NOTES
Forming part of the financial statements

21. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

2012 2011

Assets
€m

Liabilities
€m
Net assets/
liabilities
€m

Assets
€m

Liabilities
€m
Net assets/
liabilities
€m
Group
Property, plant & equipment 4.5 - 4.5 5.9 - 5.9
Provision for ROI trade related items - - - 0.6 - 0.6
Provision for UK trade related items - (7.2) (7.2) - (5.9) (5.9)
Retirement benefit obligations 1.9 - 1.9 2.0 - 2.0
Derivative financial instruments 0.1 - 0.1 0.2 - 0.2
 
6.5 (7.2) (0.7) 8.7 (5.9) 2.8



2012 2011

Assets
€m

Liabilities
€m
Net assets/
liabilities
€m

Assets
€m

Liabilities
€m
Net assets/
liabilities
€m
Company
Derivative financial instruments - - - 0.2 - 0.2
Interest free loans fair value adjustment - - - 0.4 - 0.4
 
- - - 0.6 - 0.6


Analysis of movement in net deferred tax assets/liabilities

1 March
2011
€m
Recognised
in income
statement
€m
Translation
adjustment
€m
Recognised
in other
comprehensive
income
€m
29 February
2012
€m
Group
Property, plant & equipment 5.9 (1.4) - - 4.5
Provision for ROI trade related items 0.6 (0.6) - - -
Provision for UK trade related items (5.9) (1.2) (0.1) - (7.2)
Retirement benefit obligations 2.0 (2.5) - 2.4 1.9
Derivative financial instruments 0.2 - - (0.1) 0.1
 
2.8 (5.7) (0.1) 2.3 (0.7)





1 March
2010
€m

Recognised
in income
statement
€m


Translation
adjustment
€m
Recognised
in other
comprehensive
income
€m


28 February
2011
€m
Group
Property, plant & equipment 7.6 (1.7) - - 5.9
Provision for ROI trade related items 1.2 (0.6) - - 0.6
Provision for UK trade related items (4.6) (1.1) (0.2) - (5.9)
Retirement benefit obligations 2.8 (0.8) - - 2.0
Derivative financial instruments 0.7 - - (0.5) 0.2
7.7 (4.2) (0.2) (0.5) 2.8





1 March
2011
€m

Recognised
in income
statement
€m
Recognised
in other
comprehensive
income
€m


29 February
2012
€m
Company
Derivative financial instruments 0.2 - (0.2) -
Interest free loans fair value adjustment 0.4 (0.4) - -
0.6 (0.4) (0.2) -





1 March
2010
€m

Recognised
in income
statement
€m
Recognised
in other
comprehensive
income
€m


28 February
2011
€m
Company
Derivative financial instruments 0.5 - (0.3) 0.2
Interest free loans fair value adjustment 8.0 (7.6) - 0.4
8.5 (7.6) (0.3) 0.6



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22. RETIREMENT BENEFIT OBLIGATIONS

The Group operates a number of defined benefit pension schemes for certain employees in the Republic of Ireland (ROI) and in Northern Ireland, all of which provide pension benefits based on final salary and the assets of which are held in separate trustee administered funds. The Group provides permanent health insurance cover for the benefit of its employees and separately charges this to the income statement.

The pension scheme assets are held in separate trustee administered funds to meet long-term pension liabilities to past and present employees. The trustees of the funds are required to act in the best interest of the funds’ beneficiaries. The appointment of trustees to the funds is determined by the schemes’ trust documentation. The Group has a policy in relation to its principal staff pension fund that members of the fund should nominate half of all fund trustees.

All schemes are closed to new members since April 2007. There are now no active members in the Executive defined benefit pension scheme (FY2011: 3 active members), while active members of the Staff defined benefit pension scheme represent less than 10% of total membership. There are 9 active members in the NI scheme (FY2011: 33 active members). The Group’s ROI defined benefit pension reform programme concluded during the financial year with the Pensions Board issuing a directive under Section 50 of the Pensions Act 1990 to remove the mandatory pension increase rule, which guaranteed 3% per annum increases to certain pensions in payment, and to replace it with guaranteed pension increases of 2% per annum for each year 2012 to 2014 and thereafter for all future pension increases to be awarded on a discretionary basis.

Actuarial valuations – funding requirements
Independent actuarial valuations of the defined benefit schemes are carried out on a triennial basis using the attained age method. The funding requirements in relation to the Group’s ROI defined benefit schemes are assessed at each valuation date and are implemented in accordance with the advice of the actuaries. The most recently completed formal actuarial valuations of the main schemes were carried out on 1 January 2009 and the actuary, Mercer (Ireland) Limited, submitted Actuarial Funding Certificates to the Pensions Board confirming that the Schemes did not satisfy the Minimum Funding Standard at that date. Given that the removal of guaranteed pension increases would not correct this situation, Funding Proposals were submitted to, and approved by the Pensions Board on 23 February 2012, which the Directors believe will enable the schemes to meet the Minimum Funding Standard by 31 December 2016. The actuarial valuations are not available for public inspection; however the results of the valuations are advised to members of the various schemes.

The Trustees were required to update the actuarial valuations and funding requirements of both ROI pension schemes for the Funding Proposal submissions. The Funding Proposals commit the Group to contributions of 14% of Pensionable Salaries to fund future pension accrual of benefits (previously 38.1% of Pensionable Salaries), a deficit contribution of €3.4m and an additional supplementary deficit contribution of €1.9m for which the Group reserves the right to reduce or terminate if on consultation with the Trustees, and if the Scheme Actuary advises that it is no longer required due to a correction in market conditions.

Method and assumptions
Independent actuaries, Mercer (Ireland) Limited, have employed the projected unit credit method to determine the present value of the defined benefit obligations arising and the related current service cost.

The financial assumptions that have the most significant impact on the results of the actuarial valuations are those relating to the discount rate used to convert future pension liabilities to current values and the rate of increase in salaries. These and other assumptions used to determine the retirement benefits obligations and service cost under IAS 19 Employee Benefits are set out below.

