Annual Report 2019

INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) China Merchants China Direct Investments Limited Annual Report 2019 23 REVIEW OF INVESTMENTS (CONTINUED) On 17 July 2019, Iflytek announced that it had completed the issuance of a total of 108 million new shares to ten designated investors at an issue price of RMB27.10 per share. The funds raised amounted to RMB2.93 billion, which were mainly used in the business development of the company and the replenishment of working capital. On 3 February 2020, Iflytek pre-announced that its unaudited net profit for 2019 ranged from RMB732 million to RMB894 million, up 35% to 65% year-over-year. The increase in results was mainly due to the ongoing development of the AI industry, as well as repeated success in achieving the corporate strategic plan and the continuing enhancement of profitability, driven by its innovative technologies. The company estimates that the sales revenue in 2019 will exceed RMB10 billion, reaching a new milestone in terms of scale. Ningbo Meishan Free Trade Port Area Jiangmen Venture Capital LLP (the “Jiangmen Ventures Fund”) was established in Ningbo, Zhejiang in September 2016, with an investment horizon of 5 to 7 years and with a total fund subscription amount of RMB410 million (presently, the paid-in capital amounted to RMB242.5 million). Its major investment targets are chiefly early-stage business ventures related to machine intelligence, Internet of Things (IoT), natural user interface, and enterprise computing. The general partner and investment manager of the Jiangmen Ventures Fund is Jiangmen Capital Management (Beijing) Co., Ltd., which is responsible for defining and executing the investment strategy for the Jiangmen Ventures Fund, as well as for managing their operations. The Fund completed a capital contribution of RMB30 million (equivalent to US$4.74 million) in January 2018, representing 12.37% of the paid-in capital of the Jiangmen Ventures Fund. The Fund received a cash distribution from the Jiangmen Ventures Fund of RMB0.19 million in June 2019. As of the end of 2019, the carrying value of the Fund’s interest in the Jiangmen Ventures Fund was US$5.11 million, representing an increase of 0.79% over US$5.07 million at the end of last year. By the end of December 2019, the Jiangmen Ventures Fund has made investments in nineteen projects for a total of RMB219 million. Of these, investments amounting to RMB72.2 million were completed in 2019, including seven new projects and a debt-equity swap of one existing convertible loan. Another seven projects completed new rounds of financing, while another project was exited completely with a multiple of 4.02 during 2019. CAS Cambricon Technology Co., Ltd. (“Cambricon”) was established in 2016 in Beijing. The company grew out of a research and development project of the Smart Chips Research Group at the Institute of Computing Technology, Chinese Academy of Sciences, and is a high technology company that focuses on the research, development and design of AI chips. In June 2018, the Fund, via a partnership entity, invested approximately RMB38 million (equivalent to US$5.94 million) for a 0.246% beneficial equity interest in Cambricon. Cambricon completed a new round of equity financing in September 2019, and the Fund’s beneficial equity interest in Cambricon was diluted to 0.229%, accordingly. As of the end of 2019, the carrying value of the Fund’s interest in Cambricon was US$7.26 million, representing an increase of 31.05% over US$5.54 million at the end of last year.