At 31 December 2006 ...... (326) (22) (348) (163) (511) 146 (365) Curtailment and settlement: Disposal of businesses ...... 3 — 3 — 3 (1) 2 Curtailment: US defined benefit pension plan changes ...... 15 — 15 — 15 (5) 10 Curtailment: Gain on retiree medical .... — — — 39 39 (14) 25 Exceptional items ...... 18 — 18 39 57 (20) 37

At 1 January 2005 ...... (477) (20) (497) (269) (766) 228 (538) Exchange differences ...... (17) (2) (19) (29) (48) 16 (32) Current service cost ...... (22) (4) (26) (2) (28) 7 (21) Exceptional items (see below) ...... 6 — 6 46 52 (18) 34 Total included in operating profit ...... (16) (4) (20) 44 24 (11) 13 Net finance cost ...... (13) — (13) (16) (29) 10 (19) Actuarial changes ...... (20) — (20) 8 (12) 4 (8) Cash contributions and benefits paid ..... 26 4 30 18 48 (14) 34 Transfers ...... 3 (1) 2 — 2 — 2 At 31 December 2005 ...... (514) (23) (537) (244) (781) 233 (548)

Curtailment: Disposal of businesses ...... 6 — 6 — 6 (2) 4 Past service credit: Gain on retiree medical . — — — 46 46 (16) 30 Exceptional items ...... 6 — 6 46 52 (18) 34

The balance for net retirement benefit obligations at 31 December 2006 of £365m (2005: £548m) is included in the consolidated balance sheet as retirement benefit obligations of £514m (2005: £783m), other receivables of £3m (2005: £2m) and deferred tax assets of £146m (2005: £233m). Rexam pays the retiree medical costs on behalf of certain prior year disposed businesses which are subsequently reimbursed by those businesses. The £3m (2005: £2m) included in other receivables represents the actuarial value of the total amount that is reimbursable.

F-119 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) (ii) Defined benefit pension plans The Group operates various defined benefit pension schemes throughout the world, the largest being in the UK and USA. With respect to the UK, a full actuarial valuation by a qualified actuary was carried out as at 31 March 2005 and updated to 31 December 2006. With respect to the United States, a full actuarial valuation by a qualified actuary was carried out as at 1 January 2006 and updated to 31 December 2006.

UK USA Other Total UK USA Other Total 2006 2006 2006 2006 2005 2005 2005 2005 £m £m £m £m £m £m £m £m Amounts recognised in the consolidated balance sheet: Fair value of plan assets ...... 1,388 856 69 2,313 1,296 997 64 2,357 Present value of funded obligations ...... (1,514) (970) (74) (2,558) (1,533) (1,164) (80) (2,777) Funded defined benefit pension plans ...... (126) (114) (5) (245) (237) (167) (16) (420) Present value of unfunded obligations ...... — (32) (49) (81) — (39) (55) (94) Net liability ...... (126) (146) (54) (326) (237) (206) (71) (514) Amounts recognised in the consolidated income statement: Included in employee benefits expense: Current service cost ...... (10) (8) (4) (22) (11) (8) (3) (22) Curtailments and settlements—exceptional items ...... 215118 6—— 6 (8) 7 (3) (4) (5) (8) (3) (16) Included in net finance cost: Expected return on plan assets ...... 80 43 3 126 74 48 3 125 Interest cost ...... (72) (60) (5) (137) (71) (61) (6) (138) 8 (17) (2) (11) 3 (13) (3) (13) Total recognised in the consolidated income statement ...... — (10) (5) (15) (2) (21) (6) (29) Amounts recognised in the statement of recognised income and expense: Actuarial gains/(losses) on plan assets ...... 36 (5) 1 32 148 (7) 4 145 Actuarial gains/(losses) on retirement benefit obligations ...... 48 41 14 103 (140) (12) (13) (165) Amounts recognised in the statement of recognised income and expense ...... 84 36 15 135 8 (19) (9) (20) Changes in the fair value of plan assets: At 1 January ...... 1,296 997 64 2,357 1,102 931 56 2,089 Exchange differences ...... — (110) (2) (112) —99(1)98 Acquisition of subsidiaries ...... —————1—1 Expected return on plan assets ...... 80 43 3 126 74 48 3 125 Actuarial gains/(losses) ...... 36 (5) 1 32 148 (7) 4 145 Employer contributions ...... 27 11 3 41 146222 Plan participant contributions ...... 2—243—14 Benefits paid ...... (53) (80) (2) (135) (45) (81) (1) (127) At 31 December ...... 1,388 856 69 2,313 1,296 997 64 2,357