Mortality rates also have a significant impact on the actuarial valuations, and as the number of deaths within the scheme have been too small to analyse and produce any meaningful scheme-specific estimates of future levels of mortality, the rates used have been based on the most up-to-date mortality tables, PNL00 62% (males) and PNL00 70% (females), with age ratings and loading factors to allow for future mortality improvements. These tables conform to best practice. The growing trend for people to live longer and the expectation that this will continue has been reflected in the mortality assumptions used for this valuation as indicated below. This assumption will continue to be monitored in light of general trends in mortality experience. Based on these tables, the assumed life expectations on retirement are:

Future life expectations at age 65 2012
No of years
2011
No of years
Current retirees – no allowance for future improvements Male 23.2 19.5
Female 24.6 21.8
 
Future retirees – with allowance for future improvements Male 24.7 24.3
Female 25.8 26.3


Scheme liabilities:
The average age of active members is 42 and 49 years for the ROI Staff and the UK defined benefit pension schemes respectively (the executive defined benefit pension scheme has no active members), while the average duration of liabilities ranges from 14 to 22 years.

The principal long-term financial assumptions used by the Group’s actuaries in the computation of the defined benefit liabilities arising on pension schemes as at 29 February 2012 and 28 February 2011 are as follows:

2012 2011
ROI UK ROI UK
Salary increases 0.0% - 3.0% 3.7% 0.0% - 3.0% 4.2%
Increases to pensions in payment 2.0% - 2.25% 2.5% 3.0% 2.5%
Discount rate 4.7% - 4.9% 4.75% 5.3% - 5.5% 5.5%
Inflation rate 2.0% 3.0% 2.0% 3.5%


Scheme assets:
The long-term rates of return expected at 29 February 2012 and 28 February 2011, determined in conjunction with the Group’s actuaries and based on market expectations at the beginning of the financial year for investment returns over the entire life of the related obligation, analysed by the class of investments in which the schemes’ assets are invested, are as follows:

2012 2011
ROI UK ROI UK
Equity 6.90% 6.25% 7.00% 7.43%
Bonds 4.40% 3.25% 4.50% 4.43%
Property 5.90% - 6.00% -
Cash 2.50% 0.50% 2.50% 0.50%
Alternatives 5.90% - - -


The assumption used is the average of the above assumptions, appropriate to the individual asset classes, weighted by the proportion of the assets in the particular asset class. The investment return on bonds has been based on market yield of the bond fund’s benchmark index at the balance sheet date. The assumed investment return on equities allows for a 3.8% (2011:3.1%) equity risk premium over the 30 year government bond yield.

a. Impact on Group income statement

2012 2011
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
Analysis of defined benefit pension expense:
Current service cost 0.6 0.1 0.7 1.0 0.2 1.2
Past service cost (14.8) - (14.8) - - -
Curtailment gain - (0.1) (0.1) (1.9) (0.1) (2.0)
Interest on scheme liabilities 8.1 0.2 8.3 8.2 0.2 8.4
Expected return on scheme assets (7.1) (0.3) (7.4) (6.6) (0.2) (6.8)
 
Total (income)/expense recognised in income statement (13.2) (0.1) (13.3) 0.7 0.1 0.8


Analysis of amount recognised in other comprehensive income

2012 2011 2010 2009 2008
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
ROIv€m UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
Actual return less expected return on scheme assets (0.8) 0.3 (0.5) (0.9) 0.2 (0.7) 15.3 0.6 15.9 (44.0) (0.8) (44.8) (26.9) (1.1) (28.0)
Experience gains and losses on scheme liabilities (0.8) - (0.8) 1.1 - 1.1 3.2 0.4 3.6 0.1 (0.2) (0.1) 4.4 (0.4) 4.0
Effect of changes in assumptions on value of liabilities (17.3) (0.4) (17.7) (0.1) (0.1) (0.2) (2.0) (0.8) (2.8) 3.2 0.1 3.3 22.6 3.4 26.0
 
Total (18.9) (0.1) (19.0) 0.1 0.1 0.2 16.5 0.2 16.7 (40.7) (0.9) (41.6) 0.1 1.9 2.0
 
Scheme assets 142.9 5.3 148.2 136.9 4.3 141.2 131.5 3.1 134.6 107.3 2.2 109.5 123.8 3.3 127.1
Scheme liabilities (158.2) (5.1) (163.3) (151.9) (4.6) (156.5) (151.9) (3.9) (155.8) (151.8) (3.2) (155.0) (150.6) (3.7) (154.3)
Deficit in scheme (15.3) - (15.3) (15.0) (0.3) (15.3) (20.4) (0.8) (21.2) (44.5) (1.0) (45.5) (26.8) (0.4) (27.2)
Surplus in scheme - 0.2 0.2 - - - - - - - - - - - -


b. Impact on Group balance sheet
The net pension liability at 29 February 2012 is analysed as follows:

Analysis of net pension deficit

2012 2011
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
Bid value of assets at end of year:
Equity(i) 36.6 2.6 39.2 51.7 2.1 53.8
Bonds 66.1 2.6 68.7 61.7 2.1 63.8
Property 4.9 - 4.9 5.1 - 5.1
Cash 20.3 0.1 20.4 18.4 0.1 18.5
Alternatives 15.0 - 15.0 - - -
 
142.9 5.3 148.2 136.9 4.3 141.2
 
Actuarial value of scheme liabilities (158.2) (5.1) (163.3) (151.9) (4.6) (156.5)
 
(Deficit)/surplus in the scheme (15.3) 0.2 (15.1) (15.0) (0.3) (15.3)
Related deferred tax asset 1.9 - 1.9 1.9 0.1 2.0
 
Net pension (deficit)/surplus (13.4) 0.2 (13.2) (13.1) (0.2) (13.3)


(i) The defined benefit pension schemes have a passive self investment in C&C Group plc of €nil (2011: €16,000).

The alternative investment category includes investments in various asset classes including equities, commodities, currencies and hedge funds. The investments are managed by fund managers.

