On June 18th, the Shanghai Regulatory Bureau of the China Banking and Insurance Regulatory Commission released an administrative penalty information disclosure table, showing that CITIC Financial Asset Management Co., Ltd. Shanghai Free Trade Zone Branch (formerly China Huarong Asset Management Co., Ltd. Shanghai Free Trade Zone Branch, hereinafter referred to as "CITIC Financial Asset") was ordered to make corrections due to non-compliance in collateral management and illegal acquisition of normal assets from non-financial institutions, and was fined RMB 1 million.

At the same time, Zhang Fuquan, senior manager of the Innovative Business Department of the China Huarong Asset Management Co., Ltd. Shanghai Free Trade Zone Branch, was warned and fined RMB 50,000.

On June 13th, CITIC Financial Asset (02799.HK) announced that due to the need for a coordinating meeting, the company's temporary shareholders' meeting will be postponed to June 28th.

At the same time, the temporary shareholders' meeting will consider and approve two special resolution proposals: the extraction of Daqin Railway stocks and the transfer of the interests of four single asset management plans.

According to the proposal to extract Daqin Railway stocks in the announcement, CITIC Financial Asset proposed to extract from its holding of part or all of the Daqin Railway stocks in Asset Management Plan A, that is, to directly extract A-shares of Daqin Railway held directly by the company from Asset Management Plan A. CITIC Financial Asset is the sole principal and beneficiary of Asset Management Plan A.

The proposal stated that the weighted return on equity (ROE) of Daqin Railway at the end of 2023 was 9.09%. In recent years, Daqin Railway has always maintained a dividend payout ratio of more than 50%, and investors can continue to receive dividend income, which is suitable for medium- to long-term holding. CITIC Financial Asset stated that the extraction of Daqin Railway stocks from Asset Management Plan A this time is an asset extraction conducted by the company in accordance with the provisions of clause A of the asset management contract. After the extraction is completed, the company will directly hold the portion of Daqin Railway stocks, and can obtain stable dividend income in the future and reduce tax expenditures.

In addition, another proposal of CITIC Financial Asset is to transfer the interests of four single asset management plans.

It is understood that the resolutions to commission CITIC Securities Asset Management and CITIC Construction Investment to set up single asset management plans for investment at the first and second temporary shareholders' meetings of CITIC Financial Asset in January and February 2024 have been approved by shareholders, namely, the "CITIC Securities Asset Management Plan" and the "CITIC Construction Investment Asset Management Plan," with CITIC Bank as the custodian. From the approval of the four single asset management plan proposals at the beginning of the year to the issuance of the transfer notice, less than half a year has passed.

According to CITIC Securities Asset Management Plan and CITIC Construction Investment Asset Management Plan, CITIC Financial Asset has established four single asset management plans managed by CITIC Securities Asset Management and CITIC Construction Investment. Investment scope includes high-quality assets of listed companies at home and abroad, including bonds and stocks. The total entrusted fund scale does not exceed RMB 60 billion, and the investment period is three years. This transfer belongs to the early termination of the commission.

Through the four single asset management plans, CITIC Financial Asset holds the assets of several domestic and foreign companies, including Kunlun Energy (0135.HK), China Power (2380.HK), China Telecom (0728.HK) and Bank of China (3988.HK), with shareholding ratios of 2.48%, 4.9%, 1.32% and 3.31% respectively. After the liquidation is completed, the entire or partial stock holdings of the four asset management plans will be recovered in the existing distribution method. Before delivering the relevant stocks to CITIC Financial Asset International, the latter will directly or indirectly enjoy shareholder rights such as voting rights and disposal rights of the relevant stocks.

The trading price is that CITIC Financial Asset plans to invest RMB 3.12 billion to buy Daqin Railway stocks held by Asset Management Plan A. The transfer price is based on the weighted average price of the secondary market on the day of transfer. The transfer price of the interests of the four asset management plans is based on the net asset value of the four single asset management plans on the day before the transfer date. Considering the fluctuation of net asset value, the transfer price will not exceed the increase of entrusted fund scale of RMB 10 billion of the four single asset management plans before the transfer.

After the liquidation is completed, the entire or partial stock holdings of the four asset management plans will be recovered in the existing distribution method. Before delivering the relevant stocks to CITIC Financial Asset International, the latter will directly or indirectly enjoy shareholder rights such as voting rights and disposal rights of the relevant stocks.

The trading price is that CITIC Financial Asset plans to invest RMB 3.12 billion to buy Daqin Railway stocks held by Asset Management Plan A. The transfer price is based on the weighted average price of the secondary market on the day of transfer.

The transfer price of the interests of the four asset management plans is based on the net asset value of the four single asset management plans on the day before the transfer date. Considering the fluctuation of net asset value, the transfer price will not exceed the increase of entrusted fund scale of RMB 10 billion of the four single asset management plans before the transfer.

At the beginning of this year, when the joint asset management plan was established, China CITIC Financial Assets stated that the purpose of establishing the joint asset management plan was to further tap the synergies of China CITIC Group, strengthen risk management and control capabilities, and enhance its role in supporting investment expertise.

Formerly known as China Huarong, CITIC Financial Assets was founded in 1999 and is one of the four major state-owned financial asset management companies, mainly engaged in non-performing asset management, financial services and other business. In January of this year, it was officially renamed CITIC Financial Assets Management Co., Ltd. and became a member of CITIC Group.

In May of this year, CITIC Financial Assets announced that it would transfer 60% of the issued shares of Jinzu Co., Ltd. held by it to CITIC Group through an agreement transfer. According to the announcement, after the sale is completed, Jinzu Co., Ltd. will no longer be a subsidiary of CITIC Financial Assets. At the same time, the core tier one capital of its parent company will be supplemented by more than 6.3 billion yuan in one go. Previously, in order to focus on its main business, China Huarong Asset Management had slimmed down several times and had successively transferred five licensing subsidiaries, including Huarong Zhongguancun Non-performing Asset Trading Center, Huarong Consumer Finance, Huarong Securities, Haurong Xiangjiang Bank, and Haurong Trust.

In terms of performance, in 2023, CITIC Financial Assets achieved a turnaround in operating performance. Its total income in 2023 was 75.8 billion yuan, a year-on-year increase of 105.2%, of which the NPL operating division's total income was 66.955 billion yuan, a year-on-year increase of 110.8%, and achieved a net profit attributable to the parent company of 1.766 billion yuan. As of the end of 2023, the company's total assets amounted to 968.103 billion yuan, an increase of 1.1% compared to the end of the previous year.