Reckitt Benckiser Group PLC — Annual Report 2018

May 13, 2020

Report and Financial Statements

Year Ended

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31 December 2018

Company Number 05960843

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Company Information

Directors	Adrian Nevil Hennah John Dixon Simon Andrew Neville Jonathan Timmis
Company Secretary	Christine Anne-Marie Logan
Registered Number	05960843
Registered Office	103-105 Bath Road Slough Berkshire SL 1 3UH
Independent Auditor	KPMG LLP 15 Canada Square London E14 5GL

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Contents

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	Page
Strategic Report	$1 - 2$
Directors' Report	$3 - 5$
Independent Auditor's Report	$6 - 10$
Statement of Comprehensive Income	11
Balance Sheet	12
Statement of Changes in Equity	13
Notes to the Financial Statements	$14 - 39$

Strategic Report For the Year Ended 31 December 2018

The Directors of Reckitt Benckiser Treasury Services plc (the "Company") present their Strategic Report for the year ended 31 December 2018.

Principal activities

The principal activity of the Company is primarily to provide financing to the Reckitt Benckiser group of companies (the "Group"), including to act as a finance company for other Group companies. It also holds investments in other Group entities. The Company carries out the strategy intended by the Company Directors.

Business review

Review of the business

Given the straightforward nature of the business, the Company's Directors are of the opinion that analysis using KPIs is not necessary for an understanding of the development, performance or position of the business.

Principal risks and uncertainties

The principal risks and uncertainties of the Company are integrated with the principal risks of the Group and are not managed separately. Accordingly, the principal risks and uncertainties of Reckitt Benckiser Group plc, which include those of the Company, are discussed on pages 42 - 57 of the Group's Financial Statements which do not form part of this report. In addition, those principal risks and uncertainties of the Group, that also represent those of the Company, are discussed in the financial instruments note 13 to these Financial Statements.

Financial risk management

The Company is a subsidiary undertaking within the Group. Cash funds of the Group are managed at Group level. Interest is received/paid by the Company on certain loans with other Group companies, on bonds, on commercial paper and term loans.

Liquidity and interest rate risk

The Company's arrangements with the Group, as described above, ensure it can access the funds needed to meet its liquidity requirements as cash can be obtained through Group funding and external borrowings. Interest receivable/payable on loans with other Group companies, bonds, term loans and commercial paper are calculated at both fixed and floating rates of interest. The Group's liquidity requirements and interest rate risks are managed at a Group level.

Currency risk

The Company's functional currency is Sterling and its Financial Statements are also presented in Sterling. Some transactions undertaken by the Company are denominated in currencies other than Sterling. The Company's policy is to actively manage its exposure to currency risk and to minimise this risk. The Company purchases derivatives, including the use of forward contracts to manage its exposure to foreign currency debt, as part of its treasury management activities. As at 31 December 2018, the net derivative value was a liability of £110,292k (2017 - liability of £71,677k)

Credit risk

The Company has no significant concentrations of credit risk. Financial Institution counterparties are subject to approval under the Group's counterparty risk policy and such approval is limited to financial institutions with a BBB rating or above. The amount of exposure to any individual counterparty is subject to a limit defined within the counterparty risk policy, which is reassessed annually by the Board of Reckitt Benckiser Group plc. Amounts owing from companies in the Group are usually remitted within the Company's standard credit terms.

Strategic Report (continued) For the Year Ended 31 December 2018

Results for the year and movement on reserves

The Financial Statements for the year ended 31 December 2018 show a profit of £114,655k (2017 - profit of £66,974k). The profit for the year has been added to reserves (2017 - added to reserves). As at 31 December 2018 the Company has net assets of £4,970,723k (2017: £4,854,562k).

Future developments

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No significant change in the business of the Company has taken place during the year or is expected in the immediately foreseeable future.

This report was approved by the Board on 26 June 2019 and signed on its behalf.

John Dixon Director

Directors' Report to the members of Reckitt Benckiser Treasury Services plc For the Year Ended 31 December 2018

The Directors present their report and the audited Financial Statements for the year ended 31 December 2018.

Directors

The Directors of the Company who held office during the year and up to the date of signing of the Financial Statements, unless otherwise stated, were:

Adrian Nevil Hennah John Dixon Simon Andrew Neville Jonathan Timmis (appointed 16 March 2018)

Directors' indemnity

On 28 July 2009, Reckitt Benckiser Group plc executed a deed poll of indemnity for the benefit of each individual who is, at any time on, or after 28 July 2009, an officer of Reckitt Benckiser Group plc and/or any company within the Group in respect of costs of defending claims against them and third party liabilities.

Statement of Directors' responsibilities in respect of the Strategic Report, the Directors' Report and the Financial Statements

The Directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent:
• state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements:
• assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, and Corporate Governance Statement that complies with that law and those regulations.

Directors' Report to the members of Reckitt Benckiser Treasury Services plc (continued) For the Year Ended 31 December 2018

Responsibility Statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

• the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Directors' Report/Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

Employees

The Company is committed to the principle of equal opportunity in employment. No applicant or employee receives less favourable treatment on the grounds of nationality, age, gender, religion, race, ethnicity or disability. The Company recognises its responsibilities to disabled persons and endeavours to assist them to make their full contribution at work. Where employees become disabled, every practical effort is made to allow them to continue in their jobs or to provide retraining in suitable alternative work. It is essential to the continued improvement in efficiency and productivity throughout the Group that each employee understands the Group's strategies, policies and procedures. Open and regular communication with employees at all levels is an essential part of the management process. A continuing programme of training and development reinforces the Group's commitment to employee development.

Results for the year and movement on reserves

The Company's results for the year and movements on reserves are included in the Strategic Report on page 2.

Other information

Disclosures in respect of financial instruments are made in note 13.

Disclosures made in respect to post balance sheet events are made in note 20.

Corporate Governance Considerations

Disclosures required under the Disclosure and Transparency Rules ("DTR")

Statutory Reporting

The monitoring of the financial reporting and statutory audit of the Group, which includes the Company, is discussed on pages 80 to 86 of the Reckitt Benckiser Group plc Annual Report 2018.

Other required disclosures

For the 12 months ended 31 December 2018, the Company did not have any securities carrying voting rights admitted to trading on a regulated market and therefore disclosures reguired by paragraph 13 for Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) are not applicable.

Financial risk management

The Company's approach to managing financial risk is included in the Strategic Report on page 1.

Directors' Report to the members of Reckitt Benckiser Treasury Services plc (continued) For the Year Ended 31 December 2018

Future developments

No significant change in the business of the Company has taken place during the year or is expected in the immediately foreseeable future.

Going concern

The Company participates in the Group's centralised treasury arrangements and so shares the banking arrangements with its parent and fellow subsidiaries.

