During the reporting period, there was no significant entrustment in respect of fund and asset management.
9.25 Significant event in respect of fund entrusting
During the reporting period, there was no event in respect of fund entrusting beyond our normal business.
9.26 Major activities in asset acquisition, disposal and reorganization
9.26.1 Progress of the acquisition of CIGNA & CMC Life Insurance
In order to further optimize revenue structure, broaden operation channels and enhance comprehensive competitive edge, the Company and Shenzhen Dingzun Investment Advisory Company, Ltd. (“Dingzun”) entered into a share transfer agreement on 5 May 2008, pursuant to which the Company agreed to acquire from Dingzun its 50% equity interest in CIGNA & CMC Life Insurance for a consideration of RMB141,865,000.
China Merchants Steam Navigation Company Limited, a wholly owned subsidiary of CM Group, is a substantial shareholder of the Company. CM Group is an indirect controlling shareholder of Dingzun which in turn holds 50% equity interest in CIGNA & CMC Life Insurance. Dingzun is therefore a connected person of the Company under the Hong Kong Listing Rules. The transaction contemplated by the Share Transfer Agreement constituted a disclosable and connected transaction of the Company, which was subject to Independent Shareholders’ approval pursuant to Rule 14A.18 of the Hong Kong Listing Rules.
The acquisition was approved by the Board and the shareholders’ general meeting of the Company. Currently, the Company had made re-submissions concerning the acquisition to relevant regulatory authorities in accordance with the Pilot Administrative Measures for Commercial Banks to Make Equity Investment in Insurance Companies, and the acquisition is still pending for the approvals from relevant regulatory authorities.
Further details of the above acquisition were set out in the announcements published by the Company on newspapers and websites designated for disclosure of the information on 6 May 2008, 28 June 2008 and 4 June 2011.
9.26.2 Progress of the acquisition of Tibet Trust
On 18 August 2008, the 27th meeting of the Seventh Session of the Board of Directors of the Company passed the “Resolution on Acquisition of Controlling Interest in Tibet Autonomous Region Trust and Investment Corporation (“Tibet Trust”), pursuant to which, the Company agreed to acquire 60.5% equity interest in Tibet Trust and authorized the Company’s management to deal with the acquisition procedures.
In September 2008, the Company entered into a framework agreement with relevant parties including Tibet Autonomous Region Finance Bureau in relation to the acquisition of equity interest in Tibet Trust. On 3 August 2009, the Company entered into an agreement on transfer of interest and right in Tibet Trust with the relevant parties including Tibet Autonomous Region Finance Bureau. Pursuant to the agreement, the Company will acquire 60.5% equity interest in Tibet Trust at a consideration of RMB363,707,028.34. The acquisition is still pending for the approval of relevant regulatory authorities.
In order to promote the acquisition of equity interest in Tibet Trust, the Company proactively negotiated with the relevant parties, which has effectively facilitated the restructuring process of Tibet Trust.
9.27 Implementation of the Share Appreciation Rights Incentive Scheme
during the reporting period
For details about the implementation of the Company’s Share Appreciation Rights Incentive Scheme, please refer to the section “Directors, supervisors, senior management, employees and branch operational structure”.
9.28 Explanatory notes and independent opinions of the independent
non-executive directors towards the Company’s guarantees
China Merchants Bank Co., Ltd
Explanatory notes and independent opinions of the independent non-executive directors towards the Company’s guarantees
In accordance with CSRC Approval [2003] No. 56 of China Securities Regulatory Commission and the relevant provisions of Shanghai Stock Exchange, the independent non-executive directors of China Merchants Bank Co., Ltd. carried out a due diligence review of the Company’s guarantees for 2011 on an open, fair and objective basis, and their opinions are as follows:
After review, it was ascertained that the guarantee business of China Merchants Bank Co., Ltd. was approved by the People’s Bank of China and China Securities Regulatory Commission, and it is carried out in the ordinary course of business of banks as a conventional business. As at 31 December 2011, the balance of the Company’s guarantee business (including irrecoverable letters of guarantees and shipping guarantees) was RMB111.522 billion, representing an increase of 4.91% from the beginning of the year.
