Vodafone 1998 Annual Report Download - page 59

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Vodafone Report and Accounts - Financial Review
paper programme. The programme is fully supported by committed bank
facilities that expire between 31 March 2000 and 31 March 2003.
Foreign exchange management
Foreign currency exposures on known future transactions are hedged,
including those resulting from the repatriation of international dividends and
loans. Forward foreign exchange contracts are the derivative instrument most
used for this purpose.
The Group's policy is not to hedge its international net assets with respect to
foreign currency balance sheet translation exposure since net assets
represent a small proportion of the market value of the Group and
international operations provide risk diversity. However, 23% of gross
borrowings were denominated in currencies other than sterling in anticipation
of dividend streams from profitable international operations and this provides
a partial hedge against profit and loss account translation exposure.
Interest rate management
The Group's main interest rate exposure is to sterling interest rates, although
there is a smaller exposure to Dutch guilder interest rates.
Under the Group's interest rate management policy, interest rates are fixed
when net interest is forecast to have a significant impact on profits. Therefore,
the term structure of interest rates are managed within limits approved by the
Board, using derivative financial instruments such as interest rate swaps,
futures and forward rate agreements.
At the end of the year, 55% of the Group's gross borrowings were fixed for a
period of at least one year. A one percentage rise in market interest rates
would affect profits before tax by less than one percent.
Counterparty risk management
Cash deposits and other financial instrument transactions give rise to credit
risk on the amounts due from counterparties. The Group regularly monitors
these risks and the credit ratings of its counterparties and, by policy, limits the
aggregate credit and settlement risk it may have with any one counterparty.
Whilst the Group may be exposed to credit losses in the event of non
performance by these counterparties, it considers the possibility of material
loss to be minimal because of these control procedures.
http://www.vodafone.com/download/investor/reports/annual98/financialreview/treasury.html (2 of 2)29/03/2007 23:09:18