Reconciliation of scheme assets

2012 2011
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
Assets at beginning of year 136.9 4.3 141.2 131.5 3.1 134.6
 
Movement in year
Translation adjustment - 0.1 0.1 - 0.2 0.2
Expected return on scheme assets 7.1 0.3 7.4 6.6 0.2 6.8
Actual return less expected return on scheme assets (0.8) 0.3 (0.5) (0.9) 0.2 (0.7)
Employer contributions 5.4 0.5 5.9 6.0 0.6 6.6
Member contributions 0.3 - 0.3 0.2 0.1 0.3
Benefit payments (6.0) (0.2) (6.2) (6.5) (0.1) (6.6)
 
Assets at end of year 142.9 5.3 148.2 136.9 4.3 141.2


The expected employer contributions to defined benefit schemes for year ending 28 February 2013 is €6.5m.

The scheme assets had the following investment profile at the year end:

2012 2011
ROI NI ROI NI
Equities 26% 49% 38% 50%
Bonds 46% 49% 45% 48%
Property 3% - 4% -
Cash 14% 2% 13% 2%
Alternatives 11% - - -
100% 100% 100% 100%


Reconciliation of actuarial value of liabilities

2012 2011
ROI
€m
UK
€m
Total
€m
ROI
€m
UK
€m
Total
€m
Liabilities at beginning of year 151.9 4.6 156.5 151.9 3.9 155.8
 
Movement in year
Translation adjustment - 0.1 0.1 - 0.3 0.3
Current service cost 0.6 0.1 0.7 1.0 0.2 1.2
Past service gain (14.8) - (14.8) - - -
Curt ailment gain - (0.1) (0.1) (1.9) (0.1) (2.0)
Interest cost on scheme liabilities 8.1 0.2 8.3 8.2 0.2 8.4
Member contributions 0.3 - 0.3 0.2 0.1 0.3
Actuarial loss/(gain) immediately recognised in equity 18.1 0.4 18.5 (1.0) 0.1 (0.9)
Benefit payments (6.0) (0.2) (6.2) (6.5) (0.1) (6.6)
 
Liabilities at end of year 158.2 5.1 163.3 151.9 4.6 156.5



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23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Group’s multinational operations expose it to various financial risks in the ordinary course of business that include credit risk, liquidity risk, commodity price risk, currency risk and interest rate risk. This note discusses the Group’s exposure to each of these financial risks, summarises the risk management strategy for managing these risks and details the accounting treatment applied to the Group’s derivative financial instruments and hedging activities. The note is presented as follows:-

  1. Overview of the Group’s risk exposures and management strategy
  2. Financial assets and liabilities as at 29 February 2012/28 February 2011 and Determination of Fair Value
  3. Market risk
  4. Credit risk
  5. Liquidity risk
  6. Accounting for derivative financial instruments and hedging activities

(a) Overview of the Group’s risk exposures and management strategy
The most significant financial market risks that the Group is exposed to include foreign currency exchange rate risk, commodity price fluctuations, interest rate risk and financial counterparty creditworthiness. There has been no significant change during the financial year to either the financial risks faced by the Group or the Board’s approach to the management of these risks.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. This is executed through various committees to which the Board has delegated appropriate levels of authority. An essential part of this framework is the role undertaken by the audit committee, supported by the internal audit function, and the Group Chief Financial Officer. The Board, through its Committees, has reviewed the internal control environment and the risk management systems and process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks will be managed effectively. The Board has embedded these structures and procedures throughout the Group and considers these to be a robust and efficient mechanism for creating a culture of risk awareness at every level of management.

The Group’s risk management programme seeks to minimise the potential adverse effects, arising from fluctuations in financial markets, on the Group’s financial performance in a non speculative manner at a reasonable cost when economically viable to do so. The Group achieves the management of these risks in part, where appropriate, through the use of derivative financial instruments. All derivative financial contracts entered into are in liquid markets with credit rated parties. Treasury activities are performed within strict terms of reference that have been approved by the Board.

(b) Financial assets and liabilities
The carrying and fair values of financial assets and liabilities by measurement category were as follows:

Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m

Carrying
value
€m

Fair
value
€m
Group
 
29 February 2012
Financial assets:
Cash & cash equivalents - 128.3 - 128.3 128.3
Derivative financial assets 0.1 - - 0.1 0.1
Trade receivables - 79.8 - 79.8 79.8
Advances to customers - 24.7 - 24.7 24.7
 
Financial liabilities:
Interest bearing loans & borrowings - - (60.0) (60.0) (60.0)
Derivative financial liabilities (0.9) - - (0.9) (0.9)
Trade payables & accruals - - (141.9) (141.9) (141.9)
Provisions - - (17.3) (17.3) (17.3)
 
(0.8) 232.8 (219.2) 12.8 12.8



Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m

Carrying
value
€m

Fair
value
€m
Group
 
28 February 2011
Financial assets:
Cash & cash equivalents - 128.7 - 128.7 128.7
Derivative financial assets 0.4 - - 0.4 0.4
Trade receivables - 91.0 - 91.0 91.0
Advances to customers - 24.4 - 24.4 24.4
 
Financial liabilities:
Interest bearing loans & borrowings - - (135.0) (135.0) (129.0)
Derivative financial liabilities (2.1) - - (2.1) (2.1)
Trade payables & accruals - - (139.1) (139.1) (139.1)
Provisions - - (15.7) (15.7) (15.7)
 
(1.7) 244.1 (289.8) (47.4) (41.4)



Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m

Carrying
value
€m

Fair
value
€m
Company
 
29 February 2012
Financial assets:
Cash & cash equivalents - 9.3 - 9.3 9.3
Amounts due from Group undertakings - 30.6 - 30.6 30.6
 
 
Financial liabilities:
Interest bearing loans & borrowings - - (60.0) (60.0) (60.0)
Amounts due to Group undertakings - - (10.0) (10.0) (10.0)
Trade payables & accruals - - (0.2) (0.2) (0.2)
 
- 39.9 (70.2) (30.3) (30.3)



Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m

Carrying
value
€m

Fair
value
€m
Company
 
28 February 2011
Financial assets:
Amounts due from Group undertakings - 24.9 - 24.9 24.9
 
Financial liabilities:
Interest bearing loans & borrowings - - (135.0) (135.0) (129.0)
Derivative financial liabilities (2.0) - - (2.0) (2.0)
Accruals - - (0.4) (0.4) (0.4)
 
(2.0) 24.9 (135.4) (112.5) (106.5)


Determination of Fair Value
The Group’s accounting policies require the determination of fair value, for both financial and non-financial assets and liabilities. Set out below are the major methods and assumptions used in estimating the fair values of the Group’s financial assets and liabilities. There is no material difference between the fair value of financial assets and liabilities falling due within one year and their carrying amount as due to the short term maturity of these financial assets and liabilities their carrying amount is deemed to approximate fair value.

