CCL Releases 2007 Annual Financial Statements



    Stock Symbol: TSX - CCL.A and CCL.B

    TORONTO, March 12 /CNW/ - CCL Industries Inc., a world leader in the
development of labelling solutions and specialty packaging for the consumer
products and healthcare industries, released today its annual financial
statements for the year ended December 31, 2007 and the related Management's
Discussion and Analysis. The Company previously released its summary financial
results for 2007 on February 28, 2008.
    With headquarters in Toronto, Canada, CCL Industries now employs
approximately 5,300 people and operates 53 production facilities in North
America, Europe, Latin America and Asia. CCL Label is the world's largest
converter of pressure sensitive and film materials and sells to leading global
customers in the consumer packaging, healthcare and consumer durable segments.
CCL Container and CCL Tube produce aluminum cans, bottles and plastic tubes
for the consumer products industry in North America.

    Statements contained in this Press Release, other than statements of
historical facts, are forward-looking statements subject to a number of
uncertainties that could cause actual events or results to differ materially
from some statements made.



    Consolidated Financial Statements
    (In thousands of Canadian dollars)

    CCL INDUSTRIES INC.

    Years ended December 31, 2007 and 2006


    AUDITORS' REPORT TO THE SHAREHOLDERS

    We have audited the consolidated balance sheets of CCL Industries Inc. as
at December 31, 2007 and 2006 and the consolidated statements of earnings,
comprehensive income, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
    We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
    In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 2007 and 2006 and the results of its operations and its cash
flows for the years then ended in accordance with Canadian generally accepted
accounting principles.

    (signed)

    KPMG LLP

    Chartered Accountants, Licensed Public Accountants

    Toronto, Canada
    February 28, 2008



    
    CCL INDUSTRIES INC.
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    December 31, 2007 and 2006

    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash and cash equivalents                    $    96,602   $   125,000
      Accounts receivable, trade                       127,105       178,819
      Other receivables and prepaid expenses            97,710        23,115
      Inventories (note 6)                              69,606        97,963
      -----------------------------------------------------------------------
                                                       391,023       424,897

    Property, plant and equipment (note 7)             630,810       628,019

    Other assets (note 8)                               33,340        28,914

    Future income tax assets (note 12)                  32,135        32,261

    Intangible assets (note 9)                          26,132        39,499

    Goodwill                                           374,750       389,000
    -------------------------------------------------------------------------
                                                   $ 1,488,190   $ 1,542,590
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank advances (note 10)                      $         -   $    12,428
      Accounts payable and accrued liabilities         221,254       280,752
      Income and other taxes payable                     2,501        13,697
      Current portion of long-term debt (note 10)       21,211        16,119
      -----------------------------------------------------------------------
                                                       244,966       322,996

    Long-term debt (note 10)                           382,166       413,552

    Other long-term items (note 11)                     48,796        52,332

    Future income tax liabilities (note 12)             94,403       101,109
    -------------------------------------------------------------------------
                                                       770,331       889,989
    Shareholders' equity:
      Share capital (note 13)                          190,504       190,251
      Accumulated other comprehensive loss (note 3)    (85,455)      (18,546)
      Contributed surplus (note 13)                      6,715         4,226
      Retained earnings                                606,095       476,670
      -----------------------------------------------------------------------
                                                       717,859       652,601
    Commitments and contingencies (note 14)
    Subsequent event (note 19)
    -------------------------------------------------------------------------
                                                   $ 1,488,190   $ 1,542,590
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.

    On behalf of the Board:

    D.G. Lang               Director        J.K. Grant              Director
    -----------------------                 -----------------------



    CCL INDUSTRIES INC.
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars)

    Years ended December 31, 2007 and 2006

    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------

    Sales                                          $ 1,144,260   $ 1,029,569

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income from operations before undernoted
     items                                         $   206,904   $   176,054

    Depreciation and amortization                       75,912        67,047
    -------------------------------------------------------------------------
                                                       130,992       109,007

    Interest (note 10)                                  23,157        20,584
    -------------------------------------------------------------------------
                                                       107,835        88,423

    Restructuring and other items, net loss (gain)
     (note 5)                                           (4,137)       11,502
    -------------------------------------------------------------------------

    Earnings before income taxes                       111,972        76,921

    Income taxes (notes 5 and 12)                       18,466        12,053
    -------------------------------------------------------------------------

    Net earnings from continuing operations             93,506        64,868

    Net earnings from discontinued operations,
     net of tax (note 4)                                10,957        12,552

    Gain on sale of discontinued operations
     (note 4)                                           43,452             -

    -------------------------------------------------------------------------
    Net earnings                                   $   147,915   $    77,420
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings per Class B share (note 13):
      Continuing operations                        $      2.90   $      2.02
      Discontinued operations                             0.34          0.39
      Gain on sale of discontinued operations             1.35             -

    -------------------------------------------------------------------------
      Net earnings                                 $      4.59   $      2.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted earnings per Class B share (note 13):
      Continuing operations                        $      2.79   $      1.95
      Discontinued operations                             0.33          0.38
      Gain on sale of discontinued operations             1.30             -

    -------------------------------------------------------------------------
      Diluted earnings                             $      4.42   $      2.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    CCL INDUSTRIES INC.
    Consolidated Statements of Comprehensive Income
    (In thousands of Canadian dollars)

    Years ended December 31, 2007 and 2006

    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------

    Net earnings                                   $   147,915   $    77,420

    Other comprehensive income, net of tax:
      Unrealized gains (losses) on translation
       of financial statements of self-sustaining
       foreign operations                             (107,129)       33,480
      Gains (losses) on hedges of net investment
       in self-sustaining foreign operations,
       net of tax of $6,591 (2006 - recovery of
       $6,032)                                          38,378       (14,078)
      -----------------------------------------------------------------------
      Unrealized foreign currency translation,
       net of hedging activities                       (68,751)       19,402

      Losses on derivatives designated as cash flow
       hedges, net of tax of $1,141                     (6,812)            -
      Reclassification of losses on derivatives
       designated as cash flow hedges to earnings,
       net of tax of $7                                  5,906             -
      -----------------------------------------------------------------------
      Change in losses on derivatives designated as
       cash flow hedges                                   (906)            -
      -----------------------------------------------------------------------

      Other comprehensive income (loss)                (69,657)       19,402

    -------------------------------------------------------------------------
    Comprehensive income (note 1(o))               $    78,258   $    96,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    CCL INDUSTRIES INC.
    Consolidated Statements of Shareholders' Equity
    (In thousands of Canadian dollars)

    Years ended December 31, 2007 and 2006

    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------

    Share capital (note 13):
      Class A shares, beginning of year            $     4,525   $     4,608
      Conversion of Class A to Class B                       -           (83)
      -----------------------------------------------------------------------
      Class A shares, end of year                        4,525         4,525

      Class B shares, beginning of year                192,977       191,541
      Stock options exercised, Class B                   4,421         1,353
      Conversion of Class A to Class B                       -            83
      -----------------------------------------------------------------------
      Class B shares, end of year                      197,398       192,977

      Executive share purchase plan loans,
       beginning of year                                (1,599)       (1,841)
      Repayment of executive share purchase
       plan loans                                          341           242
      -----------------------------------------------------------------------
      Executive share purchase plan loans,
       end of year                                      (1,258)       (1,599)

      Shares held in trust, beginning of year           (5,652)       (5,572)
      Shares purchased and held in trust                (4,509)          (80)
      -----------------------------------------------------------------------
      Shares held in trust, end of year                (10,161)       (5,652)
    -------------------------------------------------------------------------
    Share capital, end of year                         190,504       190,251

    Contributed surplus:
      Contributed surplus, beginning of year             4,226         2,005
      Stock option expense                               1,020           680
      Stock options exercised                             (238)          (83)
      Stock-based compensation plan                      1,707         1,624
    -------------------------------------------------------------------------
    Contributed surplus, end of year                     6,715         4,226

    Retained earnings, beginning of year:              476,670       413,025
      Transition adjustment on adoption of new
       accounting standards (note 1(o))                 (3,062)            -
      Net earnings                                     147,915        77,420
      Dividends:
        Class A                                         (1,023)         (908)
        Class B                                        (14,405)      (12,867)
      -----------------------------------------------------------------------
      Total dividends, end of year                     (15,428)      (13,775)
    -------------------------------------------------------------------------
    Retained earnings, end of year                     606,095       476,670

    Accumulated other comprehensive loss (note 3):
      Accumulated other comprehensive loss,
       beginning of year                               (18,546)      (37,948)
      Transition adjustment on adoption of new
       accounting standards (note 3)                     2,748             -
      Other comprehensive income (loss)                (69,657)       19,402
    -------------------------------------------------------------------------
    Accumulated other comprehensive loss,
     end of year                                       (85,455)      (18,546)
    -------------------------------------------------------------------------
    Total shareholders' equity, end of year        $   717,859   $   652,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    CCL INDUSTRIES INC.
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

    Years ended December 31, 2007 and 2006

    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------

    Cash provided by (used for):

    Operating activities:
      Net earnings                                 $   147,915   $    77,420
      Earnings from discontinued operations,
       net of tax                                      (10,957)      (12,552)
      Gain on sale of discontinued operations          (43,452)            -
      Items not involving cash:
        Depreciation and amortization                   75,912        67,047
        Executive compensation                           2,370         2,102
        Future income taxes                             (5,435)       (7,496)
        Restructuring and other items, net of tax       (1,947)       10,228
        Gain on sale of property, plant and
         equipment                                      (2,644)       (1,158)
      -----------------------------------------------------------------------
                                                       161,762       135,591
      Net change in non-cash working capital           (16,928)        6,321
      -----------------------------------------------------------------------
      Cash provided by continuing operations           144,834       141,912
      Cash provided by discontinued operations          17,360        19,386
      -----------------------------------------------------------------------
      Cash provided by operating activities            162,194       161,298

    Financing activities:
      Proceeds on issuance of long-term debt           107,055       202,623
      Retirement of long-term debt                     (63,987)     (183,690)
      Increase (decrease) in bank advances              (4,038)        2,844
      Issue of shares                                    4,183         1,270
      Purchase of shares held in trust                  (4,357)            -
      Dividends                                        (15,233)      (13,775)
      -----------------------------------------------------------------------
      Cash provided by financing activities             23,623         9,272

    Investing activities:
      Additions to property, plant and equipment      (163,453)     (150,423)
      Proceeds on disposal of property, plant and
       equipment                                         6,486        13,122
      Proceeds on business dispositions                 69,526        27,122
      Business acquisitions                           (105,575)      (62,170)
      Long-term investment acquisition                  (8,795)            -
      Other                                                  -         1,251
      -----------------------------------------------------------------------
      Cash used for investing activities              (201,811)     (171,098)

    Effect of exchange rates on cash                   (12,404)        5,335
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash
     equivalents                                       (28,398)        4,807

    Cash and cash equivalents, beginning of year       125,000       120,193

    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year         $    96,602   $   125,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    CCL INDUSTRIES INC.
    Notes to Consolidated Financial Statements (continued)
    (Tabular amounts in thousands of Canadian dollars, except per share data)

    Years ended December 31, 2007 and 2006
    -------------------------------------------------------------------------

    1.  Significant accounting policies:

        (a) Basis of accounting:

            The consolidated financial statements include the accounts of
            CCL Industries Inc. (the "Company") and all subsidiary companies
            since dates of acquisition. Investments subject to significant
            influence are accounted for using the equity method. Investments
            that are jointly controlled are accounted for using proportionate
            consolidation.

        (b) Foreign currency translation:

            The Company records foreign currency-denominated transactions at
            the Canadian dollar equivalent at the date of the transaction and
            translates foreign currency-denominated monetary assets and
            liabilities at year-end exchange rates. Exchange gains and losses
            are included in earnings.

            The Company's foreign subsidiaries are defined as
            self-sustaining. Revenue and expense items, including
            depreciation and amortization, are translated at the average
            exchange rate for the year. All assets and liabilities are
            translated at year-end exchange rates and any resulting exchange
            gains or losses are included in shareholders' equity as part of
            accumulated other comprehensive loss. The revaluation of foreign
            currency debt, net of related tax, that hedges the net investment
            in foreign operations is also charged to the accumulated other
            comprehensive loss. Foreign exchange gains and losses on the
            reduction of net investments in foreign subsidiaries are included
            in net earnings for the year.

            Movement in the accumulated other comprehensive loss during the
            year results from changes in the value of the Canadian dollar in
            comparison primarily to the U.S. dollar, the U.K. pound sterling,
            the euro, the Danish krone, the Mexican peso, the Thailand baht,
            the Chinese renminbi, the Brazilian real, the Polish zloty, and
            the Japanese yen and from changes in foreign currency-denominated
            net assets.

            Foreign currency transactions within each subsidiary are
            translated at the rate of exchange in effect at the time of the
            transaction. Monetary balances held in foreign currencies are
            translated at the rate of exchange at the end of the period and
            any gain or loss is recorded in income.

        (c) Cash and cash equivalents:

            Cash and cash equivalents consist of cash in bank and short-term
            investments with original maturity dates on acquisition of
            90 days or less.

        (d) Inventories:

            Raw materials and supplies are valued at the lower of cost and
            replacement cost. Work in process and finished goods are valued
            at the lower of cost and net realizable value. Cost is determined
            on a first-in, first-out basis.

        (e) Property, plant and equipment:

            Property, plant and equipment are recorded at cost, which
            includes interest and certain start-up costs during the
            construction of major projects. Depreciation is provided over the
            assets' estimated useful lives, primarily on the straight-line
            basis, using rates varying from 2% to 30% on buildings, and from
            7% to 33% on machinery and equipment.

            Long-lived assets, including property, plant and equipment
            subject to depreciation, are reviewed for impairment whenever
            events or changes in circumstances indicate that the carrying
            amount of an asset may not be recoverable. Impairment losses for
            assets held for use where the carrying value is not recoverable
            are measured based on fair value, which is measured by discounted
            cash flows. Impairment losses on any assets held for sale are
            measured based on expected proceeds less direct costs to sell.

        (f) Intangible assets:

            Intangible assets, consisting primarily of the value of acquired
            customer contracts and relationships, are amortized over the
            expected life and any impairment is charged against earnings. The
            amortization period ranges from 10 to 12 years and is recorded on
            a straight-line basis. Impairment losses for intangible assets
            where the carrying value is not recoverable, are measured based
            on fair value. Fair value is calculated by using discounted cash
            flows.

        (g) Goodwill:

            Goodwill represents the excess of the purchase price of the
            Company's interest in the businesses acquired over the fair value
            of the underlying net identifiable tangible and intangible assets
            arising on acquisitions. Goodwill is not amortized but is
            required to be tested for impairment annually. To test
            impairment, the Company determines whether the fair value of each
            reporting unit to which goodwill has been attributed is less than
            the carrying value of the reporting unit's net assets including
            goodwill, thus indicating potential impairment. If the fair value
            of the reporting unit exceeds its carrying amount, further
            evaluation is not necessary. However, if the fair value of the
            reporting unit is less than its carrying amount, further
            evaluation is required to compare the implied fair value of the
            reporting unit's goodwill to its carrying amount to determine
            whether a write-down of goodwill is required.

            Any impairment is then recorded as a separate charge against
            earnings. During the current year, the Company assessed the fair
            value of reporting units to which the underlying goodwill was
            attributable and determined that no charge for impairment of
            goodwill was required for the year ended December 31, 2007.

        (h) Revenue recognition:

            Revenue is recorded and related costs transferred to cost of
            sales at the time the product is shipped and ownership transfers
            to the customers. At that time, persuasive evidence of an
            arrangement exists, the price to the customer is fixed and
            ultimate collection is reasonably assured.

        (i) Employee future benefits:

            The Company accrues its obligation under employee benefit plans
            and related costs net of plan assets. Pension costs are
            determined periodically by independent actuaries. The actuarial
            determination of the accrued benefit obligations for the plans
            use the projected benefit method prorated on service and
            incorporates management's best estimate of future salary
            escalation, retirement age, inflation and other actuarial
            factors. The cost is then charged to expense as services are
            rendered. Past service costs arising from plan amendments are
            amortized on a straight-line basis over the expected average
            remaining service lives of the employees who are members of the
            plan. Net actuarial gains and losses that exceed 10% of the
            greater of the benefit obligation and the value of plan assets
            are amortized over the expected average remaining service lives
            of the employees who are members of the plan.

        (j) Stock-based compensation plan:

            The Company applied the intrinsic value method of accounting for
            employee stock options granted prior to January 1, 2003 as
            permitted by The Canadian Institute of Chartered Accountants'
            ("CICA") Handbook Section 3870, Stock-based Compensation and
            Other Stock-based Payments. Under the intrinsic value method,
            consideration paid by employees on the exercise of stock options
            was credited to share capital and no compensation expense was
            recognized.

            The Company adopted the fair value-based method prescribed by
            CICA Handbook Section 3870 to account for employee stock options
            granted after December 31, 2002. Under the fair value-based
            method, compensation cost is measured at fair value at the date
            of grant and is expensed over the award's vesting periods. In
            accordance with one of the transitional options permitted under
            the amended Section 3870, the new recommendations were applied to
            all stock-based compensation granted on or after January 1, 2003.
            Stock-based compensation granted prior to January 1, 2003
            continues to be accounted for using the intrinsic value method.
            The description of the plan and the pro forma effect of using
            this method are described in note 13.

        (k) Earnings per share:

            Basic earnings per share are computed by dividing net earnings by
            the weighted average number of shares outstanding during the
            year. The Company uses the treasury stock method for calculating
            diluted earnings per share. Diluted earnings per share are
            computed similarly to basic earnings per share except that the
            weighted average shares outstanding are increased to include
            additional shares from the assumed exercise of stock options,
            shares held as security for executive share purchase plan loans
            outstanding, shares held in trust and deferred share units, if
            dilutive. The number of additional shares is calculated by
            assuming that outstanding stock options, shares held in trust and
            deferred share units were exercised and that the proceeds from
            such exercises were used to acquire shares of common stock at the
            average market price during the year.

        (l) Income taxes:

            The Company is following the asset and liability method of
            accounting for future income taxes. Under this method of tax
            allocation, future income tax assets and liabilities are
            determined based on the differences between the financial
            reporting and tax basis of assets and liabilities, and are
            measured using the enacted or substantively enacted tax rates and
            laws that are expected to be in effect in the years in which the
            future income tax assets or liabilities are expected to be
            settled or realized. A valuation allowance is provided to the
            extent that it is more likely than not that future income tax
            assets will not be realized.

        (m) Exit and disposal costs:

            The Company recognizes costs associated with exit or disposal
            activities at fair value in the year in which the liability is
            incurred. Special termination benefits are recognized at fair
            value at the communication date.

        (n) Use of estimates:

            The presentation of financial statements requires management to
            make estimates and assumptions that affect the reported amounts
            of assets and liabilities and the disclosure of contingent assets
            and liabilities at the date of the financial statements and
            revenue and expenses during the year. In particular, the amounts
            recorded for inventories, redundant assets, bad debts,
            derivatives, income taxes, restructuring, pension and other post-
            retirement benefits, contingencies and litigation, environmental
            matters, outstanding self-insured claims, depreciation and
            amortization of property, plant and equipment, and the valuation
            of goodwill are based on estimates. Actual results could differ
            from those estimates.

        (o) Changes in accounting policies:

            Effective January 1, 2007, the Company adopted the new CICA
            Handbook Section 1530, Comprehensive Income; Section 3251,
            Equity; Section 3861, Financial Instruments - Disclosure and
            Presentation; Section 3865, Hedges; and Section 3855, Financial
            Instruments - Recognition and Measurement.

            Section 1530, Comprehensive Income, establishes standards for
            reporting and presenting comprehensive income, which is defined
            as the change in equity from transactions and other events from
            non-owner sources. Other comprehensive income refers to items
            recognized in comprehensive income that are excluded from net
            earnings calculated in accordance with generally accepted
            accounting principles ("GAAP").

            Section 3251, Equity, establishes standards for the presentation
            of equity and changes in equity during the reporting period. This
            Section requires an enterprise to present a separate component of
            equity for each category of equity that is of a different nature.

            Section 3861, Financial Instruments - Disclosure and
            Presentation, establishes standards for presentation of financial
            instruments and non-financial derivatives, and identifies the
            information that should be disclosed about them. Under the new
            standards, policies followed for years prior to the effective
            date are generally not reversed, therefore, the comparative
            figures have not been restated except for the requirement to
            restate currency translation adjustment as part of other
            comprehensive income.

            Section 3865, Hedges, describes when and how hedge accounting can
            be applied as well as the disclosure requirements. Hedge
            accounting enables the recording of gains, losses, revenue and
            expenses from derivative financial instruments in the same year
            as for those related to the hedged item.

            Section 3855, Financial Instruments - Recognition and
            Measurement, prescribes when a financial asset, financial
            liability or non-financial derivative is to be recognized on the
            balance sheet and at what amount, requiring fair value or cost-
            based measures under different circumstances. Under Section 3855,
            financial instruments must be classified into one of these five
            categories: held for trading, held-to-maturity, loans and
            receivables, available-for-sale financial assets or other
            financial liabilities. All financial instruments, including
            derivatives, are measured on the balance sheet at fair value
            except for loans and receivables, held-to-maturity investments
            and other financial liabilities, which are measured at amortized
            cost. Subsequent measurement and changes in fair value will
            depend on their initial classification, as follows: held for
            trading financial assets are measured at fair value and changes
            in fair value are recognized in net earnings; available-for-sale
            financial instruments are measured at fair value with changes in
            fair value recorded in other comprehensive income until the
            investment is derecognized or impaired at which time the amounts
            would be recorded in net earnings.

            Under adoption of these new standards, the Company designated its
            cash and cash equivalents as held for trading. Long-term
            investments are designated as available-for-sale. Cash and cash
            equivalents and long-term investments are measured at fair value.
            Accounts receivable are classified as loans and receivables,
            which are measured at amortized cost. Bank advances, accounts
            payable and accrued liabilities and long-term debt are classified
            as other financial liabilities, which are measured at amortized
            cost. The Company has also elected to expense, as incurred,
            transaction costs related to long-term debt.

            Upon adoption of these new standards, the Company recorded a
            decrease to opening retained earnings of $3.0 million. The
            decrease to opening retained earnings was a result of the write-
            off of previously deferred transaction costs related to issuance
            of long-term debt ($1.0 million loss, net of tax of
            $0.5 million), the write-off of a deferred loss on the
            termination of various cross currency interest rate swaps that
            did not meet the new requirements ($2.1 million loss, no tax) and
            the ineffectiveness of cash flow hedges discussed below
            ($0.1 million gain, net of tax).

            All derivative instruments, including embedded derivatives, are
            recorded on the consolidated balance sheet at fair value unless
            exempted from derivative treatment as a normal purchase or sale.
            All changes in their fair value are recorded in net earnings
            unless cash flow hedge accounting is used, in which case, changes
            in fair value are recorded in other comprehensive income. The
            Company has applied this accounting treatment for all embedded
            derivatives in existence at transition. The impact of the change
            in accounting policy related to embedded derivatives is not
            material.