On the basis of their assessment of the Company's financial position and of the enquiries made of the Directors of Reckitt Benckiser Group plc, the Company's Directors have a reasonable expectation that the Company will be able to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements.

Independent auditor

The external auditor of the Company for the prior financial year was PricewaterhouseCoopers LLP. The Company's ultimate parent company, Reckitt Benckiser Group plc ("the Group"), undertook an audit tender in 2017 and appointed KPMG LLP as external auditor for the Group for the financial year ended 31 December 2018. Accordingly, KPMG LLP was appointed by the Company to replace PricewaterhouseCoopers LLP as auditor for the year ended 31 December 2018.

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

Political contributions

Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year.

Disclosure of information to auditor

Each of the persons who are Directors at the time when this Directors' Report to the members of Reckitt Benckiser Treasury Services plc is approved has confirmed that:

• so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
• the Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This report was approved by the Board on 26 June 2019 and signed on its behalf.

John/Ďixon Director

Independent Auditor's Report to the members of Reckitt Benckiser Treasury Services plc

1 Our opinion is unmodified

We have audited the financial statements of Reckitt Benckiser Treasury Services plc ("the Company") for the year ended 31 December 2018 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and the related notes, including the accounting policies in note 1.

In our opinion the financial statements:

• give a true and fair view of the state of Company's affairs as at 31 December 2018 and of the its profit for the year then ended;
• have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were first appointed as auditor by the directors on 17 May 2019. The period of total uninterrupted engagement is for the financial year ended 31 December 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the Company In accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

2 Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter, in arriving at our audit opinion above, together with our key audit procedures to address that matter and, as required for public interest entities, our results from those procedures. This matter was addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter.

Independent Auditor's Report to the members of Reckitt Benckiser Treasury Services plc (continued)

	: Our response
Reliance on support	Our procedures included:
	Key dependency assessment: Inspecting
The carrying amount of the	letters of support from the company's ultimate parent
amounts owed by Group	indicating their intention to continue to provide
	undertakings is significant and at : financial support to the debtors, to enable them to
risk of irrecoverability due to the	: meet their obligations as they fall due.
	Funding assessment: Challenging the
entities that the Company lends	financial capacity of the ultimate parent and the Group
to. The Company is reliant on	it heads, including inspection of the Group's latest
	available audited accounts and considering the ability
	of the ultimate parent to provide financial support.
	Evaluating intent: Challenging the directors'
	assessment of the intention of the ultimate parent to
	provide such financial support by considering the
	Group's history of providing support and the
	commercial advantages and disadvantages to the
	ultimate parent of providing such support.
	Assessing transparency: Assessing the
	adequacy of the Company's disclosures in respect of
	amounts owed by Group undertakings.
	Our results: We found the Company's assessment of
	the recoverability of the amounts owed by Group
	undertakings to be acceptable.
	: The risk Group undertakings: net current liabilities of certain support provided by their ultimate parent to the relevant Group undertaking in assessing recoverability of the balance.

3 Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements as a whole was set at £460m, determined with reference to a benchmark of total assets (of which it represents 1.0%). We consider total assets to be the most appropriate benchmark given the Company's primary activity is the financing of other Group companies.

We agreed to report to the Board of Directors any corrected or uncorrected identified misstatements exceeding £23m, in addition to other identified misstatements that warranted reporting on qualitative grounds.

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Independent Auditor's Report to the members of Reckitt Benckiser Treasury Services pic (continued)

4 We have nothing to report on going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements ("the going concern period").

Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company will continue in operation.

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures.

Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements.

We have nothing to report in these respects, and we did not identify going concern as a key audit matter.

5 We have nothing to report on the other information in the Report and Financial Statements

The Directors are responsible for the other information presented in the Report and Financial Statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors' report

Based solely on our work on the other information:

• we have not identified material misstatements in the strategic seport and the directors' report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Independent Auditor's Report to the members of Reckitt Benckiser Treasury Services plc (continued)

6 We have nothing to report on the other matters on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
• the financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

7 Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on pages 3 and 4, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or other irreqularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

			A fuller description of our responsibilities is provided on the FRC's website at
	www.frc.org.uk/auditorsresponsibilities.

Irregularities - ability to detect

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience (as required by auditing standards) and discussed with the Directors and other management the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Whilst the Company is subject to many other laws and regulations, we did not identify any others where the consequences of non-compliance alone could have a material effect on amounts or disclosures in the financial statements.

Independent Auditor's Report to the members of Reckitt Benckiser Treasury Services plc (continued)

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing noncompliance and cannot be expected to detect non-compliance with all laws and regulations.

8 The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

K. Ríochet 6

Richard Broadbelt (Senior Statutory Auditor) For and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants

15 Canada Square London E14 5GL

26 June 2019

Statement of Comprehensive Income For the Year Ended 31 December 2018

	Note	2018 £000	2017 £000
Other operating income			375
Administrative expenses		(1, 458)	(1, 363)
Operating loss		(1, 458)	(988)
Interest receivable and similar income	4	626,931	424,825
Interest payable and similar charges	5	(476, 955)	(362,085)
Profit before tax		148,518	61,752
Tax on profit	6	(33, 863)	5,222
Profit for the financial year		114,655	66,974
Other comprehensive income/(loss)
Gains/(losses) on cash flow hedges (net of tax)		1,506	(2,894)
Total comprehensive income		116,161	64,080

The notes on pages 14 to 39 form part of these Financial Statements.

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All amounts in the current and prior year relate to continuing operations.

All amounts included in other comprehensive income may be reclassified to profit or loss in subsequent years.

Reckitt Benckiser Treasury Services plc
Registered number: 05960843

Balance Sheet As at 31 December 2018

	Note		2018 £000		2017 £000
Fixed Assets
Investments	7		3,610,237		3,610,237
Current Assets
Debtors due after more than one year	8,13	1,161,563		1,207,246
Debtors due within one year	8,13	40,995,414		41,700,099
Current asset investments	9,13	128,974		72,284
Cash at bank and in hand	10, 13	14,569		24,874
		42,300,520		43,004,503
Creditors due within one year	11,13	(32, 633, 181)		(32, 180, 790)
Net Current Assets			9,667,339		10,823,713
Total Assets less Current Liabilities			13,277,576		14,433,950
Creditors due after more than one year	12, 13		(8, 306, 853)		(9,579,388)
Net Assets			4,970,723		4,854,562
Equity
Share capital	15		2,000		2,000
Share premium			3,975,335		3,975,335
Other reserves			897		(609)
Retained earnings			992,491		877,836
Total Equity			4,970,723		4,854,562

The notes on pages 14 to 39 form part of these Financial Statements.

