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This note should be read in conjunction with the Finance Director’s review.

Carrying values and fair values of financial instruments

The carrying values of the Group's assets and liabilities are analysed as follows:

			2008 2007
			Financial instruments				Financial instruments
		Notes	Derivative £m	Non- Derivative £m	Non-financial instruments £m	Total £m	Derivative £m	Non- Derivative £m	Non-financial instruments £m	Total £m
Assets:
Unlisted non-current asset investments 1,2		10	—	53	—	53	—	57	—	57
Other non-current assets			—	—	5,764	5,764	—	—	4,149	4,149
Trade and other receivables: 3
Trade receivables and similar items 1		12	—	1,939	—	1,939	—	1,211	—	1,211
Other non-derivative financial assets 1		12	—	369	—	369	—	321	—	321
Non-financial instruments		12	—	—	1,621	1,621	—	—	1,053	1,053
Other financial assets 4			390	—	—	390	514	—	—	514
Short-term investments 1,3			—	1	—	1	—	40	—	40
Cash and cash equivalents: 3
Cash at bank and in hand		13	—	940	—	940	—	1,265	—	1,265
Short-term deposits		13	—	1,531	—	1,531	—	632	—	632
Other current assets			—	—	2,621	2,621	—	—	2,217	2,217
			390	4,833	10,006	15,229	514	3,526	7,419	11,459
Liabilities:
Borrowings	– current4	14	—	(23)	—	(23)	—	(34)	—	(34)
	– non-current4	14	—	(1,325)	—	(1,325)	—	(1,030)	—	(1,030)
Other financial liabilities: 4
Financial RRSPs			—	(455)	—	(455)	—	(315)	—	(315)
B Shares			—	—	—	—	—	(16)	—	(16)
Other			(2,386)	—	—	(2,386)	(57)	—	—	(57)
Trade and other payables: 3
Trade payables and similar items		15	—	(2,264)	—	(2,264)	—	(1,872)	—	(1,872)
Other non-derivative financial liabilities		15	—	(430)	—	(430)	—	(315)	—	(315)
Non-financial instruments		15	—	—	(4,359)	(4,359)	—	—	(3,104)	(3,104)
Other liabilities			—	—	(1,456)	(1,456)	—	—	(1,167)	(1,167)
			(2,386)	(4,497)	(5,815)	(12,698)	(57)	(3,582)	(4,271)	(7,910)
Net assets/(liabilities)			(1,996)	336	4,191	2,531	457	(56)	3,148	3,549

The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values have been determined with reference to available market information at the balance sheet date, using the methodologies described below.

¹ Loans and receivables.

²These primarily comprise floating rate convertible loan stock. The conversion conditions are such that fair value approximates to the book value.

³Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six months.

⁴Where available, market values have been used to determine fair values. Where market values are not readily available (principally in respect of derivatives, borrowings and financial RRSPs), fair values have been estimated by discounting expected future cash flows using prevailing interest rate curves. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date.

Fair values equate to book values for both 2008 and 2007, with the following exceptions

		Book value £m	2008 Fair value £m	Book value £m	2007 Fair value £m
Borrowings	– current	(23)	(23)	(34)	(34)
	– non-current	(1,325)	(1,291)	(1,030)	(1,058)
Financials RRSPs		(455)	(487)	(315)	(340)

The carrying values of financial assets and liabilities by category, as defined by IAS 39 Financial Instruments: Recognition and Measurement, are as follows:

	2008 £m	2007 £m
Assets
Held for trading 1	390	514
Loans and receivables 2	3,892	2,221
Available for sale 2	1	40
Cash	940	1,265
Liabilities
Held for trading 1	(2,386)	(57)
Financial liabilities at amortised cost	(4,497)	(3,582)
	(1,660)	401

¹All financial assets and liabilities classified as held for trading are treated as current.

²In the comparative figures, £592m has been reclassified from available for sale to loans and receivables.

