^# Values less than R1 000

iii. Transfers between levels 1 and 2
There were no transfers in either direction between levels 1 and 2 during the current or prior year.

iv. Level 3 fair values
Reconciliation of level 3 fair values
The following table shows a reconciliation from the opening balances to the closing balances for level 3 fair values:

^# Values less than R1 000

There were no transfers out of level 3 during the current or prior year.

v. Valuation sensitivity analysis
Joint venture — Hystead

For the fair value of the equity investment in Hystead, changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects:

i. Risk management framework
The board of directors (board) has overall responsibility for the establishment and oversight of the group’s risk management framework. The board reviews and monitors the effectiveness of internal control systems, assisted by the audit and risk committees. These committees in turn are assisted by management reporting and periodic reviews, as well as reports from an outsourced internal audit service provider. The committees report to the board on the findings of the internal audit function.

Executive management implements controls to ensure the validity, accuracy and completeness of financial information. These controls are reviewed by internal audit. On an operational level, these controls are implemented by the executive committee.

The risk committee has an independent role, operating as an overseer and making recommendations to the board for its consideration and final approval. The committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management. The main role of the committee is to adopt and implement an appropriate risk management policy, aligned with industry practice. For further detail on the role and mandate of this committee, please refer to its charter online.

ii. Interest rate risk
Interest rates are monitored and appropriate steps taken to ensure that Hyprop’s exposure to interest rate fluctuations is limited. Interest rates have been fixed for periods ranging from 2016 to 2024 with an average maturity of 5,2 years. The average maturity of the fixed interest rate agreements and interest rate swaps is disclosed in note 17 — Borrowings and note 18 — Derivative instruments. The average rate of interest at year-end (applicable to total debt) was 6,7% (2015: 7,1%).

Exposure to interest rate risk
The interest rate profile of the group’s interest-bearing financial instruments as reported to the management of the group is as follows:

Fair value sensitivity analysis for fixed rate instruments
The group does not account for any fixed rate financial assets or financial liabilities at fair value through profit or loss, and the group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect affect profit or loss.

Interest rate sensitivity analysis for variable rate instruments
The sensitivity analysis includes the exposure to interest rates for both derivatives and non-derivative instruments at the end of the financial year. For floating rate liabilities it is assumed that the liability outstanding at the end of the year was outstanding for the whole year.

Based on year-end floating debt, an interest rate increase/decrease of 150 basis points while all other variables are held constant, would decrease/increase the group’s profit for the year ended 30 June 2016 by R27,3 million (2015: R5,6 million).

iii. Credit risk
Receivables
The group is exposed to credit risk due to trade receivables and loans receivable. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable. Save for national tenants, a deposit in the form of cash or bank guarantee is obtained from the tenant in terms of Hyprop’s deposit policy. Furthermore, and only if required, a deed of suretyship will be obtained from a tenant.

The credit risk in respect of loans receivable is generally mitigated by agreements with the counterparty. These agreements include claims which provide legal protection for Hyprop which are common to such agreements.

Guarantees
The off-shore funding provided to Hystead and its subsidiaries has been supported by a guarantee from Hyprop. Hyprop has agreed to guarantee the due and functional performance of obligations in terms of a EUR205 million bridge loan agreement and to give certain undertakings to and in favour of FirstRand Bank Limited (acting through its Rand Merchant Bank division).

iv. Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

This risk is minimised by holding cash balances and a floating loan facility. In addition, the company regularly monitors forecast cash flows and considers the matching of maturity profiles of financial assets and liabilities.

Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements:

v. Currency risk
The group is exposed to currency risk to the extent that there is a mismatch between the currencies in which revenue, operating costs and borrowings are denominated and the respective functional currencies of group companies. The primary functional currencies used by the group are the Rand, US Dollar and Euro. The group’s investments in sub-Saharan Africa (excluding SA) exposes the group to US Dollar currency risk, while the group’s investments in South-Eastern Europe exposes the group to Euro currency risk. Income earned from foreign operations is currently not hedged.

Currency exposure
The summary quantitative data about the group’s exposure to currency risk as reported to the management of the group is as follows:

^# Excludes the fair value of Ikeja City Mall, Lagos Nigeria, which is consolidated with investment property. Refer to note 2 — Investment Property.

Exchange rates
The following significant exchange rates have been applied:

Currency risk sensitivity analysis
A strengthening/(weakening) of the Euro and US Dollar against the Rand at 30 June would have affected the measurement of financial instruments denominated in a foreign currency and affected profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

* No comparative is shown for EUR as there was no EUR exposure in the prior year
** No movement is shown due to the deferral of recognition of Hystead