tomkins_20f.htm

____________________

A Member of the Audit Committee

R Member of the Remuneration Committee

C Member of the CSR Committee

Directors’ interests in the Company

The interests of the Directors in the share capital of the Company are shown below. No Director had any beneficial interest in the shares or loan stock of any other Group undertaking. No changes took place in Directors’ interests during the period from 4 January 2009 to 24 February 2009.

As at 3 January 2009

Number of shares(1)

As at 29 December 2007

Number of shares(2)

Beneficial

Non-

beneficial

Beneficial

Non-

beneficial

Executive Directors

J Nicol

2,251,034

–

2,095,652

–

J W Zimmerman

303,122

–

228,400

–

Non-Executive Directors

R D Gillingwater

11,000

–

9,000

–

J McDonough

9,000

–

7,000

–

D B Newlands

327,515

–

322,515

–

L M Quinn

24,000

–

22,000

–

D H Richardson

19,729

–

17,729

–

D D S Robertson

12,500

–

10,500

–

Notes

(1) Includes 338,918 deferred shares for J Nicol and 91,108 deferred shares for J W Zimmerman.

(2) Includes 431,271 deferred shares for J Nicol and 98,398 deferred shares for J W Zimmerman.

Senior management

Denise Burton – Company Secretary, aged 49: was appointed to her current role in November 2007. She joined the Company in March 1989 as Assistant Company Secretary and subsequently was Deputy Company Secretary for over ten years.

David Carroll – Executive Vice President – Corporate Development, aged 51: was appointed to his current position in October 2007, having previously had executive responsibilities for four business units within the Group since joining in 2003. He joined the Group from Magna International Inc. where he had operated in various sales and planning roles since 1984 becoming Executive Vice President, Marketing and Corporate Planning in 2002.

Terry O'Halloran – Chief Operating Officer – Building Products, aged 61: was appointed to his current role in May 2007, having served as the President – Building Products since January 2007, and having been Group President – Air Systems Components Division since 1999. He has had 23 years’ experience with the Group in the Building Products business group, including his roles as President of Air Systems Components Limited Partners and President of Ruskin.

George Pappayliou – General Counsel, aged 54: was appointed to his present role on 9 April 2003. He joined the Group in August 1990 with the acquisition of Philips Industries. Thereafter he served as the General Counsel of Tomkins Industries and later as the Group’s General Counsel – North America.

Alan Power – Executive Vice President – Industrial and Automotive, aged 46: joined the Group in his current role in September 2008 from Van Rob where he was President and Chief Operating Officer. He has held similar positions at National Rubber Technologies and Decoma International where he spent a large part of his career.

Mildred Woryk – Vice President – Human Resources, aged 49: was appointed to her current role on 1 May 2006. She joined the Group in October 1993 and, prior to her current appointment, served as Assistant General Counsel.

Key governance principles

The Board promotes the highest standards of corporate governance within the Company through its support and application of the Principles of Good Governance set out in section 1 of the Combined Code. A summary of the Company’s system of applying the principles and the manner in which the provisions in section 1 have been complied with are set out below. Section 1 of the Combined Code sets out the main and supporting Principles of Good Governance for companies which are split into the following areas:

1. Directors

2. Remuneration

3. Accountability and audit

4. Shareholder relations

Each of these areas is addressed in turn.

1. Directors

A. The Board

The Company is controlled through its Board of Directors whose main roles are to:

–	create value for shareholders;

–	provide leadership of the Company;

–	approve the Company’s strategic objectives;

–	ensure that the necessary financial and other resources are made available to the management to enable them to meet those objectives; and

–	operate within a framework of effective controls which enables the assessment and management of principal business risks.

The Board, which has reserved certain specific matters to itself for decision (set out in a Schedule of Reserved Matters), is responsible for approving overall Group strategy and financial policy, acquisition and divestment policy and major capital expenditure projects. It also appoints and removes members of the Board and Board Committees, reviews recommendations of the Audit Committee, Remuneration Committee and Nomination Committee, and the appointment of the independent auditor. It also reviews the financial performance and operation of each of the Company’s businesses. The Company has granted qualifying third- party indemnities to the Directors that remain in force at the time of this report.

The Board sets the standards and values of the Company and much of this has been embodied in the Company’s Code of Conduct and Ethics and Human Rights Policy which can be found on the Company’s website, www.tomkins.co.uk. The Code of Conduct and Ethics applies to all Directors, officers and employees, including the principal executive, financial and accounting officers, as required by section 406 of Sarbanes-Oxley, the related rules of the SEC and the rules of the NYSE. The Code of Conduct and Ethics contains provisions (Reporting of Violations) under which employees can report violations of company policy or any applicable law, rule or regulation, including those of the SEC. US employees have the added protection of section 806 of Sarbanes-Oxley, which prohibits the discrimination by a company or others against an employee where such violations are reported. The current procedure, which is set out in Tomkins’ Code of Conduct and Ethics, provides for information to be given anonymously or by named employees under conditions of confidentiality. Those employees who come forward and give their name are assured that they will receive the full protection of section 806 of Sarbanes-Oxley and no retaliation will take place. This is of particular importance since 48% of the Company’s employees are based in the US. Furthermore, the Company ensures that the principles are applied in other jurisdictions, subject to compliance with local employment and other laws.

The Board has delegated to the CEO responsibility for the day-to-day management of the Group subject to certain financial limits above which Board approval is required. The delegated authority includes such matters as operations, acquisitions and divestitures, investments, capital expenditure, borrowing facilities and foreign currency transactions.

The Board comprises a Non-Executive Chairman, five additional Non-Executive Directors and two Executive Directors who, together with their different financial, commercial, technical and operational expertise and cultures, bring with them a wide range of experience to the Company.

Key governance principles (continued)

The Board has determined that the Non-Executive Directors, Richard Gillingwater, John McDonough, Leo Quinn, David Richardson and Struan Robertson, are independent, as they are independent of the Company’s executive management and free from any material business or other relationship with the Company (either directly or as a partner, shareholder or officer of an organisation that has a relationship with the Company). Accordingly, the Board believes that there are no such relationships that could materially interfere with the exercise of its independent judgement.

Non-Executive Directors are normally appointed for a minimum period of two years which is renewable by agreement with the Board and is subject to approval by shareholders at the AGM. The terms and conditions of appointment of Non-Executive Directors are available for inspection at the Company’s registered office during normal business hours on weekdays and will also be available for inspection at the place of the AGM from 15 minutes before the meeting until it ends. The Combined Code recommends the appointment of a senior independent Non-Executive Director, and Richard Gillingwater fulfilled this role in 2008. The roles of Non-Executive Directors are to:

–	scrutinise the performance of management in meeting the agreed objectives;

–	help develop proposals on strategy; and

–	monitor the reporting of performance, including satisfying themselves as to the integrity of financial information and that financial controls and systems of risk management put in place by the Company are robust and effective.

They meet together from time to time in the absence of management and the Chairman normally presides over such meetings.

On appointment, Non-Executive Directors receive a range of information about the Company by way of an induction programme which aims to provide an understanding of the Company as a whole, including its strategy, structure, geographic spread of operations, financial position, markets, products, technologies and people, as well as their legal responsibilities as Directors and, where appropriate, any training that is necessary for them to carry out their duties effectively. The Board and its Committees receive, in a timely manner, detailed information concerning the matters to be discussed at meetings to enable them to make informed decisions. The Directors have access to the advice and services of the Company Secretary (whose removal may be effected only with the approval of the Board) and can obtain independent professional advice at the Company’s expense in furtherance of their duties, if required.

The Board ordinarily meets not less than five times a year and will hold additional meetings when circumstances require. During the year ended 3 January 2009, the Board met on five occasions. Between meetings, the Chairman and CEO update the Non-Executive Directors on current matters and there is frequent contact to progress the affairs of the Company. With the encouragement of the CEO, the Non-Executive Directors have regular contact with senior management through their presentations at Board meetings, at strategic reviews and on other occasions.

Attendance by each individual Director at Board and principal Committee meetings held during 2008

	Board		Audit Committee		Remuneration Committee		Nomination Committee*		Corporate Social Responsibility Committee
Meetings held in 2008		5		4		5		3		4
Meetings attended:
David Newlands		5		n/a		4		3		n/a
Richard Gillingwater		5		4		5		3		n/a
John McDonough		5		3		5		3		4
James Nicol		5		n/a		n/a		n/a		4
Leo Quinn		5		3		5		3		n/a
David Richardson		5		4		n/a		3		n/a
Struan Robertson		5		n/a		n/a		3		4
John Zimmerman		5		n/a		n/a		n/a		n/a
*By written resolution

Notes

n/a = not applicable (where a Director is not a member of a Committee).

Key governance principles (continued)

1. Directors (continued)

A. The Board (continued)

All of the Directors served throughout the year. John McDonough and Leo Quinn were unable to attend one Audit Committee meeting and David Newlands was unable to attend one Remuneration Committee meeting. The remaining Directors attended all Board and relevant Committee meetings in 2008. During the year, other Directors have attended meetings of the Directors’ membership of Committees Audit Committee, Remuneration Committee, Nomination Committee and Corporate Social Responsibility Committee by invitation. These details are not included in the table above. On the rare occasion when a Director cannot attend a meeting, he will normally make his views on the agenda items known prior to the meeting to the Chairman or, in respect of Committee meetings, to the Chairman of the respective Committee.

Directors' membership of Committees

	Audit	Nomination	Remuneration	Corporate Social Responsibility	Disclosure	General Purposes
David Newlands		C	M		C
James Nicol				M	M	C
John Zimmerman					M	M
Richard Gillingwater	M	M	M
John McDonough	M	M	C	M
Leo Quinn	M	M	M
David Richardson	C	M
Struan Robertson		M

C – Chairman M – Member

At the Company’s forthcoming AGM, and in accordance with the Company’s Articles of Association, Richard Gillingwater and Struan Robertson will retire from the Board by virtue of length of service and will seek reappointment.

B. Chairman and CEO

There is a clear division of responsibility between the Chairman and the CEO, with neither having unfettered powers of decision with respect to substantial matters. The Chairman is responsible for running the Board and ensures that all Directors receive sufficient relevant information on financial, business and corporate matters to enable them to participate effectively in Board decisions. In advance of each meeting, the Board is provided with comprehensive briefing papers on items under consideration.

The Chairman, David Newlands, is also Chairman of KESA Electricals plc and PayPoint plc. Whilst these are important appointments, the Board believes that the Chairman continues to be able to carry out his duties and responsibilities effectively for the Company. In view of this, as set out in the Remuneration Committee report, the Board renewed David Newlands’ letter of appointment for a further three years from 18 February 2009. This was felt to be appropriate in order to take advantage of his knowledge of the Company, his experience of earlier recessions, his experience in chairing Tomkins during the current period of unprecedented economic turmoil and finally his guidance in relation to the refinancing of the Company’s banking facilities.

The CEO’s primary role is the running of the Company’s businesses and the development and implementation of strategy. The Non-Executive Directors have the opportunity to meet with the Chairman and with the Chief Executive periodically, either together or separately, to consider and discuss a wide range of matters affecting the Company, its business, strategy and other matters.

C. Board Committees

The Board has established a number of committees and receives reports of their proceedings. Each committee has its own delegated authority as defined in its terms of reference which are reviewed periodically by the Board. The Board is satisfied that its committees have written terms of reference which conform with best corporate governance practice. The terms of reference for all Board committees can be found under ‘Governance’ in the ‘Responsibilities’ area of the Company’s website, www.tomkins.co.uk, or a copy can be obtained by application to the Company Secretary at the Company’s registered office.

The Board appoints the chairmen and members of all Board committees upon the recommendation of the Nomination Committee. The Company Secretary is Secretary to all Board committees. The principal committees, their membership and a brief description of their duties are set out below.

Audit Committee

Details of the Audit Committee and its work can be found on pages 50 and 51.

Nomination Committee

The Nomination Committee makes recommendations to the Board on all proposed appointments of Directors through a formal and transparent procedure. The Committee meets as and when required.

Key governance principles (continued)

In accordance with the Company’s Articles of Association, Directors are subject to reappointment at the AGM immediately following the date of their appointment and thereafter they have to seek reappointment no more than three years from the date they were last reappointed. The Committee recommends to the Board the names of the Directors who are to seek reappointment at the AGM in accordance with the Company’s Articles of Association. The Companies Act 2006 imposed new duties on Directors to avoid a conflict of interests, particularly in relation to third-party arrangements and, during the year, the Board delegated to the Nomination Committee the duty of looking at new appointees and examining any possible sources of potential conflict. This duty was incorporated into the Nomination Committee’s terms of reference in July 2008. The Committee and the Board are aware of and support the principles set out in section A.4 of the Combined Code relating to appointments to the Board.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee meets at least three times a year. The Committee is chaired by an independent Non-Executive Director and its membership also includes the CEO. Its principal role is to determine, on behalf of the Board, the framework or broad policy and objectives on CSR and, in particular, in the areas of health, safety and the environment and propose any amendments to existing policies for approval by the Board. It also reviews management’s performance in the achievement of HSE objectives and reviews HSE reports produced by business units for compliance with all local health, safety and environmental codes of practice, legislation and relevant industry practice.

More details of the work of the Corporate Social Responsibility Committee can be found in the Corporate Responsibility Report to shareholders available on the Company’s website, www.tomkins.co.uk.

Remuneration Committee

Details of the Remuneration Committee and its work can be found on pages 52 to 60.

Disclosure Committee

The Disclosure Committee meets as and when required for the purpose of, inter alia, reviewing and approving for release all price-sensitive information relating to the Company and compliance with the Disclosure and Transparency Rules of the UKLA.

General Purposes Committee

The General Purposes Committee meets as and when required. It comprises Executive Directors and senior executives and the quorum requires the presence of at least one Executive Director. The Committee deals principally with day-to-day matters of a routine nature and matters delegated to it by the Board.

D. Board, Committee and Chairman evaluations

Under the direction of the Senior Independent Director, Richard Gillingwater, evaluations of the effectiveness of the Board, its Committees and Chairman were conducted during the year. The evaluation processes followed the same approach as the previous year which drew on the experiences of the previous evaluations of the Board and its Committees and concentrated on six key elements:

–

the optimum mix of skills and knowledge amongst the Directors;

–

clarity of goals and processes;

–

tailoring the evaluation to the specific circumstances of Tomkins;

–

the culture of candour that encourages constructive evaluation;

–

regular reviews of assessment criteria; and

–

full disclosure of procedures and criteria to the Board.

Board and Committees

A Board performance evaluation took place during the year, and a report was prepared and considered by the Board. The vast majority of questions were answered with positive comments and with scores indicating a high degree of satisfaction with the Board, Committees and Chairman and there was a very strong conclusion that we have a well-functioning Board and Committees.

There were some suggestions for improvement, including the allocation of more time on the Company’s longer-term objectives and planning, with particular reference to the sufficiency of the number of Board meetings in the current macroeconomic climate. Executive and senior management succession planning and talent development within the Company was another area which came under scrutiny, with particular reference to the positions of the Chairman, and the CEO and his immediate reports. Other areas considered were the effectiveness of Board activities in terms of considering certain financial and structural issues in a proactive way and improvement of budgetary control. In relation to strategic planning and objectives, there were suggestions for improvement in simple KPIs to measure business performance as well as financial performance, KPIs for CSR matters being of particular use. Suggestions for improving specific Non- Executive Director contributions to the Board included more location visits.

Key governance principles (continued)

1. Directors (continued)

D. Board, Committee and Chairman evaluations (continued)

Board and Committees (continued)

In relation to the Committees, the scores were high. It was noted that the Audit Committee is well served by staff functions and it was thought that both internal and external audit had worked well, though there was a request for more discussion and understanding of the principal risks and uncertainties faced by the Company and mitigation actions. In relation to the Remuneration Committee, it was suggested that more work on major remuneration developments was needed. The strong commitment to the CSR initiative was commended, together with the quality of review and effectiveness of the process and it was recommended that the CSR Committee continue to support the environmental and community aspects of the CSR initiative.

Chairman

For the evaluation of the Chairman, the questionnaire sought views across a broad range of his responsibilities. There was considerable positive feedback from Directors on the role of the Chairman and his effective leadership of the Board, his interaction with the CEO, his excellent relationship with members of the Board, the high regard in which he is held by senior management and, in particular, his efforts to ensure a clear distinction between the role of the Board and that of management.

The Senior Independent Director discussed various matters raised with the Chairman and the Non- Executive Directors as appropriate and arrangements were made to address the matters raised by the respective evaluations.

2. Remuneration

See the Remuneration Committee report on pages 52 to 60.

3. Accountability and audit

A. Financial reporting

In the Directors’ report, the Board seeks to provide a detailed understanding of each business of the Group, together with a balanced and understandable assessment of the Group’s position and prospects.

B. Internal control

Further information on the internal control environment within which the Group operates may be found in the Directors’ statement on internal control on pages 48 and 49.

C. ‘Whistleblower’ reporting procedures

Under section 301 of Sarbanes-Oxley, all SEC-registered companies, including non-US companies such as Tomkins, acting through the Audit Committee of the Board, must provide a procedure for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters. The Audit Committee and the Board have established a procedure for the confidential and anonymous submission by employees of concerns regarding these matters.

4. Shareholder relations

The Company places a high degree of importance on maintaining good relationships and communications with both institutional and private investors and ensures that shareholders are kept informed of significant Company developments.

To assist members of the Board to gain an understanding of the views of institutional shareholders, at each of its meetings the Board receives an Investor Relations Report which covers a wide range of matters including a commentary on the perception of the Company and views expressed by the investment community, media reports, share price performance and analysis. Analysts’ reports and estimates are also made available to all Directors. The announcement of interim management statements, half- year and full-year results provides opportunities for the Company to answer questions from institutional shareholders covering a wide range of topics. The Chairman, CEO, Finance Director and Investor Relations staff hold an ongoing dialogue with institutional shareholders to ensure the mutual understanding of objectives. The CEO and other senior executives participate in industry conferences which are attended by existing and potential shareholders. The Company exercises care to ensure that all price-sensitive information is released to all shareholders at the same time, as required by the Listing Rules of the UKLA and consistent with the SEC Regulation FD in the US.

The Company’s website provides shareholders and potential investors with information about the Company, including annual and half-yearly reports, recent announcements, investor presentations, share price information, Group policies, corporate responsibility and governance matters. Shareholders are also able to put questions to the Company via its website.

Shareholders also have the opportunity to attend the AGM to put questions to the Board. Full details of the 2009 AGM are in the Notice of Meeting. It has been the Company’s practice to send the Notice of Meeting and related papers to shareholders at least 20 working days before the AGM and to propose separate resolutions on each substantially separate issue.

The Board notes that section 2 of the Combined Code seeks to encourage more active participation by institutional shareholders, including entering into a dialogue with companies and making considered use of their votes – principles which the Company supports.

Key governance principles (continued)

Substantial shareholdings

Voting rights notified under the Disclosure and Transparency Rules of the UKLA at 24 February 2009 are set out in the table below.

	No. of shares	% of total voting rights
Schroders plc	88,316,340	10.02
Sprucegrove Investment Management Limited	43,969,223	4.99
Invesco Ltd (through AiM Trimark, Powershares etc.)	43,431,651	4.93
Aberdeen Asset Management, PLC	42,965,662	4.87
Tradewinds Global Investors, LLC	39,043,040	4.43
Legal & General Group plc	35,075,908	3.98

Shareholder rights

The Company’s issued share capital is comprised of ordinary shares of 9 cents each and deferred shares of £1 each. The Company’s authorised share capital previously included convertible cumulative preference shares of $50 each and convertible cumulative redeemable preference shares of $50 each, both of which were convertible into ordinary shares. No preference shares were in issue at the beginning of 2008, and the authority for them was removed at the AGM on 1 May 2008. See also notes 38 and 39 to the Group’s consolidated financial statements.

Significant agreements and change of control

The Group has issued bonds totalling £400 million. The terms of the bonds entitle the holders to require redemption where there is a change of control of the Company combined with a ratings downgrade. In addition, under the Group’s £400 million credit facility, the lenders are entitled, on a change of control, to require prepayment of amounts outstanding.

In addition, the service agreement of James Nicol entitles him to the payment of one year’s salary, the value of certain benefits and certain additional bonus entitlements where his employment is terminated (either by the Company or by himself) within three months after a change of control.

Compliance statement

Except where indicated, the Company complied throughout the year ended 3 January 2009 with all the provisions set out in section 1 of the Combined Code. The certifications of the CEO and Finance Director required under sections 302 and 906 of Sarbanes-Oxley, and the related rules of the SEC, will be filed as exhibits to the Company’s Form 20-F. Pursuant to section 303A of the listing standards of the NYSE, the Foreign Private Issuer Annual Written Affirmation was sent to the NYSE in June 2008, affirming without qualification that Tomkins has complied with the requirements laid down by the NYSE with such exceptions as are permitted for Foreign Private Issuers, as described below.

A general summary of the significant ways in which the Company’s corporate governance differs from that followed by domestic US companies under the NYSE’s listing standards, as required by section 303A.11 is as follows:

Compensation of the CEO

Under 303A.05(b), the compensation committee must have a written charter that addresses the committee’s purpose and responsibilities which, inter alia, has responsibility to ‘review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the board), determine and approve the CEO’s compensation level based on this evaluation.’

The Remuneration Committee of Tomkins, has been delegated by the Board the authority to ’...review and determine the total individual remuneration packages of each Executive Director for approval by the Board.’

Re-appointment of independent external auditors

The Company’s practice, in accordance with UK company law and the Combined Code in relation to the appointment and termination of the external auditor, is that a recommendation is made by the Audit Committee to the Board, which will then make a recommendation to shareholders in general meeting. This differs from the procedure in the US, where the external auditor is accountable to the audit committee, which has the authority to appoint or dismiss the external auditors without reference to shareholders.

Corporate governance guidelines

It is not the Company’s practice for the Nomination Committee to have responsibility for developing corporate governance principles, this being a matter for the entire Board. This is a common approach amongst UK listed companies. The evaluation of the Board, its Committees and Directors, is overseen by the Senior Independent Director.

Internal control

The Directors have overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. To fulfil this responsibility, the Directors have established a Performance Management Framework within which each of the Group’s businesses operates. Within this framework, the management of each of the businesses considers strategic, operational, commercial and financial risks, and identifies risk-mitigation actions. Whilst acknowledging the overall responsibility for the system of internal control, the Directors are aware that the system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide reasonable and not absolute assurance against material misstatement or loss.

During the period under review, the Directors were not aware of any control breakdowns which resulted in a material loss to the Group.

The Performance Management Framework, which includes an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, has been in place throughout the financial year and up to the approval date of the Directors’ Report and Accounts. Each business unit’s management identifies and assesses the key business risks affecting the achievement of its objectives. Business unit management also identifies the risk management processes used to mitigate the key risks to an acceptable level and, where appropriate, additional actions required to further manage and mitigate them. The risk summaries developed out of this process are updated at least annually. In addition, Group-level management considers those risks to the Group’s strategic objectives that may not be identified and managed at the business unit level. The key risks, which are detailed on pages 36 and 37, and mitigation strategies are also discussed at least annually with the Audit Committee as well as the full Board.

The risk management processes described above are applied to major decision-making processes such as acquisitions as well as operational risks within the business including environmental, health and safety.

The other key elements of the Performance Management Framework, which constitutes the control environment are:

Business strategy reviews

Each business is required to prepare a strategic position assessment taking into account the current and likely future market environment and competitive position of the business with specific consideration given to strategic risk. Group-level management reviews the strategy with each business and the Board is presented with a summary of the plans.

Business reviews

On a quarterly basis, Group-level management performs extensive reviews with each business. These reviews consider current and projected financial and operating results, and address the progress of key strategic and operating initiatives and risk management activities.

Financial plans

Each business prepares financial plans in accordance with a prescribed format, which includes consideration of risks. Group-level management reviews the financial plans with the business units and a summary is presented to the Board for approval.

Balance sheet reviews and walkthroughs of controls

Business unit and Group-level financial management conduct periodic, on-site reviews of the underlying rationale, support and controls for the significant line item components comprising the balance sheets for each business in the Group. In 2008, an adjunct programme of remotely-conducted ‘walkthroughs’ of controls over transaction processes for our newer, smaller businesses and joint ventures was initiated to reach those distant locales cost effectively.

Investment project authorisation

All significant investment project expenditures are subject to a formal investment project authorisation process which takes into account, inter alia, operational, financial and technical risks. Post-investment analysis is conducted to facilitate continuous improvement in the investment planning process, including risk identification and mitigation.

Reporting, analysis and forecasts

All businesses are required to report monthly to Group-level management on financial performance. Comparisons are made with plan, forecast and prior year, and significant variances and changes in the business environment are explained. Each business reassesses its forecast for the financial year on a monthly basis. Quarterly, each business prepares a forecast for the following 18 months and reviews projections for the current and following year.

Financial strategy

The financial strategy includes assessment of the major financial risks related to interest rate exposure, foreign currency exposure, debt maturity and liquidity. There is a comprehensive global insurance programme using the external insurance market and some limited use of an internal captive insurance company. Group Treasury manages hedging activities, relating to financial risks, with external cover for net currency transaction exposures. The Group Tax function manages tax compliance and tax risks associated with the Group’s activities. The Audit Committee, through periodic direct reports from the Group Treasurer and the Vice-President, Tax, oversees the financial strategy as well as the tax strategy, and considers the associated risks and risk-management techniques being used by the Group.

Internal control (continued)

Reporting certifications

In connection with the preparation of the annual financial statements, senior business general management and financial management sign a certificate which includes a declaration regarding the existence of internal controls, the proper recording of transactions and the identification and evaluation of significant business risks. These certifications were expanded to encompass section 302 of Sarbanes-Oxley in support of statements required to be made by the Company’s CEO and CFO.

Sarbanes-Oxley

As a foreign private issuer listed on the NYSE in the US, the Group is subject to the provisions of Sarbanes-Oxley. In particular, section 404 of Sarbanes-Oxley requires certifications by management regarding the effectiveness of internal controls over financial reporting and requires the independent auditors to express an opinion on such internal controls. Accordingly, the Group undertakes each year a comprehensive, risk-based approach to testing its internal controls to ensure compliance with the requirements of section 404 of Sarbanes-Oxley. The Company’s CEO and CFO have issued their report attesting to the Group’s compliance with section 404 of Sarbanes-Oxley as at 3 January 2009. While management’s certification and the external auditor’s opinion on internal controls over financial reporting are necessarily reported in the Company’s SEC filings, the results of its compliance with Sarbanes-Oxley also serve to underpin the internal control framework for the Group.

During the year ended 3 January 2009, there have not been any changes in the Group's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Group's internal controls over financial reporting.

The CEO and the CFO have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a –15(e) and 15d – 15(e) under the Exchange Act) as at 3 January 2009. Based on such evaluation, those officers have concluded that, as at 3 January 2009, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the periodic filings under the Exchange Act.

Internal Audit

The Group has an established internal audit function; the Vice-President, Internal Audit directs the activities of the internal auditors on a day-to-day basis and has a direct reporting line to the Chairman of the Audit Committee. Internal Audit’s responsibilities include performing independent objective assurance activities in order to evaluate the adequacy and effectiveness of the Group’s system of internal control and risk management processes. The Internal Audit plan is constructed to provide geographic coverage on a cyclical basis while tailoring to address specific risk concerns. During the year, it reported regularly to the Audit Committee on its internal audit reviews of the Group’s operations.

The Directors confirm that the effectiveness of the system of internal control for the year ended 3 January 2009 has been reviewed in line with the criteria set out in the guidance for Directors in the Combined Code.

Audit Committee report

This Report has been prepared in accordance with the requirements of paragraph C.3.3 of the Combined Code and paragraphs 5.1 and 5.2 of the Guidance on Audit Committees produced by Sir Robert Smith. The report describes the role of the Audit Committee in meeting these requirements.

