FINANCIAL INSTRUMENTS BY CATEGORY

During the year funds were invested into share investment schemes and Jasco Electronics Holdings was reclassified as fair value through profit and loss (Previously held as non-current asset held for sale).

During the year funds were invested into share investment schemes and Jasco Electronics Holdings was reclassified as fair value through profit and loss (Previously held as non-current asset held for sale).

FINANCIAL INSTRUMENTS BY CATEGORY

Trade receivables that are less than three months past due are not considered for impairment. As at 30 June 2016, trade receivables of R58.3 million (2015: R16.2 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default and are expected to be recoverable.

Ageing of trade and other receivables (R’000):

Disclosure of trade debtors:

No ageing is applicable to the other categories within trade and other receivables. However, all trade and other receivables of the Company are current or due on demand.

The majority of its client base comprises large medical healthcare providers for open schemes and listed blue chip companies with regards to closed medical schemes. Amounts invoiced to these clients are banked in advance before invoice date and therefore the risk of non-recovery is very low.

Provisions for impairment are raised when there is evidence that amounts are not recoverable in full or part from the debtor. Disputed claims and long outstanding debts are usually indicators of non-recovery. The Group does not raise a general provision for all outstanding debtors due to the high quality of its debtors and an impeccable repayment history. The provision raised above relates to specific debtors.

The creation and release of provision for impaired receivables have been included in ‘other expenses’ in the statement of comprehensive income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The other classes within trade and other receivables, detailed in note 9.2 do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

All receivables are current. The carrying amounts of all trade and other receivables approximate fair value.

Refer to note 9.1 for ageing of trade and other receivables.

* The increase in trade debtors is due to the trade balances relating to Pharmacy Direct (Pty) Ltd.

The receivable from the subsidiary has been accounted for at amortised cost. The fair value of the loan approximates the carrying value of the receivable. This loan has been partially settled and written off at year-end.

Management has assessed the likelihood of non-recovery of outstanding amounts due from its associates and determined that no impairment is necessary due to the fact that all associates are profitable or will be profitable in the foreseeable future.

CLASSIFICATION OF INVESTMENT AS AVAILABLE FOR SALE

Due to the 3% shareholding of AAR being declared as a dividend in specie to Medscheme Holdings (Pty) Ltd, the investment in AAR was accounted for as an available for sale financial instrument as management intends to hold the investment for the medium to long term and is not held for trading.

IMPAIRMENT INDICATORS FOR THE AVAILABLE FOR SALE INVESTMENT

The investment is considered to be impaired if there has been a significant or prolonged decline in the fair value below its cost. The Group evaluates the duration and the extent to which the fair value of the investment is less than its cost, and the financial health of and short term business outlook for the investee (including factors such as industry and sector performance, changes in technology and operational and financing cash flows). Due to the factors listed above, the Group has determined that an impairment is not required in the 2016 financial year.

SIGNIFICANT ESTIMATES

The fair value of the investment in AAR Insurance Holdings Kenya is not traded in an active market and as a result is determined using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of the reporting period. At year end, based on the latest financial information provided to us, the carrying amount approximates the fair value.

The rating scores are based on the following broad investment grade definitions:

For purposes of the statement of cash flows, the year-end cash and cash equivalents comprise the following:

Included in the cash balance is an amount of R10 million deposited at Nedbank Limited as a good-faith deposit on behalf of a strategic target for acquisition. This is a loan receivable and not cash in the bank. The effective interest rate applicable to cash at bank is 5.25% (June 2015: 5.46%).

All trade and other payables are current and are expected to be settled with the next 12 months. The carrying values at the year-end approximate their fair values.

The interest bearing borrowings above bear interest at 87% of the Prime rate.

ABSA Bank has provided AfroCentric Investment Corporation Limited a primary lending facility of R10 million. (June 2015: R10 million). This facility ranks “pari-passu” with the preference share facility in the name of ACT Funding (Pty) Ltd and shares in the security provided for this facility. There has been no drawn down of this facility at year end.

