Tesco 2005 Annual Report Download - page 53

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Note 21 Financial instruments continued
Fixed rate financial liabilities
2005 2004
Weighted Weighted Weighted Weighted
average average time average average time
interest rate for which interest rate for which
26 Feb 2005 rate is fixed 28 Feb 2004 rate is fixed
% Years % Years
Currency
Sterling 5.7 7 5.3 6
Euro 5.4 1 5.4 1
Japanese Yen 1.3 5 1.0 5
Czech Krona 3.9 3 4.0 4
Slovak Krona 4.3 3 – –
Malaysian Ringgit 7.9 12 – –
Taiwanese Dollar 4.5 – 4.5 2
Weighted average 5.5 6 5.3 6
Floating rate liabilities bear interest at rates based on relevant national LIBOR equivalents. The interest rate profile of the
Group has been further managed by the purchase of Euro interest rate collars with an aggregate notional principal of £145m
(2004 – £135m). The average strike rate of the interest rate caps purchased is 6.76%, while the average strike rate of the
interest rate floors sold is 2.98%. The average maturity of the collars is two and a half years. The current value of these contracts,
if realised, is a loss of £1.7m (2004 – £2.6m).
Sterling interest rate caps with an aggregate notional principal of £600m were purchased during the year. The strike rate on these
caps is 6% and the average maturity is five years. The current value of these contracts, if realised, is £3.5m.
Retail Price Index funding of £226m (2004 – £220m), maturing 2016, is outstanding and has been classified as fixed rate debt.
The interest rate payable on this debt is 4% and the principal is linked to the Retail Price Index. Limited Price Index funding, of
£228m (2004 – £221m), maturing 2025, is outstanding and has been classified as fixed rate debt. The interest rate payable on
this debt is 3.322% and the principal is 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%.
Analysis of interest rate exposure and currency profile of financial assets
The interest rate exposure and currency profile of the financial assets of the Group at 26 February 2005 were:
2005 2004
Cash at Cash at
bank and Short-term bank and Short-term
in hand deposits Other Total in hand deposits Other Total
£m £m £m £m £m £m £m £m
Sterling 411 231 104 746 517 161 112 790
Other currencies 389 115 4 508 153 269 4 426
Total financial assets 800 346 108 1,254 670 430 116 1,216
An investment in collateralised Deutsche Bank preference shares of £150m was held at 26 February 2005, paying fixed
interest of 4.3%.
Other financial assets, in respect of amounts owed by undertakings in which the company has a participating interest, attracted
a rate of interest of 5.7% (being LIBOR plus a margin). 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.
Tesco PLC 51