Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 110 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2020 5. FINANCIAL INSTRUMENTS (CONTINUED) Fair value measurement of financial instruments Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis Most of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements are observable. 31 December 31 December 2020 Increase(+)/ decrease(-) in fair value of assets if 10% increase/ 2019 Increase(+)/ decrease(-) in fair value of assets if 10% increase/ Significant 31 December 31 December Relationship of decrease of the decrease of the 31 December 31 December Fair value Valuation unobservable 2020 2019 unobservable inputs unobservable unobservable Financial assets 2020 2019 hierarchy techniques input(s) Range Range to fair value inputs (Note 2) inputs (Note 2) US$ US$ US$ US$ Financial assets at FVTPL Listed equity securities (Note 1) 423,278,417 343,741,290 Level 1 Quoted bid prices in N/A N/A N/A N/A N/A N/A active market Investment deposits (Note 1) — 14,907,829 Level 2 Recent transaction price N/A N/A N/A N/A N/A N/A Listed equity securities within 16,725,161 4,540,862 Level 3 Quoted bid – Discount rate for 9.6% 2.2% - 6.2% The higher -178,000/ -19,000/ lock-up period (Note 1) price in active market and adjusted for lack of marketability lack of marketability the discount rate, the lower the fair value +178,000 +19,000 Equity securities (including equity 294,607,458 243,036,583 Level 3 Market comparable – Earnings multiples 12.0x - 84.8x 20.4x - 28.9x The higher the multiples, +28,736,000/ +24,499,000/ securities traded on the National companies – Revenue multiples 2.4x 3.7x the higher the -28,736,000 -24,499,000 Equities Exchange and Quotations – Book value multiples 1.4x - 6.7x 1.3x - 5.2x fair value (“ New Third Board ”) and unlisted equity securities) and unlisted – Discount rate for 52% 51% The higher -30,587,000/ -15,090,000/ participating preferred unit (Note 1) lack of marketability and specific risk the discount rate, the lower the fair value +30,587,000 +15,090,000 Unlisted debt investments (Notes 1 and 4) 27,562,108 48,926,349 Level 3 Discounted cash flow – Discount rate 0% - 4.3% 5.2% The higher -33,000/ -438,000/ the discount rate, the +33,000 +438,000 lower the fair value