Annual Report 2022

28 China Merchants China Direct Investments Limited Annual Report 2022 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 2022, the carrying value of the Fund’s interest in Hwagain was US$3.42 million, representing a decrease of 5.52% from the value at the end of last year of US$3.62 million. In 2022, Hwagain continued to maintain sound and stable development. In addition to addressing daily business operation management issues in areas such as pulp paper production, paper product sales and forestry operations, the company has also made certain optimisations and technological upgrades to the production process at the Ganzhou base plant and Chongzuo factory. Furthermore, the company has also focused on increasing production safety, improving environmental protection, and adopting other best practices. Hwagain recorded an unaudited net profit of RMB56.84 million for 2022, up 78.24% 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 July 2009. As of 31 December 2022, 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. In June 2022, the Fund received a cash dividend of RMB0.79 million from Wuhan Rixin for 2021. As of the end of 2022, the carrying value of the Fund’s interest in Wuhan Rixin was US$3.37 million, representing a decrease of 16.58% from the value at the end of last year of US$4.04 million. On 23 August 2022, Wuhan Rixin announced that its unaudited net loss for the first half of 2022 was RMB14.70 million, while it recorded a net loss of RMB18.15 million for the same period last year. The main reason for the loss decrease was that the two complementary photovoltaic power plant projects sold by the company were completed and recognised as revenue during the period. Nanning Huiyou Xingyao Equity Investment Fund L.P. (“Huiyou Xingyao Fund”) was established in Nanning, Guangxi in September 2020, with an investment horizon of 5 to 7 years and with a total fund subscription amount of RMB113 million. Huiyou Xingyao Fund is a single-project equity investment fund, making equity investments solely in Wuhan YZY Biopharma Co., Ltd. (“ YZY Biopharma ”). YZY Biopharma is a pharmaceutical company with a bispecific antibody platform and related biopharmaceutical research and development capabilities. The fund manager of Huiyou Xingyao Fund is Tongde Qianyuan (Beijing) Investment Management Co., Ltd., which is responsible for providing consultation and advice on investment matters, as well as providing daily operations and investment management services. The Fund has committed to subscribe to an aggregate of RMB24 million by installment, representing 21.24% of the total fund subscription amount of Huiyou Xingyao Fund. The Fund completed capital contributions of RMB16.31 million (equivalent to US$2.47 million) and RMB7.69 million (equivalent to US$1.19 million) in November 2020 and July 2021, respectively, representing an aggregate of RMB24 million (equivalent to US$3.66 million) or 100% of the subscription amount committed by the Fund.