**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 20-F**

 

| **o**                                 | **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                         |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |                                                                                                                                                                                                                                        |
| **ý**                            | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                   |
|                                  |                                                                                                                                                                                                                                        |
|                                  | **For  the fiscal year ended December 28, 2002.**                                                                                                                                                                                      |
|                                  |
| **o**                                 | **TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                              |
|                                  |                                                                                                                                                                                                                                        |
|                                  | **For  the transition period from                    to                  ** |
|                                  |
| **Commission file number: 333-14044** |

 

**UNITEDBISCUITS FINANCE PLC**

| (Additional  Registrant)                                                                       |
|------------------------------------------------------------------------------------------------|
|                                                                                           |
| **Regentrealm  Limited**                                                                       |
| (Exact names of Registrants as specified in  their charters)                                   |
|                                                                                           |   |   |
| ***ENGLAND AND WALES***                                                                        |
| *(Jurisdiction  of incorporation or organization)*                                             |
|                                                                                           |   |   |
| ***HAYES PARK, HAYES  END ROAD, HAYES,  MIDDLESEX UB4 8EE, UNITED KINGDOM***                   |
| *(Address  of principal executive offices)*                                                    |
|                                                                                           |   |   |
| *Securities  registered or to be registered pursuant to Section 12(b) of the Act:*             |
| **Title of each class**                                                                        |   | **Name of each exchange on which registered** |
| **None**                                                                                       |   | **None** |
|                                                                                           |   |   |
| *Securities  registered or to be registered pursuant to Section 12(g) of the Act:*             |
| ***None***                                                                                     |
| *(Title  of Class)*                                                                            |
|                                                                                           |
| *Securities  for which there is a reporting obligation pursuant to Section 15(d) of the  Act:* |
| ***10*****3****/****4****% Senior Subordinated Notes due 2011**                                |
| ***10*****5****/****8****% Senior Subordinated Notes due 2011**                                |
| ***Guarantee of 10*****3****/****4****% Senior Subordinated Notes due 2011**                   |
| ***Guarantee of 10*****5****/****8****% Senior Subordinated Notes due 2011**                   |
| *(Title  of Class)*                                                                            |

 

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by the annual report:

**Ordinary shares, nominal value £1.00 per share:  2,010,002 shares**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

| ý  Yes |   | o  No |
|-------------|--------|-------|

 

Indicate by check mark whichfinancial statement item the registrants have elected to follow.

| o  Item 17 |   | ý  Item 18 |
|------------|--------|-----------------|

 

----

 

**TABLEOF CONTENTS**

 
| PART I                |
|-----------------------|
|                  |   |
| ITEM 1.               | Identity of Directors,  Senior Management and Advisors |
|                  |   |
| ITEM 2.               | Offer Statistics and  Expected Timetable |
|                  |   |
| ITEM 3.               | Key Information |
|                  |   |
| ITEM 4.               | Information on the  Company |
|                  |   |
| ITEM 5.               | Operating and Financial  Review and Prospects |
|                  |   |
| ITEM 6.               | Directors, Senior  Management and Employees |
|                  |   |
| ITEM 7.               | Major Shareholders and  Related Party Transactions |
|                  |   |
| ITEM 8.               | Financial Information |
|                  |   |
| ITEM 9.               | The Offer and Listing |
|                  |   |
| ITEM 10.              | Additional  Information |
|                  |   |
| ITEM 11.              | Quantitative and  Qualitative Disclosures About Market Risk |
|                  |   |
| ITEM 12.              | Description of  Securities Other than Equity Securities |
|                  |   |
| PART II               |
|                  |   |
| ITEM 13.              | Defaults, Dividend  Arrearages and Delinquencies |
|                  |   |
| ITEM 14.              | Material  Modifications to the Rights of Security Holders and Use of Proceeds |
|                  |   |
| ITEM 15.              | Controls and  Procedures |
|                  |   |
| ITEM 16.              | [Reserved] |
|                  |   |
| PART III              |
|                  |   |
| ITEM 17.              | Financial Statements |
|                  |   |
| ITEM 18.              | Financial  Statements |
|                  |   |
| ITEM 19.              | Exhibits |
|                  |   |
| Signatures            |
|                  |   |
| Certifications        |
|                  |   |
| FINANCIAL  STATEMENTS |

 

ii

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**BASIS OF PRESENTATION OF INFORMATION**

 

**United Biscuits Finance plc and Regentrealm Limited**

 

References in this annualreport to “UB Finance” are to United Biscuits Finance plc and “Regentrealm” areto Regentrealm Limited, a direct wholly owned subsidiary of UB Finance.  Unless the context otherwise requires, “we,”“us,” “our” and the “company” refer collectively to UB Finance and itssubsidiaries.

 

In April 2000, funds advisedor managed by Cinven Limited (“Cinven”), Paribas Affaires Industrielles (nowPAI management) (“PAI”), DB Capital Partners (“DB Capital”) and Nabisco(collectively, the “Equity Sponsors”) acquired United Biscuits (Holdings) plcthrough a public tender offer and subsequently renamed the company UnitedBiscuits (Holdings) Limited (“United Biscuits”). In connection with thisacquisition, certain entities, including UB Finance and Regentrealm, wereformed as financing vehicles. UB Finance, through its subsidiaries, holds 100%of the equity of United Biscuits, which acts as the holding company of ouroperating subsidiaries.

 

In February 2003, certainsenior members of the management group of DB Capital formed MidOcean Partners,LP (“MidOcean”) for the purpose of acquiring a controlling interest in certaininvestments in Deutsche Bank’s private equity investment portfolio, includingDB Capital’s minority interest in the company. Deutsche Bank has a 20percent interest in MidOcean.

 

**Accounting Periods and Financial Information**

 

We generally present ourfinancial information based on 13 periods of four calendar weeks. As a result,our fiscal year consists of 52 weeks, our first fiscal quarter consists of fourperiods (16 weeks) and our remaining three fiscal quarters each consistsof three periods (12 weeks). Every five or six years, we lengthen thefinal period of our fiscal year to five weeks, in which event our fourthquarter consists of 13 weeks and our fiscal year consists of 53 weeks. Our nextfiscal year, covering 2003, will consist of 53 weeks and will end on January 3,2004.

 

Unless the contextotherwise indicates, financial information and data with respect to ourbusiness for:

 

•                  2002means the 52-week period ended December 28, 2002;

 

•                  2001means the 52-week period ended December 29, 2001; and

 

•                  2000means the 52-week period ended December 30, 2000.

 

The financial statementsof UB Finance and Regentrealm included in this annual report have been preparedin accordance with the accounting principles generally accepted in the UnitedKingdom (“U.K. GAAP”) which differ in certain respects from the accountingprinciples generally accepted in the United States (“U.S. GAAP”). The principaldifferences between U.K. GAAP and U.S. GAAP applicable to UB Finance andRegentrealm are summarized in Note 27 of Notes to the Financial Statementsincluded elsewhere in this annual report.

 

Our financial statementsand other financial information included in this annual report are reported inpounds sterling and all references to “pound(s) sterling” or “£” are to thelawful currency of the United Kingdom.

 

1

----

 

**Market Share Information**

 

The market, industry andproduct segment data contained in this annual report have been taken fromindustry and other sources available to us and in some cases adjusted based onmanagement’s industry and other knowledge. All market share information in thisannual report is based on the retail value of the referenced entity’s share ofthe total retail sales of the referenced market for the calendar year 2002. Wehave not independently verified any third-party market information. Similarly,while we believe our internal estimates are reliable, they have not beenverified by any independent sources and we cannot assure you as to theiraccuracy.

 

**Cautionary Statement Regarding Forward-Looking Information**

 

This annual reportincludes statements that are, or may deemed to be, “forward-looking statements”within the meaning of U.S. securities laws. The terms “anticipates,” “expects,”“may,” “will,” “should” and other similar expressions identify forward-lookingstatements. These statements appear in a number of places throughout thisannual report and include statements regarding our intentions, beliefs orcurrent expectations concerning, among other things, our results of operations,financial condition, liquidity, prospects, growth, strategies and theindustries in which we operate.

 

By their nature,forward-looking statements involve risks and uncertainties because they relateto events and depend on circumstances that may or may not occur in the future.Forward-looking statements are not guarantees of future performance and ouractual results of operations, financial condition and liquidity, and the developmentof the industries in which we operate may differ materially from those made inor suggested by the forward-looking statements contained in this annual report.Important factors that could cause those differences include, but are notlimited to:

 

•                  oursubstantial leverage and our ability to meet our debt obligations;

 

•                  ourability to achieve expected cost savings through operating efficiencies andprocurement savings;

 

•                  areduction in overhead and manufacturing rationalization or otherwise;

 

•                  ourability to generate growth or profitable growth;

 

•                  ourability to successfully integrate our acquisitions and to complete our internalreorganization initiatives;

 

•                  therates of growth of the European biscuit and snack markets in which we compete;

 

•                  ourability to develop and introduce new products successfully;

 

•                  ourexposure to currency fluctuations;

 

•                  increasedcompetition from other companies in our industry and our ability to retain andincrease our market shares; and

 

•                  generallocal and global economic conditions.

 

2

----

 

We urge you to read Item3D. “Key Information 3⁄4 Risk Factors,”Item 4. “Information on the Company” and Item 5. “Operating and FinancialReview and Prospects” for a more complete discussion of the factors that couldaffect our future performance and the industries in which we operate.

 

**PART I**

 

**ITEM 1****.        IDENTITYOF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS**

 

Not applicable.

 

**ITEM 2****.        OFFERSTATISTICS AND EXPECTED TIMETABLE**

 

Not applicable.

 

**ITEM 3****.        KEYINFORMATION**

 

**A.            Selected Financial Data**

 

Thefollowing tables set forth selected historical consolidated financialinformation for:

 

•                  UnitedBiscuits, our predecessor, as of and for the fiscal years endedJanuary 2, 1999 and January 1, 2000 and for the 15-weekperiod ended April 14, 2000, the date United Biscuits was acquired bya subsidiary of UB Finance;

 

•                  UBFinance as of December 30, 2000 and for the fiscal period fromMarch 10, 2000 (inception) to December 30, 2000 and as ofand for the fiscal years ended December 29, 2001 andDecember 28, 2002; and

 

•                  Regentrealmas of January 1, 2000 and as of and for the fiscal years endedDecember 30, 2000, December 29, 2001 andDecember 28, 2002.

 

Thedata as of and for the fiscal years ended January 2, 1999 andJanuary 1, 2000 for United Biscuits have been extracted or derivedfrom audited consolidated financial statements of United Biscuits that are notincluded in this annual report. The data as of and for the 15-week period endedApril 14, 2000 for United Biscuits have been extracted or derivedfrom the audited consolidated financial statements of United Biscuits includedelsewhere in this annual report. The data as of December 30, 2000 forUB Finance and as of January 1, 2000 and December 30, 2000 for Regentrealm havebeen extracted or derived from audited consolidated financial statements of UBFinance and Regentrealm respectively, that are not included in this annualreport. The data for the period from March 10, 2000 (inception) toDecember 30, 2000, and the data as of and for the fiscal years endedDecember 29, 2001 and December 28, 2002 for UB Finance andthe data as of January 1, 2000 and as of and for the fiscal yearsended December 30, 2000, December 29, 2001 andDecember 28, 2002 for Regentrealm have been extracted or derived fromthe audited consolidated financial statements of UB Finance and Regentrealm,respectively, included elsewhere in this annual report. All of theseconsolidated financial statements have been audited by Ernst & Young LLP,independent auditors, or its predecessor firm, Ernst & Young.

 

Youshould read the following selected financial information in conjunction withthe information contained in Item 5. “Operating and Financial Review andProspects” and the consolidated financial statements of UB Finance andRegentrealm and the related notes thereto included elsewhere in this annualreport.

 

3

----

 

**Selected Financial Data**

 
|                                                                        | **United  Biscuits (Holdings) Limited** |                                   | **United  Biscuits Finance plc** |                                  |
|-----------------------------------------------------------------------------|-----------------------------------------|----------------------------------------|----------------------------------|---------------------------------------|
|                                                                        |                                    | **52 weeks   ended  January 2,  1999** |                             | **52 weeks  ended  January 1,  2000** |   | **15 weeks  ended   April 14,  2000   Restated(5)** |   | **Period  from   March 10,  2000  (inception) to  December 30,  2000   Restated(5)** |   | **52 weeks  ended   December 29,  2001  Restated(5)** |   | **52 weeks  ended  December 28,  2002** |   |
|                                                                        |                                    | **(****£ million)**               | ** **                       |
| **Amounts  in accordance with U.K. GAAP:**                             |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| **Profit and Loss Account Data**                                            |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Turnover  (net sales)                                                       |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                                      |                                    | 1,118.0                                |                             | 1,137.9                               |   | 282.3 |   | 880.7 |   | 1,262.8 |   | 1,308.3 |   |
| Discontinued  operations                                                    |                                    | 567.2                                  |                             | 473.3                                 |   | 46.2 |   | — |   | — |   | — |   |
|                                                                        |                                    | 1,685.2                                |                             | 1,611.2                               |   | 328.5 |   | 880.7 |   | 1,262.8 |   | 1,308.3 |   |
| Group  operating profit before goodwill amortization and exceptional items: |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                                      |                                    | 80.9                                   |                             | 84.9                                  |   | 7.6 |   | 85.5 |   | 113.6 |   | 134.2 |   |
| Discontinued                                                                |                                    | 41.1                                   |                             | 24.2                                  |   | 0.8 |   | — |   | — |   | — |   |
|                                                                        |                                    | 122.0                                  |                             | 109.1                                 |   | 8.4 |   | 85.5 |   | 113.6 |   | 134.2 |   |
| Goodwill  amortization                                                      |                                    | (1.2                                   | )                                | (2.4                                  | ) | (0.8 | ) | (21.9 | ) | (36.4 | ) | (40.7 | ) |
| Operating  exceptional items                                                |                                    | (29.0                                  | )                                | (44.4                                 | ) | (10.0 | ) | (16.8 | ) | (42.3 | ) | (35.4 | ) |
| Group  operating profit/(loss)                                              |                                    | 91.8                                   |                             | 62.3                                  |   | (2.4 | ) | 46.8 |   | 34.9 |   | 58.1 |   |
| Share  of operating profit in joint ventures                                |                                    | 0.3                                    |                             | 2.0                                   |   | 1.4 |   | 2.2 |   | 1.2 |   | 0.6 |   |
| Operating  profit/(loss)                                                    |                                    | 92.1                                   |                             | 64.3                                  |   | (1.0 | ) | 49.0 |   | 36.1 |   | 58.7 |   |
| Non-operating  exceptional items                                            |                                    | (0.6                                   | )                                | (90.2                                 | ) | (9.2 | ) | (0.6 | ) | (8.9 | ) | 11.1 |   |
| Profit/(loss)  before interest                                              |                                    | 91.5                                   |                             | (25.9                                 | ) | (10.2 | ) | 48.4 |   | 27.2 |   | 69.8 |   |
| Interest                                                                    |                                    | (12.2                                  | )                                | (22.8                                 | ) | (3.8 | ) | (103.3 | ) | (154.9 | ) | (142.8 | ) |
| Profit/(loss)  before taxation                                              |                                    | 79.3                                   |                             | (48.7                                 | ) | (14.0 | ) | (54.9 | ) | (127.7 | ) | (73.0 | ) |
| Taxation                                                                    |                                    | (20.7                                  | )                                | (11.4                                 | ) | (8.3 | ) | (40.1 | ) | 28.2 |   | 26.4 |   |
| Minority  interests                                                         |                                    | (0.4                                   | )                                | 0.3                                   |   | — |   | — |   | — |   | — |   |
| Net  profit/(loss) for the period                                           |                                    | 58.2                                   |                             | (59.8                                 | ) | (22.3 | ) | (95.0 | ) | (99.5 | ) | (46.6 | ) |
| **Other  Financial Data:**                                                  |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Adjusted  EBITDA(1)                                                         |                                    | 122.2                                  |                             | 129.9                                 |   | 21.3 |   | 118.3 |   | 166.6 |   | 188.4 |   |
| Capital  expenditure:                                                       |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                                      |                                    | 69.0                                   |                             | 77.6                                  |   | 11.9 |   | 43.2 |   | 48.3 |   | 59.2 |   |
| Total  operations                                                           |                                    | 94.2                                   |                             | 91.6                                  |   | 12.6 |   | 43.2 |   | 48.3 |   | 59.2 |   |
| **Balance  Sheet Data (at end of period)**:                                 |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Cash  and short-term deposits                                               |                                    | 60.0                                   |                             | 204.9                                 |   |   |   | 80.7 |   | 36.8 |   | 21.2 |   |
| Tangible  fixed assets                                                      |                                    | 592.6                                  |                             | 510.8                                 |   |   |   | 462.4 |   | 442.5 |   | 438.9 |   |
| Intangible  fixed assets                                                    |                                    | 45.5                                   |                             | 51.4                                  |   |   |   | 711.0 |   | 675.8 |   | 635.1 |   |
| Net  current (liabilities)/assets                                           |                                    | (5.7                                   | )                                | 163.4                                 |   |   |   | 69.3 |   | 94.7 |   | 101.0 |   |
| Total  assets                                                               |                                    | 1,146.6                                |                             | 1,153.3                               |   |   |   | 1,758.9 |   | 1,568.2 |   | 1,488.1 |   |
| Total  debt (2)                                                             |                                    | 244.7                                  |                             | 304.5                                 |   |   |   | 806.2 |   | 725.8 |   | 663.5 |   |
| Net  debt (3)                                                               |                                    | 184.7                                  |                             | 99.6                                  |   |   |   | 743.8 |   | 713.1 |   | 663.0 |   |
| Ordinary  share capital                                                     |                                    | 136.8                                  |                             | 137.4                                 |   |   |   | 2.0 |   | 2.0 |   | 2.0 |   |
| Shareholders’  funds/(deficit)                                         |                                    | 385.8                                  |                             | 471.2                                 |   |   |   | (106.4 | ) | (205.0 | ) | (250.8 | ) |
|                                                                        |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| **Amounts  in accordance with U.S. GAAP:**                             |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| **Profit  and Loss Account Data:**                                          |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Net  sales                                                                  |                                    |                                   |                             | 1,305.3                               |   | 328.5 |   | 880.7 |   | 1,262.8 |   | 1,151.7 |   |
| Operating  income/(loss)                                                    |                                    |                                   |                             | 25.1                                  |   | (8.3 | ) | 38.6 |   | 39.3 |   | 91.7 |   |
| Income/(loss)  from continuing operations                                   |                                    |                                   |                             | 77.5                                  |   | (9.4 | ) | (58.6 | ) | (103.9 | ) | (8.7 | ) |
| Net  income/(loss) for the period                                           |                                    |                                   |                             | 84.4                                  |   | (10.4 | ) | (57.6 | ) | (102.7 | ) | (12.9 | ) |
| **Balance  Sheet Data (at end of period):**                                 |                                    |                                   |                             |                                  |   |   |   |   |   |   |   |   |   |
| Total  assets                                                               |                                    |                                   |                             | 1,291.5                               |   |   |   | 1,808.0 |   | 1,628.3 |   | 1,579.2 |   |
| Net  current assets                                                         |                                    |                                   |                             | 188.5                                 |   |   |   | 124.4 |   | 151.3 |   | 152.1 |   |
| Shareholders’  equity/(deficit)                                        |                                    |                                   |                             | 629.9                                 |   |   |   | (68.9 | ) | (175.0 | ) | (188.2 | ) |

 

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Footnotesappear on following page.

 

4

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|                                                                       |   | **Regentrealm  Limited**                              |       |
|----------------------------------------------------------------------------|--------|-------------------------------------------------------|------------|
|                                                                       |   | **52 weeks  ended  December 30,  2000   Restated(5)** |       | **52 weeks   ended   December 29,  2001  Restated(5)** |   | **52 weeks   ended  December 28,  2002** |   |
|                                                                       |   |                                                  | ** ** | **(£  million)** | ** ** |   | ** ** |
| **Amounts in accordance with U.K. GAAP**                                   |   |                                                  |       |   |   |   |   |
| **Profit and Loss Account Data**                                           |   |                                                  |       |   |   |   |   |
| Turnover-continuing  operations:                                           |   | 880.7                                                 |       | 1,262.8 |   | 1,308.3 |   |
|                                                                       |   |                                                  |       |   |   |   |   |
| Group  operating profit before goodwill amortization and exceptional items |   | 85.5                                                  |       | 113.6 |   | 134.2 |   |
| Goodwill  amortization                                                     |   | (21.9                                                 | )          | (36.4 | ) | (40.7 | ) |
| Operating  exceptional items                                               |   | (16.8                                                 | )          | (42.3 | ) | (35.4 | ) |
| Group  operating profit                                                    |   | 46.8                                                  |       | 34.9 |   | 58.1 |   |
| Share  of operating profit in joint ventures                               |   | 2.2                                                   |       | 1.2 |   | 0.6 |   |
| Operating  profit                                                          |   | 49.0                                                  |       | 36.1 |   | 58.7 |   |
| Non-operating  exceptional items                                           |   | (0.6                                                  | )          | (8.9 | ) | 11.1 |   |
| Profit  before interest                                                    |   | 48.4                                                  |       | 27.2 |   | 69.8 |   |
| Interest                                                                   |   | (97.8                                                 | )          | (149.3 | ) | (141.8 | ) |
| Loss  before taxation                                                      |   | (49.4                                                 | )          | (122.1 | ) | (72.0 | ) |
| Taxation                                                                   |   | (40.1                                                 | )          | 28.2 |   | 26.4 |   |
| Loss  for the period                                                       |   | (89.5                                                 | )          | (93.9 | ) | (45.6 | ) |
|                                                                       |   |                                                  |       |   |   |   |   |
| **Other  Financial Data:**                                                 |   |                                                  |       |   |   |   |   |
| Capital  expenditure-total operations                                      |   | 43.2                                                  |       | 48.3 |   | 59.2 |   |
|                                                                       |   |                                                  |       |   |   |   |   |
| **Balance  Sheet Data (at end of period):(4)**                             |   |                                                  |       |   |   |   |   |
| Cash  and short-term deposits                                              |   | 80.7                                                  |       | 36.8 |   | 21.2 |   |
| Tangible  fixed assets                                                     |   | 462.4                                                 |       | 442.5 |   | 438.9 |   |
| Intangible  fixed assets                                                   |   | 711.0                                                 |       | 675.8 |   | 635.1 |   |
| Net  current assets                                                        |   | 115.6                                                 |       | 119.2 |   | 125.3 |   |
| Total  assets                                                              |   | 1,795.5                                               |       | 1,588.5 |   | 1,508.4 |   |
| Total  debt(2)                                                             |   | 477.8                                                 |       | 517.8 |   | 447.8 |   |
| Net  debt(3)                                                               |   | 410.7                                                 |       | 495.7 |   | 439.0 |   |
| Ordinary  share capital                                                    |   | 2.0                                                   |       | 2.0 |   | 2.0 |   |
| Shareholders’  deficit                                                |   | (101.1                                                | )          | (193.9 | ) | (238.7 | ) |
|                                                                       |   |                                                  |       |   |   |   |   |
| **Amounts  in accordance with U.S. GAAP:**                                 |   |                                                  |       |   |   |   |   |
| **Profit  and Loss Account Data:**                                         |   |                                                  |       |   |   |   |   |
| Net  sales                                                                 |   | 880.7                                                 |       | 1,262.8 |   | 1,151.7 |   |
| Operating  income                                                          |   | 38.6                                                  |       | 39.3 |   | 91.7 |   |
| Loss  from continuing operations                                           |   | (53.1                                                 | )          | (98.3 | ) | (7.7 | ) |
| Loss  for the period                                                       |   | (52.1                                                 | )          | (97.1 | ) | (11.9 | ) |
| **Balance  Sheet Data (at end of period):**                                |   |                                                  |       |   |   |   |   |
| Total  assets                                                              |   | 1,841.2                                               |       | 1,639.2 |   | 1,591.2 |   |
| Net  current assets                                                        |   | 167.3                                                 |       | 167.3 |   | 169.1 |   |
| Shareholders’  deficit                                                |   | (63.4                                                 | )          | (163.9 | ) | (176.1 | ) |

 

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(1)                                  EBITDA represents earnings before interest, tax,depreciation and amortization. Adjusted EBITDA represents EBITDA fromcontinuing operations, excluding share of profit of joint ventures andexceptional items. While EBITDA should not be considered as a substitute foroperating profit and cash flows from operations, we believe it provides usefulinformation regarding our ability to meet future debt service requirements. TheEBITDA measures presented may not be comparable to similarly titled measuresused by other companies.

(2)                                  Totaldebt comprises long-term debt plus short-term debt but does not include anyamount due to a parent company.

(3)                                  Netdebt comprises total debt less cash and short-term deposits plus unamortizeddebt issuance costs. Under U.K. GAAP, debt issuance costs are deducted from therelated debt amounts for the purposes of balance sheet presentation and areamortized over the life of the debt.

(4)                                  AtJanuary 1, 2000, Regentrealm’s balance sheet comprised an amount due fromUnited Biscuits Finance plc of £1 and share capital of £1.

(5)                                  Theamounts for 2000 and 2001 for United Biscuits Finance plc and RegentrealmLimited have been restated to reflect the adoption of FRS 19 (see Note 2 ofNotes to the Financial Statements). The financial information relating toPredecessor has not been restated for FRS 19 as it is not practical.

 

5

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**Non-GAAP Financial Data**

 

EBITDA represents earnings beforeinterest, tax, depreciation and amortization. Adjusted EBITDA represents EBITDAfrom continuing operations, excluding share of profit of joint ventures andexceptional items. While EBITDA should not be considered as a substitute foroperating profit and cash flows from operations, we believe it provides usefulinformation regarding our ability to meet future debt service requirements. TheEBITDA measures presented may not be comparable to similarly titled measuresused by other companies.

 
|                                                     |   | **United  Biscuits (Holdings) Limited** |   | **United  Biscuits Finance plc**       |       |
|----------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|------------|
|                                                     |   | **52 weeks  ended   January 2,  1999**  |   | **52 weeks  ended   January 1,  2000** |       | **15 weeks  ended   April 14,  2000   Restated (5)** |   | **Period  from   March 10, 2000  (inception) to  December 30,   2000  Restated (5)** |   | **52 weeks   ended  December 29,  2001   Restated (5)** |   | **52 weeks ended   December 28, 2002** |   |
|                                                     |   |                                    |   |                                   | ** ** | **(£ million  )** | ** ** |   | ** ** |   | ** ** |
| **Reconciliation  of Adjusted EBITDA to U.K. GAAP data** |   |                                    |   |                                   |       |   |   |   |   |   |   |   |   |
| Profit/(loss)  before interest-continuing operations     |   | 56.7                                    |   | 46.0                                   |       | (12.1 | ) | 46.6 |   | 26.5 |   | 69.8 |   |
| Depreciation                                             |   | 41.3                                    |   | 45.0                                   |       | 13.7 |   | 32.8 |   | 53.0 |   | 54.2 |   |
| Goodwill  amortization                                   |   | 1.2                                     |   | 2.4                                    |       | 0.8 |   | 21.9 |   | 36.4 |   | 40.7 |   |
| EBITDA                                                   |   | 99.2                                    |   | 93.4                                   |       | 2.4 |   | 101.3 |   | 115.9 |   | 164.7 |   |
| Non-operating  exceptionals                              |   | 0.6                                     |   | 0.2                                    |       | 9.0 |   | 0.6 |   | 8.9 |   | (11.1 | ) |
| Operating  exceptionals                                  |   | 22.7                                    |   | 36.7                                   |       | 10.0 |   | 16.8 |   | 42.3 |   | 35.4 |   |
| Share  of profit of joint ventures                       |   | (0.3                                    | )      | (0.4                                   | )          | (0.1 | ) | (0.4 | ) | (0.5 | ) | (0.6 | ) |
| Adjusted  EBITDA                                         |   | 122.2                                   |   | 129.9                                  |       | 21.3 |   | 118.3 |   | 166.6 |   | 188.4 |   |

 

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Footnoteappears on the previous page

 

**Currency and Exchange Rate Data**

 

The following tableprovides, for the periods indicated, information concerning the exchange ratefor pounds sterling expressed in U.S. dollars per £1.00 based on the noonbuying rate in the City of New York for cable transfers as certified forcustoms purposes by the Federal Reserve Bank of New York.

 
| **Year Ended December 31,** |   | **Period   End*** |   | **Average  Rate**** |   | **High** |   | **Low** |   |
|-----------------------------|--------|-------------------|--------|---------------------|--------|----------|--------|---------|--------|
| 1998                        |   | 1.66              |   | 1.66                |   | 1.72     |   | 1.61    |   |
| 1999                        |   | 1.62              |   | 1.61                |   | 1.68     |   | 1.55    |   |
| 2000                        |   | 1.50              |   | 1.51                |   | 1.65     |   | 1.40    |   |
| 2001                        |   | 1.45              |   | 1.44                |   | 1.50     |   | 1.37    |   |
| 2002                        |   | 1.60              |   | 1.51                |   | 1.61     |   | 1.41    |   |

 

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*                                         Representsthe noon buying rate on the last business day of the period.

**                                  Theaverage of the noon buying rates on the last business day of each month duringthe applicable period.

 

The following tableprovides, for the periods indicated, the high and low noon buying rates forpounds sterling expressed in U.S. dollars per £1.00.

 
| **Month and Year**             |   | **High** |   | **Low** |   |
|--------------------------------|--------|----------|--------|---------|--------|
| September 2002                 |   | $        | 1.57   |    | $      | 1.53 |   |
| October 2002                   |   | 1.58     |   | 1.54    |   |
| November  2002                 |   | 1.60     |   | 1.54    |   |
| December  2002                 |   | 1.61     |   | 1.55    |   |
| January  2003                  |   | 1.66     |   | 1.59    |   |
| February  2003                 |   | 1.65     |   | 1.57    |   |
| March  (through March 17) 2003 |   | 1.61     |   | 1.57    |   |
|                                |        |          |        |         |        |  |  |

 

We make no representationthat any amount translated in this annual report could have been or could beconverted at any of the rates indicated above or at any other rates.

6

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**B.****                                    Capitalizationand Indebtedness**

 

Notapplicable.

 

**C.****                                    Reasons for theOffer and Use of Proceeds**

 

Notapplicable.

 

**D.****                                    Risk Factors**

* *

*Our business, and an investment inour company, is subject to a number of significant risks, including thosedescribed below. These risks are not the only ones that we face. Additionalrisks not presently known to us or that we currently deem immaterial may also impairour business operations.*

 

**SignificantCompetition — We offer products in highly competitive markets, and our failureto compete effectively might adversely affect our results of operations.**

 

The biscuit and snack industries and the markets forour products are highly competitive. We compete primarily on the strength ofour brands, the quality of our products, product innovation and price. Ourability to compete effectively requires continuous efforts in sales andmarketing of our existing products, development of new products and costrationalization. As we cannot predict the actions of our competitors or theireffect on our ability to market and sell our products, the competitiveenvironment in our markets may have a negative impact on our future businessperformance. For further information on competition and our competitors in themarkets and market segments in which we compete, see Item 4.B. “Information onthe Company — Business Overview — Competition.”

** **

**Consolidationof Grocery Retailers in Our Markets — Our results of operations may beadversely affected by the consolidation of grocery retailers.**

 

There is an increasing trend towards consolidation inthe retail grocery industry in the United Kingdom and the rest of WesternEurope. These consolidations have concentrated sales channels, increased thebargaining power of the major grocery retailers and intensified pricecompetition among these retailers. As a result, grocery retailers andmanufacturers frequently engage in pricing campaigns such as “Everyday LowPrice” and “Buy One Get One Free” in order to promote their products and gainmarket share. These campaigns, which historically have adversely affected ourresults of operations, are likely to continue and adversely affect our results.

** **

**Risks ofBusiness Strategy — Our ability to improve our cash flow and profitabilitydepends on a number of factors, including the successful implementation of ourbusiness strategy.**

 

Our business strategy is to increase our cash flow andprofitability by implementing initiatives aimed at achieving cost savings andgenerating profitable growth. If we are unsuccessful in implementing ourbusiness strategy and achieving cost savings, generating growth or increasingour cash flow or profitability, we may be unable to fulfill our obligationswith respect to our 103⁄4% Senior Subordinated Notes due 2011 and 10***5/******8***% Senior Subordinated Notes due 2011(collectively, the “Notes”) or to comply with the financial covenants under oursenior credit facility.

 

7

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In order to realize expected cost savings, we mustsuccessfully reduce our overhead costs, improve our procurement process,realize operating efficiencies and rationalize our manufacturing capacity. Thecost of these plans in 2002 was approximately £67 million and we expect toincur similar costs in 2003 to achieve overall cost savings. Our ability togenerate growth will depend on our successful promotion of our products, ourability to develop new innovations and, ultimately, customer demand for andacceptance of our products. The success of our efforts to implement ourstrategy to accomplish these goals could be affected by a number of factorsbeyond our control, such as operating difficulties, increased operating costs, personnelturnover, competitors and customers, delays in implementing initiatives andgeneral economic or industry conditions. In addition, implementing our strategywill require significant management resources and may divert or strain ourmanagement’s ability to focus on other company objectives.

** **

**EffectiveControl by the Equity Sponsors — The interests of our Equity Sponsors mayconflict with the interests of the holders of the Notes.**

 

Fundscontrolled by Cinven, PAI and MidOcean beneficially own 97% of our votingequity. Messrs. Robert Bradish, Graham Clempson, Bertrand Meunier and DominicMurphy, members of the board of directors of UB Finance, are also eitherdirectors or members of senior management of our Equity Sponsors. In addition,under the shareholders agreement of our parent company, United Biscuits Group(Investments) Ltd (“UB Parent”), Nabisco has significant veto rights withrespect to UB Parent and its subsidiaries, including with respect to the saleor merger of UB Parent and its subsidiaries. Under the consortium agreement,the other Equity Sponsors also have significant veto rights with respect toUnited Biscuits (Equity) Ltd, a Cayman Islands company which owns UB Parent andits subsidiaries. Accordingly, the Equity Sponsors have a great deal ofinfluence over our management policies and the power to control all matterssubmitted to a vote of our shareholders. The interests of the Equity Sponsorsmay conflict with the interests of the holders of the Notes.

** **

**CurrencyFluctuations — We have multinational operations that expose us to currencyexchange risks.**

 

As our reporting currency is the pound sterling, anymovement in foreign currency exchange rates in relation to pounds sterlingcould have an impact on our business, financial condition and results ofoperations. A large percentage of our revenues historically has been generatedin the United Kingdom; however, our operations are geographically diverse andin 2002, we had sales in approximately 100 countries and currently operate 22manufacturing facilities located in six countries. Due to our geographicallydiversified customer base, we generate a portion of our revenues from sales incurrencies other than those in which our subsidiaries regularly operate andincur their expenses. We also have long-term borrowings and related interestpayment obligations in currencies other than the pound sterling. In addition,the financial condition and results of operations of our overseas subsidiariesare measured and recorded in the relevant domestic currency of the jurisdictionin which the subsidiaries are located and then translated into pounds sterlingfor inclusion in our consolidated financial statements.

 

8

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**Brands and Intellectual PropertyRights — Some of our intellectual property rights could be challenged or lapse.**

 

Approximately 86% of our sales in 2002 were frombranded products. Our principal trademarks are registered in the UnitedKingdom, and we have trademark registrations for various products in more than100 other countries. We also have licensing arrangements under which we sellour products, including our license from Nabisco to market specified Nabiscobrands. Our trademark and license rights may not be adequate to preventimitation of our products by others or to prevent others from seeking to blocksales of our products that violate their trademarks and proprietary rights. Ifa competitor were to infringe on trademarks or licenses held by us, enforcingour intellectual property rights would likely be costly, may not be successful,and would divert funds and resources that could otherwise be used to operateour business.

 

**GovernmentRegulation — We are subject to extensive regulation.**

 

As a manufacturer of products intended for human consumption,we are subject to extensive U.K. and pan-European governmental regulation overissues such as product composition, packaging, labelling, advertising and thesafety of our products; the health, safety and working conditions of ouremployees; and our competitive and marketplace conduct. Our failure to complywith these regulations could result in fines and penalties, restrict ourability to market our products or require us to change our products, any ofwhich could have a material adverse effect on our business.

 

In addition, our past and present business operationsand ownership and operation of real property are subject to a broad range ofenvironmental laws and regulations in each of the jurisdictions in which weoperate. These laws and regulations impose increasingly more stringentenvironmental protection standards on us and affect air emissions, wastewaterdischarges, the use and handling of hazardous materials, noise levels, wastedisposal practices and environmental clean-up, among other things. As a result,we may be exposed to substantial environmental costs and liabilities, includingliabilities associated with divested assets and past activities. We cannotpredict future environmental liabilities and the amounts we have provided andbudgeted for may not be adequate.

 

**TradeHostilities — A trade dispute with the North American Free Trade Area couldresult in tariffs on our exported products.**

 

In 2002, we sold £37.8 million of ourEuropean-manufactured products within the North American Free Trade Area, whichrepresented 2.9% of our sales for that year. In the past, trade disputesbetween European and North American trading blocks have resulted in thetemporary escalation of tariffs. If future trade disputes resulted in asubstantial increase in tariffs on biscuits or crackers, our trade in NorthAmerica could be significantly damaged and our results of operations could beadversely affected.

 

**Dependenceon Raw Materials — Our inability to pass price increases of raw materials on toour customers could adversely affect our results of operations.**

 

The prices of many of our raw materials are affectedby governmental agricultural policies, the operations of our suppliers,political upheavals, fluctuations in underlying commodity market prices and actsof God such as severe weather conditions. We may not be able to obtainsufficient supplies from our suppliers or alternative sources or we may becharged more for our raw materials if a supply disruption or other adverseevent occurs that affects our sources. To the extent we are able to obtainsufficient quantities of raw materials in the event of a supply disruption, ourability to pass through any increase in raw materials costs to our customerswould 

 

9

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depend upon competitive conditions and pricing methodsemployed in the various markets in which we sell our products. In addition, ifour raw material costs increase for any other reason, *e.g*., underlying commodityprice increases, our ability to pass this increase to our customers wouldsimilarly depend on competitive and market conditions. Consequently, a materialor prolonged supply disruption, or material increase in raw material pricesdriven by other factors could adversely affect our results of operations.

 

**DefinedPension Benefit Schemes — Our results of operations may be adversely affectedby the cost of funding our pension schemes.**

 

UnitedBiscuits operates a defined benefit pension arrangement in the United Kingdomthat has liabilities to retired employees, to previous employees who have leftthe service of the company but who are not yet drawing pension benefits and tocurrent employees who are members of the plan. Both the company and currentemployees who are members of the plan contribute to a fund that is invested inorder to meet these liabilities.

 

Theinvestment strategy of the fund is determined by the investment fund trusteeswho receive independent advice in carrying out these responsibilities. In orderto take advantage of the higher returns that equity investment has historicallygenerated, a substantial proportion of the fund is invested in equities. Thisinvestment strategy, while it has been successful over the long term, carriesthe risk that a significant decline in equity values can give rise to a fundingdeficit which may require the company to significantly increase itscontributions from the current rate of 9% of plan members’ salary(approximately £8 million in 2002). If the company was unable or unwillingto increase contributions to a level agreed to by the trustees and theindependent actuary, then the scheme could be wound up, which would crystallizea significant one-off cash liability for the company. Either the highercontributions or a one-off cash liability could impair the ability of thecompany to invest in its programs to reduce cost, to drive profitable brandedgrowth or could restrict its ability to meet its obligations under these notesas they fall due. Closure of the pension fund, any changes to the benefits providedor to the employee contribution rate, could also have industrial relationsconsequences that might impair the company’s ability to service demand andgenerate cash.

 

**SubstantialLeverage — Our substantial debt could adversely affect our business and preventus from fulfilling our obligations under the Notes.**

 

We have a substantial amount of indebtedness andsignificant debt service obligations. As of December 28, 2002, ouroutstanding long-term debt (including current maturities) was£678.1 million. We anticipate that our substantial leverage will continuefor the foreseeable future. Our high level of debt may have important negativeconsequences for the holders. For example, it could:

 

•                  makeit more difficult for us to satisfy our obligations with respect to the Notes;

 

•                  increaseour vulnerability to adverse general economic and industry conditions;

 

•                  limitour ability to obtain additional financing for working capital, capitalexpenditures, acquisitions, general corporate or other purposes;

 

•                  placeus at a competitive disadvantage relative to our competitors that have lessdebt and greater access to capital resources than we have;

 

10

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•                  requireus to dedicate a substantial portion of our cash flow from operations to ourdebt service obligations; and

 

•                  limitour flexibility in planning for, or reacting to changes in, our business andthe industry in which we operate.

 

**Restrictionson Operations — Our debt agreements contain significant restrictions limitingour flexibility in operating our business.**

 

Various covenants contained in our debt instruments,including the senior credit facility and the indenture governing the Notes,restrict our ability to:

 

•                  borrowmoney;

 

•                  paydividends or make other distributions;

 

•                  grantliens on our assets;

 

•                  makespecific asset dispositions;

 

•                  makespecific investments;

 

•                  enterinto transactions with affiliates; or

 

•                  merge,consolidate or transfer all or substantially all of our assets.

 

These covenants could materially and adversely affectour ability to finance our future operations or capital needs or to engage inother business activities that may be in our best interest. These restrictionson our operations may adversely affect our ability to make payments on theNotes.

** **

**Abilityto Service Debt — We will require a significant amount of cash to service ourdebt, and our ability to generate cash depends on many factors beyond ourcontrol which may affect our ability to meet our obligations to the holders ofthe Notes.**

 

Our ability to make scheduled payments on, and satisfyour obligations under, our indebtedness, including our senior credit facilityand the Notes, depends upon our future operating performance. Because ourfuture operating performance is affected by many factors beyond our control, wemay not be able to generate sufficient cash flow to meet our obligations withrespect to the Notes. For instance, our future operating performance will beaffected by the successful implementation of our business strategy as well asgeneral economic, competitive, market, business and other conditions. If futurecash flow is not sufficient to make scheduled payments on our debt, we willneed to refinance all or a portion of our debt, including our senior creditfacility and the Notes, before maturity, obtain additional financing or sellassets. If we are not able to refinance any of our debt, obtain additionalfinancing or sell assets on commercially reasonable terms or at all we may notbe able to satisfy our obligations with respect to the Notes.

 

11

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**HoldingCompany Structure — Both UB Finance and Regentrealm are holding companies withno revenue-generating operations of their own. Unless they receive sufficient funds from subsidiaries to pay principalof and interest on the Notes, they will not be able to make payments on theNotes.**

 

UB Finance relies on payments from its subsidiaries togenerate the funds necessary to make payments on the Notes.  UB Finance is a holding company and does notdirectly conduct any business.  BecauseUB Finance relies on funds from its subsidiaries, it may not be able to satisfyits obligations with respect to the Notes. The principal assets of UB Financeconsist of:

 

•                  itsequity interest in Regentrealm, its direct, wholly owned subsidiary;

 

•                  intercompanyloans made by UB Finance to Regentrealm with the proceeds of intercompanyborrowings from Runecorp Limited, UB Finance’s parent; and

 

•                  anintercompany loan made by UB Finance to Regentrealm with the proceeds from theNotes offering. As a result, UB Finance is wholly dependent on dividends andother distributions it receives from Regentrealm, including payments underthese intercompany loans, to make payments on the Notes. Regentrealm, which isalso a holding company and parent of UB Finance’s operating subsidiaries, alsodepends on dividends and other distributions it receives from its subsidiaries.The ability of UB Finance’s subsidiaries to make payments to Regentrealmdepends on their cash flow and earnings. In addition, dividends from UBFinance’s subsidiaries are limited by local corporate law, which in Europetypically limits dividends to accumulated earnings of the relevant subsidiary.Because of the holding company structure, UB Finance may not be able toreceive sufficient funds from its subsidiaries to pay the principal of andinterest on the Notes.

 

12

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**ITEM 4****.        INFORMATIONON THE COMPANY**

 

**A.****                                    History andDevelopment of the Company**

 

We arethe leading manufacturer and marketer of biscuits in the United Kingdom, Iberiaand the Netherlands and second largest manufacturer and marketer of biscuits inFrance and Belgium. In the United Kingdom, we are the leading manufacturer andmarketer of nuts and the second largest manufacturer and marketer of savorysnacks and crisps. We manufacture and market a wide range of products inWestern Europe under well-recognized brand names, and branded productsaccounted for approximately 86% of our sales in 2002. Among our popular brandnames are *McVitie’s,Penguin, go ahead!, McVitie’s Jaffa Cakes, Marbu Dorada,Chiquilin, Fontaneda, Filipinos, BN, Delacre, Verkade, Hula Hoops, Skips,Mini Cheddars, McCoy’s, Phileas Fogg*and *KP Nuts*.We are also exclusively licensed to manufacture and market *Oreo*, *Chips Ahoy!* and otherkey Nabisco brands in parts of Europe and North Africa.

 

***United BiscuitsFinance plc***

 

UBFinance was incorporated in England and Wales on March 10, 2000, toact as a financing company in connection with the acquisition of UnitedBiscuits by the Equity Sponsors. In April 2000, the Equity Sponsorsacquired United Biscuits, the holding company of our operating subsidiaries,through a public tender offer. We refer to this acquisition as the “UB acquisition.”Concurrently with the UB acquisition, we entered into agreements for a seriesof divestitures and other acquisitions designed to focus our business on ourkey Western European markets and our core branded products. The UB acquisition,together with the acquisitions and dispositions of material assets connectedwith the acquisition of United Biscuits described in Item 7.B. “MajorShareholders and Related Party Transactions — Related Party Transactions,” arecollectively referred to as the “Transactions” in this annual report.

 

RunecorpLimited, a wholly owned subsidiary of UB Parent, is the beneficial owner andholder of all the ordinary shares of UB Finance. Prior to the acquisition ofUnited Biscuits, UB Finance had not engaged in any business.

 

***Regentrealm Limited***

 

Regentrealm,a direct, wholly owned subsidiary of UB Finance, is the guarantor of the Notes.Regentrealm was incorporated in England and Wales onNovember 29, 1999. Regentrealm is a holding company that indirectlyowns United Biscuits, the holding company of our operating subsidiaries.

 

Regentrealmholds no assets other than the shares of its directly and wholly ownedsubsidiary, Finalrealm Limited, and the intercompany loans to its subsidiaries.Other than its guarantee of the Notes, its obligations to UB Finance underintercompany loans and the senior credit facility, Regentrealm does not haveany debt obligations. Prior to the UB acquisition, Regentrealm had not engagedin any business.

 

Theregistered offices of UB Finance and Regentrealm are located at Hayes Park,Hayes End Road, Hayes, Middlesex UB4 8EE, United Kingdom, and theirtelephone number is +44 20 8234 5000.

 

13

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***Agent for Serviceof Process***

 

Eachof UB Finance and Regentrealm has appointed CT Corporation System,111 Eighth Avenue, New York, New York 10011, as its agent for serviceof process with respect to the Notes, the guarantee for the Notes and therelated indenture.

** **

**B.****                                    Business Overview**

# ** **

# **Overview**

 

We manufacture and marketproducts for the retail grocery, convenience and impulse and food servicemarkets in two product categories: biscuits and snacks.

 

•                  *Biscuits£969.6 million, or 74.1%, of our 2002 sales, of which approximately 86% werebranded.* We manufacture and market biscuits, crackers and cakes inWestern Europe and for export across the world.

 

We are the largestmanufacturer and marketer of biscuits in the United Kingdom. In 2002, ourcombined branded and retailer-branded biscuit sales accounted for approximately27% of the U.K. biscuit market. Our U.K. branded biscuit sales accounted forapproximately 21% of the overall market, representing more than twice thebranded biscuit sales of our closest competitor. Our U.K. biscuits business isanchored by our primary brand, *McVitie’s. McVitie’s* is among thebest-known brands in the United Kingdom, and *McVitie’s* biscuits werepurchased by over 85% of U.K. households in 2002. Among our popular coreproduct brands in the United Kingdom are *McVitie’s Digestive*and*Chocolate Digestive(*formerly*Homewheat), Penguin, go ahead!* and*  McVitie’s Jaffa Cakes*.We also export biscuits and crackers to approximately 100 countries, including *Carr’s*premium-brandedcrackers and *Delacre* biscuits to North America.

 

We are the largest manufacturerand marketer of biscuits in Spain and the Netherlands with market shares ofapproximately 27% and 20%, respectively, the second largest manufacturer andmarketer of biscuits in France and Belgium, with market shares of approximately12% and 14%, respectively and the second largest marketer of biscuits inPortugal with a market share of approximately 15%. Our core continental WesternEuropean biscuit brands are *Fontaneda, Chiquilin* and *Filipinos*in Iberia, *BN*and *Delacre*in France, *Verkade*and *Sultana*in the Netherlands and *Delacre* in Belgium. We also manufactureand market Iberia’s top-selling dry dessert mix and baking powder brand, *Royal*.We are exclusively licensed to manufacture and market *Oreo, Chips Ahoy!*andother key Nabisco brands in parts of Europe and North Africa.

 

•                  *Snacks£338.7 million, or 25.9%, of our 2002 sales, of which approximately 84% werebranded.* We are the largest manufacturer and marketer of nuts in theUnited Kingdom, with a market share of approximately 20% of the packaged nutsmarket, and the second largest manufacturer and marketer of savory snacks andcrisps in the United Kingdom, with a market share of approximately 15% of thepackaged savory snacks and crisps market. Our leading snack brands include *Hula Hoops,Skips, Mini Cheddars, McCoy’s, Phileas Fogg* and *KP Nuts*.

 

14

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**Markets**

 

***General***

 

The principal markets inwhich we operate — the U.K. biscuit and snack markets and the Iberian, French,Dutch and Belgian biscuit markets — share a number of characteristics.

 

The majority of biscuitsand, to a lesser extent, snacks are sold through major grocery retailers. It isexpected that market leaders with large-scale manufacturing and distribution,as well as brands with strong media support, will be better able to negotiatemore favorable prices with retailers and leverage their existing brands. Theimportance of maintaining strong relationships with retailers has also become acritical success factor for food companies and drives many initiatives such ascategory management. Food companies with strong market positions and retailrelationships have increasingly benefited from these initiatives throughmaintaining shelf space and maximizing distribution efficiencies.

 

Consumer demand for foodproducts has been strongly influenced by the trends toward out-of-home eatingand away from the traditional three-meals-a-day eating pattern. Consumers nowdemand convenience foods, including biscuit and snack products that offergreater variety, healthier alternatives and more portable and practicalpackaging. These trends have also added to the significance of convenience andimpulse distribution channels. Retailers in these distribution channelsgenerally seek branded products with high turnover.

*** ***

***U.K. Biscuit Market***

 

The U.K. biscuit markethad retail sales of approximately £1.6 billion in 2002 and has had relativelystable growth over the last five years, with an average annual growth rate of1% to 2% during the period. The U.K. biscuit market is expected to continue tohave a modest annual growth of between 1% and 2% over the next three years.This stable growth can be attributed in large part to the greater demand forconvenience foods. Biscuits represent the largest packaged grocery category forlarge U.K. grocery retailers. It is estimated that over 90 million biscuits areconsumed daily and that approximately 99% of all U.K. households purchasebiscuits annually. Branded biscuit sales accounted for 77% of the market withretailer-branded biscuit sales representing the remainder. The retailer brandcomponent of the market has declined over the past three years and decreasedfrom 29% of total market sales in 1999 to 23% in 2002.

*** ***

***Continental Western European Biscuit Markets***

 

The continental WesternEuropean biscuit markets in which we compete had retail sales of approximately£1.8 billion in 2002 and have grown at an average annual rate of 4% over thelast five years. These markets have a lower per capita biscuit consumptionrate than that of the United Kingdom and their growth is expected to outpacethat of the U.K. biscuit market over the next three years.

*** ***

***U.K. Snacks Market***

 

The U.K. savory snacks,nuts and crisps market had retail sales of approximately £1.8 billion in2002 and has grown at an average annual rate of 2% over the last five years.The U.K. snacks market is expected to grow at an annual rate of 1% to 2% overthe next three years. Like the U.K. biscuit market, the U.K. snacks market’sgrowth is driven by an increased demand for convenience foods. Over 80% of U.K.savory snack products sold are branded products.

 

15

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Large retail grocerychains dominate the sale of snacks in the United Kingdom, but convenience andimpulse outlets are also significant snack distribution channels, as savorysnack products are very often consumed out of the home.

 

**Products**

 

We manufacture and marketbiscuits, snacks and other selected grocery products for retail sale throughlarge grocery retailers and convenience and impulse channels. We offer ourproducts primarily in the United Kingdom and in continental Western Europe. Weproduce both branded and retailer-branded products, with branded productsaccounting for approximately 86% of our sales in 2002.

 

**Biscuits Category**

 

Our biscuits category hadsales of £969.6 million in 2002, representing 74.1% of our total sales for theyear, approximately 86% of which were from branded products.

 

***United Kingdom***

 

We are the leadingmanufacturer and marketer of biscuits in the United Kingdom, with a totalmarket share of approximately 27%. Our branded biscuit sales accounted forapproximately 21% of the overall U.K. biscuit market, representing more thantwice the branded biscuit sales of our closest competitor. We compete in allsegments of the U.K. biscuit market, which are: everyday biscuits, everydaytreats, healthier biscuits, chocolate biscuit bars, children’s biscuits, savorybiscuits, seasonal biscuits, special treats, and crackers and crispbreads. Wealso manufacture and market snack and family cakes in the United Kingdom. Weproduce both branded and retailer-branded biscuits for the U.K. and exportmarkets, with company-branded products accounting for approximately 78% of ourtotal U.K. biscuit category sales in 2002.

* *

*Branded Biscuits*

 

In 2002, 61% of our totalU.K. branded biscuit sales were derived from four core brands: *McVitie’s Core*including*Digestive*and*Chocolate Digestive (*formerly*Homewheat),Penguin, go ahead!* and *McVitie’s Jaffa Cakes.*

 

We are the market leaderin the UK biscuit market with our branded biscuits representing approximately21% of the total biscuit market, more than twice the branded share of ournearest competitor. We manufacture and market three of the five top-sellingbiscuit brands in the United Kingdom.

* *

*Retailer-branded Biscuits*

 

We operate a successfulretailer-branded business for retail grocery customers and are the secondlargest supplier of retailer-branded biscuits in the United Kingdom. Byproducing a limited portfolio of retailer-branded products, we obtain greaterutilization of our factories and spread our manufacturing and distributioncosts over a larger production volume, thus improving profitability. Providingretailer-branded products also makes us valuable to retailers as we can offer abroader range of products within the biscuit category. In 2002, 19% of ourtotal U.K. biscuit category sales were generated by our retailer-brandedbusiness.

 

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*Cakes*

 

We produce cake productsunder the *McVitie’s*brand and under selected *McVitie’s*product brand names, such as *go ahead!*and *McVitie’s Jaffa Cakes*and we are the leader in the cake bars segment, with a 45% market share. Ourcake sales grew to £43.1 million in 2002 and represented 8.4% of the sales ofour U.K. biscuits business. Our cake bar range has benefited from ourrelationship with Mars, through which we have introduced jointly branded snackcake products such as *McVitie’s Galaxy, McVitie’s Starburst,McVitie’s M&M’s, McVitie’s Bounty, McVitie’s Snickers*and*McVitie’s Milky Way*snack cakes.

 

***Southern Europe***

 

Our Iberian business,which was acquired from Nabisco as part of the UB acquisition, is the leader inthe £0.3 billion Spanish biscuit market, with a branded share of approximately27% of the total market, which is nearly double the branded share of our nextlargest competitor. We manufacture and market six of the top ten biscuit brandsin Spain. In Portugal, we are the second largest marketer in the £0.1 billion biscuitmarket with a 15% market share. We are the leading manufacturer and marketer ofdry dessert mixes and baking powder in Iberia. We also manufacture and marketcanned meat products, orange juice and tomato products for the Iberian market.Our key biscuit brands in Iberia include*Chiquilin, Filipinos, Fontaneda* as wellas *Oreo*and *Chips Ahoy!*produced under license from Nabisco.

* *

*Royal*is a rangeof dry dessert mixes and baking powders. *Royal* is the leading brand in bothcategories and has a 79% share of the dry mix market.

 

***Northern Europe***

 

We are a leadingmanufacturer of sweet biscuits in Northern Europe with the number one marketposition in the Netherlands and the number two market positions in the othertwo countries in which we operate.

 

**The Netherlands.** Weare the largest manufacturer and marketer in the £0.2 billion Dutch sweetbiscuit market, with a 20% market share. We target primarily thein-between-meals and everyday biscuits segments.

* *

*Verkade* is ourumbrella brand in the Netherlands and substantially all our products inthe Netherlands are marketed under this brand. Our primary product brand, *Verkade Sultana*,a fruit-filled biscuit, is the largest selling biscuit brand in theNetherlands. The brand competes in the in-between-meals segment of the market.

 

**France**. We are thesecond largest manufacturer and marketer of sweet biscuits in the £0.8 billionFrench biscuit market, with a 12% market share. We focus on two segments of themarket; children’s biscuits and adult biscuits. We have two core brands inFrance. *BN*,a range of children’s biscuits, is the second largest biscuit brand in theFrench market, and *Delacre,* a premium biscuit brand focusedprimarily on the assortment segment.

