China Merchants Energy Shipping Co.Ltd(601872) : China Merchants Energy Shipping Co.Ltd(601872) about the risk assessment report of China Merchants Group Finance Co., Ltd. on December 31, 2021

Securities code: China Merchants Energy Shipping Co.Ltd(601872) securities abbreviation: China Merchants Energy Shipping Co.Ltd(601872) China Merchants Energy Shipping Co.Ltd(601872) about

China Merchants Group Finance Co., Ltd

Risk assessment report as of December 31, 2021

According to the requirements of Shanghai Stock Exchange’s self regulatory guidelines for listed companies No. 5 – transactions and related party transactions, China Merchants Energy Shipping Co.Ltd(601872) (hereinafter referred to as “the company”) inspected the financial license, business license and other certificates of China Merchants Group Finance Co., Ltd. (hereinafter referred to as “the finance company”), and reviewed the balance sheet, income statement, cash flow statement and other regular financial reports of the finance company, After assessing the business qualification, business and risk status of the financial company, the relevant risk assessment is reported as follows:

1、 Basic information of finance company

The finance company was officially established on May 17, 2011. It is a non bank financial institution with the status of enterprise legal person.

Registered address: 1501, 15 / F, building B, building 10, yard 5, Anding Road, Chaoyang District, Beijing legal representative: Zhou Song

Registered capital: RMB 5 billion

Unified social credit Code: 91110 Sgis Songshan Co.Ltd(000717) 82949xa

Up to now, the composition of shareholders is as follows:

Serial number name or name of contributor subscribed capital (100 million yuan) equity ratio

1 China Merchants Group Co., Ltd. 25.5 51.00%

2 Sinotrans Limited(601598) Changhang Group Co., Ltd. 24.5 49.00%

The business scope of the finance company includes: handling financial and financing consulting, credit assurance and related consulting and agency business for member units; Assist member units to realize the receipt and payment of transaction funds; Provide guarantee to member units; Handle entrusted loans between member units; Handle bill acceptance and discount for member companies; Handle the internal transfer settlement between member units and the corresponding settlement and clearing scheme design; Absorbing deposits from member units; Handle loans and financial leases for member units; Engage in interbank lending; Underwriting corporate bonds of member units; Securities investment (fixed income); Product buyer’s credit and financial leasing of member units.

2、 Basic information of internal control of finance company

(I) control environment

According to the requirements of modern corporate governance structure, the finance company has established the board of shareholders, the board of directors and the board of supervisors, and has clearly stipulated the responsibilities of the board of directors, directors, supervisors and senior managers in risk management. The board of directors has a strategy and risk management committee and an audit committee, which are responsible to the board of directors. In accordance with the principle of mutual checks and balances among decision-making system, execution system and supervision and feedback system, the financial company establishes good corporate governance and an organizational structure with reasonable division of labor, clear responsibilities and clear reporting relationship, so as to provide necessary preconditions for the effectiveness of internal control.

The organization chart is as follows:

(II) risk identification and assessment

The finance company has formulated a series of internal control systems and management methods, operating procedures and internal control manuals for various businesses, and set up a risk management department (legal compliance department) and an audit department to conduct all-round supervision and audit on the business activities of the finance company. The finance company has established a relatively perfect hierarchical authorization management system, with clear division of responsibilities among departments and posts and clear reporting relationship at all levels. Through the reasonable setting of departments and post responsibilities, a risk control mechanism of mutual supervision and restriction between departments and posts has been formed. The strategy and risk management committee supervises the overall risk control of the financial company, reviews the risk status report of the financial company, puts forward opinions on improving risk management and internal control, and reports to the board of directors.

(III) control activities

1. Settlement business control

In terms of deposit absorption and settlement business of member units, the finance company has formulated settlement management and business systems such as settlement business management measures, settlement business operation procedures, settlement account management measures and settlement business internal control management measures in accordance with various regulatory laws and regulations; For cross-border capital business, formulate the operating procedures for cross-border capital centralized operation and management business and cross-border operation process, clarify the business links, executive roles and main business rules of the process, and effectively control business risks.

In terms of deposits, the finance company strictly follows the principles of equality, voluntariness, fairness and good faith to handle deposit business for member units, and the relevant policies are implemented in strict accordance with the relevant provisions of the CBRC and the people’s Bank of China, so as to fully ensure the safety of the funds of member units and safeguard the legitimate rights and interests of all parties.