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The Financial Statements on pages 11 to 39 were approved and authorised for issue by the Board and were signed on at the Board and were

John Dixon Director

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	Share capital	Share premium	Other reserves	Retained earnings	Total Equity
	£000	£000	£000	£000	£000
At 1 January 2018	2,000	3.975,335	(609)	877,836	4,854,562
Comprehensive income
Profit for the financial year		۰	٠	114,655	114,655
Movements in hedging reserve (net of tax)		$\bullet$	1,506		1,506
Total comprehensive income			1,506	114,655	116,161
Total transactions with owners		٠
Balance at 31 December 2018	2.000	3,975,335	897	992,491	4,970,723

Statement of Changes in Equity
For the Year Ended 31 December 2018

Included in other reserves are movements on cash flow hedges, net of tax.

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Statement of Changes in Equity
For the Year Ended 31 December 2017

	Share capital	Share premium	Other reserves	Retained earnings	Total Equity
	£000	£000	£000	£000	£000
At 1 January 2017	2,000	3,975,335	2,285	810,862	4,790,482
Comprehensive income
Profit for the financial year	٠			66,974	66,974
Movements in hedging reserve (net of tax)	$\blacksquare$	۰	(2,894)		(2,894)
Total comprehensive
(loss)/income	$\blacksquare$	$\bullet$	(2,894)	66,974	64,080
Total transactions with owners	$\blacksquare$	$\bullet$
Balance at 31 December 2017	2.000	3,975,335	(609)	877,836	4,854,562

Included in other reserves are movements on cash flow hedges, net of tax.

The notes on pages 14 to 39 form part of these Financial Statements.

1. Accounting Policies

The principal accounting policies are summarised below. They have been applied consistently throughout the year and the preceding year.

1.1 General Information

Reckitt Benckiser Treasury Services plc is a public limited company, limited by shares and is incorporated in England and Wales. The address of the registered office is given on the Company Information page at the beginning of these statutory Financial Statements. The nature of the Company's operations and its principal activities are set out in the Strategic Report on pages 1 to 2.

1.2 Statement of Compliance

The Financial Statements have been prepared on a going concern basis, under the historical costs convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and in compliance with United Kingdom Accounting Standards, comprising Financial Reporting Standard 101, Reduced Disclosure Framework' (FRS 101) and the Companies Act 2006.

1.3 Basis of Preparation

The preparation of Financial Statements in compliance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101") requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 2).

1.4 Going concern

The Company participates in the Group's centralised treasury arrangements and so shares the banking arrangements with its parent and fellow subsidiaries.

On the basis of their assessment of the Company's financial position and of the enquiries made of the Directors of Reckitt Benckiser Group plc, the Company's Directors have a reasonable expectation that the Company will be able to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements.

1.5 Changes in accounting policy and disclosure

The following standard issued by the IASB and endorsed by the EU has been adopted by the Company from 1 January 2018:

IFRS 9 Financial Instruments (replacing IAS 39 Financial Instruments: Recognition and × Measurement)

IFRS 9 addresses the classification and measurement of financial instruments and introduces new principles for hedge accounting and a new forward-looking impairment model for financial assets.

Accounting Policies (continued) $\mathbf{1}$

1.5 Changes in accounting policy and disclosure (continued)

The adoption of IFRS 9 principles did not result in any material changes to the measurement of income or costs in the Statement of Comprehensive Income ("SCI") or of assets and liabilities in the Balance Sheet.

All classes of financial assets and financial liabilities had, as at 1 January 2018, the same carrying values under IFRS 9 as they had under IAS 39. All hedge relationships designated under IAS 39 at 31 December 2017 met the criteria for hedge accounting under IFRS 9 on 1 January 2018 and were hence regarded as continuing hedge relationships.

1.6 Financial Reporting Standard 101 - Reduced Disclosure Exemptions

The Company has taken advantage of the following disclosure exemptions in preparing these Financial Statements, as permitted by FRS 101 for qualifying entities:

• The requirements of IAS 7 Statement of Cash Flows:
• The requirements in IAS 24 Related Party Disclosures not to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member;
• The requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures:
• The following paragraphs of IAS 1. 'Presentation of Financial Statements':
• 10(d). (statement of cash flows).
• 16 (statement of compliance with all IFRS).
• -38A (requirement for minimum of two primary statements, including cash flow statements),
• 38B-D (additional comparative information),
• -40A-D (requirements for a third statement of financial position).
• 111 (cash flow statement information), and
• 134-136 (capital management disclosures)
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting policies, Changes in Accounting Estimates and Errors; and
• The requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairment of Assets, provided that equivalent disclosures are included in the consolidated Financial Statements of the Group in which the entity is consolidated.

The Company's results are included in the publicly available consolidated Financial Statements of Reckitt Benckiser Group plc and these Financial Statements may be obtained from 103-105 Bath Road, Slough, Berkshire, SL1 3UH, United Kingdom, or at https://www.rb.com.

1.7 Consolidation

The Financial Statements contain information about Reckitt Benckiser Treasury Services plc as an individual company and do not contain consolidated financial information as the parent of a group. The Company is exempt under section 400 of the Companies Act 2006 from the requirement to prepare consolidated Financial Statements as it and its subsidiary undertakings are included in the consolidated Financial Statements of its ultimate parent company, Reckitt Benckiser Group plc, a company registered in England and Wales.

$1.$ Accounting Policies (continued)

1.8 Foreign Currency Balances

The Company's functional and presentational currency is Sterling, therefore foreign currency is determined to be any other currency than Sterling.

Transactions denominated in foreign currencies are translated into Sterling at the rate of exchange on the day the transaction occurs. Monetary assets and liabilities denominated in a foreign currency are translated into Sterling at the exchange rate ruling on the balance sheet date. Resultant foreign exchange gains and losses are recorded in the Statement of Comprehensive Income for the financial year.

1.9 Pension Commitments

The Company contributes to a defined contribution scheme on behalf of its employees. Payments to the scheme are recognised as an employee benefit expense in the year they are incurred.

1.10 Interest

Interest receivable is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Interest receivable is credited to the Statement of Comprehensive Income on recognition. Interest payable is recognised when it is probable that the economic benefits will flow from the Company and the amount of expense can be measured reliably. Interest payable is debited to the Statement of Comprehensive Income on recognition.

1.11 Provisions for liabilities

Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the Statement of Comprehensive Income in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet.

1.12 Fixed Asset Investments

Investments in subsidiaries are held at cost less accumulated impairment losses.

A review for the potential impairment of an investment is carried out by the Directors if events or changes in circumstances indicate that the carrying value of the investment may not be recoverable.

1.13 Current Asset Investments

Current asset investments are included at amortised cost and include deposits and money market funds with a maturity of less than three months.

Accounting Policies (continued) 1.