Terms of reference

The Committee’s terms of reference, a copy of which can be found in the Responsibilities – Governance area on the Company’s website, are reviewed from time to time and approved by the Board. They are based on the model terms of reference set out in the Guidance Note produced by the Institute of Chartered Secretaries and Administrators and take account of the requirements of Sarbanes-Oxley and the Guidance Notes set out in Sir Robert Smith’s Report published in January 2003.

The terms of reference cover membership and appointment, meetings, duties and responsibilities, authority and a number of other matters. The Companies Act 2006 imposed new duties on Directors to avoid a conflict of interests, particularly in relation to third-party arrangements and, during the year, the Board delegated to the Audit Committee the duty of looking at each Director in turn and examining any possible sources of potential conflict. This duty was incorporated into the Audit Committee’s terms of reference in July 2008. No conflicts were found to exist.

Membership and appointment

The Audit Committee comprises four independent Non- Executive Directors: David Richardson who was appointed to the Committee in March 2006 and became Chairman in May 2006, Richard Gillingwater who was appointed in December 2005, John McDonough and Leo Quinn who were appointed in July 2007.

The Board has determined that all four members of the Audit Committee are independent for the purposes of the Combined Code and rule 10A.3(b)(1) under the Exchange Act and section 303A of the NYSE’s Listed Company Manual. The members bring wide-ranging financial, commercial and management experience to the work of the Audit Committee.

The Chairman of the Committee, David Richardson, is a Chartered Accountant (FCA), having previously held a number of senior financial management and strategic planning positions in Whitbread plc from 1983 to 2005 (in the UK and US), becoming Group Finance Director in 2001. Prior to 1983, he held financial positions in ICL plc and Touche Ross & Co. In accordance with section 407 of Sarbanes-Oxley, the Board has determined that David Richardson is an ‘audit committee financial expert’ as that term is defined under the rules of the SEC, having significant, relevant and up-to-date UK and US financial and accounting knowledge and experience.

Meetings

The Audit Committee meets at least four times a year and on other occasions when circumstances require. The quorum for a meeting of the Committee is two members. The Finance Director and representatives from the independent auditor and the internal auditor attend meetings under a standing invitation. The Chairman of the Board, the CEO and other Directors are able to attend meetings of the Committee under the practice that any Director may attend any meeting of a Committee of the Board, provided that they have no conflict of interest in respect of business to be discussed. It is usual practice for the CEO to attend meetings of the Audit Committee. Other finance and business risk executives attend meetings and the Company Secretary is Secretary to the Committee. The Committee Chairman reports regularly to the Board on its activities. Four meetings were held during the year and attendance is set out in the table on page 43.

Work of the Committee

The Committee has established an ‘agenda framework’ which the Company considers vital for maintaining an appropriate focus on the objectives of the Committee. The agenda sets out all of the operational duties and responsibilities outlined in the Committee’s terms of reference and is based on four regular meetings, in February, April, July and November, which coincide with the interim management statements and the announcement of results. The areas covered by the ‘agenda framework’ are as follows:

1.	Corporate Governance, including the regular review of the Committee’s terms of reference and annual evaluation, regulatory issues, review of delegated authorities and review of auditor independence.

2.	Internal Audit, including the review of the internal audit charter, internal audit review reports on the Group’s internal control and risk assessment processes, compliance with auditing standards and progress against its internal audit plan, functional developments and key performance measures.

3.	Confidential sessions with the independent auditors and the Vice-President, Internal Audit, in the absence of Directors and Company executives.

4.	Financial Reporting, including current accounting and financial reporting matters and review of half-yearly and annual financial statements prior to their submission to the Board for approval, which includes the consistency of judgements adopted.

5.	Independent Auditors, including appointment, audit plan and scope, review of audit fees, cost effectiveness, approval of non-audit fees, reports on half-yearly and annual financial statements and the effectiveness of internal controls over financial reporting, status reports, management letters and the nature and extent of non-audit services.

The audit plan and scope sets out details of the areas to be covered and how the audit is to be conducted. The Chairman of the Audit Committee meets periodically with the independent auditors to discuss progress on the audit and the major points to arise, and has the opportunity to assess the effectiveness of the process. The Committee is also able to assess the effectiveness of the auditors and the process through reports made by the independent auditors.

Audit Committee report (continued)

In addition to the items considered by the Committee under the ‘agenda framework’, during 2008 other important issues considered included a review of the change of the Company’s functional currency and the Group's presentation currency from sterling to the US dollar, periodic reporting under the Disclosure and Transparency Rules of the UKLA, a review of the top ten required financial controls and an update of the Committee’s terms of reference to deal with changes brought about by the Companies Act 2006. The Committee also undertook regular reviews of the internal control systems and the statement to be made in the Directors’ Report in respect of internal controls, the Group risk profile, Group tax reports, updates on compliance with the Combined Code and approval of Form 20-F. The Committee received reports on the Company’s efforts in countering potential fraud in the Group. The Internal Audit function is actively engaged in assessing the adequacy and effectiveness of the Group’s system of internal control and risk management processes. Each quarter, the Committee receives a summary of reviews of the businesses’ risk management processes and any significant related financial exposures are highlighted. The risk assessment process and risk mitigation plans are an important part of the development of business strategies. Business risks are considered at the quarterly reviews with the businesses, where all of the major strategic, operational, compliance and financial risks are discussed. Confidential meetings with representatives of the independent auditors and internal audit functions took place during the year in the absence of executives.

In determining its policy on the extent of non-audit services provided by the independent auditors, the Committee has taken account of the rules of the SEC which regulate and, in certain circumstances, prohibit the provision of, certain types of non-audit services by the independent auditors. Non-audit services require the approval of the Chairman of the Audit Committee. During the year, certain projects requiring tax services were awarded to the firm of the independent auditors. In those cases where the work was awarded to the independent auditors, it was concluded that the firm of the independent auditors was best placed to supply such tax services in a cost-effective manner due to the experience and qualifications of the individuals providing such services, the independent auditors’ knowledge of the Company and its tax affairs and that the best interests of the Company were served by engaging the firm of the independent auditors. The previous adoption of certain other rules by the Committee, including those relating to audit partner rotation, relevant ethical guidance regarding the provision of non-audit services by the independent auditors (in particular that the independent auditors should not audit their own firm’s work, make management decisions for the Company, create a mutuality of interest nor be put in the position of advocate for the Company), when taken together provide adequate protection of auditor independence. All fees proposed by the independent auditors must be reported to and approved by the Audit Committee or, between meetings, the Chairman of the Audit Committee. Details of audit fees for the year can be found in note 17 to the Group’s consolidated financial statements.

The Company’s practice, in accordance with UK company law and the Combined Code, in relation to the appointment and termination of the independent auditors, involves a recommendation from the Audit Committee to the Board, which will then make a recommendation to shareholders in general meeting. This differs from the procedure in the US, where the independent auditors are accountable to the Audit Committee which has the authority to appoint or dismiss the independent auditors without reference to shareholders.

With the approval of the Board, the Committee has established guidelines for the recruitment of employees or former employees of the independent auditors. The Group will not engage, on a part-time or full-time basis, any person who is or was an employee of the Company’s independent auditors, where that person has worked on the Group’s audit either as a principal or partner at any time during a period of not less than three years prior to the proposed date of joining the Group. Certain less stringent conditions apply to other employees or former employees of the independent auditors.

A ‘whistleblowing’ procedure has been established for the confidential and anonymous submission by employees of concerns regarding accounting, internal controls or auditing matters, in accordance with the requirements of section 301 of Sarbanes-Oxley. Should a call be received on the dedicated telephone line, the Company Secretary or the General Counsel would immediately report to the appropriate management all concerns raised. A course of action is agreed and a report is prepared for review at the next meeting of the Audit Committee, including details of actions taken to deal with the matters raised where the significance of the event warrants such an action. The Chairman of the Committee will report, if appropriate, whistleblowing claims to the Committee and the Board. The Company’s Code of Conduct and Ethics includes the whistleblowing procedure. Calls to the designated telephone number, as well as direct contacts with management, are made from time to time, but no whistleblowing issues material to the Company were dealt with by the Committee during the year.

Shareholders are given the opportunity at the AGM to ask the Chairman of the Committee questions on this report and any other related matter.

David Richardson

Chairman, Audit Committee

24 February 2009

Remuneration Committee report

1. Introduction

This report to shareholders sets out the membership of the Remuneration Committee and the names of the advisers who provided services to the Committee during the year ended 3 January 2009. The policies that have been followed by the Remuneration Committee during the year in determining the elements of executive remuneration are also set out, together with the policies and principles to be followed by the Committee over the next two years.

This report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002 (‘DRRR’) which set out statutory requirements for the disclosure of Directors’ remuneration. The report also meets the relevant requirements of the Listing Rules of the UKLA and describes how the Board has applied the Principles of Good Governance relating to Directors’ remuneration. The DRRR require the independent auditors to report to the Company’s members on the auditable parts of the Remuneration Committee report and to state whether, in their opinion, those parts of the report have been properly prepared in accordance with the Companies Act 1985.

The Board keeps under review the terms of reference for the Remuneration Committee which are based on current best practice contained in the model terms of reference set out in the Guidance Note produced by the Institute of Chartered Secretaries and Administrators. The principal responsibility of the Committee is to determine the framework or broad policy for the Company’s executive remuneration and the remuneration of the Chairman of the Board, for approval by the Board. The remuneration of Non-Executive Directors is a matter for the Board itself. The terms of reference of the Remuneration Committee can be found under ‘Governance’ in the ‘Responsibilities’ area of the Company’s website, www.tomkins.co.uk. In addition, the Company takes full account of the guidelines published by the Association of British Insurers and the National Association of Pension Funds.

During the year, the Remuneration Committee assessed and approved awards under the PSP. It also advanced the grant dates of PSP awards by three months to deal with timing issues related to the cessation of quarterly reporting, making a one-off 25% reduction in the value of the related awards to take account of the earlier grant. The Committee also made a technical amendment to the PSP award limits, which are expressed in terms of shares but relate to an underlying monetary value, in order to reinforce the principle of the PSP that a participant cannot exceed either the maximum shares or monetary value awarded by the Committee at the end of the performance period. The Committee also reviewed calculations relating to awards made to Directors under the ABIP and approved the granting of awards under the Sharesave Scheme. The annual base salary review for executives within the ABIP was carried out in accordance with the ABIP rules, using the 12-month average Retail Prices Index for UK executives (4.3%) and Consumer Price Index for US executives (4.2%).

Details of the emoluments, bonuses, benefits-in-kind, incentive arrangements (including share options and other long-term incentives), pensions and service contracts applicable to each Director who served during the year ended 3 January 2009 are given in this report, which will be put to the vote of shareholders at the forthcoming AGM.

2. Membership of the Remuneration Committee and advisers

The Remuneration Committee is made up of the Chairman of the Board, and Non-Executive Directors whom the Board determined to be independent, as each was found to be free from any material business or other relationship with the Company (either directly or as a partner, shareholder or officer of an organisation that has a relationship with the Company). Accordingly, the Board believes that there are no such relationships that could materially interfere with the exercise of their independent judgement. The members of the Remuneration Committee throughout the year ended 3 January 2009 and as at that date, were John McDonough (Chairman), Richard Gillingwater, David Newlands and Leo Quinn and there were no changes to the membership of the Committee during the year. In June 2006, the Financial Reporting Council published an updated version of the Combined Code that, amongst other things, included a provision that permitted the Chairman to sit on the Remuneration Committee. David Newlands served as a member of the Remuneration Committee during the year.

The Committee consults with the CEO concerning matters of executive remuneration. The Committee appointed PA Consulting Group to provide independent verification of the cost of capital in respect of the Company’s PSP and to assist with briefing the Committee on issues relating to the ABIP and to the PSP, and to remuneration generally. Mercer Limited provided professional advice to the Company and to the trustees of the pension schemes of Tomkins and some of its subsidiaries in respect of their respective pension arrangements and Mercer Limited and Buck Consultants (Healthcare) Limited provided professional consultancy advice to Tomkins in respect of the placement and operation of life assurance.

Other than those consulting services mentioned above, PA Consulting Group, Mercer Limited and Buck Consultants (Healthcare) Limited had no connections with the Company.

Remuneration Committee report (continued)

3. Statement of the Company’s policy on Directors’ remuneration (unaudited information)

The policies operated by the Company during the year and those to be applied over the next two years are set out below:

A. Executive remuneration

The Company’s policy on executive remuneration is that the Remuneration Committee and the Board should each satisfy itself that executives, including Executive Directors, are fairly rewarded for their individual contributions to the Group’s performance. The Remuneration Committee has sought to ensure that Executive Directors receive a level of remuneration that is appropriate to their scale of responsibility and performance, and which will attract, motivate and retain individuals of the necessary calibre. The only pensionable element of Executive Directors’ remuneration is basic salary. This policy applies whether or not an Executive Director is a member of the Tomkins Retirement Benefits Plan or has a personal pension arrangement.

B. Annual remuneration for executives

The Board recognises that one of its key objectives is to grow the value of the business for the benefit of shareholders and that such growth is strongly related, amongst other things, to the degree of entrepreneurial spirit in the Group. In order to create the necessary entrepreneurial impetus within an organisation, compensation arrangements are required which are similar to those that an owner of a business would seek. This has led to the adoption of a remuneration policy under which the levels of total remuneration are set in order to attract, retain and motivate executives.

The executive rewards at Tomkins have a standard composition, made up of three principal elements:

–

Base salary

–

Annual Bonus Incentive Plan

–

The Performance Share Plan

These standard elements form part of a carefully-designed system put in place between 2003 and 2006 to create an entrepreneurial focus on value creation. The process had three stages:

–

first, we agreed a clear set of principles to guide system design

–

secondly, we drafted system structures which would embody these principles

–

finally, we calibrated each element of the system to ensure enhanced rewards for above-target performance – and reduced rewards for below-target performance.

Remuneration is benchmarked against a series of comparable UK companies as well as North American auto-component manufacturers and is provided through a combination of base salaries at median level or below and annual bonuses that have a direct and proportionate link to total value created for shareholders. This provides the incentive for executives to act like owners of the business. The Remuneration Committee and the Board believe that this more closely aligns the interests of shareholders and management whereby executives only receive substantial rewards when they have created exceptional value in the business.

Over time and subject to the achievement of value- creation, this policy is designed to lead to a realignment of the component parts of total executive remuneration, so that a greater part of the total package received by executives is made up of incentive pay with the remainder coming from base salaries at the median level or below. The performance targets for the ABIP and the PSP ensure that a substantial proportion of total remuneration is directly related to actual measurable performance. Further details of the ABIP and the PSP are set out in section 4B on pages 55 to 57.

C. Non-Executive Directors’ fees and Chairman’s remuneration

The Executive Directors review the fees of Non- Executive Directors who play no part in determining their own remuneration. The Chairman’s remuneration is determined by the Remuneration Committee and is approved by the Board. The Chairman takes no part in the discussions and decisions relating to his own remuneration. The review of Non-Executive Directors’ fees and the Chairman’s remuneration takes place every two years, the last review having taken place on 1 January 2008 and the next one being due on 1 January 2010.

D. Service contracts

The Company’s policy on Directors’ service contracts is that service contracts and letters of appointment for Executive Directors normally provide for notice periods of no longer than 12 months. On appointment, a longer notice period may apply, but this will reduce over time to the normal 12 months’ notice period. Notwithstanding the provisions in an Executive Director’s service contract or letter of appointment concerning termination payments, the Company will seek to reduce any compensation that may be payable to reflect the departing Director’s obligation to mitigate loss.

E. External appointments

The Company’s policy on external appointments is that, with the approval of the Chairman of the Board, Executive Directors are permitted to hold appointments outside the Company. Any fees payable in connection with such appointments are normally retained by Directors unless otherwise agreed.

Remuneration Committee report (continued)

F. Long-term incentives and share options

The Company has operated a number of share-based long-term incentive schemes in the past but, following a review of executive remuneration, the Remuneration Committee and Board expect the number of plans and schemes to reduce over time as they lapse and are not renewed or replaced. As previously reported, the Remuneration Committee and the Board decided not to continue with an executive share option scheme beyond 9 May 2005, the date on which the Company’s executive share option schemes lapsed. Following shareholder approval, the PSP was introduced.

The Company operates an employee savings related share option scheme, the Sharesave scheme, which applies to all UK employees.

G. Retirement benefits

The Company’s defined benefit pension plan was closed to new members in April 2002 and, since that time, the Company’s policy has been that new employees, including Executive Directors and senior executives, will receive a payment from the Company to enable them to make contributions to pension plans of their choice on behalf of themselves and their dependants. No change to this policy is expected over the next two years.

4. Elements of remuneration (audited information)

Executive remuneration is comprised of base salary, a bonus (in three parts: cash, bonus shares and deferred shares) and benefits-in-kind. Non-Executive Directors are awarded a basic fee and fees for their work on Board Committees. The table below sets out the remuneration paid to each of the current Directors.

A. Base salary, fees, bonuses and benefits-in-kind

													Total emoluments
Directors’ emoluments	Basic salary/fees $000		Bonus cash(1) $000		Bonus shares(1) $000		Bonus deferred shares(2) $000		Benefits- in-kind(3) $000		Pension contribution(5) $000		Year ended 3 January 2009 $000		Year ended 29 December 2007 $000
Chairman
D B Newlands(4)		407		–		–		–		–		–		407		380
Executive Directors
J Nicol		1,763		433(7)		108(7)		216(7)		73		661		3,254		4,794
J W Zimmerman (from 1 October 2007)		573		203(8)		51(8)		102(8)		26		215		1,170		380(6)
Non-Executive Directors
R D Gillingwater(4)		150		–		–		–		–		–		150		142
J McDonough(4) (from 14 June 2007)		143		–		–		–		–		–		143		68
L M Quinn(4) (from 6 July 2007)		119		–		–		–		–		–		119		62
D H Richardson(4)		124		–		–		–		–		–		124		124
D D S Robertson(4)		122		–		–		–		–		–		122		132
		3,401		636		159		318		99		876		5,489		6,082

Notes

(1)	Details of bonus payments in accordance with the Annual Bonus Incentive Plan are given in section B below.
(2)	Deferred shares are held under the Annual Bonus Incentive Plan.
(3)	Benefits-in-kind include medical cover, car and fuel benefits, and other benefits in accordance with their service contract.
(4)	On 4 August 2008, 2,000 shares were purchased for each of the Non-Executive Directors and 5,000 shares were purchased for the Chairman, at a market price of 127.50p per share. The cost of these shares formed part of their remuneration.
(5)	See section 6 ‘Retirement benefits’ below for more details.
(6)	The comparative figure for John Zimmerman relates to the 3 months from 1 October 2007 to 29 December 2007.
(7)	Comparative figures for Jim Nicol's bonus elements for 2007 were $1,307,000 bonus cash, $326,000 in bonus shares and $652,000 in bonus deferred shares.
(8)	Comparative figures for John Zimmerman's bonus elements for the 3 months from 1 October 2007 to 29 December 2007 were $114,000 bonus cash, $28,000 in bonus shares and $56,000 in bonus deferred shares.

Remuneration Committee report (continued)

Chairman’s remuneration

With the assistance of PA Consulting and, having taken into consideration comparative remuneration data, the contribution made by the Chairman to the Company’s affairs, the time he devotes to the Company’s business and the extra responsibilities placed upon him arising from the changes in corporate governance requirements in the UK and the US, the Remuneration Committee recommended to the Board that his remuneration should be increased from £185,000 ($370,148) plus 2,000 Tomkins plc shares per annum, to £205,000 ($394,687) plus 5,000 Tomkins plc shares per annum with effect from 1 January 2008 for a two-year period. These recommendations were approved by the Board.

Non-Executive Directors’ fees

With the assistance of PA Consulting, the Executive Directors reviewed the fees paid to Non-Executive Directors and, having taken into consideration comparative remuneration data, the contribution made by individual Non-Executive Directors to the Company’s affairs, the time they devote to the Company’s business and the extra responsibilities placed upon them arising from the changes in corporate governance requirements in the UK and the US, approved an increase in the fees to the following with effect from 1 January 2008 for a two-year period:

Basic fee

£45,815 p.a. ($88,208) (previously £42,500 p.a. ($85,034)); plus 2,000 Tomkins’ shares p.a. (unchanged)

Additional fees

Audit Committee

Chairman: £16,170 p.a. ($31,132) (previously £15,000 p.a. ($30,012))

Other members: £8,085 p.a. ($15,566) (previously £7,500 p.a. ($15,006))

Remuneration Committee

Chairman: £10,780 p.a. ($20,755) (previously £10,000 p.a. ($20,008))

Other members: £5,390 p.a. ($10,377) (previously £5,000 p.a. ($10,004))

CSR Committee

Chairman: £13,475 p.a. ($25,943) (previously £12,500 p.a. ($25,010))

Other members: £5,390 p.a. ($10,377) (previously £5,000 p.a. ($10,004)) plus £1,617 per meeting day ($3,113) (previously £1,500 per meeting day ($3,001))

Senior Independent Director

£16,170 p.a. ($31,132) (previously £15,000 p.a. ($30,012))

B. Current incentive schemes

Annual Bonus Incentive Plan

The Executive Directors and senior managers participate in the ABIP. Each participant in the ABIP receives a percentage of ‘bonusable profit’ of the business for which he or she has responsibility. Bonusable profit is based on operating profit less a charge for tax, certain exceptional items and a charge for invested capital. The objective of the ABIP is to reward the senior executives for increasing the overall value created in the business. Accordingly, bonusable profit may increase at a faster rate than operating profit where the margin of the return over the cost of capital increases. This aligns the interests of management and shareholders. In arriving at bonusable profit, adjustments may be made for restructuring charges relating to strategic manufacturing initiatives to match the costs of the strategic manufacturing initiatives to the benefits over a period of up to three years. The charge for taxation reflects the ongoing charge for tax excluding any benefit from exceptional adjustments to tax provisions. The charge for invested capital is based on applying the estimated weighted average cost of capital to the average invested capital in the Group. The estimated weighted average cost of capital takes into account the capital structure of the Group and the costs associated with each element of capital. The method of calculation has been agreed by the Remuneration Committee and is subject to review each year. The invested capital is based on the book value of the Group’s assets, excluding goodwill relating to acquisitions made prior to 30 December 1999. The cost of capital used in the calculation of bonusable profit for the year under review was 7.73%.

The Remuneration Committee carries out a detailed review of the computations involved and ensures that the rules are applied consistently. Furthermore, the independent auditors are asked to perform agreed-upon procedures on behalf of the Remuneration Committee on the calculations which underlie the computation of the bonusable profit. The incentive bonus of the Executive Directors is based on a percentage of the bonusable profit of the Group which, for the year ended 3 January 2009, was $63.6 million (2007: $192.1 million) and the respective bonusable profit percentages were: James Nicol (0.85%) and John Zimmerman (0.4%). James Nicol received through bonus cash and bonus shares the sum of $541,000 (2007: $1,633,000) and John Zimmerman received the sum of $254,000 (three months to December 2007: $142,000). Jim Nicol received through bonus deferred shares a further sum of $216,000 (2007: $652,000) and John Zimmerman received a sum of $102,000 (three months to December 2007: $56,000). Although there is no limit to the bonusable profit on which bonuses are calculated, inordinate growth in bonusable profit in any one year is unlikely to arise due to the nature of the Group’s business.

Remuneration Committee report (continued)

4. Elements of remuneration (audited information) (continued)

B. Current incentive schemes (continued)

Annual Bonus Incentive Plan (continued)

The bonus awards are payable to senior participants, including Executive Directors, as to four-sevenths in cash, one-seventh in bonus shares and two-sevenths in deferred shares. The bonus awards payable to the remaining participants are as to three-quarters in cash, one-twelfth in bonus shares and one-sixth in deferred shares. The bonus is paid at the end of June, September and December based on 75% of the bonus earned to the end of the previous quarter, with the balance of the full entitlement to the bonus for the calendar year paid at the end of March following the calendar year-end. Bonus shares are restricted and vest only after a period of three years from the initial bonus award. Dividends are paid on the bonus shares. Deferred shares are awarded at the time of the initial bonus award but the vesting of the shares is conditional on continued employment with the Group for three years after the award. Dividends are not paid on the deferred shares until they have vested. On leaving the Company, the bonus shares will normally vest in full. In good leaver circumstances, the deferred shares will vest on a pro-rata basis.

As a condition of continued participation in the ABIP, senior participants, including Executive Directors, are required to retain shares with a value equivalent to one year’s total after-tax remuneration including bonus, based on an average of the previous three years. Remaining participants are required to hold shares with a value equivalent to one-half of one year’s total after- tax remuneration including bonus, based on an average of the previous three years. Increases in annual base salary of all participants, including Executive Directors, are restricted to the equivalent rate of increase in the Retail Prices Index (in the UK) or equivalent index in the country in which a participant works. The restrictions on the increases in salary, together with the growth in bonus, assuming increases in bonusable profit, will result in the incentive pay element of remuneration increasing over time. The share awards will increase the investment each of the participants, including Executive Directors, has in Tomkins plc shares.

The Tomkins 2006 Performance Share Plan

The PSP is a long-term incentive plan as detailed in the 2006 AGM circular. The purpose of the PSP is two-fold. First, to provide a share-based long-term incentive arrangement for senior executives that more closely aligns the interests of executives with shareholders. Secondly, the PSP is in substitution of the Company’s legal obligation to the CEO to provide annual grants of options, which had previously been satisfied by the Executive Share Option Scheme that lapsed in May 2005. The Remuneration Committee considered the alternatives and, with the agreement of the CEO and the assistance of PA Consulting Group, devised a plan that achieves those aims. The PSP will provide rewards in future years only if shareholders have seen value created over the preceding three years. The Remuneration Committee and Board believe that this creates a better alignment between executive reward and the creation of shareholder value than a standard executive share option scheme. The PSP has four key features:

	(i)	the performance baseline is established which is equal to the cost of equity and if TSR (comprising dividends and increase in the share price) over three years does not exceed the cost of equity over the same three-year period, no award of shares will be made;
	(ii)	the award of shares will be proportional to the degree of performance over the baseline;
	(iii)	there is a ‘cap’ on the quantum of share awards and the value of shares awarded at the end of the performance period; and
	(iv)	subject to TSR performance, awards will be made at the end of each three-year performance period.

Remuneration Committee report (continued)

The following maximum awards of Tomkins shares have been made to James Nicol and John Zimmerman under the PSP:

Director	Date of award	Vesting date	Maximum number of shares	Number of shares awarded at end of performance period	Share price required for performance baseline to have been achieved(3)	Share price required for full vesting(3)	Maximum value of award shares at end of performance period £m
J Nicol	22 Nov 05(2)	22 Nov 08	1,041,666	–	302.50p	393.49p	4.0(1)
	22 Nov 06	22 Nov 09	1,152,737	N/A	282.36p	361.66p	4.0
	22 Nov 07	22 Nov 10	1,606,296	N/A	202.87p	257.12p	4.0
	20 Aug 08	20 Aug 11	1,744,794	N/A	155.77p	195.62p	3.0
J W Zimmerman	22 Nov 05(2)	22 Nov 08	208,333	–	302.50p	393.49p	0.8(1)
	22 Nov 06	22 Nov 09	230,547	N/A	282.36p	361.66p	0.8
	22 Nov 07	22 Nov 10	481,889	N/A	202.87p	257.12p	1.2
	20 Aug 08	20 Aug 11	523,438	N/A	155.77p	195.62p	0.9

(1)	Matured without award and lapsed

(2)	Awards with a performance period commencing on 22 November 2005 were approved by shareholders at the AGM on 22 May 2006.