Carrying values of other financial assets and liabilities

	Foreign exchange contracts £m	Commodity contracts £m	Interest rate contracts £m	Financial RRSPs £m	B Shares £m	Total £m
At December 31, 2008
Assets	112	—	278	—	—	390
Liabilities	(2,293)	(89)	(4)	(455)	—	(2,841)
	(2,181)	(89)	274	(455)	—	(2,451)
At December 31, 2007
Assets	433	39	42	—	—	514
Liabilities	(54)	—	(3)	(315)	(16)	(388)
	379	39	39	(315)	(16)	126

Other financial liabilities are analysed as follows:

	2008 £m	2007 £m
Current liabilities	(2,450)	(85)
Non-current liabilities	(391)	(303)
	(2,841)	(388)

Foreign exchange and commodity financial instruments

The Group uses various financial instruments to manage its exposure to movements in foreign exchange rates. The Group uses commodity swaps to manage its exposure to movements in the price of commodities (jet fuel and base metals). From January 1, 2005, the Group has not included foreign exchange or commodity financial instruments in any cash flow hedging relationships for accounting purposes. To hedge the currency risk associated with a borrowing denominated in US dollars, the Group has currency derivatives designated as part of fair value hedges.

Movements in the fair values of foreign exchange and commodity instruments were as follows:

	Foreign exchange instruments Commodity instruments
	Total £m	Included in transition hedging reserve £m	Included in income statement £m	Total £m	Included in transition hedging reserve £m	Included in income statement £m
At January 1, 2007	554	254		39	—
Fair value changes to derivative contracts not in accounting hedging relationships 1	215	—	215	36	—	36
Fair value changes to fair value hedges 1,2	(6)	—	(6)	—	—	—
Fair value of contracts settled	(384)	—	—	(36)	—	—
Transferred to revenue	—	(149)	149	—	—	—
At January 1, 2008	379	105		39		—
Fair value changes to derivative contracts not in accounting hedging relationships 1	(2,383)	—	(2,383)	(96)	—	(96)
Fair value changes to fair value hedges 1,2	83	—	83	—	—	—
Fair value of contracts settled	(236)	—	—	(32)	—	—
Fair value of derivative contracts assumed on formation of joint venture	(24)	—	—	—	—	—
Transferred to revenue	—	(80)	80	—	—	—
At December 31, 2008	(2,181)	25		(89)	—

¹ Included in financing.

² Loss on related hedged items £83m (2007 £6m gain).

Interest rate financial instruments

The Group uses interest rate swaps, forward rate agreements and interest rate caps to manage its exposure to movements in interest rates. Where the effectiveness of the hedge relationship in a cash flow hedge is demonstrated, changes in the fair value that are deemed effective are included in the hedging reserve and released to match actual payments on the hedged item.

Movements in the fair values of interest rate financial instruments were as follows:

	Total £m	Included in fair value hedging relationships £m	Other interest rate financial instruments £m	Included in income statement £m
At January 1, 2007	15	18	(3)
Fair value changes 1,2	24	24	—	24
At January 1, 2008	39	42	(3)
Fair value changes 1,2	235	236	(1)	235
At December 31, 2008	274	278	(4)

¹ Included in financing.

²Loss on related hedged items £236m (2007 £24m).

Financial risk and revenue sharing partnerships (RRSPs)

The Group has financial liabilities arising from financial RRSPs. These financial liabilities are valued at each reporting date using the a mortised cost method. This involves calculating the present value of the forecast cash flows of the arrangements using the internal rate of return at the inception of the arrangements as the discount rate.

Movements in the a mortised cost values of financial RRSPs were as follows:

	2008 £m	2007 £m
At January 1	315	324
Cash paid to partners	(53)	(55)
Addition	40	—
Exchange adjustments direct to reserves	6	7
Financing charge1	26	26
Excluded from underlying profit:
Exchange adjustments 1	118	(7)
Restructuring of financial RRSP agreements and changes in forecast payments1	3	20
At December 31	455	315

¹Included in financing.

