Annual Report 2024

China Merchants China Direct Investments Limited Annual Report 2024 31 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) 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 2024, the carrying value of the Fund’s interest in Hwagain was US$2.48 million, representing a decrease of 14.19% from the value at the end of last year of US$2.89 million. In 2024, Hwagain’s revenue and net profit saw a decline due to sales price fluctuation of paper products, while other operations as a whole were otherwise relatively stable. Hwagain recorded an unaudited net profit of RMB3.16 million for 2024, down 90.42% 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 Wuhan Rixin in July 2009. As of 31 December 2024, 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. As of the end of 2024, the carrying value of the Fund’s interest in Wuhan Rixin was US$1.04 million, representing a decrease of 35.40% from the value at the end of last year of US$1.61 million. On 26 August 2024, Wuhan Rixin announced that its unaudited net loss for the first half of 2024 was RMB16.37 million, compared to a net loss of RMB29.60 million for the same period last year. The reason for a lesser loss was that a photovoltaic power plant project developed and constructed by the company was recognised as sales revenue during the period. On 6 June 2024, Wuhan Rixin announced that during the company’s financing process, the banks and non-bank financial institutions required the company’s controlling shareholder & de-facto controller, as well as his spouse, to provide a joint and several liability guarantee for the company’s financing. However, due to an investment contract dispute arbitration case between the company’s controlling shareholder & de-facto controller and an investor, the personal bank account and the company’s shares held by the former were frozen, which greatly affected the former’s personal credit, and in turn affected the company’s financing. The Fund will closely monitor subsequent developments and the potential impact on the Fund, and will take appropriate measures to protect the interests of the Fund when necessary.