Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 26 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) Shenzhen Geesun Intelligent Technology Co., Ltd. (“Geesun Intelligent”) was established in Shenzhen, Guangdong in 2006, and is a leading professional manufacturer of production equipment and automated production lines for lithium ion batteries and super capacitors in China. Its name was changed to Shenzhen Geesun Zhiyun Technology Co., Ltd. in April 2015 as a result of an acquisition and capital increase, and was further changed to its present name as a result of a transfer of its entire equity interest by its then controlling shareholder to CAS Investment Management Co., Ltd., then the second largest shareholder, in October 2016. The Fund invested RMB20 million (equivalent to US$2.93 million) in May 2010. The Fund’s equity interest in Geesun Intelligent was diluted from 5.32% to 5.31%, subsequent to a new round of capital increase in March 2020. As of the end of 2020, the carrying value of the Fund’s interest in Geesun Intelligent was US$0.31 million, representing a decrease of 93.33% from the value at the end of last year of US$4.65 million. In 2020, due to the impact of the novel coronavirus pandemic, Geesun Intelligent continued to adhere to its business strategy by focusing on customer restructuring. Presently, Geesun Intelligent’s products have been recognised by top- tier lithium battery plants and the company has received large orders from customers for thermal compound stacking machines. Due to an expected significant increase in orders, Geesun Intelligent is currently facing tight funding, while the company’s new round of capital increase is currently at a standstill. Geesun Intelligent recorded an unaudited net loss of RMB76.70 million for 2020, which was due mainly to the production suspension because of the novel coronavirus pandemic, together with the relatively long testing period by customers for new products. Hwagain Group Co., Ltd. (“Hwagain”) was formed by the merger of two paper manufacturers located in Nanning, Guangxi in 1998. It is principally engaged in the research and development, production, and sale of high quality printing paper and tissue paper. The Fund invested RMB119.99 million (equivalent to US$19.00 million) in January 2012 for a 7.10% equity interest in Hwagain. As of the end of 2020, the carrying value of the Fund’s interest in Hwagain was US$6.36 million, representing a decrease of 19.29% from the value at the end of last year of US$7.88 million. In 2020, in the context of effective control of the novel coronavirus pandemic, Hwagain experienced a sound recovery of its operations, with orderly progress achieved in pulp paper production, paper products sales and forestry operation, as well as zero work-related injuries or environmental accidents. In response to the current segmented needs of the printing paper market, Hwagain has developed new products, such as different types of craft paper, art paper, pressure relief paper and noodle paper. Hwagain recorded an unaudited net profit of RMB23.57 million for 2020, down 63.55% year-over-year. Wuhan Rixin Technology Co., Ltd. (“Wuhan Rixin”) was established in Wuhan, Hubei in 2001, and is a state- accredited high technology enterprise engaged in the design, production and installation of solar modules and Building Integrated Photovoltaic (BIPV) products, as well as in the operation, maintenance and management of solar powered electric systems. The stock of Wuhan Rixin was listed for trading on the New Third Board in February 2016. The Fund invested RMB15 million (equivalent to US$2.20 million) in July 2009. As of 31 December 2020, the Fund held a total of 4.95 million shares in Wuhan Rixin, as a result of the receipt of 1.65 million new shares via a capitalisation issue from Wuhan Rixin in May 2019, accounting for 4.24% of the issued share capital of Wuhan Rixin. In November 2020, the Fund received a cash dividend of RMB0.50 million from Wuhan Rixin for the first half of 2020.