1.14 Financial Instruments

Reckitt Benckiser Treasury Services plc may use derivatives to manage its exposure to fluctuating foreign exchange rates. The Company has adopted IFRS 9 'Financial Instruments'. The derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at fair value. Except for certain derivatives designated as cash flow hedges, all changes in fair value of derivative instruments are recognised immediately in profit or loss. The Company designates certain derivative financial instruments as cash flow hedges. The effective portion of changes in the fair value is initially recorded in other comprehensive income ("OCI"). Amounts recorded in other comprehensive income are recycled to profit or loss in the period in which the hedged item will affect profit or loss. Any gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

The Company recognises financial instruments when it becomes a party to the contractual arrangements of the instrument. Financial instruments are de-recognised when they are discharged or when the contractual terms expire. The Company's accounting policies in respect of financial instruments are explained below.

(a) Financial Assets

The Company recognises amounts owed by Group undertakings at amortised cost. The Company also recognises its derivative assets either as cash flow hedges or at fair value through profit or loss.

Amounts owed by Group undertakings are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of intra-Group funding. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at fair value through other comprehensive income, but not to investments in equity instruments. Measurement of ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

The Company has determined that the application of IFRS 9's impairment requirements at 1 January 2018 results in no additional allowance for impairment.

(b) Financial Liabilities

The Company classifies its financial liabilities in the following categories: as financial liabilities at amortised cost or derivatives at fair value either as cash flow hedges or through profit or loss.

Financial liabilities at amortised cost include: bank borrowings, intercompany loans, bonds and commercial paper. These are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method.

(c) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and deposits.

Accounting Policies (continued) 1.

1.15 Cash at bank and in hand

Cash at bank and in hand comprise cash balances and deposits.

Bank overdrafts are included within creditors due within one year in the Balance Sheet.

1.16 Income tax

Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in profit for the financial year, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity. In this case the tax is also recognised in Other Comprehensive Income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted in the UK or substantively enacted, at the Balance Sheet date and any adjustment to tax payable in respect of previous years.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. The deferred tax is not accounted for if it arises from the total recognition of an asset or liability in a transaction (other than a business combination) that affects neither accounting nor taxable profit or loss at that time. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the investor is able to control the timing of temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current tax liabilities and where there is an intention to settle balances on a net basis.

1.17 Operating segments

The Group has one operating segment which is the provision of treasury services to the Group.

$2.$ Accounting Estimates and Judgements

In the application of the Company's accounting policies the Directors are required to make a number of estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In preparing these Financial Statements, the Directors have had to make the following judgements:

• Determine whether loans are at a market rate of interest at inception in order to consider whether a day one fair value adjustment is required.
• Determine whether there are indicators of impairment of the Company's fixed asset investments. Factors considered are net assets for financing companies.
• Expected credit losses relating to intercompany assets have been assessed as not material to the Financial Statements.

The Company's Directors are of the opinion that there are no further judgements and no other key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying value of assets and liabilities for the Company within the next financial year.

3. Staff costs

Staff costs were as follows:

2018 £000	2017 £000
736	802
97	81
64	64
897	947

The average monthly number of employees during the year was as follows:

	2018 No.	2017 No.
Administration and support	10	10

$\bar{\gamma}$

$\hat{\mathbf{r}}$

$\mathcal{L}$

$\mathcal{L}$

$\sim$ $\sim$

Notes to the Financial Statements For the Year Ended 31 December 2018

4.	Interest receivable and similar income
		2018 £000	2017 £000
	Interest receivable from Group undertakings	602,183	402,203
	Bank interest receivable	24,748	22,622
		626,931	424,825
5.	Interest payable and similar charges
		2018 £000	2017 £000
	Interest payable on third party borrowings	266,690	179,190
	Interest payable to Group undertakings	194,568	97,781
	Amortisation of issue costs of bank loans repaid		35,149
	Net exchange losses	15,697	49,965
		476,955	362,085
6.	Taxation
		2018 £000	2017 £000
	Corporation tax
	Current tax on profit for the financial year	23,731	1,018
	Adjustments in respect of previous periods Foreign tax	8,007	(8,368)
	Foreign tax relief/other relief	(574)	(498)
	Foreign withholding tax charge	2,699	2,626
	Total current tax	33,863	(5, 222)
	Deferred tax
	Adjustment in respect of previous periods
	Total deferred tax
	Tax on profit	33,863	(5, 222)

$\sim 10^{-10}$

6. Taxation (continued)

Reconciliation of tax charge/(credit)

The tax assessed for the year is higher than (2017 - lower than) the standard rate of corporation tax in the UK of 19% (2017 - 19.25%). The differences are explained below:

	2018 £000	2017 £000
Profit before tax	148,518	61,752
Profit multiplied by standard rate of corporation tax in the UK of 19% (2017 - 19.25%) Effects of:	28.218	11,885
Adjustments in respect of previous periods	8.007	(8,368)
Transfer pricing adjustments	(4, 488)	(4, 153)
Higher rate taxes on overseas earnings	2.126	2.128
Net non-taxable worldwide debt cap income		(6,714)
Total tax charge/(credit) for the year	33,863	(5,222)

Factors that may affect future tax charges

The UK tax rate reduces to 17% from 1 April 2020 and this has been substantively enacted. Future profits will be taxed at the appropriate rate.

Worldwide debt cap

Worldwide debt cap legislation provides for the exemption of certain financing income of UK Group companies where there has been a disallowance of interest expense in relevant UK Group companies.

These rules were repealed with effect from 1 April 2017 as part of the UK Government's package of measures to reduce the tax deductibility of corporate interest expense. Therefore, worldwide debt cap only relates to the period to 1 April 2017.

$\overline{7}$ . Fixed Asset Investments

$\ddot{\phantom{a}}$

$\sim$

	Investments in subsidiary undertakings £000
Cost
At 1 January 2018	3,610,237
At 31 December 2018	3,610,237
Impairment
At 1 January 2018 and 31 December 2018
Net book value
At 31 December 2018	3,610,237
At 31 December 2017	3,610,237

Subsidiaries

The following are direct subsidiaries of the Company:

$\cdot$

	Class of
Name	shares	Holding Registered office
Reckitt Benckiser Jersey (No.1) Limited	Ordinary	100 % IFC 5, St Helier, Jersey, JE1 1ST
Reckitt Benckiser Jersey (No.2) Limited	Ordinary	100 % IFC 5, St Helier, Jersey, JE1 1ST

The Directors believe that the carrying value of the investments is supported by their net assets.

