15th Feb 2006 07:02
Air China Ld15 February 2006 PART 2 CHAPTER 1 GENERAL PROVISIONS Article 1 In order to protect the legitimate interests of Air ChinaLimited (hereinafter referred to as the "Company") and its shareholders, tospecify the duties and authority of the general meetings, to ensure the proper,efficient and smooth operation of the general meetings and to ensure the generalmeetings exercise their functions and powers legally, these Rules are formulatedin accordance with laws and regulations such as the "Company Law of thePeople's Republic of China" (hereinafter referred to as the "Company Law"), "Mandatory Provisions for the Articles of Association of Companies to beListed Overseas", "Guide to Articles of Association of Listed Companies","Standards for the Governance of Listed Companies" and "Regulatory OpinionsRegarding General Meetings of Listed Companies" and provisions of the Articlesof Association of Air China Limited (hereinafter referred to as the "Articlesof Association"). Article 2 These Rules apply to the general meetings of the Company andshall be binding on the Company, shareholders, authorized proxies of theshareholders attending the meeting, and directors, supervisors and otherrelevant personnel present at the meeting. Article 3 The Company shall maximize the presence of shareholders atany general meeting by whatever means including the use of modern communicationchannels to the full extent, on condition that the general meeting shall be heldlegally and validly. Selection of time and place for any general meeting shallallow as many shareholders as possible to be present at the meeting. Article 4 The board of the Company shall strictly comply with theprovisions of the relevant laws and regulations and the Articles of Associationregarding the convening of general meetings when organizing the generalmeetings. The directors of the Company shall not obstruct the lawful exercise ofpowers by a general meeting. Article 5 Any shareholder who holds the shares of the Company legallyand validly is entitled to personally or authorize a proxy to attend a generalmeeting, and shall have various rights including the right to be informed of theCompany's affairs, the right to speak, the right to raise questions and theright to vote pursuant to law. CHAPTER 2 SYSTEM OF SHAREHOLDERS' GENERAL MEETINGS Article 6 Shareholders and their proxies attending a general meetingshall comply with the provisions of the relevant laws and regulations, Articlesof Association and these Rules, and shall take initiatives to maintain the orderof the meeting and shall not infringe the legitimate rights and interests ofother shareholders. Article 7 The secretariat of the Company's board of directors isresponsible for all works of preparation and organization for holding of thegeneral meetings. Article 8 In convening a general meeting, the principle of cost-savingand simplicity shall be adhered to. No extra benefits shall be given to theshareholders (or their proxies) present at the meeting. Article 9 The general meeting is classified into the annual generalmeeting (hereinafter referred to as "AGM") and extraordinary generalmeetings. All shareholders are entitled to attend the AGMs and extraordinary generalmeetings. In the circumstances specified in the Articles of Association, the Company shallconvene a class meeting. Holders of different classes of shares are classshareholders. Except other classes of shareholders, holders of domestic sharesand those of foreign shares are deemed to be shareholders of different classes,and holders of foreign share shall be deemed to be the same class shareholders. Article 10 AGMs shall be held by the board once every year and convenedwithin six months from the end of the previous financial year. In the event thatthe Company is unable to convene an AGM within the period of time mentionedabove for any reason, the Company shall explain to the stock exchange and make apublic announcement. Article 11 Under any of the following circumstances, the board shallconvene an extraordinary general meeting within two months from the date uponwhich the circumstance occurs: (1) The number of directors falls short of the minimum number required by theCompany Law or is less than two-thirds of the number required by the Articles ofAssociation; (2) The unrecovered losses of the Company amount to one-third of the totalamount of its paid-up share capital; (3) Shareholder(s) individually or jointly holding more than 10% (excludingproxy voting rights) of the Company's issued and outstanding shares carryingvoting rights request(s) in writing the convening of an extraordinary generalmeeting; (4) It is deemed necessary by the board; (5) It is proposed by the supervisory committee; (6) It is proposed by a sufficient number of independent directors as required; (7) Any other circumstance so specified by the Articles of Association occurs. The amount(s) of shareholding mentioned in (3) above is calculated as on the daywhen the shareholder(s) in question make(s) the request(s) in writing. In any event of (1), (2), (3) or (5) of this Article and if the board fails toconvene an extraordinary general meeting within the specified period,shareholder(s) who fulfill(s) the requirement or the supervisory committee mayconvene an extraordinary general meeting in accordance with the Articles ofAssociation and provisions hereof. Article 12 To vary or abrogate the rights of the class shareholders,the Company must approve it by a special resolution in a general meeting and itmust also be approved by the holders of shares of that class at a separatemeeting in accordance with the Articles of Association. Article 13 Voting by correspondence may be taken at a general meetingwhen necessary, except for AGMs and the extraordinary general meetings proposedby shareholders or the supervisory committee. Any matter specified in Article 73hereof to be approved at an extraordinary general meeting shall not be voted bycorrespondence. Article 14 The board, independent directors and qualified shareholders(in accordance with the standards issued by competent regulatory authoritiesfrom time to time) may collect voting rights from shareholders of the Company ata general meeting. The voting rights shall be collected with nil consideration,voting rights collected at a consideration are void. The person who collectsvoting rights shall fully disclose relevant information to the person whosevoting rights are collected. Article 15 The chairman of a general meeting may require any of thefollowing persons to retire from the meeting: (1) any person who is not qualified to be present at the meeting; (2) any personwho causes a disorderly meeting; (3) any person who is dressed improperly orimmorally; (4) any person who carries dangerous objects; (5) any other circumstance which warrants such retirement from the meeting. If any of the aforesaid persons disobey the order of retirement, the chairmanmay take necessary action to enforce the retirement from the meeting. Article 16 The board of the Company shall engage a lawyer to attend theshareholders' general meeting in accordance with the applicable law. Thelawyer shall provide legal opinion and publish an announcement on the followingissues: (1) Whether the convocation and procedures for convening the shareholders'general meeting comply with the requirements of laws and regulations and theArticles of Association; (2) Whether the attending persons are eligible to attend the meeting; (3) Whether the shareholders proposing new motions at the general meeting areeligible to do so; (4) Whether the voting procedures of the shareholders' general meeting arevalid; (5) Legal opinion on other matters upon request by the Company. The board of the Company may also engage a notary to attend the shareholders'general meeting. CHAPTER 3 FUNCTIONS AND POWERS OF THE SHAREHOLDERS' GENERAL MEETING Article 17 The powers exercisable by a general meeting are as follows: (1) to decide on the Company's business policy and investment plans; (2) to elect and replace directors and to decide on matters relating to theremuneration of directors; (3) to elect and replace supervisors who are representatives of shareholders andto decide on matters relating to the remuneration of supervisors; (4) to examine and approve the reports of the board; (5) to examine and approve the reports of the supervisory committee; (6) to examine and approve the Company's proposed annual budgets and finalaccounts; (7) to examine and approve the Company's profit distribution proposals andloss recovery proposals; (8) to resolve on the proposals for increase or reduction of the Company'sregistered capital; (9) to resolve on the proposals for merger, demerger, dissolution andliquidation of the Company; (10) to resolve on the proposal for issue of the Company's debt securities; (11) to resolve on the proposal for appointment, removal or non-reappointment ofthe Company's accounting firm; (12) to amend the Articles of Association; (13) to consider motions raised by the supervisory committee or shareholder(s)who represent(s) more than 3% of the total number of shares of the Company withvoting rights; (14) to resolve on the Company's transaction of purchase or sale of majorassets within one year with the transaction amount exceeding 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 Association; (16) to resolve on other matters which, in accordance with the laws,administrative regulations and Articles of Association, must be approved by ageneral meeting. A general meeting shall exercise its powers within the scope stipulated by theCompany Law and the Articles of Association and shall not interfere with thedecisions of shareholders regarding their own rights. Article 18 Any external guarantee of the Company under any of thefollowing circumstances shall be approved by the general meeting after beingconsidered and passed by the board of directors: (1) Any provision of guarantee, where the total amount of external guaranteesprovided by the Company or its controlled subsidiaries exceeds 50% of the latestaudited net assets; (2) provision of guarantee to anyone whose liability-asset ratio exceeds 70%; (3) provision of a single guarantee whose amount exceeds 10% of the latestaudited net assets; (4) provision of guarantee to shareholders, actual controllers and their relatedparties; (5) the amount of external guarantees of the Company within a year exceeds 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 Association. The matter of the fifth sub-paragraph above shall be passed by votesrepresenting more than two-thirds of the voting rights of the shareholders(including their proxies) present at the general meeting. Article 19 Matters which, in accordance with the provisions of thelaws, administrative regulations and the Articles of Association, are requiredto be approved by the general meeting must only be considered at such meetingsso as to protect the decision-making power of the shareholders of the Company onsuch matters. Under necessary and reasonable circumstances, the general meeting may authorizethe board to decide, within the scope of authorization granted by the generalmeeting, specific issues relating to matters to be resolved on by the generalmeeting which may not be decided upon immediately at a general meeting. With regard to an authorization granted by a general meeting to the board, ifthe matter is within the scope of the ordinary resolution, it shall be passed byvotes representing a majority of the voting rights held by the shareholders(including their proxies) present at the meeting; and if it is within the scopeof the special resolution, it shall be passed by votes representing more thantwo-thirds of the voting rights held by the shareholders (including theirproxies) present at the meeting. The contents of the authorization shall bespecific and detailed. Article 20 Authorization to be granted by a general meeting to theboard shall be in accordance with the following principles: (1) to focus on the operation and development of the Company, to make good useof market opportunities and to ensure smooth and efficient operation of theCompany; (2) to be flexible and pragmatic, to avoid excessive formalities on conditionthat it is not against the Articles of Association, and to ensure the businessdecision of the Company is made in a timely manner; (3) not to harm the interests of the Company and shareholders as a whole,especially the legal interests of minority shareholders. Article 21 The Company's decision-making and approval process inrespect of investment projects shall be subject to the following terms ofreference for the purposes of ensuring a prudent investment policy for theCompany and enhancing the efficiency of its daily operations: (I) Scope of the board's authority 1. General transactions (including investments and acquisitions). The boardshall have the authority to approve any transaction which fulfills the followingconditions: (1) based on the ratio tests specified in the Rules Governing the Listing ofSecurities on the Stock Exchange of Hong Kong Limited (the "Listing Rules ofthe Stock Exchange"), any of the assets ratio, profit ratio, revenue ratio,consideration ratio and equity capital ratio of the transaction is less than25%; and (2) each of the following five ratios applicable to the transaction is less than50%: total asset value of the transaction (the higher of the book value and theappraised value, if applicable) to the latest audited total asset value of theCompany; the transaction amount (including the debts and costs assumed) to thelatest audited net asset value of the Company; profit from the transaction tothe audited net profit of the Company for the latest financial year; revenuegenerated from the main business under the subject of the transaction (such asequity interests) for the latest financial year to the audited revenue from themain business of the Company for the latest financial year; and relevant netprofit generated under the subject of the transaction (such as equity interests)for the latest financial year to the audited net profit of the Company for thelatest financial year; and in addition, the total amount of purchases or sales,in which such transaction is included, of major assets (including connectedtransactions) within one year is less than 30% of the total assets of theCompany (absolute values shall be taken if the above values are negative). 