Risk management policies and hedging activities

The principal financial risks to which the Group is exposed are: foreign currency exchange rate risk; interest rate risk; and commodity price risk. The Board has approved policies for the management of these risks.

Foreign currency exchange rate risk –The Group has significant cash flows (most significantly US dollars, followed by the euro) denominated in currencies other than the functional currency of the relevant trading entity. To manage its exposures to changes in values of future foreign currency cash flows, so as to maintain relatively stable long-term foreign exchange rates on settled transactions, the Group enters into derivative forward foreign currency transactions. For accounting purposes, these derivative contracts are not designated as hedging instruments.

The Group also has exposures to the fair values of non-derivative financial instruments denominated in foreign currencies. To manage the risk of changes in these fair values, the Group enters into derivative forward foreign exchange contracts, which are designated as fair value hedges for accounting purposes.

The Group regards its interests in overseas subsidiary companies as long-term investments. The Group aims to match its translational exposures by matching the currencies of assets and liabilities. Where appropriate, foreign currency financial liabilities may be designated as hedges of the net investment.

Liquidity risk –The Group’s policy is to hold financial investments and maintain undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet its medium-term capital and funding obligations and to meet any unforeseen obligations and opportunities. The Group holds cash and short-term investments, which together with the undrawn committed facilities, enable the Group to manage its liquidity risk. The profile of the maturity of the Group’s committed facilities is discussed in the Finance Director’s review.

Credit risk –The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its financial instruments. The effective monitoring and controlling of credit risk is a key component of the Group’s risk management activities. The Group has credit policies covering both trading and financial exposures. Credit risks arising from treasury activities are managed by a central treasury function in accordance with the Group credit policy. The objective of the policy is to diversify and minimise the Group’s exposure to credit risk from its treasury activities by ensuring the Group transacts strictly with single A or higher rated financial institutions based on pre-established limits per financial institution. At the balance sheet date, there were no significant concentrations of credit risk to individual customers or counterparties. The maximum exposure to credit risk at the balance sheet date is represented by the carrying value of each financial asset, including derivative financial instruments.

Interest rate risk –The Group’s interest rate risk is primarily in relation to its fixed rate borrowings (fair value risk), floating rate borrowings, cash and cash equivalents (cash flow risk). Interest rate derivatives are used to manage the overall interest rate profile within the Group policy, which is to maintain a higher proportion of debt at floating rates of interest as a natural hedge to the net cash position. These are designated as either fair value or cash flow hedges as appropriate.

Commodity risk –The Group has exposures to the price of jet fuel and base metals arising from business operations. To minimise its cash flow exposures to changes in commodity prices, the Group enters into derivative commodity transactions. For accounting purposes, these derivative contracts are not designated as hedging instruments.

Other price risk –The Group’s cash equivalent balances represent investments in money market instruments, with a term of up to one month. The Group does not consider that these are subject to significant price risk.

Derivative financial instruments

The nominal amounts and fair values of derivative financial instruments are as follows, analysed by year of expected maturity:

							2008
	Expected maturity					Fair value
	Nominal amount £m	Within one year £m	Between one and two years £m	Between two and five years £m	After five years £m	Assets £m	Liabilities £m
Foreign exchange contracts:
Fair value hedges	(280)	—	(106)	(128)	(46)	56	—
Non-hedge accounted	9,653	1,760	2,080	5,711	102	56	(2,293)
Interest rate contracts:
Fair value hedges	848	—	130	660	58	278	—
Non-hedge accounted	65	25	22	—	18	—	(4)
Commodity contracts:
Non-hedge accounted	271	106	73	92	—	—	(89)
	10,557	1,891	2,199	6,335	132	390	(2,386)
							2007
	Expected maturity					Fair value
	Nominal amount £m	Within one year £m	Between one and two years £m	Between two and five years £m	After five years £m	Assets £m	Liabilities £m
Foreign exchange contracts:
Fair value hedges	(280)	—	—	(105)	(175)	—	(27)
Non-hedge accounted	5,168	2,135	1,816	1,217	—	433	(27)
Interest rate contracts:
Fair value hedges	751	—	—	594	157	42	—
Non-hedge accounted	74	20	18	16	20	—	(3)
Commodity contracts:
Non-hedge accounted	166	91	55	20	—	39	—
	5,879	2,246	1,889	1,742	2	514	(57)

As described above, all derivative financial instruments are entered into for risk management purposes, although these may not be designated into hedging relationships for accounting purposes.

