Our normal business programmes that are due to be completedby the millennium, such as the roll out of the new Point of Salesystems, will also ensure Year 2000 compliance.ECONOMIC & MONETARY UNIONAlthough the United Kingdom will not be a member of the initialphase effective on 1 January 1999, Marks & Spencer will by then be trading, either directly or through franchise partners, in 10 of the initial 11 participating countries. The Company has been fullyinvolved in discussions in Brussels and London about the practicalaspects of the introduction of the euro.During the changeover period the new tills now being introducedthroughout Europe are capable of handling the necessary twocurrencies. Important practical decisions for the dual display ofprices will be trialled in our Dutch stores before being extended to the other member countries.The additional costs associated with the introduction of the euroin the Republic of Ireland and our Continental European stores arenot thought to be significant. It is too early to forecast accuratelythe potential costs of the euro’s introduction in the UK.TAXThe effective rate of tax for the Group has decreased from 31.4%last year to 29.0% this year reflecting the fall in the rate ofcorporation tax in the UK from 33% to 31%. The rate also benefitsfrom prior year adjustments, the impact of tax jurisdictionsoverseas and capital allowances in excess of depreciation offset bylosses and costs which are not deductible for tax purposes.SURPLUSES ON REVALUATION OF INVESTMENTSThe revaluation surplus of £49.8 million shown in the statement oftotal recognised gains and losses relates mainly to our investmentinterest in the Gyle Shopping Centre. (See note 11C on page 60.)TREASURY POLICYTreasury policies are regularly reviewed by the Board, and day today operations are directly controlled by senior management.There has been no material change to policies for investment,borrowing and foreign exchange during 1997/98. The Group does not hedge balance sheet and profit and loss account translationexposures. Where appropriate, borrowings are arranged in localcurrencies and this provides a natural hedge against overseasassets. Intra group purchases of merchandise by overseassubsidiaries are covered by forward foreign exchange contracts forperiods averaging 10-15 months.The Group’s Treasury uses derivatives to manage risk by alteringthe interest rate and currency exposures on investment, fundingand foreign exchange contracts so that the resulting exposuresgive greater certainty of future costs. Contracts are only enteredinto when there is underlying commercial justification and withcounterparties which fulfil predetermined credit criteria. The maintypes of instrument used are interest rate swaps, forward rateagreements and forward currency contracts.