Notes to the Company financial statements

46 Contingent liabilities

The Company has given an unlimited guarantee in respect of the overdraft of all the subsidiary undertakings. At 1 February 2009, there was a credit balance of £0.5m including uncleared banking items (2008: £0.4m).

The Company has also provided a guarantee in respect of Sterling and Euro Bonds, amounting to £784m (2008: £758m) in respect of a subsidiary undertaking.

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

In September 2007, the Office of Fair Trading (OFT) issued a Statement of Objections to a number of grocery retailers and milk producers, alleging collusion in the setting of prices for certain dairy products in 2002 and 2003. Morrisons was accused in relation to one infringement in 2002, and has vigorously denied this. Based on the evidence put forward, the Board does not consider it probable that the Company will ultimately incur a fine and, accordingly, has made no provision for any such liability.

The OFT have also raised a legal issue regarding the sale of tobacco and whether established industry practices represented a breach of competition law. It is likely that this can only be settled through a formal judicial process. The Board has not made a provision for such a liability.

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