Annual Report & Accounts 2006 - Notes To The Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2006
Weighted average Weighted average
Weighted average period for which period until
Currency interest rate rate is fixed maturity
% Years Years
Sterling 7.5 1.0 1.0
Total 7.5 1.0 1.0
MATURITY OF FINANCIAL LIABILITIES
The maturity profile of the Group’s financial liabilities at 31 December 2006 was as follows:
£m
In one year or less, or on demand 3,224,794
In more than one year but not more than two years –
In more than two years but not more than five years –
In more than five years –
3,224,794
BORROWING FACILITIES
The Group has no undrawn committed borrowing facilities.
MARKET PRICE RISK
The Group’s exposure to market price risk comprises interest rate and currency risk exposures. It monitors these
exposures primarily through a process known as sensitivity analysis. This involves estimating the effect on results
before tax over various periods of a range of possible changes in interest rates and exchange rates. The sensitivity
analysis model used for this purpose makes no assumptions about any interrelationships between such rates or
about the way in which such changes may affect the economies involved. As a consequence, figures derived from
the Group’s sensitivity analysis model should be used in conjunction with other information about the Group’s risk
profile.
The Group’s policy towards currency risk is to eliminate all exposures that will impact on reported results as soon
as they arise. This is reflected in the sensitivity analysis, which estimates that five and ten percentage point increases
in the value of sterling against all other currencies would have had minimal impact on results before tax.
On the other hand, the Group’s policy is to accept a degree of interest rate risk as long as the effects of various
changes in rates remain within certain prescribed ranges. On the basis of the Group’s analysis, it is estimated that a
rise of one percentage point in all interest rates would have increased 2006 loss before tax by approximately 0.5
per cent and that a three percentage point increase would have reduced such profits by 1.8 per cent. This is well
within the ranges that the Group regards as acceptable.