 

**Belgium.** We are thesecond largest manufacturer and marketer within the £0.2 billion Belgian sweetbiscuit market, with a 14% market share. We hold the leading position in thepremium assortment biscuits segment anchored by our *Delacre*brand. We alsomarket fruit-filled biscuits under the *Sultana* brand.

 

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***Export***

 

We export our brandedproducts to approximately 100 countries around the world and had export salesof £79.7 million in 2002. We believe we are the leading manufacturer andmarketer of premium European cookies and crackers exporting to North America,where we have strong positions in the premium savory and premium assortmentbiscuits segments. *McVitie’s, Carr’s, BN*and *Delacre*areour key export brands.

 

Sales in North Americawere £37.8 million in 2002, primarily from sales of *Delacre*assortments towarehouse club retailers in the United States and sales of *Carr’s*water crackers andother *Carr’s*branded crackers. We export our products through third-partydistributors with whom we mainly enter into short-term distribution contractswhich typically vary to comply with the laws and commercial practices of theparticular local jurisdiction.

 

**Snacks Category**

 

Our snacks business hadsales of £338.7 million in 2002, representing 25.9% of our sales for the year,approximately 84% of which were from branded products. We have a strong productportfolio of branded savory snacks, nuts and crisps, including three of the tentop-selling snack brands in the United Kingdom. We are the second largestproducer of branded savory snacks and crisps, with a 15% market share, and thelargest manufacturer and marketer of nuts in the United Kingdom, with a marketshare of approximately 20% of the packaged nuts market. We also hold secondarypositions in the savory snacks markets in the Netherlands and Belgium.

 

***Savory Snacks and Crisps***

 

We compete in allsegments of the U.K. savory snacks and crisps market, including everydaysnacks, children’s snacks, adult/premium snacks and healthier snacks. We marketa portfolio of leading brands, including *Hula Hoops*, *Skips*, *Mini Cheddars*, *McCoy’s*and*Phileas Fogg*.

 

***Nuts***

 

We are the leadingmanufacturer and marketer in the £0.1 billion U.K. nuts market and have a 63%share of the branded market and a 20% share of the overall packaged nutsmarket. Over two-thirds of our sales of nuts are from branded products soldunder the *KP Nuts*brand name.

 

**Seasonality**

 

Oursales are generally higher towards the end of the year because consumer demandfor our products is typically higher during the Christmas and New Year holidayseason. Our working capital position is also affected by the seasonality of ourbusiness because we build up our inventories during our third fiscal quarter.However, the impact on working capital has been less pronounced in 2001 and 2002due to improved working capital management. Our monthly average working capitalwas £85.8 million in 2002, whereas our average working capital during our thirdfiscal quarter in 2002 was £86.1 million.

 

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**Procurement**

 

Our procurement unit ismanaged centrally, with purchasing specialists operating across our businessesto maximize the savings we can achieve from our purchasing scale. The primaryraw materials we use are ingredients, such as flour, sugar, cocoa, dairy, fatsand oils, nuts, flavorings and potatoes, and packaging materials, such ascardboard tubes, films, cardboard cases and tins. We source our raw ingredientsfrom a number of different suppliers in the United Kingdom, continentalEurope, the United States, Africa and Asia. We believe there are a number ofalternative suppliers for all our primary raw ingredients and packagingmaterials.

 

**Distribution**

 

We distribute ourproducts in the United Kingdom via eight distribution points, including one centraldistribution centre. We distribute our products in continental Western Europethrough nine distribution points in Iberia, four distribution points in France,four distribution points in the Netherlands and two distribution points inBelgium.

 

**Customers and Distribution Channels**

 

We sell our productsprincipally to major grocery retailers and independent grocers and throughimpulse and convenience channels. In the United Kingdom, we have been chosen toact as the biscuit “category manager” to four of the top five grocery retailersas a result of our top-selling brands, our leading market position and ourconsumer category knowledge. We are also the biscuit category manager for theleading retailers in the Netherlands. As a category manager, we have theopportunity to offer creative suggestions to retailers in order to increasecategory sales. We believe that we are also well-regarded in Spain and thatSpanish retailers rate us ahead of our competitors in brand strength, newproduct development and product category knowledge. We are continuing to buildour relationships with retailers in our other European markets, such as Franceand Belgium, where we are working with top retailers to introduce a newapproach to market segmentation. By developing and maintaining strong workingrelationships with retailers, we are able to optimize the presentation of ourproducts and maximize the amount and prominence of retail shelf space ourproducts are given in these retailers’ outlets.

 

In recent years, asout-of-home consumption has increased and impulse food purchases have becomemore important to consumers’ lifestyles, we have targeted convenience andimpulse channels. Convenience and impulse channels comprise a variety ofoutlets, including convenience stores, garage forecourts (*i.e.,* gas stationmini-markets), off-licenses (*i.e*.*,* outlets that sell liquor for consumptionoff the premises), bars and pubs, where consumers make spontaneous purchases ofsnacks. We believe the convenience and impulse channels will continue tobenefit from the trend towards snacking and we intend to continue to targetthese channels to increase sales.

 

**Sales and Marketing**

 

We have a sales force ofapproximately 550 employees and a marketing group of 120 employees.Our sales force consists of national account teams divided between our twoproduct categories and dedicated to supporting the major customers of a givencategory, and a field sales operation responsible for supporting wholesalersand their customers at a local level. Each sales force works with a salessupport staff responsible for establishing category management strategies. Eachcategory also has a brand management team responsible for developing brandstrategies, new products and product-line extensions and for marketing activities,such as advertising, sponsorship programs and consumer public relations. Wegenerally sell our products on an order-by-order basis and do not enter intolong-term contracts to supply our products.

 

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To create brandawareness, build customer loyalty and stimulate demand for our brandedproducts, we devote substantial resources to marketing our products. We marketour products through a combination of advertising, consumer promotions andtrade promotions. We advertise our products through television, radio and printmedia. Our consumer promotions feature in-store and on-package promotions suchas collectibles and coupons redeemable for school supplies. Our tradepromotions typically include special displays and product value promotions. Wetailor our marketing strategies to our local markets.

 

**Competition**

 

The biscuit and snackmarkets are highly competitive. We compete against numerous businesses ofvarying sizes, both in the United Kingdom and in continental Western Europe. Wecompete primarily on the basis of the strength of our brands, the quality ofour products, product innovation, price and our relationships with retailers.Our principal competitors in the U.K. biscuit market are Burton’s Foods(controlled by Hicks, Muse, Tate & Furst, a U.S.private equity firm), whose key brands include *Cadbury Fingers*(producedunder a license from Cadbury), *Wagon Wheels*, *Maryland Cookies*and *Jammie Dodgers*;Northern Foods, which markets *Fox’s*branded products; Danone, whoseJacob’s biscuits operation markets *Cream Crackers*, *TUC*and *Ritz*brands; and Nestlé,whose key brands are *KitKat*, *Blue Riband*and *Breakaway*.Our biggest competitor in the continental Western European biscuit markets inwhich we compete is Danone, whose key brands include *Prince*, *Petit Ecolier*, *Pims*,*Pepito*,*Mikado*,*Barquette*,*Belin Crackers*and its *Taillefine/Vitalinea*healthy biscuitrange. Our principal competitor in the U.K. savory snacks and crisps market isPepsiCo Inc.’s U.K. subsidiary, Walkers Snackfoods, which is the largestparticipant in the market. Walkers’ key brands include *Walkers Crisps*, *Monster Munch*,*Quavers*,*Wotsits,**Doritos*and*French Fries*.We also compete in the U.K. savory snacks market with Golden Wonder, whosekey brands are *Nik Naks* and *Wheat Crunchies*. The principalmethods of competition in our industry include new product development,advertising and media campaigns, effective management of category and retailerrelationships, consumer and price promotions and overall pricing strategy.

# ** **

# **RegulatoryMatters**

 

As a manufacturer ofproducts intended for human consumption, we are subject to extensivegovernmental regulation from both national and pan-European governmentalentities concerning, among other things, product composition, packaging,labelling, advertisement and the safety of our products; the health, safety andworking conditions of our employees; and our competitive and marketplaceconduct. These include, in the United Kingdom, the Food Safety Act 1990 andassociated food labelling regulations and, in the European Union, E.U.Directives on general product safety, control of foodstuffs and regulation offood additives.

 

From time to time,additional legislative initiatives may be introduced that may affect ouroperations and the conduct of our businesses, and we cannot provide assurancethat the cost of complying with these initiatives or that the effects of theseinitiatives will not have a material adverse effect on our profitability orfinancial condition in the future. We operate systems and policies to ensurethat we are complying with the statutes and regulations that impact ouroperations.

 

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**C.****                                    OrganizationalStructure**

 

The followingchart shows our corporate structure:

 

 

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Footnotes appear on thefollowing page.

 

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(1)                                  Theinvestment interests of our Equity Sponsors are represented by£400.0 million initial aggregate principal amount of deep discounted bondsissued by Solvecorp Limited to PAI, Cinven and MidOcean, dual convertiblediscounted preferred securities issued for £145.0 million by Deluxestar toNabisco and £2.0 million of equity invested by Cinven, PAI and MidOceanthrough United Biscuits (Equity) Limited, a Cayman Islands company, which holdsand beneficially owns 95% of the shares of UB Parent, the remaining 5% areowned by senior management. Nabisco also holds warrants exercisable uponcertain events for shares of UB Parent.

 

(2)                                  Guarantorsof the senior credit facility.

 

(3)                                  Representsequity ownership in Runecorp Limited (“Runecorp”).

 

(4)                                  £545.0 millionof proceeds from the investments made by the Equity Sponsors were loaned fromRunecorp to UB Finance, from UB Finance to Regentrealm and from Regentrealmto Finalrealm Limited for use in the acquisition of United Biscuits. Cashinterest under these intercompany loans is not payable until their maturity in2049, subject to the occurrence of specified events which may result in theacceleration of their maturity. The intercompany loan from Runecorp to UBFinance is subject to a subordination agreement pursuant to which noenforcement action may be taken, and no payments may be made, before thematurity or repayment of the Notes, other than payments permitted under theindenture.

 

(5)                                  UBFinance loaned the proceeds from the Notes offering to Regentrealm pursuant toan intercompany loan. Regentrealm used the proceeds to repay an existingintercompany loan from UB Finance.  UBFinance used the proceeds from the loan repayment, along with borrowings underour senior credit facility, the proceeds from the sale of our interest inYoung’s Bluecrest Ltd and cash on hand, to repay the senior subordinated bridgefacility in April 2001.

 

(6)                                  Thesenior credit facility includes a £90.0 million revolving credit facility.This facility was reduced to £60.0 million during 2002 and £52.5 millionwas available to be drawn down at December 28, 2002. £81.6 million of the termfacility had been repaid by December 28, 2002. The balance outstanding isincreased by an unfavorable euro exchange movement since inception, amountingto £0.3 million.

 

Thefollowing table sets forth our significant subsidiaries, their geographiclocations and our ownership interest.

 
| **Subsidiary**                      |   | **Geographic  Location** |   | **Ownership Interest** |   |
|-------------------------------------|--------|--------------------------|--------|------------------------|--------|
|                                |   |                     |   |                   |   |
| Regentrealm  Limited                |   | United  Kingdom          |   | 100                    | %      |
| United  Biscuits (Holdings) Limited |   | United  Kingdom          |   | 100                    | %      |
| United  Biscuits (UK) Limited       |   | United  Kingdom          |   | 100                    | %      |
| UB  Investments plc                 |   | United  Kingdom          |   | 100                    | %      |
| UB  Overseas Limited                |   | United  Kingdom          |   | 100                    | %      |
| United  Biscuits France SA          |   | France                   |   | 100                    | %      |
| United  Biscuits Industrie SAS      |   | France                   |   | 100                    | %      |
| UB  Investments (Netherlands) BV    |   | The  Netherlands         |   | 100                    | %      |
| Koninklijke  Verkade NV             |   | The  Netherlands         |   | 100                    | %      |
| United  Biscuits Iberia, S.L.       |   | Spain                    |   | 100                    | %      |
| Galletas  United Biscuits S.A (1).  |   | Spain                    |   | 100                    | %      |
| Carnes  y Conservas Espanolas S.A.  |   | Spain                    |   | 100                    | %      |
| NV  Biscuits Delacre SA             |   | Belgium                  |   | 100                    | %      |

** **

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(1)                During 2002, theSpanish subsidiaries Galletas Fontaneda S.A. and Galletas Artiach S.A. weremerged into Marbu S.A. and the company changed its name to Galletas UnitedBiscuits S.A.

 

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**D.****                                    Property, Plantsand Equipment**

 

***Manufacturing Facilities***

 

Weowned and operated 25 manufacturing facilities during 2002. The biscuitmanufacturing facilities at Hatton in Scotland and at Aguilar in Spain weresold and the facility at Ede in the Netherlands was closed and the sitesubsequently sold in 2002. Our manufacturing network is characterized by large,well-invested facilities in the United Kingdom, which typically operate atrelatively high utilization levels, and smaller, more specialized facilities incontinental Western Europe and Tunisia. The following maps and accompanyingtext set forth the location and principal uses of 21 of our currentmanufacturing facilities, including capacity in thousands of tonnes. Ourfacility in Tunisia, North Africa, is not shown on the maps. It has a capacityof five thousand tonnes and produces dry dessert mixes.

 

**United Kingdom**

 

 

Note: Annualcapacity in thousands of tonnes

 

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* Proposal to close thesite announced in February 2003.

 

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**Continental Western Europe**

 

 

Note: Annualcapacity in thousands of tonnes.

 

***Environmental Matters***

 

Our past and presentbusiness operations and ownership and operation of real property are subject toa broad range of environmental laws and regulations in each of thejurisdictions in which we operate, such as the Environmental Protection Act1990 and the Water Resources Act 1991. These laws andregulations impose increasingly stringent environmental protection standards onus and affect, among other things, air emissions, wastewater discharges, theuse and handling of hazardous materials, noise levels, waste disposal practicesand environmental clean-up. As a result, we may be exposed to substantialenvironmental costs and liabilities, including liabilities associated withdivested assets and past activities. We are not aware of any existing environmentalliabilities, claims, investigations or proceedings that could reasonably beexpected to have a material adverse impact on our financial position. However,we cannot predict future environmental liabilities nor can we provide assurancethat the amounts we have provided and budgeted for will be adequate.

 

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**ITEM 5****.        OPERATINGAND FINANCIAL REVIEW AND PROSPECTS**

 

**A.****                                    Operating Results**

 

***Overview***

 

Sincethe UB acquisition in April 2000, a new management team has joined us and hasundertaken a comprehensive review of our operations. Historically, ouroperations were divided into three divisions: U.K. biscuits, internationalbiscuits and U.K. snacks. The U.K. biscuits division manufactured and marketedbiscuits and cakes for the U.K. and Irish markets. The international biscuitsdivision manufactured and marketed biscuits and snacks in continental Europeand Asia and managed our export business. The U.K. snacks division manufacturedand marketed savory snacks, nuts and crisps in the United Kingdom. Followingour new management team’s review of our operations, we have restructured ourbusiness and combined our U.K. and international biscuits operations, with ourU.K. snacks operations remaining separate. The operating and financial reviewcontains segmental analyses.

 

***Critical Accounting Policies***

 

Oursignificant accounting policies are described in Note 2 of Notes to theFinancial Statements. Our critical accounting policies are those that have ameaningful impact on the reporting of our financial condition and results, andthat require significant management judgment and estimates. These policiesinclude our accounting for asset impairments, pensions and trade and consumerpromotion activities.

 

Inaccordance with U.K. GAAP, the carrying values of goodwill and tangible fixedassets are reviewed where there are indications of impairment. Indications ofimpairment are a matter of judgment and may arise, for example, as a result ofchanging patterns of customer behavior or general economic and industryconditions. Where there are indications of impairment, the carrying value ofgoodwill and tangible fixed assets will be reviewed and where it is felt thatasset values are impaired, the carrying value of assets will be written down totheir recoverable amount. Under U.S. GAAP, the carrying value of capitalizedgoodwill is subject to an annual impairment review. The carrying value oftangible fixed assets is reviewed where there are indications of impairment.

 

Thedetermination of our obligation and expense for pension costs is dependent onour selection of certain assumptions used by actuaries in calculating suchamounts. These assumptions are set out in Note 21 of Notes to the FinancialStatements and include the discount rate, the expected long-term rate of returnon plan assets and rates of increase in compensation. In accordance with bothU.K. GAAP and U.S. GAAP, actual results that differ from our assumptions areaccumulated and amortized over future periods and, therefore, generally affectour recognized expense and recorded obligation in such future periods. We areguided in selecting our assumptions by our independent actuaries and, while webelieve our assumptions are appropriate, significant differences in our actualexperience or significant changes in our assumptions could materially affectour pension obligations and our future expense.

 

Theamount and timing of recognition of trade and consumer promotion expenseinvolves management judgment related to the estimated utilization of thepromotional activity. The balance sheet liabilities associated with theseactivities is based on management judgment of the estimate necessary to meetclaims made by customers in respect of discounts and rebates. Provision is madefor any anticipated claim and released, to the extent unutilized, once thelikelihood of such a claim being made has become remote.

 

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**Significant Factors Affecting OurResults of Operations**

 

Ourconsolidated results of operations have been affected by a number of factors,including acquisitions and dispositions, restructuring programs, our businessstrategies, currency fluctuations and industry trends.

 

***Acquisitions and Dispositions***

 

Wehave historically pursued a strategy of both internal and external growth.Since the UB acquisition, our strategy has been to focus on key WesternEuropean markets and our core branded products. As a result of thesestrategies, we have made a number of acquisitions and dispositions which haveaffected our results of operations during the past three years. The followingis a summary of the material acquisitions and dispositions undertaken sinceJanuary 1, 2000:

 

•                  As part of the UB acquisition we enteredinto an agreement to sell some of our biscuit and snack operations in Europeand Asia to Danone*.*Danone paid a total purchase price of £282.9 million afteradjustments*.*Danone acquired our *TUC* and *Cheddars* savory snackbusinesses in the United Kingdom, our biscuit businesses in Poland, Hungary,Denmark, Norway, Sweden and Finland and our snack food businesses in Germanyand Italy*.*Danone also acquired our snack food operations in Malaysia andSingapore. The disposition of assets toDanone was completed with the sale of our operations in Finland on May 4, 2001.

 

•                  As part of the UB acquisition, we also acquiredNabisco’s operations in Iberia in July 2000 and agreed to acquireNabisco’s biscuit and dry dessert mix operations in Saudi Arabia and Tunisia.The total transactional value was £156.8 million, including assumed debt andafter adjustments. United Biscuits acquired operating control and economicownership of Nabisco’s assets in Tunisia and Saudi Arabia in July 2000. Theacquisition of the Tunisian business was completed on April 20, 2001.  Following further discussions betweenNabisco and United Biscuits, Nabisco has confirmed, by agreement effective fromFebruary 18, 2003, that it does not intend to withdraw from the Saudi Arabianjoint venture arrangement. In accordance with the July 2000 agreement, Nabiscohas paid $4.8 million (approximately £3.1 million) to United Biscuits as anadjustment to the purchase price. The adjusted total transactional value,following this agreement, is £153.7 million. We also agreed to sell our operations in China, Hong Kong and Taiwan toNabisco, with a transactional value of £73.8 million, including assumed debtand after adjustments. We completed the sale of our assets in Hong Kong andTaiwan on September 29, 2000. The sale of our assets in China was completed onMarch 25, 2002.

 

As aresult of the acquisition of United Biscuits and the Iberian and Tunisianbusinesses, goodwill amortization of £40.7 million, £36.4 million and £21.9million was charged to operating profit in the period endedDecember 28, 2002, December 29, 2001 and December 30, 2000,respectively. For the 15-week period ended April 14, 2000, goodwillamortization of £0.8 million was charged to operating profit. This goodwillarose on acquisitions made by our predecessor, United Biscuits, prior toJanuary 1, 2000.

 

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***Restructuring Programs***

 

In1996, we began a comprehensive program to review and restructure our biscuitsoperations in the United Kingdom in an effort to improve operating efficiencyand achieve cost savings. The initial phase of the restructuring programinvolved the rationalization of our procurement and distribution facilities inthe United Kingdom and the increased automation of our U.K. biscuitmanufacturing facilities. As a result of this restructuring program, we reducedour U.K. biscuits workforce in the United Kingdom by approximately 14%between 1996 and 1999 (excluding reductions related to divestitures).

 

In2000, we began the second phase of the restructuring program, combining ourprocurement, distribution and research and development operations across allour operations in order to apply our U.K. cost-reduction expertise incontinental Western Europe. Since joining us in late 2000, our new management hasexpanded the second phase of our restructuring program and introduced a morecomprehensive cost-saving program based on implementing operating efficiencies,improving our procurement process, eliminating overhead costs and rationalizingmanufacturing capacity.

 

In2001, we restructured our operations around our two key product categories,biscuits and snacks, and made a series of organizational changes to align oursenior management teams with our overall category strategy. Each category isnow managed as an integrated business supported by group-wide functions forprocurement, human resources, finance, information systems and technical. Wecompleted the restructuring of the Teesside and Consett snack factories in theUnited Kingdom by reducing the number of products manufactured at Teesside andintegrating resources at the two sites. We also restructured the Zaandambiscuit factory in the Netherlands to specialize in fruit-filled products byoutsourcing chocolate products and upgrading the facilities. We closed ouroffices in West Drayton and Staines and relocated to a single head office inHayes, Middlesex, United Kingdom. During 2001, we incurred costs of£40.1 million on our restructuring programs.

 

During2002, we closed our Ede biscuit factory in the Netherlands and subsequentlysold the site. We also sold Aguilar, one of our three biscuit manufacturingfacilities in Spain, transferred some of the production undertaken at thatfacility to our other Spanish biscuit facilities and entered into a manufacturingsupply agreement. We also sold a small biscuit factory in Hatton, Scotland. Bythe end of 2002, we had implemented a substantial portion of the second phaseof our restructuring program. During 2002, we incurred costs of£36.1 million on our restructuring programs.

 

InFebruary 2003, following the detailed review of the U.K. supply chain, weannounced our proposal to close the Ashby de la Zouch biscuit factory by theend of 2004. We are currently in consultation with our employees concerningthis proposal.

 

***Business Strategy***

 

Ourstrategy revolves around delivering profitable branded growth funded by costrelease. A key platform for this strategy is to ensure strong growth from ourmost important brands. During the first quarter of 2002, we completed ourreview of brand and market portfolio prioritization. We have prioritized ourmarkets and identified brands which have strong current consumer image,financial scale, high margins and growth potential. We continue to prioritizemarketing support and innovation behind these priority brands to drive higherlevels of profitable branded growth. The remaining branded and retailer brandedproducts will continue to be managed to maximize their profit contribution.During 2002, this strategy has affected our results of operations, resulting insales of the aforementioned prioritized brands growing by 7.0% and all brandedsales growing by 3.9%, in each case compared to the results of operations for2001.

 

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***Currency Fluctuation***

 

Althougha majority of our sales are generated in the United Kingdom, our operations aregeographically diverse, and in 2002, we had sales in approximately 100countries and 25 manufacturing facilities located in six countries, which hadreduced to 22 by the end of 2002. As a result, our financial position andresults of operations are subject to both currency transaction risk andcurrency translation risk.

 

*CurrencyTransaction Risk*

 

Dueto our geographically diversified customer base, we generate a portion of ourrevenues from sales in currencies other than those in which our subsidiariesregularly operate and incur their expenses. We also have long-term borrowingsand related interest payment obligations in currencies other than the pound sterling.  We hedge against currency transaction riskby matching cash inflows in a particular currency with our costs and interestpayments in the same currency. We enter into forward foreign currency contractsto hedge against our exposure to foreign currency exchange rate fluctuations inthe purchase of raw materials and in our export business. From time to time, wealso purchase forward foreign currency contracts to hedge against expected netexposure to foreign currency exchange rate fluctuations with respect toparticular contractual commitments. As of December 28, 2002, we hadthe equivalent of £75.5 million of forward currency contracts, with anaggregate unrealized net loss of £1.3 million on those instruments at thatdate.

 

*CurrencyTranslation Risk*

 

Thefinancial condition and results of operations of our overseas subsidiaries aremeasured and recorded in the relevant domestic currency of the jurisdiction inwhich the subsidiaries are located and then translated into pounds sterling forinclusion in our consolidated financial statements.  In recent years, the appreciation of the pound sterling againstother major European currencies, including the euro, has had a negative impacton our sales and operating profit as reported in pounds sterling. During 2002,the pound sterling depreciated against the euro and appreciated against thedollar. Translation of our operating results had an estimated net adverseimpact on our sales and operating profit of approximately £16.0 millionand £0.3 million, respectively, in 2000, approximately £5.0 million and £0.3million, respectively, in 2001 and had a positive impact of approximately£7.9 million and £0.6 million, respectively, in 2002. We borrow in localcurrencies, as appropriate, to minimize the impact of currency translation riskfrom our overseas operations with respect to our balance sheet.

 

***Industry Factors***

 

Ourfinancial condition and results of operation are also influenced by industrytrends. In recent years, there has been increased consolidation among the majorgrocery retailers in the United Kingdom as well as in continental Europe.During the past three years, there were two significant mergers of largegrocery retailers in the United Kingdom. In addition, Wal-Mart entered the U.K. market through its 1999acquisition of ASDA, one of the U.K.’s largest grocery retailers.  In continental Europe, two major groceryretailers, Carrefour and Promodes, merged in 1999 to create the largestretailer in both France and Spain. These consolidations have concentrated saleschannels, increased the bargaining power of the major grocery retailers andintensified price competition among these retailers. As a result, groceryretailers and manufacturers frequently engage in pricing campaigns such as“Everyday Low Price” and “Buy One Get One Free” in order to promote theirproducts and gain market share. These campaigns have generally lowered ourmargins by increasing our short-term promotion costs, but this effect ispartially offset by the additional sales made as a result of these campaigns.

 

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***Seasonality and Accounting Periods***

 

Dueto the nature of our business and the food industry in general, we manage ourbusiness and financial accounting on a weekly basis. Our fiscal year consistsof 52 calendar weeks and is divided into 13 periods, with each consisting offour calendar weeks. Our first fiscal quarter consists of four four-weekperiods, totaling 16 weeks, and our remaining three fiscal quarters eachconsists of three four-week periods, totaling 12 weeks. Every five orsix years, we lengthen the final period of our fiscal year to five weeks, inwhich event our fourth quarter consists of 13 weeks and our fiscal yearconsists of 53 weeks. Our next fiscal year, covering 2003, will consist of 53weeks and will end on January 3, 2004.

 

As aresult of the seasonality of our sales and our fiscal accounting conventions,the results of our operations for any given fiscal quarter will not necessarilyindicate our results for the full year. For a description of the seasonality ofour business, see Item 4.B. “Information on the Company — Seasonality.” Thefollowing table sets forth the sales per quarter and the average sales perfour-week accounting period of our biscuit and snack categories in 2002 byfiscal quarter:

 

**Continuing Operations**

 
|               |   | **52-week Period Ended December 28, 2002** |       |
|--------------------|--------|-------------------------------------------------|------------|
| **Sales**          |   | **First  Quarter  (Periods 1-4)**               |       | **Second  Quarter****(Periods 5-7)** |   | **Third  Quarter  (Periods 8-10)** |   | **Fourth****Quarter(Periods 11-13)** |   |
|               |   | **(£ million)**                            | ** ** |
| Biscuits           |   | 251.3                                           |       | 222.3 |   | 246.1 |   | 249.9 |   |
| Snacks             |   | 91.2                                            |       | 79.7 |   | 81.7 |   | 86.1 |   |
| Total              |   | 342.5                                           |       | 302.0 |   | 327.8 |   | 336.0 |   |
|               |   |                                            |       |   |   |   |   |   |   |
| Average per period |   | 85.6                                            |       | 100.7 |   | 109.3 |   | 112.0 |   |

 

29

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**Results ofOperations**

 

Thefollowing table summarizes the results of our continuing operations for 2000,2001 and 2002. Our continuing operations include our Iberian operation fromJuly 11, 2000 and our Tunisian operation from April 20, 2001, the dates oftheir respective acquisitions, but exclude our Asian assets and the businessesdisposed of in the Danone Transaction. The financial data presented below havebeen derived from and should be read in conjunction with our consolidatedfinancial statements included elsewhere in this annual report. 

 
|                                                                                 |   | **2002**             |   | **2001**             |   | **2000**             |   |
|--------------------------------------------------------------------------------------|--------|----------------------|--------|----------------------|--------|----------------------|--------|
| **Continuing  Operations**                                                           |   | **(£ million)** |   | **(% total  sales)** |   | **(£ million)** |   | **(% total  sales)** |   | **(£ million)** |   | **(% total  sales)** |   |
|                                                                                 |   |                 |   |                 |   |                 |   |   |   |   |   |   |   |
| Sales                                                                                |   | 1,308.3              |   | 100.0                |   | 1,262.8              |   | 100.0 |   | 1,163.0 |   | 100.0 |   |
| Cost of sales                                                                        |   | (709.8               | )      | (54.3                | )      | (702.8               | )      | (55.7 | ) | (682.8 | ) | (58.7 | ) |
| Gross profit                                                                         |   | 598.5                |   | 45.7                 |   | 560.0                |   | 44.3 |   | 480.2 |   | 41.3 |   |
| Distribution, selling and marketing expenses                                         |   | (385.8               | )      | (29.5                | )      | (365.8               | )      | (29.0 | ) | (309.1 | ) | (26.6 | ) |
| Administrative expenses                                                              |   | (84.6                | )      | (6.5                 | )      | (81.6                | )      | (6.4 | ) | (88.9 | ) | (7.6 | ) |
| Other income                                                                         |   | 6.1                  |   | 0.5                  |   | 1.0                  |   | 0.1 |   | 10.9 |   | 0.9 |   |
| Group operating profit before goodwill amortization and  operating exceptional items |   | 134.2                |   | 10.3                 |   | 113.6                |   | 9.0 |   | 93.1 |   | 8.0 |   |
|                                                                                 |   |                 |   |                 |   |                 |   |   |   |   |   |   |   |
| Adjusted EBITDA(1)                                                                   |   | 188.4                |   | 14.4                 |   | 166.6                |   | 13.2 |   | 139.6 |   | 12.0 |   |

 

----

(1)                                  EBITDA represents earnings before interest, tax,depreciation and amortization. Adjusted EBITDA represents EBITDA fromcontinuing operations, excluding share of profit of joint ventures andexceptional items. While EBITDA should not be considered as a substitute foroperating profit and cash flows from operations, we believe it provides usefulinformation regarding our ability to meet future debt service requirements. TheEBITDA measures presented may not be comparable to similarly titled measuresused by other companies.

 

30

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In 2001, we divided our continuing operations into the following sixsegments, reflecting our operational management structure:

 

•                  the U.K. Biscuits segment covers the manufactureand marketing of biscuits and cakes in the United Kingdom and the marketing ofbiscuits and cakes in the Republic of Ireland;

 

•                  the Northern Europe segment covers the manufactureand marketing of biscuits in France, Belgium and the Netherlands;

 

•                  the Southern Europe segment covers the manufactureand marketing of biscuits, dry dessert mixes, fruit juice, canned meat andtomato products in Iberia;

 

•                  the U.K. Snacks segment covers the manufacture andmarketing of savory snacks, nuts and crisps in the United Kingdom;

 

•                  the General Export segment covers exports ofbranded products to approximately 100 countries around the world throughthird-party distributors and includes our operations in Tunisia; and

 

•                  the Other business segment covers the Beneluxsnacks business, which manufactures crisps and savory snacks in the Netherlandsand markets them in Belgium, the Netherlands and Luxembourg.

 

Wehave restated our sales and operating profit before goodwill amortization andexceptional items for 2000 for our continuing operations on this new basis andthese are shown together with the corresponding analysis for 2001 and 2002 inthe tables below. 

 
|                          |   | **2002**              |   | **2001  Restated (1)** |   | **2000  Restated (1)** |   |
|-------------------------------|--------|-----------------------|--------|------------------------|--------|------------------------|--------|
| **Sales**                     |   | **(£  million)** |   | **(%  total)**         |   | **(£  million)**  |   | **(% total)** |   | **(£ million)** |   | **(%  total)** |   |
|                          |   |                  |   |                   |   |                   |   |   |   |   |   |   |   |
| Biscuits–U.K.            |   | 510.7                 |   | 39.0                   |   | 498.6                  |   | 39.5 |   | 488.5 |   | 42.0 |   |
| Biscuits–Northern Europe |   | 195.6                 |   | 15.0                   |   | 185.6                  |   | 14.7 |   | 181.0 |   | 15.6 |   |
| Biscuits–Southern Europe |   | 183.6                 |   | 14.0                   |   | 156.8                  |   | 12.4 |   | 81.4 |   | 7.0 |   |
| U.K. Snacks                   |   | 309.6                 |   | 23.7                   |   | 309.0                  |   | 24.4 |   | 299.4 |   | 25.7 |   |
| General Export                |   | 79.7                  |   | 6.1                    |   | 82.9                   |   | 6.6 |   | 80.6 |   | 6.9 |   |
| Other                         |   | 29.1                  |   | 2.2                    |   | 29.9                   |   | 2.4 |   | 32.1 |   | 2.8 |   |
| Total continuing operations   |   | 1,308.3               |   | 100.0                  |   | 1,262.8                |   | 100.0 |   | 1,163.0 |   | 100.0 |   |

 
| **Operating Profit Before  Goodwill Amortization and  Exceptional Items** |   | **(£  million)** |   | **(%  margin)** |   | **(£  million)** |   | **(%  margin)** |   | **(£  million)** |   | **(%  margin)** |   |
|---------------------------------------------------------------------------|--------|-----------------------|--------|-----------------|--------|-----------------------|--------|-----------------|--------|-----------------------|--------|-----------------|--------|
|                                                                      |   |                  |   |            |   |                  |   |            |   |                  |   |            |   |
| Biscuits–U.K.                                                        |   | 72.0                  |   | 14.1            |   | 71.3                  |   | 14.3            |   | 65.2                  |   | 13.3            |   |
| Biscuits–Northern Europe                                             |   | 5.7                   |   | 2.9             |   | (6.6                  | )      | (3.6            | )      | (7.9                  | )      | (4.4            | )      |
| Biscuits–Southern Europe                                             |   | 18.0                  |   | 9.8             |   | 11.7                  |   | 7.5             |   | 5.6                   |   | 6.9             |   |
| U.K. Snacks                                                               |   | 35.2                  |   | 11.4            |   | 38.2                  |   | 12.4            |   | 35.1                  |   | 11.7            |   |
| General Export                                                            |   | 17.6                  |   | 22.2            |   | 12.2                  |   | 14.7            |   | 5.3                   |   | 6.6             |   |
| Other                                                                     |   | (2.8                  | )      | (9.6            | )      | (1.3                  | )      | (4.3            | )      | 1.1                   |   | 3.4             |   |
| Central                                                                   |   | (11.5                 | )      | —          |   | (11.9                 | )      | —          |   | (11.3                 | )      | —          |   |
| Total continuing operations                                               |   | 134.2                 |   | 10.3            |   | 113.6                 |   | 9.0             |   | 93.1                  |   | 8.0             |   |

 

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(1)                                  Theamounts for 2001 and 2000 have been restated to reflect the change in method ofapportioning corporate overhead expenditure.

 

31

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Oursales from continuing operations by geographic destination for 2000, 2001 and2002 were as follows:

 
|                                 |   | **2002**             |       | **2001**             |       | **2000**             |       |
|--------------------------------------|--------|----------------------|------------|----------------------|------------|----------------------|------------|
| **Sales by  Geographic Destination** |   | **(£ million)** |       | **(%  total sales)** |       | **(£ million)** |       | **(%  total sales)** |   | **(£ million)** |   | **(%  total sales)** |   |
|                                 |   |                 | ** ** |                 | ** ** |                 | ** ** |   |   |   | ** ** |   | ** ** |
| U.K. and Ireland                     |   | 812.0                |       | 62.1                 |       | 807.7                |       | 64.0 |   | 777.8 |   | 66.9 |   |
| Continental Europe                   |   | 434.9                |       | 33.2                 |       | 392.5                |       | 31.1 |   | 322.6 |   | 27.7 |   |
| Other                                |   | 61.4                 |       | 4.7                  |       | 62.6                 |       | 4.9 |   | 62.6 |   | 5.4 |   |
| Total                                |   | 1,308.3              |       | 100.0                |       | 1,262.8              |       | 100.0 |   | 1,163.0 |   | 100.0 |   |

 

***Sales***

Oursales reflect sales to third parties after trade discounts and excludingsales-related taxes. We derive our sales from selling biscuits and snacks inthe United Kingdom, Ireland, France, the Netherlands and Belgium and from ourexport business. Following the acquisition of our Iberian business from Nabiscoin July 2000, we also derive revenues from selling biscuits, dry dessert mix,fruit juice, canned meat and tomato products in Iberia. Our principalgeographic market is the United Kingdom and Ireland, which accounted forapproximately 63% of the sales of our continuing operations between 2000 and2002. Sales of company-branded products represented approximately 86% of our2002 sales, with the remainder representing retailer-branded products.

 

***Cost of Sales***

 

Ourcost of sales includes the costs of ingredients, packaging materials, directlabor and manufacturing overhead. The major ingredients we use are sugar, fatsand oils, cocoa, flour, nuts, fruits, dairy products and potatoes. Our laborcosts include salaries, hourly wages and other direct costs of employment. Wehave reduced labor costs over the last few years through productivityimprovements and other restructuring efforts. Manufacturing overhead includesthe cost of utilities, plant supervision and management costs, technical andengineering support costs, health and safety compliance costs, maintenance andinsurance costs, quality control costs and depreciation expenses relating tomanufacturing equipment.

 

***Distribution, Sellingand Marketing Expenses***

 

Ourdistribution expenses represent the cost of warehousing our products andtransporting them to our distributors and retail customers. Our sellingexpenses represent operating costs associated with our sales force, includingemployee compensation and commissions. Our marketing expenses consist ofadvertising expenses, the cost of promotions and marketing overhead costs. Ourpromotional costs include, among other things, discounts we give to retailersin connection with product-specific promotions. Our distribution, selling andmarketing expenses also include costs associated with new product development.

 

***Administrative Expenses***

 

Ouradministrative expenses consist primarily of costs associated with our finance,human resource, procurement, information technology, research and developmentand general management functions. Research and development costs are incurredfor the development of new products and the enhancement of existing products.

 

32

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***Fiscal 2002 (Year ended December 28, 2002)compared to Fiscal 2001 (Year ended December 29, 2001).***

 

**Continuing Operations**

 

Thefollowing discussion relates to our continuing operations, which excludes ourjoint venture operation discontinued in March 2001, and includes the NorthAfrican business (“UB Tunisia”) acquired from Nabisco from April 20, 2001.No adjustment has been made for the year to date results of UB Tunisia, theresults of which are included in the first quarter of 2002 but not in the firstquarter results for 2001, as there is no significant effect, for comparabilitypurposes, on the underlying business performance.

 

***Turnover***

 
|                                 |   | **2002**             |   | **2001** |   | **%** |   |
|--------------------------------------|--------|----------------------|--------|----------|--------|-------|--------|
|                                 |   | **(£ million)** |   |     |   |
| Turnover from  continuing operations |   | 1,308.3              |   | 1,262.8  |   | 3.6   | %      |

 

Turnover from continuing operations for 2002increased from £1,262.8 million in 2001 to £1,308.3 million in 2002, anincrease of £45.5 million, or 3.6% after taking account of currency translationgains of £7.9 million. Our strategy in relation to our brands is to drivegrowth in priority brands by providing increased focus and investment and tomanage non-strategic brands and retailer brands to maximize profitability. Wehave made significant progress in achieving this strategy with total brandedsales growth of 3.9% across our Group and more specifically, branded salesgrowth of 4.0% in U.K. Biscuits, 6.0% in Northern Europe, 13.8% in SouthernEurope and 1.1% in U.K. Snacks. In addition, sales of our less profitable,non-branded products have declined in 2002 by 2.3%. This is predominantly dueto the cancellation of the contract to supply products to Danone. The majorityof these contract sales have now ceased; however, there are some products whichwill continue to be supplied in 2003.

 

***Cost of Sales***

 
|                                      |   | **2002**             |   | **2001** |   | **%** |   |
|-------------------------------------------|--------|----------------------|--------|----------|--------|-------|--------|
|                                      |   | **(£ million)** |   |     |   |
| Cost of sales from  continuing operations |   | 709.8                |   | 702.8    |   | 1.0   | %      |

 

Costof sales from continuing operations increased from £702.8 million in 2001to £709.8 million in 2002, an increase of £7.0 million, or 1.0%. Thiscompares to a sales increase of £45.5 million or 3.6% for the year. As aconsequence, there has been an improvement in gross profit margin predominantlydriven by the company’s cost reduction strategy. This strategy includes theimplementation of manufacturing efficiency projects and the securing ofprocurement savings through our “e Sourcing initiative,” which allowssuppliers to tender for contracts on-line. We are also continuing to implementchanges in ways of working across our U.K. and Northern European supply chain.The improvement in margin is also partly attributable to the company’s overallsales mix which has benefited from more higher-margin branded product sales andless lower-margin retailer brand and non-strategic products.

 

***Gross Profit***

 
|                                     |   | **2002**             |   | **2001** |   | **%** |   |
|------------------------------------------|--------|----------------------|--------|----------|--------|-------|--------|
|                                     |   | **(£ million)** |   |     |   |
| Gross profit from  continuing operations |   | 598.5                |   | 560.0    |   | +6.9  | %      |

 

33

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Grossprofit increased from £560.0 million in 2001 to £598.5 million in 2002, anincrease of £38.5 million, or 6.9%. This equates to a gross profit marginof 45.7% in 2002 compared to 44.3% in 2001. This improvement in margin isattributable to an improved product mix and product cost-reduction initiatives,as described under “Cost of Sales,” and recovery of cost inflation throughprice increases.

 

***Distribution, Selling and MarketingExpenses***

 
|                                                                    |   | **2002**             |   | **2001** |   | **%** |   |
|-------------------------------------------------------------------------|--------|----------------------|--------|----------|--------|-------|--------|
|                                                                    |   | **(£ million)** |   |     |   |
| Distribution, selling  & marketing costs from continuing operations |   | 385.8                |   | 365.8    |   | +5.5  | %      |

 

Distribution,selling and marketing expenses increased from £365.8 million in 2001 to£385.8 million in 2002, an increase of £20.0 million, or 5.5%. Theyear-on-year increase is the result of an increase in marketing expenditurewhich has risen by 15.9% between 2001 and 2002. We have increased expenditureon new product launches and re-launches and incurred additional advertising andmarketing expenditure to support our priority brands. The other categories ofdistribution, selling and marketing expenditure have reduced by 8.6% between2001 and 2002. This is consistent with our strategy of implementing costreduction initiatives to provide funds to reinvest in priority brand growth.

*** ***

***Administration Expenses***

 
|                                                   |   | **2002**             |   | **2001** |   | **%** |   |
|--------------------------------------------------------|--------|----------------------|--------|----------|--------|-------|--------|
|                                                   |   | **(£ million)** |   |     |   |
| Administration expenses  from continuing operations(1) |   | 84.5                 |   | 81.6     |   | +3.6  | %      |

 

----

(1)  Excluding operating exceptional items of£35.4 million (2001: £42.3 million) which are discussed separately.

 

Ouradministrative expenses increased from £81.6 million for 2001 to£84.5 million in 2002, an increase of £2.9 million, or 3.6%. This increasein administrative expense is the result of inflationary increases and, inparticular, a substantial increase in insurance premiums driven by the externalmarket. This has been offset by cost-reduction initiatives across the Group, inparticular the removal of layers of management through organizationalalignment.

 

Themajority of administrative costs are directly related to the operations of ourbusiness units and consequently charged to, and reflected in, the segmentaloperating results. The balance of administrative costs that are not includedwithin the segmental results are considered central costs and representcorporate governance costs, including executive costs, and costs of our legal,company secretarial, pension administration, tax and treasury functions. Thesecosts have decreased from £11.9 million in 2001, to £11.5 million in 2002.

* *

*Other Income*. Our other incomeconsists principally of royalties received in connection with long-standinglicensing arrangements for certain brands in Japan and the United States, theresults of undertaking hedging in connection with foreign currency transactionsand any other income that arises from time to time that it is appropriate toinclude in other income. Other income for 2002 amounted to £6.1 million comparedto £1.0 million for 2001. The higher income in 2002 was primarily the result ofhedging our foreign currency transactions which, due to fluctuations in theexchange rates during that period, particularly in connection with our U.S.dollar transactions, resulted in gains. Some of the gains offset losses arisingin our Export business.

 

34

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*OperatingProfit Before Exceptional Items and Goodwill Amortization*. Operating profit before exceptional items and goodwillamortization increased from £113.8 million in 2001 to £134.2 millionin 2002, an increase of £20.4 million, or 17.9%. The growth is a result ofsales growth, improved margins due to the shift of sales to higher-marginproducts and cost-reduction programs.

 

*GoodwillAmortization.* Goodwillamortization was £40.7 million for 2002 compared to £36.4 million for2001. The goodwill amortization for 2002 and 2001 consists of the amortizationof the goodwill arising on the UB acquisition completed in April 2000 andthe acquisitions of UB Iberia and UB Tunisia completed in July 2000and April 2001, respectively. In addition, in 2002, there has been anadditional goodwill amortization charge of £4.0 million to reflect theimpairment of the goodwill attributed to the Benelux Snacks business in April2000.

 

*Interest.*Interest for 2002 was £142.8 million arisingmainly on the debt incurred in connection with the UB acquisition. Interest for2001 amounted to £154.9 million. The decrease reflects the full-year effect ofthe reduced interest cost of the Notes, issued in April 2001, compared tothe original bridging finance that they replaced, and the effect of repaymentsmade under the senior facilities agreement.

* *

*Taxation.*We had a tax credit of £14.1 million for2002 compared to a tax credit of £28.2 million for 2001. The movement inthe year on year tax credit of £14.1 million is due to a reduction of £11.4million in the deferred tax credit arising under FRS 19, an increase in thecurrent year current tax charge of £0.2 million, a reduction in the prior yearcurrent tax credit of £2.6 million and a decrease in the joint venture taxcharge of £0.1 million.

 

**Segmental Performance**

* *

*U.K. Biscuits.* Sales increased from £498.6 million in 2001 to£510.7 million in 2002, an increase of £12.1 million, or 2.4%. Thisimprovement in performance reflects our strategy of increasing sales ofpriority brands. Branded sales grew 4.0%, primarily due to sales of *McVitie’s *corebrands, which increased by 12.4%. The launch of *McV Munchbites* in the firstquarter, the re-launch of the *McVitie’s*range in the second quarter, andthe launch of *McV Cookies* inthe third quarter of the year have contributed to our sales growth. Inaddition, *McVitie’s*cake sales increased by 12% in 2002 due to the success of new ranges and newproduct development launches particularly during the second quarter. Sales ofnon-branded product declined by 3% due to an 18% decrease in contractmanufacturer sales to Danone. Danone has given notice to terminate the manufacturingcontract entered into at the time a number of our overseas businesses wereacquired by Danone. The contract was substantially terminated by the end of2002, although some products continue to be supplied in 2003. Price increaseswere successfully implemented across the range of brands in the first quarterof 2002.

 

Duringthe third quarter of 2001, the company announced its intention to close itsmanufacturing facility in Hatton, Scotland and in the third quarter of 2002,the facility was sold.

 

InFebruary 2003, following a detailed review of U.K. biscuit manufacturingfacilities, we announced a proposal to close the Ashby de la Zouch biscuitfactory by the end of 2004. We are currently in consultation with our employeesconcerning this proposal.

 

35

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Operating profit beforegoodwill and exceptional items rose from £71.3 million in 2001 to £72.0million in 2002, an increase of £0.7 million, or 1.0%. This increase is due toincreased turnover and gross profit and overhead savings, offset by increasesin marketing expenditure. The average gross margin of U.K. biscuits sales rosefrom 57.9% in 2001 to 58.5% in 2002. The improvement in margin was achievedthrough our continuing strategy of obtaining manufacturing and purchasing costsavings and the impact of an improving mix of brands as we achieve growth inour branded portfolio. Marketing and promotional expenditure increased by 21%compared to 2001 due to an increase in promotional activity and an increase insupport for the aforementioned new product launches and the relaunch of the *McV*brand.

* *

*Northern EuropeBiscuits.* Sales increasedfrom £185.6 million in 2001 to £195.6 million in 2002, an increase of £10.0million or 5.4% after taking account of currency translation gains of£4.0 million. This was the result of our strategy of focusing on prioritybrands while simultaneously reducing investment in non-strategic brands. AcrossNorthern Europe, branded sales rose by 6.0% compared to 2001, driven predominantlyby *BN*and*Sultana*sales.*BN*salesincreased by 10% across Northern Europe, compared to 2001, due to thesuccessful launches of *BN Max, BN Mini* *Max*and *BNPetit Dejeuner*. *Sultana* sales have risen by 25% comparedto 2001, driven by the launch of *Sultana Start* and *Sultana Fruit and Cereals*.Our strategy of focusing on higher-margin products and ongoing manufacturingcost savings resulted in an increase in margin from 62.5% in 2001 to 65.8% in2002. Overhead cost saving initiatives have allowed us to increase ourmarketing expenditure by 12% compared to 2001.

 

As aresult of improved margins and strict cost control, operating profit beforegoodwill and exceptional items was £5.7 million in 2002. This compares to anoperating loss before goodwill and exceptional items of £6.6 million in 2001.

 

Substantialimprovement in profitability of the Northern Europe business is a key componentof our business strategy. In 2001, we undertook a review of overheads acrossNorthern Europe. As a result of the review, 110 people have left the business.In addition, we have reviewed our supply chain processes across Northern Europeand as a result, significant organizational changes are being implemented whichwill drive improvements in manufacturing efficiency. As part of this process weconcluded a CATS (*Cessation Activit**és TravailleursSalaries*) Agreement with ourFrench employees during the year. CATS is a government-sponsored scheme wherebyemployees over 55 years of age are offered early retirement and the cost of thescheme is shared between the French government and the employer. The agreementis valid for five years and will conclude in 2006. The closure of our Edebiscuit factory in the Netherlands was completed in January 2002.

* *

*Southern EuropeBiscuits.* Sales increasedfrom £156.8 million in 2001 to £183.6 million in 2002, an increase of £26.8million, or 17.1% after taking account of currency gains of £4.1 million.The underlying increase in turnover was driven by branded sales which increasedby 14% compared to 2001. Sales have increased across the portfolio of brandswith *Filipinos,Chiquilin*and *Fontaneda* benefiting from successfuladvertising campaigns and the launch of *Chiquilin Energy* and *Fontaneda Diver*and as a result, marketing expenditure has increased by 18.1% compared to 2001.

 

Operatingprofit before goodwill and exceptional items has increased from £11.7 millionin 2001 to £18.0 million in 2002. The significant increase in sales volume, asmall increase in gross margin and the strict control of overheads during theyear have offset the increase in marketing spend.

 

36

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InDecember 2002, we sold the Aguilar biscuit facility in Spain to Groupo Siro,and transferred some of the production undertaken at that facility to our otherSpanish biscuit facilities. As part of the disposal agreement a manufacturingsupply agreement has been entered into with Groupo Siro whereby the group willpurchase finished product over a three-year period.

* *

*U.K. Snacks.* Sales increased from £309.0 million in 2001to £309.6 million in 2002. During the first quarter of 2002, sales acrossthe range decreased by 6.4% compared to the first quarter of 2001. This wasdriven by an especially high level of promotional activity undertaken by ourcompetitors. In the remaining three quarters of 2002, we have recovered thesales lost in the first quarter and as a result our full-year sales of prioritybrands and branded products have increased by 5.5% and 1.1%, respectively. Ourprogram of new product development, media expenditure and promotionalactivities has continued to be delivered. Among our branded portfolio, *MiniCheddars* introduced new flavor variants, driving sales up 15.4%while *McCoys*delivered an 11.4% sales increase compared to 2001. This was achieved by theintroduction of a new sharing format with dip and a significant increase inmarketing expenditure. The *Hula Hoop* range was extended with thelaunch of *HulaHoop Shoks* and additional flavor variants on existing product lines.The performance of the *Skips* range was aided by the launch of *Skips BuzzBoltz* and *Skips Tickle Pickle*. The increase inour priority brand sales was offset by a decrease in the sales of lower-marginretailer and non-strategic brands. The U.K. savory snacks market remains highlycompetitive with Walkers (Pepsico) leading the market and as part of ourstrategy, we have invested heavily in the priority brands to drive growth whileat the same time pursuing a long-term brand-building strategy. The U.K. nuts marketis also extremely competitive; however, we remain the clear market leader.

 

Operatingprofit before goodwill and exceptional items has decreased from £38.2 millionin 2001 to £35.2 million in 2002, driven by the increased marketingexpenditure. Total marketing and promotional expenditure increased by 15%compared to 2001, with the aforementioned new product development launchesaccounting for a significant portion of the increase. This has been partiallyoffset by savings in overheads resulting from cost-reduction initiatives.

 

*General Export.* Our strategy for the export segment is to managethe existing portfolio of revenues to improve the overall profitability of theexport business by prioritizing investment and reducing activity innon-profitable areas. Sales have decreased from £82.9 million to £79.7 milliondue to the impact of foreign exchange transaction losses and the implementationof our strategy to exit from non-profitable business. The foreign exchangetransaction losses are mitigated by hedging gains included in Other Income.

 

Operatingprofit before goodwill and exceptional items increased from £12.2 million to£17.6 million. This is attributable to an increase in gross margin from 49.4%in 2001 to 50.4% in 2002, and the implementation of cost-reduction programswhich have resulted in the closure of a number of regional offices and areduction in the number of head office staff.

* *

*Other.* Benelux Snacks sales decreased from £29.9 millionto £29.1 million and the operating loss before goodwill and exceptional itemsincreased from £1.3 million in 2001 to £2.8 million in 2002. The snacksmarkets have been particularly competitive in the Netherlands and Belgiumduring 2002; and this has resulted in a decline in our branded sales. Thedecrease in branded sales has been compensated for by an increase inretailer-brand sales. This change in the Benelux sales portfolio has driven anadverse mix and hence an increase in the operating loss before goodwill andexceptional items. A new management team have now been put in place toundertake appropriate action to reverse the decline in branded sales.

 

37

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***Fiscal 2001 (Year ended December 29, 2001)compared to Fiscal 2000 (Year ended December 30, 2000)***

 

**Continuing Operations**

 

Forthe purposes of comparison we have adjusted the 2001 results to exclude theresults of UB Tunisia, which was acquired in April 2001, and the first sixmonths of UB Iberia, which was acquired in July 2000.

 

***Turnover***

 
|                                 |   | **2001**             |   | **2000** |   | **%**  |   |
|--------------------------------------|--------|----------------------|--------|----------|--------|--------|--------|
|                                 |   | **(£ million)** |   |     |   |
| Turnover from  continuing operations |   | 1,262.8              |   | 1,163.0  |   | +8.6   | %      |
| *Less:*  UB Tunisia             |   | (6.7                 | )      |     |   |   |   |
| *Less:*  UB Iberia              |   | (71.7                | )      |     |   |   |   |
| Adjusted Turnover                    |   | 1,184.4              |   | 1,163.0  |   | +1.8   | %      |

 

Turnover from continuing operations for 2001increased from £1,163.0 million in 2000 to £1,262.8 million in 2001, anincrease of £99.8 million, or 8.6%. After deducting the increase attributableto the year-to-date results of UB Tunisia and the first-half 2001 results of UBIberia, the underlying sales increased by £21.4 million, or 1.8%, after takingaccount of currency translation losses of £5.0 million. The key elements of ourstrategy in relation to our brands are to drive growth in priority brands byproviding increased focus and investment in core brands while managingnon-strategic brands to maximize profitability. Retailer brands are also beingmanaged to drive profitability and, as a result, several low-margin productshave been withdrawn. We have made significant progress in achieving thisstrategy with total branded sales growth of 3.7% across our Group and morespecifically, branded sales growth of 6.5% in U.K. Biscuits, 2.9% in NorthernEurope, 5.5% in Southern Europe and 7.0% in U.K. Snacks. In addition, sales ofour less-profitable, retailer-brand products have declined in 2001 by 10.4%, inline with our strategy to manage the retailer-brand portfolio to maximizeprofit.

 

***Cost of Sales***

*** ***
|                                      |   | **2001**             |   | **2000** |   | **%**  |   |
|-------------------------------------------|--------|----------------------|--------|----------|--------|--------|--------|
|                                      |   | **(£ million)** |   |     |   |
| Cost of sales from  continuing operations |   | 702.8                |   | 682.8    |   | +2.9   | %      |
| *Less:*  UB Tunisia                  |   | (3.0                 | )      |     |   |   |   |
| *Less:*  UB Iberia                   |   | (36.9                | )      |     |   |   |   |
| Adjusted Cost of Sales                    |   | 662.9                |   | 682.8    |   | -2.9   | %      |

 

Costof sales from continuing operations increased from £682.8 million in 2000to £702.8 million in 2001, an increase of £20.0 million, or 2.9%. Afterdeducting the increase attributable to the year-to-date results of UB Tunisiaand the first-half 2001 results of UB Iberia, underlying cost of sales has decreased by £19.9 million or 2.9% whilewe have achieved an increase of 1.8% in our underlying sales for the sameperiod. This improvement in margin is partly attributable to the company’soverall sales mix, which has been driven towards higher-margin branded productsand away from lower-margin retailer brand and non-strategic products. Inaddition, the cost-reduction strategy relating to manufacturing efficienciesand procurement also resulted in significant savings. During the third quarterof 2001, we began the implementation of our “e Sourcing initiative”. We useinternet-based software that allows our suppliers to tender a bid for ourbusiness on-line. This has resulted in successful cost savings across a numberof input categories, including corrugated packaging, fats and oils, dairy, andoffice supplies.