(3)	Due to the nature of the performance criteria, it is impossible to provide exact minimum and maximum share prices that would be required for awards to begin to be made, and be made in full, at the end of the performance period. This is because future dividends and the relevant exchange rate to convert those dividends to sterling are unknown. The illustrative share prices in the above table assume constant dividends and exchange rates throughout the remainder of each of the performance periods. Based on the assumptions above, the net value of outstanding awards based on the share price as at 3 January 2009 was $nil (2007: $nil).

The Tomkins 2005 Sharesave Scheme

This is a standard HM Revenue & Customs-approved savings related share option scheme which is open to employees who are resident for tax purposes in the UK.

C. Closed incentive schemes

The following schemes are now closed.

The Tomkins Executive Share Option Scheme No. 3 and The Tomkins Executive Share Option Scheme No. 4

ESOS 3 and ESOS 4 lapsed for grant purposes on 9 May 2005 and the Remuneration Committee and the Board decided not to continue with an executive share option scheme beyond that date.

ESOS 3 was an HM Revenue & Customs-approved scheme. ESOS 4 was not approved by HM Revenue & Customs. The options under both schemes mature after three years. All outstanding ESOS 4 options were granted to participants within the limit of four times their annual earnings. The performance condition for all outstanding options under ESOS 3 and ESOS 4 required that the growth in Tomkins’ earnings per share must exceed the growth in the Retail Prices Index by an average of 2% per annum over a three-year period before an option can be exercised, which was in accordance with contemporary practice when the schemes were introduced in 1995.

The Tomkins Savings Related Share Option Scheme No. 2

This was a standard HM Revenue & Customs-approved savings related share option scheme which lapsed for grant purposes on 9 May 2005.

The Tomkins Share Matching Scheme

Awards which had been made under a now expired scheme known as The Tomkins Restricted Share Plan and which had vested, were eligible for matching awards for the same number of shares under the SMS. Such awards could be for up to two conditional share matching awards vesting a further two years and four years respectively after the end of the original restricted period. The final grant of SMS awards vested during 2007 and the SMS has therefore now expired. With shareholder approval, this share scheme was introduced in 1996 with no performance conditions attached and, accordingly, it did not comply with Schedule A of the Combined Code.

Remuneration Committee report (continued)

4. Elements of remuneration (audited information) (continued)

C. Closed incentive schemes (continued)

Tomkins Premium Priced Option

This was an option specifically and solely granted to James Nicol as part of the incentive package to ensure he joined Tomkins. No performance conditions were attached to this option and it therefore does not comply with Schedule A of the Combined Code. It consists of a non-transferable option to acquire 5,076,142 shares. The exercise price was 197p per share in respect of 2,538,072 shares (A option shares), 276p per share in respect of 1,522,842 shares (B option shares) and 345p per share in respect of 1,015,228 shares (C option shares). The options have all vested and will lapse on 11 February 2012 or earlier in certain circumstances.

Ongoing option

This is an option specifically and solely granted to James Nicol on 11 February 2002 as part of the incentive package to attract him to the Company. It consists of a non-transferable option to acquire 1,522,842 shares at 197p per share, which became exercisable on 18 February 2005 provided the rate of increase of earnings per share over any three-year period was equal to or greater than the rate of increase of the Retail Prices Index plus 9%. This performance condition was met and the option has been exercised in respect of 972,842 shares. The option will lapse on 11 February 2012 or earlier in certain circumstances. If there is a variation in the share capital of the Company, the Remuneration Committee may adjust the number of shares in either the Tomkins Premium Priced Option or the Ongoing Option as it reasonably deems appropriate to take account of the variation.

Directors’ share options

	As at 3 January 2009 and 29 December 2007	Period of exercise
	No.	From	To
J Nicol	9,409,642	4 Jan 09	28 Nov 14
J W Zimmerman	225,000	4 Jan 09	28 Nov 14

There were no movements in Directors' share options during the year.

The table below details the weighted average price each Director would have had to pay to exercise his options and how much they were worth in monetary terms at the year-end and prior year-end.

Weighted average

exercise price (p)

as at 3 January 2009

Weighted average

exercise price (p)

as at 29 December 2007

Net value of unexercised options

Exercise price exceeds

market price

Market price exceeds

exercise price

Exercise price

exceeds

market price

Market price

exceeds

exercise price

As at

3 January

2009

£000

As at

29 December

2007

£000

J Nicol

242.36

–

242.36

–

J W Zimmerman

256.31

–

256.31

–

The closing mid-market price of a Tomkins share as at 3 January 2009 was 133.50p with a range of closing prices during the year 30 December 2007 to 3 January 2009 of 93.5p to 194.75p.

Options included in the above table at 3 January 2009 relate to ESOS 4 (J Nicol 3,775,486 shares and J Zimmerman 225,000 shares) and, in the case of James Nicol, SAYE 2 (8,014 shares), the Premium Priced Option (5,076,142 shares) and the Ongoing Option (550,000 shares).

The Tomkins Share Matching Scheme

The value of entitlements held under the SMS was £nil and therefore no current Director was required to retain shares in this respect as at both 3 January 2009 and 29 December 2007.

During the year, no shares vested to Directors under the SMS (2007: 4,061 shares worth $15,000).

Directors’ interests in Tomkins shares at 3 January 2009

The Directors’ current interests in Tomkins shares are set out on page 41 and, in the case of the Executive Directors, where appropriate these included shares held through their participation in the ABIP.

Remuneration Committee report (continued)

5. Performance graph (unaudited information)

The graph below plots TSR on a holding in the Company’s shares for each of the past five years ended 31 December, measured against the performance of the FTSE Industrial Engineering Index.

This index was chosen because its major constituents are, like Tomkins, moderately-diversified engineering groups with significant manufacturing operations outside the home UK market.

6. Retirement benefits (audited information)

James Nicol and John Zimmerman were not entitled to any retirement benefits defined in terms of final or average salary but, in 2008, they received a payment at an annual rate of 37.5% of their basic salary to enable them to make contributions to retirement benefit schemes of their choice on behalf of themselves and their dependants. For the year ended 3 January 2009, this amounted to $661,000 (2007: $660,000) for James Nicol and $215,000 for John Zimmerman (2007: payments totalling $42,000 made to defined contribution pension plans on behalf of John Zimmerman from 1 October 2007 to the end of December 2007).

7. Service contracts (unaudited information)

A summary of the service contract or letter of appointment of each of the Directors is as follows:

James Nicol – Chief Executive Officer

The Company and James Nicol entered into a contract dated 11 February 2002 which set out the terms and conditions under which he joined the Company as Chief Executive Officer on 18 February 2002. The contract remains in force until terminated by either party giving notice of not less than 12 months. Mr Nicol has been a Director for seven years.

John Zimmerman – Finance Director (from 1 October 2007)

John Zimmerman’s contract was signed on 18 February 2008 with an effective start date of 1 October 2007. The contract can be terminated by John Zimmerman by giving six months’ notice or by the Company with immediate effect. Termination by the Company would under normal circumstances result in the equivalent of 12 months’ salary and bonus being due to Mr Zimmerman in lieu of a notice period. Mr Zimmerman has been a Director for one year and four months.

Non-Executive Directors

None of the Non-Executive Directors has a service contract with the Company, their terms of engagement being set out in a letter of appointment. Ordinarily, Non-Executive Directors serve for a period of two years but, subject to agreement with the Board, a Non-Executive Director can be reappointed for a further term of up to three years. The appointment of Non-Executive Directors may be terminated before the conclusion of their two-year term by, and at the discretion of, either party upon two weeks’ written notice.

In the case of David Newlands, the appointment is for a term of three years and may be terminated at any time by either party giving one month’s written notice. None of the Non- Executive Directors is entitled to compensation for loss of office. The dates from which the respective letters of appointment are effective and the Directors’ length of service are as follows: Richard Gillingwater: 20 December 2007, three years and one month; David Newlands: 18 February 2009, nine years and six months; John McDonough: 14 June 2007, one year and eight months; Leo Quinn: 6 July 2007, one year and seven months; David Richardson: 1 March 2008, two years and eleven months and Struan Robertson: 20 December 2007, three years and one month.

Remuneration Committee report (continued)

8. Former Directors (audited information)

No payments were made to former Directors during the year (2007: $152,000).

The amounts awarded to former Directors in 2007 for comparative purposes were as follows: K Lever (to 1 October 2007) $3,307,000; J M J Keenan (to 13 June 2007) $50,000; I J G Napier (from 14 June to 13 December 2007) $60,000; and Sir Brian Pitman (to 13 June 2007) $52,000. The £1,822,000 ($3,645,000) disclosed in the 2007 Annual Report in respect of Ken Lever included a compensation for loss of office payment of £1,006,000 ($2,013,000). This amount included an over-accrual of $338,000 (£169,000), as a reduced amount was paid out in 2008 in the form of a bonus under the ABIP.

9. Sums paid to third parties in respect of a Director’s services (audited information)

No amounts are paid to third parties in respect of a Director’s services to the Company or any company within the Group.

10. Sums received by Executive Directors from other external directorships (audited information)

James Nicol and John Zimmerman hold no external directorships.

Compliance statement

The Company complies with the requirements of Schedule 7A of the Companies Act 1985 and the Listing Rules of the UKLA unless otherwise indicated. In preparing this report, the Remuneration Committee has given full consideration to the provisions set out in Schedule B to the Combined Code.

This Report has been approved by the Remuneration Committee and the Board and signed on their behalf by

John McDonough

Chairman, Remuneration Committee

24 February 2009

Statement of Directors’ responsibilities

Financial statements

The Directors are required by UK company law to prepare consolidated financial statements of the Group and individual financial statements of the Company for each financial year.

Group

The Directors are required by law to prepare the Group’s financial statements in accordance with the Companies Act 1985, IFRS and Article 4 of the IAS Regulation.

The Directors are required to ensure that the Group’s financial statements present fairly for each financial year the Group’s financial position, financial performance and cash flows which requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definition and recognition criteria for assets, liabilities, income and expenses set out in the IASB’s “Framework for the Preparation and Presentation of Financial Statements”.

In preparing the Group’s financial statements, the Directors are required to select and apply accounting policies, present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information, and provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position, financial performance or cash flows.

Company

The Directors have prepared the Company’s financial statements in accordance with UK GAAP, rather than IFRS.

The Directors are required by law to ensure that the Company’s financial statements give a true and fair view of the state of affairs of the Company at the end of the financial year and of its profit or loss for the financial year. However, the Directors are permitted by section 230 of the Companies Act 1985 not to include the Company’s profit and loss account in the financial statements.

In preparing the Company’s financial statements, the Directors are required to select suitable accounting policies and apply them consistently, make judgements and estimates that are reasonable and prudent, and state whether applicable accounting standards have been followed subject to any material departures that must be disclosed and explained in the financial statements.

Accounting records

The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and that of the Group, and which enable them to ensure that the financial statements of the Company and those of the Group comply with applicable law.

Safeguarding assets

The Directors are responsible for safeguarding the assets of the Company and those of the Group and hence for taking such steps as are reasonably open to them to prevent and detect fraud and other irregularities.

Directors’ remuneration

The Directors are responsible for including in the Annual Report a report on Directors’ remuneration which complies with the requirements of the Companies Act 1985.

Website

The Directors are responsible for the maintenance and integrity of the financial information contained on the Company’s website, www.tomkins.co.uk. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ responsibility statement

In accordance with the Listing Rules of the UK Listing Authority, each of the Directors confirms that to the best of his knowledge:

–	the Group’s financial statements have been prepared in accordance with IFRS and give a true and fair view of the Group’s assets, liabilities and financial position as at 3 January 2009 and of its loss for the financial year then ended; and
–	the Directors’ report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that the Group faces.

Disclosure of information to auditors

In accordance with section 234ZA of the Companies Act 1985, each of the Directors confirms, with respect to the audit of the financial statements of the Company and those of the Group, that:

–	so far as he is aware, there is no relevant audit information of which the auditors are unaware; and
–	he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the auditors are aware of that information.

Approved by the Board on 24 February 2009 and signed on its behalf by:

David Newlands

Chairman

Independent auditors’ report

To the members of Tomkins plc

We have audited the consolidated financial statements of Tomkins plc and its subsidiaries (together, “the Group”) for the year ended 3 January 2009 (“the Group’s financial statements”) which comprise the consolidated income statement, the consolidated cash flow statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the reconciliation of changes in consolidated shareholders’ equity and the related notes 1 to 50. The Group’s financial statements have been prepared in accordance with the accounting policies set out therein. We have also audited the information in the Remuneration Committee’s report that is described as having been audited.

We have reported separately on the individual financial statements of Tomkins plc for the year ended 3 January 2009.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

The Directors’ responsibilities for preparing the Annual Report, the Remuneration Committee report and the Group’s financial statements in accordance with applicable law and International Financial Reporting Standards (“IFRS”) as adopted for use in the European Union are set out in the statement of Directors’ responsibilities on page 61.

Our responsibility is to audit the Group’s financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (United Kingdom and Ireland).

We report to you our opinion as to whether the Group’s financial statements give a true and fair view, whether the Group’s financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation and whether the part of the Remuneration Committee report described as having been audited has been properly prepared in accordance with the Companies Act 1985. We also report to you whether, in our opinion, the information given in the Directors’ report is consistent with the Group’s financial statements.

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 Directors’ remuneration and other transactions is not disclosed.

We review whether the corporate governance statement within the Directors’ report reflects the Company’s compliance with the nine provisions of the 2006 Combined Code 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 the other information contained in the Annual Report as described in the contents section and consider whether it is consistent with the Group’s financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group’s financial statements. Our responsibilities do not extend to any further information outside the Annual Report.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (United Kingdom 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’s financial statements and the part of the Remuneration Committee report to be audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Group’s 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’s financial statements and the part of the Remuneration Committee report to be audited 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’s financial statements and the part of the Remuneration Committee report to be audited.

Opinion

In our opinion:

–	the Group’s financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union, of the state of the Group’s affairs as at 3 January 2009 and of its loss for the year then ended;

–	the Group’s financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation;

–	the part of the Remuneration Committee report described as having been audited has been properly prepared in accordance with the Companies Act 1985; and

–	the information given in the Directors’ report is consistent with the Group’s financial statements.

Separate opinion in relation to IFRS

As explained in note 3 to the Group’s financial statements, the Group, in addition to complying with its legal obligation to comply with IFRS as adopted for use in the European Union, has also complied with IFRS as issued by the International Accounting Standards Board (“IASB”).

In our opinion the Group’s financial statements give a true and fair view, in accordance with IFRS as issued by the IASB, of the state of the Group’s affairs as at 3 January 2009 and of its loss for the year then ended.

Deloitte LLP

Chartered Accountants and Registered Auditors

London

24 February 2009

Consolidated income statement

	Note		Year ended 3 January 2009 $ million				Year ended 29 December 2007 $ million				Year ended 30 December 2006 $ million
Continuing operations
Sales		5		5,515.9				5,886.1				5,746.1
Cost of sales				(4,023.7	)			(4,284.6	)			(4,165.9	)
Gross profit				1,492.2				1,601.5				1,580.2
Distribution costs				(584.5	)			(578.4	)			(564.3	)
Administrative expenses				(512.8	)			(500.6	)			(478.4	)
Impairments		6		(342.4	)			(0.8	)			(2.9	)
Restructuring costs		7		(26.0	)			(27.6	)			(23.9	)
Net gain on disposals and on the exit of businesses		7		43.0				91.4				5.7
Restructuring initiatives				17.0				63.8				(18.2	)
Share of (loss)/profit of associates				(2.1	)			0.8				2.8
Operating profit				67.4				586.3				519.2

Interest payable		9		(137.8	)			(142.1	)			(142.6	)
Investment income		10		87.8				86.8				73.3
Other finance expense		11		(25.0	)			(5.6	)			(1.3	)
Net finance costs				(75.0	)			(60.9	)			(70.6	)
(Loss)/profit before tax				(7.6	)			525.4				448.6
Income tax expense		12		(38.4	)			(139.9	)			(65.6	)
(Loss)/profit for the period from continuing operations				(46.0	)			385.5				383.0

Discounted operations
Loss for the period from discontinued operations		13		–				(66.7	)			(21.3	)
(Loss)/profit for the period		14		(46.0	)			318.8				361.7
Minority interests				(18.1	)			(25.0	)			(20.5	)
(Loss)/profit for the period attributable to equity shareholders				(64.1	)			293.8				341.2

(Loss)/earnings per share
Basic
Continuing operations				(7.29	)	c		41.42		c		43.21
Discounted operations				–		c		(7.66	)	c		(2.54	)
Total operations		15		(7.29	)	c		33.76		c		40.67

Diluted
Continuing operations			(7.29		)	c	40.91			c	42.13			c
Discontinued operations			–			c	(7.54		)	c	(2.41		)	c
Total operations		15		(7.29	)	c		33.37		c		39.72		c

Dividends per ordinary share		16		13.02		c		27.68		c		27.26		c

Consolidated cash flow statement

	Note		Year ended 3 January 2009 $ million			Year ended 29 December 2007 $ million			Year ended 30 December 2006 $ million
Operating activities
Cash generated from operations		18		628.7			638.7			607.8
Income taxes paid				(116.3	)		(110.4	)		(151.8	)
Income taxes received				31.8			24.2			9.4
Net cash inflow from operating activities				544.2			552.5			465.4
Investing activities
Purchase of property, plant and equipment				(183.2	)		(231.3	)		(193.8	)
Purchase of computer software				(10.6	)		(5.2	)		(38.3	)
Capitalisation of development costs				(0.6	)		(0.4	)		(0.6	)
Disposal of property, plant and equipment				7.9			39.6			25.9
Purchase of available-for-sale investments				(0.1	)		(0.2	)		(0.2	)
Sale of available-for-sale investments				1.6			0.6			0.6
Purchase of interests in associates				(10.4	)		(3.8	)		(3.5	)
Purchase of subsidiaries, net of cash acquired		44		(65.0	)		(17.0	)		(201.0	)
Sale of businesses and subsidiaries, net of cash disposed		45		124.6			216.3			12.5
Interest received				11.2			12.2			18.7
Dividends received from associates				0.6			1.4			0.6
Net cash (outflow)/inflow from investing activities				(124.0	)		12.2			(379.1	)
Financing activities
Issue of ordinary shares				0.2			2.4			27.3
Redemption of convertible cumulative preference shares				–			(1.2	)		–
Draw-down of bank and other loans				114.6			8.4			102.5
Repayment of bank and other loans				(15.6	)		(289.9	)		(51.2	)
(Payments)/receipts on foreign currency derivatives				(178.6	)		(16.3	)		59.9
Capital element of finance lease rental payments				(2.8	)		(3.2	)		(3.8	)
Interest element of finance lease rental payments				(0.5	)		(1.4	)		(1.1	)
Decrease in collateralised cash				0.7			2.4			2.6
Purchase of own shares				(4.7	)		(6.9	)		(8.7	)
Interest paid				(55.0	)		(64.8	)		(71.1	)
Equity dividend paid				(246.2	)		(247.3	)		(217.3	)
Preference dividend paid				–			(2.0	)		(13.0	)
Investment by a minority shareholder in a subsidiary				0.4			3.8			5.9
Dividend paid to a minority shareholder in a subsidiary				(13.5	)		(14.4	)		(14.7	)
Net cash outflow from financing activities				(401.0	)		(630.4	)		(182.7	)
Increase/(decrease) in net cash and cash equivalents				19.2			(65.7	)		(96.4	)
Net cash and cash equivalents at the beginning of the period				280.2			326.4			378.6
Foreign currency translation				(21.2	)		19.5			44.2
Net cash and cash equivalents at the end of the period				278.2			280.2			326.4

Analysis of net cash and cash equivalents:			As at			As at			As at
			3 January			29 December			30 December
			2009			2007			2006
			$ million			$ million			$ million
Cash and cash equivalents				291.9			295.9			337.6
Bank overdrafts				(13.7	)		(15.7	)		(11.2	)
				278.2			280.2			326.4

As at 3 January 2009, the Group’s net debt was $476.4 million (29 December 2007: $591.5 million).

A reconciliation of the change in net cash and cash equivalents to the movement in net debt is presented in note 18.

Consolidated balance sheet

		As at	As at
		3 January	29 December
		2009	2007
	Note	$ million	$ million
Non-current assets
Goodwill	19	415.9	660.0
Other intangible assets	20	108.8	93.1
Property, plant and equipment	21	1,167.3	1,414.4
Investments in associates	22	20.3	17.7
Trade and other receivables	24	105.9	24.9
Deferred tax assets	36	64.8	47.4
Post-employment benefit surpluses	34	5.3	7.2
		1,888.3	2,264.7
Current assets
Inventories	23	772.4	799.8
Trade and other receivables	24	769.7	989.1
Income tax recoverable		47.6	29.5
Available-for-sale investments	26	0.8	3.0
Cash and cash equivalents	27	291.9	295.9
		1,882.4	2,117.3
Assets held for sale	28	–	90.9
Total assets		3,770.7	4,472.9
Current liabilities
Bank overdrafts	29	(13.7)	(15.7)
Bank and other loans	29	(29.5)	(39.8)
Obligations under finance leases	30	(1.5)	(1.8)
Trade and other payables	31	(650.1)	(738.7)
Income tax liabilities		(17.9)	(28.7)
Provisions	37	(48.8)	(50.2)
		(761.5)	(874.9)
Non-current liabilities
Bank and other loans	29	(762.9)	(820.5)
Obligations under finance leases	30	(5.4)	(7.8)
Trade and other payables	31	(51.6)	(43.2)
Post-employment benefit obligations	34	(333.6)	(306.5)
Deferred tax liabilities	36	(29.7)	(42.2)
Income tax liabilities		(63.5)	(67.6)
Provisions	37	(23.2)	(27.3)
		(1,269.9)	(1,315.1)
Liabilities directly associated with assets held for sale	28	–	(28.1)
Total liabilities		(2,031.4)	(2,218.1)
Net assets		1,739.3	2,254.8
Capital and reserves
Ordinary share capital	38	79.6	65.5
Share premium account	38	799.1	679.4
Deferred shares	39	0.1	–
Own shares	40	(14.9)	(18.9)
Capital redemption reserve	41	921.7	718.8
Currency translation reserve	41	(169.6)	313.7
Available-for-sale reserve	41	(1.0)	(0.2)
(Accumulated deficit)/retained profit	41	(4.2)	379.5
Shareholders’ equity		1,610.8	2,137.8
Minority interests	42	128.5	117.0
Total equity		1,739.3	2,254.8

Approved by the Board on 24 February 2009 and signed on its behalf by:

J Nicol Director

J W Zimmerman Director

Consolidated statement of recognised income and expense

	Year ended			Year ended			Year ended
	3 January			29 December			30 December
	2009			2007			2006
	$ million			$ million			$ million
(Loss)/profit for the period		(46.0	)		318.8			361.7
Net (expense)/income recognised directly in equity
(Loss)/gain on available-for-sale investments		(1.0	)		(0.8	)		1.1
Post-employment benefits:
– Net actuarial (loss)/gain		(98.8	)		95.9			38.0
– Effect of the asset ceiling		12.3			(43.8	)		(1.6	)

Currency translation differences on foreign operations:
– Subsidiaries	(211.7	)	109.2		(305.1	)
– Associates	(3.2	)	0.6		(0.9	)
Gain/(loss) on net investment hedges	57.2		(27.2	)	127.6
Currency translation differences on change of presentation currency	–		36.1		227.8
Income tax benefit/(expense) on items taken directly to equity	14.3		(12.6	)	(1.8	)
	(230.9	)	157.4		85.1
Transfers from equity to the income statement
Gain realised on the sale of available-for-sale investments	(1.2	)	(0.6	)	(0.4	)
Currency translation differences on foreign operations sold	6.7		28.4		–
	5.5		27.8		(0.4	)
Total recognised income and expense for the period	(271.4	)	504.0		446.4

Attributable to:
– Equity shareholders	(287.8	)	474.4		421.8
– Minority interests	16.4		29.6		24.6
	(271.4	)	504.0		446.4

Reconciliation of changes in consolidated shareholders’ equity

	Year ended			Year ended			Year ended
	3 January			29 December			30 December
	2009			2007			2006
	$ million			$ million			$ million
Shareholders’ equity at the beginning of the period		2,137.8			1,769.2			1,140.8
Total recognised income and expense attributable to equity shareholders		(287.8	)		474.4			421.8
Dividends on ordinary shares		(246.2	)		(247.3	)		(217.3	)
Ordinary shares issued:
– Conversion of convertible cumulative preference shares		–			130.0			390.7
– Exercise of employee share options		0.2			2.4			27.4
Purchase of own shares		(4.7	)		(6.9	)		(8.7	)
Cost of share-based incentives		11.5			16.0			14.5
Net (reduction in)/addition to shareholders’ equity during the period		(527.0	)		368.6			628.4
Shareholders’ equity at the end of the period		1,610.8			2,137.8			1,769.2

Notes to the financial statements

1. Nature of operations

Tomkins plc and its subsidiaries comprise a global engineering and manufacturing business. The Group is organised for management reporting purposes into two principal business groups: Industrial & Automotive and Building Products.

Industrial & Automotive manufactures a wide range of systems and components for car, truck and industrial equipment manufacturing markets, and industrial and automotive aftermarkets throughout the world. Industrial & Automotive is comprised of four operating segments: Power Transmission, Fluid Power, Fluid Systems and Other Industrial & Automotive.

Building Products is comprised of two operating segments: Air Systems Components and Other Building Products. Air Systems Components supplies the industrial and residential heating, ventilation and air conditioning market, mainly in North America. Other Building Products manufactures a variety of products for the building and construction industries, mainly in North America.

2. Transition to reporting in US dollars

Over recent years, the focus of the Group’s acquisition activity has been overseas and there has been a reduction in the relative importance of its UK operations. The Group’s principal operations are based in the US and the majority of the Group’s profit is generated in US dollars. Against this background, the Directors consider that the Company’s functional currency changed from sterling to the US dollar at the beginning of 2008.

Consistent with the change in the Company’s functional currency, the Group changed its presentation currency from sterling to the US dollar with effect from the beginning of 2008. Comparative figures for 2007 and 2006 have been re-presented in US dollars.

The change of the Group’s presentation currency and that of the Company’s functional currency were accounted for in accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates”.

On the change of the Group’s presentation currency, comparative figures previously reported in sterling were translated into US dollars as follows:

–

income and expenses were translated at the average exchange rate for the relevant period;

–

assets and liabilities were translated at the closing exchange rate on the relevant balance sheet date; and

–

equity items were translated at historical exchange rates.

The exchange rates used were as follows:

	2007	2006	2005	2004
	£1=$	£1=$	£1=$	£1=$
Average rate	2.00	1.83	1.82	1.83
Closing rate	1.99	1.96	1.72	1.92

As a result of the change of the Group’s presentation currency, a currency translation difference of $338.8 million was recognised in equity as at 29 December 2007 which represented the difference between the Group’s assets and liabilities translated from sterling into US dollars at the closing exchange rate on that date of £1=$1.99 and the equity items recognised in the consolidated financial statements that were translated from sterling into US dollars at historical exchange rates.

The currency translation difference arose as follows:

	$ million
Ordinary share capital		(22.6	)
Share premium account		(112.4	)
Own shares		3.4
Capital redemption reserve		(202.9	)
Currency translation reserve		17.7
Minority interests		(22.0	)
		(338.8	)

The change of the Company’s functional currency was accounted for prospectively from the beginning of 2008. Accordingly, the assets, liabilities and equity items of the Company as at 29 December 2007 were translated from sterling into US dollars at the closing exchange rate on that date of £1=$1.99.

