Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS 7 OVERALL PERFORMANCE China Merchants China Direct Investments Limited and its subsidiaries (the “ Fund ”) recorded a profit attributable to equity shareholders of US$89.79 million for the year ended 31 December 2020, compared to a profit attributable to equity shareholders of US$101.81 million for last year, representing a decrease of US$12.02 million or 11.81%—with the profit decrease largely attributable to a smaller gain in the overall value of the financial assets at fair value through profit or loss (the “ Financial Assets ”) and to an increase in administrative expenses. As of 31 December 2020, the net assets of the Fund were US$775.43 million (31 December 2019: US$649.05 million), with a net asset value per share of US$5.090 (31 December 2019: US$4.261). The net gain on the Financial Assets for the year was US$126.20 million, compared to a net gain of US$131.85 million for last year, representing a decrease of 4.29%. The listed and unlisted investments recorded net gains of US$61.82 million and US$64.38 million, respectively. For more information on the change in fair value of each of the listed and unlisted investments, please see the section titled “Review of Investments” in this Investment Manager’s Discussion and Analysis. Total investment income for the year increased by 3.73% to US$16.11 million (2019: US$15.53 million) as compared to last year, due mainly to an increase in dividend income from investments. ACQUISITIONS AND DISPOSALS OF INVESTMENTS In 2020, the Fund continued to seek out and rigorously evaluate investment opportunities. During the year, the Fund made new investments in the financial payment, information technology and pharmaceutical industries. The new direct investments completed include the following: On 4 December 2019, the Fund entered into a share transfer agreement and other relevant agreements in relation to China UnionPay Co., Ltd. (“ China UnionPay ”), pursuant to which the Fund agreed to acquire a 0.17% equity interest in China UnionPay from an existing shareholder at a price of RMB220 million. The Fund remitted the consideration of RMB220 million (equivalent to US$31.12 million) on 27 April 2020 and the equity transfer was duly completed on 1 June 2020. China UnionPay is a leading enterprise in the financial payment industry. On 27 December 2019, the Fund entered into an equity transfer agreement in relation to Anhui iFlytek Healthcare Information Technology Co., Ltd. (“ iFlytek Healthcare ”), pursuant to which the Fund agreed to acquire a 3% equity interest in iFlytek Healthcare from an existing shareholder, Anhui Iflytek Venture Capital LLP, at a price of RMB60 million. The Fund remitted the consideration of RMB60 million (equivalent to US$8.60 million) on 31 December 2019 and the equity transfer was duly completed on 27 February 2020. iFlytek Healthcare is an artificial intelligence (AI) medical enterprise. On 4 September 2020, the Fund entered into a partnership agreement and other relevant agreements in relation to CASRF Fund L.P. (“ CASRF Fund ”), pursuant to which the Fund agreed to contribute capital of RMB50 million in total by installment to CASRF Fund, to be used for an investment in CASREV FUND III-RMB L.P. (“ CASREV Fund III ”), indirectly representing 1.11% of the current paid-in capital of RMB4,500 million of CASREV Fund III. As of 31 December 2020, the Fund had completed its capital contribution of RMB25 million (equivalent to US$3.75 million) in aggregate. The major investment targets of CASREV Fund III include enterprises related to smart manufacturing, smart products and services, big data and cloud computing, AI, Internet of Things (IoT), blockchain, biological engineering, chips and sensors, operating system, kernel modules, communication networks, materials, and other emerging technologies.