15th Feb 2006 07:02
Air China Ld15 February 2006 PART 1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION If you are in doubt as to any aspect of this circular, you should consult yourstockbroker or other registered dealer in securities, bank manager, solicitor,professional accountant or other professional adviser. If you have sold or transferred all your shares in Air China Limited, you shouldat once hand this circular and the accompanying form of proxy and the notice ofattendance to the purchaser or the transferee or to the bank, stockbroker orother agent through whom the sale or transfer was effected for transmission tothe purchaser or transferee. The Stock Exchange of Hong Kong Limited takes no responsibility for the contentsof this circular, makes no representation as to its accuracy or completeness andexpressly disclaims any liability whatsoever for any loss howsoever arising fromor in reliance upon the whole or any part of the contents of this circular. AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753) (1) PROPOSED A SHARE ISSUE (2) PROPOSED AMENDMENTS TO THE ARTICLES (3) PROPOSED APPOINTMENT OF NEW INDEPENDENT NON-EXECUTIVE DIRECTOR It is important to note that the purpose of distributing this circular is toprovide the shareholders of the Company with information on the proposed issueof A Shares by the Company, so that the shareholders of the Company may make aninformed decision on voting in respect of certain resolution(s) to be tabled atthe extraordinary general meeting of the Company. This circular does notconstitute, or form part of, an offer or invitation, or solicitation orinducement of an offer, to subscribe for or purchase any of the A Shares orother securities of the Company, nor is this circular calculated to inviteoffers for any shares or other securities of the Company. A letter from the Board is set out on pages 3 to 12 of this circular. Notices convening Foreign Shareholders Class Meeting (as appropriate) of theCompany to be held on 28 March 2006 at 2:00 p.m., and the EGM at 2:30 p.m. (orimmediately after the conclusion or adjournment of the Foreign ShareholdersClass Meeting) at The Conference Room, 29/F, Air China Building, 36 XiaoyunRoad, Chaoyang District, Beijing, PRC, together with the notice of attendanceand form of proxy are enclosed herein. Whether or not you intend to attend the Class Meetings or the EGM, you arerequested to complete and return the form of proxy in accordance with theinstruction printed thereon. If you intend to attend the respective meetings,you are required to complete and return the notice of attendance toComputershare Hong Kong Investor Services Limited for holders of H Shares atRooms 1712-1716, Hopewell Centre, 183 Queen's Road East, Hong Kong or to theaddress of the Company's Board Secretariat for holders of Domestic Shares andNon-H Foreign Shares on or before 8 March 2006. For holders of H Shares, theproxy form should be returned to Computershare Hong Kong Investor ServicesLimited and for holders of Domestic Shares and Non-H Foreign Shares, the proxyform should be returned to the address of the Company's Board Secretariat notless than 24 hours before the time appointed for the meetings or any adjournedmeetings thereof. Completion and return of the form(s) of proxy will not preclude you fromattending and voting in person at the meetings or at any adjourned meetingsshould you so wish. 13 February 2006 CONTENTS Page Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Letter from the Board A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. Proposed A Share Issue . . . . . . . . . . . . . . . . . . . . . . . 4 C. Proposed amendments to Articles . . . . . . . . . . . . . . . . . . 9 D. Rules and procedures of meetings and other systems . . . . . . . . 10 E. Appointment of new independent non-executive Director . . . . . . . 10 F. Increase in number of Directors . . . . . . . . . . . . . . . . . . 11 G. Class Meetings and the EGM . . . . . . . . . . . . . . . . . . . . 11 H. Procedures for demanding a poll . . . . . . . . . . . . . . . . . . 12 I. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Notice of Foreign Shareholders Class Meeting . . . . . . . . . . . . . . . . 13 Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Appendix I - Proposed amendments to Articles of Association . . . . . . . . . 20 Appendix II - Proposed Rules and Procedures for Shareholders' General Meetings . . . . . . . . . . . . . . . . . . . . . . . 75 Appendix III - Proposed Rules and Procedures for Board Meeting . . . . . . . 108 Appendix IV - Proposed Rules and Procedures for Meetings of Supervisors . . 126 Appendix V - Proposed Connected Transaction Decision Making System . . . . . 134 DEFINITIONS In this circular, unless otherwise indicated in the context, the following expressions havethe meaning set out below: "A Share Issue" the proposed issue of not more than 2.7 billion A Shares by the Company to qualified institutional investors as approved by CSRC and placees through online offering based on market share value and subscribers allowed by the regulatory bodies and by the applicable laws and regulations at the time of the A Shares Issue, which are proposed to be listed on the Shanghai Stock Exchange "A Shares" the Domestic Shares which are proposed to be allotted and issued by the Company to qualified institutional investors as approved by CSRC and placees through online offering based on market share value and subscribers allowed by the regulatory bodies and by the applicable laws and regulations at the time of the A Shares Issue and listed on the Shanghai Stock Exchange "Articles" the articles of association of the Company from time to time "Board" the board of Directors of the Company "Class Meetings" the Domestic Shareholders Class Meeting and the Foreign Shareholders Class Meeting to be held on 28 March 2006 to approve, inter alia, the A Share Issue "Company" AIR CHINA LIMITED (Air China Limited), a joint stock limited company incorporated in the PRC, with primary listing on The Stock Exchange of Hong Kong Limited with stock code 753 and secondary listing on the Official List of the UK Listing Authority "CSRC" China Securities Regulatory Commission "Directors" the directors of the Company "Domestic Shareholders Class the class meeting for holders of Domestic Shares to beMeeting" held on 28 March 2006 to approve, inter alia, the A Share Issue "Domestic Shares" the ordinary shares of RMB1.00 each issued by the Company, which are subscribed for in Renminbi or credited as fully paid up by PRC nationals "EGM" the extraordinary general meeting of the Company to be held immediately after the conclusion or adjournment of the H Shareholders Class Meeting on 28 March 2006 to approve, inter alia, the A Share Issue "Foreign Shares" both Non-H Foreign Shares and H Shares "Foreign Shareholders Class the class meeting for holders of H Shares and Non-HMeeting" Foreign Shares to be held on 28 March 2006 at 2:00 p.m. to approve, inter alia, the A Share Issue "Group" the Company and its subsidiaries and joint ventures "H Shares" overseas listed foreign shares of RMB1.00 each in the share capital of the Company which are listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars and admitted to the Official List of the UK Listing Authority and are admitted for trading on the market for listed securities of the London Stock Exchange "Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited "Listing Rules" the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange "Non-H Foreign Shares" the ordinary shares of RMB1.00 each in the share capital of the Company which as at the date of this circular are held by China National Aviation Corporation (Group) Limited, a company incorporated in Hong Kong "PRC" the People's Republic of China, excluding, for the purpose of this circular only, Hong Kong, Macau and Taiwan "Price Consultation Period" the period commencing from the date the Company makes the preliminary offer document relating to the A Share Issue publicly available and ending on the date on which the bookbuilding process with the institutional investors is completed. "RMB" Renminbi, the lawful currency of the PRC "SFO" Hong Kong Securities and Futures Ordinance "Shareholders" holders of Domestic Shares, Non-H Foreign Shares and H Shares "Shares" Domestic Shares, H Shares, Non-H Foreign Shares and A Shares LETTER FROM THE BOARD AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753)Executive Directors: Registered office:Mr. Ma Xulun 9th Floor, Blue Sky MansionMr. Cai Jianjiang 28 Tianzhu Road Zone AMr. Fan Cheng Tianzhu Airport Industrial Zone Shunyi DistrictNon-executive Directors: BeijingMr. Li Jiaxiang PRCMr. Kong DongMr. Wang Shixiang Principal place of businessMr. Yao Weiting in Hong Kong: 5th Floor, CNAC HouseIndependent non-executive Directors: 12 Tung Fai RoadMr. Hu Hung Lick, Henry Hong Kong International AirportMr. Wu Zhipan Hong KongMr. Zhang Ke 13 February 2006 To the Shareholders Dear Sir or Madam, (1) PROPOSED A SHARE ISSUE (2) PROPOSED AMENDMENTS TO THE ARTICLES (3) PROPOSED APPOINTMENT OF NEW INDEPENDENT NON-EXECUTIVE DIRECTOR A. INTRODUCTION The Company announced on 9 February 2006 that, subject to Shareholders'approval at the EGM and the separate Class Meetings, the Company will apply tothe relevant authorities in the PRC for regulatory approval for the allotmentand issue of not more than 2.7 billion A Shares to institutional and publicinvestors in the PRC and for the listing of such A Shares on the Shanghai StockExchange. The A Share Issue is subject to approvals from (a) Shareholders to besought at separate Class Meetings and the EGM; and (b) the relevant PRCauthorities. The Company intends to use the net proceeds from the A Share Issue for thepurchase of certain aircraft, and certain project on expansion of existingoperating support facilities, details of which are set out below in thiscircular. In order to comply with the relevant requirements applicable to PRC listedissuers, the Board also proposes to make certain amendments to the Articles andto adopt certain rules and procedures for corporate meetings. In addition, at the board meeting held on 5 September 2005, the Board resolvedto propose that Mr. Jia Kang be appointed as an additional independentnon-executive Director, which appointment is subject to shareholders'approval. In light of such appointment, a special resolution to amend theArticles so that the number of members of the Board be increased from 11 to 12members will also be proposed at the EGM as well. Further information on theproposed appointment of Mr. Jia Kang as a Director and this particular proposedamendment to the Articles is set out in the announcement made by the Companydated 6 September 2005. The purpose of this circular is to give you details of, among other things, theproposed A Share Issue, amendments to the Articles, the appointment of newindependent non-executive Director and the increase in number of Directors. B. PROPOSED A SHARE ISSUE 1. General Subject to Shareholders' approval at the EGM and the separate Class Meetings,the Company will apply to the relevant authorities in the PRC for regulatoryapproval for the allotment and issue of not more than 2.7 billion A Shares toinstitutional and public investors in the PRC and for the listing of such AShares on the Shanghai Stock Exchange. It is expected that such investors willnot include connected persons (as defined under the Listing Rules) of theCompany. If any of such investors includes any connected persons of the Company,the Company will take steps to comply with the relevant connected transactionrequirements under the Listing Rules. At present, the Company has its H Shareslisted on the main board of the Hong Kong Stock Exchange and are admitted fortrading on the market for listed securities on the London Stock Exchange. The proposed A Share Issue and the listing application are subject to approvalby the Shareholders at the EGM and the separate Class Meetings to be held on 28March 2006. As at the date of this circular, no application has been made by theCompany to any PRC authorities in relation to the A Share Issue. It is expectedthat the listing application will be made around the end of March 2006. 2. Structure of the A Share Issue The structure of the proposed A Share Issue is set out below: Type of securities to be issued: RMB denominated ordinary shares (i.e. A Shares). Number of A Shares to be issued: Not more than 2.7 billion A Shares, representing approximately 28.62% of the existing issued share capital of the Company and approximately 22.25% of the enlarged issued share capital of the Company immediately after completion of the proposed A Share Issue, assuming no other changes to the share capital of the Company. Nominal value: RMB1.00 each. Rights attached to A Share: The A Shares to be issued are listed Domestic Shares and, except as otherwise provided for in the Articles, will rank pari passu with the existing Domestic Shares, H Shares and Non-H Foreign Shares in all respects. Target subscribers: Qualified institutional investors as approved by CSRC and the placees through online offering based on market share value, and subscribers allowed by the regulatory bodies and by the applicable laws and regulations at the time of A Shares Issue. Basis for determining the The issue price will not be lower than 90% ofissue price: the average closing price of the Company's H Shares on the Hong Kong Stock Exchange during the Price Consultation Period of the A Share Issue. The issue price for the proposed A Share Issue will be determined based on the PRC securities market conditions at the time when the A Share Issue takes place and in accordance with the applicable CSRC regulations. Thus the amount to be raised from the A Share Issue cannot be ascertained as at the date of this circular. Use of proceeds: It is intended that the net proceeds from the A Share Issue would be used to part finance the purchase of 20 Airbus A330-200 aircraft, 15 Boeing 787 aircraft and 10 Boeing 737-800 aircraft and Air China's project relating to the expansion of existing operating support facilities at the Beijing Capital International Airport ("Proposed Projects"). It will be proposed to the Shareholders at the EGM that the Company be authorised to apply the proceeds from the A Share Issue to any payment due in relation to the Proposed Projects or to repay any outstanding bank loan in relation to the Proposed Projects that occurred before the completion of the A Share Issue; after above prescribed use of the proceeds, any balance of it shall be applied to the working capital of the Company. 3. Information on the Proposed Projects Investment amount It is intended the net proceeds from A Share Issue will be used to part financethe Company's purchase of 20 Airbus A330-200 aircraft, 15 Boeing 787 aircraftand 10 Boeing 737-800 aircraft and Air China's project relating to theexpansion of existing operating support facilities at the Beijing CapitalInternational Airport. The total purchase amount for these aircraft will be lessthan the aggregate catalog price of US$5.68 billion, and the total investmentamount for the project relating to the expansion of existing operating supportfacilities will be approximately RMB600 million. Benefit for the Proposed Projects Pursuant to a purchase agreement dated 26 January 2005 between the Company, AirChina Group Import and Export Trading Co., and Airbus S.A.S, the Company hasagreed to purchase 20 Airbus A330-200 aircraft from Airbus S.A.S.. The Companyalso entered into a purchase agreement with Boeing Company on 8 August 2005 and17 January 2006, pursuant to which the Company has agreed to purchase 15 Boeing787 aircraft and 10 Boeing 737-800 aircraft, respectively. Further informationon the purchases of the 20 Airbus A330-200 aircraft, the 15 Boeing 787 aircraftand the 10 Boeing B737-800 aircraft is set out in the announcements made by theCompany dated 26 January 2005, 8 August 2005 and 10 February 2006, respectively. The purchases of aircraft will expand the fleet capacity of the Company and theaircraft from the purchases will principally serve the routes to internationaldestinations in Europe, Australia, North America and certain key domesticdestinations such as Lhasa. The aircraft from the purchases are expected toreplace certain aircraft in the existing fleet of the Company. The purchase ofthe Boeing 737-800 aircraft will also reinforce Beijing's position as atransportation hub and increase frequency of flights, departing originally fromBeijing, of a number of key domestic flight courses. The purchases of aircraftwill enable the Company to provide more cost-efficient and comfortable servicesto the passengers. The Company obtained approval from the National Development and ReformCommission of the People's Republic of China in September 2005 to commence aproject relating to the expansion of the existing operating support facilitiesat the Beijing Capital International Airport. The total investment amount of theproject is approximately RMB600 million. The project involves the expansion ofvarious operating support facilities including the acquisition of a piece ofland with an area of approximately 1 million square metres and the expansion ofground services facilities and other facilities. 4. Shareholders' approval and other approvals The Class Meetings and the EGM will be held on 28 March 2006 to consider and, ifthought fit, approve, among other things, the A Share Issue. It should be notedthat the A Share Issue, upon the approval by the Shareholders at the separateClass Meetings and the EGM, is still subject to the approval by the CSRC andother PRC government authorities, if necessary. In addition, the approval by theShanghai Stock Exchange as to the listing of and dealings in the A Shares on theShanghai Stock Exchange is also required. Upon obtaining the requisiteShareholders' approval at the Class Meetings and the EGM, it is expected thatthe listing application will be made around the end of March 2006. 5. Reasons for and benefits of the A Share Issue The Company believes that the A Share Issue will establish a new financingplatform for the Company and will broaden the Company's access to differentsecurities markets. This will enable the Company to enhance the development ofits operations and to further improve its competitiveness. The Company believesthat the A Share Issue will provide the financial resources required to partfinance the development of the Proposed Projects. The Company expects that afterthe completion of the Proposed Projects, the carrying capacity of the Group willbe further enhanced. Furthermore, the Company also believes that the capitalraised from the A Share Issue will result in improvements in its debt-to-equityratio and accordingly, will lower its operating risks. The Directors believe that the A Share Issue will benefit the Company and theShareholders as a whole. 