2014 — Page 103

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

24 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL

INSTRUMENTS (Continued)

(d)

Equity price risk

The Group is exposed to equity price change arising from equity investments classified as available-for-sale securities (see note 16). Other than unquoted securities held for strategic purpose, all of these investments are listed.

Listed investments held in the available-for-sale securities portfolio have been chosen based on their longer term growth potential and are monitored regularly for performance against expectations.

Sensitivity analysis

At 31 December 2014, it is estimated that an increase/decrease of 10% (2013: 10%) in the market prices of the

investments in available-for-sale securities, with all other variables held constant would have increased/decreased the

securities revaluation reserve by approximately HK$52,117,000 (2013: HK$40,074,000).

The sensitivity analysis indicates the instantaneous change in the Group's profit after tax (and retained profits) and other components of consolidated equity that would arise assuming that the changes in the stock market index or other relevant risk variables had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by the Group which expose the Group to equity price risk at the end of the reporting period. The analysis is performed on the same basis for 2013.

Fair value measurement

(e)

(i)

Financial assets measured at fair value

Fair value hierarchy

The following table presents the fair value of the Group's financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available

Level 3 valuations: Fair value measured using significant unobservable inputs

Management performs valuations for the financial instruments and reports directly to the audit committee. A valuation report with analysis of changes in fair value measurement is prepared at each interim and annual reporting date, and is reviewed and approved by senior management. Discussion of the valuation process and results with the audit committee is held twice a year, to coincide with the reporting dates.

Hong Kong Ferry (Holdings) Company Limited Annual Report 2014

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