Notes to the
Accounts

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19 Financial instruments

A full discussion on treasury policy is given in the Financial Review. Short-term debtors and creditors have been excluded from all the following disclosures, other than currency risk disclosures as set out in table e.

a. Maturity of borrowings and other financial liabilities
The maturity profile of the Group's borrowings and other financial liabilities is shown below:

			2004				2003
All figures in £ millions			Group	Company			Group	Company
Maturity of borrowings
Short-term
Bank loans and overdrafts			107	139			119	262
9.5% Sterling Bonds 2004			-	-			108	-
4.625% Euro Bonds 2004			-	-			348	348
Total due within one year, or on demand			107	139			575	610
Medium and long-term
Loans or instalments thereof repayable:
From one to two years			130	-			85	-
From two to five years			733	541			582	443
After five years not by instalments			849	640			680	680
Total due after more than one year			1,712	1,181			1,347	1,123
Total borrowings			1,819	1,320			1,922	1,733
Note At 31 December 2004 £61m (2003: £85m) of debt, including commercial paper, currently classified from two to five years would be repayable within one year if refinancing contracts were not in place. The short-term bank loans and overdrafts of the Group are lower than those of the company because of bank offset arrangements.
	2004				2003
All figures in £ millions	Finance leases	Other financial liabilities	Total		Finance leases	Other financial liabilities		Total
Maturity of other financial liabilities
Amounts falling due:
In one year or less or on demand	2	4	6		3	5		8
In more than one year but not more than two years	1	19	20		1	14		15
In more than two years but not more than five years	1	9	10		1	7		8
In more than five years	-	25	25		-	21		21
	4	57	61		5	47		52

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b. Borrowings by instrument

	2004			2003
All figures in £ millions	Group	Company		Group	Company
Unsecured
9.5% Sterling Bonds 2004	-	-		108	-
4.625% Euro Bonds 2004	-	-		348	348
7.375% US Dollar notes 2006	130	-		139	-
6.125% Euro Bonds 2007	390	390		343	343
10.5% Sterling Bonds 2008	100	100		100	100
4.7% US Dollar Bonds 2009	181	-		-	-
7% Global Dollar Bonds 2011	260	260		278	278
7% Sterling Bonds 2014	226	226		235	235
5.7% US Dollar Bonds 2014	207	-		-	-
4.625% US Dollar notes 2018	156	156		167	167
Bank loans and overdrafts and commercial paper	169	188		204	262
Total borrowings	1,819	1,320		1,922	1,733

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c. Undrawn committed borrowing facilities

All figures in £ millions	2004	2003
Expiring within one year	-	-
Expiring between one and two years	-	950
Expiring in more than two years	641	-
	641	950

Note All of the above committed borrowing facilities incur commitment fees at market rates. In addition to the above facilities, there are a number of short-term overdrafts that are utilised in the normal course of the business.

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d. Currency and interest rate risk profile

	2004
				Fixed rate borrowings
	Borrowings £m	Total variable rate £m	Total fixed rate £m	Weighted average interest rate %	Weighted average period for which rate is fixed - years
Currency and interest rate risk profile of borrowings
US dollar	1,332	830	502	5.8	2.4
Sterling	201	91	110	8.9	6.4
Euro	284	160	124	5.6	1.5
Other currencies	2	2	-	-	-
	1,819	1,083	736
	2003
				Fixed rate borrowings
	Borrowings £m	Total variable rate £m	Total fixed rate £m	Weighted average interest rate %	Weighted average period for which rate is fixed - years
Currency and interest rate risk profile of borrowings
US dollar	1,427	864	563	5.9	3.2
Sterling	201	61	140	8.0	9.0
Euro	292	166	126	5.3	1.7
Other currencies	2	2	-	-	-
	1,922	1,093	829
Note The figures shown in the tables above take into account interest rate, currency swaps and forward rate contracts entered into by the Group. Variable rate borrowings bear interest at rates based on relevant national LIBOR equivalents.
			2004
All figures in £ millions			Other financial liabilities	Total fixed rate	Total no interest paid
Currency and interest rate risk profile of other financial liabilities
US dollar			40	10	30
Sterling			8	3	5
Euro			11	-	11
Other currencies			2	1	1
			61	14	47
Note The US dollar fixed rate liability is fixed for 7 years at a rate of 6.3%. The sterling fixed rate liability is fixed for 2 years at a rate of 6.9%. The other currencies fixed rate liability is fixed for 3 years at a rate of 5.0%.
			2003
All figures in £ millions			Other financial liabilities	Total fixed rate	Total no interest paid
Currency and interest rate risk profile of other financial liabilities
US dollar			35	4	31
Sterling			5	1	4
Euro			12	-	12
			52	5	47
	2004
All figures in £ millions	US dollar	Sterling	Euro	Other currencies	Total
Currency and interest rate risk profile of financial assets
Cash at bank and in hand	170	52	72	77	371
Short-term deposits	7	89	125	21	242
Other financial assets	33	12	3	1	49
	210	153	200	99	662
Fixed rate	5	3	-	1	9
Floating rate	189	140	195	95	619
No interest received	16	10	5	3	34
	210	153	200	99	662
Note The US dollar fixed rate asset is fixed for 11 years at a rate of 8.2%. The sterling fixed rate asset is fixed for 5 years at a rate of 7.0%. The other currencies fixed rate asset is fixed for 7 years at a rate of 2.0%.
	2003
All figures in £ millions	US dollar	Sterling	Euro	Other currencies	Total
Currency and interest rate risk profile of financial assets
Cash at bank and in hand	150	54	40	65	309
Short-term deposits	112	20	104	16	252
Other financial assets	44	7	7	1	59
	306	81	151	82	620
Fixed rate	6	2	-	-	8
Floating rate	259	72	144	78	553
No interest received	41	7	7	4	59
	306	81	151	82	620