 

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***Gross Profit***

 
|                                     |   | **2001**             |   | **2000** |   | **%**  |   |
|------------------------------------------|--------|----------------------|--------|----------|--------|--------|--------|
|                                     |   | **(£ million)** |   |     |   |
| Gross profit from  continuing operations |   | 560.0                |   | 480.2    |   | +16.6  | %      |
| *Less:*  UB Tunisia                 |   | (3.7                 | )      |     |   |   |   |
| *Less:*  UB Iberia                  |   | (34.8                | )      |     |   |   |   |
| Adjusted Gross Profit                    |   | 521.5                |   | 480.2    |   | +8.6   | %      |

 

Grossprofit increased from £480.2 million in 2000 to £560.0 million in 2001, anincrease of £79.8 million, or 16.6%. This equates to a gross profit marginof 44.3% in 2001 compared to 41.3% in 2000. After deducting theincrease attributable to the year-to-date results of UB Tunisia and thefirst-half 2001 results of UB Iberia,the underlying gross profit has increased by £41.3 million, or 8.6%, andthe underlying gross profit margin has increased from 41.3% to 44.0%. Thisimprovement in margin is attributable to an improved product mix, recovery ofcost inflation through price increases and product cost-reduction initiatives.

 

***Distribution, Selling and MarketingExpenses***

 
|                                                                    |   | **2001**             |   | **2000** |   | **%**  |   |
|-------------------------------------------------------------------------|--------|----------------------|--------|----------|--------|--------|--------|
|                                                                    |   | **(£ million)** |   |     |   |
| Distribution, selling  & marketing costs from continuing operations |   | 365.8                |   | 309.1    |   | +18.3  | %      |
| *Less:*  UB Tunisia                                                |   | (1.6                 | )      |     |   |   |   |
| *Less:*  UB Iberia                                                 |   | (27.8                | )      |     |   |   |   |
| Adjusted Distribution,  Selling & Marketing Expenses                |   | 336.4                |   | 309.1    |   | +8.8   | %      |

 

Distribution,selling and marketing expenses increased from £309.1 million in 2000 to£365.8 million in 2001, an increase of £56.7 million, or 18.3%. Afterdeducting the increase attributable to the year-to-date results of UB Tunisiaand the first-half 2001 results of UB Iberia, underlying costs increased by £27.3 million, or 8.8%. The keyreason for this cost increase was our investment in marketing, targeted at ourpriority brands within U.K. Biscuits, Northern Europe, Southern Europe and U.K.Snacks.

 

***Administration Expenses***

 
|                                                   |   | **2001**             |   | **2000** |   | **%**  |   |
|--------------------------------------------------------|--------|----------------------|--------|----------|--------|--------|--------|
|                                                   |   | **(£ million)** |   |     |   |
| Administration expenses  from continuing operations(1) |   | 81.6                 |   | 88.9     |   | -8.2   | %      |
| *Less:*  UB Tunisia                               |   | (0.3                 | )      |     |   |   |   |
| *Less:*  UB Iberia                                |   | (3.4                 | )      |     |   |   |   |
| Adjusted Administration  Expenses                      |   | 77.9                 |   | 88.9     |   | -12.4  | %      |

 

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(1)Excluding operational exceptional items of £42.3 million (2000: £26.8 million)which are separately discussed.

 

Ouradministrative expenses decreased from £88.9 million for 2000 to £81.6 millionin 2001, a decrease of £7.3 million, or 8.2%. After deducting theincrease attributable to the year-to-date results of UB Tunisia and thefirst-half 2001 results of UB Iberia,our underlying administrative costs decreased by £11.0 million, or 12.4%. Thekey reason for this cost reduction has been the overall re-alignment of ouroverhead structure to reflect our new category structure. Steps have alreadybeen taken to remove layers of management as the organization is re-aligned toreflect a category-based operating structure that is supported by Group-widesupport services. In addition, the U.K. Southeast head offices wereconsolidated in 2001.

 

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Themajority of administrative costs are directly related to the operations of ourbusiness units and consequently charged to, and reflected in, the segmentaloperating results. The balance of administrative costs that are not includedwithin the segmental results are considered central costs and representcorporate governance costs, including executive costs, and costs of our legal,company secretarial, pension administration, tax and treasury functions. Thesecosts have decreased from £13.1 million in 2000, to £10.7 million in 2001.The decrease in overheads has been driven by an overall simplification ofoverhead structures to reflect the new category organization, a reduction inthe number of senior managers and the consolidation of the U.K. Southeast head offices.

 

*Other Income*. Our other incomeconsists principally of royalties received in connection with long-standinglicensing arrangements for certain brands in Japan and the United States, theresults of undertaking hedging in connection with foreign currency transactionsand any other income that arises from time to time that is appropriate toinclude in other income. Other income for 2001 amounted to £1.0 millioncompared to £10.9 million for 2000. Higher income in 2000 was primarily theresult of hedging our foreign currency transactions which, due to fluctuationsin the exchange rates during that period, resulted in gains.

 

*OperatingProfit Before Exceptional Items and Goodwill Amortization*. Operating profit before exceptional items andgoodwill amortization increased from £93.1 million in 2000 to£113.6 million in 2001, an increase of £20.5 million, or 22.0%. Ofthis increase, £3.9 million relates to first-half 2001 results for UB Iberiaand £2.0 million relates to post-acquisition results for UB Tunisia.****Theremaining £14.6 million of growth is a result of sales growth, improvedmargins due to the shift of sales to higher-margin products and cost-reductionprograms, and an overall reduction in administrative costs.

 

*GoodwillAmortization.* The amountsfor 2001 and 2000 have been restated to reflect the adoption of FRS 19.Restated goodwill amortization was £36.4 million for 2001 (£35.9 millionprior to restatement) and £22.7 million for 2000 (£22.4 million prior torestatement). The goodwill amortization for 2001 consists of the amortizationof the goodwill arising on the UB acquisition completed in April 2000 andthe acquisitions of UB Iberia and UB Tunisia completed in July 2000 andApril 2001, respectively. The goodwill amortization for 2000 reflects theamortization of goodwill by our predecessor, United Biscuits (Holdings) Limitedfor the fifteen weeks ended April 14, 2000 and amortization arising fromthe UB acquisition in April 2000 for the 37-week period ended December 30,2000.

 

*Interest.*Interest for 2001 was £154.9 million, arisingmainly on the debt incurred in connection with the UB acquisition. Interest for2000 was £107.1 million. This increase reflects the full-year charge in respectof the debt incurred in connection with the UB acquisition in April 2000.

 

*Taxation.* The amounts for 2001 and 2000 have been restatedto reflect the adoption of FRS 19. We had a tax credit of £28.2 millionfor 2001 (£0.6 million prior to restatement) compared to a tax charge of£48.4 million for 2000 (£3.1 million prior to restatement). The movementin the year-on-year tax charge of £76.6 million is due to a reduction in thedeferred tax charge arising under FRS 19 of £72.4 million, a reduction in thecurrent-year tax charge of £5.7 million, a reduction in the prior-year taxcredit of £1.8 million, and a decrease in the joint venture tax charge of£0.3 million. The decrease in the current-year current tax charge is due to theinterest expenses being fully available for offset against the 2001 U.K.taxable income, and relief being available in the Netherlands in respect of afactory closure and related redundancy costs.

 

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**Segmental Performance**

 

*U.K. Biscuits.* Sales increased from £488.6 million in 2000 to£498.6 million in 2001, an increase of £10.0 million, or 2.0%. Thisincrease in our performance was a result of our strategy of building ourpriority brands. Branded sales grew 6.5%, primarily due to increases in salesof *McVitie’s *corebrands and *Penguin*.The range of core brands benefited from the relaunch of the *Mini’s*range and successful in-store promotional programs, while *Penguin* gained sales as aresult of the launch of the new *Flipper Dipper* product and increased mediaand promotional spending. In addition, the *go ahead!* range continues to performstrongly following a re-launch of the range during February 2001. InApril 2001, price increases were successfully implemented across the rangeof brands.

 

Salesof retailer brand products declined by 8.7% in line with our strategy to manageour non-strategic portfolio for profit maximization, and following the generalmarket trend in this category.

 

Operatingprofit before goodwill and exceptional items rose from £65.2 million in2000 to £71.3 million in 2001, an increase of £6.1 million, or 9.4%. Theaverage gross margin of U.K. biscuits sales rose from 53.9% in 2000 to 56.4% in2001. This improvement in margin was primarily due to our ongoing strategy of manufacturingand purchasing cost savings plus the impact of an improving mix of brands as westrive towards growth in our branded portfolio. Marketing investment increasedcompared to 2000 due to the additional support provided to priority brands.This increase was funded by significant cuts in sales overheads, marketingoverheads and administration expenses.

 

*Northern EuropeBiscuits.* Sales increasedfrom £181.0 million in 2000 to £185.6 million in 2001, an increase of £4.6million, or 2.5% after taking account of currency translation losses of£2.4 million. This was driven by the strategy of focusing on prioritybrands while simultaneously reducing investment in non-strategic brands anddeliberately exiting from less-profitable product lines. Across Northern Europe,branded sales rose 2.9% compared to 2000, driven by the launch of *BN Max*and *SultanaStart. Delacre* also regained leadership of the assortment categoryand launched a new mini-assortment, *Delacre Temptation.* Our strategy offocussing on higher-margin products and ongoing manufacturing and cost savingsresulted in an increase in margin from 60.0% in 2000 to 61.9% in 2001. Furthercost savings from tight control of overhead spending enabled us to increase ourmarketing spending by 13.3%****compared to 2000. As a result of improvedmargins and tight cost control, operating loss before goodwill and exceptionalitems decreased by £1.3 million to £6.6 million in 2001 compared to aloss of £7.9 million in 2000.

 

Aspart of our strategy to cut costs, the closure of our Ede biscuit factory inthe Netherlands was completed in January 2002.

 

*Southern EuropeBiscuits.* We completed theacquisition of the Iberian business on July 11, 2000. Turnoverincreased by £75.4 million, from £81.4 million in 2000 to £156.8 million in 2001,after taking account of currency translation losses of £2.6 million.  Of this increase, £71.7 million isattributable to the first-half 2001 results of the Iberian acquisition;therefore, on an underlying basis, turnover has increased by £3.7 million. Theunderlying increase in turnover was driven by branded sales, which increased by5.5% over 2001. *Oreo, Chiquilin* and *Chips Ahoy!* benefited from the support ofsuccessful advertising campaigns, in-store promotions and the launch of *Oreos Ositos*.As a result of the increased advertising, marketing spending has increased by6% compared to 2000. Operating profit before goodwill and exceptional items hasincreased by £6.1 million to £11.7 million compared to 2000. Of thisincrease, £3.9 million relates to the acquisition of UB Iberia. Theremaining £1.6 million reflects the increase in priority brand sales, offset bythe increased marketing expenditure.

 

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*U.K. Snacks.* Sales increased from £299.4 million in 2000to £309.0 million in 2001, an increase of £9.6 million, or 3.2%. Sales ofpriority brands increased 12.7% compared to 2000, being primarily due toincreases in sales of *Hula Hoops, Mini Cheddars* and *McCoys*.All three brands benefited from the launch of new products. The *Hula Hoops*range was extended with the launch of *Hula Hoops XL* and *Hula Hoops Minis*, while the *MiniCheddars* and *McCoys* ranges were extended with theaddition of new flavor variants. This increase was partially offset by adecrease in the sales of lower-margin retailer and non-strategic brands, whichis in line with our overall business strategy. This strategy, in conjunctionwith ongoing manufacturing and cost savings has resulted in an increase inmargin from 59.4% in 2000 to 60.0% in 2001. The U.K. savory snacks and crispssector is very competitive, with Walkers (Pepsico) leading the market. As partof our overall strategy, we have invested heavily in our core brands in orderto drive growth, while at the same time pursuing a long-term brand-buildingstrategy. Total marketing investment increased by 27% compared to 2000, withthe aforementioned new product development launches accounting for asignificant portion of the increase. This increased support has beenfacilitated by a reduction in overheads. Operating profit before goodwill andexceptional items increased from £35.1 million in 2000 to £38.2 million in2001, an increase of £3.1 million, or 8.8%

 

*General Export.* Our strategy for the export segment is to managethe existing portfolio of revenues to improve the overall profitability of theexport business by prioritizing investment and reducing activity innon-profitable areas. Turnover increased by £2.3 million, from £80.6 million in2000 to £82.9 million in 2001; however, £6.7 million of the 2001 turnoverrelates to the turnover of the newly acquired UB Tunisia business and thereforeunderlying sales have decreased by £4.4 million. The overall profitabilityof the segment has been increased through cost-reduction programs which haveresulted in the closure of a number of regional offices and a reduction in thenumber of head office staff. Consequently, operating profit before goodwill andexceptional items has increased by £6.9 million, of which £2.0 millionrelates to the acquisition of UB Tunisia.

 

*Other.* The performance of our Benelux Snacks divisionduring 2001 was down compared to 2000 due to disruptions arising out ofnegotiations to dispose of the business in 2000. We ultimately decided not todispose of this business and, as part of our strategy to focus on core brands,the Benelux Snacks division is now managed under the Other business segment.Sales decreased from £32.1 million in 2000 to £29.9 million in 2001 and therewas an operating loss before goodwill and exceptional items of £1.3 million in2001, compared to a profit of £1.1 million in 2000.

 

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***Exceptional Items (continuing anddiscontinued operations)***

 

Inrespect of 2002, we recorded a total of £12.0 million as exceptionalitems, £35.4 million of which was recorded as an expense against operatingprofit and £23.4 million as a net non-operating credit.

 

Exceptionalitems charged against operating profit included £11.9 million inrestructuring charges relating to overhead reduction programs across the wholebusiness, £9.8 million in restructuring charges in connection withmanufacturing efficiency and overhead reduction programs in the United Kingdomand Northern Europe, £3.6 million in connection with a provision, relatingto anticipated costs in connection with surplus leasehold properties, requiredunder U.K. GAAP, £8.0 million in connection with fixed-asset impairmentsand £2.1 million relating to factory closures.

 

Non-operatingexceptional items consisted of £25.1 million received in connection with anadjustment to the purchase price of Keebler Company, a business sold by asubsidiary of United Biscuits to Inflo Holdings Corporation in 1996; £12.3million received in relation to a claim for refund of withholding tax paid inconnection with the reorganization of the U.S. business of United Biscuits in1992, of which £7.2 million was a refund of withholding tax and £5.1 millionwas interest attributable thereto; £1.2 million profit on disposal offixed assets; £0.8 million loss on disposal of the Hatton manufacturingfacility in Scotland and £14.4 million loss on the disposal of the Aguilarbiscuit manufacturing facility in Spain.

 

For2001, we recorded a total of £51.2 million as exceptional items,£42.3 million of which were recorded against operating profit and £8.9million as non-operating items. The exceptional items charged against operatingprofit included £2.2 million paid to settle a contract termination claimwith a Canadian distributor, £19.4 million in restructuring chargesrelating to the consolidation of our U.K. southeast head offices, £2.5million in restructuring charges relating to our southern European overheadreduction program, £1.5 million related to the closure of two distributiondepots, £16.2 million in connection with manufacturing efficiency programsand £0.5 million in restructuring charges relating to a branch officeclosure. The non-operating exceptional items were a £8.9 million loss ondisposal of fixed assets.

 

Forthe period from March 10, 2000 to December 30, 2000, we recorded a total of£19.1 million as exceptional items, £18.5 million of which wererecorded against operating profit and £0.6 million as non-operating items.The exceptional items charged against operating profit included £2.0 millionrelating to the integration of the Iberian operations with our existingoperations, £14.8 million principally relating to severance costsassociated with central overhead reductions and facility reorganizations and£1.7 million relating to our share of exceptional items of Young’s Bluecrest,which we disposed of in March 2001. Non-operating exceptional items primarilyrepresented losses on disposal of fixed assets.

 

Forthe 15-week period ended April 14, 2000, we recorded a total of £19.2million as exceptional items, £10.0 million of which were recorded againstoperating profit and £9.2 million of which were recorded as non-operatingitems. The exceptional items charged against operating profit included£5.7 million relating to non-cash write-downs of fixed assets and £4.3million principally relating to restructuring costs associated with centraloverhead reductions. Non-operating exceptional items included £8.6 millionrelating to costs associated with the UB acquisition, £1.0 million relatingto losses on disposal of businesses and £0.4 million relating to a gain ondisposal of fixed-asset investments.

 

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**B.****                                    Liquidity andCapital Resources**

*** ***

***Overview***

 

Duringthe past three years, our principal sources of funds were cash generated fromour operating activities, dispositions of assets and long-term borrowings. Ourprincipal uses of cash before the UB acquisition were for capital expenditures,acquisitions, working capital, debt service, taxes and dividends. In thefuture, we expect that our principal uses of cash will be to fund capitalexpenditures, the non-capital restructuring costs associated with implementingour cost-saving initiatives, working capital and to fund our debt service andrepayment obligations on the debt we incurred in connection with the UBacquisition and the Notes offering.

 

***Historical Cash Flows***

* *

*Cash Flow from Operating Activities*

 

Wehad a net cash inflow of £105.1 million from operating activities during 2002.This net inflow consisted of £188.3 million generated from operations,£31.0 million expended on rationalization and other exceptional items andan increase in working capital of £52.2 million. The increase in workingcapital includes £38.2 million included in accruals and deferred income whichrelated to an advance received from Nabisco in anticipation of its acquisitionof the Group’s operations in China. The disposal was completed in the firstquarter of 2002 and the advance was reclassified as sale proceeds. The compensatinginflow, in the first quarter of 2002, is reflected in cash flow fromacquisitions and disposals for 2002. The underlying increase in working capitalis therefore £14.0 million. This increase is due to lower creditors as a resultof the timing of payments to our suppliers in December and higher debtors dueto higher sales.

 

Wehad a net cash inflow of £66.9 million from operating activities during 2001.This net inflow consisted of £166.5 million generated from operations,£31.5 million expended on rationalization and other exceptional items andan increase in working capital of £68.1 million. The increase inworking capital includes £51.8 million included in accruals and deferred incomewhich related to loans received from Danone and Nabisco in anticipation oftheir acquisitions of the Group’s operations in Finland, Poland and China. Atotal of £50.6 million of this relates to the loan repayment on completion ofthe sale of the Group’s operations in Finland and Poland, and £1.2 millionreflects a partial loan repayment in connection with an adjustment to the saleprice of the Group’s Chinese operations. The underlying increase in workingcapital is therefore £16.3 million. This increase is largely due to higherdebtors as a result of the timing of month end payments from retail customersin December.

 

Ournet cash inflows from operating activities during 2000 were £156.0 million, anincrease of £78.0 million, or 100.0%, from £78.0 million during 1999. Our netcash flow increased by £6.5 million as a result of the acquisition of theIberian business from Nabisco in July 2000, while our cash flow decreased by£12.4 million as a result of the disposition of our operations in Europe andAsia to Danone and Nabisco and the sale of our chilled and frozen foods operations.We reduced our working capital by £39.3 million as we lowered the levels of ourinventory and our trade debtors at the end of 2000. We also reduced ourrestructuring expenditure by £20.0 million during 2000, of which£2.4 million was associated with discontinued operations.

 

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# ***Cash Flow from Returns on Investments and Servicing ofFinance***

 

During 2002, we had acash outflow of £65.6 million in connection with servicing our debts and a cashinflow of £2.4 million in respect of monies placed on short-term deposits. Thenet outflow of £63.2 million is a decrease of £7.0 million compared with 2001. The decrease reflects the full-year effect of thereduced interest cost of the Senior Subordinated Notes, issued inApril 2001, compared to the original bridging finance that they replaced,and the effect of repayments made under the Senior Facilities Agreement.

 

During 2001, we had acash outflow of £73.8 million in connection with servicing our debts and a cashinflow of £3.6 million in respect of monies placed on short-term deposits. Thisnet outflow of £70.2 million is an increase of £3.3 million compared with 2000,and represents a full year’s debt service following the UB acquisition.

 

# ***Cash Flow from Capital Expenditure and Financial Investment***

 

During 2002, we had a netcash outflow of £54.6 million in connection with capital expenditure, anincrease of £6.9 million compared to 2001. We incurred capital expenditure of£59.2 million and received £4.6 million in connection with the disposal offixed assets. Additionally, we had a cash inflow of £0.5 million in connectionwith a loan made to us by our joint venture company, KP Ireland Ltd.

 

During 2001, we had a netcash outflow of £47.7 million in connection with capital expenditure, areduction of £4.6 million compared to 2000. Additionally, we had a cash inflowof £0.6 million in connection with a loan made to us by our joint venture, KPIreland Ltd.

 

In 2000, our net cashoutflow in connection with capital expenditure was £52.3 million, a reductionof £34.5 million compared to 1999. The reduction was a result of the disposalof our frozen and chilled food businesses and the fact that we expendedapproximately £20.0 million on the installation of SAP, an integrated systemspackage to support our business during 1999. Additionally, in 2000, we had anet cash inflow of £545.0 million of loans made to us by our Equity Sponsors aspart of the financing for the UB acquisition. We also had a cash inflow of £0.4million in connection with a loan made to us by our joint venture, KP IrelandLtd, and £0.5 million in connection with the sale of a small tradeinvestment.

 

# ***Cash Flow from Acquisitions and Disposals***

 

During 2002, we had a netcash inflow of £53.5 million from acquisitions and disposals. We received £38.2million relating to the completion of the disposal of the group’s operations inChina to Nabisco during the first quarter of 2002. The compensating outflow of£38.2 million is reflected in cash flow from operating activities for theyear to date. In the second quarter of 2002, we received £25.1 million relatingto an adjustment to the sale price of Keebler Company sold by United Biscuits(Holdings) Ltd in 1996.

 

During 2001, we had a netcash inflow of £59.9 million from acquisitions and disposals, which wasprincipally attributable to the disposal of our Polish and Finnish operationsand our 44.2% interest in Young’s Bluecrest Ltd.

 

Net cash outflows fromacquisitions and disposals during 2000 were £1,156.0 million, of which £1,312.3million related to the costs associated with the UB acquisition, and£156.3 million related to the Danone and Nabisco Transactions.

 

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***Capital ExpenditureRequirements and Restructuring Costs***

 

During2002, we incurred capital expenditures of £59.2 million. Approximately£31.2 million of these expenditures were incurred in connection with thedelivery of cost-saving initiatives. The balance of expenditures was incurredto support new product development initiatives and essential health, safety ormaintenance projects. Additionally, during 2002, we incurred restructuringcosts of £36.1 million relating to cost-saving initiatives. Capitalexpenditures and restructuring costs were funded from cashflow from operations.

 

Weexpect to invest in capital and restructuring costs at comparable levels during2003. We plan to fund all of these expenditures from cashflow from operations.

 

Wemay also, from time to time, consider acquisitions of investment in otherbusinesses, which may require additional funding.

 

***Debt ServiceObligations***

 

As aresult of the debt we incurred in connection with the UB acquisition and theNotes offering, we have significant debt service and repayment obligations underthe senior credit facility and the Notes. In 2002, we incurred interest chargestotaling £63.7 million in respect of our borrowings under the senior creditfacility, the Senior Subordinated Notes and other bank facilities.

 

*Senior Credit Facility*

 

Thesenior credit facility consists of four term loan facilities (Facilities A, B,C and D) and a revolving facility. As of December 28, 2002, we had borrowed thefull £535.0 million under the term loan facilities, £453.7 million ofwhich remained outstanding.

 

Theloan facilities were used to finance the UB acquisition, support therefinancing of the senior subordinated bridge facility and the repayment, onMay 1, 2001, of $125.0 million aggregate principal amount of 9% Notes due2001. The senior credit facility provides that the term loan facilities will berepaid as follows:

 

•                    Facility A (£279.8 million principal amount) inthirteen semiannual installments that began in April 2001 and will end in April2007. As of December 28, 2002, £220.5 million remained outstanding.

 

•                    Facility B (£109.1 million principal amount) intwo equal installments in November 2007 and April 2008. As of December 28,2002, £105.4 million remained outstanding.

 

•                    Facility C (£109.1 million principal amount) intwo equal installments in November 2008 and April 2009. As of December 28,2002, £106.1 million remained outstanding.

 

•                    Facility D (€22.8 million principal amount and£23.0 million principal amount) in a single installment in October 2009. As ofDecember 28, 2002, £21.7 million remained outstanding.

 

Weare currently scheduled to make the following principal payments on the termloan facilities under the senior credit facility:

 

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| **Year** |   | **Total  Payment  Amount*** |   |
|----------|--------|-----------------------------|--------|
|     |   | **(£ million)**        |   |
| 2003     |   | 28.4                        |   |
| 2004     |   | 48.0                        |   |
| 2005     |   | 54.4                        |   |
| 2006     |   | 61.4                        |   |
| 2007     |   | 81.0                        |   |
| 2008     |   | 105.7                       |   |
| 2009     |   | 74.8                        |   |
| Total    |   | 453.7                       |   |

 

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*                                         Excludes scheduled installment payments of £11.9million made in 2001 and £14.9 million made in April 2002 and voluntaryprepayments of £39.8 million and £15.0 million made in April 2002 and May 2002,respectively. As at December 28, 2002, the debt outstanding reflectsan unfavorable exchange movement during the year of £0.5 million in respect ofFacility D euro principal. A further voluntary prepayment of £15.0 million wasmade in January 2003.

 

Therevolving credit facility provided for revolving advances and the issuance ofletters of credit in an aggregate amount of up to £90.0 million outstanding atany time to be used for general corporate purposes. Each advance made under therevolving credit facility must be repaid on the last day of each interestperiod relating to it, although amounts are available to be re-borrowed,subject to the maximum limit available under the facility.

 

Thecompany reduced the revolving credit facility to an aggregate amount of £60million in May 2002. After giving effect to the £1.5 million reserved foroutstanding letters of credit and £6.0 million reserved to cover the dayto day banking requirements of the U.K. business, being £4.6 million foran overdraft facility and £1.4 million to cover contingent liabilities, wehad £52.5 million available to be drawn as of December 28, 2002.

 

Advances under thevarious facilities bear interest at rates per annum equal to LIBOR plus, whereappropriate, any applicable mandatory liquid asset costs, plus the followingapplicable margins: (1) 2.25% per annum for Facility A; (2) 2.75% perannum for Facility B; (3) 3.25% per annum for Facility C; (4) 3.50% perannum for Facility D; and (5) 2.25% per annum for the revolving creditfacility. As of March 31, 2001, there was a margin adjustment mechanism inrelation to Facility A and the revolving credit facility in effect, under whichthe applicable margins may be reduced based on the ratio of total debt toEBITDA (as defined in the senior credit facility) reflected in the financialstatements delivered for the previous accounting quarter. As at December 28,2002, the margin applicable to Facility A and the revolving credit facility is1.75%.

 

An issuing bank fee of0.125% per annum is payable quarterly in arrears on the issuing bank’s exposureunder any letters of credit in addition to the margin applicable to therevolving credit facility. Commitment commissions are payable quarterly inarrears at a rate of 0.75% per annum on the undrawn and uncanceled portion ofthe revolving credit facility.

 

Underthe senior credit facility, we are required to make mandatory prepayments insome circumstances out of the net proceeds we receive from price adjustments inconnection with the Transactions, asset disposals, insurance claims and surpluscash. We are also permitted to make voluntary prepayments on the loans underthe senior credit facility. We are required to comply with financial covenantsunder the senior credit facility. These covenants require us to maintainspecified consolidated financial ratios for EBITDA to net cash interest, totalnet debt to EBITDA and cash flow to total debt service. We must maintain:

 

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•                                          EBITDA to net cash interest ratio ranging from1.85 to 1.0 for the fiscal quarter ended December 28, 2002 to 3.9 to 1.0 forthe fourth fiscal quarter of 2008 and for every fiscal quarter afterwards;

 

•                                          total net debt to EBITDA ratio ranging from 4.6 to1.0 for the fiscal quarter ended December 28, 2002 to 1.1 to 1.0 for the firstfiscal quarter beginning in 2009 and for every fiscal quarter afterwards; and

 

•                                          cash flow to total debt service of 1.0 to 1.0.

 

Thesenior credit facility places annual limits on our maximum capitalexpenditures. These limits increase from year to year, from £51.0 million in2002 and up to £62.5 million in 2009 and for each year thereafter with theright to carry forward any unspent capital expenditures in any given year up toa maximum carryforward in any given year of £10.0 million. The capitalexpenditure limit for any financial year can also be increased by a further£5.0 million out of the annual *de minimis* allowance. We are currently incompliance with all of our financial covenants under the senior creditfacility.

 

*Hedging Arrangements*

 

Regentrealm is requiredby the terms of the senior credit facility to enter into hedging arrangementsto provide protection in respect of interest rate risk exposure arising becausethe financing under the senior credit facility is at floating interest rates.The hedging arrangements must cover at least 50% of the amount of the totalcommitments under the term loan facilities for a period of at least two yearsfrom the date of the closing of the UB acquisition. This requirement cameto an end during 2002. Hedging banks are required to enter into theintercreditor deed and will be granted security, guarantees and subordinationrights which rank at least equal to the obligations of the lenders under thesenior credit facility.

 

Regentrealm currently hasthree interest rate swaps in place to hedge its interest rate exposure underthe senior credit facility. Under the two swap arrangements which are currentlyeffective, it receives interest at six- month LIBOR and pays interest at 5.685%on £150 million and 6.61% on £66.2 million. The £150 million swap matureson October 28, 2005 or October 28, 2003, at the bank’s option. Theoriginal principal amount of the £66.2 million swap was £420.0 million. Theprincipal will further reduce to £62.5 million for the period fromApril 29, 2003 to closure on October 28, 2003. The third swap arrangementcomes into effect for a three year period from October 28, 2003. Under thisarrangement, Regentrealm will receive interest at six-month LIBOR and payinterest at 4.78% on £62.5 million.

 

*Proposed Amendment to the Terms of the Senior CreditFacility*

 

We arediscussing a proposal to amend the terms of our senior credit facility. Ifsuccessful, we anticipate that Term Loans A, B, C and D, totaling £438.9million at March 17, 2003, and the revolving credit facility totaling£60.0 million, of which £53.0 million is available to be drawn, will bereplaced by a five year term loan of £250.0 million and a revolving creditfacility of £225.0 million. It is anticipated that the term loan will haverepayments scheduled over a five year period; the margin on the term loan andthe revolving credit facility will be lower than the existing Term A loan and revolvingcredit facility; the cash flow covenant will be removed; the remainingcovenants will be reset and the revolving credit facility will be available forgeneral corporate purposes. We anticipate that the terms of the facility willbe amended before the end of the first quarter of 2003.

 

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*Senior Subordinated Notes*

 

In April 2001, UB Financeissued £120.0 million aggregate principal amount of Senior Subordinated Notesdue 2011 bearing interest at a rate of 103/4%per annum and €160.0 million aggregate principal amount of Senior SubordinatedNotes due 2011 bearing interest at a rate of 105/8%per annum, all of which were guaranteed by Regentrealm on an unsecured seniorsubordinated basis. Interest on the Notes is due on April 15 and October 15 ofeach year.

 

The Notes are scheduledto be repaid in one installment on April 15, 2011. In addition, at any timebefore April 15, 2004, we may choose to repurchase up to 35% of the Notes withthe proceeds from a public equity offering, at specified redemption rates andsubject to certain conditions. Except as described above, the Notes will beredeemable at our option after April 15, 2006, in whole or in part.In the event of a change of control, the holders of the Notes may require us torepurchase the Notes at 101% of the face amount, plus accrued interest andother amounts due thereon, if any.

 

The indenture governingthe Notes contains covenants limiting our ability to:

 

•                                          incur additional debt;

•                                          pay dividends or distributions on capital stockor repurchase capital stock;

•                                          make particular investments;

•                                          create liens on our assets to secure debt;

•                                          enter into transactions with affiliates;

•                                          merge or consolidate with another company; and

•                                          transfer and sell assets.

 

Thesecovenants are subject to a number of important limitations and exceptions.

 

*6.375% Sterling Bonds due 2009*

 

Inaddition to the senior credit facility and the Notes, as of December 28, 2002,we had outstanding £43,000 aggregate principal amount of 6.375% Bonds due 2009.

 

# ***Intercompany Loans***

 

UB Finance loaned theproceeds from the Notes offering to Regentrealm. UB Finance also loaned toRegentrealm the proceeds of the intercompany loans in the aggregate principalamount of £545.0 million made to UB Finance by its parent, Runecorp. Thepayment terms of the intercompany loan made with the proceeds of the Notesoffering mirror the payment terms of the Notes to enable Regentrealm to payamounts to the UB Finance equal to the amounts due from time to time under theNotes. These intercompany loans will be subordinated in right of payment toRegentrealm’s obligations under the senior credit facility.

 

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*Intercreditor Deed*

 

UB Finance, its parentcompanies and most of its subsidiaries are parties to the intercreditor deed.Until the date all obligations under the senior credit facility have beenrepaid in full, the intercreditor deed will, among other things:

 

•                                          prohibitUB Finance from making any payments with respect to the Notes other thanscheduled interest payments, costs and expenses relating to the issuance of theNotes and other amounts due under the terms of the indenture to the extent nototherwise prohibited by the intercreditor deed, *provided* that no paymentsmay be made during the continuation of a payment default or if a stop noticehas been issued (for up to 179 days in any 365-day period) in respect of anon-payment default under the senior credit facility;

 

•                                          prohibitUB Finance and Regentrealm and its subsidiaries from making any prepayments orrepayments on the Notes or any acquisition of the Notes, without the consent ofthe senior creditors, except in accordance with the terms of the indenture forthe Notes;

 

•                                          prohibitpayments from Regentrealm to UB Finance except on dates and in amounts not toexceed the scheduled interest and other payments due on the Notes plus certainmonitoring, oversight and financial advisory fees due to the Equity Sponsors, *provided*that no such payment will be permitted upon and during the continuation of apayment default or if a stop notice has been issued (for up to 179 days inany 365-day period) in respect of a non-payment default under the senior creditfacility;

 

•                                          prohibitany enforcement action by the Issuer on the intercompany loans made by it toRegentrealm until after the expiration of the period beginning on the date ofan occurrence of a payment default on the Notes and ending on the first tooccur of (1) the 179th day from the payment default date, (2) thedate on which an order is entered for the dissolution or winding-up ofRegentrealm or (3) the date on which the shareholders of Regentrealm passa resolution for the dissolution or winding-up of Regentrealm;

 

•                                          givethe lenders under the senior credit facility priority of payment oversubordinated debts, including the intercompany loans, in the event of anyinsolvency, bankruptcy, receivership, liquidation or reorganization proceedingrelating to Regentrealm or UB Finance; and

 

•                                          prohibitUnited Biscuits and its subsidiaries from making any payments toUB Finance or any of its parent holding companies other than to fund theforegoing payments and certain corporate overhead expenses and fees and taxespayable by Regentrealm, UB Finance or any of the parent holding companies of UBFinance, subject to an annual limit of £5.0 million (other than fortaxes).

 

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*General Considerations*

 

UBFinance is a holding company and does not have operations of its own. It relieson dividends and payments on its intercompany loans to Regentrealm to makepayments on the principal and interest of the Notes. Regentrealm is also aholding company and does not directly conduct any business operations.Regentrealm relies on dividends and other payments from our operatingsubsidiaries to generate funds to fulfill its obligations under theintercompany loans. For more information regarding these limitations and otherrestrictions that apply to UB Finance and Regentrealm, please see Item 3.D. “KeyInformation — Risk Factors — Ability to Service Debt,” and “— Holding CompanyStructure.”

 

Webelieve that the cash flow generated from our operating activities, togetherwith borrowings under the senior credit facility, should be sufficient to fundour debt service requirements, working capital needs, anticipated capitalexpenditures and restructuring costs and other operating needs for theforeseeable future. Our future operating performance and ability to service ourexisting and future debt, including the Notes, will be subject to futureeconomic conditions and to financial, business and other factors, many of whichare beyond our control.

 

**C.****                                    Research andDevelopment, Patents, Licenses, etc.**

* *

***Research and Development***

 

Our research anddevelopment unit is responsible for working to improve the taste, nutrition andconvenience of our products and developing new products. The unit also developsand implements plans for improving the efficiency of our manufacturing processand distribution system. Among the innovations and improvements developed byour research and development unit are our low-fat *go ahead!* products and ourtube packaging technology.

 

We spent £8.2 million,£6.4 million and £6.7 million on research and development in 2000, 2001 and2002, respectively. Research and development expenditures do not include allcosts associated with new product development. Cost-saving initiatives,together with a more focused research and development program have reduced ourexpenditure in 2001 and 2002. Our central technical facility is located in HighWycombe, United Kingdom, although we have research and development resourceslocated throughout our organization. The High Wycombe facility employsapproximately 56 professionals and has extensive pilot plant facilities andscientific laboratories, as well as an engineering facility.

 

***Trademarks and Licenses***

 

We own a substantialnumber of registered and unregistered trademarks in countries throughout theworld for use in connection with the sale, marketing and manufacture of ourbiscuit and snack products. These trademarks are critical to our operationsbecause brand-name recognition is a key factor in the success of many of ourproduct lines. The current registrations of these trademarks are effective forvarying periods of time and may be renewed periodically provided we comply withall applicable laws.

 

Nabisco has granted us anexclusive license for the manufacture, marketing, sale and distribution ofproducts under a number of material trademarks. We entered into an exclusivesublicense with Merola Finance B.V., a licensee of Nabisco, for themanufacture, sale and distribution of *Oreo*, *Chips Ahoy!*, *Air Crisps*, *Nabisco*(HouseMark), *Nabisco*(with Corner Triangle), *Ritz*and *Teddy Grahams*, in certainparts of Europe, North Africa and the Middle East. 

 

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Each of these licensesexpires the earlier of (1) five years following the occurrence of a change ofcontrol of United Biscuits or (2) the occurrence of a material breach by us ofany of the license agreements. Under the sublicense agreement with Merola, weare required to pay a royalty for net sales equal to 1.5% of the net salesprice of (x) all licensed products sold or distributed in the licensedterritory and (y) all products sold or distributed in Iberia, whether or notthese products bear the licensed trademarks, but excluding those productsbearing United Biscuits trademarks, up to a maximum amount equal to the netroyalty paid by Merola to Nabisco for calendar year 1999. As aconsequence of the agreement with Nabisco, effective from February 18, 2003,not to complete the acquisition of Nabisco’s business in the Middle East, theagreement with Merola Finance BV has been amended to exclude territoriesassociated with the Middle Eastern business. The sum of $959,000 was paid byNabisco as consideration for exclusion of such territories.

 

We acquired Nabisco’s *Royal*trademarkin most of the countries in Europe, the Middle East and Africa. Nabisco remainsthe owner of the *Royal*trademark in the rest of the world. We have agreedwith Nabisco that until July 2005, neither of us will actively market *Royal*-brandedproducts or establish any branch or maintain any distribution depot forproducts under the *Royal*trademark in the territories of theother party.

 

As part of ouracquisition of the *Royal*trademarks, Nabisco assigned to uslicense agreements with Del Monte Foods Italia, S.r.l., in relation to groceryproducts produced by it under the *Royal*trademark in Italy, and with AgnaLudvigsson, in relation to its manufacture and sale of baking powder andpuddings in Iceland under the *Royal*trademark.

 

We have entered into aknow-how cross license with Nabisco. Under this agreement, each party grants tothe other a non-exclusive, perpetual, irrevocable, royalty-free license to useand exploit its know-how regarding the manufacture and use of dairy-based, drydessert mixes marketed and sold under the *Royal*trademark.

 

We have granted anexclusive and royalty-free license to Nabisco to use some *Marbu*trademarks inconnection with the production and marketing of baked goods in Argentina,Chile, China and Indonesia and the *Filis* trademark in Mexico. The license isperpetual, but can be terminated by either party in the event of a materialbreach by the other party.

 

We have an ongoing,non-exclusive license with Mars (UK) Limited for the manufacture anddistribution of *Galaxy, Starburst, M&M’s, Bounty, Snickers*and *Milky Way*snackcakes in the United Kingdom. This license commenced on April 4, 1998 and may beterminated subject to specific provisions.

 

We also enter intolicense agreements in connection with various promotions, usually for ashort-term period. These short-term licenses typically run for a term of sixmonths to one year with varying promotional fees to be paid by us, depending onthe agreement. A typical short-term license allows us to use a particulartrademark within a specified territory on our branded products or in connectionwith in-store promotions or television or print advertising.

 

We also own licenses andpatents and possess know-how relating to our products and manufacturingprocesses and product packaging. These licenses, patents and know-how, alongwith the trademarks we own and that are licensed to use, represent one of ourmajor commercial assets.

 

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**D.****                                    Trend Information**

 

SeeItems 5.A. “Operating and Financial Review and Prospects — OperatingResults” and 5.B. “Operating and Financial Review and Prospects —Liquidity and Capital Resources” for a discussion of information required bythis item.

 

**ITEM 6****.        DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES**

 

**A.****                                    Directors, SeniorManagement**

 

The following table setsforth names and positions of the directors and executive management of UBFinance and Regentrealm.

 
| **Name**          |   | **Date of Birth** |   | **Position Held**                           |
|-------------------|--------|-------------------|--------|---------------------------------------------|
|              |   |              |   |                                        |
| Malcolm  Ritchie  |   | 06/13/54          |   | Chairman  and Chief Executive*              |
| Will  Carter      |   | 11/30/56          |   | Managing  Director – Snacks Category   |
| Ian  Cray         |   | 08/12/57          |   | Chief  Financial Officer                    |
| Graham  Johns     |   | 06/17/56          |   | Managing  Director – Biscuits Category |
| Kevin  McGurk     |   | 02/07/64          |   | Operational  Services Director              |
| Bill  Winthrop    |   | 05/23/50          |   | Group  Management Services Director         |
| Robert  Bradish   |   | 06/11/52          |   | Director*                                   |
| Graham  Clempson  |   | 08/25/61          |   | Director*                                   |
| Bertrand  Meunier |   | 03/11/56          |   | Director*                                   |
| Dominic  Murphy   |   | 03/14/67          |   | Director*                                   |

 

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*                                         Statutory director of UB Finance and Regentrealm.

 

**Malcolm Ritchie** was appointed as Chairman and Chief Executive inSeptember 2000. Before joining United Biscuits, Mr. Ritchie served asPresident of Heinz Europe, Executive Vice President of Heinz and as a member ofthe board of Heinz from 1998.  From 1994to 1997, Mr. Ritchie served as Managing Director of Heinz U.K. Beforejoining Heinz, Mr. Ritchie was Chief Executive of the European AmbientFoods Group of Hillsdown Holdings and had previously held management positionsin the food industry with Premier Brands and Cadbury Schweppes.

 

**Will Carter** was appointed ManagingDirector — Snacks Category, in January 2001. Mr. Carterserved as Managing Director of KP Foods from 1999 until 2001. Mr. Carterhas been with United Biscuits for over 20 years and served as McVitie’sU.K. Marketing Director from 1998 to 1999, as Snacks Business Unit Directorfrom 1996 to 1998 and before that, as Marketing Director of Terry’s Group.

 

**Ian Cray** was appointed Chief Financial Officer uponjoining United Biscuits in January 2001. Before joining United Biscuits,Mr. Cray served as Group Treasurer of the Diageo Group, a position he had heldsince 2000. From May 1997 to 2000, Mr. Cray was the Finance Director of GlobalOperations within UDV and held that post throughout the integration processarising from the merger of Grand Met and Guinness. From 1996 to May 1997, Mr.Cray was Director of Group Treasury for Grand Met. Mr. Cray was with Diageo andits predecessor companies for 14 years, and previously worked for CadburySchweppes and Unilever.

 

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**Graham Johns** was appointed ManagingDirector — Biscuits Category and Managing Director of U.K. Biscuitsin January 2001. Before joining United Biscuits, Mr. Johns served inseveral management positions at Heinz Europe including Managing Director —European Infant Feeding. Before joining Heinz in 1987, Mr. Johns served asMarketing Manager of Courage Brewing.

 

**Kevin McGurk** was appointed Operational Services Director inFebruary 2001. Before joining United Biscuits, Mr. McGurk served asEuropean Purchasing Director of Heinz from 1999. He also previously served asPurchasing General Manager of the Heinz European Grocery Division from 1996 to1999. Before joining Heinz, Mr. McGurk spent several years with theAmbient Foods Group of Hillsdown Holdings where he served as the European GroupPurchasing Manager.

 

**Bill Winthrop** was appointed Group Management Services Directorin November 2000. Before joining United Biscuits, Mr. Winthrop servedas Management Services Director of Heinz Europe from 1994 to 2000. Beforejoining Heinz in 1993, Mr. Winthrop served as European InformationServices Director for Black & Decker.

 

**Robert Bradish** is Vice President of Strategy &Development for Kraft Foods International’s European Union region.  Mr. Bradish has been with Kraft Foods forover 20 years and has held a variety of management positions both in the UnitedStates and Europe. Before assuming his current position in 1999, Mr. Bradishwas Vice President of Strategy and Development, Kraft Foods International, andfrom 1995 to 1998 was Vice President of Strategy and Development, Kraft Foods Central& Eastern Europe, Mideast and Africa region. After the acquisition ofNabisco by Kraft Foods, Mr. Bradish became a member of the boards of UB Financeand Regentrealm on December 21, 2000.

 

**Graham Clempson** isEuropean Managing Partner of the U.S. and U.K. advisors of MidOcean Partners,LP and of MidOcean Associates, SPC, its general partner. Mr. Clempson is alsoChief Executive Officer of Morgan Grenfell Private Equity Limited. Formerly,Mr. Clempson was European Managing Partner for DB Capital Partners andChief Executive Officer of Morgan Grenfell Private Equity. Mr. Clempson joinedBankers Trust in 1983 and then moved to Deutsche Bank following the merger ofBankers Trust into the Deutsche Bank group in June 1999. Prior to his currentappointment with DB Capital Partners in 2000, Mr. Clempson was Co-Head ofEuropean Investment Banking from 1999 and had particular responsibility for theFinancial Sponsor Coverage and High Yield departments. Mr. Clempson became amember of the boards of UB Finance and Regentrealm on February 28, 2002.

 

**Bertrand Meunier** is a member of the Executive Committee of PAIManagement. Mr. Meunier became a member of the boards of UB Finance andRegentrealm on March 22, 2000. Mr. Meunier joined PAI in 1982. From1985 to 1996, Mr. Meunier was in charge of investment activity in PAI’sInformation, Technology and Telecommunications Division. Since 1996,Mr. Meunier has been responsible for investments in the Consumer Productsand Services sector. He is also a director of Diana, Stoeffler, Evialis,Panzani, STEF-TFE, Keolis, Yoplait, Provimi and Royal Canin.

 

**Dominic Murphy** is an investment director for Cinven.Mr. Murphy became a member of the boards of UB Finance and Regentrealm onMarch 22, 2000. Before joining Cinven in 1996, Mr. Murphy worked forthe private equity company 3i and for Arthur Andersen. He is also a director ofNational Car Parks.

 

Theaddress of the directors and executive management of United Biscuits is c/oUnited Biscuits, Hayes Park, Hayes End Road, Hayes, Middlesex UB4 8EE,United Kingdom.

 

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**B.****                                    Compensation**

*** ***

***Compensation Arrangements***

 

Theaggregate compensation paid to all of our directors and executive management in2002 was approximately £3.0 million. Of this aggregate compensation,approximately £2.9 million was paid in salaries (including bonuses),approximately £62,550 was paid as benefits in kind and approximately £57,320was paid in pension contributions. For 2002, the highest-paid director orexecutive received £1.0 million including bonuses, benefits in kind and pensioncontributions. Members of our senior management including executive managementteam were entitled to receive bonuses for 2002 under an incentive scheme. Theamounts of the bonuses awarded are based on scaled sales, profit, market shareand cash performance targets set by the board of UB Parent. Details of ourannual incentive bonus plan are provided below.

 

Underthe shareholders agreement between UB Parent and the Equity Sponsors, UB Parentmakes annual payments of £25,000 in directors’ fees to the Equity Sponsors foreach of their nominated directors (“Equity Sponsor directors”) in addition topayment of all reasonable out-of-pocket expenses incurred by the directors inconnection with their participation in board meetings. The shareholdersagreement is described below in Item 7.B. “Major Shareholders and Related PartyTransactions — Related Party Transactions — Shareholders Agreement.”

 

***2002 Senior Management Incentive Scheme***

 

The2002 Senior Management Incentive Scheme provided cash bonuses to approximately1000 senior managers based on pre-set performance targets. The cash targetwas met and the plan was implemented. Any individual participating in the planwas entitled to receive a cash scaled payment ranging from 0 to 125% of theirpotential payout, depending on the target met and the individual’s personalperformance within our appraisal system. Payments under the plan were made inMarch 2003 and distributed through our payroll.

 

***Senior Management Equity Purchase Scheme***

 

Under the articles ofassociation of UB Parent, members of our executive management were entitled topurchase shares in UB Parent representing 3% of the equity of UB Parent(“M Shares”). M Shares were purchased by members of our executivemanagement at the price of £4.70 per share in May 2001 and totaledapproximately £300,000. Other lower tier members of our senior management weregiven the opportunity to purchase shares in a separate class of sharesrepresenting 2% of the equity of UB Parent (“E Shares”). E Shares werepurchased by lower tier members of our senior management during 2001 and 2002at a price of £4.70 per share and totaled approximately £200,000. The M Sharesand E Shares, together with the ordinary shares of UB Parent, rank *pari passu*for any dividends and on a return of capital, including liquidation of UBParent. The holders of M Shares are entitled to one vote per share at ashareholders’ meeting while the E Shares do not carry any votes. These sharesin UB Parent may be transferred subject to restrictions set forth in itsarticles of association.

 

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**C.****                                    BoardPractices**

 

***Term of Office***

 

The directors are subjectto retirement by rotation and do not hold a fixed term of office. One third ofthe directors retire at each annual general meeting of the company. Retiringdirectors may offer themselves for re-appointment. The current directors, withthe exception of Graham Clempson, have been in office for the full year endedDecember 28, 2002.

 

***Directors’ ServiceContracts***

 

There are no servicecontracts in relation to the directors who represent the Equity Sponsors. Asdescribed above, the shareholders agreement provides that the equity sponsordirectors of parent shall be entitled to receive directors fees of £25,000(plus VAT) per annum for each director which shall accrue from day to day andshall be payable quarterly in arrears in respect of each year. Four of the fivedirectors of UB Finance are Equity Sponsor directors of UB Parent.

 

The executive directorshave contracts of employment with United Biscuits (UK) Limited, the principaloperating subsidiary of United Biscuits, some of which are subject to finalnegotiation. Except for variances in remuneration and bonus levels, thecontracts are uniform and all provide that the directors are entitled to anotice period of 12 months. The contract also provides in their respectiveschedules a mechanism for a genuine pre-estimate of loss, based upon theoverall contractual package. Accordingly, in the event of a termination, theexecutive director would be entitled to 12 months’ compensation for loss of thefollowing benefits; salary, car, health insurance, life cover and pension. TheSenior Management Incentive Scheme bonus is expressly excluded from the noticeperiod compensation.

 

***Audit and Remuneration Committee***

 

The Audit andRemuneration Committee (the “Audit Committee”) reports to UB Parent. The AuditCommittee is composed of Equity Sponsor appointees, consisting of nominees fromeach of Cinven, PAI and Nabisco. The Chairmanship of the Audit Committee isallotted equally between Cinven and PAI.

 

The current EquitySponsor Audit Committee appointees are Yagnish Chotai (Cinven) and BertrandMeunier (PAI) (together, the joint rotating Chairmen) and Bob Bradish(Nabisco). Dominic Murphy and Dominique Megret, directors of UB Finance attendmeetings of the Audit Committee. As noted above, any Equity Sponsor member ofthe board of UB Parent can attend meetings of the Audit Committee as a member.

 

Also in attendance,although not members of the Audit Committee, are the Chairman and ChiefExecutive Officer, Malcolm Ritchie and for the purposes of the audit aspect ofthe Audit Committee, the Chief Financial Officer, Ian Cray, both of whom areExecutive directors of UB Finance.

 

The shareholdersagreement sets out the purpose of the Audit Committee which is to:

 

1)             review the accounting policies and procedures of theGroup, its internal financial control systems and its compliance with statutoryrequirements and consider any matter raised by our external and internalauditors;

 

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2)                                      makerecommendations to the board of UB Parent on the remuneration of all directorsand the appointment or dismissal of all directors of our subsidiaries, otherthan the directors appointed by the Equity Sponsors; and

 

3)                                      makerecommendations to the board of UB Parent on the terms of appointment ordismissal and the remuneration of senior employees of the company who are notdirectors and whose total remuneration is in excess of £100,000 per annum.

 

The Audit Committee meetsthree times each year and invites other relevant persons such asrepresentatives of the Internal Audit, External Audit, Risk Management andDisclosure Committees to its meetings as deemed necessary. The responsibilitiesinclude evaluating the appropriate risk framework and communicating theimportance of internal control and the management of a risk through the RiskManagement committee, reviewing the activities and organization structure ofthe Internal Audit function taking account of U.S. Securities and ExchangeCommission (the “SEC”) guidelines, including their work plan and consideringthe major findings from their work together with our management responses, andreviewing the annual financial statements before the submission to the board ofUB Parent and determining whether they are complete and consistent withinformation known to Audit Committee members and reviewing the performance ofthe external auditors and making recommendations to the Board as to theirre-appointment. The chairman of the Audit Committee makes a brief report of thefindings and recommendations of the Audit Committee to the board of UB Parentat each board meeting.

 

**D.****                                    Employees**

 

As ofDecember 28, 2002, we had approximately 11,500 employees, equivalent toapproximately 10,500 full-time employees. Approximately 70% of our full-timeemployees, both in the United Kingdom and continental Western Europe, are representedby unions. We have historically enjoyed good working relationships with ourunions and have not recently experienced any significant work stoppages,slowdowns or other collective employee actions that have materially disruptedour business.

 

**E.****                                      Share Ownership**

 

See the discussion of ourSenior Management Equity Purchase Scheme included above in “— Compensation —Senior Management Equity Purchase Scheme.” As of December 28, 2002, MalcolmRitchie beneficially owned 1.25% of the equity shares of UB Parent. No othermembers of the boards of UB Finance and Regentrealm beneficially owned morethan 1% of the outstanding shares of UB Parent.

 

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**ITEM 7****.        MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

 

**A.****                                    Major Shareholders**

 

All of the ordinary shares of Regentrealm are held and beneficiallyowned by UB Finance. All the ordinary shares of UB Finance are held andbeneficially owned by Runecorp, a wholly owned subsidiary of UB Parent. UnitedBiscuits (Equity) Limited (“UB Equity Cayman”) holds and beneficially owns 95%of the shares of UB Parent, the remaining 5% are owned by senior management.PAI, Cinven and MidOcean own 39.8%, 39.8% and 20.4% of the voting shares ofUB Equity Cayman, respectively.

 

Nabisco holds warrants of UB Parent that are exercisable upon theearlier of a listing of UB Parent’s shares, a sale of UB Parent orthe 49th anniversary of the warrant deed on July 25, 2049.  The number of ordinary shares issuable uponexercise of the warrants is based on a formula which, if calculated at the timeof the UB acquisition, would have been for approximately 26.51% of the equityof UB Parent. Nabisco may exercise its warrants by the tender of its£145.0 million discounted securities of Deluxestar Limited (“Deluxestar”),a direct wholly owned subsidiary of UB Parent.

 

The Equity Sponsors are parties to a shareholders agreement whichprovides for certain rights and obligations in respect of their shareownership. See “— Financing of UB Acquisition — Shareholders Agreement.”

** **

**B.****                                    Related PartyTransactions**

 

Set forth below is a description of transactions weentered into with our shareholders or affiliates during the three year periodended December 28, 2002. Some of these relationships continue to be in effectand may result in conflicts of interest between us and these shareholders oraffiliates.

 

Inconnection with the UB acquisition, we agreed to undertake certain acquisitionsand dispositions, including the EMENA acquisition and the sale of the Asian assetsdiscussed below in order to focus our business on our key Western Europeanmarkets*.*

 

***NabiscoTransactions***

* *

*EMENAAcquisition*

 

InMarch 2000, Deluxestar, an affiliate of our parent, UB Parent, entered into anagreement to acquire from Nabisco the beneficial interests in some of itsEuropean, Middle Eastern and North African assets (together, the “EMENAAssets”) located in Iberia, Saudi Arabia and Tunisia, respectively. Thetransfers of the Iberian and Tunisian businesses were completed on July 11,2000 and April 20, 2001, respectively. The EMENA Assets were valued at£167.0 million, including assumed debt and as adjusted to the 2000 fiscalyear end. On November 29, 2001, a further adjustment of £10.2 millionwas agreed with Nabisco, reducing the total transactional value to £156.8million. Following further discussions between Nabisco and UnitedBiscuits, Nabisco has confirmed, by agreement effective from February 18, 2003,that it does not intend to withdraw from the Saudi Arabian joint venturearrangement. In accordance with the July 2000 agreement, Nabisco has paid $4.8million (approximately £3.1 million) to United Biscuits as an adjustment to thepurchase price. The adjusted total transactional value is £153.7 million. Inconnection with the EMENA acquisition, Deluxestar issued to Nabisco dualconvertible discounted preferred securities and the number of ordinary sharesissuable pursuant to warrants previously issued to Nabisco by UB Parent wasadjusted.