            The Company uses various financial instruments to manage foreign
            currency exposures, fluctuation in interest rates and exposures
            related to the purchase of aluminum for the Container Division.
            These financial instruments are classified into three types of
            hedges: cash flow hedges, fair value hedges and hedges of net
            investments in self-sustaining operations.

            In a cash flow hedge, the effective portion of changes in the
            fair value of derivatives is recognized in other comprehensive
            income. Any gain or loss in fair value relating to the
            ineffective portion is recognized immediately in the consolidated
            statement of earnings. Upon adoption of the new standards, the
            Company remeasured its cash flow hedge derivatives at fair value.
            Aluminum forward contracts with an unfavourable fair value of
            $0.6 million are recorded in other receivables and prepaid
            expenses. In addition, the Company entered into a cross currency
            interest rate swap agreement ("CCIRSA") that converted U.S.
            dollar fixed rate debt into Canadian dollar fixed rate debt in
            order to reduce the Company's exposure to the U.S. dollar debt
            and currency exposures. This CCIRSA is also designated as a cash
            flow hedge and has an unfavourable fair value of $8.7 million for
            the current year and is recorded in long-term debt. The Company
            also had used forward contracts to hedge foreign exchange
            exposure on anticipated sales. All existing forward contracts
            matured earlier in 2007. During the year, these hedges were
            previously recorded in accounts payable and accrued liabilities.

            In a fair value hedging relationship, the carrying value of the
            hedged item is adjusted by gains or losses attributable to the
            hedged risk and recorded in net earnings. This change in fair
            value of the hedged item, to the extent the hedging relationship
            is effective, is offset by changes in the fair value of the
            derivative also measured at fair value on the consolidated
            balance sheet date, with changes in value recorded through net
            earnings. The Company has two CCIRSAs designated as fair value
            hedges, which convert U.S. dollar fixed rate debt into Canadian
            dollar floating rate debt in order to reduce the risk of changes
            in the value of the debt. In addition, the Company has an
            interest rate swap converting U.S. dollar fixed rate debt to U.S.
            dollar floating rate debt to reduce interest rate risk exposure.
            These fair value hedges have an unfavourable fair value of
            $8.3 million and are recorded in long-term debt.

            In a hedge of a net investment in a self-sustaining foreign
            operation, the portion of the gain or loss on the hedging item
            that is determined to be an effective hedge should be recognized
            in comprehensive income and the ineffective portion should be
            recognized in net earnings. The Company has various borrowings
            designated as a hedge of the net investment in a self-sustaining
            operation. During 2006, the Company entered into CCIRSAs that
            converted Canadian dollar fixed rate debt and floating rate debt
            into euro fixed rate debt and euro floating rate debt in order to
            hedge the Company's exposure to the euro, with a view to reducing
            foreign exchange fluctuations and interest expense. These CCIRSAs
            have been designated as net investment hedges and have a net
            favourable fair value of $3.1 million at the end of 2007 and are
            recorded in other assets and long-term debt.

            The primary changes for the Company's 2006 accounting policies
            relating to financial instruments were the requirements to record
            certain non-financial contracts at their fair value and the
            election to write off previously deferred transaction costs
            related to issuance of long-term debt. In addition, realized and
            unrealized gains and losses associated with derivative
            instruments used in hedging relationships were deferred off-
            balance sheet and recognized in income in the period in which the
            underlying hedged transaction was recognized.

        (p) Recently issued accounting standards:

            In May 2007, the CICA issued a new Handbook Section 3031,
            Inventories, which addresses the measurement and disclosure of
            inventories. The new standard is effective for interim and annual
            financial statements for fiscal years beginning on or after
            January 1, 2008. Management is currently reviewing the potential
            impact on the financial results of the Company. However, further
            disclosure will be required in the consolidated statement of
            earnings as it will now be necessary to disclose the amount of
            inventories recognized as an expense during the year. The Company
            will comply with this standard effective January 1, 2008.

            In October 2006, the CICA issued new standards related to
            financial instrument presentation and disclosure, Handbook
            Section 3862, Financial Instruments - Disclosure, and Handbook
            Section 3863, Financial Instruments - Presentation. These
            standards revise and enhance the disclosure requirements of
            Handbook Section 3861, Financial Instruments - Disclosure and
            Presentation. These standards are effective for interim and
            annual financial statements relating to fiscal years beginning on
            or after October 1, 2007. Management is currently reviewing the
            potential impact on the Company. The Company will comply with the
            requirements of the new standard when the standard becomes
            effective.

            In October 2006, the CICA approved a new accounting standard,
            Handbook Section 1535, Capital Disclosures. This new section
            establishes standards for disclosing information about an
            entity's capital and how it is managed. This standard is
            effective for interim and annual financial statements relating to
            fiscal years beginning on or after October 1, 2007. Management is
            currently reviewing the potential impact on the Company. The
            Company will comply with the requirements of the new standard
            when the standard becomes effective.

    2.  Acquisitions:

        On January 26, 2007, the Company completed its purchase of the sleeve
        label business of Illinois Tool Works, Inc. ("ITW"). ITW's sleeve
        label business, through its two locations in the United Kingdom and
        one location in each of Austria, Brazil and the United States, is a
        leading supplier of shrink sleeve and stretch sleeve labels for
        markets in Europe and the Americas. The purchase price was
        $105.6 million, net of cash acquired. The Company established a
        $95.0 million line of credit, of which $75.0 million was drawn to
        facilitate the purchase. The Company is reviewing the valuation of
        the net assets acquired, including intangible assets; therefore,
        certain items disclosed below may change when the review is
        completed.

        Details of the transaction are as follows:

        ---------------------------------------------------------------------

        Current assets                                           $    23,805
        Current liabilities                                           (8,487)
        Non-current assets at assigned values                         35,234
        Future income taxes                                           (1,516)
        Goodwill and intangible assets                                56,539

        ---------------------------------------------------------------------
        Net assets purchased                                     $   105,575
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Total consideration:
          Cash, less cash acquired of $2.8 million               $   105,575

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In January 2006, the Company purchased Prodesmaq, based in Vinhedo,
        Brazil. Prodesmaq operates a state-of-the-art plant and is Brazil's
        largest supplier of pressure sensitive labels for many global
        companies in the home and personal care, healthcare and premium food
        and beverage markets. The purchase price was $62.2 million, net of
        cash acquired.

        Details of the transaction are as follows:

        ---------------------------------------------------------------------
        Current assets                                           $     9,824
        Current liabilities                                           (2,120)
        Non-current assets at assigned values                          9,272
        Future income taxes                                              (24)
        Intangible assets                                             14,794
        Goodwill                                                      30,424

        ---------------------------------------------------------------------
        Net assets purchased                                     $    62,170
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Total consideration:
          Cash, less cash acquired of $1.7 million               $    62,170

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    3.  Accumulated other comprehensive loss:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Unrealized foreign currency translation
         losses, net of tax of $13,919
         (2006 - $7,328)                            $   (87,297) $   (18,546)
        Impact of new net investment hedge
         accounting standards on January 1, 2007,
         net of tax of $85                                  378            -
        Impact of new cash flow hedge accounting
         standards on January 1, 2007, net
         of tax of $1,291                                 2,370            -
        Change in losses on derivatives designated
         as cash flow hedges, net of tax recovery
         of $1,148                                         (906)           -

        ---------------------------------------------------------------------
                                                    $   (85,455) $   (18,546)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  Discontinued operations:

        In November 2007, the Company sold its interest in the ColepCCL joint
        venture to the majority joint venture party for $72.8 million (EUR
        50.0 million) in cash and a short-term note for a further EUR
        50.0 million ($74.4 million) to be paid February 29, 2008. The sale
        resulted in a gain of $43.5 million. The disposition is reported as
        discontinued operations and the results are as follows:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Sales from discontinued operations          $   199,400  $   182,660

        ---------------------------------------------------------------------

        Income before undernoted items              $    23,268  $    25,540
        Depreciation and amortization                     6,881        7,558
        Interest expense, net                             1,099          819
        ---------------------------------------------------------------------

        Earnings before income taxes                     15,288       17,163

        Income taxes                                      4,331        4,611

        ---------------------------------------------------------------------
        Net earnings from discontinued operations   $    10,957  $    12,552
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Gain on sale of discontinued operations     $    43,452  $         -

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                                        2006
        ---------------------------------------------------------------------

        Current assets                                           $    75,227
        Long-lived assets                                             99,519

        Current liabilities                                           50,179
        Long-term liabilities                                         14,185

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company has indemnified the purchasers against limited defined
        claims from the past conduct of the business. It is not possible to
        quantify the maximum potential liability in relation to the
        indemnities. The Company has not made any provision for estimated
        indemnification claims.

    5.  Restructuring and other items:

        ---------------------------------------------------------------------
                                           Segment         2007         2006
        ---------------------------------------------------------------------

        Container segment restructuring  Container  $      (252) $   (11,354)
        Recovery related to a disposed
         operation                       Corporate            -        1,250
        Gain on sale of CCL Label B.V.,
         net of restructuring costs          Label            -          498
        Repatriation of capital          Corporate        1,338       (3,531)
        Gain on sale of CCL Dispensing
         Systems, LLC                         Tube            -        1,635
        Gain on note receivable          Corporate        2,340            -
        Gain on sale of land             Corporate          711            -

        ---------------------------------------------------------------------
        Gain (loss)                                 $     4,137  $   (11,502)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Tax recovery (expense) on
         restructuring and other items              $      (452) $     1,274

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In the fourth quarter of 2007, the Company repatriated capital from a
        foreign subsidiary, which resulted in a net foreign exchange gain of
        $1.3 million. Gains or losses arise from the difference between the
        exchange rate in effect on the date the capital was returned to
        Canada, compared to the historical rate in effect when the capital
        was invested. This exchange gain did not give rise to any tax effect.

        In December 2007, an unrealized exchange gain on a euro-denominated
        note receivable on the sale of ColepCCL of $2.3 million was
        recognized ($1.6 million after tax).

        In March 2007, the Company sold its non-operational land in Toronto,
        Canada, for $2.0 million cash and realized a gain of $0.7 million
        ($0.9 million after tax).

        In early 2006, the Company commenced a senior management
        restructuring of the Container segment and recorded provisions
        related to severance costs and obsolete equipment and spare parts
        totalling $11.4 million ($7.2 million after tax). In 2007, further
        costs of $0.3 million ($0.2 million after tax) were incurred in
        restructuring the Container Division.

        In December 2006, the Company recovered $1.3 million related to a
        loan amount previously provided for on a disposed operation with no
        tax effect.

        In October 2006, the Company restructured its European label
        operations which included the sale of its CCL Label B.V. operation in
        the Netherlands for $2.8 million cash. The Company realized a gain of
        $1.0 million on the sale and incurred restructuring costs of
        $0.5 million (net gain of $0.7 million after tax).

        In July 2006, the Company repatriated capital from a foreign
        subsidiary, which resulted in a net foreign exchange loss of
        $3.5 million. Gains and losses arise from the difference between the
        exchange rate in effect on the date the capital was returned to
        Canada compared to the historical rate in effect when the capital was
        invested. These gains or losses on foreign exchange do not give rise
        to any tax effect.

        In February 2006, the Company sold its CCL Dispensing Systems, LLC
        net assets for $24.4 million cash and realized a gain of $1.6 million
        (net loss of $1.5 million after tax).

    6.  Inventories:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------
        Raw materials and supplies                  $    29,498  $    45,675
        Work in process and finished goods               40,108       52,288

        ---------------------------------------------------------------------
                                                    $    69,606  $    97,963
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  Property, plant and equipment:

        ---------------------------------------------------------------------
                                                     Accumulated    Net book
        2007                                  Cost  depreciation       value
        ---------------------------------------------------------------------
        Land                           $    21,380  $         -  $    21,380
        Buildings                          159,247       39,007      120,240
        Machinery and equipment            775,303      286,113      489,190
        ---------------------------------------------------------------------
                                       $   955,930  $   325,120  $   630,810
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                     Accumulated    Net book
        2006                                  Cost  depreciation       value
        ---------------------------------------------------------------------
        Land                           $    22,605  $         -  $    22,605
        Buildings                          178,094       52,837      125,257
        Machinery and equipment            767,579      287,422      480,157
        ---------------------------------------------------------------------
                                       $   968,278  $   340,259  $   628,019
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Construction in progress assets of $88.6 million (2006 -
        $61.9 million) are included in machinery and equipment and represent
        assets constructed or developed over time. Depreciation commences
        when these assets become available for commercial use.

    8.  Other assets:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Long-term investments                       $    26,572  $    19,551
        Deferred charges and other                        6,768        9,363

        ---------------------------------------------------------------------
                                                    $    33,340  $    28,914
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In December 2007, the Company formed a joint venture in Russia in the
        pressure sensitive label business named CCL-Kontur. CCL paid cash of
        $8.8 million for its 50% share in December with an expectation to pay
        a further $5.8 million in the first quarter once the assets of the
        business have been legally transferred to the joint venture by the
        Russian partner. The Russian partner has operating control of the
        business and, consequently, the investment is being carried at its
        equity value. The allocation of the investment to specific assets
        will be completed during the first quarter and the purchase equation
        will be finalized during 2008.

    9.  Intangible assets:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Intangible assets, primarily customer
         contracts and relationships                $    39,367  $    50,153
        Amortization                                    (13,235)     (10,654)

        ---------------------------------------------------------------------
                                                    $    26,132  $    39,499
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Total debt:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Bank advances                               $         -  $    12,428
        Current portion of long-term debt                21,211       16,119
        Long-term debt due after one year               382,166      413,552

        ---------------------------------------------------------------------
        Total debt outstanding                      $   403,377  $   442,099
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (a) The total borrowings at December 31, 2007 are denominated in the
            following currencies:

            -----------------------------------------------------------------
                                          2007                  2006
            -----------------------------------------------------------------
                                      Local   Canadian      Local   Canadian
                                   currency equivalent   currency equivalent
            -----------------------------------------------------------------

            U.S. dollar       USD   213,166  $ 209,153    277,200  $ 323,040
            Euros             EUR    81,552    116,288     67,814    104,278
            Canadian dollar   CAD    48,757     48,757          -          -
            U.K. pound
             sterling         GBP     8,332     16,331         56        127
            Chinese renminbi  RMB    55,558      7,517     55,968      8,356
            Thai baht         THB   156,353      5,180    195,347      6,298
            Japanese yen      JPY    17,074        151          -          -

            -----------------------------------------------------------------
                                             $ 403,377             $ 442,099
            -----------------------------------------------------------------
            -----------------------------------------------------------------


        (b) The short-term operating lines of credit provided to the Company,
            and amounts used included in bank advances, at December 31 are:

            -----------------------------------------------------------------
                                                           2007         2006
            -----------------------------------------------------------------

            Credit lines available                  $    40,647  $    67,688
            Credit lines used                               931       12,428

            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Operating facilities amounting to $0.3 million (2006 -
            $1.4 million) are secured by parent guarantees and receivables
            with the balance being unsecured. All are at interest rates
            varying with London Interbank Offered Rate ("LIBOR"), the prime
            rate and similar market rates for other currencies.


        (c) Total long-term debt is comprised of:

            -----------------------------------------------------------------
                                                           2007         2006
            -----------------------------------------------------------------
            $95.0 million unsecured revolving line
             of credit issued January 2007, rates
             varying with prime, Canadian bankers'
             acceptance, LIBOR or EURIBOR,
             repayable in January 2013              $    45,000  $         -
            Unsecured senior notes issued March
             2006, 5.29%, repayable in March 2011
             (U.S. $60.0 million)                        59,477       69,922
            Unsecured senior notes issued March
             2006, 5.57%, repayable in March 2016
             (U.S. $110.0 million)                      109,040      128,190
            Unsecured senior notes issued July 1998,
             6.90%, weighted-average, repayable in
             three tranches with repayments after
             12, 15 and 20 years (U.S. $110.0 million)  109,040      128,190
            Unsecured senior notes issued September
             1997, 6.97%, repayable in equal
             instalments starting September 2002 and
             finishing September 2012
             (2007 - U.S. $46.8 million;
             2006 - U.S. $56.2 million)                  46,410       65,472
            Other loans                                  34,410       37,897
            -----------------------------------------------------------------
                                                        403,377      429,671

            Current portion                             (21,211)     (16,119)

            -----------------------------------------------------------------
                                                    $   382,166  $   413,552
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Other loans include commercial paper loans, term bank loans,
            industrial revenue bonds and capital leases at various rates and
            repayment terms. In addition, other loans include the fair value
            of cross currency and interest rate swap agreements.

        (d) Interest rate swap agreements:

            During 2006, the Company entered into cross currency interest
            rate swap agreements that converted U.S. dollar fixed rate debt
            into Canadian dollar fixed rate debt and Canadian dollar floating
            rate debt in order to reduce the Company's exposure to the U.S.
            dollar debt, currency and interest rate exposures.

            -----------------------------------------------------------------
             Notional principal
                   amount              Interest rate
            ---------------------  ---------------------
            Fixed          Fixed       Paid    Received            Effective
             rate           rate       (CAD)       (USD)  Maturity      date
            -----------------------------------------------------------------

            U.S. $60.0   C$70.4                            March 8, March 29,
            million      million     4.50%        5.29%      2011      2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------


            -----------------------------------------------------------------
             Notional principal
                   amount              Interest rate
            ---------------------  ---------------------
            Fixed       Floating       Paid    Received            Effective
             rate           rate       (CAD)       (USD)  Maturity      date
            -----------------------------------------------------------------

            U.S. $31.0   C$36.0   3-month BA                July 8, December
            million      million     + 1.67%      6.67%       2010  29, 2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------

            U.S. $28.1   C$32.6   3-month BA             September  December
            million(*)   million     + 2.01%      6.97%   16, 2012  29, 2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (*) There is an annual principal payment on this swap. Current
                principal amounts are U.S. $23.4 million and C$27.2 million.

            During 2006, the Company entered into cross currency interest
            rate swap agreements that converted Canadian dollar fixed rate
            and Canadian dollar floating rate debt into euro fixed rate debt
            and euro floating rate debt in order to hedge the Company's
            exposure to the euro with a view to reducing foreign exchange
            fluctuations and interest expense.

            -----------------------------------------------------------------
             Notional principal
                   amount              Interest rate
            ---------------------  ---------------------
            Fixed          Fixed       Paid    Received            Effective
             rate           rate       (EUR)       (CAD)  Maturity      date
            -----------------------------------------------------------------

            C$70.4       EUR50.0                           March 8, March 29,
            million      million      3.82%       4.50%       2011      2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------


            -----------------------------------------------------------------
             Notional principal
                   amount              Interest rate
            ---------------------  ---------------------
            Floating    Floating       Paid    Received            Effective
             rate           rate       (EUR)       (CAD)  Maturity      date
            -----------------------------------------------------------------

                                    6-month
            C$36.0       EUR23.6    EURIBOR  3-month BA     July 8, December
            million      million    + 1.64%     + 1.67%       2010  29, 2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                    6-month
            C$32.6       EUR21.3    EURIBOR  3-month BA  September  December
            million(*)   million    + 1.99%     + 2.01%   16, 2012  29, 2006

            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (*) There is an annual principal payment on this swap. Current
                principal amounts are C$27.2 million and EUR17.8 million.

            During 2005, the Company entered into cross currency interest
            rate swap agreements that converted U.S. dollar fixed rate debt
            into euro floating rate debt in order to redistribute the
            Company's exposure to the U.S. dollar, the euro, and fixed and
            floating interest rates with a view to reducing foreign exchange
            fluctuations and interest rate costs. Due to changes in Canadian
            GAAP effective January 1, 2007, these swaps did not meet the new
            requirements to be considered as hedges and were consequently
            terminated on December 29, 2006. The termination resulted in a
            loss of $2.1 million that was deferred as other assets for 2006
            and was recognized in opening retained earnings in 2007.

            -----------------------------------------------------------------
             Notional principal
                   amount              Interest rate
            ---------------------  ---------------------
            Fixed       Floating       Paid    Received            Effective
             rate           rate       (EUR)       (USD)  Maturity      date
            -----------------------------------------------------------------

                                    6-month
            U.S. $31.0   EUR25.6    EURIBOR                 July 8,  June 20,
               million   million    + 2.32%       6.67%       2010      2005

            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                    6-month
            U.S. $37.5   EUR31.0    EURIBOR              September   June 20,
             million(*)  million    + 2.67%       6.97%   16, 2012      2005

            -----------------------------------------------------------------
            -----------------------------------------------------------------
           (*)  There was an annual principal payment on this swap. On the
                termination date, principal amounts were U.S. $28.1 million
                and EUR23.2 million.

            During 2002 and 2003, the Company entered into interest rate swap
            agreements in order to redistribute the Company's exposure to
            fixed and floating interest rates with a view to reducing
            interest costs over the long term.

            -----------------------------------------------------------------
                                       Interest rate
            Notional               ---------------------
            principal                  Paid    Received            Effective
            amount      Currency       (USD)       (USD)  Maturity      date
            -----------------------------------------------------------------

                                    3-month
            $60.0                     LIBOR               March 15,  June 14,
            million          USD    + 2.18%       6.66%       2006      2002

            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                    3-month
            $60.0                     LIBOR               March 15, December
            million          USD    + 3.49%       6.66%       2006  13, 2002

            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                    3-month
            $42.1                     LIBOR              September  December
            million(*)       USD    + 2.97%       6.97%   16, 2012  16, 2003

            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (*) There is an annual principal payment on this swap. Current
                principal amount is U.S. $23.4 million.

        (e) The overall weighted average interest rate on total long-term
            debt factoring in the interest rate swap agreements at
            December 31, 2007 was 5.8% (2006 - 5.9%).

        (f) Interest expense incurred is as follows:

            -----------------------------------------------------------------
                                                           2007         2006
            -----------------------------------------------------------------

            Current                                 $     1,973  $     1,656
            Long-term                                    26,478       23,953
            -----------------------------------------------------------------
                                                         28,451       25,609

            Interest income                              (4,195)      (4,206)
            -----------------------------------------------------------------
                                                         24,256       21,403

            Less interest allocated to discontinued
             operations                                  (1,099)        (819)

            -----------------------------------------------------------------
                                                    $    23,157  $    20,584
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Interest paid during the year was $28.4 million (2006 -
            $25.0 million).

