21 assets and liabilities classified as held for sale

An analysis of the assets and liabilities classified as held for sale at 31 December, principally the discontinued Closures division, is set out below.

For further information on the discontinued Closures division see note 10.

Other assets classified as held for sale of £2m (2009: £4m) comprise properties in the US deemed surplus to requirements.

22 trade and other payables

The carrying amounts of total trade and other payables are denominated in the following currencies, which in most instances are the functional currencies of the relevant subsidiaries.

23 borrowings

The Group has a range of bank borrowings maturing between 2012 and 2015. 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 US public bond, a US private placement, a subordinated bond and medium term notes in issue. The US public bond and US private placement totalling $775m were issued at a fixed price and mature in 2013. 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 into 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 mature in 2013. They were issued at fixed rates of interest although some have been swapped to floating rates of interest in euro through the use of interest rate derivatives. The bulk of the Group's drawn debt is currently represented by various bond issues with significant headroom available under its committed bank facilities.

Total minimum lease payments at 31 December 2010 are £1m (2009: £3m).

Included within borrowings are secured loans of £15m (2009: £15m), the security for which is principally property.

The carrying amounts of total borrowings are denominated in the following currencies.

24 net borrowings

Net borrowings at 31 December by instrument.

Movement in net borrowings.

Reconciliation of net borrowings to the consolidated balance sheet.

25 financial instruments

(i) carrying amount and fair value of financial assets and liabilities

Analysis of the carrying values and fair values at 31 December, by category and by class, of financial assets and liabilities.

Market values have been used to determine the fair values of available for sale financial assets, bank overdrafts and floating rate bank loans. The carrying values of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short term nature. The fair values of the US public bond, subordinated bond and medium term notes have been determined by reference to quoted market prices at the close of business on 31 December. The US private placement is not a publicly traded instrument and its fair value has been approximated using the market value of the US public bond, which has a similar maturity date. The fair values of interest rate swaps, cross currency 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 commodity contracts has been determined by marking those contracts to market at prevailing forward prices.

In both 2010 and 2009, all financial instruments measured at fair value are categorised as level 2 in the fair value measurement hierarchy, whereby the fair value is determined by using valuation techniques, except for £27m (2009: £18m) of fixed rate listed investments included in available for sale financial assets that are classified as level 1. The valuation techniques for level 2 instruments use observable market data where it is available, for example quoted market prices, and rely less on estimates.

(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 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 onerous and the income statement volatility arising is not expected to be significant.

(a) market risk: currencies

Currency risks arise from the multi currency cash flows within the Group. These risks arise from exchange rate fluctuations relating to the translation of balance sheet items of foreign subsidiaries (translation risk) and from currency flows from sales and purchases (transaction risk).

The policy regarding translation risk is 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. Some cross currency swaps used to manage the Group's currency exposures, whilst economically effective, are ineligible for hedge accounting treatment.

The policy regarding transaction risk is to hedge the reported net transaction exposure in full less an allowance for variability in forecasting. This is generally achieved through the use of forward foreign exchange contracts with amounts hedged being based on the reporting from individual Group businesses. None of the foreign exchange derivative instruments at 31 December 2010 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.

Transactional foreign exchange risks are hedged by Group treasury unless it is a legal requirement in the country where the foreign exchange risk arises that hedging is carried out locally. In the latter 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.

The currency denomination of borrowings at 31 December 2010 was 75% in US dollars, 22% in euros and 3% in all other currencies (2009: 70% US dollars, 27% euros, 3% all other currencies).

(b) market risk: interest rates

Changes in interest rates on interest bearing receivables and floating rate debt in different currencies create interest rate risk. The objective of the Group's interest rate risk management is to manage its exposure to the impact of changes in interest rates in the currencies in which debt is borrowed. Group policy is to keep between 20% and 80% of interest at fixed rates. Interest rate risk is managed through the issue of fixed rate debt and through the use of interest rate derivatives that are used to manage the overall fixed to floating mix of debt, which was 76% fixed and 24% floating at 31 December 2010 (2009: 72% and 28%). 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 at any point in time.

Cash at bank earns interest at floating rates based on bank deposit rates in the relevant currency. Short term deposits are usually made for periods varying 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 repriced 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, whilst economically effective, are ineligible for hedge accounting treatment. Fair value gains and losses on these hedges are recognised in the consolidated income statement. In 2010, there was a loss of £12m (2009: gain £14m) on fair value changes on financing derivative financial instruments, disclosed separately within interest expense in the consolidated income statement.