Derivative financial instruments related to foreign exchange risks are denominated in the following currencies:

	2008 Currencies purchased forward
	Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Currencies sold forward:
Sterling	—	280	—	43	323
US dollar	10,096	—	1,189	1,097	12,382
Euro	—	—	—	614	614
Other	2	44	166	91	303
	2007 Currencies purchased forward
	Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Currencies sold forward:
Sterling	—	280	—	30	310
US dollar	5,136	—	922	431	6,489
Euro	—	—	—	497	497
Other	3	12	151	98	264

Other derivative financial instruments are denominated in the following currencies:

	2008 £m	2007 £m
Sterling	18	20
US dollar	791	470
Euro	500	500

Non-derivative financial instruments

Non-derivative financial instruments are denominated in the following currencies:

		2008
		Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Assets:
Unlisted non-current investments		46	1	4	2	53
Trade receivables and similar items		249	1,228	211	251	1,939
Other non-derivative financial assets		91	110	85	83	369
Short-term investments		—	—	—	1	1
Cash at bank and in hand		99	552	129	160	940
Short-term deposits		479	287	744	21	1,531
		964	2,178	1,173	518	4,833
Liabilities:
Borrowings	– current	(3)	(4)	(2)	(14)	(23)
	– non-current	(200)	(381)	(744)	—	(1,325)
Financial RRSPs		—	(455)	—	—	(455)
Trade payables and similar items		(763)	(979)	(250)	(272)	(2,264)
Other non-derivative financial liabilities		(144)	(151)	(58)	(77)	(430)
		(1,110)	(1,970)	(1,054)	(363)	(4,497)
		(146)	208	119	155	336
		2007
		Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Assets:
Unlisted non-current investments		46	6	2	3	57
Trade receivables and similar items		233	720	133	125	1,211
Other non-derivative financial assets		150	68	40	63	321
Short-term investments		40	—	—	—	40
Cash at bank and in hand		161	376	608	120	1,265
Short-term deposits		319	293	3	17	632
		949	1,463	786	328	3,526
Liabilities:
Borrowings	– current	(5)	(3)	(1)	(25)	(34)
	– non-current	(203)	(290)	(537)	—	(1,030)
Financial RRSPs		—	(315)	—	—	(315)
B Shares		(16)	—	—	—	(16)
Trade payables and similar items		(959)	(495)	(248)	(170)	(1,872)
Other non-derivative financial liabilities		(148)	(85)	(35)	(47)	(315)
		(1,331)	(1,188)	(821)	(242)	(3,582)
		(382)	275	(35)	86	(56)

Currency exposures

The Group's actual currency exposures after taking account of derivative foreign currency contracts, which are not designated as hedging instruments for accounting purposes are as follows:

	2008
Functional currency of Group operation	Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Sterling	—	11	(4)	1	8
US dollar	6	—	—	8	14
Other	—	—	(2)	5	3
	2007
Functional currency of Group operation	Sterling £m	US dollar £m	Euro £m	Other £m	Total £m
Sterling	—	3	—	2	5
US dollar	6	—	—	6	12
Euro	—	5	—	—	5
Other	—	4	9	12	25

Ageing beyond contractual due date

The ageing beyond contractual due date of the Group's financial assets is:

