AVBOB Integrated Annual Report 2018

by the Prudential Authority. Asset-liability modelling investigations are performed periodically by the Statutory Actuary. The outcome is used to determine whether the asset distribution guidelines unduly expose the Society to insolvency risk based on the nature of the liabilities (guaranteed and discretionary liabilities). The last exercise was performed during the 2016 financial year. Core aspects of the mandate given to the asset managers: • The total asset distribution of the Society must be managed in accordance with the guidelines set by the Prudential Authority. • No more than 70% of the total assets may be invested in equity risk assets. • The benchmark of 30% of the total assets must be invested in local liquid assets. • Investments in the black economic empowerment (BEE) portfolio are restricted to those that should be recognized in terms of the Financial Sector Charter. All unlisted investments require written approval. • In other portfolios, investments in equities and securities must be listed on a recognized exchange and listed securities must meet minimum credit rating criteria. • Derivative instruments are only allowed for efficient portfolio management and hedging purposes. The effective exposure for all derivative positions is limited to 10% of the fair value of the investment portfolio. Effective exposure to any over-the-counter counterparty is limited to 7.5% of the investment portfolio. • No scrip lending is allowed. The following table compares the assets of the Society with the asset distribution guidelines: 84