Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 8 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) ACQUISITIONS AND DISPOSALS OF INVESTMENTS (CONTINUED) On 24 September 2020, the Fund entered into a partnership agreement in relation to Nanning Huiyou Xingyao Equity Investment Fund L.P. (“ Huiyou Xingyao Fund ”), pursuant to which the Fund agreed to contribute capital of RMB24 million in total by installment to Huiyou Xingyao Fund, representing 21.24% of the paid-in capital of RMB113 million of Huiyou Xingyao Fund. The Fund completed the first capital contribution of RMB16.31 million (equivalent to US$2.47 million) on 16 November 2020. Huiyou Xingyao Fund is a single-project equity investment fund, making equity investments solely in Wuhan YZY Biopharma Co., Ltd. (“ YZY Biopharma ”). YZY Biopharma is a pharmaceutical company with a bispecific antibody platform and related biopharmaceutical research and development capabilities. On 14 December 2020, the Fund entered into a preferred share purchase agreement and other relevant agreements in relation to Flexiv Ltd. (“ Flexiv ”), pursuant to which the Fund agreed to contribute capital of US$5 million to Flexiv to acquire a 1.67% equity interest in Flexiv upon completion of capital increase. The Fund completed its capital contribution of US$5 million on 24 December 2020. Flexiv is a technology company that focuses on the development and application of adaptive robots. In addition, the Fund exited from two direct investment projects and traded a stock on the secondary market during the year. On 26 May 2020, the Fund entered into an equity transfer agreement in relation to Jiangsu Huaer Quartz Materials Co., Ltd. (“ Jiangsu Huaer ”), pursuant to which the Fund agreed to transfer its entire 7.50% equity interest in Jiangsu Huaer to an assignee designated by the de facto controlling shareholder of Jiangsu Huaer at a price of RMB1.96 million. The Fund received the full transfer price of RMB1.96 million (equivalent to US$0.27 million) on 28 May 2020. The pre-tax internal rate of return to the Fund from Jiangsu Huaer was negative 18.91%. The Fund, upon negotiation, invoked a repurchase provision and entered into an equity repurchase agreement in relation to Guangxi Xinhua Preschool Education Investment Corporation Limited (“ Xinhua Preschool Education ”) on 18 December 2020, whereby the Fund agreed to transfer its entire 30% equity interest in Xinhua Preschool Education to the major shareholder of Xinhua Preschool Education at a price of RMB36 million. The Fund received the full repurchase price of RMB36 million (equivalent to US$5.51 million) on 18 December 2020. The pre-tax internal rate of return to the Fund from Xinhua Preschool Education was 1.99%. During the month of January 2020, the Fund acquired 14.46 million shares of Beijing Energy International Holding Co., Ltd. (“ Beijing Energy International ”, formerly Panda Green Energy Group Limited) at an average price of HK$0.241 per share on the Hong Kong secondary stock market, for an aggregate invested amount of HK$3.49 million (equivalent to US$0.45 million). During the period of November to December 2020, the Fund disposed of its entire holding of 14.46 million shares of Beijing Energy International for net proceeds of HK$4.00 million (equivalent to US$0.52 million). The pre-tax internal rate of return to the Fund from Beijing Energy International was 16.90%. LIQUIDITY, FINANCIAL RESOURCES, GEARING AND COMMITMENTS The Fund’s cash and cash equivalents decreased by 5.89%, from US$64.14 million at the end of last year to US$60.36 million (representing 6.21% of the Fund’s total assets) as of 31 December 2020, due mainly to the investment payments made to the projects greater than the funds received from the projects. As of 31 December 2020, the Fund had no outstanding bank loans (31 December 2019: Nil).