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e. Currency exposures The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency.

	2004 Net foreign monetary assets/(liabilities)
All figures in £ millions	US dollar	Sterling	Euro	Other currencies	Total
Functional currency of entity
US dollar	-	1	-	5	6
Sterling	(6)	-	9	3	6
Euro	-	-	-	-	-
Other currencies	20	(1)	-	-	19
	14	-	9	8	31
	2003 Net foreign monetary assets/(liabilities)
All figures in £ millions	US dollar	Sterling	Euro	Other currencies	Total
Functional currency of entity
US dollar	-	3	-	6	9
Sterling	20	-	7	6	33
Euro	-	-	-	5	5
Other currencies	5	(8)	5	-	2
	25	(5)	12	17	49

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f. Fair values of financial assets and financial liabilities
The table below shows the book value and the fair value of the Group's financial assets and financial liabilities:

	2004			2003
All figures in £ millions	Book value	Fair value		Book value	Fair value
Primary financial instruments held or issued to finance the Group's operations
Other financial assets	49	49		59	59
Other financial liabilities	(61)	(61)		(52)	(52)
Cash at bank and in hand	371	371		309	309
Short-term deposits	242	242		252	252
Short-term borrowings	(107)	(107)		(575)	(619)
Medium and long-term borrowings	(1,712)	(1,817)		(1,347)	(1,553)
Derivative financial instruments held to manage the interest rate and currency profile
Interest rate swaps	-	23		-	(4)
Currency swaps	-	11		-	26

Note Other financial assets, other financial liabilities, cash at bank and in hand, short-term deposits and short-term borrowings: the fair value approximates to the carrying value due to the short maturity periods of these financial instruments. Medium and long-term borrowings: the fair value is based on market values or, where these are not available, on the quoted market prices of comparable debt issued by other companies. Interest rate swaps: the fair value of interest rate swaps is based on market values. At 31 December 2004 the notional principal value of these swaps was £2,824m (2003: £2,394m). Currency swaps: the fair value of these contracts is based on market values. At 31 December 2004 the Group had £368m (2003: £1,096m) of such contracts outstanding.

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g. Hedges The Group's policy on hedges is explained in the Financial Review. The table below shows the extent to which the Group has off-balance sheet (unrecognised) gains and losses in respect of financial instruments used as hedges at the beginning and end of the year. It also shows the amount of such gains and losses which have been included in the profit and loss account for the year and those gains and losses which are expected to be included in next year's or later profit and loss accounts.

All figures in £ millions	Unrecognised gains	Unrecognised losses	Unrecognised total net gains/(losses)
Gains and losses on hedges at 31 December 2003	82	(60)	22
Gains and losses arising in previous years that were recognised in 2004	(19)	-	(19)
Gains and losses arising before 31 December 2003 that were not recognised in 2004	63	(60)	3
Gains and losses arising in 2004 that were not recognised in 2004	10	21	31
Unrecognised gains and losses on hedges at 31 December 2004	73	(39)	34
Of which:
Gains and losses expected to be recognised in 2005	1	(2)	(1)
Gains and losses expected to be recognised in 2006 or later	72	(37)	35

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