In terms of fund settlement, the financial company mainly relies on the fund settlement system for system control. The fund settlement system supports customers’ multi-level authorization and approval of business to prevent customers’ operational risks. When member companies log in to the fund settlement system to submit instructions, the key elements cannot be modified to ensure the integrity of the business instructions submitted by member companies. The settlement business of the financial company has set up three lines of Defense: the settlement post is based on double duties and double responsibilities as the first line of defense, the post role authorization is the second line of defense, and the comprehensive supervision of the audit department is the third line of defense. The finance company has established a relatively perfect business approval and authorization system to determine the authority of personnel in different positions of settlement to deal with business according to the type of business, amount and risk level. The fund settlement system supports the online reconciliation function and supports the real-time query and verification of the accounts of member companies.

2. Control of foreign exchange settlement and sales business

The foreign exchange settlement and sales business of the finance company includes the settlement and sales of foreign exchange on behalf of customers and their own. The finance company has formulated the management measures for the settlement and sales of foreign exchange business, the operating procedures for the settlement and sales of foreign exchange business, the guidelines for the risk management of the settlement and sales of foreign exchange business, the Interim Provisions on the risk management of RMB and foreign exchange spot transactions, the operating procedures for RMB and foreign exchange spot transactions and other systems to standardize the daily operation of the settlement and sales of foreign exchange business. The risk management department shall monitor the risk of the foreign exchange settlement and sales business of the financial company, act as the administrator of the foreign exchange trading system, and set and manage the authority of operators; The finance department is responsible for pricing the listed exchange rate of the finance company, and the financial market department is responsible for dispatching foreign exchange funds to meet the payment needs; The settlement business department sets up a foreign exchange team, which is responsible for the operation of the inter-bank foreign exchange market. The settlement team is responsible for the preliminary examination of documents and accounting treatment, and implements the separation system of transaction and clearing; The audit department is responsible for the audit and supervision of the foreign exchange settlement and sales business system and business operation.

3. Credit business control

In terms of credit business management, the finance company strictly implements credit management and handles various credit businesses within the credit line for member units. Detailed management measures have been formulated for all credit businesses, business is carried out in strict accordance with the system, and the whole process risk management of credit business is implemented. Specifically, it includes:

(1) Credit

The finance company controls the total amount and structure of annual credit every year. The finance company formulates the credit policy guidelines of the finance company every year according to the financing needs of the member units and the capital status of the finance company, establishes the credit scale and scope, and ensures that the total amount of credit is reasonable and the structure is balanced.

The credit approval of member units shall follow the principle of “rating before credit”, and shall take effect only after being approved by the credit review committee of the finance company and the authorized approver.

(2) Self operated loan

The financial company carries out self loan business within the credit limit of its member units, and carries out the three check system in its own loan issuance, and conducts regular investigation before loan, loan time examination and post loan inspection. The approval of self operated loans shall strictly comply with the principle of separating the front, middle and back office. After the credit business is initiated by the credit business department and completed due diligence, it shall be reported to the risk management department for risk review, and the loan can be made only after being approved by the authorized approver. According to the different risk levels of member units, different guarantee methods such as credit, mortgage and pledge are required for self operated loans, and the risk is controlled through fund management means such as closed management of project funds and entrusted payment of loan funds.

(3) Bill business

The finance company carries out bill acceptance and bill discount business. Strictly control the credit risk of bill acceptance business: first, make an all-round evaluation of the drawer and objectively evaluate the drawer’s repayment ability and willingness; Second, examine the authenticity of bills; Third, certain guarantee measures are required according to the credit level of the drawer. Strictly control operational risks in bill discount business: first, strictly review the elements and authenticity of bills, and pay attention to query; Second, strictly examine the qualification of discounters to ensure that Bill transactions are true and reasonable; Third, strictly follow the discount operation process to ensure the legality and compliance of system operation and business approval; Fourth, strengthen the custody of bills and implement double responsibility.

(4) Guarantee business

The finance company manages the guarantee as a risky asset, and controls the total amount of the guarantee business according to the index requirements of the regulatory authority. The external guarantee generally needs one of monetary margin, mortgage or pledge and high-quality enterprise counter guarantee to ensure the safe and stable handling of the guarantee.

