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Notes to the Consolidated Financial Statements

31st March 2016

15 INVESTMENT PROPERTIES (CONTINUED)

Fair value measurements using significant unobservable inputs

The table below analyses investment property carried at fair value, by valuation method. The different
levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).

The Group’s investment property is categorised as level 3 and there were no transfers among levels 1, 2
and 3 during the year.

Fair value of the Group’s investment property is mainly derived using the investment method of the
income approach, by taking into account the current rental income from the existing tenancy agreement
and reversionary income potential by adopting appropriate term/reversionary yields, which are derived
from analysis of sales transaction and Valuer’s interpretation of prevailing investor requirements or
expectations. For the reversionary potential of the property, the Valuer refers market price of similar
comparable properties. There was no change to the valuation technique with that of prior year.

Term and reversionary yields are estimated by the Valuer based on the risk profile of the investment
properties being valued. The higher the yields, the lower is the fair value. At 31st March 2016, yield
ranged from 3.1% to 6.1% (2015: 2.4% to 3.9%) were adopted in the term yields analysis for the
Group’s investment property.

Prevailing market prices are estimated based on recent sales transactions within the subject property
and other comparable properties. The lower the prices, the lower is the fair value. At 31st March 2016,
prevailing market prices ranged from HK$2,680 to HK$3,075 (2015: HK$2,880 to HK$7,870) per square
foot were adopted in the term and reversionary analysis for the Group’s investment property.

70 ALCO HOLDINGS LIMITED ANNUAL REPORT 2016