	2008
	Within terms £m	Up to three month overdue £m	Between three months and one year overdue £m	More than one year overdue £m	Total £m
Assets:
Unlisted non-current asset investments	53	—	—	—	53
Trade receivables and similar items	1,516	322	93	8	1,939
Other non-derivative financial assets	354	9	4	2	369
Other financial assets	390	—	—	—	390
Short-term investments	1	—	—	—	1
Cash at bank and in hand	940	—	—	—	940
Short-term deposits	1,531	—	—	—	1,531
	4,785	331	97	10	5,223
	2007
	Within terms £m	Up to three month overdue £m	Between three months and one year overdue £m	More than one year overdue £m	Total £m
Assets:
Unlisted non-current asset investments	57	—	—	—	57
Trade receivables and similar items	973	186	52	—	1,211
Other non-derivative financial assets	296	8	17	—	321
Other financial assets	514	—	—	—	514
Short-term investments	40	—	—	—	40
Cash at bank and in hand	1,265	—	—	—	1,265
Short-term deposits	632	—	—	—	632
	3,777	194	69	—	4,040

Contractual maturity analysis

						2008
	Gross cash flows
	Within one year £m	Between one and two years £m	Between two and five years £m	After five years £m	Discounting £m	Carrying value £m
Borrowings:
Unsecured bank loans	(20)	(2)	(1)	(3)	1	(25)
Unsecured bond issues	(69)	(200)	(1,004)	(309)	263	(1,319)
Other secured	(3)	—	—	(1)	—	(4)
	(92)	(202)	(1,005)	(313)	264	(1,348)
Other:
Trade payables and similar items	(2,255)	(5)	(4)	—	—	(2,264)
Derivative financial liabilities	(252)	(225)	(817)	(963)	(129)	(2,386)
Financial RRSPs	(56)	(177)	(127)	(198)	103	(455)
Other non-derivative financial liabilities	(408)	(21)	(1)	—	—	(430)
	(2,971)	(428)	(949)	(1,161)	(26)	(5,535)
	(3,063)	(630)	(1,954)	(1,474)	238	(6,883)
						2007
	Gross cash flows
	Within one year £m	Between one and two years £m	Between two and five years £m	After five years £m	Discounting £m	Carrying value £m
Borrowings:
Unsecured bank loans	(26)	(1)	(1)	—	—	(28)
Other unsecured	(3)	—	—	—	—	(3)
Unsecured bond issues	(56)	(56)	(773)	(432)	317	(1,000)
Secured bank loans	(1)	(1)	(26)	—	4	(24)
Other secured	(6)	(3)	—	(1)	1	(9)
	(92)	(61)	(800)	(433)	322	(1,064)
Other:
Trade payables and similar items	(1,862)	(2)	(7)	(1)	—	(1,872)
Derivative financial liabilities	(13)	(2)	(4)	20	(58)	(57)
Financial RRSPs	(38)	(34)	(201)	(141)	99	(315)
B Shares	(16)	—	—	—	—	(16)
Other non-derivative financial liabilities	(271)	(1)	(29)	(14)	—	(315)
	(2,200)	(39)	(241)	(136)	41	(2,575)
	(2,292)	(100)	(1,041)	(569)	363	(3,639)

Interest rate risk

In respect of income earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest rates and the periods in which they reprice. The value shown is the carrying amount.