 

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*Sale ofAsian Assets*

 

OnJuly 11, 2000, we entered into an agreement to sell our operations in mainlandChina, Hong Kong and Taiwan and the related intellectual property rights toNabisco*.*Our assets were valued at £75.0 million and Nabisco paid cash of £63.1 millionand assumed £11.9 million of external debt. On November 29, 2001, an adjustmentof £1.2 million was agreed with Nabisco and the transactional value was therebyreduced to £73.8 million*. *Wecompleted the sale of our assets in Hong Kong and Taiwan on September 29, 2000.We completed the sale of our operations in China on March 25, 2002.

 

*NabiscoLicense Agreements*

 

Aspart of the Transactions, in July 2000, we entered into a series of trademarklicense agreements with Nabisco under which Nabisco granted us an exclusivelicense for the manufacture, marketing, sale and distribution of products undera number of material trademarks These trademarks are discussed in Item 5.C.“Operating and Financial Review and Prospects — Research and Development,Patents, Licenses, etc. — Trademarks and Licenses.”

** **

**Financingof UB Acquisition**

 

The UB acquisition wasfunded by loans under the senior credit facility, a senior subordinated bridgefacility, deep discounted bonds, dual convertible preferred discountedsecurities and equity contributions*.* The senior subordinated bridge facilitywas repaid in part with the net proceeds from the Notes offering. As ofDecember 28, 2002, our total outstanding long-term debt, including currentmaturities but excluding intercompany loans and unamortized debt issue costs,was £679.1 million. Deutsche Bank AG London, an affiliate of DB Capital, is ajoint arranger and lender under the senior credit facility, was a facilityagent and lender under the senior subordinated bridge facility and a co-managerof the Notes offering, for which they received the customary fees.

*** ***

***ShareholdersAgreement***

 

OnMarch 17, 2000, the Equity Sponsors entered into a shareholders agreement withUB Parent, which was supplemented on April 17, 2000. The shareholders agreementwas supplemented again on March 13, 2003. Among other things, the shareholdersagreement provides that each of the Equity Sponsors, subject to maintainingspecified ownership thresholds, has the right to appoint an equal number ofdirectors (currently three) to the board of directors of UB Parent, except forMidOcean, which has the right to appoint two directors. The quorum for thetransaction of business at any board meeting is one director from each of theEquity Sponsors, including the MidOcean director. No resolution of thedirectors will be effective unless approved by a majority of the directorspresent.

 

Under the shareholdersagreement, each of the Equity Sponsors is entitled to receive an annualmonitoring fee in payment for their financial oversight and investmentmonitoring services. Subject to the discretion of the board of directors of UBParent, the amount of the monitoring fee may be increased from time to time.PAI and Cinven were initially entitled to receive £266,667 each, Nabisco wasinitially entitled to receive £200,000 and DB Capital was initially entitled toreceive £141,666. The fees payable for the year ended April 14, 2002 wereagreed at £984,375 of which PAI and Cinven were entitled to £300,000 each, Nabiscowas entitled to £225,000 and DB Capital Partners was entitled to £159,375.

 

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Each of the directors ofUB Finance and Regentrealm is also a director of UB Parent. In addition tothese directors, PAI and Nabisco each have an additional two directors on theboard of UB Parent and Cinven and MidOcean each have one additional director onthe board of UB Parent. Under the shareholders agreement, UB Parent makesannual payments of £25,000 in directors’ fees to the Equity Sponsors for eachof their nominated directors, in addition to payment of all reasonableout-of-pocket expenses incurred by the directors in connection with theirparticipation in board meetings. The shareholders agreement provides that UB Parentmay not take particular actions without the prior written consent of Nabisco,including:

 

**•**                  appointing or removing officers;

 

•                  issuingadditional securities, and

 

•                  UBParent or its subsidiaries participating in transactions, including anacquisition or sale of assets, or a merger, consolidation or partnership withother companies where the value of the transactions exceeds £25.0 million inthe aggregate.

 

Theshareholders agreement provides, however, that the prior written consent ofNabisco will not be required for the sale, lease, license or other dispositionof all or any part of the *BN* and/or *Delacre* brands on or afterJanuary 1, 2003.

 

Allthe shares and share equivalents of UB Parent are held by UB Equity Cayman, andNabisco. The shareholders agreement provides that neither UB Equity Cayman,Nabisco nor any other holder of UB Parent’s or UB Equity Cayman’s shares maytransfer its shares to a person other than its respective affiliates for aperiod of three years after the execution date of the shareholders agreement(the “restricted period”). Following the expiration of the restricted period onMarch 16, 2003, each of Nabisco and UB Equity Cayman are subject to aright of refusal in the event that a third party makes a bona fide offer topurchase all or substantially all of its shares in UB Parent. If the othershareholder does not exercise its rights, then the selling shareholder may sellits shares to the third party and require the other shareholder to sell all ofits shares to the third-party purchaser. If the selling shareholder is sellingmore than 5% of the outstanding ordinary shares of UB Parent, the othershareholder can require the third party to purchase a proportionate number ofits shares. The shareholders agreement also requires that if Cinven, PAI orMidOcean receives an offer from a bona fide third party to purchase all orsubstantially all of their shares in UB Equity Cayman, Nabisco has the right topurchase those shares on the same terms that would apply to an offer for theshares of UB Parent.

 

If UBEquity Cayman desires to sell most or all of its shares in UB Parent after therestricted period ends, it must give Nabisco the right to make an offer topurchase those securities at a price set by Nabisco. If Nabisco does not makean offer, UB Equity Cayman is free to sell its shares. If Nabisco makes anoffer, UB Equity Cayman may then provide a counter-offer price. If Nabisco doesnot elect to buy the shares at the counter-offer price, then UB Equity Caymanmay proceed within 90 days with a private sale of all the shares to a bonafide third party if the sale price is at least 105% of Nabisco’s initialoffer price. If UB Equity Cayman sells its shares to a third party, it has theright to require Nabisco to sell its shares to the third party. If the sharesbeing sold by UB Equity Cayman amount to more than 5% of the outstanding sharesof UB Parent, Nabisco can sell a proportionate number of its shares to thethird party. The shareholders agreement also requires that if PAI, Cinven or MidOceandesires to sell most or all of their shares in UB Equity Cayman, Nabisco has aright of first offer to purchase those shares under the same terms that applyto a sale of the UB Equity Cayman securities.

 

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Theshareholders agreement also provides for a Nabisco right of first offer topurchase all of the securities of UB Equity Cayman after the expiration of therestricted period. If UB Equity Cayman elects not to sell to Nabisco pursuantto any of the right of first offer provisions of the shareholders agreement, UBEquity Cayman has the right to sell all or some of its securities in a publicsale, subject to procedures requiring notice to Nabisco. Nabisco has the rightto then purchase those securities before the public sale. UB Equity Cayman mayonly exercise the rights contemplated under the right of first offer and publicsale provisions of the shareholders agreement twice in aggregate in anycalendar year.

 

Theexercise of these sale and purchase rights may under certain circumstancesresult in a change of control under the indenture which would require us tomake an offer for the Notes.

 

Theshareholders agreement also gives the holders of these ordinary sharespre-emptive rights on future sales of securities by UB Parent.

 

Forthe duration of the shareholders agreement and for one year from itstermination date, none of the Equity Sponsors is permitted directly orindirectly to carry on the business of United Biscuits in a territory definedto include most nations within the European Union and the European Free TradeAssociation and a number of nations in Eastern and Central Europe and NorthAfrica, other than through UB Parent and/or its subsidiaries. Except for thisprohibition nothing in the shareholders agreement limits the current or futurebusiness activities of the shareholders of UB Parent, whether or not thoseactivities compete with those of UB Parent and its subsidiaries.

 

Inconnection with the UB acquisition Cinven, PAI and DB Capital entered into aconsortium agreement with each other and with UB Equity Cayman and itssubsidiaries. The consortium agreement was supplemented on March 13, 2003.Under the consortium agreement, PAI, Cinven and MidOcean have the right toappoint up to four, four and two directors of UB Equity Cayman, respectively,and each of these directors shall be entitled but not obligated to be adirector of each of UB Parent and its subsidiaries. The quorum for thetransaction of business at any board meeting is one director from each ofCinven, PAI and MidOcean. The consortium agreement provides that particularactions relating to UB Equity Cayman and its subsidiaries, including, amongother things, changes in the nature of their business, dissolution,transactions outside the ordinary course of business, remuneration ofdirectors, establishment of incentive schemes giving rise to payments outsidethe budget and share option schemes, require the prior written consent of PAI,Cinven and MidOcean. The board may not take other significant actions withoutthe prior written consent of a majority of the shareholders. The consortiumagreement also contains restrictions, similar to those in the shareholdersagreement, on the ability of the shareholders to transfer their shares.

 

***Transaction Fees***

 

Aspart of the Transactions, we and our affiliates entered into an agreement withthe Equity Sponsors regarding financing fees payable to Cinven, PAI, Nabiscoand DB Capital for their services in connection with the Transactions. Underthe agreement, we agreed to pay £6.0 million each to PAI and Cinven, £3.1million to DB Capital and £4.9 million and $5.0 million to Nabisco. Webelieve that these fees, which were negotiated among the Equity Sponsors on anarm’s-length basis, are comparable to fees paid to private equity sponsors incomparable transactions. Payment of the transaction fees was completed during2001. Additionally, in 2001, we paid $10.0 million to Nabisco in full and finalsettlement of outstanding third party expenses relating to the UB acquisition.

 

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**C.**                                    **Interests of Experts and Counsel**

 

Not applicable.

 

**ITEM 8****.        FINANCIALINFORMATION**

 

**A.****                                    ConsolidatedStatements and Other Financial Information**

 

SeeItem 18.

 

**LegalProceedings**

 

**A.1**

 

We were involved in multiple lawsuits in France over the “smiley face”trademark we use in the mini *BN* products we market in France. FranklinLoufrani, a French citizen, claims to be the registered owner of the trademarksince September 27, 1991, the date of his filing with the French trademarkoffice. In November 1999, we requested the *Tribunal de Grande Instance*of Paris to cancel the trademark filed by Mr. Loufrani for non-use underthe French trademark law. Although the Tribunal rejected this request onprocedural grounds, we have appealed the case to the *Cour d*’*Appel*of Paris and filed another request for cancellation of the trademark with the *Tribunal deGrande Instance*.  InJuly 2000, Mr. Loufrani brought a suit against us in the *Tribunal de Grande Instance*of Nantes for trademark violation and requested the court to seize packages ofmini *BN*products with the smiley-face trademark and issue an injunction prohibiting usfrom using the trademark. The cases in Paris and Nantes are still pending. Althougha judgment by the *Cour d*’*Appel* of Paris is not expected for anothertwo years, the final hearing for pleadings in the *Tribunal de Grande Instance*of Paris took place on October 19, 2001 and a decision was made in ourfavor on January 22, 2002. However, Mr. Loufrani filed an appeal and wehave now filed our counter-statement. The closure of written proceedings hasbeen ordered for 10 February 2003 and the oral proceedings are scheduled forApril 1, 2003. The court awarded us a “provisional execution” which allows usto continue to use the trademark as Mr. Loufrani’s registration was deemed tobe null as far as the biscuit category is concerned. The action in the *Tribunal de Grande* *Instance*in Nantes has been suspended pending the outcome of the Paris appeal. If thelatter is positive, the action in Nantes will be irrelevant. Our annual salesof mini *BN*products in 2002 were approximately €14.0 million (approximately£9.1 million).

** **

We are from time to time also involved in variousroutine legal proceedings incidental to the ordinary course of our business. Webelieve that the outcome of all pending legal proceedings, either individuallyor in the aggregate, will not have a material adverse effect on ourconsolidated financial condition or results of operations.

 

**B.****                                    Significant Changes**

 

None.

 

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**ITEM 9****.        THEOFFER AND LISTING**

 

**A.****                                    Offer and ListingDetails**

 

Not applicable.

 

**B.****                                    Plan ofDistribution**

 

Notapplicable.

 

**C.****                                    Markets**

 

The Notes arelisted on the Luxembourg Stock Exchange.

 

**D.****                                    SellingShareholders**

 

Notapplicable.

 

**E.****                                      Dilution**

 

Notapplicable.

 

**F.****                                      Expenses of theIssue**

 

Notapplicable.

 

**ITEM 10****.      ADDITIONALINFORMATION**

 

**A.****                                    Share Capital**

 

Notapplicable.

 

**B.****                                    Memorandum andArticles of Association**

 

The objectives of UBFinance include: (1) acting as the holding and coordinating company for all ofour direct and indirect subsidiaries, including our operating subsidiaries;(2) subscribing for, purchasing or otherwise acquiring, taking, holding orselling on such terms and conditions as may be thought fit, any shares orstocks, bonds, debentures or other securities or obligations of any company;(3) undertaking and executing agency and commission work; (4) carrying onany other trade or business in connection with any of the businesses ofUB Finance; (5) purchasing, leasing, acquiring or holding any interest inproperty, plant and equipment necessary or convenient for the purposes of or inconnection with UB Finance’s business; (6) erecting, constructing, altering andmaintaining any roads, railways or other means of transport, plant andequipment necessary or convenient for UB Finance’s business, and contributingto or subsidizing the erection, construction and maintenance of any of theabove; (7) borrowing, raising or securing the payment of money for thepurposes of or in connection with UB Finance’s business; (8) mortgagingand charging the undertaking of all or any of the real and personal propertyand assets, and all or any of the uncalled capital of UB Finance and to issuedebentures and collaterally or further to secure any securities of UB Financeby a trust deed or similar assurances; (9) the issuance and deposit of anysecurities which UB Finance has power to issue; (10) receiving money on depositor loan and the guaranteeing of the obligations and contracts of customers andothers; (11) lending money, giving indemnities and guaranteeing the 

 

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liabilities andobligations of and the payment of any moneys whatsoever (including but notlimited to capital, principal, premiums, interest, dividends, costs andexpenses on any stocks, shares or securities) by any person, firm or companyincluding but not limited to the holding company or a subsidiary;(12) procuring, establishing and maintaining a pension or superannuationfund for the benefit of employees who meet the specified criteria; (13) investingand dealing with the moneys of UB Finance; (14) paying or acceptingpayment for any property or right acquired or sold, as the case may be, by UBFinance; (15) entering into any partnership or joint-purse arrangement oramalgamating with any company proposing to carry on business within the objectsof UB Finance; (16) establishing or promoting any other company whoseobjectives shall include the acquisition and taking over of all or any of theassets and liabilities of UB Finance; (17) purchasing or acquiring andundertaking all or any part of the business of any company carrying on businesssimilar to that of UB Finance; (18) selling, improving, managing ordeveloping any of the property of UB Finance; (19) distributing among theshareholders any property of UB Finance, or any proceeds of sale or disposal ofany property of UB Finance; and (20) giving financial assistance for thepurpose of acquisition of the shares in UB Finance or UB Finance’s holdingcompany.

 

Unless and untilotherwise determined by UB Finance by ordinary resolution, UB Financeshall have no more than 12 but no less than two directors. The board ofdirectors of UB Finance (the ”Board”) shall have the power to appointdirectors and such directors shall not be required to hold any shares of UBFinance. UB Finance may by ordinary resolution remove any director before theexpiration of his period of office.

 

The share capital of UBFinance was increased from £1,000 to £600,002 by the creation of 599,002ordinary shares of £1 each by an ordinary resolution passed on March 22, 2000.It then subsequently increased from £600,002 to £2,010,002 by the creation ofan additional 1,410,000 ordinary shares of £1 each by an ordinaryresolution passed on April 25, 2000. Unissued shares and any shares createdafter adoption of UB Finance’s articles of association (the “Articles”) are atthe disposal of the Board, which may allot grant options over, offer orotherwise deal with such shares and the disposal thereof. UB Finance may alsoissue a warrant with respect to any fully paid shares. UB Finance may byordinary resolution increase, consolidate, cancel any shares and sub-divide itsshare capital. In addition, UB Finance may by special resolution reduce itsshare capital in any way.

 

Subject to restrictionsset forth in the Articles, each holder of the shares (each, a “holder”) maytransfer all or any of his shares by instrument of transfer in writing in anyusual form or in any form approved by the Board. Subject to the terms ofallotment of shares, the Board may by means of a resolution from time to timemake calls on the holders in respect of any moneys unpaid on the shares, of anyclass, held by them and not payable on a date fixed by or in accordance withthe terms of issue. If any holder fails to pay and does not comply with asubsequent notice sent by the Board, the shares in respect of which such callwas made will be forfeited.

 

Annual general meetingsshall be held at such time and place as the Board may determine. In addition,the Board may convene an extraordinary general meeting whenever it thinks fit.At any such meeting, no business shall be transacted except that stated by therequisition or proposed by the Board. All such meetings convened for thepassing of a special resolution shall require not less than 20 working days’notice in writing. All other extraordinary general meetings shall be convenedby not less than 14 clear days’ notice in writing. A quorum at such generalmeetings shall be two persons entitled to attend and to vote on the business tobe transacted.

 

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**C.****                                    Material Contracts**

 

The following materialcontracts are described within Item 5.A. “Operating and Financial Review andProspects — Operating Results — Significant FactorsAffecting Our Results of Operations — Acquisitions and Dispositions” and Item5.B. “ — Liquidity and Capital Resources — Debt Service Obligations.”

 

•                  Indenture,dated April 17, 2001, between United Biscuits Finance plc, Regentrealm Limited,as Guarantor, and The Bank of New York, as Trustee;

 

•                  SeniorCredit Facilities Agreement, dated December 14, 1999, between RegentrealmLimited and Solvecorp Limited, Runecorp Limited and Others, as Borrowers andGuarantors, Finalrealm Limited, Deutsche Bank AG London, Credit Suisse FirstBoston and J.P. Morgan plc, as Joint Lead Arrangers, Deutsche Bank AG London,The Chase Manhattan Bank and DLJ Capital Funding, Inc., as Original Lenders,Deutsche Bank AG London as Sole Book Runner, Agent and Security Agent, and CreditSuisse First Boston and J.P. Morgan plc, as Documentation Agents, as amendedand restated on April 28, 2000, August 28, 2000, November 28, 2000 andApril 17, 2001;

 

•                  Intra-GroupLoan Agreement, dated April 17, 2001, between United Biscuits Finance plc andRegentrealm Limited, as Borrower; and

 

•                  SubordinationAgreement, dated April 17, 2001, between United Biscuits Finance plc, RunecorpLimited, as Parent and The Bank of New York, as Trustee.

 

The following materialcontracts are described in more detail in Item 7.B. “Major Shareholders andRelated Party Transactions — Related Party Transactions — Nabisco Transactions— EMENA Acquisition — Transaction Fees” and Item 5.C. “Operating and FinacialReview and Prospects — Research and Development, Patents, Licenses, etc. —Trademarks and Licenses.”

 

•                  Deedof Settlement relating to Nabisco Arabia Company Limited dated February 18,2003 between Deluxestar Limited, United Biscuits Group (Investments) Limited,United Biscuits Equity Limited, Finalrealm Limited, UB Investments(Netherlands) B.V., Nabisco International, Inc., Cinven Limited andOthers, PAI Management Limited and Others and Deutsche Bank AG, London Branchand Others.

 

•                  SettlementAgreement, dated October 31, 2002, between Nabisco International Inc., UnitedBiscuits Group (Investments) Limited, United Biscuits Equity Limited, CinvenLimited, PAI Management SAS, Deutsche Bank AG, London Branch and Others,Deluxestar Limited, Finalrealm Limited, UB Foods US Limited, United Biscuits(Holdings) Limited, UB Investments plc, Runecorp Limited.

 

•                  VariationAgreement (Sub-License), dated February 18, 2003 between Merola FinanceB.V. and United Biscuits Iberia S.L.

 

**D.****                                    Exchange Controls**

 

None.

** **

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**E.****                                      Taxation**

 

**U.S. Federal Income Tax Considerations**

 

The followingdiscussion is based upon the provisions of the U.S. Internal Revenue Code of1986, as amended (the “Code”), the applicable U.S*.*Treasury regulationspromulgated or proposed thereunder, judicial authority and currentadministrative rulings and practice. Legislative, judicial or administrativechanges or interpretations may be forthcoming that may be retroactive and thatcould alter or modify the continued validity of the following statements andconclusions.

 

Except as specifically noted, this discussion is limited to the U.S.federal income tax considerations that apply to a beneficial owner of a Notewho or which is:

 

(1)                                  a citizen or resident of the United States;

 

(2)                                  a corporation (or other entity treated as acorporation for U.S. federal tax purposes) created or organized under the lawsof the United States or any political division of or within the United States;

 

(3)                                  an estate, the income of which is subject to U.S.federal income tax regardless of its source; or

 

(4)                                  a trust, if a court within the United States isable to exercise primary supervision over the administration of the trust andone or more U.S. persons have authority to control all substantial decisions ofthe trust (a “U.S. Holder”).

 

Certain aspects of U.S. federal income taxation relevant to a beneficialowner of a Note other than a U.S. Holder (a “Non-U.S. Holder”) are alsodiscussed below. The discussion below assumes that the Notes will be treated asdebt for U.S. federal income tax purposes. The discussion does not address allaspects of U.S. federal income taxation that might be relevant to particularholders in light of their personal investment circumstances or status, nor doesit discuss the consequences to investors subject to special treatment under theU.S. federal income tax laws, such as dealers in securities or foreigncurrency, taxpayers that have elected mark-to-market accounting, financialinstitutions, insurance companies, tax-exempt organizations, taxpayers holdingNotes as part of a “straddle,” “hedge” or “conversion transaction” or that havea “functional currency” other than the U.S. dollar, and U.S. expatriates orformer long-term residents of the United States. This discussion does notaddress any special rules that may apply if the holder receives principal ininstallment payments or if a Note is called before the maturity date. Thisdiscussion also does not take into consideration any U.S. federal income taximplications if:

 

(1)                                  UB Finance consolidates or merges with or into anyother person or sells, assigns, transfers, leases, conveys or otherwisedisposes of all or substantially all of its assets to another person; or

 

(2)                                  a successor entity succeeds UB Finance.

 

Additionally, the discussion does not consider the tax treatment ofpartnerships or persons who hold the Notes through a partnership or otherpass-through entity.  Moreover, theeffect of any applicable state, local or foreign tax laws or the applicabilityof U.S. federal gift or estate taxation is not discussed.  Holders are urged to consult their own taxadvisors regarding the U.S. federal, state, local and other tax considerationsof the acquisition, ownership and disposition of the Notes.

 

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Except as otherwise indicated below, this discussion is generallylimited to the tax consequences to beneficial owners of the Notes that areinitial holders of the Notes, that hold the Notes as capital assets (within themeaning of Section 1221 of the Code) and that purchased the Notes at the“issue price.”  For this purpose, the“issue price” of a Note is the first price at which a substantial amount of theNotes were sold to the public for money, excluding sales to bond houses,brokers or similar persons or organizations acting in the capacity ofunderwriters, placement agents or wholesalers.

 

**Each Holdershould consult its own tax advisor concerning the application of United Statesfederal income tax laws, as well as the laws of any state, local or foreigntaxing jurisdiction to its particular situation.**

 

***U.S. Holders***

 

*Stated Intereston Notes*

 

Stated interest on a Note will be taxable to a U.S. Holder as ordinaryincome either at the time it accrues or is received in accordance with the U.S.Holder’s method of accounting. Stated interest paid on a Note will beincludible in income by a U.S. Holder in an amount equal to theU.S. dollar value of the interest, regardless of whether a payment is infact converted to dollars at that time. If the U.S. Holder uses the cash methodof accounting for tax purposes, the U.S. dollar value of the interest isdetermined using the spot rate at the time payment is received. If a U.S.Holder uses the accrual method of accounting for tax purposes, the U.S. dollarvalue of the interest is determined using the average exchange rate during therelevant accrual period (or partial accrual period for interest paid in asubsequent taxable year) or, if elected, the spot rate (a) on the last dayof the relevant accrual period (or partial accrual period) or (b) on thepayment date, if that date is within five business days of the last day of theaccrual period or taxable year. Any such election will apply to all debtinstruments held by the U.S. Holder at the beginning of the first taxable year towhich the election applies or afterwards acquired and will be irrevocablewithout the consent of the U.S. Internal Revenue Service. Any differencesin the exchange rate between the rate at which interest on a Note is includedin income and the spot rate on the payment (or disposition) date for interestwill result in exchange gain or loss on the related amount of interest, andwill generally be treated as ordinary income or loss for U.S. federal incometax purposes. The U.S. dollar value of interest accrued or received, adjustedfor any exchange gain or loss as to the amount accrued, generally will be aU.S. Holder’s tax basis in the foreign currency received as interest on a Note.

 

*AdditionalAmounts*

 

We intend to treat the possibility that we will pay “Additional Amounts”(*i.e.*,the amount of interest provided in the Notes to prevent any net reduction forwithholding taxes, determined using the withholding tax rate applicable to theU.S. Holder) as a remote or incidental contingency, within the meaning ofapplicable U.S. Treasury regulations. Accordingly, the gross amount of anyAdditional Amounts should be includible in gross income by a U.S. Holderas ordinary interest income at the time that amount is received or accrued inaccordance with the U.S. Holder’s method of accounting for tax purposes inthe same manner as discussed above under “— Stated Interest on Notes.”Consequently, the amount a U.S. Holder will include in gross income withrespect to a Note could exceed the amount received by the U.S. Holder asstated interest should Additional Amounts be due under the Notes.

 

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*WithholdingTaxes*

 

Any U.K. taxes withheld and not refunded to a U.S. Holder will betreated as foreign taxes eligible for credit against that Holder’sU.S. federal income tax liability, at the election of theU.S. Holder, subject to generally applicable limitations and conditions,including that the U.S. Holder claim any applicable treaty benefits.Alternatively, those taxes are eligible for deduction in computing theU.S. Holder’s taxable income. Stated interest and Additional Amounts willconstitute foreign source income for U.S. foreign tax credit purposes. Theincome will generally constitute “passive income” or, in the case of aU.S. Holder that is a financial services entity, “financial servicesincome,” for U.S. foreign tax credit purposes, unless the rate thatapplies to the U.S. Holder is 5% or more, in which case the incomegenerally will constitute “high withholding tax interest.” The calculation offoreign tax credits involves the application of complex rules that depend on aU.S. Holder’s particular circumstances. Accordingly, investors are urged to consult their tax advisors regardingtheir ability to claim a credit for any foreign withholding taxes paid underthe Notes.

 

*Sale, Exchangeor Redemption*

 

Unless a non-recognition provision applies, the sale, exchange,redemption (including under an offer by us) or other disposition of a Note willbe a taxable event for U.S. federal income tax purposes. In that event, a U.S.Holder will recognize gain or loss equal to the difference between:

 

(1)                                  the amount of cash plus the fair market value ofany property received upon that sale, exchange, redemption or other taxabledisposition (other than amounts attributable to accrued interest); and

 

(2)                                  the U.S. Holder’s adjusted tax basis in the Note.

 

A U.S. Holder’s tax basis in a Note generally will equal the cost of theNote to the U.S. Holder, which is the U.S. dollar value of the foreigncurrency purchase price of the Note translated at the spot rate for the date ofpurchase, or, in some cases, the settlement date. A U.S. Holder will havea tax basis in any foreign currency received on the sale, exchange orretirement of a Note equal to the U.S. dollar value of that foreign currency onthe date of receipt.

 

Except to the extent of exchange gain or loss discussed below, gain orloss recognized by a U.S. Holder of a Note should be capital gain or lossand will be long-term capital gain or loss if the Note has been held, ortreated as held, by the U.S. Holder for more than one year at the time ofsale, exchange, redemption or other disposition. Upon the sale, exchange,retirement or repayment of a Note, a U.S. Holder will recognize exchangegain or loss to the extent that the rate of exchange on the date of retirementor disposition differs from the rate of exchange on the date the Note wasacquired or deemed acquired. Exchange gain or loss is recognized, however, onlyto the extent of total gain or loss on the transaction. For purposes ofdetermining the total gain or loss on the transaction, a U.S. Holder’s taxbasis in a Note will generally equal the U.S. dollar cost of the Note. Exchangegain or loss recognized by a U.S. Holder will generally be treated asordinary income or loss.

 

Any gain realized by a U.S. Holder on the sale, exchange or redemptionof a Note generally will be treated as U.S. source income for U.S. foreign taxcredit purposes.  Any loss realized upona sale, exchange, redemption or other disposition of a Note generally will beallocated against U.S. source income for U.S. foreign tax credit purposes.

 

68

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***Non-U.S. Holders***

 

Subject to the discussion below under “— Information Reporting andBack-up Withholding,” a Non-U.S. Holder of a Note generally will not be subjectto U.S. federal income or withholding tax on payments, including statedinterest or Additional Amounts in respect of a Note and gain realized on thesale, exchange, redemption or other disposition of a Note unless:

 

(1)                                  that income is effectively connected with theconduct by the Non-U.S. Holder of a trade or business in the United States or,in the case of a treaty resident, attributable to a permanent establishment (ora fixed base) in the United States; or

 

(2)                                  in the case of a gain, the Non-U.S. Holder of aNote is a nonresident alien individual who holds a Note as a capital asset andis present in the United States for 183 days or more in the taxable yearof the sale, exchange, redemption or other disposition and certain otherconditions are satisfied.

 

***InformationReporting and Back-up Withholding***

 

Payments of interest and principal on a Note and the proceeds from thesale or redemption of a Note paid to a U.S. Holder, other than a corporation orother exempt recipient, will be reported to the U.S. Internal Revenue Service.A U.S. Holder may be subject to U.S. back-up withholding on interest andprincipal paid on a Note and proceeds from the sale or redemption of a Noteunless the U.S. Holder:

 

(1)                                  is a corporation or comes within certain otherexempt categories and, when required, demonstrates this fact; or

 

(2)                                  provides a correct taxpayer identification numbercertified under penalties of perjury, certifies as to no loss of exemption fromback-up withholding and otherwise complies with the applicable requirements ofthe back-up withholding rules.

 

Interest on a Note paid outside the United States to a Non-U.S. Holderthrough a U.S. person, or a person with certain enumerated U.S. relationships(a “U.S.-related person”), is subject to information reporting and possibleback-up withholding unless documentation and other requirements are satisfied.The payment of principal on a Note and the proceeds from the sale or redemptionof a Note by a Non-U.S. Holder to or through the U.S. office of any broker,U.S. or foreign, or the non-U.S. office of a U.S. person or a U.S. relatedperson, will be subject to information reporting and possible back-upwithholding unless:

 

(1)                                  the owner certifies its non-U.S. status underpenalties of perjury or otherwise establishes an exemption; and

 

(2)                                  the broker does not have actual knowledge, orreason to know, that the holder is a U.S. Holder or that the conditions of anyother exemption are not, in fact, satisfied.

 

The back-up withholding tax rate is 30% for years 2002 and 2003, 29% foryears 2004 and 2005, 28% for years 2006 through 2010 and 31% for years 2011 andthereafter. Any amount withheld under the back-up withholding rules will becreditable against the Holder’s U.S. federal income tax liability, subject tosatisfaction of certain procedural requirements.  Holders of Notes are urged to consult their tax advisors todetermine whether they qualify for exemption from U.S. withholding and theprocedure for obtaining an exemption, if applicable.

 

69

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**THEPRECEDING DISCUSSION OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ISFOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACHHOLDER  SHOULD CONSULT HIS, HER OR ITSOWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDINGAND DISPOSING OF NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.**

 

**U.K. TaxConsiderations**

 

The following summary describes certain limited U.K. tax consequences ofthe ownership of the Notes but does not purport to be comprehensive. Exceptwhere expressly stated, the summary relates only to the position of thosepersons who are the absolute beneficial owners of their Notes and the intereston those Notes and may not apply to special situations, such as those ofdealers in securities. Furthermore, the discussion below is generally based uponprovisions of U.K tax law and U.K. Inland Revenue practice as of the datehereof. **Werecommend that holders of Notes should consult their own tax advisorsconcerning the U.K. tax consequences of holding Notes in the light of theirparticular situations as well as any consequences arising under the law of anyother relevant tax jurisdiction.  Norepresentations as to the tax consequences to any particular holder of theNotes are made hereby.**

 

***Intereston the Notes***

 

The Notes constitute “quoted Eurobonds” within the meaning ofsection 349 of the U.K. Income and Corporation Taxes Act 1988(“ICTA”) as they are listed on a “recognized stock exchange” within the meaningof section 841 of ICTA. The Luxembourg Stock Exchange is currently a recognizedstock exchange for these purposes. Accordingly, as the Notes are listed on theLuxembourg Stock Exchange, and as long as they remain so listed, payments ofinterest on the Notes may be made without withholding on account of U.K. incometax.

 

Interest on the Notes constitutes U.K. source income for U.K. taxpurposes and, as such, may be subject to income tax by direct assessment evenwhere paid without withholding, except in the hands of a holder who is exemptfrom U.K. income tax under the terms of an applicable double taxation treaty orotherwise. However, interest on a U.K. source received without deduction orwithholding on account of U.K. tax will not be chargeable to U.K. tax in thehands of a holder of a Note who is not resident for tax purposes in the U.K.unless that holder carries on a trade, profession or vocation in the U.K.through a U.K. permanent establishment, branch or agency in connection withwhich the interest is received or to which the Note is attributable. There areexemptions for interest received by certain categories of agents, such asbrokers and investment managers.

 

***U.K.Corporation Taxpayers***

 

For holders of Notes within the charge to U.K. corporation tax anyprofits and gains, including interest, arising from the Notes in the hands ofthose holders will generally be charged to tax as income in each accountingperiod on a basis reflecting the treatment in the statutory accounts of theholders, calculated in accordance with the holder’s authorized accountingmethods.

 

70

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***Exchange of Information Provisions***

 

Pursuant to theprovisions of the Finance Act 2000, the U.K. Inland Revenue can obtaininformation about the U.K. savings income of individuals, and in certaincircumstances, can exchange taxpayer information with the tax authorities ofother jurisdictions.

 

***StampDuty and Stamp Duty Reserve Tax***

 

No stamp duty or stamp duty reserve tax is payable on the issuance ortransfer of the Notes.

 

***EUProposed Savings Directive***

 

On 21st January, 2003,the European Council of Economics and Finance Ministers (“ECOFIN”) agreed onproposals pursuant to which, with effect from January 1, 2004, Member Stateswill be required to provide to the tax authorities of another Member Statedetails of payments of interest (or similar income) paid by a person within itsjurisdiction to an individual resident in that other Member State, except that,for a transitional period only, Austria, Belgium and Luxembourg will instead berequired to operate a withholding system in relation to such payments (thetransitional period being related to the conclusion of certain other agreementsrelating to information exchange with certain other countries).  It is anticipated that the final text of aDirective to implement the proposals will be decided at the ECOFIN meetingexpected to be in March 2003.

 

Pending agreement on the precise text of the Directive, it is notpossible to predict what effect, if any, the adoption of the proposed Directivewould have on the Notes or on the payments of principal or interest on theNotes.

 

**We recommendthat persons who are in any doubt as to their tax position or who may besubject to tax in other jurisdictions consult their own tax advisors.**

 

**Dividends and Paying Agents**

 

Notapplicable.

 

**Statements by Experts**

 

Notapplicable.

 

**H.****                                    Documents onDisplay**

 

We aresubject to the informational requirements of the Securities Exchange Act of1934, as amended (the “Exchange Act”), applicable to foreign private issuersand fulfill the obligation with respect to such requirements by filing reportswith the SEC. You may read and copy any document we file with the SEC withoutcharge at the SEC’s public reference room at 450 Fifth Street, N.W.,Washington, D.C. 20549. Copies of such material may be obtained by mail fromthe Public Reference Branch of the  SECat such address, at prescribed  rates.Please call the SEC at l-800-SEC-0330 for further information on the publicreference room.

 

As aforeign private issuer, we are exempt from the rules under the Exchange Act prescribingthe furnishing and content of proxy statements, and our officers, directors andprincipal shareholders are exempt from the reporting and “short-swing”profit-recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not be required under the Exchange Act to file periodicreports and financial statements with the SEC as frequently or 

 

71

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as promptly as U.S.companies whose securities are registered under the Exchange Act. A copy ofeach report submitted in accordance with applicable U.S. securities laws isavailable for public review at our principal executive offices.

 

**I.****                                         SubsidiaryInformation**

 

Notapplicable.

 

**ITEM 11****.      QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

**Quantitative andQualitative Disclosures About Market Risks**

 

In the ordinary course of our business, we are exposed to a variety ofmarket risks arising from fluctuations in foreign currency exchange rates,interest rates and commodity prices. To manage these risks effectively, weenter into hedging transactions and use derivative financial instruments,pursuant to established internal guidelines and policies, to mitigate theadverse effects of these market risks. We do not enter into financial instrumentsfor trading or speculative purposes.

 

The following table provides information as of December 28, 2002 aboutour financial instruments that were sensitive to changes in interest rates. Theinformation is presented in pounds sterling, which is our reporting currency.Actual cash flows of the various instruments are denominated in euro, poundssterling and dollars.

 
|                         |             | **Expected to mature before December 28,** |   |     |   |     |   |     |   |
|------------------------------|------------------|--------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                         |             | **2003**                                   |   | **2004** |   | **2005** |   | **2006** |   | **2007** |   | **Thereafter** |   | **Total** |   | **Fair Value** |   |
|                         |             | **(£ million)**                       |   |
|                         |             |                                       |   |     |   |     |   |     |   |   |   |   |   |   |   |   |   |
| Floating rate long-term debt |             |                                       |   |     |   |     |   |     |   |   |   |   |   |   |   |   |   |
| Senior credit facility       | –Facility A |                                       | 28.4   |     | 48.0   |     | 54.4   |     | 61.4   |   | 28.3 |   |   |   | 220.5 |   | 220.5 |   |
|                         | –Facility B |                                       |   |     |   |     |   |     |   |   | 52.7 |   | 52.7 |   | 105.4 |   | 105.4 |   |
|                         | –Facility C |                                       |   |     |   |     |   |     |   |   |   |   | 106.1 |   | 106.1 |   | 106.1 |   |
|                         | –Facility D |                                       |   |     |   |     |   |     |   |   |   |   | 21.7 |   | 21.7 |   | 21.7 |   |
| Total floating rate          |             | 28.4                                       |   | 48.0     |   | 54.4     |   | 61.4     |   | 81.0 |   | 180.5 |   | 453.7 |   | 453.7 |   |

 

In order to ensure that there was an appropriate balance between fixedand floating rate debt, interest rate swaps were put in place so that as ofDecember 28, 2002, approximately 48% of our total floating rate debt had beenconverted into fixed rate debt:

 
| **Notional Amount**  |   | **Fixed Rate** |   | **Fair Value**        |   |
|----------------------|--------|----------------|--------|-----------------------|--------|
| **(£ million)** |   |           |   | **(£  million)** |   |
| 66.2                 |   |           | 6.610  | %                     | (1.7   | ) |
| 150.0                |   |           | 5.685  | %                     | (6.1   | ) |
|                 |   |           |   | (7.8                  | )      |

 

**ITEM 12****.      DESCRIPTIONOF SECURITIES OTHER THAN EQUITY SECURITIES**

 

Not applicable.

 

72

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**PART II**

 

**ITEM 13.****              DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

 

None.

** **

**ITEM 14.****              MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS ANDUSE OF PROCEEDS**

 

None.

** **

**ITEM 15.****              CONTROLS AND PROCEDURES**

 

**Evaluationof Disclosure Controls and Procedures**

 

Based on its review within 90 days of the date of thisannual report of the Group’s disclosure controls and procedures, the ChiefExecutive Officer and Chief Financial Officer have concluded that the Group’scurrent disclosure controls and procedures are effective to ensure thatmaterial information by the Group is recorded, processed, summarized and reportedin a timely manner and that the information is accumulated and communicated tomanagement to allow timely decisions regarding required disclosure.

 

**Changein Internal Controls**

 

As of the date of thisannual report, based on the assessment of the Board, there were no changes inthe Group’s internal controls or in other factors that could significantlyaffect these controls subsequent to the date of their evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses.

 

**ITEM16.****                                              [RESERVED]**

 

73

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**PART III**

 

**ITEM 17.****                 FINANCIAL STATEMENTS**

 

We have responded to Item 18. “Financial Statements”in lieu of this item.

 

**ITEM 18.****                 FINANCIAL STATEMENTS**

 

The following consolidated financial statements andschedules together with the reports thereon of Ernst & Young LLP, are filedas part of this annual report:

 

 
| Reports of Independent  Auditors                                                                                                                                                                                                                                                                                                                 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                             |
| **Financial Statements**                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Profit and Loss Accounts of United Biscuits Finance plc for the 52 weeks  ended December 28, 2002, the 52 weeks ended December 29, 2001 and the period  from March 10, 2000 (inception) to December 30, 2000 and United Biscuits  (Holdings) Limited for the 15 weeks ended April 14, 2000                                         |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Statements of Total Recognized Gains and Losses of United Biscuits Finance  plc for the 52 weeks ended December 28, 2002, the 52 weeks ended December 29,  2001 and the period from March 10, 2000 (inception) to December 30,  2000 and United Biscuits (Holdings) Limited for the 15 weeks ended April 14,  2000       |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated Balance Sheets of  United Biscuits Finance plc at December 28, 2002 and at December 29, 2001                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Cash Flow Statements of United Biscuits Finance plc for the 52 weeks  ended December 28, 2002, the 52 weeks ended December 29, 2001 and the period  from March 10, 2000 (inception) to December 30, 2000 and United Biscuits  (Holdings) Limited for the 15 weeks ended April 14, 2000                              |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Statement of Changes in Shareholders’ Funds of United Biscuits Finance plc for  the 52 weeks ended December 28, 2002, the 52 weeks ended December 29, 2001  and the period from March 10, 2000 (inception) to December 30, 2000  and United Biscuits (Holdings) Limited for the 15 weeks ended April 14,  2000 |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Profit and Loss Account of Regentrealm Limited for the 52 weeks ended  December 28, 2002, the 52 weeks ended December 29, 2001 and the 52 weeks  ended December 30, 2000                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Statements of Total Recognized Gains and Losses of Regentrealm Limited for  the 52 weeks ended December 28, 2002, the 52 weeks ended December 29, 2001  and the 52 weeks ended December 30, 2000                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                             |
| Consolidated  Balance Sheets of Regentrealm Limited at December 28, 2002 and at December  29, 2001                                                                                                                                                                                                                                               |

 

74

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| Consolidated  Cash Flow Statements of Regentrealm Limited for the 52 weeks ended December  28, 2002, the 52 weeks ended December 29, 2001 and the 52 weeks  ended December 30, 2000                                                                                                                                                                                                                                                                                             |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Consolidated Statement  of Changes in Shareholders’ Funds of Regentrealm Limited for the 52 weeks  ended December 28, 2002, the 52 weeks ended December 29, 2001 and the 52  weeks ended December 30, 2000                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Notes to the Financial Statements  of United Biscuits Finance plc and Regentrealm Limited                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **Schedules**                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Schedule  II – Valuation and Qualifying Accounts of United Biscuits Finance plc for the  52 weeks ended December 28, 2002, the 52 weeks ended December 29, 2001 and  the period from March 10, 2000 (inception) to December 30, 2000 and United  Biscuits (Holdings) Limited for the 15 weeks ended April 14, 2000 and of  Regentrealm Limited for the 52 weeks ended December 28, 2002, the 52 weeks  ended December 29, 2001 and the 52 weeks ended December 30, 2000

  |

 

**ITEM 19.****                                              EXHIBITS**

 

Theexhibits filed with or incorporated by reference into this annual report arelisted below.

 
| 1.1    | Memorandum and Articles  of Association of United Biscuits Finance plc (incorporated herein by  reference to Exhibit 3.1 to UB Finance’s Registration Statement on Form F-4,  filed with the United States Securities and Exchange Commission on October  26, 2001, declared effective on October 31, 2001 (the “Exchange Offer  Registration Statement).* |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                 |
| 1.2    | Memorandum and Articles  of Association of Regentrealm Limited (incorporated herein by reference to  Exhibit 3.2 to the Exchange Offer Registration Statement).*                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                 |
| 1.3    | Memorandum and Articles  of Association of United Biscuits Group (Investments) Limited (incorporated  herein by reference to Exhibit 1.3 to the Annual Report on Form 20-F for the  fiscal year ended December 29, 2001).*                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                 |
| 2.1    | Indenture, dated April  17, 2001, between United Biscuits Finance plc, Regentrealm Limited, as  Guarantor, and The Bank of New York, as Trustee (incorporated herein by  reference to Exhibit 4.1 to the Exchange Offer Registration Statement).*                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                 |
| 2.2    | Form of Global Note  (included in Exhibit 2.1) (incorporated herein by reference to Exhibit 4.1 to  the Exchange Offer Registration Statement).*                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                 |
| 2.3    | Form of Definitive  Registered Note (included in Exhibit 2.1) (incorporated herein by reference  to Exhibit 4.1 to the Exchange Offer Registration Statement).*                                                                                                                                                                                                      |

 

----

***             **Incorporatedby reference.

 

75

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|   | Senior Credit  Facilities Agreement, dated December 14, 1999, between Regentrealm Limited  and Solvecorp Limited, Runecorp Limited and Others, as Borrowers and  Guarantors, Finalrealm Limited, Deutsche Bank AG London, Credit Suisse First  Boston and J.P. Morgan plc, as Joint Lead Arrangers, Deutsche Bank AG London,  The Chase Manhattan Bank and DLJ Capital Funding, Inc., as Original Lenders,  Deutsche Bank AG London as Sole Book Runner, Agent and Security Agent, and  Credit Suisse First Boston and J.P. Morgan plc, as Documentation Agents, as  amended and restated on April 28, 2000, August 28, 2000, November  28, 2000 and April 17, 2001 (incorporated herein by reference to Exhibit 4.4  to the Exchange Offer Registration Statement).* |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.5    | Intra-Group Loan  Agreement, dated April 17, 2001, between United Biscuits Finance plc and  Regentrealm Limited, as Borrower (incorporated herein by reference to Exhibit  4.5 to the Exchange Offer Registration Statement).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.6    | Subordination  Agreement, dated April 17, 2001, between United Biscuits Finance plc,  Runecorp Limited, as Parent and The Bank of New York, as Trustee  (incorporated herein by reference to Exhibit 4.6 to the Exchange Offer  Registration Statement).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.7    | Registration Rights  Agreement, dated April 17, 2001, between United Biscuits Finance plc and  Regentrealm Limited, as Guarantor and Deutsche Bank AG London, J.P. Morgan  Securities Ltd. and Credit Suisse First Boston (Europe) Limited, as the  Initial Purchasers (incorporated herein by reference to Exhibit 4.7 to the  Exchange Offer Registration Statement).*                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.1    | Shareholders Agreement,  dated March 17, 2000, between Cinven Limited, Paribas Affaires Industrielles,  DB Capital Partners, Nabisco and United Biscuits Group (Investments) Limited  as supplemented on April 17, 2000 (incorporated herein by reference to Exhibit  10.1 to the Exchange Offer Registration Statement),* as further supplemented  on March 13, 2003.**                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.2    | Amended and Restated  Merger Agreement dated July 11, 2000 between Deluxestar Limited and  Finalrealm Limited and Bladeland Ltd (now United Biscuits Group (Investments)  Limited) and Nabisco International Inc., in respect of the acquisition of  Nabisco Iberia S.L., Nabisco Saudi Arabia Co. Limited and Nabisco Tunisia  S.A..**                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.3    | Share Sale Agreement,  dated July 11, 2000, between (1) UB Foods US Limited, (2) Nabisco  International, Inc., (3) United Biscuits (Holdings) Limited, (4) UB  Investments Plc and (5) Runecorp Limited (incorporated herein by  reference to Exhibit 10.11 to the Exchange Offer Registration  Statement).*                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.4    | Trade Mark Sub-Licence  Agreement, dated July 11, 2000, between Merola Finance B.V. and Nabisco  Iberia S.L. (incorporated herein by reference to Exhibit 10.12 to the  Exchange Offer Registration Statement),* as amended by Variation Agreement  (Sub-Licence) on February 18, 2003. **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.5    | Know-How Cross Licence  Agreement, dated July 11, 2000, between Nabisco Iberia S.L. and Nabisco, Inc.  (incorporated herein by reference to Exhibit 10.13 to the Exchange Offer  Registration Statement).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

----

| ***** | Incorporated by  reference. |
|-------|-----------------------------|
| **    | Filed herewith              |

 

76

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| 4.6    | Assignment of Royal  Trade Marks, dated July 11, 2000, between Nabisco, Inc. and Nabisco Iberia  S.L. (incorporated herein by reference to Exhibit 10.14 to the Exchange Offer  Registration Statement).*        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                             |
| 4.7    | Royal Trade Mark Use  Agreement, dated July 11, 2000, between Nabisco, Inc. and Nabisco Iberia S.L.  (incorporated herein by reference to Exhibit 10.15 to the Exchange Offer  Registration Statement).*         |
|   |                                                                                                                                                                                                             |
| 4.8    | Trade Mark Licence  Agreement, dated July 11, 2000, between Nabisco Iberia S.L. and Nabisco, Inc.  (incorporated herein by reference to Exhibit 10.16 to the Exchange Offer  Registration Statement).*           |
|   |                                                                                                                                                                                                             |
| 4.9    | Trade Mark Assignment  for Local Brands, dated July 11, 2000, between Nabisco, Inc. and Nabisco  Iberia S.L. (incorporated herein by reference to Exhibit 10.17 to the  Exchange Offer Registration Statement).* |
|   |                                                                                                                                                                                                             |
| 8.1    | Subsidiaries of United  Biscuits Finance plc (incorporated herein by reference to Exhibit 21.1 to the  Exchange Offer Registration Statement).*                                                                  |

 

----

***             **Incorporatedby reference.

 

77

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**SIGNATURES**

 

Eachregistrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersignedto sign this annual report on its behalf.

 
|                        | **UNITED  BISCUITS FINANCE PLC** |
|-----------------------------|----------------------------------|
|                        |                             |
|                        |                             |
|                        | By:                              | Malcolm Ritchie /s/ |   |
|                        | Name:                            | **Malcolm  Ritchie** |
|                        | Title:                           | **Chief  Executive Officer** |
|                        |                             |   |
|                        |                             |   |
|                        | **REGENTREALM  LIMITED**         |
|                        |                             |
|                        |                             |
|                        | By:                              | Ian Cray /s/ |   |
|                        | Name:                            | **Ian  Cray** |
|                        | Title:                           | **Chief  Financial Officer** |
|                        |                             |
|                        |                             |
| Date:  March 24,  2003 |                             |

 

78

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**CERTIFICATIONS**

 

**CHIEFEXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEYACT OF 2002**

 

**I,Malcolm Ritchie, certify that:**

 
| 1.     | I have reviewed this  annual report on Form 20-F of United Biscuits Finance plc (registrant) and  Regentrealm Limited (additional registrant);                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 2.     | Based on my knowledge,  this annual report does not contain any untrue statement of a material fact  or omit to state a material fact necessary to make the statements made, in  light of the circumstances under which such statements were made, not  misleading with respect to the period covered by this annual report;                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 3.     | Based on my knowledge,  the financial statements, and other financial information included in this  annual report, fairly present in all material respects the financial  condition, results of operations and cash flows of the registrant as of, and  for, the periods presented in this annual report;                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.     | The registrant’s other  certifying officers and I are responsible for establishing and maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14  and 15d-14) for the registrant and have:                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                               | designed such  disclosure controls and procedures to ensure that material information  relating to the registrant, including its consolidated subsidiaries, is made  known to us by others within those entities, particularly during the period  in which this annual report is being prepared; |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                               | evaluated the  effectiveness of the registrant’s disclosure controls and procedures as of a  date within 90 days prior to the filing date of this annual report (the  “Evaluation Date”); and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | c)                                                                                                                                                                                                                                                                                                                                                                                               | presented in this  annual report our conclusions about the effectiveness of the disclosure  controls and procedures based on our evaluation as of the Evaluation Date; |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 5.     | The registrant’s other  certifying officers and I have disclosed, based on our most recent  evaluation, to the registrant’s auditors and the audit committee of  registrant’s board of directors (or persons performing the equivalent  function):                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                               | all significant  deficiencies in the design or operation of internal controls which could  adversely affect the registrant’s ability to record, process, summarize and  report financial data and have identified for the registrant’s auditors any  material weaknesses in internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                               | any fraud, whether or  not material, that involves management or other employees who have a  significant role in the registrant’s internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 6.     | The registrant’s other  certifying officers and I have indicated in this annual report whether or not  there were significant changes in internal controls or in other factors that  could significantly affect internal controls subsequent to the date of our  most recent evaluation, including any corrective actions with regard to  significant deficiencies and material weaknesses. |

 

 
|                 | By:    | Malcolm Ritchie /s/         |   |
|----------------------|--------|-----------------------------|--------|
|                 |   | **Malcolm Ritchie**         |
|                 |   | **Chief Executive Officer** |
| Date: March 24, 2003 |

 

79

----

 

**CERTIFICATIONS**

 

**CHIEFFINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEYACT OF 2002**

** **

**I, IanCray, certify that:**

 
| 1.     | I have reviewed this  annual report on Form 20-F of United Biscuits Finance plc (registrant) and  Regentrealm Limited (additional registrant);                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 2.     | Based on my knowledge,  this annual report does not contain any untrue statement of a material fact  or omit to state a material fact necessary to make the statements made, in  light of the circumstances under which such statements were made, not  misleading with respect to the period covered by this annual report;                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 3.     | Based on my knowledge,  the financial statements, and other financial information included in this  annual report, fairly present in all material respects the financial  condition, results of operations and cash flows of the registrant as of, and  for, the periods presented in this annual report;                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.     | The registrant’s other  certifying officers and I are responsible for establishing and maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14  and 15d-14) for the registrant and have:                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                               | designed such  disclosure controls and procedures to ensure that material information  relating to the registrant, including its consolidated subsidiaries, is made  known to us by others within those entities, particularly during the period  in which this annual report is being prepared; |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                               | evaluated the  effectiveness of the registrant’s disclosure controls and procedures as of a  date within 90 days prior to the filing date of this annual report (the  “Evaluation Date”); and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | c)                                                                                                                                                                                                                                                                                                                                                                                               | presented in this  annual report our conclusions about the effectiveness of the disclosure  controls and procedures based on our evaluation as of the Evaluation Date; |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 5.     | The registrant’s other  certifying officers and I have disclosed, based on our most recent  evaluation, to the registrant’s auditors and the audit committee of  registrant’s board of directors (or persons performing the equivalent  function):                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                               | all significant  deficiencies in the design or operation of internal controls which could  adversely affect the registrant’s ability to record, process, summarize and  report financial data and have identified for the registrant’s auditors any  material weaknesses in internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                               | any fraud, whether or  not material, that involves management or other employees who have a  significant role in the registrant’s internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                             |
| 6.     | The registrant’s other  certifying officers and I have indicated in this annual report whether or not  there were significant changes in internal controls or in other factors that  could significantly affect internal controls subsequent to the date of our  most recent evaluation, including any corrective actions with regard to  significant deficiencies and material weaknesses. |

 

 
|                 | By:    | Ian Cray /s/                |   |
|----------------------|--------|-----------------------------|--------|
|                 |   | **Ian Cray**                |
|                 |   | **Chief Financial Officer** |
|                 |   |
| Date: March 24, 2003 |   |

 

80

----

 

EXHIBIT INDEX

 
| **Exhibit** |   | **Description**                                                                                                                                                                                                                                                                       |
|-------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                  |
| 4.1         |   | Agreement Supplemental  to the Consortium Agreement, the Shareholders Agreement and Supplemental  Agreement, dated March 13, 2003.                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                  |
| 4.2         |   | Amended and Restated  Merger Agreement dated July 11, 2000 between Deluxestar Limited and  Finalrealm Limited and Bladeland Limited and Nabisco International Inc., in  respect of the acquisition of Nabisco Iberia S.L., Nabisco Saudi Arabia Co.  Limited and Nabisco Tunisia S.A. |
|        |   |                                                                                                                                                                                                                                                                                  |
| 4.4         |   | Variation Agreement  (Sub-Licence) dated February 18, 2003 between Merola Finance B.V. and Nabisco  Iberia S.L.                                                                                                                                                                       |

 

----

** **

 

**UNITED BISCUITS****FINANCE plc**

 

**REPORT OF INDEPENDENT AUDITORS**

 

To:                             TheDirectors

United Biscuits Financeplc

 

We have audited the accompanying consolidated balance sheets of UnitedBiscuits Finance plc as at December 29, 2001 and December 28, 2002 and therelated consolidated profit and loss accounts and consolidated statements oftotal recognized gains and losses, cash flows and changes in shareholders’funds for the period from March 10, 2000 (inception) to December 30, 2000and the years ended December 29, 2001 and December 28, 2002, and theconsolidated profit and loss accounts and consolidated statements of totalrecognized gains and losses, cash flows and changes in shareholders’ funds ofUnited Biscuits (Holdings) Limited (Predecessor) for the 15 weeks endedApril 14, 2000. Our audits also included the financial statement schedulelisted in the Index at Item 18. These financial statements and schedule are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements and schedule based on our audits.

