R'000 R'000 Equity Swap positions (8 244 218) (4 628 085)

Option positions 1 868 291 1 056 331 Futures positions 8 272 326 4 488 706 Equity positions (1 865 843) (923 802) Net Position 30 556 (6 850)

43.1 Market risk (continued)

43.1.3 Foreign currency risk

43.1.3.1 Key risk exposures

The group is exposed to foreign currency risk as a result of foreign exchange transaction exposures.

Transaction exposures arise when a business undertakes a transaction in a currency other than its functional currency. As various funds under management are denominated in foreign currencies, the Stenham group carries currency exposure in respect of revenues earned within its hedge fund of funds business. To manage this exposure, non-Sterling revenues are converted promptly on receipt and forward foreign exchange contracts (FEC's) are, in certain instances, entered into to hedge cash flows arising from non-Sterling debtors. At reporting date, the group had no forward foreign exchange contracts in place. Outside these exposures, in the normal course, the group does not have significant transaction exposures other than those in respect of transactions with foreign subsidiaries and offshore trading related balances of the consolidated hedge funds and Peregrine Securities. The Peregrine High Growth en Commandite Partnership holds financial investments in foreign equities and bonds, the foreign currency risk exposure is managed by holding foreign cash balances as well as trading in listed currency futures. The Peregrine Securities Group maintains cash balances with various offshore financial institutions to facilitate offshore trading on behalf of its clients, these foreign currency exposures are not hedged and are reported to and monitored by the Peregrine Securities Risk Committee.

The main currencies in which the group transacts are Rand (ZAR), Sterling (GBP), Euro (EUR) and US dollar (USD) and a lesser scale, Swiss Franc (CHF), Australian dollar (AUD), Yen (JPY), Hong Kong dollar (HKD) and Kenyan Shilling (KES).

Foreign exchange gains and losses are accounted for in profit or loss.

The mandates of some of the funds under management permit investment in offshore instruments as well as foreign currency. The effects of movements in these instruments and currencies as a result of currency fluctuation is reflected within the funds realised or unrealised gains/losses earned/incurred and are not separately disclosed. Such exposure to currency fluctuations is considered to be part and parcel of the hedge fund management activities, and is viewed together with equity price risk and managed simultaneously.

Whilst foreign exchange translation exposure, arising from the translation of the group's offshore operations into rands is not considered a foreign currency exposure under IFRS, it is important to note that, following on the acquisition of Stenham in 2009 and the incorporation of Peregrine International Holdings in 2012, a significant portion of the group's revenues are earned in foreign currencies and the volatility of these currencies relative to the rand will impact the group's rand profit or loss and asset values.

The carrying amounts of the group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows: USD GBP EUR CHF JPY AUD HKD KES Total R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 2015 Non-current assets 323 373 - 340 899 110 130 1 454 - - - 775 856 Current assets 655 971 78 882 108 760 34 857 243 12 362 2 368 454 893 897 Total assets 979 344 78 882 449 659 144 987 1 697 12 362 2 368 454 1 669 753 Non-current liabilities (21 563) - - - - (21 563) Current liabilities (80 974) (1 150) (11 296) - - - (777) - (94 197) Total liabilities (102 537) (1 150) (11 296) - - - (777) - (115 760) Net exposure 876 807 77 732 438 363 144 987 1 697 12 362 1 591 454 1 553 993 2014 Non-current assets 140 386 - 100 509 3 406 - - - - 244 301 Current assets 248 796 22 944 91 320 196 061 468 9 913 2 988 - 572 490 Total assets 389 182 22 944 191 829 199 467 468 9 913 2 988 - 816 791 Non-current liabilities - - - - Current liabilities (51 849) (13) (14 999) (11 845) (287) (2) (115) - (79 110) Total liabilities (51 849) (13) (14 999) (11 845) (287) (2) (115) - (79 110) Net exposure 337 333 22 931 176 830 187 622 181 9 911 2 873 - 737 681

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Group

1GBP: ZAR 17,99 17,53 1EUR: ZAR 13,01 14,50 1CHF: ZAR 12,48 11,91 1JPY: ZAR 0,10 0,10 1AUD: ZAR 9,25 9,77 1HKD: ZAR 1,57 1,36 1KES: ZAR 0,13 -

43.1.3.2 Foreign currency sensitivity analysis

The table below depicts the group’s sensitivity to the stated percentage change below in value of the rand against the various currencies. The sensitivity analysis measures the impact on the group's exposure in rands (based on a change in the reporting date spot rate) and the impact on the group's rand profitability given a simultaneous change in all currencies to which the group is exposed at reporting date. Given the volatility of the rand in the current reporting period, a different percentage change per currency was used, based on the movement in the closing spot rates from the prior year and after consideration of post year-end currency fluctuations.

