Annual Report 2023

14 14 China Merchants China Direct Investments Limited Annual Report 2023 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) 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 2023, 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 2023, the Fund received a cash dividend of RMB95.93 million from CMB for 2022. As of the end of 2023, the carrying value of the Fund’s interest in CMB was US$216.73 million, representing a decrease of 26.61% from the value at the end of last year of US$295.30 million. The Fund’s unrealised loss attributable to its investment in CMB for 2023 was negative US$74.02 million, down 21.15% year-over-year. On 26 March 2024, CMB announced that its audited net profit for 2023 was RMB146.6 billion, up 6.22% year-over- year. On 14 February 2023, since approximately RMB100 billion out of RMB140.5 billion of CMB’s existing capital instruments will enter the exercisable redemption period in the next 2 to 3 years, and these capital instruments are relatively large in volume, and there is a need to maintain a stable capital adequacy ratio, the board of directors of CMB therefore passed a resolution on the issuance of capital bonds so that CMB can apply to the relevant regulatory authorities for a capital bond issuance quota, of an amount of RMB107 billion. This issuance amount had previously been authorised at the 2020 shareholders meeting. After obtaining approval from the relevant regulatory authorities for the issuance, CMB can, with reference to the bank’s actual operations as well as to the resolution’s requirements, issue such bonds to replenish its capital, securely and as needed. On 27 June 2023, CMB’s capital plan targets for 2023-2027 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 reach and be maintained at levels greater than 10.0%, 11.0% and 13.0%, respectively. On 19 November 2023, CMB exercised its redemption right to redeem early all of the RMB20 billion 10-year tier-two capital bonds issued in November 2018. On 1 December 2023, as approved by the National Administration of Financial Regulation, CMB completed an issuance of undated capital bonds of RMB30 billion in the national interbank bond market. The proceeds from issuance of the bonds will be used to replenish the bank’s additional tier-one capital, in accordance with applicable laws and approval by regulatory authorities. In 2023, the Fund did not dispose of any A shares of CMB.