Investor Presentaiton

MORGAN STANLEY BANK ASIA LIMITED NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2020 28. ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (CONTINUED) a. Financial assets and liabilities recognised at fair value on a recurring basis (continued) The Company's valuation approach and fair value hierarchy categorisation for certain significant classes of financial instruments recognised at fair value on a recurring basis is as follows: Asset and Liability / Valuation Technique Government debt securities US treasury securities ⚫ Fair value is determined using quoted market prices. Non US Government Obligations Fair value is determined using quoted prices in active markets when available. When not available, quoted prices in less-active markets are used. In the absence of position- specific quoted prices, fair value may be determined through benchmarking from comparable instruments. Valuation Hierarchy Classification • Level 1 as inputs are observable and in an active market • Level 1 - if actively traded and inputs are observable - • Level 2 if the market is less active or prices are dispersed • Level 3 - in instances where the prices are unobservable Derivatives OTC derivative contracts (include swap contracts related to interest rates and foreign currencies) . Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled using a series of techniques, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, simulation models or a combination thereof. Many pricing models do not entail material subjectivity as the methodologies employed do not necessitate significant judgement, since model inputs may be observed from actively quoted markets, as is the case for generic interest rate swaps. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. Securities purchased under agreements to resell • Fair value is computed using a standard cash flow discounting methodology. • The inputs to the valuation include contractual cash flows and collateral funding spreads, which are the incremental spread over the overnight indexed swap ("OIS") rate for a specific collateral rate (which refers to the rate applicable to a specific type of security pledged as collateral). - when valued using • Level 2 observable inputs, or where the unobservable input is not deemed significant • Level 3 - if an unobservable input is deemed significant • Level 2 when the valuation inputs are observable Level 3 in instances where the unobservable inputs is deemed significant 54

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