ABSA Bank has provided ACT Funding (Pty) Ltd with a preference share facility of R200 million, guaranteed by AfroCentric Investment Corporation Limited and ACT Healthcare Assets (Pty) Ltd. This facility was initially due for redemption in March 2014, but agreement was reached with the lenders to extend the redemption over a period of 3 years to 11 February 2017. This loan was settled in December 2015.

The loan with ACT Funding (Pty) Ltd is unsecured and interest free.

The loan with AfroCentric Health (Pty) Ltd is unsecured and bears interest at the prime interest rate calculated monthly.

These loans has not fixed terms of repayment but payable on demand.

FAIR VALUE HIERARCHY

The following hierarchy is used to classify financial and non-financial instruments for fair value measurement purposes:

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The following table presents the groups assets and liabilities that are measured at fair value at 30 June 2016:

Specific valuation techniques used to value financial and non-financial instruments include:

The assets disclosed above have been classified as a Level 3 financial and non-financial instruments i.e. the inputs are not based on observable market data except for the investment in, Jasco Electronics Holdings Limited, which is classified as a Level 1 financial instrument (non-current asset held for sale). The carrying amount of all assets in the table above approximates the fair value of the assets.

Group fair value measurements using significant unobservable inputs (Level 3):

VALUATION INPUTS AND RELATIONSHIPS TO FAIR VALUE

INVESTMENT IN AAR

The fair value of the investment in AAR Insurance Holdings is derived by valuation techniques using the most recent financial information available to AfroCentric Investment Corporation Limited. Management are satisfied that valuation of the investment in the AAR represents the fair value.

INVESTMENT PROPERTY

The fair value of the investment property is derived by an external property valuer using current prices in an active market for similar property in the same location and condition. In applying this approach the valuer has selected other properties that have similar risk, growth and cash-generating profiles. Management reviews the valuation performed by the external valuer and is satisfied that the inputs used by the external property valuer are reasonable.

CONTINGENT CONSIDERATION

Discounted cash flow method was used to capture the present value of the expected future economic benefits that will flow out of the Company arising from the contingent consideration. Under the contingent consideration arrangement, AfroCentric Investment Corporation Limited is required to issue Glen Eden Trading 58 (Proprietary) Limited an additional 26 192 902 shares based on management’s best estimate as per the Acquisition of shares agreement. R134.9 million is the estimated fair value of this obligation at year-end.

The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements.

VALUATION PROCESS

The finance department of the Group performs the valuations of the investments for financial reporting purposes, including level 3 fair values (excluding the investment property). The team reports directly to the Chief Financial Officer (“CFO”). Discussions of the valuation processes and results are held between the CFO and the Group Finance department at least once every six months, in line with the Group’s bi-annual reporting periods.

The following table reflects the impact on the statement of comprehensive income and other comprehensive income should the fair value increase or decrease by 10%.

As disclosed in Note 10, in 2016 Jasco Electronics Holdings Limited no longer met the classification of non-current asset held for sale. The reason for no longer meeting the classification as a non-current asset held for sale is due to the fact the Group is currently not actively searching for a buyer but is still committed to sell the investment in the near future.

During the year AfroCentric Investment Corporation Limited invested funds into four different investments, namely:

CLASSIFICATION FINANCIAL ASSETS THROUGH PROFIT AND LOSS

As a result of holding these assets for the medium term these have been designated at fair value through profit and loss.

IMPAIRMENT INDICATORS FOR FAIR VALUE THROUGH PROFIT AND LOSS INVESTMENT

Any impairment will be reflected in the share price which would result in a fair value loss that would be recognised in the statement of comprehensive income.

AA – The financial instrument is judged to be of high quality, is subject to very low credit risk and indicates quality issuers.

During the year AfroCentric Investment Corporation Limited invested funds into the following investments, namely:

CLASSIFICATION FINANCIAL ASSETS AT AMORTISED COST

Deposits are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. The deposits are included as non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which would be classified as current assets. The carrying amount approximates the fair value of the investments.

The following tables represent the fair value hierarchical disclosure if the Investments at amortised costs were to be classified at fair value:

The following table presents the investments that are measured at fair value at 30 June 2016: