Tesco 2001 Annual Report Download - page 35

TESCO PLC 33
NOTE 20 Financial instruments continued
Analysis of interest rate exposure and currency of financial assets
The interest rate exposure and currency profile of the financial assets of the Group at 24 February 2001 were:
Cash at Cash at
bank and Short-term 2001 bank and Short-term 2000
in hand deposits Other Total in hand deposits Other Total
£m £m £m £m £m £m £m £m
Sterling 94 22 43 159 – 75 37 112
Other 185 233 – 418 88 183 – 271
Total financial assets 279 255 43 577 88 258 37 383
Other financial assets are in respect of amounts owed by undertakings in which the company has a participating interest, which attract a rate
of interest of 6.7% (2000 – 6.7%). Surplus funds are invested in accordance with approved limits on security and liquidity and bear rates of
interest based on relevant LIBOR equivalents. Cash at bank and in hand includes non-interest bearing cash and cash in transit.
Borrowing facilities
The Group has the following undrawn committed facilities available at 24 February 2001 in respect of which all conditions precedent had been
met at that date:
2001 2000
£m £m
Expiring within one year – 110
Expiring between one and two years 330 55
Expiring in more than two years 550 600
880 765
All facilities incur commitment fees at market rates and would provide funding at floating rates.
Currency exposures
Within the Group, the principal differences on exchange arising which are taken to the profit and loss account relate to purchases made by
Group companies in currencies other than their reporting currencies. After taking account of local forward currency purchases used to hedge
these transactions, there were no significant balances on these exposures at year end. Also, rolling hedges of up to 18 months duration are
maintained against the value of investments in, and long-term intercompany loans to, overseas subsidiaries and, to the extent permitted in
SSAP20, differences on exchange are taken to the statement of total recognised gains and losses.
Fair values of financial assets and financial liabilities
2001 2000
Book value Fair value Book value Fair value
£m £m £m £m
Primary financial instruments held or issued to finance the Group’s operations:
Short-term borrowings (1,413) (1,420) (847) (847)
Long-term borrowings (1,925) (1,974) (1,559) (1,563)
Short-term deposits 255 255 258 258
Cash at bank and in hand 279 279 88 88
Derivative financial instruments held to manage the interest rate and currency profile:
Interest rate swaps and similar instruments – 12 – 4
Forward foreign currency contracts (12) (18) (9) (9)
Swap profit crystallisation (7) (7) (12) (12)
(2,823) (2,873) (2,081) (2,081)
Other significant financial instruments outstanding at the year end are £220m (2000 – £44m) nominal value forward foreign exchange contracts
hedging the cost of foreign currency denominated purchases. On a mark-to-market basis, these contracts show a loss of £6m (2000 – nil).
The remaining £12m (2000 – £9m) relates to losses on forward foreign currency contracts hedging investments in overseas subsidiaries.
In accordance with SSAP20 these differences on exchange are taken to the statement of total recognised gains and losses.The fair values of the
interest rate swaps, forward foreign currency contracts and long-term sterling denominated fixed rate debt have been determined by reference to
prices available from the markets on which the instruments are traded. The fair values of all other items have been calculated by discounting
expected future cash flows at prevailing interest rates.