%%%%%%%% Major categories of plan assets as a percentage of total plan assets at 31 December: Equities ...... 738484873 13 47 47 Bonds ...... 25 92 47 50 24 86 47 51 Cash ...... 2—523162

F-120 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) Changes in the fair value of defined benefit pension obligations:

UK USA Other Total UK USA Other Total 2006 2006 2006 2006 2005 2005 2005 2005 £m £m £m £m £m £m £m £m At 1 January ...... (1,533) (1,203) (135) (2,871) (1,359) (1,087) (120) (2,566) Exchange differences ...... — 131 2 133 — (119) 4 (115) Acquisition of subsidiaries ...... —————(1)—(1) Current service cost ...... (10) (8) (4) (22) (11) (8) (3) (22) Curtailments and settlements—exceptional items ...... 215118 6—— 6 Interest cost ...... (72) (60) (5) (137) (71) (61) (6) (138) Actuarial gains/(losses) ...... 48 41 14 103 (140) (12) (13) (165) Plan participant contributions ...... (2) — (2) (4) (3) — (1) (4) Benefits paid ...... 53 80 5 138 45 82 4 131 Transfer from available for sale financial assets ...... —2—2—3—3 Transfer to liabilities classified as held for sale ...... ——11———— At 31 December ...... (1,514) (1,002) (123) (2,639) (1,533) (1,203) (135) (2,871)

Principal actuarial assumptions:

UK USA Other UK USA Other 2006 2006 2006 2005 2005 2005 %%%%%% Future salary increases ...... 4.40 4.50 2.89 4.25 4.50 2.89 Future pension increases ...... 3.00 — 1.95 2.75 — 1.72 Discount rate ...... 5.00 5.75 4.46 4.75 5.40 3.92 Inflation rate ...... 3.00 2.50 1.95 2.75 2.50 1.91 Expected return on plan assets (net of administration expenses): Equities ...... 7.37 7.24 6.88 6.95 7.23 6.83 Bonds ...... 4.62 4.37 4.08 4.10 4.26 3.57 Cash ...... 4.87 2.96 4.05 4.35 2.82 2.02 To develop the expected return on plan assets assumption, the Group considered the current level of expected returns on risk free investments, primarily government bonds, the historical level of the risk premium associated with the asset class concerned and the expectations for future returns of the asset class. The resulting rates for equities, bonds and cash are then reduced to allow for administration expenses. The mortality assumptions used in valuing the liabilities of the UK pension plan in 2006 and 2005 are based on the standard tables PA92 as published by the Institute and Faculty of Actuaries. These tables are adjusted to reflect the circumstances of the plan membership. The life expectancy assumed for male pensioners aged 65 is 19.6 years (2005: 19.6 years) and for female pensioners aged 65 is 22.4 years (2005: 22.4 years). The mortality assumptions used in valuing the liabilities of the US pension plans are based on the RP2000 combined active and retiree mortality table projected to 2006 weighted 70% blue collar and 30% white collar (2005: UP1 994 mortality table). The life expectancy assumed for male pensioners aged 65 is 17.8 years (2005: 17.3 years) and for female pensioners aged 65 is 20.2 years (2005: 20.7 years).

F-121 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) Information on defined benefit plans:

2006 2005 2004 £m £m £m Fair value of plan assets ...... 2,313 2,357 2,089 Present value of defined benefit obligations ...... (2,639) (2,871) (2,566) Net liability ...... (326) (514) (477) Cumulative actuarial gains/(losses) ...... 36 (99) (79)

2006 2005 2004 Experience gains/(losses) arising on defined benefit obligations: Amount (£m) ...... 103 (165) (142) Percentage of present value of defined benefit obligations (%) ...... 4 (6) (6) Experience gains arising on plan assets: Amount (£m) ...... 32 145 63 Percentage of plan assets (%) ...... 1 63

The Group expects to contribute £45m in cash to its defined benefit pension plans in 2007.

(iii) Other pension plans The Group operates a number of defined contribution plans, included as part of other pensions in (i) above, for which the charge in the consolidated income statement for the year was £1m (2005: £1m) and cash contributions were £1m (2005: £1m).

F-122 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) (iv) Retiree medical Certain current and former employees in the USA are provided with cover for medical costs and life assurance, referred to in these consolidated financial statements as retiree medical. These unfunded benefits are assessed with the advice of a qualified actuary.

