Page 91 -

Notes to the Consolidated Financial Statements

31st March 2017

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 was no transfers among levels 1, 2
and 3 during the year.

Fair value of the Group’s investment properties 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 transactions 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 type of
investment properties being valued. The higher the yields, the lower is the fair value. At 31st March
2017, yields ranged from 4.0% to 7.0% (2016: 3.1% to 6.1%) were adopted in the term yields analysis
for the Group’s investment properties.

For the investment property located in Yuen Long, prevailing market price are estimated based on
recent land sales transactions nearby. The lower the prices, the lower is the fair value. At 31st March
2017, prevailing market prices ranged from HK$121 to HK$714 per square foot on site area basis were
adopted in the term and reversionary analysis for the Group’s investment properties.

For the remaining investment properties, prevailing market price are estimated based on recent sales
transactions within the subject buildings/developments or other comparable properties. The lower the
prices, the lower is the fair value. At 31st March 2017, prevailing market prices ranged from HK$2,901
to HK$3,587 (2016: HK$2,680 to HK$3,075) per square foot on saleable area basis were adopted in the
term and reversionary analysis for the Group’s investment properties.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2017 89