        (g) Long-term debt repayments are as follows:

            -----------------------------------------------------------------
            2008                                                 $    21,211
            2009                                                      12,681
            2010                                                      47,693
            2011                                                      79,199
            2012                                                      10,211
            Thereafter                                               232,382

            -----------------------------------------------------------------
                                                                 $   403,377
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    11. Other long-term items:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Environmental reserves, less current portion
         of $1,775 (2006 - $2,069)                   $    5,712   $    6,712
        Outstanding self-insured claims and reserves      4,484        6,901
        Employee future benefits and deferred
         compensation                                    33,144       34,076
        Deferred revenue and other                        5,456        4,643

        ---------------------------------------------------------------------
                                                     $   48,796   $   52,332
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Environmental reserves represent management's best estimate for site
        restoration costs. Outstanding self-insured claims and reserves are
        actuarially determined. The actual timing of payments against these
        liabilities is unknown. Employee future benefits are discussed in
        note 16.

        The Company has an unfunded deferred compensation plan for its active
        employees and retirees of $13.4 million (2006 - $14.5 million).

    12. Income taxes:

        (a) Effective tax rate:

            -----------------------------------------------------------------
                                                          2007          2006
            -----------------------------------------------------------------

            Combined Canadian federal
             and provincial income tax rate               34.1%         34.1%
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Total earnings before income taxes     $   111,972   $    76,921
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Expected income taxes                  $    38,205   $    26,245
            Increase (decrease) resulting from:
              Realized benefit of foreign tax
               rate                                     (6,979)       (4,719)
              Recognized income tax benefit of
               losses                                   (2,053)            -
              Non-taxable portion of goodwill                -         2,367
              Non-taxable portion of capital gain         (243)         (296)
              Impact of favourable tax
               settlements from prior years             (5,822)      (11,500)
              Losses on restructuring and other
               items for which no tax benefit
               has been recognized                       1,641           192
              Impact of tax rate reduction              (4,310)       (1,088)
              Other                                     (1,973)          852
            -----------------------------------------------------------------
            Income taxes                           $    18,466   $    12,053
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Income taxes paid                      $    36,548   $    42,040
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Future income taxes impacted earnings in the current year by a
            recovery of $5,811 (2006 - $13,311) which includes a recovery of
            $478 for discontinued operations (2006 - $724).

            Income taxes includes tax expense on restructuring and other
            items of $452 (2006 - recovery of $1,274) as discussed in note 5.

            -----------------------------------------------------------------
                                    2007                      2006
            -----------------------------------------------------------------
                             Earnings          Tax     Earnings          Tax
            -----------------------------------------------------------------

            Total earnings
             before income
             taxes        $   111,972  $    18,466  $    76,921  $    12,053
            Earnings from
             discontinued
             operations        15,288        4,331       17,163        4,611
            Gain on sale of
             discontinued
             operations        43,452            -            -            -
            -----------------------------------------------------------------
                          $   170,712  $    22,797  $    94,084  $    16,664
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        (b) The tax effects of the significant components of temporary
            differences giving rise to the Company's net income tax assets
            and liabilities are as follows:

            -----------------------------------------------------------------
                                                           2007         2006
            -----------------------------------------------------------------

            Future income tax assets:
              Non-deductible reserves               $    29,966  $    35,635
              Alternative minimum tax
               credit carryforward                        2,005        2,415
              Amount related to tax
               losses carried forward                    24,795       24,673
              ---------------------------------------------------------------
              Future income tax assets
               before valuation allowance                56,766       62,723

              Valuation allowance                       (24,631)     (30,462)
              ---------------------------------------------------------------
              Future income tax assets
               net of valuation allowances               32,135       32,261

            Future income tax liabilities:
              Property, plant and equipment,
               goodwill and other assets                 70,940       73,185
              Unrealized foreign exchange gains          13,091        6,996
              Other                                      10,372       20,928
              ---------------------------------------------------------------
              Future income tax liabilities              94,403      101,109

            -----------------------------------------------------------------
            Net future income tax liabilities       $    62,268  $    68,848
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    13. Share capital:

        ---------------------------------------------------------------------
                                                           2007         2006
        ---------------------------------------------------------------------

        Issued and outstanding:
          Issued share capital                      $   201,923  $   197,502
          Less:
            Executive share purchase plans loans         (1,258)      (1,599)
            Shares held in trust                        (10,161)      (5,652)
        ---------------------------------------------------------------------
        Total                                       $   190,504  $   190,251
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (a) Shares held in trust:

            During 2005, the Company granted an award of 200,000 Class B
            shares of the Company. These shares are restricted in nature;
            120,000 shares vested in 2007 based on performance and
            80,000 shares will vest in 2009 dependent on continuing
            employment. The Company purchased these 200,000 shares in the
            open market and has placed them in trust until they are fully
            vested.

            During 2007, the Company granted an award of 120,000 Class B
            shares of the Company. These shares are restricted in nature;
            shares will vest in 2010 dependent on performance conditions and
            on continuing employment. The Company purchased these
            120,000 shares in the open market and has placed them in trust
            until they are fully vested.

            The fair values of these stock awards are being amortized over
            the vesting period and recognized as compensation expense as is
            described for employee stock options in note 13(e)(i).

        (b) Shares issued:

    -------------------------------------------------------------------------
                               Class A               Class B
                          Shares     Amount     Shares     Amount      Total
    -------------------------------------------------------------------------

    Balance,
     December 31, 2005     2,422  $   4,608     30,089  $ 191,541  $ 196,149
    Stock options
     exercised                 -          -         91      1,353      1,353
    Conversions from
     Class A to Class B
     shares                  (43)       (83)        43         83          -
    -------------------------------------------------------------------------

    Balance,
     December 31, 2006     2,379      4,525     30,223    192,977    197,502
    Stock options
     exercised                 -          -        278      4,421      4,421
    -------------------------------------------------------------------------
    Balance,
     December 31, 2007     2,379  $   4,525     30,501  $ 197,398  $ 201,923
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

            In 2005, the Company issued 200,000 restricted shares as part of
            the consideration for the purchase of the remaining 49% of its
            European joint venture, CCL-Pachem. These restricted shares are
            price protected and cannot be sold until December 31, 2008.

        (c) Share attributes:

            The Company's authorized capital consists of an unlimited number
            of Class A voting shares and an unlimited number of Class B
            non-voting shares.

            (i)  Class A:

                 Class A shares carry full voting rights and are convertible
                 at any time into Class B shares. Dividends are currently set
                 at $0.05 per share per annum less than Class B shares.

            (ii) Class B:

                 Class B shares rank equally in all material respects with
                 Class A shares, except as follows:

                 (a) Holders of Class B shares are entitled to receive
                     material and attend, but not to vote at, regular
                     shareholder meetings.

                 (b) Holders of Class B shares are entitled to voting
                     privileges when consideration for the Class A shares,
                     under a takeover bid when voting control has been
                     acquired, exceeds 115% of the market price of the
                     Class B shares.

                 (c) Holders of Class B shares are entitled to receive, or
                     have set aside for payment, dividends declared by the
                     Board of Directors from time to time.

                 (d) Earnings per share:

                     --------------------------------------------------------
                                        2007                    2006
                                 Class A     Class B     Class A     Class B
                     --------------------------------------------------------

                     Basic
                      earnings    $ 4.27      $ 4.59      $ 2.36      $ 2.41
                     Diluted
                      earnings      4.11        4.42        2.28        2.33
                     --------------------------------------------------------
                     --------------------------------------------------------


                     --------------------------------------------------------
                                                            2007        2006
                     --------------------------------------------------------

                     Year-to-date weighted
                      average number of shares        32,284,210  32,240,324
                     --------------------------------------------------------
                     --------------------------------------------------------

                     Year-to-date weighted
                      average diluted number
                      of shares                       33,492,937  33,259,055
                     --------------------------------------------------------
                     --------------------------------------------------------

                     Fully diluted earnings per Class B share computed using
                     the treasury stock method reflects the dilutive effect,
                     if any, of the exercise of share options, shares held as
                     security for executive share purchase plan loans
                     outstanding, shares held in trust and deferred share
                     units at December 31, assuming they had been exercised
                     at the beginning of the year.

        (e) Stock-based compensation plans:

            At December 31, 2007, the Company had two stock-based
            compensation plans, which are described below:

            (i)  Employee stock option plan:

                 Under the employee stock option plan, the Company may grant
                 options to employees, officers and inside directors of the
                 Company up to 3,000,000 Class B non-voting shares. The
                 Company does not grant options to outside directors. The
                 exercise price of each option equals the market price of the
                 Company's stock on the date of grant, and an option's
                 maximum term is 10 years. Before December 2003, options
                 vested 20% on the grant date and 20% each year following the
                 grant date. The term of these options was generally
                 10 years. Beginning December 2003, options granted begin to
                 vest a year from grant date, with 25% vesting one year from
                 grant date and 25% each subsequent year. The term of these
                 options is five years from the grant date. Exceptions to
                 this vesting schedule were grants in 2005 to certain
                 employees totalling 50,000 shares upon the acquisition of
                 the employees' business by the Company. These options vest
                 only at the end of five years and expire after 10 years.

                 The Company accounts for employee stock-based compensation
                 granted prior to January 1, 2003 using the intrinsic value
                 method. If the fair value method had been applied to stock
                 options granted between January 1, 2002 and December 31,
                 2002, additional compensation costs of nil (2006 -
                 $0.3 million) would have been recorded. Pro forma net
                 earnings would be unchanged in 2007 (2006 - $77.1 million)
                 and pro forma earnings per share would be unchanged in 2007
                 (2006 - $2.40). For options granted after December 31, 2002
                 and share awards granted for executive compensation, the
                 fair value method has been recognized in the financial
                 statements resulting in an expense of $2.4 million (2006 -
                 $2.1 million) with a corresponding offset to contributed
                 surplus. The fair value of options granted has been
                 estimated using the Black-Scholes model and the following
                 assumptions:

                 ------------------------------------------------------------
                                                          2007          2006
                 ------------------------------------------------------------

                 Risk-free interest rate                 3.75%         4.09%
                 Expected life                       4.5 years     4.5 years
                 Expected volatility                       21%           21%
                 Expected dividends                      $0.48         $0.44
                 ------------------------------------------------------------
                 ------------------------------------------------------------

                 A summary of the status of the Company's employee stock
                 option plan as of December 31, 2007 and 2006 and changes
                 during the years ended on those dates is presented below:

                 ------------------------------------------------------------
                                               2007                     2006
                 ------------------------------------------------------------
                                           Weighted                 Weighted
                                            average                  average
                                           exercise                 exercise
                                Shares        price      Shares        price
                 ------------------------------------------------------------

                 Outstanding,
                  beginning
                  of year        1,799   $    17.79       1,734   $    16.55
                 Granted           165        38.77         170        28.45
                 Exercised        (278)       15.05         (91)       14.03
                 Forfeited           -            -         (14)       17.95
                 ------------------------------------------------------------
                 Outstanding,
                  end of year    1,686   $    20.30       1,799   $    17.79
                 ------------------------------------------------------------
                 ------------------------------------------------------------

                 Options
                  exercisable,
                  end of year    1,204   $    16.10       1,295   $    14.91

                 ------------------------------------------------------------
                 ------------------------------------------------------------

                 The following table summarizes information about the
                 employee stock options outstanding at December 31, 2007:

    -------------------------------------------------------------------------
                           Options outstanding           Options exercisable
                  ------------------------------------- ---------------------
                                   Weighted
                                    average   Weighted              Weighted
    Range of                      remaining    average   Options     average
     exercise         Options   contractual   exercise   exercis-   exercise
     price        outstanding          life      price      able       price
    -------------------------------------------------------------------------

    $ 8.35 - $12.00      142      2.8 years    $  8.35       142     $  8.35
    $12.01 - $16.00      467      2.7 years      13.15       467       13.15
    $16.01 - $20.00      497      2.5 years      17.96       455       17.98
    $20.01 - $30.00      415      3.9 years      27.89       140       27.68
    $30.01 - $44.25      165      4.9 years      38.77         -           -
    -------------------------------------------------------------------------
    $ 8.35 - $44.25    1,686      3.2 years    $ 20.30     1,204     $ 16.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

            (ii) Executive share purchase plan:

                 Under the executive share purchase plan, which was
                 discontinued in December 2001, the Company provided
                 assistance to senior officers and executives of the Company
                 to invest in Class B shares of the Company in the open
                 market by providing interest-free loans. The loans have a
                 10-year term and are repayable only when the shares are sold
                 or upon completion of employment. The executive share
                 purchase plan loans have been deducted from shareholders'
                 equity. These loans are secured by 100,000 (2006 - 125,000)
                 Class B shares of the Company with a quoted value at
                 December 31, 2007 of $38.61 (2006 - $28.37) per Class B
                 share, totalling $3.9 million (2006 - $3.5 million).

        (f) Deferred share units:

            The Company maintains a deferred share unit ("DSU") plan. Under
            this plan, non-employee members of the Company's Board of
            Directors may elect to receive DSUs, in lieu of cash
            remuneration, for director fees which would otherwise be payable
            to such directors or any portion thereof. The number of units
            received is equivalent to the fees earned and is based on the
            fair market value of a Class B non-voting share of the Company's
            capital stock on the date of issue of the DSU. DSUs cannot be
            redeemed or paid out until such time as the director ceases to be
            a director. A DSU entitles the holder to receive, on a deferred
            payment basis, either the number of Class B non-voting shares of
            the Company equating to the number of his or her DSUs, or, at the
            election of the Company, a cash amount equal to the fair market
            value of an equal number of Class B non-voting shares of the
            Company on the redemption date. The Company had 15,924 DSUs
            outstanding as at December 31, 2007. The amount expensed in 2007
            totalled $0.4 million (2006 - $0.2 million).

    14. Commitments and contingencies:

        The Company has commitments under various long-term operating lease
        agreements.

        Future minimum payments under such lease obligations are due as
        follows:

        ---------------------------------------------------------------------

        2008                                                        $  9,241
        2009                                                           7,301
        2010                                                           5,631
        2011                                                           4,303
        2012                                                           2,654
        Thereafter                                                     9,949
        ---------------------------------------------------------------------
                                                                    $ 39,079
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company and its consolidated subsidiaries are defendants in
        actions brought against them from time to time in connection with
        their operations. While it is not possible to estimate the outcome
        of the various proceedings at this time, the Company does not believe
        they will have a material impact on its financial position or
        results of operations.

    15. Guarantees:

        In connection with the divestitures of certain operations, the
        Company has indemnified the purchasers against defined claims from
        the past conduct of the business and also provided certain guarantees
        in relation to the obligations assumed by the purchasers. It is not
        possible to quantify the maximum potential liability in relation to
        the indemnities. There were no guarantees related to indemnities
        incurred from disposed operations and other guarantees (2006 -
        $1.9 million). Certain indemnities for environmental matters have
        been accrued for in other long-term items (note 11).

        Standby letters of credit amounted to $4.0 million (2006 -
        $11.6 million) and are secured with existing operating lines of
        credit.

    16. Employee future benefits:

        The Company maintains two defined benefit pension plans, several
        defined contribution pension plans and various supplemental
        retirement plans.

        The expense for the defined contribution plans was $5.1 million
        (2006 - $4.5 million).

        Information on the defined benefit plans and the supplemental
        retirement plans is as follows:

        ---------------------------------------------------------------------
                                                          2007          2006
        ---------------------------------------------------------------------

        Accrued benefit obligation:
          Balance, beginning of year               $    70,390   $    59,904
          Current service cost                             743           663
          Interest cost                                  3,205         2,892
          Benefits paid                                 (1,824)       (1,717)
          Actuarial loss (gain)                         (4,366)           32
          Reinstatements and transfers                     (97)        2,722
          Effect of curtailment                            283             -
          Special termination benefits                     141             -
          Foreign exchange rate changes                 (6,287)        5,894
        ---------------------------------------------------------------------
        Balance, end of year                       $    62,188   $    70,390
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Plan assets:
          Fair value, beginning of year            $    34,511   $    26,826
          Actual return on plan assets                   1,977         2,904
          Employer contributions                         2,403         1,763
          Benefits paid                                 (1,824)       (1,717)
          Reinstatements and transfers                     (97)        1,216
          Foreign exchange rate changes                 (4,360)        3,519
        ---------------------------------------------------------------------
        Fair value, end of year                    $    32,610   $    34,511
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Fund status, net deficit of plans          $   (29,578)  $   (35,879)
        Unamortized past service cost                      124           169
        Unamortized net actuarial loss                   9,095        14,773
        ---------------------------------------------------------------------
        Accrued benefit liability                  $   (20,359)  $   (20,937)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The amount of accrued benefit liability is included in the Company's
        balance sheets under other long-term liabilities, less current
        portion of $0.7 million (2006 - $1.3 million), which is included in
        accrued liabilities.

        Included in the above accrued benefit liability for 2007 is
        $19.3 million (2006 - $19.1 million) for the unfunded supplemental
        retirement plans.

        The most recent actuarial valuation of the UK defined benefit pension
        plan for funding purposes was as of January 1, 2005. The next
        valuation will be as of January 1, 2008 and will be completed during
        2008.

        The Company is in the process of converting a portion of a Canadian
        executive defined contribution pension plan to an existing defined
        benefit pension plan. The assets and obligations to be transferred to
        the defined benefit plan will be $2.2 million. The most recent
        actuarial valuation for funding purposes of the plan was as of
        January 1, 2006. The next actuarial valuation for this plan will be
        as of January 1, 2009.

        Plan assets consist of equity securities 72% (2006 - 72%), debt
        securities 21% (2006 - 20%), real estate 4% (2006 - 5%) and other 3%
        (2006 - 3%).

        The significant actuarial assumptions adopted in measuring the
        Company's accrued benefit liability are as follows:

        ---------------------------------------------------------------------
                                                          2007          2006
        ---------------------------------------------------------------------

        Discount rate                                    5.49%         4.97%
        Expected long-term rate of return
         on plan assets                                  6.92%         7.00%
        Rate of compensation increase                    3.34%         3.39%
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company's net benefit plan expense is as follows:

        ---------------------------------------------------------------------
                                                          2007          2006
        ---------------------------------------------------------------------

        Current service cost                          $    743      $    663
        Past service cost                                   21            21
        Interest cost                                    3,205         2,892
        Expected return on plan assets                  (2,275)       (1,908)
        Amortization of net actuarial loss                 627           710
        Curtailment loss                                   307             -
        Special termination benefits                       141             -
        ---------------------------------------------------------------------
        Net benefit plan expense                      $  2,769      $  2,378
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The average remaining service period of active members covered by the
        defined benefit plans is 14 years for 2007 (2006 - 16 years).

    17. Segmented information:

        The Company's reportable segments are generally managed independently
        of each other, primarily because of product diversity. Each segment
        retains its own management team and is responsible for compiling its
        own financial information.

        The Company has three reportable segments: Label, Container and Tube
        (2006 - four reportable segments: Label, Container, Tube and
        ColepCCL). In 2006, the Company separated the Container segment into
        Container and Tube, to more closely represent the current management
        structure and provide more relevant information to the Company's
        shareholders. The Label segment produces pressure sensitive
        self-adhesive labels, and designs and prints a wide range of
        high-quality paper and film, expanded content, promotional, coupon
        and in-mould labels. The Container segment manufactures aluminum
        aerosol containers and the Tube segment manufactures plastic tubes.
        The ColepCCL segment produces aerosol, liquid and solid stick
        products and manufactures steel aerosol, food and general line cans
        and plastic containers.

        Transactions with one significant customer in 2007 accounted for
        approximately $127 million (2006 - one customer for $155 million) of
        the Company's total revenue.

        The accounting policies of the segments are the same as those
        described in the summary of significant accounting policies. The
        Company evaluates performance based on income from operations before
        interest, restructuring and other items and income taxes, and on
        return on operating assets.

        (a) Industry segments:

            -----------------------------------------------------------------
                                       Sales                    Income
                                 2007         2006         2007         2006
            -----------------------------------------------------------------

            Label         $   904,438  $   784,134  $   122,466  $   100,605
            Container         181,470      176,311       17,760       16,677
            Tube               58,352       69,124          460        4,482
            -----------------------------------------------------------------
                          $ 1,144,260  $ 1,029,569      140,686      121,764
                          ------------ ------------
                          ------------ ------------
            Corporate
             expense                                     (9,694)     (12,757)
            Interest expense,
             net                                        (23,157)     (20,584)
            Restructuring and
             other items, net
             gain (loss) (note 5)                         4,137      (11,502)
            Income taxes                                (18,466)     (12,053)
            -----------------------------------------------------------------

            Net earnings from
             continuing
             operations                                  93,506       64,868
            Net earnings from
             discontinued
             operations,
             net of tax                                  10,957       12,552
            Gain on sale of
             discontinued
             operations                                  43,452            -
            -----------------------------------------------------------------
            Net earnings                            $   147,915  $    77,420
            -----------------------------------------------------------------
            -----------------------------------------------------------------


            -----------------------------------------------------------------
                                   Identifiable
                                      assets                   Goodwill
            -----------------------------------------------------------------
                                 2007         2006         2007         2006
            -----------------------------------------------------------------
            Label         $   994,440  $   909,264  $   336,490  $   303,579
            Container         166,838      194,438       12,734       12,759
            Tube               82,424       96,923       25,526       30,026
            ColepCCL                -      172,429            -       42,636
            Corporate         244,488      169,536            -            -
            -----------------------------------------------------------------
                          $ 1,488,190  $ 1,542,590  $   374,750  $   389,000
            -----------------------------------------------------------------
            -----------------------------------------------------------------


            -----------------------------------------------------------------
                                   Depreciation
                                 and amortization
                                 from continuing               Capital
                                    operations               expenditures
            -----------------------------------------------------------------
                                 2007         2006         2007         2006
            -----------------------------------------------------------------
            Label         $    57,389  $    48,712  $   130,094  $   100,413
            Container          11,254       10,604       11,622       34,408
            Tube                6,852        7,091        9,551        9,724
            ColepCCL                -            -       12,030        5,522
            Corporate             417          640          156          356
            -----------------------------------------------------------------
                          $    75,912  $    67,047  $   163,453  $   150,423
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        (b) Geographic segments:

            -----------------------------------------------------------------
                                                           Property, plant
                                                            and equipment
                                       Sales                 and goodwill
                                 2007         2006         2007         2006
            -----------------------------------------------------------------

            Canada        $   134,451  $   135,875  $   120,728  $   120,569
            United States
             and Puerto Rico  433,946      449,269      404,450      436,912
            Mexico and
             Brazil            97,309       79,996       88,883       55,387
            Europe            448,927      345,561      355,912      369,804
            Asia               29,627       18,868       35,587       34,347
            -----------------------------------------------------------------
                          $ 1,144,260  $ 1,029,569  $ 1,005,560  $ 1,017,019
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            The geographical segment is determined by the location of the
            Company's country of operation.

    18. Financial instruments:

        (a) Risk management activities:

            In the past, the Company has utilized forward foreign exchange
            contracts to hedge its foreign currency exposure on certain
            anticipated U.S. sales. The contracts obliged the Company to sell
            U.S. dollars in the future at predetermined rates. As at
            December 31, 2007, the Company had no outstanding contracts.

