Fair value hierarchy (continued)

43.4.1 Valuation techniques applied and inputs to valuation techniques:

Valuation technique Description of Description of Value of Recurring or used to determine fair value significant significant significant Non-recurring observable inputs unobservable unobservable fair value used in valuation technique inputs used in inputs used in measurement

valuation technique valuation technique

(not applicable (not applicable

for Level 1) for Level 1)

Financial assets at fair value through profit or loss

Amounts receivable in respect of

stock broking activities : Equities Quoted market prices Unadjusted quoted prices in an N/A N/A Recurring active market of listed equities

Equities and bonds held by hedge funds Quoted market prices Unadjusted quoted prices in an N/A N/A Recurring active market of listed equities

and bonds

Unit trusts Quoted market prices The sum of the unadjusted quoted N/A N/A Recurring prices in an active market of listed

underlying investments linked to units in unit trusts

Variable rate debenture Quoted market prices The sum of unadjusted quoted N/A N/A Recurring prices in an active market of listed

underlying investments linked to variable rate debentures

Investments linked to Quoted market prices The sum of unadjusted quoted N/A N/A Recurring policyholder investment contracts prices in an active market of

underlying investments that consist of listed equities, listed bonds and hedge fund investments that make up the portfolio of policyholder assets

Share portfolio investments – unlisted Quoted market prices The sum of unadjusted quoted N/A N/A Recurring prices in an active market of

underlying listed preference shares

Private equity investments – listed Quoted market prices Unadjusted quoted prices N/A N/A Recurring in an active market of

underlying investments

Private equity investments – unlisted Techniques used include Market related interest rate Professional Purchase price Recurring amortised cost of loans advice and of level 2

receivable, independent purchase prices investment was valuations and cost R1 m

Property fund investments – listed Quoted market prices Unadjusted quoted prices N/A N/A Recurring in an active market of

underlying investments

85

inputs used in unobservable unobservable fair value valuation technique inputs used in inputs used in measurement

valuation technique valuation technique

(not applicable (not applicable

for Level 1) for Level 1)

Financial assets at fair value through profit or loss

Property fund investments - unlisted Valued on an open market N/A Open market Note 1 Recurring basis by independent value is based

external valuators, on the estimated in accordance with amount for which the Royal Institution a property should of Chartered Surveyors exchange on the Appraisal and Valuation date of the valuation Standards between a willing buyer and a willing seller in an arm’s length transaction

Hedge fund investments – unlisted Quoted market prices The fair value is N/A Unobservable inputs Recurring determined by an are mostly expense

independent administrator, accruals of the hedge based on the quoted fund entities that market prices of the are deducted from underlying investments the sum of the held by the hedge funds fair values of net investments held by the hedge funds Note 1 - Unlisted property fund investments are valued using two methods.

1. Open market value is determined using the market rent capitalised by the market investment yield, ranging from 4.46% to 9.38% (2014: 2.31% to 12.4%), net of market buyers costs of 5.8% (2014: 5.8%). Open market value is based on the estimated amount for which a property should exchange on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

2. Open market value is determined using the discounted cash flow model, net of market buyers costs of 5.5% (2014: 5.5%), the appropriate risk-adjusted discount rate equals the un-leveraged Internal Rate of Return of the cash flow stream and ranges from 6.8% to 7.0% (2014: 5.4% to 7.2%). The terminal capitalisation rate adopted in the valuation is used to capitalise the stabilised net operating income in the final cash flow year into perpetuity and ranges from 5.5% to 7.3% (2014: 5% to 7.4%). These rates, which is a growth explicit yield, are appropriate market yields for the specific properties, predominately reflecting the sustainability of the properties, the locations, use and quality of the buildings, depreciation from wear and tear as well as the investment market environment.

43.4 Fair value hierarchy (continued)

43.4.1 Valuation techniques applied and inputs to valuation techniques (continued):

Valuation technique Description of Description of Value of Recurring or used to determine fair value significant observable significant significant Non-recurring inputs used in unobservable unobservable fair value valuation technique inputs used in inputs used in measurement

valuation technique valuation technique

(not applicable (not applicable

for Level 1) for Level 1)

Financial liabilities at fair value through profit or loss

Amounts payable in respect of stock

broking activities: Equities Quoted market prices Unadjusted quoted prices N/A N/A Recurring in an active market

of listed equities Instruments held by hedge funds:

Short equity positions, Quoted market prices Unadjusted quoted prices N/A N/A Recurring options and bonds in an active market

of listed instruments

Net assets attributable to outside Quoted market prices The fair value is N/A Unobservable inputs Recurring investors in the hedge funds determined by an are mostly expenses

independent administrator, accruals of the based on the quoted hedge fund entities that market prices of the are deducted from the underlying investments sum of the fair values held by the hedge funds of net investments held by the hedge funds

Policyholder investment Quoted market prices The sum of the quoted N/A N/A Recurring contract liabilities market prices of

pension assets less related tax liability

Financial instrument liability: Quoted market prices Unadjusted quoted prices N/A N/A Recurring Basket portfolio in an active market

for listed exchange traded derivative

87

Designated at inception Designated at inception

R'000 R'000