2006 2005 £m £m Amounts recognised in the consolidated balance sheet: Present value of the retiree medical obligation ...... (163) (244) Amounts recognised in the consolidated income statement: Included in employee benefits expense: Current service cost ...... (2) (2) Curtailments—exceptional item ...... 39 — Past service credit—exceptional item ...... — 46 37 44 Included in net finance cost: Interest cost (including administration costs of £1m (2005: £1m)) ...... (12) (16) Total recognised in the consolidated income statement ...... 25 28 Amounts recognised in the statement of recognised income and expense: Actuarial gains ...... 20 8 Changes in the present value of the retiree medical obligation: At 1 January ...... (244) (269) Exchange differences ...... 24 (29) Current service cost ...... (2) (2) Curtailments—exceptional item ...... 39 — Past service credit—exceptional item ...... — 46 Net finance cost ...... (12) (16) Actuarial gains ...... 20 8 Benefits paid ...... 12 18 At 31 December ...... (163) (244)

Principal actuarial assumptions:

2006 2005 %% Discount rate ...... 5.75 5.40 Healthcare cost trend rate ...... 13.0 in 2003 13.0 in 2003 reducing reducing to 5.0 over to 5.0 over 10 years 10 years The mortality assumptions used in valuing the liabilities of retiree medical are based on the RP2000 combined active and retiree blue collar table projected to 2006 (2005: UP1994 mortality table).

F-123 Notes to the consolidated financial statements (Continued)

25 Retirement benefit obligations (Continued) The life expectancy assumed for male pensioners aged 65 is 16.8 years (2005: 17.3 years) and for female pensioners aged 65 is 19.6 years (2005: 20.7 years). Assumed healthcare cost trend rates can have a significant effect on amounts reported for retiree medical. A one percentage point change in assumed rates would have the following impact:

2006 2005 £m £m 1% increase: Service cost and interest cost combined increase ...... (2) (2) Retiree medical obligation increase ...... (13) (20) 1% decrease: Service cost and interest cost combined reduction ...... 1 1 Retiree medical obligation reduction ...... 11 17

2006 2005 2004 Information on retiree medical: Present value of retiree medical obligation (£m) ...... (163) (244) (269) Cumulative actuarial gains/(losses) (£m) ...... 15 (5) (13) Experience gains/(losses) arising on retiree medical obligation: Amount (£m) ...... 20 8 (13) Percentage of present value of retiree medical obligation (%) ...... 12 3(5)

F-124 Notes to the consolidated financial statements (Continued)

26 Provisions

Environmental Emission Restructuring Incentives compliance rights Other (Note i) (Note ii) (Note iii) (Note iv) (Note v) Total £m £m £m £m £m £m At 1 January 2006 ...... (3) (8) (27) (9) (5) (52) Exchange differences ...... —— 3——3 Charge for the year ...... (18) — — (4) (9) (31) Released in the year ...... —1——12 Utilised ...... 11 5 2 — 1 19 Utilisation to settle obligation ..... —— —10—10 At 31 December 2006 ...... (10) (2) (22) (3) (12) (49) At 31 December 2006 Current liabilities ...... (10) (2) (3) (3) — (18) Non current liabilities ...... — — (19) — (12) (31) (10) (2) (22) (3) (12) (49) At 31 December 2005 Current liabilities ...... (2) (2) (3) (9) (2) (18) Non current liabilities ...... (1) (6) (24) — (3) (34) (3) (8) (27) (9) (5) (52)

Notes (i) Restructuring The provision relates primarily to amounts set aside for various reorganisations within the Group. Most of the utilisation of these provisions is likely within the next year. (ii) Incentives Incentives relate to the cash settled phantom share option scheme. This provision is short term, with the timing of its utilisation being dependent on various performance criteria being met. For further details of the phantom share option scheme see note 28 and the Remuneration Report. (iii) Environmental compliance Environmental compliance mainly relates to the US and is long term in nature with the timing of utilisation unknown due to the need to complete remedial investigations, to negotiate remedial plans with local authorities and to implement agreed plans. (iv) Emission rights The utilisation of emission rights in the Glass businesses is likely within the next year. (v) Other Other provisions include £8m (2005: £nil) in respect of a legacy litigation claim relating to an acquired business. The claim had been initiated before Rexam assumed control of that business. The amount of the final liability and timing of payment, if any, is dependent upon the outcome of the litigation. Other provisions also include £3m (2005: £4m) relating to onerous property contracts in the UK, the timing of the utilisation of which is in accordance with those contracts and £1m (2005: £1m) relating to business disposals, the amount of the final liability and timing of payment, if any, being dependent upon the outcome of negotiations.