6. Effect of the A Share Issue on the Company's shareholding structure Set out below is the shareholding structure of the Company as at the date ofthis circular and immediately upon completion of the A Share Issue assuming thatan aggregate of 2.7 billion new A Shares will be issued under the A Share Issueand no other changes to the share capital of the Company: Immediately after As at the Date of completion of the this circular A Share Issue Number of Number of Shares % Shares % (1) Non-Listed Domestic 4,826,195,989 51.16 4,826,195,989 39.78 Shares (2) Non-H Foreign Shares 1,380,482,920 14.64 1,380,482,920 11.38 (3) Listed Shares - H Share 3,226,532,000 34.20 3,226,532,000 26.59 - A Share - - 2,700,000,000 22.25 Total number of 3,226,532,000 34.20 5,926,532,000 48.84 Listed Shares (4) Total number of 9,433,210,909 100 12,133,210,909 100 Shares As advised by the Company's PRC counsel, Haiwen & Partners ("Haiwen"), theCompany is not required to implement the share conversion reform in the PRC asit is not an existing A Share company that is currently listed on the ShanghaiStock Exchange. As set out in the table above, the shareholding structure of theCompany immediately after the completion of the A Share Issue under existinglaws and regulations is currently expected to comprise non-listed DomesticShares, non-H Foreign Shares, H Shares and A Shares, although certain newdevelopments as set out below are expected. According to the Guidelines on Share Conversion Reform of Listed Companiesissued by the CSRC and other relevant authorities and committees in 2005,companies seeking an A Share listing in the PRC will no longer have bothtradeable shares and non-tradeable shares. As the laws and regulations relatingto the conversion of non-tradeable shares into tradable shares upon listing (the"New Rules") have not been promulgated, the CSRC has temporarily suspendedgiving final approvals for A Share offerings. It is expected that CSRC will only approve new A Share listing after the NewRules have been promulgated. Although the conversion procedures under the NewRules are still uncertain at this stage, it is expected that under the NewRules, the existing non-listed Domestic Shares may be converted into tradeableshares eligible for listing and thus become A Shares, which will carry the samerights as the other A Shares issued by the Company. It is expected that theconversion of non-listed Domestic Shares into A Shares (if approved) will notinvolve any payment of compensation by the holders of the non-listed DomesticShares to the holders of A Shares and will also not require approval byShareholders at separate Class Meetings. C. PROPOSED AMENDMENTS TO ARTICLES To accommodate the A Share Issue, the Company will, when proceeding with the AShare Issue, make proposed amendments to the Articles in compliance with allrelevant and applicable PRC legal and regulatory requirements. Such amendmentsare proposed in accordance with laws and regulations prescribed by the relevantPRC authorities including the CSRC, stipulating provisions mandatory orrecommended for inclusion in articles of association of PRC listed companies.The proposed amended Articles will be adopted for use by the Company aftercompletion of the A Share Issue. The proposed amendments to be made to the Articles primarily aimed to enhancethe corporate governance of the Company and, in accordance with the relevant PRClaws and regulations, deal with matters relating to different areas such asprotection of public shareholders' rights, shareholders' meetings,independent directors and certain other related matters. Further details ofthose proposed amendments are set out in Appendix I to this circular. Such amendments are made on the basis of the existing Articles. The amendedArticles will comply with the relevant laws and regulations applicable tocompanies with listed H Shares and A Shares and will safeguard the interest ofboth the holders of H Shares and holders of A Shares. The proposed amendments to the Articles are subject to approval by way of aspecial resolution by the Shareholders at the EGM, and are conditional uponobtaining any approval, endorsement or registration as may be necessary from therelevant PRC authorities. D. RULES AND PROCEDURES OF MEETINGS AND OTHER SYSTEMS Under the listing requirements of the PRC, the Company has to lay down certainrules and procedures of meetings as well as other decision systems, some ofwhich require Shareholders' approval at the EGM. Special resolutions toconsider, approve and adopt the following rules and procedures will be proposedat the EGM: (a) the Rules and Procedures for Shareholders' General Meetings;(b) the Rules and Procedures for Board Meetings; and (c) the Rules andProcedures for Meetings of Supervisors. Ordinary resolution to consider, approveand adopt the Connected Transaction Decision Making System will be proposed atthe EGM. The unofficial English translations of each of the above rules andprocedures and systems are set out in Appendices II, III, IV and V to thiscircular. E. APPOINTMENT OF NEW INDEPENDENT NON-EXECUTIVE DIRECTOR In order to comply with the requirement of the relevant PRC laws and regulationsin respect of corporate governance of listed issuers in the PRC, at the boardmeeting held on 5 September 2005, the Board resolved to propose that Mr. JiaKang be appointed as an additional independent non-executive Director. Anannouncement was made by the Company on 6 September 2005. An ordinary resolutionto consider and approve the appointment of Mr. Jia will be proposed at the EGM. Mr. Jia Kang, aged 52, is the head of Fiscal Science Research Institute ofMinistry of Finance. Mr. Jia holds a Doctor's Degree of Economic and works asvice chairman of China Public Finance Society and a director of China TaxAssociation and National Debt Association of China. Mr. Jia is also the visitingprofessor of China Renmin University, National Institute of Administration andXiamen University. Mr. Jia has participated in the researches relating to stateeconomic planning and is the author of a large number of economic publications. Mr. Jia does not have any relationship with any other Directors, seniormanagement, substantial shareholders (as defined in the Listing Rules), orcontrolling shareholders (as defined in the Listing Rules) of the Company. Mr. Jia does not have any interests in shares of the Company within the meaningof Part XV of the SFO. The director's fee of Mr. Jia, if any, will be determined subsequent to theEGM by reference to the current emoluments of other independent non-executiveDirectors. Announcement will be made by the Company in due course when thedirector's fee or other emolument of Mr. Jia is determined. The term of hisoffice shall commence on the date of approval of the amendments to Article 93relating to the number of directors by the relevant government authorities andshall end on the expiry of the term of the current session of the Board. F. INCREASE IN NUMBER OF DIRECTORS In light of the appointment of Mr. Jia Kang, the total number of the Directorsshall be increased from eleven to twelve members. An announcement was made bythe Company on 6 September 2005. A special resolution to consider and approvethe amendment of the Article so that the number of Directors be increased fromeleven to twelve members will also be proposed in the EGM. The appointment ofMr. Jia Kang will become effective when that special resolution is passed at theEGM and approval of the same by PRC government authorities is obtained. G. CLASS MEETINGS AND THE EGM Special resolutions to approve, among other matters, the proposed A Share Issueand the proposed amendments to the Articles will be proposed at the EGM.Ordinary resolutions to approve, among other matters, the appointment of the newindependent non-executive Director and the adoption of the Connected TransactionDecision Making System will also be proposed at the EGM. In addition, special resolution to approve the A Share Issue will be proposed atthe Domestic Shareholders Class Meeting and the Foreign Shareholders ClassMeeting. At the Foreign Shareholders Class Meeting, the votes of all holders ofForeign Shares and the holders of overseas listed foreign shares, that is,holders of H Shares, in respect of the special resolution to be proposed at theForeign Shareholders Class Meeting will be counted separately. The Company willtreat the special resolution of the Foreign Shareholders Class Meeting to bepassed if it attains a two-thirds majority of the voting rights of holders ofForeign Shares and that of holders of H Shares attending the meeting. As advisedby Haiwen, this arrangement does not contravene any PRC laws, and the specialresolution, if passed, would be valid. As advised by Haiwen, the separatecounting of the votes of the holders of H Shares is valid. No Shareholder is required to abstain from voting in connection with the mattersto be resolved at the separate Class Meetings and the EGM. Notices convening Foreign Shareholders Class Meeting (if applicable) and theEGM, together with the notice of attendance and form of proxy are enclosed inthis circular. Whether or not you intend to attend the Class Meetings or the EGM, you arerequested to complete and return the form of proxy in accordance with theinstruction printed thereon. If you intend to attend the respective meetings,you are required to complete and return the notice of attendance toComputershare Hong Kong Investor Services Limited for holders of H Shares atRooms 1712-1716, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kongor to the address of the Company's Board Secretariat for holders of DomesticShares and Non-H Foreign Shares on or before 8 March 2006. For holders of HShares, the proxy form should be returned to Computershare Hong Kong InvestorServices Limited and for holders of Domestic Shares and Non-H Foreign Shares,the proxy form should be returned to the address of the Company's BoardSecretariat not less than 24 hours before the time appointed for the holding ofthe meetings or any adjourned meetings thereof. Completion and return of the form(s) of proxy will not preclude you fromattending and voting in person at the meetings or at any adjourned meetingsshould you so wish and completion and return of the notice of attendance do notaffect the right of a Shareholder to attend the respective meeting. However, afailure to return the notice of attendance may result in an adjournment of therespective meeting, if the number of Shares carrying the right to voterepresented by the Shareholders proposing to attend the relevant meeting by thenotice of attendance does not reach more than half of the total number of Sharesof the Company carrying the right to vote at the relevant meeting. H. PROCEDURES FOR DEMANDING A POLL Pursuant to Article 72 of the existing Articles, at any general meeting, aresolution put to the vote of the meeting shall be decided on a show of handsunless a poll is (before or after any vote by the show of hands) demanded: (i) by the chairman of the meeting; (ii) by at least two shareholders present in person or by proxy for the timebeing entitled to vote at the meeting; or (iii) by any shareholder or shareholders (including proxy) holding individuallyor holding in aggregate of 10% or more of the shares carrying the right to voteat the meeting. I. RECOMMENDATION The Directors consider that the A Share Issue, the proposed amendments to theArticles, the proposed appointment of the additional independent non-executiveDirector and the increase in number of the Directors are in the best interestsof the Company and its Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of theresolutions which will be proposed at the Class Meetings and the EGM. Yours faithfully, For and on behalf of Air China Limited Li Jiaxiang Chairman NOTICE OF FOREIGN SHAREHOLDERS CLASS MEETING AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753) NOTICE IS HEREBY GIVEN that the class meeting for holders of Foreign Shares(including H Shares and Non-H Foreign Shares) ("Foreign Shareholders ClassMeeting") of Air China Limited ("Company") will be held at The ConferenceRoom, 29/F, Air China Building, 36 Xiaoyun Road, Chaoyang District, Beijing, PRCat 2:00 p.m. on 28 March 2006 to consider and, if thought fit, to pass thefollowing resolution. Unless otherwise indicated, capitalised terms used hereinshall have the same meaning as those defined in the announcement of the Companydated 9 February 2006 (the "Announcement"): Special Resolution: "THAT, conditional upon the approval of the same by the Domestic ShareholdersClass Meeting and by shareholders of the Company at the extraordinary generalmeeting to be convened, the public offering of not more than 2.7 billion AShares by the Company in the PRC be and is hereby approved." By Order of the Board Zheng Baoan Li Man Kit Joint Company Secretaries Beijing, the PRC 9 February 2006 Notes: 1. The votes of all holders of Foreign Shares and the holders of overseaslisted foreign shares, that is, holders of H Shares, in respect of this specialresolution will be counted separately. The Company will treat this specialresolution to be passed if it attains a two-thirds majority of the voting rightsof holders of Foreign Shares and that of holders of H Shares attending themeeting. As advised by the Company's PRC counsel, Haiwen & Partners ("Haiwen"), this arrangement does not contravene any PRC laws, and that thisspecial resolution, if passed, would be valid. As advised by Haiwen, theseparate counting of the votes of the holders of H Shares is valid. 2. The proposed A Share Issue and the Company's proposed plan inrelation to the use of proceeds from the A Share Issue Shareholders are reminded to read carefully details of the proposed A ShareIssue as well as the relevant content of the proposal made by the Company inrelation to the use of proceeds from the A Share Issue as contained in theCircular to be despatched to the Shareholders. 3. Closure of register of members and eligibility for attending the ForeignShareholders Class Meeting Holders of H Shares of the Company are advised that the register of members ofthe Company will close from 27 February 2006 to 28 March 2006 (both daysinclusive), during which time no transfer of H Shares of the Company will beeffected and registered. In order to qualify for attendance at the ForeignShareholders Class Meeting, instruments of transfer accompanied by sharecertificates and other appropriate documents must be lodged with the Company's H share registrar, Computershare Hong Kong Investor Services Limited, by 4:00p.m. on 24 February 2006. Holders of H Shares of the Company whose names appear on the register of membersof the Company maintained in Hong Kong on 24 February 2006 are entitled toattend the Foreign Shareholders Class Meeting. Holder of Non-H Foreign Shares of the Company whose name appears on the registerof members of the Company maintained in Hong Kong on 24 February 2006 isentitled to attend the Foreign Shareholders Class Meeting. 4. Notice of attendance Shareholders who intend to attend the Foreign Shareholders Class Meeting shouldcomplete and lodge the accompanying notice of attendance and return it to forholders of H Shares, the Company's H share registrar and for holders of Non-HForeign Shares, the Company's Board Secretariat, on or before 8 March 2006.The notice of attendance may be delivered by hand, by post or by fax to theCompany's H share registrar, or to the address of the Company's BoardSecretariat (as may be applicable). Completion and return of the notice ofattendance do not affect the right of a Shareholder to attend the ForeignShareholders Class Meeting. However, a failure to return the notice ofattendance may result in an adjournment of the Foreign Shareholders ClassMeeting, if the number of Shares carrying the right to vote represented by theShareholders proposing to attend the Foreign Shareholders Class Meeting by thenotice of attendance does not reach more than half of the total number ofForeign Shares of the Company carrying the right to vote at the ForeignShareholders Class Meeting. 5. Proxy Every Shareholder who has the right to attend and vote at the ForeignShareholders Class Meeting is entitled to appoint one or more proxies, whetheror not they are members of the Company, to attend and vote on his behalf at theForeign Shareholders Class Meeting. A proxy shall be appointed by an instrument in writing. Such instrument shall besigned by the appointer or his attorney duly authorised in writing. If theappointer is a legal person, then the instrument shall be signed under a legalperson's seal or signed by its director or an attorney duly authorised inwriting. The instrument appointing the proxy shall be deposited at the Company'sH share registrar for holders of H Shares or at the address of the Company's Board Secretariat for holders of Domestic Shares and Non-H Foreign Sharesnot less than 24 hours before the time appointed for the holding of the ForeignShareholders Class Meeting. If the instrument appointing the proxy is signed bya person authorised by the appointer, the power of attorney or other document ofauthority under which the instrument is signed shall be notarised. The notarisedpower of attorney or other document of authority shall be deposited together andat the same time with the instrument appointing the proxy at the Company's Hshare registrar or the address of the Company's Board Secretariat (as may beapplicable). 6. Other businesses (i) The Foreign Shareholders Class Meeting is expected to last for half an hour.Shareholders and their proxies attending the meeting shall be responsible fortheir own traveling and accommodation expenses. (ii) The address of Computershare Hong Kong Investor Services Limited is: Room 1712-1716 Hopewell Centre 183 Queen's Road East Wanchai Hong Kong TelNo.: (852) 2862 8628 Fax No.: (852) 2865 0990 (iii) The address of the Company's Board Secretariat is: Secretariat of the Board Air China Limited South Terminal Beijing Capital International Airport Chaoyang District, Beijing 100621 PRC Tel No.: (86 10) 6458 0753 Fax No.: (86 10) 6458 5095 Contact Person: Mr. ZhouWu NOTICE OF EGM AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753) NOTICE IS HEREBY GIVEN that an extraordinary general meeting ("EGM") of AirChina Limited ("Company") will be held at The Conference Room, 29/F, AirChina Building, 36 Xiaoyun Road, Chaoyang District, Beijing, PRC at 2:30 p.m. on28 March 2006 (or immediately after the conclusion or adjournment of the ForeignShareholders Class Meeting) to consider and, if thought fit, to pass thefollowing resolutions. Unless otherwise indicated, capitalised terms used hereinshall have the same meaning as those defined in the announcement of the Companydated 9 February 2006 ("Announcement"): Special Resolutions: 1. "THAT the public offering of A Shares by the Company in the PRC ("AShare Issue") and each of the following terms and conditions for the A ShareIssue be and are hereby approved one by one: (1) Class of Shares: RMB denominated ordinary shares (i.e. A Shares); (2) Nominal value: RMB1.00 each; (3) Total number of A Shares to be issued: not more than 2,700,000,000 A Shares; (4) Target subscribers: qualified institutional investors as approved by CSRCand the placees through online offering based on market share value, and subscribers allowed by the regulatory bodies and by the applicable laws and regulations at the time of A Shares Issue; (5) Issue price: The issue price shall be determined based on the PRC securitiesmarket conditions at the time when the A Share Issue takes place and inaccordance with the applicable regulations; (6) Place of listing: Shanghai Stock Exchange; (7) The existing and new Shareholders of the Company after completion of the AShare Issue whose names appear on the register of members of the Company shallbe entitled to sharing the Company's undistributed retained profitsimmediately prior to the completion of the A Share Issue; (8) The Board of Directors of the Company shall be and is authorized todetermine and deal with at its discretion and with full authority, the mattersin relation to the A Share Issue (including but not limited to the specific timing of issue, numberof A Shares to be issued, offering mechanism, pricing mechanism, issue price,target subscribers and the number and proportion of A Shares to be issued toeach subscriber); (9) The Board of Directors of the Company shall be and is authorized to at itsdiscretion and with full authority sign or execute all necessary documents(including but not limited to the preliminary prospectus, the prospectus,underwriting agreement, listing agreement and any related announcement), effectand carry out necessary formalities (including but not limited to procedures forlisting of the A Shares on Shanghai Stock Exchange), and take all othernecessary actions in connection with the A Share Issue, as well as to handle allregistration requirements in relation to changes in the registered capital ofthe Company following the completion of the A Share Issue; (10) This Special Resolution 1, conditional upon the approval of the A ShareIssue by the Domestic Shareholders Class Meeting and Foreign Shareholders ClassMeeting, respectively, shall be effective for a period of 12 months from thedate of the approval by the EGM, Domestic Shareholders Class Meeting and ForeignShareholders Class Meeting whichever is the last." The implementation of this Special Resolution 1 is subject to the approval bythe China Securities Regulatory Commission ("CSRC"). 2. "THAT subject to the passing of the above Special Resolution 1, theproceeds from the A Share Issue be and is hereby approved to be used for thepurchase of 20 Airbus A330-200 aircraft, 15 Boeing 787 aircraft and 10 Boeing737-800 aircraft and Air China's project relating to expansion of existingoperating support facilities at the Beijing Capital International Airport, byapplying to any payment due in relation to the projects above or to repay anyoutstanding bank loan in relation to the projects above occurred before thecompletion of the A Share Issue; after above prescript use of the proceeds, anybalance of it shall apply to the working capital of the Company, and the Boardof Directors of the Company shall, subject to the scope of use of proceeds setout in this Special Resolution 2, be and is hereby authorized to determine andadjust with full authority the projects, the priority and the actual projectinvestment amounts and bank loan repayment amounts to which the proceeds fromthe A Share Issue shall be applied." The implementation of this Special Resolution 2 is subject to the approval bythe CSRC. 3. "THAT subject to the passing of the above Special Resolution 1 andconditional upon the completion of the A Share Issue, the amendments to theArticles of Association as set out in Appendix I to the Circular be and arehereby approved and the Board be and is hereby authorised to make furtheramendments which in its opinion may be necessary, desirable and expedient inaccordance with the mandatory requirements of the applicable laws andregulations, and as government authorities of the PRC may require, and to applyfor approvals from the relevant government authorities after the completion ofthe A Share Issue." The amended Articles of Association referred to in this Special Resolution 3will come into effect after approvals from the relevant authorities areobtained. 4. "THAT, subject to the passing of the above Special Resolution 1 andconditional upon the completion of the A Share Issue, the Rules and Proceduresfor Shareholders' General Meetings, Rules and Procedures for Board Meetingsand Rules and Procedures for Meetings of Supervisors, as amended, details ofwhich are set out in Appendices II, III, and IV to the Circular, be and arehereby approved and adopted as part of the Articles of Association and shallcome into effect upon the effectiveness of the amendments to the Articles ofAssociation covered in above Special Resolution 3." 5. "THAT the amendment to the Articles of Association in respect of number ofDirectors be and is hereby approved as follows: Article 93 of existing Article of Association which provides that "...theCompany shall have a Board of Directors which is composed of 11 Directors..."shall be amended to read as "...the Company shall have a Board of Directorswhich is composed of 12 Directors...". The effectiveness of this Special Resolution 5 is subject to the approval of PRCgovernment authorities. Ordinary Resolutions: 6. "THAT, subject to Special Resolution 5 being passed at the EGM andapproved by PRC government authorities, the appointment of Mr. Jia Kang as anindependent non-executive Director for a term from the date of approval of theamendments to Article 93 relating to the number of directors by the relevantgovernment authorities to the expiry date of the term of the current session ofthe Board be and is hereby approved and the Board be and is hereby authorized tofix Mr. Jia Kang's emoluments." 