The Company emphasizes risk management of the guarantee business. It formulates specific management measures and operation workflow according to the risk characteristics of this business. In addition, the Company enhances risk monitoring and safeguards of this business through management means such as on-site and offsite checks. During the reporting period, the operations of the Company’s guarantee business was normal and there was no violated guarantees.
China Merchants Bank Co., Ltd. Independent Non-executive Directors
9.29 Use of funds by related parties
During the reporting period, neither the major shareholders of the Company nor their related parties had used any funds of the Company for non-operating purposes, and none of them had used the funds of the Company through any related party transactions on anything other than an arm’s length basis.
9.30 Establishment and implementation of the management system
regarding inside information and insiders
In order to regulate the management of the Company’s inside information, enhance the confidentiality of inside information, maintain the principle of fairness in information disclosure and safeguard the legal interests of investing public, the Board of Directors of the Company approved the “Inside Information and the Rules on Persons with knowledge of inside information of China Merchants Bank Co., Ltd.” (“Insider Information and the Rules on the Management of Insiders”). During the reporting period, in accordance with the requirements of the “Insider Information and the Rules on Persons with inside information”, the Company regulated the persons with inside information and completed registration and filing for inside information in four cases. During the reporting period, in accordance with the relevant requirements of the Notice Regarding the Conscientious Implementation of Resolutions Made at the “Special Working Conference for Information Disclosure by Companies Listed on Shenzhen Stock Exchange”(Shen Zheng Ju Gong Si Zi [2011] No.87) issued by Shenzhen Securities Regulatory Bureau, the Company provided a “special training on prevention of insider transaction” to all directors, supervisors, senior management as well as the key employees who may have access to inside information, so as to further improve the awareness of prevention and control of insider transaction within the whole Company. By way of this training, the Company further implemented various measures relating to the prevention of insider transaction, so as to effectively prevent and control potential illegal act of insider transaction within the Company. During the reporting period, none of the persons were found taking advantage of the inside information to trade in the Company’s shares.
9.31 Responsibility statements on internal control
The Board of Directors of the Company is responsible to i) ensure the establishment and implementation of an adequate and effective internal control system by the Company; ii) examine and approve the overall business strategies and major policies of the Company and conduct regular checks and evaluations on their execution; iii) ensure that the Company operates in compliance with laws and regulatory policies; iv) clearly set up the acceptable risk level; v) ensure that the senior management adopts all necessary measures to identify, measure, monitor and control risks; vi) approve the Company’s organizational structures; and vii) ensure that the senior management monitors and evaluates the adequacy and effectiveness of the internal control system. The Audit Committee under the Board of Directors is responsible to monitor the effectiveness of the implementation of the Company’s internal control and the self-assessment of internal control as well as coordinate internal control audits and other relevant matters.
The Company will strengthen its internal control according to regulatory requirements and its management needs. By conducting self-assessment of internal control, issues can be identified and subsequent improvements will be made, thereby the Company’s ability to prevent risks and the quality of standardized practice will be enhanced.
9.32 Statement made by the directors about their responsibility on the
financial statements
The senior management of the Company provides the Board of Directors with adequate explanation and sufficient information to enable the Board of Directors to make informed assessment on the financial and other information submitted to it for approval. The directors of the Company acknowledged their responsibility for preparing the financial statements for the year ended 31 December 2011 to present a true view of the operating results of the Company. So far as the directors are aware, there is no material uncertainties related to events or conditions that might have a significant adverse effect on the Company’s ability of sustainable operation.
9.33 Compliance with Banking (Disclosure) Rules
The Company has prepared the financial statements in respect of H Shares for the year 2011 in strict compliance with the Banking (Disclosure) Rules issued by Hong Kong Monetary Authority.
9.34 Review on annual results
KPMG Huazhen and KPMG Certified Public Accountants, our external auditors, have audited the financial statements of the Company prepared in accordance with the PRC Generally Accepted Accounting Principles and the International Financial Reporting Standards respectively, and each has issued an unqualified audit report respectively. The Audit Committee of the Company has reviewed the results and financial report of the Company for the year ended 31 December 2011.
9.35 Annual general meeting and closure of register of members
The Company’s 2011 Annual General Meeting will be convened on Wednesday, 30 May 2012, the notice of which will be further announced by the Company.