 

We conducted our audits in accordance with United Kingdom auditingstandards and United States generally accepted auditing standards. Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of United BiscuitsFinance plc at December 29, 2001 and December 28, 2002, and the consolidatedresults of its operations and its consolidated cash flows for the period fromMarch 10, 2000 (inception) to December 30, 2000, and the years endedDecember 29, 2001 and December 28, 2002 and the consolidated resultsof operations and consolidated cash flows of United Biscuits (Holdings) Limited(Predecessor) for the 15 weeks ended April 14, 2000 in conformity withaccounting principles generally accepted in the United Kingdom which differ incertain respects from those generally accepted in the United States (see Note27 of Notes to the Financial Statements). Also, in our opinion, the relatedfinancial statement schedule, when considered in relation to the basicfinancial statements taken as a whole, presents fairly in all material respectsthe information set forth therein.

 

 
|            |   | ERNST  & YOUNG LLP |
|-----------------|--------|------------------------|
|            |   |                   |
| London, England |   |                   |
| March 24, 2003  |   |                   |

 

F-1

----

 

**REGENTREALM****LIMITED**

 

**REPORT OF INDEPENDENT** AUDITORS

 

To:                             TheDirectors

Regentrealm Limited

 

We have audited the accompanying consolidated balancesheets of Regentrealm Limited as at December 29, 2001 and December 28, 2002,and the related consolidated profit and loss accounts and consolidatedstatements of total recognized gains and losses, cash flows and changes inshareholders’ funds for the years ended December 30, 2000, December 29, 2001,and December 28, 2002. Our audits also included the financial statementschedule listed in the Index at Item 18. These financial statements and scheduleare the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements and schedule based on ouraudits.

 

We conducted our auditsin accordance with United Kingdom auditing standards and United Statesgenerally accepted auditing standards. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Regentrealm Limitedat December 29, 2001 and December 28, 2002, and the consolidatedresults of its operations and its consolidated cash flows for the years endedDecember 30, 2000, December 29, 2001, and December 28, 2002 in conformity withaccounting principles generally accepted in the United Kingdom which differ incertain respects from those generally accepted in the United States (see Note27 of Notes to the Financial Statements). Also, in our opinion, the relatedfinancial statement schedule, when considered in relation to the basicfinancial statements taken as a whole, presents fairly in all material respectsthe information set forth therein.

 

 
|            | ERNST  & YOUNG LLP |
|-----------------|------------------------|
|            |
| London, England |
| March 24, 2003  |

 

F-2

----

 

**UNITED****BISCUITSFINANCE plc**

 

**CONSOLIDATED PROFIT****AND LOSS ACCOUNTS**

 
|                                                                                     |   |      |   | **Company**                                   |   | **Predecessor**                                      |   |
|------------------------------------------------------------------------------------------|--------|-----------|--------|-----------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                     |   | **Notes** |   | **52 weeks********ended  December  28, 2002** |   | **52 weeks  ended  December  29, 2001  Restated(3)** |   | **Period from March 10, 2000 (inception)********to December 30,********2000(1)********Restated(3)** |   | **15 weeks********ended********April 14,********2000********Restated(3)** |   |
|                                                                                     |   |      |   | **(£ million)**                          |   |
| **Turnover: Group and share of  joint ventures**                                         |   |      |   | 1,310.0                                       |   | 1,284.2                                              |   | 978.8 |   | 370.5 |   |
| Less:   share of joint ventures’ turnover                                      |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Continuing operations                                                                    |   |      |   | (1.7                                          | )      | (1.7                                                 | )      | (1.2 | ) | (0.4 | ) |
| Discontinued operations                                                                  |   |      |   | —                                        |   | (19.7                                                | )      | (96.9 | ) | (41.6 | ) |
|                                                                                     |   |      |   | (1.7                                          | )      | (21.4                                                | )      | (98.1 | ) | (42.0 | ) |
| **Group turnover**                                                                       |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Continuing operations                                                                    |   | 4         |   | 1,308.3                                       |   | 1,262.8                                              |   | 880.7 |   | 282.3 |   |
| Discontinued operations                                                                  |   |      |   | —                                        |   | —                                               |   | — |   | 46.2 |   |
|                                                                                     |   |      |   | 1,308.3                                       |   | 1,262.8                                              |   | 880.7 |   | 328.5 |   |
| Cost of sales                                                                            |   |      |   | (709.8                                        | )      | (702.8                                               | )      | (522.6 | ) | (183.4 | ) |
| Gross profit                                                                             |   |      |   | 598.5                                         |   | 560.0                                                |   | 358.1 |   | 145.1 |   |
| Net operating expenses, including goodwill  amortization and operating exceptional items |   | 5 &10 |   | (540.4                                        | )      | (525.1                                               | )      | (311.3 | ) | (147.5 | ) |
| **Group operating profit/(loss)**                                                        |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Continuing operations                                                                    |   |      |   | 58.1                                          |   | 34.9                                                 |   | 46.8 |   | (3.2 | ) |
| Discontinued operations                                                                  |   |      |   | —                                        |   | —                                               |   | — |   | 0.8 |   |
|                                                                                     |   | 4         |   | 58.1                                          |   | 34.9                                                 |   | 46.8 |   | (2.4 | ) |
| Share of operating profit in joint ventures                                              |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Continuing operations                                                                    |   |      |   | 0.6                                           |   | 0.5                                                  |   | 0.4 |   | 0.1 |   |
| Discontinued operations                                                                  |   |      |   | —                                        |   | 0.7                                                  |   | 1.8 |   | 1.3 |   |
|                                                                                     |   |      |   | 0.6                                           |   | 1.2                                                  |   | 2.2 |   | 1.4 |   |
|                                                                                     |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| **Operating profit/(loss)**                                                              |   |      |   | 58.7                                          |   | 36.1                                                 |   | 49.0 |   | (1.0 | ) |
|                                                                                     |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Profit/(loss) on disposal of businesses                                                  |   | 6         |   | 9.9                                           |   | —                                               |   | — |   | (1.0 | ) |
| Profit/(loss) on disposal of fixed assets                                                |   |      |   | 1.2                                           |   | (8.9                                                 | )      | (0.6 | ) | 0.4 |   |
| Costs relating to offers for Predecessor                                                 |   |      |   | —                                        |   | —                                               |   | — |   | (8.6 | ) |
| **Profit/(loss) before interest**                                                        |   | 5         |   | 69.8                                          |   | 27.2                                                 |   | 48.4 |   | (10.2 | ) |
| Interest                                                                                 |   | 7         |   | (142.8                                        | )      | (154.9                                               | )      | (103.3 | ) | (3.8 | ) |
| **Loss on ordinary activities  before tax**                                              |   |      |   | (73.0                                         | )      | (127.7                                               | )      | (54.9 | ) | (14.0 | ) |
| Taxation                                                                                 |   | 8         |   | 14.1                                          |   | 28.2                                                 |   | (40.1 | ) | (8.3 | ) |
| Exceptional taxation refund                                                              |   | 9         |   | 12.3                                          |   | —                                               |   | — |   | — |   |
| **Loss attributable to  shareholders(2)**                                                |   |      |   | (46.6                                         | )      | (99.5                                                | )      | (95.0 | ) | (22.3 | ) |

 

----

| (1)    |   | United Biscuits (Finance) plc (the “Company”) did not trade in the  period from inception to April 14, 2000, the date United Biscuits (Holdings)  Limited (the “Predecessor”) was acquired by a subsidiary of the Company.  Accordingly, the results of the Company  presented above for the period from March 10, 2000 (inception) to December  30, 2000 are for the 37 weeks ended December 30, 2000. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (2)    |   | A summary of the significant adjustments to loss attributable to  shareholders (net loss) that would be required if U.S. generally accepted  accounting principles were to be applied instead of those generally accepted  in the United Kingdom is set out in Note 27 of Notes to the Financial  Statements.                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (3)    |   | The amounts for 2001 and 2000 for the Company and the amounts for the  Predecessor have been restated to reflect the adoption of FRS 19 (see Note 2  of Notes to the Financial Statements).                                                                                                                                                                                                                                      |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-3

----

 

**UNITED BISCUITS FINANCE plc**

 

**CONSOLIDATED STATEMENT OF TOTAL RECOGNIZEDGAINS AND LOSSES**(1)

 
|                                                            |   | **Company**                             |   | **Predecessor**                                            |   |
|-----------------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------------------------|--------|
|                                                            |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001********Restated(2)** |   | **Period from March 10, 2000 (inception)  to December 30,********2000(1)********Restated(2)** |   | **15 weeks  ended  April 14,********2000********Restated(2)** |   |
|                                                            |   | **(£ million)**                    |   |
| Loss attributable to  shareholders                              |   | (46.6                                   | )      | (99.5                                                      | )      | (95.0 | ) | (22.3 | ) |
| Translation differences on foreign currency net  investments    |   | 0.8                                     |   | 1.1                                                        |   | (13.6 | ) | (0.7 | ) |
| **Total recognized gains and losses relating to the  period**   |   | (45.8                                   | )      | (98.4                                                      | )      | (108.6 | ) | (23.0 | ) |
| Prior year adjustment(2)                                        |   | (9.1                                    | )      |                                                       |   |   |   |   |   |
| **Total gains and losses  recognised since last annual report** |   | (54.9                                   | )      |                                                       |   |   |   |   |   |

 

----

| (1)    |   | Comprehensive income as required by U.S. generally accepted accounting  principles is set out in Note 27 of Notes to the Financial Statements.                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                             |
| (2)    |   | The amounts for 2001 and 2000 for the Company and the Predecessor have  been restated to reflect the adoption of FRS 19 (see Note 2 of Notes to  the Financial Statements). |

 

The Notes to the Financial Statements are an integral part of theseFinancial Statements.

 

F-4

----

 

**UNITED BISCUITS FINANCE plc**

 

**CONSOLIDATED BALANCE** SHEETS(1)

 
|                                                         |   |      |       | **At December 28,********2002** |       | **At December 29,********2001  Restated(2)** |       |
|--------------------------------------------------------------|--------|-----------|------------|---------------------------------|------------|----------------------------------------------|------------|
|                                                         |   | **Notes** |       |                            |       |
|                                                         |   |      |       | **(£ million)**            |       |
| **Fixed assets**                                             |   |      |       |                            |       |                                         |       |
| Intangible assets                                            |   | 10        |       | 635.1                           |       | 675.8                                        |       |
| Tangible assets                                              |   | 11        |       | 438.9                           |       | 442.5                                        |       |
| Investments in joint ventures                                |   | 12        |       |                            |       |                                         |       |
| Share of gross assets                                        |   |      |       | 4.0                             |       | 3.3                                          |       |
| Share of gross liabilities                                   |   |      |       | (0.3                            | )          | (0.3                                         | )          |
|                                                         |   |      |       | 3.7                             |       | 3.0                                          |       |
|                                                         |   |      |       | **1,077.7**                     |       | **1,121.3**                                  | ** ** |
| **Current assets**                                           |   |      |       |                            |       |                                         |       |
| Stocks                                                       |   | 13        |       | 76.1                            |       | 72.9                                         |       |
| Debtors                                                      |   | 14        |       | 311.3                           |       | 298.5                                        |       |
| Assets held for disposal                                     |   | 15        |       | —                          |       | 38.2                                         |       |
| Taxation                                                     |   |      |       | 1.8                             |       | 0.5                                          |       |
| Cash and short-term deposits                                 |   | 17        |       | 21.2                            |       | 36.8                                         |       |
|                                                         |   |      |       | **410.4**                       |       | **446.9**                                    | ** ** |
| **Creditors: amounts falling due within one year**           |   |      |       |                            |       |                                         |       |
| Trade and other creditors                                    |   | 16        |       | 278.6                           |       | 316.7                                        |       |
| Loans, overdrafts and finance lease obligations              |   | 17        |       | 30.8                            |       | 35.5                                         |       |
|                                                         |   |      |       | **309.4**                       |       | **352.2**                                    | ** ** |
|                                                         |   |      |       |                            |       |                                         |       |
| **Net current assets**                                       |   |      |       | **101.0**                       | ** ** | **94.7**                                     | ** ** |
|                                                         |   |      |       |                            |       |                                         |       |
| **Total assets less current  liabilities**                   |   |      |       | **1,178.7**                     | ** ** | **1,216.0**                                  | ** ** |
| **Creditors: amounts falling due after more than one  year** |   |      |       |                            |       |                                         |       |
| Loans and finance lease obligations                          |   | 17        |       | 632.7                           |       | 690.3                                        |       |
| Amount due to parent company                                 |   | 23        |       | 735.2                           |       | 657.0                                        |       |
| Other creditors                                              |   |      |       | 1.2                             |       | 1.5                                          |       |
| Taxation                                                     |   |      |       | 15.2                            |       | 13.9                                         |       |
|                                                         |   |      |       | **1,384.3**                     |       | **1,362.7**                                  | ** ** |
|                                                         |   |      |       |                            |       |                                         |       |
| **Provisions for liabilities and charges**                   |   | 18        | ** ** | **45.2**                        | ** ** | **58.3**                                     | ** ** |
|                                                         |   |      |       | **(250.8**                      | **)**      | **(205.0**                                   | **)**      |
|                                                         |   |      |       |                            |       |                                         |       |
| **Capital and reserves**                                     |   |      |       |                            |       |                                         |       |
| Called-up share capital                                      |   |      |       | 2.0                             |       | 2.0                                          |       |
| Profit and loss account                                      |   |      |       | (252.8                          | )          | (207.0                                       | )          |
| **Shareholders’ funds**(1)                              |   |      |       | **(250.8**                      | **)**      | **(205.0**                                   | **)**      |

 

----

| (1)    |   | A summary of the significant adjustments to shareholders’ funds that  would be required if U.S. generally accepted accounting principles were to be  applied instead of those generally accepted in the United Kingdom is set out  in Note 27 of Notes to the Financial Statements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                          |
| (2)    |   | The amounts for 2001 have been restated to reflect the adoption of FRS  19 (see Note 2 of Notes to the Financial Statements).                                                                                                                                                                 |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-5

----

 

**UNITED BISCUITS FINANCE plc**

 

**CONSOLIDATEDCASH FLOW STATEMENTS(1)**

 
|                                                                                           |   |      |   | **Company**                                   |   | **Predecessor**                                      |   |
|------------------------------------------------------------------------------------------------|--------|-----------|--------|-----------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                           |   | **Notes** |   | **52 weeks********ended  December  28, 2002** |   | **52 weeks  ended  December 29,  2001  Restated(2)** |   | **Period from March 10,  2000  (inception)  to December 30,  2000 (1)  Restated(2)** |   | **15 weeks  ended********April 14,  2000** |   |
|                                                                                           |   |      |   | **(£ million)**                          |   |
| **Reconciliation  of operating profit to net cash inflow/(outflow) from operating activities** |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Operating  profit/(loss)                                                                       |   |      |   | 58.7                                          |   | 36.1                                                 |   | 49.0 |   | (1.0 | ) |
| Exceptional charges to operating profit                                                        |   |      |   | 35.4                                          |   | 42.3                                                 |   | 18.5 |   | 10.0 |   |
| Operating profit before exceptionals                                                           |   |      |   | 94.1                                          |   | 78.4                                                 |   | 67.5 |   | 9.0 |   |
| Depreciation and goodwill amortization                                                         |   |      |   | 94.9                                          |   | 89.4                                                 |   | 54.7 |   | 15.6 |   |
| (Increase)/decrease in stocks                                                                  |   |      |   | (0.9                                          | )      | (2.0                                                 | )      | 14.7 |   | 1.0 |   |
| (Increase)/decrease in debtors                                                                 |   |      |   | (4.9                                          | )      | (14.7                                                | )      | 10.0 |   | (3.7 | ) |
| (Decrease)/increase in creditors                                                               |   |      |   | (46.4                                         | )      | (51.4                                                | )      | 63.9 |   | (53.4 | ) |
| Expenditure against rationalization provisions  and operating exceptionals                     |   |      |   | (31.0                                         | )      | (31.5                                                | )      | (17.8 | ) | (1.0 | ) |
| Other                                                                                          |   |      |   | (0.7                                          | )      | (1.3                                                 | )      | (4.5 | ) | — |   |
| Net cash inflow/(outflow) from operating  activities                                           |   | 20        |   | 105.1                                         |   | 66.9                                                 |   | 188.5 |   | (32.5 | ) |
|                                                                                           |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| **Cash flow statement**                                                                        |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Net cash inflow/(outflow) from operating  activities                                           |   | 20        |   | 105.1                                         |   | 66.9                                                 |   | 188.5 |   | (32.5 | ) |
| Net cash outflow from returns on investments and  servicing of finance                         |   | 20        |   | (63.2                                         | )      | (70.2                                                | )      | (63.1 | ) | (3.8 | ) |
| Tax received/(paid)                                                                            |   | 20        |   | 12.5                                          |   | 2.1                                                  |   | (3.4 | ) | (0.7 | ) |
| Net cash (outflow)/inflow from capital  expenditure and financialinvestment                    |   | 20        |   | (54.1                                         | )      | (47.1                                                | )      | 505.3 |   | (11.7 | ) |
| Net cash inflow/(outflow) from acquisitions and  disposals                                     |   | 20        |   | 53.5                                          |   | 59.9                                                 |   | (1,146.3 | ) | (9.7 | ) |
| Dividends paid                                                                                 |   | 20        |   | —                                        |   | —                                               |   | — |   | (16.9 | ) |
| Cash inflow/(outflow) before use of liquid  resources & financing                          |   |      |   | 53.8                                          |   | 11.6                                                 |   | (519.0 | ) | (75.3 | ) |
|                                                                                           |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Net cash (outflow)/inflow from management of  liquid resources                                 |   | 20        |   | (0.6                                          | )      | 14.0                                                 |   | 80.0 |   | (10.0 | ) |
| Net cash (outflow)/inflow from financing                                                       |   | 20        |   | (69.7                                         | )      | (70.8                                                | )      | 477.1 |   | (1.4 | ) |
| (Decrease)/increase in cash in the period                                                      |   | 17        |   | (16.5                                         | )      | (45.2                                                | )      | 38.1 |   | (86.7 | ) |
|                                                                                           |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| **Reconciliation of net cash flow to movement in net  borrowings**                             |   |      |   |                                          |   |                                                 |   |   |   |   |   |
| Net borrowings at beginning of period                                                          |   | 17        |   | (689.0                                        | )      | (725.5                                               | )      | — |   | (99.6 | ) |
| (Decrease)/increase in cash for period                                                         |   |      |   | (16.5                                         | )      | (45.2                                                | )      | 38.1 |   | (86.7 | ) |
| Repayment of/(increase in) debt                                                                |   |      |   | 69.7                                          |   | 70.8                                                 |   | (477.1 | ) | 1.4 |   |
| Management of liquid resources                                                                 |   |      |   | 0.6                                           |   | (14.0                                                | )      | (80.0 | ) | 10.0 |   |
| Acquisition of Predecessor                                                                     |   |      |   | —                                        |   | —                                               |   | (151.8 | ) | — |   |
| Cash/(loans) acquired with purchase of subsidiary                                              |   |      |   | —                                        |   | 7.5                                                  |   | (76.2 | ) | — |   |
| Costs of raising finance                                                                       |   |      |   | —                                        |   | 13.7                                                 |   | 25.8 |   | — |   |
| Proceeds of issue of shares for cash                                                           |   |      |   | —                                        |   | —                                               |   | 11.2 |   | 3.3 |   |
| New finance leases                                                                             |   |      |   | (0.7                                          | )      | —                                               |   | — |   | — |   |
| Foreign exchange translation difference                                                        |   | 17        |   | (6.4                                          | )      | 3.7                                                  |   | (15.5 | ) | 4.3 |   |
| Movement in net borrowings in the period                                                       |   |      |   | 46.7                                          |   | 36.5                                                 |   | (725.5 | ) | (67.7 | ) |
| Net borrowings at end of period                                                                |   | 17        |   | (642.3                                        | )      | (689.0                                               | )      | (725.5 | ) | (167.3 | ) |

 

----

| (1)    |   | The significant differences between the cash flow statements presented  above and those required by U.S. generally accepted accounting principles are  set out in Note 27 of Notes to the Financial Statements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                            |
| (2)    |   | The amounts for 2001 and 2000 for the Company have been restated to  reflect the adoption of FRS 19 (see Note 2 of Notes to the Financial  Statements).                                                         |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-6

----

 

**UNITED BISCUITS FINANCE plc**

 

**CONSOLIDATEDSTATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS**

 
|                                                           |   | **Ordinary Shares********of £1 each** |       |
|----------------------------------------------------------------|--------|--------------------------------------------|------------|
| **Share Capital**                                              |   | **(Number)**                               |       | **(£)** |   |
|                                                           |   | **(million)**                              |       |
| **Company**                                                    |   |                                       |       |   |   |
|                                                           |   |                                       |       |   |   |
| ***Authorized***                                               |   |                                       | ** ** |   | ** ** |
| On inception                                                   |   | 0.6                                        |       | 0.6 |   |
| Increase                                                       |   | 1.4                                        |       | 1.4 |   |
| At December 30, 2000, December 29, 2001 and  December 28, 2002 |   | 2.0                                        |       | 2.0 |   |
|                                                           |   |                                       |       |   |   |
| ***Allotted,  called up and fully paid***                      |   |                                       |       |   |   |
| At December 30, 2000, December 29, 2001 and  December 28, 2002 |   | 2.0                                        |       | 2.0 |   |
|                                                           |   |                                       |       |   |   |
|                                                           |   | **Ordinary Shares  of 29p each**           |       |
|                                                           |   | **(Number)**                               |       | **(£)** |   |
|                                                           |   | **(million)**                              |       |
| **Predecessor**                                                |   |                                       |       |   |   |
|                                                           |   |                                       |       |   |   |
| ***Authorized, allotted,  called up and fully paid***          |   |                                       | ** ** |   | ** ** |
| At January 1, 2000                                             |   | 473.8                                      |       | 137.4 |   |
| Issue of shares                                                |   | 1.8                                        |       | 0.5 |   |
| At April 14, 2000                                              |   | 475.6                                      |       | 137.9 |   |

 
| **Share capital and reserves**           |   | **Share  capital**   |   | **Share  premium  account** |   | **Capital  reserve** |   | **Profit and  loss  account  Restated(1)** |   | **Total** |   |
|------------------------------------------|--------|----------------------|--------|-----------------------------|--------|----------------------|--------|--------------------------------------------|--------|-----------|--------|
|                                     |   | **(£ million)** |   |
| **Company**                              |   |                 |   |                        |   |                 |   |                                       |   |      |   |
|                                     |   |                 |   |                        |   |                 |   |                                       |   |      |   |
| On  inception                            |   | 0.6                  |   | —                      |   | —               |   | —                                     |   | 0.6       |   |
| Shares issued                            |   | 1.4                  |   | —                      |   | —               |   | —                                     |   | 1.4       |   |
| Retained loss for the period             |   | —               |   | —                      |   | —               |   | (58.8                                      | )      | (58.8     | )      |
| Exchange differences                     |   | —               |   | —                      |   | —               |   | (13.6                                      | )      | (13.6     | )      |
| At December 30, 2000 as reported         |   | 2.0                  |   | —                      |   | —               |   | (72.4                                      | )      | (70.4     | )      |
| Prior year adjustment(1)                 |   | —               |   | —                      |   | —               |   | (36.2                                      | )      | (36.2     | )      |
| At December 30, 2000 as restated         |   | 2.0                  |   | —                      |   | —               |   | (108.6                                     | )      | (106.6    | )      |
| Retained loss for the period as restated |   | —               |   | —                      |   | —               |   | (99.5                                      | )      | (99.5     | )      |
| Exchange differences                     |   | —               |   | —                      |   | —               |   | 1.1                                        |   | 1.1       |   |
| At December 29, 2001, as restated        |   | 2.0                  |   | —                      |   | —               |   | (207.0                                     | )      | (205.0    | )      |
| Retained loss for the period             |   | —               |   | —                      |   | —               |   | (46.6                                      | )      | (46.6     | )      |
| Exchange differences                     |   | —               |   | —                      |   | —               |   | 0.8                                        |   | 0.8       |   |
| At December 28, 2002                     |   | 2.0                  |   | —                      |   | —               |   | (252.8                                     | )      | (250.8    | )      |
|                                     |   |                 |   |                        |   |                 |   |                                       |   |      |   |
| **Predecessor**                          |   |                 |   |                        |   |                 |   |                                       |   |      |   |
|                                     |   |                 |   |                        |   |                 |   |                                       |   |      |   |
| At January 1, 2000                       |   | 137.4                |   | 118.8                       |   | 146.6                |   | 68.4                                       |   | 471.2     |   |
| Shares issued                            |   | 0.5                  |   | 2.9                         |   | —               |   | —                                     |   | 3.4       |   |
| Retained loss for the period             |   | —               |   | —                      |   | —               |   | (12.9                                      | )      | (12.9     | )      |
| Exchange differences                     |   | —               |   | —                      |   | —               |   | (0.7                                       | )      | (0.7      | )      |
| At April 14, 2000                        |   | 137.9                |   | 121.7                       |   | 146.6                |   | 54.8                                       |   | 461.0     |   |

 

----

| (1) |   | The figures have been restated to reflect the adoption of FRS 19 (see  Note 2 of Notes to the Financial Statements). |
|-----|--------|----------------------------------------------------------------------------------------------------------------------|

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-7

----

 

**REGENT****REALM LIMITED**

 

**CONSOLIDATEDPROFIT AND LOSS ACCOUNTS**

 
|                                                                                     |   | **Notes** |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001  Restated (3)** |   | **52 weeks  ended  December 30,  2000 (1)  Restated (3)** |   |
|------------------------------------------------------------------------------------------|--------|-----------|--------|-----------------------------------------|--------|-------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                                                     |   |      |   | **(£ million)**                    |   |
|                                                                                     |   |      |   |                                    |   |                                                  |   |                                                      |   |
| **Turnover:   Group and share of joint ventures**                                   |   |      |   | 1,310.0                                 |   | 1,284.2                                               |   | 978.8                                                     |   |
| Less:  share  of joint ventures’ turnover                                      |   |      |   |                                    |   |                                                  |   |                                                      |   |
| Continuing operations                                                                    |   |      |   | (1.7                                    | )      | (1.7                                                  | )      | (1.2                                                      | )      |
| Discontinued operations                                                                  |   |      |   | —                                  |   | (19.7                                                 | )      | (96.9                                                     | )      |
|                                                                                     |   |      |   | (1.7                                    | )      | (21.4                                                 | )      | (98.1                                                     | )      |
|                                                                                     |   |      |   |                                    |   |                                                  |   |                                                      |   |
| **Group turnover****–**continuing  operations                                       |   |      |   | 1,308.3                                 |   | 1,262.8                                               |   | 880.7                                                     |   |
| Cost of sales                                                                            |   |      |   | (709.8                                  | )      | (702.8                                                | )      | (522.6                                                    | )      |
| Gross profit                                                                             |   |      |   | 598.5                                   |   | 560.0                                                 |   | 358.1                                                     |   |
| Net operating expenses, including goodwill  amortization and operating exceptional items |   | 5 &10 |   | (540.4                                  | )      | (525.1                                                | )      | (311.3                                                    | )      |
|                                                                                     |   |      |   |                                    |   |                                                  |   |                                                      |   |
| **Group operating profit** – continuing operations                                  |   |      |   | 58.1                                    |   | 34.9                                                  |   | 46.8                                                      |   |
| Share of operating profit in joint ventures                                              |   |      |   |                                    |   |                                                  |   |                                                      |   |
| Continuing operations                                                                    |   |      |   | 0.6                                     |   | 0.5                                                   |   | 0.4                                                       |   |
| Discontinued operations                                                                  |   |      |   | —                                  |   | 0.7                                                   |   | 1.8                                                       |   |
|                                                                                     |   |      |   | 0.6                                     |   | 1.2                                                   |   | 2.2                                                       |   |
| Operating profit                                                                         |   |      |   | 58.7                                    |   | 36.1                                                  |   | 49.0                                                      |   |
|                                                                                     |   |      |   |                                    |   |                                                  |   |                                                      |   |
| Profit on disposal of businesses                                                         |   | 6         |   | 9.9                                     |   | —                                                |   | —                                                    |   |
| Profit/(loss) on disposal of fixed assets                                                |   |      |   | 1.2                                     |   | (8.9                                                  | )      | (0.6                                                      | )      |
| **Profit before interest**                                                               |   | 5         |   | 69.8                                    |   | 27.2                                                  |   | 48.4                                                      |   |
| Interest                                                                                 |   | 7         |   | (141.8                                  | )      | (149.3                                                | )      | (97.8                                                     | )      |
| **Loss on ordinary activities  before tax**                                              |   |      |   | (72.0                                   | )      | (122.1                                                | )      | (49.4                                                     | )      |
| Taxation                                                                                 |   | 8         |   | 14.1                                    |   | 28.2                                                  |   | (40.1                                                     | )      |
| Exceptional taxation refund                                                              |   | 9         |   | 12.3                                    |   | —                                                |   | —                                                    |   |
| **Loss attributable to shareholders**(2)                                                 |   |      |   | (45.6                                   | )      | (93.9                                                 | )      | (89.5                                                     | )      |

 

----

 
| (1)    |   | Regentrealm Limited (“Regentrealm) did not trade in the period from  January 2, 2000 to April 14, 2000, the date on which United Biscuits  (Holdings) Limited (the “Predecessor”) was acquired by a subsidiary of  Regentrealm. Accordingly, the results of Regentrealm, presented above for the  52 weeks ended December 30, 2000, reflect the consolidated results of  operations of Regentrealm for the 37 weeks ended December 30, 2000. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (2)    |   | A summary of the significant adjustments to loss attributable to  shareholders (net loss) that would be required if U.S. generally  accepted accounting principles were to be applied instead of those generally  accepted in the United Kingdom is set out in Note 27 of Notes to the  Financial Statements.                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (3)    |   | The amounts for 2001 and 2000 have been restated to reflect the  adoption of FRS 19 (see Note 2 of Notes to the Financial Statements).                                                                                                                                                                                                                                                                                                                      |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-8

----

 

**REGENTREALM LIMITED**

 

**CONSOLIDATEDSTATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES**(1)

 
|                                                          |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001  Restated (2)** |   | **52 weeks  ended  December 30,  2000  Restated (2)** |   |
|---------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                          |   | **(£ million)**                    |   |
|                                                          |   |                                    |   |                                                  |   |                                                  |   |
| Loss  attributable to shareholders                            |   | (45.6                                   | )      | (93.9                                                 | )      | (89.5                                                 | )      |
| Translation differences  on foreign currency net investments  |   | 0.8                                     |   | 1.1                                                   |   | (13.6                                                 | )      |
| **Total recognized gains and losses relating to the  period** |   | (44.8                                   | )      | (92.8                                                 | )      | (103.1                                                | )      |
| Prior year  adjustment(2)                                     |   | (9.1                                    | )      |                                                  |   |                                                  |   |
| Total gains and losses  recognised since last annual report   |   | (53.9                                   | )      |                                                  |   |                                                  |   |

 

----

| (1)    |   | Comprehensive income as required by U.S. generally accepted accounting  principles is set out in Note 27 of Notes to the Financial Statements. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                           |
| (2)    |   | The amounts for 2001 and 2000 have been restated to reflect the  adoption of FRS 19 (see Note 2 of Notes to the Financial Statements).         |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-9

----

 

**REGENTREALM LIMITED**

 

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                         |   | **Notes** |       | **At December 28,  2002** |       | **At December 29,  2001  Restated (2)** |       |
|--------------------------------------------------------------|--------|-----------|------------|---------------------------|------------|-----------------------------------------|------------|
|                                                         |   |      |       | **(£ million)**      |       |
| **Fixed Assets**                                             |   |      |       |                      |       |                                    |       |
| Intangible assets                                            |   | 10        |       | 635.1                     |       | 675.8                                   |       |
| Tangible assets                                              |   | 11        |       | 438.9                     |       | 442.5                                   |       |
| Investments in joint ventures                                |   | 12        |       |                      |       |                                    |       |
| Share of gross assets                                        |   |      |       | 4.0                       |       | 3.3                                     |       |
| Share of gross liabilities                                   |   |      |       | (0.3                      | )          | (0.3                                    | )          |
|                                                         |   |      |       | 3.7                       |       | 3.0                                     |       |
|                                                         |   |      |       | **1,077.7**               |       | **1,121.3**                             | ** ** |
| **Current assets**                                           |   |      |       |                      |       |                                    |       |
| Stocks                                                       |   | 13        |       | 76.1                      |       | 72.9                                    |       |
| Debtors                                                      |   | 14        |       | 331.6                     |       | 318.8                                   |       |
| Assets held for disposal                                     |   | 15        |       | —                    |       | 38.2                                    |       |
| Taxation                                                     |   |      |       | 1.8                       |       | 0.5                                     |       |
| Cash and short-term deposits                                 |   | 17        |       | 21.2                      |       | 36.8                                    |       |
|                                                         |   |      |       | **430.7**                 |       | **467.2**                               | ** ** |
| **Creditors: amounts falling due  within one year**          |   |      |       |                      |       |                                    |       |
| Trade and other creditors                                    |   | 16        |       | 273.6                     |       | 311.6                                   |       |
| Loans, overdrafts and finance lease obligations              |   | 17        |       | 31.8                      |       | 36.4                                    |       |
|                                                         |   |      |       | **305.4**                 |       | **348.0**                               | ** ** |
|                                                         |   |      |       |                      |       |                                    |       |
| **Net current assets**                                       |   |      |       | **125.3**                 | ** ** | **119.2**                               | ** ** |
|                                                         |   |      |       |                      |       |                                    |       |
| **Total assets less current  liabilities**                   |   |      |       | **1,203.0**               | ** ** | **1,240.5**                             | ** ** |
|                                                         |   |      |       |                      |       |                                    |       |
| **Creditors: amounts falling due  after more than one year** |   |      |       |                      |       |                                    |       |
| Loans and finance lease obligations                          |   | 17        |       | 416.0                     |       | 481.4                                   |       |
| Amount due to United Biscuits Finance plc                    |   | 23        |       | 964.1                     |       | 879.3                                   |       |
| Other creditors                                              |   |      |       | 1.2                       |       | 1.5                                     |       |
| Taxation                                                     |   |      |       | 15.2                      |       | 13.9                                    |       |
|                                                         |   |      |       | **1,396.5**               |       | **1,376.1**                             | ** ** |
|                                                         |   |      |       |                      |       |                                    |       |
| **Provisions for liabilities and  charges**                  |   | 18        | ** ** | **45.2**                  | ** ** | **58.3**                                | ** ** |
|                                                         |   |      |       | **(238.7**                | **)**      | **(193.9**                              | **)**      |
| **Capital and reserves**                                     |   |      |       |                      |       |                                    |       |
| Called-up share capital                                      |   |      |       | 2.0                       |       | 2.0                                     |       |
| Profit and loss account                                      |   |      |       | (240.7                    | )          | (195.9                                  | )          |
| **Shareholders’ funds**(1)                              |   |      |       | **(238.7**                | **)**      | **(193.9**                              | **)**      |

 

 

----

| (1)    |   | A summary of the significant adjustments to shareholders’ funds that  would be required if U.S. generally accepted accounting principles were to be  applied instead of those generally accepted in the United Kingdom is set out  in Note 27 of Notes to the Financial Statements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                          |
| (2)    |   | The amounts for 2001 and 2000 have been restated to reflect the  adoption of FRS 19 (see Note 2 of Notes to the Financial Statements).                                                                                                                                                        |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-10

----

 

**REGENTREALM LIMITED**

 

**CONSOLIDATEDCASH FLOW STATEMENTS(1)**

** **
|                                                                                 |   | **Notes** |       | **52 weeks  ended  December 28,  2002** |       | **52 weeks  ended  December 29,  2001  Restated(2)** |       | **52 weeks  ended  December 30,  2000  Restated(2)** |       |
|--------------------------------------------------------------------------------------|--------|-----------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
|                                                                                 |   |      |       | **(£ million)**                    |       |
| **Reconciliation of operating  profit to net cash inflow from operating activities** |   |      | ** ** |                                    | ** ** |                                                 | ** ** |                                                 | ** ** |
| **Operating profit**                                                                 |   |      |       | 58.7                                    |       | 36.1                                                 |       | 49.0                                                 |       |
| Exceptional charges to operating profit                                              |   |      |       | 35.4                                    |       | 42.3                                                 |       | 18.5                                                 |       |
| Operating profit before exceptionals                                                 |   |      |       | 94.1                                    |       | 78.4                                                 |       | 67.5                                                 |       |
| Depreciation and goodwill amortization                                               |   |      |       | 94.9                                    |       | 89.4                                                 |       | 54.7                                                 |       |
| (Increase)/decrease in stocks                                                        |   |      |       | (0.9                                    | )          | (2.0                                                 | )          | 2.7                                                  |       |
| (Increase)/decrease in debtors                                                       |   |      |       | (4.9                                    | )          | (5.8                                                 | )          | 14.5                                                 |       |
| (Decrease)/increase in creditors                                                     |   |      |       | (45.4                                   | )          | (51.6                                                | )          | 68.8                                                 |       |
| Expenditure against rationalization provisions  and operating exceptionals           |   |      |       | (31.0                                   | )          | (31.5                                                | )          | (17.8                                                | )          |
| Other                                                                                |   |      |       | (0.7                                    | )          | (1.3                                                 | )          | (4.5                                                 | )          |
| Net cash inflow from operating activities                                            |   |      |       | 106.1                                   |       | 75.6                                                 |       | 185.9                                                |       |
|                                                                                 |   |      |       |                                    |       |                                                 |       |                                                 |       |
| **Cash flow statement**                                                              |   |      |       |                                    |       |                                                 |       |                                                 |       |
| Net cash inflow from operating activities                                            |   |      |       | 106.1                                   |       | 75.6                                                 |       | 185.9                                                |       |
| Net cash outflow from  returns on investments and servicing of finance               |   | 20        |       | (63.2                                   | )          | (70.2                                                | )          | (63.1                                                | )          |
| Tax received/(paid)                                                                  |   | 20        |       | 12.5                                    |       | 2.1                                                  |       | (3.4                                                 | )          |
| Net cash  (outflow)/inflow from capital expenditure and financial investment         |   | 20        |       | (54.1                                   | )          | (162.8                                               | )          | 838.4                                                |       |
| Net cash  inflow/(outflow) from acquisitions and disposals                           |   | 20        |       | 53.5                                    |       | 59.9                                                 |       | (1,146.3                                             | )          |
| Cash inflow/(outflow)  before use of liquid resources and financing                  |   |      |       | 54.8                                    |       | (95.4                                                | )          | (188.5                                               | )          |
|                                                                                 |   |      |       |                                    |       |                                                 |       |                                                 |       |
| Net cash inflow from  management of liquid resources                                 |   | 20        |       | (0.6                                    | )          | 14.0                                                 |       | 80.0                                                 |       |
| Net cash (outflow)/inflow  from financing                                            |   | 20        |       | (69.7                                   | )          | 36.2                                                 |       | 146.6                                                |       |
| (Decrease)/increase in  cash in the period                                           |   | 17        |       | (15.5                                   | )          | (45.2                                                | )          | 38.1                                                 |       |
|                                                                                 |   |      |       |                                    |       |                                                 |       |                                                 |       |
| **Reconciliation of net cash flow  to movement in net borrowings**                   |   |      |       |                                    |       |                                                 |       |                                                 |       |
| Net borrowings at  beginning of period                                               |   | 17        |       | (481.0                                  | )          | (397.1                                               | )          | —                                               |       |
| (Decrease)/increase in cash for the period                                           |   |      |       | (15.5                                   | )          | (45.2                                                | )          | 38.1                                                 |       |
| Repayment of/(increase in) debt                                                      |   |      |       | 69.7                                    |       | (36.2                                                | )          | (146.6                                               | )          |
| Management of liquid resources                                                       |   |      |       | 0.6                                     |       | (14.0                                                | )          | (80.0                                                | )          |
| Acquisition of Predecessor                                                           |   |      |       | —                                  |       | —                                               |       | (151.8                                               | )          |
| Cash/(loans) acquired with purchase of  subsidiary                                   |   |      |       | —                                  |       | 7.5                                                  |       | (76.2                                                | )          |
| Costs of raising finance                                                             |   |      |       | —                                  |       | 3.4                                                  |       | 15.6                                                 |       |
| Proceeds of issue of shares for cash                                                 |   |      |       | —                                  |       | —                                               |       | 11.2                                                 |       |
| New finance leases                                                                   |   |      |       | (0.7                                    | )          | —                                               |       | —                                               |       |
| Foreign exchange  translation difference                                             |   | 17        |       | 0.3                                     |       | 0.6                                                  |       | (7.4                                                 | )          |
| Movement in net  borrowings in the period                                            |   |      |       | 54.4                                    |       | (83.9                                                | )          | (397.1                                               | )          |
| Net borrowings at end  of period                                                     |   | 17        |       | (426.6                                  | )          | (481.0                                               | )          | (397.1                                               | )          |

 

----

| (1)    |   | The significant differences between the cash flow statements presented  above and those required by U.S. generally accepted accounting principles are  set out in Note 27 of Notes to the Financial Statements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                            |
| (2)    |   | The amounts for 2001 and 2000 have been restated to reflect the  adoption of FRS 19 (see Note 2 of Notes to the Financial Statements).                                                                          |

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-11

----

 

**REGENTREALM LIMITED**

 

**CONSOLIDATEDSTATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS**

 
|                                     |   | **Share capital**                                                                             |   | **Profit and  loss  account  Restated(1)** |      |   |   |
|------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|--------|--------|
|                                     |   | **Authorized and allotted,********called up and fully paid  Ordinary Shares of £1 each** |   |                                       | **Total** |   |
|                                     |   | **(Number)**                                                                                  |   | **(£)**                               |      |   |   |   |   |
|                                     |   | **(million)**                                                                                 |   | **(£ million)**                       |      |
|                                     |   |                                                                                          |   |                                       |      |   |   |   |   |
| At December 30, 2000 as reported         |   | 2.0                                                                                           |   | 2.0                                        |      | (66.9  | )      | (64.9 | ) |
| Prior year adjustment(1)                 |   | —                                                                                        |   | —                                     |      | (36.2  | )      | (36.2 | ) |
| At December 30, 2000 as restated         |   | 2.0                                                                                           |   | 2.0                                        |      | (103.1 | )      | (101.1 | ) |
| Retained loss for the period as restated |   | —                                                                                        |   | —                                     |      | (93.9  | )      | (93.9 | ) |
| Exchange differences                     |   | —                                                                                        |   | —                                     |      | 1.1    |   | 1.1 |   |
| At December 29, 2001 as restated         |   | 2.0                                                                                           |   | 2.0                                        |      | (195.9 | )      | (193.9 | ) |
| Retained loss for the period             |   | —                                                                                        |   | —                                     |      | (45.6  | )      | (45.6 | ) |
| Exchange differences                     |   | —                                                                                        |   | —                                     |      | 0.8    |   | 0.8 |   |
| At December 28, 2002                     |   | 2.0                                                                                           |   | 2.0                                        |      | (240.7 | )      | (238.7 | ) |

 

----

| (1) |   | The amounts for 2001 and 2000 have been restated to reflect the adoption  of FRS 19 (see Note 2 of Notes to the Financial Statements). |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------|

 

TheNotes to the Financial Statements are an integral part of these FinancialStatements.

 

F-12

----

 

**UNITEDBISCUITS FINANCE plc**

**and REGENTREALM LIMITED**

** **

**NOTES****TO THE FINANCIAL STATEMENTS**

 

 

**1              Basis of preparation anddescription of business**

 

United Biscuits Finance plc (the “Company”) wasincorporated on March 10, 2000 as a private limited company under the nameDreadstar Limited. On November 28, 2000 it was re-registered as a publiclimited company and its name changed to United Biscuits Finance plc.

 

Regentrealm Limited (“Regentrealm”) was incorporatedon November 29, 1999 as a private limited company. Regentrealm acts asguarantor under the terms of the Indenture relating to the issue of the SeniorSubordinated Notes by the Company.

 

The Company is the immediate parent company ofRegentrealm which is wholly owned.

 

The Company and Regentrealm were formed, together witha number of other entities, by a consortium of financial investors whichultimately consisted of funds advised or managed by Paribas AffairesIndustrielles (now PAI management) (“PAI”), Cinven Limited, DB CapitalPartners, whose interests in the Company and Regentrealm were acquired byMidOcean Partners, LP (“MidOcean”) in February 2003, and Nabisco (collectively,the “Equity Sponsors”) in connection with the acquisition (the “Acquisition”)of United Biscuits (Holdings) plc, a company then listed on the London StockExchange. Subsequent to its acquisition, United Biscuits (Holdings) plc wasre-registered as a private limited company and re-named United Biscuits(Holdings) Limited (the “Predecessor”). In these financial statements, the termthe “Group” is used to refer both to the Company, together with itssubsidiaries subsequent to the Acquisition, and the Predecessor, together withits subsidiaries prior to the Acquisition. The term “Group” also refers toRegentrealm together with its subsidiaries where the context so requires.

 

The purchase of the Predecessor by the Company hasbeen reflected in the consolidated financial statements using the acquisitionmethod of accounting.

 

These financial statements have been prepared to showthe performance of the Predecessor and its subsidiaries for the 15 weeks endedApril 14, 2000, the Company and its subsidiaries for the period from March 10,2000 (inception) to December 30, 2000, the year ended December 29, 2001 and theyear ended December 28, 2002 and Regentrealm and its subsidiaries for the yearsended December 30, 2000, December 29, 2001 and December 28, 2002. Prior to theAcquisition on April 14, 2000, the Company and Regentrealm did not trade.Accordingly, the Company’s consolidated profit and loss account and cash flowstatement for the period from March 10, 2000 (inception) toDecember 30, 2000 and that of Regentrealm for the year ended December30, 2000 reflect the results of operations of the Group for the 37 weeks endedDecember 30, 2000.

 

F-13

----

 

In connection with the Acquisition, it was agreed thatthe Group would sell its operations in Scandinavia, Malaysia, Singapore,Finland, Poland and Hungary, its snack interests in Germany and Italy andcertain savory biscuit brands in the United Kingdom to Group Danone S.A. andits operations in China, Hong Kong and Taiwan to Nabisco. The net assets ofthese operations have been recorded by the Company as assets held for disposalwithin current assets at their anticipated net disposal proceeds and theresults of operations have not been consolidated subsequent to April 14,2000. During the 37-week period ended December 30, 2000, the Group sold all itsinvestments in these businesses with the exception of the investments in China,Finland and Poland. The Group’s operations in Poland and Finland were sold inFebruary 2001 and May 2001, respectively. The Group’s operations in China weresold on March 25, 2002. The results of these operations are reflected asdiscontinued operations in the financial statements of the Predecessor.

 

In connection with the Acquisition, it was also agreedthat the Group would acquire from Nabisco, through an affiliated company, itsEuropean, Middle Eastern and North African biscuit and dessert mix operationsand certain other food businesses. The European and North African businesseswere acquired on July 11, 2000 and April 20, 2001, respectively, and have beenreflected in the consolidated financial statements using the acquisition methodof accounting. At December 28, 2002 the acquisition of the MiddleEastern business had not been completed and, since the year end, an agreement,effective February 18, 2003, has been reached with Nabisco whereby theacquisition will no longer proceed. As a consequence, $4.8 million has beenpaid to the Group by Nabisco.

 

The Group is a leading manufacturer and marketer ofbiscuits and snacks in the United Kingdom and continental Western Europe.  The Company’s continuing operations havebeen divided into seven segments reflecting the internal operational managementstructure of the Group. These segments comprise UK Biscuits, Northern EuropeBiscuits, Southern Europe Biscuits, UK Snacks, General Export and Other.Additionally, there are central costs which represent corporate governancecosts, including executive costs, and costs of the Company’s legal, companysecretarial, pension administration, tax and treasury functions.

 

**2              Accounting policies**

 

**Basis ofaccounting**

 

The financial statements are prepared on thehistorical cost basis of accounting and in accordance with applicable UnitedKingdom accounting standards.

 

In preparing these financial statements, certain itemshave been included in order to comply with accounting presentation anddisclosure requirements applicable in the United States in respect of foreignregistrants. A reconciliation to U.S. GAAP is set out in Note 27.

 

F-14

----

 

Also, in preparing the financial statements for thecurrent period, the Group has adopted FRS 19 “Deferred Taxation”. The adoptionof FRS 19 has resulted in a change of accounting policy for deferred taxationand as a result, deferred tax is now recognized in accordance with theaccounting policy described below. This change in accounting policy has resultedin a restatement to prior years for the Group, reducing shareholders’ funds atDecember 30, 2000 by £36.2 million and at December 29, 2001 by £9.1 million.The provision for deferred taxation has been increased by £17.7 million atDecember 29, 2001 (£45.3 million at December 30, 2000) and the goodwill thatarose on the acquisition of United Biscuits (Holdings) Limited has beenincreased by £9.4 million. The effect on the profit and loss account has beento decrease the tax charge in 2001 by £27.6 million (an increase in the taxcharge of £36.0 million for the year ended December 30, 2000).

 

**Basis ofconsolidation**

 

The financial statements of the Company, Regentrealmand the Predecessor consolidate, respectively, the accounts of the Company,Regentrealm and the Predecessor and their respective subsidiaries, togetherwith the Group’s share of net assets and results of joint ventures. The resultsof subsidiaries acquired or sold are consolidated and the Group’s share of theresults of joint ventures are included for the periods from their effectivedate of acquisition or to their effective date of sale.

 

**Turnover**

 

Turnover consists of sales to third parties aftertrade discounts and excludes sales related taxes.

 

**Revenuerecognition**

 

Sales are recognized based on confirmed deliveries tocustomers.

 

**Researchand development**

 

Expenditure on research and development is written offas incurred.

 

**Foreigncurrency translation**

 

# **The profit and loss accounts ofoverseas subsidiaries are translated at weighted average rates of exchange. Thebalance sheets of overseas subsidiaries are translated at the rates of exchangeruling at the year end. Exchange differences arising on the re-translation ofopening net assets are taken directly to reserves. All other translation differencesare taken to the profit and loss account with the exception of differencesarising on the translation of foreign currency borrowings to the extent thatthey are used to finance, or provide a hedge against, Group equity investmentsin foreign subsidiaries, which are taken directly to reserves together with theexchange difference on the net investment in these subsidiaries.**

 

F-15

----

 

# **Taxation**

 

Deferred tax isrecognized in respect of all timing differences that have originated but notreversed at the balance sheet date where transactions or events have occurredat that date that will result in an obligation to pay more, or a right to payless or to receive more tax, with the following exceptions:

 

•                         provisionis made for gains which have been rolled over into replacement assets, only tothe extent that, at the balance sheet date, there is a commitment to dispose ofthe replacement assets.  However, noprovision is made where, on the basis of all available evidence at the balancesheet date, it is more likely than not that the taxable gain will again berolled over into further replacement assets;

•                         provisionis made for deferred tax that would arise on remittance of the retainedearnings of overseas subsidiaries, associates and joint ventures only to theextent that, at the balance sheet date, dividends have been accrued asreceivable;

•                         deferredtax assets are recognized only to the extent that the directors consider thatit is more likely than not that there will be suitable taxable profits fromwhich the future reversal of the underlying timing differences can be deducted.

 

Deferred tax is measured on an undiscounted basis atthe tax rates that are expected to apply in the periods in which timingdifferences reverse, based on tax rates and laws enacted or substantivelyenacted at the balance sheet date.

 

This policy represents a change in accounting policyfor the Company and Regentrealm as a result of the adoption of FRS 19 “DeferredTaxation”.

 

**Exceptionalitems**

 

Items which are of an exceptional nature by virtue oftheir size or incidence are included within operating profit unless theyrepresent profits or losses on the sale or termination of a business, costs offundamental reorganization or restructuring having a material effect on thenature and focus of the Group, or profits or losses on the disposal of fixedassets. In these cases, separate disclosure is provided in the profit and lossaccount after operating profit.

 

**Pensionfunding**

 

Pension costs are charged to the profit and lossaccount over the average expected service lives of current employees. Actuarialsurpluses are amortized, on a level capital basis, over the expected remainingservice lives of current employees. Differences between amounts charged to theprofit and loss account and payments made to the schemes are treated asprepayments or provisions in the balance sheet.

 

F-16

----

 

# **Financialinstruments**

 

Derivative financial instruments are used by the Groupto manage foreign currency and interest rate exposures. Amounts payable orreceivable in respect of interest rate swap agreements are recognized asadjustments to the interest charge over the period of the contracts. Gains orlosses on forward and option contracts for foreign currency and commodities arerecognized in the profit and loss account when the hedged transaction occurs.Payments made to secure a hedge, or unrealized profits generated prior tomaturity, are included in the balance sheet as prepayments or accruals,respectively, pending amortization to the profit and loss account over theperiod of usage of the hedged commodity.

 

Certain commodities are purchased on the futuresmarket in order to reduce the exposure to changes in the cost of ingredients.When contracts are closed, the realized surpluses and deficits are appliedagainst the cost of the related ingredients in the year of delivery.

 

Option premiums paid are recognized in the profit andloss account as incurred. Premiums and discounts arising on financialliabilities are amortized over the remaining life of the instrument concerned.

 

**Financecosts on debt**

 

Costs associated with the raising of finance aredeferred and amortized over the period of related borrowings.

 

**Goodwill**

 

On the acquisition of a subsidiary business, jointventure or associate, fair values are attributed to the net tangible assetsacquired and to intangible assets where they can be measured reliably andseparately identified at the time of acquisition. Where the fair value of theconsideration exceeds the aggregate value of these assets, the difference istreated as goodwill and is capitalized on the consolidated balance sheet.Goodwill and where appropriate, separately identified intangibles, are amortizedin equal installments over their useful economic lives which, in the absence ofindications to the contrary, will be assumed to be no more than 20 years.Goodwill is reviewed for impairment at the end of the first full year followingthe year of acquisition and subsequently if there are indications ofimpairment.

 

F-17

----

 

**Tangiblefixed assets**

 

Tangible fixed assets are held at cost. The Group hasa policy of not revaluing tangible fixed assets.

 

Depreciation is calculated to write off the cost oftangible fixed assets over their expected useful lives by equal annualinstallments, principally at the following rates:

 
| Land and buildings    | - 1.5% unless short leasehold |
|-----------------------|-------------------------------|
| Short leaseholds      | - over the life of the lease  |
| Plant                 | - 3%  to 15%  pa         |
| Vehicles              | - 20% to 30% pa               |
| Fixtures and fittings | - 10% to 33% pa               |

 

Assets under construction are capitalized as part offixed assets but are not depreciated until such time as construction iscomplete when they are transferred into the appropriate category of fixedassets and depreciated accordingly.

 

The carrying values of tangible fixed assets arereviewed where there are indications of impairment.

 

**Governmentgrants**

 

Capital grants received in respect of any fixed assetsare credited to deferred income and amortized to the profit and loss accountover the economic useful lives of the assets to which they relate.

 

**EmployeeShare Ownership Plan (ESOP)**

 

Shares of the Predecessor held to the order of theESOP Trust were shown on its balance sheet as investments held at directors’valuation based on their market value at the balance sheet date. Any losses,and any gains to the extent that they represented the reversal of previousrevaluation losses, were taken to the profit and loss account as exceptionalitems. The corresponding borrowings used to finance the shares purchased wererecorded as borrowings of the Group. Dividend income, interest expense and costs of the Trust were recordedwith the appropriate captions in the profit and loss account. Following theAcquisition, the ESOP was cancelled.

 

**Stocks**

** **

Stocks are valued at the lower of cost and netrealizable value. Cost in the case of raw materials and goods for resale isdetermined on a first-in, first-out basis. Cost in the case of productsmanufactured by Group companies comprises direct material and labor coststogether with appropriate factory overheads.

 

F-18

----

 

**Cash andshort-term deposits**

 

Cash includes cash in hand and deposits repayable ondemand with any qualifying financial institutions, less overdrafts from anyqualifying institution repayable on demand.

 

**Leasingand hire purchase commitments**

 

Assets obtained under finance leases and hire purchasecontracts are capitalized and depreciated over their useful lives.  The interest element of the rentalobligations is charged to the profit and loss account over the period of theprimary lease and represents a constant proportion of the balance of capitalrepayments outstanding.  Rentals paidunder operating leases are charged to income on a straight-line basis over theterm of the lease.

 

**Advertisingcosts**

 

Advertising costs are expensed as incurred.

 

**Softwaredevelopment costs**

 

Costs incurred in developing software for internal useare capitalized when the software reaches the application development stage andare amortized over the expected useful economic life of the software.

 

**Use ofestimates**

 

The preparation of financial statements requiresmanagement to make estimates that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the balancesheet date and the reported amounts of revenues and expenses for the reportingperiod.  Actual results could differfrom those estimates.

 

F-19

----

 

**3              Acquisitions**

** **

**Companyand Regentrealm**

 

***52 weeks ended December 28, 2002***

 

Neither the Company nor Regentrealm made anyacquisitions in the year ended December 28, 2002.

 

***52 weeks ended December 29, 2001***

 

**UnitedBiscuits Tunisia S.A.**

 

On April 20, 2001 the Group acquired a 100% interestin United Biscuits Tunisia S.A.

