Annual Report 2019

INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) China Merchants China Direct Investments Limited Annual Report 2019 13 REVIEW OF INVESTMENTS (CONTINUED) China Merchants Bank Co., Ltd. (“CMB”) is China’s first joint-stock commercial bank, with its headquarters in Shenzhen, Guangdong and with its shares listed on the Shanghai Stock Exchange since 2002 and on the Hong Kong Stock Exchange since 2006. As of 31 December 2019, the Fund held 55.20 million A shares of CMB, accounting for 0.219% of the total issued share capital of CMB, with a corresponding investment cost of RMB154.61 million (equivalent to US$19.79 million). In July 2019, the Fund received a cash dividend of RMB51.88 million from CMB for 2018. As of the end of 2019, the carrying value of the Fund’s interest in CMB was US$297.34 million, representing an increase of 46.77% over US$202.59 million at the end of last year. The Fund’s unrealised gain attributable to its investment in CMB for 2019 was US$98.99 million, as compared to an unrealised loss for last year. On 21 March 2020, CMB announced that its audited net profit for 2019 was RMB92.9 billion, up 15.28% year-over- year. On 27 June 2019, CMB’s capital plan targets for 2019-2021 were approved by the shareholders meeting of CMB as follows: within the planning period, the core tier-one capital adequacy ratio, tier-one capital adequacy ratio and total capital adequacy ratio shall be reached and maintained at levels greater than 9.5%, 10.5% and 12.5%, respectively. Moreover, the shareholders meeting and the board of directors of CMB have successively approved the relevant resolutions to authorise CMB to issue write-down undated capital bonds of no more than RMB50 billion, and to include this issuance in CMB’s other tier-one capital in accordance with applicable laws and approval by regulatory authorities and, upon the occurrence of the triggering events specified in the offering documents, to absorb the loss by means of a write-down, whether in whole or in part. On 2 November 2019, CMB announced that it has received approval from the China Banking and Insurance Regulatory Commission (the “ CBIRC ”) for the commencement of business by CMB Asset Management Co., Ltd. (“ CMB Asset Management ”). CMB Asset Management is the second asset management subsidiary of a joint- stock commercial bank to be approved for the commencement of business, with registered capital of RMB5 billion. The establishment of an asset management subsidiary is an important step for CMB to take in promoting the healthy development of its asset management business. It will subject both management and operations to more stringent regulatory requirements with respect to investor protection, corporate governance and risk management, but it will also grant the new company greater flexibility when running businesses in areas such as sales management, investment scope, product design and cooperation with other institutions. Furthermore, it will permit CMB to change the legal status of its asset management business unit from a department to a legal entity and thereby separate all risks of the legal entity from the parent company — consistent with CMB’s goal of “Being trusted by our clients. Managing wealth for our clients.” In 2019, the Fund did not dispose of any A shares of CMB.