            The Company had also entered into a non-deliverable forward
            foreign exchange contract in July 2006 to hedge its investment
            and cash flow from its Brazilian subsidiaries. The contract
            required the Company to receive or pay the Canadian dollar change
            in value of the hedge in April 2007. There is no outstanding
            contract as at December 31, 2007.

            The Company enters into futures contracts to hedge the cost of
            aluminum used in its container manufacturing process against
            specific customer requirements. As at December 31, 2007, futures
            contracts for U.S. $14.1 million of aluminum purchase commitments
            at an average price of U.S. $2,547 per metric ton, extending
            through 2008, were outstanding.

        (b) Credit risk:

            Certain financial assets of the Company, including cash and cash
            equivalents, are exposed to credit risk. The Company may, from
            time to time, invest in debt obligations and commercial paper of
            governments and corporations. Such investments are limited to
            those issuers carrying an investment grade credit rating. In
            addition, the Company limits the amount that is invested in
            issues of any one government or corporation.

        (c) Fair values:

            The carrying values of cash and cash equivalents, accounts
            receivable, other receivables, long-term investments and accounts
            payable and accrued liabilities approximate fair values due to
            the short-term maturities of these financial instruments.

            The fair value of long-term debt is $408.6 million (2006 -
            $439.1 million). Fair value of long-term debt is determined as
            the present value of contractual future payments of principal and
            interest discounted at the current market rates of interest
            available to the Company for the same or similar debt
            instruments.

            There were no outstanding U.S. dollar forward foreign exchange
            contract rates as at December 31, 2007 (2006 - unrecognized
            financial liabilities with a fair value loss of $0.2 million).

            There were no outstanding non-deliverable Brazilian real forward
            contracts as at December 31, 2007 (2006 - unrecognized financial
            liability with a fair value loss of $1.1 million).

            The unrealized loss on the interest rate swap agreements and the
            cross currency interest rate swap agreements as at December 31,
            2007 amounts to $13.9 million (2006 - $14.8 million).

            Future aluminum contracts that have become unfavourable
            constitute unrecognized financial liabilities and have a fair
            value loss of $0.6 million (2006 - fair value gain of
            $4.5 million).

        (d) Foreign exchange gains and losses:

            Included in income from operations for the year ended
            December 31, 2007 are foreign exchange gains totalling
            $3.0 million (2006 - $1.2 million).

    19. Subsequent event:

        On January 31, 2008, the Company acquired CD-Design GmbH
        ("CD-Design"), a privately owned business based in Solingen, Germany.
        CD-Design converts pressure sensitive films and aluminum for
        automotive original equipment manufacturers in Germany and other
        European markets. The purchase price is approximately $10.0 million
        in a combination of cash and assumed debt and potentially a further
        $4.5 million in cash at the end of 2008 as an earn-out subject to
        achieving certain financial targets. The purchase was funded with
        existing cash on hand.


                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                   YEARS ENDED DECEMBER 31, 2007 AND 2006

    (TABULAR AMOUNTS IN MILLIONS OF CANADIAN DOLLARS EXCEPT PER SHARE DATA)
    

    This document has been prepared for the purpose of providing Management's
Discussion and Analysis ("MD&A") of the financial condition and results of
operations for the years ended December 31, 2007 and 2006. The information in
this MD&A is current to February 28, 2008, unless otherwise noted. This MD&A
should be read in conjunction with the Company's December 31, 2007 year-end
financial statements, which form part of the CCL Industries Inc. 2007 Annual
Report dated February 28, 2008. The financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP") and
unless otherwise noted, both the financial statements and this MD&A are
expressed in Canadian dollars as the reporting currency. The major measurement
currencies of CCL's operations are the Canadian dollar, the U.S. dollar, the
euro, the Danish krone, the U.K. pound sterling, the Mexican peso, the
Thailand baht, the Chinese renminbi, the Brazilian real, the Polish zloty and
the Russian rouble. All "per Class B share" amounts in this document are
expressed on an undiluted basis, unless otherwise indicated. CCL's Audit
Committee and its Board of Directors have reviewed this MD&A to ensure
consistency with the approved strategy of the Company and the results of the
Company.

    
                                    INDEX
                                    -----

    1.  Corporate Overview

        A) Our Company                B) Our Customers and Markets
        C) Our Strategy and           D) Recent Acquisitions and Dispositions
           Financial Targets          F) Seasonality and Fourth Quarter
        E) Consolidated Annual           Financial Results
           Financial Results

    2.  Business Segment Review

        A) General                    B) Label Division
        C) Container Division         D) Tube Division

    3.  Financing and Risk Management

        A) Liquidity and Capital      B) Cash Flow
           Resources                  D) Shareholders' Equity and Dividends
        C) Interest Rate, Foreign     F) Controls and Procedures
           Exchange Management
           and Other Hedges
        E) Commitments and Other
           Contractual Obligations

    4.  Risks and Uncertainties

    5.  Accounting Policies and Non-GAAP Measures

        A) Key Performance Indicators B) Accounting Policies and
           and Non-GAAP Measures         New Standards
        C) Critical Accounting        D) Inter-Company and Related Party
           Estimates                     Transactions

    6.  Outlook
    

    Management's Discussion and Analysis contains forward-looking
information, as defined in the Securities Act (Ontario) (hereinafter referred
to as "forward-looking statements"), including statements concerning possible
or assumed future results of operations of the Company. Forward-looking
statements typically are preceded by, followed by or include the words
"believes," "expects," "anticipates," "estimates," "intends," "plans," or
similar expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions including, but
not limited to, the impact of competition; consumer confidence and spending
preferences; general economic and geopolitical conditions; currency exchange
rates; and CCL's ability to attract and retain qualified employees.
Accordingly, the Company's results could differ materially from those
anticipated in these forward-looking statements. Further details on key risks
can be found throughout this report, particularly in the "Risks and
Uncertainties" section.

    1. CORPORATE OVERVIEW
    ----------------------

    A) Our Company

    CCL Industries Inc. is a leading provider of state-of-the-art specialty
packaging solutions to global producers of consumer brands in the home and
personal care, healthcare, durable goods, and specialty food and beverage
sectors. Founded in 1951, the Company has been public under its current name
since 1980. CCL's corporate office is located in Toronto, Canada with its
operational leadership centred in Framingham, Massachusetts, United States.
The corporate office provides executive and centralized services such as
finance, accounting, internal audit, treasury, risk management, legal, tax,
human resources, information technology and environmental, health and safety.
The Framingham office provides operational direction and oversees the
activities of CCL's divisions: Label, Container and Tube. As of February 2008,
CCL employs approximately 5,300 people and operates 53 production facilities
in North America, Latin America, Europe and Asia, including an equity
investment in Russia since December 2007.

    B) Our Customers and Markets

    CCL's customer base is primarily comprised of a significant number of
global non-durable consumer product and healthcare companies. A strategy of
many of our customers is to create ever-growing global market positions.
Recent trends include customer consolidation, even among the largest players,
and a disproportionate growth in sales in emerging markets.
    Total demand for non-durable personal care, healthcare and household
products is fairly stable as consumers generally use them on a regular basis,
often daily. There tends to be less volatility in demand for CCL's products
and services relative to those of some other industries. This is due to the
more predictable and routine consumer usage of these non-durable products and,
as a result, the specialty packaging products and services supplied by CCL.
Certain markets, such as beverage and agro-chemical products, are seasonal in
nature and affect the variability of quarterly sales and profitability.
    The state of the global economy and geopolitical events affect consumer
demand and ultimately our customers' plans. Our customers react to these
issues and competitive activity in their industries as they develop marketing
strategies including the introduction and promotion of new and existing
products. These factors directly influence the demand for CCL's packaging
components of our customers' products. The Company's growth expectations
generally mirror industry trends and the growth of gross domestic product in
each market. CCL also anticipates improving its market share generally in each
market and category over time, consistent with its recent overall historical
trend.
    No single competitor of the Label Division has the substantial operating
breadth or geographic range as CCL Label. There is one competitor in North
America in the Container business and a handful of competitors in the Tube
category.

    C) Our Strategy and Financial Targets

    CCL's vision is to increase shareholder value by providing the best total
value to our customers as a successful, growing market leader in specialty
packaging and by building on the strengths of our people, manufacturing skills
and strong international customer relationships. The Company anticipates
increasing its market share in most categories by capitalizing on our
customers' growth, by following market trends such as globalization, by new
product innovation and by further developing existing products.
    A key driver in CCL's strategy is focus. We aspire to be the market
leader and the highest value-added producer for each product line and region
that we choose to cover. CCL does not intend to move into radically different
segments of the packaging industry but rather to expand in existing categories
or in other adjacent areas closely aligned with our existing business
strengths. The recent sale of our interest in the non-core ColepCCL joint
venture, the creation of the new equity investment in Russia (a geographic
expansion in pressure sensitive labels) and the CD-Design GmbH acquisition (an
expansion into durable pressure sensitive labels) are further steps in
building on our focused business strategy.
    The Company's overall strategic focus in this decade has been to maximize
earnings and cash flow from our current operations while developing growth
opportunities through investment in new plants and equipment and by innovation
in new product development. This approach is intended to allow us to increase
market share and to grow internationally with our customers. The strategy also
includes seeking attractively priced acquisitions. These acquisitions should
be within CCL's core competencies and manufacturing capabilities and be
immediately accretive to earnings. In addition, they may enhance geographic
expansion and provide new technologies and products to CCL's portfolio.
    In addition, CCL has a continuous focus on maximizing cash flow by
minimizing working capital investment and ensuring capital spending is
positively accretive to earnings, and selectively targets the most attractive
growth opportunities.
    A key financial target is return on equity before restructuring and other
items and favourable tax adjustments ("ROE", a non-GAAP measure; see "Key
Performance Indicators and Non-GAAP Measures" in Section 5A below). CCL
continues to execute its strategy with a goal of achieving the ROE level of
its leading peers in specialty packaging, currently in the 12% to 14% range.
ROE has grown from 11.5% in 2002 to 13.3% in 2007 despite the significant
growth in equity as a result of the gains on sale of the North American Custom
Manufacturing Division ("Custom") in 2005 and the ColepCCL joint venture in
2007, and the cumulative negative effect on earnings of the stronger Canadian
dollar. Management believes that this target level of ROE is reasonable and
attractive to investors.
    Another important and related financial target is the long-term growth
rate of earnings per share. Management believes that taking into account both
the overall stable demand for non-durable consumer products globally and the
continuing benefits from its focused strategies and operational approach, a
targeted growth rate in earnings per share excluding restructuring and other
items and favourable tax adjustments (a non-GAAP measure; see "Key Performance
Indicators and Non-GAAP Measures" in Section 5A below) in the range of 10%
compounded annually is realistic. The Company will continue to focus on
generating cash and to effectively utilize the cash flow generated by
operations and divestitures. This cash will continue to be invested in capital
additions to take advantage of organic growth opportunities and in
acquisitions that are accretive to earnings per share. If the net cash flow
periodically exceeds attractive acquisition opportunities available, CCL will
also repurchase its shares provided that the repurchase is accretive to
earnings per share, is at a valuation equal or lower than valuations for
acquisition opportunities and will not increase financial leverage beyond
targeted levels. Earnings per share from continuing operations and
discontinued operations, excluding restructuring and other items and
favourable tax adjustments and gains on business dispositions, have grown by
19%, 19% and 53% in 2007, 2006 and 2005, respectively, well in excess of our
cumulative target despite the impact of unfavourable currency.
    The framework supporting the above two targets is an appropriate level of
financial leverage. Based on the dynamics within the packaging industry and
the risks that higher leverage may bring, CCL has a comfort level of
approximately 45% for its net debt to total book capitalization (a non-GAAP
measure; see "Key Performance Indicators and Non-GAAP Measures" in Section 5A
below). As at December 31, 2007, net debt to total book capitalization was
30%. The January 2008 CD-Design transaction (see "Recent Acquisitions and
Dispositions" in Section 1D below) will add approximately 2% to the net debt
to total book capitalization ratio while the collection of the final payment
on the sale of ColepCCL at the end of February 2008 reduced this ratio by
approximately 5% on a pro forma basis. With the recent level of profitability
that the Company has experienced and the current leverage, this would imply
that CCL's debt would firmly fit into the investment-grade category. This
leverage level is well below the target range, primarily due to the sale of
ColepCCL, and indicates that there is substantial room for additional net debt
to finance appropriate growth opportunities without the need to attract new
equity.
    CCL has also targeted the dividend payout as an important metric. CCL has
paid dividends quarterly for over 25 years without an omission or reduction
and has increased the dividend substantially in the last five years. The
Company views this consistency as an important factor in enhancing shareholder
value. The Company plans to continue paying dividends equal to 20% to 25% of
earnings excluding gains on dispositions, restructuring and other items and
favourable tax adjustments. In 2007, the dividend payout ratio was 17% (18% in
2006). The dividend payout ratio was below the targeted range due to the
substantial earnings growth in the last two years. Consequently, after a
review of the 2007 results, and considering the cash flow and earnings
budgeted for 2008, the Board of Directors has declared a 17% increase in the
dividend to $0.14 per quarter per Class B share (or $0.56 annualized)
effective with the March 31, 2008 payment. If this level of dividend had been
in effect for 2007, the dividend payout ratio would have been 20%.
    The Company believes that all of the above targets are compatible with
each other and consequently should drive meaningful shareholder value.
    CCL's strategy and its ability to grow and achieve attractive returns for
its shareholders are shaped by key internal and external factors that are
common to specialty packaging. The key performance driver is our continuous
focus on customer satisfaction, founded on a reputation of quality
manufacturing, competitive cost, innovation, dependability, ethical business
practices and financial stability. CCL believes that it is the highest value-
added producer in most of its businesses, and is continuing to foster new
product innovations to support its customers' needs.

    D) Recent Acquisitions and Dispositions

    In 2005, the Company recognized that the opportunities for growth in its
specialty packaging businesses were substantial. At that time, CCL was offered
what it considered to be a premium cash price for its North American Custom
Manufacturing Division ("Custom"). The sale of Custom for $273 million in cash
was both a financial and strategic decision. Strategically, CCL's focus was
dramatically narrowed by its transformation into a pure specialty packaging
company, with the exception of its 40% ownership in the ColepCCL joint
venture.
    In November 2007, CCL sold its interest in ColepCCL to its majority
partner for cash proceeds of approximately $147 million with half paid upon
closing and the balance paid on February 29, 2008. This price represented a
good valuation for the investment and completed the transformation of the
Company into a focused specialty packaging business.
    The proceeds from both of these sales have been and continue to be
invested in the Company's higher growth specialty packaging businesses. These
investments include accretive acquisitions and capital spending for organic
internal growth and technology enhancements. The sale of Custom and ColepCCL
also reduced CCL's financial leverage, and the Custom sale reduced the
financial risk associated with its dependence on the U.S. dollar and the
international competitive risk of the North American economy. The ColepCCL
sale reduced the investment risk of minority ownership, the related inability
for CCL to control operating decisions associated with this joint venture and
the risks in operating a contract manufacturing and metal packaging business
in Europe. CCL is now a more internationally positioned company with increased
diversification across the global economy and with exposure to many different
currencies. For financial reporting purposes, Custom and ColepCCL have been
treated as discontinued operations.
    CCL has been redeploying the proceeds of the sale of Custom and ColepCCL
and its cash flow from operations into its specialty packaging business with
internal organic capital investments and by way of the following acquisitions
in the last two years:

    
    -   In January 2006, the Prodesmaq label business in Brazil was acquired
        as CCL's first venture into South America for $62 million.
    -   In January 2007, CCL acquired the shrink sleeve and stretch sleeve
        business of Illinois Tool Works, Inc. ("ITW") located in Europe,
        Brazil and the United States for $106 million.
    -   In December 2007, CCL entered into the 50% owned CCL-Kontur equity
        investment located in Moscow and St. Petersburg, Russia, servicing
        the personal care and beverage label markets in the region for
        $9 million with further investment to come in early 2008 once the
        assets have been legally transferred to the Company.
    -   In January 2008, CD-Design in Germany was acquired for $10 million as
        CCL's first entry into the durable label business as it services the
        European automotive original equipment manufacturing market primarily
        in Germany, with a further payment of $5 million expected based on
        financial performance.
    

    From 2005 until now, CCL has spent $326 million on acquisitions. They
have been funded by dispositions totalling $444 million in cash over the same
time frame, including the $74 million in 2008 for the final payment on the
sale of ColepCCL.
    All of the recent acquisitions, including building new plants in
Thailand, Poland and China in the last few years and Vietnam and India in
2008, have positioned the Label Division as the global leader for pressure
sensitive labels in the personal care, healthcare, battery, food, beverage,
promotional and specialty categories.
    In February 2006, the Company divested the assets of the CCL Dispensing
business in Libertyville, Illinois, as it was deemed to be a non-core minor
player in the global closures market. In October 2006, the label business in
Houten, the Netherlands, was sold as it was relatively small and serviced
primarily local customers that were not part of the Label Division's target
markets.

    E) Consolidated Annual Financial Results

    
    Selected Financial Information
    ------------------------------

    Results of Consolidated Operations          2007        2006        2005
    ----------------------------------          ----        ----        ----

    Sales from continuing operations      $  1,144.3  $  1,029.5  $    922.5
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    Income from operations before
     undernoted items                     $    206.9  $    176.1  $    146.9

    Depreciation and amortization               75.9        67.0        57.6
    Interest expense (net)                      23.2        20.6        18.8
                                          ----------- ----------- -----------
                                               107.8        88.5        70.5
    Restructuring and other items
     - net gain (loss)                           4.1       (11.5)      (16.5)
                                          ----------- ----------- -----------
    Earnings before income taxes               111.9        77.0        54.0
    Income taxes                                18.5        12.1        13.8
                                          ----------- ----------- -----------
    Net earnings from continuing
     operations                                 93.4        64.9        40.2
    Net earnings from discontinued
     operations, net of tax                     11.0        12.5        15.1
    Gain on sale of discontinued
     operations, net of tax                     43.5           -       108.5
                                          ----------- ----------- -----------
    Net earnings                          $    147.9  $     77.4  $    163.8
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    Per Class B share
      Continuing operations               $     2.90  $     2.02  $     1.26
      Discontinued operations                   0.34        0.39        0.48
      Gain on sale of discontinued
       operations                               1.35           -        3.36
                                          ----------- ----------- -----------
      Net earnings                        $     4.59  $     2.41  $     5.10
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
      Restructuring and other items
       and favourable tax adjustment
       - net gain (loss)                  $     0.42  $     0.04  $    (0.42)
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
      Diluted earnings                    $     4.42  $     2.33  $     4.97
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    

    Comments on Consolidated Results
    --------------------------------
    Sales from continuing operations were $1,144.3 million in 2007 compared
to $1,029.5 million in 2006, up a healthy 11%. This performance comes off a
very strong year in 2006, with growth of 12% over the 2005 sales level despite
unfavourable currency translation. The annualized impact of the ITW
acquisition in 2007 provided a significant part of the sales growth, partially
offset by two small divestitures in 2006. Organic growth was also a major
contributor to the sales improvement in 2007. The sales growth in 2007 of
$114.8 million was derived from the following divisions: Label
($120.3 million), Container ($5.2 million) offset in part by Tube (down
$10.7 million). In 2007, currency translation had a very small negative effect
on sales; however, the US-based business units were negatively affected by
unfavourable currency translation (particularly Container and Tube) whereas
the European operations (Label) were favourably affected by currency
translation.
    Sales from manufacturing in Canada represented only 12% of 2007 total
sales from continuing operations. Sales and income reported from foreign
operations are reported in local currency and then translated into Canadian
dollars. During 2006 and 2007, a number of important currencies changed value
relative to the Canadian dollar. The US dollar, the base currency of 38% of
CCL's total sales from continuing operations, depreciated by 5% on average for
the year 2007 versus 2006, following a depreciation of 6% in 2005. All of the
2007 reduction occurred in the last half of the year. In addition, Europe,
accountable for 39% of CCL's total sales, has seen its primary currency, the
euro, appreciate against the Canadian dollar in 2007 by 3% on average versus
2006, after a depreciation of 6% in 2005. However, all of the relative
appreciation of the euro in 2007 occurred in the first half of the year. There
was a modest 1% negative effect on sales due to currency translation in 2007
overall, but in 2006 it had a more significant negative effect on reported
sales. If the effect of foreign currency translation and the impact of
divestitures were excluded, sales increased by 13% in 2007 compared to 2006,
including acquisitions. Excluding currency translation and the impact of
divestitures, sales from continuing operations increased by 17% in 2006
compared to 2005.
    Divisional operating income from continuing operations in 2007 was
$140.7 million, up a very strong 16% from $121.8 million reported in 2006 and
$99.3 million earned in 2005. This income growth was derived from both
existing and acquired operations despite negative currency influences. The
growth in divisional operating income in 2007 of $18.9 million was generated
in Label ($21.8 million) and Container ($1.2 million) offset, in part, by Tube
($4.1 million). The Container and Tube operations were negatively impacted by
currency translation. In addition, Container was affected by unfavourable
currency transactions on its Canadian operations year-over-year of
$3.9 million. Further details on the divisions follow later in this report.
    Corporate expenses in 2007 at $9.7 million were down from $12.7 million
in 2006 and $10.0 million in 2005. Certain corporate expenses had been
previously allocated to the disposed Custom business in 2005. Major areas of
decreased corporate expenses in 2007 were lower insurance costs, including a
reduction in self-insured claims reserves, and reduced performance-based
executive compensation.
    Earnings before interest, taxes, depreciation and amortization ("EBITDA")
from continuing operations before restructuring and other items (a non-GAAP
measure; see "Key Performance Indicators and Non-GAAP Measures" in Section 5A
below) in 2007 was $206.9 million, up a strong 17% from the $176.1 million
recorded in 2006. The growth in 2006 was up a substantial 20% from the 2005
level of $146.9 million.
    Net interest expense from continuing operations was $23.2 million in
2007, up $2.6 million from the $20.6 million recorded in 2006 and the
$18.8 million of 2005. In all years, interest expense was allocated to
discontinued operations, which accounts for some of the increase in 2006. The
other factors in the increase in net interest costs are higher floating
interest rates and higher average net debt during the year to finance the ITW
acquisition. The depreciation of the U.S. dollar and fluctuations in the euro
over this period have had the overall effect of reducing reported interest
expense since CCL's borrowings are primarily impacted by these currencies.
Interest expense is net of interest earned on short-term investments, interest
rate swap agreements ("IRSA") and cross currency interest rate swap agreements
("CCIRSA"). The Company amortized a gain realized on the sale of an IRSA in
2001 until March 2006.
    In 2007, the Company incurred restructuring costs and other items for a
total gain of $4.1 million ($3.7 million after tax) as follows:

    
    -   In the first quarter, a gain on sale of a redundant property of
        $0.7 million ($0.9 million after tax);
    -   Container Division restructuring costs net of a recovery of a
        severance provision of $0.2 million ($0.1 million after tax);
    -   In the fourth quarter, a gain on repatriation of capital from a
        foreign subsidiary to Canada primarily from the sale of ColepCCL of
        $1.3 million with no tax effect; and
    -   In the fourth quarter, an unrealized exchange gain on the euro-
        denominated note receivable from the sale of ColepCCL of $2.3 million
        ($1.6 million after tax).