		2008 Period inwhich interest rate reprices
	Effective interest rate %	Total £m	6 months or less £m	6-12 months £m	1-2 years £m	2-5 years £m	More than 5 years £m
Short-term investments 1	9.6769%	1	1	—	—	—	—
Cash at bank and in hand 2		940	940	—	—	—	—
Short-term deposits 3		1,531	1,531	—	—	—	—
Unsecured bank loans
€2.5m floating rate loan	EURIBOR +1.2	(2)	(2)	—	—	—	—
€5m floating rate loan	EURIBOR +0.5	(5)	(5)	—	—	—	—
Overdrafts 4		(9)	(9)	—	—	—	—
55m Indian Rupee Fixed Rate Loan	13.5455%	(1)	—	(1)	—	—	—
79.4m Norwegian Kroner Floating Rate Loan	NIBOR + 1.1	(8)	(8)	—	—	—	—
Effect of interest rate swaps	3.3521%	—	40	—	(22)	—	(18)
Unsecured bond issues
7 3/8% Notes 2016 £200m	7.3750%	(200)	—	—	—	—	(200)
5.84% Notes 2010 US$187m	5.8400%	(136)	—	—	(136)	—	—
Effect of interest rate swaps	USD LIBOR +1.159	—	(136)	—	136	—	—
6.38% Notes 2013 US$230m	6.3800%	(178)	—	—	—	(178)	—
Effect of interest rate swaps	USD LIBOR +1.26	—	(178)	—	—	178	—
6.55% Notes 2015 US$83m	6.5500%	(67)	—	—	—	—	(67)
Effect of interest rate swaps	USD LIBOR +1.24	—	(67)	—	—	—	67
4 1/2% Notes 2011 €750m	4.5000%	(738)	—	—	—	(738)	—
Effect of interest rate swaps	GBP LIBOR +0.911	—	(738)	—	—	738	—
Other secured
Obligations under finance leases	5.5226%	(4)	(3)	—	—	—	(1)
		1,124	1,366	(1)	(22)	—	(219)

Interest rate risk

		2007 Period inwhich interest rate reprices
	Effective interest rate %	Total £m	6 months or less £m	6-12 months £m	1-2 years £m	2-5 years £m	More than 5 years £m
Short-term investments 1	5.5913%	40	14	6	—	12	8
Cash at bank and in hand 2		1,265	1,265	—	—	—	—
Short-term deposits 3		632	632	—	—	—	—
Unsecured bank loans
€4m floating rate loan	EURIBOR +1.2	(3)	(3)	—	—	—	—
Overdrafts 4		(25)	(25)	—	—	—	—
Effect of interest rate swaps	1.2277%	—	54	—	(18)	(16)	(20)
Other unsecured
South Korean Won floating rate loan	KRW LIBOR +0.9	(2)	(2)	—	—	—	—
Other loan 2008 (interest rate nil)	0.0000%	(1)	(1)	—	—	—	—
Unsecured bond issues
7 3/8% Notes 2016 £200m	7.3750%	(200)	—	—	—	—	(200)
5.84% Notes 2010 US$187m	5.8400%	(97)	—	—	—	(97)	—
Effect of interest rate swaps	USD LIBOR +1.159	—	(97)	—	—	97	—
6.38% Notes 2013 US$230m	6.3800%	(123)	—	—	—	—	(123)
Effect of interest rate swaps	USD LIBOR +1.26	—	(123)	—	—	—	123
6.55% Notes 2015 US$83m	6.5500%	(46)	—	—	—	—	(46)
Effect of interest rate swaps	USD LIBOR +1.24	—	(46)	—	—	—	46
4 1/2% Notes 2011 €750m	4.5000%	(534)	—	—	—	(534)	—
Effect of interest rate swaps	GBP LIBOR +0.911	—	(534)	—	—	534	—
Secured bank loans
US$ floating rate loan	USD LIBOR +0.53	(24)	(24)	—	—	—	—
Other secured
Obligations under finance leases	6.0183%	(9)	(2)	(3)	(3)	—	(1)
		873	1,108	3	(21)	(4)	(213)

¹ Interest on the short-term investments are at fixed rates.

² Cash at bank and in hand comprises bank balances and demand deposits and earns interest at rates based on daily bank deposit rates.

³ Short-term deposits are deposits placed on money markets for periods up to three months and earn interest at the respective short-term deposit rates.

⁴ Overdrafts bear interest at rates linked to applicable LIBOR rates that fluctuate in accordance with local practice.

Some of the Group’s borrowings are subject to the Group meeting certain obligations, including customary financial covenants. If the Group fails to meet its obligations these arrangements give rights to the lenders, upon agreement, to accelerate repayment of the facilities. There are no rating triggers contained in any of the Group’s facilities that could require the Group to accelerate or repay any facility for a given movement in the Group’s credit rating.