F-125 Notes to the consolidated financial statements (Continued)

27 Equity

Attributable to equity shareholders of Rexam PLC Convertible Ordinary preference Deferred Share Capital Fair value share share share premium redemption Retained and other Minority Total capital capital capital account reserve earnings reserves interests equity £m £m £m £m £m £m £m £m £m At 1 January 2006 ...... 356 1 — 748 279 (431) 56 — 1,009 Exchange differences ...... — — — — — — (95) — (95) Actuarial gains on retirement benefits ...... — — — — — 155 — — 155 Tax on actuarial gains on retirement benefits ...... — — — — — (48) — — (48) Net investment hedges ..... — — — — — — 28 — 28 Cash flow hedges recognised . — — — — — — 32 — 32 Tax on cash flow hedges .... ——————4—4 Cash flow hedges transferred to inventory ...... — — — — — — (44) — (44) Cash flow hedges transferred to the income statement . . . — — — — — — (1) — (1) Sale of available for sale financial assets ...... — — — — — — (2) — (2) Net profit/(loss) recognised directly in equity ...... — — — — — 107 (78) — 29 Profit for the financial year . . — — — — — 223 — — 223 Total recognised profit/(loss) for the year ...... — — — — — 330 (78) — 252 Share options value of services provided ...... ————— 1——1 Share options proceeds from shares issued ...... 2——11————13 Purchase of Rexam PLC shares by Employee Share Trust ...... — — — — — (4) — — (4) Early redemption of convertible preference shares ...... 17 (1) 72 — — (9) — — 79 Redemption of deferred shares ...... — — (72) — 72 — — — — Increase in minority interests . ———————22 Dividends paid ...... — — — — — (103) — — (103) At 31 December 2006 ..... 375 — — 759 351 (216) (22) 2 1,249

F-126 Notes to the consolidated financial statements (Continued)

27 Equity (Continued)

Ordinary Convertible Share Capital Fair value share share premium redemption Retained and other Total capital capital account reserve earnings reserves equity £m £m £m £m £m £m £m At 1 January 2005 ...... 354 1 741 279 (552) 3 826 Exchange differences ...... — — — — — 26 26 Actuarial losses on retirement benefits . — — — — (12) — (12) Tax on actuarial losses on retirement benefits ...... — — — — 4 — 4 Net investment hedges ...... — — — — — 7 7 Cash flow hedges recognised ...... — — — — — 60 60 Tax on cash flow hedges ...... — — — — — (9) (9) Cash flow hedges transferred to inventory ...... — — — — — (31) (31) Net profit/(loss) recognised directly in equity ...... — — — — (8) 53 45 Profit for the financial year ...... — — — — 223 — 223 Total recognised profit for the year .... — — — — 215 53 268 Share options value of services provided — — — — 6 — 6 Share options proceeds from shares issued ...... 2 — 7 — — — 9 Purchase of Rexam PLC shares by Employee Share Trust ...... — — — — (3) — (3) Dividends paid ...... — — — — (97) — (97) At 31 December 2005 ...... 356 1 748 279 (431) 56 1,009

F-127 Notes to the consolidated financial statements (Continued)

27 Equity (Continued)

Available for Net Total sale financial Cash flow investment fair value Translation assets hedge hedge and other Fair value and other reserves reserve reserve reserve reserve reserves £m £m £m £m £m At 1 January 2006 ...... 18 (1) 32 7 56 Exchange differences ...... (95) — — — (95) Net investment hedges ...... ———2828 Cash flow hedges recognised ...... — — 32 — 32 Tax on cash flow hedges ...... —— 4—4 Cash flow hedges transferred to inventory . . . — — (44) — (44) Cash flow hedges transferred to the income statement ...... — — (1) — (1) Sale of life insurance policies ...... — (2) — — (2) At 31 December 2006 ...... (77) (3) 23 35 (22) At 1 January 2005 ...... (8) (1) 12 — 3 Exchange differences ...... 26 — — — 26 Net investment hedges ...... — — — 7 7 Cash flow hedges recognised ...... — — 60 — 60 Tax on cash flow hedges ...... — — (9) — (9) Cash flow hedges transferred to inventory . . . — — (31) — (31) At 31 December 2005 ...... 18 (1) 32 7 56

The balance of £3m on the available for sale financial assets reserve at 31 December 2006 represents an unrealised loss on investments used to satisfy certain US pension obligations. The balance of £1m at 31 December 2005 represented an unrealised loss of £3m on investments used to satisfy certain US pension obligations offset by an unrealised gain of £2m on life insurance policies. This gain

F-128 Notes to the consolidated financial statements (Continued)

27 Equity (Continued) was subsequently transferred to the consolidated income statement in 2006 following the sale of those policies.

