Annual Report 2019

INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) China Merchants China Direct Investments Limited Annual Report 2019 22 REVIEW OF INVESTMENTS (CONTINUED) Anhui Iflytek Venture Capital LLP (“Iflytek Venture Capital”) was established in Hefei, Anhui in December 2015, with an investment horizon of 7 to 9 years and with a fund size of RMB602 million. Its major investment targets are industries related to the Internet and applications of artificial intelligence (AI) in China, primarily to areas including education, healthcare, tourism, motor vehicles, Internet of Things (IoT), smart hardware, information security, e-commerce, interactive entertainment, smart toys, robotics and Internet advertising. The general partner and investment manager of Iflytek Venture Capital is Wuhu Iflytek Investment Management LLP, which is responsible for defining and executing the investment strategy for Iflytek Venture Capital, as well as for managing their operations. The Fund has committed to subscribe to an aggregate of RMB90 million by installment, for a 14.95% interest in Iflytek Venture Capital. In December 2016, August 2017, April 2018 and January 2019, the Fund completed capital contributions of RMB36 million (equivalent to US$5.19 million), RMB13.50 million (equivalent to US$2.01 million), RMB13.50 million (equivalent to US$2.15 million) and RMB13.50 million (equivalent to US$1.99 million) to Iflytek Venture Capital, respectively, representing an aggregate of RMB76.50 million (equivalent to US$11.34 million) or 85% of the subscription amount committed by the Fund. In addition, through the end of December 2019, the Fund received cash distributions from Iflytek Venture Capital in a cumulative amount of RMB19.76 million. As of the end of 2019, the carrying value of the Fund’s interest in Iflytek Venture Capital was US$9.77 million, representing an increase of 17.57% over US$8.31 million at the end of last year. As of the end of 2019, the unaudited net asset value of Iflytek Venture Capital was RMB578 million, representing an increase of 54.10% compared to the end of last year. By the end of December 2019, Iflytek Venture Capital has made investments in a total of twenty four projects, including five new investments in 2019. Among the existing projects, Iflytek Venture Capital has exited entirely from two projects and has exited partially from two projects. Furthermore, two projects completed their listing on the Shenzhen Stock Exchange in 2019, while one project is planning to apply for an IPO on the main board of the secondary stock market in Mainland China and two other projects are planning to apply for an IPO on the Shanghai Sci-Tech Board. 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 of Mainland China with an aggregate invested amount of RMB130 million (equivalent to US$18.83 million). As of 31 December 2019, 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 0.309% of the issued share capital of Iflytek. In October 2019, the Fund received a cash dividend (net of tax) of RMB0.65 million from Iflytek for the first half of 2019. As of the end of 2019, the carrying value of the Fund’s interest in Iflytek was US$33.62 million, representing an increase of 37.67% over US$24.42 million at the end of last year.