 

Details of the assets acquired and goodwill arisingare set out below:

 
|                                                                             |   | **Book  value** |   | **Accounting  Policy  Alignment** |   | **Adjustments** |   | **Fair  value** |   |
|----------------------------------------------------------------------------------|--------|-----------------|--------|-----------------------------------|--------|-----------------|--------|-----------------|--------|
|                                                                             |   |            |   | **(£  million)**             |   |            |   |
|                                                                             |   |            |   |                              |   |            |   |            |   |
| Tangible fixed  assets                                                           |   | 2.6             |   | (1.4                              | )      | —          |   | 1.2             |   |
| Stocks                                                                           |   | 1.3             |   | —                            |   | (0.3            | )      | 1.0             |   |
| Debtors                                                                          |   | 1.5             |   | —                            |   | (0.2            | )      | 1.3             |   |
| Creditors                                                                        |   | (2.7            | )      | —                            |   | (0.5            | )      | (3.2            | )      |
| Cash acquired                                                                    |   | 7.5             |   | —                            |   | —          |   | 7.5             |   |
|                                                                             |   | 10.2            |   | (1.4                              | )      | (1.0            | )      | 7.8             |   |
| Goodwill arising                                                                 |   |            |   |                              |   |            |   | 10.7            |   |
| Total purchase  consideration (including transaction costs of £0.1 million) |   |            |   |                              |   |            |   | 18.5            |   |

 

The accounting policy alignment to fixed assetsrepresents the alignment of depreciation rates with those of the Group.

 

***Period from March 10, 2000 (inception) toDecember 30, 2000 (Company) and 52 weeks ended December 30, 2000 (Regentrealm)***

 

**UnitedBiscuits (Holdings) Limited (Predecessor)**

 

On April 14, 2000 the Group acquired 93% of theoutstanding shares of United Biscuits (Holdings) plc.  On June 13, 2000 the Group acquired the remaining shares ofUnited Biscuits (Holdings) plc pursuant to the compulsory  acquisition provisions of the Companies Act1985 and  re-registered the company as aprivate limited company, to become United Biscuits (Holdings) Limited.

 

In the year ended December 29, 2001, the fair valuesoriginally allocated to the purchased assets have been revised and finalised aspermitted by FRS 7.  The details ofrevisions to provisional fair values and the impact on goodwill arising are setout below.

 

F-20

----

 
|                                                                              |   | **Book value  Restated(1)** |       | **Adjustments(2)** |       | **Provisional  fair values  Restated(1)** |       | **Revisions  to   provisional  fair values** |       | **Final fair    values  Restated(1)** |       |
|-----------------------------------------------------------------------------------|--------|-----------------------------|------------|--------------------|------------|-------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------|------------|
|                                                                              |   |                        | ** ** |               | ** ** | **(£ million)**                      | ** ** |                                         | ** ** |                                  | ** ** |
| Intangible fixed  assets                                                          |   | 53.4                        |       | (53.4              | )          | —                                    |       | —                                       |       | —                                |       |
| Tangible fixed  assets                                                            |   | 503.2                       |       | (86.9              | )          | 416.3                                     |       | —                                       |       | 416.3                                 |       |
| Investments                                                                       |   | 26.4                        |       | 12.5               |       | 38.9                                      |       | (0.9                                         | )          | 38.0                                  |       |
| Stocks                                                                            |   | 64.3                        |       | (12.7              | )          | 51.6                                      |       | —                                       |       | 51.6                                  |       |
| Debtors                                                                           |   | 288.0                       |       | (32.7              | )          | 255.3                                     |       | (3.7                                         | )          | 251.6                                 |       |
| Assets held  exclusively for resale                                               |   | —                      |       | 340.5              |       | 340.5                                     |       | (1.2                                         | )          | 339.3                                 |       |
| Creditors                                                                         |   | (276.9                      | )          | 46.0               |       | (230.9                                    | )          | 0.3                                          |       | (230.6                                | )          |
| Provisions                                                                        |   | (37.1                       | )          | 0.2                |       | (36.9                                     | )          | —                                       |       | (36.9                                 | )          |
| Net debt assumed                                                                  |   | (167.3                      | )          | 15.5               |       | (151.8                                    | )          | —                                       |       | (151.8                                | )          |
|                                                                              |   | 454.0                       |       | 229.0              |       | 683.0                                     |       | (5.5                                         | )          | 677.5                                 |       |
| Goodwill arising                                                                  |   |                        |       |               |       | 647.5                                     |       |                                         |       | 653.0                                 |       |
| Total purchase  consideration (including transaction costs of £46.6 million) |   |                        |       |               |       | 1,330.5                                   |       |                                         |       | 1,330.5                               |       |

 

----

| (1)    | The book value, provisional fair values and final  fair values have been restated to reflect the adoption of FRS 19  (see Note 2 to the Financial Statements).                                                                                        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                       |   |
| (2)    | The adjustments to book value represent the increase  to estimated net realizable value of the net assets held for disposal (see  note 1) and of the Group’s interest in the Young’s Bluecrest joint venture  which was sold in March 2001. |

 

**UnitedBiscuits Iberia, S.L. (formerly Nabisco Iberia, S.L.)**

 

On July 11, 2000, the Group acquired a 100% interestin United Biscuits Iberia, S.L.

 

In the year ended December 29, 2001, the fair valuesoriginally allocated to the purchased assets have been revised and finalised aspermitted by FRS 7. The details of revisions to provisional fair values and theimpact on goodwill arising are set out below:

 
|                          |   | **Book &  provisional fair   values** |       | **Revisions  to  provisional  fair values** |       | **Final fair  values** |       |
|-------------------------------|--------|-------------------------------------------|------------|---------------------------------------------|------------|------------------------|------------|
|                          |   |                                      | ** ** | **(£  million)**                       | ** ** |                   | ** ** |
|                          |   |                                      |       |                                        |       |                   |       |
| Tangible fixed  assets        |   | 38.3                                      |       | —                                      |       | 38.3                   |       |
| Cash                          |   | 1.2                                       |       | —                                      |       | 1.2                    |       |
| Stocks                        |   | 23.1                                      |       | —                                      |       | 23.1                   |       |
| Debtors                       |   | 47.3                                      |       | —                                      |       | 47.3                   |       |
| Creditors                     |   | (38.2                                     | )          | (0.3                                        | )          | (38.5                  | )          |
| Provisions                    |   | (1.9                                      | )          | —                                      |       | (1.9                   | )          |
| Loans                         |   | (77.4                                     | )          | —                                      |       | (77.4                  | )          |
|                          |   | (7.6                                      | )          | (0.3                                        | )          | (7.9                   | )          |
| Goodwill arising              |   | 85.4                                      |       |                                        |       | 70.4                   |       |
| Total purchase  consideration |   | 77.8                                      |       |                                        |       | 62.5                   |       |

 

Under the conditions of the purchase agreement thecompany agreed with Nabisco, in November 2001, to adjust the purchaseconsideration for United Biscuits Iberia, S.L.

 

F-21

----

 

The loss after tax of United Biscuits Iberia underSpanish GAAP for the period January 1, 2000 to the date of acquisitionwas €17.0 million (year ended December 31, 1999 loss of €35.0 million).

 

Had the acquisitions of the Predecessor and UnitedBiscuits Iberia been consummated on March 10, 2000 (inception) in the case ofthe Company or on January 1, 2000 and November 29, 1999 (inception)in the case of Regentrealm, the unaudited pro forma Group turnover and lossattributable to shareholders would have been as follows:

 
|           |   | **Company**                                                                   |   | **Regentrealm**                                |   |
|----------------|--------|-------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|           |   | **Period  from  March 10, 2000   (inception) to   December  30,   2000** |   | **52 weeks  ended  December  30,   2000** |   | **Period  from   November 29,   1999 (inception) to   January 1,  2000** |   |
|           |   |                                                                          |   | **(£  million)**                          |   |   |   |
|           |   |                                                                          |   |                                           |   |   |   |
| Group turnover |   | 1,040.0                                                                       |   | 1,232.6                                        |   | 98.6 |   |
| Net loss       |   | (63.6                                                                         | )      | (164.3                                         | )      | (22.6 | ) |

#### ** **

#### **Predecessor**

 

***15 weeks ended April 14, 2000***

** **

The Group made no acquisitions during the 15 weeksended April 14, 2000.

 

F-22

----

 

**4              Segmentalanalysis**

 

In the first quarter of the year ended December 29,2001, the Group’s continuing operations were divided into seven segments,reflecting the new internal operational management structure of the Group. Thesegments comprise UK Biscuits, Northern Europe Biscuits, Southern EuropeBiscuits, UK Snacks, General Export, Other and Central. The segmental amountsfor continuing operations for the period from March 10, 2000 (inception) toDecember 30, 2000 (Company) and the 52 weeks ended December 30, 2000(Regentrealm) and for the 15 weeks ended April 14, 2000 (Predecessor) have beenrestated to reflect the new segments.

 

U.K. Biscuits covers manufacturing and marketing ofbiscuits and cakes in the United Kingdom and marketing of biscuits and cakes inthe Republic of Ireland. Northern Europe covers the manufacturing and marketingof biscuits in France, Belgium and the Netherlands. Southern Europe covers themanufacturing and marketing of biscuits and other food products in Iberia.General Export covers exports of branded products around the world and includesthe operations in Tunisia. U.K. Snacks covers the manufacturing and marketingof savory snacks, nuts and crisps in the United Kingdom. The Benelux snackbusiness is categorized as Other. Additionally, there are central costs whichrepresent corporate governance costs, including executive costs, and costs ofthe Company’s legal, company secretarial, pension administration, tax andtreasury functions.

 

F-23

----

 
|                                                                    |   | **Biscuits**                                                  |       |                 |       |                 |       |           |       |                |       |      |       |
|-------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|----------------|------------|---------------------|------------|-----------|------------|
|                                                                    |   | **UK**                                                        |       | **Northern  Europe** |       | **Southern  Europe** |       | **UK  Snacks** |       | **General  Export** |       | **Other** |       | **Central** |   | **Total** |   |
|                                                                    |   | **(£ million  except for average number of employees )** | ** ** |
| **Company and Regentrealm**                                             |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| ***52 weeks ended December 28, 2002***                                  |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| Group turnover                                                          |   | 510.7                                                         |       | 195.6                |       | 183.6                |       | 309.6          |       | 79.7                |       | 29.1      |       | — |   | 1,308.3 |   |
| Group operating  profit/(loss) before goodwill and exceptional items    |   | 72.0                                                          |       | 5.7                  |       | 18.0                 |       | 35.2           |       | 17.6                |       | (2.8      | )          | (11.5 | ) | 134.2 |   |
| Goodwill and  exceptional items                                         |   | (8.3                                                          | )          | (9.3                 | )          | (2.4                 | )          | (0.1           | )          | 0.2                 |       | (0.2      | )          | (56.0 | ) | (76.1 | ) |
| **Group  operating profit/(loss)**                                      |   | 63.7                                                          |       | (3.6                 | )          | 15.6                 |       | 35.1           |       | 17.8                |       | (3.0      | )          | (67.5 | ) | 58.1 |   |
| Share of  operating profit in joint ventures                            |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 0.6 |   |
| Operating profit                                                        |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 58.7 |   |
| Profit on  disposal of businesses                                       |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 9.9 |   |
| Profit on  disposal of fixed assets                                     |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 1.2 |   |
| **Profit before interest**                                              |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 69.8 |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| Depreciation                                                            |   | 27.7                                                          |       | 6.3                  |       | 5.6                  |       | 10.3           |       | 0.4                 |       | 1.4       |       | 2.5 |   | 54.2 |   |
| Gross capital  expenditure                                              |   | 17.1                                                          |       | 11.8                 |       | 7.7                  |       | 10.2           |       | 0.2                 |       | 1.5       |       | 10.7 |   | 59.2 |   |
| Total assets (at  period end) – Company                            |   | 331.7                                                         |       | 133.2                |       | 115.6                |       | 123.7          |       | 34.3                |       | 9.2       |       | 740.4 |   | 1,488.1 |   |
| Total assets (at  period end) – Regentrealm                        |   | 331.7                                                         |       | 133.2                |       | 115.6                |       | 123.7          |       | 34.3                |       | 9.2       |       | 760.7 |   | 1,508.4 |   |
| Long-lived assets  (at period end)                                      |   | 217.6                                                         |       | 69.0                 |       | 40.4                 |       | 53.4           |       | 1.0                 |       | 7.0       |       | 689.3 |   | 1,077.7 |   |
| Average number of employees                                             |   | 4,624                                                         |       | 2,086                |       | 1,170                |       | 2,375          |       | 113                 |       | 184       |       | 588 |   | 11,140 |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| **Company and Regentrealm**                                             |   |                                                          | ** ** |                 | ** ** |                 | ** ** |           | ** ** |                | ** ** |      | ** ** |   | ** ** |   | ** ** |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| ***52 weeks ended December 29, 2001***                                  |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| **Group turnover**                                                      |   | 498.6                                                         |       | 185.6                |       | 156.8                |       | 309.0          |       | 82.9                |       | 29.9      |       | — |   | 1,262.8 |   |
| Group operating  profit/(loss) before goodwill and exceptional items(3) |   | 71.3                                                          |       | (6.6                 | )          | 11.7                 |       | 38.2           |       | 12.2                |       | (1.3      | )          | (11.9 | ) | 113.6 |   |
| Goodwill and  exceptional items(4)                                      |   | (4.3                                                          | )          | (8.8                 | )          | (2.6                 | )          | (0.9           | )          | (2.9                | )          | (0.1      | )          | (59.1 | ) | (78.7 | ) |
| Group operating  profit/(loss)                                          |   | 67.0                                                          |       | (15.4                | )          | 9.1                  |       | 37.3           |       | 9.3                 |       | (1.4      | )          | (71.0 | ) | 34.9 |   |
| Share of  operating profit in joint ventures                            |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 1.2 |   |
| Operating profit                                                        |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 36.1 |   |
| Loss on disposal  of fixed assets                                       |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | (8.9 | ) |
| **Profit before interest**                                              |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   | 27.2 |   |
|                                                                    |   |                                                          |       |                 |       |                 |       |           |       |                |       |      |       |   |   |   |   |
| Depreciation                                                            |   | 29.4                                                          |       | 5.5                  |       | 5.2                  |       | 10.2           |       | 0.4                 |       | 1.2       |       | 1.1 |   | 53.0 |   |
| Gross capital  expenditure                                              |   | 13.1                                                          |       | 7.3                  |       | 4.7                  |       | 9.4            |       | 0.1                 |       | 0.3       |       | 13.4 |   | 48.3 |   |
| Total assets (at  period end) – Company(4)                         |   | 329.1                                                         |       | 113.0                |       | 108.3                |       | 118.8          |       | 59.1                |       | 11.7      |       | 828.2 |   | 1,568.2 |   |
| Total assets (at  period end) – Regentrealm(4)                     |   | 329.1                                                         |       | 113.0                |       | 108.3                |       | 118.8          |       | 59.1                |       | 11.7      |       | 848.5 |   | 1,588.5 |   |
| Long-lived  assets (at period end)                                      |   | 228.5                                                         |       | 55.9                 |       | 38.8                 |       | 46.6           |       | 1.3                 |       | 6.4       |       | 743.8 |   | 1,121.3 |   |
| Average number  of employees                                            |   | 4,955                                                         |       | 2,340                |       | 1,153                |       | 2,518          |       | 155                 |       | 167       |       | 791 |   | 12,079 |   |

 

----

| (1)    | Discontinued operations comprised the results of the  Group’s International businesses (see Note 1) and, for joint ventures, the  Groups’ share of results of its Young’s Bluecrest joint venture.                                                                                                                                                                                                 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (2)    | The Company did not trade in the period from March  10, 2000 to April 14, 2000 and Regentrealm did not trade in the period from  January 2, 2000 to April 14, 2000. Accordingly, the results of the Company  presented above for the period from March 10, 2000 to December 30, 2000 and  for Regentrealm presented above for the 52 weeks ended December 30, 2000 are  for the 37 weeks ended December 30, 2000. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (3)    | The amounts for 2001 and 2000 have been restated to  reflect the change in method of apportioning corporate overhead expenditure.                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (4)    | The amounts for 2001 and 2000 have been restated to  reflect the adoption of FRS 19 (see Note 2 of Notes to the Financial  Statements).                                                                                                                                                                                                                                                                           |

 

F-24

----

 
|                                                                                                                                    |   | **Biscuits**                                                 |       |                 |   |                 |   |           |   |                |   |      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|----------------------|--------|----------------------|--------|----------------|--------|---------------------|--------|-----------|--------|
|                                                                                                                                    |   | **UK**                                                       |       | **Northern  Europe** |   | **Southern  Europe** |   | **UK  Snacks** |   | **General  Export** |   | **Other** |   | **Central** |   | **Total** |   |
|                                                                                                                                    |   | **(£ million  except for average number of employees)** | ** ** |
| ***Period From March 10, 2000(inception) to December 30, 2000  (Company) and 52 weeks ended December 30, 2000 (Regentrealm)******(1)*** |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
|                                                                                                                                    |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| **Group turnover**                                                                                                                      |   | 359.4                                                        |       | 131.5                |   | 79.8                 |   | 222.0          |   | 65.3                |   | 22.7      |   |   |   | 880.7 |   |
| Group operating  profit/(loss) before goodwill and exceptional items(3)                                                                 |   | 53.0                                                         |       | (3.2                 | )      | 5.2                  |   | 29.6           |   | 5.2                 |   | 0.9       |   | (5.2 | ) | 85.5 |   |
| Goodwill and  exceptional items(4)                                                                                                      |   | (2.5                                                         | )          | (1.7                 | )      | (1.8                 | )      | (0.2           | )      | (0.5                | )      | (0.5      | )      | (31.5 | ) | (38.7 | ) |
| **Group  Operating Profit/(loss)**                                                                                                      |   | 50.5                                                         |       | (4.9                 | )      | 3.4                  |   | 29.4           |   | 4.7                 |   | 0.4       |   | (36.7 | ) | 46.8 |   |
| Share of  operating profit in joint ventures                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 2.2 |   |
| Operating profit                                                                                                                        |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 49.0 |   |
| Loss on disposal  of fixed assets                                                                                                       |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (0.6 | ) |
| **Profit Before Interest**                                                                                                              |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 48.4 |   |
|                                                                                                                                    |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| Depreciation                                                                                                                            |   | 18.7                                                         |       | 3.7                  |   | 2.5                  |   | 6.9            |   | 0.1                 |   | 0.5       |   | 0.4 |   | 32.8 |   |
| Gross capital  expenditure                                                                                                              |   | 16.2                                                         |       | 6.5                  |   | 3.6                  |   | 5.6            |   | —              |   | 0.3       |   | 11.0 |   | 43.2 |   |
| Total assets (at  period end) – Company(4)                                                                                         |   | 340.2                                                        |       | 134.8                |   | 114.1                |   | 101.3          |   | 38.1                |   | 15.1      |   | 1,015.3 |   | 1,758.9 |   |
| Total assets (at  period end) – Regentrealm(4)                                                                                     |   | 340.2                                                        |       | 134.8                |   | 114.1                |   | 101.3          |   | 38.1                |   | 15.1      |   | 1,051.9 |   | 1,795.5 |   |
| Long-lived  assets (at period end)                                                                                                      |   | 251.6                                                        |       | 61.8                 |   | 38.7                 |   | 44.9           |   | 0.3                 |   | 7.6       |   | 808.0 |   | 1,212.9 |   |
| Average number  of employees                                                                                                            |   | 5,161                                                        |       | 2,464                |   | 1,354                |   | 2,782          |   | 58                  |   | 150       |   | 767 |   | 12,736 |   |
|                                                                                                                                    |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| **Predecessor**                                                                                                                         |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| ***15 weeks ended April 14, 2000***                                                                                                     |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| **Group turnover**                                                                                                                      |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| Continuing  operations                                                                                                                  |   | 129.1                                                        |       | 49.5                 |   | 1.6                  |   | 77.4           |   | 15.3                |   | 9.4       |   | — |   | 282.3 |   |
| Discontinued                                                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 46.2 |   |
|                                                                                                                                    |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 328.5 |   |
| Group operating  profit/(loss) before goodwill and exceptional items(3)                                                                 |   | 12.2                                                         |       | (4.7                 | )      | 0.4                  |   | 5.5            |   | 0.1                 |   | 0.2       |   | (6.1 | ) | 7.6 |   |
| Goodwill and  exceptional items                                                                                                         |   | (5.3                                                         | )          | (3.0                 | )      | —               |   | (1.0           | )      | —              |   | —    |   | (1.5 | ) | (10.8 | ) |
| Group operating profit/(loss) continuing operations                                                                                     |   | 6.9                                                          |       | (7.7                 | )      | 0.4                  |   | 4.5            |   | 0.1                 |   | 0.2       |   | (7.6 | ) | (3.2 | ) |
| Discontinued                                                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 0.8 |   |
| **Group  operating loss**                                                                                                               |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (2.4 | ) |
| Share of  operating profit in joint ventures                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 1.4 |   |
| Operating loss                                                                                                                          |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (1.0 | ) |
| Loss on disposal of business                                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (1.0 | ) |
| Profit on disposal of fixed assets                                                                                                      |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | 0.4 |   |
| Costs relating to offers for the predecessor                                                                                            |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (8.6 | ) |
| **Loss  before interest**                                                                                                               |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   | (10.2 | ) |
|                                                                                                                                    |   |                                                         |       |                 |   |                 |   |           |   |                |   |      |   |   |   |   |   |
| Depreciation                                                                                                                            |   | 8.1                                                          |       | 2.0                  |   | —               |   | 3.2            |   | —              |   | 0.2       |   | 0.2 |   | 13.7 |   |
| Gross capital  expenditure                                                                                                              |   | 4.4                                                          |       | 1.1                  |   | —               |   | 0.2            |   | —              |   | —    |   | 6.2 |   | 11.9 |   |
| Total assets (at  period end)                                                                                                           |   | 291.7                                                        |       | 161.3                |   | —               |   | 99.4           |   | 41.2                |   | 15.9      |   | 225.1 |   | 834.6 |   |
| Long-lived  assets (at period end)                                                                                                      |   | 252.9                                                        |       | 61.1                 |   | —               |   | 45.3           |   | 0.4                 |   | 7.2       |   | 129.2 |   | 496.1 |   |
| Average number  of employees                                                                                                            |   | 5,339                                                        |       | 2,351                |   | —               |   | 2,796          |   | 86                  |   | 162       |   | 767 |   | 11,501 |   |

 

----

| (1)    | Discontinued operations comprised the results of the  Group’s International businesses (see Note 1) and, for joint ventures, the  Groups’ share of results of its Young’s Bluecrest joint venture.                                                                                                                                                                                                 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (2)    | The Company did not trade in the period from March  10, 2000 to April 14, 2000 and Regentrealm did not trade in the period from  January 2, 2000 to April 14, 2000. Accordingly, the results of the Company  presented above for the period from March 10, 2000 to December 30, 2000 and  for Regentrealm presented above for the 52 weeks ended December 30, 2000 are  for the 37 weeks ended December 30, 2000. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (3)    | The amounts for 2001 and 2000 have been restated to  reflect the change in method of apportioning corporate overhead expenditure.                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (4)    | The amounts for 2001 and 2000 have been restated to  reflect the adoption of FRS 19 (see Note 2 of Notes to the Financial  Statements).                                                                                                                                                                                                                                                                           |

 

F-25

----

 
|                                                                                                                               |   | **United  Kingdom  & Ireland** |   | **Continental  Europe** |   | **Asia** |   | **Rest of  World** |   | **Discontinued****(1)** |   | **Total** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|-------------------------|--------|----------|--------|--------------------|--------|-------------------------|--------|-----------|--------|
|                                                                                                                               |   | **(£  million)**              |   |
| **Company and Regentrealm**                                                                                                        |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| ***52 weeks ended December 28, 2002***                                                                                             |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| Group Turnover                                                                                                                     |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| By source                                                                                                                          |   | 820.3                              |   | 488.0                   |   | —   |   | —             |   | —                  |   | 1,308.3   |   |
| By destination                                                                                                                     |   | 811.8                              |   | 434.9                   |   | 3.8      |   | 57.8               |   | —                  |   | 1,308.3   |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| Long-lived  assets (at period end)                                                                                                 |   | 960.3                              |   | 117.4                   |   | —   |   | —             |   | —                  |   | 1,077.7   |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| ***52 weeks ended December 29, 2001***                                                                                             |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| **Group Turnover**                                                                                                                 |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| By source                                                                                                                          |   | 807.6                              |   | 455.2                   |   | —   |   | —             |   | —                  |   | 1,262.8   |   |
| By destination                                                                                                                     |   | 807.7                              |   | 392.5                   |   | 2.7      |   | 59.9               |   | —                  |   | 1,262.8   |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| Long-lived  assets (at period end)(4)                                                                                              |   | 1,018.9                            |   | 102.4                   |   | —   |   | —             |   | —                  |   | 1,121.3   |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| ***Period from March 10, 2000 (inception) to December 30,  2000 (Company) and 52 weeks ended December 30, 2000 (Regentrealm)(2)*** |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| **Group Turnover**                                                                                                                 |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| By source                                                                                                                          |   | 581.4                              |   | 299.3                   |   | —   |   | —             |   | —                  |   | 880.7     |   |
| By destination                                                                                                                     |   | 571.4                              |   | 255.7                   |   | 5.0      |   | 48.6               |   | —                  |   | 880.7     |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| Long-lived  assets (at period end)(4)                                                                                              |   | 1,104.5                            |   | 108.4                   |   | —   |   | —             |   | —                  |   | 1,212.9   |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| **Predecessor**                                                                                                                    |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| ***15 weeks ended April 14, 2000***                                                                                                |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| **Group Turnover**                                                                                                                 |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| By source                                                                                                                          |   | 206.5                              |   | 75.8                    |   | —   |   | —             |   | 46.2                    |   | 328.5     |   |
| By destination                                                                                                                     |   | 206.4                              |   | 66.9                    |   | 0.7      |   | 8.3                |   | 46.2                    |   | 328.5     |   |
|                                                                                                                               |   |                               |   |                    |   |     |   |               |   |                    |   |      |   |
| Long-lived  assets (at period end)                                                                                                 |   | 427.4                              |   | 68.7                    |   | —   |   | —             |   | 86.9                    |   | 583.0     |   |

 

----

| (1)    | Discontinued operations comprised the results of the  Group’s International businesses (see Note 1) and, for joint ventures, the  Groups’ share of results of its Young’s Bluecrest joint venture.                                                                                                                                                                                                 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (2)    | The Company did not trade in the period from March  10, 2000 to April 14, 2000 and Regentrealm did not trade in the period from  January 2, 2000 to April 14, 2000. Accordingly, the results of the Company  presented above for the period from March 10, 2000 to December 30, 2000 and  for Regentrealm presented above for the 52 weeks ended December 30, 2000 are  for the 37 weeks ended December 30, 2000. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (3)    | The amounts for 2001 and 2000 have been restated to  reflect the change in method of apportioning corporate overhead expenditure.                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| (4)    | The amounts for 2001 and 2000 have been restated to  reflect the adoption of FRS 19 (see Note 2 of Notes to the Financial  Statements).                                                                                                                                                                                                                                                                           |

 

F-26

----

 

**5****                                         Profit/(loss)before interest**

 

Profit/(loss) beforeinterest is after charging:

 
|                                                                 |   | **Company  and Regentrealm**            |       | **Predecessor**                         |       |
|----------------------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                                                 |   | **52 weeks  ended  December 28,  2002** |       | **52 weeks  ended  December 29,  2001** |       | **Period  from  March 10, 2000  (inception) to  December 30,  2000 (Company)  and 52 weeks  ended  December  30, 2000  (Regentrealm)** |   |   |   |
| **15 weeks  ended  April 14, 2000**                                  |
|                                                                 |   |                                    | ** ** | **(£  million)**                   | ** ** |   | ** ** |
| Operating  exceptional items (included with administrative expenses) |   |                                    | ** ** |                                    | ** ** |   | ** ** |   | ** ** |
| Acquisition-related  restructuring costs                             |   | —                                  |       | 0.5                                     |       | 2.0 |   | — |   |
| Onerous  leasehold contracts                                         |   | 3.6                                     |       | 4.8                                     |       | 2.1 |   | — |   |
| Factory closures  and reorganization costs                           |   | 23.8                                    |       | 34.8                                    |       | 12.7 |   | 4.3 |   |
| Termination of  Canadian distribution agreement                      |   | —                                  |       | 2.2                                     |       | — |   | — |   |
| Fixed asset  impairments(1)                                          |   | 8.0                                     |       | —                                  |       | — |   | 5.7 |   |
| Share of joint  venture’s exceptional items                     |   | —                                  |       | —                                  |       | 1.7 |   | — |   |
|                                                                 |   | 35.4                                    |       | 42.3                                    |       | 18.5 |   | 10.0 |   |
|                                                                 |   |                                    |       |                                    |       |   |   |   |   |
| Depreciation of  tangible fixed assets                               |   | 54.2                                    |       | 53.0                                    |       | 32.8 |   | 14.8 |   |
| Amortization of  goodwill restated(2)                                |   | 40.7                                    |       | 36.4                                    |       | 21.9 |   | 0.8 |   |
| Operating lease  rentals                                             |   |                                    |       |                                    |       |   |   |   |   |
| Plant and  machinery                                                 |   | 7.2                                     |       | 8.2                                     |       | 5.2 |   | 2.2 |   |
| Land and  buildings                                                  |   | 7.8                                     |       | 5.2                                     |       | 5.8 |   | 2.1 |   |
| Research and  development                                            |   | 6.7                                     |       | 6.4                                     |       | 5.5 |   | 2.7 |   |
| Advertising costs                                                    |   | 43.9                                    |       | 32.6                                    |       | 23.0 |   | 10.3 |   |
|                                                                 |   |                                    |       |                                    |       |   |   |   |   |
|                                                                 |   | **(£’000)**                   |       |
| Directors’  emoluments                                          |   | 1,057                                   |       | 884                                     |       | 235 |   | 88 |   |
| Emoluments of  the highest paid director                             |   | 957                                     |       | 784                                     |       | 133 |   | 67 |   |
|                                                                 |   |                                    |       |                                    |       |   |   |   |   |
| **Fees payable to auditors**                                         |   | **(£’000**)                   |       |
| Audit fees                                                           |   | 713                                     |       | 630                                     |       | 562 |   | 228 |   |
| Internal audit  services(3)                                          |   | 124                                     |       | 720                                     |       | 438 |   | 194 |   |
| For other  services - United Kingdom                                 |   | 33                                      |       | 115                                     |       | 434 |   | 106 |   |
| For other  services - overseas                                       |   | 5                                       |       | 5                                       |       | 10 |   | 7 |   |

 

----

| (1)    | The charge for fixed asset impairments in the 52  weeks ended December 28, 2002 was in respect of the write off of redundant  production assets and impairment to land and buildings. The charge for fixed  asset impairments in the 15 weeks ended April 14, 2000 was in respect of  the write-off of redundant production assets. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                     |   |
| (2)    | The amounts for 2001 and 2000 for the Company and  Regentrealm have been restated to reflect the adoption of FRS 19 (see Note 2  of Notes to the Financial Statements).                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                     |   |
| (3)    | Following the issue of revised SEC guidelines on  independence, it was agreed with Ernst & Young LLP, during the year, that  they should cease to perform internal audit services.                                                                                                                                                   |

 

All activities of theCompany and Regentrealm for 2000 relate to acquisitions during the period.

 

F-27

----

 
|                                          |   | **Company  and Regentrealm**           |   |
|-----------------------------------------------|--------|----------------------------------------|--------|
|                                          |   | **52 weeks  ended  December 28, 2002** |   |   |   | **52 weeks  ended  December 29, 2001  Restated****(2)** |   |
|                                          |   | **Continuing  operations**             |   |   |   | **Continuing    operations** |   | **Discontinued  operations** |   | **Total** |   |
|                                          |   | **(£  million)**                  |   |   |   |   | ** ** | **(£  million)** | ** ** |   | ** ** |
|                                          |   |                                   |   |   |   |   |   |   |   |   |   |
| Turnover                                      |   | 1,308.3                                |   |   |   | 1,262.8 |   | — |   | 1,262.8 |   |
| Cost of sales                                 |   | (709.8                                 | )      |   |   | (702.8 | ) | — |   | (702.8 | ) |
| Gross profit                                  |   | 598.5                                  |   |   |   | 560.0 |   | — |   | 560.0 |   |
| Distribution,  selling and marketing expenses |   | (385.8                                 | )      |   |   | (365.8 | ) | — |   | (365.8 | ) |
| Administrative  expenses(1)                   |   | (120.0                                 | )      |   |   | (123.9 | ) | — |   | (123.9 | ) |
| Goodwill  amortization                        |   | (40.7                                  | )      |   |   | (36.4 | ) | — |   | (36.4 | ) |
| Other income                                  |   | 6.1                                    |   |   |   | 1.0 |   | — |   | 1.0 |   |
| Group operating  profit                       |   | 58.1                                   |   |   |   | 34.9 |   | — |   | 34.9 |   |
| Share of joint  ventures                      |   | 0.6                                    |   |   |   | 0.5 |   | 0.7 |   | 1.2 |   |
|                                          |   | 58.7                                   |   |   |   | 35.4 |   | 0.7 |   | 36.1 |   |
| Non-operating exceptional  items              |   | 11.1                                   |   |   |   | (8.9 | ) | — |   | (8.9 | ) |
| Profit before  interest                       |   | 69.8                                   |   |   |   | 26.5 |   | 0.7 |   | 27.2 |   |

 
|                                          |   | **Company  and Regentrealm**                                                                                                                      |   | **Predecessor**              |   |
|-----------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                          |   | **Period  from March 10, 2000  (inception) to December 30, 2000  (Company) and 52 weeks ended  December 30, 2000 (Regentrealm)  Restated****(2)** |   |                         |   |
| **15 weeks  ended April 14, 2000**            |
|                                          |   | **Continuing  Operations**                                                                                                                        |   | **Discontinued  operations** |   | **Total** |   | **Continuing  Operations** |   | **Discontinued  operations** |   | **Total** |   |
|                                          |   | **(£  million)**                                                                                                                             |   |
| Turnover                                      |   | 880.7                                                                                                                                             |   | —                       |   | 880.7 |   | 282.3 |   | 46.2 |   | 328.5 |   |
| Cost of sales                                 |   | (522.6                                                                                                                                            | )      | —                       |   | (522.6 | ) | (160.2 | ) | (23.2 | ) | (183.4 | ) |
| Gross profit                                  |   | 358.1                                                                                                                                             |   | —                       |   | 358.1 |   | 122.1 |   | 23.0 |   | 145.1 |   |
| Distribution,  selling and marketing expenses |   | (219.9                                                                                                                                            | )      | —                       |   | (219.9 | ) | (89.2 | ) | (15.6 | ) | (104.8 | ) |
| Administrative  expenses(1)                   |   | (74.6                                                                                                                                             | )      | —                       |   | (74.6 | ) | (41.1 | ) | (4.2 | ) | (45.3 | ) |
| Goodwill  amortization                        |   | (21.9                                                                                                                                             | )      | —                       |   | (21.9 | ) | (0.8 | ) | — |   | (0.8 | ) |
| Other income                                  |   | 5.1                                                                                                                                               |   | —                       |   | 5.1 |   | 5.8 |   | (2.4 | ) | 3.4 |   |
| Group operating  (loss)/profit                |   | 46.8                                                                                                                                              |   | —                       |   | 46.8 |   | (3.2 | ) | 0.8 |   | (2.4 | ) |
| Share of joint  ventures                      |   | 0.4                                                                                                                                               |   | 1.8                          |   | 2.2 |   | 0.1 |   | 1.3 |   | 1.4 |   |
|                                          |   | 47.2                                                                                                                                              |   | 1.8                          |   | 49.0 |   | (3.1 | ) | 2.1 |   | (1.0 | ) |
| Non-operating  exceptional items              |   | (0.6                                                                                                                                              | )      | —                       |   | (0.6 | ) | (9.0 | ) | (0.2 | ) | (9.2 | ) |
| (Loss)/profit  before interest                |   | 46.6                                                                                                                                              |   | 1.8                          |   | 48.4 |   | (12.1 | ) | 1.9 |   | (10.2 | ) |

 

----

| (1)    | Inclusive of operating exceptional items.                                                                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                    |   |
| (2)    | The amounts for 2001 and 2000 for the Company and  Regentrealm have been restated to reflect the adoption of FRS 19 (see Note 2  of Notes to the Financial Statements). |

 

F-28

----

 

**6              Exceptional profit/(loss) on disposalof business**

#### ** **

#### **Companyand Regentrealm**

#### ** **

#### ***52 weeks ended December 28,2002***

# ** **

# **Profiton disposal**

 

In April 2002, £25.1 million was received inconnection with an adjustment to the purchase price of Keebler Company, abusiness sold by a subsidiary of United Biscuits (Holdings) Limited to InfloHoldings Corporation in 1996.

 

# **Losson disposal**

 

In September 2002, the group sold its productionoperation at Hatton, Scotland to Murdoch and Allen giving rise to anexceptional loss of £0.8 million. In December 2002, the group sold its biscuitmanufacturing plant at Aguilar in Southern Europe to Groupo Siro, resulting inan exceptional loss of £14.4 million.

 

#### **Predecessor**

 

**15 weeks ended April 14, 2000**

 

In February 2000, theGroup sold its Snacksdirect van sales operation to Palmer & Harvey McLaneLimited, giving rise to an exceptional loss of £1.0 million.

 

**7              Interest**

 

 
|                                   |   | **Company**                             |       | **Predecessor**                         |   | **Regentrealm**                                                      |   |
|----------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                   |   | **52 weeks  ended  December 28,  2002** |       | **52 weeks  ended  December 29,  2001** |   | **Period  from  March 10, 2000  (inception) to  December 30,  2000** |   | **15 weeks  ended  April 14,  2000** |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **52 weeks  ended  December 30,  2000** |   |
|                                   |   | **(£  million)**                   | ** ** |
| **Interest payable**                   |   |                                    |       |                                    |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Senior credit  facility                |   | (32.3                                   | )          | (38.8                                   | )      | (22.0                                                                | )      | — |   | (32.3 | ) | (38.8 | ) | (22.0 | ) |
| Senior  subordinated bridge            |   | —                                  |       | (13.0                                   | )      | (28.1                                                                | )      | — |   | — |   | — |   | — |   |
| Senior  subordinated notes             |   | (23.6                                   | )          | (16.4                                   | )      | —                                                               |   | — |   | — |   | — |   | — |   |
| Bank loans and  overdrafts             |   | (1.9                                    | )          | (1.7                                    | )      | (17.3                                                                | )      | (6.9 | ) | (1.9 | ) | (1.7 | ) | (17.3 | ) |
| Other                                  |   | (5.9                                    | )          | (5.7                                    | )      | (9.7                                                                 | )      | (6.3 | ) | (5.9 | ) | (5.7 | ) | (9.7 | ) |
| Interest payable  to related companies |   | (78.1                                   | )          | (75.4                                   | )      | (42.2                                                                | )      | — |   | (101.7 | ) | (104.8 | ) | (70.2 | ) |
| Amortized  finance charges             |   | (3.4                                    | )          | (7.9                                    | )      | (7.5                                                                 | )      | — |   | (2.4 | ) | (2.3 | ) | (2.0 | ) |
|                                   |   | (145.2                                  | )          | (158.9                                  | )      | (126.8                                                               | )      | (13.2 | ) | (144.2 | ) | (153.3 | ) | (121.3 | ) |
| **Interest receivable**                |   |                                    |       |                                    |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Short-term  deposits                   |   | 2.4                                     |       | 3.3                                     |   | 3.1                                                                  |   | 2.4 |   | 2.4 |   | 3.3 |   | 3.1 |   |
| Other                                  |   | —                                  |       | 0.9                                     |   | 20.8                                                                 |   | 7.1 |   | — |   | 0.9 |   | 20.8 |   |
|                                   |   | 2.4                                     |       | 4.2                                     |   | 23.9                                                                 |   | 9.5 |   | 2.4 |   | 4.2 |   | 23.9 |   |
|                                   |   |                                    |       |                                    |   |                                                                 |   |   |   |   |   |   |   |   |   |
|                                   |   | (142.8                                  | )          | (154.7                                  | )      | (102.9                                                               | )      | (3.7 | ) | (141.8 | ) | (149.1 | ) | (97.4 |   |
| Interest payable  by joint ventures    |   | —                                  |       | (0.2                                    | )      | (0.4                                                                 | )      | (0.1 | ) | — |   | (0.2 | ) | (0.4 | ) |
|                                   |   | (142.8                                  | )          | (154.9                                  | )      | (103.3                                                               | )      | (3.8 | ) | (141.8 | ) | (149.3 | ) | (97.8 | ) |

 

F-29

----

 

**8              Taxon loss on ordinary activities**

 

The tax charge/(credit)is made up as follows:

 
|                                                  |   | **Company  and Regentrealm**               |   | **Predecessor**                                           |   |
|-------------------------------------------------------|--------|--------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                  |   | **52 weeks ended  December 28, 2002** |   | **52 weeks   ended   December 29, 2001  Restated****(1)** |   | **Period  from  March 10 2000  (inception) to  December 30, 2000  (company) and 52  weeks ended  December 30, 2000  (Regentrealm)  Restated****(1)** |   | **15 weeks  ended  April 14, 2000  restated****(1)** |   |
|                                                  |   | **(£  million)**                      |   |
| Current tax:                                          |   |                                       |   |                                                      |   |   |   |   |   |
| UK corporation  tax at 30%                            |   | 0.1                                        |   | 0.1                                                       |   | — |   | 3.5 |   |
| Tax under/(over)  provided in previous years          |   | 0.1                                        |   | (2.6                                                      | )      | — |   | (5.1 | ) |
|                                                  |   | 0.2                                        |   | (2.5                                                      | )      | — |   | (1.6 | ) |
|                                                  |   |                                       |   |                                                      |   |   |   |   |   |
| Foreign tax                                           |   | 0.3                                        |   | 0.1                                                       |   | 2.0 |   | 0.4 |   |
| Tax (over)/under  provided in previous years          |   | (0.9                                       | )      | (0.8                                                      | )      | — |   | (0.1 | ) |
|                                                  |   | (0.6                                       | )      | (0.7                                                      | )      | 2.0 |   | 0.3 |   |
|                                                  |   |                                       |   |                                                      |   |   |   |   |   |
| Total current  tax                                    |   | (0.4                                       | )      | (3.2                                                      | )      | 2.0 |   | (1.3 | ) |
|                                                  |   |                                       |   |                                                      |   |   |   |   |   |
| Deferred tax:                                         |   |                                       |   |                                                      |   |   |   |   |   |
| Origination and  reversal of timing differences       |   | (13.5                                      | )      | 2.4                                                       |   | 1.8 |   | 0.1 |   |
| Adjustment in  respect of change in accounting policy |   | —                                     |   | (27.6                                                     | )      | 35.9 |   | 9.4 |   |
| Effect of  decreased tax rate on opening liability    |   | (0.3                                       | )      | —                                                    |   | — |   | — |   |
| Total deferred  tax                                   |   | (13.8                                      | )      | (25.2                                                     | )      | 37.7 |   | 9.5 |   |
|                                                  |   |                                       |   |                                                      |   |   |   |   |   |
| Group tax on  profit/(loss) on ordinary activities    |   | (14.2                                      | )      | (28.4                                                     | )      | 39.7 |   | 8.2 |   |
| Share of tax of  joint venture                        |   | 0.1                                        |   | 0.2                                                       |   | 0.4 |   | 0.1 |   |
| Tax on  profit/(loss) on ordinary activities          |   | (14.1                                      | )      | (28.2                                                     | )      | 40.1 |   | 8.3 |   |

 

----

(1)          The amounts for 2001 and2000 for the Company and Regentrealm have been restated to reflect the adoptionof FRS 19 (see Note 2 of Notes to the Financial Statements).

 

The key factors which mayaffect future tax charges include the availability of accelerated taxdepreciation, utilization of unrecognized losses (see below), changes in taxlegislation and the proportion of profits subject to different overseas taxrates.

 

At December 28, 2002, theGroup had tax losses carried forward of approximately £113 million onwhich deferred tax has not been provided. Of these approximately£61 million relate to non-trading losses in the United Kingdom.These losses can only be offset against future non-trading profits. Thebalance of £52 million arises in France, Belgium, Spain and the United States.It is not anticipated that these will be able to be offset against profitsarising within the next year.

 

F-30

----

 

The statutory rate of corporation tax is reconciled tothe effective current and overall rates of tax as follows:

 
|                                                 |   | **Company  and Regentrealm**             |   | **Predecessor**                          |   |
|------------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
|                                                 |   | **52 weeks   ended   December 28, 2002** |   | **52 weeks   ended   December 29, 2001** |   | **Period  from  March 10   2000 (inception)   to December 30, 2000 (Company) and   52 weeks ended December 30, 2000 (Regentrealm)** |   | **15 weeks   ended   April 14,   2000** |   |
|                                                 |   | **(percentage** )                        |   |
| **Reconciliation of current tax rate:**              |   |                                     |   |                                     |   |   |   |   |   |
|                                                 |   |                                     |   |                                     |   |   |   |   |   |
| UK Corporation  tax standard rate                    |   | (30.0                                    | )      | (30.0                                    | )      | (30.0 | ) | (30.0 | ) |
| Rate  differential                                   |   | 0.1                                      |   | (0.3                                     | )      | (0.5 | ) | 1.1 |   |
| Accelerated  capital allowances                      |   | 20.0                                     |   | 11.8                                     |   | (8.4 | ) | 8.4 |   |
| Short-term  timing differences                       |   | (4.5                                     | )      | (0.6                                     | )      | (4.1 | ) | 1.8 |   |
| Release of  over-provisions in prior year            |   | (1.1                                     | )      | (2.7                                     | )      | — |   | (36.9 | ) |
| Losses on which  no tax credit provided              |   | 5.5                                      |   | 7.3                                      |   | 43.5 |   | 6.3 |   |
| Statutory  apportionment of profits for tax purposes |   | —                                   |   | —                                   |   | (9.4 | ) | 36.6 |   |
| Goodwill  amortization                               |   | 16.5                                     |   | 8.4                                      |   | 11.9 |   | 1.8 |   |
| Other items                                          |   | (6.9                                     | )      | 3.7                                      |   | 1.4 |   | 2.3 |   |
| Effective  current tax rate - Company                |   | (0.4                                     | )      | (2.4                                     | )      | 4.4 |   | (8.6 | ) |
| Losses on which  no tax credit provided              |   | —                                   |   | (0.1                                     | )      | 0.5 |   |   |   |
| Effective  current tax rate – Regentrealm       |   | (0.4                                     | )      | (2.5                                     | )      | 4.9 |   |   |   |
|                                                 |   |                                     |   |                                     |   |   |   |   |   |
| **Reconciliation of overall tax rate:**              |   |                                     |   |                                     |   |   |   |   |   |
|                                                 |   |                                     |   |                                     |   |   |   |   |   |
| UK Corporation  tax standard rate                    |   | (30.0                                    | )      | (30.0                                    | )      | (30.0 | ) | (30.0 | ) |
| Rate  differential                                   |   | 0.1                                      |   | (0.3                                     | )      | (0.5 | ) | 1.1 |   |
| Accelerated  capital allowances                      |   | (0.4                                     | )      | (6.8                                     | )      | 70.7 |   | 89.8 |   |
| Short-term  timing differences                       |   | 0.4                                      |   | (2.7                                     | )      | (7.7 | ) | (5.3 | ) |
| Release of  over-provisions in prior year            |   | (13.2                                    | )      | (2.2                                     | )      | — |   | (36.2 | ) |
| Losses on which  no tax credit is provided           |   | 14.7                                     |   | 7.8                                      |   | 36.6 |   | (0.8 | ) |
| Statutory  apportionment of profits for tax purposes |   | —                                   |   | —                                   |   | (9.4 | ) | 36.6 |   |
| Goodwill  amortization                               |   | 16.5                                     |   | 8.4                                      |   | 11.9 |   | 1.8 |   |
| Other items                                          |   | (7.4                                     | )      | 3.7                                      |   | 1.4 |   | 2.3 |   |
| Effective  overall tax rate - Company                |   | (19.3                                    | )      | (22.1                                    | )      | 73.0 |   | 59.3 |   |
| Losses on which  no tax credit provided              |   | (0.3                                     | )      | (1.0                                     | )      | 8.2 |   |   |   |
| Effective  overall tax rate – Regentrealm       |   | (19.6                                    | )      | (23.1                                    | )      | 81.2 |   |   |   |

 

For the purposes of U.K. corporation tax, the strictstatutory basis for apportionment of profits for the year ended December 30,2000 between the pre-acquisition and post-acquisition period is timeapportionment. This has the effect of bringing taxable profits forward into the15 weeks ended April 14, 2000.

 

F-31

----

 

Loss on ordinary activities before tax is analyzed asfollows:

 
|           |   | **Company**                              |   | **Predecessor**                          |   |
|----------------|--------|------------------------------------------|--------|------------------------------------------|--------|
|           |   | **52 weeks   ended   December 28, 2002** |   | **52 weeks   ended   December 29, 2001** |   | **Period  from March 10   2000 (inception)   to December 30, 2000** |   | **15 weeks   ended   April 14,   2000** |   |
|           |   | **(£ million)**                     |   |
| United Kingdom |   | (74.0                                    | )      | (121.0                                   | )      | (49.8 | ) | (6.6 | ) |
| Overseas       |   | 1.0                                      |   | (6.7                                     | )      | (5.1 | ) | (7.4 | ) |
|           |   | (73.0                                    | )      | (127.7                                   | )      | (54.9 | ) | (14.0 | ) |

 
|           |   | **Regentrealm**                           |   |
|----------------|--------|-------------------------------------------|--------|
|           |   | **52 weeks   ended   December 28,  2002** |   | **52 weeks   ended   December 29,  2001** |   | **52 weeks   ended   December 30,  2000** |   |
|           |   | **(£ million)**                      |   |
| United Kingdom |   | (73.0                                     | )      | (115.4 | ) | (44.3 | ) |
| Overseas       |   | 1.0                                       |   | (6.7 | ) | (5.1 | ) |
|           |   | (72.0                                     | )      | (122.1 | ) | (49.4 | ) |

 

**9              Exceptional tax refund**

 

£12.3 million was received in relation to a claim forrefund of withholding tax paid in connection with the reorganisation of the USbusiness of United Biscuits (Holdings) Limited in 1992. The amount receivedcomprised a £7.2 million refund of withholding tax and £5.1 million of interestattributable thereto.

 

F-32

----

 

**10           Intangible assets**

 
|                                                          |   | **Goodwill   Restated(1)** |         |
|---------------------------------------------------------------|--------|----------------------------|--------------|
|                                                          |   | **(£  million)**      |         |
| **Company  and Regentrealm**                                  |   |                       | ** **   |
|                                                          |   |                       |         |
| ***Cost***                                                    |   |                       | *** *** |
| At December 31,  2000 as reported                             |   | 723.5                      |         |
| Prior year adjustment  – deferred tax(1)                 |   | 9.4                        |         |
| At December 31,  2000 as restated                             |   | 732.9                      |         |
| Arising on  current year acquisitions                         |   | 10.7                       |         |
| Arising due to  revisions to previous amounts                 |   | (9.5                       | )            |
| At December 29,  2001as restated and December 28, 2002        |   | 734.1                      |         |
|                                                          |   |                       |         |
| ***Amortization***                                            |   |                       | * *     |
| At December 31,  2000 as reported                             |   | 21.6                       |         |
| Prior year  adjustment – deferred tax(1)                 |   | 0.3                        |         |
| At December 31,  2000 as restated                             |   | 21.9                       |         |
| Charge for  period                                            |   | 36.6                       |         |
| Charge as a  result of the deferred tax prior year adjustment |   | 0.5                        |         |
| Credit arising from  revisions to previous amounts            |   | (0.7                       | )            |
| At December 29,  2001as restated                              |   | 58.3                       |         |
| Charge for  period(2)                                         |   | 40.7                       |         |
| At December 28,  2002                                         |   | 99.0                       |         |
|                                                          |   |                       |         |
| Net book value at December 28, 2002                           |   | 635.1                      |         |
| Net book value at December 29, 2001                           |   | 675.8                      |         |

 

----

(1)          The amounts for 2001 and2000 for the Company and Regentrealm have been restated to reflect the adoptionof FRS 19 (see Note 2 of Notes to the Financial Statements).

(2)          The charge for theperiod includes £4.2 million accelerated write off of goodwill in respect of asmall business unit following a review of the carrying value of goodwill.

 

The goodwill arising in the 52 weeks ended December29, 2001 was in respect of the acquisition of United Biscuits Tunisia S.A.

 

The goodwill arising in the 15 weeks ended April 14,2000 was in respect of a prior year acquisition.

 

F-33

----

 

**11           Tangible fixed assets**

 
|                                 |   | **Land &  buildings** |     |          |     |                                   |     |                          |     |                           |     |
|--------------------------------------|--------|---------------------------|----------|---------------|----------|----------------------------------------|----------|-------------------------------|----------|--------------------------------|----------|
|                                 |   | **Freehold**              |     | **Leasehold** |     | **Plant,  machinery   & vehicles** |     | **Fixtures   & fittings** |     | **Assets  under construction** |     | **Total** |   |
|                                 |   | **(£  million)**     |     |
| **Company and Regentrealm**          |   |                      |     |          |     |                                   |     |                          |     |                           |     |   |   |
|                                 |   |                      |     |          |     |                                   |     |                          |     |                           |     |   |   |
| ***Cost***                           |   |                      | * * |          | * * |                                   | * * |                          | * * |                           | * * |   | * * |
| At December 31,  2000                |   | 125.5                     |     | 6.1           |     | 268.1                                  |     | 50.1                          |     | 45.4                           |     | 495.2 |   |
| Exchange  adjustment                 |   | (1.6                      | )        | —        |     | (5.1                                   | )        | (0.5                          | )        | (0.3                           | )        | (7.5 | ) |
| Businesses  acquired                 |   | 0.5                       |     | —        |     | 0.5                                    |     | 0.1                           |     | 0.1                            |     | 1.2 |   |
| Additions                            |   | 0.7                       |     | —        |     | 4.5                                    |     | 0.2                           |     | 42.9                           |     | 48.3 |   |
| Reclassifications                    |   | (16.9                     | )        | 8.0           |     | 49.1                                   |     | 13.9                          |     | (54.1                          | )        | — |   |
| Disposals                            |   | (1.1                      | )        | (3.0          | )        | (13.5                                  | )        | 0.5                           |     | (4.1                           | )        | (21.2 | ) |
| At December 29,  2001                |   | 107.1                     |     | 11.1          |     | 303.6                                  |     | 64.3                          |     | 29.9                           |     | 516.0 |   |
| Exchange  adjustment                 |   | 3.4                       |     |          |     | 11.3                                   |     | 0.9                           |     | 0.7                            |     | 16.3 |   |
| Additions                            |   | 1.9                       |     | 0.4           |     | 18.9                                   |     | 4.5                           |     | 33.5                           |     | 59.2 |   |
| Reclassifications                    |   | 1.3                       |     | 1.0           |     | 12.5                                   |     | 6.9                           |     | (21.7                          | )        | — |   |
| Disposals                            |   | (4.1                      | )        | —        |     | (13.0                                  | )        | (0.6                          | )        | —                         |     | (17.7 | ) |
| At December 28,  2002                |   | 109.6                     |     | 12.5          |     | 333.3                                  |     | 76.0                          |     | 42.4                           |     | 573.8 |   |
|                                 |   |                      |     |          |     |                                   |     |                          |     |                           |     |   |   |
| ***Depreciation***                   |   |                      | * * |          | * * |                                   | * * |                          | * * |                           | * * |   | * * |
| At December 31,  2000                |   | 1.4                       |     | 0.5           |     | 29.1                                   |     | 1.8                           |     | —                         |     | 32.8 |   |
| Exchange  adjustment                 |   | (0.7                      | )        | —        |     | (3.2                                   | )        | (0.3                          | )        | —                         |     | (4.2 | ) |
| Charge for  period                   |   | 3.9                       |     | 1.1           |     | 43.9                                   |     | 4.1                           |     | —                         |     | 53.0 |   |
| Reclassification                     |   | (3.3                      | )        | 2.1           |     | (7.5                                   | )        | 8.7                           |     | —                         |     | — |   |
| Disposals                            |   | —                    |     | —        |     | (5.0                                   | )        | (3.1                          | )        | —                         |     | (8.1 | ) |
| At December 29,  2001                |   | 1.3                       |     | 3.7           |     | 57.3                                   |     | 11.2                          |     | —                         |     | 73.5 |   |
| Exchange  adjustment                 |   | 1.5                       |     | —        |     | 7.4                                    |     | 0.7                           |     | —                         |     | 9.6 |   |
| Charge for period                    |   | 3.6                       |     | 0.9           |     | 36.1                                   |     | 13.6                          |     | —                         |     | 54.2 |   |
| Impairment                           |   | 4.3                       |     | —        |     | 3.7                                    |     | —                        |     | —                         |     | 8.0 |   |
| Reclassification                     |   | 0.4                       |     | —        |     | (1.0                                   | )        | 0.6                           |     | —                         |     | — |   |
| Disposals                            |   | (0.4                      | )        | —        |     | (9.5                                   | )        | (0.5                          | )        | —                         |     | (10.4 | ) |
| At December 28,  2002                |   | 10.7                      |     | 4.6           |     | 94.0                                   |     | 25.6                          |     | —                         |     | 134.9 |   |
|                                 |   |                      |     |          |     |                                   |     |                          |     |                           |     |   |   |
| Net book value  at December 28, 2002 |   | 98.9                      |     | 7.9           |     | 239.3                                  |     | 50.4                          |     | 42.4                           |     | 438.9 |   |
| Net book value  at December 29, 2001 |   | 105.8                     |     | 7.4           |     | 246.3                                  |     | 53.1                          |     | 29.9                           |     | 442.5 |   |

 

F-34

----

 
|                             |   | **Land & buildings** |   | **Plant,********machinery   & vehicles** |   | **Fixtures  & fittings** |   | **Assets under   construction** |   | **Total** |   |
|----------------------------------|--------|--------------------------|--------|----------------------------------------------|--------|------------------------------|--------|---------------------------------|--------|-----------|--------|
|                             |   | **Freehold**             |   | **Leasehold**                                |   |                         |   |                            |   |
|                             |   | **(£ million)**     |   |
| **Predecessor**                  |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
|                             |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
| ***Cost***                       |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
| At January 2, 2000               |   | 163.4                    |   | 15.0                                         |   | 657.5                        |   | 56.0                            |   | 73.6      |   | 965.5 |   |
| Exchange adjustment              |   | 0.1                      |   | 0.1                                          |   | 0.5                          |   | 0.1                             |   | 0.1       |   | 0.9 |   |
| Additions                        |   | 0.5                      |   | —                                       |   | 0.5                          |   | 2.7                             |   | 8.9       |   | 12.6 |   |
| Reclassifications                |   | 2.1                      |   | —                                       |   | (41.8                        | )      | 40.7                            |   | (1.0      | )      | — |   |
| Disposals                        |   | —                   |   | —                                       |   | (3.7                         | )      | (5.9                            | )      | —    |   | (9.6 | ) |
| At April 14, 2000                |   | 166.1                    |   | 15.1                                         |   | 613.0                        |   | 93.6                            |   | 81.6      |   | 969.4 |   |
|                             |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
| ***Depreciation***               |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
| At January 2, 2000               |   | 46.5                     |   | 3.6                                          |   | 354.3                        |   | 33.7                            |   | 16.6      |   | 454.7 |   |
| Exchange adjustment              |   | —                   |   | —                                       |   | 0.3                          |   | —                          |   | —    |   | 0.3 |   |
| Charge for the year              |   | 1.0                      |   | 0.2                                          |   | 11.0                         |   | 2.6                             |   | —    |   | 14.8 |   |
| Exceptional impairment           |   | 0.2                      |   | —                                       |   | 5.5                          |   | —                          |   | —    |   | 5.7 |   |
| Reclassifications                |   | 0.1                      |   | 0.1                                          |   | (10.9                        | )      | 10.7                            |   | —    |   | — |   |
| Disposals                        |   | —                   |   | —                                       |   | (3.5                         | )      | (5.8                            | )      | —    |   | (9.3 | ) |
| At April 14, 2000                |   | 47.8                     |   | 3.9                                          |   | 356.7                        |   | 41.2                            |   | 16.6      |   | 466.2 |   |
|                             |   |                     |   |                                         |   |                         |   |                            |   |      |   |   |   |
| Net book value at April 14, 2000 |   | 118.3                    |   | 11.2                                         |   | 256.3                        |   | 52.4                            |   | 65.0      |   | 503.2 |   |

 

The net book value ofleasehold properties includes £7.9 million (2001: £7.3 million) in respect ofleases with under 50 years to run at December 28, 2002.