    The positive earnings impact of these restructuring and other items in
2007 was $0.12 per Class B share. In addition, the Company recorded favourable
tax adjustments of $9.9 million or $0.30 per share. The net gain of the
restructuring and other items and favourable tax adjustments in 2007 was
$0.42 per share.
    There were a number of restructuring and other items in 2006 for a total
loss of $11.5 million ($10.2 million after tax) as follows:

    -   In early 2006, the Company commenced a senior management
        restructuring in the Container Division and incurred severance costs.
        With new management in place, and in light of changes in the business
        environment, the Division's capital assets and spare parts inventory
        were reviewed and it was determined that certain of these assets had
        no future value in the restructured operations and should not have a
        carrying value. The total cost of the Container restructuring was
        $11.4 million ($7.2 million after tax).

    -   The Company sold net assets of its CCL Dispensing Systems, LLC for
        $24.4 million in cash and realized a gain of $1.6 million (net loss
        of $1.5 million after tax).

    -   The Company repatriated capital from a foreign subsidiary for a net
        foreign exchange loss of $3.5 million with no tax effect.

    -   The Company restructured its European label operations, which
        included the sale of its label operation in Houten, the Netherlands,
        for $2.8 million cash and incurred certain severances within the
        Label Division. The gain on sale, net of restructuring costs, was
        $0.5 million ($0.7 million after tax).

    -   The Company recovered $1.3 million related to a loan amount
        previously provided for on a disposed operation with no tax effect.
    

    The negative earnings impact of these restructuring and other items was
$0.32 per Class B share for the full year 2006. In addition, in December, the
Company recorded a favourable tax adjustment of $11.5 million or $0.36 per
share.
    There were three restructuring and other items in 2005 for a total loss
of $17.9 million ($17.8 million after tax). The Company sold its equity
interest in IntraPac L.P. in exchange for certain real estate of the business
and recorded a loss of $12.7 million ($12.6 million after tax), recorded an
impairment of a ColepCCL property held for sale of $1.4 million and
restructured its Mexican Container business by recording an impairment on
certain equipment and inventory of $3.8 million. Also in 2005, there was a
favourable tax adjustment from previously unrecognized tax losses of
$4.3 million.
    The negative earnings impact of the restructuring and other items in 2005
was $0.55 per Class B share. In addition, the favourable tax adjustments in
2005 positively impacted earnings per share by $0.13. The net loss of the
restructuring and other items and favourable tax adjustments in 2005 was
$0.42 per share.
    In 2007, the tax rate from continuing operations was 16.5% compared to
15.7% and 25.6%, respectively, in 2006 and 2005. These effective rates are
lower than the combined Canadian federal and provincial tax rate of 34.1% in
all three years. The actual tax rate has been lower in these years due to the
benefit of lower tax rates in foreign subsidiaries net of income and expense
items not subject to tax. In 2007, tax rates were positively affected by tax
rate reductions in Canada and foreign jurisdictions and other adjustments for
a total of $9.9 million or $0.30 per share that positively affected the tax
rate. The tax rate would have been 25.4% in 2007 if the above tax expense
reductions were excluded. In 2006, CCL successfully settled a significant tax
reassessment with a foreign tax authority and recorded a net reduction in tax
of $11.5 million or $0.36 per share. The tax rate would have been 30.6% in
2006 if the above tax expense reduction were excluded. The 2005 tax rate would
have been 33.5% if the benefit of a previously unrecognized tax loss due to
the sale of Custom were excluded.
    Approximately 88% of CCL's sales are manufactured in plants outside of
Canada, and the income from these foreign operations is subject to varying
rates of taxation. The Company has benefited from lower tax rates in these
jurisdictions compared to the combined Canadian federal and provincial rates.
The Company's effective tax rate varies from year to year as a result of the
level of income in the various countries, tax losses not previously
recognized, tax reassessments and income and expense items not subject to tax.
    On November 20, 2007, ColepCCL was sold and is now classified as
discontinued operations. Net earnings from this business for the part year of
2007 were $11.0 million compared to the full year 2006 of $12.5 million and
$9.8 million in 2005. In addition, a gain of $43.5 million was recorded upon
the sale of the business in 2007. In 2005, the Custom business was sold and it
generated earnings of $5.3 million in 2005 and a gain on disposal of
$108.5 million.
    Net earnings for 2007 of $147.9 million compares to $77.4 million in 2006
and $163.8 million in 2005. Net earnings per Class B share amounted to $4.59
in 2007 versus the $2.41 recorded in 2006 and $5.10 in 2005. The fluctuation
in earnings and earnings per Class B share over the three years was due to the
sequential improvement in operational performance, restructuring and other
items in each year and the significant gains on the sale of ColepCCL in 2007
and Custom in 2005. In particular, 2007 results included the positive impact
of the gain on the sale of ColepCCL of $43.5 million or $1.35 per share and
2005 had the benefit of the gain on the sale of Custom of $108.5 million or
$3.36 per share. Diluted earnings per Class B share were $4.42 in 2007
compared to $2.33 in 2006.
    There was $0.01 negative effect of foreign currency translation,
including the benefit of lower interest costs on CCL's earnings per share from
continuing operations in 2007 compared to 2006. The negative impact of
currency translation was $0.13 per share in 2006 compared to 2005. The
negative effect on currency transactions in the Container Division's Canadian
operation due to the weakening U.S. dollar was $0.09 per share in 2007
compared to 2006 and was $0.07 per share in 2006 compared to 2005.
    The following table is presented to provide context to the change in the
Company's financial performance. CCL's strategy is to continue to increase the
earnings in existing businesses and replace the earnings from recent large
divestitures - Custom in 2005 and ColepCCL in 2007. The plan to replace this
income includes investing in existing businesses by capital expenditures and
accretive acquisitions, generating interest income on the cash proceeds from
the sale, paying down debt and potentially repurchasing stock at appropriate
prices. There have been no share repurchases since early 2005. On March 4,
2008, the Company initiated a normal course issuer bid to repurchase up to
2.5 million Class B shares and 13,000 Class A shares in the following
12 months.
    The progress of our earnings growth is of primary importance to our
shareholders, lenders, employees and the financial community. This progress is
measured based on earnings per Class B share from the following table. The
gains from the sale of the Custom business in 2005 and ColepCCL in 2007 are
excluded for this purpose. If the net negative impact of restructuring and
other items and the favourable tax adjustments indicated above were excluded
from these results, there is meaningful performance improvement over this time
frame.

    
    Earnings per Class B Share                  2007        2006        2005
    --------------------------                  ----        ----        ----

    Continuing operations                 $     2.90  $     2.02  $     1.26
    Discontinued operations               $     0.34  $     0.39  $     0.48
    Net gain (loss) from restructuring
     and other items and favourable tax
     adjustments included in continuing
     operations(*)                        $     0.42  $     0.04  $    (0.42)

    (*) Note: This is a non-GAAP measure. Refer to "Key Performance
              Indicators and Non-GAAP Measures" in Section 5A below.
    

    The financial results of ColepCCL have been restated to discontinued
operations due to its sale in November 2007.
    The sale of Custom in 2005 required a restatement of its results,
including the allocation of certain costs between continuing and discontinued
operations. Interest expense was allocated based on the ratio of the net
assets employed in the business (not the proceeds from the sale) to the total
net assets of CCL. The income tax expense was based on Custom operating as an
independent business in Canada and the United States and incurring income tax
at the appropriate federal, provincial and state tax rates.

    F) Seasonality and Fourth Quarter Financial Results

    
    2007                       Qtr 1     Qtr 2     Qtr 3     Qtr 4      Year
    ----                       -----     -----     -----     -----      ----
    Sales
      Label                 $  245.1  $  238.4  $  222.9  $  198.0  $  904.4
      Container                 52.9      49.3      40.2      39.1     181.5
      Tube                      18.2      15.8      11.8      12.6      58.4
                            --------- --------- --------- --------- ---------
      Total sales           $  316.2  $  303.5  $  274.9  $  249.7  $1,144.3
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------

    Divisional operating
     income
      Label                 $   37.8  $   31.6  $   28.6  $   24.5  $  122.5
      Container                  6.0       6.0       2.9       2.9      17.8
      Tube                       1.4       0.2      (0.4)     (0.8)      0.4
                            --------- --------- --------- --------- ---------
      Contribution from
       continuing operations    45.2      37.8      31.1      26.6     140.7
    Corporate expenses           3.5       1.0       2.9       2.3       9.7
                            --------- --------- --------- --------- ---------
                                41.7      36.8      28.2      24.3     131.0
    Interest expense, net        6.4       6.2       5.8       4.8      23.2
                            --------- --------- --------- --------- ---------
                                35.3      30.6      22.4      19.5     107.8
    Restructuring and other
     items - net gain (loss)    (0.3)        -       1.2       3.2       4.1
                            --------- --------- --------- --------- ---------
    Earnings before income
     taxes                      35.0      30.6      23.6      22.7     111.9
    Income taxes                 8.7       4.7       2.8       2.3      18.5
                            --------- --------- --------- --------- ---------
    Net earnings from
     continuing operations      26.3      25.9      20.8      20.4      93.4
    Net earnings from
     discontinued operations     3.7       2.9       3.0       1.4      11.0
    Gain on sale of
     discontinued operations       -         -         -      43.5      43.5
                            --------- --------- --------- --------- ---------
    Net earnings            $   30.0  $   28.8  $   23.8  $   65.3  $  147.9
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------

    Per Class B Share
    -----------------
    Net earnings from
     continuing operations  $   0.82  $   0.80  $   0.64  $   0.64  $   2.90
    Net earnings from
     discontinued operations    0.11      0.09      0.10      0.04      0.34
    Gain on sale of
     discontinued operations       -         -         -      1.35      1.35
                            --------- --------- --------- --------- ---------
    Net earnings            $   0.93  $   0.89  $   0.74  $   2.03  $   4.59
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------
    Diluted earnings        $   0.90  $   0.86  $   0.71  $   1.95  $   4.42
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------
    Restructuring and other
     items and favourable
     tax adjustments
     included in net
     earnings - net gain    $   0.05  $   0.11  $   0.12  $   0.14  $   0.42
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------


    2006                       Qtr 1     Qtr 2     Qtr 3     Qtr 4      Year
    ----                       -----     -----     -----     -----      ----
    Sales
      Label                 $  205.1  $  191.5  $  188.1  $  199.4  $  784.1
      Container                 44.4      48.3      41.5      42.1     176.3
      Tube                      19.1      17.7      17.0      15.3      69.1
                            --------- --------- --------- --------- ---------
      Total sales           $  268.6  $  257.5  $  246.6  $  256.8  $1,029.5
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------

    Divisional operating
     income
      Label                 $   29.2  $   23.2  $   21.7  $   26.6  $  100.7
      Container                  6.2       5.7       1.9       2.8      16.6
      Tube                       1.0       1.5       1.4       0.6       4.5
                            --------- --------- --------- --------- ---------
      Contribution from
       continuing operations    36.4      30.4      25.0      30.0     121.8
    Corporate expenses           3.5       3.2       1.5       4.5      12.7
                            --------- --------- --------- --------- ---------
                                32.9      27.2      23.5      25.5     109.1
    Interest expense, net        5.4       5.1       5.1       5.0      20.6
                            --------- --------- --------- --------- ---------
                                27.5      22.1      18.4      20.5      88.5
    Restructuring and other
     items - net gain (loss)     0.4      (1.0)     (3.7)     (7.2)    (11.5)
                            --------- --------- --------- --------- ---------
    Earnings before income
     taxes                      27.9      21.1      14.7      13.3      77.0
    Income taxes (recovery)      9.8       6.0       4.7      (8.4)     12.1
                            --------- --------- --------- --------- ---------
    Net earnings from
     continuing operations      18.1      15.1      10.0      21.7      64.9
    Net earnings from
     discontinued operations     3.0       2.5       3.6       3.4      12.5
                            --------- --------- --------- --------- ---------
    Net earnings            $   21.1  $   17.6  $   13.6  $   25.1  $   77.4
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------

    Per Class B Share
    -----------------
    Net earnings from
     continuing operations  $   0.57  $   0.46  $   0.32  $   0.67  $   2.02
    Net earnings from
     discontinued operations    0.09      0.08      0.11      0.11      0.39
                            --------- --------- --------- --------- ---------
    Net earnings            $   0.66  $   0.54  $   0.43  $   0.78  $   2.41
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------
    Diluted earnings        $   0.64  $   0.53  $   0.41  $   0.75  $   2.33
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------
    Restructuring and
     other items and
     favourable tax
     adjustments included
     in net earnings
     - net gain (loss)      $  (0.03) $  (0.03) $  (0.10) $   0.20  $   0.04
                            --------- --------- --------- --------- ---------
                            --------- --------- --------- --------- ---------
    

    Fourth Quarter Results
    ----------------------
    Sales from continuing operations for the fourth quarter of 2007 were
$249.7 million, down $7.1 million, or 3%, from $256.8 million recorded in last
year's fourth quarter. This sales performance was primarily due to the
significant impact of unfavourable comparative currency translation and
slightly lower sales compared to a strong fourth quarter in 2006, offset in
part by the ITW sleeve acquisition. The decrease in sales came from the Label
Division ($1.4 million), Container ($3.0 million) and Tube ($2.7 million).
    In the fourth quarter results, currency translation was substantially
unfavourable with a 14% decline in the U.S. dollar and a 3% decline in the
euro compared to last year, based on the quarterly average, resulting in an
overall 8% negative impact on total sales. The year-over-year decline in Label
and Tube was partly due to currency translation while Container experienced
organic growth that was more than offset by unfavourable currency. The Label
Division experienced a very strong fourth quarter in 2006 compared to 2007
while the Tube Division continued the unfavourable volume trend from the third
quarter due primarily to the slowing U.S. economy.
    Divisional operating income in the fourth quarter of 2007 was
$26.6 million, down $3.4 million, or 11%, from $30.0 million in the fourth
quarter of 2006. This income reduction was primarily due to unfavourable
currency effects offset in part by the ITW sleeve acquisition. This reduction
came from Label ($2.1 million) and Tube ($1.4 million) while Container had an
increase of $0.1 million. Foreign currency transactions negatively impacted
Container by $1.4 million in the fourth quarter of 2007 relative to 2006,
primarily due to the weakness of the U.S. dollar.
    Corporate expenses were down by $2.2 million due primarily to lower
performance-related bonuses in 2007 versus 2006.
    Net interest expense of $4.8 million in this year's fourth quarter was
down by $0.2 million from last year's $5.0 million due primarily to lower debt
levels subsequent to the sale of ColepCCL.
    Restructuring and other items in the fourth quarter of 2007 were a net
gain of $3.2 million ($2.7 million after tax). The restructuring and other
items, the details of which were explained earlier under the annual financial
results, consisted of Container's restructuring of $0.4 million ($0.3 million
after tax), more than offset by a $1.3 million gain on repatriation of capital
with no tax effect and a gain on the euro-denominated note receivable from the
sale of ColepCCL of $2.3 million ($1.6 million after tax). The gain from the
sale of ColepCCL was $43.5 million and the income earned from this
discontinued operation in the 51 days of ownership in the fourth quarter of
2007 was $1.4 million compared to $3.4 million in the full fourth quarter of
2006.
    Restructuring and other items in the fourth quarter of 2006 created a net
loss of $7.2 million ($3.6 million after tax). The restructuring and other
items, the details of which were explained earlier under the annual financial
results, consisted of Container's restructuring of $9.0 million ($5.6 million
after tax), offset in part by a $1.3 million recovery related to a loan amount
previously provided for on a disposed operation, with no tax effect, and the
gain on the sale of Houten, the Netherlands operation, of $0.5 million
($0.7 million after tax).
    Tax expense in the fourth quarter of 2007 was $2.3 million with a tax
rate of 10% due primarily to the benefit of tax rate reductions in certain
jurisdictions of $2.1 million. Excluding the benefit of tax rate reductions,
the tax rate for the fourth quarter of 2007 would have been 19.4%. This is
lower than the average year's rate due primarily to the non-taxable nature of
certain restructuring and other items in the fourth quarter and higher
earnings in lower taxed jurisdictions.
    Tax expense in the fourth quarter of 2006 was a net recovery of
$8.4 million due primarily to the favourable settlement with a foreign tax
authority for a net amount of $10.1 million. Excluding the favourable tax
adjustment of $10.1 million for the quarter, the tax rate for the fourth
quarter of 2006 would have been 12.8%. This is lower than the average year's
rate due primarily to the non-taxable nature of certain restructuring and
other items in the fourth quarter and higher earnings in lower taxed
jurisdictions.
    Net earnings in the fourth quarter of 2007 were $65.3 million, up 160%
from the $25.1 million earned in last year's comparable quarter.
    Earnings per Class B share were $2.03 in the fourth quarter of 2007, up
160% from the $0.78 earned in fourth quarter 2006. Unfavourable currency
translation reduced earnings per share from continuing operations compared to
last year by $0.05 per share, and unfavourable currency transactions further
reduced earnings per share from continuing operations by $0.04.
    Restructuring and other items in the fourth quarter of 2007 positively
affected earnings per share by $0.08. In addition, favourable tax adjustments
added $0.06 per share. The gain on the sale of ColepCCL was $1.35 per share
and earnings from discontinued operations were $0.04 per share.
    Restructuring and other items in the fourth quarter of 2006 negatively
affected earnings per share by $0.12. This was more than offset by the
favourable tax adjustments of $0.32 per share.
    The following table provides context to the comparative performance of
the business. If the impact of restructuring and other items and the
favourable tax adjustments were excluded from these results, there is good
improvement over the prior year's performance.

    
                                                     Fourth Quarter
                                         ------------------------------------
    Earnings per Class B Share                  2007        2006        2005
    --------------------------                  ----        ----        ----

    From continuing operations            $     0.64  $     0.67  $     0.40
    From discontinued operations          $     0.04  $     0.11  $     0.08

    Net gain (loss) from restructuring
     and other items and favourable
     tax adjustments included in
     continuing operations(*)             $     0.14  $     0.20  $    (0.07)

    (*) Note: This is a non-GAAP measure; see "Key Performance Indicators and
              Non-GAAP Measures" in Section 5A below.
    

    Summary of Seasonality and Quarterly Results
    --------------------------------------------
    Sales and net earnings comparability between the quarters of 2007 and
2006 were primarily affected by the general overall improvement in operations,
the negative impact of weakening foreign currencies relative to the Canadian
dollar, the dates of acquisitions and divestitures, and the effect and timing
of restructuring and other items.
    The Label Division has generally experienced strong demand in the last
few years in its existing and newly acquired operations. Sales and income
growth have been substantial in each quarter compared to the prior year. In
2007, the slowing U.S. economy and the overall macro-economic environment had
an impact on the business in the fourth quarter. The beer label business has
grown from a small base three years ago to be a substantial product category.
Seasonality for this business primarily results in high demand in the spring
and summer and has affected quarterly results. Return on sales for the year (a
non-GAAP measure; see "Key Performance Indicators and Non-GAAP Measures" in
Section 5A below) in 2003 was 8.2% but has grown to 12.8% in 2006 and 13.5% in
2007. This margin improvement is due to the incremental volume, combined with
the increased sales of higher margin products and improved efficiencies. This
level of return, combined with the volume growth, reflects the Division's
strategy of capitalizing each operation with world-class equipment and
servicing our international customers on a global basis for their unique
product needs.
    The Container Division encountered significant challenges in the last
half of 2006. Prior to this time, sales of aluminum aerosol and bottle
products had been very strong with sales backlogs persisting despite the
addition of significant and expensive new capacity. By the second quarter of
2006, the impact on the industry of meaningfully higher aluminum costs
combined with significantly lower volumes of higher margin beverage containers
resulted in lower order intake, reduced production volumes and subsequently
lower profit margins. The Division responded to these challenges in 2007 by
increasing prices to its customers to offset aluminum cost increases and
maintained the same level of volume while reducing its operating costs. The
Canadian operation was hit hard by the declining value of the U.S. dollar and
therefore its margins, as it lost $3.9 million on currency transactions
compared to 2006. A restructuring of this operation was recorded in the fourth
quarter of 2006. Return on sales for 2007 was 9.8% compared to 9.4% in 2006
and 13.1% in 2005, with the operational improvements being offset by the
currency impact in 2007 versus 2006.
    The Tube Division experienced good sales and income growth through 2005
and 2006. The business started 2007 well but volume dropped quickly in mid-
spring. High-end tube demand in the U.S. market was very soft due primarily to
the U.S. economic slowdown and its negative impact on customer demand. This
business has a relatively high level of incremental margin on volume changes
and the reduced sales volume had a very negative effect on profitability for
the balance of the year. Return on sales for the year for the Tube Division
fell to 0.7% in 2007 from the 6.5% level in 2006. However, the Division has
seen good order intake to start 2008 with existing and new customers.
    Net earnings for CCL for 2007 were up 91.1% from 2006 due primarily to
the impact, after tax, of the gain on sale of ColepCCL and from improved
operational performance in 2007 versus 2006. The first three quarters of 2007
resulted in good sales and earnings growth over 2006. The fourth quarter of
2006 was generally strong and the results for the fourth quarter of 2007 were
not as robust as previous quarters due in part to the substantial impact of
the strong Canadian dollar. Despite the negative impact of currency, earnings
growth over the last two years from continuing operations overall has achieved
management's expectations, with the exception of the Tube business.

