Tesco 2006 Annual Report Download - page 77

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75Tesco plc
Note 20 Financial instruments continued
Financial instruments under UK GAAP FRS 13 ‘Derivatives and other financial instruments: disclosures’ (relating to the
comparative period ended 26 February 2005)
An explanation of the objectives and policies for holding and issuing financial instruments is set out in the Operating and financial
review on page 16. Other than where these items have been included in the currency risk disclosures, short-term receivables and
payables have been excluded from the following analysis.
Analysis of interest rate exposure and currency of financial liabilities
The interest rate exposure and currency profile of the financial liabilities of the Group as at 26 February 2005, after taking into
account the effect of interest rate and currency swaps, were:
2005
Floating rate Fixed rate
liabilities liabilities Total
£m £m £m
Currency
Sterling – 2,203 2,203
Euro 577 24 601
Thai Baht 550 – 550
Czech Krona 335 139 474
Slovak Krona 13 31 44
Japanese Yen 23 141 164
Korean Won 654 – 654
Chinese Yuan 127 – 127
Other 149 22 171
Grossliabilities 2,428 2,560 4,988
Fixed rate financial liabilities
2005
Weighted Weighted
average average time
interest rate for which
26 Feb 2005 rate is fixed
%Years
Currency
Sterling 5.7 7
Euro 5.4 1
Japanese Yen 1.3 5
Czech Krona 3.9 3
Slovak Krona 4.3 3
Malaysian Ringgit 7.9 12
Taiwanese Dollar 4.5 –
Weighted average 5.5 6
Floating rate liabilities as at 26 February 2005 bore interest at rates based on relevant national LIBOR equivalents. The interest rate
profile of the Group was further managed by the purchase of Euro interest rate collars with an aggregate notional principal of
£145m. The average strike rate of the interest rate caps purchased was 6.76%, while the average strike rate of the interest rate floors
sold was 2.98%. The average maturity of the collars as at 26 February 2005 was two and a half years. The value of these contracts as
at 26 February 2005, if realised, would have resulted in a loss of £1.7m.
Sterling interest rate caps with an aggregate notional principal of £600m were purchased during the year ended 26 February 2005.
The strike rate on these caps was 6% and the average maturity was five years. The value as at 26 February 2005 of these contracts,
if realised, would have been £3.5m.
Retail Price Index funding of £226m, maturing in 2016, was outstanding as at 26 February 2005 and was classified as fixed rate
debt. The interest rate payable on this debt was 4% and the principal was linked to the Retail Price Index. Limited Price Index
funding, of £228m, maturing in 2025, was outstanding as at 26 February 2005 and was classified as fixed rate debt. The interest
rate payable on this debt was 3.322% and the principal was linked to the Retail Price Index. The maximum indexation of the
principal in any one year is 5.0% and the minimum is 0.0%.