Convertible preference Non voting shares of deferred Convertible Non voting Ordinary 1284⁄7p shares of Ordinary preference deferred Unclassified shares of issued 0.0001p shares of shares of shares of shares of 642⁄7p issued and fully issued and 642⁄7p 1284⁄7p 0.0001p 0.0001p Number of shares and fully paid paid cancelled authorised authorised authorised authorised Thousands Thousands Billions Thousands Thousands Billions Billions At 1 January 2006 ...... 553,590 69,397 — 794,534 69,399 — — Shares issued on employee share option schemes ...... 3,771 — — — — — — Conversion of convertible preference shares ...... 23 (66) — 132 (66) — — Early redemption of convertible preference shares ...... 25,944 (69,331) 72,462 25,948 (69,333) 72,462 — Redemption and redesignation of deferred shares ...... — — (72,462) — — (72,462) 72,462 At 31 December 2006 ...... 583,328 — — 820,614 — — 72,462 At 1 January 2005 ...... 550,851 69,417 — 794,495 69,419 — — Shares issued on employee share option schemes ...... 2,732 — — — — — — Conversion of convertible preference shares ...... 7 (20) — 39 (20) — — At 31 December 2005 ...... 553,590 69,397 — 794,534 69,399 — —

At 1 January 2006, Rexam’s share capital comprised ordinary shares and convertible preference shares. The holders of convertible preference shares had a right to convert their holdings on 28 February in any year until 2015 into fully paid ordinary shares on the basis of 0.3508 new ordinary shares for each convertible preference share. Following a proposal from the Board, shareholders approved the compulsory conversion of all of the issued convertible preference shares into new ordinary shares at an enhanced conversion rate of 0.3742 new ordinary shares for each convertible preference share held on the record date of 13 October 2006. On 16 October 2006, the 69,331,279 issued convertible preference shares were converted into 25,943,764 new ordinary shares. As part of the conversion process the difference in value between the aggregate nominal value of the convertible preference shares prior to conversion and the aggregate nominal value of the new ordinary shares was redesignated into 72,462,081,857,143 deferred shares of 0.0001 pence each. The deferred shares were redeemed for 1p per holding on 31 December 2006 and their authorised share capital was redesignated as unclassified share capital.

28 Share based payment Rexam’s equity settled share based payment schemes comprise the Long Term Incentive Scheme (LTIS), the Executive Share Option Scheme (ESOS) and the Savings Related Share Option Scheme (SAYE). Rexam’s cash settled share based payment scheme is the Phantom Stock Plan (Phantoms).

F-129 Notes to the consolidated financial statements (Continued)

28 Share based payment (Continued) LTIS Annual grants of options over ordinary shares are made to executive directors and certain senior executives. The Total Shareholder Return (TSR) of Rexam is measured and compared to a comparator group of listed companies. The percentage of share options that actually vest is dependent upon Rexam’s comparative TSR over a three year measurement period, commencing on 1 January of the year in which the option is granted. If performance targets are met, share options vest on 1 January, three years after the start of the measurement period and can be exercised at a nominal cost to the employee. The expiry date is six years and eleven months after the grant date.

ESOS Annual grants of options over ordinary shares are made to certain executives. All shares will vest if the performance target (annual growth rate of pre determined economic profit) is met over the three year measurement period. Share options are exercisable three years after grant date and expire ten years after grant date. The exercise price is set at market value using the average of the mid market price of a Rexam ordinary share over a three day period preceding the grant date.

SAYE All employee SAYE schemes are open to eligible employees resident in the UK and Ireland. Annual grants of options over ordinary shares are currently made at an exercise price of 80% of the market value of Rexam shares at grant date. Share options vest three, five or seven years after grant date, depending on the scheme selected by the employee at grant and expire six months after vesting.

Phantoms This scheme operates in the same way as the ESOS with the same terms and conditions, but is made to certain executives located outside the UK and is settled in cash. The employee benefit expense recognised in relation to share based payment is set out below.

2006 2005 £m £m LTIS, ESOS and SAYE equity settled schemes ...... 1 6 Phantoms cash settled scheme ...... (1) 2 — 8

The provision for phantoms at 31 December 2006 was £1m (2005: £6m). The intrinsic value of phantoms that had vested but had not been exercised at 31 December 2006 was £1m (2005: £1m). The fair values of the share options granted during the year were calculated using the models set out below.