Short term bank deposits and cash & cash equivalents
The nominal amount of all short-term bank deposits and cash & cash equivalents is deemed to reflect fair value at the balance sheet date.

Advances to customers
The nominal amount of all advances to customers, after provision for impairment, is considered to reflect fair value. The commercial rationale for such advances is to develop good customer relations rather than to make financial investments.

Trade & other receivables/payables
The nominal amount of all trade & other receivables/payables after provision for impairment is deemed to reflect fair value at the balance sheet date with the exception of provisions and amounts due from Group undertakings which are discounted to fair value.

Derivatives (interest rate swaps and forward currency contracts)
The fair values of forward currency contracts and interest rate swaps are based on market price calculations using financial models.

The Group has adopted the following fair value measurement hierarchy for financial derivatives that are measured in the balance sheet at fair value:

  • Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities. The fair value of financial instruments that are not traded in an active market (e.g. over the counter derivatives) are determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.
  • Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
  • Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The carrying values of all derivative financial assets and liabilities held by the Group at 29 February 2012 and 28 February 2011 were based on fair values arrived at using Level 2 inputs.

Interest bearing loans & borrowings
The fair value of all interest bearing loans & borrowings have been calculated by discounting all future cash flows to their present value using a market rate reflecting the Group’s cost of borrowing at the balance sheet date. All loans bear interest at floating rates. At 29 February 2012, the nominal amount of drawn debt is deemed to reflect fair value due to the short term maturity of the debt.

(c) Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group enters into derivative financial contracts to mitigate risks arising in the ordinary course of business from foreign exchange rate and interest rate movements, and also incurs financial liabilities, in order to manage these market risks. The Group carries out all such transactions within the Treasury policy as set down by the Board of Directors. Generally the Group seeks to apply hedge accounting in order to manage volatility in the income statement.

Commodity price risk
The Group is exposed to variability in the price of commodities used in the production or in the packaging of finished products, such as malt, barley, sugar, apple concentrate and aluminium. Commodity price risk is managed, where economically viable, through fixed price contracts with suppliers incorporating appropriate commodity hedging and pricing mechanisms. The Group does not directly enter into commodity hedge contracts. The cost of production is also sensitive to variability in the price of energy, primarily gas and electricity. It is Group policy to fix the cost of a certain level of its energy requirement through fixed price contractual arrangements directly with its energy suppliers.

Currency risk
The Company’s functional and reporting currency and that of its share capital is euro. The euro is also the Group’s reporting currency and the currency used for all planning and budgetary purposes. However, as the Group both transacts in foreign currencies and consolidates the results of a number of subsidiary entities with functional currencies other than euro, namely sterling and US Dollar, it is exposed to currency risk. The Group’s primary currency exposures relate to sales transactions by Group companies in currencies other than their functional currency (transaction risk), and fluctuations in the euro value of the Group’s net investment in foreign currency (primarily sterling) denominated subsidiary undertakings (translation risk). Currency exposures for the entire Group are managed and controlled centrally.

The Group seeks to minimise its foreign currency transaction exposure when economically viable by maximising the value of its foreign currency input costs and creating a natural hedge. Group policy is to manage its remaining net exposure by hedging a portion of the projected non-euro forecast sales revenue up to a maximum of two years ahead. Forward foreign currency contracts are used to manage this risk. The Group does not enter into derivative financial instruments for speculative purposes. All derivative contracts entered into are in liquid markets with credit-approved counterparties. Treasury operations are controlled within strict terms of reference that have been approved by the Board.

The Group seeks to partially manage foreign currency translation risk through borrowings denominated in sterling. The Group’s sterling debt facility (note 19), which had been repaid in full at the year end, was designated as a net investment hedge of its sterling subsidiaries. In addition, the Group has a number of long term sterling intra group loans for which settlement is neither planned nor likely to happen in the foreseeable future, and as a consequence are deemed quasi equity in nature and are therefore part of the Group’s net investment in its foreign operations. The Group does not hedge the translation exposure arising on the translation of the profits of foreign currency subsidiaries.

The net currency gains and losses on transactional currency exposures are recognised in the income statement and the changes arising from fluctuations in the euro value of the Group’s net investment in foreign currency subsidiaries are reported separately within other comprehensive income.

The currency profile of the Group’s financial instruments subject to transactional exposure as at 29 February 2012 is as follows:-

Euro
€m
Sterling
€m
USD/CAD
€m
Not at risk
€m
Total
€m
Group
 
Cash & cash equivalents 0.7 13.5 3.4 110.7 128.3
Trade receivables 0.1 1.0 3.0 75.7 79.8
Advances to customers - - - 24.7 24.7
Derivative financial assets and liabilities - (0.8) - - (0.8)
Interest bearing loans & borrowings - - - (60.0) (60.0)
Trade payables & accruals (0.6) (6.3) (0.8) (134.2) (141.9)
Provisions - - - (17.3) (17.3)
 
Total 0.2 7.4 5.6 (0.4) 12.8


The currency profile of the Company’s financial instruments as at 29 February 2012 is as follows:-

Euro
€m
Sterling
€m
USD/CAD
€m
Not at risk
€m
Total
€m
Company
Cash & cash equivalents - - - 9.3 9.3
Amounts due (to)/from subsidiary undertakings - (53.7) - 74.3 20.6
Interest bearing loans & borrowings - - - (60.0) (60.0)
 
Trade payables & accruals - - - (0.2) (0.2)
Total - (53.7) - 23.4 (30.3)


Foreign currency contracts in place at 29 February 2012 to sell fixed amounts of sterling and US dollars for contracted euro amounts can be summarised as follows:-

USD
$m
Average
forward rate
Sterling
£m
Average
forward rate
Year ended 28 February 2013 1.0 1.321 35.0 0.857


A 10% strengthening in the euro against sterling, Canadian dollar and the US dollar, based on outstanding financial assets and liabilities at 29 February 2012, would have a €1.2m negative impact on the income statement and a €3.9m positive impact on the cashflow hedging reserve. A 10% weakening in the euro against sterling, Canadian dollar and the US dollar would have a €1.5m positive effect on the income statement and a €4.7m negative impact on the cash flow hedging reserve. This analysis assumes that all other variables, in particular interest rates, remain constant.

