REUTERS GROUP PLC ANNUAL REPORT AND ACCOUNTS 1999

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Notes on the consolidated cash flow statement continued12. Derivatives and other financial instruments continuedThe weighted average fixed rate receivable on the interest rate swaps at 31 December 1999 was 6% (1998 – 7%, 1997 – 8%) and the weighted average variable ratepayable was 7% (1998 – 6%, 1997 – 7%). The weighted average variable rate is based on the rate implied in the yield curve at the balance sheet date.All derivative instruments are unsecured. However, Reuters does not anticipate non-performance by the counterparties who are all banks with recognised long-termcredit ratings of ‘A’ or higher.Tables containing information on hedging gains and losses are set out on page 40.Carrying and fair values of group financial assets and liabilities at 31 December were:1999 1998 1997CARRYING FAIR CARRYING FAIR CARRYING FAIRVALUE VALUE VALUE VALUE VALUE VALUE£M £M £M £M £M £MDerivative instruments – (13) – (7) 3 44Other financial assets:Fixed asset investments 127 733 25 67 19 33Long-term debtors 19 19 16 16 15 15Short-term investments and cash 609 609 1,006 1,006 1,356 1,356Other financial liabilities:Short-term borrowings (307) (307) (1,005) (1,005) (48) (48)Long-term borrowings (261) (244) (4) (4) (18) (18)Other long-term financial liabilities (12) (12) (6) (6) – –The fair value of long term-liabilities is after taking into account the effect of interest rate swaps.Short-term debtors and creditors have been excluded from the above analysis and all other disclosures in this note, other than the currency risk disclosures.Financial instrument sensitivity analysisThe analysis below summarises the sensitivity of the fair value of the group’s financial instruments to hypothetical changes in market rates. Fair values are thepresent value of future cash flows based on market rates at the valuation date.The estimated changes in the fair value for foreign exchange rates are based on an instantaneous 10% change in the value of sterling against all other currenciesfrom the levels applicable at 31 December 1999 with all other variables remaining constant. The +10% case represents a 10% strengthening of sterling against allother currencies and the –10% case represents a 10% weakening of sterling.FAIR VALUE CHANGEFAVOURABLE/(ADVERSE)FAIR VALUE EXCHANGE RATE MOVEMENT£M £M £M+10% –10%Foreign exchange forward contracts (3) 26 (29)Foreign currency options 7 18 (12)4 44 (41)The estimated changes in fair values for interest rate movements are based on an instantaneous change of 1% (100 basis points) in the specific rate of interest fromthe levels effective at 31 December 1999 with all other variables remaining constant.FAIR VALUE CHANGEFAVOURABLE/(ADVERSE)FAIR VALUE INTEREST RATE MOVEMENT£M £M £M+1% –1%Interest rate swap contracts (17) (7) 8]Monetary assets and liabilities by currency, excluding the functional currency of each operation at 31 December 1999, were:NET FOREIGN CURRENCY MONETARY ASSETS/(LIABILITIES) £MHONGUS SWISS EURO KONGSTERLING DOLLAR FRANC BLOC DOLLAR OTHER TOTALFunctional currency of operationSterling – 35 (23) (35) (6) 36 7US dollar 38 – 11 20 23 10 10238 35 (12) (15) 17 46 10954 Reuters Group PLC Annual Report 1999
12. Derivatives and other financial instruments continuedNet currency gains and losses arising from monetary assets/(liabilities) not in the functional currency of an operation are recognised in its profit and loss account.Those arising from the translation of US dollar functional currency financial statements into sterling (principally Instinet and TIBCO Finance) are recognised in thestatement of recognised gains and losses.The currency and interest rate profile of the group’s financial assets at 31 December 1999 was:SHORT-TERM INVESTMENTSFIXED RATE INVESTMENTSWEIGHTED WEIGHTEDAVERAGE AVERAGENON- FLOATING FIXED INTEREST TIME FORINTEREST RATE RATE RATE AT WHICH RATETOTAL BEARING INVESTMENTS INVESTMENTS 31 DECEMBER IS FIXED£M £M £M £M % YEARSSterling 200 51 149 – – –US dollar 400 150 206 44 6 2Other 155 64 91 – – –Total31 December 1999 755 265 446 44 6 231 December 1998 1,047 85 857 105 6 231 December 1997 1,390 115 1,212 63 7 2Sterling and US dollar floating rate investments include £202 million (1998 – £623 million, 1997 – £789 million) of money market deposits which mature withinthree months of the balance sheet date. Interest on short-term investments is earned at rates based on local money market rates.Fixed rate investments are those investments which have an interest rate fixed for a period of greater than one year.The currency and interest rate profile of the group’s financial liabilities at 31 December 1999 was:BORROWINGSFIXED RATE BORROWINGSWEIGHTED WEIGHTEDAVERAGE AVERAGEOTHER FLOATING FIXED INTEREST TIME FORFINANCIAL RATE RATE RATE AT WHICH RATETOTAL LIABILITIES BORROWINGS BORROWINGS 31 DECEMBER IS FIXED£M £M £M £M % YEARSSterling 497 3 494 – – –Euro 49 – 49 – – –Other 34 9 25 – – –Total31 December 1999 580 12 568 – – –31 December 1998 1,015 6 1,005 4 9 131 December 1997 66 – 58 8 9 2The floating rate borrowings comprise bank loans and overdrafts bearing interest at rates based on local money market rates, commercial paper and medium-termnotes. The weighted average interest rate on bank borrowings at 31 December 1999 was 5% (1998 – 4%, 1997 – 4%).Total borrowings are repayable as follows:1999 1998 1997£M £M £MWithin one year 307 1,005 48Between one and two years 39 4 18Between two and five years 222 – –568 1,009 66Bank borrowings secured against freehold property – 3 15In December 1997, Reuters Group PLC entered into syndicated credit facilities for £1.5 billion to cover payments due to shareholders under the capitalreorganisation. A facility of £1.0 billion expired on 2 December 1998. The remaining £0.5 billion which is at variable interest rates based on LIBOR, the LondonInterbank Offer Rate, may be drawn and redrawn up to one month prior to its maturity in December 2002.In March 1998 Reuters established a Euro Commercial Paper Programme. This provides access to £1.5 billion of uncommitted short-term finance of which£1.3 billion was unused at 31 December 1999. In December 1998 Reuters established a £1.0 billion Euro Medium Term Note Programme of which £741 millionwas unused at 31 December 1999.In addition, at 31 December 1999 Reuters had unused, short-term, uncommitted bank borrowing facilities denominated in various currencies, the sterlingequivalent of which was approximately £257 million, at money market rates varying principally between 3% and 9%, depending on the currency.Reuters Group PLC Annual Report 1999 55
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REUTERS GROUP PLC ANNUAL REPORT AND
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REUTERS GROUP PLC ANNUAL REPORT AND ACCOUNTS 1999

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