Valuation model LTIS...... Monte Carlo/Binomial ESOS...... Binomial SAYE...... Black Scholes Phantoms ...... Binomial

F-130 Notes to the consolidated financial statements (Continued)

28 Share based payment (Continued) The number of options and weighted average exercise prices of all share option schemes are set out below.

2006 2005 Weighted Weighted 2006 average 2005 average Number of exercise price Number of exercise price options Pence options Pence Outstanding at 1 January ...... 21,829,872 272.2 23,616,397 235.7 Granted ...... 4,938,792 313.9 6,023,110 298.3 Forfeited ...... (3,174,632) 101.6 (2,080,461) 102.2 Exercised ...... (6,085,904) 316.2 (5,714,064) 210.6 Expired ...... ——(15,110) 440.7 Outstanding at 31 December ...... 17,508,128 299.6 21,829,872 272.2 Exercisable at 31 December ...... 2,024,787 336.9 2,931,045 390.7

The exercise prices and average remaining contractual lives of share options by scheme are set out below.

2006 2005 2006 2006 Weighted average 2005 2005 Weighted average Options Range of remaining Options Range of remaining outstanding exercise prices contractual life outstanding exercise prices contractual life Number Pence Years Number Pence Years LTIS...... 5,833,788 0.1 5.2 6,670,161 0.1 5.1 ESOS...... 7,047,050 196.9 to 552.7 7.6 9,616,129 196.9 to 514.8 7.7 SAYE...... 1,123,629 184.7 to 435.0 2.8 1,262,623 184.7 to 400.0 3.1 Phantoms ..... 3,503,661 239.8 to 552.7 8.0 4,280,959 239.8 to 514.8 7.7 The key assumptions used in valuing share options.

2006 2005 Expected dividend growth (%) ...... 3.1 to 3.7 3.4 to 4.3 Expected and historical volatility (%) ...... 17.4 to 30.2 21.4 to 32.7 Risk free interest rate (%) ...... 4.3 to 4.6 4.0 to 4.7 Expected life of LTIS options (years) ...... 3 3 Expected life of ESOS options (years) ...... 5 5 Expected life of SAYE options (3 year, 5 year and 7 year contracts) (years) ...... 3.2, 5.2 and 7.2 3.2, 5.2 and 7.2 Expected life of phantoms options (years) ...... 3 to 10 3 to 10 Weighted average share price (pence) ...... 521 487 Weighted average fair value of options granted (pence) ...... 121 135 Weighted average exercise price (pence) ...... 317 262

F-131 Notes to the consolidated financial statements (Continued)

28 Share based payment (Continued) The assumptions made to incorporate the effects of expected early exercise have been included by assuming an expected option life based on historical exercise patterns for each option scheme. Historical volatilities are arrived at using a period comparable with the expected life of the option. The correlation coefficient for the LTIS is calculated using the correlation matrix for the TSR simulation using three year daily historical stock price series for each company in the comparator group, including Rexam, from the beginning of the measurement date. A ten year life is initially assumed to calculate the fair value of phantoms. As the fair value is updated at each subsequent valuation the expected life is reduced for each year until exercise.

Rexam Employee Share Trust The Group operates an employee share trust, the Rexam Employee Share Trust (the Trust), that owns 203,198 ordinary shares of 642⁄7p in Rexam PLC at 31 December 2006 (2005: 4,495) acquired at an average cost of £5.03 (2005: £5.20) and included in the consolidated balance sheet within retained earnings at a cost of £1m (2005: £nil). The shares are used to satisfy LTIS and certain ESOS share option exercises. The purchases are funded by a combination of cash contributions from participating companies and interest free loans from Rexam PLC. Dividends receivable during the year have been waived. The administration expenses of the Trust are borne by the Trust. Shares are allocated by the Trust when relevant options under the schemes are exercised. The market value of the shares at 31 December 2006 was £1m (2005: £nil).

29 Acquisition of subsidiaries (i) Details of acquisitions in 2006

Percentage of Nature of Date of acquisition equity acquired activity Egyptian Can Making Company (Ecanco) .... 6 February 2006 100% Beverage Cans Airspray NV ...... 23 May 2006 82.8%* Plastic Packaging World Glory Limited (FangXin) ...... 16 June 2006 100% Plastic Packaging True Pack Private Limited ...... 25 September 2006 100% Plastic Packaging HTW Beverage Can (India) Private Limited . . 14 October 2006 51% Beverage Cans

* At 31 December 2006 the percentage ownership had increased to 99.71%.

