16.1 Fair Values of Financial Instruments

i) Valuation framework

All investments and disposals relating to the Directed Portfolio are made at the direction of the Minister for Finance. The Agency’s responsibilities regarding the Directed Portfolio include the implementation of directions from the Minister and the valuation of relevant securities for the purpose of the Fund’s financial statements.

As the Fund’s ordinary shareholding of 99.9% in AIB leaves a free float of only 0.1%, the Agency engaged an external firm to provide an independent fair market value of the Fund’s holding as at 31 December 2016 for the purpose of valuing this investment in line with generally accepted accounting principles.

The Fund’s ordinary shareholding in Bank of Ireland was valued at its relevant quoted market price at 31 December 2016.

The Fund’s Global Custodian, Bank of New York Mellon, holds the Fund’s investments in Bank of Ireland and AIB in segregated accounts. In the event of the Global Custodian’s failure, the ability of the Fund to transfer these securities might be temporarily impaired. Bank of New York Mellon is a member of a major securities exchange and at 31 December 2016 held a long-term Moody’s credit rating of A1. The Agency monitors the credit ratings of its Global Custodian on a regular basis and reviews the findings documented in the SOC 1 report on the Global Custodian’s internal controls on a regular basis.

The table below analyses financial instruments at fair value at the reporting date by the level in the fair value hierarchy. The amounts are based on the values recognised in the Statement of Financial Position. All fair value measurements below are recurring.

Market price risk exposure

The cumulative Directed Portfolio asset value exposed to market price risk at 31 December 2016 comprises the value of investments as detailed in the following table:

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