8. Debtors

$\bar{\beta}$

$\bar{a}$

	2018 £000	2017 £000
Due after more than one year
Amounts owed by Group undertakings	1.160.420	1,204,759
Derivative financial instruments - Intragroup		85
Derivative financial instruments - External	1.143	2.402
	1.161.563	1,207,246

8. Debtors (continued)

Due within one year	2018 £000	2017 £000
40.953.169 Amounts owed by Group undertakings		41,667,666
Prepayments and accrued income	772	564
Deferred tax asset	٠	125
Derivative financial instruments - Intragroup	8.399	15.997
33,074 Derivative financial instruments - External		15.747
40,995,414		41.700.099

The amounts owed by Group undertakings are repayable on demand, unsecured and are either interest free, interest-bearing at a fixed rate, interest-bearing at LIBOR minus or plus a margin of various rates or interest-bearing at other floating based rates (2017 - same). Further detail on the rates of interest receivable on amounts owed by Group undertakings is provided in note 13 to these Financial Statements.

The intragroup derivative financial instruments represent intragroup forward contracts which are fair valued through profit and loss.

The external derivative financial instruments represent the forward contracts with third parties outside of the Group which are fair valued, either through profit or loss or designated as cash flow hedges.

The fair value of derivatives has been estimated using forward exchange rates derived from market sourced data at the Balance Sheet date, with the resulting value discounted back to present value.

$9.$ Current Asset Investments

	2018 £000	2017 £000
Short term deposits	128,974	72,284

Short term deposits relate to deposits and money market funds with a maturity of less than three months. Short term deposits are at a floating rate.

Cash at bank and in hand 10.

	2018 £000	2017 £000
Cash at bank	14.569	24,874

Creditors due within one year $11.$

2018 £000	2017 £000
1.166 Bank loans and overdrafts	548
17,468 Derivative financial instruments - Intragroup	16,322
1,608,373 Commercial paper issued by the Company	948,466
Bonds ۰	369,531
30,973,725 Amount owed to Group undertakings	30,817,110
16.912 Derivative financial instruments - External	15.744
15.269 Accruals and deferred income	13.069
268 Deferred tax liability
32,633,181	32,180,790

The amounts owed to Group undertakings are repayable on demand, unsecured and are either interest free, interest-bearing at a fixed rate, interest-bearing at LIBOR minus or plus a margin of various rates or interest-bearing at other floating based rates (2017 - same). Further detail on the rates of interest payable on amounts owed to Group undertakings is provided in note 13 to these Financial Statements.

Included in the amounts owed to Group undertakings are Eurobonds, quoted on the Channel Islands Stock Exchange, of £43,124k (2017 - £40,702k) issued to subsidiary undertakings that have an early redemption option attached to them. The carrying value of each bond is a reasonable approximation of fair value. They are interest bearing at a rate of 3M LIBOR plus 0.3% (2017 - same).

The Commercial Paper issued by the Company represents unsecured short term debt instruments, taken out against short term funding. As at 31 December 2018 the Company had Commercial Paper in issue amounting to US\$782,750k (nominal values) at rates between 2.54% and 2.98% with maturities ranging from 3 January 2019 to 7 March 2019, and €1,110,000k (nominal values) at rates between negative 0.21% and negative 0.25% with maturities ranging from 23 January 2019 to 13 June 2019. As at 31 December 2017 the Company had Commercial Paper in issue amounting to US\$80,500k (nominal values) at a rate of 1.52% maturing on 16 January 2018, and €1,000,000k (nominal values) at rates between negative 0.24% and negative 0.33% with maturities ranging from 22 January 2018 to 13 June 2018.

The intragroup derivative financial instruments represent intragroup forward contracts which are fair valued through profit and loss.

The external derivative financial instruments represent the forward contracts with third parties outside of the Group which are fair valued, either through profit and loss or designated as cash flow hedges.

The fair value of derivatives has been estimated using forward exchange rates derived from market sourced data at the Balance Sheet date, with the resulting value discounted back to present value.

Further disclosures about the deferred tax liability is included in note 14.

12. Creditors due after more than one year

	2018 £000	2017 £000
Bonds	6.440.220	6.072.875
Term loans	1,326,236	3,091,750
Amounts owed to Group undertakings	421,869	340.921
Derivative financial instruments - Intragroup	118,528	73,755
Derivative financial instruments - External	۰	87
	8,306,853	9,579,388

$\ddot{\phantom{a}}$

The amounts owed to Group undertakings are unsecured, interest-bearing at LIBOR minus or plus a margin of various rates (2017 - same). Further details on the rates of interest payable on amounts owed to Group undertakings

$13.$ Financial Instruments

Financial instruments by category:

At 31 December 2018

	Amortised cost £000	Fair value through the SCI £000	Derivatives used for hedging £000	Carrying value total £000	Fair value total £000
Assets as per the balance sheet
Cash at bank and in hand	14,569			14,569	14,569
Current asset investments	128,974			128,974	128,974
External derivative financial instruments - short term		31,729	1,345	33,074	33,074
External derivative financial instruments - long term		1,143		1,143	1,143
Internal derivative financial instruments - short term		8,399		8,399	8,399
Intercompany financing loans - short term $(3)(4)$	40,953,169			40,953,169	40.953.169
Intercompany financing loans - long term $(3)(4)$	1,160,420			1,160,420	1,195,149
Prepayments and accrued income	772			772	772

$\overline{a}$

$\sim$

$\mathcal{A}$

$\ddot{\phantom{a}}$

Amortised cost £000	Fair value through the SCI £000	Derivatives used for hedging £000	Carrying value total £000	Fair value total £000
1,609,539			1,609,539	1,609,539
6,440,220			6,440,220	6,174,508
1,326,236			1,326,236	1,326,236
	16,909	3	16,912	16,912
	17,468		17,468	17,468
	118,528		118,528	118,528
30,940,479			30,940,479	30,940,479
421,869			421,869	421,869
33,246			33,246	33,246
15,269			15,269	15,269

Notes to the Financial Statements For the Year Ended 31 December 2018

Advise they must be avenued a large

26

$\sim$

$\mathbf{r}$

At 31 December 2017

$\sim 10^7$

$\Delta \sim 1$

$\sim 10^{-10}$ km s $^{-1}$

$\mathcal{L}(\mathbf{x})$ and $\mathcal{L}(\mathbf{x})$ . The $\mathcal{L}(\mathbf{x})$

	Amortised cost £000	Fair value through the SCI £000	Derivatives used for hedging £000	Carrying value total £000	Fair value total £000
Assets as per the balance sheet
Cash at bank and in hand	24,874			24,874	24,874
Current asset investments	72,284			72,284	72,284
External derivative financial instruments - short term		15,747		15,747	15,747
External derivative financial instruments - long term		2,402		2,402	2,402
Internal derivative financial instruments - short term		15,997		15,997	15,997
Internal derivative financial instruments - long term		85		85	85
Intercompany financing loans - short term $(3)(4)$	41.667.666			41,667,666	41,667,666
Intercompany financing loans - long term $(3)(4)$	1,204,759			1,204,759	1,238,275
Prepayments and accrued income	564			564	564