7. "THAT the Connected Transaction Decision Making System, details of whichare set out in Appendix V to the Circular be and is hereby approved and adoptedand that Connected Transaction Decision Making System shall come into effectupon the effectiveness of the amendments to the Articles of Association coveredin above Special Resolution 3." By Order of the Board Zheng Baoan Li Man Kit Joint Company Secretaries Beijing, the PRC 9 February 2006 Notes: 1. Corporate governance documents Details of (a) the Rules and Procedures of the Shareholders' General Meeting;(b) Rules and Procedures for Board Meetings; and (c) Rules and Procedures forMeetings of Supervisors are set out in Appendices II to IV respectively to theCircular and are also available for inspection on the website of The StockExchange of Hong Kong Limited (http://www.hkex.com.hk). 2. Appointment of independent non-executive director Brief biographical details of Mr. Jia Kang are set out in the paragraph headed"Appointment of new independent non-executive Director" of the Circular to bedespatched to the Shareholders and the announcement of the Company dated 6September 2005. 3. The proposed A Share Issue and the Company's proposed plan inrelation to the use of proceeds from the A Share Issue Shareholders are reminded to read carefully details of the proposed A ShareIssue as well as the relevant content of the proposal made by the Company inrelation to the use of proceeds from the A Share Issue as contained in theAnnouncement and the Circular to be despatched to the Shareholders. 4. Amendments to Articles Details of the proposed amendments are set out in Appendix I to the Circular tobe despatched to the Shareholders and are also available for inspection on thewebsite of The Stock Exchange of Hong Kong Limited (http://www.hkex.com.hk). 5. Closure of register of members and eligibility for attending the EGM Holders of H Shares of the Company are advised that the register of members ofthe Company will close from 27 February 2006 to 28 March 2006 (both daysinclusive), during which time no transfer of H Shares of the Company will beeffected and registered. In order to qualify for attendance at the EGM,instruments of transfer accompanied by share certificates and other appropriatedocuments must be lodged with the Company's H share registrar, ComputershareHong Kong Investor Services Limited by 4:00 p.m. on 24 February 2006. Shareholders of the Company whose names appear on the register of member of theCompany at the close of business on 24 February 2006 are entitled to attend theEGM. 6. Notice of attendance Shareholders who intend to attend the EGM should complete and lodge theaccompanying notice of attendance and return it to, for holders of H Shares, theCompany's H share registrar, or for holders of Domestic Shares and Non-HForeign Shares, the Company's Board Secretariat, on or before 8 March 2006.The notice of attendance may be delivered by hand, by post or by fax to theCompany's H share registrar, or to the address of the Company's BoardSecretariat (as may be applicable). Completion and return of the notice ofattendance do not affect the right of a Shareholder to attend the EGM. However,a failure to return the notice of attendance may result in an adjournment of theEGM, if the number of shares carrying the right to vote represented by theshareholders proposing to attend the EGM by the notice of attendance does notreach more than half of the total number of shares of the Company carrying theright to vote at the EGM. 7. Proxy Every Shareholder who has the right to attend and vote at the EGM is entitled toappoint one or more proxies, whether or not they are members of the Company, toattend and vote on his behalf at the EGM. A proxy shall be appointed by an instrument in writing. Such instrument shall besigned by the appointer or his attorney duly authorised in writing. If theappointer is a legal person, then the instrument shall be signed under a legalperson's seal or signed by its director or an attorney duly authorised inwriting. The instrument appointing the proxy shall be deposited at the Company'sH share registrar for holders of H Shares or at the address of the Company's Board Secretariat for holders of Domestic Shares and Non-H Foreign Sharesnot less than 24 hours before the time appointed for the holding of the EGM. If theinstrument appointing the proxy is signed by a person authorised by theappointer, the power of attorney or other document of authority under which theinstrument is signed shall be notarised. The notarised power of attorney orother document of authority shall be deposited together and at the same timewith the instrument appointing the proxy at the Company's H share registraror the address of the Company's Board Secretariat (as may be applicable). 8. Other businesses (i) The EGM is expected to last for two hours. Shareholders and their proxiesattending the meeting shall be responsible for their own traveling andaccommodation expenses. (ii) The address of Computershare Hong Kong Investor Services Limited is: Room 1712-1716 Hopewell Centre 183 Queen's Road East Wanchai Hong Kong TelNo.: (852) 2862 8628 Fax No.: (852) 2865 0990 (iii) The address of the Company's Board Secretariat is: Secretariat of the Board Air China Limited South Terminal Beijing Capital International Airport Chaoyang District, Beijing 100621 PRC Tel No.: (86 10) 6458 0753 Fax No.: (86 10) 6458 5095 Contact Person: Mr. ZhouWu APPENDIX I PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION EXPLANATIONS FOR APPLICABLE ARTICLES OF ASSOCIATION (DRAFT) UPON COMPLETION OFADDITIONAL ISSUE OF A SHARES The Company, currently as a H share company, plans to apply for additional issueof A shares. Pursuant to relevant requirements specified by the CSRC, during theapplication for A share issue, the articles of association (draft) shall beprepared for adoption upon completion of the additional issue in accordance withrelevant provisions applicable to A share companies. The relevant requirements applicable to the aforesaid A share companies mainlyinclude "Company Law of the People's Republic of China" (the "CompanyLaw"), "Securities Law of the People's Republic of China" (the"Securities Law"), "Guide to Articles of Association of Listed Companies"(the "Guide to Articles of Association"), "Standards for the Governance ofListed Companies" (the "Standards for Governance"), "Regulatory Opinionson General Meetings of Listed Companies" ("Regulatory Opinions on GeneralMeetings"), "Guiding Opinions on the Setting Up of a System of IndependentDirectors for Listed Companies" ("Guiding Opinions on Independent DirectorsSystem"), "Provisions on Strengthening the Protection of the Interests ofPublic Shareholders" ("Protection of the Public Shareholders"), and"Notice on the Regulation of the External Guarantees by Listed Companies" ("Notice on the Regulation of the External Guarantees"). With reference to the requirements of the aforesaid documents and the latestrequirements promulgated in Hong Kong, in view of, inter alia, the changes inthe shareholders, registered capital and shareholding structure of the Companyupon completion of additional issue of A shares as well as the change of theCompany into an A share company, the Company has made the necessary supplementsand amendments to the clauses of the prevailing Articles of Associations tocompile the new Articles of Association (draft) for adoption upon completion ofthe additional issue. Details of amendments are as follows (appropriate consequential changes to thenumbering and sequence of the relevant chapter, article, paragraph andsub-paragraph will be made, if required, which will not be specificallydescribed herein): I. GENERAL AMENDMENTS TO REFERENCE 1. All references to "security supervision organization of the StateCouncil", "security committee of the State Council" and "securitymanagement department of the State Council" appearing in the Articles ofAssociation are all proposed to be uniformly amended to read as "securitiesregulatory authority of the State Council". 2. All references to "president and other senior officers" are allproposed to be uniformly amended to read as "president, deputy president andother senior management personnel". II. SPECIFIC AMENDMENTS 1. The first paragraph of Article 6 of the Original Articles of Associationprovides that: "In accordance with the provisions of the Company Law, the SpecialRegulations and the Mandatory Provisions for Articles of Association ofCompanies Listing Overseas (the "Mandatory Provisions") and other applicablePRC laws and administrative regulations, the Company amended the originalArticles of Association of the Company (the "Original Articles of Association") and adopt these Articles of Association (the "Articles of Association" or"these Articles of Association")." This paragraph is proposed to be amended to read as follows: "In accordance with the relevant provisions of the Company Law, the SpecialRegulations and the Mandatory Provisions for Articles of Association ofCompanies Listing Overseas (the "Mandatory Provisions"), Instructions ofArticles of Association of Listed Companies (hereinafter to be referred to asthe Instructions of Articles of Association"), Administrative Guidelines forListed Companies (hereinafter to be referred to as the "AdministrativeGuidelines") and other applicable PRC laws and administrative regulations, theCompany held the general meeting of shareholders on (28 March) 2006, to amendthe original Articles of Association of the Company (the "Original Articlesof Association") and adopt these Articles of Association (the "Articles ofAssociation" or "these Articles of Association")." 2. The second paragraph of Article 8 of the Original Articles of Associationprovides that: "Subject to Chapter 22 of these Articles of Association, a shareholder maytake action against the Company pursuant to the Company's Articles ofAssociation, and the Company may take action against its shareholders pursuantto the Company's Articles of Association. A shareholder may also take actionagainst another shareholder, and may take action against the directors,supervisors, president and other senior officers of the Company pursuant to theCompany's Articles of Association." This paragraph is proposed to be amended to read as follows: "Subject to Chapter 23 of these Articles of Association, a shareholder maytake action against the Company pursuant to the Company's Articles ofAssociation. The Company may take action against shareholders, directors,supervisors, president, deputy president and other senior officers of theCompany pursuant to the Company's Articles of Association. A shareholder mayalso take action against another shareholder, and may take action against thedirectors, supervisors, president, vice presidents and other senior officers ofthe Company pursuant to the Company's Articles of Association." 3. Article 9 of the Original Articles of Association provides that: "The Company may invest in other limited liability companies or joint stocklimited companies. The Company's liability thereto shall be limited to theamount of its capital contribution to the invested company. Subject to the approval of the companies approving department authorized by theState Council, the Company may, as required by its operation and management,operate as a holding company as specified in paragraph 2 of Article 12 of theCompany Law." This paragraph is proposed to be amended to read as follows: "The Company may invest in any other enterprise. However, unless otherwisestipulated by law, the Company shall not become a contributor with jointliability on the debts of such enterprise." 4. A new paragraph, reading as follows, is proposed to be added to theOriginal Articles of Association as the third paragraph of Article 17 thereof: "The domestic shares of the Company are centrally deposited with the ShanghaiBranch of China Securities Depository and Clearing Corporation Limited in itscustody. The overseas listed foreign shares of the Company are principallydeposited with Hong Kong Securities Clearing Company Limited in its custody." 5. Article 19 of the Original Articles of Association provides that: "Subject to the approval of the companies approving department authorized bythe State Council, the Company may issue a total of 9,433,210,909 ordinaryshares, of which 6,500,000,000 shares were issued to the promoters of theCompany upon the Company's establishment." This paragraph is proposed to be amended to read as follows: "Subject to the approval of the companies approving department authorized bythe State Council, the Company shall issue a total of 9,433,210,909 ordinaryshares, of which 6,500,000,000 shares were issued to the promoters of theCompany upon the Company's establishment. Details of the contribution by thepromoters upon the Company's establishment are as follows: Number of shares Date ofName of the promoter subscribed Method of contribution contribution China National Aviation 5,054,276,915 Capital contribution of 9 SeptemberHolding Company RMB560,782,100 in the 2004 form of currency, contribution of RMB6,451,765,800 in the form of the assets and liabilities of its subsidiaries relating to their major businesses of air passenger and cargo transportation China National Aviation 1,445,723,085 Equity contribution of 9 SeptemberCorporation (Group) RMB2,005,866,000 2004Limited 6. The following paragraphs are proposed to be added to the OriginalArticles of Association as the third and fourth paragraphs of Article 20thereof: "After the aforesaid issue of the Company's overseas listed foreignshares, with the approvals of the general meeting, class meetings of domesticshareholders and foreign shareholders by way of respective special resolutionsas well as the approvals of the approving department authorized by the StateCouncil, the Company has issued (i') domestic shares listed in the PRC (Ashares). Upon the aforesaid capital increase by issuing A shares, the Company's share capital structure is as follows: The Company has issued a total of (i') ordinary shares, of which China NationalAviation Holding Company holds 4,826,195,989 domestic shares, representingapproximately (i')% of the total share capital of the Company; China National AviationCorporation (Group) Limited holds 1,380,482,920 foreign shares, representingapproximately (i')% of the total share capital of the Company; other holders ofoverseas listed foreign shares (H shares) hold 3,226,532,000 shares,representing approximately (i')% of the total share capital of the Company andholders of domestic shares listed in the PRC hold (i') shares, representing (i') % of the total ordinary shares in issue of the Company." 7. Article 23 of the Original Articles of Association provides that: "Theregistered capital of the Company shall be RMB9,433,210,909.00." This Article isproposed to be amended to read as follows: "The registered capital of the Company shall be RMB9,433,210,909.00. (Theregistered capital shall be adjusted accordingly after A share issue.)" 8. The following is proposed to be added as sub-paragraph (4) of the secondparagraph of Article 24 of the Articles of Association: "The Company may increase its capital in the following ways: ... (4) by capitalizing the common reserve fund; ..." 9. The second paragraph of Article 27 of the Original Articles ofAssociation provides that: "The Company shall notify its creditors within ten (10) days of the date ofthe Company's resolution for reduction of capital and shall publish anannouncement in newspaper at least three (3) times within thirty (30) days ofthe date of such resolution. A creditor has the right within thirty (30) days ofreceipt of the notice or, in the case of a creditor who does not receive suchnotice, within ninety (90) days of the date of the first public announcement, torequire the Company to repay its debts or to provide a corresponding guaranteefor such debt." This paragraph is proposed to be amended to read as follows: "The Company shall notify its creditors within ten (10) days of the date ofthe Company's resolution for reduction of capital and shall publish anannouncement in newspaper within thirty (30) days of the date of suchresolution. A creditor has the right within thirty (30) days of receipt of thenotice or, in the case of a creditor who does not receive such notice, withinforty-five (45) days of the date of the first public announcement, to requirethe Company to repay its debts or to provide a corresponding guarantee for suchdebt." 10. A new sub-paragraph, reading as follows, is proposed to be added to Article29 of the Original Articles of Association as sub-paragraph (4) of this Articlethereof: "The Company may repurchase shares in one of the following ways, with theapproval of the relevant governing authority of the State: ... (4) by other means which are permitted by law, administrative regulations andsecurities regulatory authority of the State Council." 11. The first paragraph of Article 31 of the Original Articles of Associationprovides that: "Shares which have been lawfully repurchased by the Company shall becancelled within the period prescribed by law and administrative regulation, andthe Company shall apply to the original companies registration authority forregistration of the change in its registered capital." This paragraph is proposed to be amended to read as follows: "Shares which have been lawfully repurchased by the Company shall becancelled or transferred within the period prescribed by law, administrativeregulation and relevant listing rules, and in the case of cancellation, theCompany shall apply to the original companies registration authority forregistration of the change in its registered capital." 12. The Article 38 of the Original Articles of Association provides that: "Share certificates of the Company shall be signed by the chairman of theboard of directors. ..." This Article is proposed to be amended to read as follows: "Share certificates of the Company shall be signed by the legalrepresentative. ..." 13. The following Article is proposed to be added to the Original Articles ofAssociation as Article 39 thereof: "The Company shall not accept its shares being held as security under apledge." 14. The following Article is proposed to be added to the Original Articles ofAssociation as Article 40 thereof: "During their term of office, the directors, supervisors, president, deputypresidents and other senior officers of the Company shall report periodically tothe Company their shareholdings in the Company and any changes thereto. Transferof shares by the aforesaid persons shall be conducted in accordance with theprovisions of laws, regulations and/or relevant listing rules." 15. The following Article is proposed to be added to the Original Articles ofAssociation as Article 41 thereof: "All profits derived by directors, supervisors, president, deputy presidentsand other senior officers of the Company and any shareholder holding more than5% of the voting shares in the Company, through selling his shares in theCompany within a period of six months following the purchase of such shares orthrough repurchasing shares issued by the Company within a period of six monthsfollowing the sale of his shares, shall belong to the Company. The provisions of the preceding paragraph shall apply to senior officers,including but not limited to the directors, supervisors, president, deputypresident and other senior officers, as specified in the Articles of Associationof the Company's legal person shareholders with more than 5% of the votingrights in the Company." 16. Article 43 of the Original Articles of Association shall be renumbered asArticle 46. The fourth paragraph of Article 43 of the Original Articles of Associationprovides that: "The directors, supervisors, president, deputy presidents and other seniorofficers of the Company shall report to the Company their shareholdings in theCompany, and shall not transfer their shares in the Company during their termsof office." This paragraph is proposed to be amended to read as follows: "The directors, supervisors, president, vice presidents and other seniorofficers of the Company shall report to the Company their shareholdings in theCompany and any changes thereto." 