Interest rate risk
The interest rate profile of the Group and Company’s interest-bearing financial instruments at the reporting date is summarised as follows:

Group Company
2012
€m
2011
€m
2012
€m
2011
€m
Variable rate instruments
Interest bearing loans & borrowings (60.0) (135.3) (60.0) (135.3)
Cash & cash equivalents 128.3 128.7 9.3 -
Derivative financial instruments - notional amounts - (50.0) - (50.0)
 
68.3 (56.6) (50.7) (185.3)


The Group and Company’s exposure to interest rate risk arises principally from its long-term debt obligations. It is Group policy to manage interest cost and exposure to market risk centrally by using interest rate swaps to give the desired mix of fixed and floating rate debt. With the objective of managing this mix in a cost-efficient manner, the Group and Company enter into interest rate swap agreements under which the Group contracts to exchange, at predetermined intervals, the difference between fixed and variable interest amounts calculated by reference to a pre-agreed notional principal. These swaps are designated under IAS 39 Financial Instruments: Recognition and Measurement as cash flow hedges to hedge the exposure to variability in cash flow arising from the changes in benchmark interest rates.

No outstanding interest rate swap contract existed at the 29 February 2012. At 28 February 2011, the Group had a €50m interest rate swap in place.

Financial instruments: Cash flow hedges
The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are expected to occur:-

Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2
years
€m
More than
2 years
€m
Group
29 February 2012
Forward exchange contracts
- assets 0.1 0.1 0.1 - - -
- liabilities (0.9) (1.0) (0.3) (0.7) - -
 
(0.8) (0.9) (0.2) (0.7) - -
 
28 February 2011
 
Interest rate swaps
- liabilities (2.0) (2.4) (0.8) (0.8) (0.8) -
 
Forward exchange contracts
- assets 0.4 0.4 0.4 - - -
- liabilities (0.1) (0.1) - (0.1) - -
 
(1.7) (2.1) (0.4) (0.9) (0.8) -


The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are expected to impact the income statement:-

Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2
years
€m
More than
2 years
€m
Group
29 February 2012
 
Forward exchange contracts
- assets 0.1 0.1 0.1 - - -
- liabilities (0.9) (0.7) (0.3) (0.4) - -
 
(0.8) (0.6) (0.2) (0.4) - -
 
28 February 2011
 
Interest rate swaps
- liabilities (2.0) (2.4) (0.8) (0.8) (0.8) -
 
Forward exchange contracts
- assets 0.4 0.3 0.3 - - -
- liabilities (0.1) (0.1) - (0.1) - -
 
(1.7) (2.2) (0.5) (0.9) (0.8) -


The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are expected to occur:-

Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2
years
€m
More than
2 years
€m
Company
29 February 2012
 
Interest rate swaps
- liabilities - - - - - -
- - - - - -
 
28 February 2011
 
Interest rate swaps
- liabilities (2.0) (2.4) (0.8) (0.8) (0.8) -
 
(2.0) (2.4) (0.8) (0.8) (0.8) -


The cash flows associated with derivatives that are cash flow hedges are expected to impact the income statement in the same periods.

(d) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables, its cash advances to customers, cash & cash equivalents including deposits with banks and derivative financial instruments contracted with banks. The Group has an indirect exposure to European Sovereigns via its defined benefit pension scheme investment portfolio. In the context of the Group’s operations, credit risk is mainly influenced by the individual characteristics of individual counterparties and is not considered particularly concentrated as primarily arises from a wide and varied customer base.

The Group has detailed procedures for monitoring and managing the credit risk related to its trade receivables and advances to customers based on experience, customer track records and historic default rates. Generally, individual ‘risk limits’ are set by customer and risk is only accepted above such limits in defined circumstances. A strict credit assessment is made of all new applicants who request credit-trading terms. The utilisation and revision, where appropriate, of credit limits is regularly monitored. Impairment provision accounts are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amount is considered irrecoverable and is written off directly against the trade receivable.

Advances to customers are generally secured by, amongst others, rights over property or intangible assets, such as the right to take possession of the premises of the customer. Interest rates calculated on repayment/annuity advances are generally based on the risk-free rate plus a margin, which takes into account the risk profile of the customer and value of security given. In some circumstances, the interest rate charged may be reduced to reflect the margins earned by the Group from trading activity with that customer. The Group establishes an allowance for impairment of advances that represents its estimate of potential future losses.

From time to time, the Group holds significant cash balances, which are invested on a short-term basis and disclosed under cash & cash equivalents in the balance sheet. Risk of counterparty default arising on short term cash deposits is controlled within a framework of dealing with banks who are members of the Group’s banking syndicate, and by limiting the credit exposure to any one of these banks or institutions. Management does not anticipate any counterparty to fail to meet its obligations.

The Company also bears credit risk in relation to amounts owed by Group undertakings and from guarantees provided in respect of the liabilities of wholly owned subsidiaries as disclosed in note 28.

The carrying amount of financial assets, net of impairment provisions represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:-

Group Company
2012
€m
2011
€m
2012
€m
2011
€m
Trade receivables 79.8 91.0 - -
Advances to customers 24.7 24.4 - -
Amounts due from Group undertakings - - 30.6 24.9
Cash & cash equivalents 128.3 128.7 9.3 -
Forward exchange contracts 0.1 0.4 - -
 
232.9 244.5 39.9 24.9


The ageing of trade receivables and advances to customers together with an analysis of movement in the Group impairment provisions against these receivables are disclosed in note 16. The Group does not have any significant concentrations of risk.

(e) Liquidity risk
Liquidity risk is the risk that the Group or Company will not be able to meet its financial obligations as they fall due. Liquid resources are defined as the total of cash & cash equivalents. The Group finances its operations through cash generated by the business and medium term bank credit facilities; the Group does not use off-balance sheet special purpose entities as a source of liquidity or financing.