$\sim$ $\sim$

At 31 December 2017

$\hat{\mathbf{v}}$

$\sim$ $\lambda$

	Amortised cost £000	Fair value through the SCI £000	Derivatives used for hedging £000	Carrying value total £000	Fair value total £000
Liabilities as per the balance sheet
Borrowings (excluding bonds) (1)	949,014			949,014	949,014
Bonds (2)	6,442,406		$\qquad \qquad \blacksquare$	6,442,406	6,374,506
Term loans (2)	3,091,750			3,091,750	3,091,750
External derivative financial instruments - short term		15,010	734	15,744	15,744
External derivative financial instruments - long term		87		87	87
Internal derivative financial instruments - short term		16,322		16,322	16,322
Internal derivative financial instruments - long term		73,755		73,755	73,755
Intercompany financing loans - short term $(3)(4)$	30,814,132			30,814,132	30,814,132
Intercompany financing loans - long term $(3)(4)$	340,921			340,921	340,921
Intercompany trade payables	2.978			2,978	2,978
Accruals and deferred income	13,069			13,069	13,069

$\sim$ $\sim$

$\overline{\phantom{a}}$

Financial Instruments (continued)

(1) The categories in this disclosure are determined by IFRS 9. As at 31 December 2018 the Company had Commercial Paper in issue amounting to US\$782,750k (nominal values) at rates between 2.54% and 2.98% with maturities ranging from 3 January 2019 to 7 March 2019, and €1,110,000k (nominal values) at rates between negative 0.21% and negative 0.25% with maturities ranging from 23 January 2019 to 13 June 2019. As at 31 December 2017 the Company had Commercial Paper in issue amounting to US\$80,500k (nominal values) at a rate of 1.52% maturing on 16 January 2018, and €1,000,000k (nominal values) at rates between negative 0.24% and negative 0.33% with maturities ranging from 22 January 2018 to 13 June 2018.

(2) Bonds as at 31 December 2018 are comprised of the following tranches: US\$2,500,000k at 2.375% (matures in 2022), US\$750,000k at 3m LIBOR plus a margin of 0.56% (matures in 2022), US\$500,000k at 3.625% (matures in 2023), US\$2,000,000k at 2.75% (matures in 2024), US\$2,500,000k at 3% (matures in 2027). Bonds of US\$500,000k matured in 2018. Bonds in 2017 were comprised of the same tranches. The fair value of bonds at 31 December 2018 is a liability of £6,174,508k (2017: liability of £6,374,506k). This value is derived using a quoted market rate in an active market (level 1 classification). The term loan is interest bearing at a floating rate of interest plus a margin and is comprised of two tranches: a tranche repayable in 2020 and a tranche repayable in 2022. The carrying value of the term loan at 31 December 2018 is a liability of £1,326,236k (2017: 3,091,750k). The fair value approximates to carrying value and is calculated using discounted future cashflows at floating market rates (level 2 classification).

(3) Intercompany loans payable and receivable are unsecured and are either interest free, interest bearing at a fixed rate, interest bearing at LIBOR plus or minus a margin of various rates or interest bearing at other floating based rates (2017 - same).

(4) The fair value of short term loans is deemed to be in line with the carrying amount due to their short term nature. The fair value of floating long term loans are deemed to be comparable with carrying value. The fair value of long term fixed rate debt is determined by discounting future flows at the prevailing rate and converting to sterling at the year end rate.

All financial instruments, with the exception of the bonds, are in level 2 of the fair value hierarchy. Fair value for financial instruments held at amortised cost has been estimated by discounting cash flows at prevailing interest rates and by applying year end exchange rates. The fair value measurement hierarchy levels have been defined as follows:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3. Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

The fair value of internal and external forward foreign exchange contracts at 31 December 2018 is a liability of £152,908k (2017: £105,908k) and an asset of £42,616k (2017: £34,231k). This value is determined using forward exchange rates derived from market sourced data at the Balance Sheet date, with the resulting value discounted back to present value (level 2 classification).

As the value of level 3 instruments at 31 December 2018 is £nil (2017: £nil), no further level 3 disclosures have been made. There have been no movements of financial instruments between levels (2017: £nil).

Offsetting Financial Assets and Financial Liabilities

The Company has forward foreign exchange contracts that are subject to enforceable master netting
arrangements. The following tables set out the carrying amounts of the recognised financial instruments that are subject to these agreements.

(a) Financial assets

$\ddot{\phantom{a}}$

	Gross amounts of recognised financial assets £000	Gross amounts of recognised financial liabilities set off in the balance sheet £000	Net amounts of financial assets presented in the balance sheet £000	Financial instruments not set off in the balance sheet £000	Net amount £000
As at 31 December 2018
Forward foreign exchange contracts - External	34.217		34.217	(13,638)	20,579
Forward foreign exchange contracts - Internal	8.399		8,399	۰	8,399
	42,616		42,616	(13.638)	28,978

	Gross amounts of recognised financial assets £000	Gross amounts of recognised financial liabilities set off in the balance sheet £000	Net amounts of financial assets presented in the balance sheet £000	Financial instruments not set off in the balance sheet £000	Net amount £000
As at 31 December 2017
Forward foreign exchange contracts - External	18.149		18,149	(10, 413)	7,736
Forward foreign exchange contracts - Internal	16,082		16.082 $\circ$		16,082
	34,231		34.231	(10, 413)	23,818

$\bar{\mathcal{A}}$

$\bar{\mathbf{v}}$

(b) Financial Liabilities

$\ddot{\phantom{1}}$

$\bar{\Delta}$

	Gross amounts of recognised financial liabilities £000	Gross amounts of recognised financial assets set off in the balance sheet £000	Net amounts of financial liabilities presented in the balance sheet £000	Financial instruments not set off in the balance sheet £000	Net amount £000
As at 31 December 2018
Forward foreign exchange contracts - External	(16, 912)		(16.912)	13,638	(3,274)
Forward foreign exchange contracts - Internal	(135,996)		(135,996)		(135,996)
	(152,908)		(152,908)	13,638	(139, 270)

	Gross amounts of recognised financial liabilities £000	Gross amounts of recognised financial assets set off in the balance sheet £000	Net amounts of financial liabilities presented in the balance sheet £000	Financial instruments not set off in the balance sheet £000	Net amount £000
As at 31 December 2017
Forward foreign exchange contracts - External	(15, 831)		(15, 831)	10,413	(5, 418)
Forward foreign exchange contracts - Internal	(90, 077)	$\blacksquare$	(90, 077)		(90, 077)
	(105, 908)		(105.908)	10,413	(95, 495)

External FX forward trades are subject to an enforceable right of offset in the event of a default by either party. Internal trades are not subject to such an agreement.

