ITF

Notes (Forming part of the financial statements) (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 £21,700,000 (2017: £17,671,000) at an average exchange rate of US$1.376/£1 for hedges expiring in 2019 and US$1.321 for hedges expiring in 2020 (2017: US$1.277/£1 expiring in 2018 and US$1.351 expiring in 2019). These contracts mature at various dates throughout 2019 and 2020 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 a liability of $1,630,000 (2017: asset of $1,199,000) with a corresponding entry in reserves. Euro: The group did not enter into forward currency contracts to sell Euros in 2018 (2017: nil) due to all significant income contracts being denominated in US Dollars. A movement of $0.01 in the mark to market valua on would result in a change in the fair value of $217,000 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 2018 Cash and cash equivalents Trade receivables Financial assets measured at FVPL Trade payables Forward exchange contracts Net exposure 31 December 2017 Cash and cash equivalents Trade receivables Financial assets measured at FVPL Trade payables Forward exchange contracts Net exposure Price Risk The group's exposure to equity securi es price risk arises from investments held by the group and classified in the balance sheet as fair value through profit or loss. To manage its price risk arising from investments, the group diversifies its por olio in accordance with the limits set by the group. All the groups investments are publicly traded. Sensi vity Increases and decreases in the world equity markets have a material effect on the group's post-tax surplus for any year. The group has iden fied the MSCI World Index to be reflec ve of movements in world equity prices. Based on recent vola lity an increase of 6.7% and a decrease of 9.5% are reasonably possible for which the impact on the group's post-tax surplus is es mated to be: MSCI increase 6.7% - 2018 post-tax surplus increases by $2,010,000; MSCI decrease 9.5% - 2018 post-tax surplus decreases by $1,912,000. Sterling $'000 1,393 20 - (733) - 680 Sterling $'000 927 22 - (1,622) - (673) Euro $'000 435 1,110 - (239) - 1,306 Euro $'000 118 968 - (66) - 1,020 US Dollar $'000 26,398 7,291 60,280 (1,382) (1,630) 90,957 US Dollar $'000 12,641 11,876 68,637 (375) 1,199 93,978 Other $'000 524 32 - (14) - 542 Other $'000 483 - - 7 - 490 Total $'000 28,750 8,453 60,280 (2,368) (1,630) 93,485 Total $'000 14,169 12,866 68,637 (2,056) 1,199 94,815 ITF ANNUAL REPORT AND FINANCIAL STATEMENTS / 34 34. FINANCIAL INSTRUMENTS (CONTINUED)

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