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Notes to the Consolidated Financial Statements

31st March 2018

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 between levels 1,
2 and 3 during the year.

Fair value of the Group’s investment properties is mainly derived using 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 to 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
2018, yields ranging from 3.3% to 6.3% (2017: 4.0% to 7.0%) were adopted in the term yields analysis
for the Group’s investment properties.

For the investment property located in Yuen Long, prevailing market price is estimated based on recent
land sales transactions nearby. The lower the prices, the lower is the fair value. At 31st March 2018,
prevailing market prices ranged from HK$524 to HK$583 (2017: 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 is 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 2018, prevailing market prices ranged from HK$3,004
to HK$3,647 (2017: HK$2,901 to HK$3,587) per square foot on saleable area basis were adopted in the
term and reversionary analysis for the Group’s investment properties.

100 ALCO HOLDINGS LIMITED ANNUAL REPORT 2018