(5) Intermediary business

The finance company carries out entrusted loans, financial consultants and other intermediary businesses, does not advance funds, only charges handling fees, and does not bear any form of capital risk. The entrusted loan business must be deposited before lending. If the borrower cannot repay the principal and interest of the loan, the finance company will not bear the responsibility of repaying the principal and interest. Financial advisory business adheres to independence, does not make financing commitments in financial advisory services, does not issue false reports, and does not support illegal requirements.

4. Internal audit control

The finance company has established the management measures for internal audit and the operating procedures for routine audit, which defines the responsibilities and authorities of internal audit institutions and auditors, as well as the contents and procedures of internal audit. As the internal audit institution of the financial company, the audit department conducts independent and objective supervision, inspection and evaluation of various business and management activities of the financial company on a quarterly basis, and regularly carries out special internal audit, and organizes various special inspection and troubleshooting activities to ensure the stable operation of the financial company. At the same time, the audit department evaluates the rationality of the design and operation effectiveness of internal control measures for various business and management activities of the company on an annual basis, and prevents relevant risks through the effective implementation of internal control activities.

5. Information system control

The financial company has divided functional areas such as test, production and DMZ on the network partition, isolated and defended by multi-level security protection equipment, deployed high-performance firewall and access list strategy, and only allowed specific service access to the address and port in the list; And adopt vulnerability scanning and intrusion detection system to ensure network security; Access the core business system and log in through CA key authentication; Use professional backup software and hardware for data level backup of databases and applications and save them in remote safes. At the same time, the core business system has carried out the level assurance and filing of information system security, and obtained the level III Filing Certificate of capital system security, further improving the level of system security reinforcement and protection; The finance company has obtained direct connection with 13 banks by special line to ensure the safety and efficiency of data transmission.

(IV) overall evaluation of internal control

The internal control system of the financial company is perfect and implemented effectively. All businesses can be carried out in strict accordance with the system and process without major operational risks; All regulatory indicators meet the requirements of regulatory authorities; The business operation is legal and compliant, the management system is sound, and the risk management is effective. 3、 Operation management and risk management of finance company

(I) operation

As of December 31, 2021, the total assets of the finance company were 66.332 billion yuan and the owner’s equity was 6.864 billion yuan. 58.830 billion yuan of deposits were absorbed from member units. In 2021, the total profit was 730 million yuan and the net profit was 551 million yuan.

(II) management

Since its establishment, the finance company has adhered to the principle of sound operation, and has passed routine audit, special internal audit, system construction and management in strict accordance with the company law of the people’s Republic of China, the law of the people’s Republic of China on banking supervision and administration, the accounting standards for business enterprises, the measures for the administration of financial companies of enterprise groups, relevant national financial regulations, rules and articles of association under the framework of comprehensive risk management Internal control construction and evaluation, standardize business behavior, and consolidate the internal control management of the financial company.

(III) regulatory indicators

According to the measures for the administration of financial companies of enterprise groups and other relevant provisions, as of December 31, 2021, all regulatory indicators of the financial company have met the specified requirements.

Classification index name regulatory requirements December 31, 2021

Capital adequacy ratio ≥ 10% 14.39%

Non performing assets ratio ≤ 4% 0.00%

Asset quality

Non performing loan ratio ≤ 5% 0.00%

Market risk proportion of self owned fixed assets ≤ 20% 0.07%

Liquidity ratio ≥ 25% 59.70%

Liquidity risk

Proportion of borrowed funds ≤ 100% 1.02%

As of December 31, 2021, the shareholder China Merchants Group Co., Ltd. had a deposit of 14.167 billion yuan and no loan; The shareholder Sinotrans Limited(601598) Changhang Group Co., Ltd. has a deposit of RMB 4.813 billion and no loan.

(V) deposits and loans of listed companies

As of December 31, 2021, the total deposits of the company and its subsidiaries were 2.5 billion yuan; The total loans of the company and its subsidiaries amounted to 858 million yuan.

4、 Risk assessment opinions

Based on the above judgment, the company believes that:

(1) The finance company has legal and valid financial license and business license; (2) It is not found that the financial company violates the measures for the administration of financial companies of enterprise groups issued by Bank Of China Limited(601988) industry supervision and Administration Commission

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