17. Article 47 of the Original Articles of Association shall be renumbered asArticle 50. The second paragraph of the Article 47 of the Original Articles of Associationprovides that: "Application by a holder of domestic shares, who has lost his sharecertificate, for a replacement share certificate shall be dealt with inaccordance with Article 150 of the Company Law." This paragraph is proposed to be amended to read as follows: "Application by a holder of domestic shares, who has lost his sharecertificate, for a replacement share certificate shall be dealt with inaccordance with Article 144 of the Company Law." 18. Article 51 of the Original Articles of Association will be renumbered asArticle 54, with sub-paragraphs (2) and (4) of this Article proposed to beamended, a new sub-paragraph proposed to be added as sub-paragraph (6) of theparagraph (5)2 thereof, and a new paragraph added as paragraph (7) thereof, toread as follows. Sub-paragraphs (2) and (4) of this Article of the Original Articles ofAssociation provide that: "The ordinary shareholders of the Company shall enjoy the following rights: ... (2) the right to attend or appoint a proxy to attend shareholders' generalmeetings and to vote thereat; ... (4) the right to transfer shares in accordance with laws, administrativeregulations and provisions of the Articles of Association; ..." Sub-paragraphs (2) and (4) are proposed to be amended, a new sub-paragraphproposed to be added as sub-paragraph (6) of the paragraph (5)2 thereof, and anew paragraph added as paragraph (7) thereof, to read as follows: "The ordinary shareholders of the Company shall enjoy the following rights: ... (2) the right to attend or appoint a proxy to attend shareholders' generalmeetings and to vote thereat in accordance with the number of shares held; ... (4) the right to transfer, bestow or pledge his shares in accordance with laws,administrative regulations and provisions of the Articles of Association; (5) the right to obtain relevant information in accordance with the provisionsof the Articles of Association, including: 1. obtaining a copy of the Articles of Association after payment of costs; 2. inspecting and copying after payment of a reasonable fee: ... (6) Counterfoils of company debt securities, resolutions of board meetings,meetings of supervisory committee and financial and accounting reports. ... (7) the right to bring a suit to the people's court against acts which aredetrimental to company interests or infringe on the lawful interests ofshareholders, and to claim the relevant interests pursuant to the Company Law orother laws and administrative regulations; ..." 19. Article 54 of the Original Articles of Association will be renumbered asArticle 57, and the following paragraph is proposed to be added thereto as thesecond paragraph thereof: "Acting in concert' in this Article shall refer to two or more personsreaching a consensus by way of an agreement (whether verbal or written) to gainor consolidate their control over the Company through any of them acquiring thevoting right of the Company." 20. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 58 thereof: "The controlling shareholder and the effective controlling person of theCompany shall have fiduciary duty to the Company and the public shareholders ofthe Company. The controlling shareholder shall exercise its right strictly underthe law as a capital contributor. The controlling shareholder shall not damagethe legal rights of the Company and its public shareholders through connectedtransactions, profit distribution, asset restructuring, external investment,fund appropriation and loan guarantee, nor the interests of the Company and itspublic shareholders through its controlling position." 21. Article 56 of the Original Articles of Association will be renumbered asArticle 60, sub-paragraph (13) thereof is proposed to be amended, and twosub-paragraphs are proposed to be added as sub-paragraphs (14) and (15), to readas follows. Sub-paragraph (13) thereof provides that: "The shareholders' generalmeeting shall have the following functions and powers: ... (13) to consider motions raised by shareholders who represent 5 % or more of thetotal number of voting shares of the Company; ..." Sub-paragraph (13) thereof is proposed to be amended, and two sub-paragraphs areadded as (14) and (15), to read as follows: "The shareholders' general meeting shall have the following functions andpowers: ... (13) to consider motions raised by the supervisory committee or shareholders whorepresent more than 3% of the total number of voting shares of the Company; (14) to resolve on the Company's transactions involving purchase and disposalof substantial assets within one year, whose amounts exceed 30% of the totalassets of the Company; (15) to resolve on the Company's external guarantees which shall be approvedby a general meeting as provided by laws, administrative regulations and theArticles of Associations; ..." 22. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 61 thereof: "Any external guarantee of the Company shall be considered and passed by theboard of directors. The following matters shall be approved by the generalmeeting after being considered by the board of directors: 1. Any provision of guarantee by the Company or its controlled subsidiariesmade after the total amount of external guarantees have exceeded 50% of thelatest audited net assets; 2. provision of guarantee to anyone whose liability-asset ratio exceeds 70%; 3. provision of a single guarantee, amount of which exceeds 10% of the latestaudited net assets; 4. provision of guarantee to shareholders, actual controllers and their relatedparties; 5. external guarantees made by the Company within a year, amount of whichexceeds 30% of total assets of the Company; 6. other matters that shall be approved by the general meeting as stipulated bylaws and regulations and the Articles of Associations. The matter of the aforesaid fifth sub-paragraph shall be passed by votesrepresenting more than two-thirds of the voting rights of the shareholders(including their proxies) present at the general meeting. If the directors, president, deputy presidents and other senior officers of theCompany have committed any violations of the laws, administrative regulations ortheir authorities of approval and examination procedures for the externalguarantees prescribed in the Articles of Association, they shall be liable forany losses suffered by the Company arising therefrom, and the Company mayinstitute legal proceedings against them by law." 23. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 62 thereof: "Matters subject to decision by general meetings as required by law,administrative regulations and the Company's Articles of Association shall beconsidered by general meetings for the purpose of protecting the right ofshareholders to decide on such matters. Where necessary and reasonable, anymatter which is relevant to matters subject to resolution but unable to bedecided immediately at a general meeting may be, with the authority granted bythe general meeting, decided by the board of directors within the scopeauthorized by the general meeting. Where the authority granted by the general meeting to the board of directors isrelated to a matter subject to an ordinary resolution, such resolution shall bepassed by votes exceeding one-half (excluding one-half) of the voting rights ofthe shareholders present at the general meeting (including proxies); where it isrelated to a special resolution, such resolution shall be passed by a voterepresenting more than two-thirds of the voting rights of the shareholderspresent at the general meeting (including proxies). The substance of theauthorization shall be clear and specific." 24. Article 58 of the Original Articles of Association will be renumbered asArticle 64 thereof. Sub-paragraphs (2), (3) and (5) of the second paragraph thereof provide that: "The board of directors shall convene an extraordinary general meeting withintwo (2) months of the occurrence of any one of the following events: ... (2) where the unrecovered losses of the Company amount to one-third of the totalamount of its share capital; (3) where shareholder(s) holding 10 % or more of the Company's issued andoutstanding voting shares request(s) in writing for the convening of anextraordinary general meeting; ... (5) whenever two or more independent directors so request." These sub-paragraphs are proposed to be amended to read as follows: "The board of directors shall convene an extraordinary general meeting withintwo (2) months of the occurrence of any one of the following events: ... (2) where the unrecovered losses of the Company amount to one-third of the totalamount of its paid-up share capital; (3) where shareholder(s) individually or jointly holding more than 10 % of theCompany's issued and outstanding voting shares (excluding a proxy/proxies)request(s) in writing for the convening of an extraordinary general meeting; ... (5) whenever independent directors reaching the quorum of the meeting sorequest. The number of the shares held by the shareholder(s) referred to in the precedingsub-paragraph (3) shall be calculated as at the date on which the relevantwritten request is made." 25. Article 60 of the Original Articles of Association will be renumbered asArticle 66 thereof. This Article provides that: "When the Company convenes a shareholders' annual general meeting,shareholder(s) holding 5% or more of the total voting shares of the Companyshall have the right to propose new motions in writing, and the Company shallplace such proposed motions on the agenda for such annual general meeting ifthey are matters which fall within the functions and powers of shareholders ingeneral meetings." This Article is proposed to be amended to read as follows: "If the Company convenes the shareholders' general meetings, thesupervisory committee and the shareholders who individually or jointly holdingmore than 3% of shares in the Company may propose extempore motions 10 daysprior to the general meetings and submit them in writing to the board ofdirectors. The board of directors shall notify other shareholders of suchmotions within 2 days after receiving the motions, and submit such extemporemotions to the general meetings for consideration and approval. The contents ofthe extempore motions shall fall within the terms of reference of the generalmeeting and have specified subjects and specific resolutions." 26. Article 61 of the Original Articles of Association shall be renumbered asArticle 67. Paragraph 2 of Article 61 of the Original Articles of Association is proposed tobe deleted: Paragraph 2 of Article 61 of the Original Articles of Association provides that: "An extraordinary general meeting shall not resolve on any matter not statedin the notice for the meeting." 27. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 68 thereof: "Matters considered and decided by general meetings shall be subject toconfirmation in accordance with the Company Law and the Company's Articles ofAssociation. General meetings may decide on any matters required by the Company's Articles of Association. A general meeting shall not resolve on any matter not stated in the noticeconvening the meeting as stipulated in Article 65 and Article 66 of the Articlesof Association." 28. The following paragraph is proposed to be added to the Original Article ofAssociation as Article 69 thereof: "Any resolution proposed at a general meeting shall be a specific resolutionin connection with matters required to be considered at the general meeting.Such resolution at the general meeting shall meet the following conditions: (1) The substance of the proposed resolution shall not be in contravention withthe law, administrative regulations and the Company's Articles of Associationand shall fall within the business scope of the Company and the terms ofreference of the general meeting; (2) The subject of the proposed resolutions shall be definite with a specificmatter for resolution; (3) The proposed resolutions shall be put forward or delivered to the board ofdirectors in writing." 29. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 78 thereof: "When any general meeting considers connected transactions, the connectedshareholder shall not participate in the vote and the number of voting sharesthat it represents shall not be counted as part of the total number of validvotes. The announcement of the resolution of the general meeting shall fullydisclose the votes of the non-connected shareholders. In the event that theconnected shareholder cannot abstain from voting under special circumstances,the Company may, with the prior approval of the relevant authorities, carry outthe vote in accordance with the normal procedure and provide a detailedexplanation on the issue in the announcement of the resolution made by thegeneral meeting. The aforesaid connected shareholder refers to any shareholder being a connectedperson or, if not a connected person, a person who are materially interested inthe transaction to be voted or his associate as defined by the listing rulesfrom time to time." 30. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 79 thereof: "If a proxy attends a shareholders' general meeting on behalf of anindividual shareholder, that proxy should produce his identificationdocumentation and the letter of authorization signed by the shareholderappointing the proxy. If the legal representative of a corporate shareholderappoints a proxy to attend the meeting, that proxy should produce hisidentification documentation and the letter of authorization signed by therelevant legal representative appointing the proxy. If a corporate shareholderappoints a proxy as is authorized by the resolution of its board of directors orother equivalent governing body to attend the meeting on the shareholder'sbehalf, the proxy should produce his identification documentation and the powerof attorney, issued by the relevant board of directors or governing body,bearing the seal of the relevant corporation. All relevant letters ofappointment shall specify the date on which it is issued." 31. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 80 thereof: "The board of directors, independent directors and certain qualifyingshareholders (as determined under the criteria made by relevant regulatoryauthorities from time to time) of the Company may canvass the Company'sshareholders for votes at shareholders' general meetings. Public canvass forvotes shall be made in accordance with regulations of relevant regulatoryauthorities and the securities exchange(s) on which the Company's shares arelisted." 32. Article 70 of the Original Articles of Association will be renumbered asArticle 81. The second paragraph of this Article thereof provides that: "An ordinary resolution shall be passed by votes representing more thanone-half of the voting rights represented by the shareholders (includingproxies) present at the meeting." This paragraph is proposed to be amended to read as follows: "An ordinary resolution shall be passed by votes exceeding one-half(excluding one-half) of the voting rights of the shareholders (includingproxies) present at the meeting." 33. Article 71 of the Original Articles of Association will be renumbered asArticle 82. This Article thereof provides that: "A shareholder (including a proxy), when voting at a shareholders' generalmeeting, may exercise such voting rights as are attached to the number of votingshares which he represents. Each share shall have one (1) vote. Where a shareholder is, under the applicable listing rules, required to abstainfrom voting on any particular resolution or to vote only for or only against anyparticular resolution, any votes cast by or on behalf of such shareholder or hisproxy in contravention of such requirement or restriction shall not be counted." This Article is proposed to be amended to read as follows: "A shareholder (including a proxy), when voting at a shareholders' generalmeeting, may exercise such voting rights as are attached to the number of votingshares which he represents. Except for the accumulated voting mechanism forelecting directors as stipulated in Article 108 of the Articles of Association,each share shall have one (1) vote. Where a shareholder is, under the applicable listing rules as amended from timeto time, required to abstain from voting on any particular resolution or to voteonly for or restricted to only vote against any particular resolution, any votescast by or on behalf of such shareholder or his proxy in contravention of suchrequirement or restriction shall not be counted." 34. Article 76 of the Original Articles of Association will be renumbered asArticle 87 thereof, and a new sub-paragraph, reading as follows, is proposed tobe added thereto as sub-paragraph (5) thereof: "The following matters shall be resolved by an ordinary resolution at ashareholders' general meeting: ... (5) Appointment, removal and non-reappointment of an accounting firm; ..." 35. Article 79 of the Original Articles of Association will be renumbered asArticle 90 thereof. This Article provides that: "Shareholders who request for the convening of an extraordinary generalmeeting or a class meeting shall comply with the following procedures: (1) Two (2) or more shareholders holding in aggregate 10 % or more of the sharescarrying the right to vote at the meeting sought to be held shall sign one (1)or more counterpart requisitions stating the object of the meeting and requiringthe board of directors to convene a shareholders' extraordinary generalmeeting or a class meeting thereof. The board of directors shall as soon aspracticable proceed to convene the extraordinary general meeting of shareholdersor a class meeting thereof after receipt of such requisition(s). The amount ofshareholdings referred to above shall be calculated as at the date of deposit ofthe requisition(s). (2) If the board of directors fails to issue a notice of such a meeting withinthirty (30) days from the date of receipt of the requisition(s), therequisitionists may themselves convene such a meeting (in a manner as similar aspossible to the manner in which shareholders' meetings are convened by theboard of directors) within four (4) months from the date of receipt of therequisition(s) by the board of directors. Any reasonable expenses incurred by the requisitionists by reason of failure bythe board of directors to duly convene a meeting shall be borne by the Companyand any sum so repaid shall be set-off against sums owed by the Company to thedefaulting directors." This Article is proposed to be amended to read as follows: "The supervisory committee or shareholders who request for the convening ofan extraordinary general meeting or a class meeting shall comply with thefollowing procedures: (1) The supervisory committee or two (2) or more shareholders individually orjointly holding in aggregate more than 10 % of the shares carrying the right tovote at the meeting sought to be held shall sign one (1) or more counterpartrequisitions stating the object of the meeting and requiring the board ofdirectors to convene a shareholders' extraordinary general meeting or a classmeeting thereof. The board of directors shall as soon as practicable proceed toconvene the extraordinary general meeting of shareholders or a class meetingthereof after receipt of such requisition(s). The amount of shareholdingsreferred to above shall be calculated as at the date of deposit of therequisition(s). (2) If the board of directors fails to issue a notice of such a meeting withinthirty (30) days from the date of receipt of the requisition(s), the supervisorycommittee or the requisitionists may themselves convene such a meeting (in amanner as similar as possible to the manner in which shareholders' meetingsare convened by the board of directors) within four (4) months from the date ofreceipt of the requisition(s) by the board of directors. Any reasonable expenses incurred by the supervisory committee or therequisitionists by reason of failure by the board of directors to duly convene ameeting shall be borne by the Company and any sum so repaid shall be set-offagainst sums owed by the Company to the defaulting directors." 36. Article 80 of the Original Articles of Association will be renumbered asArticle 91 thereof. This Article provides that: "The shareholders' general meeting shall be convened and chaired by thechairman of the board of directors. If the chairman is unable to attend themeeting for any reason, the vice-chairman of the board of directors shallconvene and chair the meeting. If both the chairman and vice-chairman of theboard of directors are unable to attend the meeting, then the board of directorsmay designate a director to convene and chair the meeting. If no chairman of themeeting has been so designated, shareholders present shall choose one (1) personto act as the chairman of the meeting. If for any reason, the shareholders shallfail to elect a chairman, then the shareholder (including a proxy) holding thelargest number of shares carrying the right to vote thereat shall be thechairman of the meeting." This Article is proposed to be amended to read as follows: "The general meeting shall be convened by the board of directors, and thechairman of the board shall preside over and act as the chairman of themeetings. If the chairman is unable or has failed to perform his duties, thedeputy chairman shall preside over and act as the chairman of the meetings. Inthe event that the deputy chairman is unable or has failed to perform hisduties, a director shall be elected by a simple majority of directors to presideover and act as the chairman of the meetings. If the board of directors isunable or fails to perform its duties of convening the general meeting, thesupervisory committee shall convene, preside over and act as the chairman of themeetings in a time manner. In the event that the supervisory committee does notconvene and preside over the meeting, the shareholder(s) who individually orjointly holds or hold more than 10% shares in the Company for over ninety (90)days may convene or preside over such meeting at his/their own discretion,shareholders present shall choose one (1) person to act as the chairman of themeeting. If for any reason, the shareholders shall fail to elect a chairman,then any shareholder (including a proxy) holding the largest number of sharescarrying the right to vote thereat shall be the chairman of the meeting." 37. Article 81 of the Original Articles of Association will be renumbered asArticle 92 thereof. This Article provides that: "The chairman of the meeting shall be responsible for determining whether aresolution has been passed. His decision, which shall be final and conclusive,shall be announced at the meeting and recorded in the minute book." This Article is proposed to be amended to read as follows: "The chairman of the meeting shall be responsible for determining whether aresolution has been passed. His decision, which shall be final and conclusive,shall be announced at the meeting and recorded in the minute book. The Companyshall announce the resolution of shareholders' general meetings in accordancewith applicable laws and the relevant regulations of the securities exchange(s)on which the Company's shares are listed." 