Annual Report 2024

100 China Merchants China Direct Investments Limited Annual Report 2024 INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter Key audit matter is the matter that, in our professional judgement, was of most significance in our audit of the consolidated financial statements of the current period. The matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Valuation of Level 3 financial instruments Refer to note 4 and 5 to the consolidated financial statements and the accounting policies in note 3. The Key Audit Matter How the matter was addressed in our audit As at 31 December 2024, financial instruments carried at fair value accounted for a significant portion of the Group’s assets. The total fair value of financial assets and financial liabilities measured at fair value through profit or loss classified as Level 3, amounted to US$352.86 million and US$0.70 million, respectively. Management engaged external valuation specialists to assist the valuations for the Group’s certain financial instruments. The valuation of the Group’s Level 3 financial instruments were measured using valuation techniques that involve significant inputs that were not based on observable market data (“ unobservable inputs ”). Where unobservable inputs were used, significant management judgement and estimates were made in the valuation process. We identified assessment of the fair value of Level 3 financial instruments as a key audit matter because of the degree of complexity involved in valuing these financial instruments and the degree of judgement exercised by management in determining the inputs used in the valuation models. Our audit procedures to assess the valuation of Level 3 financial instruments included the following: ‧ assessing the design and implementation of key internal controls over the valuation of the financial instruments; ‧ reading investment agreements for Level 3 financial instruments, on a sample basis, to understand the relevant investment terms and identify any conditions that were relevant to the valuation of these financial instruments; ‧ evaluating the competence, capability and objectivity of the external valuation specialists; ‧ with the assistance of our valuation specialists, assessing the fair value of financial instruments, on a sample basis, by evaluating the appropriateness of the Group’s valuation models, evaluating the reasonableness of the inputs and the appropriateness of the application by the Group; either conducting independent valuation or obtaining inputs independently, and comparing our valuation results with that of the Group; and ‧ assessing the reasonableness of the disclosures in the consolidated financial statements with reference to the requirements of the prevailing accounting standards.