 

The net book value of tangiblefixed assets acquired under finance lease arrangements, all of which are plant,machinery and vehicles, is set out below:

 
|                     |   | **Company and Regentrealm** |   |
|--------------------------|--------|-----------------------------|--------|
|                     |   | **At December 28,  2002**   |   | **At December 29,  2001** |   |
|                     |   | **(£ million)**        |   |
|                     |   |                        |   |   |   |
| Cost                     |   | 2.3                         |   | 1.1 |   |
| Accumulated depreciation |   | (0.6                        | )      | (0.1 | ) |
| Net book value           |   | 1.7                         |   | 1.0 |   |

 

F-35

----

 

**12           Investments**

 
|                                       |   | **Joint ventures**   |   |
|--------------------------------------------|--------|----------------------|--------|
|                                       |   | **Investments**      |   | **Loans** |   | **Total** |   |
|                                       |   | **(£ million)** |   |
| **Company and Regentrealm**                |   |                 |   |   |   |   |   |
| ***Cost***                                 |   |                 |   |   |   |   |   |
| At December 31, 2000                       |   | 14.7                 |   | 24.2 |   | 38.9 |   |
| Disposal                                   |   | (13.2                | )      | (24.2 | ) | (37.4 | ) |
| At December 29, 2001 and December 28, 2002 |   | 1.5                  |   | — |   | 1.5 |   |
|                                       |   |                 |   |   |   |   |   |
| ***Post acquisition reserves***            |   |                 |   |   |   |   |   |
| At December 31, 2000                       |   | 0.7                  |   | — |   | 0.7 |   |
| Share of profit for the period             |   | 0.8                  |   | — |   | 0.8 |   |
| At December 29, 2001                       |   | 1.5                  |   | — |   | 1.5 |   |
| Exchange adjustment                        |   | 0.2                  |   | — |   | 0.2 |   |
| Share of profit for the period             |   | 0.5                  |   | — |   | 0.5 |   |
| At December 28, 2002                       |   | 2.2                  |   | — |   | 2.2 |   |
|                                       |   |                 |   |   |   |   |   |
| Net book value at December 28, 2002        |   | 3.7                  |   | — |   | 3.7 |   |
| Net book value at December 29, 2001        |   | 3.0                  |   | — |   | 3.0 |   |

 

**Joint ventures**

 

The Group holds a 50%interest in the ordinary shares of KP Ireland Limited, which is incorporatedand operates in the Republic of Ireland, the principal activity of which is themanufacture of snack products.

 

As at December 30, 2000 theGroup also held a 44.2% interest in Young’s Bluecrest Seafood Holdings Limited,which was incorporated and operated in England.  This investment was sold on March 12, 2001.

 

F-36

----

 

**13           Stocks**

 
|                          |   | **Company and Regentrealm** |   |
|-------------------------------|--------|-----------------------------|--------|
|                          |   | **At December 28,  2002**   |   | **At December 29,  2001** |   |
|                          |   | **(£ million)**        |   |
| Raw materials and consumables |   | 25.9                        |   | 27.8 |   |
| Work in progress              |   | 8.8                         |   | 7.8 |   |
| Finished goods                |   | 41.4                        |   | 37.3 |   |
|                          |   | 76.1                        |   | 72.9 |   |

 

There is no materialdifference between the replacement cost and historical cost of stocks.

 

**14           Debtors**

 
|                                           |   | **Company**               |   | **Regentrealm**           |   |
|------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|
|                                           |   | **At December 28,  2002** |   | **At December 29,  2001** |   | **At December 28,  2002** |   | **At December 29,  2001** |   |
|                                           |   | **(£ million)**      |   |
| Trade debtors                                  |   | 249.4                     |   | 241.3                     |   | 249.4 |   | 241.3 |   |
| Due from group undertakings                    |   | 1.5                       |   | —                    |   | 1.5 |   | — |   |
| Due from United Biscuits Finance plc           |   | —                    |   | —                    |   | 20.3 |   | 20.3 |   |
| Other debtors                                  |   | 13.1                      |   | 8.4                       |   | 13.1 |   | 8.4 |   |
| Prepayments and accrued income                 |   | 47.3                      |   | 48.8                      |   | 47.3 |   | 48.8 |   |
|                                           |   | 311.3                     |   | 298.5                     |   | 331.6 |   | 318.8 |   |
|                                           |   |                      |   |                      |   |   |   |   |   |
| Of which falling due after more than one year: |   |                      |   |                      |   |   |   |   |   |
| Other debtors                                  |   | 0.3                       |   | 0.4                       |   | 0.3 |   | 0.4 |   |
| SSAP 24 pension prepayment                     |   | 38.1                      |   | 32.0                      |   | 38.1 |   | 32.0 |   |
|                                           |   | 38.4                      |   | 32.4                      |   | 38.4 |   | 32.4 |   |

 

Otherdebtors includes an amount of £0.8 million paid to Nabisco in respect of theacquisition of Nabisco’s Middle Eastern operations (2001 - £0.8 million) whichhad not been completed at December 28, 2002. Since the year end anagreement has been reached with Nabisco that the acquisition will not proceedand as a consequence $4.8 million has been received.

 

Tradedebtors are stated net of provisions for bad and doubtful debts of £1.9 million(2001 - £1.2 million).

 

F-37

----

 

**15           Assets heldfor disposal**

 
| **Company and Regentrealm** |   | **(£ million)** |   |
|-----------------------------|--------|----------------------|--------|
| At December 31, 2000        |   | 90.0                 |   |
| Completed disposals         |   | (50.6                | )      |
| Adjustment to sales price   |   | (1.2                 | )      |
| At December 29, 2001        |   | 38.2                 |   |
| Completed disposals         |   | (38.2                | )      |
| At December 28, 2002        |   | —               |   |

 

Asset out in note 1, certain subsidiaries were excluded from consolidation by theCompany and Regentrealm as the Group’s interest is held exclusively with a viewto subsequent resale and have been recorded at their estimated net realizablevalue.  The assets held for disposal atDecember 29, 2001 represent the net realisable value of ouroperations in China, the disposal of which was completed on March 25, 2002.

 

**16           Trade andother creditors**

 
|                                  |   | **Company**               |   | **Regentrealm**           |   |
|---------------------------------------|--------|---------------------------|--------|---------------------------|--------|
|                                  |   | **At December 28,  2002** |   | **At December 29,  2001** |   | **At December 28,  2002** |   | **At December 29,  2001** |   |
|                                  |   | **(£ million)**      |   |
| Trade creditors                       |   | 83.3                      |   | 73.2                      |   | 83.3 |   | 73.2 |   |
| Other creditors                       |   | 38.1                      |   | 95.2                      |   | 38.1 |   | 95.2 |   |
| Due to joint ventures                 |   | 3.3                       |   | 2.6                       |   | 3.3 |   | 2.6 |   |
| Other taxes and social security costs |   | 6.3                       |   | 6.2                       |   | 6.3 |   | 6.2 |   |
| Accruals and deferred income          |   | 147.6                     |   | 139.5                     |   | 142.6 |   | 134.4 |   |
|                                  |   | 278.6                     |   | 316.7                     |   | 273.6 |   | 311.6 |   |

 

Othercreditors at December 29, 2001 included £38.2 million received in respect ofthe sale of the Group’s operations in China.

 

F-38

----

 

**17           Loans,overdrafts and finance lease obligations**

 
|                                                                   |   | **Company**               |   | **Regentrealm**           |   |
|------------------------------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|
|                                                                   |   | **At December 28,  2002** |   | **At December 29,  2001** |   | **At December 28,  2002** |   | **At December 29,  2001** |   |
|                                                                   |   | **(£ million)**      |   |
| **Bank loans**                                                         |   |                      |   |                      |   |   |   |   |   |
| Senior Credit Facility                                                 |   | 453.7                     |   | 522.9                     |   | 453.7 |   | 522.9 |   |
|                                                                   |   |                      |   |                      |   |   |   |   |   |
| **Debenture and other loans**                                          |   |                      |   |                      |   |   |   |   |   |
| £120m 10.75% Senior Subordinated Notes due 2011                   |   | 120.0                     |   | 120.0                     |   | — |   | — |   |
| €160m 10.625% Senior Subordinated Notes due 2011                  |   | 104.0                     |   | 97.4                      |   | — |   | — |   |
| £150m 6.375% guaranteed bonds 2009                                |   | —                    |   | 0.1                       |   | — |   | 0.1 |   |
| Other                                                                  |   | 5.1                       |   | 8.5                       |   | 5.1 |   | 8.5 |   |
|                                                                   |   | 229.1                     |   | 226.0                     |   | 5.1 |   | 8.6 |   |
|                                                                   |   |                      |   |                      |   |   |   |   |   |
| **Finance lease obligations**                                          |   | 1.4                       |   | 1.0                       |   | 1.4 |   | 1.0 |   |
| **Total gross borrowings**                                             |   | 684.2                     |   | 749.9                     |   | 460.2 |   | 532.5 |   |
|                                                                   |   |                      |   |                      |   |   |   |   |   |
| **Analysis by maturity**                                               |   |                      |   |                      |   |   |   |   |   |
| Repayable as follows:                                                  |   |                      |   |                      |   |   |   |   |   |
| After more than five years                                             |   | 404.5                     |   | 502.3                     |   | 180.5 |   | 284.9 |   |
| Between four and five years                                            |   | 80.9                      |   | 64.9                      |   | 80.9 |   | 64.9 |   |
| Between three and four years                                           |   | 61.5                      |   | 57.6                      |   | 61.5 |   | 57.6 |   |
| Between two and three years                                            |   | 54.6                      |   | 50.8                      |   | 54.6 |   | 50.8 |   |
| Between one and two years                                              |   | 48.6                      |   | 35.5                      |   | 48.6 |   | 35.5 |   |
|                                                                   |   | 650.1                     |   | 711.1                     |   | 426.1 |   | 493.7 |   |
| Under one year                                                         |   | 34.1                      |   | 38.8                      |   | 34.1 |   | 38.8 |   |
| **Total gross borrowings**                                             |   | 684.2                     |   | 749.9                     |   | 460.2 |   | 532.5 |   |
| Less:   Issue costs                                               |   | (20.7                     | )      | (24.1                     | )      | (12.4 | ) | (14.7 | ) |
|                                                                   |   | 663.5                     |   | 725.8                     |   | 447.8 |   | 517.8 |   |
| Less:   Included in creditors: amounts falling due withinone year |   | (30.8                     | )      | (35.5                     | )      | (31.8 | ) | (36.4 | ) |
| Amounts falling due after more than one year                           |   | 632.7                     |   | 690.3                     |   | 416.0 |   | 481.4 |   |

 

F-39

----

 

Inconnection with the acquisition of the Predecessor, the Group throughRegentrealm entered into a Senior Credit Facility. Borrowings under thesearrangements consisted of:

 
| **Senior  Credit** |   | **December 28, 2002**                                                                   |   | **December 29, 2001**                                                                   |
|--------------------|--------|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|
|               |   |                                                                                    |   |                                                                                    |
| Facility A         |   | £220.5 million repayable by installments between April 2003 and April  2007        |   | £267.9 million repayable by installments between April 2002 and April  2007        |
|               |   |                                                                                    |   |                                                                                    |
| Facility B         |   | £105.4 million repayable by two equal installments in October 2007 and  April 2008 |   | £109.1 million repayable by two equal installments in October 2007 and  April 2008 |
|               |   |                                                                                    |   |                                                                                    |
| Facility C         |   | £106.1 million repayable by two equal installments in October 2008 and  April 2009 |   | £109.1 million repayable by two equal installments in October 2008 and  April 2009 |
|               |   |                                                                                    |   |                                                                                    |
| Facility D         |   | €13.2 million and £13.2 million repayable in full in October 2009             |   | €22.8 million and £23.0 million repayable in full in October 2009             |

 

The Senior Credit Facilityborrowings are secured by fixed and floating charges from each of the U.K.charging subsidiaries and share pledges over two Dutch subsidiaries. InApril 2001 security was also provided in the form of share pledges overfive Spanish subsidiaries and fixed charges have been taken over three Spanishproperties and certain intellectual property. In November 2001 security was provided in the form of a sharepledge over a further Dutch subsidiary and a mortgage on its property. In June2002 security was provided in the form of share pledges over two Frenchsubsidiaries.

 

The application of proceedsof enforcement of this security above a certain level is subject to theprovisions of an intercreditor deed (the “Intercreditor Deed”) datedDecember 16, 1999, as amended and re-stated from time to time. TheIntercreditor Deed sets out the respective rights of certain creditors of theGroup as regards ranking of debt and security.

 

The Intercreditor Deedprovides that senior debt and hedging liabilities, as defined therein, rank (tothe extent provided therein) in priority to, first, the Senior SubordinatedBridge Facility, second, the Take-out Securities Debt, third, the Inter-companyDebt, and fourth, the Investor Debt, all as defined therein.

 

Interest on advances underthe senior credit facility is payable as follows:

 

•                  Facility A-LIBOR plus 1.75% (2.25% until May24, 2002, then 2.00% until August 9, 2002)

•                  Facility B-LIBOR plus 2.75%

•                  Facility C-LIBOR plus 3.25%

•                  Facility D-EURIBOR plus 3.50% (Euro portion€13.2 million)

•                  Facility D-LIBOR plus 3.50% (Sterlingportion £13.2 million)

 

F-40

----

 

Asan integral part of these borrowing arrangements, certain restrictive financialcovenants are in place. The covenants do not detract from the normal course ofthe business.

 

OnApril 17, 2001, the Company issued £120 million 103/4% SeniorSubordinated Notes and €160.0 million 105/8% Senior Subordinated Notes.  Interest is payable on April 15 and October15 of each year. The Senior Subordinated Notes are guaranteed by Regentrealm.The proceeds of the issue were used together with other cash resources of theCompany to repay the Senior Subordinated Bridge Facility. Also, at that date, afurther £10.0 million was drawn under Facility A and £23.0 million and€22.8 million was drawn under Facility D of the Senior Credit Facility.

 

**Interest rate agreements**

 

Regentrealmis required by the terms of the Senior Credit Facility to enter into hedgingarrangements to provide protection in respect of its interest rate riskexposure thereunder.  The hedgingarrangements must cover at least 50% of the amount of the total commitmentsunder the term loan facilities for a period of at least two years from April28, 2000.  Hedging banks are required toenter into the Intercreditor Deed and will be granted security, guarantees andsubordination rights which rank at least equal to the obligations of thelenders under the senior credit facility.

 

The Group has hedged itsinterest rate exposure under the senior credit facilities by entering into twointerest rate swaps under which it receives interest at six-month LIBOR andpays interest at 5.685% on £150.0 million and 6.61% on £66.2 million. The£150.0 million swap matures on October 28, 2005 (or October 28, 2003 at thebank’s option). The £66.2 million swap expires on October 28, 2003. Theoriginal principal amount of the £66.2 million swap (December 29, 2001£181.2 million) was £420.0 million. The principal continues to reduce andfuture principal amounts are as follows:

 
|                            |   | **(£ million)** |   |
|---------------------------------|--------|----------------------|--------|
| October 29, 2002-April 28, 2003 |   | 66.2                 |   |
| April 29, 2003-October 28, 2003 |   | 62.5                 |   |

 

On September 25, 2002 a further interest rate swap was entered intounder which the Group will receive interest at six month LIBOR and will payinterest at 4.78% commencing on October 28, 2003 for a period of three years.

 

**Analysis by currency**

 
|                       |   | **Company**                     |   | **Regentrealm**                 |   |
|----------------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                       |   | **At December 28,********2002** |   | **At December 29,********2001** |   | **At December 28,  2002** |   | **At December 29,********2001** |   |
|                       |   | **(£ million)**            |   |
| Sterling                   |   | 571.4                           |   | 630.1                           |   | 451.4 |   | 510.1 |   |
| Euro                       |   | 112.8                           |   | 119.8                           |   | 8.8 |   | 22.4 |   |
| **Total gross borrowings** |   | 684.2                           |   | 749.9                           |   | 460.2 |   | 532.5 |   |

 

F-41

----

 

**Analysis of changes in net borrowings**

 
| **Company**                                |   | **Cash**             |   | **Liquid(1)********resources** |   | **Overdrafts** |   | **Debt due********within 1  year** |   | **Debt due  after 1  year** |   | **Finance  lease********obligations** |   | **Total** |   |
|--------------------------------------------|--------|----------------------|--------|--------------------------------|--------|----------------|--------|------------------------------------|--------|-----------------------------|--------|---------------------------------------|--------|-----------|--------|
|                                       |   | **(£ million)** |   |
| On inception                               |   | —               |   | —                         |   | —         |   | —                             |   | —                      |   | —                                |   | —    |   |
| Acquisition of Predecessor                 |   | 24.8                 |   | 100.0                          |   | (5.5           | )      | (43.9                              | )      | (226.2                      | )      | (1.0                                  | )      | (151.8    | )      |
| Acquisition of United BiscuitsIberia, S.L. |   | 1.2                  |   | —                         |   | —         |   | (77.4                              | )      | —                      |   | —                                |   | (76.2     | )      |
| Cash flow                                  |   | 32.6                 |   | (80.0                          | )      | 5.5            |   | 121.9                              |   | (562.0                      | )      | —                                |   | (482.0    | )      |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (85.9                              | )      | 85.9                        |   | —                                |   | —    |   |
| Effect of exchange rate movements          |   | 2.1                  |   | —                         |   | —         |   | (2.3                               | )      | (15.3                       | )      | —                                |   | (15.5     | )      |
| At December 30, 2000                       |   | 60.7                 |   | 20.0                           |   | —         |   | (87.6                              | )      | (717.6                      | )      | (1.0                                  | )      | (725.5    | )      |
| Acquisition of United BiscuitsTunisia S.A. |   | 7.5                  |   | —                         |   | —         |   | —                             |   | —                      |   | —                                |   | 7.5       |   |
| Cash flow                                  |   | (36.5                | )      | (14.0                          | )      | (8.7           | )      | 87.6                               |   | (3.1                        | )      | —                                |   | 25.3      |   |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (30.8                              | )      | 30.8                        |   | —                                |   | —    |   |
| Effect of exchange rate movements          |   | (0.8                 | )      | (0.1                           | )      | 0.2            |   | 0.9                                |   | 3.5                         |   | —                                |   | 3.7       |   |
| At December 29, 2001                       |   | 30.9                 |   | 5.9                            |   | (8.5           | )      | (29.9                              | )      | (686.4                      | )      | (1.0                                  | )      | (689.0    | )      |
| Cash flow                                  |   | (16.8                | )      | 0.6                            |   | 3.6            |   | 14.9                               |   | 54.5                        |   | 0.3                                   |   | 57.1      |   |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (10.1                              | )      | 6.8                         |   | (0.7                                  | )      | (4.0      | )      |
| Effect of exchange rate movements          |   | 1.1                  |   | (0.5                           | )      | (0.2           | )      | —                             |   | (6.8                        | )      | —                                |   | (6.4      | )      |
| At December 28, 2002                       |   | 15.2                 |   | 6.0                            |   | (5.1           | )      | (25.1                              | )      | (631.9                      | )      | (1.4                                  | )      | (642.3    | )      |
|                                       |   |                 |   |                           |   |           |   |                               |   |                        |   |                                  |   |      |   |
| **Predecessor**                            |   |                 |   |                           |   |           |   |                               |   |                        |   |                                  |   |      |   |
| At January 1, 2000                         |   | 114.9                |   | 90.0                           |   | —         |   | (64.7                              | )      | (238.7                      | )      | (1.1                                  | )      | (99.6     | )      |
| Cash flow                                  |   | (81.2                | )      | 10.0                           |   | (5.5           | )      | 4.6                                |   | —                      |   | 0.1                                   |   | (72.0     | )      |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (11.5                              | )      | 11.5                        |   | —                                |   | —    |   |
| Effect of exchange rate movements          |   | 1.0                  |   | —                         |   | —         |   | 2.4                                |   | 0.9                         |   | —                                |   | 4.3       |   |
| At April 14, 2000                          |   | 34.7                 |   | 100.0                          |   | (5.5           | )      | (69.2                              | )      | (226.3                      | )      | (1.0                                  | )      | (167.3    | )      |
|                                       |   |                 |   |                           |   |           |   |                               |   |                        |   |                                  |   |      |   |
| **Regentrealm**                            |   |                 |   |                           |   |           |   |                               |   |                        |   |                                  |   |      |   |
| On inception and January 1, 2000           |   | —               |   | —                         |   | —         |   | —                             |   | —                      |   | —                                |   | —    |   |
| Acquisition of Predecessor                 |   | 24.8                 |   | 100.0                          |   | (5.5           | )      | (43.9                              | )      | (226.2                      | )      | (1.0                                  | )      | (151.8    | )      |
| Acquisition of United BiscuitsIberia, S.L. |   | 1.2                  |   | —                         |   | —         |   | (77.4                              | )      | —                      |   | —                                |   | (76.2     | )      |
| Cash flow                                  |   | 32.6                 |   | (80.0                          | )      | 5.5            |   | 121.9                              |   | (241.7                      | )      | —                                |   | (161.7    | )      |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (85.9                              | )      | 85.9                        |   | —                                |   | —    |   |
| Effect of exchange rate movements          |   | 2.1                  |   | —                         |   | —         |   | (2.3                               | )      | (7.2                        | )      | —                                |   | (7.4      | )      |
| At December 30, 2000                       |   | 60.7                 |   | 20.0                           |   | —         |   | (87.6                              | )      | (389.2                      | )      | (1.0                                  | )      | (397.1    | )      |
| Acquisition of United BiscuitsTunisia S.A. |   | 7.5                  |   | —                         |   | —         |   | —                             |   | —                      |   | —                                |   | 7.5       |   |
| Cash flow                                  |   | (36.5                | )      | (14.0                          | )      | (8.7           | )      | 87.6                               |   | (120.4                      | )      | —                                |   | (92.0     | )      |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (30.8                              | )      | 30.8                        |   | —                                |   | —    |   |
| Effect of exchange rate movements          |   | (0.8                 | )      | (0.1                           | )      | 0.2            |   | 0.9                                |   | 0.4                         |   | —                                |   | 0.6       |   |
| At December 29, 2001                       |   | 30.9                 |   | 5.9                            |   | (8.5           | )      | (29.9                              | )      | (478.4                      | )      | (1.0                                  | )      | (481.0    | )      |
| Cash flow                                  |   | (16.8                | )      | 0.6                            |   | 3.6            |   | 14.9                               |   | 54.5                        |   | 0.3                                   |   | 57.1      |   |
| Other non-cash changes                     |   | —               |   | —                         |   | —         |   | (11.1                              | )      | 8.8                         |   | (0.7                                  | )      | (3.0      | )      |
| Effect of exchange rate movements          |   | 1.1                  |   | (0.5                           | )      | (0.2           | )      | —                             |   | (0.1                        | )      | —                                |   | 0.3       |   |
| At December 28, 2002                       |   | 15.2                 |   | 6.0                            |   | (5.1           | )      | (26.1                              | )      | (415.2                      | )      | (1.4                                  | )      | (426.6    | )      |

 

----

(1)           Liquid resources are funds held ondeposit with a maturity or period of notice greater than 24 hours.

 

F-42

----

 

#### **FinancialInstruments**

 
|                 |   | **Net debt**         |   | **Cash and  short term  deposits** |   | **Gross  borrowings** |   | **Gross  borrowings  at floating  rates** |   | **Gross  borrowings  at fixed********rates** |   | **Weighted  average  interest rates  on fixed rate  debt** |   | **Weighted  average  period for  which rates  are fixed** |   |
|----------------------|--------|----------------------|--------|------------------------------------|--------|-----------------------|--------|-------------------------------------------|--------|----------------------------------------------|--------|------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                 |   | **(£ million)** |   |
| **Company**          |   |                 |   |                               |   |                  |   |                                      |   |                                         |   |                                                       |   |                                                      |   |
| Sterling             |   | 571.3                |   | (0.1                               | )      | 571.4                 |   | 233.8                                     |   | 337.6                                        |   | 7.4                                                        | %      | 4.4 years                                                 |   |
| US dollar            |   | (6.4                 | )      | (6.4                               | )      | —                |   | —                                    |   | —                                       |   | —                                                     |   | —                                                    |   |
| Euro                 |   | 98.1                 |   | (14.7                              | )      | 112.8                 |   | 8.8                                       |   | 104.0                                        |   | 10.6                                                       | %      | 8.3 years                                                 |   |
| At December 28, 2002 |   | 663.0                |   | (21.2                              | )      | 684.2                 |   | 242.6                                     |   | 441.6                                        |   |                                                       |   |                                                      |   |
|                 |   |                 |   |                               |   |                  |   |                                      |   |                                         |   |                                                       |   |                                                      |   |
| Sterling             |   | 629.2                |   | (0.9                               | )      | 630.1                 |   | 177.8                                     |   | 452.3                                        |   | 7.1                                                        | %      | 4.5 years                                                 |   |
| US dollar            |   | (9.6                 | )      | (9.6                               | )      | —                |   | —                                    |   | —                                       |   | —                                                     |   | —                                                    |   |
| Euro                 |   | 93.5                 |   | (26.3                              | )      | 119.8                 |   | 22.4                                      |   | 97.4                                         |   | 10.6                                                       | %      | 9.3 years                                                 |   |
| At December 29, 2001 |   | 713.1                |   | (36.8                              | )      | 749.9                 |   | 200.2                                     |   | 549.7                                        |   |                                                       |   |                                                      |   |
|                 |   |                 |   |                               |   |                  |   |                                      |   |                                         |   |                                                       |   |                                                      |   |
| **Regentrealm**      |   |                 |   |                               |   |                  |   |                                      |   |                                         |   |                                                       |   |                                                      |   |
| Sterling             |   | 451.3                |   | (0.1                               | )      | 451.4                 |   | 233.8                                     |   | 217.6                                        |   | 6.2                                                        | %      | 1.7 years                                                 |   |
| US dollar            |   | (6.4                 | )      | (6.4                               | )      | —                |   | —                                    |   | —                                       |   | —                                                     |   | —                                                    |   |
| Euro                 |   | (5.9                 | )      | (14.7                              | )      | 8.8                   |   | 8.8                                       |   | —                                       |   | —                                                     |   | —                                                    |   |
| At December 28, 2002 |   | 439.0                |   | (21.2                              | )      | 460.2                 |   | 242.6                                     |   | 217.6                                        |   |                                                       |   |                                                      |   |
|                 |   |                 |   |                               |   |                  |   |                                      |   |                                         |   |                                                       |   |                                                      |   |
| Sterling             |   | 509.2                |   | (0.9                               | )      | 510.1                 |   | 177.8                                     |   | 332.3                                        |   | 6.2                                                        | %      | 2.5 years                                                 |   |
| US dollar            |   | (9.6                 | )      | (9.6                               | )      | —                |   | —                                    |   | —                                       |   | —                                                     |   | —                                                    |   |
| Euro                 |   | (3.9                 | )      | (26.3                              | )      | 22.4                  |   | 22.4                                      |   | —                                       |   | —                                                     |   | —                                                    |   |
| At December 29, 2001 |   | 495.7                |   | (36.8                              | )      | 532.5                 |   | 200.2                                     |   | 332.3                                        |   |                                                       |   |                                                      |   |

 

Interest on cash andshort-term deposits is based on floating rates linked to LIBOR.

 

The analysis of fixed andfloating rates takes account of interest rate swaps.

 

**Undrawn committed facilities atthe period end**

** **
|                            |   | **Company and Regentrealm** |   |
|---------------------------------|--------|-----------------------------|--------|
|                            |   | **At December 28,  2002**   |   | **At December 29,  2001** |   |
|                            |   | **(£ million)**        |   |
| Expiring in one year or less    |   | —                      |   | — |   |
| Expiring in more than two years |   | 52.5                        |   | 83.0 |   |
|                            |   | 52.5                        |   | 83.0 |   |

 

F-43

----

 

**Fair values of financial instruments**

 
|                                                                |   | **Company**                                |   | **Regentrealm**                       |   |
|---------------------------------------------------------------------|--------|--------------------------------------------|--------|---------------------------------------|--------|
|                                                                |   | **Carrying  value at  December 28,  2002** |   | **Fair value at  December 28,  2002** |   | **Carrying  value at  December 29,  2001** |   | **Fair value at  December 29,  2001** |   | **Carrying  value at  December 28,  2002** |   | **Fair value at  December 28,  2002** |   | **Carrying  value at  December 29,  2001** |   | **Fair value at  December 29,  2001** |   |
|                                                                |   | **(£ million)**                       |   |
| Cash and short-term  deposits                                       |   | 21.2                                       |   | 21.2                                  |   | 36.8 |   | 36.8 |   | 21.2 |   | 21.2 |   | 36.8 |   | 36.8 |   |
| Current portion of  loans, overdraftsand  finance lease obligations |   | (34.1                                      | )      | (34.1                                 | )      | (38.8 | ) | (38.8 | ) | (34.1 | ) | (34.1 | ) | (38.8 | ) | (38.8 | ) |
| Long-term loans and  finance lease obligations                      |   | (650.1                                     | )      | (678.1                                | )      | (711.1 | ) | (732.9 | ) | (426.1 | ) | (426.1 | ) | (493.7 | ) | (493.7 | ) |
| Derivatives relating to  loans                                      |   |                                       |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rates swaps                                                |   | —                                     |   | (8.1                                  | )      | — |   | (6.5 | ) | — |   | (8.1 | ) | — |   | (6.5 | ) |
| Other derivatives                                                   |   |                                       |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forward foreign  currency contracts                                 |   | —                                     |   | (1.3                                  | )      | — |   | (0.5 | ) | — |   | (1.3 | ) | — |   | (0.5 | ) |
| Cash-settled commodity  contracts                                   |   | —                                     |   | 0.3                                   |   | 0.1 |   | 0.1 |   | — |   | 0.3 |   | 0.1 |   | 0.1 |   |

 

The fair value of debt andderivative instruments is calculated by discounting all future cash flows bythe market yield curve at the balance sheet date.

 

Currencyderivatives are translated into sterling at the rates of exchange prevailing atthe balance sheet date.

 

**Functional currencies of Group operations**

 

Monetaryassets and liabilities denominated in currencies other than the functionalcurrency of the entity owning them, and excluding currency funding for overseasnet investments which is dealt with in the statement of total recognized gainsand losses, are not material.

 

**Foreign exchange risk management**

 

TheGroup has entered into forward foreign exchange contracts in order to swapliquid assets and liabilities into the currencies required for Group purposes.

 

Asat December 28, 2002 the following contracts were outstanding:

 
|            |   | **Receive for £** |   | **Pay for £**                       |   |
|-----------------|--------|------------------------|--------|------------------------------------------|--------|
|            |   | **Contract  amount**   |   | **Average  contractual  exchange  rate** |   | **Contract  amount** |   | **Average  contractual  exchange  rate** |   |
|            |   | **(£ million)**   |   |                                     |   | **(£ million)** |   |   |   |
| **Currency**    |   |                   |   |                                     |   |   |   |   |   |
| U.S. dollar     |   | 35.5                   |   | 1.445                                    |   | 12.5 |   | 1.538 |   |
| Euro            |   | 26.3                   |   | 1.583                                    |   | — |   | — |   |
| Canadian dollar |   | —                 |   | —                                   |   | 1.1 |   | 2.231 |   |
| Total.          |   | 61.8                   |   |                                     |   | 13.6 |   |   |   |

 

F-44

----

 

Asat December 29, 2001 the following contracts were outstanding:

 
|            |   | **Receive for £** |   | **Pay for £**                       |   | **Pay for €**   |   |
|-----------------|--------|------------------------|--------|------------------------------------------|--------|----------------------|--------|
|            |   | **Contract  amount**   |   | **Average  contractual  exchange  rate** |   | **Contract  amount** |   | **Average  contractual  exchange  rate** |   | **Contract  amount** |   | **Average  contractual  exchange  rate** |   |
|            |   | **(£ million)**   |   |                                     |   | **(£ million)** |   |   |   | **(£ million)** |   |   |   |
| **Currency**    |   |                   |   |                                     |   |                 |   |   |   |   |   |   |   |
| U.S. dollar     |   | 40.9                   |   | 1.428                                    |   | 8.7                  |   | 1.402 |   | 1.8 |   | 0.883 |   |
| Euro            |   | 31.6                   |   | 1.606                                    |   | 4.1                  |   | 1.618 |   | — |   | — |   |
| Canadian dollar |   | —                 |   | —                                   |   | —               |   | — |   | 0.7 |   | 1.388 |   |
| Total           |   | 72.5                   |   |                                     |   | 12.8                 |   |   |   | 2.5 |   |   |   |

 

**Hedges**

 

Profitsand losses on financial instruments used for hedging are recognized when theexposure that is being hedged is recognized. Unrecognized and deferred profits and losses on financial instrumentsused for hedging are as follows:

 
|                                                                                     |   | **Net gains/(losses)** |   |
|------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                     |   | **(£ million)**   |   |
| Losses arising in the 52 weeks ended December 28,  2002 that were not recognized in 2002 |   | (9.4                   | )      |
| Of which:                                                                                |   |                   |   |
| Losses expected to be recognized in 2003                                                 |   | (3.0                   | )      |
| Losses expected to be recognized in 2004 or later                                        |   | (6.4                   | )      |
|                                                                                     |   | (9.4                   | )      |
|                                                                                     |   |                   |   |
| Losses arising in the 52 weeks ended December 29,  2001 that were not recognized in 2001 |   | (7.0                   | )      |
| Of which:                                                                                |   |                   |   |
| Losses expected to be recognized in 2002                                                 |   | (0.5                   | )      |
| Losses expected to be recognized in 2003 or later                                        |   | (6.5                   | )      |
|                                                                                     |   | (7.0                   | )      |

#### ** **

**Counterparty risk**

 

#### **TheGroup is exposed to loss in the event of non-performance by the counterpartiesto the above agreements but such non-performance is not expected to occur.**

 

F-45

----

 

**18           Provisions for liabilities andcharges**

 
|                                            |   | **Retirement********benefits** |   | **Rationalization********provisions** |   | **Onerous  contacts** |   | **Deferred  taxation** |   | **Total** |   |
|-------------------------------------------------|--------|--------------------------------|--------|---------------------------------------|--------|-----------------------|--------|------------------------|--------|-----------|--------|
|                                            |   | **(£ million)**           |   |
| **Company  and Regentrealm**                    |   |                           |   |                                  |   |                  |   |                   |   |      |   |
| At December 31, 2000 as reported                |   | 6.3                            |   | 2.5                                   |   | 11.5                  |   | 7.7                    |   | 28.0      |   |
| Prior year adjustment deferred tax (see Note 2) |   | —                         |   | —                                |   | —                |   | 45.3                   |   | 45.3      |   |
| At December 31, 2000 as restated                |   | 6.3                            |   | 2.5                                   |   | 11.5                  |   | 53.0                   |   | 73.3      |   |
| Exchange adjustment                             |   | (0.1                           | )      | (0.1                                  | )      | —                |   | —                 |   | (0.2      | )      |
| Profit and loss charge                          |   | 0.4                            |   | 15.5                                  |   | 5.7                   |   | 2.4                    |   | 24.0      |   |
| Charge as a result of the adoption of FRS 19    |   | —                         |   | —                                |   | —                |   | (27.6                  | )      | (27.6     | )      |
| Other movements                                 |   | 0.3                            |   | (3.7                                  | )      | —                |   | —                 |   | (3.4      | )      |
| Amounts utilized                                |   | (0.6                           | )      | (4.8                                  | )      | (2.4                  | )      | —                 |   | (7.8      | )      |
| At December 29, 2001 as restated                |   | 6.3                            |   | 9.4                                   |   | 14.8                  |   | 27.8                   |   | 58.3      |   |
| Exchange adjustment                             |   | 0.3                            |   | 0.1                                   |   | —                |   | 0.1                    |   | 0.5       |   |
| Profit and loss charge/(credit)                 |   | 0.6                            |   | 18.1                                  |   | 3.6                   |   | (13.8                  | )      | 8.5       |   |
| Other movements                                 |   | —                         |   | 0.4                                   |   | —                |   | —                 |   | 0.4       |   |
| Amounts utilized                                |   | (0.8                           | )      | (18.6                                 | )      | (3.1                  | )      | —                 |   | (22.5     | )      |
| At December 28, 2002                            |   | 6.4                            |   | 9.4                                   |   | 15.3                  |   | 14.1                   |   | 45.2      |   |

** **

Rationalization provisionsare recorded only where there is a legal or constructive obligation.

 

The provision for onerouscontracts principally relates to the cost of surplus leasehold properties,where unavoidable costs exceed anticipated income. Lease commitments are ofvarying duration and expenditure is expected to be charged against theprovisions for a number of years.

 

**Provision for deferred taxation**

 
|                                            |   | **Accelerated  capital********allowances** |       | **Temporary  losses** |       | **Other  timing  differences** |       | **Losses** |       | **Total** |       |
|-------------------------------------------------|--------|--------------------------------------------|------------|-----------------------|------------|--------------------------------|------------|------------|------------|-----------|------------|
|                                            |   | **(£ million)**                       |       |
| **Company and Regentrealm**                     |   |                                       | ** ** |                  | ** ** |                           | ** ** |       | ** ** |      | ** ** |
| At December 31, 2000 as reported                |   | —                                     |       | —                |       | 7.7                            |       | —     |       | 7.7       |       |
| Prior year adjustment deferred tax (see Note 2) |   | 54.9                                       |       | —                |       | (4.8                           | )          | (4.8       | )          | 45.3      |       |
| At December 31, 2000 as restated                |   | 54.9                                       |       | —                |       | 2.9                            |       | (4.8       | )          | 53.0      |       |
| Profit and loss charge                          |   | 0.7                                        |       | —                |       | 1.7                            |       | —     |       | 2.4       |       |
| Charge as a result of the adoption of FRS 19    |   | (23.8                                      | )          | —                |       | (4.5                           | )          | 0.7        |       | (27.6     | )          |
| At December 29, 2001 as restated                |   | 31.8                                       |       | —                |       | 0.1                            |       | (4.1       | )          | 27.8      |       |
| Exchange adjustment                             |   | 0.1                                        |       | —                |       | —                         |       | —     |       | 0.1       |       |
| Profit and loss charge/(credit)                 |   | (14.7                                      | )          | 12.1                  |       | 1.1                            |       | (12.3      | )          | (13.8     | )          |
| At December 28, 2002                            |   | 17.2                                       |       | 12.1                  |       | 1.2                            |       | (16.4      | )          | 14.1      |       |

 

F-46

----

 

No provision has beenmade for taxation that would arise in the event of certain overseassubsidiaries and associates distributing their reserves, because it is theGroup’s policy to reinvest profits generated by overseas operations.

 

**19           Employeeshare schemes**

 

**Company and Regentrealm**

 

Following theAcquisition, the UK parent company United Biscuits Group (Investments) Ltd(“UBGI”) commenced a share scheme whereby certain executives and employees ofthe Group were given the entitlement to acquire certain classes of shares inUBGI.  Any purchase of shares by anexecutive or employee has been recorded in the accounts of UBGI and the moneyheld in a separate bank account of UBGI.

 

**20           Cash flow**

 

The reconciliation ofoperating profit to net cash inflow/(outflow) from operating activities isshown within the consolidated cashflow statements for the Company on page F-6and for Regentrealm on page F-11.

 

All of the activities ofthe Company and of Regentrealm for the 52 weeks ended December 28, 2002and the 52 weeks ended December 29, 2001 are regarded as continuing.

 

A reconciliation ofoperating (loss)/profit to net cash (outflow)/inflow from operating activitiesfor the Predecessor for the 15 weeks ended April 14, is set out below:

 
|                                                                       |   | **Predecessor**                    |       |
|----------------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                       |   | **15 weeks  ended April 14, 2000** | ** ** |
|                                                                       |   | **Continuing  operations**         | ** ** | **Discontinued  operations** | ** ** | **Total** | ** ** |
|                                                                       |   | **(£  million)**              | ** ** |
| **Operating (loss)/profit**                                                |   | (3.1                               | )          | 2.1 |   | (1.0 | ) |
| Exceptional  charges to operating profit                                   |   | 10.0                               |       | — |   | 10.0 |   |
| **Operating profit before exceptionals**                                   |   | 6.9                                |       | 2.1 |   | 9.0 |   |
| Depreciation  and goodwill amortization                                    |   | 14.5                               |       | 1.1 |   | 15.6 |   |
| (Increase)/decrease  in stocks                                             |   | (0.3                               | )          | 1.3 |   | 1.0 |   |
| Increase  in debtors                                                       |   | (3.6                               | )          | (0.1 | ) | (3.7 | ) |
| Decrease  in creditors                                                     |   | (52.9                              | )          | (0.5 | ) | (53.4 | ) |
| Expenditure  against rationalization provisions and operating exceptionals |   | (0.6                               | )          | (0.4 | ) | (1.0 | ) |
| Net  cash (outflow)/inflow from operating activities                       |   | (36.0                              | )          | 3.5 |   | (32.5 | ) |

 

F-47

----

 

 
|                                                                                 |   | **Company**                            |       | **Predecessor**                        |       |
|--------------------------------------------------------------------------------------|--------|----------------------------------------|------------|----------------------------------------|------------|
|                                                                                 |   | **52 weeks  ended December 28,  2002** | ** ** | **52 weeks  ended December 29,  2001** | ** ** | **Period  from  March 10,  2000  (inception) to  December 30,  2000** |   | **15 weeks  ended  April 14,  2000** | ** ** |
|                                                                                 |   | **(£  million)**                  | ** ** |
| **Returns  on investments and servicing of finance**                                 |   |                                   |       |                                   |       |   |   |   |   |
| Interest  paid                                                                       |   | (65.6                                  | )          | (73.8                                  | )          | (88.3 | ) | (13.3 | ) |
| Interest received                                                                    |   | 2.4                                    |       | 3.6                                    |       | 25.2 |   | 9.5 |   |
| **Net  cash outflow from returns on investments and servicing****of finance**        |   | (63.2                                  | )          | (70.2                                  | )          | (63.1 | ) | (3.8 | ) |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Taxation**                                                                         |   |                                   |       |                                   |       |   |   |   |   |
| U.K. corporation tax received/(paid)                                                 |   | 0.1                                    |       | 1.1                                    |       | (4.8 | ) | 1.0 |   |
| Overseas tax received/(paid)                                                         |   | 12.4                                   |       | 1.0                                    |       | 1.4 |   | (1.7 | ) |
| **Tax received/(paid)**                                                              |   | 12.5                                   |       | 2.1                                    |       | (3.4 | ) | (0.7 | ) |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Capital  expenditure and financial investment**                                    |   |                                   |       |                                   |       |   |   |   |   |
| Purchase of fixed assets                                                             |   | (59.2                                  | )          | (48.3                                  | )          | (43.2 | ) | (12.6 | ) |
| Sale of fixed assets                                                                 |   | 4.6                                    |       | 0.6                                    |       | 3.1 |   | 0.4 |   |
| Net  sale of investments                                                             |   | —                                 |       | —                                 |       | — |   | 0.5 |   |
| Payments from associates                                                             |   | 0.5                                    |       | 0.6                                    |       | 0.4 |   | — |   |
| Loans from related parties                                                           |   | —                                 |       | —                                 |       | 545.0 |   | — |   |
| **Net  cash (outflow)/inflow from capital expenditure and****financial  investment** |   | (54.1                                  | )          | (47.1                                  | )          | 505.3 |   | (11.7 | ) |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Acquisitions  and disposals**                                                      |   |                                   |       |                                   |       |   |   |   |   |
| Acquisitions of predecessor                                                          |   | —                                 |       | (33.1                                  | )          | (1,303.7 | ) | — |   |
| Purchase of business                                                                 |   | —                                 |       | 2.7                                    |       | (15.8 | ) | — |   |
| Payments against acquisition provisions                                              |   | —                                 |       | —                                 |       | (1.1 | ) | (1.1 | ) |
| Costs  relating to offers for the Predecessor                                        |   | —                                 |       | —                                 |       | — |   | (8.6 | ) |
| Net  cash/(borrowings) acquired with subsidiary                                      |   | —                                 |       | 7.5                                    |       | (76.2 | ) | — |   |
| Net  proceeds received from sale of business                                         |   | 53.5                                   |       | 82.8                                   |       | 235.0 |   | — |   |
| Net  borrowings sold with businesses                                                 |   | —                                 |       | —                                 |       | 15.5 |   | — |   |
| **Net  cash inflow/(outflow) from acquisitions and disposals**                       |   | 53.5                                   |       | 59.9                                   |       | (1,146.3 | ) | (9.7 | ) |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Dividends  paid**                                                                  |   |                                   |       |                                   |       |   |   |   |   |
| Equity  dividends paid                                                               |   | —                                 |       | —                                 |       | — |   | (16.9 | ) |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Management  of liquid resources**                                                  |   |                                   |       |                                   |       |   |   |   |   |
| Cash  placed on/(withdrawn from) deposit                                             |   | 0.6                                    |       | (14.0                                  | )          | (80.0 | ) | 10.0 |   |
| **Net  cash (inflow)/outflow from management of liquid****resources**                |   | 0.6                                    |       | (14.0                                  | )          | (80.0 | ) | 10.0 |   |
|                                                                                 |   |                                   |       |                                   |       |   |   |   |   |
| **Financing**                                                                        |   |                                   |       |                                   |       |   |   |   |   |
| Proceeds  from new borrowings                                                        |   | —                                 |       | (3.1                                   | )          | (562.0 | ) | — |   |
| Cost  of financing                                                                   |   | —                                 |       | (13.7                                  | )          | (25.8 | ) | — |   |
| Repayment  of borrowings                                                             |   | 69.7                                   |       | 87.6                                   |       | 121.9 |   | 4.7 |   |
| Proceeds  of issue of shares for cash                                                |   | —                                 |       | —                                 |       | (11.2 | ) | (3.3 | ) |
| **Net  cash outflow/(inflow) from financing**                                        |   | 69.7                                   |       | 70.8                                   |       | (477.1 | ) | 1.4 |   |

 

F-48

----

 
|                                                                             |   | **Regentrealm**                         |       |
|----------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                             |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **Period  from  March 10, 2000  (inception) to  December 30,  2000** |   |
|                                                                             |   | **(£  million)**                   | ** ** |
| **Returns  on investments and servicing of finance**                             |   |                                    |       |   |   |   |   |
| Interest paid                                                                    |   | (65.6                                   | )          | (73.8 | ) | (88.3 | ) |
| Interest  received                                                               |   | 2.4                                     |       | 3.6 |   | 25.2 |   |
| **Net  cash outflow from returns on investments and****servicing  of finance**   |   | (63.2                                   | )          | (70.2 | ) | (63.1 | ) |
|                                                                             |   |                                    |       |   |   |   |   |
| **Taxation**                                                                     |   |                                    |       |   |   |   |   |
| U.K.  corporation tax received/(paid)                                            |   | 0.1                                     |       | 1.1 |   | (4.8 | ) |
| Overseas tax received                                                            |   | 12.4                                    |       | 1.0 |   | 1.4 |   |
| **Tax received/(paid)**                                                          |   | 12.5                                    |       | 2.1 |   | (3.4 | ) |
|                                                                             |   |                                    |       |   |   |   |   |
| **Capital  expenditure and financial investment**                                |   |                                    |       |   |   |   |   |
| Purchase  of fixed assets                                                        |   | (59.2                                   | )          | (48.3 | ) | (43.2 | ) |
| Sale of fixed assets                                                             |   | 4.6                                     |       | 0.6 |   | 3.1 |   |
| Payments from associates                                                         |   | 0.5                                     |       | 0.6 |   | 0.4 |   |
| Loans from related parties                                                       |   | —                                  |       | (115.7 | ) | 878.1 |   |
| **Net  cash (outflow)/inflow from capital expenditure and financial investment** |   | (54.1                                   | )          | (162.8 | ) | 838.4 |   |
|                                                                             |   |                                    |       |   |   |   |   |
| **Acquisitions  and disposals**                                                  |   |                                    |       |   |   |   |   |
| Acquisitions of predecessor                                                      |   | —                                  |       | (33.1 | ) | (1,303.7 | ) |
| Purchase of business                                                             |   | —                                  |       | 2.7 |   | (15.8 | ) |
| Payments  against acquisition provisions                                         |   | —                                  |       | — |   | (1.1 | ) |
| Net cash/(borrowings) acquired with subsidiary                                   |   | —                                  |       | 7.5 |   | (76.2 | ) |
| Net proceeds received from sale of business                                      |   | 53.5                                    |       | 82.8 |   | 235.0 |   |
| Net borrowings sold with businesses                                              |   | —                                  |       | — |   | 15.5 |   |
| **Net  cash inflow/(outflow) from acquisitions and****disposals**                |   | 53.5                                    |       | 59.9 |   | (1,146.3 | ) |
|                                                                             |   |                                    |       |   |   |   |   |
| **Management  of liquid resources**                                              |   |                                    |       |   |   |   |   |
| Cash  placed on/(withdrawn from) deposit                                         |   | 0.6                                     |       | (14.0 | ) | (80.0 | ) |
| **Net  cash (inflow)/outflow from management of liquid****resources**            |   | 0.6                                     |       | (14.0 | ) | (80.0 | ) |
|                                                                             |   |                                    |       |   |   |   |   |
| **Financing**                                                                    |   |                                    |       |   |   |   |   |
| Proceeds  from new borrowings                                                    |   | —                                  |       | (120.4 | ) | (241.7 | ) |
| Cost  of financing                                                               |   | —                                  |       | (3.4 | ) | (15.6 | ) |
| Repayment  of borrowings                                                         |   | 69.7                                    |       | 87.6 |   | 121.9 |   |
| Proceeds  of issue of shares for cash                                            |   | —                                  |       | — |   | (11.2 | ) |
| **Net  cash outflow/(inflow) from financing**                                    |   | 69.7                                    |       | (36.2 | ) | (146.6 | ) |

 

F-49

----

 

**21           Pay and benefits to employees**

** **
|                                            |   | **Company  and Regentrealm**            |       | **Predecessor**                         |       |
|-------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                            |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **Period  from  March 10, 2000  (inception) to  December 30, 2000  (Company and 52  weeks ended  December 30, 2000  (Regentrealm)** |   | **15 weeks  ended  April 14,  2000** | ** ** |
|                                            |   | **(£  million)**                   | ** ** |
| Gross  wages and salaries, holiday and sick pay |   | 222.2                                   |       | 229.7                                   |       | 151.8 |   | 68.9 |   |
| Social  security costs                          |   | 31.0                                    |       | 31.6                                    |       | 20.5 |   | 9.3 |   |
| Pension  and other costs                        |   | 5.5                                     |       | 7.4                                     |       | 5.3 |   | 3.6 |   |
|                                            |   | 258.7                                   |       | 268.7                                   |       | 177.6 |   | 81.8 |   |

 

**Pensionschemes**

 

The Group’s principalpension schemes are in the United Kingdom. They are of the defined benefit typefunded by payments to separate, trustee administered funds.

 

The total pension costfor the Group was £2.3 million (2001: £3.4 million), of which £2.6 millionnet cost relates to the Pension Plan and £0.3 million net benefit relates tothe Supplemental Scheme.

 

In accordance with SSAP24, prepayments include £38.1 million (2001: £32.0 million) in respect of theGroup’s pension schemes, resulting from the difference between pension costscharged to the profit and loss account and the amounts funded.

 

Acting on the advice ofthe Group’s actuaries, future contributions payable are set at levels that takeaccount of past service surpluses that currently exist in the schemes.

 

These schemes are subjectto full actuarial valuations at least every three years. A full actuarialvaluation was carried out in April 2000 by a qualified independent actuary. AtApril 2000, the levels of funding as a percentage of accrued benefitliabilities were 112% (1997-106%). The total market value of these schemes’assets at the valuation date was £986.0 million.

 

The stability of the ageprofile of scheme membership dictates the most appropriate actuarial method tobe used in valuing a scheme. The independent actuaries have advised that theprojected unit method is the most appropriate method for valuing the mainpension plan.  The attained age methodhas been retained for the smaller U. K. scheme.

 

F-50

----

 

In accordance with thedisclosure requirements of FRS 17, the assets in the schemes, the expected rateof return and the net pension deficit were:

 
|                                               |   | **Company**                             |       | **Regentrealm**                                      |       |
|----------------------------------------------------|--------|-----------------------------------------|------------|------------------------------------------------------|------------|
|                                               |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001  Restated(1)** |       | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001  Restated(1)** |   |
|                                               |   | **(£  million)**                   | ** ** |
| Net  liabilities                                   |   |                                    | ** ** |                                                 | ** ** |   | ** ** |   | ** ** |
| Net  liabilities excluding pension deficit         |   | (288.9                                  | )          | (237.0                                               | )          | (276.8 | ) | (225.7 | ) |
| Pension  deficit                                   |   | (194.4                                  | )          | (40.3                                                | )          | (194.4 | ) | (40.3 | ) |
| Net  liabilities including pension deficit         |   | (483.3                                  | )          | (277.3                                               | )          | (471.2 | ) | (266.0 | ) |
|                                               |   |                                    |       |                                                 |       |   |   |   |   |
| Reserves                                           |   |                                    |       |                                                 |       |   |   |   |   |
| Profit  and loss reserve excluding pension deficit |   | (290.9                                  | )          | (239.0                                               | )          | (278.8 | ) | (227.7 | ) |
| Pension  deficit                                   |   | (194.4                                  | )          | (40.3                                                | )          | (194.4 | ) | (40.3 | ) |
| Profit  and loss reserve                           |   | (485.3                                  | )          | (279.3                                               | )          | (473.2 | ) | (268.0 | ) |

 

----

(1)   The amounts for 2001 have been restated toreflect the adoption of FRS 19 (see Note 2 of Notes to the FinancialStatements).