38. Article 83 of the Original Articles of Association will be renumbered asArticle 94 thereof. The second and third paragraph thereof provide that: "The Company's secretary shall produce the minutes of the shareholders'general meeting, which shall be signed by directors present at the meeting. Resolutions adopted by a shareholders' general meeting shall be included inthe minutes of the meeting. The record and minutes of the meeting shall be inChinese. Such record and minutes, shareholders' attendance lists and proxyforms shall be kept at the Company's place of residence." This paragraph is proposed to be amended to read as follows: "The Company's secretary shall produce the minutes of the shareholders'general meeting, which shall be signed by the person in charge (chairman of themeeting) and directors present at the meeting. Resolutions adopted by a shareholders' general meeting shall be included inthe minutes of the meeting. The record and minutes of the meeting shall be inChinese. Such record and minutes, shareholders' attendance lists and proxyforms shall be permanently kept at the Company's place of residence." 39. Article 89 of the Original Articles of Association will be renumbered asArticle 100 thereof, and the following paragraph is proposed to be added theretoas the second paragraph thereof: "Where a shareholder is, under the applicable listing rules as amended fromtime to time, required to abstain from voting on any particular resolution ofany class meeting or to vote only for or against any particular resolution ofany class meeting, any votes cast by or on behalf of such shareholder or hisproxy in contravention of such requirement or restriction shall not be counted." 40. Article 92 of the Original Articles of Association will be renumbered asArticle 104 thereof. The sub-paragraph 2 of the second paragraph thereof provides that: "where the Company's plan to issue domestic shares and overseas listedforeign shares at the time of its establishment is carried out within fifteen(15) months from the date of approval of the securities commission of the StateCouncil." This sub-paragraph is proposed to be amended to read as follows: "where the Company's plan to issue domestic shares and overseas listedforeign shares at the time of its establishment is carried out within fifteen(15) months from the date of approval of the regulatory securities authority ofthe State Council." 41. Article 93 of the Original Articles of Association will be renumbered asArticle 105 thereof. The first paragraph thereof provides that: "The Company shall have a board of directors. The board of directors shallconsist of 12* directors, more than half of which shall be outside directors(hereinafter referred to those who do not hold offices in the Company), and ofwhich more than three shall be independent directors (hereinafter referred todirectors who are independent from the Company's shareholders and do not hold offices in the Company). At least oneindependent director shall have appropriate professional qualification, orexpertise in accounting or related financial management." This paragraph is proposed to be amended to read as follows: "The Company shall have a board of directors. The board of directors shallconsist of 12 directors, more than half of which shall be outside directors(hereinafter referred to those who do not hold offices in the Company), and ofwhich more than four shall be independent directors (hereinafter referred todirectors who are independent from the Company's shareholders and do not holdoffices in the Company). At least one independent director shall haveappropriate professional qualification, or expertise in accounting or relatedfinancial management." * Note: This assumes that the amendment to Articles 93 relating to thechanges in the number of directors has been approved. 42. Article 94 of the Original Articles of Association will be renumbered asArticle 106, with the first, second and seventh paragraphs thereof beingproposed to be amended, a new paragraph added thereto as the second paragraph,and the original third and fourth paragraphs thereof deleted. This Article has seven paragraphs: "Directors shall be elected at the shareholders' general meeting each fora term of three (3) years. At the expiry of a director's term, the term isrenewable upon re-election. (Note: first paragraph) A written notice of the intention to nominate a person for election as adirector and a notice in writing by that person indicating his acceptance ofsuch nomination shall be given to the Company seven (7) days before the date ofsuch shareholders' general meeting. (Note: second paragraph) Subject to compliance with all relevant laws and administrative regulations, theshareholders' general meeting may by extraordinary resolution remove anydirector before the expiration of his term of office. However, the director'sright to claim for damages which arises out from his removal shall not beaffected thereby. (Note: third paragraph) The chairman and the deputy chairman shall be elected and removed by more thanone-half of all of the members of the board of directors. The term of office ofeach of the chairman and the deputy chairman is three (3) years, which term isrenewable upon re-election. (Note: fourth paragraph) The outside directors shall have sufficient time and necessary knowledge andability to perform their duties. When an outside director performs his duties,the Company must provide necessary information and independent directors maydirectly report to the shareholders' meeting, the securities regulatoryauthority under the State Council and other relevant departments thereon. (Note:fifth paragraph) The executive directors shall handle matters as authorized by the board ofdirectors. (Note: sixth paragraph) The Directors shall not be required to hold shares in the Company. (Note:seventh paragraph)" After the first, second and seventh paragraphs amended, a new paragraph added asthe second paragraph, and the original third and fourth paragraphs deleted, theamended Article has six paragraphs: "Directors shall be elected at the shareholders' general meeting each fora term of three (3) years (from the election date until the date on which thenew board of directors has been elected by a general meeting). At the expiry ofa director's term, the term is renewable upon re-election, but anyindependent director may not serve in this position for a consecutive period ofover six years. (Note: first paragraph, amended) The list of director candidates shall be submitted as a motion to theshareholders' general meeting for resolution. The candidates other than thosefor independent directors shall be nominated by the board of directors, thesupervisory committee or shareholder(s) individually or jointly holding morethan 5% of the total number of the Company's shares carrying voting rightsand be elected by the shareholders' general meeting. (Note: second paragraph,added) A written notice of the intention to nominate a person for election as adirector and a notice in writing by that person indicating his acceptance ofsuch nomination shall be given to the Company seven (7) days before the date ofsuch shareholders' general meeting. The minimum length of the period forsubmission of such notices shall be seven (7) days. (Note: third paragraph) The outside directors shall have sufficient time and necessary knowledge andability to perform its duties. When an outside director performs his duties, theCompany must provide necessary information and independent directors maydirectly report to the shareholders' meeting, the securities regulatoryauthority of the State Council and other relevant departments thereon. (Note:fourth paragraph) The executive directors shall handle matters as authorized by the board ofdirectors. (Note: fifth paragraph) Directors are natural persons who shall not be required to hold shares in theCompany. (Note: sixth paragraph, amended)" 43. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 107 thereof: "The following procedures shall have been carried out prior to the electionof any non-independent director: (1) The party nominating any non-independent director candidate shall haveobtained the nominee's consent prior to the nomination, and shall be fullyaware of such particulars of the nominee in terms of his occupation, academicbackground, professional title, detailed work experience and all informationregarding his positions held concurrently and be responsible for providing tothe Company written materials in relation to such particulars. The candidateshall undertake to the Company in writing that he agrees to accept thenomination, and that the disclosed information about him is true and complete.He shall also warrant to conscientiously perform his responsibilities as adirector upon being elected. (2) If the nomination of a non-independent director candidate occurs before themeeting of the board of directors, the written materials pertaining to theparticulars of the nominee described in sub-paragraph (1) of this Article shall,if required under applicable laws, regulations and/or relevant listing rules, beannounced together with the resolution of the board of directors in accordancewith such requirements. (3) If an extempore motion proposed for the election of any non-independentdirector is put forward by shareholder(s) who, individually or jointly, hold(s)more than 5% of the total number of shares of the Company carrying the votingright, or by the supervisory committee, the following documents shall besubmitted to the Company sixteen (16) days before the annual general meeting:the intent to nominate a director candidate , the written notice of the nomineeexpressing his willingness to accept the nomination, and the written materialspertaining to the particulars of the nominee and the nominee's undertakingsas mentioned in the preceding subparagraph (1) of this Article. Such noticesshall not be submitted before the day following the delivery of notice of therelevant meeting for the election of directors and shall be submitted no laterthan seven (7) days before the date of the relevant general meeting" 44. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 108 thereof: "If the controlling interest of the Company's controlling shareholderexceeds 30%, and when a vote is held at the shareholders' general meeting ona resolution to elect a director, an accumulated voting mechanism shall beadopted such that when more than two directors are being elected at a generalmeeting of the shareholders, each of the shares held by the shareholdersparticipating in the vote shall carry voting rights equal in number to thenumber of director candidates; a shareholder may cast all of his votes on onecandidate or may split his votes and cast them on more than one candidate." 45. A new Article is proposed to be added to the Original Articles ofAssociation by re-scheduling the fourth paragraph of Article 94 thereof asArticle 109. 46. Article 95 of the Original Articles of Association will be renumbered asArticle 110 thereof, with sub-paragraph (12) of the first paragraph and thesecond paragraph thereof being proposed to be amended, two new sub-paragraphsadded thereto as sub-paragraphs (8) and (9) of the first paragraph and one newparagraph added thereto as the third paragraph. Sub-paragraph (12) of the first paragraph and the second paragraph thereofprovide that: "The board of directors is accountable to the shareholders in general meetingand exercises the following functions and powers: ... ... (12) to exercise any other powers conferred by the shareholders in generalmeetings and these Articles of Associations. Other than the board of directors' resolutions in respect of the mattersspecified in sub-paragraphs (6), (7) and (11) of this Article which shall bepassed by the affirmative vote of more than two-thirds of all the directors, theboard of directors' resolutions in respect of all other matters may be passedby the affirmative vote of a simple majority of the directors." Sub-paragraph (12) of the first paragraph and the second paragraph thereof areproposed to be amended to read as follows (of which sub-paragraph (12) to bere-numbered as sub-paragraph (14)), two new sub-paragraphs are proposed to beadded thereto as sub-paragraphs (8) and (9) thereof, and one paragraph addedthereto as the third paragraph: "The board of directors is accountable to the shareholders in general meetingand exercises the following functions and powers: ... (8) to decide on other matters of external guarantee other than those requiringapproval of the shareholders' general meeting, in accordance with theprovisions of laws, administrative regulations and Articles of Associations; (9) to decide on the general investment, risky investment, connectedtransactions, charge on asset and other matters of guarantee within theauthorization by the shareholders' general meeting; ...... (14) to exercise any other powers as provided by laws, regulations or thisArticles of Association and conferred by the shareholders in general meetings. Other than the board resolutions in respect of the matters specified insub-paragraphs (6), (7) and (13) of this Article and matters of externalguarantee which shall be passed by the affirmative vote of more than two-thirdsof all the directors, the board resolutions in respect of all other matters maybe passed by the affirmative vote of exceeding one-half of all of the directors. If any director is associated with the enterprises that are involved in thematters to be resolved by the board meetings, he shall not exercise his votingrights for such matters, and shall not exercise voting rights on behalf of otherdirectors. Such board meetings shall be convened with more than half of thedirectors who are not connected, and the decisions made by the board meetingsshall be passed by more than half of the directors who are not connected. Theaforesaid matters to be passed by more than two-thirds of the directors shall bepassed by votes of more than two-thirds of the directors who are not connected.If the number of directors attending the board meetings is no less than three,such matters shall be submitted to the Company's general meeting forapproval......." 47. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 111 thereof: "With the authorization of the board of directors, the chairman of the boardis entitled to exercise some of the functions and powers of the board ofdirectors while the board is not in session. The substance of the authorizationof the board of directors shall be clear and specific." 48. Article 96 of the Original Articles of Association is proposed to berenumbered as Article 112 thereof. The first paragraph thereof provides that: "The board of directors shall not, without the prior approval of shareholdersin a general meeting, dispose of or agree to dispose of any fixed assets of theCompany where the aggregate of the amount or value of the consideration for theproposed disposal, and the amount or value of the consideration for any suchdisposal of any fixed assets of the Company that has been completed in theperiod of four (4) months immediately preceding the proposed disposal, exceeds33 % of the value of the Company's fixed assets as shown in the latestbalance sheet which was tabled at a shareholders' general meeting." This paragraph is proposed to be amended to read as follows: "The board of directors shall not, without the prior approval of shareholdersin a general meeting, dispose of or agree to dispose of any fixed assets of theCompany where the aggregate of the amount or value of the consideration for theproposed disposal, and the amount or value of the consideration for any suchdisposal of any fixed assets of the Company that has been completed in theperiod of four (4) months immediately preceding the proposed disposal, exceeds33 % of the value of the Company's fixed assets as shown in the latestbalance sheet which was tabled at a shareholders' general meeting. Shouldthere be any inconsistency between the preceding requirements and provisions ofthe securities exchange on which the Company's shares are listed in respectof the issue, the latter shall prevail." 49. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 113 thereof: "The board of directors shall be entitled to make decisions on the investment(including risky investment) or acquisition within the authorization granted bythe general meeting, unless otherwise stated in applicable laws, regulations and/or relevant listing rules. The board of directors, however, shall organizeexperts and professionals to review any significant investment or acquisitionbeyond the authorization granted by the board of directors, and submit them tothe general meeting for approval." 50. Article 97 of the Original Articles of Association will be renumbered asArticle 113 thereof, with three new sub-paragraphs being proposed to be addedthereto as subparagraph (4), (5) and (6) of the first paragraph thereof, and thesecond paragraph thereof being proposed to be amended: The second paragraph thereof provides that: "When the chairman is unable to exercise his powers, such powers shall beexercised by another director who has been designated by the chairman toexercise such powers on his behalf." Three new sub-paragraphs are proposed to be added thereto as sub-paragraph (4),(5) and (6) of the first paragraph thereof, and the second paragraph is proposedto be amended, to read as follows: "The chairman of the board of directors shall exercise the following powers: ... (4) to sign important documents of the board of directors and other documentswhich should be signed by the legal representative of the Company; (5) to exercise the functions and powers of the legal representative; (6) in any emergent force majeure events such as natural disasters, to exercisehis special right of disposition in accordance with law and in the interests ofthe Company, and report to the board of directors and the general meeting of theCompany thereafter; The deputy chairman shall assist the chairman in performing his duties. If thechairman is unable or fails to perform his duties, such duties shall beperformed by the deputy chairman; in the event that the deputy chairmen isunable or fails to perform their duties, a director shall be elected jointly bya simple majority of the directors to perform such duties." 51. Article 98 of the Original Articles of Association will be renumbered asArticle 115 thereof. The first paragraph thereof provides that: "Meetings of the board of directors shall be held at least twice every yearand shall be convened by the chairman of the board of directors. All of thedirectors should be notified of the meeting ten (10) days beforehand. Wherethere is an urgent matter, an extraordinary meeting of the board of directorsmay be held if it is so requested by more than one-third of the directors, thechairman of the board of directors or the Company's president, without beingsubject to the provisions of Article 99 on notice of the meetings." This paragraph is proposed to be divided into the first and second paragraphswith amendments to read as follows: "Meetings of the board of directors shall be held at least twice every yearand shall be convened by the chairman of the board of directors. All of thedirectors and supervisors should be notified of the meeting fourteen (14) daysbeforehand. The chairman of the board of directors shall, without being subject to theperiod of notification, convene an extraordinary meeting of the board ofdirectors within ten (10) days in any of the following circumstances: (1) shareholder(s) representing more than 10% of the voting rights so request(s); (2) the chairman of the board of directors considers necessary; (3) more than one-third of the directors so request jointly; (4) more than half of independent directors so request jointly; (5) the supervisory committee so requests; (6) the president of the Company so requests." 52. Article 99 of the Original Articles of Association will be renumbered asArticle 116 thereof. The second and third paragraphs thereof provide that: "Notice of boardmeetings shall be given by the following methods: ... (2) For meetings of the board of directors of which the time and venue have notbeen decided by the board of directors beforehand, the chairman of the board ofdirectors shall notify the directors of the time and venue of such meeting 10days in advance by telex, by telegram, by facsimile, by express service or byregistered mail or by hand, unless otherwise provided for in Article 98. (3) The notice shall be written in Chinese and where necessary, may include anEnglish version, and shall contain the meeting agenda. Any director may waivehis right to receive notice of the board meeting." This paragraph is proposed to be amended to read as follows: "Notice of boardmeetings shall be given by the following methods: ... (2) For meetings of the board of directors of which the time and venue have notbeen decided by the board of directors beforehand, the chairman of the board ofdirectors shall notify the directors and supervisors of the time and venue ofsuch meeting 14 days in advance by telex, by telegram, by facsimile, by expressservice or by registered mail or by hand, unless otherwise provided for inArticle 115. (3) The notice shall be written in Chinese and where necessary, may include anEnglish version. Any director may waive his right to receive notice of the boardmeeting." 53. Article 101 of the Original Articles of Association will be renumbered asArticle 118 thereof. This Article provides that: "A board meeting shall only be convened if more than half of the board ofdirectors are present (including any directors appointed in writing pursuant toArticle 102 to attend the meeting as the representatives of other directors).Each director has one vote. Any resolution requires the affirmative votes ofmore than half of all the board of directors in order to be passed. In the caseof equal division of votes, the chairman of the board of directors is entitledto a casting vote." This Article is proposed to be amended to read as follows: "A board meeting shall only be convened if a majority of the board ofdirectors are present (including any directors appointed in writing pursuant toArticle 119 to attend the meeting as the representatives of other directors).Each director has one vote. Any resolution requires the affirmative votes ofmore than half of all the board of directors in order to be passed. In the caseof equal votes, the chairman of the board of directors is entitled to a castingvote." 54. Article 102 of the Original Articles of Association will be renumbered asArticle 119 thereof, with a new paragraph, reading as follows, being proposed tobe added thereto as the third paragraph thereof: "In case a director has failed to be present in person at any two consecutiveboard meetings, nor authorized another director to be present at the boardmeeting on his behalf, he shall be considered unable to fulfill hisresponsibilities as a director, and the board of directors shall accordinglysuggest the shareholders' general meeting making a replacement." 55. Article 104 of the Original Articles of Association will be renumbered asArticle 121, with the first paragraph being proposed to be amended and thesecond paragraph deleted. The first paragraph thereof provides that: "The board of directors shall keep minutes of resolutions passed at meetingsof the board of directors in Chinese. Opinions of the independent(non-executive) directors shall be clearly stated in the resolutions of theboard of directors. The minutes of each board meeting shall be provided to allthe directors promptly. Directors who wish to amend or supplement the minutesshall submit the proposed amendments to the chairman in writing within one weekafter receipt of the meeting minutes. The minutes shall be signed by thedirectors present at the meeting and the person who recorded the minutes afterthey are finalised. The minutes of board meetings shall be kept at the premisesof the Company in the PRC and a complete copy of the minutes shall be promptlysent to each director." This is proposed to be amended to read as follows: "The board of directors shall keep minutes of resolutions passed at meetingsof the board of directors in Chinese. Any director present at a meeting isentitled to request for an explanation of his comments made at the meetings tobe noted in the minutes. Opinions of the independent (non-executive) directorsshall be clearly stated in the resolutions of the board of directors. Theminutes of each board meeting shall be provided to all the directors promptly.Directors who wish to amend or supplement the minutes shall submit the proposedamendments to the chairman in writing within one week after receipt of themeeting minutes. The minutes shall be signed by the directors present at themeeting and the person who recorded the minutes after they are finalised. Theminutes of board meetings shall be permanently kept at the premises of theCompany in the PRC and a complete copy of the minutes shall be promptly sent toeach director." 56. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 122 thereof: "Any written resolution by the directors but not signed in accordance withthe statutory procedure shall have no legal effect as a resolution of themeeting of the board of directors even if each director has expressed hisopinion by different means. Any directors who have voted for a resolution passed at a board meeting which ishowever in violation of the law, administrative regulations, the Company'sArticles of Association or any resolutions of a general meeting shall bedirectly liable. If it can be proved that a director has voted against such aresolution and that such objection was recorded in the minutes of the meeting,such director may be released from any liability. Any director who has castabstention vote, or who has been absent at the meeting and has not authorizedanother person to be present on his behalf at the meeting, may not be releasedfrom such liability. Similarly, any director who has clearly expressed hisopposition during the discussion but has not voted against the relevantresolution may not be released from liability." 57. A new Article is added to the Original Articles of Association byre-scheduling the third paragraph of Article 94 thereof as Article 123 thereof. 58. A new Article, reading as follows, is proposed to be added to the OriginalArticles of Association as Article 124 thereof: "A director may resign before his term of office expires. Any director whointends to resign shall submit a written letter of resignation to the board ofdirectors. In addition to this, any independent director who intends to resignshall explain the issues and circumstances related to his resignation or anyother issues or circumstances that he considers necessary to be brought to theattention of the Company's shareholders or creditors. If a director's resignation results in the then number of members of theboard of directors to fall below the minimum required quorum of the board ofdirectors, that director's resignation shall not come into effect until thevacancy resulting from his resignation is filled by his successor. Otherdirectors shall convene an extraordinary shareholder's general meeting toelect a new director therefor as soon as possible. Before such a shareholders' general meeting makes its resolution on the election, the functions and thepowers of the relevant director who has tendered his resignation and those ofthe other members of the board of directors shall be subject to reasonablerestrictions. If an independent director's resignation results in the proportion of thethen remaining independent directors to the total number of directors in theboard being less than minimum ratio required by any relevant regulatoryauthorities, that independent director's resignation shall not come intoeffect until his vacancy is filled by his successor." 59. A new Chapter of "Independent Directors" is proposed to be added theOriginal Articles of Association as Chapter XI thereof, which comprises Articles125 to 131 being proposed to read as follows: Article 125 An independent director candidate of the Company shall be nominatedby the board of directors, the supervisory committee, or shareholder(s)individually or jointly holding more than 1% of the total number of sharescarrying the right to vote, and shall be elected by a shareholders' generalmeeting of the Company. (1) The party nominating any independent director candidate shall have obtainedthe nominee's consent prior to the nomination, and shall be fully aware ofsuch particulars of the nominee in terms of his occupation, academic background,professional title, detailed work experience and all information regarding hispositions held concurrently and be responsible for providing to the Companywritten materials in relation to such particulars. The candidate shall undertaketo the Company in writing that he agrees to accept the nomination, and that thedisclosed information about him is true and complete. He shall also warrant toconscientiously perform his responsibilities as a director upon being elected. (2) The party nominating any independent director shall give his opinions as tothe nominee's qualification and independency as an independent director. Ifrequired under any applicable laws, regulations and/or the applicable listingrules, the nominee shall make a public announcement in accordance with suchrequirements stating that there exists no relationship between the Company andhim that affects his independent and objective judgment. (3) If the nomination of an independent director candidate occurs before themeeting of the board of directors, the written materials pertaining to theparticulars of the nominee described in paragraphs (1) and (2) of this Articleshall, if required under applicable laws, regulations and/or relevant listingrules, be announced together with the resolution of the board of directors inaccordance with such requirements. (4) If an extempore motion proposed at a general meeting for the election of anyindependent director is put forward by shareholder(s) who, individually orjointly, hold(s) more than 5% of the total number of shares of the Companycarrying the voting right, or by the supervisory committee, the followingdocuments shall be submitted to the Company sixteen (16) days before the annualgeneral meeting: the intent to nominate a director candidate , the writtennotice of the nominee expressing his willingness to accept the nomination, andthe written materials pertaining to the particulars of the nominee and thenominee's undertakings as mentioned in the preceding paragraphs (1) and (2)of this Article. (5) Before the shareholders' general meeting for the election of theindependent director, if required under any applicable laws, regulations and/orthe relevant listing rules, the Company shall submit the relevant materialsconcerning the nominee to the securities regulatory authority of the State Council, relevantlocal official agencies of the securities regulatory authority of the StateCouncil in the area in which the Company is located, and the stock exchange(s)and relevant regulatory authorities on which the Company's shares are listed.If the board of directors disputes the particulars pertaining to the nominee, itshall also submit its written opinions to the relevant authorities. If thesecurities regulatory authority of the State Council objects to a nominee, suchperson may not be an independent director candidate. When the shareholders'general meeting is convened for the election of the independent director, theboard of directors of the Company shall explain whether the securitiesregulatory authority of the State Council objects to the relevant nominee. Article 126 The independent director shall meet the following basicrequirements: (1) He shall be qualified to take the position of a director in accordance withthe law, administrative regulations and other relevant requirements; (2) He shall be independent as is required by applicable laws, administrativeregulations, departmental provisions and the relevant listing rules; (3) He shall have basic knowledge of the operation of a listed company, and isfamiliar with relevant laws, administrative regulations, provisions and rules(including but not limited to accounting principles); (4) He shall have more than five (5) years' legal or economic workingexperience or other working experience necessary for the discharge of the dutiesof an independent director; (5) He shall meet other conditions provided for under the Company's Articlesof Association. Article 127 The independent director shall be independent. Unless otherwiseprovided for under applicable laws, regulations and/or the relevant listingrules, the following persons shall not be the Company's independentdirectors: (1) Staff of the Company or its subsidiaries, their lineal relatives or personswho have a significant social relationship with any of them (lineal relativesreferring to persons being spouse, parents and children; and significant socialrelationship being relationship of brothers and sisters, parents-in-law,children-in-law, spouse of brothers and sisters, and the spouse's brothersand sisters); (2) Any natural person who directly or indirectly holds more than 1% of theCompany's shares in issue, or any natural person shareholder who is among theten largest shareholders of the Company, and his lineal relatives; (3) Any employee of any corporate shareholder that directly or indirectly holdsmore than 5% of the Company's shares in issue, or any employee of any of thefive largest corporate shareholders of the Company, and his lineal relatives; (4) Any person who was a person mentioned in any of the aforesaid threecategories during the last one year; (5) Any person who provides financial, legal or advisory services to the Companyor to its subsidiaries; (6) Any person who has been determined as being improper to serve as anindependent director by the securities regulatory authority of the StateCouncil. Article 128 The board of directors shall propose to the shareholders' generalmeeting to dismiss or replace the independent director who has not been presentin person for three times consecutively at board meetings. Except for thepersons mentioned above and those stipulated under the Company Law as beingimproper to serve as an independent director, the independent director shall notbe dismissed until the expiry of his term of office without reason. The Companyshall disclose the early dismissal as a matter of special disclosure item, whilethe independent director concerned who believes that his dismissal has beenunreasonably made may make a public announcement. Article 129 In addition to the functions and powers stipulated by the CompanyLaw, other relevant laws, administrative regulations and regulations and theArticles of Association, the independent directors shall have the followingspecific functions and powers: (1) In respect of major connected transactions (as determined by the criteriaannounced by the competent regulatory authority from time to time) that shall beconsidered at the shareholders' general meeting as required by the law,regulations and applicable listing rules, and in respect of appointment andremoval of the Company's accounting firm (if required under applicable laws,regulations and/or applicable listing rules), the relevant requirements shall beobserved; and if more than half of the independent directors approve therelevant matters, it shall be put forward to the board of directors for review.The resolution of the board of directors in respect of the Company'sconnected transactions shall not become effective until each independentdirector has signed for the resolution. Before any independent director arrivesat his decision, he may employ agency firms to provide an independent financialreport as the basis of his decision; (2) Independent directors shall propose to the board of directors in respect ofproposals to retain or dismiss an accounting firm; (3) Independent directors may request the board of directors to conveneextraordinary shareholders' general meetings; (4) Independent directors shall propose to convene board meetings; (5) Independent directors shall appoint external auditors and consultingadvisors; (6) Independent directors may publicly canvass for votes from shareholders priorto shareholders' general meetings; (7) Independent directors may directly report to the shareholders' generalmeeting, the securities regulatory authority of the State Council, and otherrelevant authorities. Independent directors shall obtain the consent from more than half of the totalnumber of independent directors in the exercise of their functions and powersprovided for under sub-paragraphs (2), (3), (4), (6) and (7) of this Article,and from all of the independent directors in the exercise of their functions andpowers provided for under sub-paragraph (5) of this Article. Article 130 In addition to exercising the above-mentioned functions and powers,the independent directors shall provide independent opinions to the board ofdirectors or the shareholders' general meetings concerning the followingissues: (1) Nomination, appointment and dismissal of directors; (2) Appointment or dismissal of any member of the Company's seniormanagement; (3) Remuneration of directors and members of the Company's senior management; (4) Issues that the independent directors consider possible to impair on therights and interests of minority shareholders; (5) Important capital transfers between the Company and the shareholders orbetween the Company and its connected enterprises; (6) Distribution plans of the cash profits that the board of directors has notmade; (7) Other issues regulated by applicable laws, regulations and the Articles ofAssociation. Each of the independent directors shall provide his comments on the above issuesby way of: either agreeing to the relevant proposal; reserving his opinion withreasons; objecting to the relevant proposal with reasons; or expressing his viewas not being able to provide his comments and his difficulties thereof. Article 131 The independent directors shall submit their annual report of thework undertaken to the shareholders' general meeting of the Companyaccounting for their performance of duties." 60. Article 105 of the Original Articles of Association shall be renumbered asArticle 132. Sub-paragraph 3 of the second paragraph of the Original Articles of Associationprovide that: "The Strategy and Investment Committee shall be accountable to the board ofdirectors and exercise the following functions: ... (3) determine the establishment, merger and demerger of the subsidiaries of theCompany; ..." This paragraph is proposed to be amended to read as follows: "The Strategy and Investment Committee shall be accountable to the board ofdirectors and exercise the following functions: ... (3) determine the establishment, merger and demerger of the materialsubsidiaries of the Company; ..." 61. Article 109 of the Original Articles of Association will be renumbered asArticle 136 thereof. Sub-paragraph (10) of the second paragraph thereof provides that: "The mainresponsibilities of the secretary of the board of directors include: ... (10) to exercise other powers and duties authorized by the board of directorsand other powers and duties required in the overseas listing jurisdiction." This sub-paragraph is proposed to be amended to read as follows: "The mainresponsibilities of the secretary of the board of directors include: ... (10) to exercise other powers and duties authorized by the board of directorsand other powers and duties required under the law of jurisdiction in which theCompany's shares are listed or relevant provisions of the securities exchangelocated therein." 62. Article 110 of the Original Articles of Association will be renumbered asArticle 137 thereof. This Article provides that: "A director or other senior officer of the Company may also act as thesecretary of the board of directors. The certified public accounting firm whichhas been appointed by the Company to act as its auditors shall not act as thesecretary of the board of directors." This is proposed to be amended to read as follows: "A director or other senior officer of the Company (excluding the presidentand financial controller) may also act as the secretary of the board ofdirectors. The certified public accounting firm which has been appointed by theCompany to act as its auditors shall not act as the secretary of the board ofdirectors." 63. Article 112 of the Original Articles of Association will be renumbered asArticle 139, with a new paragraph, reading as follows, being proposed to beadded thereto as the third paragraph thereof: "A director may also act as the president, deputy president or other seniorofficer. However, directors who do so shall not exceed half of the total numberof directors." 64. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 140 thereof: "The term of office of the president shall be three years and renewable uponre-election." 65. Article 113 of the Original Articles of Association will be renumbered asArticle 141 thereof, with two new sub-paragraphs, reading as follows, beingproposed to be added thereto as sub-paragraphs (10) and (11) thereof: "The president shall be accountable to the board of directors and shallexercise the following functions and powers: ... (10) to propose the salary, welfare, awards and punishment for the staff of theCompany and to make decision on employment or dismissal of the staff of theCompany; and (11) to propose to convene extraordinary meetings of the board of directors; ..." 66. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 142 thereof: "The president shall report to the board of directors, or report at therequest of the supervisory committee, the signing, execution, capital operationand profit and loss of the Company's major contracts. The president shallensure the authenticity of the report." 67. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 143 thereof: "The president shall in advance consult the employees before making decisionson issues related to their own interests such as salary, welfare, productionsafety and work, labor insurance and termination of appointment (or dismissal)." 68. Article 117 of the Original Articles of Association will be renumbered asArticle 147. The first paragraph thereof provides that: "The supervisory committee shall comprise five (5) supervisors includingoutside supervisors (hereinafter meaning supervisors who do not hold office inthe Company) who shall constitute more than half of the supervisory committee.The supervisory committee shall have one (1) chairman. Each supervisor shallserve for a term of three (3) years, which term is renewable upon re-electionand re-appointment." This is proposed to be amended to read as follows: "The supervisory committee shall compose of five (5) supervisors includingoutside supervisors (hereinafter meaning supervisors who do not hold office inthe Company) who shall constitute more than half of the supervisory committee.The number of supervisors who are employee representatives shall constitute noless than one-third of the members of the supervisory committee. The supervisorycommittee shall have one (1) chairman. Each supervisor shall serve for a term ofthree (3) years, which term is renewable upon re-election and re-appointment." 