Tesco 2003 Annual Report Download - page 42

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40 TESCO PLC
notes to the financial statements continued
NOTE 20 Financial instruments
An explanation of the objectives and policies for holding and issuing financial instruments is set out in the operating and financial
review on pages 2 to 5. Other than where these items have been included in the currency risk disclosures, short-term debtors
and creditors 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 at 22 February 2003, after taking into
account the effect of interest rate and currency swaps, were:
2003 2002
Floating rate
Fixed rate
Floating rate
Fixed rate
liabilities liabilities Total liabilities liabilities Total
£m £m £m £m £m £m
Currency
Sterling 1,145 2,476 3,621 1,358 1,508 2,866
Euro 361 23 384 116 147 263
Thai Baht 447 – 447 394 – 394
Korean Won 404 – 404 388 – 388
Other 432 87 519 319 – 319
Gross Liabilities 2,789 2,586 5,375 2,575 1,655 4,230
Fixed rate financial liabilities
2003 2002
Weighted Weighted Weighted Weighted
average average time average average time
interest rate
for which interest rate for which
22 Feb 2003
rate is fixed
23 Feb 2002
rate is fixed
% Years % Years
Currency
Sterling 5.8 7 6.4 9
Euro 5.4 3 5.7 2
Czech Krona 3.75––
Taiwanese Dollar 4.52––
Weighted average 5.8 7 6.4 9
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 interest rate collars with an aggregate notional principal of £135m
(2002 – nil).The interest rate caps with an aggregate notional principal of £100m, as at the prior year end, have matured
during the year. The average strike price of the interest rate caps purchased is 6.76%, while the average strike price of the
interest rate floors sold is 2.98%.The average maturity of the collars is four and a half years. The current value of these
contracts, if realised, is a loss of £2.3m (2002 – nil). Retail Price Index funding of £212m (2002 – £210m), 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. An additional tranche of Limited Price Index funding, maturing 2025, has been issued during the year
bringing the total to £215m (2002 – £162m) and has been classified as fixed 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%.