Annual Report 2022

14 China Merchants China Direct Investments Limited Annual Report 2022 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) On 30 December 2022, CMB announced that it had exercised its right of redemption on 28 December 2022, per the terms of the relevant bond prospectus, and had redeemed all subordinated bonds that had been issued previously on 28 December 2012 in the amount of RMB11.7 billion. In 2022, the Fund did not dispose of any A shares of CMB. China Credit Trust Co., Ltd. (“CCT”) was established in 1995, with its headquarters in Beijing. The principal activities of CCT are trust management, fund management, investments and loan financing. It is the first trust company with a full range of licenses for international business in the Chinese trust industry. As of 31 December 2022, the Fund held a 6.94% equity interest in CCT, with a total investment cost of US$50.49 million. CCT has increased its registered capital from RMB2,457 million to RMB4,850 million by converting its capital reserves into registered capital. And the relevant change of business registration was completed on 28 February 2022. The Fund’s stake in CCT remains unchanged afterwards. As of the end of 2022, the carrying value of the Fund’s interest in CCT was US$140.46 million, representing a decrease of 35.62% from the value at the end of last year of US$218.16 million. The Fund’s unrealised loss attributable to its investment in CCT for 2022 was negative of US$61.09 million, up 1,909.54% year-over-year. For 2022, CCT recorded an unaudited net profit of RMB1,092 million, up 4.83% year-over-year. During the year, the company recorded an increase in income from handling fees and commissions, as well as interest income, compared to last year. In addition, the loss due to credit impairment for the year decreased, while the sum of investment income and the gain on change in fair value saw an increase, compared to last year. In 2022, CCT’s scale of trust management assets and active management business reported strong growth and outperformed its peers. It is important to note that both the revenue of trust business and profit of CCT grew despite an overall decline in revenue and profit for the trust industry in China during this period of time. In light of the various regulatory measures imposed on the trust industry by the CBIRC and the downturn in China’s real estate market, CCT has sought to optimise its business mix. To this end, CCT’s real estate trust business and the proportion of such business has fallen sharply, while its standardised trust business has grown to become CCT’s primary focus with the trust asset size increased from RMB25.7 billion by the end of 2021 to RMB168.9 billion by the end of 2022, up by more than 500%. CCT is also actively promoting its equity investment trust business. Meanwhile, CCT is seeking to expand its service trust business, encompassing securitised assets and family trusts (including insurance trust), and to enhance its brand value and industry influence by developing charity trusts. CCT and its single largest shareholder, the PICC Group, further strengthened their cooperation and, as a result, the insurance trust business that they have jointly promoted is growing rapidly and has commenced operations in over ten cities across the country. The two parties successfully signed an insurance trust on 20 May 2022, for the first time, with a value of over RMB100 million. And a more recent trust signed on 12 January 2023 set a new record high.