Annual Report 2024

22 China Merchants China Direct Investments Limited Annual Report 2024 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) The business license of Iflytek Venture Capital is set to expire on 29 January 2025. To meet the exit requirements of the projects held, including the listed shares of Xunfei Healthcare currently under a lock-up period, as well as other investee companies expected to be listed soon, all limited partners have unanimously agreed to restructure Iflytek Venture Capital as a limited partnership of a non-fund nature. As a result, its name has changed to “Anhui Iflytek Information Technology LLP,” with a term of operation for five years. Additionally, its general partner has changed to “Hefei Iflytek Ruijin Enterprise Management LLP.” 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 2024, 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 0.295% of the issued share capital of iFLYTEK. In July 2024, the Fund received a cash dividend (net of tax) of RMB0.65 million from iFLYTEK for 2023. As of the end of 2024, the carrying value of the Fund’s interest in iFLYTEK was US$45.73 million, representing an increase of 2.67% over US$44.54 million at the end of last year. The Fund’s unrealised gain attributable to its investment in iFLYTEK for 2024 was US$1.86 million, down 85.75% year-over-year. On 19 October 2024, iFLYTEK announced that its unaudited net loss for the first three quarters of 2024 was RMB344 million, compared to a net gain of RMB99.36 million for the same period last year. iFLYTEK turned from profit to loss, due primarily to heavy investments in areas such as cognitive large models with artificial general intelligence (AGI). In addition, the company also continued to make significant investments in the research and development of large models, as well as in the implementation and expanded use of independently controllable core technologies, controllable industry chains and large model industry applications. However, despite these significant investments, iFLYTEK recorded an unaudited net profit of RMB56.96 million for the third quarter of 2024, achieving a turnaround to profitability during the quarter. On 27 June 2024, iFLYTEK published “Spark Desk V4.0,” along with its application products, and announced that this version has achieved a comprehensive upgrade in seven core areas, namely text generation, language understanding, know-how answering, logical reasoning, mathematical capability, coding capability and multimodal capability. Its performance ranks first in eight international mainstream test sets, surpassing GPT-4 Turbo. This achievement not only demonstrates the profound progress of iFLYTEK in AI technology, but also highlights its competitiveness in the global AI field.