Annual Report 2022

7 China Merchants China Direct Investments Limited Annual Report 2022 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS OVERALL PERFORMANCE China Merchants China Direct Investments Limited and its subsidiaries (the “ Fund ”) recorded a loss attributable to equity shareholders of US$153.17 million for the year ended 31 December 2022, compared to a profit attributable to equity shareholders of US$24.21 million for last year. The reversal was mainly due to a significant decline in the overall value of the financial assets at fair value through profit or loss (the “ Financial Assets ”), resulting in the recognition of a loss, rather than a gain as in the prior year. As of 31 December 2022, the net assets of the Fund were US$571.57 million (31 December 2021: US$805.70 million), with a net asset value per share of US$3.752 (31 December 2021: US$5.289). The net loss on the Financial Assets for the year was US$199.78 million, compared to a net gain of US$48.65 million for last year. Looking deeper, the Fund’s listed and unlisted investments recorded net losses of US$116.88 million and US$82.90 million, respectively. For more information on the change in fair value of each of the listed and unlisted investments, please see the section titled “Review of Investments” in this Investment Manager’s Discussion and Analysis. Total investment income for the year increased by 5.02% to US$14.85 million (2021: US$14.14 million) as compared to last year, due mainly to an increase in dividend income from investments. ACQUISITIONS AND DISPOSALS OF INVESTMENTS In 2022, the Fund continued to seek out and rigorously evaluate investment opportunities. During the year, the Fund made investments in the information technology industry and medical industry. The direct investments completed include the following: Beijing Huashun Xin’an Technology Co., Ltd. (“ Huashun Xin’an ”) carried out a new round of equity financing and introduced several new investors. To avoid a dilution of its interest, the Fund entered into an investment agreement, along with other relevant agreements, in relation to Huashun Xin’an on 25 March 2022, and made a further investment of RMB6.50 million (equivalent to US$1.02 million) in Huashun Xin’an on 19 April 2022. The relevant formalities were duly completed on 25 April 2022 and the Fund holds a 4.295% equity interest in Huashun Xin’an, accordingly. On 30 September 2022, the Fund entered into a preferred shares subscription agreement in relation to Immvira Bioscience Inc. (“ Immvira ”), pursuant to which the Fund agreed to contribute US$8 million to Immvira in order to subscribe to the preferred shares issued by Immvira and to obtain a 1.67% equity interest. The Fund paid the said investment amount to Immvira on 24 October 2022 to complete the transaction. Immvira is a biotech research and development company, and is principally engaged in clinical research and the development of vector technologies as potential cancer therapeutics. Leveraging intrinsic mechanisms of action and tumor microenvironment modifications, Immvira is focused on developing a new generation of novel anti-cancer drug vectors, including replicating and non- replicating herpes simplex virus vectors, drug delivery exosomes and tumor vaccines.