As a consequence of applying the closing exchange rate rather than historical exchange rates to the equity items of the Company, $334.5 million of the currency translation difference arising on the change of the Group’s presentation currency was transferred from the cumulative currency translation reserve back to the equity items of the Company that are recognised as equity items in the consolidated financial statements.

The currency translation difference transferred may be analysed as follows:

	$ million
Ordinary share capital		22.6
Share premium account		112.4
Own shares		(3.4	)
Capital redemption reserve		202.9
		334.5

Notes to the financial statements (continued)

3. Principal accounting policies

A. Basis of preparation

The consolidated financial statements on pages 63 to 134 have been prepared on a going concern basis in accordance with International Financial Reporting Standards adopted for use in the European Union and, except as described under the heading “Financial instruments”, under the historical cost convention.

From the Group’s perspective, there are no applicable differences between IFRS adopted for use in the European Union and IFRS as issued by the International Accounting Standards Board and therefore the financial statements also comply with IFRS as issued by the IASB.

The Group’s principal accounting policies are unchanged compared with the year ended 29 December 2007.

During the period, the Group adopted the following accounting pronouncements that are relevant to its operations, neither of which had any impact on its results or financial position:

–	IFRS 8 “Operating Segments” (adopted early)

–	IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

The Group’s annual financial statements are drawn up to the Saturday nearest 31 December. These financial statements cover the 53 week period from 30 December 2007 to 3 January 2009 (“2008”) with comparative figures for the 52 week periods from 31 December 2006 to 29 December 2007 (“2007”) and from 1 January 2006 to 30 December 2006 (“2006”).

B. Basis of consolidation

The consolidated financial statements include the results, cash flows and assets and liabilities of the Company and its subsidiaries, and the Group’s share of the results and net assets of its associates.

A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. The results of a subsidiary acquired during the period are included in the Group’s results from the effective date of acquisition. The results of a subsidiary sold during the period are included in the Group’s results up to the effective date of disposal.

Where accumulated losses applicable to a minority interest in a subsidiary exceed the minority’s interest in the equity of the subsidiary, the excess is allocated to the Group’s interest in the subsidiary, except to the extent that the minority has a binding obligation and is able to make an additional investment to cover its share of the accumulated losses.

Intra-Group transactions and balances, and any unrealised gains and losses arising from intra-Group transactions, are eliminated on consolidation.

C. Associates

An associate is an entity over which the Company, either directly or indirectly, is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies of the entity.

Associates are accounted for using the equity method. Losses of an associate in excess of the Group’s interest in the entity are not recognised, except to the extent that the Group has incurred obligations on behalf of the entity. Profits and losses recognised by the Company or its subsidiaries on transactions with an associate are eliminated to the extent of the Group’s interest in the associate concerned.

D. Foreign currency translation

At entity level, transactions denominated in foreign currencies are translated into the entity’s functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognised in the income statement.

On consolidation, the results of foreign operations are translated into the Group’s presentation currency at the average exchange rate for the period and their assets and liabilities are translated into the Group’s presentation currency at the exchange rate ruling on the balance sheet date. Currency translation differences are recognised directly in equity in the currency translation reserve.

In the event that a foreign operation is sold, the gain or loss on disposal recognised in the income statement is determined after taking into account the cumulative currency translation differences that are attributable to the operation. On adoption of IFRS, the Group elected to deem cumulative currency translation differences to be $nil. Accordingly, the gain or loss recognised on disposal of a foreign operation does not include currency translation differences that arose before 4 January 2004.

In the cash flow statement, the cash flows of foreign operations are translated into the Group’s presentation currency at the average exchange rate for the period.

Notes to the financial statements (continued)

E. Revenue

Revenue from the sale of goods is measured at the invoiced amount net of returns, early settlement discounts, rebates and sales taxes and is recognised only where there is persuasive evidence of a sales agreement, the delivery of goods has occurred, the sale price is fixed or determinable and the collectability of revenue is reasonably assured.

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

Dividend income is recognised when payment is received.

F. Restructuring initiatives

Restructuring initiatives comprise expenses incurred in major projects undertaken to rationalise and improve the cost competitiveness of the Group and consequential gains and losses arising on the exit and disposal of businesses or on the disposal of assets.

G. Goodwill

Business combinations are accounted for using the purchase method.

Goodwill arises on the acquisition of interests in subsidiaries and associates. Goodwill represents any excess of the cost of acquisition over the interest acquired by the Group in the fair value of the entity’s identifiable assets, liabilities and contingent liabilities at the date of acquisition.

Goodwill in respect of an acquired subsidiary is recognised as an intangible asset and is allocated to the CGU or group of CGUs that are expected to benefit from the synergies of the acquisition. Goodwill is not amortised but tested at least annually for impairment and carried at cost less any recognised impairment.

Goodwill in respect of an acquired interest in an associate is subsumed within investments in associates.

Where the interest acquired by the Group in the fair value of the entity’s assets, liabilities and contingent liabilities exceeds the cost of acquisition, the excess is recognised immediately as a gain in the income statement.

H. Other intangible assets

Other intangible assets are stated at cost less accumulated amortisation and any recognised impairment losses. All intangible assets recognised by the Group are considered to have finite useful lives.

	(i)	Assets acquired in business combinations An intangible resource acquired in a business combination is recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights. An acquired intangible asset is amortised on a straight-line basis so as to charge its cost, which represents its fair value at the date of acquisition, to the income statement over its expected useful life, which is in the range 2 to 15 years.

	(ii)	Product development costs All research expenditure is charged to the income statement in the period in which it is incurred. Development expenditure is charged to the income statement in the period in which it is incurred unless it relates to the development of a new or significantly improved product, it is incurred after the technical feasibility of the product has been proven, and customer orders have been received that are expected to provide income sufficient to cover the further development expenditure that will be incurred prior to the product going into full production. Capitalised development expenditure is amortised on a straight-line basis such that it is charged to the income statement over the expected life of the resulting product.

	(iii)	Computer software Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset. Amortisation is provided on a straight-line basis so as to charge the cost of the software to the income statement over its expected useful life, which is in the range 3 to 5 years.

I. Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment losses. Freehold land and assets under construction are not depreciated. Depreciation of property, plant and equipment, other than freehold land and assets under construction, is generally provided on a straight-line basis so as to charge the depreciable amount to the income statement over the expected useful life of the asset concerned, which is in the following ranges:

Freehold buildings and long-leasehold property	10 to 50 years
Short-leasehold property	Length of lease
Plant, equipment and vehicles	2 to 20 years

Borrowing costs attributable to assets under construction are charged to the income statement in the period in which they are incurred.

Notes to the financial statements (continued)

3. Principal accounting policies (continued)

J. Leases

Leases that confer rights and obligations similar to those that attach to owned assets are classified as finance leases. All other leases are classified as operating leases.

Assets held under finance leases are included within property, plant and equipment, initially measured at their fair value or, if lower, the present value of the minimum lease payments, and a corresponding liability is recognised within obligations under finance leases. Subsequently, the assets are depreciated on a basis consistent with similar owned assets or over the term of the lease, if shorter. At inception of the lease, the lease rentals are apportioned between an interest element and a capital element so as to produce a constant periodic rate of interest on the outstanding liability. Thereafter, the interest element is recognised as an expense in the income statement while the capital element is applied to reduce the outstanding liability.

Operating lease rentals, and any incentives receivable, are recognised in the income statement on a straight- line basis over the term of the lease.

K. Impairment of long-lived assets

An asset is impaired to the extent that its carrying amount exceeds its recoverable amount, which represents the higher of the asset’s value in use and its fair value less costs to sell. An asset’s value in use represents the present value of the future cash flows expected to be derived from the continued use of the asset. Fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined for the CGU to which the asset belongs. An asset’s CGU is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets of groups of assets. Goodwill does not generate cash flows independently of other assets and is therefore tested for impairment at the level of the CGU or group of CGUs to which it is allocated.

Where appropriate, impairment of long-lived assets other than goodwill is recognised before goodwill is tested for impairment. When goodwill is tested for impairment and the carrying amount of the CGU or group of CGUs to which the goodwill has been allocated exceeds its recoverable amount, the impairment is allocated first to reduce the carrying amount of the goodwill and then to the other long- lived assets belonging to the CGU or group of CGUs pro-rata on the basis of their carrying amounts.

Impairments are recognised in the income statement. Impairments recognised in previous periods for long- lived assets other than goodwill are reversed if there has been a change in the estimates used to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount had no impairment been recognised in previous periods. Impairments recognised in respect of goodwill are not reversed.

L. Inventories

Inventories are valued at the lower of cost and net realisable value, with due allowance for any excess, obsolete or slow-moving items. Cost represents the expenditure incurred in bringing inventories to their existing location and condition, which may include the cost of raw materials, direct labour costs, other direct costs and related production overheads. Cost is generally determined on a first in, first out basis. Net realisable value is the estimated selling price less costs to complete and sell.

From time to time, the Group enters into forward purchase contracts to fix the price of commodities purchased for use in its manufacturing operations. As used by the Group, such derivative contracts do not fall within the scope of IAS 39 and, therefore, are not recognised as assets or liabilities.

M. Grants

Grants received relating to property, plant and equipment are treated as deferred income and recognised as income in equal instalments over the expected useful lives of the assets concerned. Other grants received are recognised as income on a systematic basis so as to match them with the costs they are intended to compensate or, if those costs have already been recognised, the grants are recognised as income in the period in which they are received.

Notes to the financial statements (continued)

N. Financial instruments

(i) Investments

Listed investments are classified as available-for-sale and are measured at fair value. Changes in their fair values are recognised in a separate component of equity except to the extent that they represent an other than temporary impairment in which case the impairment loss is recognised in the income statement. Realised gains and losses are transferred from equity to the income statement in the event of the disposal of the investments.

(ii) Trade receivables

Trade receivables represent the amount of sales of goods to customers for which payment has not been received, less an allowance for doubtful accounts that is estimated based on factors such as the credit rating of the customer, historical trends, the current economic environment and other information.

(iii) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits available on demand and other short-term, highly liquid investments with a maturity on acquisition of three months or less, and bank overdrafts. Bank overdrafts are presented as current liabilities to the extent that there is no right of offset with cash balances.

(iv) Trade payables

Trade payables represent the amount of invoices received from suppliers for purchases of goods and services for which payment has not been made.

(v) Bank and other loans

Bank and other loans are initially measured at fair value, net of directly attributable transaction costs, if any, and are subsequently measured at amortised cost using the effective interest rate method.

(vi) Derivative financial instruments

The Group uses derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts and interest rate swaps, to reduce its exposure to exchange rate and interest rate movements. The Group does not hold or issue derivatives for speculative or trading purposes.

Derivative financial instruments are recognised as assets and liabilities measured at their fair values at the balance sheet date. Changes in their fair values are recognised in the income statement and this is likely to cause volatility in situations where the carrying value of the hedged item is either not adjusted to reflect fair value changes arising from the hedged risk or is so adjusted but that adjustment is not recognised in the income statement. Provided the conditions specified by IAS 39 are met, hedge accounting may be used to mitigate this volatility.

The Group does not generally apply hedge accounting to transactional foreign currency hedging relationships, such as hedges of forecast or committed transactions. It does, however, apply hedge accounting to translational foreign currency hedging relationships and to hedges of its interest rate exposures where it is permissible to do so under IAS 39. When hedge accounting is used, the relevant hedging relationships are classified as a fair value hedge, a cash flow hedge or, in the case of a hedge of the Group’s net investment in a foreign operation, a net investment hedge.

Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the resulting gain or loss is recognised in the income statement where, to the extent that the hedge is effective, it offsets the change in the fair value of the hedging instrument.

Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument are recognised directly in equity rather than in the income statement. When the hedged item in a cash flow hedge is recognised in the financial statements, the accumulated gain or loss recognised in equity is either recycled to the income statement or, if the hedged item results in a non-financial asset, is recognised as an adjustment to its initial carrying amount. Accumulated gains and losses recognised in equity in relation to a net investment hedge are recycled to the income statement on disposal of the foreign operation.

Derivative financial instruments are classified as current assets or liabilities unless they are in a designated hedging relationship and the hedged item is classified as a non-current asset or liability.

Derivative financial instruments that are not in a designated hedging relationship are classed as trading.

Notes to the financial statements (continued)

3. Principal accounting policies (continued)

N. Financial instruments (continued)

(vii) Embedded derivatives

Derivatives embedded in non-derivative host contracts are recognised separately as derivative financial instruments when their risks and characteristics are not closely related to those of the host contract and the host contract is not stated at its fair value with changes in its fair value recognised in the income statement.

(viii) Preference shares

Prior to redemption in July 2007, the Company’s US dollar denominated 5.56% convertible cumulative preference shares were classified as non-current liabilities and translated into sterling at the exchange rate ruling at the balance sheet date. Dividends payable on the preference shares were included in interest payable.

(ix) Own shares

Own shares represent the Company’s ordinary shares that are held by the Company, its subsidiaries and sponsored ESOP trusts in relation to the Group’s employee share schemes. Own shares are deducted at cost in arriving at shareholders’ equity and gains and losses on their sale or transfer are recognised directly in equity.

O. Post-employment benefits

Post-employment benefits comprise pension benefits provided to employees throughout the world and other benefits, mainly healthcare, provided to certain employees in North America.

For defined contribution plans, the cost of providing the benefits represents the Group’s contributions to the plans and is recognised in the income statement in the period in which the contributions fall due.

For defined benefit plans, the cost of providing the benefits is determined based on actuarial valuations of each of the plans that are carried out annually at the Group’s balance sheet date by independent, qualified actuaries. Plan assets are measured at their fair value at the balance sheet date. Benefit obligations are measured using the projected unit credit method.

The cost of defined benefit plans recognised in the income statement comprises the net total of the current service cost, the past service cost, the expected return on plan assets, the interest cost and the effect of curtailments or settlements. The current service cost represents the increase in the present value of the plan liabilities expected to arise from employee service in the current period. Past service costs resulting from enhanced benefits are recognised in the income statement on a straight-line basis over the vesting period, or immediately if the benefits have vested.

The expected return on plan assets is based on market expectations at the beginning of the period of future returns over the life of the benefit obligation. The interest cost represents the increase in the benefit obligation due to the passage of time. The discount rate used is determined at the balance sheet date by reference to market yields on high-quality corporate bonds, where available, or government bonds. Gains and losses on curtailments or settlements are recognised in the income statement in the period in which the curtailment or settlement occurs.

Actuarial gains and losses, which represent differences between the expected and actual returns on the plan assets and the effect of changes in actuarial assumptions, are recognised in the statement of recognised income and expense in the period in which they occur.

The defined benefit liability or asset recognised in the balance sheet comprises the net total for each plan of the present value of the benefit obligation, minus any past service costs not yet recognised, minus the fair value of the plan assets, if any, at the balance sheet date. Where a plan is in surplus, the asset recognised is limited to the amount of any unrecognised past service costs and the present value of any amounts that the Group expects to recover by way of refunds or a reduction in future contributions. The net total for all plans in surplus is classified as a non-current asset. The net total for all plans in deficit is classified as a non-current liability.

Notes to the financial statements (continued)

P. Share-based incentive

Share-based incentives are provided to employees under the Group’s share option, bonus and other share award schemes. All existing schemes are classified as equity-settled. The Group recognises a compensation expense in respect of these schemes that is based on the fair value of the awards, where appropriate, measured using an option-pricing model. Fair value is determined at the date of grant and is not subsequently remeasured unless the conditions on which the award was granted are modified. Generally, the compensation expense is recognised on a straight-line basis over the vesting period. Adjustments are made to reduce the compensation expense to reflect expected and actual forfeitures during the vesting period due to failure to satisfy service conditions or non-market performance conditions. In the event of a cancellation, the compensation expense that would have been recognised over the remainder of the vesting period is recognised immediately in the income statement.

In accordance with IFRS 1 “First-time Adoption of IFRS”, the Group has not applied this policy to awards that were granted on or before 7 November 2002.

Q. Provisions

A provision is a liability of uncertain timing or amount and is recognised when the Group has a present obligation as a result of a past event, it is probable that payment will be made to settle the obligation and the payment can be estimated reliably.

Provision is made for warranty claims when the relevant products are sold, based on historical experience of the nature, frequency and average cost of warranty claims.

Provision is made for the cost of product recalls if management considers it probable that it will be necessary to recall a specific product and the amount can be reasonably estimated.

Provision is made for restructuring costs when a detailed formal plan for the restructuring has been determined and the plan has been communicated to the affected parties. Gains from the expected disposal of assets are not taken into account in measuring these provisions and provision is not made for future operating losses.

Provision is made for claims for compensation for injuries sustained by the Group’s employees while at work. The provision represents management’s best estimate of the liability for claims made but not yet fully settled and for incidents which have occurred but have not yet been reported to the Group. The Group’s liability for claims made but not yet fully settled is calculated on an actuarial basis by a third party administrator. Historical data trends are used to estimate the liability for unreported incidents.

R. Taxation

Current tax is the amount of tax payable or recoverable in respect of the taxable profit or loss for the period. Taxable profit differs from accounting profit because it excludes items of income or expense recognised for accounting purposes that are either not taxable or deductible for tax purposes or are taxable or deductible in other periods. Current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

The Group recognises provisions in respect of uncertain tax positions whereby additional current tax may become payable in future periods following the audit by the tax authorities of previously filed tax returns. Provisions for uncertain tax positions are based upon management’s assessment of the likely outcome of issues associated with assumed permanent differences, interest that may be applied to temporary differences, the possible disallowance of tax credits and penalties. Provisions for uncertain tax positions are reviewed regularly and are adjusted to reflect events such as the expiry of limitation periods for assessing tax, administrative guidance given by the tax authorities and court decisions.

Deferred tax is tax expected to be payable or recoverable on differences between the carrying amount of an asset or a liability and its tax base used in the computation of taxable profit. Deferred tax is accounted for using the liability method, whereby deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction other than a business combination that affects neither accounting profit nor taxable profit.

Deferred tax is provided on temporary differences arising on investments in foreign subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated using the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised.

Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax is recognised in the income statement unless it relates to an item recognised directly in equity, in which case it too is recognised directly in equity.

Notes to the financial statements (continued)

3. Principal accounting policies (continued)

S. Assets held for sale and discontinued operations

Assets are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. For this to be the case, the asset must be available for immediate sale in its present condition, management must be committed to, and have initiated, a plan to sell the asset which, when initiated, was expected to result in a completed sale within 12 months. An extension of the period required to complete the sale does not preclude the asset from being classified as held for sale, provided the delay was for reasons beyond the Group’s control and management remains committed to its plan to sell the asset. Assets that are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

A discontinued operation is a component of an entity that has either been disposed of, or satisfies the criteria to be classified as held for sale, and represents a separate major line of business or geographic area of operations, is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations, or is a subsidiary acquired exclusively with a view to disposal.

T. Dividends on ordinary shares

Dividends payable on ordinary shares are recognised in the financial statements when they have been appropriately authorised and are no longer at the Company’s discretion. Accordingly, interim dividends are recognised when they are paid and final dividends are recognised when they are declared following approval by shareholders at the Company’s AGM. Dividends on ordinary shares are recognised as an appropriation of shareholders’ equity.

U. Accounting pronouncements not yet adopted

Recently-issued accounting pronouncements that are relevant to the Group’s operations but have not yet been adopted are outlined below. With the exception of the revisions to IAS 23 and those to IFRS 3 and IAS 27, management does not expect that the adoption of these pronouncements will have a material impact on the Group’s results or financial position.

IAS 23 Revised “Borrowing Costs”

In March 2007, the IASB published a revised version of IAS 23 that changes the permitted treatment of borrowing costs relating to “qualifying assets”, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale. Under the existing standard, the Group recognises all borrowing costs as an expense in the period in which they are incurred. Under the revised standard, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset must be capitalised as part of the cost of that asset.

IAS 23 Revised must be applied to borrowing costs relating to qualifying assets for which capitalisation commences in annual periods beginning on or after 1 January 2009.

Management expects that IAS 23 Revised will have an initial positive impact on the Group’s results and financial position because borrowing costs that would have been expensed as incurred will be capitalised as part of the cost of qualifying assets. However, this initial positive impact will be offset over time by the higher depreciation expense that will be recognised in respect of the qualifying assets. Management is not yet able to estimate reliably the effect of IAS 23 Revised as this will depend on the level of expenditure on qualifying assets and prevailing market interest rates.

IAS 1 Revised “Presentation of Financial Statements”

In September 2007, the IASB published a revised version of IAS 1 which provides for a number of presentational changes to financial statements, including the option to present a single statement of comprehensive income (rather than an income statement and a separate statement of other comprehensive income), the requirement to disclose income tax relating to each component of other comprehensive income, and the requirement to present a balance sheet as at the beginning of the earliest comparative period when an entity applies a change of accounting policy retrospectively or makes a retrospective restatement.

IAS 1 Revised is effective for annual periods beginning on or after 1 January 2009.

IFRS 3 Revised “Business Combinations” and IAS 27 Revised “Consolidated and Separate Financial Statements”

In January 2008, the IASB issued revised versions of IFRS 3 and IAS 27 that introduce a number of changes that will affect the accounting for future business combinations and the accounting in the event of the loss of control over a subsidiary.

Notes to the financial statements (continued)

Where a business combination involves a minority interest, the Group will be able to choose for each business combination whether to measure the minority interest at fair value or, as at present, at the minority’s share of the fair value of the net assets of the acquired entity. In step acquisitions, previously held interests will be remeasured at fair value and any gain or loss arising will be recognised in the income statement. On the loss of control of a subsidiary, any retained interest will be remeasured at fair value and any gain or loss will be reflected in the gain or loss on loss of control.

Other significant changes are that acquisition costs will be expensed and adjustments to contingent consideration will be recognised in the income statement.

IFRS 3 Revised and IAS 27 Revised are effective for annual periods commencing on or after 1 July 2009.

The financial effect of IFRS 3 Revised and IAS 27 Revised will be dependent on the circumstances surrounding the future transactions to which they will apply, that are at present unknown.

Amendment to IFRS 2 “Share-based Payment – Vesting Conditions and Cancellations”

In January 2008, the IASB published an amendment to IFRS 2 which clarifies that only service conditions and performance conditions attaching to a share-based incentive are vesting conditions and specifies that all cancellations, whether by the Group or by the participant, should receive the same accounting treatment. It is expected that the principal impact of the amendment will be in relation to the Group’s savings-related share option scheme. At present, if a participant in that scheme forfeits an award by ceasing to make payments to the savings contract, the event is treated as a forfeiture. On adoption of the amendment, that event will be treated as a cancellation unless a subsequent award is identified as a replacement, in which case it will be treated as a modification.

The amendment to IFRS 2 is effective for annual periods beginning on or after 1 January 2009.

Improvements to IFRS 2008

In May 2008, the IASB published its first annual improvements standard which contains minor amendments to standards that address a number of issues, including the following: the accounting for amendments to retirement benefit plans involving a reduction of benefits and the treatment of plan administration costs; the classification of the assets and liabilities of a subsidiary as held for sale where the parent is committed to sell but will retain a non- controlling interest; the accounting for impairment of an investment in an associate that includes goodwill; and the disclosure of estimates used to determine the recoverable amount of cash-generating units.

Most of the amendments are effective for annual periods beginning on or after 1 January 2009.

IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”

IFRIC 16 provides guidance on net investment hedge accounting, including: which foreign currency risks qualify for hedge accounting, and what amount can be designated; where, within a group, the hedging instrument can be held; and what amount should be reclassified from equity to the income statement on disposal of the hedged foreign operation.

IFRIC 16 is effective for annual periods commencing on or after 1 October 2008.

4. Critical accounting estimates

A. Background

When applying the Group’s accounting policies, management must make assumptions and estimates concerning the future that affect the carrying amounts of assets and liabilities at the balance sheet date, the disclosure of contingencies that existed at the balance sheet date and the amounts of revenue and expenses recognised during the accounting period. Such assumptions and estimates are based on factors such as historical experience, the observance of trends in the industries in which the Group operates and information available from the Group’s customers and other outside sources.

Due to the inherent uncertainty involved in making assumptions and estimates, actual outcomes could differ from those assumptions and estimates. An analysis of the key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of the Group’s assets and liabilities within the next financial year is presented below.

B. Post-employment benefits

The Group operates pension plans throughout the world, covering the majority of its employees. Pension benefits are provided by way of both defined contribution plans and defined benefit plans. The Group’s defined benefit pension plans are closed to new entrants. The Group also provides other post- employment benefits, principally health and life insurance cover, to certain of its employees in North America by way of unfunded defined benefit plans.

The Group accounts for post-employment benefits in accordance with IAS 19 “Employee Benefits”, whereby the cost of defined benefit plans is determined based on actuarial valuations of the plans that are carried out annually at the Group’s balance sheet date. The actuarial valuations are dependent on assumptions about the future that are made by management on the advice of independent qualified actuaries. If actual experience differs from these assumptions, there could be a material change in the amounts recognised by the Group in respect of defined benefit plans in the next financial year.

Notes to the financial statements (continued)

4. Critical accounting estimates (continued)

B. Post-employment benefits (continued)

As at 3 January 2009, the present value of the benefit obligation was $1,165.8 million. The benefit obligation is calculated using a number of assumptions including future salary increases, increases to pension benefits, mortality rates and, in the case of post-employment medical benefits, the expected rate of increase in medical costs. The present value of the benefit obligation is calculated by discounting the benefit obligation using market yields on high-quality corporate bonds at the balance sheet date. As at 3 January 2009, the fair value of the plan assets was $862.1 million. The plan assets consist largely of listed securities and their fair values are subject to fluctuation in response to changes in market conditions.

Effects of changes in the actuarial assumptions underlying the benefit obligation, effects of changes in the discount rate applicable to the benefit obligation and effects of differences between the expected and actual return on the plan assets are classified as actuarial gains and losses and are recognised directly in equity. During 2008, the Group recognised a net actuarial gain of $98.8 million. Further actuarial gains and losses will be recognised during the next financial year.

An analysis of the assumptions that will be used by management to determine the cost of defined benefit plans that will be recognised in the income statement in the next financial year is presented in note 34.

C. Impairment of long-lived assets

Goodwill, other intangible assets and property, plant and equipment are tested for impairment whenever events or circumstances indicate that their carrying amounts might be impaired. Additionally, goodwill and capitalised development expenditure relating to a product that is not yet in full production are subject to an annual impairment test. Due to the nature of the Group’s operations, it is generally not possible to estimate the recoverable amount for individual long- lived assets and impairment tests are usually based on the value in use of the CGU or group of CGUs to which the asset belongs.

Value in use represents the net present value of the cash flows expected to arise from the relevant CGU or group of CGUs and its calculation requires management to estimate those cash flows and to apply a suitable discount rate to them.

Management bases the estimated cash flows of the CGU or group of CGUs on assumptions such as the future changes in sales volumes, future changes in selling prices, and expected changes in material prices, salaries and other costs. Management determines a discount rate for each CGU or group of CGUs using a capital asset pricing model, which is based on variables including the applicable risk-free interest rates and, for determining the cost of equity, the long-term equity risk premium and the assumed share price volatility relative to the market, and, for determining the cost of debt, the assumed credit risk spreads.

As at 3 January 2009, the carrying amount of long- lived assets was $1,692.0 million, after taking into account impairments totalling $342.4 million that were recognised during 2008. Further impairment losses may be recognised on these assets within the next financial year if there are adverse changes in the variables and assumptions underlying the estimated future cash flows of the CGUs or the discount rates that are applied to those cash flows.

Sensitivity analysis of the carrying amount of goodwill to the key assumptions underlying the value in use calculations is presented in note 19.