    2) BUSINESS SEGMENT REVIEW
    --------------------------

    A) General

    All divisions invest significant capital and management effort in their
facilities in order to develop world-class manufacturing operations, with
spending allocated to cost-reduction projects, the development of innovative
products, the maintenance and expansion of existing capacity and the
continuous improvement in health and safety in the workplace, including
environmental activities. In the last five years, CCL's capital spending was
significantly higher than its depreciation expense in order to take advantage
of new market and product opportunities and to improve infrastructure and
operating performance. Capital spending is more fully discussed in the
Divisions' sections below.
    Although each division is a leader in market share or has a significant
position in the markets it serves, it also operates in a mature and
competitive environment. In recent years, consumer products and healthcare
companies have experienced steady pressure to maintain or even reduce their
prices to their major retail and distribution customers. Consumer product and
healthcare customers and their retail and distribution customers continue to
experience consolidation in their industries. This has, in turn, resulted in a
discipline throughout the supply chain for reducing costs in order to maintain
reasonable profit margins at each level in the supply chain. The acceleration
in commodity costs has created serious challenges to meet the pricing concerns
of our customers. This dynamic has been an ongoing challenge for CCL and its
competitors, requiring greater control and firm cost structures. Unlike some
of its competitors, CCL has the financial strength to invest in the equipment
and innovation necessary to constantly strive to be the highest value-added
producer in the markets that it serves.
    The cost of many of the key raw material inputs for CCL, such as resins,
aluminum, film, paper and inks, is dependent on the economics within the
petrochemical and energy industries. The significant cost fluctuations for
these inputs have an impact on the Company's profitability. Over the past few
years, booming global demand has caused a tremendous increase and instability
in the cost of these commodities. CCL generally has the ability, due to its
size and the use of long-term contracts with both its suppliers and customers,
to moderate fluctuations in costs from its suppliers and to pass on price
increases to its customers to recover such increases. The success of the
business is dependent on each business managing the cost-and-price equation
with suppliers and customers. The cost of aluminum has doubled over the last
three years. Since it is the largest component of the Container Division's
costs, the ability to fully recover these large cost increases from customers
who are accustomed to more stable pricing is a challenge but has been well
managed in the last year.
    Most of our facilities are in locations with adequate skilled labour,
resulting in moderate pressure on wage rates and employee benefits. CCL's
labour costs are competitive in each of the geographies in which it does
business. The Company uses a combination of annual and long-term incentive
plans specifically designed for corporate, divisional and plant staff to focus
key employees on the objectives of achieving annual business plans and
creating shareholder value through growth, innovation, cost reductions and
cash flow generation in the longer term.
    A driver common to all divisions for maximizing operating profitability
is the discipline of pricing orders based on size, including consideration for
fluctuations in raw materials and packaging costs, manufacturing efficiency
and available capacity. This approach facilitates effective asset utilization
and higher levels of profitability. Efficiency is generally benchmarked per
production line against a target such as "throughput of quality product" and
per order against scrap and output standards. The analysis of total
utilization versus capacity available per production line or facility is also
used to manage certain segments of the business. In most of the Company's
operations, the measurement of each sales order shipped is based on actual
production costs to calculate the amount of actual profit margin earned and
its return on sales. This process ensures that pricing policies and production
performance are aligned in attaining profit margin targets.
    Performance measures used by the divisions that are critical to meeting
their operating objectives and financial targets are return on sales, cash
flow, days working capital employed and return on investment. Measures used at
the corporate level include operating income, return on sales, EBITDA, net
debt to total capitalization, ROE and earnings per share (non-GAAP measures;
see "Key Performance Indicators and Non-GAAP Measures" in Section 5A below).
Growth in earnings per share is a key metric. In addition, the Company also
monitors earnings per share before restructuring and other items since the
timing and extent of restructuring and other items do not reflect or relate to
the Company's ongoing and future potential operating performance. Performance
measures are primarily measured against a combination of prior year, budget,
industry standards or other benchmarks to promote continuous improvement in
each business and process.
    Management believes it has both the financial and non-financial
resources, internal controls and reporting systems and processes in place to
execute its strategy, manage key performance drivers and deliver targeted
financial results. In addition, the Company's internal audit function provides
another discipline to ensure that its disclosure controls and procedures, and
internal controls over financial reporting, will be assessed on a regular
basis against current corporate standards of effectiveness and compliance.
    CCL is not heavily dependent upon specialized manufacturing equipment.
Most of the manufacturing equipment employed by the divisions can be sourced
from many different suppliers. CCL, however, has the financial resources to
purchase this expensive equipment and to build infrastructure in current and
new markets because of its financial strength. Most of CCL's direct
competitors are much smaller and may not have the financial resources to stay
current in maintaining state-of-the-art facilities like CCL can. Our
competitive advantage is based primarily on our customer service and process
technology, the know-how of our people and the ability to develop proprietary
tooling and manufacturing techniques. Certain new manufacturing lines take
many months for suppliers to construct, and any delays in delivery and/or
commissioning can have an impact on customer expectations and profitability.
The Company also uses strategic partnerships as a method of obtaining
proprietary technology in order to support growth plans and expand its product
offerings.
    The expertise of our employees is a key element to achieving CCL's
business plans. This know-how is broadly distributed throughout the business
and its 53 facilities; therefore, the Company is generally not at risk of
losing its competency through the loss of any particular employee or group of
employees. Employee skills are constantly being developed through on-the-job
training and external technical education, and are enhanced by our culture of
considering creative alternative applications and processes for our
manufactured products.
    The nature of the research carried out by the divisions can best be
characterized as application or process development. As a leader in specialty
packaging, the Company spends meaningful resources assisting customers with
product development and developing innovative packaging components. While
customers regularly come to CCL with concepts and request assistance in
developing a commercial packaging solution, the Company also takes innovative
packaging concepts to its customers. Company and customer information is
protected through the use of confidentiality agreements and by limiting access
to our manufacturing facilities.
    The Company continues to invest time and capital to upgrade and expand
its business systems. This investment is critical to keep pace with customer
requirements and to gain or maintain a competitive edge. The Container and
Tube Divisions require and have the capability for web-based supply chain
integration with their customers and suppliers. While the systems of the Label
Division do not require the same degree of sophistication due to the lesser
requirements of its customers, the Division communicates with many customers
and suppliers through the Internet, particularly when transferring and
confirming printing layouts, designs and colours.

    
    Divisional Financial Results
    ----------------------------
                                                2007        2006        2005
                                                ----        ----        ----
    Divisional sales
    ----------------
      Label                               $    904.4  $    784.1  $    669.0
      Container                                181.5       176.3       170.7
      Tube                                      58.4        69.1        82.8
                                          ----------- ----------- -----------
    Total sales from continuing
     operations                           $  1,144.3  $  1,029.5  $    922.5
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    Sales from discontinued operations    $    199.4  $    182.7  $    434.4
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    Operating Income
    ----------------
      Label                               $    122.5  $    100.7  $     72.7
      Container                                 17.8        16.6        22.4
      Tube                                       0.4         4.5         4.2
                                          ----------- ----------- -----------
    Divisional operating income from
     continuing operations                $    140.7  $    121.8  $     99.3
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    Operating income from discontinued
     operations                           $     16.4  $     18.0  $     25.0
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    

    Comments on Divisional Income from Continuing Operations
    --------------------------------------------------------
    The above summary includes the results of acquisitions and segregates the
effect of discontinued operations on reported sales and operating income.
    Divisional operating income in 2007 increased to $140.7 million from
$121.8 million in 2006, up a strong 16%. Primary contributors to the
improvement were generally strong organic sales growth in the Label business,
an accretive acquisition and improved profit margins in all divisions except
Tube. Return on sales has grown to 12.3% in 2007 from 11.8% in 2006 and 10.8%
in 2005. These results were achieved despite the negative translation effect
of the stronger Canadian dollar relative to the U.S. dollar and European
currencies, discussed previously. This comparative result was also negatively
affected by the weaker U.S. dollar on currency transactions from the Canadian
operation of the Container Division, also described above. In 2006, divisional
operating income from continuing operations increased by $22.5 million
compared to 2005. The major reason for this increase was the higher sales
volumes and operating income generated by the Label Division due to
acquisitions, organic growth and improved efficiencies. The Container Division
contributed to this increase by improving its margins and controlling expenses
and the Tube Division returned to profitability under new management with a
cost and margin focus.

    B) Label Division

    Overview

    The Label Division is the leading North American, Latin American,
European and Asian producer of innovative label solutions for consumer product
marketing companies in the personal and beauty care, food and beverage,
battery, household, chemical and promotional segments of the industry, and
also supplies major pharmaceutical, healthcare, durable goods and industrial
chemical companies. The Division's product lines include pressure sensitive,
shrink sleeve, stretch sleeve, in-mould and expanded content labels and
pharmaceutical instructional leaflets. It currently operates from 48
facilities located in the United States, Canada, Mexico, Puerto Rico, Brazil,
the United Kingdom, France, Germany, the Netherlands, Denmark, Austria, Italy,
Poland, China, Thailand and Russia. Included in the above are two plants in
Russia from the CCL-Kontur equity investment formed in December 2007 and the
German plant from the CD-Design acquisition in January 2008.
    This Division operates within a sector of the packaging industry made up
of a very large number of competitors that manufacture a vast array of product
information and identification labels. There are many other label categories
that do not fall within the Division's target market. The Company believes
that the Label Division is the largest player in its global label markets.
Competition mainly comes from single plant operations that compete in local
markets with CCL's business. There are a few multi-plant competitors in
individual countries but there is no major competitor that has plants both in
Europe and North America or has the global reach of CCL Label.
    CCL Label's mission is to be the global supply chain leader of innovative
premium package and promotional label solutions for the world's largest
consumer product and healthcare companies. It aspires to do this from regional
facilities that focus on specific customer groups, products and manufacturing
technologies in order to maximize management's expertise and manufacturing
efficiencies to enhance customer satisfaction. The Label Division is expected
to continue to grow and expand its global reach through acquisitions, joint
ventures and greenfield start-ups and expand its product offerings in segments
of the pressure sensitive label industry that it has not yet entered.
    In January 2006, the Division acquired Prodesmaq in Brazil as its first
venture into South America, thereby creating, in conjunction with existing
plants in Mexico and Puerto Rico, a significant presence in the Latin American
pressure sensitive label market. Prodesmaq serves many of the Division's
global customers in the home and personal care, healthcare and premium food
and beverage categories.
    In January 2007, CCL acquired the sleeve label business of ITW with four
plants located in Europe and Brazil, and with a sales and distribution office
in the United States. The Division had previously been a small player in the
sleeve market but with this acquisition, CCL is well positioned as one of the
leading global players in this fast growing segment of the label industry.
This segment serves many of the Division's key global customers in the food,
beverage, home and personal care markets and in 2007 the Division was focused
on integrating the business into the CCL Label network.
    As previously described, CCL entered into the CCL-Kontur equity
investment in Russia in December 2007, servicing the personal care and
beverage markets from Moscow and St. Petersburg, and acquired CD-Design in
Germany in January 2008 as its first entry into the durable goods labels,
servicing the German and European original equipment manufacturing automotive
markets.
    In October 2006, the Division sold its small non-core label business in
Houten, the Netherlands, as it serviced primarily local customers outside of
Label's target markets.
    All of the above developments have positioned the Label Division as the
global leader for pressure sensitive labels within our multinational customer
base in the personal care, healthcare, battery, food, beverage, durable goods
and specialty label categories.
    The Division considers demand for traditional pressure sensitive labels,
particularly in North America and Western Europe, to be reasonably mature and,
as such, will continue to focus its expansion plans on innovative and higher
growth product lines within those geographies with a view to improving overall
profitability. In Eastern Europe, Asia and Latin America, there is a higher
level of economic growth expected and this should provide opportunities for
the Division to dramatically improve market share and profitability in these
regions in the next few years.
    The Division produces labels primarily from polyolefin films and paper
sourced from converters using raw material primarily from the petrochemical
and paper industries. CCL Label is generally able to mitigate the cost
volatility of these components due to a combination of purchasing leverage,
agreements with suppliers and its ability to pass on these cost increases to
customers.
    There is a close alignment in label demand to consumer demand for non-
durable goods. Management believes that growth mirroring that of its customers
can be attained over the next few years through its focused strategy by
capitalizing on the following customer trends.
    Our global customers are limiting the number of suppliers, are expecting
a full range of product offerings in more geographies, are requiring more
integration into their supply chain at a global level, and are concerned with
the integrity of their products and the protection of their brands,
particularly in markets where counterfeit products are an issue. These issues
negatively affect many of our competitors, as well as the fact that high-end
premium packaging requires significant investment in innovation, printing
equipment and technology. Trusted and reliable suppliers are important
considerations for global consumer product companies and major pharmaceutical
companies.

    
    Label Financial Performance

                            2007   % Growth       2006   % Growth       2005
                            ----   --------       ----   --------       ----

    Sales                 $904.4       15%      $784.1       17%      $669.0
    Operating income      $122.5       22%      $100.7       38%       $72.7
    Return on sales         13.5%                 12.8%                 10.9%
    

    The 2007 results include the January acquisition of the ITW sleeve
business. The 2006 results include the January acquisition of Prodesmaq and
the October disposition of Houten. The 2005 performance includes the results
of Steinbeis Packaging acquired in January, the acquisition of the remaining
49% of the CCL-Pachem joint venture in August, the results of Merroc Ltd. also
acquired in August and Inprint Systems acquired in September. Sales in 2007
increased 15% to $904.4 million from $784.1 million in 2006, after having
increased in 2006 by 17% from the $669.0 million level recorded in 2005. As
noted earlier, the significant strengthening of the Canadian dollar in 2007,
2006 and 2005 has had a negative effect on reported sales and operating
income.
    Sales growth in 2007 was driven primarily by the ITW sleeve acquisition
as it accounted for 11% of the increase with organic growth contributing 5% of
the improvement, partially offset by 1% due to a disposition. The Division
continued to experience volume gains with global customers that are launching
many new products in North America, Europe, Latin America and Asia. A negative
trend continues to be customer consolidation and retailer power, including the
pressure for cost savings throughout the supply chain.
    The North American home and personal care business had modest growth in
2007 over 2006 after experiencing weaker market conditions in the last half of
the year in line with its major customers' performance. The North American
healthcare business continued to show good growth in 2007, particularly in
expanded content labels as customers became more confident in our increased
capabilities, product range and world-class plants. Developing and producing
new business in healthcare takes more time than in other categories due to the
strict regulatory nature of the pharmaceutical industry. The North American
specialty business experienced good sales growth in agricultural-chemical
labels, offset in part by promotional labels as this business tends to have
major volume fluctuations over time.
    In Latin America, the Mexican operation continues to operate under tight
capacity in its old facility as it transitions to its new plant in early 2008.
Sales growth was modest in 2007 but further market penetration is planned once
the new larger plant is operational. The Brazilian Prodesmaq continues to
widen its product lines as it has added beverage, healthcare and agro-chemical
products to its mainstay personal care business. The Mexican and Brazilian
operations continue to work together to enhance growth in Latin America. In
addition, with the acquisition of the ITW sleeve business in January 2007,
Brazil has added this product line to its offerings.
    In Europe, the personal care business had modest sales growth. The
healthcare and specialty businesses continued to have solid underlying growth
throughout Europe and absorbed the closure of a small operation in Lewes,
United Kingdom. The beverage business in Western and particularly Eastern
Europe continued to grow significantly although there was a slowdown in the
fourth quarter. New applications with large beverage customers are planned,
particularly with wash-off labels. The battery business is managed on a global
basis, including the large operation in Meerane, Germany, a smaller operation
in the U.S. and a plant in Hefei, China. Sales growth in batteries worldwide
was impacted by the move of some customers to produce batteries in Asia. We
have picked up some of this relocated business in Hefei.
    In Asia, sales growth in Thailand was very strong with three global
personal care customers serviced from this facility. The new operation in
Guangzhou, China, is now expanding its customer base in that immense market. A
new sales office was opened in Japan and is working with customer technical
centres located there. Additional new sites are planned for start-up in late
2008 in Vietnam, Thailand, China and India as we are continuing to follow our
customers into new regions, products and markets.
    The shrink and stretch sleeve business of ITW has been a great success
since the acquisition in January 2007. The business exceeded expectations for
sales and income contribution in 2007 and further growth is anticipated as new
products come on stream and new markets are entered.
    Operating income of $122.5 million in 2007 was 22% higher than the
$100.7 million recorded in 2006, which was 38% higher than the $72.7 million
of 2005. Return on sales was 13.5% compared to 12.8% in 2006 and 10.9% in
2005. This growth in operating income and return on sales has been achieved
due to the shift in focus to higher margin products and markets, the global
growth from the Division's relationships with international customers, the
contribution of the ITW sleeve acquisition and the continuing strategy to
replace and upgrade existing manufacturing equipment in order to broaden
product capabilities and improve operating efficiencies. Included in the 2007
results was $2.0 million of move costs as part of the modernization of the
operations described below.
    The Label Division invested $130.1 million in capital spending in 2007,
after spending $100.4 million in 2006 and $96.0 million in 2005, to expand its
manufacturing base in current and new markets. Major expenditures include
building new plants to replace old facilities in Mexico and Memphis,
Tennessee, and the expansion and outfitting of many of our locations with new
label presses and associated manufacturing equipment. Depreciation and
amortization amounted to $57.4 million in 2007 compared to $48.7 million in
2006 and $39.0 million in 2005. Over the last few years, the Division has been
replacing and upgrading its infrastructure with new plants and modernizations.
There are a few remaining facilities that require an upgrade, with the vast
majority of the modernization program completed. The Division is expected to
continue to grow the business by spending capital to broaden its product
offerings internationally and to reduce operating costs. New plants are
planned in Paris and in a number of Asian locations for later this year or
early next year.

    Subsequent Event
    ----------------
    In January 2008, the Label Division acquired the CD-Design business for
$10 million in a combination of cash and assumed debt with potentially a
further $4.5 million in cash at the end of 2008, subject to EBITDA exceeding
$2.6 million in 2008. In 2007, CD-Design had sales of $26 million.

    C) Container Division

    Overview

    The Container Division is a leading manufacturer of specialty containers
for the consumer products industry in North America and Mexico. The key
product line is recyclable aluminum aerosol cans and bottles for the personal
care, home care and cosmetic industries, plus shaped aluminum bottles for the
beverage market. It operates from three plants located in the United States,
Canada and Mexico. A new plant is under construction in Mexico. The Division
functions in a competitive environment, which includes imports and the ability
of customers, in some cases, to shift a product to competing alternative
technology.
    The strategic plan for this Division includes growing its market share
through manufacturing excellence, exceeding customer expectations and
innovation. The Division invests significant resources in the development of
innovative containers such as its highly decorated and shaped aluminum cans
and bottles and the development of barrier packs. As the demand for these new
higher value products has grown, the Division dedicates new lines and/or
adapts existing lines to their production and has been acquiring new lines in
order to meet expected overall market requirements and to maximize
manufacturing efficiencies.
    Aluminum represents a significant variable cost for this Division.
Aluminum is a commodity that is supplied by a limited number of global
producers and is traded in the market by financial investors and speculators.
The recent upward trajectory and volatility in aluminum prices (doubling in
the last three years) had a significant impact on manufacturing costs,
necessitating increased selling prices to our customers.
    The Division historically had used a general hedging program, since
aluminum trades as a commodity on the London Metals Exchange ("LME"), in
combination with fixed price contracts with a number of its significant
customers, to try to moderate the fluctuations in the cost of aluminum in
order to reduce the volatility of its profit margins. However, with the
dramatic run-up of aluminum costs, it has been difficult to get customers to
commit to fixed cost pricing. Consequently, the Division has been attempting
to pass on these dramatically higher costs to its customers and, in 2007, has
been reasonably successful in maintaining targeted profit margins.
Approximately 27% of the Division's estimated 2008 aluminum requirements has
been hedged in conjunction with customers by using futures contracts on the
LME. There are no hedges beyond 2008. The unrealized loss on the aluminum
futures contracts as at December 31, 2007 was $0.6 million.
    Management believes the market for aluminum containers has a solid
foundation. In the short term, the development and rollout of new aerosol
products has moderated, and beverage bottles have seen a revival in the
promotional side of the beer, soft drink and specialty beverage industry.
Although our customers and the consumer have high satisfaction levels with
this package, the relatively high cost makes it somewhat more expensive than
some other containers in different formats and materials. The aluminum
container is generally perceived to be more esthetically pleasing than steel
containers. The biggest risk for the Division's business base relates to
customers importing similar containers or shifting their products into
containers of other materials such as steel, glass or plastic, leading to a
loss in market share. However, certain products and delivery systems can only
be provided in an aluminum container. The relative cost of steel versus
aluminum containers impacts the marketers' choice of container and may cause
volume gains or losses if customers decide to change from one product form to
another.
    In North America, there is only one other competitor in the extruded
aluminum container business. CCL believes that it is approximately the same
size as its only domestic competitor in its market and has about 50% market
share. Other competition comes from South American, Asian and European imports
with currency exchange rates and lead times being important factors.
    The success of new products promoted heavily in the market will have a
material impact on the Division's sales and profitability. Beverage products
packaged in our shaped resealable aluminum bottle, for example, are directly
impacted by the success or failure of these new products in the market.
Another growth opportunity is the possibility of acquiring market share from
competitors in existing product lines.
    Until early 2006, the Division had not been able to keep up with market
demand in the aluminum container business for many years. With both CCL and
its major competitors adding significant manufacturing capacity and with
softness in market demand, there was excess capacity in late 2006 through
early 2007. However, with improved demand for personal care and beverage
containers since that time, there is much less excess capacity in the
industry.
    In early 2006, the Company commenced the reorganization of the Container
business by bringing in a new management team to improve operational
effectiveness and to be more responsive to its customers. During the year,
overhead was downsized and severance costs were incurred. With the reduced
volume levels, management reviewed its asset base and determined that certain
production equipment and spare parts inventory were not required for future
production and were deemed obsolete and written off. These restructuring
activities were recorded as restructuring and other items.
    With the strong Canadian dollar, the Canadian operation has become less
cost competitive than operations in Mexico and the United States.
Consequently, the Penetanguishene, Ontario, plant has been downsized,
resulting in restructuring costs in late 2007 and certain production lines
have been relocated to Mexico. In addition, a new plant is in the process of
being outfitted with two new lines in Guanajuato, Mexico, to access this
growing market and to provide low-cost capacity for all of North America.

    
    Container Financial Performance

                            2007   % Growth       2006   % Growth       2005
                            ----   --------       ----   --------       ----

    Sales                 $181.5        3%      $176.3        3%      $170.7
    Operating income       $17.8        7%       $16.6     (26)%       $22.4
    Return on sales          9.8%                  9.4%                 13.1%
    

    Sales increased by 3% in 2007 after a 3% increase in 2006 relative to
2005. Both of these comparatives were negatively impacted by currency
translation. Excluding currency, sales would have grown by 6% in 2007. Unit
volume was unchanged in 2007 but sales grew as a result of improved pricing
and better product mix. With the impact of higher aluminum costs and reduced
demand for beverage containers in particular, the Division experienced lower
overall sales volumes in 2006. The Division had experienced strong growth in
aluminum aerosol and beverage containers in 2005 as volume increases absorbed
all of the added capacity installed in the previous year.
    Operating income of $17.8 million in 2007 was up 7% from the
$16.6 million recorded in 2006 and below the record $22.4 million level of
2005. Return on sales rose to 9.8% from the 9.4% mark in 2006 after being
historically at the 13% level in 2005 and prior years. Operating income was
improved in 2007 due to a better matching of selling prices and input costs,
and improved efficiencies despite unfavourable currency translation and
transactions. Profitability was dramatically affected in 2006 by lower margins
caused by increased aluminum costs, higher depreciation and overhead costs
related to the installation of new lines and the excess capacity that was
created, and the negative effect of currency.
    The Penetanguishene, Ontario plant sells more than 95% of its production
to the U.S. market. Since the U.S. dollar has continued to weaken, the
negative impact of currency transactions on operating income was $3.9 million
in 2007 compared to 2006, and $2.1 million in 2006 compared to 2005.
    The outlook for aluminum container products continues to be reasonable
into 2008 and is dependent on the U.S. economy, the Division's ability to
secure price adjustments with key customers aligned with changes in aluminum
costs and on securing new business, particularly with certain beverage
accounts, that would add incremental volume. The impact of exchange rates, and
therefore higher relative production costs, continues to be a concern for the
Canadian operation. A new plant in Mexico is under construction to satisfy the
growth in our customers' filling operations in Mexico.
    In 2007, the Division spent $11.6 million to maintain and expand its
manufacturing base compared to the $34.4 million and $36.2 million spent in
2006 and 2005, respectively. Over the last five years, the Division has spent
a significant portion of this capital on the purchase and installation of six
high-speed aluminum container production lines in Canada and the U.S. Payments
have been made on a seventh line to be installed in the new plant in Mexico
and an additional line has been ordered and will be installed before the end
of 2008. Depreciation and amortization in 2007 amounted to $11.3 million
compared to $10.6 million in 2006 and $9.2 million in 2005.

