Annual Report 2019

China Merchants China Direct Investments Limited Annual Report 2019 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2019 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 2019 2018 Increase(+)/ Increase(+)/ decrease(-) decrease(-) in fair value in fair value of assets if of assets if Relationship of 10% increase/ 10% increase/ Significant 31 December 31 December unobservable decrease of the decrease of the 31 December 31 December Fair value Valuation unobservable 2019 2018 inputs to fair unobservable unobservable Financial assets 2019 2018 hierarchy techniques input(s) Range Range value inputs (Note 2) inputs (Note 2) US$ US$ US$ US$ Financial assets at FVTPL Listed equity securities (Note 1) 343,741,290 247,736,786 Level 1 Quoted bid prices in N/A N/A N/A N/A N/A N/A active market Investment deposits 14,907,829 — Level 2 Recent transaction price N/A N/A N/A N/A N/A N/A Listed equity securities 4,540,862 9,909,689 Level 3 Quoted bid price in - Discount rate for 2.2% - 6.2% 4.7% - 4.9% The higher -19,000/ -51,000/ within lock-up period (Note 1) active market lack of the discount rate, +19,000 +51,000 and adjusted for lack marketability the lower of marketability the fair value Equity securities (including equity 243,036,583 219,314,975 Level 3 Market comparable – Earnings multiples 20.4x - 28.9x 16.6x - 42.0x The higher +24,499,000/ +21,340,000/ securities traded on the companies – Revenue multiples 3.7x 2.3x - 3.5x the multiples, -24,499,000 -21,340,000 National Equities Exchange – Book value multiples 1.3x - 5.2x 1.3x - 3.2x the higher and Quotations (“ New Third Board ”) the fair value and unlisted equity securities) and unlisted – Discount rate for 51% 51% The higher -15,090,000/ -22,402,000/ participating preferred unit lack of the discount rate, +15,090,000 +22,402,000 (Note 1) marketability the lower and specific risk the fair value Unlisted debt investments 48,926,349 76,519,700 Level 3 Discounted cash flow – Discount rate 5.2% 5.2% The higher -438,000/ -870,000/ (Notes 1 and 4) the discount rate, +438,000 +870,000 the lower the fair value