2. Connected transactions. The board shall have the authority to approve anyconnected transaction which fulfills the following conditions: (1) any of the assets ratio, revenue ratio, consideration ratio and equitycapital ratio of the transaction specified in the Listing Rules of the StockExchange is less than 2.5%; and (2) the transaction amount represents less than 5% of the latest audited netasset absolute value of the Company, and the total amount of purchases or sales,in which such transaction is included, of major assets (including generaltransactions) within one year is less than 30% of the total assets of theCompany. 3. Risk investments (representing futures contracts such as aircraft fuelprices hedging contracts and other derivatives). Subject to Clause (I)1 ofArticle 21 herein, the board of directors shall have the authority to examineand approve the projects with an investment amount of less than 15% of theCompany's latest audited net asset; the projects exceeding the aforesaidlimit shall be approved by a general meeting. 4. External Guarantee. The board of directors shall have the authority toapprove external guarantees, except those required to be approved by the generalmeetings in accordance with applicable domestic and overseas laws andregulations, regulatory documents and the Articles of Association. (II) Scope of the management's authority 1. General transactions (including investments and acquisitions). Theworking committee of the president shall have the authority to approve anytransaction which fulfills the following conditions: based on the ratios testsspecified in the Listing Rules of the Stock Exchange, any of the assets ratio,profit ratio, revenue ratio, consideration ratio and equity capital ratio isless than 3%; and the total amount of purchases or sales, in which suchtransaction is included, of major assets (including connected transactions)within one year is less than 30% of the total assets of the Company. 2. Connected transactions. The working committee of the president shall havethe authority to approve any transaction which fulfills the followingconditions: based on the ratio tests specified in the Listing Rules of the StockExchange, any of the assets ratio, revenue ratio, consideration ratio and equitycapital ratio is less than 0.1%; and the total amount of purchases or sales, inwhich such transaction is included, of major assets (including generaltransactions) within one year is less than 30% of the total assets of theCompany. Article 22 In disposing of fixed assets, where the sum of the expectedvalue of the consideration for a fixed asset to be disposed of and the amountsgenerated from all completed disposals of fixed assets of the Company during aperiod of four (4) months prior to the proposed disposal does not exceed 33% ofthe value of the Company's fixed assets as shown in the latest balance sheetreviewed at a shareholders' general meeting, the board is authorized by thegeneral meeting to examine and approve the disposal of fixed assets. If thepercentage described above is less than 0.2%, the working committee of thepresident is authorized by the shareholders' general meetings to examine andapprove the disposal of the fixed assets. However, the working committee of thepresident shall not decide on the disposals of airplanes, engines andinfrastructures. Should there be any inconsistency between the precedingrequirements and provisions of the stock exchange on which the Company'sshares are listed in respect of the issue, the latter shall prevail. Disposals of the fixed assets include transfer of some asset interests, but notinclude guarantee provided by pledge of fixed assets. CHAPTER 4 MOTIONS IN THE SHAREHOLDERS' GENERAL MEETING Article 23 Motions in a general meeting refers to specific motionsregarding issues which shall be discussed in a general meeting, and generalmeetings shall resolve on specific motions. Motions in a general meeting shall meet the following requirements: (1) Contents of motions shall comply with provisions of the laws, regulationsand the Articles of Association and shall fall within the scope of business ofthe Company and terms of reference of a general meeting; (2) Motions shall cover a specific subject with specific issues to be resolved; (3) Motions shall be submitted or delivered to the board of directors in writtenform. Article 24 Before the issuance of a notice by the board of directorsregarding the convening of a shareholders' general meeting, the secretary tothe board of directors may collect motions from shareholder(s) holding more than3% of the Company's voting shares, supervisors and independent directors andsubmit the same to the board of directors for examination and approval andsubsequently submit the same as motions to the shareholders' general meetingfor consideration. Article 25 The supervisory committee and the shareholders individuallyor jointly holding more than 3% of the total voting shares of the Company maypropose provisional motions in a general meeting in accordance with the relevantprocedures as provided in applicable laws and regulations. If a provisional motion represents a new item not listed in the notice of aBoard meeting, the proposer shall submit the motion to the board 10 days priorto the general meeting, the board shall notify other shareholders within twodays upon receipt of the motion, and submit the provisional motion for approvalat a general meeting. Article 26 The board shall not propose any new motion which is notincluded in the notice of general meeting after the notice has been issued. Anyamendment to the existing motions shall be announced 15 days prior to thegeneral meeting. Otherwise, the date of the meeting shall be postponed accordingly to ensure thatthe amendment is announced at least 15 days prior to the general meeting. Article 27 The board shall review and approve provisional motionsproposed by the supervisory committee and shareholders individually or jointlyholding more than 3% of the Company's voting shares at a general meeting inaccordance with the following principles: (1) Relevance. The board shall review the motions and where issues involved inthe motion are directly related to the Company and fall within the scope of thefunctions of a general meeting as stipulated by the laws, regulations and theArticles of Association, the motion shall be submitted to the general meetingfor discussion, failing which no such submission shall be effected. (2) Procedures. The board may decide on procedural issues relating to themotion. Where a motion needs to be divided into different motions or merged withother motions to be voted on, the consent of the person(s) proposing theoriginal motion is required. Where such person(s) does not agree with thechange, the chairman of the general meeting may request the general meeting todecide on the procedural issues and conduct the discussion in accordance withthe procedures decided on by the general meeting. Article 28 Where it decides not to include any of motions proposed tothe shareholders' general meeting in the agenda thereof, the board ofdirectors shall give an explanation at the meeting and announce the contents ofsuch motion and explanation of the board, together with the resolutions of theshareholders' general meeting after the conclusion of the meeting. Anyshareholder proposing a motion who disagrees with the exclusion by the board ofdirectors of his motion from the agenda of the shareholders' general meetingmay, according to the provisions in the Articles of Association these Rules,request the convening of an extraordinary general meeting. Article 29 Where shareholder(s) individually or jointly holding 10% ormore of the Company's voting shares propose(s) to convene an extraordinarygeneral meeting or a class general meeting, the shareholder(s) shall sign one ormore written request(s) in identical form requiring the board to convene anextraordinary general meeting or a class shareholders' general meeting andstating the subject of the meeting, and at the same time submit motionscomplying with the requirements of these Rules to the board. Article 30 Motions in a general meeting regarding the following shallbe deemed to be a variation or abrogation of the rights of certain classshareholder and the board shall submit the same to a class shareholders'general meeting for review: (1) to increase or decrease the number of shares of such class, or to increaseor decrease the number of shares of a class having voting rights, distributionrights or other privileges equal or superior to those of the shares of suchclass; (2) to change all or part of the shares of such class into shares of anotherclass or to change all or part of the shares of another class into shares ofthat class or to grant relevant conversion rights; (3) to cancel or reduce rights to accrued dividends or cumulative dividendsattached to shares of such class; (4) to reduce or cancel rights attached to the shares of such class topreferentially receive dividends or to receive distributions of assets in aliquidation of the Company; (5) to add, cancel or reduce share conversion rights, options, voting rights,transfer rights, pre-emptive placing rights, or rights to acquire securities ofthe Company attached to the shares of such class; (6) to cancel or reduce rights to receive payments made by the Company in aparticular currency attached to the shares of such class; (7) to create a new class of shares with voting rights, distribution rights orother privileges equal or superior to those of the shares of such class; (8) to restrict the transfer or ownership of the shares of such class or toimpose additional restrictions; (9) to issue rights to subscribe for, or to convert into, shares of such classor another class; (10) to increase the rights and privileges of the shares of another class; (11) to restructure the Company in such a way as to cause shareholders ofdifferent classes to bear liabilities disproportionately during therestructuring; (12) to amend or abrogate the provisions of Chapter 9 of the Articles ofAssociation "Special Procedures for Voting by a Class of Shareholders". Article 31 Resolutions in relation to investment, disposal of assets,acquisition and merger shall be proposed with sufficient details, including theamount involved, consideration (or basis of calculation thereof), book value ofassets, impact on the Company, status of approval and whether connectedtransactions are involved. The board shall announce the results of assetsvaluation, results of audit or independent financial report, if required inaccordance with the applicable regulations, at least five days prior to the dateon which the shareholders' general meeting is to be held. Article 32 Where the board proposes motions to change the use ofproceeds, it shall state the reasons thereof, the status of new projects andeffects on the prospects of the Company in the notice convening the shareholders' general meeting. Article 33 For matter related to issuance of new shares and convertiblebonds which are subject to approval by securities compliance institution, itshall be proposed as a specific motion. Article 34 The board, after approving an annual report, shall resolveon the proposal of profit distribution and make it a motion for AGM. When theboard makes a motion of capitalizing the capital reserve, it shall state thereason in detail and disclose it in an announcement. When making an announcementabout shares distribution or proposal of capitalizing the capital reserve, theboard shall disclose the earnings per share and net asset per share before andafter such distribution or capitalization, as well as the impact on the Company's future development. Article 35 The engagement of an accounting firm shall be proposed as amotion by the board of directors and is subject to the approval of theshareholders' general meeting. Where the board proposes the removal ordiscontinuation of re-appointment of an accounting firm, prior notice shall begiven to the accounting firm and the reasons for such proposal shall be given atthe shareholders' general meeting. The accounting firm shall have the rightto give opinions at the meeting. During the recess period, the