D. Inventory

Inventories are stated at the lower of cost and net realisable value, with due allowance for excess, obsolete or slow-moving items. Net realisable value is based on current assessments of future demand, market conditions and new product development initiatives. As at 3 January 2009, the carrying value of inventories was $772.4 million, net of allowances of $45.1 million. Should demand for the Group’s products decline further during the next financial year as a result of the current economic downturn, additional allowances may be necessary in respect of excess or slow-moving items.

E. Financial instruments

Derivative financial instruments that the Group holds for the purpose of hedging its currency and interest rate exposures are recognised as assets and liabilities in the Group’s balance sheet measured at their fair value at the balance date. As at 3 January 2009, the Group recognised a net asset of $28.4 million in respect of derivatives. The fair value of derivatives continually changes in response to changes in prevailing market conditions and applicable credit risk spreads. Where permissible under IAS 39, the Group uses hedge accounting to mitigate the impact of changes in the fair value of derivatives on the income statement but the Group’s results may be affected by changes in the fair values of derivatives where hedge accounting cannot be applied or due to hedge ineffectiveness.

Notes to the financial statements (continued)

F. Workers’ compensation

Provision is made for claims for compensation for injuries sustained by the Group’s employees while at work. The Group’s liability for claims made but not fully settled is calculated on an actuarial basis. Historical data trends are used to estimate the liability for unreported incidents. As at 3 January 2009, the workers’ compensation provision amounted to $25.5 million. Further provision may be necessary within the next financial year if the actual cost of settling claims exceeds management’s estimates.

G. Environmental liabilities

Provision is made for the estimated cost of known environmental remediation obligations in relation to the Group’s current and former manufacturing facilities. Cost estimates include the expenditure expected to be incurred in the initial remediation effort and, where appropriate, in the long-term monitoring of the relevant sites. Management monitors for each remediation project the costs incurred to date against expected total costs to complete and operates procedures to identify possible remediation obligations that are presently unknown.

As at 3 January 2009, the provision for environmental remediation costs amounted to $7.4 million. Further provision may be necessary within the next financial year if actual remediation costs exceed expected costs, new remediation obligations are identified or there are changes in the circumstances affecting the Group’s legal or constructive remediation obligations.

H. Product warranties

Provision is made for the estimated cost of future warranty claims on the Group’s products. Management bases the provision on historical experience of the nature, frequency and average cost of warranty claims and takes into account recent trends that might suggest that the historical claims experience may differ from future claims. As at 3 January 2009, the Group’s provision for warranty claims amounted to $11.5 million. Further provision may be necessary within the next financial year if actual claims experience differs from management’s estimates.

I. Taxation

The Group is subject to income tax in each of the jurisdictions in which it operates. Management is required to exercise significant judgement in determining the Group’s provision for income taxes.

Estimation is required of taxable profit in order to determine the Group’s current tax liability. Management’s judgement is required in relation to uncertain tax positions whereby additional current tax may become payable in the future following the audit by the tax authorities of previously filed tax returns. As at 3 January 2009, the Group holds a provision for uncertain tax positions amounting to $63.5 million. It is possible that the final outcome of these uncertain tax positions may differ from management’s estimates.

Estimation is also required of temporary differences between the carrying amount of assets and liabilities and their tax base. Deferred tax liabilities are recognised for all taxable temporary differences but, where there exist deductible temporary differences, management’s judgement is required as to whether a deferred tax asset should be recognised based on the availability of future taxable profits. As at 3 January 2009, the Group recognised net deferred tax assets amounting to $35.1 million. It is possible that the deferred tax assets actually recoverable may differ from the amounts recognised if actual taxable profits differ from management’s estimates.

As at 3 January 2009, deferred tax liabilities were not recognised on retained profits of foreign subsidiaries and associates amounting to $3,180.5 million because the Group is able to control the remittance of those profits to the UK and it is probable that they will not be remitted in the foreseeable future. Income tax may be payable on these amounts if circumstances change and either their remittance can no longer be controlled by the Group or they are actually remitted to the UK.

Notes to the financial statements (continued)

5. Segment information

A. Background

The Group’s operating segments are identified by grouping together businesses that manufacture similar products, as this is the basis on which information is provided to the Board for the purposes of allocating resources within the Group and assessing the performance of the Group’s businesses.

The Group’s business segments are described in note 1.

The Board uses adjusted operating profit to measure the profitability of each segment. Adjusted operating profit is therefore the measure of segment profit presented in the Group’s segment disclosures. Adjusted operating profit represents operating profit before the amortisation of intangible assets arising on acquisitions, restructuring initiatives (comprising restructuring costs and the net gain or loss on disposals and on the exit of businesses) and impairments.

As indicated in note 3, the Group adopted IFRS 8 “Operating Segments” early with effect from the beginning of 2008. Accordingly, certain information for prior years has been restated to conform with the requirements of IFRS 8.

B. Sales and adjusted operating profit – continuing operations

	Sales						Adjusted operating profit
	Year ended		Year ended		Year ended		Year ended		Year ended		Year ended
	3 January		29 December		30 December		3 January		29 December		30 December
	2009		2007		2006		2009		2007		2006
	$ million		$ million		$ million		$ million		$ million		$ million
By operating segment
Industrial & Automotive:
– Power Transmission		2,106.4		2,063.2		1,851.2		229.6		266.8		258.2
– Fluid Power		832.3		769.1		709.4		46.2		71.0		64.4
– Fluid Systems		501.2		583.8		447.4		39.9		55.0		22.9
– Other Industrial & Automotive		620.9		896.6		976.0		44.0		84.6		98.8
		4,060.8		4,312.7		3,984.0		359.7		477.4		444.3
Building Products:

– Air Systems Components	1,112.3	1,083.6	1,070.6	104.2		102.5		106.3
– Other Building Products	342.8	489.8	691.5	(24.0	)	4.0		47.3
	1,455.1	1,573.4	1,762.1	80.2		106.5		153.6
Corporate	–	–	–	(36.5	)	(53.4	)	(52.6	)

	5,515.9	5,886.1	5,746.1	403.4		530.5	545.3

By origin
US	2,947.6	3,457.0	3,718.7	181.4		300.8	347.3
UK	399.6	408.1	256.7	(4.5	)	7.4	(13.0	)
Rest of Europe	787.2	733.9	641.2	55.9		66.1	59.9
Rest of the world	1,381.5	1,287.1	1,129.5	170.6		156.2	151.1
	5,515.9	5,886.1	5,746.1	403.4		530.5	545.3

By destination
US	3,178.7	3,712.5	3,840.3
UK	129.0	149.4	134.2
Rest of Europe	864.9	809.7	685.2
Rest of the world	1,343.3	1,214.5	1,086.4
	5,515.9	5,886.1	5,746.1

Inter-segment sales were not significant.

Notes to the financial statements (continued)

Reconciliation of adjusted operating profit to (loss)/profit before tax:

	Year ended			Year ended			Year ended
	3 January			29 December			30 December
	2009			2007			2006
	$ million			$ million			$ million
Adjusted operating profit		403.4			530.5			545.3
Amortisation of intangible assets arising on acquisitions		(10.6	)		(7.2	)		(5.0	)
Impairments (see note 6)		(342.4	)		(0.8	)		(2.9	)
Restructuring initiatives (see note 7)		17.0			63.8			(18.2	)
Operating profit		67.4			586.3			519.2
Net finance costs		(75.0	)		(60.9	)		(70.6	)
(Loss)/profit before tax		(7.6	)		525.4			448.6

Segmental analysis of the sales and adjusted operating profit of discontinued operations is presented in note 13. C. Segment asset

The Board does not review, and is not regularly provided with, an analysis of the Group’s total assets by operating segment. In order to comply with the requirements of IFRS 8, an analysis is provided below of the Group’s operating assets, goodwill and other intangible assets by operating segment:

C. Segment assets

	As at		As at		As at
	3 January		29 December		30 December
	2009		2007		2006
	$ million		$ million		$ million
By operating segment
Continuing operations
Industrial & Automotive:
– Power Transmission		1,185.0		1,706.6		1,555.9
– Fluid Power		594.5		601.6		557.3
– Fluid Systems		236.3		406.4		334.8
– Other Industrial & Automotive		375.7		422.8		417.2
		2,391.5		3,137.4		2,865.2
Building Products:
– Air Systems Components		753.2		771.9		785.9
– Other Building Products		110.8		151.0		205.3
		864.0		922.9		991.2
Corporate		33.7		27.8		24.9
		3,289.2		4,088.1		3,881.3
Discontinued operations
Industrial & Automotive:
– Wiper Systems		–		–		220.3
		3,289.2		4,088.1		4,101.6

Reconciliation of assets analysed by operating segment to total assets:
	As at		As at		As at
	3 January		29 December		30 December
	2009		2007		2006
	$ million		$ million		$ million
Segment assets		3,289.2		4,088.1		4,101.6
Cash and cash equivalents		291.9		295.9		337.6
Collateralised cash		3.8		5.8		8.0
Derivatives hedging translational exposures		73.4		6.2		4.9
Deferred tax assets		64.8		47.4		71.0
Income tax recoverable		47.6		29.5		42.7
Total assets		3,770.7		4,472.9		4,565.8

Notes to the financial statements (continued)

5. Segment information (continued)

D. Non-current assets

The geographic analysis of long-lived assets (goodwill and other intangible assets, and property, plant and equipment) and investments in associates was as follows:

	As at		As at		As at
	3 January		29 December		30 December
	2009		2007		2006
	$ million		$ million		$ million
By location
US		957.3		1,047.0		1,098.9
UK		70.1		131.0		124.2
Rest of Europe		192.6		233.3		202.7
Rest of the world		492.3		773.9		679.6
		1,712.3		2,185.2		2,105.4

Capital expenditure, depreciation and amortisation in respect of long-lived assets was as follows:

	Year ended 3 January 2009						Year ended 29 December 2007						Year ended 30 December 2006
	Capital						Capital						Capital
	expenditure		Depreciation		Amortisation		expenditure		Depreciation		Amortisation		expenditure		Depreciation		Amortisation
	$ million		$ million		$ million		$ million		$ million		$ million		$ million		$ million		$ million
By operating segment
Continuing operations
Industrial & Automotive:
– Power Transmission		83.9		95.2		7.5		91.8		102.1		6.4		98.1		85.7		8.3
– Fluid Power		35.8		27.3		8.8		38.2		26.4		6.9		27.0		18.7		11.0
– Fluid Systems		22.3		26.1		1.2		41.9		29.8		0.8		34.0		27.4		0.6
– Other Industrial
& Automotive		19.9		16.7		1.4		27.6		18.5		1.3		17.6		17.8		0.7
		161.9		165.3		18.9		199.5		176.8		15.4		176.7		149.6		20.6
Building Products:
– Air Systems Components		28.4		26.3		6.6		23.5		26.0		4.7		24.5		27.2		2.7
– Other Building Products		3.3		11.4		0.2		8.8		12.7		0.1		21.5		17.2		0.2
		31.7		37.7		6.8		32.3		38.7		4.8		46.0		44.4		2.9
Corporate		0.2		0.1		0.3		0.3		0.4		0.4		1.0		0.3		0.6
		193.8		203.1		26.0		232.1		215.9		20.6		223.7		194.3		24.1
Discontinued operations
Industrial & Automotive:
– Wiper Systems		–		–		–		4.4		–		–		8.4		13.9		0.3
		193.8		203.1		26.0		236.5		215.9		20.6		232.1		208.2		24.4

The Board regularly reviews the Group’s capital expenditure, which represents cash outflows on additions to property, plant and equipment and non-integral computer software included within other intangible assets.

6. Tangible fixed assets

	Long leasehold property $ million		Plant, equipment and vehicles $ million			Total $ million
Cost
As at 29 December 2007		0.2		4.4			4.6
Additions		–		0.2			0.2
Disposals		–		(0.2	)		(0.2	)
As at 3 January 2009		0.2		4.4			4.6

Accumulated depreciation
As at 29 December 2007		–		3.8			3.8
Depreciation charge for the period		–		0.4			0.4
Disposals		–		(0.2	)		(0.2	)
As at 3 January 2009		–		4.0			4.0

Net book value
As at 29 December 2007		0.2		0.6			0.8
As at 3 January 2009		0.2		0.4			0.6

7. Investments in subsidiaries

	$ million
Cost and net book value
As at 29 December 2007		3,146.0
Additions		57.2
Disposals		(73.7	)
As at 3 January 2009		3,129.5

Details of the Company’s principal trading subsidiaries are set out on page 152. A complete list of the Company’s subsidiaries will be filed with the Company’s next annual return.

8. Debtors

	As at 3 January 2009 $ million		As at 29 December 2007 $ million
Amounts falling due within one year
Amounts owed by subsidiaries		0.2		5.8
Other taxes and social security		0.1		0.4
Prepayments and accrued income		0.5		2.2
Other debtors		0.6		0.6
		1.4		9.0
Amounts falling due after more than one year
Amounts owed by subsidiaries		188.5		346.0
Derivative financial instruments (note 11)		16.1		2.2
		204.6		348.2
		206.0		357.2

The amounts owed by subsidiaries classified as falling due after more than one year have no specified terms of repayment and are intended to be settled on a net basis. The Company has given an undertaking to the counterparties that it will not require settlement within one year of the balance sheet date. Generally, these amounts bear interest at floating rates based on prevailing market interest rates applicable to the currencies in which they are denominated.

141

Notes to the financial statements (continued)

9. Creditors: amounts falling due within one year

	As at 3 January 2009 $ million		As at 29 December 2007 $ million
Trade creditors		0.5		1.8
Bank overdrafts – unsecured		1.0		1.2
Loan notes – unsecured		0.3		0.4
Other loans – unsecured (note 10)		1.6		1.8
Amounts owed to subsidiaries		16.6		1.4
Other taxes and social security		0.3		0.8
Accruals and deferred income		14.9		9.2
Other creditors		12.6		18.5
		47.8		35.1

The loan notes must be repaid at par, by the Company on 30 June 2012. Until that time, the noteholders have the right to require full or part repayment, at par, half-yearly on 30 June and 31 December and for this reason they are classified as current liabilities.

10. Creditors: amounts falling due after more than one year

	As at 3 January 2009 $ million		As at 29 December 2007 $ million
Other loans – unsecured		231.8		295.1
Amounts owed to subsidiaries		94.1		276.0
Accruals and deferred income		4.9		18.0
		330.8		589.1

Other loans

Other loans comprise a £ 150 million bond drawn down by the Company under the Group’s EMTN Programme. The bond is repayable at par on 20 December 2011 and bears interest at a fixed rate of 8% per annum.

The carrying amount of other loans may be analysed as follows:

	As at 3 January 2009 $ million			As at 29 December 2007 $ million
Principal amount		219.2			298.9
Accrued interest payable		0.7			0.6
Unamortised transaction costs		(0.3	)		(0.6	)
Carrying amount before hedge accounting		219.6			298.9
Fair value hedge adjustment		13.8			(2.0	)
Carrying amount		233.4			296.9

As at 3 January 2009 $ million		As at 29 December 2007 $ million
Maturity analysis:
– Within one year	1.6		1.8
– Between one and two years	0.9		1.2
– Between two and five years	230.9		293.9
	233.4		296.9

142

Notes to the financial statements (continued)

Amounts owed to subsidiaries

Amounts owed to subsidiaries classified as falling due after more than one year have no specified terms of repayment and are intended to be settled on a net basis. The Company has received an undertaking from the counterparties that they will not require settlement within one year of the balance sheet date. Generally, these amounts bear interest at floating rates based on prevailing market interest rates applicable to the currencies in which they are denominated.

11. Derivative financial instruments

The Company holds derivative financial instruments in accordance with the Group’s policy in relation to financial risk management. Details of that policy are set out in note 33 of the Group’s consolidated financial statements.

The carrying value of derivative financial instruments held by the Company was as follows:

As at 3 January 2009

As at 29 December 2007

Assets

$ million

Liabilities

$ million

Assets

$ million

Liabilities

$ million

Carrying value

Interest rate swaps

16.1

2.2

Interest rate swaps are used to swap borrowings by the Company under the Group’s EMTN Programme from fixed interest rates to floating interest rates. These contracts have been designated and are effective as fair value hedges in relation to the borrowings.

During 2008, the Company recognised a fair value gain of $18.9 million (2007: gain of $2.8 million) in relation to these contracts and the carrying amount of the hedged borrowings was increased by $20.1 million (2007: increased by $1.4 million) to reflect the change in the fair value of the borrowings attributable to the hedged risk and the amortisation of the transitional adjustment that was recognised on adoption of FRS 26. During 2008, a net loss of $1.2 million (2007: net gain of $1.4 million) was therefore recognised in the profit and loss account in relation to these hedges.

The profile of interest rate swaps held by the Company was as follows:

Interest rate

Payable

Receivable

Notional

Principal Amount

million

Variable

Fixed

Variable rate

index

As at 3 January 2009

Maturity date – December 2011

150.0

5.7%

8.0%

6 month LIBOR

As at 29 December 2007

Maturity date – December 2011

150.0

8.6%

8.0%

6 month LIBOR

12. Pensions

A. Defined contribution schemes

The Company provides defined contribution pension benefits to those of its employees who are not eligible to participate in its defined benefit pension plans. The expense recognised in the profit and loss account in respect of those plans represents the contributions payable by the Company for the period at rates that are specified in the rules of the plans. At the balance sheet date, the Company had paid over all contributions due to the plans.

B. Defined benefit schemes

The Company operates a number of funded defined benefit pension plans in the UK that provide benefits based upon final pensionable salary and the period of service of the individual employees. The plan assets are held separately from the Company’s assets in funds that are under the control of trustees. Day-to-day management of the plan assets is carried out by independent investment managers who, at the request of the Company, are prohibited by the trustees from investing directly in the Company.

Certain employees and former employees whose pension benefits exceed the maximum that may be provided from the Company’s defined benefit pension plans are entitled to an additional unfunded pension payable directly by the Company after their retirement.

The defined benefit pension plans operated by the Company are closed to new entrants.

143

Notes to the financial statements (continued)

12. Pensions (continued)

B. Defined benefit schemes (continued)

The principal assumptions used in the actuarial valuations of the defined benefit pension plans were as follows:

	As at 3 January 2009 % per annum	As at 29 December 2007 % per annum
Salary increases	4.00%	4.25%
Increase to pensions in payment	3.00%	3.25%
Increase to deferred pensions	3.00%	3.25%
Long-term rate of return on plan assets	6.31%	5.00% – 7.00%
Discount rate	6.50%	5.75%
Inflation rate	3.00%	3.25%

The current life expectancies underlying the value of accrued liabilities were as follows:

	As at 3 January 2009	As at 29 December 2007
Current pensioners (at age 65) – male – female	21.5 years 24.5 years	20.5 years 23.4 years
Future pensioners (at age 65) – male – female	22.5 years 25.5 years	22.2 years 25.0 years

The fair value of the plan assets and the expected rates of return were as follows:

	As at 3 January 2009		As at 29 December 2007		As at 30 December 2006
	Long-term expected rate of return % per annum	Fair value $ million	Long-term expected rate of return % per annum	Fair value $ million	Long-term expected rate of return % per annum	Fair value $ million
Equities	8.00%	100.9	7.95%	160.0	7.80%–8.00%	160.1
Bonds	5.15%	106.8	5.25%–5.75%	153.7	5.00%	139.3
Other assets	4.30%	0.6	4.85%	1.2	4.20%	1.2
		208.3		314.9		300.6

The net pension liability may be analysed as follows:

	As at 3 January 2009 $ million			As at 29 December 2007 $ million
Present value of plan liabilities:
– Funded		193.0			290.4
– Unfunded		0.1			0.2
		193.1			290.6
Fair value of plan assets		(208.3	)		(314.9	)
Surplus in the plans		(15.2	)		(24.3	)
Effect of the asset ceiling		20.7			36.1
Net pension liability		5.5			11.8

144

Notes to the financial statements (continued)

Changes in the present value of the benefit obligation were as follows:

	As at 3 January 2009 $ million			As at 29 December 2007 $ million
At the beginning of the period		290.6			302.4
Current service cost		0.9			0.8
Interest cost		15.7			15.6
Settlements and curtailments		–			(1.4	)
Net actuarial gain		(22.4	)		(20.1	)
		284.8			297.3
Employees’ contributions		0.1			0.2
Benefits paid		(13.5	)		(14.2	)
Transfer of pension plan from a subsidiary		–			1.8
Foreign currency translation		(78.3	)		5.5
At the end of the period		193.1			290.6

Changes in the fair value of plan assets were as follows:
	As at 3 January 2009 $ million			As at 29 December 2007 $ million
At the beginning of the period		314.9			300.6
Expected return on plan assets		16.1			16.4
Settlements and curtailments		–			(1.4	)
Net actuarial (loss)/gain		(32.1	)		0.6
		298.9			316.2
Employer’s contributions		5.6			7.2
Employees’ contributions		0.1			0.2
Benefits paid		(13.5	)		(14.2	)
Foreign currency translation		(82.8	)		5.5
At the end of the period		208.3			314.9

Plan assets do not include any of the Company’s or the Group’s own financial instruments, nor any property, or other assets used by the Company or the Group.

The return and risk expectations for each asset class incorporate assumptions about historical return relationships, current financial market conditions and the degree of global capital market integration. The assumptions used have been derived from rigorous historical performance analysis combined with forward-looking views of the financial markets as revealed through the yield on long-term bonds and the price earnings ratios of the major stock market indices. The actuaries review analyses of historical risk and the correlation of the return on asset classes and apply subjective judgment based on their knowledge of the Company’s plans. The result of this analysis is incorporated into a risk matrix from which expected long-term risk premiums for each asset class are developed. The nominal return expectations are determined by combining the asset class risk premiums with expected inflation and real risk-free rate assumptions. As a final consideration, the nominal return assumptions are blended with current market conditions to develop long-term equilibrium expectations.

The actual loss on plan assets was 5.1% (2007: gain of 5.7%).

145

Notes to the financial statements (continued)

12. Pensions (continued)

B. Defined benefit schemes (continued)

Actuarial gains and losses recognised in relation to the defined benefit plans were as follows:

	Year ended 3 January 2009 $ million			Year ended 29 December 2007 $ million			Year ended 30 December 2006 $ million			Year ended 31 December 2005 $ million			Year ended 1 January 2005 $ million
At the end of the period
Present value of the benefit obligation		193.1			290.6			302.4			276.9			270.5
Fair value of plan assets		(208.3	)		(314.9	)		(300.6	)		(260.8	)		(256.3	)
(Surplus)/deficit in the plan		(15.2	)		(24.3	)		1.8			16.1			14.2

Recognised in the period
Net actuarial (loss)/gain on plan assets		(32.1	)		0.6			(3.3	)		21.5			2.5
Net actuarial gain/(loss) on benefit obligation		22.4			20.1			12.9			(32.4	)		(17.1	)
		(9.7	)		20.7			9.6			(10.9	)		(14.6	)

As at 3 January 2009, the cumulative net actuarial loss recognised in the statement of total recognised gains and losses amounted to $15.5 million (2007: $5.8 million).

The Company expects to contribute approximately $6.8 million to the defined benefit pension plans in 2009.

13. Share-based incentives

A. Background

The Company operates a number of share-based compensation arrangements to provide incentives to the Group’s senior executives and other eligible employees. Details of the schemes in respect of which options and awards are outstanding are set out in the Remuneration Committee report.

Although the Company’s ordinary shares are now denominated in US dollars, they continue to be quoted in sterling on the London Stock Exchange.

The information provided below relates only to options and awards that were granted to persons who are employees of the Company.

B. Share options

Following a review by the Board in 2004, it was decided that the Company’s executive share option schemes would not be renewed when they lapsed for the purposes of new awards in May 2005. Awards granted under these schemes were subject to a performance condition that the rate of increase in the Group’s earnings per share must exceed the growth in the UK Retail Prices Index by an average of 2% per annum over any three-year period after the options were granted. The final unvested options under these schemes vested during 2007.

Options continue to be granted from time to time under the Company’s Sharesave scheme, which is restricted to employees who are resident for tax purposes in the UK. It offers eligible employees the option to buy ordinary shares in Tomkins plc after a period of three, five or seven years funded from the proceeds of a savings contract to which employees may contribute up to £250 per month.

In 2008, the compensation expense recognised in respect of share options was $nil (2007: $1.0 million).

146

Notes to the financial statements (continued)

Changes in the total number of share options outstanding to employees of the Company during the period were as follows:

	As at 3 January 2009					As at 29 December 2007
	Options Number			Weighted average exercise price Pence		Options Number			Weighted average exercise price Pence
Outstanding at the beginning of the period		10,602,911			243.06		10,708,870			243.30
Granted during the period		117,551			140.20		28,727			211.40
Forfeited during the period		(127,304	)		215.33		(30,840	)		226.57
Exercised during the period		–			–		(103,846	)		263.46
Lapsed during the period		(790,500	)		253.57		–			–
Outstanding at the end of the period		9,802,658			241.34		10,602,911			243.06

Exercisable at the end of the period		9,623,128			242.73		4,787,486			241.74

No options were exercised during 2008. On the dates on which options were exercised during 2007, the weighted average market price of the Company’s ordinary shares was 287.47p per share.

The fair value of options granted under the Sharesave scheme was measured at their respective grant dates using the Black-Scholes option-pricing formula based on the following assumptions:

	Year ended 3 January 2009	Year ended 29 December 2007
Weighted average fair value	37.66p	69.34p
Weighted average assumptions:
– Share price	176.75p	264.25p
– Exercise price	140.20p	211.40p
– Expected volatility	24.46%	24.08%
– Expected life	4.47 years	3.96 years
– Risk-free interest rate	4.55%	5.29%
– Expected dividends	13.89p	13.89p

Expected volatility was determined based on the historical volatility of the market price of the Company’s ordinary shares over the shorter of the expected life of the options and the period since the beginning of the Company’s financial year ended 30 April 2002 when, following a period of significant demerger activity, the Group was refocused on its remaining core businesses. Adjustments have been made to the expected life used in the model to reflect the effects of non-transferability, exercise restrictions and behavioural considerations.

The weighted average contractual life of share options outstanding to the Company’s employees at the end of the period was as follows:

	As at 3 January 2009				As at 29 December 2007
	Outstanding Number		Weighted average remaining contractual life Years		Outstanding Number		Weighted average remaining contractual life Years
Range of exercise prices:
– 100p to 150p		107,948		4.16		–		–
– 151 p to 200p		3,088,072		3.10		3,088,072		4.12
– 201 p to 250p		2,832,842		4.84		3,424,635		5.88
– 251 p to 300p		2,758,568		3.92		3,074,976		4.85
– 301 p and higher		1,015,228		3.10		1,015,228		4.12
		9,802,658				10,602,911

147

Notes to the financial statements (continued)

13. Share-based incentives (continued)

C. Other awards

The Company’s principal ongoing share-based compensation arrangements are the Annual Bonus Incentive Plan and the Performance Share Plan. Both are restricted to the Company’s senior executives.

ABIP provides an award of bonus shares and deferred shares based on the profit of the business for which the participants have responsibility. Bonus shares are restricted and vest after a period of three years. Dividends are paid on the bonus shares. Deferred shares vest after a period of three years conditional on the participant’s continued employment with the Group. Dividends are not paid on the deferred shares until they have vested. During 2008, awards were granted over 180,348 ordinary shares (2007: 399,854 ordinary shares) under the ABIP.

PSP provides awards of shares which vest after a period of three years conditional on the Group’s total shareholder return relative to its cost of equity over the vesting period and the participant’s continued employment with the Group. During 2008, awards were granted over 2,103,039 ordinary shares under the PSP (2007: 2,295,249 ordinary shares).

The fair value of awards made under the ABIP is measured based on the market price of the Company’s ordinary shares on the date of the award. Where the awards do not attract dividends during the vesting period, the market price is reduced by the present value of the dividends expected to be paid during the expected life of the awards. The weighted average fair value of awards made under these schemes during the period was 129.34p (2007: 215.68p).

