Annual Report 2021

China Merchants China Direct Investments Limited Annual Report 2021 28 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. 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 5.31% to 5.08%, due to a capital increase by other shareholders of Geesun Intelligent in December 2021. In addition, in January 2022, due to the exercise of the conversion option by a first-tier lithium battery manufacturer in accordance with the convertible bond agreement signed with Geesun Intelligent in 2020, the equity interest of Geesun Intelligent held by the Fund was further diluted from 5.08% to 2.35%. As of the end of 2021, the carrying value of the Fund’s interest in Geesun Intelligent was US$0.45 million, representing an increase of 45.16% over US$0.31 million at the end of last year. Since 2021, due to changes in its customer focus, Geesun Intelligent has adapted to give priority to serving a first- tier lithium battery manufacturer, primarily because the laser die-cutting machines and winding machines that the company has developed are of particular value to this customer, resulting in several large orders. Geesun Intelligent returned to profitability in 2021 and recorded an unaudited net profit of RMB36.60 million. 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 2021, the carrying value of the Fund’s interest in Hwagain was US$3.62 million, representing a decrease of 43.08% from the value at the end of last year of US$6.36 million. In 2021, rising prices for bulk raw materials, an increase in future inflation expectations, and product price fluctuations led to increased instability and uncertainty in the paper industry. In this market environment, Hwagain focused on the daily management of pulp paper production, paper product sales and forestry operations, with a goal to preserve the sound and stable operation of the business. Hwagain recorded an unaudited net profit of RMB31.81 million for 2021, up 73.44% 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 2021, 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 3.90% of the issued share capital of Wuhan Rixin.