NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 4. Management of insurance and financial risks (continued) (f) Fair value measurements (continued) Investment properties (continued) Valuation processes of the Group The Group engages external, independent and qualified valuers to determine the fair values of the Group’s investment properties at the end of every financial year based on the properties’ highest and best use. In the Income Capitalisation Approach, gross rental income (net of GST) is estimated at a mature maintainable occupancy level from which total expenses have been deducted and net income capitalised at an appropriate rate. The Discounted Cash Flow Approach involves the estimation and projection of a net income stream over a period and discounting the net income stream with an internal rate of return to arrive at the market value. The discounted cash flow method requires the valuer to assume a rental growth rate indicative of market and the selection of a target internal rate of return consistent with the current market requirements. The Direct Comparison Approach involves analysis of recent transactions of comparable properties within the vicinity and elsewhere in Singapore. Necessary adjustments have been made for the differences in location, tenure, size, shape, design and layout, age and condition of buildings, date of transactions and the prevailing market and prevailing condition amongst other factors affecting their values. Financial asset / liabilities not carried at fair value Loans The fair value of consumer loans is based on cash flows discounted at the interest rate of the Co-operative’s subordinated debt (Note 18) and are classified as Level 3. The fair value and interest rates used are as follows: 2018 Life Insurance Par Fund Interest rate used Carrying value $’000 Fair value $’000 Consumer loans 21,670 19,132 3.65% 2017 Life Insurance Par Fund Interest rate used Carrying value $’000 Fair value $’000 Consumer loans 23,463 19,945 3.65% 91 2018 ANNUAL REPORT