F-132 Notes to the consolidated financial statements (Continued)

29 Acquisition of subsidiaries (Continued)

2006: Ecanco Airspray FangXin Other Total £m £m £m £m £m Consideration: Cash ...... 59 106 20 10 195 Adjustment to Precise Technology cash consideration .... —— — 2 2 Accrued costs ...... —— 1 1 2 Deferred ...... —— 3— 3 59 106 24 13 202 Carrying values at acquisition ...... 13 25 20 5 63 Fair value adjustments ...... 17 21 (5) (1) 32 Fair value of net assets acquired ...... 30 46 15 4 95 Goodwill ...... 29 60 9 9 107 Consideration ...... 59 106 24 13 202 Net borrowings/(cash) assumed ...... (1) — 11 3 13 Gross consideration ...... 58 106 35 16 215

Goodwill represents the value of synergies and the workforce. In accordance with IFRS3 ‘‘Business Combinations’’, the £2m adjustment to Precise Technology cash consideration in 2006 has been accounted for as an adjustment to goodwill in 2006.

Final fair value As adjustments previously for Precise As 2005: reported Technology restated £m £m £m Consideration: Cash ...... 109 — 109 Deferred ...... 1 — 1 110 — 110 Fair value of net liabilities/(assets) acquired ...... 10 (8) 2 Goodwill ...... 120 (8) 112

F-133 Notes to the consolidated financial statements (Continued)

29 Acquisition of subsidiaries (Continued) (ii) Fair value tables for 2006 acquisitions

Carrying Fair value value at Fair value of net assets acquisition adjustments acquired £m £m £m Ecanco: Intangible assets ...... —1414 Property, plant and equipment ...... 9413 Working capital ...... 3— 3 Net cash ...... 1— 1 Deferred and current tax ...... — (1) (1) Net assets ...... 13 17 30 Airspray: Intangible assets ...... 23335 Property, plant and equipment ...... 14 (2) 12 Working capital ...... 9 (2) 7 Deferred and current tax ...... — (8) (8) Net assets ...... 25 21 46 FangXin: Intangible assets ...... —1 1 Property, plant and equipment ...... 28 (5) 23 Working capital ...... 3 (2) 1 Net borrowings ...... (11) — (11) Deferred and current tax ...... —1 1 Net assets ...... 20 (5) 15

The fair value adjustments for Ecanco comprise the recognition of intangible assets of £14m and the revaluation of property, plant and equipment of £4m less attributable tax of £1m. The fair value adjustments for Airspray comprise the revaluation of intangible assets of £33m less attributable tax of £8m, the downward revaluation of property, plant and equipment of £2m and £2m of various working capital adjustments. The fair value adjustments for FangXin comprise the recognition of intangible assets of £1m, the downward revaluation of property, plant and equipment of £5m less attributable tax of £1m, inventory provisions of £4m, the revaluation of land use rights of £1m and £1m of other working capital adjustments. Due to the timing of the acquisitions, fair values for Ecanco, Airspray and FangXin are provisional and will be finalised in the 2007 consolidated financial statements.

Ecanco Airspray FangXin £m £m £m Operating profit included in the consolidated income statement in 2006 . . . 75 1 Combined pro forma sales and operating profit for 2006 relating to all 2006 acquisitions, assuming they were acquired on 1 January 2006, were £83m and £14m respectively.

F-134 Notes to the consolidated financial statements (Continued)

29 Acquisition of subsidiaries (Continued) (iii) Final fair value table for Precise Technology

Provisional Additional Total fair Carrying fair value fair value Total fair value of net value at adjustments adjustments value liabilities acquisition in 2005 in 2006 adjustments acquired £m £m £m £m £m Intangible assets ...... 11 30 4 34 45 Property, plant and equipment ...... 34 — 12 12 46 Deferred tax assets ...... 1 (1) 1 — 1 Inventories ...... 21 — (1) (1) 20 Trade and other receivables ...... 34 — 1 1 35 Cash and cash equivalents ...... 3 — — — 3 Borrowings ...... (102) — — — (102) Trade and other payables ...... (31) (1) (3) (4) (35) Current tax liabilities ...... 1 (1) — (1) — Deferred tax liabilities ...... (6) (10) (6) (16) (22) Net (liabilities)/assets ...... (34) 17 8 25 (9)

(iv) Cash flows arising from acquisitions

2006 2005 £m £m Cash consideration ...... 195 109 Cash and cash equivalents acquired ...... — (4) Cash payments for prior year acquisitions ...... 7 1 Net cash outflow in the cash flow statement ...... 202 106