The fair value of awards made under the PSP was measured at their respective grant dates using the Monte-Carlo valuation model based on the following assumptions:

	Year ended 3 January 2009	Year ended 29 December 2007
Weighted average fair value	34.20p	42.87p
Weighted average assumptions:
– Expected volatility	37.49%	28.73%
– Expected life	3.00 years	3.00 years
– Risk-free interest rate	4.57%	4.44%
– Dividend yield	9.97%	5.00%

Expected volatility was determined based on the historical volatility of the market price of the Company’s ordinary shares over the expected life of the awards.

In 2008, the compensation expense recognised in respect of other awards was $2.3 million (2007: $4.2 million).

14. Deferred tax

At present, the Company does not recognise deferred tax assets because their future recoverability is uncertain due to the extent of forecast tax losses available for surrender within the UK tax group to which the Company belongs. Deferred tax assets will be recognised when it is considered more likely than not that they will be recovered.

Deferred tax assets not recognised were as follows:

	As at		As at
	3 January		29 December
	2009		2007
	$ million		$ million
Depreciation in excess of tax allowances		1.6		1.8
Share-based incentives		0.3		0.6
Pensions		1.5		3.2
Other timing differences		1.5		0.2
		4.9		5.8

148

Notes to the financial statements (continued)

15. Ordinary shares

A. Authorised shares

Ordinary shares of 9c each

Ordinary shares of 5p each

Number

of shares

Nominal

value

$ million

Number

of shares

Nominal

value

$ million

As at 29 December 2007

–

1,585,164,220

79.2

Redenomination on 22 May 2008:

– Cancellation of ordinary shares of 5p each

–

(1,585,164,220

)

(79.2

)

– Authorisation of ordinary shares of 9c each

1,585,164,220

142.7

–

As at 3 January 2009

1,585,164,220

142.7

–

On 22 May 2008, the Company’s ordinary shares were redenominated from sterling to US dollars by way of a reduction of capital under section 135 of the Companies Act 1985. Following approval by the Company’s shareholders and pursuant to an Order of the High Court of Justice in England and Wales, the share capital of the Company was reduced by cancelling and extinguishing all of the issued and unissued ordinary shares of 5 pence each. The amount standing to the credit of share capital was transferred to a specially created cancellation reserve where it was retranslated into US dollars at the exchange rate ruling at the close of business in London on 21 May 2008 of £1=$1.96 giving rise to a currency translation loss of $1.3 million. The cancellation reserve was then applied by issuing new ordinary shares of 9 cents each to holders of the cancelled ordinary shares of 5 pence each on a one-for-one basis.

The redenomination did not affect the rights of the holders of ordinary shares.

B. Allotted, issued and fully paid shares

	Number of shares			Ordinary share capital $ million			Cancellation reserve $ million			Share premium account $ million			Total $ million
As at 29 December 2007		884,106,772			65.5			–			679.4			744.9
Transfer of currency translation difference on change of functional currency (note 2)		–			22.6			–			112.4			135.0
		884,106,772			88.1			–			791.8			879.9
Shares issued before redenomination:
– Exercise of employee share options		45,000			–			–			0.2			0.2
As at 22 May 2008		884,151,772			88.1			–			792.0			880.1
Redenomination:
– Cancellation of ordinary shares of 5p each		(884,151, 772	)		(88.1	)		88.1			–			–
– Currency translation difference on redenomination		–			–			(1.3	)		–			(1.3	)
– Issue of deferred shares of £ 1 each		–			–			–			(0.1	)		(0.1	)
– Issue of ordinary shares of 9c each		884,151, 772			79.6			(79.6	)		–			–
– Transfer to share premium account		–			–			(7.2	)		7.2			–
		–			(8.5	)		–			7.1			(1.4	)
As at 3 January 2009		884,151,772			79.6			–			799.1			878.7

149

Notes to the financial statements (continued)

16. Deferred shares

Authorised

Allotted, issued and fully paid

Number

of shares

Nominal

value

Number

of shares

Share capital

$ million

Deferred shares of £1 each

As at 29 December 2007

–

Authorised and issued on redenomination of ordinary shares

50,000

0.1

As at 3 January 2009

50,000

0.1

Under section 118 of the Companies Act 1985, the Company must have a minimum share capital of £50,000 denominated in sterling. Accordingly, immediately upon the reduction of capital and before the issue and allotment of the new ordinary shares, the Company increased its capital by £50,000 by the creation of 50,000 deferred shares of £1 each which were paid up in full at par by capitalisation of the equivalent amount standing to the credit of the Company’s share premium account. The deferred shares are not listed on any investment exchange and have extremely limited rights such that they effectively have no value. It is intended that the deferred shares will be held by either the Company Secretary or by a Director of the Company (they are currently held by the Company Secretary).

Following the implementation of section 542 of the Companies Act 2006 on 1 October 2009, the Company will no longer be required to have any share capital denominated in sterling. Accordingly, the Company intends to buy back and cancel the deferred shares as soon as practicable after 1 October 2009.

17. Own shares

	Year ended 3 January 2009						Year ended 29 December 2007
	Number of shares			$ million			Number of shares			$ million
At the beginning of the period		4,205,841			18.9			4,205,248			19.8
Transfer of currency translation difference on change of functional currency (note 2)		–			3.4			–			–
		4,205,841			22.3			4,205,248			19.8
Own shares purchased		1,506,518			4.7			1,597,500			6.9
Sale or transfer of own shares		(2,053,809	)		(12.1	)		(1,596,907	)		(7.8	)
At the end of the period		3,658,550			14.9			4,205,841			18.9

Own shares represent the cost of the Company’s ordinary shares acquired to meet the Group’s expected obligations under the employee share schemes. Dividends relating to own shares held have been waived with the exception of those that are payable to participants in the relevant schemes.

As at 3 January 2009, 1,143,076 ordinary shares (29 December 2007: 1,376,975 ordinary shares) were held in trust and 2,515,474 ordinary shares (29 December 2007: 2,828,866 ordinary shares) were held as treasury shares.

As at 3 January 2009, the market value of own shares held was $7.1 million (29 December 2007: $15.1 million).

150

Notes to the financial statements (continued)

18. Other reserves

	Capital redemption reserve $ million		Merger reserve $ million		Capital reserve $ million		Currency translation reserve $ million			Profit and loss account reserve $ million			Total $ million
As at 29 December 2007		718.8		165.1		80.9		599.9			577.3			2,142.0
Transfer of currency translation difference on change of functional currency (note 2)		202.9		64.9		31.7		(599.9	)		168.8			(131.6	)
		921.7		230.0		112.6		–			746.1			2,010.4
Profit for the period attributable to equity shareholders		–		–		–		–			322.4			322.4
Other recognised gains and losses:
– Retirement benefits
Net actuarial loss		–		–		–		–			(9.7	)		(9.7	)
Adjustment for unrecoverable surplus		–		–		–		–			9.6			9.6
		–		–		–		–			(0.1	)		(0.1	)
Total recognised gains and losses		–		–		–		–			322.3			322.3
Other changes in shareholders’ funds:
– Currency translation difference on redenomination of ordinary shares (note 15)		–		–		–		–			1.3			1.3
– Transfer of own shares		–		–		–		–			(2.2	)		(2.2	)
– Cost of share-based incentives		–		–		–		–			2.5			2.5
– Dividends paid on ordinary shares		–		–		–		–			(246.2	)		(246.2	)
		–		–		–		–			(244.6	)		(244.6	)
As at 3 January 2009		921.7		230.0		112.6		–			823.8			2,088.1

The Company’s distributable reserves as at 3 January 2009 amounted to $936.4 million.

19. Guarantees

The Company has guaranteed the borrowing facilities of certain subsidiaries. As at 3 January 2009, these facilities totalled $1,348.3 million (29 December 2007: $1,733.4 million) against which $676.0 million (29 December 2007: $653.1 million) had been drawn.

The Company has also guaranteed certain property leases and performance bonds entered into in the ordinary course of business by certain of its subsidiaries.

151

Principal subsidiaries and associates

Details of the Company’s principal trading subsidiaries and associates as at 3 January 2009 are set out below. Each entity is wholly owned by the Group and is registered in England and Wales, unless otherwise stated. A complete list of the Company’s subsidiaries and associates will be filed with the Company’s annual return.

Industrial & Automotive

A.E. Hydraulic (Pte) Ltd	Gates Canada Inc	Gates Rubber (Shanghai) Co	Gates Winhere Automotive
Hydraulic and industrial hose	Belts and hose	Ltd	Pump Products (Yantai) Co Ltd
solutions and services	Canada	Hose distributor	(ordinary shares – 60% owned)
Singapore		China	Automotive pumps
	Gates Europe NV		China
Dexter Axle Company Inc	Belts and hose	Gates (U.K.) Ltd
Manufactured housing, mobile	Belgium	Belts and couplings	Ideal Internacional SA*
home and trailer products		Scotland	(ordinary shares – 40% owned)
US	Gates Fleximak Ltd		Hose clamps
	Flexible fluid transfer products	Gates Unitta Asia	Mexico
Dexter Chassis Group Inc.	British Virgin Islands	Kabushikikaishu
Recreational vehicle frames		(ordinary shares – 51% owned)	Plews Inc
US	Gates (India) Private Ltd	Belts	Lubrication tools
	Hose	Japan	US
Eifeler Maschinenbau GmbH	India
Hydraulic tube fittings		Gates Unitta Asia Trading	Pyung Hwa CMB Co Ltd*
Germany	Gates Korea Company Ltd	Company Pte Ltd	(ordinary shares – 21% owned)
	(ordinary shares – 51% owned)	(ordinary shares – 51% owned)	Belts
Epicor Industries Inc	Belts	Belts	Korea
Hose clamps	Korea	Singapore
US			Schrader SAS
	Gates Mectrol Inc	Gates Unitta India Company	Valves and fittings
Formflo Limited	Belts	Private Ltd	France
Powertrain components, systems and assemblies Gates GmbH	US Gates de Mexico SA de CV Belts and hose	(ordinary shares – 51% owned) Belts India	Schrader Bridgeport Brasil Ltda Valves and fittings Brazil
Belts	Mexico	Gates Unitta Korea Company
Germany Gates SAS Belts, hose and couplings France	Gates Polska S.p.z.o.o. Belts Poland	Ltd (ordinary shares – 51% owned) Belts Korea	Schrader-Bridgeport International Inc Valves and fittings US Schrader Duncan Ltd*
Gates Argentina SA Belt and hose distributor Argentina	Gates PT Spain SA Belts and hose Spain The Gates Corporation	Gates Unitta Power Transmission (Shanghai) Ltd (ordinary shares – 51% owned) Belts China	(ordinary shares – 50% owned) Valves and fittings India Schrader Electronics Ltd
Gates Australia Pty Ltd	Belts and hose		Automotive electronics
Belt and hose distributor Australia	US Gates Rubber Company (NSW)	Gates Unitta Power Transmission (Suzhou) Ltd (ordinary shares – 51% owned)	Northern Ireland Schrader Engineered Products
Gates do Brasil Industria	Pty Ltd	Belts	(Kunshan) Co Ltd
e Comercio Ltda	Hose	China	Valves and fittings
Belts and hose	Australia		China
Brazil	Gates Rubber Company	Gates Unitta (Thailand) Company Ltd	Stackpole Limited
	(Singapore) Pte Ltd	(ordinary shares – 51 % owned)	Powertrain components,
	Hose distributor Singapore	Belts Thailand	systems and assemblies Canada

Building Products

Air System Components Inc

Heating, ventilating and air

conditioning components

Aquatic Industries Inc

Whirlpools

Hart & Cooley Inc

Heating, ventilating and air

conditioning components

Lasco Bathware Inc

Fibreglass and acrylic baths

and whirlpools

NRG Industries Inc

Commercial air conditioning

components

Philips Products Inc

Aluminium, wood and vinyl

windows, vinyl clad steel doors

and ventilating devices

Rolastar Pvt Ltd

(ordinary shares – 60% owned)

Duct manufacturer

India

Ruskin Company

Air, fire and smoke dampers,

louvres and fibreglass products

Ruskin Air Management Ltd

Air handling products and

louvred windows

Ruskin (Thailand) Co Ltd

Commercial and industrial air,

fire/smoke and control dampers

Thailand

Selkirk Americas LP

Chimney, venting and air

distribution products

*Associate

152

Supplemental financial information (unaudited)

Analysis of movements in net debt

	Year ended 3 January 2009 $ million			Year ended 29 December 2007 $ million			Year ended 30 December 2006 $ million
Cash generated from operations		628.7			638.7			607.8
Capital expenditure:
– Purchase of property, plant and equipment		(183.2	)		(231.3	)		(193.8	)
– Purchase of computer software		(10.6	)		(5.2	)		(38.3	)
		(193.8	)		(236.5	)		(232.1	)
Disposal of property, plant and equipment		7.9			39.6			25.9
Operating cash flow		442.8			441.8			401.6
Tax:
– Income taxes paid		(116.3	)		(110.4	)		(151.8	)
– Income taxes received		31.8			24.2			9.4
		(84.5	)		(86.2	)		(142.4	)
Interest and preference dividends:
– Interest element of finance lease rental payments		(0.5	)		(1.4	)		(1.1	)
– Interest received		11.2			12.2			18.7
– Interest paid		(55.0	)		(64.8	)		(71.1	)
– Preference dividend paid		–			(2.0	)		(13.0	)
		(44.3	)		(56.0	)		(66.5	)
Other movements:
– Capitalisation of development costs		(0.6	)		(0.4	)		(0.6	)
– Dividends received from associates		0.6			1.4			0.6
– Investment by a minority shareholder in a subsidiary		0.4			3.8			5.9
– Dividend paid to a minority shareholder in a subsidiary		(13.5	)		(14.4	)		(14.7	)
		(13.1	)		(9.6	)		(8.8	)
Free cash flow to equity shareholders		300.9			290.0			183.9
Ordinary dividends		(246.2	)		(247.3	)		(217.3	)
Acquisitions and disposals:
– Purchase of subsidiaries, net of cash acquired		(65.0	)		(17.0	)		(201.0	)
– Sales of businesses and subsidiaries, net of cash disposed		124.6			216.3			12.5
– Leases disposed of on sale of businesses		–			6.1			–
– Purchase of available-for-sale investments		(0.1	)		(0.2	)		(0.2	)
– Sale of available-for-sale investments		1.6			0.6			0.6
– Debt acquired on acquisition of subsidiaries		(0.8	)		–			–
– Purchase of interests in associates		(10.4	)		(3.8	)		(3.5	)
		49.9			202.0			(191.6	)
Ordinary share movements:
– Issue of ordinary shares		0.2			2.4			27.3
– Purchase of own shares		(4.7	)		(6.9	)		(8.7	)
		(4.5	)		(4.5	)		18.6
Foreign currency movements:
– Cash and cash equivalents		(21.2	)		19.5			44.2
– Other net debt		215.9			(42.5	)		(110.2	)
– (Payments)/receipts on foreign currency derivatives		(178.6	)		(16.3	)		59.9
		16.1			(39.3	)		(6.1	)
Cash movement in net debt		116.2			200.9			(212.5	)
Non-cash movements		(1.1	)		(1.6	)		2.0
Conversion of preference shares		–			130.0			390.7
Decrease in net debt		115.1			329.3			180.2

153

Supplemental financial information (unaudited) (continued)

Analysis of underlying changes

2007 compared with 2008

$ million, unless stated otherwise	Industrial & Automotive			Building Products			Corporate			Total
Sales
2007		4,312.7			1,573.4			–			5,886.1
Exchange rate effect		159.2			(1.3	)		–			157.9
Disposals		(255.0	)		(13.8	)		–			(268.8	)
Like-for-like basis		4,216.9			1,558.3			–			5,775.2
Acquisitions		22.4			41.1			–			63.5
Underlying change		(178.5	)		(144.3	)		–			(322.8	)
2008		4,060.8			1,455.1			–			5,515.9

Underlying change(1)		(4.2	)%		(9.3	)%		–			(5.6	)%

Adjusted operating profit
2007		477.4			106.5			(53.4	)		530.5
Exchange rate effect		18.9			(0.2	)		1.7			20.4
Disposals		(20.3	)		(1.9	)		0.1			(22.1	)
Like-for-like basis		476.0			104.4			(51.6	)		528.8
Acquisitions		7.2			3.1			–			10.3
Underlying change		(123.5	)		(27.3	)		15.1			(135.7	)
2008		359.7			80.2			(36.5	)		403.4

Underlying change(1)		(25.9	)%		(26.1	)%		29.3	%		(25.7	)%

2006 compared with 2007

$ million, unless stated otherwise	Industrial & Automotive			Building Products			Corporate			Total
Sales
2006		3,984.0			1,762.1			–			5,746.1
Exchange rate effect		135.1			5.4			–			140.5
Disposals		(26.6	)		(90.2	)		–			(116.8	)
Like-for-like basis		4,092.5			1,677.3			–			5,769.8
Acquisitions		23.6			40.9			–			64.5
Underlying change		196.6			(144.8	)		–			51.8
2007		4,312.7			1,573.4			–			5,886.1

Underlying change(1)		4.9	%		(8.2	)%		–			0.9	%

Adjusted operating profit
2006		444.3			153.6			(52.6	)		545.3
Exchange rate effect		14.2			0.6			(4.2	)		10.6
Disposals		(0.6	)		(8.7	)		–			(9.3	)
Like-for-like basis		457.9			145.5			(56.8	)		546.6
Acquisitions		4.6			1.9			–			6.5
Underlying change		14.9			(40.9	)		3.4			(22.6	)
2007		477.4			106.5			(53.4	)		530.5

Underlying change(1)		3.4	%		(26.6	)%		6.5	%		(4.1	)%

(1) The underlying percentage change is calculated by taking the underlying change as a percentage of the like-for-like basis.

154

Five-year summary

$ million, unless stated otherwise	Year ended 3 January 2009(1)			Year ended 29 December 2007(1)(2)			Year ended 30 December 2006(1)(2)			Year ended 31 December 2005(1)(2)			Year ended 1 January 2005(1)(2)
Consolidated income statement data
Sales		5,515.9			5,886.2			5,746.1			5,380.2			4,996.2
Adjusted operating profit(3)		403.4			530.5			545.3			547.4			535.3
Amortisation of intangible assets arising on acquisitions		(10.6	)		(7.2	)		(5.0	)		(0.4	)		–
Restructuring costs		(26.0	)		(27.6	)		(23.9	)		(7.6	)		(23.0	)
Net gain on disposals and on the exit of businesses		43.0			91.4			5.7			15.4			4.6
Restructuring initiatives		17.0			63.8			(18.2	)		7.8			(18.4	)
Impairment		(342.4	)		(0.8	)		(2.9	)		(0.4	)		–
Operating profit		67.4			586.3			519.2			554.8			516.9
(Loss)/profit before tax		(7.6	)		525.4			448.6			484.0			470.8
(Loss)/profit from continuing operations		(46.0	)		385.6			383.0			375.1			377.2
(Loss)/profit from discontinued operations		–			(66.6	)		(21.3	)		(9.8	)		6.4
(Loss)/profit for the period		(46.0	)		319.0			361.7			365.3			383.6
Minority interests		(18.1	)		(25.0	)		(20.5	)		(16.3	)		(18.4	)
(Loss)/profit attributable to equity shareholders		(64.1	)		294.0			341.2			349.0			336.7

(Loss)/earnings per ordinary share
Basic
Continuing operations		(7.29	)c		41.42	c		43.21	c		46.51	c		46.55	c
Discontinued operations		–	c		(7.66	)c		(2.54	)c		(1.27	)c		0.83	c
Total operations		(7.29	)c		33.76	c		40.67	c		45.24	c		47.38	c
Diluted
Continuing operations		(7.29	)c		40.91	c		42.13	c		44.32	c		44.17	c
Discontinued operations		–	c		(7.54	)c		(2.41	)c		(1.12	)c		0.73	c
Total operations		(7.29	)c		33.37	c		39.72	c		43.20	c		44.90	c
Average number of ordinary shares (millions)
Basic		879.7			870.3			838.9			771.4			770.7
Diluted		879.7			884.0			883.8			876.4			876.8
Dividends for the period
Per ordinary share (4)		13.02	c		27.68	c		27.25	c		24.09	c		23.11	c
Per ADS (4)		52.08	c		110.72	c		109.00	c		96.36	c		92.44	c

	As at 3 January 2009(1)			As at 29 December 2007(1)(2)			As at 30 December 2006(1)(2)			As at 31 December 2005(1)(2)			As at 1 January 2005(1)(2)
Consolidated balance sheet data
Goodwill and other intangible assets		415.9			753.1			731.4			586.3			443.3
Property, plant and equipment		1,167.3			1,414.4			1,360.3			1,427.9			1,425.0
Other non-current assets		193.3			97.2			91.4			216.5			244.0
Current assets		1,888.3			2,117.3			2,085.2			2,172.7			2,072.7
Assets held for sale		–			90.9			297.5			23.0			63.0
Total assets		3,770.7			4,472.9			4,565.8			4,426.4			4,248.0
Current liabilities		(761.5	)		(874.9	)		(843.4	)		(935.8	)		(871.6	)
Non-current liabilities		(1,269.9	)		(1,315.1	)		(1,728.8	)		(2,266.7	)		(2,400.3	)
Liabilities associated with assets held for sale		–			(28.1	)		(125.5	)		–			(0.6	)
Total liabilities		(2,031.4	)		(2,218.1	)		(2,697.7	)		(3,202.5	)		(3,272.5	)
Net assets		1,739.3			2,254.8			1,868.1			1,223.9			975.5

Shareholders’ equity		1,610.8			2,137.8			1,769.1			1,140.8			895.6
Minority interests		128.5			117.0			99.0			83.1			79.9
Total equity		1,739.3			2,254.8			1,868.1			1,223.9			975.5

(1)	The selected financial data set out above has been extracted from the Group’s audited consolidated financial statements for the relevant year prepared in accordance with IFRS.

(2)	At the beginning of 2008, the Group changed its presentation currency from sterling to the US dollar. Financial information for 2007 and prior years has been re-presented on the basis described in note 2 to the consolidated financial statements.

(3)	Adjusted operating profit is discussed in the “Performance measures” section on pages 10 to 12.

(4)	Dividends in respect of 2007 and prior years were declared and paid in sterling and have been translated into US dollars at the exchange rate on their respective payment dates. ve payment dates.

155

Investor information

History and development of the Company

Tomkins plc was incorporated in England in 1925 as F.H. Tomkins Buckle Company Limited, a small manufacturer of buckles and fasteners, which it remained until the 1980s. It was converted from a private company into a public company in March 1950, re-registered as a public limited company in February 1982, and changed its name to Tomkins plc in 1988.

In the late 1980s, the Company made a number of acquisitions of engineering companies in both the UK and the US. In 1992, the Group diversified into food manufacturing, with the acquisition of Ranks Hovis McDougall plc in the UK.

In 1996, the Group established the Industrial & Automotive business group with the acquisition of The Gates Corporation in the US.

In 1997, management embarked on a long-term programme of disposing of non-core businesses and enhanced its remaining core businesses through a number of bolt-on acquisitions. In the early 2000s, the Group disposed of its Food Manufacturing and Professional, Garden and Leisure Products business groups and became focused on its two remaining business groups: Industrial & Automotive and Building Products.

Industrial & Automotive acquired Stant Corporation and its subsidiaries (1997), Schrader-Bridgeport (1998), ACD Tridon (1999) and Stackpole (2003), and disposed of Trico (2007) and Stant Corporation (2008).

Building Products is comprised of two operating segments: Air Systems Components and Other Building Products. Air Systems Components supplies the industrial and residential HVAC market mainly in North America. Other Building Products manufactures a variety of products for the building and construction industries, mainly in North America.

Building Products was based on the acquisition of Philips Industries (1990) and acquired Hart & Cooley (1999), Ruskin Air Management (2000) and Selkirk (2006), and disposed of Lasco Fittings (2007).

Incorporation

Tomkins plc is incorporated in England and Wales and is registered with the Registrar of Companies in England & Wales under number 203531.

The Company operates under English law.

Website

The Company’s website address is www.tomkins.co.uk. All of the Company’s recent results announcements and press releases are accessible on our website, together with this and previous Annual Reports and provides direct links to the websites of the Group’s main operating companies.

The price of the Company’s ordinary shares and its ADRs is also available, with a 20-minute delay. In addition, the site also provides historic share price information, index comparators and a shareholding calculator tool.

ADR holders

Ordinary shares in Tomkins plc are listed on the London Stock Exchange and, in the form of ADSs, on the NYSE. ADSs, each representing four ordinary shares, are evidenced by ADRs issued by JPMorgan Chase Bank, N.A., as Depositary, pursuant to a sponsored ADR programme. The Company’s ADSs have been listed on the NYSE since February 1995, prior to which they were quoted on NASDAQ from November 1988.

Tomkins is subject to the regulations of the SEC as they apply to foreign companies and files with the SEC its Annual Report on Form 20-F and provides other information as required. ADR holders are not members of the Company but may instruct the Depositary as to the exercise of voting rights pertaining to the number of ordinary shares represented by their ADRs. ADR holders with queries about their holdings should contact the Depositary, whose contact details are provided on page 165.

Trading symbols

On the London Stock Exchange, the Company’s SEDOL number is 0896265 (ISIN code GB0008962655) and its trading symbol is ‘TOMK’. On the NYSE, the Company’s trading symbol for its ADRs is‘TKS’.

Share price information

The high and low closing prices of the ordinary shares on the London Stock Exchange and the ADSs on the NYSE for the periods indicated are set out below. The tables do not reflect trading after the daily official close of the London Stock Exchange for which no official quotations exist.

Five-year annual prices

	Pence per ordinary share				US dollars per ADS
	High		Low		High		Low
2004		287.50		241.75		20.53		17.96
2005		302.50		242.00		22.43		18.51
2006		343.75		229.75		25.36		17.61
2007		302.50		172.50		23.92		13.75
2008		194.75		93.50		15.09		5.29

156

Investor information (continued)

Two-year quarterly prices

	Pence per ordinary share				US dollars per ADS
	High		Low		High		Low
2007
Q1		280.50		244.50		22.35		18.97
Q2		302.50		253.75		23.92		19.96
Q3		267.50		214.50		21.65		17.12
Q4		233.50		172.50		18.97		13.75
2008
Q1		189.50		150.75		15.01		12.19
Q2		194.75		151.25		15.09		12.01
Q3		172.25		115.50		12.67		9.32
Q4		154.75		93.50		11.07		5.29
2009
Q1(1)		141.00		112.50		8.37		6.31

(1) Covering the period up to and including 19 February 2009.

Most recent monthly prices

	Pence per ordinary share				US dollars per ADS
	High		Low		High		Low
August		148.75		126.50		11.03		10.13
September		172.25		142.00		12.67		10.29
October		142.25		104.25		10.20		6.38
November		125.25		93.50		8.01		5.29
December		128.50		105.50		7.83		6.04
January		141.00		117.75		8.37		6.61
February(1)		133.00		112.50		7.84		6.31

(1) Covering the period up to and including 19 February 2009.

Substantial shareholdings

The Company’s issued share capital as at 3 January 2009 consisted of 884,151,772 ordinary shares with a nominal value of 9 cents each.

As at 19 February 2009, 884,151,772 ordinary shares were outstanding. As at that date, 2,232,599 ordinary shares were held by 71 registered holders with a registered address in the US and 65,422 ADRs were held by 149 registered holders with a registered address in the US. Since certain of the ordinary shares and ADRs were held by brokers and nominees, the number of record holders in the US may not be representative of the number of beneficial holders or of where the beneficial holders are resident.

Ordinary shareholders of the Company do not have different voting rights.