69. The Article 118 of the Original Articles of Association will be renumberedas Article 148. The first paragraph thereof provides that: "The supervisory committee shall include four (4) supervisors who shallrepresent the shareholders (hereinafter including qualified outside supervisors)and one (1) supervisor who shall represent the employees. Supervisors whorepresent the shareholders shall be elected or removed by the shareholders ingeneral meetings, and the supervisor who represents employees shall be electedor removed by the employees democratically." This paragraph is proposed to be amended to read as follows: "The supervisory committee shall include three (3) supervisors who shallrepresent the shareholders (all of which are outside supervisors) and two (2)supervisors who shall represent the employees. Supervisors who represent theshareholders shall be elected or removed by the shareholders in generalmeetings, and the supervisor who represents employees shall be elected orremoved by the employees democratically." 70. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 149 thereof: "The list of supervisor candidates representing the shareholders shall besubmitted as a motion to the shareholders' general meeting for resolution.Such supervisor candidates shall be nominated by the board of directors, thesupervisory committee and the shareholder(s) individually or jointly holdingmore than 5% of the total number of shares of the Company carrying votingrights. The election and removal of such supervisors shall be determined at theshareholders' general meeting of the Company." 71. Article 120 of the Original Articles of Association will be renumbered asArticle 151 thereof. This Article provides that: "Meetings of the supervisory committee shall be held at least once everyyear, and shall be convened by the chairman of the supervisory committee." This is proposed to be amended to read as follows: "Meetings of the supervisory committee shall be held at least once every sixmonths, and shall be convened and chaired by the chairman of the supervisorycommittee. If the chairman of the supervisory committee is unable or has failedto perform his duties, a supervisor shall be elected by a simple majority ofsupervisors to convene and chair meetings of the supervisory committee. Noticesconvening meetings of the supervisory committee shall be delivered to allsupervisors no less than 10 days before the meeting is convened." 72. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 152 thereof: "If any supervisor fails to attend meetings of the supervisory committee inperson twice consecutively, nor appoints another supervisors to be present onhis behalf, he shall be deemed incapable of performing his responsibilities andthe shareholders' general meeting or the employee representatives' meetingshall remove that supervisor." 73. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 153 thereof: "If supervisors have not been re-elected in time when the terms of service ofthe current supervisors have expired, or any supervisor's resignation beforehis term of service expires causes the number of supervisors to be less than therequired quorum, the supervisors whose terms have just expired shall continue toperform their duties in accordance with the provisions of the laws,administrative regulations and articles of association until the vacancy hasbeen filled by another elected supervisor." 74. Article 121 of the Original Articles of Association will be renumbered asArticle 154. (1) Sub-paragraph (7) of the first paragraph thereof is proposed to bere-scheduled as sub-paragraph (9) and amended, with two new sub-paragraphs (5)and (7) to be added thereto. The first paragraph thereof provides that: "The supervisory committee shall be accountable to the shareholders in ageneral meeting and shall exercise the following functions and powers inaccordance with law: ... (7) other functions and powers specified in the Articles of Association." This paragraph is proposed to be amended to read as follows: "The supervisory committee shall be accountable to the shareholders in ageneral meeting and shall exercise the following functions and powers inaccordance with law: ... (5) to propose an extempore motion at the general meeting; ... (7) to propose to convene an extraordinary board meeting; ... (9) other functions and powers specified in the law, administrative regulationsand the Articles of Association and provided by the shareholders' generalmeeting." (2) The second paragraph thereof provides that: "The supervisory committee may make recommendations on the appointment ofaccounting firm by the Company, may appoint another accounting firm in the nameof the Company when necessary to examine financial affairs of the Companyindependently, and may directly report relevant information to the securitiesauthorities of the State Council and other relevant authorities." This paragraph is proposed to be amended to read as follows: "The supervisory committee may make recommendations on the appointment ofaccounting firm by the Company, may appoint another accounting firm in the nameof the Company when necessary to examine financial affairs of the Companyindependently, and may directly report relevant information to the securitiesregulatory authority of the State Council and other relevant authorities." 75. The following paragraph is proposed to be added as Article 155 of theArticles of Association: "The supervisory committee may request for the directors, president, deputypresident and other senior officers, internal and external accounting officersto attend meetings of the supervisory committee and answer to the questionsraised by the supervisory committee." 76. The following paragraph is proposed to be added as Article 157 of theArticles of Association: "The supervisory committee shall produce minutes in respect of resolutions ofthe meetings, and the supervisors and recorder(s) attending the meetings shallsign the minutes. Each supervisor shall be entitled to request for anexplanation of his comments made at the meetings to be noted in the minutes.Such minutes shall be kept well and permanently as important records of theCompany." 77. Article 125 of the Original Articles of Association will be renumbered asArticle 160. (1) Sub-paragraphs (3) of the first paragraph of this Article is proposed to beamended and a new sub-paragraphs is proposed to be added thereto assub-paragraph (11) of the first paragraph thereof. Sub-paragraphs (3) of the first paragraph of this Article provides that: "A person may not serve as a director, supervisor, president, deputypresident or any other senior officer of the Company if any of the followingcircumstances apply: ... (3) a person who is a former director, factory manager or manager of a companyor enterprise which has been dissolved or put into liquidation as a result ofmismanagement and who was personally liable for the winding up of such companyor enterprise, where less than three (3) years have elapsed since the date ofcompletion of the insolvent liquidation of the company or enterprise; ..." Sub-paragraph (3) of the first paragraph of this Article is proposed to beamended and a new sub-paragraphs is proposed to be added thereto assub-paragraphs (11) of the first paragraph thereof: "A person may not serve as a director, supervisor, president, deputypresident or any other senior officer of the Company if any of the followingcircumstances apply: ... (3) a person who is a former director, factory manager or manager of a companyor enterprise which has been dissolved or put into liquidation and who waspersonally liable for the winding up of such company or enterprise, where lessthan three (3) years have elapsed since the date of completion of the insolventliquidation of the company or enterprise; ... (11) a person who has been prohibited from entering the market by the securitiesregulatory authority of the State Council, where such prohibition has not beenremoved." (2) The following paragraph is proposed to be added thereto as the secondparagraph thereof: "In case any of the above circumstances occurs in respect of any director inservice, the board of directors shall terminate all functions and powers of thatdirector on the date on which the circumstance has become known to it and shallsuggest the shareholders' general meeting to remove that director. In caseany of the above circumstances occurs to the president in service, the board ofdirectors shall terminate all functions and powers of the president on the dateon which the circumstance has become known to it and shall convene a boardmeeting to remove that president. In case any of the above circumstances occursto any supervisor in service, the supervisory committee shall terminate all thefunctions and powers of that supervisor on the date on which the circumstancehas become known to it and shall suggest the shareholders' general meeting oremployee representatives' meeting to remove that supervisor." 78. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 161 thereof: "Unless otherwise stipulated under the Articles of Association or legallyauthorized by the board of directors, any director shall not act on behalf ofthe Company or the board of directors in his own name. When a director acts inhis own name, a third party could reasonably believe that he is acting on behalfof the Company or the board of directors. Thus he shall first declare hisposition and status." 79. Article 128 of the Original Articles of Association will be renumbered asArticle 164. This Article provides that: "Each of the Company's directors, supervisors, president and other seniorofficers owes a duty, in the exercise of his powers and in the discharge of hisduties, to exercise the care, diligence and skill that a reasonable and prudentperson would exercise in similar circumstances." This Article is proposed to be amended to read as follows: "Each of the Company's directors, supervisors, president, deputy presidentand other senior officers owes a duty, in the exercise of his powers and in thedischarge of his duties, to exercise the care, diligence and skill that areasonable and prudent person would exercise in similar circumstances, includingbut not limited to such criteria and guidelines providing for the professionalethics of the Company's staff as prescribed by the Company." 80. Article 129 of the Original Articles of Association will be renumbered asArticle 165. Paragraph (11) thereof provides that: "not to misappropriate the Company's funds nor to lend such funds to anyperson, not to use the Company's assets to set up deposit accounts in his ownname or in any name nor to use such assets to guarantee the debts of ashareholder of the Company or any other personal liabilities;" This paragraph is proposed to be amended to read as follows: "not to misappropriate the Company's funds, not to use the Company'sassets to set up deposit accounts in his own name or in any other name nor tolend the Company's funds to any person, nor use the Company's assets toprovide any guarantee for any person without prior consent of the generalmeeting when aware of this matter;" 81. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 166 thereof: "When the general meeting requires the directors, supervisors, president,deputy presidents and other senior officers to attend the meeting, thedirectors, supervisors, president, deputy presidents and other senior officersshall so attend and answer shareholders' questions. The directors, president, deputy presidents and other senior officers shallprovide the supervisory committee of true and relevant information and shall nothamper the supervisory committee's performance of duties." 82. Article 131 of the Original Articles of Association will be renumbered asArticle 168. This Article provides that: "The fiduciary duties of the directors, supervisors, president and othersenior officers of the Company do not necessarily cease upon termination oftheir term of office. The duty of confidentiality in respect of trade secrets ofthe Company survives the termination of their term of office. Other duties maycontinue for such period as the principle of fairness may require depending onthe amount of time which has lapsed between the termination and the actconcerned and the circumstances and the terms under which the relationshipbetween the relevant director, supervisor, president and other senior officer onthe one hand and the Company on the other hand was terminated." This Article is proposed to be amended to read as follows: "The fiduciary duties of the directors, supervisors, president, vicepresident and other senior officers of the Company do not necessarily cease whenthey resign or upon the termination of their term of office. Such officers shallcontinue to observe their respective fiduciary duties at any time before theresignation or expiry of term of office, as the case may be, becomes effectiveand for a reasonable period thereafter. The duty of confidentiality in respectof trade secrets of the Company survives the termination of their term of officeuntil such secrets become publicly known. Other duties may continue for suchperiod as the principle of fairness may require depending on the amount of timewhich has lapsed between the termination and the act concerned and thecircumstances and the terms under which the relationship between the relevantdirector, supervisor, president and other senior officer on the one hand and theCompany on the other hand was terminated." 83. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 169 thereof: "Any director, supervisor, president, deputy president or other seniorofficer of the Company who has left his office without authorization before histerm of office expires and thereby caused the Company to incur a loss shall beliable to the Company for compensation." 84. Article 133 of the Original Articles of Association will be renumbered asArticle 171. The second paragraph thereof provides that: "Subject to the exceptions provided by these Articles of Association, adirector shall not vote at the relevant meeting of the board of directors inrespect of any contract, transaction or arrangement in which he, or hisassociates (as defined by the applicable listing rules), are materiallyinterested and he shall not be counted as part of the quorum of such meeting." This paragraph is proposed to be amended to read as follows: "Subject to the exceptions provided by these Articles of Association, adirector shall not vote at the relevant meeting of the board of directors inrespect of any contract, transaction or arrangement in which he, or hisassociates (as defined by the applicable listing rules which may be revised fromtime to time), are materially interested and he shall not be counted as part ofthe quorum of such meeting." 85. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 178 thereof: "Subject to the approval of the shareholders' general meeting, the Companymay purchase liability insurance for its directors, supervisors, president,deputy president and other senior officers, except for liabilities arising fromthe violation of laws, administrative regulations or the Articles of Associationof the Company." 86. Chapter XVI of the Original Articles of Association will be renumbered asChapter XVII thereof, with its title being proposed to be changed from"Financial and Accounting System and Profit Distribution" to "FinancialAccounting System, Profit Distribution and Auditing". 87. Article 144 of the Original Articles of Association will be renumbered asArticle 183. The third paragraph thereof provides that: "At the end of each fiscal year, the Company shall prepare a financial reportwhich shall be audited and verified in a manner prescribed by law." This paragraph is proposed to be amended to read as follows: "At the end of each fiscal year, the Company shall prepare a financial reportwhich shall be audited and verified by an accounting firm in a manner prescribedby law." 88. Article 149 of the Original Articles of Association will be renumbered asArticle 188. This Article provides that: "The Company shall publish its financial reports twice every fiscal year,that is, the interim financial report shall be published within sixty (60) daysafter the expiration of the first six (6) months of each fiscal year; the annualfinancial report shall be published within one hundred and twenty (120) daysafter the expiration of each fiscal year." This Article is proposed to be amended to read as follows: "The Company shall publish its financial reports four times every fiscalyear, that is, the first quarterly financial report shall be published withinthirty (30) days after the expiration of the first three (3) months of eachfiscal year; the interim financial report shall be published within sixty (60)days after the expiration of the first six (6) months of each fiscal year; thethird quarterly financial report shall be published within thirty (30) daysafter the expiration of the first nine (9) months of each fiscal year; theannual financial report shall be published within one hundred and twenty (120)days after the expiration of each fiscal year." 89. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 189 thereof: "The Company's annual financial report and interim report for any mid-yearprofit distribution should include the following: (1) Balance sheet; (2) Income statement; (3) Statement of profit distribution; (4) Cash flow statement; (5) Notes tofinancial statements. If the Company does not make a mid-year profit distribution, the interim reportshall include the above-mentioned financial statements and notes except that setout in the preceding sub-paragraph (3)." 90. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 191 thereof: "The Company shall adopt initiative methods of profit distribution and payattention to investors' reasonable investment return. The Company's board of directors shall announce in the periodical report thereasons if no plan of cash profit distribution is made and the independentdirectors shall give independent opinions. If the shareholder improperly appropriates the Company's capital, the Companyshould deduct the cash bonus distributed to the shareholder so as to reimbursethe appropriated capital." 91. Article 151 of the Original Articles of Association will be renumbered asArticle 192. This Article provides that: "When distributing its after-tax profits in a given year, the Company shallcontribute 10% of the profits to the Company's statutory common reserve fundand 5% to 10% to the Company's statutory common welfare fund. Where theaccumulated amount of the statutory common reserve fund reaches 50% or more ofthe registered capital of the Company, no further contribution is required. Where the statutory common reserve fund is insufficient to make up for thelosses of the Company in the previous year, before making contribution to thestatutory common reserve fund and the statutory common welfare fund, the profitsmade in the current year shall be used to make up for the losses first. After making contribution to the statutory common reserve fund from itsafter-tax profits, the Company may, subject to resolutions adopted at a generalmeeting, make contributions to discretionary common reserve funds. After making up for the losses and making contributions to the common reservefund and the statutory common welfare fund, any remaining profits shall bedistributed to the shareholders in proportion to their respective shareholdings." This Article is proposed to be amended to read as follows: "When distributing its after-tax profits in a given year, the Company shallcontribute 10% of the profits, based on the net profits of the Companycalculated in accordance with the accounting principles adopted in the People's Republic of China, to the Company's statutory common reserve fund. Wherethe accumulated amount of the statutory common reserve fund reaches 50% or moreof the registered capital of the Company, no further contribution is required. Where the statutory common reserve fund is insufficient to make up for thelosses of the Company in the previous years, before making contribution to thestatutory common reserve fund, the profits made in the current year shall beused to make up for the losses first. After making contribution to the statutory common reserve fund from itsafter-tax profits, the Company may, subject to resolutions adopted at a generalmeeting, make contributions from its after-tax profits to discretionary commonreserve funds. After making up for the losses and making contributions to the common reservefund, any remaining profits shall be distributed to the shareholders inproportion to their respective shareholdings. Such profit distribution shall notbe applied to shares held by the Company." 92. Article 154 of the Original Articles of Association will be renumbered asArticle 195. This Article provides that: "The common reserve funds (including the statutory common reserve fund,discretionary common reserve fund and capital surplus fund) of the Company shallonly be applied to make up for losses, expanding the Company's production andoperation or capitalization. If a general meeting of the Company resolves to capitalize any common reservefund, the Company shall issue new shares to the existing shares in proportion totheir respective shareholdings or increase the par value of each share providedthat when capitalizing the statutory common reserve fund, the balance of suchfund shall not be less than 25% of the registered capital." This Article is proposed to be amended to read as follows: "The common reserve funds (including the statutory common reserve fund,discretionary common reserve fund and capital surplus fund) of the Company shallonly be applied to make up for losses, expanding the Company's production andoperation or capitalization. However, the capital surplus fund may not beapplied for making up for losses. When capitalizing the statutory common reserve fund, the balance of such fundshall not be less than 25% of the registered capital before the capitalization." 93. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 197 thereof: "The Company's board of directors must complete the distribution ofdividends (in cash or in kind in the form of shares) within two months after theshareholders' meeting resolution approving the relevant profit distributionproposal." 94. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 204 thereof: "The Company shall implement an internal audit system and appoint full timeauditors to carry out internal auditing and supervision of the Company'sfinancial income and expenses and economic activities." 95. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 205 thereof: "The Company's internal auditing system and the responsibilities of theauditing personnel should be carried out after obtaining approval by the boardof directors. The auditor-in-chief shall be accountable and respond to the boardof directors." 96. Article 162 of the Original Articles of Association will be renumbered asArticle 206. The first paragraph thereof provides that: "The Company shall appoint an independent firm of accountants which isqualified under the relevant regulations of the State to audit the Company'sannual report and review the Company's other financial reports." This paragraph is proposed to be amended to read as follows: "The Company should appoint an independent accounting firm which complieswith the relevant requirements of the People's Republic of China to audit itsannual accounts, review its other financial reports, carry out net assetverifications and provide other related consulting services." 97. Article 163 of the Original Articles of Association will be renumbered asArticle 207. This Article provides that: "The accounting firm appointed by the Company shall hold office from theconclusion of the annual general meeting of shareholders at which they wereappointed until the conclusion of the next annual general meeting ofshareholders." This Article is proposed to be amended to read as follows: "The term of office of an accounting firm appointed by the Company shall beone year, commencing from the conclusion of the annual general meeting andexpires at the conclusion of the next annual general meeting. At the expiry ofsuch term, the relevant accounting firm may be re-appointed." 98. Article 168 of the Original Articles of Association will be renumbered asArticle 212: The first paragraph thereof provides that: "The Company's appointment, removal or non-reappointment of an accountingfirm shall be resolved by the shareholders in a general meeting. Such resolutionshall be filed with the securities authority of the State Council." This paragraph is proposed to be amended to read as follows: "Decisions to appoint, remove or not to renew the services of an accountingfirm shall be made by the shareholders in general meetings and shall, ifrequired under applicable laws and regulations and/or relevant listing rules andin accordance with such requirements, be disclosed in the relevant newspapers.When necessary, the reason for the change shall be stated. Further, any suchdecision shall be filed with the securities regulatory authority of the StateCouncil and the Institute of Certified Public Accountants of the People'sRepublic of China" 99. Article 169 of the Original Articles of Association will be renumbered asArticle 213. The first paragraph thereof provides that: "Prior notice should be given to the accounting firm if the Company decidesto remove such accounting firm or not to renew the appointment thereof. Suchaccounting firm shall be entitled to make representations at the shareholders' general meeting. Where the accounting firm resigns from its position, itshall make clear to the shareholders in a general meeting whether there has beenany impropriety on the part of the Company." This paragraph is proposed to be amended to read as follows: "If the Company dismisses or does not continue with the re-appointment of itsaccounting firm, it should advice the accounting firm ten days in advance, andthe accounting firm shall have the right to present its views at the shareholders' generalmeeting. When the accounting firm considers that the grounds on which theCompany decided to dismiss its service or not to renew its appointment areunjustified, it may file a complaint with the securities regulatory authority ofthe State Council and the Institute of Chartered Public Accountants of thePeople's Republic of China. If an accounting firm resigns, it shall be underan obligation to inform the shareholders in general meetings as to whether ornot there is any impropriety with the Company's affairs." 100. Article 170 of the Original Articles of Association will be renumbered asArticle 214. The first paragraph thereof is proposed to be amended and two newparagraphs are proposed to be added as the second and third paragraphs thereof. The first paragraph thereof provides that: "In the event of the merger or demerger of the Company, a plan shall bepresented by the Company's board of directors and shall be approved inaccordance with the procedures stipulated in the Articles of Association. TheCompany shall then go through the relevant approval process. A shareholder whoobjects to the plan of merger or demerger shall have the right to demand theCompany or the shareholders who consent to the plan of merger or demerger toacquire such dissenting shareholders' shareholding at a fair price." The first paragraph is proposed to be amended and two new paragraphs areproposed to be added as the second and third paragraphs thereof as follows: "The Company shall be merged or divided in accordance with the law. Themerger or division of the Company shall be carried out in accordance with thefollowing procedures: (1) The board of directors proposes an agenda for the merger or division of theCompany; (2) The shareholders in general meetings shall pass a resolution in accordancewith the provisions under the Articles of Association; (3) The relevant parties shall enter into an agreement for the merger ordivision; (4) The relevant examination and approval procedures shall be carried out inaccordance with the law; (5) The various merger or division matters, such as creditors' rights anddebts and the disposal of claims, etc., shall be carried out; (6) The registration of dissolution or registration of the change shall becarried out. When the Company is merged or divided, the board of directors shall takenecessary measures to safeguard the legitimate rights and interests of theshareholders who oppose the Company's merger or division proposal. Shareholders who oppose the Company's merger or division proposal areentitled to require the Company or the shareholders who agree to the Company's merger or division proposal to purchase their shares at a fair price." 101. Article 171 of the Original Articles of Association will be renumbered asArticle 215. The second paragraph thereof provides that: "In the event of the Company's merger, the merging parties shall execute amerger agreement and prepare a balance sheet and an inventory of properties. TheCompany shall notify its creditors within 10 days from the date of the Company'smerger resolution and shall publish a public notice in a newspaper at least3 times within 30 days of the date of such resolution." The paragraph is proposed to be amended to read as follows: "In the event of the Company's merger, the merging parties shall execute amerger agreement and prepare a balance sheet and an inventory of properties. TheCompany shall notify its creditors within 10 days from the date of the Company'smerger resolution and shall publish a public notice in a newspaper within30 days of the date of such resolution." 102. Article 172 of the Original Articles of Association will be renumbered asArticle 216. The second and third paragraphs thereof provide that: "In the event of demerger of the Company, the parties to such demerger shallenter into a demerger agreement and prepare a balance sheet and an inventory ofproperties. The Company shall notify its creditors within ten (10) days of thedate of the Company's demerger resolution and shall publish a public noticein a newspaper at least three (3) times within thirty (30) days of the date ofthe Company's demerger resolution. Debts of the Company prior to demerger shall be assumed by the companies arisingfrom the demerger in accordance with the agreement of the parties." The paragraphs are proposed to be amended to read as follows: "In the event of demerger of the Company, the parties to such demerger shallenter into a demerger agreement and prepare a balance sheet and an inventory ofproperties. The Company shall notify its creditors within ten (10) days of thedate of the Company's demerger resolution and shall publish a public noticein a newspaper within thirty (30) days of the date of the Company's demergerresolution. The debts of the Company prior to demerger shall be assumed as joint liabilityby the companies arising from the demerger, except for those which writtenagreement has been reached with the creditor in respect of repayment of thedebts prior to the demerger." 103. Article 174 of the Original Articles of Association will be renumbered asArticle 218. The fourth paragraph thereof provides that: "The Company shall be dissolved and liquidated upon the occurrence of any ofthe following events: ... (4) the Company is ordered to close down pursuant to laws because of itsviolation of laws and administrative regulations." The fourth paragraph is proposed to be amended to read as follows, and a fifthparagraph, reading as follows, is proposed to be added: "The Company shall be dissolved and liquidated upon the occurrence of any ofthe following events: ... (4) the business licence of Company is suspended, ordered to close down or isrevoked; (5) there is severe difficulty in the operation and management of the Company,the subsisting of the Company will incur substantial damage to the shareholders'interests, it may not be solved by other means, shareholders holding over10% of the total voting rights of shareholders of the Company request the People's court to dissolve the company, and the People's Court dissolves theCompany according to laws." 104. Article 175 of the Original Articles of Association will be renumbered asArticle 219. The first paragraph thereof is proposed to be amended, a newparagraph is proposed to be added as the second paragraph thereof and the thirdparagraph thereof is proposed to be deleted: The first and third paragraphs thereof provide that: "A liquidation committee shall be set up within fifteen (15) days of theCompany being dissolved pursuant to sub-paragraph (1) of the preceding Article,and the composition of the liquidation committee of the Company shall bedetermined by an ordinary resolution of shareholders in a general meeting. Ifthe Company fails to set up the liquidation committee within the time limit, thecreditors may apply to the People's Court for appointment of relevant personsto form a liquidation committee and carry out liquidation. ... Where the Company is dissolved under sub-paragraph (4) of the preceding Article,the relevant governing authorities shall organise the shareholders, relevantorganisations and professional personnel to establish a liquidation committee tocarry out the liquidation." This first paragraph thereof is proposed to be amended, a new paragraph isproposed to be added as the second paragraph thereof and the third paragraphthereof is proposed to be deleted, reading as follows: "A liquidation committee shall be set up within fifteen (15) days of theCompany being dissolved pursuant to sub-paragraph (1), (4) and (5) of thepreceding Article, and the composition of the liquidation committee of theCompany shall be determined by an ordinary resolution of shareholders in ageneral meeting. If the Company fails to set up the liquidation committee withinthe time limit, the creditors may apply to the People's Court for appointmentof relevant persons to form a liquidation committee and carry out liquidation. Where the Company is dissolved under the condition of sub-paragraph (2) of thepreceding Article, all relevant parties to merger or demerger shall handle theliquidation in accordance with the agreement of merger or demerger reachedbetween them. ..." 105. Article 177 of the Original Articles of Association will be renumbered asArticle 221. This Article provides that: "The liquidation committee shall, within ten (10) days of its establishment,send notices to creditors and shall, within sixty (60) days of itsestablishment, publish a public announcement in a newspaper at least three (3)times. The registration of creditors' rights shall be conducted by theliquidation committee." This Article is proposed to be amended to read as follows: "The liquidation committee shall, within ten (10) days of its establishment,send notices to creditors and shall, within sixty (60) days of itsestablishment, publish a public announcement in a newspaper. The registration ofcreditors' rights shall be conducted by the liquidation committee. During theperiod of the claim for creditors' rights, the liquidation committee shallnot repay the creditors." 106. Article 178 of the Original Articles of Association will be renumbered asArticle 222. The second and fourth paragraphs thereof provide that: "During the liquidation period, the liquidation committee shall exercise thefollowing functions and powers: ... (2) to notify the creditors or to publish public announcements; ... (4) to pay all outstanding taxes; ..." The paragraphs thereof are proposed to be amended to read as follows: "During the liquidation period, the liquidation committee shall exercise thefollowing functions and powers: ... (2) to notify the creditors and to publish public announcements; ... (4) to pay all outstanding taxes and to the taxes incurred during the liquidation process; ..." 107. Article 179 of the Original Articles of Association will be renumbered as Article 223. The second and fourth paragraphs thereof provide that: "... After the payment of liquidation expenses with priority, the Company's assetsshall be distributed in accordance with the following sequence: (i) salaries andlabour insurance expenses of employees of the Company; (ii) outstanding taxes;(iii) bank loans, debt securities of the Company and other debts of the Company. ... During the liquidation period, the Company shall not commence any new businessactivities." The paragraphs thereof are proposed to be amended to read as follows: "... After the payment of liquidation expenses with priority, the Company's assetsshall be distributed in accordance with the following sequence: (i) salaries ofemployees of the Company; (ii) social insurance fees and statutory compensation;(iii) outstanding taxes; (iv) bank loans, debt securities of the Company andother debts of the Company. ... During the liquidation period, the Company shall not commence any new businessactivities not related to liquidation." 108. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 227 thereof: "Any amendment to the Articles of Association shall be made in accordancewith the following procedures: (1) The board of directors shall pass any resolution in accordance with theArticles of Association, prepare any resolution on amendments to the Articles ofAssociation in accordance with the Articles of Association. Alternatively, theshareholders may propose a resolution on amendment to the Articles ofAssociation; (2) The shareholders shall be notified of the proposed amendments, and ashareholders' general meeting shall be convened for voting; (3) Any content of the amendments submitted to the shareholders' generalmeeting for voting shall be passed by a special resolution." 109. A new Article, reading as follows, is proposed to be added to the OriginalArticles of Association as Article 228 thereof: "The Articles of Association of the Company shall be amended upon theoccurrence of any of the following events: (1) After any amendment to the Company Law of the People's Republic of Chinaor other relevant laws and administrative regulations, any provision under theArticles of Association conflicts with the provisions of the amended law orregulations; (2) A change occurs to the Company resulting in an inconsistency with theArticles of Association; (3) The Company's shareholders in general meetings decide to amend theArticles of Association of the Company." 110. Article 184 of the Original Articles of Association will be renumbered asArticle 230: This Article provides that: "Where amendments of the Articles of Association involve the registeredparticulars of the Company, procedures for alteration of registration shall behandled in accordance with the law." This Article is proposed to be amended to read as follows: "Where amendments of the Articles of Association involve the registeredparticulars of the Company, procedures for alteration of registration shall behandled in accordance with the law. Any amendment to the Articles of Associationinvolving items which are required under laws or administrative regulations tobe disclosed shall be published by way of a public announcement." 111. Chapter XXI of the Original Articles of Association will be renumbered asChapter XXII thereof, with its title being proposed to be changed from "Notices"to "Notice and Public Announcement". 112. A new Article, reading as follows, is proposed to be added to the OriginalArticles of Association as Article 231 thereof: "The Company's notices shall be delivered by the following means: (1) bydesignated person; (2) by mail; (3) by way of public announcement; (4) by othermeans in accordance with the Articles of Association. The Company's notices delivered by way of public announcement are deemed tobe received by all relevant parties as soon as the public announcement ispublished, provided that such announcement shall be published in the designatednewspapers." 113. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 233 thereof: "When a notice is delivered by a designated person, the date on which therecipient signs (or seals) on the acknowledgement of receipt is deemed to be thedate on which the notice is delivered; When the notice is delivered by way of public announcement, the date on whichthe public announcement is first published is deemed to be the date on which thenotice is delivered." 114. The following paragraph is proposed to be added as Article 235: "Unless otherwise provided, any notice or report that is required orpermitted to be issued by the Company by way of public announcement under theArticles of Association must be published in at least one newspaper withnational circulation designated by the securities regulatory authority of theState Council and in other newspapers in China designated by the board ofdirectors, and must simultaneously be published on the same day in the Englishand Chinese languages, respectively, in at least one major English newspaper andone major Chinese newspaper in Hong Kong." 115. The following paragraph is proposed to be added to the Original Articles ofAssociation as Article 240 thereof: "The phrases "more than", "within" and "below" herein for thenumbers include the numbers indicated themselves, while the phrases "majority", "fall short", "beyond" and "exceed" exclude the numbers indicatedthemselves." APPENDIX II PROPOSED RULES AND PROCEDURES FOR SHAREHOLDERS' GENERAL MEETINGS EXPLANATIONS FOR RULES AND PROCEDURE FOR GENERAL MEETINGS OF AIR CHINA COMPANYLIMITED (DRAFT) The Company, currently as an H share company, has an intention to make a publicissue of A shares. Pursuant to the related requirements of the CSRC, after thecompletion of the issuance of A shares, the Company will be required to makeamendments in accordance with the laws, regulations and standard documentsapplicable to domestic listed companies such as "Company Law of the People's Republic of China", "Mandatory Provisions for the Articles ofAssociation of Companies to be Listed Overseas", "Guide to Articles ofAssociation of Listed Companies", "Standards for the Governance of ListedCompanies", "Regulatory Opinions Regarding General Meetings of ListedCompanies", "Notice on the Standardization of the External Guarantees forListed Companies", as well as the amended Articles of Association of the Companybased on the requirements for domestically listed companies, to "Rules ofProcedure for General Meetings" which shall be an appendix to the Articles ofAssociations and take effect with the amended Articles of Associationsimultaneously. The amendments are made to the original Rules and Procedure,mainly covering the functions and powers of the general meetings, theauthorization of the general meetings to the board of directors and the workingcommittee of president, the nomination procedures of directors and supervisors,the proposal of extraordinary resolutions to the general meetings, registrationof the general meetings, the convening and presiding procedures of the generalmeetings, the proposals and convening procedures of the extraordinary generalmeetings, the cumulative voting systems for the election of directors, etc. Forthe details, please refer to "Rules and Procedure for General Meetings"(Draft) contained in the Appendix. This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOWRelated Shares:
Air China