Annual Report 2022

20 China Merchants China Direct Investments Limited Annual Report 2022 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) As of the end of 2022, the carrying value of the Fund’s debt in Qinghai Lake Tourism was US$5.29 million, representing a decrease of 11.54% from the value at the end of last year of US$5.98 million. In recent years, due to the impact of the coronavirus pandemic, Qinghai Lake Tourism has continued to operate at distressed levels, with a lower volume of tourists and limited operating costs. With the relaxation of pandemic control measures, the number of tourists is expected to increase progressively. In the meantime, the firm is actively communicating with government departments as it seeks a full acquisition of Qinghai Lake Tourism shares by state- owned enterprises. The Investment Manager is closely monitoring these developments. Xi’an Jinpower Electrical Co., Ltd. (“Jinpower Electrical”) was established in Xi’an, Shaanxi in 2001 and is a high technology enterprise principally engaged in the research and development, and production, of intelligent online monitoring systems for transmission lines and substation equipment for the power grid. The stock of Jinpower Electrical was listed for trading on the New Third Board in January 2016. The Fund invested RMB20 million (equivalent to US$3.03 million) in January 2011 and held 2.89 million shares in Jinpower Electrical as of 31 December 2022, accounting for 4.825% of the issued share capital of Jinpower Electrical. As of the end of 2022, the carrying value of the Fund’s interest in Jinpower Electrical was US$0.57 million, representing a decrease of 38.04% from the value at the end of last year of US$0.92 million. On 19 August 2022, Jinpower Electrical announced that its unaudited net loss for the first half of 2022 was RMB5.57 million, while the net loss for the same period last year was RMB6.50 million. The lesser loss was mainly due to a reversal of credit impairment loss for the receipt of past due receivables during the period. In recent years, the company has faced many difficulties in production and operations, such as coronavirus pandemic outbreaks, rising raw material prices, tight liquidity and more intense competition in the industry, all of which has had an impact on the company’s operations, and has caused the company’s operating results to fall short of expectations in recent years. 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. Since December 2016, the Fund had made successive capital contributions to Iflytek Venture Capital for an aggregate of RMB90 million (equivalent to US$13.28 million), representing 100% of the subscription amount committed by the Fund. In addition, through the end of December 2022, the Fund received cash distributions from Iflytek Venture Capital in a cumulative amount of RMB46.96 million. As of the end of 2022, the carrying value of the Fund’s interest in Iflytek Venture Capital was US$24.93 million, representing an increase of 123.99% over US$11.13 million at the end of last year.