board may if reasonably required, appoint anotheraccounting firm temporarily to fill the vacancy arising from the due removal ofthe existing accounting firm. However, such temporary appointment shall berectified at the next shareholders' general meeting. Where the accountingfirm tenders its resignation, the board shall explain the reason thereof at thenext shareholders' general meeting. The resigning accounting firm is obligedto give an explanation in writing or in person by a representative attending theshareholders' general meeting of whether there is any improper matterinvolved with the Company. Article 36 List of nominations for directors or supervisors aresubmitted by way of motion to be resolved by general meeting. Shareholders individually or jointly holding more than 5% of the issued andoutstanding voting shares of the Company may make a motion of nominations fordirectors (excluding independent directors and the same shall applyhereinafter). Such motion shall be submitted to the board for review andannouncement. Shareholders individually or jointly holding more than 5% of the issued andoutstanding voting shares of the Company may make a motion of nominations fornon-staff representative supervisors. Such motion shall be reviewed bysupervisory committee and passed to the board for announcement. The proposer shall provide the board with the brief biographies, backgroundinformation and relevant evidence of the nominees, which shall be reviewed bythe board or the supervisory committee. Motions which comply with the laws andregulations and the Company's Articles of Association shall be submitted togeneral meeting for consideration. Motions which are not in compliance with theaforesaid requirement and which are not submitted to the general meeting forconsideration shall be explained and accounted for at the general meeting. The board or the supervisory committee shall provide shareholders with the briefbiographies and background information of the nominees for directorship orsupervisorship. Article 37 Procedures for nomination of independent directors are asfollows: (1) An independent director candidate shall be nominated by the board ofdirectors, the supervisory committee, or shareholder(s) individually or jointlyholding more than 1% of the total number of shares carrying the right to vote,and shall be elected by a shareholders' general meeting of the Company. (2) 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, academicqualification, professional title, detailed work experience and all informationregarding his positions held concurrently and be responsible for providing tothe Company his opinions in relation to the nominee's qualification as aindependent director and independence. The nominee shall make a publicannouncement in accordance with such requirements stating that there exists norelationship between the Company and him that affects his independent andobjective judgment. Before the general meeting is convened for election ofindependent directors, the Company shall announce the abovementioned inaccordance with the relevant requirements. (3) Before the shareholders' general meeting for the election of theindependent director, the Company shall submit the relevant materials concerningthe nominee to the regulatory securities authority of the State Council and/orits external authority and the stock exchange(s) on which the Company'sshares are listed. If the board of directors disputes the particulars pertainingto the nominee, it shall also submit its written opinions to the relevantauthorities. (4) The above regulatory securities authorities will verify the qualificationsand degrees of independence of the nominees for independent directors within theperiods of time as required by them. Any of such nominees objected by theregulatory securities authorities may be treated as a nominee for executivedirector instead of independent director. When a general meeting is convened tonominate independent directors, the board shall make a statement on whether theregulatory securities authorities have any objection against the nominations. Article 38 The board shall, in regard to the agenda items of a generalmeeting, provide a set of documentary materials including the agenda,resolutions and the relevant background information to attending shareholdersand proxies, directors, supervisors, president, deputy presidents and othersenior officers, for the purpose of ensuring that all the parties present at themeeting shall have an understanding of the matters to be considered at themeeting. For any general meeting legally convened by the supervisory committeeor shareholders, the documentary materials shall be provided by the convener ofthe meeting in accordance with the aforesaid requirement. CHAPTER 5 NOTICE OF THE SHAREHOLDERS' GENERAL MEETING Article 39 Where the Company convenes a general meeting, a writtennotice shall be given 45 days prior to the date of the meeting to notify all theshareholders recorded in the register of shareholders of the issues to beconsidered at the meeting, and the date and venue of the meeting. The notice of a general meeting shall be delivered to shareholders (whether ornot they are entitled to vote at the general meeting) by hand or by pre-paidmail to their addresses as shown in the register of shareholders. For holders ofdomestic shares, the notice of the meeting may be issued in the form of publicnotices. Public notices referred to in the preceding paragraph shall be published in oneor more newspaper(s) designated by the regulatory securities authority of theState Council during the period between 45 days to 50 days prior to the date ofthe meeting. Once the announcement is made, holders of domestic shares shall bedeemed to have received the notice of the relevant general meeting. Unless otherwise required by applicable laws, the duration of 45 days aforesaidis inclusive of the date upon which the notice is issued and exclusive of thedate upon which the general meeting is convened. Article 40 The notice of a class general meeting shall be deliveredonly to shareholders entitled to vote at such meeting. Article 41 The notice of a general meeting shall meet the followingrequirements: (1) be in written form; (2) specifies the venue, date and time ofthe meeting; (3) states matters to be discussed at the meeting; (4) provides shareholders with such information and explanation as necessary toenable them to make an informed decision on issues to be discussed. Suchprinciple includes (but is not limited to) where a proposal is made to merge theCompany, to repurchase shares of the Company, to reorganize its share capital orto make any other reorganization of the Company, and detailed conditions of theproposed transaction shall be provided together with contracts (if any) and thecause and effect of any such proposal shall also be properly explained; (5) contains a disclosure of the nature and extent of the material interests ofany director, supervisor, president, deputy presidents and other senior officersin relation to the issue to be discussed. Where the effect of the issue to bediscussed on any director, supervisor, president, deputy presidents and othersenior officers in their capacity as shareholders is different from the effecton other class shareholders, the difference shall be clearly explained; (6) contains the full text of any special resolution to be proposed at themeeting; (7) contains a clear statement that a shareholder entitled to attend and vote atsuch meeting is entitled to appoint one or more proxies to attend and vote atsuch meeting on his behalf and that such proxy needs not be a shareholder; (8) specifies the time and venue for lodging proxy forms for the meeting. Article 42 In order to convene a general meeting, the board shall issuea notice stating the issues to be discussed at the meeting and fully disclosethe contents of any motions proposed by the board. Where there is any change toissues covered by resolutions passed by the previous general meeting, fulldetails of the motion, and not just the contents of the change, shall be stated. Items included under "other business" without specific contents shall not bedeemed as a motion and the same shall not be voted on at a general meeting. Article 43 The board shall specify in the notice issued to shareholdersthat shareholders and authorized proxies intending to attend a general meetingshall deliver to the Company their written replies concerning their attendanceat such meeting 20 days prior to the date of the meeting. The Company shall, based on the written replies received from shareholders 20days prior to the date of the general meeting, calculate the number of votingshares held by shareholders intending to attend the meeting. Where the number ofvoting shares represented by shareholders intending to attend the meetingamounts to more than one-half of the Company's voting shares, the Company mayconvene the general meeting; if not, the Company shall, within 5 days, notifyshareholders again of the issues to be reviewed, date and venue of the meetingin the form of public notices. The Company may then convene the general meetingafter the publication of such notices. Article 44 After a notice convening the general meeting is issued bythe board, the general meeting shall not be convened before the date announced,nor shall it be postponed with no reason. If, for any special reason, theCompany must delay the convening of the general meeting, the board shall issue anotice of postponement at least five working days prior to the original date ofgeneral meeting. The board shall explain in the notice of postponement thereason and announce the new convening date. Any postponement in convening a general meeting of the Company shall not causeany change to the originally scheduled date of determining the eligibility ofattending the general meeting (or the record date). Article 45 The board, after receiving a proposal in writing ofconvening an extraordinary general meeting by the supervisory committee, shallissue a notice convening the general meeting within 15 days from the date ofreceiving the proposal in writing. If the board does not issue the notice intime as aforesaid, the supervisory committee may, after informing the board inwriting and filing the case for record in accordance with the requirements ofthe regulatory securities authorities and the stock exchange, convene theextraordinary general meeting within four months from the date of the boardreceiving the proposal in writing. Procedures of convening the meeting shall follow the procedures of conveninggeneral meeting by the board. Costs incurred shall be borne by the Company. Article 46 After receiving a motion in writing from an independentdirector, the board shall consider whether the motion is in line with theCompany's arrangement and decide whether to convene an extraordinary generalmeeting, and shall revert such decision to the independent director within 15days from receipt of the motion in writing. Notice of convening theextraordinary general meeting shall be issued as soon as possible thereafter. Ifthe board dissents from convening the extraordinary general meeting, the boardshall revert to the independent director and disclose the relevant circumstancesand reasons. Article 47 Where the board accepts a request from shareholdersindividually or jointly holding more than 10% of the Company's voting sharesand agrees to convene an extraordinary general meeting, it shall issue a noticeto convene the same. Where there is any alteration to the original motion of the proposingshareholders to be stated in the notice, consents shall be sought from therelevant shareholders. Once the notice is issued, the board shall not proposenew motions or change or postpone the holding of the general meeting without theconsent of the proposing shareholders. Article 48 Where the board fails to issue a notice convening a generalmeeting within 30 days upon receipt of a written request from shareholdersindividually or jointly holding more than 10% of the Company's voting shares,the proposing shareholders may convene an extraordinary general meeting withinfour months after the board has received such request. Where the proposingshareholders decide to convene such a meeting by themselves, they shall notifythe board in writing in advance, report to the responsible organization ofsecurities authorities of the State Council and the stock exchange in the placewhere the Company is located, for reference and issue a notice convening themeeting. The notice of the meeting shall comply with general requirements fornotices of meetings and shall also meet the following requirements: (1) new contents shall not be added to a motion, otherwise the proposingshareholders must resubmit the request to convene a general meeting to theboard; (2) the meeting shall be held at the address of the Company. CHAPTER 6 REGISTRATION FOR THE SHAREHOLDERS' GENERAL MEETING Article 49 A shareholder may attend the general meeting in person orappoint a proxy to attend and vote on his behalf. Article 50 Where a shareholder intends to appoint a proxy to attend andvote on his behalf, a written proxy form shall be duly completed. Such writtenproxy form shall state the following: (1) the name of the authorized proxy of the shareholder; (2) the number