ITF

31 32. FINANCIAL INSTRUMENTS (CONTINUED) e) Market Risk Financial Risk Management Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the group's income or the value of its holdings of financial instruments. The group's financial risk management objec ve is to control the exposure to foreign exchange fluctua ons especially in sterling and to a lesser extent the euro and Australian dollar, against the US dollar. Sterling: The group has entered into forward currency contracts to buy £17,671,000 (2016: £16,800,000) at an average exchange rate of US$1.277/£1 for hedges expiring in 2018 and US$1.351 for hedges expiring in 2019 (2016: US$1.378/£1 expiring in 2017 and US$1.251 expiring in 2018). These contracts mature at various dates throughout 2018 and 2019 to match budgeted sterling expenditure. The fair value of these hedges, based on the mark to market valua ons of the contracts at the balance sheet date, using prices on that date to purchase the same forward contracts, was an asset of $1,199,000 (2016: liability of $1,722,000) with a corresponding entry in reserves. Euro: The group did not enter into forward currency contracts to sell Euros in 2017 (2016: nil) due to all significant income contracts being denominated in US Dollars. The forward exchange contracts are being used to hedge the foreign currency risk of the firm commitments. A movement of $0.01 in the mark to market valua on would result in a change in the fair value of $177,000 on the sterling hedges contracts. The group's exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments except deriva ves when it is based on no onal amounts: 31 December 2017 Cash and cash equivalents Trade receivables Trade payables Forward exchange contracts Net exposure 31 December 2016 Cash and cash equivalents Trade receivables Trade payables Forward exchange contracts Net exposure Sterling $000 927 22 (1,622) - (673) Sterling $000 569 63 (646) - (14) Euro $000 118 968 (66) - 1,020 Euro $000 2,336 741 (65) - 3,012 US Dollar $000 12,641 11,876 (375) 1,199 25,341 US Dollar $000 8,353 9,846 (573) (1,722) 15,904 Other $000 483 - 7 - 490 Other $000 418 35 (2) - 451 Total $000 14,169 12,866 (2,056) 1,199 26,178 Total $000 11,676 10,685 (1,286) (1,722) 19,353 NOTES (forming part of the financial statements)

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