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37 URBAN DEVELOPMENT CORPORATION Notes to the Non-Consolidated Financial Statements (Continued) Year ended March 31, 2010


Financial instruments (cont’d) (a)

Financial risk management (cont’d): (ii)

Market risk (cont’d):

! Foreign currency risk (cont’d): Management of foreign currency risk The corporation manages foreign currency risk by ensuring that the exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. Management further manages this risk by maximising foreign currency earnings and holding foreign currency balances. 2010 US$ $’000 Total and net foreign currency asset


2009 J$ $’000


US$ $’000

J$ $’000



Foreign currency sensitivity A 5% revaluation/devaluation (2009: 2% revaluation or a 10% devaluation) of the US$ against the Jamaica dollar would have increased/(decreased) profit for the year by $4,318,967 (2009: $5,037,000 for a 2% revaluation or $25,187,000 for a 10% devaluation). This analysis assumes that all other variables, in particular interest rates, remain constant. Exchange rates for the US dollar in terms of the Jamaica dollar were as follows: At December 14, 2011: At March 31, 2010: At March 31, 2009:

86.89 88.96 87.95

! Interest rate risk: Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The corporation takes on exposure to the effects of fluctuations in the prevailing levels of market interest rate on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. Management of interest rate risk The corporation is exposed to interest rate risk through borrowings and deposits held at fixed and variable rates. The corporation manages these risks by ensuring that an appropriate mix is maintained. Additionally, the risk position is evaluated regularly.

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