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## 20 FINANCIAL INSTRUMENTS CONTINUED 

## A) CASH FLOW INTEREST RATE RISK 

The Group is exposed to cash flow interest rate risk from monies held at bank and on deposit at variable rates. The considerations below and the figures quoted are the same for both Group and Company. 

The Group’s financial assets and liabilities accrue interest at prevailing floating rates in the United Kingdom or at pre-arranged fixed rates, as described further below. The Group does not currently use derivative instruments to manage its interest rate risk. 

At 31 December 2014 the Group held cash at bank and in deposits under its control of $16,078,547 (2013 – $23,289,453) which forms the majority of the Group’s working capital. Of the cash at bank and in deposit, $539,971 (2013 – $1,851,458) relates to deposits placed with banking institutions that are available on demand which carry interest at prevailing United Kingdom deposit floating rates. The balance represents restricted deposits of $15,538,576 (2013 – $21,468,731) with a weighted average fixed interest rate of 0.2% (2013 – 0.2%) for three months. If there was 1% change in interest rates the impact on the statement of comprehensive income would be $160,785 (2013 – $232,895). 

## B) FOREIGN CURRENCY TRANSLATION RISK 

The operational currency of the oil and gas exploration and evaluation activities of the Group is US$ and the Group’s functional and presentational currency is US$. Foreign exchange risk arises because the Group’s services and treasury function is UK£, which results in gains or losses on retranslation into US$. To minimise this foreign currency risk cash balances are held in both UK£ and US$. 

The foreign currency profile of financial assets and liabilities of the Group and the Company are as follows: 

<img src='content_image/135977.jpg'>

If there was a 10% change in the year end exchange rate there would be a movement in the US$ equivalent of financial assets held in UK£ of $1,632,900 (2013: $2,288,796) for the Group and Company. 

<img src='content_image/135978.jpg'>

If there was a 10% change in the year end exchange rate there would be a movement in the US$ equivalent of financial liabilities held in the UK£ of $25,000 (2013 – $130,689) for the Group and Company. 