In addition, the Group has undrawn committed borrowing facilities available as follows:

	2008 £m	2007 £m
Expiring within one year	—	—
Expiring in one to two years	—	—
Expiring thereafter	650	450
	650	450

Sensitivity analysis

The Group is exposed to a number of foreign currencies. The most significant transactional currency exposures are US dollar with sterling and US dollar with euro.

At December 31, 2008 if sterling had weakened ten per cent against the US dollar with all other variables held constant, profit after tax for the year and equity would have been £890m lower (2007 £329m). If sterling had strengthened ten per cent against the US dollar with all other variables held constant, profit after tax for the year and equity would have been £728m higher (2007 £269m). There would have been no change to the underlying results that exclude unrealised gains and losses on foreign exchange derivatives.

At December 31, 2008 if the euro had weakened ten per cent against the US dollar with all other variables held constant, profit after tax and equity for the year would have been £102m lower (2007 £73m). If the euro had strengthened ten per cent against the US dollar with all other variables held constant, profit after tax for the year and equity would have been £84m higher (2007 £60m). There would have been no change to the underlying results that exclude unrealised gains and losses on foreign exchange derivatives.

At December 31, 2008 if the price of commodities had been ten per cent lower, with all other variables remaining constant, profit after tax for the year and equity would have been £13m lower (2007 £16m), arising mainly as the result of lower fair value gains on derivative contracts. If the price of commodities had been ten per cent higher, with all other variables remaining constant, profit after tax and equity would have been £13m higher (2007 £16m), arising mainly as the result of higher fair value gains on derivatives. There would have been no change to the underlying results that exclude unrealised gains and losses on commodity derivatives.

At December 31, 2008 the Group had no material sensitivity to changes in interest rates on that date. The main interest rate sensitivity for the Group arises as a result of the gross up of net cash and this is mitigated as described under the interest rate risk management policies.

B Shares and payments to shareholders

From July 2004 to July 2008, the Company issued non-cumulative redeemable convertible preference shares (B Shares) as an alternative to paying a cash dividend. B Shares in respect of a year are issued in the following year. Shareholders were able to redeem any number of their B Shares for cash or convert them into ordinary shares. Any B Shares retained attracted a dividend of 75 per cent of LIBOR on the 0.1p nominal value of each share, paid on a twice-yearly basis, and had limited voting rights. In certain circumstances the Company had the option to compulsorily redeem the B Shares, at any time, if the aggregate number of B Shares in issue was less than ten per cent of the aggregate number of B Shares issued, or on the acquisition or capital restructuring of the Company. The Company exercised this option in September 2008 and redeemed all B Shares then in issue.

Since January 2009, following approval by shareholders at the 2008 Annual General Meeting, the Company has issued non-cumulative redeemable preference shares (C Shares) as an alternative to paying a cash dividend. The only significant difference is that C Shares, unlike B Shares, will not carry the right to convert into ordinary shares.

Movements in the B Shares during the year were as follows:

	2008		2007
	B Shares of 0.1p each Millions	Nominal value £m	B Shares of 0.1p each Millions	Nominal value £m
Authorised
At January 1, and December 31	1,000,000	1,000	1,000,000	1,000
Issued and fully paid
At January 1	15,859	16	12,616	13
Issued	236,740	237	172,006	172
Converted into ordinary shares	(52,524)	(53)	(71,819)	(72)
Redeemed	(200,075)	(200)	(96,944)	(97)
At December 31	—	—	15,859	16

Payments to shareholders in respect of the year represent the value of B Shares or C Shares to be issued in respect of the results for the year. Issues of B Shares and C Shares were declared as follows:

	2008 C Shares		2007 B Shares
	Pence per share	£m	Pence per share	£m
Interim	5.72	105	4.04	73
Final	8.58	158	8.96	164
	14.30	263	13.00	237