    D) Tube Division

    Overview

    The Tube Division is a leading manufacturer of highly decorated extruded
tubes for the personal care and cosmetics industry in North America and
Mexico. It operates from two plants located in the United States and shares a
facility in Mexico with the Container Division. The Division operates in a
dynamic competitive environment, which includes imports and the ability of
customers to shift a product to an alternative package or to other
manufacturers.
    The strategic plan for the Tube Division is based on market share growth
through manufacturing excellence, exceeding customer expectations and
innovation. The Division has invested in equipment that improves the quality
of the tube, particularly the detailed graphics that appeal to marketers of
high-end products. The long-term market growth in specialty cosmetics and
other personal care and beauty products is a further opportunity for the
business to continue its upward trend in sales and profitability.
    There are a handful of competitors to the Tube Division in North America.
CCL believes that it is the third largest supplier in its markets and has
about 15%-20% market share in North America.
    In early February 2006, the Division sold its non-core dispensing closure
business (CCL Dispensing) in Libertyville, Illinois, to an industry leader in
closures. The business was deemed to be non-core as it was a small player in
the global closures market. This divestiture has allowed the Division to focus
on the decorated plastic tube segment.
    Polyethylene resins and polypropylene caps and closures represent
significant variable costs for this Division. There is no viable hedging
available for plastic resins. During 2005, prices for resins rose
substantially and have been volatile since that time. The Division relies on
contracts with suppliers to control costs and contracts with customers to
manage pricing and to pass on price increases for costs such as resin. The
industry has traditionally been able to pass on these cost increases over a
period of time.
    Performance in the plastic tube business had improved substantially in
2005 and 2006 with more effective operations, new world-class decorating
equipment and a return to profitability as customer confidence was restored.
However, the slowing U.S. economy has taken its toll on high-end cosmetic
products in the last half of 2007, reducing sales volumes and moving the
business back towards break-even. The Division continues to believe that some
North American plastic tube competitors are not well regarded by their
customers, particularly in comparison to global competitors. This dynamic
provides an opportunity for CCL to increase its plastic tube market share and
profitability as it improves its manufacturing processes and reputation.

    
    Tube Financial Performance

                            2007   % Growth       2006   % Growth       2005
                            ----   --------       ----   --------       ----

    Sales                  $58.4     (15)%       $69.1     (17)%       $82.8
    Operating income        $0.4     (91)%        $4.5        7%        $4.2
    Return on sales          0.7%                  6.5%                  5.1%
    

    Sales and operating income in 2005 included results of the dispensing
closure business sold in February 2006 as previously described. Sales in 2007
of $58.4 million were down 15% from 2006 but, excluding the sale of CCL
Dispensing and currency translation, sales were down by 8%. Sales growth was
down by 17% in 2006 over 2005 due to currency translation and the CCL
Dispensing disposition; otherwise, sales would have been up 9%. Operating
income fell to $0.4 million in 2007 from $4.5 million in 2006 after a
$0.3 million improvement from 2005 into 2006. Operating income was lower in
2007 due to the lower sales and the impact of the absorption of plant overhead
on the lower production volume. Return on sales has dropped to 0.7% in 2007
from 6.5% in 2006 and 5.1% in 2005.
    The outlook for 2008 sales is good, with two new significant customer
contracts in hand to start the year. Management reviewed the goodwill carried
on this business and determined that it was not impaired, primarily based on
the expectations of a return to historical profitability in 2008, in part due
to a good order backlog. The business in Los Angeles, California, is being
moved to a more appropriately sized and configured new leased facility later
in 2008.
    In 2007, the Division spent $9.6 million to maintain and expand its
manufacturing base, including new tube printing equipment and tube
manufacturing lines, compared to the $9.7 million and $9.5 million spent in
2006 and 2005, respectively. Depreciation and amortization in 2007 amounted to
$6.9 million compared to $7.1 million in 2006 and $8.6 million in 2005.

    3) FINANCING AND RISK MANAGEMENT
    --------------------------------

    A) Liquidity and Capital Resources

    The Company's financial position remains strong. As at December 31, 2007,
cash and cash equivalents were $96.6 million. This compares to $125.0 million
as at December 31, 2006 and $120.2 million as at December 31, 2005.

    
                                          Summary of Net Debt at December 31
                                          ----------------------------------
                                                2007        2006        2005
                                                ----        ----        ----

    Current debt                          $     21.2  $     28.5  $     26.1
    Long-term debt                             382.2       413.6       376.5
                                          ----------- ----------- -----------
    Total debt                                 403.4       442.1       402.6
    Cash and cash equivalents                  (96.6)     (125.0)     (120.2)
                                          ----------- ----------- -----------
    Net debt                              $    306.8  $    317.1  $    282.4
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    

    The foundation of the Company's long-term debt for the last decade has
been senior unsecured notes ("notes") held by private U.S. institutions that
total US$326.8 million (C$324.0 million) at December 31, 2007. The notes
outstanding were US$336.2 million (C$391.8 million) as at December 31, 2006.
In January 2007, the Company entered into a five-year revolving line of credit
with a Canadian chartered bank with total availability of C$95 million, of
which C$45.0 million was drawn at year-end 2007. The average interest rate at
year-end 2007 on all long-term debt was 5.8% (2006 - 5.9%) factoring in the
related interest rate swap agreements ("IRSAs") and cross currency interest
rate swap agreements ("CCIRSAs").
    The notes are denominated in U.S. dollars primarily to hedge the
Company's net investment in U.S. operations, but a portion of the notes has
been effectively swapped into euros as a hedge of the Company's European
operations. Scheduled annual repayments of US$9.4 million began in September
2002 on one series of notes, ending in 2012. No other unsecured note
repayments are required before 2010. The reported Canadian dollar amounts
outstanding for debt and cash have been reduced over the last three years due
to currency translation since the majority of debt and cash are denominated in
U.S. dollars.
    The Company's liquidity is expected to be satisfactory for the
foreseeable future due to its significant cash balances, the expected
continuation of its high level of cash flow, its low level of required debt
repayments, the receipt of the final proceeds of approximately C$74 million on
the sale of ColepCCL on February 29, 2008 and the availability of its
revolving credit line with a Canadian bank. The Company anticipates funding
all of its future commitments from the above sources but may raise further
financing and/or equity in the future to satisfy its additional commitments.
    Interest coverage (defined as annual operating income before
restructuring and other items and annual net interest expense divided by
annual net interest expense) continues to improve and was 5.6, 5.3 and 4.8
times in 2007, 2006 and 2005, respectively.
    On March 15, 2006, the Company had an obligation to repay one series of
the senior notes for US$120 million. The cash to repay these notes came from a
new private placement totalling US$170 million that closed on March 7, 2006.
This series of notes has two tranches: US$60 million for five years at 5.29%
and US$110 million for 10 years at 5.57%.

    
    Balance Sheet Data                          2007        2006        2005
    ------------------                          ----        ----        ----

    Total assets                          $  1,488.2  $  1,542.6  $  1,398.7
    Long-term debt                        $    382.2  $    413.6  $    376.5
    Shareholders' equity                  $    717.9  $    652.6  $    565.8
    Total debt                            $    403.4  $    442.1  $    402.6
    Total debt to total book
     capitalization(*)                          36.0%       40.4%       41.6%
    Net debt                              $    306.8  $    317.1  $    282.4
    Net debt to total book
     capitalization(*)                          29.9%       32.7%       33.3%

    (*) Note: This is a non-GAAP measure; see "Key Performance Indicators and
              Non-GAAP Measures" in Section 5A below.
    

    Net debt as at December 31, 2007 decreased to $306.8 million compared to
$317.1 million as at December 31, 2006 due primarily to the sale of the
ColepCCL joint venture in November 2007 and the effect of a stronger Canadian
dollar on U.S. dollar-denominated debt, partially offset by the acquisition of
the ITW sleeve business in January 2007. The majority of the debt is
denominated in U.S. dollars.
    Net debt to total book capitalization, defined as net debt divided by net
debt plus shareholders' equity, was marginally lower at 29.9% as at
December 31, 2007 compared to 32.7% at the end of 2006 and the 33.3% reported
at the end of 2005. Further information on shareholders' equity follows in
Section D.
    In January 2007, the Company acquired the sleeve label business of ITW
for $106 million. Since a large portion of the Company's cash is held in many
foreign jurisdictions and may be required for growth in those locations, CCL
entered into a five-year extendible revolving term credit line with a Canadian
bank in January 2007 for up to $95 million. This new credit line helped
finance this transaction and is a long-term additional source of credit to
manage the Company's cash flow fluctuations. The ITW transaction was funded
using $31 million in cash and $75 million from this new credit line. At the
end of 2007, $45 million of the credit was drawn down and $3.9 million was
allocated to letters of credit. The credit line was extended a further year to
mature in January 2013.
    The Company's committed credit availability at December 31, 2007 was as
follows:

    
                                                         Total
                                                        Amounts
                                                       Available
                                                      -----------

    Lines of credit - committed, unused               $     46.2
    Standby letters of credit outstanding                    4.0
                                                      -----------
    Total                                             $     50.2
                                                      -----------
                                                      -----------

    None of the above commitments expire in 2008 and it is anticipated that
the Company will renew these commitments as necessary before expiration.
    In addition, the Company had uncommitted and unused lines of credit of
approximately $39.6 million at December 31, 2007. The Company's uncommitted
lines of credit do not have a commitment expiration date and may be cancelled
at any time by the Company or the banks.

    B)  Cash Flow

    Summary of Cash Flows                       2007        2006        2005
    ---------------------                       ----        ----        ----
      Cash provided by operating
       activities                         $    162.2  $    161.3  $    112.0
      Cash provided by (used for)
       financing activities                     23.6         9.3       (38.8)
      Cash used for investing activities      (201.8)     (171.1)      (16.8)
      Effect of exchange rates on cash         (12.4)        5.3        (7.6)
                                          ----------- ----------- -----------

      Increase (decrease) in cash and
       cash equivalents                   $    (28.4) $      4.8  $     48.8
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
      Cash and cash equivalents - end of
       year                               $     96.6  $    125.0  $    120.2
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    

    In 2007, cash provided by operating activities was $162.2 million,
including the cash used for non-cash working capital ($16.9 million) and cash
from discontinued operations ($17.4 million). The increase in non-cash working
capital in 2007 was due to the receivable on the sale of ColepCCL of
$72.8 million being included in the year-end working capital. Otherwise,
non-cash working capital was reduced due to effective management of
receivables, inventory and payables during the year. The Company maintains a
rigorous focus on its investment in non-cash working capital. Days of working
capital employed (a non-GAAP measure; see "Key Performance Indicators and
Non-GAAP Measures" in Section 5A below) was 26 at December 31, 2007 as
compared to two in 2006 and seven in 2005. If the receivable related to
ColepCCL were excluded, working capital and days of working capital would have
been negative at year-end 2007.
    Cash provided by financing activities in 2007 was $23.6 million,
consisting primarily of an increase due to proceeds from issuance of long-term
debt of $107.1 million, partially offset by retirement of long-term debt of
$64.0 million, decreases in bank advances of $4.0 million and payment of
dividends of $15.2 million.
    Cash used for investing activities in 2007 of $201.8 million was
primarily for capital expenditures (see below), the ITW acquisition
($105.6 million) and the initial investment in CCL-Kontur in Russia of
$8.8 million, offset in part by proceeds of business dispositions of
$69.5 million. Cash decreased in 2007 by $28.4 million and included the
negative impact of exchange rates of $12.4 million.
    In 2006, cash provided by operational activities of $161.3 million
included $6.3 million of a reduction in non-cash working capital. Cash
provided by financing activities of $9.3 million consisted primarily of
proceeds of long-term debt issuance of $202.6 million, offset by retirement of
long-term debt of $183.7 million. Cash used for investing activities of
$171.1 million partially included capital expenditures (see below),
$62.2 million for the Prodesmaq acquisition and proceeds of a disposition of
$27.1 million. Cash increased in 2006 by $4.8 million including the positive
effect of currency exchange of $5.3 million.
    Capital spending of $163.5 million in 2007 versus $150.4 million and
$155.9 million in 2006 and 2005, respectively, was incurred in all divisions
with a view to increasing capacity based on customers' requirements, expanding
globally, implementing cost-reduction programs and maintaining the existing
asset base. In the last three years, the level of spending was significantly
higher than in prior years in order to take advantage of new market
opportunities, and to improve infrastructure and operating efficiencies.
Capital expenditures in 2008 are expected to be in the $180 million range to
facilitate further growth in existing and new product lines. Depreciation and
amortization of other assets for continuing operations in 2007 amounted to
$75.9 million, compared to $67.0 million in 2006, due to the higher property,
plant and equipment base.

    C) Interest Rate, Foreign Exchange Management and Other Hedges

    The Company uses derivative financial instruments to hedge interest
rates, foreign exchange and aluminum cost risks. Contracts are arranged with
high-quality financial institutions to minimize the counterparty risk.
    CCL had previously hedged a portion of its expected U.S. dollar cash
inflows derived from sales into the United States from the Canadian
operations, principally the Container plant in Penetanguishene, Ontario. The
balance of the U.S. dollar cash inflows was not hedged and was received at the
spot exchange rate at the time. In early 2006, with the further
diversification of currencies within CCL and the relatively small net exposure
involved, the Company decided to stop entering into new hedges and let the
existing hedges mature. The last U.S. dollar hedge matured in June 2007.
    For 2007, these hedge transactions were at an average rate of $1.13
compared to the actual average rate for the year of $1.07. For the year 2006,
these hedge transactions were at an average rate of $1.22 compared to the
actual average rate for the year of $1.13. The negative comparative impact on
earnings before tax from continuing operations due to the change in exchange
rates versus the prior year on these transactions was $3.9 million or $0.09 on
earnings per share in 2007, $2.1 million or $0.07 per share in 2006 and
$3.1 million or $0.09 per share in 2005.
    The Company uses IRSAs to allocate notional debt between fixed and
floating rates since the underlying debt has been fixed rate debt with U.S.
financial institutions. The Company believes that a balance of fixed and
floating rate debt can reduce overall interest expense and is in line with its
investment in short-term assets (e.g. working capital) and long-term assets
(e.g., property, plant and equipment).
    In 2002, the Company entered into two IRSAs with a Canadian financial
institution, the effect of which was to convert US$120 million of notional
fixed rate debt (hedging the 1996 private placement notes) into floating rate
debt, based on the three-month London Inter-Bank Offered Rates ("LIBOR").
These two IRSAs matured simultaneously with the repayment of the 1996 notes in
March 2006. In 2003, the Company entered into another IRSA to convert an
additional tranche of fixed rate debt to floating rate debt. This IRSA
converted US$42.1 million of notional fixed rate debt (hedging 50% of the 1997
private placement notes) into floating rate debt, based on three-month LIBOR
rates. The notional amount of this IRSA decreases by US$4.7 million annually
to match the decrease in the principal of the underlying notes. The notional
value of this IRSA is currently US$23.4 million.
    As the Company has developed into a global business, the broad strategy
has been to leverage and hedge the assets and cash flows of each major country
with debt denominated in the local currency. Since the Company has been
primarily borrowing from U.S. institutions in U.S. dollars, the hedging of
U.S. operations has been achieved. The Company has significantly increased its
euro-based assets and consequently has used CCIRSAs as a means to convert
notional U.S. dollar debt into euro debt to hedge the euro-based investment
and cash flows.
    In March 2006, the Company entered into two CCIRSAs with a Canadian
financial institution, the effect of which was to convert US$60 million of
notional 5.29% fixed rate debt (hedging the new five-year private placement
notes) into (euro) 50 million of notional fixed rate debt at 3.82%. The expiry
date is in 2011.
    The effect of interest earned on these swap agreements has reduced gross
interest expense by $0.5 million in 2007 compared to $1.2 million and
$3.5 million in 2006 and 2005, respectively.
    The unrealized loss on these contracts is $13.9 million due primarily to
the movement of exchange rates.
    The only other material hedge the Company is involved in is aluminum
futures contracts for the Container Division - see Section 2C, Container
Division's review.

    D) Shareholders' Equity and Dividends

    Summary of Changes in Shareholders' Equity

    
    For the Year Ended December 31              2007        2006        2005
    ------------------------------              ----        ----        ----

    Net earnings                          $    147.9  $     77.4  $    163.8
    Dividends                                  (15.4)      (13.8)      (12.8)
    Repurchase of shares, net of issuance
     and settlement of exercised stock
     options and executive share loans           4.8         1.7        (4.4)
    Purchase of shares held in trust            (4.5)          -        (5.6)
    Contributed surplus on expensing of
     stock options and stock based
     compensation plans                          2.5         2.1         1.8
    Transition adjustments on adoption of
     new accounting standards                   (0.3)          -           -
    Increase (decrease) in accumulated
     other comprehensive loss                  (69.7)       19.4       (26.0)
                                          ----------- ----------- -----------

    Increase in shareholders' equity      $     65.3  $     86.8  $    116.8
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------
    Shareholders' equity                  $    717.9  $    652.6  $    565.8
    Shares outstanding at
     December 31 - Class A                     2,379       2,379       2,422
                 - Class B                    30,501      30,223      30,089
    Book value per share (dollars)        $    22.12  $    20.24  $    17.63
    

    The Company's share repurchase program under normal course issuer bids
("bids") is utilized to enhance shareholder value when excess cash and
liquidity are in place, and the repurchase is accretive to earnings and the
best use of funds at the time. The Company announced effective on March 4,
2008 that it intended to acquire under a bid, up to 13,000 Class A voting
shares and 2,500,000 of its issued and outstanding Class B non-voting shares
in the following 12-month period. This bid represented 9.7% of the public
float of the Class A shares and 10.0% of the public float of the Class B
shares.
    The current annualized dividend rate before the increase in March 2008 is
$0.43 per Class A share and $0.48 per Class B share. Including the March 2008
increase, the annualized dividend rate is $0.51 per Class A share and $0.56
per Class B share. The Company has historically paid out dividends at a rate
of 20%-25% of normalized earnings. As previously discussed, the current payout
rate is below target at 17% but would have been 20% if the March 2008 increase
were considered.
    Book value per share (a non-GAAP measure; see "Key Performance Indicators
and Non-GAAP Measures" in Section 5A below) as at December 31, 2007 was
$22.12, up 9% compared to $20.24 at the end of 2006. It was $17.63 at the end
of 2005.


    E) Commitments and Other Contractual Obligations

    The Company's obligations relating to debt and leases at the end of 2007
were as follows:

    
                                                 Payments Due by Period
                                          -----------------------------------

    Contractual Obligations                 Total     2008     2009     2010
    -----------------------                 -----     ----     ----     ----

    Long-term lines of credit             $  45.0  $     -  $     -  $     -
    Unsecured senior notes issued
     March 2006, 5.29% repayable
     March 2011 (US$ 60.0 million)           59.5        -        -        -
    Unsecured senior notes issued
     March 2006, 5.57% repayable
     March 2016 (US$110.0 million)          109.0        -        -        -
    Unsecured senior notes issued
     September 1997, 6.97% repayable
     in equal installments starting
     September 2002 and finishing
     September 2012
     (2007 - US$ 46.8 million,
     2006 - US$ 56.2 million)                46.4      9.3      9.3      9.3
    Unsecured senior notes issued
     July 1998, 6.9% weighted average,
     repayable in three tranches with
     repayments after 12, 15 and 20 years
     (US$ 110.0 million)                    109.0        -        -     30.7
    Interest payments on debt above         133.6     22.1     21.4     19.8
    Capital leases                            1.5      0.5      0.4      0.4
    Other long-term obligations              32.9     11.5      3.0      7.3
    Operating leases                         39.1      9.2      7.3      5.6
                                         --------- -------- -------- --------

    Total contractual obligations         $ 576.0  $  52.6  $  41.4  $  73.1
                                         --------- -------- -------- --------
                                         --------- -------- -------- --------


                                                 Payments Due by Period
                                         ------------------------------------

    Contractual Obligations                  2011     2012  Thereafter
    -----------------------                  ----     ----  ----------

    Long-term lines of credit             $     -  $     -  $  45.0
    Unsecured senior notes issued
     March 2006, 5.29% repayable
     March 2011 (US$ 60.0 million)           59.5        -        -
    Unsecured senior notes issued
     March 2006, 5.57% repayable
     March 2016 (US$110.0 million)              -        -    109.0
    Unsecured senior notes issued
     September 1997, 6.97% repayable
     in equal installments starting
     September 2002 and finishing
     September 2012
     (2007 - US$ 46.8 million,
     2006 - US$ 56.2 million)                 9.3      9.2        -
    Unsecured senior notes issued
     July 1998, 6.9% weighted average,
     repayable in three tranches with
     repayments after 12, 15 and 20 years
     (US$ 110.0 million)                        -        -     78.3
    Interest payments on debt above          15.6     14.3     40.4
    Capital leases                            0.2        -        -
    Other long-term obligations              10.2      0.9        -
    Operating leases                          4.3      2.7     10.0
                                          -------- -------- --------

    Total contractual obligations         $  99.1  $  27.1  $ 282.7
                                          -------- -------- --------
                                          -------- -------- --------
    

    The Company has no material "off-balance sheet" financing obligations
except for typical long-term operating lease agreements. The nature of these
commitments is described in note 14 of the Consolidated Financial Statements.
Additionally, a majority of the Company's post-employment obligations are
defined contribution pension plans. There are no defined benefit plans funded
with CCL stock. The Company has no other material commitments other than in
the normal course of business.