of shares held by the principal represented by the authorizedproxy; (3) whether or not the proxy has any voting right(s); (4) direction(s) to vote for or against each and every issue included in theagenda of the general meeting; (5) whether or not the proxy has any voting right(s) in respect of provisionalmotions which may be included in the agenda of the AGM; and, if the proxy hassuch voting right(s), specific instructions as to the exercise of those votingrights; (6) the proxy form shall state clearly that the proxy shall be entitled to voteor not at his discretion in the absence of specific instructions from theshareholder; (7) the date of issue and validity period of the proxy form. The proxy form shall be signed by the principal or its agent acting under awritten power of attorney, where the principal is a legal person the proxy formshall bear its seal or be signed by its director or a proxy duly appointed.Where a shareholder appoints more than one proxy to attend and vote on hisbehalf, he shall specify the number of shares represented by each proxy in theproxy form. Article 51 The proxy form shall be lodged at the Company's premisesor such other venue as specified in the notice convening the meeting at least 24hours prior to the time of the relevant meeting, or 24 hours prior to thescheduled voting time. Where the proxy form is signed by a person authorized by the principal, thepower of attorney stating the authorization shall be notarized. The notarizedpower of attorney together with the proxy form shall be lodged at the Company's premises or such other venue as specified in the notice convening themeeting. Article 52 Shareholders and proxies who intend to be present at ageneral meeting shall be registered on the date and at the venue specified inthe notice of the meeting, and shall produce the relevant documents, evidence orcertificates (or copies) in accordance with the following requirements: (1) where a corporate shareholder is represented by its legal representative atthe general meeting, the legal representative shall produce his identificationcard, certificate certifying his capacity of the legal representative andshareholding certificate; (2) where a corporate shareholder is represented by a proxy other than its legalrepresentative, the proxy shall produce his identification card, proxy formsigned and sealed with the common chop of the legal representative andshareholding certificate; (3) where an individual shareholder attends the general meeting in person, heshall produce his identification card and shareholding certificate; where anindividual shareholder is represented by a proxy at the general meeting, theproxy shall produce a copy of the identification card, shareholding certificateof the principal and proxy form signed by the principal; (4) shareholders and the proxies to be present at the meeting shall produce orsubmit the originals or copies of the aforesaid documents, evidences orcertificates to the registry for the purpose of the meeting. Article 53 The eligibility of an attendee of the general meeting shallbe deemed invalid if the evidence produced involves one of the followingconditions: (1) the identification card of principal or attendee of the general meeting isfound to be forged or expired or has been altered or does not comply with theresidential identification card regulation; (2) the information on the identification card produced by the principal orattendee of the general meeting is illegible; (3) where multiple proxies shall have been appointed by the shareholder and thesignatures on the instrument of authorization are inconsistent; (4) the signature on the instrument of authorization faxed in for registrationand that on the original copy of instrument of authorization produced whenattending the general meeting are inconsistent; (5) lack of signature or seal on the instrument of authorization; (6) the relevant evidence produced by the principal or his proxy attending thegeneral meeting contravenes the relevant provisions of laws, regulations,Articles of Association and these Rules. Article 54 Where the principal or his proxy is ineligible for attendingthe general meeting as a result of irregularities of the principal'sauthorization or the fact that documents evidencing the legitimate identity ofthe principal or the authorization do not comply with the laws, regulations orprovisions of the Articles of Association, the legal consequences so arisingshall be borne by the principal or his proxy. Article 55 The Company shall be responsible for preparing an attendanceregister to be signed by those attending the meeting. The attendance registershall state the names (or names of the corporations), identification documentnumber and the address of the attendee, the number of voting shares held orrepresented, names of the principal (or names of the corporations) and so on. Article 56 Shareholders and proxies shall enter the meeting placebefore the meeting starts. If they enter the meeting place after registration isover, they may only sit in on the meeting, and the shares held by them will notbe counted towards the total number of voting shares present at the meeting.Voting shares held by those shareholders and proxies who have not filled in thevotes due to retirement in the middle of the meeting or other reasons, are stillto be counted and will not affect the total number of voting shares present atthe meeting. Article 57 The board shall take necessary measures to ensure thesolemnity and proper order of the general meeting. The Company shall have theright to reject persons, other than shareholders (or proxies), directors,supervisors, secretary to the board, senior officers, lawyer(s) engaged andpersons invited by the board, to enter the meeting venue. The Company shall takeactions to stop anyone from provoking a quarrel, making trouble or infringingthe lawful interests of other shareholders and refer the case to relevantauthorities for settlement in time. CHAPTER 7 REVIEW AND VOTING IN THE SHAREHOLDERS' GENERAL MEETING Article 58 The general meeting shall be convened by the chairman of theboard of directors, and the chairman of the board shall preside over and act asthe chairman of the meetings. If the chairman is unable or fails to perform hisduties, the deputy chairman shall preside over and act as the chairman of themeetings. In the event that the deputy chairman is unable or fails to performhis duties, a director shall be elected by a simple majority of directors topreside over and act as the chairman of the meetings. If the board of directors is unable or fails to perform its duties of conveningthe general meeting, the supervisory committee shall convene, preside over andact as the chairman of the meetings in a timely manner. In the event that thesupervisory committee does not convene and preside over the meeting, theshareholder(s) who individually or jointly holds or hold more than 10% shares inthe Company for over ninety (90) days may convene or preside over such meetingat his/their own discretion, shareholders present shall choose one (1) person toact as the chairman of the meeting. If for any reason, the shareholders fail toelect a chairman, then the shareholder (including a proxy) holding the largestnumber of shares carrying the right to vote thereat shall be the chairman of themeeting. Article 59 For an extraordinary general meeting separately convened byshareholders individually or jointly holding more than 10% of the total numberof the Company's voting shares for over ninety (90) days, the board and itssecretary shall perform their duties by due diligence. Directors and supervisorsmay attend the meeting while the secretary to the board shall attend the meetingto ensure the normal order of the meeting. Reasonable expenses of the meetingshall be borne by the Company. The chairman of the meeting shall be subject to the provisions of Article 58hereof. The shareholders making such proposal shall engage a lawyer to givelegal advice at the general meeting in accordance with the relevantrequirements. The legal fees shall be borne by such shareholders. Theshareholders may also engage a notary to give notarial advice at the meeting andthe charge shall be borne by them. The secretary to the board shall perform hisduties practically and other convening procedures shall be in compliance withrelevant provisions of the Articles of Association. Article 60 The chairman of the meeting shall declare the commencementof the meeting at the appointed time, but the meeting may be declared to havecommenced after the appointed time if any of the circumstances arises: (1) directors and supervisors have not yet arrived; (2) there exists any other significant causes. Article 61 After announcing the formal commencement of the meeting, thechairman of the meeting shall first declare that the number of the shareholderspresent at the meeting and the number of shares they represent comply with thestatutory requirements and provisions of the Articles of Association of theCompany, and then announce the meeting agenda stated in the notice, and inquirewhether the people who are present at the meeting have objections over thesequence of voting on motions. Where the board or the chairman of the meeting does not include provisionalmotions proposed by the supervisory committee or shareholder(s) into the agendaof an AGM, explanations and comments shall be made at the AGM. Article 62 The chairman of the meeting shall read the motions afterannouncing the agenda of the general meeting and require the party proposing themotion to make explanation when necessary: (1) where the party proposing the motion is the board, chairman of the board, orother directors or secretary to the board entrusted by the chairman shall makeexplanation on the motion; (2) where the party proposing the motion is not the board, the party or itsauthorized proxy shall make explanation on the motion. Article 63 For items included in the agenda of the meeting, thechairman of the meeting may, by reference to the actual situation, adopt anapproach of general reporting first, followed by considering and voting on eachitem, or single out more complicated items for reporting and then consideringand voting on each of them. Article 64 At an AGM, the board shall report and announce to themeeting the implementation status of issues which shall be conducted by theboard in accordance with resolutions of the general meetings since the last AGM. Article 65 At an AGM, the supervisory committee shall deliver specialreports relating to supervision in the previous year, including: (1) verification of the financial information of the Company; (2) performance of duties by directors and senior officers of the Company andimplementation of the relevant laws, regulations, the Articles of Associationand resolutions of the general meeting; (3) other material events to be reported to the general meeting as deemednecessary by the supervisory committee. The supervisory committee may, if it thinks necessary, comment on motionsreviewed by the general meeting, and file an independent report accordingly. Article 66 Pursuant to the relevant laws and regulations, Articles ofAssociation or other system of the Company, independent directors shall expresstheir opinions on matters requiring their views. If it is required underapplicable laws and regulations, independent directors shall submit their yearlywork reports at the AGM and make a statement on their fulfillment of duties. Article 67 Where a certified public accountant includes explanatorystatements, qualified opinion, rejection to give opinion, or adverse opinion onthe financial statement of the Company in its audit report, the board shall makean explanation to the general meeting for relevant issues which led theaccountant to express the aforesaid comments and the effect on the financial andoperating condition of the Company. Where such issues have direct impact on theprofit for the current accounting period, the board shall determine the plans onprofit distribution or capitalization of reserve funds on a "whichever-is-lower"basis. Article 68 For motions to be resolved and included in the agenda of ageneral meeting, reasonable discussion time shall be granted for each motionbefore voting. Article 69 Any shareholder or proxy may request to make a statement ata general meeting. A statement at any general meeting may take a written orverbal form. Request for making a statement shall be subject to permission by the chairman ofthe meeting. The chairman of the meeting may arrange for statements to be madeby reference to the progress of the meeting. In general, each shareholder orproxy may not make more than two statements for each motion, and each statementmay not exceed 10 minutes in principle. The statement of a shareholder or proxyshall not interrupt any of the reporting sessions or other participants'speeches at the meeting. Article 70 Only shareholders and proxies have the right to make astatement at a general meeting when motions are under consideration. Any of themwishing to make a statement shall raise his or her hand to seek the permissionof the chairman. Article 71 Shareholders or proxies may inquire about or make suggestionto a resolution, the chairman of the meeting shall by himself or appoint any ofthe directors, supervisors