30 Disposal of subsidiaries (i) Summary of disposal of subsidiaries

2006 2005 £m £m Goodwill ...... 9 7 Property, plant and equipment ...... 15 54 Working capital ...... 5 19 Deferred tax ...... 1 1 Borrowings ...... (4) (43) Retirement benefit obligations ...... (3) (6) Net assets disposed ...... 23 32 Cash proceeds ...... 19 5 Loss on disposal of subsidiaries—exceptional items after tax ...... (4) (27)

F-135 Notes to the consolidated financial statements (Continued)

30 Disposal of subsidiaries (Continued) (ii) Cash flows arising from disposal of subsidiaries

2006 2005 £m £m Cash proceeds net of costs ...... 20 5 Cash and cash equivalents disposed ...... (1) — Net cash inflow in the cash flow statement ...... 19 5

31 Movement in net borrowings

Cash and cash Financing equivalents Convertible derivative and bank Bank Medium Finance preference financial Net overdrafts loans term notes leases shares instruments borrowings £m £m £m £m £m £m £m At 1 January 2006 ...... (4) (369) (815) (36) (70) 74 (1,220) Acquisition of subsidiaries ...... — (13) — — — — (13) Disposal of subsidiaries ...... —4——— — 4 Cash flow movements ...... 14 60 (113) 15 5 (4) (23) Redemption of convertible preference shares . . — — — — 69 — 69 Non cash movements ...... 4 5 (30) 1 (4) 35 11 At 31 December 2006 ...... 14 (313) (958) (20) — 105 (1,172)

At 1 January 2005 ...... (2) (350) (824) (45) (70) 126 (1,165) Acquisition of subsidiaries ...... — (129) — — — — (129) Disposal of subsidiaries ...... — 43 — — — — 43 Cash flow movements ...... (11) 86 52 13 5 (22) 123 Non cash movements ...... 9 (19) (43) (4) (5) (30) (92) At 31 December 2005 ...... (4) (369) (815) (36) (70) 74 (1,220)

Financing derivative financial instruments are those that relate to underlying items of a financial nature. In 2006 and 2005 these comprised interest rate swaps and cross currency swaps. For further details on derivative financial instruments see note 24.

32 Commitments (i) Operating lease commitments The Group leases offices and warehouses under non cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group also leases plant and equipment under cancellable operating leases.

F-136 Notes to the consolidated financial statements (Continued)

32 Commitments (Continued) An analysis of the total future minimum lease payments under non cancellable operating leases is set out below.

Plant and Plant and Property equipment Property equipment 2006 2006 2005 2005 £m £m £m £m Less than 1 year ...... 23 3 23 3 Between 1 and 5 years ...... 44 4 53 3 Over 5 years ...... 64 — 80 — Total ...... 131 7 156 6

The total future minimum sublease receipts under non cancellable operating leases is £8m (2005: £9m).

(ii) Capital commitments

2006 2005 £m £m Contracts placed for future capital expenditure not provided in the consolidated financial statements: Property, plant and equipment ...... 72 30 Intangible assets ...... 1 — 73 30

33 Contingent liabilities

2006 2005 £m £m Guarantees of borrowings ...... 7 6 In an international group a variety of claims arise from time to time; some have little or no foundation in law or in fact and others cannot be quantified. Provision has been made in these consolidated financial statements against those claims which the Board consider are likely to result in significant liabilities.

F-137 HEAD OFFICE OF THE ISSUER Rexam PLC 4 Millbank London SW1P 3XR United Kingdom

TRUSTEE The Law Debenture Trust Corporation p.l.c. Fifth Floor 100 Wood Street London EC2V 7EX United Kingdom

PAYING AGENT, TRANSFER AGENT AND REGISTRAR Citibank, N.A., London Branch Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

LEGAL ADVISORS TO THE ISSUER As to matters of English law and U.S. law Allen & Overy LLP One Bishops Square London E1 6AD United Kingdom

LEGAL ADVISORS TO THE JOINT BOOK-RUNNING MANAGERS As to matters of U.S. law Davis Polk & Wardwell 99 Gresham Street London EC2V 7NG United Kingdom

INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH United Kingdom Merrill Corporation Ltd, London 08ZBT10401 $550,000,000

Rexam PLC

$550,000,000 6.75% Senior Notes Due 2013

OFFERING MEMORANDUM

May 29, 2008

Joint Book-Running Managers

Barclays Capital Citi RBS Greenwich Capital