Annual Report 2021

INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS China Merchants China Direct Investments Limited Annual Report 2021 7 OVERALL PERFORMANCE China Merchants China Direct Investments Limited and its subsidiaries (the “ Fund ”) recorded a profit attributable to equity shareholders of US$24.21 million for the year ended 31 December 2021, compared to a profit attributable to equity shareholders of US$89.79 million for last year, representing a decrease of US$65.58 million or 73.04%— with the profit decrease largely attributable to a much smaller gain in the overall value of the financial assets at fair value through profit or loss (the “ Financial Assets ”). As of 31 December 2021, the net assets of the Fund were US$805.70 million (31 December 2020: US$775.43 million), with a net asset value per share of US$5.289 (31 December 2020: US$5.090). The net gain on the Financial Assets for the year was US$48.65 million, compared to a net gain of US$126.20 million for last year, representing a decrease of 61.45%. The Fund’s listed and unlisted investments recorded net gains of US$50.06 million and net losses of US$1.41 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 decreased by 12.23% to US$14.14 million (2020: US$16.11 million) as compared to last year, due mainly to a decrease in dividend income from investments. ACQUISITIONS AND DISPOSALS OF INVESTMENTS In 2021, the Fund continued to seek out and rigorously evaluate investment opportunities. During the year, the Fund made new investments in the information technology industry. The direct investments completed include the following: On 24 March 2021, the Fund entered into an investment agreement and other relevant agreements in relation to Beijing Huashun Xin’an Technology Co., Ltd. (“ Huashun Xin’an ”), pursuant to which the Fund agreed to contribute capital to Huashun Xin’an in order to participate in its new round of financing and to obtain an equity interest, as well as to purchase a portion of the equity interest from the founding shareholders of Huashun Xin’an at a discounted price. The total investment made by the Fund in Huashun Xin’an is RMB30 million, representing a 4.29% equity interest. The Fund completed capital contributions of RMB24 million (equivalent to US$3.67 million) and RMB6 million (equivalent to US$0.93 million) to the Huashun Xin’an project on 9 April and 2 July 2021, respectively, making an aggregate of RMB30 million (equivalent to US$4.60 million) for this investment. Huashun Xin’an 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. It is primarily engaged in the research and development of technologies and products in the field of cyber information security. On 25 August 2021, the Fund entered into an investment agreement and other relevant agreements in relation to Xinyi Information Technology Ltd. (“ Xinyi ”), pursuant to which the Fund agreed to contribute capital of RMB35 million to Xinyi in order to participate in its new round of financing and to obtain a 1.44% equity interest. The Fund completed a capital contribution of RMB35 million (equivalent to US$5.42 million) to the Xinyi project on 9 September 2021. Xinyi 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.