Annual Report 2021

China Merchants China Direct Investments Limited Annual Report 2021 15 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) In 2021, the CBIRC continued to set caps for trust companies with respect to the absolute size of their real estate trust assets, as well as to the proportion of their non-standardised debt assets in relation to trust management assets. In addition, it has also strictly differentiated the business model of non-investment trusts in order to prevent any attempts to disguise debt as equity. At the same time, regulatory authorities continue to ask trust companies to further downsize their channel business. Thus, CCT faces significant limitations in conducting new real estate business, as it may undertake new real estate trust projects only after it has reduced exposure to current projects. Furthermore, the firm must seek arrangements that conform to the new regulatory requirements, while minimising the impact of the new regulations on its business and evaluating new projects more prudently according to market conditions. Currently, among its traditional businesses, the real estate trust business remains the primary source of income and profit for CCT. In order to optimise its trust business mix, CCT will strive to develop new trust business for standardised assets, as well as to actively promote its equity investment trust business. In addition, CCT will seek to expand its service trust business, encompassing securitised assets and family trusts, and to enhance its brand value and industry influence by developing charity trusts. Moreover, on 8 September 2021, CCT and its single largest shareholder, PICC Group, announced that an insurance trust cooperation agreement was successfully signed by both parties in Guangzhou, which should strengthen their business partnership with respect to insurance trusts and other businesses in the future. CCT regularly reviews its trust projects to identify projects with potential risk and to evaluate and review existing risk protection measures. As a result, the firm has gradually reduced its scope of business with certain real estate developers. It was reported that several large real estate developers suffered financial difficulties in the second half of 2021. In this regard, CCT has closely monitored any risks this may pose to its existing projects, and to take corresponding risk mitigation measures as soon as practical, in order to protect the interests of trust product investors. In 2021, CCT won several awards from certain financial media organisations, including the “Best Trust Product Innovation Award” from the Shanghai Securities News, the “2021 Outstanding Trust Company Award in terms of Social Responsibility” from the Securities Times, the “2021 Best Trust Company in terms of Stable Growth” from the Financial Times, the “Outstanding R&D Innovation Award” and “Outstanding Standard Trust Product Award” of the year from JRJ.com, among others. A proposal for conversion of its capital reserves into registered capital was approved at the shareholders meeting of CCT convened on 27 November 2020, under which registered capital will be increased from RMB2,457 million to RMB4,850 million. Following a delay with the application documents, the Beijing Bureau of Banking and Insurance Regulatory Commission announced its approval of the change in registered capital for CCT on 20 January 2022. After implementation of the proposal, the Fund’s stake in CCT will remain unchanged.