or other appropriate persons who are present at themeeting, to provide an answer or explanation in response to the inquiries. Thechairman of the meeting may refuse to answer any inquiries under any of thefollowing circumstances provided that he shall state the reason: (1) the statement is irrelevant to the subject; (2) matters inquired about is subject to investigation; (3) trade secrets of the Company are involved, which may not be disclosed at thegeneral meeting; (4) answering the inquiry will significantly harm the common interests ofshareholders; (5) there exists other important reasons. Article 72 In reviewing the motions included in the notice of anextraordinary general meeting, no alteration shall be made to the relevantmotions in respect of the following matters: (1) increase or reduction of the registered capital of the Company; (2) issue of debt securities of the Company; (3) demerger, merger, dissolution and liquidation of the Company; (4) amendment to the Articles of Association; (5) profits distribution plans and loss recovery plans of the Company; (6) appointment and removal of a member of the board of directors and thesupervisory committee; (7) change of the use of proceeds from a share offer; (8) the entering into of a connected transaction which requires the approval ofthe shareholders in general meetings; (9) acquisition or sale of assets which requires the approval of theshareholders in general meetings; (10) change of the accounting firm engaged. Any alteration in respect of the contents of the above motions shall be deemedto be a new motion and shall not be voted on at that shareholders' generalmeeting. Article 73 The general meetings shall resolve on all motions includedin the agenda separately, and shall not for any reason cause delay in voting on,or failure to vote on, such motions. Where different motions for the same issueare proposed at the AGM, such motions shall be voted on and resolved in theorder of time in which they are proposed. Article 74 In reviewing motions on the election of directors andsupervisors at a general meeting, shareholders shall vote on candidates for theoffice of directors or supervisors separately. Article 75 Each shareholder or his authorized proxy shall exercise hisvoting rights in accordance with the number of voting shares represented by him.Besides the situations stipulated by Article 77 in these Rules, each share shallcarry one vote. Article 76 On a poll, shareholders (including proxies) entitled to twoor more votes need not cast all his votes in the same way of affirmative votesor dissenting votes. In the event of an equality of votes, the chairman of the meeting shall beentitled to an additional vote. Article 77 Resolutions in respect of the election of directors shall bepassed by a way of cumulative voting at shareholders' general meeting inaccordance with the Articles of Association. The main procedures of thecumulative voting system are as follows: (1) where the number of directors to be elected is more than two, the cumulativevoting system must be adopted; (2) where cumulative voting system is adopted, each of the shares held by ashareholder shall carry the same number of votes as the number of directors tobe elected. All shareholders present at the general meeting for election ofdirectors may fully exercise their respective voting rights that the number ofvotes they have shall be the number of their respective shares multiplying bythe number of director candidates; (3) the notice of a shareholders' general meeting shall notify theshareholders that a cumulative voting system will be adopted for the election ofdirectors. The conveners of the shareholders' general meeting shall prepareballots suitable for cumulative voting, and shall give descriptions andexplanations in writing regarding the cumulative voting system, the completionmethod of the ballots and the methods of counting the votes; (4) in casting his votes for the director candidates at a shareholders'general meeting, a shareholder may exercise his voting rights by spreading hisvotes evenly and cast for each of the candidates the number of votescorresponding to the number of shares he holds; or he may focus on oneparticular candidate and cast for that candidate the total number of votescarried by all of his shares; or he may spread his votes over several candidatesand cast for each of them part of the total number of votes carried by theshares he holds; (5) upon the exercise of his voting rights by focusing all his votes on one orseveral of the candidates of directors, a shareholder shall not have any rightto vote for any other candidates; (6) where the total number of votes cast by a shareholder is in excess of thenumber of votes carried by the total number of shares held by him, the votescast by the shareholder shall be invalid, and the shareholder shall be deemed tohave waived his voting rights. Where the total number of votes cast by ashareholder is less than the number of votes carried by the total number ofshares held by such shareholder, the votes cast by the shareholder shall bevalid, and the voting rights attached to the shortfall between the votesactually cast and the votes which the shareholder is entitled to cast shall bedeemed to have been waived by the shareholder; (7) where the number of approval votes for a director candidate exceeds one-halfof the total voting rights (to be calculated in accordance with the total numberof shares if the cumulative voting is not adopted) represented by theshareholders present at the shareholders' general meeting, the candidateshall be the elected director. If the number of the elected director candidatesexceeds the total number of directors to be elected, those candidates who winthe largest number of approval votes shall be elected as directors (however, ifthe elected directors whose approval votes are comparatively fewer win the samenumber of approval votes, and the election of such candidates as directors willgive rise to the number of directors elected exceeding the number of directorsto be elected, such candidates shall be deemed as having not been elected); ifthe number of directors elected at a shareholders' general meeting fallsshort of the number of directors to be elected, a new round of voting shall becarried out for the purpose of filling such directorship vacancies, until allthe directors to be elected are validly elected; (8) where a new round of voting is carried out in accordance with the provisionsof paragraph (7) of this Article at the shareholders' general meeting, thenumber of votes cast by the shareholders in the cumulative voting shall bere-counted in accordance with the number of directors to be elected in the newround of voting. Article 78 When a connected transaction is considered at a generalmeeting, connected shareholders shall not vote, and the voting shares held bythem shall not be counted in the total number of shares with voting rightspresent at the meeting. The voting result of non-connected shareholders shall be adequately disclosed inthe announcement of the resolutions at the general meeting. Article 79 The votes on each matter under consideration at any generalmeeting shall be counted by two proxies and one supervisor and the votingresults shall be announced on the spot by the representative of the persons whohave counted the votes. Connected shareholders shall not participate in thecounting of votes for any connected transaction under consideration. Article 80 If any shareholder who is present in person or by proxy hasany doubt as to the result of a resolution which has been put to vote at ashareholders' general meeting, he may have the votes counted. If the chairmanof the meeting has not counted the votes, any shareholder who is present inperson or by proxy and who objects to the result announced by the chairman ofthe meeting may, immediately after the declaration of the result, demand thatthe votes be counted and the chairman of the meeting shall have the votescounted immediately. Shareholders and proxies of shareholders who object to theresults of voting may check the votes, and the results shall be final andconclusive. Any objection after the meeting shall be invalid. Article 81 The chairman of the meeting shall be responsible fordetermining whether a resolution has been passed pursuant to results of votes.His decision, which shall be final and conclusive, shall be announced at themeeting and recorded in the minutes. The Company shall announce the resolutionsof the shareholders' general meetings in accordance with applicable laws andthe relevant provisions of the stock exchange on which the shares in the Companyare listed. Article 82 Any vote shall be invalid if it is not completed inaccordance with the instructions set out in the ballot or is deliberatelystained or damaged on the surface thereof. Article 83 Resolutions of a general meeting shall be divided intoordinary resolutions and special resolutions. (I) Ordinary resolutions Ordinary resolutions shall be passed by votes exceeding one-half of votingrights represented by shareholders (including proxies) attending the generalmeeting. The following issues shall be approved by ordinary resolutions at a generalmeeting: (1) working reports of the board and the supervisory committee; (2) profit distribution plans and loss recovery plans formulated by the board; (3) appointment and removal of the members of the board and the supervisorycommittee, their remuneration and the method of payment thereof; (4) annual budgets, final accounts, balance sheets and profit and loss accountsand other financial statements of the Company; (5) appointment, removal or non-reappointment of an accounting firm; (6) other issues, except for those required by laws, administrative regulationsor the Articles of Association to be passed by special resolutions. (II) Special resolutions Special resolutions shall be passed by votes representing more than two-thirdsof voting rights represented by shareholders (including proxies) attending thegeneral meeting. The following issues shall be approved by special resolutions at generalmeetings: (1) increase or reduction in share capital of the Company and the issue ofshares of any class, warrants and other similar securities; (2) issue of debt securities of the Company; (3) demerger, merger, dissolution and liquidation of the Company; (4) amendments to the Articles of Association; (5) any other issue confirmed by an ordinary resolution at a general meetingthat it may have material impact on the Company and accordingly shall beapproved by special resolutions. Article 84 Where issues specified in sub-paragraphs (2) to (8), (11) to(12) of Article 30 of these Rules are involved, the affected class shareholders,whether or not they are entitled to vote at general meetings originally, shallhave the right to vote at class meetings. However, interested shareholder(s)shall not be entitled to vote at such class meetings. "Interested shareholder(s)" as specified in the preceding paragraph refersto: (1) in the event of a repurchase of shares by the Company by way of a generaloffer to all shareholders of the Company or by way of public transactions on astock exchange pursuant to Article 29 of the Articles of Association, an "interested shareholder" is a controlling shareholder within the meaning ofArticle 57 of the Articles of Association; (2) in the event of a repurchase of shares by the Company by an off-marketagreement pursuant to Article 29 of the Articles of Association, an "interested shareholder" is a shareholder related to the agreement; (3) in the event of a reorganization of the Company, an "interestedshareholder" is a shareholder who assumes a relatively less proportion ofobligation than that of any other shareholder of that class or who has aninterest different from that of any other shareholder of that class. Article 85 Resolutions of a class general meeting shall be approved byvotes representing more than two-thirds of the voting rights of shareholders ofthat class present at the meeting who, in accordance with Article 84, areentitled to vote at the meeting. Pursuant to the applicable rules governing listing of securities as revised fromtime to time, when any shareholder is obliged to abstain from voting on a motionat a class meeting or when any shareholder is restricted to vote in favour of oragainst a motion at a class meeting, any vote of such shareholder or its proxywhich violates the relevant requirement or restriction shall not be counted inthe voting result. Special voting procedures for class shareholders shall not apply in thefollowing circumstance: (1) with the approval by special resolutions in a general meeting, the Companyissues and plans to issue, at one or more occasions, a total number of sharesnot exceeding 20% of each of its existing issued and outstanding domestic sharesand overseas listed foreign shares in every 12 months; (2) the Company's plan to issue domestic shares and overseas listed foreignshares at the time of its establishment is completed within 15 months from thedate of approval of the regulatory securities authorities of the State Council. Article 86 Under the circumstances stipulated in the preceding Article,after announcing the notice of shareholders' general meeting, the Companyshall announce the notice of