(c) market risk: commodity prices

Changes in the market price of commodities used by the Group create commodity risk. Group policy is to manage these risks through both its supply chain management and through use of financial derivatives. Where financial derivatives are used, 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, resin and energy costs through physical supply contracts which, in the main, relate directly to commodity price indices. With regard to aluminium, which represents the Group's largest commodity exposure, the policy is to eliminate as far as possible any market price variability through hedging in tandem with contractual commitments to customers. Where Rexam assumes the aluminium price risk on customer contracts, it has defined a risk appetite with a predetermined aggregate consolidated income statement limit arising from any related aluminium hedging activities. Its position against this limit is monitored and reported on a monthly basis. For other commodities, the policy is to follow an incremental hedge approach over a period of up to three years in order to manage the price year over year and limit uncertainty. None of the commodity derivative financial instruments at 31 December 2010 related to derivative trading activity, although some fair value gains and losses were taken to the consolidated income statement because hedge accounting was not applied. The commodity hedges mainly relate to contracted and expected future purchases of aluminium, but also include resin and energy.

(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. 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.

(b) The translation impact of overseas subsidiaries is not included in the sensitivity analysis.

(c) The sensitivity analysis ignores any tax implications.

currencies

The foreign exchange rate sensitivity analysis set out in the table below is based on foreign currency positions, other than each Group entity's own functional currency, on the balance sheet at 31 December. The analysis includes only risks arising from financial instruments and gives the estimated impact on profit before tax and equity of a reasonable increase and decrease in exchange rates between currency pairs with significant currency positions.

The impact of currency risk on net investment hedges is offset by the translation of overseas subsidiaries on consolidation.

The net impact of currency translation in 2010 resulted in sales and underlying profit from continuing operations increasing by £22m and £7m respectively compared with 2009 as set out below.

interest rates

At 31 December 2010, if the US dollar interest rate were increased by 1% with all other variables held constant, profit before tax would increase by £7m as a result of US dollar denominated floating rate debt and interest rate and cross currency derivatives that are not hedge accounted. If euro and sterling interest rates were increased by 1% with all other variables held constant, profit before tax would reduce by £8m as a result of fixed rate debt being swapped into floating rate debt. A reduction in interest rates would not have a significant effect on profit before tax. There was no significant interest rate risk relating to equity in either year.

commodity prices

At 31 December 2010, there was no price risk relating to the income statement since all significant commodity derivatives were treated as cash flow hedges with movements being reflected in equity. If the aluminium price was increased or reduced by 10% with all other variables held constant, equity would increase or decrease by £45m, respectively (2009: £22m).

equity prices

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

(e) liquidity risk

An analysis of undiscounted contractual maturities for non derivative financial liabilities, derivative financial liabilities and assets and undrawn committed debt facilities is set out below.

The Group monitors its liquidity to maintain a sufficient level of undrawn committed debt facilities, thereby ensuring financial flexibility. As at 31 December 2010, Rexam had £1,078m of undrawn committed debt facilities available (2009: £1,174m).

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 2010, committed debt maturities ranged from 2% repayable in 2012 (2009: 5% repayable in 2010) to 24% repayable in 2067 (2009: 21% repayable in 2067). No more than 38% of committed debt matures in any one financial year (2009: 37%).

(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 control quality measures that are applied to counterparty institutions and also limits on maximum exposure levels to any one counterparty.

To manage credit risk, the maximum limits for bank exposures held under Group policy are set out below by individual counterparty credit rating category. These limits are used when making investments and for the use of derivative instruments. The table also sets out the Group's financial asset exposure at 31 December for each counterparty credit rating category.

See note 19 for information on credit risk with respect to customers.

(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. The Group views its ordinary share capital as equity. This objective is always subject to an overriding principle that capital must be managed to ensure the Group's ability to continue as a going concern in 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 2010, the Group's net debt to EBITDA for financial covenant purposes was 1.8 times (2009: 2.2 times). The Group aims to keep this ratio below 2.5 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 reflects non sterling amounts at average exchange rates. EBITDA is underlying operating profit after adding back depreciation and amortisation of computer software and adjusted where appropriate to include acquisitions on a pro forma basis and excludes 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 are set out below.

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 4.375% to 6.75% (2009: 4.375% to 6.75%) and payable at floating rates. These swaps hedge the exposure to changes in the fair value of medium term notes which mature in 2013 (2009: 2013). The cross currency swaps hedge changes in the fair value of the euro subordinated bond which matures in 2067. Net ineffectiveness gains of £5m were included in interest in 2010 (2009: net loss £4m).

cash flow hedges

The Group has designated forward foreign exchange contracts and aluminium and gas commodity contracts as cash flow hedges. Forward foreign exchange contracts hedge foreign currency transaction risk and mature between 2011 and 2013 (2009: between 2010 and 2011). The aluminium commodity and gas commodity contracts hedge anticipated future purchases of aluminium and gas respectively, and mature between 2011 and 2013 (2009: between 2010 and 2011).

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

An analysis of the Group's non derivative financial instruments designated as net investment hedges with respect to its subsidiaries, principally in the eurozone and the US, are set out below.

An analysis of the notional amounts and maturity dates for derivative financial instruments is set out below.

For forward foreign exchange contracts, there are other currencies traded which have been excluded as the fair values for these contracts were immaterial.