    F) Controls and Procedures

    Over the last three years, the Canadian Securities Administrators
introduced Multilateral Instrument 52-109 ("MI 52-109") defining the Company's
obligations to report on its disclosure controls and procedures and its
internal control over financial reporting.
    CCL continually reviews and enhances its systems of controls and
procedures and has taken this additional regulatory reporting requirement as
an opportunity to further formulate its financial reporting practices. The
work completed in 2006 consisted of the development of a standard set of
control documents indicating the key financial control risks the Company
considered material and the specific key controls expected to be in place at
each in-scope operation to mitigate the identified risk. However, because of
the inherent limitations in all control systems, CCL's management acknowledges
that its disclosure controls and procedures will not prevent or detect all
misstatements due to error or fraud. In addition, management's evaluation of
controls can only provide reasonable, not absolute, assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes.
    During 2007, CCL continued to build upon the foundation work completed in
2006 involving the evaluation of the disclosure controls and procedures and
began the process of conducting effectiveness testing on the disclosure
controls and procedures and its internal control over financial reporting.

    Disclosure Controls and Procedures
    ----------------------------------
    Disclosure controls and procedures are designed to provide reasonable
assurance that all relevant information is gathered and reported to senior
management, including the Vice Chairman and Chief Executive Officer ("CEO")
and the Chief Financial Officer ("CFO") on a timely basis so that appropriate
decisions can be made regarding public disclosure. CCL's Disclosure Committee
reviews all external reports and documents of CCL before publication to
enhance the Company's disclosure controls and procedures.
    As at December 31, 2007, based on this year's continued evaluation of the
disclosure controls and procedures, the CEO and CFO have concluded that our
disclosure controls and procedures, as defined in MI 52-109, are effective to
ensure that information required to be disclosed in reports and documents that
we file or submit under Canadian securities legislation is recorded,
processed, summarized and reported within the time periods specified. This was
also the case at the end of 2006 and 2005.

    Internal Control Over Financial Reporting
    -----------------------------------------
    Internal controls over financial reporting are designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian GAAP. Management is responsible for establishing and maintaining
adequate internal control over financial reporting to CCL Industries Inc.
    At the end of 2006, CCL's management disclosed that due to the nature of
its 40% ownership of the ColepCCL joint venture headquartered in Portugal, CCL
did not have the ability to design internal controls over financial reporting
extending into the joint venture due to the shareholders' agreement with the
majority shareholder of ColepCCL. Consequently, at that time, the CEO and CFO
were not in a position to evaluate the design of internal controls over
financial reporting with respect to ColepCCL. In 2007, there were no changes
from 2006 in the status of CCL's ability to evaluate the internal controls
over financial reporting of ColepCCL. With the sale of ColepCCL in November
2007, this exclusion from complying with the regulations for the ColepCCL
operations will not be necessary after the 2007 annual reporting period.
    There were no material changes in internal controls over financial
reporting in the most recent interim period.

    4) RISKS AND UNCERTAINTIES
    --------------------------

    The Company is subject to the usual commercial risks and uncertainties
from operating as a Canadian public company and as a supplier of goods and
services to the non-durable consumer packaging industry on a global basis.
These risks and uncertainties could result in a material adverse effect on our
business and financial results. A number of these potential risks that could
have a material adverse effect on the business, financial condition and
results of operations of the Company are listed generally in order of
importance as follows:

    
    -   CCL's dependence on the world economy and overall consumer
        confidence, disposable income and purchasing trends, inflation and
        geopolitical risks both globally and in each jurisdiction in which
        the Company operates;
    -   Changes within the competitive environment, including offshore
        producers, and our ability to be cost competitive and to offer value-
        added products to our customers, that may impact CCL's future
        profitability;
    -   The Company's ability to control the costs of raw materials and
        energy, including the effective negotiation of prices with suppliers
        and our ability to pass these costs on to our customers;
    -   The Container Division's ability to pass higher aluminum costs along
        to our customers and to effectively utilize the recent and planned
        added capacity in the business;
    -   The negative currency translation and transaction effect on
        consolidated earnings of a strengthening Canadian dollar against the
        currencies of the many countries in which CCL operates;
    -   The inability to return to the historical profitability of the
        Company's Tube Division, which may cause the goodwill and assets of
        the business to be impaired;
    -   The risks associated with operating a decentralized organization in
        over 50 facilities in 15 countries around the world with a variety of
        different cultures and values;
    -   Reliance on key employees and the retention of an experienced,
        skilled workforce;
    -   The ability of management to successfully integrate acquisitions and
        joint ventures into its structure, control operating performance and
        achieve synergies, and the risk associated with potential undisclosed
        liabilities associated with such acquisitions and joint ventures;
    -   Consolidation within the retail, healthcare and consumer products
        marketer base;
    -   Management of current income tax exposures and historical tax
        assessments in a multitude of jurisdictions;
    -   Price expectations by our customers due to pressure from the retail
        chains;
    -   The Company's ability to continuously comply with disclosure controls
        and internal controls over financial reporting requirements under
        MI 52-109 in light of its global structure;
    -   Achievement of planned volumes through normal growth and successful
        renegotiation of current contracts with customers;
    -   Lack of delivery of planned benefits from cost-reduction programs and
        recent restructuring efforts;
    -   The inability to continue to develop innovative packaging solutions;
    -   Usage of derivatives such as interest rate swaps, forward foreign
        exchange contracts and aluminum futures contracts to improve
        financial performance and mitigate earnings fluctuations;
    -   Availability and cost of property, casualty and executive risk
        insurance including the ability to manage cost increases and the
        residual risks not insured and thereby assumed by the Company;
    -   Operating hazards and product hazards due to the materials, processes
        and energy used to manufacture and transport the Company's products;
    -   The maintenance of good labour relations with our salaried and hourly
        personnel, including unions and labour/management committees;
    -   The maintenance of existing product regulations in each jurisdiction,
        allowing the manufacture of current and planned new products;
    -   The satisfactory settlement of existing legal proceedings and claims,
        and the management of future legal proceedings and claims; and
    -   The effective management of legacy issues related to the disposition
        of prior businesses including representations and warranties,
        environmental and tax matters and other financial obligations.
    

    Sales from Canadian operations in 2007 were 12% of CCL's total sales from
continuing operations. Non-Canadian operating results are translated into
Canadian dollars at the average exchange rate for the period covered. The
Company has significant operating bases in both the United States and Europe.
In 2007, 38% and 39% of total sales came from the United States and Europe,
respectively. The sales from foreign business units in Latin America and Asia
in 2007 were 11% of CCL's total sales. Operations outside of Canada, the
United States and Europe are perceived generally to have greater political and
economic risks and include our operations in Latin America and Asia. These
risks include possible currency devaluation, new government controls on
business activities, currency controls and changes in taxation and may have a
material negative effect on the consolidated financial results of the Company.
    The business is subject to numerous statutes, regulations, by-laws,
permits and policies related to the protection of the environment and workers'
health and safety. CCL maintains active health and safety and environmental
programs for the purpose of preventing injuries to employees and pollution
incidents at its manufacturing sites. Continual increases in costs for
healthcare, workers' compensation and general insurance may result in the
Company, in some cases, self-insuring higher levels of coverage and, in all
areas, focusing significant resources on the prevention of and management of
claims.
    The Company also carries out a program of environmental compliance
audits. This program includes an independent third party pollution liability
assessment. The Company's in-house specialists manage all remediation projects
and use the above environmental audit program to assess the adequacy of
ongoing compliance at the operating level and to establish provisions, as
required, for site restoration plans. CCL also has environmental insurance for
most of its operating sites with certain exclusions for historical matters.
The Company believes it has made adequate provision in its financial
statements for potential site restoration costs and other remedial
obligations. These site restoration and environmental reserves amounted to
$7.5 million at December 31, 2007.

    5) ACCOUNTING POLICIES AND NON-GAAP MEASURES
    --------------------------------------------

    A) Key Performance Indicators and Non-GAAP Measures

    CCL measures the success of our business using a number of key
performance indicators, many of which are in accordance with Canadian GAAP as
described throughout this report. The following performance indicators are not
measurements in accordance with Canadian GAAP and should not be considered as
an alternative to or replacement of net income or any other measure of
performance under Canadian GAAP. These non-GAAP measures do not have any
standardized meaning and may not be comparable to similar measures presented
by other issuers. In fact, these additional measures are used to provide added
insight into our results and are concepts often seen in external analysts'
research reports, financial covenants in our banking agreements and note
agreements, purchase and sales contracts on acquisitions and divestitures of
the business and in discussions and reports to and from our shareholders and
the investment community. These non-GAAP measures will be found throughout
this report and are referenced in this definition section alphabetically:
    Book Value per Share - A measure indicating the book value per the
combined outstanding Class A and Class B shares. It is calculated by dividing
shareholders' equity by the actual number of Class A and Class B shares
outstanding, excluding amounts and shares related to shares held in trust and
the executive share purchase plan.
    Days of Working Capital Employed - A measure indicating the relative
liquidity and asset intensity of the Company's working capital. It is
calculated by multiplying the net working capital by the number of days in the
quarter and then dividing by the quarterly sales. Net working capital includes
accounts receivable, inventory, other receivables and prepaid expenses,
accounts payable and accruals, income and other taxes payable.
    EBITDA - A measure used in the packaging industry and other industries to
assist in understanding operating results. It is defined as earnings before
interest, taxes, depreciation and amortization, excluding restructuring and
other items. We believe that it is an important measure as it allows us to
assess our ongoing business without the impact of interest, depreciation and
amortization and income tax expenses, as well as non-operating factors. It is
intended to indicate our ability to incur or service debt and to invest in
property, plant and equipment, and it allows us to compare our business to
those of our peers and competitors who may have different capital or
organizational structures. EBITDA is a measure tracked by financial analysts
and investors and is included in our senior notes and bank covenants and the
shareholder agreement with our former partner in the ColepCCL joint venture.
    Interest Coverage - A measure indicating the relative amount of operating
income earned by the Company compared to the amount of interest expense
incurred by the Company. It is calculated as operating income before
restructuring and other items and favourable tax adjustments plus net interest
expense, divided by net interest expense.
    Net Debt - A measure indicating the financial indebtedness of the Company
assuming that all cash on hand is used to repay a portion of the outstanding
debt. It is defined as current debt including cash advances, plus long-term
debt, less cash and cash equivalents.
    Net Debt to Total Book Capitalization - A measure indicating the
financial leverage of CCL. It measures the relative use of debt versus equity
in the book capital of the Company. Net debt to total book capitalization is
defined as net debt (see above) divided by net debt plus shareholders' equity,
expressed as a percentage.
    Restructuring and Other Items and Favourable Tax Adjustments - A measure
of significant non-recurring items that are included in net earnings. The
impact of the restructuring and other items and favourable tax adjustments on
a per share basis is measured by dividing the after-tax income of the
restructuring and other items and favourable tax adjustments by the average
number of shares outstanding in the relevant period. Management will continue
to disclose the impact of significant restructuring and other items and
favourable tax adjustments on its results because the timing and extent of
such items do not reflect or relate to the Company's ongoing operating
performance. Management generally evaluates the operating income of its
divisions before the effect of restructuring and other items and favourable
tax adjustments.
    Return on Equity ("ROE") before restructuring and other items and
favourable tax adjustments - A measure that provides insight into the
effective use of shareholder capital in generating ongoing net earnings. This
return on equity is calculated by dividing annual net income before
restructuring and other items and favourable tax adjustments by the average of
the beginning and end of year shareholders' equity.
    Return on Sales - A measure indicating relative profitability of sales to
customers. It is defined as operating income divided by sales, expressed as a
percentage.

    B) Accounting Policies and New Standards

    Accounting Policies
    -------------------
    The above analysis and discussion of the Company's financial condition
and results of operation are based upon its Consolidated Financial Statements
prepared in accordance with Canadian GAAP. A summary of the Company's
significant accounting policies is set out in note 1 of the Consolidated
Financial Statements. The changes in accounting policies adopted in the
current year due to changes in Canadian GAAP are discussed below.

    New Accounting Standards Effective 2007
    ---------------------------------------
    Effective on January 1, 2007, the Company adopted the new CICA Handbook
Section 1530, Comprehensive Income; Section 3251, Equity; Section 3861,
Financial Instruments - Disclosure and Presentation; Section 3865, Hedges and
Section 3855, Financial Instruments - Recognition and Measurement.
    Section 1530, Comprehensive Income, establishes standards for reporting
and presenting comprehensive income, which is defined as the change in equity
from transactions and other events from non-owner sources. Other comprehensive
income refers to items recognized in comprehensive income that are excluded
from net earnings calculated in accordance with GAAP.
    Section 3251, Equity, establishes standards for the presentation of
equity and changes in equity during the reporting period. This Section
requires an enterprise to present a separate component of equity for each
category of equity that is of a different nature.
    Section 3861, Financial Instruments - Disclosures and Presentation,
establishes standards for presentation of financial instruments and non-
financial derivatives, and identifies the information that should be disclosed
about them. Under the new standards, policies followed for years prior to the
effective date are generally not reversed; therefore, the comparative figures
have not been restated except for the requirement to restate currency
translation adjustment as part of other comprehensive income.
    Section 3865, Hedges, describes when and how hedge accounting can be
applied as well as the disclosure requirements. Hedge accounting enables the
recording of gains, losses, revenue and expenses from derivative financial
instruments in the same year as for those related to the hedged item.
    Section 3855, Financial Instruments - Recognition and Measurement,
prescribes when a financial asset, financial liability or non-financial
derivative is to be recognized on the balance sheet and at what amount,
requiring fair value or cost-based measures under different circumstances.
Under Section 3855, financial instruments must be classified into one of these
five categories: held for trading, held-to-maturity, loans and receivables,
available-for-sale financial assets or other financial liabilities. All
financial instruments, including derivatives, are measured on the balance
sheet at fair value except for loans and receivables, held-to-maturity
investments and other financial liabilities, which are measured at amortized
cost. Subsequent measurement and changes in fair value will depend on their
initial classification, as follows: held for trading financial assets are
measured at fair value and changes in fair value are recognized in net
earnings; available-for-sale financial instruments are measured at fair value
with changes in fair value recorded in other comprehensive income until the
investment is derecognized or impaired, at which time the amounts would be
recorded in net earnings.
    Under adoption of these new standards, the Company designated its cash
and cash equivalents as held for trading. Long-term investments are designated
as available-for-sale. Cash and cash equivalents and long-term investments are
measured at fair value. Accounts receivable are classified as loans and
receivables, which are measured at amortized cost. Bank advances, accounts
payable and accrued liabilities and long-term debt are classified as other
financial liabilities, which are measured at amortized cost. The Company has
also elected to expense, as incurred, transaction costs related to long-term
debt.
    Upon adoption of these new standards, the Company recorded a decrease to
opening retained earnings of $3.0 million. The decrease to opening retained
earnings was a result of the write-off of previously deferred transaction
costs related to issuance of long-term debt ($1.0 million loss, net of tax of
$0.5 million), the write-off of a deferred loss on the termination of various
cross currency interest rate swaps that did not meet the new requirements
($2.1 million loss, no tax) and the ineffectiveness of cash flow hedges
discussed below ($0.1 million gain, net of tax).
    All derivative instruments, including embedded derivatives, are recorded
on the balance sheet at fair value unless exempted from derivative treatment
as a normal purchase or sale. All changes in their fair value are recorded in
net earnings unless cash flow hedge accounting is used, in which case, changes
in fair value are recorded in other comprehensive income. The Company has
applied this accounting treatment for all embedded derivatives in existence at
transition. The impact of the change in accounting policy related to embedded
derivatives is not material.
    The Company uses various financial instruments to manage foreign currency
exposures, fluctuation in interest rates and exposures related to the purchase
of aluminum for the Container Division. These financial instruments are
classified into three types of hedges: cash flow hedges, fair value hedges and
hedges of net investments in self-sustaining operations.
    In a cash flow hedge, the effective portion of changes in the fair value
of derivatives is recognized in other comprehensive income. Any gain or loss
in fair value relating to the ineffective portion is recognized immediately in
the statement of earnings. Upon adoption of the new standards, the Company
remeasured its cash flow hedge derivatives at fair value. Aluminum forward
contracts with an unfavourable fair value of $0.6 million are a component of
the Company's cash flow hedges and are recorded in other receivables and
prepaid expenses. In addition, the Company entered into a cross currency
interest rate swap agreement (CCIRSA) that converted U.S. dollar fixed rate
debt into Canadian dollar fixed rate debt in order to reduce the Company's
exposure to the U.S. dollar debt and currency exposures. This CCIRSA is also
designated as a cash flow hedge and has an unfavourable fair value of
$8.7 million for the current period and is recorded in long-term debt. The
Company also had used forward contracts to hedge foreign exchange exposure on
anticipated sales. All existing forward contracts matured earlier this year.
These hedges were previously recorded in accounts payable and accrued
liabilities.
    In a fair value hedging relationship, the carrying value of the hedged
item is adjusted by gains or losses attributable to the hedged risk and
recorded in net earnings. This change in fair value of the hedged item, to the
extent the hedging relationship is effective, is offset by changes in the fair
value of the derivative also measured at fair value on the balance sheet date,
with changes in value recorded through net earnings. The Company has two
CCIRSAs designated as fair value hedges, which convert U.S. dollar fixed rate
debt into Canadian dollar floating rate debt in order to reduce interest rate
and currency risk. In addition, the Company has an interest rate swap
converting U.S. dollar fixed rate debt to U.S. dollar floating rate debt to
reduce interest rate risk exposure. These fair value hedges have an
unfavourable fair value of $8.3 million and are recorded in long-term debt.
    In a hedge of a net investment in a self-sustaining foreign operation,
the portion of the gain or loss on the hedging item that is determined to be
an effective hedge should be recognized in comprehensive income and the
ineffective portion should be recognized in net earnings. During 2006, the
Company entered into CCIRSAs that converted Canadian dollar fixed rate debt
and floating rate debt into euro fixed rate debt and euro floating rate debt
in order to hedge the Company's exposure to the euro, with a view to reducing
foreign exchange fluctuations and interest expense. These CCIRSAs have been
designated as net investment hedges and have a net favourable fair value of
$3.1 million at the end of 2007 and are recorded in other assets and long-term
debt.

    New Accounting Standards Effective in 2008
    ------------------------------------------
    In May 2007, the CICA issued a new Handbook Section 3031, Inventories,
which addresses the measurement and disclosure of inventory. The new standard
is effective for interim and annual financial statements for fiscal years
beginning on or after January 1, 2008. Management is currently reviewing the
potential impact on the financial results of the Company. However, further
disclosure will be required in the Consolidated Statement of Earnings as it
will now be necessary to disclose the amount of inventories recognized as an
expense during the period. The Company will comply with the standard on
January 1, 2008.
    In October 2006, the CICA issued new standards related to financial
instrument presentation and disclosure, Handbook Section 3862, Financial
Instruments -Disclosure and Handbook Section 3863, Financial Instruments -
Presentation. These standards revise and enhance the disclosure requirements
of Handbook Section 3861, Financial Instruments - Disclosure and Presentation.
These standards are effective for interim and annual financial statements
relating to fiscal years beginning on or after October 1, 2007. Management is
currently reviewing the potential impact on the Company. The Company will
comply with the requirements of the new standard when the standard becomes
effective.
    In October 2006, the CICA approved a new accounting standard,
Section 1535, Capital Disclosures. This new section establishes standards for
disclosing information about an entity's capital and how it is managed. This
standard is effective for interim and annual financial statements relating to
fiscal years beginning on or after October 1, 2007. Management is currently
reviewing the potential impact on the Company. The Company will comply with
the requirements of the new standard when the standard becomes effective.

    C) Critical Accounting Estimates

    The preparation of financial statements, in conformity with GAAP,
requires management to make critical estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and the
disclosure of contingent assets and liabilities. The Company evaluates these
estimates and assumptions on an ongoing basis including, but not limited to,
those related to inventories, redundant assets, bad debts, derivatives,
hedging instruments, income taxes, intangible assets, restructuring, pension
and other post-retirement benefits, environmental liabilities, self-insurance
reserves, contingencies and litigation. Estimates and assumptions are based on
historical and other factors believed to be reasonable under the
circumstances. The results of these estimates may form the basis for the
carrying value of certain assets and liabilities and may not be readily
apparent from these sources. Reported results may differ from the estimates,
under conditions and circumstances that have changed from those assumed in the
determination of these estimates. The material impact on reported results and
the potential impact and any associated risk related to these estimates are
discussed throughout this Management's Discussion and Analysis and in the
notes to the Consolidated Financial Statements.

    D) Inter-Company and Related Party Transactions

    The Company has entered into a number of agreements with its subsidiaries
that govern the management and commercial and cost-sharing arrangements with
and amongst the subsidiaries. These inter-company structures are established
on terms typical to arm's length agreements.
    The Company has no material related party transactions.

    6) OUTLOOK
    ----------

    The North American economy, particularly the economy of the United
States, had been slipping toward recession as 2007 progressed and may well be
in a recession now. In Western Europe, the economy has been reasonably strong,
partly due to market demand for products and services from Eastern Europe
including Russia. Asia and South America have continued to enjoy substantial
growth. Market demand for the Company's products (packaging components of
consumer non-durable goods) has been generally good although the recent
slowdown in the United States has had an impact on personal care markets
consistent with our customers' public reports. The Company's outlook for 2008
is positive with modest growth anticipated in both North America and Western
Europe and greater growth expected in Eastern Europe, Latin America and Asia.
The Company's order banks are in good shape for most sectors of the business
for the first quarter of 2008, and first quarter results are anticipated to be
satisfactory after a record first quarter last year, although currency
translation will have a sizeable negative impact on the comparison quarter of
2007.
    During 2008, the Company will continue to integrate and reorganize the
large number of our recent acquisitions and business units to improve
accountability and profitability and to simplify administration. The Company
has completed two acquisitions since December 2007 and is continuing to
investigate mid-sized potential acquisition candidates that meet its criteria
of core products and customers and new markets, with the expectation of
earnings accretion in the first year of ownership. In addition, existing
emerging markets such as China, Southeast Asia, Eastern Europe and Latin
America, and new emerging markets for CCL, such as India, are potential areas
of expansion that would continue to meet the demands of our global customers.
    The organic growth in sales and income experienced in 2007 is anticipated
to continue into 2008 as the Company is focused now, with the divestiture of
ColepCCL, on growing strictly as a specialty packaging business. There are
challenges expected in 2008 as the Company continues to maintain and grow its
sales volumes and profit margins in a climate of economic uncertainty. As
previously discussed, the financial performance of the Tube Division will be
critical given the relatively high level of its carrying value of goodwill.
The recent strength in the Canadian dollar relative to the currencies of CCL's
foreign operations, if unchanged from current levels, will have a significant
negative impact on earnings on a comparative basis with 2007, particularly in
the first half of 2008. Interest costs should be lower in 2008 due to the
current lower net debt levels and further cash to be received from the sale of
ColepCCL. Tax rates generally are lower in 2008 as a few countries,
particularly in Europe, have announced or enacted reduced income tax rates for
2008 and later years. The timing and size of these reductions may have a
positive effect on earnings performance in 2008 and beyond.





For further information:

For further information: Steve Lancaster, Executive Vice President,
(416) 756-8517

Organization Profile

CCL INDUSTRIES INC.

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