A positive number below indicates an increase in profit and equity following the stated percentage weakening of the rand against the other currencies. For a strengthening of the rand, there would be an equal and opposite impact on profit and equity and the balances below would be negative. The following variability per currency was used in the below foreign currency risk sensitivity analysis:

2015 2014 USD: 15% 15% GBP: 25% 25% EUR: 10% 25% CHF: 10% 20% JPY: 2% 5% AUD: 5% 5% HKD: 15% 15% KES: 8% -

Currency: USD GBP EUR CHF JPY AUD HKD KES Total R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 2015 Pre-tax profit 131 521 19 433 43 836 14 499 34 618 239 36 210 216 Post-tax profit * 94 695 13 992 31 562 10 439 24 445 172 26 151 355 2014 Pre-tax profit 50 459 5 733 43 886 37 301 9 496 431 - 138 315 Post-tax profit * 36 330 4 128 31 598 26 857 6 357 310 - 99 586 * The impact on equity is the same as the impact as post tax profit or loss.

43.1 Market risk (continued)

43.1.4 Interest rate risk

43.1.4.1 Key risk exposures

Interest rate risk refers to the impact on future cash flows and earnings of interest sensitive assets and liabilities as a result of interest rates repricing. Interest earned by the group is classified into interest earned as part of the group’s revenue generating activities and interest earned as part of the group’s financing decisions.

The most significant component of revenue interest, comprises interest earned from the group’s prime broking activities. Peregrine Equities earns and pays interest on funding provided and amounts borrowed on long and short equity swap positions, on carry accounts, on cash collateral placed with scrip lenders and in respect of initial margin held, which amounts are detailed in notes 1.1.1 and 1.1.2. In addition, Peregrine Equities earns interest on the net cash balances arising from these activities. As interest earned and paid is based on variable short term rates with similar bases (base rate), the net interest earned is not vulnerable to the risk of a repricing of the base rate. Rather interest income is vulnerable to margin pressure, declines in market activity and/or client losses all of which would adversely affect profit or loss. The interest rate sensitivity analysis presented below, consequently, excludes this category of interest.

Financial assets and liabilities that are sensitive to interest rate risk, comprise those financial instruments carried at amortised cost. This includes cash balances, loans receivable, interest-bearing borrowings, loans and payables and amounts borrowed against hedge fund investments (note 26). The decision to gear against certain of the hedge fund investments is to enhance investment returns rather than as a result of a funding decision. The rates paid on hedge fund gearing are thus managed as part of the overall return expectation of group capital.

The group manages interest rate exposure arising from other borrowings as part of the overall management of group capital. The decision to borrow and the levels at which borrowings are maintained are evaluated on a regular basis. Considerations include historic and anticipated investment yields and the cost of borrowing, the group's liquidity requirements and the current state of credit markets. The efficient allocation of capital should enhance profitability over the longer term.

In respect of free cash flow, the group manages interest rate risk through a centralised treasury function locally and within the Stenham group. The treasury aims to protect and enhance net interest income, to ensure cost-effective sources of funding and to mitigate against residual undesirable interest rate risks. Margin deposits placed with Peregrine Equities and other cash balances arising from stockbroking activities are retained in the stockbroker to meet liquidity and JSE capital adequacy requirements. Cash requirements are monitored daily and cash is placed with high credit rated financial institutions.

43.1.4.2 Interest rate sensitivity analysis

The repricing profile of financial assets and liabilities carried at amortised cost that are sensitive to interest rate fluctuations is presented in the table overleaf. Short term financial assets and liabilities carried at amortised cost whereby the effects of discounting are considered to be immaterial are reflected as "non-rate" in the sensitivity analysis. Non-interest bearing asset and liabilities carried at amortised cost are specifically classified as non- rate financial instruments (note 10) .

A 2% increase or decrease in local rates and a 1% increase or decrease in foreign rates represents management’s assessment of the reasonably possible change in interest rates. The table depicts the sensitivity of a 2% and 1% parallel shift in all applicable rates respectively.

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UK 1%)

2015 R'000 % R'000 R'000 R'000 R'000