Annual Report 2021

China Merchants China Direct Investments Limited Annual Report 2021 22 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) Anhui Iflytek Venture Capital LLP (“Iflytek Venture Capital”) was established in Hefei, Anhui in December 2015, with an investment horizon of 7 to 9 years and with a fund size of RMB602 million. Its major investment targets are industries related to the Internet and applications of artificial intelligence (AI) in China, primarily to areas including education, healthcare, tourism, motor vehicles, Internet of Things (IoT), smart hardware, information security, e-commerce, interactive entertainment, smart toys, robotics and Internet advertising. The general partner and investment manager of Iflytek Venture Capital is Wuhu Iflytek Investment Management LLP, which is responsible for defining and executing the investment strategy for Iflytek Venture Capital, as well as for managing their operations. The Fund has committed to subscribe to an aggregate of RMB90 million by installment, for a 14.95% interest in Iflytek Venture Capital. Since December 2016, the Fund had made successive capital contributions to Iflytek Venture Capital for an aggregate of RMB90 million (equivalent to US$13.28 million), representing 100% of the subscription amount committed by the Fund. In addition, through the end of December 2021, the Fund received cash distributions from Iflytek Venture Capital in a cumulative amount of RMB45.34 million. As of the end of 2021, the carrying value of the Fund’s interest in Iflytek Venture Capital was US$11.13 million, representing a decrease of 9.73% from the value at the end of last year of US$12.33 million. As of the end of 2021, the audited net asset value of Iflytek Venture Capital was RMB2,313 million, representing an increase of 359.84% compared to an audited net asset value as of the end of last year. Through the end of December 2021, Iflytek Venture Capital has made investments in twenty-seven projects. Currently, Iflytek Venture Capital has entered into the investment exit period. Of these projects, ten projects have completed new rounds of financing while another three projects (including iFlytek Healthcare) were partially exited from during 2021. Iflytek Co., Ltd. (“Iflytek”) was established in 1999 and is headquartered in Hefei, Anhui. It was listed on the SME Board of the Shenzhen Stock Exchange in May 2008. It is a national key software enterprise dedicated to the research of intelligent speech, language technologies, and AI technologies; the development of software and chip products; the provision of speech information services; and the integration of e-government systems. During the period of November to December 2016, the Fund acquired 4.54 million A shares of Iflytek at an average price of RMB19.09 (adjusted) per share on the secondary stock market with an aggregate invested amount of RMB130 million (equivalent to US$18.83 million). As of 31 December 2021, the Fund held a total of 6.81 million A shares of Iflytek, as a result of the receipt of 2.27 million new shares via a capitalisation issue from Iflytek in 2018, accounting for 0.293% of the issued share capital of Iflytek. In June 2021, the Fund received a cash dividend (net of tax) of RMB1.31 million from Iflytek for 2020. As of the end of 2021, the carrying value of the Fund’s interest in Iflytek was US$56.10 million, representing an increase of 31.66% over US$42.61 million at the end of last year. The Fund’s unrealised gain attributable to its investment in Iflytek for 2021 was US$12.27 million, up 94.79% year-over-year.