Annual Report 2021

China Merchants China Direct Investments Limited Annual Report 2021 27 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) Beijing Huashun Xin’an Technology Co., Ltd. (“Huashun Xin’an”) was established in Beijing in 2018 and is a cyber security company with a search engine for cyberspace resources. It focuses on the fields of big data security and cyberspace resources for surveying and mapping, and is primarily engaged in the research and development of technologies and products in the field of cyber information security. The Fund completed capital contributions of RMB24 million (equivalent to US$3.67 million) and RMB6 million (equivalent to US$0.93 million) in April and July 2021, respectively, for an aggregate investment of RMB30 million (equivalent to US$4.60 million), which equates to a 4.29% equity interest in Huashun Xin’an. As of the end of 2021, the carrying value of the Fund’s interest in Huashun Xin’an was US$3.15 million. In 2021, Huashun Xin’an encouraged close cooperation among all relevant government departments, promoted the construction of city-level network security, and developed new products within the information technology applications industry. At the same time, in order to align with its strategic objectives and business development needs, Huashun Xin’an is preparing to open a number of domestic and overseas offices for expanding its business in both domestic and overseas markets, while strengthening its catalog of new technologies and products. Xinyi Information Technology Ltd. (“Xinyi”) was established in Zhang Jiang District, Shanghai in March 2017. It is a company that focuses on the research and development of SoC (system on a chip) for Internet of Things (IoT) for low-power wide-area network (LPWAN), and is committed to becoming a world-class manufacturer of Internet of Things intelligent terminal SoCs for the 5th generation mobile communications (5G), with applications mainly covering smart meters, smart security, smart transportation, smart cities, the sharing economy and other scenarios. The Fund invested RMB35 million (equivalent to US$5.42 million) in September 2021 for a 1.44% equity interest in Xinyi. As of the end of 2021, the carrying value of the Fund’s interest in Xinyi was US$5.50 million. Through the end of December 2021, the firm has received sizeable orders for the Xinyi XY1100 chip from almost all module factories, as well as a large number of industry-leading customers and solution design companies, causing the firm’s income growth to accelerate. The SoC of XY2100, second-generation product, specifically developed for smart meters, is expected to tape out in the near future. In addition, the firm is actively developing the CAT-1 chip for medium-speed IoT. Rizhao Azuri Technologies Co., Ltd. (“Azuri”) was established in Rizhao, Shandong in August 2016. It is a company that develops and manufactures laser diode chips, optical devices and optical module products for high- speed optical communications, mainly targeting the fiber to the home (FTTH), 5th generation mobile communications (5G), enterprise networking and data centre markets. The Fund invested RMB30 million (equivalent to US$4.72 million) in December 2021 for a 2.50% equity interest in Azuri. As of the end of 2021, the carrying value of the Fund’s interest in Azuri was US$4.71 million. By the end of December 2021, Azuri had been approved by an important Chinese customer and had started to supply them in bulk, including 10G-EPON PR30 OLT and XG-COMBO D2/E1 OLT. The industrial-grade 10G-EPON product has also entered small-batch testing in the US market, and the company became profitable in 2021.