shareholders' general meeting once again within3 days after the day on which the share certificates are registered. CHAPTER 8 CLOSING AND ADJOURNMENT OF THE MEETING Article 87 The chairman of the meeting shall have the power to declarethe adjournment of the meeting in accordance with the arrangement and progressof the meeting. The chairman of the meeting may also declare the adjournment ofthe meeting when it is deemed necessary. Article 88 The chairman of the meeting shall declare the meeting closedafter the motions have been passed at the general meeting without objection fromany shareholders or proxies. CHAPTER 9 RESOLUTIONS AND MINUTES OF THE MEETING Article 89 A shareholders' general meeting should pass resolutionsfor the motions which are listed in the agenda of the meeting. Article 90 Minutes of a general meeting shall be kept. The minutesshall record the following information: (1) the number of voting shares represented by shareholders present at themeeting, and the percentage of such shares in the total number of shares in theCompany; (2) the date and venue of the meeting; (3) the name of the chairman of the meeting and the agenda of the meeting; (4)the summary of each attendee's opinion on motions; (5) the voting result ofeach issue voted on; (6) the inquiries and suggestions of shareholders and the answers or explanationmade by the board and the supervisory committee; (7) other issues that shall be recorded in the minutes in accordance withopinions of the general meeting and provisions of the Articles of Association. Article 91 Resolutions and minutes of a general meeting shall be signedby directors attending the meeting and the minutes recorder, while minutes ofthe meeting shall be signed by the person in charge (the chairman of themeeting), and be kept by the secretary to the board as the Company'spermanent record. Article 92 The secretary to the board shall be responsible for keepingsuch written information as the register of attendees, power of attorney,photocopy of identification documents, voting statistics sheet, minutes of themeeting and resolutions of a general meeting. CHAPTER 10 DISCLOSURE OF INFORMATION Article 93 The board of the Company shall strictly comply with thelaws, regulations and requirements of the stock exchange on which the Company's share are listed and transacted in relation to the disclosure of theCompany's information. It shall ensure that matters examined and/orresolutions passed at the board meeting are disclosed truly, accurately,thoroughly and in a timely manner. CHAPTER 11 SUPPLEMENTARY PROVISIONS Article 94 These Rules are an appendix to the Company's Articles ofAssociation. They are prepared by the board and shall come into effect, togetherwith the Company's Articles of Association amended in accordance with therequirement for domestically listed companies, upon approval of a shareholders' general meeting by passing a special resolution. Any amendment to theseRules shall be proposed by the board in form of an amendment proposal, and shallcome into effect upon approval of a shareholders' general meeting by passinga special resolution. Article 95 The shareholders' general meeting authorizes the board tointerpret these Rules. Article 96 Where any matter is not covered by these Rules or wherethese Rules fail to comply with the laws, administrative regulations, otherrelevant regulatory documents and provisions of the Articles of Association,those laws, administrative regulations, other relevant regulatory documents andprovisions of the Articles of Association shall prevail. Article 97 The phrases "more than" and "less than" herein for thenumbers includes the numbers indicated themselves while "majority" and "exceed" excludes the numbers indicated themselves. APPENDIX III PROPOSED RULES AND PROCEDURES FOR BOARD MEETING CHAPTER 1 GENERAL PROVISIONS Article 1 In order to regularize the operational procedure of theboard of directors of Air China Limited (hereinafter referred to as the "Company") and to ensure the working efficiency and the scientific strategicdecision-making of the board of directors, these Rules are formulated inaccordance with the "Company Law of the People's Republic of China"(hereinafter referred to as the "Company Law"), "Mandatory Provisions forthe Articles of Association of Companies to be Listed Overseas", "Guide toArticles of Association of Listed Companies", "Standards for the Governanceof Listed Companies" and other relevant laws and regulations and the "Articles of Association of Air China Limited" (hereinafter referred to as the"Articles of Association"). Article 2 As authorized by the general meeting, the board of directorsshall be responsible for the operation and management of the Company'sassets, and acts as central business decision-making body that is accountable tothe general meeting. CHAPTER 2 FORMATION AND COMMITTEES OF THE BOARD Article 3 The board of directors shall be established in accordancewith the Articles of Association, with the appropriate proportion of independentdirectors and outside directors. Article 4 Directors shall be elected or replaced at the shareholders' general meeting each for a term of three (3) years. The term of a directoris renewable by re-election after its expiry. However, the term of anindependent director re-elected shall not exceed six (6) years. The director,before his term of office is expired, shall not be removed by the generalmeeting without any reason. The term of a director shall be calculated from thedate of passing the resolution at the general meeting to the expiry of thatsession of the board. Article 5 When the term of office of all directors are expired, in theevent that the new board of directors has not been elected, the former directorsshall continue to perform their responsibilities until the new board ofdirectors is formed. Article 6 The board shall include one chairman and two vice-chairmen,who are elected and removed by a majority of directors. The chairman of the board of directors shall exercise the following functionsand powers: (1) to preside over shareholders' general meetings and to convene and presideover meetings of the board of directors; (2) to examine the implementation of resolutions passed by the board ofdirectors at board meetings; (3) to sign the securities certificates issued by the Company; (4) to sign important documents of the board of directors and other documentswhich should be signed by the legal representative; (5) to exercise powers of the legal representative; (6) in any emergent force majeure event such as natural disasters, to exercisehis special right of disposal to the business of the Company in compliance withlaws, regulations and in the interests of the Company, and to report to theboard of directors and the general meeting of the Company afterwards. (7) to exercise other powers conferred by the board of directors; 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 he deputy chairmen is unableor fails to perform their duties, a director shall be elected jointly by morethan a half of the directors to perform such duties. Article 7 The Company shall have a secretary to the board who shall benominated by the chairman of the board of directors and employed or dismissed bythe board of directors. The secretary shall be accountable to the board. Themain duties of the secretary to the board include: (1) organizing and arranging for the board meetings and shareholders' generalmeetings; preparing meeting materials, handling relevant meeting affairs; makingminutes of the meetings and ensuring their accuracy; keeping meeting documentsand minutes; taking initiative to monitor the progress of the implementation ofrelevant resolutions; reporting any important issues occurring during theimplementation to the board and giving relevant advice to the board. (2) ensuring the material matters decided by the board of the Company to becarried out strictly in accordance with the procedures stipulated; at request ofthe board, participating in the arrangement of consultation on and analysis ofthe matters to be decided by the board and offering relevant opinions andsuggestions; handling the day-to-day affairs of the board and its committees asentrusted. (3) acting as the liaison officer of the Company with the regulatory securitiesauthorities, responsible for organizing, preparation and timely submission ofthe documents required by the regulatory authorities as well as accepting andorganizing the implementation of any assignment from the regulatory authorities. (4) coordinating and organizing the Company's disclosure of information;establishing and improving the information disclosure system; participating inall of the Company's meetings involving the disclosure of information; andkeeping informed of the Company's material operation decisions and relatedinformation in a timely manner. (5) keeping the Company's price-sensitive information confidential andestablishing effective confidentiality systems and measures; in case of any ofthe Company's price-sensitive information divulged due to any reason, takingnecessary remedial measures, timely explaining and clarifying it, and makingrelevant reports to the regulatory authorities in overseas jurisdictions wherethe shares of the Company are listed and the CSRC. (6) coordinating and organizing marketing activities; coordinating reception ofvisitors, handling the investor relations; keeping in touch with investors,intermediaries and news media; coordinating replies to inquiries from thepublic; and ensuring investors to obtain the information disclosed by theCompany in a timely manner; organizing and preparation of the Company'sdomestic and overseas marketing and promotion activities; preparing conclusivereports on marketing and important visits; and organizing matters about thesubmission of the reports to the CSRC. (7) handling and keeping the materials in relation to information onshareholders register, directors register, amount of shares held by majorshareholders and records of directors' shares, and the list of beneficiariesof outstanding bonds of the Company. (8) assisting directors and the president in duly implementing the domestic andforeign laws, regulations, the Articles of Association and other relatedprovisions during exercising their functions and powers; upon becoming awarethat the Company has passed or may pass resolutions which may breach therelevant provisions, being liable for immediately reminding the board and beingentitled to report such facts to the CSRC and other regulatory authorities. (9) coordinating the provision of relevant information necessary for the Company's supervisory committee and other regulatory authorities to discharge their duties; assisting in carrying out due diligence on the chief financial officer, directors and the general manager of the Company of their fiduciary duties. (10) exercising other functions and powers as conferred by the board, as well asother functions and powers as required by laws in any jurisdiction where theshares of the Company are listed and the stock exchanges. Article 8 The board shall establish special committees such asstrategy and investment committee, audit and risk management committee, andmanagement personnel training and remuneration committee in accordance withrelated resolutions of the shareholders' general meeting. These specialcommittees shall consider specific matters and give their opinions and advicefor the board's decision-making based on the proposals made by the board ofdirectors, the chairman of the board and the president. The majority of members of audit and risk management committee and managementpersonnel training and remuneration committee shall be independent non-executivedirectors, and the persons in charge of the committees shall be acted byindependent non-executive directors. The audit and risk management committeeshall have at least one independent nonexecutive director who shall haverelevant professional qualifications, or shall have professional specialty inaudit or related financial management. Such special committees shall formulaterelevant working rules which shall be come into effect upon receiving approvalby the board of directors. CHAPTER 3 FUNCTIONS AND POWERS OF THE BOARD Article 9 The board shall be responsible to the shareholders'general meeting and exercise the following functions and powers: (1) to be responsible for convening shareholders' general meetings and reporton its work to the shareholders' general meetings; (2) to implement the resolutions passed at the shareholders' generalmeetings; (3) to determine the Company's business plans and investment plans; (4) to formulate the Company's annual budgets and final accounts; (5) to formulate the Company's profit distribution proposals and lossrecovery proposals; (6) to formulate the proposals for increase or reduction of the Company'sregistered capital, and proposals for issue of the Company's bonds; (7) to formulate the proposals for merger, demerger or dissolution of theCompany; (8) to decide on the general investment, risk investment, connectedtransactions, assets pledged and other guaranteed affairs of the Company withinthe authority granted by the shareholders' general meeting; (9) according to laws, administrative regulations and the Articles ofAssociation, to decide on other