Financial Performance - The consolidated net asset value of China Merchants China Fund Limited as of December 31, 2018, was $575.06 million, a decrease of 18.50% from $705.63 million in 2017[8]. - The audited consolidated loss for 2018 was $87.02 million, compared to an audited profit of $117.90 million in the previous year[8]. - The net asset value per share decreased by 18.50% to $3.775 from $4.632 in 2017[8]. - The company reported a shareholder loss of $87.02 million for the year ended December 31, 2018, compared to a profit of $117.90 million in the previous year, primarily due to a significant decline in the fair value of financial assets[18]. - The fund's net loss from financial assets for the year was $111.12 million, compared to a net gain of $174.21 million in the previous year[18]. - Investment income increased by 24.13% to $18.88 million, driven by growth in dividend and distribution income as well as interest income[18]. - The company reported a net loss of $87,021 thousand for the year 2018, compared to a profit of $117,903 thousand in 2017, marking a significant decline[125]. - The company's net asset value decreased from $705,626 thousand in 2017 to $575,055 thousand in 2018, reflecting a drop of approximately 18.4%[125]. Dividend and Shareholder Returns - The total dividend for the year was $0.17 per share, an increase of 183.33% from $0.06 per share in the previous year[8]. - A special interim dividend of $0.05 per share was declared, totaling $7,616,651, as a celebration of the company's 25th anniversary[132]. - The proposed final dividend for 2018 is $0.07 per share, an increase from $0.06 per share in 2017, amounting to a total of $18,279,962[132]. - The company's distributable reserves as of December 31, 2018, were $47,652,713, slightly down from $47,689,857 in 2017[135]. - The company plans to maintain a stable dividend policy while balancing business growth and investment opportunities[135]. Investment Activities - The total value of the group's investment projects at the end of 2018 was $634.21 million, accounting for 92.20% of the total assets, down from $824.96 million in 2017[10]. - The group completed investments in three new direct investment projects in 2018, totaling $18.68 million, all related to information technology[12]. - The fund completed investments in three new technology-related projects during 2018, including a $4.74 million investment in a venture capital fund focused on machine intelligence and IoT[19]. - The fund invested approximately $5.94 million in Cambricon Technologies, acquiring a 0.246% stake in the AI chip development company[19]. - The fund also invested $8 million in Pony AI Inc., a Chinese autonomous driving technology company, acquiring at least a 0.8% stake[20]. - The fund's total investment value as of December 31, 2018, was $634.21 million, with 58.30% in financial services and 22.10% in cultural media and consumption[27]. Economic Environment - The overall economic growth rate in China for 2018 was 6.6%, which was the lowest in 28 years[9]. - The Shanghai Composite Index fell by 24.58% in 2018, while the Hang Seng Index decreased by 13.61%[9]. - The global economic growth faces risks of further slowdown, with uncertainties from the US-China trade dispute impacting China's economic performance in 2019[99]. - The Chinese government emphasizes stable economic progress in 2019, focusing on high-quality manufacturing and rural revitalization strategies[100]. - The fund anticipates that its investment projects in China will be affected by the expected economic slowdown and structural adjustments[99]. Investment Strategy and Focus - The fund aims to explore more investment opportunities in sectors like artificial intelligence and new infrastructure, which are expected to receive policy support[100]. - The fund focuses on investing in high-quality non-listed Chinese enterprises and domestic and international Chinese concept stocks, with a strategy emphasizing mature projects and emerging industry opportunities[103]. - Future investment directions will concentrate on the financial industry, particularly insurance, emerging technology industries led by artificial intelligence, cultural tourism, and healthcare sectors[103]. - The fund aims to optimize its investment portfolio and continuously adjust its risk preferences to achieve long-term capital preservation and appreciation[103]. Risks and Challenges - The fund faces significant economic risks due to its investments in Chinese enterprises, which are heavily influenced by China's macroeconomic development[106]. - Market competition risk is heightened as the private equity investment market in China grows, leading to increased competition for potential investment targets[107]. - Operational risks arise from the complexity of evaluating and selecting investment projects, which can affect investment time costs and returns[109]. - The fund is subject to legal uncertainties due to the evolving nature of China's commercial legal system, which may limit legal protections for investors[111]. - Policy and regulatory risks can impact the value of the fund's investments, as changes in government policies, taxes, and regulations may affect the invested enterprises[112]. - Currency fluctuation risks are present, as the fund's investments are primarily in RMB, which can affect the value of investments and the fund's net asset value reported in USD[113]. - The fund's ability to remit profits and dividends outside of China is subject to foreign exchange control regulations, which may limit its capacity to distribute returns to investors[114]. Governance and Management - The board of directors includes a mix of executive and independent non-executive members, ensuring diverse governance[139]. - The company has established indemnity provisions for its directors, ensuring protection against liabilities incurred in the course of their duties[164]. - The company has purchased insurance for its directors' responsibilities and related litigation costs, further safeguarding its leadership[165]. - The board consists of three executive directors, three non-executive directors, and three independent non-executive directors as of December 31, 2018[184]. - The company has complied with all provisions of the Corporate Governance Code, except for the establishment of a remuneration committee[182]. - The independent non-executive directors have reviewed related party transactions and confirmed they were conducted on normal commercial terms[176]. Shareholder Information - Major shareholders include China Merchants Group Limited, holding 42,022,041 shares, representing 27.59% of the total issued shares[166]. - Lazard Asset Management LLC holds 26,084,706 shares, accounting for 17.12% of the total issued shares[166]. - The company has maintained a public float of at least 25% of its issued shares as required by listing rules[170].