The Group’s policy is to ensure that sufficient resources are available either from cash balances, cash flows or committed bank facilities to meet all debt obligations as they fall due. To achieve this, the Group (a) maintains adequate cash or cash equivalent balances; (b) prepares detailed 3 year cash projections; and (c) keeps refinancing options under review. In addition, the Group maintains an overdraft facility that is unsecured.

The Group entered into a €250.0m committed multi-currency five year syndicated revolving loan facility repayable in full on maturity (28 February 2017) with seven banks, including Bank of Ireland, Bank of Scotland, Barclays Bank, Danske Bank, HSBC, Rabobank and Ulster Bank. There were no drawn funds under this facility as at 29 February 2012.

Compliance with the Group’s bi-annual debt covenants (net debt:EBITDA and interest cover) is monitored continuously.

The Group’s main liquidity risk relates to maturing debt. The strong cash generative nature of the business and the disposal, during the previous financial year, of the Group’s Spirits and Liqueurs business for a gross consideration of €300.0m significantly reduced this risk. The Directors consider the risk low at the year end date as the Group ended the year in a strong cash position reporting net cash of €68.3m and, as noted above, concluded negotiations on a committed €250.0m five year multi-currency syndicated facility in February 2012 (note 19). As at 29 February 2012, undrawn borrowing capacity under committed bank facilities amounted to €375.0m, of which €125.0m was subsequently cancelled on repayment of the 2007 syndicated revolving debt facility on 30 March 2012.

The following are the contractual maturities of financial liabilities, including interest payments and derivatives and excluding the impact of netting arrangements:-

Group 2012

Carrying
amount
€m
Contractual
cash flows
€m
6 mths
or less
€m
6-12
months
€m

1-2 years
€m

>2 years
€m
Interest bearing loans & borrowings (60.0) (60.0) (60.0) - - -
FX forward contracts – gross cash outflows (0.9) (35.7) (11.9) (23.8) - -
FX forward contracts – gross cash inflows - 34.8 11.6 23.2 - -
Trade payables & accruals (141.9) (141.9) (141.9) - - -
Provisions (17.3) (21.0) (5.5) (0.9) (2.2) (12.4)
 
Total contracted outflows (220.1) (223.8) (207.7) (1.5) (2.2) (12.4)
 
2011
Interest bearing loans & borrowings (135.0) (137.8) (36.6) (0.9) (100.3) -
Interest rate swaps – net cash outflows (2.0) (2.4) (0.8) (0.8) (0.8) -
FX forward contracts – gross cash outflows (0.1) (23.6) (11.8) (11.8) - -
FX forward contracts – gross cash inflows - 23.8 12.2 11.6 - -
Trade payables & accruals (139.1) (139.1) (139.1) - - -
Provisions (15.7) (24.4) (3.2) (0.6) (1.7) (18.9)
 
Total contracted outflows (291.9) (303.5) (179.3) (2.5) (102.8) (18.9)
 
Carrying
amount
€m
Contractual
cash flows
€m
6 mths
or less
€m
6-12
months
€m

1-2 years
€m

>2 years
€m
Company 2012
Interest bearing loans & borrowings (60.0) (60.0) (60.0) - - -
Amounts due to Group undertakings (10.0) (10.0) (10.0) - - -
Trade payables & accurals (0.2) (0.2) (0.2) - - -
 
Total contracted outflows (70.2) (70.2) (70.2) - - -
 
2011
Interest bearing loans & borrowings (135.0) (137.8) (36.6) (0.9) (100.3) -
Interest rate swaps – net cash outflows (2.0) (2.4) (0.8) (0.8) (0.8) -
Trade payables & accruals (0.4) (0.4) (0.4) - - -
 
Total contracted outflows (137.4) (140.6) (37.8) (1.7) (101.1) -


(f) Accounting for derivative financial instruments and hedging activities

Group Company
2012
€m
2011
€m
2012
€m
2011
€m
Group
Financial assets: current
Forward exchange contracts 0.1 0.4 - -
 
0.1 0.4 - -
 
Financial liabilities: current
Interest rate swaps - (1.3) - (1.3)
Forward exchange contracts (0.9) (0.1) - -
 
(0.9) (1.4) - (1.3)
 
Financial liabilities: non-current
Interest rate swaps - (0.7) - (0.7)
 
- (0.7) - (0.7)


Derivatives are initially recorded at fair value on the date the contract is entered into and subsequently re-measured to fair value at reporting dates. The gain or loss arising on re-measurement is recognised in the income statement except where the instrument is a designated hedging instrument under the cash flow hedging model.

Cash flow hedges
The Group enters into interest rate swap agreements designated as cash flow hedges to manage the interest cost on borrowings. The Group had no interest rate swap contracts outstanding at 29 February 2012 (28 February 2011: €50m). The Group also enters into forward exchange contracts designated as cash flow hedges to manage short term foreign currency exposures to expected future sales. As at 29 February 2012, the notional amount of these contracts was Stg£35.0m and US$1.0m (28 February 2011: Stg£20.0m).

In order to qualify for hedge accounting, the Group is required to document the relationship between the item being hedged and the hedging instrument and demonstrate, at inception, that the hedge relationship will be highly effective on an ongoing basis. The hedge relationship must also be tested for effectiveness retrospectively and prospectively on subsequent reporting dates. Gains and losses on cash flow hedges that are determined to be highly effective are recognised in other comprehensive income and then reflected in a cash flow hedging reserve within equity to the extent that they are actually effective. When the related forecasted transaction occurs, the deferred gains or losses are reclassified from other comprehensive income to the income statement. Ineffective portions of the gain or loss on the hedging instrument are recognised immediately in the income statement.

All interest rate swaps entered into by the Group and Company are designated as cash flow hedges in accordance with IAS 39 Financial Instruments: Recognition and Measurement. The Group has tested these hedging relationships and determined them to be highly effective, both prospectively and retrospectively. The actual level of ineffectiveness arising in such relationships is not material.

The Group ordinarily seeks to apply the hedge accounting model to all forward currency contracts.

