Notes to the company financial statements
Year ended 31 July 2009

12. Derivative financial instruments

Current assets	2009 £m	2008 £m
Interest rate swaps	–	10
Currency swaps: at fair value through profit and loss	12	1
Derivative financial assets	12	11

Creditors: amounts falling due within one year	2009 £m	2008 £m
Interest rate swaps	(14)	(8)
Currency swaps: at fair value through profit and loss	(11)	–
Derivative financial liabilities	(25)	(8)

Creditors: amounts falling due after one year	2009 £m	2008 £m
Interest rate swaps	(11)	–
Derivative financial liabilities	(11)	–

Interest rate swaps

The Company uses interest rate swaps to manage its and the Group’s exposure to interest rate movements on their borrowings. The fair value of interest rate swaps is estimated on the basis of the market values of equivalent instruments at the balance sheet date.

The Group’s bank borrowings generally attract variable interest rates based on six-month LIBOR. For Group purposes interest rate swap contracts comprising fixed interest payable on notional principal of €900 million (2008: $300 million and €1,000 million) and basis point swaps with notional principal of €900 million (2008: $300 million and €400 million) are designated and effective as cash flow hedges, and the valuation gains have been deferred in equity until realised. The Company has recognised the valuation gains through profit and loss. The contracts expire between August 2009 and August 2011 (2008: September 2008 and August 2011), and the fixed interest rates range between 2.59 and 4.59 per cent (2008: 2.49 and 5.42 per cent).

At fair value through profit and loss	2009 £m	2008 £m
At 1 August	2	9
Valuation losses charged to profit and loss	(21)	–
Cash settlements in the period	(5)	(8)
Exchange	(1)	1
At 31 July	(25)	2

Currency swaps

The Company uses currency swaps either to obtain the optimum return on its and the Group’s surplus funds or to hedge the spot exchange rate risk of its and the Group’s assets and liabilities, principally loans. The fair value of currency swaps has been estimated as the cost of closing out the contracts using market prices at the balance sheet date.

At fair value through profit and loss	2009 £m	2008 £m
At 1 August	1	–
Valuation (losses)/gains (charged)/credited to profit and loss	(36)	1
Cash settlements in the period	36	–
At 31 July	1	1

At the balance sheet date the Company had entered into certain short-term currency swaps and forward contracts as follows:

	2009	2009		2008	2008
	Currency million	£m		Currency million	£m
Bought forward	EUR 585	500		DKK 1,784	188
	DKK 720	82		GBP 119	119
	CZK 95	3		USD 178	90
				Other	10
Sold forward	GBP 251	(251)		EUR 459	(361)
	USD 380	(227)		CAD 91	(45)
	CAD 135	(75)
	CHF 56	(31)
		1			1

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