external guarantees that require the approval ofthe general meetings; (10) to decide on the establishment of the Company's internal managementbodies; (11) to appoint or remove the Company's president, secretary to the board ofdirectors; to appoint or remove the Company's senior officers such as deputypresident and person in charge of finance according to the proposals of thepresident and determine their remunerations, rewards and punishment; (12) to formulate the Company's fundamental management system; (13) to formulate the proposals for any amendment to the Articles ofAssociation; (14) to manage matters of disclosure of information on the Company; (15) to make proposal of any employment or replacement of the accounting firmwhich audits the Company's accounts at the shareholders' general meeting; (16) to receive the work report of the president of the Company and examine onthe president's work; (17) to exercise other functions and powers as stipulated by laws,administrative regulations or the Articles of Association and granted by theshareholders' general meeting. Article 10 Any external guarantee of the Company shall be consideredand passed by the board of directors. Matters fulfilling any of the followingconditions shall be approved by the general meeting after being considered bythe board of directors: (1) Any provision of guarantee, provided after amount of external guaranteesprovided by the Company or its controlled subsidiaries exceeds 50% of the latestaudited net assets; (2) provision of guarantee to anyone whose liability-asset ratio exceeds 70%; (3) provision of a single guarantee whose amount exceeds 10% of the latestaudited net assets; (4) provision of guarantee to shareholders, actual controllers and theirconnected parties; (5) the amount of external guarantees of the Company within a year exceeds 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. Article 11 Limits of the board's right to approve the Company'sinvestment projects are specified as follows: (1) General transactions (including investments and acquisitions). The boardshall have the authority to approve any transaction which fulfills the followingconditions: 1. Based on the ratio tests specified in the Rules Governing the Listing ofSecurities on the Stock Exchange of Hong Kong Limited (the "Listing Rules ofthe Stock Exchange"), each of the assets ratio, profit ratio, revenue ratio,consideration ratio and equity capital ratio of the transaction is less than25%; and 2. each of the following five ratios applicable to the transaction is lessthan 50%: total asset value of the transaction (the higher of the book value andthe appraised value, if applicable) to the latest audited total asset value ofthe Company; the transaction amount (including the debts and costs assumed) tothe latest audited net asset value of the Company; profit from the transactionto the audited net profit of the Company for the latest financial year; revenuegenerated from the main business under the subject of the transaction (such asequity interests) for the latest financial year to the audited revenue from themain business of the Company for the latest financial year; and relevant netprofit generated under the subject of the transaction (such as equity interests)for the latest financial year to the audited net profit of the Company for thelatest financial year; and in addition, the total amount of purchases or sales,in which such transaction is included, of major assets (including connectedtransactions) within one year is less than 30% of the total assets of theCompany (absolute values shall be taken if the above values are negative). (2) Connected transactions. The board shall have the authority to approve anyconnected transaction which fulfills the following conditions: 1. any of the assets ratio, revenue ratio, consideration ratio and equitycapital ratio of the transaction specified in the Listing Rules of the StockExchange is less than 2.5%; and 2. the transaction amount represents less than 5% of the latest audited netasset absolute value of the Company, and the total amount of purchases or sales,in which such transaction is included, of major assets (including generaltransactions) within one year is less than 30% of the total assets of theCompany. (3) Risk investments (representing futures contracts such as aircraft fuelprices hedging contracts and other derivatives). Subject to Clause (1) ofArticle 11 in the rules, the board of directors shall have the authority toexamine and approve the projects with the investment amount of less than 15% ofthe Company's latest audited net asset; the projects exceeding the aforesaidlimit shall be examined and approved by a general meeting. (4) External Guarantee. The board of directors shall have the authority toapprove external guarantees, except those required to be approved by the generalmeetings according to applicable domestic and overseas laws and regulations,regulatory documents and stipulations of the Articles of Association. Article 12 Limits of the board's right to approve the disposals ofthe Company's fixed assets: The board of directors shall not, without the prior approval of shareholders ina general meeting, dispose of or agree to dispose of any fixed assets of theCompany, unless the sum of the expected value of the consideration for a fixedasset to be disposed of and the amounts generated from all completed disposalsof fixed assets of the Company during a period of four (4) months prior to theproposed disposal does not exceed 33 % of the value of the Company's fixedassets as shown in the latest balance sheet tabled at a shareholders' generalmeeting, in such a case the board of directors shall have the authority toapprove. Should there be any inconsistency between the preceding requirementsand provisions of the stock exchange on which the Company's shares are listedin respect of the issue, the latter shall prevail. Disposals of the fixed assets include transfer of some asset interests, but notinclude guarantee provided by pledge of fixed assets. The effectiveness of the Company's disposal of the fixed assets shall not beaffected by any breach of the forgoing provisions in Clause 1 of this Article. In the event that the board of directors make decisions on market development,mergers and acquisitions, and investments in new areas, for the projects withthe investment amounts or mergers and acquisitions of up to certain percentageof the Company's total assets (such percentage shall be decided by thegeneral meetings), a public consultant institutions shall be retained to provideprofessional advice as the important basis for the board's decision-making. Article 13 During the recess of the board meeting, the chairman of theboard, with authorization from the board, may perform partial duties of theboard. The chairman shall be authorized by the board in accordance with the followingprinciples: (1) to focus on the operation and development of the Company, to make good useof market opportunities and to ensure smooth and efficient operation of theCompany; (2) to be flexible and pragmatic, to avoid excessive formalities on conditionthat it is not against the Articles of Association, and to ensure the businessdecision of the Company is made in a timely manner; (3) not to harm the interests of the Company and shareholders as a whole,especially the legal interests of minority shareholders. CHAPTER 4 RULES FOR BOARD MEETINGS Article 14 The board meetings include regular board meetings andextraordinary board meetings. Regular board meetings include: annual meetings,interim meetings, first-quarter meetings and third-quarter meetings. (1) Regular board meetings 1. Annual board meetings Annual meetings shall be convened within 120 days from the end of the financialyear of the Company, or other time which is considered as appropriate by theboard. The directors shall discuss motions to be submitted at the generalmeeting for approval. The time of an annual board meeting shall be determined toensure that the annual general meeting of the shareholders may be convenedwithin 6 months from the close of the financial year of the Company. 2. Interim board meetings The interim board meetings shall be convened within 60 days from the expiry ofthe first six months of the financial year of the Company, or other time whichis considered as appropriate by the board. The directors shall mainly examineand approve the Company's interim reports and deal with other relevantmatters at such meetings. 3. First-quarter and third-quarter meetings The meetings shall be held in the first month of each of the second and fourthquarter of the calendar year. The directors shall mainly examine and approve theCompany's quarterly reports for the preceding quarters at such meetings. (2) Extraordinary board meetings. If any of the following circumstances occurs, the chairman of the board ofdirectors shall issue a notice convening an extraordinary board meeting withinten (10) days which shall not be limited by the notice period prescribed inArticle 24 hereof: 1. Shareholder(s) representing more than 10% of the voting rights consider(s) it necessary; 2. The chairman of the board of directors considers it necessary; 3. More than one-third of the directors jointly propose it; 4. More than one-half of the independent directors jointly propose it; 5. The supervisory committee proposes it; 6. The president proposes it. Article 15 The board meetings may be held on-site, by conference callor by written resolutions. The board meetings may be held by conference call or other similar communicationequipment, provided that the attending directors are able to hear clearly otherdirectors' speech at the meeting and communicate among themselves. Allattending directors shall be considered as being present at the meetings. In theevent that the attending directors are unable to sign on the resolutions onsite, they shall express their opinions orally during the meeting and completethe signing procedures as soon as possible. When the board of directors accepts discussion on any motion in written forminstead of holding a board meeting, the draft of the motion must be sent to eachdirector by hand, post, telegraph or facsimile transmission. In addition, whenthe number of the directors signed on the draft satisfies the quorum required bylaws, regulations and the Articles of Association, and the motion has been sentto secretary to the board by foregoing methods, such motion shall be deemed asthe board resolution, then no further board meeting will be necessary. However,regular board meetings shall not resolve on any motion in such a way of writtenmotions. Furthermore, if the board considers that any major shareholder ordirector has any material conflict of interests in any motion to be resolved ata board meeting (as defined by applicable domestic and overseas regulations) ordirector, such motion shall not be resolved in such a way of written motions. Article 16 A board meeting shall be convened and chaired by thechairman of the board. If the chairman of the board is unable or fails to convene and chair themeetings, the deputy chairman shall convene and chair the meetings; if thedeputy chairman of the board is unable or fails to convene and chair themeetings, a director shall be jointly elected by a simple majority of directorsto convene and chair the meetings. Article 17 The quorum of board meetings shall be formed by a majorityof directors. Article 18 Directors shall attend the board meetings in person. Where adirector is unable to attend a meeting for any reason, he may authorize anotherdirector in writing to attend the meeting as his proxy. The writtenauthorization shall set out the name of the attorney as well as the subject,limit and validity of such authorization, and shall be signed or sealed by theprincipal. Article 19 The board of directors shall propose to the shareholders'general meeting to replace any independent director who has not been present inperson for three times consecutively at board meeting. In the event that any other director has twice consecutively failed to bepresent in person at any board meeting, nor authorized another director to bepresent at the board meeting on his behalf, he shall be considered unable tofulfill his responsibilities as a director, and the board of directors shallaccordingly suggest the shareholders' general meeting making a replacement. CHAPTER 5 PROPOSED RESOLUTIONS OF BOARD MEETINGS Article 20 Resolutions shall be proposed to the board meetings in thefollowing circumstances: (1) The chairman of the board of directors propose it; (2) More than one-thirdof the directors jointly propose it; (3) The supervisory committee proposes it;(4) Any special committee of the board proposes it; (5) The president proposesit; (6) More than one-half of the independent directors jointly propose it; (7) other circumstances so stipulated by laws, regulations and the Articles ofAssociation. Article 21 The secretary to the board shall be responsible forcompiling the proposed resolutions to be considered at the meeting. Any personproposing the resolution shall submit such proposed resolutions and the relevantexplanatory materials to the secretary to the board 5 days before the date ofnotice convening the board meeting. Proposed resolutions in relation to majorconnected