 

The principal actuarialassumptions used in the April 2000 and the previous April 1997 valuations were:

 
|                                    |   | **2000** |   | **1997** |   |
|-----------------------------------------|--------|----------|--------|----------|--------|
| Rate of increase in salaries            |   | 4.3      | %      | 6.0      | %      |
| Rate of increase in pensions in payment |   | 2.8      | %      | 4.0      | %      |

 

For the purposes of thedisclosure requirements of FRS 17, the actuarial valuation has been updated toDecember 28, 2002. The principal actuarial assumptions used by the actuarywere:

 
|                                     |   | **Company  and Regentrealm** |       |
|------------------------------------------|--------|------------------------------|------------|
|                                     |   | **At  December 28, 2002**    | ** ** | **At  December 29, 2001** | ** ** |
| Rate  of increase in salaries            |   | 3.8                          | %          | 4.0 | % |
| Rate  of increase in pensions in payment |   | 2.4                          | %          | 2.5 | % |
| Discount  rate                           |   | 5.5                          | %          | 5.9 | % |
| Inflation  assumption                    |   | 2.3                          | %          | 2.5 | % |

 

F-51

----

 

The assets in theschemes, the expected rate of return and the net pension deficit of were:

 
|                                 |   | **Company and Regentrealm**              |       |
|--------------------------------------|--------|------------------------------------------|------------|
|                                 |   | **At December 28, 2002**                 | ** ** | **At December 29, 2001** | ** ** |
|                                 |   | **Long  term rate  of return  expected** | ** ** | **Plan** | ** ** | **Scheme** | ** ** | **Long  term rate  of return  expected** | ** ** | **Plan** | ** ** | **Scheme** | ** ** |
|                                 |   |                                     |       | **(£ million)** |   |   |   | **(£ million)** |   |
| Equities                             |   | 7.5                                      | %          | 426.0 |   | 33.1 |   | 8.0 | % | 541.2 |   | 43.1 |   |
| Bonds                                |   | 5.2                                      | %          | 141.9 |   | 11.0 |   | 5.6 | % | 163.6 |   | 13.0 |   |
| Other  assets                        |   | 4.0                                      | %          | 8.4 |   | 0.6 |   | 3.5 | % | 5.3 |   | 0.5 |   |
| Total  market value of assets        |   | 6.9                                      | %          | 576.3 |   | 44.7 |   | 7.4 | % | 710.1 |   | 56.6 |   |
| Present  value of scheme liabilities |   |                                     |       | (834.9 | ) | (63.8 | ) |   |   | (766.6 | ) | (57.7 | ) |
| Deficit  in the scheme               |   |                                     |       | (258.6 | ) | (19.1 | ) |   |   | (56.5 | ) | (1.1 | ) |
| Related  deferred tax liability      |   |                                     |       | 77.6 |   | 5.7 |   |   |   | 17.0 |   | 0.3 |   |
| Net  pension deficit                 |   |                                     |       | (181.0 | ) | (13.4 | ) |   |   | (39.5 | ) | (0.8 | ) |

 

The impact of fullyimplementing FRS 17 in the year would be to affect the amount charged tooperating profit as follows:

 
|                                                                              |   | **Company  and  Regentrealm**          |       |
|-----------------------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                                              |   | **52 weeks  ended  December 28, 2002** | ** ** |
|                                                                              |   | **Plan**                               | ** ** | **Scheme** | ** ** |
|                                                                              |   | **(£  million)**                  | ** ** |
| Current  service cost                                                             |   | 15.3                                   |       | 0.9 |   |
| Past  service cost                                                                |   | —                                 |       | — |   |
| Total  operating charge                                                           |   | 15.3                                   |       | 0.9 |   |
|                                                                              |   |                                   |       |   |   |
| Expected  return on pension scheme assets                                         |   | (51.4                                  | )          | (4.0 | ) |
| Interest  on pension scheme liabilities                                           |   | 43.9                                   |       | 3.3 |   |
| Net  return                                                                       |   | (7.5                                   | )          | (0.7 | ) |
|                                                                              |   |                                   |       |   |   |
| Actual  return less expected return on pension scheme assets                      |   | (154.1                                 | )          | (12.3 | ) |
| Experience  gains and losses arising on the scheme liabilities                    |   | (14.2                                  | )          | (2.7 | ) |
| Changes  in assumptions underlying in the present value of the scheme liabilities |   | (34.3                                  | )          | (2.7 | ) |
| Actuarial  loss realized in Statement of Total Recognized Gains and Losses        |   | (202.6                                 | )          | (17.7 | ) |
|                                                                              |   |                                   |       |   |   |
| Deficit  in scheme at the beginning of the year                                   |   | (56.5                                  | )          | (1.1 | ) |
| Movement  in year:                                                                |   |                                   |       |   |   |
| Current  service cost                                                             |   | (15.3                                  | )          | (0.9 | ) |
| Contributions                                                                     |   | 8.4                                    |       | — |   |
| Post  service costs                                                               |   | —                                 |       | — |   |
| Other  financial income                                                           |   | 7.4                                    |       | 0.6 |   |
| Actuarial  loss                                                                   |   | (202.6                                 | )          | (17.7 | ) |
| Deficit  in scheme at the end of the year                                         |   | (258.6                                 | )          | (19.1 | ) |

 

F-52

----

 
|                                                                        |   | **Company  and Regentrealm**          |       |
|-----------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                        |   | **52 weeks  ended December 28, 2002** | ** ** |
|                                                                        |   | **Plan**                              | ** ** | **Scheme** | ** ** |
|                                                                        |   |                                  | ** ** |   | ** ** |
| Difference  between the expected and actual return on scheme assets:        |   |                                  |       |   |   |
| Amount  (£ million)                                                    |   | (154.1                                | )          | (12.3 | ) |
| Percentage  of scheme assets                                                |   | (27.0                                 | )%         | (28.0 | )% |
|                                                                        |   |                                  |       |   |   |
| Experience  gains and losses on scheme liabilities:                         |   |                                  |       |   |   |
| Amount  (£ million)                                                    |   | (14.2                                 | )          | (2.7 | ) |
| Percentage  of the present value of the scheme liabilities                  |   | (2.0                                  | )%         | (4.0 | )% |
|                                                                        |   |                                  |       |   |   |
| Total  amount recognized in Statement of Total Recognized Gains and Losses: |   |                                  |       |   |   |
| Amount  (£ million)                                                    |   | (202.6                                | )          | (17.7 | ) |
| Percentage  of the present value of the scheme liabilities                  |   | (24.0                                 | )%         | (28.0 | )% |

 

**22           Financial commitments**

 

The Group’s financialcommitments in respect of finance lease and hire purchase obligations and inrespect of retirement benefits are set out in notes 17 and 18,respectively.  The Group’s financialcommitments in respect of capital expenditure and rentals are summarized below:

 
|                            |   | **Company  and Regentrealm** |       |
|---------------------------------|--------|------------------------------|------------|
|                            |   | **At  December 28,  2002**   | ** ** | **At  December 29,  2001** | ** ** |
|                            |   | **(£  million)**        | ** ** |
|                            |   |                         |       |   |   |
| Contracted  capital expenditure |   | 1.6                          |       | 1.7 |   |

 

Annual rental commitmentsin respect of operating leases:

 
|     |                                             | **Company  and Regentrealm** |       |
|----------|--------------------------------------------------|------------------------------|------------|
|     |                                             | **At  December 28, 2002**    | ** ** | **At  December 29, 2001** | ** ** |
|     |                                             | **Land and  buildings**      | ** ** | **Other** | ** ** | **Land and  buildings** | ** ** | **Other** | ** ** |
|     |                                             | **(£  million)**        | ** ** |
| Expiring | -   within one year                    |                         | 0.7        |   | 0.9 |   | 0.7 |   | 2.3 |   |
|     | -   over one year and under five years |                         | 3.8        |   | 3.0 |   | 3.3 |   | 2.5 |   |
|     | -   after five years                   |                         | 3.8        |   | 1.7 |   | 4.8 |   | 0.2 |   |
|     |                                             | 8.3                          |       | 5.6 |   | 8.8 |   | 5.0 |   |

 

F-53

----

 

Total commitments undernon-cancelable operating leases at December 28, 2002 are as follows:

 
|                 |   | **Company  and  Regentrealm** |       |
|----------------------|--------|-------------------------------|------------|
|                 |   | **At  December 28, 2002**     | ** ** |
|                 |   | **(£  million)**         |       |
| Due  within one year |   | 7.0                           |       |
| One  to two years    |   | 5.8                           |       |
| Two  to three years  |   | 5.4                           |       |
| Three  to four years |   | 5.3                           |       |
| Four  to five years  |   | 3.9                           |       |
| Thereafter           |   | 59.9                          |       |
|                 |   | 87.3                          |       |

 

**23           Related Party Transactions**

 

The Group entered into anagreement with the Equity Sponsors with respect to the proposed acquisition ofthe Predecessor. Financing fees totaling £23.3 million were payable in respectof this agreement to these parties in consideration of their services in connectionwith the offer for the Predecessor, its financing and related transactions.Under the agreement, fees of £6.0 million are payable to Cinven Limited,£6.0 million to PAI, £3.1 million to DB Capital Partners, and £8.2 millionto Nabisco. All fees had been paid by December 29, 2001.

 

During the year endedDecember 28, 2002, a total of £33.0 million (2001: £61.9 million) was payableby the Company and its subsidiaries in respect of interest to Deutsche Bank AGLondon, both for its own account and for the account of the other financialinstitutions from which funds have been borrowed. Regentrealm and itssubsidiaries paid the whole of this interest (2001: £39.1 million). The balancedue by the Company and its subsidiaries and by Regentrealm and its subsidiariesat December 28, 2002, in respect of interest, was £5.7 million(2001: £6.5 million).

 

Under the sublicenseentered into with Merola Finance B.V., a licensee of Nabisco, the Group wascharged a royalty of £2.2 million in respect of the year ended December 28,2002 (2001: £2.0 million). At December 28, 2002, the Group owed Merola FinanceB.V. £0.4 million (2001: £0.5 million).

 

Except as otherwisedisclosed in these financial statements, there were no transactions during theyear with the Group’s joint ventures or other related parties, which werematerial either to the Group or the counter party and which are required to bedisclosed under the provisions of FRS 8.

 

F-54

----

 

Amounts due to Runecorp,the immediate parent company, by the Company, and to the Company byRegentrealm, falling due after more than one year comprise:

 
|                                            |   | **Company**                |       | **Regentrealm**            |       |
|-------------------------------------------------|--------|----------------------------|------------|----------------------------|------------|
|                                            |   | **At  December 28,  2002** | ** ** | **At  December 29,  2001** | ** ** | **At  December 28,  2002** | ** ** | **At  December 29,  2001** | ** ** |
|                                            |   | **(£ million  )**     | ** ** |
| Amounts  due to Runecorp                        |   |                       |       |                       |       |   |   |   |   |
| Loans                                           |   | 682.7                      |       | 610.0                      |       |   |   |   |   |
| Accrued  interest (payable on maturity in 2049) |   | 52.5                       |       | 47.0                       |       |   |   |   |   |
| Total                                           |   | 735.2                      |       | 657.0                      |       |   |   |   |   |
|                                            |   |                       |       |                       |       |   |   |   |   |
| Amounts  due to United Biscuits Finance plc     |   |                       |       |                       |       |   |   |   |   |
| Loans                                           |   |                       |       |                       |       | 906.7 |   | 827.4 |   |
| Accrued  interest                               |   |                       |       |                       |       | 57.4 |   | 51.9 |   |
| Total                                           |   |                       |       |                       |       | 964.1 |   | 879.3 |   |

 

**24           New United Kingdom accounting standards**

 

FRS 17, “RetirementBenefits,” issued in November 2000, is fully effective for accounting periodsending on or after January 1, 2005. Certain of the disclosure requirements areeffective for periods prior to the deadline. The standard requires thatfinancial statements reflect at fair value the assets and liabilities arisingfrom an employer’s retirement benefit obligations and their related funding.The operating costs of providing retirement benefits are recognized in theperiod in which they are earned together with any related finance costs andchanges in the value of the related assets and liabilities. The disclosuresrequired by FRS 17 in respect of the transitional arrangements for accountingperiods ending after June 22, 2001 are set out in Note 21 of Notes to theFinancial Statements.

 

**25           Companies Act 1985**

 

These financialstatements do not comprise the statutory accounts of the Company, Regentrealmor the Predecessor within the meaning of section 240 of the Companies Act 1985of Great Britain. Statutory accounts for the Company for the period March 10,2000 (inception) to December 30, 2000 and the year ended December 29, 2001 andfor Regentrealm for the period November 29, 1999 (inception) to December 30,2000 and the year ended December 29, 2001 on which the auditors gaveunqualified opinions have been delivered to the Registrar of Companies forEngland and Wales. The auditors have given unqualified opinions on thestatutory accounts for the Company and for Regentrealm for the year endedDecember 28, 2002 which have not yet been delivered to the Registrar ofCompanies for England and Wales.

 

**26           UltimateHolding Company**

 

The Company’s andRegentrealm’s ultimate UK parent undertaking is United Biscuits Group(Investments) Limited. It has included the Company and Regentrealm in its groupfinancial statements, copies of which are available from its registered office:Hayes Park, Hayes End Road, Hayes, Middlesex, UB4 8EE.

 

In the director’sopinion, the Company and Regentrealm’s ultimate parent undertaking is UnitedBiscuits (Equity) Limited which is incorporated in the Cayman Islands.

 

F-55

----

 

**27           Differencesbetween United Kingdom and United States generally accepted accountingprinciples**

** **

The consolidatedfinancial statements are prepared in accordance with accounting principlesgenerally accepted in the United Kingdom (“U.K. GAAP”) which differ in certainrespects from those generally accepted in the United States (“U.S. GAAP”). Thesignificant differences applicable in the determination of loss attributable toshareholders, comprehensive loss and shareholders’ deficit are described below.

 

**Tangible Fixed Assets**

 

Under U.K. GAAP,provisions for impairment of tangible fixed assets are included indepreciation.

 

Under U.S. GAAP, amountsrelating to the impairment of tangible fixed assets are deducted from cost.

 

**Goodwill**

 

Under U.K. GAAP, goodwillarising on acquisitions by the Predecessor prior to 1998 was written off toreserves at the time of the acquisition. In the event of a subsequent disposal,any such goodwill was taken into account in the determination of the gain orloss on sale. Following the introduction of FRS 10, goodwill arising subsequentto January 3, 1998 is capitalized and amortized over its estimated useful lifeto a maximum of 20 years.

 

Under U.S. GAAP, goodwillpurchased prior to 2002 would have been capitalized and amortized over itsestimated useful life. For the purposes of the reconciliations below, theCompany and Regentrealm have adopted Statement of Financial AccountingStandards 142 (“SFAS 142”) Goodwill and Other Intangible Assets, for the yearended December 28, 2002. SFAS 142 requires that goodwill is tested at leastannually for impairment following a two step process. The first step is ascreen for potential impairment, with the second step measuring the amount ofimpairment if any. The Company and Regentrealm have performed the review at thestart of the financial year (December 30, 2001) and at the end of the thirdquarter of 2002 (October 5, 2002). Any impairment charge resulting from thesetests is reflected in the 2002 full year results. Under both U.K. GAAP and U.S.GAAP a £4.2 million impairment was recognized in the year. Adjustments made togoodwill within the “hindsight” period under U.K. GAAP, but not permitted, dueto the shorter “hindsight” period under U.S. GAAP, have been included withinthe result for the year.

 

F-56

----

 

**Pension costs**

 

Under existing U.K. GAAP,the Group provides for the cost of retirement benefits based upon consistentpercentages of employees’ pensionable pay as recommended by independentqualified actuaries.

 

Under U.S. GAAP, theprojected benefit obligations of the Group’s pension plan would be matchedagainst the fair value of the plans’ assets and would be adjusted to reflectany unrecognized obligations or assets in determining the pension cost orcredit for the year.

 

For the purpose of thereconciliations below, the Group has adopted the provisions of Statement ofFinancial Accounting Standards 87 (“SFAS 87”), “Employers’ Accounting forPensions”, with respect to its pension plans from January 3, 1999. The Groupdid not implement SFAS 87 as of its effective date for non-US pension plans(fiscal years beginning after December 15, 1988) due to theunavailability of actuarial data. Accordingly, a portion of the transitionasset at January 3, 1999 was allocated to shareholders’ equity based on a ratioof 10/18 for the Pension Plan and 10/21 for the Supplemental Scheme, being thenumber of years elapsed between the effective date of SFAS 87 (the Company’sfiscal year beginning December 30, 1998 and January 3, 1999, over the18-year plan (Pension Plan) and 21-year (Supplemental Scheme) periods beingused to amortize the transition assets.

 

**Restructuring costs**

 

Included withinprovisions for liabilities and charges of the Group under U.K. GAAP arecertain amounts which relate to the restructuring of certain of the Group’soperations.

 

Under U.S. GAAP, certainof these amounts would be charged to net income as incurred because they didnot meet the requirements of Emerging Issues Task Force issue number 94-3(“EITF 94-3”), Liability Recognition for Certain Employee Termination Benefitsand Other Costs to Exit on Activity”, at the time the provisions were madeunder U.K. GAAP.

 

F-57

----

 

**Deferred taxation**

 

Under U.K. GAAP,provision is made for deferred taxation in respect of all timing differencesthat have originated but not reversed at the balance sheet date wheretransactions or events have occurred at that date that will result in anobligation to pay more, or a right to pay less or to receive more tax, withcertain exceptions, see Note 2 of Notes to the Financial Statements.

 

Under U.S. GAAP,provision for deferred taxation is made using the full liability method on alltemporary differences between the book and tax bases of assets and liabilities.Deferred taxation assets under U.S. GAAP would be recognized only to the extentthat it is more likely than not that they will be realized.

 

**Exceptional items**

 

Items classified asexceptional under U.K. GAAP and reported after operating profit would beincluded in the determination of operating profit or in other income/expenseunder U.S. GAAP. This difference in classification does not affect net income.

 

**Debt issue costs**

 

Under U.K. GAAP, debtissue costs are deducted from the related debt amounts and amortized over thelife of the debt.

 

Under U.S. GAAP, debtissue costs are carried as current or non-current assets, as appropriate, andamortized over the life of the debt.

 

**Discontinued operations**

 

Under U.K. GAAP, theresults of the Group’s operations sold to Danone and Nabisco together with theGroup’s share of the results of the Young’s Bluecrest joint venture and thePredecessor’s frozen and chilled foods businesses have been reflected asdiscontinued operations.

 

Under U.S. GAAP, only thegroup’s share of the Young’s Bluecrest joint venture and the PredecessorsFrozen and Chilled Food business would have been reflected as discontinued.

 

F-58

----

 

**Joint Ventures**

 

Under U.K. GAAP, theGroup’s interest in joint ventures is accounted for using the “gross equitymethod of accounting”. Under this method of accounting, the Group’s share ofturnover, operating profit, interest and taxation of its joint ventures isincluded in the appropriate captions in the consolidated profit and lossaccount, and its investment in joint ventures is presented on the consolidatedbalance sheet analyzed between its share of gross assets and gross liabilities.

 

Under U.S. GAAP, the Group’sshare of after tax profits would be reflected as a single line item beforeminority interest and the investment in joint ventures would be reflected as asingle line item on the consolidated balance sheet. This difference inpresentation would have no impact on net loss or shareholder’s equity(deficit).

** **

**Accounting for derivatives**

 

For the purposes of thereconciliations below, the Company and Regentrealm adopted Statement ofFinancial Accounting Standards 133 (“SFAS 133”) Accounting for DerivativeInstruments and Hedging Activities on December 31, 2000.

 

The Group’s forwardforeign exchange contracts do not qualify as hedges under the provisions ofSFAS 133. Accordingly, the Company and Regentrealm recorded a cumulative effectof a change in accounting principle amounting to £0.9 million, net of incometaxes, as an adjustment to net income in the 52 weeks ended December 29, 2001.The fair value of the Company’s and Regentrealm’s forward foreign exchangecontracts at December 28, 2002 of £1.3 million (2001: £0.5 million) isrecorded in other current liabilities, and the change in their fair valueduring the 52 weeks ended December 28, 2002 of £0.8 million (£1.8 million forthe 52 weeks ended December 29, 2001) is charged to net loss for the period.

 

As of December 31, 2000,all of the Company’s and Regentrealm’s floating rate to fixed rate interestrate swaps were designated as hedges which qualify for evaluation using theshort-cut method for assessing effectiveness. During the 52 weeks ended December28, 2002, unrealized net losses totaling £1.1 million, after taxes, wererecorded in other comprehensive income (2001: £4.5 million, including a £3.0million cumulative effect adjustment as of December 31, 2000).

 

The fair value of theCompany’s and Regentrealm’s interest rate swaps of £8.1 million (2001:£6.5 million) is recorded as other non-current liabilities.

 

The Group’s commoditycontracts do not qualify as hedges under the provisions of SFAS 133. Thefair value of the Company’s and Regentrealm’s commodity contracts atDecember 28, 2002 of £0.3 million is recorded in current assets, andthe change in fair value during the 52 weeks ended December 28, 2002 of £0.3million is credited to net loss for the period.

 

At December 28, 2002neither the Company nor Regentrealm had any fixed rate to floating rateinterest rate swaps.

 

F-59

----

 

**Accounting for the Impairment or Disposal of Long-LivedAssets**

 

For the purpose of thereconciliation below, SFAS 144 is first applicable to the financial statementsof the Company and Regentrealm for the year ended December 28, 2002. SFAS 144supersedes SFAS 121 “Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to Be Disposed Of”. Although SFAS 144 retains many of therecognition and measurement provisions of SFAS 121, it significantly changesthe criteria that have to be met in order to classify long-lived assets asheld-for-sale, and excludes goodwill and intangible assets not being amortised,from its impairment provisions.

 

**Accounting for Certain Sales Incentives and ConsiderationPaid to a Reseller of the Group’s products**

 

For the purpose of thereconciliations below, the Company and Regentrealm adopted the provisions ofthe Emerging Issues Task Force (EITF) Issue No. 00-14 “Accounting for CertainSales Incentives” and EITF Issue No. 00-25 “Vendor Income StatementCharacterization of Consideration Paid to a Reseller of the Vendor’s products”(now codified in EITF Issue No. 01-09) for the year ended December 28, 2002.The impact on the financial statements of the Company and Regentrealm resultingfrom the application of these standards is to reduce turnover and reducedistribution, selling and marketing costs by the amount of “slotting fees” paidto retailers, which under U.K. GAAP have been included in distribution,selling and marketing costs. The standard requires these costs to be reflectedas a reduction in revenue.

 

In the year endedDecember 28, 2002 the effect of this reclassification was £156.6 million (2001:£127.0 million).

 

**Reconciliation Statements**

 

The following statementsprovide reconciliations between the loss attributable to shareholders underU.K. GAAP and net loss under U.S. GAAP and between shareholders’ funds underU.K. GAAP and shareholders’ deficit under U.S. GAAP, as well as showingcomprehensive loss under U.S. GAAP.

 

F-60

----

 

**Net loss**

 
|                                                                                                           |                         | **Company**                             |       | **Predecessor**                         |       |
|----------------------------------------------------------------------------------------------------------------|------------------------------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                                                                                           |                         | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **Period  from  March 10, 2000  (inception) to  December 30,  2000** |   | **15 weeks  ended  April 14,  2000** | ** ** |
|                                                                                                           |                         | **(£ million  )**                  | ** ** |
| Loss  attributable to shareholders as reported in the consolidated profit and loss  account under U.K. GAAP(1) |                         | (46.6                                   | )          | (99.5                                   | )          | (95.0 | ) | (22.3 | ) |
| Adjustments:                                                                                                   |                         |                                    |       |                                    |       |   |   |   |   |
| Pension  costs                                                                                                 |                         | (2.4                                    | )          | (4.0                                    | )          | (8.5 | ) | (2.9 | ) |
| Adjustment  to Iberia goodwill                                                                                 |                         | —                                  |       | 9.5                                     |       | — |   | — |   |
| Amortization  of goodwill(1)                                                                                   |                         | 36.5                                    |       | (0.2                                    | )          | 0.3 |   | (3.0 | ) |
| Cumulative  effect on prior years on adoption of SFAS 133, net of tax effect of £0.4  million             |                         | —                                  |       | 0.9                                     |       | — |   | — |   |
| Gain  on commodity contracts                                                                                   |                         | 0.3                                     |       | —                                  |       | — |   | — |   |
| Loss  on forward currency contracts                                                                            |                         | (0.8                                    | )          | (1.8                                    | )          | — |   | — |   |
| Deferred  taxation(1)                                                                                     | - methodology           |                                    | (0.8       | )                                       | (9.3       | ) | 43.0 |   | 16.9 |   |
|                                                                                                           | - on  above adjustments |                                    | 0.9        |                                    | 1.7        |   | 2.6 |   | 0.9 |   |
| Net  loss in accordance with US GAAP                                                                           |                         | (12.9                                   | )          | (102.7                                  | )          | (57.6 | ) | (10.4 | ) |
|                                                                                                           |                         |                                    |       |                                    |       |   |   |   |   |
| Arising  from:                                                                                                 |                         |                                    |       |                                    |       |   |   |   |   |
| Continuing  operations                                                                                         |                         | (8.7                                    | )          | (103.9                                  | )          | (58.6 | ) | (9.4 | ) |
| Discontinued  operations - result for the year                                                                 |                         | —                                  |       | 0.3                                     |       | 1.0 |   | (1.0 | ) |
| Cumulative  effect on prior years of adopting SFAS 133                                                         |                         | —                                  |       | 0.9                                     |       | — |   | — |   |
| Cumulative  effect on adoption of SFAS 142                                                                     |                         | (4.2                                    | )          | —                                  |       | — |   | — |   |
| Net  loss                                                                                                      |                         | (12.9                                   | )          | (102.7                                  | )          | (57.6 | ) | (10.4 | ) |

 

----

(1)                                  Theamounts for 2001 and 2000 for the Company and Regentrealm have been restated toreflect the adoption of FRS 19 (see Note 2 of Notes to the FinancialStatements).

 

F-61

----

 

 
|                                                                                                           |                    | **Regentrealm**                         |       |
|----------------------------------------------------------------------------------------------------------------|-------------------------|-----------------------------------------|------------|
|                                                                                                           |                    | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **52 weeks  ended  December 30,  2000** | ** ** |
|                                                                                                           |                    | **(£  million)**                   | ** ** |
| Loss  attributable to shareholders as reported in the consolidated profit and loss  account under U.K. GAAP(1) |                    | (45.6                                   | )          | (93.9 | ) | (89.5 | ) |
| Adjustments:                                                                                                   |                    |                                    |       |   |   |   |   |
| Pension  costs                                                                                                 |                    | (2.4                                    | )          | (4.0 | ) | (8.5 | ) |
| Adjustment  to Iberia goodwill                                                                                 |                    | —                                  |       | 9.5 |   | — |   |
| Amortization  of goodwill(1)                                                                                   |                    | 36.5                                    |       | (0.2 | ) | 0.3 |   |
| Cumulative  effect on prior years on adoption of SFAS 133, net of tax effect of £0.4  million             |                    | —                                  |       | 0.9 |   | — |   |
| Gain  on commodity contracts                                                                                   |                    | 0.3                                     |       | — |   | — |   |
| Loss  on forward currency contracts                                                                            |                    | (0.8                                    | )          | (1.8 | ) | — |   |
| Deferred  taxation(1)                                                                                          | - methodology           |                                    | (0.8       | ) | (9.3 | ) | 43.0 |   |
|                                                                                                           | - on  above adjustments |                                    | 0.9        |   | 1.7 |   | 2.6 |   |
| Net  loss in accordance with US GAAP                                                                           |                    | (11.9                                   | )          | (97.1 | ) | (52.1 | ) |
|                                                                                                           |                    |                                    |       |   |   |   |   |
| Arising  from:                                                                                                 |                    |                                    |       |   |   |   |   |
| Continuing  operations                                                                                         |                    | (7.7                                    | )          | (98.3 | ) | (53.1 | ) |
| Discontinued  operations - result for the year                                                                 |                    | —                                  |       | 0.3 |   | 1.0 |   |
| Cumulative  effect on prior years of adopting SFAS 133                                                         |                    | —                                  |       | 0.9 |   | — |   |
| Cumulative  effect on adoption of SFAS 142                                                                     |                    | (4.2                                    | )          | — |   | — |   |
| Net  loss                                                                                                      |                    | (11.9                                   | )          | (97.1 | ) | (52.1 | ) |

 

----

(1)                                  Theamounts for 2001 and 2000 for the Company and Regentrealm have been restated toreflect the adoption of FRS 19 (see Note 2 of Notes to the FinancialStatements).

 

F-62

----

 

**Comprehensiveloss**

 

Comprehensive loss underU.S. GAAP is as follows:

 
|                                                                                                                                                                  |   | **Company**                             |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                                                                                                                  |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **Period  from  March 10,  2000  (inception) to  December  30, 2000** |   |
|                                                                                                                                                                  |   | **(£  million)**                   | ** ** |
| Net  loss under US GAAP                                                                                                                                               |   | (12.9                                   | )          | (102.7 | ) | (57.6 | ) |
| Other  comprehensive income foreign exchange translation adjustments, net of tax  effect of £0.2 million (2001: £0.3 million, 2000: £4.1 million) |   | 0.6                                     |       | 0.8 |   | (9.5 | ) |
| Interest  rate swaps                                                                                                                                                  |   |                                    |       |   |   |   |   |
| Cumulative  effect on prior years on adoption of SFAS 133, net of tax effect of £1.3 million                                                                     |   | —                                  |       | (3.0 | ) | — |   |
| Loss  arising in the year, net of tax effect of £0.5 million (2001: £0.7 million,  2000: £ nil million)                                                |   | (1.1                                    | )          | (1.5 | ) | — |   |
| Comprehensive  loss                                                                                                                                                   |   | (13.4                                   | )          | (106.4 | ) | (67.1 | ) |

 
|                                                                                                                                                                  |   | **Regentrealm**                         |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                                                                                                                  |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **52 weeks  ended  December 30,  2000** | ** ** |
|                                                                                                                                                                  |   | **(£  million)**                   | ** ** |
| Net  loss under US GAAP                                                                                                                                               |   | (11.9                                   | )          | (97.1 | ) | (52.1 | ) |
| Other  comprehensive income foreign exchange translation adjustments, net of tax  effect of £0.2 million (2001: £0.3 million, 2000: £4.1 million) |   | 0.6                                     |       | 0.8 |   | (9.5 | ) |
| Interest  rate swaps                                                                                                                                                  |   |                                    |       |   |   |   |   |
| Cumulative  effect on prior years on adoption of SFAS 133, net of tax effect of £1.3  million                                                                    |   | —                                  |       | (3.0 | ) | — |   |
| Loss  arising in the year, net of tax effect of £0.5 million (2001: £0.7 million,  2000: £ nil million)                                                |   | (1.1                                    | )          | (1.5 | ) | — |   |
| Comprehensive  loss                                                                                                                                                   |   | (12.4                                   | )          | (100.8 | ) | (61.6 | ) |

 

F-63

----

 

Movements in accumulatedcomprehensive loss are as follows:

 
|                                                                                               |   | **Company  and Regentrealm**                    |       |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                               |   | **Foreign  exchange  translation  adjustments** | ** ** | **Deferred  gains/(losses)  on cash flow  hedges** |   | **Total** | ** ** |
|                                                                                               |   | **(£ million  )**                          | ** ** |
| On  inception (Company and Regentrealm) and January 1, 2000 (Regentrealm)                          |   | —                                          |       | — |   | — |   |
| Arising  in the year, net of tax effect of £4.1 million                                       |   | (9.5                                            | )          | — |   | (9.5 | ) |
| At  December 30, 2000                                                                              |   | (9.5                                            | )          | — |   | (9.5 | ) |
| Interest  rate swaps:                                                                              |   |                                            |       |   |   |   |   |
| Cumulative  effect on prior years on adoption of SFAS 133, net of tax effect of £1.3  million |   | —                                          |       | (3.0 | ) | (3.0 | ) |
| Loss  arising in the year, net of tax effect of £0.7 million                                  |   | —                                          |       | (1.5 | ) | (1.5 | ) |
| Other  comprehensive income                                                                        |   |                                            |       |   |   |   |   |
| Gain  arising in the year, net of tax effect of £0.3 million                                  |   | 0.8                                             |       | — |   | 0.8 |   |
| At  December 29, 2001                                                                              |   | (8.7                                            | )          | (4.5 | ) | (13.2 | ) |
| Interest  rate swaps:                                                                              |   |                                            |       |   |   |   |   |
| Loss  arising in the year, net of tax effect of £0.5 million (2001: £0.7 million)        |   | —                                          |       | (1.1 | ) | (1.1 | ) |
| Other  comprehensive income                                                                        |   |                                            |       |   |   |   |   |
| Gain  arising in the year, net of tax effect of £0.2 million                                  |   | 0.6                                             |       | — |   | 0.6 |   |
| At  December 28, 2002                                                                              |   | (8.1                                            | )          | (5.6 | ) | (13.7 | ) |

 

The only component ofother comprehensive income in the Predecessor was foreign exchange translationadjustments. Movement in cumulative foreign translation adjustments were notseparately tracked by the Predecessor and it is therefore not practical topresent comprehensive income under U.S. GAAP for the Predecessor.

 

F-64

----

 

**Shareholders’deficit**

 
|                                                                                                          |                               | **Company**             |       | **Regentrealm**         |       |
|---------------------------------------------------------------------------------------------------------------|------------------------------------|-------------------------|------------|-------------------------|------------|
|                                                                                                          |                               | **December  28,  2002** | ** ** | **December  29,  2001** | ** ** | **December  28,  2002** | ** ** | **December  29,  2001** | ** ** |
|                                                                                                          |                               | **(£  million)**   | ** ** |
| Shareholders’  funds as reported in the consolidated balance sheet under U.K. GAAP, restated  for FRS 19 |                               | (250.8                  | )          | (205.0                  | )          | (238.7 | ) | (193.9 | ) |
| Adjustments:                                                                                                  |                               |                    |       |                    |       |   |   |   |   |
| Intangible  fixed assets – goodwill                                                                      |                               |                    |       |                    |       |   |   |   |   |
| Cost,  restated for FRS 19                                                                                    |                               | 0.1                     |       | 0.1                     |       | 0.1 |   | 0.1 |   |
| Amortization  relating to adjustment to fair value in 2001 and adjustment for FRS 19                          |                               | 0.1                     |       | 0.1                     |       | 0.1 |   | 0.1 |   |
| Amortization  in 2002                                                                                         |                               | 36.5                    |       | —                  |       | 36.5 |   | — |   |
| Net                                                                                                           |                               | 36.7                    |       | 0.2                     |       | 36.7 |   | 0.2 |   |
|                                                                                                          |                               |                    |       |                    |       |   |   |   |   |
| Current  assets                                                                                               |                               |                    |       |                    |       |   |   |   |   |
| Prepaid  pension expense                                                                                      |                               | 33.4                    |       | 35.8                    |       | 33.4 |   | 35.8 |   |
| Deferred  debt issue costs - current portion                                                                  |                               | 3.3                     |       | 3.3                     |       | 2.3 |   | 2.4 |   |
| Fair  value of commodity contracts                                                                            |                               | 0.3                     |       | —                  |       | 0.3 |   | — |   |
| Non-current  assets-deferred debt issue costs                                                                 |                               | 17.4                    |       | 20.8                    |       | 10.1 |   | 12.3 |   |
| Creditors:  amounts falling due within one year:                                                              |                               |                    |       |                    |       |   |   |   |   |
| Loans,  overdrafts and finance lease obligations                                                              |                               | (3.3                    | )          | (3.3                    | )          | (2.3 | ) | (2.4 | ) |
| Creditors:  amounts falling due after more than one year:                                                     |                               |                    |       |                    |       |   |   |   |   |
| Loans  and finance lease obligations                                                                          |                               | (17.4                   | )          | (20.8                   | )          | (10.1 | ) | (12.3 | ) |
| Fair  value of derivatives                                                                                    | – forward currency  contracts |                    | (1.3       | )                       | (0.5       | ) | (1.3 | ) | (0.5 | ) |
|                                                                                                          | –  interest rate swaps        |                    | (8.1       | )                       | (6.5       | ) | (8.1 | ) | (6.5 | ) |
| Provisions  for liabilities and charges:                                                                      |                               |                    |       |                    |       |   |   |   |   |
| Deferred  taxation                                                                                            |  - methodology(1)             |                    | 8.8        |                    | 9.6        |   | 8.8 |   | 9.6 |   |
|                                                                                                          |  - on above adjustments       |                    | (7.2       | )                       | (8.6       | ) | (7.2 | ) | (8.6 | ) |
| Shareholders’  deficit in accordance with U.S. GAAP                                                      |                               | (188.2                  | )          | (175.0                  | )          | (176.1 | ) | (163.9 | ) |
|                                                                                                               |                                    |                         |            |                         |            |  |  |  |  |  |  |

 

----

(1)                                  Theamounts for 2001 for the Company and Regentrealm have been restated to reflectthe adoption of FRS 19 (see Note 2 of Notes to the Financial Statements).

 

F-65

----

 

**Consolidatedstatement of cash flows**

 

The consolidatedstatement of cash flows prepared under U.K. GAAP presents substantially thesame information as that required under U.S. GAAP but may differ, however, withregard to classification of items within the statements and as regards thedefinition of cash under U.K. GAAP and cash and cash equivalents under U.S.GAAP.

 

Under U.S. GAAP, cash andcash equivalents include short-term highly liquid investments but do notinclude bank overdrafts. Under U.K. GAAP, cash flows are presented separatelyfor operating activities, returns on investments and servicing of finance,taxation, capital expenditure and financial investment, acquisitions anddisposals, dividends and management of liquid resources and financing. U.S.GAAP, however, requires only three categories of cash flow activity to bereported: operating, investing and financing. Cash flows from taxation andreturns on investments and servicing of finance shown under U.K. GAAP would beincluded as operating activities under U.S. GAAP. The payment of dividendswould be included as a financing activity under U.S. GAAP. Under U.K. GAAP allinterest is treated as part of returns on investments and servicing of finance.Under U.S. GAAP capital expenditure and financial investment and acquisitionsare reported within investing activities.

 

The categories of cashflow activity under U.S. GAAP can be summarized as follows:

 
|                                                 |   | **Company**                             |       | **Predecessor**                         |       |
|------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                                 |   | **52 weeks  ended  December 28,  2002** | ** ** | **52 weeks  ended  December 29,  2001** | ** ** | **Period  from  March 10,  2000  (inception) to  December  30, 2000** |   | **15 weeks  ended  April 14,  2000** | ** ** |
|                                                 |   | **(£  million)**                   | ** ** |
| Cash  inflow/(outflow) from operating activities     |   | 54.4                                    |       | (1.2                                    | )          | 122.0 |   | (37.0 | ) |
| Net  cash (outflow)/inflow from investing activities |   | (0.6                                    | )          | 12.8                                    |       | (641.0 | ) | (21.4 | ) |
| Net  cash (outflow)/inflow from financing activities |   | (70.0                                   | )          | (54.6                                   | )          | 597.6 |   | (12.8 | ) |
| (Decrease)/increase  in cash and cash equivalents    |   | (16.2                                   | )          | (43.0                                   | )          | 78.6 |   | (71.2 | ) |
| Effect  of foreign exchange rate changes             |   | 0.6                                     |       | (0.9                                    | )          | 2.1 |   | 1.0 |   |
| Cash  and cash equivalents at:                       |   |                                    |       |                                    |       |   |   |   |   |
| Beginning  of period                                 |   | 36.8                                    |       | 80.7                                    |       | — |   | 204.9 |   |
| End  of period                                       |   | 21.2                                    |       | 36.8                                    |       | 80.7 |   | 134.7 |   |

 
|                                                 |   | **Regentrealm**                         |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                 |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **52 weeks  ended  December 30,  2000** |   |
|                                                 |   | **(£  million)**                   |   |
| Cash  inflow from operating activities               |   | 55.4                                    |   | 7.5 |   | 119.4 |   |
| Net  cash outflow from investing activities          |   | (0.6                                    | )      | (102.9 | ) | (307.9 | ) |
| Net  cash (outflow)/inflow from financing activities |   | (71.0                                   | )      | 52.4 |   | 267.1 |   |
| (Decrease)/increase  in cash and cash equivalents    |   | (16.2                                   | )      | (43.0 | ) | 78.6 |   |
| Effect  of foreign exchange rate changes             |   | 0.6                                     |   | (0.9 | ) | 2.1 |   |
| Cash  and cash equivalents at:                       |   |                                    |   |   |   |   |   |
| Beginning  of period                                 |   | 36.8                                    |   | 80.7 |   | — |   |
| End  of period                                       |   | 21.2                                    |   | 36.8 |   | 80.7 |   |

 

F-66

----

 

**Additional information required byU.S. GAAP in respect of pension costs**

 
|                                                                  |   | **Pension  Plan**                       |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                  |   | **Company  and Regentrealm**            |   | **Predecessor** |   |
|                                                                  |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **Period  from  March 10, 2000  (inception) to  December 30, 2000  (Company) and 52  weeks ended  December 30, 2000  (Regentrealm)** |   | **15 weeks  ended  April 14,  2000** |   |
|                                                                  |   | **(£  million)**                   |   |
| Benefit  obligation on acquisition at beginning of period             |   | 806.1                                   |   | 866.8 |   | 853.8 |   | 848.7 |   |
| Service  cost                                                         |   | 16.2                                    |   | 19.0 |   | 19.1 |   | 7.7 |   |
| Interest  cost                                                        |   | 46.3                                    |   | 45.4 |   | 36.0 |   | 14.4 |   |
| Employee  contributions                                               |   | 4.6                                     |   | 4.9 |   | 3.7 |   | 1.5 |   |
| Expenses                                                              |   | (0.8                                    | )      | (0.7 | ) | (0.6 | ) | (0.3 | ) |
| Amendment                                                             |   | —                                  |   | — |   | 6.5 |   | 2.6 |   |
| Actuarial  (gain)/loss                                                |   | 43.2                                    |   | (37.7 | ) | (14.5 | ) | (5.7 | ) |
| Benefits  paid                                                        |   | (43.3                                   | )      | (91.6 | ) | (37.2 | ) | (15.1 | ) |
| Benefit  obligation at end of period                                  |   | 872.3                                   |   | 806.1 |   | 866.8 |   | 853.8 |   |
|                                                                  |   |                                    |   |   |   |   |   |   |   |
| Market  value of assets on acquisition / at beginning of  period |   | 710.1                                   |   | 870.3 |   | 909.9 |   | 926.0 |   |
| Employer  contributions                                               |   | 8.4                                     |   | 8.8 |   | 7.3 |   | 3.0 |   |
| Employee  contributions                                               |   | 4.6                                     |   | 4.9 |   | 3.7 |   | 1.5 |   |
| Benefits  paid                                                        |   | (43.3                                   | )      | (91.6 | ) | (37.2 | ) | (15.1 | ) |
| Expenses                                                              |   | (0.8                                    | )      | (0.6 | ) | — |   | — |   |
| Actual  investment return                                             |   | (102.7                                  | )      | (81.7 | ) | (13.4 | ) | (5.5 | ) |
| Market  value of assets at end of period                              |   | 576.3                                   |   | 710.1 |   | 870.3 |   | 909.9 |   |
|                                                                  |   |                                    |   |   |   |   |   |   |   |
| Funded  status                                                        |   | (296.0                                  | )      | (96.0 | ) | 3.5 |   | 56.1 |   |
| Unrecognized  net loss/(gain)                                         |   | 347.8                                   |   | 144.0 |   | 42.7 |   | (17.3 | ) |
| Unrecognized  prior service cost                                      |   | 5.8                                     |   | 6.1 |   | 6.5 |   | 2.6 |   |
| Unrecognized  net (asset) at transition                               |   | —                                  |   | — |   | — |   | (19.9 | ) |
| Net  prepaid pension expense                                          |   | 57.6                                    |   | 54.1 |   | 52.7 |   | 21.5 |   |

 

F-67

----

 
|                                                                  |   | **Supplemental  Scheme**                |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                  |   | **Company  and Regentrealm**            |   | **Predecessor** |   |
|                                                                  |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **Period  from  March 10, 2000  (inception) to  December 30, 2000  (Company) and 52  weeks ended  December 30, 2000  (Regentrealm)** |   | **15 weeks  ended  April 14,  2000** |   |
|                                                                  |   | **(£  million)**                   |   |
| Benefit  obligation on acquisition at beginning of period             |   | 58.5                                    |   | 59.7 |   | 57.4 |   | 56.5 |   |
| Service  cost                                                         |   | 0.9                                     |   | 1.2 |   | 1.3 |   | 0.5 |   |
| Interest  cost                                                        |   | 3.4                                     |   | 3.2 |   | 2.4 |   | 1.0 |   |
| Employee  contributions                                               |   | —                                  |   | — |   | — |   | — |   |
| Expenses                                                              |   | (0.1                                    | )      | (0.1 | ) | (0.1 | ) | (0.1 | ) |
| Amendment                                                             |   | —                                  |   | — |   | 0.7 |   | 0.3 |   |
| Actuarial  (gain)/loss                                                |   | 5.3                                     |   | (0.7 | ) | 0.7 |   | 0.3 |   |
| Benefits  paid                                                        |   | (3.5                                    | )      | (4.8 | ) | (2.7 | ) | (1.1 | ) |
| Benefit  obligation at end of period                                  |   | 64.5                                    |   | 58.5 |   | 59.7 |   | 57.4 |   |
|                                                                  |   |                                    |   |   |   |   |   |   |   |
| Market  value of assets on acquisition / at beginning of  period |   | 56.6                                    |   | 67.7 |   | 70.7 |   | 72.0 |   |
| Employer  contributions                                               |   | —                                  |   | — |   | 0.6 |   | 0.2 |   |
| Employee  contributions                                               |   | —                                  |   | — |   | — |   | — |   |
| Benefits  paid                                                        |   | (3.5                                    | )      | (4.8 | ) | (2.7 | ) | (1.1 | ) |
| Expenses                                                              |   | (0.1                                    | )      | (0.1 | ) | — |   | — |   |
| Actual  investment return                                             |   | (8.3                                    | )      | (6.2 | ) | (0.9 | ) | (0.4 | ) |
| Market  value of assets at end of period                              |   | 44.7                                    |   | 56.6 |   | 67.7 |   | 70.7 |   |
|                                                                  |   |                                    |   |   |   |   |   |   |   |
| At  end of period                                                     |   |                                    |   |   |   |   |   |   |   |
| Funded  status                                                        |   | (19.8                                   | )      | (1.9 | ) | 8.0 |   | 13.3 |   |
| Unrecognized  net loss/(gain)                                         |   | 33.1                                    |   | 14.9 |   | 4.9 |   | (5.7 | ) |
| Unrecognized  prior service cost                                      |   | 0.6                                     |   | 0.7 |   | 0.7 |   | 0.3 |   |
| Unrecognized  net (asset) at transition                               |   | —                                  |   | — |   | — |   | (3.4 | ) |
| Net  prepaid pension expense                                          |   | 13.9                                    |   | 13.7 |   | 13.6 |   | 4.5 |   |

 

Plan assets are held inglobal equity securities and long-term bonds.

 

The principal assumptionsused in calculating the charge for the Plan and Scheme were as follows:

 
|                           |   | **Company  and Regentrealm**            |   | **Predecessor**                         |   |
|--------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                           |   | **52 weeks  ended  December  28, 2002** |   | **52 weeks  ended  December  29, 2001** |   | **Period  from March 10, 2000  (inception) to December 30,  2000 (Company) and 52 weeks  ended December 30, 2000  (Regentrealm)** |   | **15 weeks  ended  April 14,  2000** |   |
|                           |   |                                    |   |                                    |   |   |   |   |   |
| Rate  of return on assets      |   | 6.5                                     | %      | 6.9                                     | %      | 6.5 | % | 6.5 | % |
| Discount  rate                 |   | 5.5                                     | %      | 5.9                                     | %      | 5.5 | % | 5.5 | % |
| Future  salary increases       |   | 3.8                                     | %      | 4.0                                     | %      | 4.0 | % | 4.0 | % |
| Future  pension  increase |   | 2.4                                     | %      | 2.5                                     | %      | 2.5 | % | 2.5 | % |

 

F-68

----

 

Pension expensecomprises:

 

 
|                                          |   | **Pension  Plan**                       |   | **Supplemental  Scheme**                |   |
|-----------------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                          |   | **Company  and Regentrealm**            |   | **Predecessor**                         |   | **Company  and Regentrealm** |   | **Predecessor** |   |
|                                          |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **Period  from March   10, 2000 (inception)   to December 30,  2000 (Company) and  52 weeks ended  December 30, 2000  (Regentrealm)** |   | **15 weeks  ended  April 14,  2000** |   | **52 weeks  ended  December 28,  2002** |   | **52 weeks  ended  December 29,  2001** |   | **Period  from  March 10,  2000  (inception) to  December 30,  2000** |   | **15 weeks  ended  April 14,  2000** |   |
|                                          |   | **(£  million)**                   |   | **(£  million)**                   |   |
|                                          |   |                                    |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                                  |   | 16.2                                    |   | 19.0                                    |   | 19.1 |   | 7.7 |   | 0.9 |   | 1.2 |   | 1.3 |   | 0.5 |   |
| Interest cost                                 |   | 46.3                                    |   | 45.4                                    |   | 36.0 |   | 14.4 |   | 3.4 |   | 3.2 |   | 2.4 |   | 1.0 |   |
| Expected return on plan assets                |   | (58.0                                   | )      | (57.3                                   | )      | (44.4 | ) | (15.9 | ) | (4.5 | ) | (4.5 | ) | (3.4 | ) | (1.2 | ) |
| Amortization of unrecognized net loss         |   | 0.4                                     |   | 0.4                                     |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Amortization of unrecognized transition asset |   | —                                  |   | —                                  |   | — |   | (0.8 | ) | — |   | — |   | — |   | (0.1 | ) |
| Pension expense                               |   | 4.9                                     |   | 7.5                                     |   | 10.7 |   | 5.4 |   | (0.2 | ) | (0.1 | ) | 0.3 |   | 0.2 |   |

 

**Additionalinformation required by U.S. GAAP in respect of deferred taxation**

 

The analysis of thedeferred taxation balance under U.S. GAAP is as follows:

 
|                                                      |   | **Company  and Regentrealm** |   |
|-----------------------------------------------------------|--------|------------------------------|--------|
|                                                      |   | **At  December 28,  2002**   |   | **At  December 29,  2001** |   |
|                                                      |   | **(£  million)**        |   |
| Deferred  taxation liabilities                            |   |                         |   |   |   |
| Excess  of book value over taxation value of fixed assets |   | (23.0                        | )      | (36.9 | ) |
| Other  temporary differences                              |   | (33.6                        | )      | (21.1 | ) |
|                                                      |   | (56.6                        | )      | (58.0 | ) |
| Deferred  taxation assets                                 |   |                         |   |   |   |
| Excess  of taxation value over book value of fixed assets |   | 1.2                          |   | 1.3 |   |
| Tax  effect of losses carried forward                     |   | 188.9                        |   | 177.3 |   |
| Other  temporary differences                              |   | 14.0                         |   | 14.5 |   |
| Less:  Valuation allowance                           |   | (160.0                       | )      | (161.9 | ) |
|                                                      |   | 44.1                         |   | 31.2 |   |
| Net  deferred taxation liability                          |   | (12.5                        | )      | (26.8 | ) |
|                                                      |   |                         |   |   |   |
| Of  which:                                                |   |                         |   |   |   |
| Current                                                   |   | (16.0                        | )      | (1.7 | ) |
| Non-current                                               |   | 3.5                          |   | (25.1 | ) |
|                                                      |   | (12.5                        | )      | (26.8 | ) |

 

Valuation allowances areprovided mainly on capital losses and other non-trading losses, which can onlybe utilized against future capital gains and non-trading profits respectively.Provision is made to the extent that the Company and Regentrealm believe it ismore likely than not that the tax benefit will not be realized.

 

F-69

----

 

At December 28, 2002, theGroup had tax losses carried forward of approximately £572 million (2001:£582 million). Of these, approximately £508 million(2001: £527 million) relate to capital and non-trading losses in theUnited Kingdom, which have no expiry dates but can only be relieved againstfuture U.K. capital and non-trading profits, respectively. The balance of £64million (2001: £55 million) arises in France, Spain and Belgium and the UnitedStates, with £59 million (2001: £43 million) expiring at various dates through2012 and the remaining £5 million (2001: £12 million) having no expirydate.

 

**Additional information required by U.S. GAAP in respect ofstock-based compensation**

 

As allowed by SFAS 123“Accounting for Stock-Based Compensation” the Predecessor  elected to continue to follow AccountingPrinciples Board Opinion No. 25, ‘Accounting for Stock Issued to Employees’. Inaccordance with this accounting statement the Predecessor did not recognizecompensation expense on the grant of options.

 

Had compensation expensebeen determined based upon the fair value of the stock options at grant dateconsistent with the method of SFAS 123, the Predecessor’s loss for the15 weeks ended April 14, 2000 would have remained unchanged since no stockoptions were granted during the period.

 

#### **Concentrationsof credit risk**

 

Potential concentrationsof credit risk to the Group consist principally of cash and cash equivalentsand trade receivables. Cash and cash equivalents are deposited with high credit,quality financial institutions. Trade receivables across Europe comprise alarge, widespread customer base.

 

The Group did notconsider there to be any significant concentration of credit risk at December28, 2002, December 29, 2001 or at December 30, 2000.

 

#### **NewU.S. accounting standards**

 

*SFAS 146 – “Accounting for Costs Associated with Exit orDisposal Activities”*

 

SFAS 146 requirescompanies to recognize costs associated with exit or disposal activities whenthey are incurred rather than at the date of a commitment to an exit ordisposal plan. Costs covered by SFAS 146 include lease termination costs andcertain employee severance costs that are associated with a restructuring,discontinued operations, plant closing or other exit or disposal activity. Thisstatement is effective for exit or disposal activities that are initiated afterDecember 31, 2002. Accordingly, the Company and Regentrealm will apply theprovisions of SFAS 146 prospectively after December 31, 2002. The impact on theGroup, if any, will depend upon the circumstances existing at that time.

 

F-70

----

 

**UNITED BISCUITS FINANCE plc**

**Schedule II: VALUATION AND QUALIFYING ACCOUNTS**

 
|                                                              |   | **Additions**                        |       |
|-------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                              |   | **Balance at  beginning  of period** |       | **Charged to  costs and  expenses** |   | **Charged  to other  accounts** |   | **Deductions** |   | **Balance at  end of  period** |   |
|                                                              |   | **(£  million)**                |       |
| **52  weeks ended December 28, 2002**                             |   |                                 | ** ** |   | ** ** |   | ** ** |   | ** ** |   | ** ** |
| Provisions  for bad and doubtful debts                            |   | 1.2                                  |       | 0.6 |   | 0.2 |   | (0.1 | ) | 1.9 |   |
|                                                              |   |                                 | ** ** |   | ** ** |   | ** ** |   | ** ** |   | ** ** |
| **52  weeks ended December 29, 2001**                             |   |                                 | ** ** |   | ** ** |   | ** ** |   | ** ** |   | ** ** |
| Provisions  for bad and doubtful debts                            |   | 0.6                                  |       | 0.8 |   | (0.1 | ) | (0.1 | ) | 1.2 |   |
|                                                              |   |                                 |       |   |   |   |   |   |   |   |   |
| **Period  from March 10, 2000  (inception) to December 30, 2000** |   |                                 | ** ** |   | ** ** |   | ** ** |   | ** ** |   | ** ** |
| Provisions  for bad and doubtful debts                            |   | —                               |       | 1.8 |   | 0.1 |   | (1.3 | ) | 0.6 |   |
|                                                              |   |                                 |       |   |   |   |   |   |   |   |   |
| **Predecessor**                                                   |   |                                 |       |   |   |   |   |   |   |   |   |
| **15  weeks ended April 14, 2000**                                |   |                                 |       |   |   |   |   |   |   |   |   |
| Provisions  for bad and doubtful debts                            |   | 4.3                                  |       | — |   | — |   | — |   | 4.3 |   |
| **52  weeks ended January 1, 2000**                               |   |                                 |       |   |   |   |   |   |   |   |   |
| Provisions  for bad and doubtful debts                            |   | 3.8                                  |       | 2.4 |   | (0.2 | ) | (1.7 | ) | 4.3 |   |

 

**REGENTREALM LIMITED**

**VALUATION AND QUALIFYING ACCOUNTS**

 
|                                   |   | **Balance at  beginning  of period** |       | **Charged to  costs and  expenses** |       | **Charged  to other  accounts** |       | **Deductions** |       | **Balance at  end of  period** |       |
|----------------------------------------|--------|--------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|----------------|------------|--------------------------------|------------|
|                                   |   | **(£  million)**                |       |
| **52  weeks ended December 28, 2002**  |   |                                 | ** ** |                                | ** ** |                            | ** ** |           | ** ** |                           | ** ** |
| Provisions  for bad and doubtful debts |   | 1.2                                  |       | 0.6                                 |       | 0.2                             |       | (0.1           | )          | 1.9                            |       |
|                                   |   |                                 | ** ** |                                | ** ** |                            | ** ** |           | ** ** |                           | ** ** |
| **52  weeks ended December 29, 2001**  |   |                                 | ** ** |                                | ** ** |                            | ** ** |           | ** ** |                           | ** ** |
| Provisions  for bad and doubtful debts |   | 0.6                                  |       | 0.8                                 |       | (0.1                            | )          | (0.1           | )          | 1.2                            |       |
|                                   |   |                                 | ** ** |                                | ** ** |                            | ** ** |           | ** ** |                           | ** ** |
| **52  weeks ended December 30, 2000**  |   |                                 | ** ** |                                | ** ** |                            | ** ** |           | ** ** |                           | ** ** |
| Provisions  for bad and doubtful debts |   | —                               |       | 1.8                                 |       | 0.1                             |       | (1.3           | )          | 0.6                            |       |

 

S-2

----