$\sim$ $\sim$

Financial Risk Management

The Company's operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates (foreign exchange risk), interest rates, credit risks and liquidity. The Company has in place a risk management programme that uses foreign currency financial instruments, including debt, and other instruments, to limit the impact of these risks on the financial performance of the Company.

The Company's financing and financial risk management activities are centralised into Group Treasury ('GT') to achieve benefits of scale and control. The Company manages financial exposures of the wider Group centrally in a manner consistent with underlying business risks. The Company manages only those risks and flows generated by the underlying commercial operations and speculative transactions are not undertaken.

The Board of Directors review and agree policies, guidelines and authority levels for all areas of Treasury activity and individually approve significant activities. GT operates under the close control of the CFO and is subject to periodic independent reviews and internal audits.

1. Market Risk

(a) Foreign exchange risk

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from recognised assets and liabilities.

The Company's policy is to align interest costs and operating profit of its major currencies in order to provide some protection against the translation exposure on foreign currency profits after tax.

The Company aligns internal foreign currency exposures and where necessary uses external debt and forward FX instruments to mitigate the risk to its income statement. The Company seeks to minimise its foreign currency exposures.

The notional principal amount of the outstanding external forward foreign exchange contracts at 31 December 2018 was £1,426,791k payable (2017: £2,616,712k payable).

The notional principal amount of the outstanding internal forward foreign exchange contracts at 31 December 2018 was £1,344,291k payable (2017: £1,989,742k payable).

The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the Balance Sheet.

The remaining major monetary financial instruments (liquid assets, receivables, interest and non-interest bearing liabilities) are directly denominated in the functional currency of the Company or are transferred to the functional currency of the local entity through the use of derivatives.

The gains and losses from fair value movements on derivatives held at fair value through the profit or loss, recognised in the Income Statement was a £22,102k gain (2017 - £17,590k loss). This includes the forward exchange contracts economically hedging intercompany and external debt, which is included in the net exchange losses in the year in note 5 to these Financial Statements (2017 - net exchange losses in note 5).

Market Risk (continued)

(b) Cash flow and fair value interest rate risk

The Company has both interest-bearing and non interest-bearing assets and liabilities. The Company monitors its interest income and expense rate exposure on a regular basis. The Company manages its interest income rate exposure on its gross financial assets by using a combination of fixed rate term deposits.

Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Company calculates the impact on the Income Statement of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies, calculated on a full year and pre-tax basis.

The scenarios are only run for liabilities and assets that represent the major interest-bearing positions. Based on the simulations performed, the impact on the Income Statement of a 50 basis-point shift in interest rates would be a maximum increase of £9,287k (2017: £7,989k) or decrease of £9,287k (2017: £7,989k), respectively for the liabilities and assets covered.

The Company has a number of loans, both receivable and payable, with other Group companies. These. loans are unsecured and are either interest free, interest bearing at a fixed rate, or interest bearing at a floating based rate. The tables below categorise the intragroup loans by the rates of interest that are applied to these loans.

$\frac{1}{2}$

$2047$

Amounts owed by Group undertakings

	20 I O £000	ZUII £000
Basis of interest receivable:
Interest free	76,113	62,625
Fixed based interest (4.5%) (2017 - between 2.6% and 4.5%)	707,794	675,122
Floating based interest	41,325,060	42.127.756
Total	42,108,967	42,865,503
Amounts owed to Group undertakings
	2018 £000	2017 £000
Basis of interest payable:
Interest free	1,389,590	1,300,720
Fixed based interest (between 2.63% and 5.5%) (2017 - between 3.5% and 4.81%)	43,595	28,805
Floating based interest	29,928.956	29,824,241
Total	31,362,141	31,153,766

2. Credit Risk

The Company has no significant concentrations of third party credit risk. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks and financial institutions, as well as credit exposures to customers. Financial institution counterparties are subject to approval under the Group's counterparty risk policy and such approval is limited to financial institutions with a BBB rating or above. The Company uses BBB and higher rated counterparties to manage risk, and operationally only uses sub BBB rated counterparties by exception. The amount of exposure to any individual counterparty is subject to a limit defined within the counterparty risk policy, which is reassessed annually by the Board of Directors. Derivative financial instruments are only traded with counterparties in accordance with the approved policy. Derivative risk is measured using a risk weighting method.

The Company has counterparty risk from asset positions held with financial institutions. This is comprised of short-term investments, cash and cash equivalents and derivatives positions as stated on the face of the Balance Sheet. For risk management purposes the Company assesses the exposure to major financial institutions by looking at the deposits, cash and cash equivalents and 5% of derivative notional position. The table below summarises the Company's assessment of its exposure.

	2018
	Credit	Exposure
	rating	£000
Counterparty
Financial Institution A	A+	98.974
Financial Institution B	A+	30,690
Financial Institution C	AA-	25,000
Financial Institution D	A	5,000

Credit	2017 Exposure
rating	£000
AA-	42,920
A	32,205
AAA	30,000
А	18,867
A	16,778

The above table does not include exposures to intercompany balances, the Company is in a net asset position and there is no history of intercompany default on balances owing to the Company. The maximum asset exposure to intercompany credit risk is £42,121,988k (2017: £42,888,507k).

3. Liquidity Risk

Cash flow forecasting is performed by other business units in the Group and on an aggregated basis by Group Treasury. GT monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities. Funds over and above those required for short-term working capital purposes by the local businesses are generally remitted to GT. The Company uses the remittances to settle obligations, repay borrowings, or, in the event of a surplus, invest in short-term instruments issued by institutions with a BBB rating or above.

The Company has various borrowing facilities available to it. The Company has bilateral credit facilities with high-quality international banks. All of these facilities have similar or equivalent terms and conditions and have a financial covenant, which is not expected to restrict the Company's future operations.

At the end of 2018, the Company had, in addition to its long-term debt of £7,766,456k (2017: £9,164,625k), undrawn committed borrowing facilities totalling £4,500,000k (2017: £4,500,000k), of which £4,500,000k exceeded 12 months' maturity (2017: £4,500,000k). The committed borrowing facilities, together with available uncommitted facilities and central cash and investments, are considered sufficient to meet the Company's projected cash requirements.

The undrawn committed facilities available, in respect of which all conditions precedent have been met at the balance sheet date, were as follows:

2018 £000	2017 £000
4,500,000	4,500,000
4,500,000	4,500,000

All committed facilities are at floating rates of interest.

The facilities have been arranged to cover general corporate purposes, including support for commercial paper issuance. All facilities incur commitment fees at market rates.

The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows which have been calculated using spot rates at the relevant balance sheet date, including interest to be paid.

