NTUC Income AR 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 4. MANAGEMENT OF INSURANCE AND FINANCIAL RISKS (CONTINUED) (f) Fair value measurements (continued) Investment properties (continued) Valuation techniques and inputs used in Level 3 fair value measurements The following table presents the valuation techniques and key inputs that were used to determine the fair value of investment properties categorised under Level 3 of the fair value hierarchy which involves significant unobservable inputs. Description Fair value at 31 December 2017 $’000 Valuation techniques Unobservable inputs 1 Range of unobservable inputs Relationship of unobservable inputs to fair value Completed Investment properties 1,870,001 Income Capitalisation Approach Estimated rental rate Retail: $8 to $18 per square foot per month Office / Industrial: $2 to $9 per square foot per month The higher the rental value per square foot, the higher the fair value. Capitalisation rate 3.5% to 6.5% The higher the capitalisation rate, the lower the fair value. Discounted Cash Flow Approach Rental growth rate 3% to 3.25% The higher the rental growth rate, the higher the fair value. Discount rate 6.5% to 7.25% The higher the discount rate, the lower the fair value. Direct Comparison Approach Valuation per square foot Retail: $4,180 to $5,964 per square foot Office / Industrial: $260 to $3,819 per square foot The higher the valuation per square foot, the higher the fair value. 1 There were no significant inter-relationships between unobservable inputs. Description Fair value at 31 December 2016 $’000 Valuation techniques Unobservable inputs 1 Range of unobservable inputs Relationship of unobservable inputs to fair value Completed Investment properties 1,779,708 Income Capitalisation Approach Estimated rental rate Retail:$11 to $19 per square foot per month Office / Industrial: $2 to $9 per square foot per month The higher the rental value per square foot, the higher the fair value. Capitalisation rate 3.5% to 6.5% The higher the capitalisation rate, the lower the fair value. Discounted Cash Flow Approach Rental growth rate 3.0% to 3.3% The higher the rental growth rate, the higher the fair value. Discount rate 6.5% to 7.5% The higher the discount rate, the lower the fair value. Direct Comparison Approach Valuation per square foot Retail: $4,226 to $8,419 per square foot Office / Industrial: $303 to $3,819 per square foot The higher the valuation per square foot, the higher the fair value. 1 There were no significant inter-relationships between unobservable inputs. ANNUAL REPORT 2017 NTUC INCOME INSURANCE CO-OPERATIVE LIMITED 88