At 29 February 2012, the effective portion of gains and losses arising on derivative financial contracts have been deferred in other comprehensive income only to the extent that they relate to highly probable forecast transactions and where all the hedge accounting criteria in IAS 39 Financial Instruments: Recognition and Measurement have been met.

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24. SHARE CAPITAL AND RESERVES

Authorised
Number
Allotted and
called up
Number
Authorised
€m
Allotted and
called up
€m
At 29 February 2012
Ordinary shares of €0.01 each 800,000,000 339,274,722* 8.0 3.4
         
At 28 February 2011
Ordinary shares of €0.01 each 800,000,000 337,196,128** 8.0 3.4
         
At 28 February 2010
Ordinary shares of €0.01 each 800,000,000 334,068,149*** 8.0 3.3


* inclusive of 12.4m treasury shares which are not fully paid up. The balance of 326,911,485 ordinary shares are fully paid
** inclusive of 12.6m treasury shares which are not fully paid up. The balance of 324,609,460 ordinary shares are fully paid
*** inclusive of 16.0m treasury shares which are not fully paid up. The balance of 318,068,149 ordinary shares are fully paid

All shares in issue carry equal voting and dividend rights. The beneficial owners of the 12.4m (2011:12.6m) shares issued under the Joint Share Ownership Plan have waived their right to receive dividends under the terms of the Plan.

Reserves
Group

Allotted and called
up Ordinary Shares
Ordinary Shares held
by the Trustee of the
Employee Benefit Trust
2012
‘000
2011
‘000
2012
‘000
2011
‘000
As at 1 March 337,196 334,068 12,587 16,000
Shares issued in lieu of dividend 1,370 2,538 - -
Shares issued in respect of options exercised 709 590 - -
Shares disposed of or transferred to Participants - - (224) (3,413)
As at 29/(28) February 339,275 337,196 12,363* 12,587


* 1,226,669 (2011:650,000) shares are held in the sole name of the Trustee of the Employee Benefit Trust.

Movements in the year ended 29 February 2012
In July 2011, 316,818 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €3.59 per share, instead of part or all the cash element of their final dividend entitlement for the year ended 28 February 2011. In December 2011, 1,053,176 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €2.89 per share, instead of part or all the cash element of their interim dividend entitlement for the year ended 29 February 2012. Also during the financial year, 708,600 ordinary shares were issued on the exercise of share options for a net consideration of €1.5m.

During the financial year, 625,000 unvested Interests and 175,000 vested Interests awarded under the Joint Share Ownership Plan and held by participants who had left the Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Benefit Trust and held in trust on behalf of employees. 223,431 shares were either sold by the Trustees or transferred to participants on the vesting of Interests and are no longer accounted for as Treasury shares. All shares held by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Benefit Trust which were neither cancelled nor disposed of by the Trust at 29 February 2012 continue to be included in the treasury share reserve.

Movements in the year ended 28 February 2011
In September 2010, 1,276,318 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €3.19 per share, instead of part or all the cash element of their final dividend entitlement for the year ended 28 February 2010. In December 2010, 1,261,761 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €3.17 per share, instead of part or all the cash element of their interim dividend entitlement for the year ended 28 February 2011. Also during the financial year, 589,900 ordinary shares were issued on the exercise of share options for a consideration of €1.2m.

In June 2010, 3,413,332 vested Interests awarded under the Joint Share Ownership Plan in December 2008 were sold and are no longer accounted for as Treasury shares. In addition, 650,000 unvested Interests held by participants who had left the Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Benefit Trust and continue to be held in trust by them while a further 50,000 vested Interests held by a participant who had left the Group had not been sold at 28 February 2011. As these shares were neither cancelled nor disposed of by the Trust at 28 February 2011 they continue to be included in the treasury share reserve.

Share premium - Group
The change in legal parent of the Group on 30 April 2004, as disclosed in detail in that year’s annual report, was accounted for as a reverse acquisition. This transaction gave rise to a reserve of €703.9m, which, for presentation purposes in the Group financial statements, has been netted against the share premium in the consolidated balance sheet.

Share premium - Company
The share premium, as stated in the Company balance sheet, represents the premium recognised on shares issued and amounts to €793.9m as at 29 February 2012 (2011: €788.2m). The current year movement relates to the exercise of share options and the issuance of a scrip dividend to those who elected to receive additional ordinary shares in place of a cash dividend.

Capital redemption reserve and capital reserve
These reserves initially arose on the conversion of preference shares into share capital of the Company and other changes and reorganisations of the Group’s capital structure. These reserves are not distributable.

Cash flow hedging reserve
The hedging reserve includes the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred as set out in note 23 together with any deferred gains or losses on hedging contracts where hedge accounting was discontinued but the forecast transaction was still anticipated to occur.

Share-based payment reserve
The reserve relates to amounts expensed in the income statement in connection with share option grants falling within the scope of IFRS 2 Share-based Payment plus amounts received from participants on award of Interests under the Group’s Joint Share Ownership Plan less reclassifications to retained income following exercise/forfeit post vesting or lapse of such share options and Interests, as set out in note 4.

Currency translation reserve
The translation reserve comprises all foreign exchange differences from 1 March 2004, arising from the translation of the Group’s net investment in its non-euro denominated operations, including the translation of the profits of such operations from the average exchange rate for the year to the exchange rate at the balance sheet date, as adjusted for the translation of foreign currency borrowings designated as net investment hedges.

Treasury shares
This reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by the Group’s Employee Benefit Trust. The consideration paid, 90% by a Group company and 10% by the participants, in respect of these shares is deducted from total shareholders’ equity and classified as treasury shares on consolidation until such time as the Interests vest and the participant acquires the shares from the Trust or the Interests lapse and the shares are cancelled or disposed of by the Trust.

Capital management
The Board’s policy is to maintain a strong capital base so as to safeguard the Group’s ability: to continue as a going concern for the benefit of shareholders and stakeholders; to maintain investor, creditor and market confidence; and, to sustain the future development of the business through the optimisation of the value of its debt and equity shareholding balance.

The Board considers capital to comprise long-term debt and equity. There are no externally imposed requirements with respect to capital with the exception of a financial covenant in the Group’s debt facilities which limits the net debt:EBITDA ratio to a maximum of 3.5 times. This financial covenant was complied with throughout the year.

The Board periodically reviews the capital structure of the Group, considering the cost of capital and the risks associated with each class of capital. The Board approves any material adjustments to the capital structure in terms of the relative proportions of debt and equity. In order to maintain or adjust the capital structure, the Group may issue new shares, dispose of assets to reduce debt, alter dividend policy by increasing or reducing the dividend paid to shareholders, return capital to shareholders and/or buy back shares. In respect of the financial year ended 29 February 2012, the Company paid an interim dividend on ordinary shares of 3.67c per share (2011: 3.3c per share) and the Directors propose, subject to shareholder approval, that a final dividend of 4.5c per share be paid, bringing the total dividend for the year to 8.17c per share (2011: 6.6c per share).

The Group monitors debt capital on the basis of interest cover and by the ratio of Net debt:EBITDA before exceptional items. At 29 February 2012, the Group was net cash positive. During the financial year, the Group entered into a new five year committed €250.0m multi-currency syndicated revolving debt facility with seven banks and repaid the outstanding amounts drawn under its sterling debt facility. The Group’s 2007 Euro facility, which was due to mature in May 2012, was voluntarily repaid and cancelled on 30 March 2012 from surplus cash resources (note 19).

Company income statement
In accordance with Section 148(8) of the Companies (Amendment) Act, 1963, the income statement of the Company has not been presented separately in these consolidated financial statements. A profit of €96.8m (2011: €5.6m loss) was recognised in the individual Company income statement of C&C Group plc.

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25. COMMITMENTS

(a) Capital commitments
At the year-end, the following capital commitments authorised by the Board had not been provided for in the financial statements:-

2012
€m
2011
€m
Contracted 3.7 7.0
Not contracted 6.7 11.7
10.4 18.7


The contracted capital commitments at 29 February 2012 primarily relate to capital expenditure associated with the bottling line at Shepton Mallet while those at 28 February 2011 primarily relate to costs associated with transferring the Gaymers cider business onto a new IT systems platform. The transfer of the Gaymers cider business onto the new platform was completed in August 2011.

(b) Commitments under operating leases
Future minimum rentals payable under non-cancellable operating leases at the year end are as follows:

2012 2011
Land &
buildings
€m
Plant &
machinery
€m

Other
€m

Total
€m
Land &
buildings
€m
Plant &
machinery
€m

Other
€m

Total
€m
Payable in less than one year 4.0 0.4 0.4 4.8 4.0 0.8 0.6 5.4
Payable between 1 and 5 years 14.8 1.1 1.2 17.1 14.7 2.0 0.1 16.8
Payable greater than 5 years 15.6 0.1 0.2 15.9 18.9 - - 18.9
 
34.4 1.6 1.8 37.8 37.6 2.8 0.7 41.1


(c) Other commitments
At the year end, the value of contracts placed for future expenditure was :-

2012
€m
2011
€m
Other commitments 40.5 33.3


Commitments for future expenditure primarily relate to minimum purchase commitments for packaging materials, fixed charge commitments in relation to logistics and warehousing services and commitments under the Group’s sponsorship agreements. The commitments are principally due within a period of twenty four months.

Where the Company enters into financial guarantee contracts to guarantee the indebtedness of companies within the Group, the Company considers these to be insurance arrangements and accounts for them as such. The Company treats the guarantee contract as a contingent liability until such time as it becomes probable that it will be required to make a payment under the guarantee.

As outlined in note 19, the Company has two syndicated bank loan facilities in place at year end, a euro loan facility entered into in May 2007, scheduled to mature in May 2012, and a multi-currency loan facility entered into in February 2012. The Company, together with a number of its subsidiaries, gave a letter of guarantee to secure its obligations in respect of these loans. The actual loans outstanding at 29 February 2012 amounted to €60.0m (2011: €135.3m).

During the previous financial year, Tennent Caledonian Breweries UK Limited, entered into a guarantee with Clydesdale Bank plc whereby it guaranteed £250,000 plus interest and charges of the drawn debt of one of its customers. The guarantee expires on the earliest of; 10 years from the date on which the guarantee becomes effective, the secure liabilities are repaid, or by mutual agreement with Clydesdale Bank plc.

Enterprise Ireland funding of €0.9m (€0.3m in the current financial year) was received towards the costs of implementing developmental projects. Scottish Enterprise Board funding of €0.3m (€0.1m in the current financial year) was received under the terms of its Regional Selective Assistance Scotland Scheme. These funds are fully repayable should the Company at any time during the term of the Agreements be in breach of the terms and conditions of the Agreements. The Agreements terminate five years from inception.

Under the terms of the Sale and Purchase Agreements with respect to the disposal of the Wines and Spirits distribution businesses in the year to 28 February 2009, the Group had a maximum exposure of €9.6m with respect to the Republic of Ireland business and £1.9m with respect to the Northern Ireland business in relation to warranties undertaken. The time limit for all claims with respect to these warranties expired on 13 June 2010 and 26 August 2010 respectively, except for any claim relating to tax in Northern Ireland where the time limit is 7 years from the transaction date.

Under the terms of the Sale and Purchase Agreement with respect to the prior year disposal of the Group’s Spirits & Liqueurs business to William Grant & Sons Holdings Limited, the Group had a maximum aggregate exposure of €300.0m in relation to warranties (€99.0m in relation to tax warranties). The time limit for the notification of all claims with respect to all warranties with the exception of tax claims expired in December 2011. The time limit for any claim relating to tax is 5 years from the transaction date and is due to expire in June 2015.

Under the terms of the Sale and Purchase Agreement with respect to the current year disposal of the Group’s Northern Ireland wholesaling business, the Group has a maximum aggregate exposure of £4.3m in relation to warranties. The time limit for notification of all claims with respect to these warranties is 18 months from the transaction date, with the exception of a claim relating to tax where the time limit is 7 years from the transaction date.

Pursuant to the provisions of Section 17 of the Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of its subsidiary companies incorporated in the Republic of Ireland for the financial year to 29 February 2012 and as a result such subsidiaries are exempt from the filing provisions of Section 7, Companies (Amendment) Act, 1986 (note 28).

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