Tesco 2011 Annual Report Download - page 134

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NOTE 23 FINANCIAL RISK FACTORS CONTINUED
During 2011 and 2010, net debt was managed using derivative instruments to hedge interest rate risk as follows:
2011 2010
Fixed
£m
Floating
£m
Total
£m
Fixed
£m
Floating
£m
Total
£m
Cash and cash equivalents – 1,870 1,870 – 2,819 2,819
Loans and advances to customers – Tesco Bank 2,161 2,480 4,641 1,827 2,285 4,112
Loans and advances to banks and other financial assets – Tesco Bank 404 – 404 144 – 144
Short-term investments – 1,022 1,022 – 1,314 1,314
Other investments – Tesco Bank 925 183 1,108 581 282 863
Joint venture and associate, loan receivables (note 30) – 503 503 – 309 309
Other receivables – 25 25 – – –
Finance leases (note 36) (92) (106) (198) (83) (126) (209)
Bank and other borrowings (9,697) (1,180) (10,877) (11,806) (1,258) (13,064)
Customer deposits – Tesco Bank (398) (4,676) (5,074) – (4,357) (4,357)
Deposits by banks – Tesco Bank (36) – (36) (30) – (30)
Future purchases of non-controlling interests (106) – (106) (146) – (146)
Derivative effect:
Interest rate swaps (1,218) 1,218 – (2,215) 2,215 –
Cross currency swaps 3,459 (3,459) – 6,677 (6,677) –
Index-linked swaps (498) 498 – – – –
Caps and collars – – – 120 (120) –
Total (5,096) (1,622) (6,718) (4,931) (3,314) (8,245)
Credit risk
Credit risk arises from cash and cash equivalents, trade and other receivables, customer deposits, financial instruments and deposits with banks and
financial institutions. The Group policy on credit risk is described on page 57.
The counterparty exposure under derivative contracts is £1,287m (2010 – £1,474m). The Group policy is to transact derivatives only with counterparties
rated at least A1 by Moody’s.
The Group considers its maximum credit risk to be £10.9bn (2010 – £11.0bn), being the Group’s total financial assets.
For credit risk relating to Tesco Bank, refer to the separate section on Tesco Bank financial risk factors below.
Liquidity risk
Liquidity risk is managed by short-term and long-term cash flow forecasts. In addition, the Group has committed facility agreements for £2.8bn
(2010 – £2.6bn), which mature between 2014 and 2015.
The Group has a European Medium Term Note programme of £15.0bn, of which £8.5bn was in issue at 26 February 2011 (2010 – £10.6bn), plus
a Euro Commercial Paper programme of £2.0bn, none of which was in issue at 26 February 2011 (2010 – £nil), and a US Commercial Paper
programme of $4.0bn, none of which was in issue at 26 February 2011 (2010 – $nil).
For liquidity risk relating to Tesco Bank, refer to the separate section on Tesco Bank financial risk factors below.
FINANCIAL STATEMENTS
130
—
TESCO PLC Annual Report and Financial Statements 2011
Notes to the Group financial statements