To the Company’s knowledge, no person or entity other than those shown below is the owner of more than 5% of its outstanding ordinary shares, nor is the Company directly or indirectly owned or controlled by any corporation, by any government or by any other natural or legal person or persons, severally or jointly.

Based on an analysis of our share register as at 3 February 2009, the shareholders holding more than 5% of the Company’s outstanding ordinary shares were as follows:

		Number of ordinary shares held				Percentage of issued ordinary shares held
Schroder Investment Management			88,315,883				9.99	%

This information has been based on an analysis of the shares held on Tomkins’ share register and differs from the table of substantial shareholdings on page 47 which shows voting rights officially notified under the Disclosure and Transparency Rules of the UKLA.

Significant changes in shareholders owning more than 5% of the ordinary share capital of the Company over the past three years were as follows:

–	Invesco Limited decreased their holding to 0.83% at19 February 2009 from 7.17% at 3 April 2008, having held 5.15% as at 13 April 2007 and 0.66% at 24 April 2006.

–	Nuveen Investment LLC decreased their holding to 4.57% at 19 February 2009 from 6.44% at 3 April 2008, having held 10.40% at 13 April 2007 and 4.91 % at 24 April 2006.

–	Sprucegrove Investments Management Ltd decreased theirholding to 4.83% at 19 February 2009 from 5.11 % at 3 April 2008, having held 5.89% as at 13 April 2007 and 4.96% at 24 April 2006.

There are no arrangements currently known to the Company that would result in a change in control of the Company.

Purchases of ordinary shares

The table below sets out details of shares repurchased by the Company and affiliated purchasers in 2008 under publicly announced plans or programmes.

	Number of shares purchased		Average price paid per share		Maximum number of shares that may yet be purchased
March 2008		950,000		153.42p		87,460,677
June 2008		310,000		167.04p		87,150,677
September 2008		210,000		159.90p		86,940,677
Total		1,470,000

At the Company’s AGM on 13 June 2007, shareholders approved a resolution allowing the Company to repurchase up to 85,829,110 ordinary shares of the Company. This approval expired at a further AGM of the Company held on 1 May 2008, at which shareholders approved a resolution allowing the Company to repurchase up to 88,410,677 ordinary shares of the Company. This approval will expire on 1 May 2009. All shares repurchased in the period were purchased in order that they can, at the relevant time, be allocated to employees under the Company’s ABIP.

157

Investor information (continued)

Purchases of ordinary shares (continued)

As at 29 December 2007, the Company held 4,205,841 ordinary shares purchased as part of its publicly announced plan. During 2008, 2,053,809 ordinary shares were transferred to employees under the Company’s ABIP. As at 3 January 2009, the Company held 3,658,550 of its own ordinary shares.

Directors’ Report and accounts – Companies House

Subject to the passing of the resolution to receive the financial statements that will be proposed at the Company’s AGM on 1 June 2009, a copy of the Annual Report omitting photographic representations and with such further modifications as may be necessary will be lodged with the Registrar of Companies in England & Wales in accordance with the Companies Act 1985 (as amended). After being so lodged, further copies of the Annual Report in the form sent to shareholders will be available from the Company Secretary upon request.

Documents on display

The Company is subject to the information requirements of the Exchange Act and in accordance therewith files reports and other information with the SEC. These reports and other information can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N. E., Washington, D.C. 20549, and at the SEC’s regional office at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may request copies of all or a portion of these documents from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Reports filed by the Company with the SEC since August 2002 are available on the SEC’s website at www.sec.gov.

As a foreign private issuer, the Company is exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements and the reporting and ‘short-swing’ profit recovery provisions contained in section 16 of the Exchange Act.

Memorandum and Articles of Association

General

The rights of the shareholders are set out in the Articles of the Company and are provided by applicable English law. The following summary of key provisions of the Articles is qualified in its entirety by reference to the Articles filed as Exhibit 1.1 to the Company’s annual report filing with the SEC on Form 20-F.

The main objects and purposes of the Company, set out in Articles 4(a) to (c) of the Memorandum of Association, are as follows:

–	to co-ordinate and manage the business activities of the Company and generally to carry out the function of a group holding company;

–	to carry on the business of hardware manufacture and the manufacture of and dealing in minerals and metals, and all kinds of other connected goods; and

–	to carry on any other business of a similar nature which the Directors deem convenient for the Company to carry on, or consider will enhance or render more profitable the value of the Company’s property.

Board of Directors

The Articles provide for a minimum of two and a maximum of 15 Directors. The shareholders may change these limits by passing an ordinary resolution. The Articles do not contain any requirement for a Director to hold qualification shares. At each AGM, the following shall retire:

–	any Director appointed by the Board since the last general meeting;

–	any Director who held office at the time of the two preceding AGMs and who did not retire at either of them; and

–	any Director who has been in office, other than as a Director holding an executive position, for a continuous period of nine years or more at the date of the meeting.

Subject to the provisions of the Companies Act 2006, the Board may from time to time appoint one or more Directors to an executive office on such terms and for such period as it may determine. The Articles contain no age limit requirements for the retirement or non-retirement of Directors.

The Articles allow the Directors to authorise conflicts of interest and potential conflicts of interest, where appropriate, and contain other provisions for dealing with Directors’ conflicts of interest to avoid a breach of duty.

There are safeguards which will apply when the Directors decide whether to authorise a conflict or potential conflict. First, only Directors who have no interest in the matter being considered will be able to take the relevant decision and, secondly, in taking the decision, the Directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. The Directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate.

The Articles contain provisions relating to confidential information, attendance at Board meetings and availability of Board papers to protect a Director being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the Directors.

158

Investor information (continued)

A Director who has disclosed to the Board that he or she has an interest in any transaction or arrangement with the Company, may participate in such transaction or arrangement, but may not vote in respect of any such transaction. A Director may not be counted in the quorum of a meeting in relation to any resolution on which he is barred from voting.

Directors’ ordinary remuneration (other than an Executive Director) may not exceed £250,000 per annum as the Board (or any duly authorised committee thereof) may from time to time determine or such greater amount as the Company may, upon the recommendation of the Board, from time to time by ordinary resolution determine. Any Director who (by arrangement with the Board) performs or renders any special duties or services outside his ordinary duties as a Director may be awarded extra remuneration (in addition to fees or ordinary remuneration) by way of salary or commission or participation in profits or otherwise.

The Board may exercise all the powers of the Company to borrow money, mortgage property and assets and issue debentures and other securities. The Articles require the Board to restrict aggregate borrowings of the Company to one and a half times the share capital of the Company plus capital reserves (calculated as set forth in the Articles).

Share capital, dividends and voting rights

The authorised share capital of the Company is $142,664,780 divided into 1,585,164,220 ordinary shares with a nominal value of 9 cents each and £50,000 divided into 50,000 deferred shares with a nominal value of £1 each.

Under section 21 of the Companies Act 2006, the Company may by special resolution at a general meeting of shareholders alter its Articles and thereby alter the rights of the shareholders of the Company. A special resolution is a resolution that can only be passed by a majority of no less than three-quarters of the shares entitled to vote that are voted. Whenever the share capital of the Company is divided into different classes of shares, the rights attached to any class may only be varied or abrogated either with the consent in writing of the holders of three-quarters of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of such holders. The Articles provide that the necessary quorum for a meeting at which such a special resolution may be passed is at least two persons holding or representing by proxy no less than one-third in nominal amount of the issued shares of that class.

The Company in a general meeting of shareholders may declare dividends on the ordinary shares in its discretion by reference to an amount in sterling or in a foreign currency, but dividends may not exceed the amount recommended by the Board. Dividends remaining unclaimed for 12 years after having been declared are forfeited and revert to the Company.

On a show of hands, each holder of ordinary shares present at a general meeting of the Company is entitled to one vote. On a poll, the holders of ordinary shares are entitled to one vote per share. Cumulative voting is not permitted.

Multiple proxies may be appointed provided that each proxy is appointed to exercise the rights attached to a different share or shares held by the shareholder.

The deferred shares are not listed on any investment exchange and have extremely limited rights such that they effectively have no value. The deferred shares are currently held by the Company Secretary.

There are no provisions in the Articles discriminating against an existing or prospective holder of securities as a result of such shareholder owning a substantial number of shares.

General meetings

The Company shall in each year hold a general meeting of shareholders within six months of its accounting reference date. The Board may call an extraordinary general meeting whenever it determines appropriate. In addition, members holding not less than one-tenth of the voting rights of the share capital entitled to vote at a general meeting of the Company can require an extraordinary general meeting to be convened.

Only shareholders registered in accordance with the Articles may be recognised as valid shareholders. There are no other limitations on the rights to own securities.

There are no provisions in the Articles that would have the effect of delaying, deferring or preventing a change of control of the Company and that would operate only with respect to a merger, acquisition, or corporate restructuring involving the Company or any of its subsidiaries.

Disclosure of ownership

There are no provisions in the Articles relating to the ownership threshold above which shareholder ownership must be disclosed. The Disclosure and Transparency Rules of the UKLA require a shareholder to notify the Company in respect of a 3% holding subject to certain exemptions, and there is an additional obligation to notify the Company when a 10% threshold is reached which is not subject to any exemptions.

159

Investor information (continued)

Changes in capital

There are no conditions imposed by the Articles governing changes in capital that are more stringent than those conditions that would be required by governing English law.

Registrar

Administrative enquiries concerning shareholdings in Tomkins plc, such as loss of a share certificate, dividend payment instructions, or a change of address, or the amalgamation of multiple holdings should be notified direct to the Company’s Registrar, Equiniti Limited, whose contact details for general enquiries are provided on page 165.

Any correspondence with the Registrar should refer to Tomkins plc, quoting the reference 0398, and state the registered name and address of the shareholder.

Payment of dividends

Dividends are declared and paid in US dollars although, unless they elect otherwise, shareholders in the UK and the Republic of Ireland will receive dividends in sterling. Shareholders who have mandated their dividends to be credited to a nominated bank or building society account should note that dividends are paid automatically to their account through the Bankers’ Automated Clearing Services (“BACS”) with the associated tax voucher being sent direct to shareholders at their registered address unless requested otherwise. If the nominated account is with a bank or building society which is not a member of BACS, both the payment and tax voucher are sent to the account holding branch.

Shareholders who do not currently mandate their dividends and who wish to have their dividend paid direct to a bank or building society account should complete a dividend mandate instruction form obtainable from the Company’s Registrar, whose contact details with regard to the payment of dividends are provided on page 165.

Dividend Reinvestment Plan

The Company offers a Dividend Reinvestment Plan. This allows shareholders to invest their cash dividend in purchasing shares of the Company in the market. The Company’s Registrar arranges, on behalf of participants, through the agency of a suitably authorised stockbroking business, the purchase of the maximum whole number of ordinary shares possible on, or as soon as reasonably practicable after, the dividend payment date. Favourable dealing costs have been arranged. For further details or an application form, please contact the Registrar’s Dividend Reinvestment Plan team, whose contact details are provided on page 165.

Individual Savings Accounts (ISAs)

A Tomkins ISA enables UK residents to invest in the Company in a tax efficient manner. You can obtain more information on ISAs from our corporate ISA provider, Equiniti Limited, whose contact details are provided on page 165.

Patents, trademarks and contracts

Trademarks and trade names are identified with a number of the Group’s products and services and are of importance in the sale and marketing of those products and services. However, the Group is not dependent to any significant degree upon these trademarks and trade names, nor on any single or series of related patents, licenses, financial or commercial contracts.

Government laws and regulations

The Company's subsidiaries and many of our products are regulated by government authorities in a number of countries.

The Company's subsidiaries are subject to regulation under various and changing local, national and international laws and regulations relating to the environment, business practice and employee health and safety. Permits may be required for certain operations (particularly air emission permits) and these permits are subject to renewal, modification and, in certain circumstances, revocation. Some of the applicable regulations allow local or national authorities to mandate product recalls or seize products.

Our products are subject to regulations relating to production (including environmental regulations), sale, advertising, safety, labelling and raw materials.

Management believes that the Company’s subsidiaries are in substantial compliance with applicable laws and regulations and that appropriate controls have been implemented by subsidiaries to minimise the risk of non-compliance.

Exchange controls

There is currently no English law, decree or regulation that restricts the export or import of capital, including, but not limited to, UK foreign exchange controls, or that affects the remittance of dividends (except as otherwise set out under ‘Taxation’ below) or other payments to holders of ordinary shares. There are no limitations under English law or the Company’s Articles on the rights of persons who are neither residents nor nationals of the UK from freely holding, voting or transferring ordinary shares in the same manner as UK residents or nationals.

160

Investor information (continued)

Taxation

The following is a summary of the principal US federal income and UK tax consequences of the purchase, ownership and disposition of ordinary shares or ADSs by certain US Holders (as defined below) and not a complete analysis or listing of all of the possible tax consequences of such purchase, ownership or disposition. Furthermore, this summary does not address the tax consequences under state, local, or non-US or non-UK tax law of such purchase, ownership or disposition, or the US federal estate or gift tax consequences thereof. Certain US Holders with special status (e.g. banks and financial institutions, insurance companies, tax-exempt entities, dealers in securities, and traders in securities that mark-to-market) or in special tax situations (e.g. whose functional currency is not the US dollar, who hold their ordinary shares or ADSs as part of a straddle, appreciated financial position, hedge, conversion transaction or other integrated investment, who hold (directly, indirectly or through attribution) 10% or more of the voting power of the Company’s shares, or who are subject to the alternative minimum tax) will be subject to special rules not described below. This summary is limited to US Holders that hold their ordinary shares or ADSs as capital assets and does not address the tax treatment of US Holders that are partnerships or pass-through entities that are not partnerships or the tax treatment of the holders of interests in such entities. The following summary of US federal income and UK tax consequences is not exhaustive of all possible tax considerations and should not be considered legal or tax advice. Prospective investors are therefore advised to consult their own professional tax advisers with respect to the tax consequences of the purchase, ownership and disposition of ordinary shares or ADSs, including specifically the consequences under state, local and tax laws.

This summary is based upon the Code, Treasury regulations promulgated under the Code, the Tax Convention, and administrative and judicial interpretations thereof, all as in effect as of the date of this Annual Report and all of which are subject to change, possibly with retroactive effect. Statements regarding UK tax laws and practices set out below are based on those UK laws and published practices of

HM Revenue & Customs as at the date of this Annual Report which UK laws and practices are subject to change, again possibly with retroactive effect. As used herein, a US Holder is a beneficial owner of ordinary shares or ADSs that, for

US federal tax purposes, is:

–	a citizen or resident of the US;

–	a corporation, or other entity treated as a corporation for US federal income tax purposes created or organised in the US or under the laws of the US or any state thereof (or the District of Columbia);

–	an estate the income of which is subject to US federal income taxation regardless of its source;

–	a trust if a court within the US is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust; or

–	a trust if it has a valid election in effect to be treated as a US person under the Code.

HM Revenue & Customs should treat US Holders of ADSs as the owners of the underlying ordinary shares for the purpose of the taxation of dividend payments under the Tax Convention. US Holders of ADSs are also treated as the owners of the underlying shares for the purposes of the Code.

Taxation of dividends

The gross amount of distributions in respect of the Company’s ordinary shares or ADSs will be included in the gross income of US Holders and treated as dividends to the extent of the Company’s current and accumulated earnings and profits, as determined under US federal income tax principles. Such dividends will not qualify for the dividends received deduction available in certain circumstances to corporate holders. Distributions in excess of current and accumulated earnings and profits will be treated as a return of capital to the extent of a US Holder’s adjusted tax basis in the ordinary shares or ADSs and, thereafter, as capital gains.

For taxable years that begin before 2011, ‘qualified dividend income’ (as defined below) paid by the Company generally will be taxable to non-corporate US Holders at the 15% reduced rate. For this purpose, except as described below, dividends paid by the Company will be ‘qualified dividend income’ and taxable at the reduced rate, if shares in the Company are readily tradable on an established securities market in the US, including NYSE and NASDAQ, or if the Company is eligible for benefits of a comprehensive income tax treaty with the US which the US Secretary of the Treasury has determined is satisfactory for this purpose and which includes a provision for the exchange of information. The US Secretary of the Treasury has determined that the Tax Convention qualifies as a comprehensive income tax treaty for this purpose. Dividends paid by a foreign corporation will not constitute qualified dividend income, however, if that corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as a PFIC for US federal income tax purposes. In addition, US Holders will be eligible for the reduced rate only if they have held the ordinary shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex- dividend date and satisfy certain other requirements.

US Holders will not be subject to UK withholding tax on any dividends paid in respect of ordinary shares. Provided that dividends paid in respect of ADSs are treated as distributions for UK tax purposes, such dividends will not be subject to UK withholding tax.

Foreign currency dividends

For US federal income tax purposes, any dividend paid in foreign currency will be included in income in a US dollar amount equal to the US dollar value of such foreign currency calculated by reference to the exchange rate in effect on the day the dividends are actually or constructively received by the US Holders, regardless of whether the foreign currency is converted into US dollars at that time. US Holders will generally have a basis in the foreign currency equal to its US dollar value on the date of actual or constructive receipt. Any gain or loss realised by the US Holders on subsequent conversion or other disposition of the foreign currency will be treated as US source ordinary income or loss.

161

Investor information (continued)

PFIC status

The Company believes that it will not be considered a PFIC for US federal income tax purposes. However, since the Company’s status as a PFIC depends on the composition of its income and assets and the market value of its assets from time to time, there can be no assurance that it will not be considered a PFIC in any taxable year.

US shareholders in a company classified as a PFIC have certain federal income tax consequences. In determining a company’s PFIC status for a taxable year, two tests must be applied, as well as certain look-through rules. If 75% or more of a company’s gross income (including the pro-rata gross income of any company in which such company is considered to own 25% or more of the stock by value) for the taxable year is passive, it is considered a PFIC. Alternatively, if 50% or more of its gross assets (including the pro-rata value of the assets of any company in which such company is considered to own 25% or more of the stock by value) during the taxable year, based on their average value, are either held for the production of or produce passive income, it is considered a PFIC. In this instance, passive income commonly includes dividends, interest, royalties, rents, annuities, gains from commodities and securities transactions, and the excess of gains over losses from the disposition of assets which produce passive income (unless the 25% look-through rules otherwise apply).

If the Company were treated as a PFIC in a taxable year, a US Holder may be subject to particular adverse tax consequences. The receipt of certain ‘excess distributions’, as well as the disposition of ordinary shares or ADSs, could trigger increased tax liability. ‘Gain’ or excess distribution would be allocated among the tax years of the shareholder’s holding period from the time the entity was determined to be a PFIC. The portion allocable to prior years would be taxed at the highest marginal US federal tax rate and would be subject to an interest charge.

Certain elections may enable the shareholder in a PFIC to avoid some of these adverse tax consequences. Under the QEF election, a US shareholder is taxed currently on its share of the company’s ordinary income. Under the mark-to-market election, a US shareholder recognises gains or losses each year for the difference between the fair market value and the adjusted basis of his or her shares. US Holders should consult their tax advisers for further details of the restrictions and coverage of each election and the potential tax consequences arising from the ownership and disposition of an interest in a PFIC.

Taxation of capital gains

Corporate US Holders that are resident in the US and not resident in the UK for UK tax purposes will not generally be liable for UK corporation tax on capital gains realised on the sale or other disposal of ordinary shares or ADSs unless a specific Corporate US Holder carries on a trade in the UK through a permanent establishment and the ordinary shares or ADSs are or have been used, held or acquired for the purposes of such trade through such permanent establishment. Non- corporate US Holders that are resident in the US and are neither resident nor ordinarily resident in the UK for UK tax purposes will not generally be liable for UK tax on capital gains realised on the sale or other disposal of ordinary shares or ADSs unless a specific non-corporate US Holder carries on a trade, profession or vocation in the UK through a branch or agency and the ordinary shares or ADSs are or have been used, held or acquired for the purposes of such trade, profession or vocation through such branch or agency.

Notwithstanding the foregoing, an individual US Holder who is neither resident nor ordinarily resident in the UK for UK tax purposes for a period of less than five years, but who was previously resident or ordinarily resident in the UK, and who disposes of ordinary shares or ADSs during the period of non-residence may also be liable on returning to the UK for UK tax on capital gains despite the fact that the individual was not resident or ordinarily resident in the UK for UK tax purposes at the time of the disposal.

US Holders will generally recognise capital gain or loss for US federal income tax purposes upon the sale or other disposal of such US Holders’ ordinary shares or ADSs in an amount equal to the difference between the US dollar value of the amount realised on the sale or other disposal and the US Holders’ adjusted tax basis, determined in US dollars, in such ordinary shares or ADSs. Such gains or losses will be eligible for long-term capital gain or loss treatment if the ordinary shares or ADSs have been held for more than one year at the time of such sale or disposal. Long-term capital gains of individuals are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. In general, any gain or loss recognised by a US Holder on the sale or other disposition of ordinary shares or ADSs will be US-source income or loss for purposes of US federal foreign tax credit limitation.

162

Investor information (continued)

UK inheritance tax

Under the Estate and Gift Tax Convention, ordinary shares or ADSs will generally not be subject to UK inheritance tax upon an individual’s death or on a transfer of the ordinary shares or ADSs during the individual’s lifetime if it is held by an individual who is domiciled in the US and is not treated as domiciled in the UK and is not a national of the UK. In certain other cases where the individual is domiciled in the US and is treated as domiciled in the UK, the individual may be subject to UK inheritance tax. Also, an individual will be subject to UK inheritance tax in the exceptional case in which ordinary shares or ADSs are part of the business property of a UK permanent establishment or pertains to a fixed base of the individual in the UK used for the performance of independent personal services. In the unusual case where ordinary shares or ADSs are subject to both the UK inheritance tax and the US federal estate and gift tax, the Estate and Gift Tax Convention generally provides for a tax credit under the rules enumerated in the Estate and Gift Tax Convention.

UK stamp duty or SDRT

UK stamp duty or SDRT is not generally payable on the issuance of ordinary shares (except see below regarding the issue of ordinary shares to the custodian of the Depositary). The transfer of ordinary shares will generally give rise to a liability to UK stamp duty at the rate of 0.5% (rounded up to the next multiple of £5) of the amount or value of the consideration paid. SDRT is generally chargeable at the same rate on entering into an unconditional agreement to transfer ordinary shares (or upon a conditional agreement to transfer ordinary shares becoming unconditional). However, such SDRT is cancelled or repaid if the agreement is completed within six years of the date of the unconditional agreement (or the date on which the conditional agreement became unconditional) by a duly stamped transfer instrument. Where an instrument of transfer of ordinary shares is executed where there is no change of beneficial ownership, it will generally not be subject to UK stamp duty or to the principal 0.5% SDRT charge.

The issuance of ordinary shares to the custodian of the Depositary will generally give rise to an SDRT liability at 1.5% of the issue price. The transfer of ordinary shares to the custodian of the Depositary will generally give rise to either UK stamp duty at the rate of 1.5% of the value of the ordinary shares transferred (rounded up to the next multiple of £5) or, in the unlikely event that there is no transfer instrument on which UK stamp duty is chargeable, to SDRT at the rate of 1.5% of the value of the ordinary shares transferred.

In accordance with the terms of the Deposit Agreement, any tax or duty payable by the Depositary or the custodian of the Depositary on deposits of ordinary shares will be charged by the Depositary to the party to whom the ADSs are delivered against such deposits.

Following the issue or transfer of ordinary shares to the custodian of the Depositary, no SDRT will generally be payable on the issue of ADSs or on an agreement to transfer ADSs, nor should UK stamp duty be payable on a transfer of ADSs, provided, amongst other things, that the instrument of transfer is executed and retained outside the UK. A transfer of ordinary shares by the Depositary or its nominee to the relevant ADS holder when the ADS holder is not transferring beneficial ownership will generally not be liable to a stamp duty charge or to the principal 0.5% SDRT charge.

US backup withholding and information reporting

Payments of dividends and other proceeds with respect to ordinary shares or ADSs made within the US by a US paying agent or other US intermediary will be reported to the IRS and to the US Holders as may be required under applicable regulations unless a specific US Holder is a corporation or otherwise establishes a basis for exemption. Backup withholding may apply to reportable payments if the US Holders fail to provide an accurate taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding requirements. The amount of any backup withholding from a payment to a US Holder will be allowed as a credit against his or her US federal income tax liability and any excess amounts will be refundable, if the US Holder provides the required information to the IRS. US Holders should consult their tax advisers as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.

Share dealing

For UK residents, internet and telephone share dealing services have been arranged through Equiniti Limited which provide a simple way to buy or sell the Company’s ordinary shares. For internet dealing, existing shareholders should log on to www.shareview.co.uk. You will need your account number shown on your share certificate or tax voucher. The commission rate for internet dealing is 1% with a minimum charge of £20. For telephone dealing, please call 0845 603 7037 between 8.30 am and 4.30 pm, Monday to Friday; the commission rate for share transactions by telephone is 1.5% with a minimum charge of £25.

A weekly postal dealing service is also available and a form, together with terms and conditions, can be obtained by calling 0845 603 7037; commission is 1% with a minimum charge of £20.

Contact details for Equiniti Limited with regard to share dealing services, including contact numbers for callers from outside the UK, are provided on page 165.

Global Invest Direct

A simple dealing service is available to US residents only for buying and selling Tomkins ADRs. Details can be obtained from JPMorgan Chase Bank, N.A., whose contact details are provided on page 165.

163

Investor information (continued)

ShareGift

The Company supports ShareGift, the charity share donation scheme (registered charity number 1052686). Through ShareGift, shareholders who have only a very small number of shares, which might be considered uneconomic to sell, are able to donate them to charity. Donated shares are aggregated and sold by ShareGift, the proceeds being passed on to a wide range of UK charities. Donating shares to charity gives rise neither to a gain nor a loss for UK Capital Gains Tax purposes and UK taxpayers may also be able to claim income tax relief on the value of the donation.

ShareGift transfer forms specifically for the Company’s shareholders are available from the Company’s Registrar and, even if the share certificate has been lost or destroyed, the gift can be completed. The service is generally free. However, there may be an indemnity charge for a lost or destroyed share certificate where the value of the shares exceeds £100. ShareGift’s contact details are provided on page 165.

Electronic communication

The Company’s Registrar operates a share register internet enquiry service to provide shareholders with details of their shareholdings. To register for the service, please go to www.shareview.co.uk. You will need your shareholder reference (which can be found on your share certificate or tax voucher) and you will be asked to select your own PIN. A user ID will then be posted to you. Once registered, shareholders may elect to receive future shareholder information and Company documents in electronic format. The main benefits of this system are speed and ease of use while saving money for your Company and reducing the demand on natural resources. A visit to www.shareview.co.uk will also provide you with more details of the service and practical help and information on other share registration matters.

As permitted by the provisions of the Companies Act 2006 relating to electronic communications, the Company now supplies all shareholders with shareholder documents by making them available on its website, www.tomkins.co.uk, except where a shareholder has specifically requested that the Company continues to provide him or her with hard copies. Shareholders will be informed by post or email whenever a shareholder document is made available on the website. Shareholders can, at any time, change their decision on how they wish to receive shareholder documents by advising the Company’s Registrar, whose contact details with regard to electronic communication are provided on page 165.

Electronic proxy voting

Shareholders may register their voting instructions for the forthcoming AGM via the internet. If you have registered for the shareview service offered by the Company’s Registrar, you may submit your voting instructions by logging on to your shareview portfolio and accessing the Company Meetings – Tomkins site. If you have not registered with shareview, you may still register your vote electronically by going to www.sharevote.co.uk. You will be required to key in the three security numbers printed on your form of proxy to access the voting site.