At 31 December 2018	Total £000	Less than 1 vear £000	Between 1 and 2 years £000	Between 2 and 5 years £000	Over 5 years £000
Overdrafts	(1, 166)	(1.166)
Commercial paper	(1,608,373)	(1,608,373)		-
Bonds	(7,510,216)	(182, 869)	(182, 924)	(3,388,739)	(3,755,684)
Term loans	(1,475,036)	(41, 710)	(41, 710)	(1,391,616)
Intercompany trade payables	33,246	33,246
Accruals and deferred income	15.269	15.269			$\blacksquare$
Intercompany financing loans	(31, 405, 072)	(30, 889, 677)	(4, 463)	(58, 519)	(452, 413)

	Total £000	Less than 1 vear £000	Between 1 and 2 years £000	Between 2 and 5 years £000	Over 5 years £000
At 31 December 2017
Overdrafts	(548)	(548)			$\bullet$
Commercial paper	(948,466)	(948, 466)
Bonds	(7,631,382)	(545, 877)	(170, 681)	(2,890,459)	(4,024,365)
Term loans	(3,343,341)	(65, 193)	(65, 193)	(3.212.955)
Intercompany trade payables	(2,978)	(2,978)			$\overline{\phantom{0}}$
Accruals and deferred income	(13,069)	(13,069)	$\blacksquare$		$\blacksquare$
Intercompany financing loans	(31, 203, 663)	(30, 820, 061)	(2,687)	(10, 587)	(370, 328)

The table below analyses the Company's derivative financial instruments into relevant maturity groupings based on the remaining period between the Balance Sheet date and the contractual maturity date. The amounts disclosed using spot rates at the relevant balance sheet date.

At 31 December 2018

$\cdot$

$\ddot{\phantom{a}}$

	Less than 1 vear £000	Between 1 £000	Between 2 and 2 years and 5 years £000	Over 5 years £000
Forward exchange contracts - External
Outflow	(1,422,196)	(4, 595)	$\blacksquare$
Inflow	1.430.385	6.215	$\blacksquare$
Forward exchange contracts - Internal
Outflow	(1,338,076)	(6.215)	٠
Inflow	1,329,598	4.595	$\blacksquare$

$\mathcal{L}$

TUL MU TUUL LINGU VI DOGGIINGI LUTU
At 31 December 2017
	Less than 1 year £000	Between 1 and 2 years £000	Between 2 and 5 years £000	Over 5 years £000
Forward exchange contracts - External
Outflow	(2,605,686)	(6, 431)	(4, 595)	۰
Inflow	2,606,901	8.203	6.418
Forward exchange contracts - Internal
Outflow	(1,407,326)	(8.203)	(574, 213)
Inflow	1,406,458	6.431	672,633

4. Capital Management

The Company considers capital to be net debt plus total equity. Net debt is calculated as total external borrowings (excluding intercompany liabilities) less cash at bank and in hand, current asset investments and derivative financial instruments. Total equity includes share capital, reserves and retained earnings as shown in the Company Balance Sheet.

	2018 £000	2017 £000
Net debt	9,229,912	10,396,074
Total equity	4,970,723	4,854,562
	14,200,635	15,250,636

The objectives for managing capital are to safeguard the Company's ability to continue as a going concern, in order to provide returns for Shareholders and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital.

The Company monitors net debt and at year end the Company had net debt of £9,229,912k (2017: £10,396,074k). The Company seeks to pay down net debt using cash generated by the Group companies to maintain an appropriate level of financial flexibility.

37

14. Deferred taxation

		2018 £000
At beginning of year		125
Adjustments in respect of prior periods through OCI		(372)
Deferred tax charge in OCI for the period		(21)
At end of year		(268)
The deferred tax (liability)/asset is made up as follows:
	2018 £000	2017 £000
Deferred tax on cash flow hedges	(268)	125
Share Capital
	2018	2017
	£000	£000
Allotted and fully paid 2,000,102 (2017 - 2,000,102) Ordinary shares of £1 each	2,000	2,000

16. Related Party Transactions

$15.$

During the year, Reckitt Benckiser Treasury Services plc earned £41k (2017 - £nil) of interest receivable and incurred £7k (2017 - £69k) of interest payable to RB & Manon Business Co. Limited, another group company. RB & Manon Business Co. Limited is 75.05% owned by SSL Healthcare (Shanghai) Limited and 24.95% by three individual third-party shareholders. At the year-end, borrowings of £192k (2017 -£5,616k) were outstanding and included within creditors (2017 - included within creditors). The creditor is repayable on demand, unsecured and interest bearing at a rate of 3M LIBOR less 0.125% (2017 - same).

During the year, Reckitt Benckiser Treasury Services ptc incurred £2,905k (2017 - £485k) of interest payable to RB (China Trading) Limited, another group company. RB (China Trading) Limited is 80% owned by Reckitt Benckiser plc and 20% by an individual third-party shareholder. At the year-end, receivables of £768k (2017- £nil) and borrowings of £102,144k (2017 - £68,634k) were outstanding. Receivables are included within debtors and borrowings are included within creditors (2017 - borrowings included within creditors). The debtor is repayable on demand, unsecured and interest bearing at a rate of 3M LIBOR plus 0.2%. The creditor is repayable on demand, unsecured and interest bearing at a rate of 3M LIBOR less 0.125% (2017 - same).

$17.$ Directors

During the year the Company had 4 Directors resident in the UK, none of whom received any emoluments in respect of services to the Company (2017 - 4 Directors, no emoluments). The remuneration is paid by Reckitt Benckiser Corporate Services Limited which has made no recharge to the Company for the Directors' services during their time as Director. The Directors are also Directors of a number of fellow subsidiaries, and it is not possible to make an accurate apportionment of their remuneration in respect of each of the subsidiaries. Accordingly, the above details include no remuneration in respect of the Directors. The Directors have no material interest in any contract of significance to the Company's business.

18. Ultimate Parent Undertaking and Controlling Party

The immediate parent company is Reckitt Benckiser plc, a company which is registered in England and Wales.

The ultimate parent company and controlling party is Reckitt Benckiser Group plc, a company incorporated in England and Wales, which is the parent undertaking of the smallest and largest Group to consolidate these Financial Statements. Copies of the Group Financial Statements of Reckitt Benckiser Group plc can be obtained from 103-105 Bath Road, Slough, Berkshire, SL1 3UH or at https://www.rb.com.

19. Auditor's remuneration

The auditor's remuneration is met by the ultimate parent company, Reckitt Benckiser Group plc and is disclosed in total in the Group Financial Statements. No recharge is made to its subsidiaries as it is not practical to make an allocation of the audit fee to each subsidiary entity individually.

Post Balance Sheet Event 20.

Following the year end the Company has repaid US\$600,000k of its term loan debt.