164

Useful contacts

Address	Telephone	Website
Tomkins plc – Corporate office and registered office East Putney House 84 Upper Richmond Road London SW15 2ST	+44 (0)20 8871 4544	www.tomkins.co.uk
Company’s Registrar Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA	General enquiries/ Electronic communication 0871 384 2811 from within UK +44 121 415 7047 from outside UK Textel 0871 384 2255	www.shareview.co.uk
	Payment of dividends 0871 384 2811 from within UK +44 121 415 7047 from outside UK Textel 0871 384 2255
	Dividend Reinvestment Plan 0871 384 2268 from within UK +44 121 415 7173 from outside UK
	Share dealing services (UK residents only) 0845 603 7037 from within UK +44 121 415 7560 from outside UK	www.shareview.co.uk
ISA Helpline Equiniti Limited Spencer Road Lancing West Sussex BN99 6UY	0845 300 0430 from within UK +44 121 415 7572 from outside UK
ADR general enquiries Global Invest Direct JPMorgan Chase Bank, N.A. PO Box 3408 South Hackensack NJ 07606-3408 US	+1 800 990 1135 from within the US +1 651 453 2128 from outside the US	www.ADR.com email: jpmorgan.adr@wellsfargo.com
ShareGift 17 Carlton House Terrace, London SW1Y 5AH	+44 (0)20 7930 3737	www.ShareGift.org

165

Cross-reference to Form 20-F

Certain of the information in this document that is referenced in the following table is included in the Company’s Annual Report on Form 20-F for 2008 (the “2008 Form 20-F”) filed with the SEC. No other information in this document is included in the 2008 Form 20-F or incorporated by reference into any filings by the Company under the Securities Act. The 2008 Form 20-F has not been approved or disapproved by the SEC nor has the SEC passed judgement upon the adequacy or accuracy of the 2008 Form 20-F.

Item	Description	Location	Page
1	Identity of directors, senior management and advisers	Not applicable	n/a
2	Offer statistics and expected timetable	Not applicable	n/a
3	Key Information
	3A Selected financial data	Five-year summary	155
		Note 2 – Transition to reporting in US dollars	67
	3B Capitalisation and indebtedness	Not applicable	n/a
	3C Reasons for the offer and use of proceeds	Not applicable	n/a
	3D Risk factors	Principal risks and uncertainties	36
4	Information on the Company
	4A History and development of the Company	Registered office (back cover)	OBC
		Investor Information – History and development of the Company	156
		OFR – Operating results	13
		Note 44 – Acquisitions	128
		Note 45 – Disposals	130
		OFR – Property, plant and equipment	26
		Note 21 – Property, plant and equipment	97
	4B Business overview	Industrial & Automotive	6
		Building Products	8
		OFR – Operating results	13
		Investor Information – Government laws and regulations	160
		Investor Information – Patents, trademarks and contracts	160
	4C Organisational structure	Note 1 – Nature of operations	67
		Subsidiaries and associates	152
	4D Property, plant and equipment	OFR – Property, plant and equipment	26
4A	Unresolved staff comments	Not applicable	n/a
5	Operating and financial review and prospects
	5A Operating results	OFR – Operating results	13
	5B Liquidity and capital resources	OFR – Liquidity and capital resources	21
		Note 27 – Cash and cash equivalents	101
		Note 33 – Financial risk management	106
		Note 48 – Capital commitments	132
	5C Research and development, patents and licences etc	OFR – Other intangible assets	26
		Note 14 – Profit for the period	89
	5D Trend information	OFR – Operating results	13
		Outlook	5
	5E Off-balance sheet arrangements	OFR – Off-balance sheet arrangements	29
		Note 47 – Operating leases	132
	5F Tabular disclosure of contractual obligations	OFR – Contractual obligations	29
	5G Safe harbour	Special note regarding forward-looking statements (front cover)	IFC
6	Directors, senior management and employees
	6A Directors and senior management	Board of Directors	40
	6B Compensation	Remuneration Committee report*	52
		Note 49 – Related party transactions	132
	6C Board practices	Key governance principles	42
	6D Employees	Corporate Social Responsibility – Our workplace: employees	38
		Note 8 – Staff costs	83
	6E Share ownership	Remuneration Committee report*	52
		Note 35 – Share-based incentives	120
7	Major shareholders and related party transactions
	7A Major shareholders	Investor information – Substantial shareholdings	157
	7B Related party transactions	Note 49 – Related party transactions	132
	7C Interests of experts and counsel	Not applicable	n/a

166

Cross-reference to Form 20-F (continued)

Item	Description	Location	Page
8	Financial information
	8A Consolidated statements and other financial information	Item 18 – Financial statements	63
		Auditors’ report	**
		Note 46 – Contingent liabilities	132
		OFR – Dividend	15
	8B Significant changes	Not applicable	n/a
9	The Offer and listing
	9A Offer and listing details	Investor information – Share price information	156
	9B Plan of distribution	Not applicable	n/a
	9C Markets	Investor information – Trading symbols	156
	9D Selling shareholders	Not applicable	n/a
	9E Dilution	Not applicable	n/a
	9F Expenses of the issue	Not applicable	n/a
10	Additional information
	10A Share capital	Not applicable	n/a
	10B Memorandum and Articles of Association	Investor information – Memorandum and Articles of Association	158
	10C Material contracts	Key governance principles – Significant agreements and change of control	47
	10D Exchange controls	Investor information – Exchange controls	160
	10E Taxation	Investor information – Taxation	161
	10F Dividends and paying agents	Not applicable	n/a
	10G Statements by experts	Not applicable	n/a
	10H Documents on display	Investor information – Documents on display	158
	10I Subsidiary information	Subsidiaries and associates	152
11	Quantitative and qualitative disclosures about market risk	OFR – Liquidity and capital resources	21
		Note 33 – Financial risk management	106
12	Description of securities other than equity securities	Not applicable	n/a
13	Defaults, dividend arrearages and delinquencies	None	n/a
14	Material modifications to the rights of security holders and the use of proceeds	None	n/a
15	Controls and procedures	Internal control	48
		Management’s annual report on internal control over financial reporting	**
		Attestation report of the registered public accounting firm	**
		Internal control – Sarbanes-Oxley	49
16	[Reserved]
	16A Audit committee financial expert	Audit Committee report – Membership and appointment	50
	16B Code of ethics	Key governance principles – The Board	42
	16C Principal accountant fees and services	Note 17 –Auditors’ remuneration	91
	16D Exemptions from the listing standards for audit committees	None	n/a
	16E Purchase of equity securities by the issuer or affiliated purchasers	Investor information – Purchases of ordinary shares	157
	16F Change in a registrant’s certifying accountant	Not applicable	n/a
	16G Corporate governance	Key governance principles – Compliance statement	47
17	Financial statements	Not applicable	n/a
18	Financial statements	Consolidated financial statements	63
19	Exhibits		**

*	For the purposes of the Form 20-F, sections of the Remuneration Committee report that are marked ‘audited’ are not required to be audited in accordance with PCAOB standards and are not considered audited in the Form 20-F.

**	Filed separately with the SEC as an exhibit to the Form 20-F. For the purposes of the Form 20-F, the auditors’ report on page 62 of this annual report is not considered to be filed with the SEC.

167

Financial calendar

2009
Interim management statement	14 May 2009
AGM 2009	1 June 2009
Final dividend payment – year ended 3 January 2009	10 June 2009
Interim results announcement – six months ending 27 June 2009	13 August 2009
Interim management statement	5 November 2009
Interim dividend payment – year ending 2 January 2010	November 2009
Year end	2 January 2010


2010
Preliminary announcement – year ending 2 January 2010	February 2010
Interim management statement	May 2010
AGM 2010	May/June 2010
Final dividend payment –year ending 2 January 2010	May/June 2010

168

Glossary of terms

$, US dollar, cents, c	US dollar ($) and cents, the currency of the US
£, sterling, pence, p	Pound sterling (£) and pence, the currency of the UK
€, euro	The currency of certain member states of the European Union
ABI	Architecture Billings Index, an indicator of non-residential construction activity in the US produced by the American Institute of Architects
ABIP	The Tomkins Annual Bonus Incentive Plan
Adjusted earnings per share	See “Performance measures” on pages 10 to 12
Adjusted operating profit	See “Performance measures” on pages 10 to 12
Adjusted operating margin	See “Performance measures” on pages 10 to 12
ADR	American Depositary Receipt, a negotiable certificate evidencing an ADS
ADS	American Depositary Share (representing four ordinary shares) held by the Depositary
AGM	Annual General Meeting
Articles	The current Memorandum and Articles of Association of Tomkins plc
ASC	Air Systems Components
ASIC	Application Specific Integrated Circuit
the Board	The Board of Directors of Tomkins plc
Cash conversion	See “Performance measures” on pages 10 to 12
CGU	Cash-generating unit
the Code	The US Internal Revenue Code of 1986, as amended
the Combined Code	The Combined Code on Corporate Governance issued by the UK Financial Reporting Council in June 2006
Companies Act 1985	The Companies Act of England and Wales 1985, as amended
Companies Act 2006	The Companies Act of England and Wales 2006
the Company	Tomkins plc
CSM	Database of automotive information and analysis prepared by CSM Worldwide, a provider of automotive market forecasting services and strategic advisory solutions to automotive manufacturers, suppliers and financial organisations

CSR	Corporate Social Responsibility
Deferred shares	The deferred shares of £ 1 each in the capital of the Company, created pursuant to Resolution 16 at the Company’s AGM on 1 May 2008
Depositary	JPMorgan Chase Bank, N.A
Detroit Three	General Motors, Ford and Chrysler, automotive OEMs
Director	A director of Tomkins plc
EMTN Programme	The Euro Medium Term Note Programme
EPS	Earnings per share
ESOP	Employee Share Ownership Plan
ESOS 3 and ESOS 4	The Tomkins Executive Share Option Scheme No. 3 and the Tomkins Executive Share Option Scheme No. 4, which both lapsed for grant purposes in 2005
the Estate and Gift Tax Convention	The convention between the US and the UK for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on estates of deceased persons and on gifts
the Exchange Act	US Securities Exchange Act of 1934
Free cash flow	See “Performance measures” on pages 10 to 12
Gates	The businesses and operations of the Gates Corporation, a subsidiary of the Company
Gates E&S	Gates Engineering & Services
the Group	The Company together with its subsidiaries
HSE	Health, Safety and the Environment
HVAC	Heating, Ventilation and Air Conditioning
I&A	Industrial & Automotive
IASB	International Accounting Standards Board
Ideal	The businesses and operations of Epicor Industries Inc, a subsidiary of the Company, trading as Ideal

169

Glossary of terms (continued)

IFRIC	International Financial Reporting Interpretations Committee
IFRS	International Financial Reporting Standards
Incident rate	The number of reportable incidents per 100 workers over a period of one year
Independent auditor	Deloitte LLP
ISIN	International Securities Identification Number
KPI	Key Performance Indicator
LEED	Leadership in Energy and Environmental Design
NAHB	National Association of Homebuilders, a trade association of the residential construction industry and related activities in the US
NAPA	National Automotive Parts Association, a co-operative that distributes automotive parts to retail outlets principally in the US
Net capital expenditure : depreciation	See “Performance measures” on pages 10 to 12
Net debt	See “Performance measures” on pages 10 to 12
Non-GAAP measure	A measure of historical or future financial performance, financial position or cash flows which is adjusted to exclude or include amounts that would not be so adjusted in the most comparable measure prescribed by IFRS
NYSE	The New York Stock Exchange
OE	Original equipment
OEM	Original equipment manufacturer
OFR	Operating and financial review
Operating cash flow	See “Performance measures” on pages 10 to 12
Ordinary shares	The ordinary shares in the capital of the Company that, with effect from 22 May 2008, have a nominal value of 9 cents each
PFIC	Passive Foreign Investment Company
Preference shares	The convertible cumulative preference shares of $50 each in the capital of the Company, of which the remaining shares outstanding were redeemed in 2007
Project Eagle	A three-year performance improvement programme announced in 2008 to address the cost base and improve competitiveness
Project Cheetah	A more extensive set of actions announced in 2009 to reset the Group’s manufacturing footprint to lower-cost locations and further take advantage of opportunities in higher growth markets
PSP	The Tomkins 2006 Performance Share Plan
QEF	Qualified Electing Fund
Registrar	Equiniti Limited
Restructuring initiatives	Expenses incurred in major projects undertaken to rationalise and improve the cost competitiveness of the Group and consequential gains and losses arising on the exit and disposal of businesses or on the disposal of assets
RTPMS	Remote Tyre Pressure Monitoring System
RVIA	Recreation Vehicle Industry Association, a national trade association representing recreation vehicle manufacturers and their component parts suppliers in the US
SAAR	Seasonally Adjusted Annual Rate
SAYE 2	The Tomkins Savings Related Share Option Scheme No. 2, that lapsed for grant purposes in 2005
SDRT	Stamp Duty Reserve Tax, payable on paperless transactions for shares in the UK
SEC	US Securities and Exchange Commission
SEDOL	Stock Exchange Daily Official List, a list of security identifiers used in the UK for clearing purposes.
Severity rate	Average number of lost workdays per 100 employees over a period of one year
Sharesave scheme	The Tomkins 2005 Sharesave Scheme
SMS	The Tomkins Share Matching Scheme, that expired in 2007
Sarbanes-Oxley	The US Sarbanes-Oxley Act of 2002
the Securities Act	US Securities Act of 1933, as amended
Stamp Duty	A tax payable on paper transactions for shares in the UK
Subsidiary	An entity that is controlled, either directly or indirectly, by the Company

170

Glossary of terms (continued)

the Tax Convention	The convention between the government of the US and the government of the UK for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains dated 24 July 2001, as ratified on 31 March 2003 and amended
TREAD Act	US Transportation Recall Enhancement, Accountability, and Documentation Act of 2000
Trico	Trico Products Corporation and its related businesses, which constituted the Group’s former Wiper Systems business segment (sold during 2007)
TSR	Total Shareholder Return, comprising dividends paid on ordinary shares and the increase or decrease in the market price of ordinary shares
UK GAAP	United Kingdom Generally Accepted Accounting Practice
UK	The United Kingdom of Great Britain and Northern Ireland
UKLA	United Kingdom Listing Authority
Underlying change in sales	See “Performance measures” on pages 10 to 12
and adjusted operating profit
US	The United States of America, its territories and possessions, any state of the United States and the District of Columbia
uPVC	Unplasticised Poly Vinyl Chloride

171

The paper in this report is produced with FSC mixed sources pulp which is fully recyclable, biodegradable, pH Neutral, heavy metal absence and acid-free. It is manufactured within a mill which complies with the international environmental ISO 14001 standard.

This has been printed using an alcohol free process and the printing inks are made from vegetable oil and are non-hazardous from renewable sources. Over 90% of solvents and developers are recycled for further use and recycling initiatives are in place for all other waste associated with this production. The printers are FSC and ISO 14001 certified with strict procedures in place to safeguard the environment through all their processes and are working on initiatives to reduce their Carbon Footprint.

Designed and produced by MAGEE www.magee.co.uk

Contact details of Company Contact Person:
Name	John Zimmerman
E-mail	jzimmerman@tomkins.co.uk
Telephone	+44 (0) 208 877 5155
Address	Tomkins plc East Putney House 84 Upper Richmond Road London SW15 2ST United Kingdom

Title of each class	Name of each exchange on which registered
Ordinary Shares, nominal value 9c per share	New York Stock Exchange *

American Depositary Shares (each of which represents four Ordinary Shares)	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes x No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.	Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:	Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

US GAAP	¨
International Financial Reporting Standards as issued by the International Accounting Standards Board	x
Other	¨

	à	Tomkins is a global engineering and manufacturing group, with market and technical leadership across all of its business activities


Directors’ report

Overview
02	Financial summary
03	Group strategy
04	Chairman’s statement and Chief Executive’s review
06	Our businesses

Performance
10	Performance measures
13	Operating and financial review
36	Principal risks and uncertainties
38	Corporate social responsibility

Governance
40	Board of Directors
42	Key governance principles
48	Internal control
50	Audit Committee report
52	Remuneration Committee report
61	Statement of Directors’ responsibilities

Financial statements

Group
62	Independent auditors’ report
63	Consolidated financial statements prepared in accordance with IFRS

Company
135	Independent auditors’ report
136	Company financial statements prepared in accordance with UK GAAP
152	Principal subsidiaries and associates

Additional information

153	Supplemental financial information
155	Five-year summary
156	Investor information
165	Useful contacts
166	Cross-reference to Form 20-F
168	Financial calendar
169	Glossary of terms

–	Completed the divestment of the non-core businesses, Stant and Standard-Thomson.

–	Completed three acquisitions: in India, Singapore and the US (the latter with operations in China). Signed a joint venture agreement in the Middle East for the manufacture and distribution of non-residential Air Systems Components products.

–	Announced and commenced implementation of our performance improvement initiative, Project Eagle, incorporating outsourcing of central functions, low-cost country sourcing, expansion of existing restructuring initiatives and strategic pricing initiatives.

–	Identified further opportunities for restructuring our manufacturing footprint under a new initiative, Project Cheetah, to better position the Group for the future.

–	Introduced and expanded our range of new products including the energy recovery ventilator, the electromechanical drive and the two speed variable vaneoil pumps.


Financial highlights:		Key products:	Key brands:
Power Transmission
Sales:	$2,106.4m	Belts, pulleys, tensioners and idlers,	Gates
Operating margin:	10.9%	powder metal components, electro-	Gates Mectrol
% of Group sales:	38.2%	mechanical drive systems, power	Stackpole
		transmission and pump components,
		engine and transmission oil pumps
Fluid Power
Sales:	$832.3m	Hydraulics, hoses, belts, coupling	Gates
Operating margin:	5.6%	systems	EMB
% of Group sales:	15.1%		Gates Fleximak
			A.E. Hydraulic
			Gates E&S
Fluid Systems
Sales:	$501.2m	RTPMS, wheel and tyre valves,	Schrader Electronics
Operating margin:	8.0%	inflating gauges	Schrader Bridgeport
% of Group sales:	9.1%

Other I&A
Sales:	$620.9m	Axles and wheels, trailer chassis and	Dexter Axle
Operating margin:	7.1%	components, fabricated metal parts,	Ideal
% of Group sales:	11.2%	clamps, water and oil pumps	Plews & Edelmann
			Tridon
			Gates Winhere

Key markets served:		Key market drivers:

à	Industrial machinery and equipment	à	Industrial activity
à	Processing industries	à	Commodity prices
à	Earthmoving equipment	à	Industrial capital expenditure
à	Agricultural equipment	à	Agricultural activity
à	Mining	à	Industrial construction
à	Oil and gas	à	Automotive production
à	Leisure equipment	à	Number of cars in use
à	Consumer equipment	à	Average age of cars in use
à	Automotive OE	à	Car usage (measured by miles driven)
à	Automotive aftermarket	à	Oil and fuel prices

Industrial
Top five customers
(% of Group sales)
– Motion Industries	2.0%
– John Deere	1.0%
– Redneck Trailer Supplies	0.9%
– Jayco	0.7%
– JCB	0.6%

Automotive
Top five customers
(% of Group sales)
– General Motors	6.1%
– NAPA	3.1%
– Ford	2.0%
– Hyundai	1.6%
– Chrysler	1.6%


	à	Focus on:

Key markets served:		Key market drivers:
à	Residential construction	à	Housing starts
à	Commercial construction	à	Square feet of construction
à	Recreational vehicles	à	Construction value
à	Manufactured housing	à	Recreational vehicle production
à	Remodelling and repair	à	Manufactured housing shipments
		à	Architectural billings

Other Building Products Top five customers (% of Group sales)
– Home Depot	0.9%
– Ferguson Enterprises	0.6%
– Thor Industries	0.2%
– Fleetwood Enterprises	0.2%
– Dapsco	0.2%

$m unless stated otherwise	2008		2007		2006

Continuing operations
Sales		5,515.9		5,886.1		5,746.1
Adjusted operating profit		403.4		530.5		545.3
Adjusted operating
margin		7.3%		9.0%		9.5%

Cash conversion (continued)

$m unless stated otherwise	2008			2007			2006
Total operations
Operating cash flow		442.8			441.8			401.6
Adjusted for:
– Cash outflow on restructuring costs		16.3			1.2			19.3
Adjusted operating cash flow		459.1			443.0			420.9
Adjusted operating profit		403.4			534.2			546.4
Cash conversion		113.8	%		82.9	%		77.0	%

	2008			2007
	$m			$m
Interest cost on benefit obligation		78.4			76.3
Expected return on plan assets		(75.5	)		(75.0	)
Net finance costs on post-employment benefits		2.9			1.3

à	US industrial production declined by 8% in 2008

à	European industrial production declined by 10% in 2008

à	Industrial production in India and China softened in 2008

à	Continued decline in North American auto production

à	Detroit Three on the brink of bankruptcy/accessing government funds

à	European auto production declined by 5%

à	Slowdown in emerging economies

à	Low consumer confidence causing deferral of discretionary spend

à	Continued decline in miles driven

à	Lack of credit threatening the smaller distributors

à	Destocking by distributors causing challenges in working capital management

à	Significant declines in construction measured on square foot basis

à	Lack of credit affecting market

à	Vacancy rates rising

à	ABI suggesting significant decline in 2009

à	Increasing focus on ‘green’ buildings through demand for LEED-certified buildings

à	Seasonally adjusted annual housing starts declined to 560,000 units in December 2008

à	Significant lack of credit availability restricting purchasing power

à	Increasing inventory of unsold homes

à	Declining property values

à	Rising foreclosures

	2008 Days		2007 Days
Company		37		30
Group (range of days)		12-166		16-132
Group (average days)		60		59

	2008			2007
	$m			$m
Opening net debt		(591.5	)		(920.8	)
Cash generated from operations		628.7			638.7
Capital expenditure		(193.8	)		(236.5	)
Disposal of property, plant and equipment		7.9			39.6
Operating cash flow		442.8			441.8
Income taxes paid (net)		(84.5	)		(86.2	)
Interest and preference dividends (net)		(44.3	)		(56.0	)
Other movements		(13.1	)		(9.6	)
Free cash flow to equity shareholders		300.9			290.0
Ordinary dividends		(246.2	)		(247.3	)
Acquisitions and disposals (net)		49.9			202.0
Ordinary share movements		(4.5	)		(4.5	)
Foreign currency movements		16.1			(39.3	)
Cash movement in net debt		116.2			200.9
Noncash movement in net debt		(1.1	)		(1.6	)
Conversion of preference shares		–			130.0
Total movement in net debt		115.1			329.3
Closing net debt		(476.4	)		(591.5	)

	Facility	Drawings		Total
	$m	$m		$m
Committed facilities
– Bonds	584.4	(584.4	)	–
– Credit facility	584.4	(129.3	)	455.1
– Finance leases	6.9	(6.9	)	–
	1,175.7	(720.6	)	455.1
Uncommitted facilities
– Credit facilities	495.4	(34.7	)	460.7
Total headroom	1,671.1	(755.3	)	915.8
Less: Uncommitted facilities				(495.4	)
Committed (minimum) headroom				420.4
Cash and cash equivalents				291.9

			Effect of		Net debt
	Net debt		currency		after currency
	before currency		translation		translation
	translation hedges		hedges		hedges
	$m		$m		$m
Currency:
– US dollar	(38.0	)	343.8		305.8
– Sterling	662.5		(649.8	)	12.7
– Euro	0.6		94.0		94.6
– Canadian dollar	(21.9	)	126.3		104.4
– Other	(126.8	)	85.7		(41.1	)
	476.4		–		476.4

	Carrying amount
	$m		%
US		533.2		45.7	%
UK		56.9		4.9	%
Rest of Europe		169.3		14.5	%
Rest of the world
– Canada		157.0		13.5	%
– China		87.8		7.5	%
– Mexico		50.6		4.3	%
– Other countries		112.5		9.6	%
		407.9		34.9	%
Total		1,167.3		100.0	%

	2008		2007
	$m		$m
Fair value of the plan assets		862.1		1,125.0
Present value of the benefit obligation		1,018.1		1,196.5
Deficit in the plans		156.0		71.5
Effect of the asset ceiling		24.6		49.4
Net pension liability		180.6		120.9

				Earliest period in which payment/(receipt) due
				Less than
	Total			1 year			1 – 3 years			3 – 5 years		After 5 years
	$m			$m			$m			$m		$m
Bank and other loans:
– Principal		735.4			20.9			348.5			0.6		365.4
– Interest payments(1) (2)		204.4			41.6			79.8			44.8		38.2
Derivative financial instruments:
– Payments(2) (3)		682.9			677.0			5.9			–		–
– Receipts(2) (3)		(663.8	)		(655.9	)		(7.9	)		–		–
Finance leases		9.5			1.9			2.6			1.4		3.6
Operating leases		229.5			41.3			64.5			46.6		77.1
Post-employment benefits(4)		43.2			43.2			–			–		–
Purchases(5)		46.0			42.5			1.2			0.9		1.4
Total(6)		1,287.1			212.5			494.6			94.3		485.7

	2007 $m		2006 $m
Interest cost on benefit obligation	76.3		67.7
Expected return on plan assets	(75.0	)	(61.1	)
Net finance costs on
post-employment benefits	1.3		6.6

	2008		Number of facilities reporting		2007		Number of facilities reporting
Total waste (million metric tonnes)		0.179		132		0.195		126
Landfill waste (million metric tonnes)		0.040		132		0.044		126
Total energy consumed (billion KWh)		1.577		127		1.604		114
Water consumption (million m3)		2.534		128		2.550		121
Total greenhouse gas emissions (million tonnes)		0.177		127		0.137		114

1	David Newlands R, Aged 62 Non-Executive Chairman Appointed to the Board in August 1999 and became Chairman in June 2000. He is Chairman of KESA Electricals plc and PayPoint plc, and a director of a number of other companies. He was formerly Finance Director of The General Electric Company, p.l.c., Chairman of Britax International plc and Deputy Chairman of Standard Life Assurance.	4	Richard Gillingwater A R, Aged 52 Senior Independent Non-Executive Director Appointed to the Board in December 2005. He is Dean of Cass Business School and previously held senior appointments in the UK Government and the City of London, as Chairman of the Shareholder Executive, the body responsible for the Government’s shareholdings in major, public-owned businesses, and at CSFB, BZW and Kleinwort Benson.
2	James Nicol C, Aged 55 Chief Executive Officer Appointed to the Board in February 2002. Former President and Chief Operating Officer of Magna International Inc., the Canadian automotive parts company. He joined Magna in 1987 as Vice-President, Special Projects, following a successful career as a commercial lawyer. He left in 1992 to set up TRIAM Automotive Inc. and returned to Magna as Vice-Chairman when Magna acquired TRIAM in 1998.	5	John McDonough A R C, Aged 57 Independent Non-Executive Director Appointed to the Board in June 2007. He is the Group Chief Executive of Carillon plc having been appointed in 2001. He was previously Vice President, Integrated Facilities Management, Europe, the Middle East and Africa of Johnson Controls Inc and is currently Chairman of the CBI’s Construction Council, Vice Chairman of the CBI’s Public Services Strategy Board and a member of the CBI’s President’s Committee.
3	John Zimmerman Aged 45 Finance Director Appointed to the Board in October 2007. He is a Chartered Accountant (S.A.) and practised for a number of years at Deloitte in South Africa. He joined Braxton Associates in Toronto in 1990 and then became a partner at Orenda Corporate Finance in 1994. He joined Tomkins as Vice President of Corporate Development in 1999.	6	Leo Quinn A R, Aged 52 Independent Non-Executive Director Appointed to the Board in July 2007. He was Group Chief Executive Officer of De La Rue plc until his resignation on 31 December 2008, following the sale and return of proceeds of half the company. Before this, he was Chief Operating Officer of Invensys plc’s Production Management Division. Prior to his time at Invensys, he spent 16 years with Honeywell Inc. in a variety of senior management roles in the USA, Europe, the Middle East and Africa.