transactions (as determined on the criteria promulgated by therelevant regulatory authorities from time to time) in relation to theappointment and removal of accounting firm, which are subject to approval by theboard or the shareholders at the general meeting and proposed resolutions ofappointment or dismissal of accounting firms shall first be approved by morethan one-half of the independent directors. The relevant materials shall besubmitted to the chairman of the board or the convener of the board meetingafter such materials being compiled by the secretary to the board who shall setout the time, place and agenda of the meeting. Article 22 The secretary of the board shall be responsible forcommunication and liaison with all directors during the period from the issue ofnotice convening the board meeting to the holding of the meeting, and make atimely supplement of the documents as required by the directors for makingdecisions on the resolution. Where more than one-fourth of the directors or more than two independentdirectors consider the materials provided insufficient or uncertain, they mayjointly make a proposal in written form to adjourn the board meeting or thediscussion on part of the proposed resolutions. The board shall accept suchproposal. Unless such proposal is put forward during the meeting, the secretaryto the board shall give a notice to the directors, supervisors and other personsattending the meeting upon receiving a written joint request from the relevantdirectors to adjourn the meeting or discussion on part of the proposedresolutions. CHAPTER 6 NOTICE OF MEETINGS Article 23 A notice of a board meeting shall be given to all thedirectors, supervisors or other persons attending the meeting before the date ofsuch meeting, and shall be signed and issued by the convener of the boardmeeting. The notice of such meeting shall set out the following: (1) the time and placeof the meeting; (2) the duration of the meeting; (3) the agenda, relevant reasons, subject matter and the relevant materials; (4) the date of the notice. Article 24 The notice of the board meetings shall be given inaccordance with the following requirements: (1) If the time and place of regular board meeting has been stipulated by theboard, the board may not give any notice unless the time and place of regularboard meeting are changed. The agenda and relevant documents of the meetingshall be given to all directors, supervisors and other persons attending themeeting at least 3 days in advance; (2) If the time and place of regular board meeting are not stipulated by theboard, the secretary to the board shall inform all directors at least 14 days inadvance of the time, place and agenda of the meeting by facsimile transmission,courier, registered post or hand; (3) The notice shall be written in Chinese and if necessary, be accompanied byan English version. Article 25 Any director, upon receipt of the notice, shall notify thesecretary of the board within two days prior to the meeting whether he willattend the meeting. A director may waive his right to receive the notice of the board meeting. If any director has been present in the meeting, and he does not claim beforehis arrival or claim at the meeting that no such notice is received by him, itshall be deemed that the notice of meeting has been served on him. Article 26 If any adjournment or cancellation of the meeting for anyreason, a notice shall be given to the attendees one day before the originaldate of the meeting. CHAPTER 7 CONSIDERING AND VOTING ON PROPOSED RESOLUTIONS Article 27 The chairman of the board meeting shall call the meeting asscheduled. Article 28 The meeting shall be chaired by the chairman of the meeting.The person proposing a resolution or relevant persons shall elaborate theproposed resolutions to the board. Article 29 Meetings of the board shall be conducted in a democratic wayand views of its members shall be duly respected. Article 30 When reviewing the relevant motions and items, in order tounderstand the main points and situations in detail, the board may require headsof the relevant departments to attend the meeting to answer relevant questions.If any proposal being considered at the meeting is found unclear or infeasibleto be fully discussed, the board shall adjourn the discussion on that subject. Article 31 Attending personnel shall have the right to speak but noright to vote. Resolutions of the board shall be made after due consideration of theiropinions. Article 32 The independent directors shall give their independentopinions to the board or the general meeting on the following matters: (1) the nomination, appointment and removal of any director; (2) the appointment and dismissal of any senior officer; (3) the remuneration of the directors and senior officers of the Company; (4) the existing or new loans granted by the Company to its shareholders, actualcontroller or related enterprises, or other funds transferred from the Company,with the total amount exceeding $3 million or 5% of the latest audited net assetvalue, and whether the Company has taken effective measures to recover suchdebts; (5) Distribution plans of the cash profits that the board of directors has notmade; (6) Issues that the independent directors consider possible to impair on therights and interests of minority shareholders; (7) other matters so stipulated by laws, regulations, regulatory documents orthe Articles of Association. An independent director shall provide his comments by way of: agreeing;reserving his opinion with reasons; objecting with reasons; or expressing hisview as not being able to provide his comments and his difficulties thereof. When the relevant issues are of those required to be disclosed, opinions ofindependent directors shall be notified in public by the Company. In addition,if the independent directors have different opinions and cannot come to anagreement, their opinions shall be disclosed respectively by the board. Article 33 In reviewing the proposed resolutions at the board meeting,all directors present at meetings shall declare their affirmative, dissentingvotes or abstaining opinions. The proposal may be voted by show of hands or by apoll, which shall be decided by the chairman of the board meeting. The directors who are acting as proxies shall exercise the voting rights withinthe scope of such authorization. Article 34 If a director fails to attend a board meeting in person orby proxy, he shall be deemed to have waived his rights to vote at the meeting. Article 35 Any resolutions of the board with respect to any of thefollowing matters shall be passed by more than two-thirds of the directors whileother resolutions of the board shall be passed by a majority of the directors:(1) formulation of proposals for the increase or reduction of the registeredcapital of the Company; (2) formulation of proposals for the issue of the debtsecurities of the Company; (3) making proposals for merger, demerger ordissolution of the Company; (4) formulation of proposals for amendments to theArticles of Association; (5) external guarantee; and (6) other matters sostipulated by laws, regulations or the Articles of Association. Article 36 Each director has one vote. In the case of equal division ofaffirmative and dissenting votes, the chairman of the board of directors isentitled to a casting vote. Article 37 If any director is associated with the enterprises that are involvedin the matters to be resolved by the board meetings, he shall not exercise hisvoting rights for such matters, nor shall he exercise voting rights on behalf ofother directors. Such board meetings shall be convened by a majority of thedirectors present thereat who not connected. Decisions made by the boardmeetings shall be passed by a majority of the directors that are not connected.The matters provided in Article 35 hereof to be passed by more than two-thirdsof the directors shall be passed by votes of more than two-thirds of thedirectors that are not connected. If the number of non-connected directorsattending the board meetings falls short of three, such matters shall besubmitted to the Company's general meeting for approval. Article 38 If any director of the Company or its associates (as definedby the applicable securities listing rules as amended from time to time) has/have direct or indirect material interest in the contract, transaction orarrangement entered into or contemplated by the Company (except for employmentcontracts between the Company and directors, supervisors, president, deputypresidents and other senior officers), whether an approval from the board ofdirectors is required for the relevant matters under normal circumstances, heshall disclose to the board of the nature and amount of his interest as soon aspracticable. In respect of the contract, arrangement or proposal in which the relevantdirector or his associates has/have substantial interests, the relevant directorshall not vote at the relevant board meeting, nor shall he be counted in thequorum. CHAPTER 8 RESOLUTIONS AND MINUTES OF THE MEETINGS Article 39 In general, resolutions shall be made in respect of allmatters considered at the board meeting. Article 40 A resolution of the board on the Company's connectedtransaction shall not be valid until it is approved by the independent directorsin writing. Article 41 A written resolution of the board which is signed by thedirectors shall not take legal effect as a resolution of the board if it has notbeen passed in accordance with the prescribed procedures, notwithstanding allthe directors have already expressed their opinions in different ways. Article 42 The minutes of the board meeting shall record in detail thematters discussed by the directors. The minutes shall state the following: (1) the date and place of the meeting, and the names of convener and chairman ofthe meeting; (2) the names of the directors attending the meeting in person or by proxy andthe names of their proxies; (3) the agenda of the meeting; (4) the summary of the directors' opinions (for a meeting by writtenresolution, the directors' opinions in writing shall prevail) (including anydoubts or objections of the directors); (5) the voting method and result of each proposed resolution (the result of thevoting shall set out the respective number of the votes of assenting, dissentingor abstention). Article 43 The minutes of each board meeting shall be given to alldirectors as soon as practicable. Directors who wish to amend or supplement theminutes shall submit a written report setting out his comments to the chairmanof the board within one week after the receipt of the minutes circulated. Article 44 Directors and recorder(s) present at meetings shall sign theminutes. Each director shall be entitled to request for an explanation of hiscomments made at the meetings to be noted in the minutes. Such minutes shall beproperly and permanently kept as important documents of the Company in thepremises thereof. Article 45 Any director who votes for a resolution in violation of anylaws, administrative regulations, the Articles of Association or resolutions ofgeneral meeting shall be directly liable for all losses arising therefrom. Anydirector who votes against the resolution and who has been proved as havingexpressed dissenting opinions on the resolution that are recorded in the minutesof the meeting may be exempted from such liability. Any director who abstainsfrom voting or who fails to attend the meeting in person or by proxy shall notbe exempted from such liability. Any director who explicitly expresses hisobjection in the course of discussion but fails to cast an objection vote shallnot be exempted from such liability. CHAPTER 9 IMPLEMENTATION OF THE RESOLUTIONS OF THE BOARD MEETING AND FEEDBACKS Article 46 The board of the Company shall strictly comply with thelaws, regulations and requirements of the stock exchange on which the Company's share are listed and transacted in relation to the disclosure of theCompany's information. It shall ensure that matters examined and/orresolutions passed at the board meeting are disclosed truly, accurately,thoroughly and in a timely manner. Article 47 Prior to disclosure of any resolution of the board throughnormal channels, any attendee shall by no means disclose it in any form oracquire any interest for himself thereby. CHAPTER 10 IMPLEMENTATION OF THE RESOLUTIONS OF THE BOARD MEETING AND FEEDBACKS Article 48 The following matters shall not be carried out until theyare examined and approved by the board and submitted to and approved by thegeneral meeting: (1) to formulate the Company's annual budget and final accounts; (2) to formulate the Company's profit distribution proposals and lossrecovery proposals; (3) to formulate the proposals for increase or reduction of the Company'sregistered capital; (4) to formulate the proposals for issue of Company's debt securities; (5) to formulate the proposals for merger, demerger or dissolution of theCompany; (6) to formulate the proposals for any amendment to the Articles ofAssociations; (7) to make proposal of any employment or replacement of the accounting firmwhich audits the Company's accounts at the shareholders' general meeting. Article 49 The president shall fully implement the resolutions passedby a board meeting within the scope of his duties or as authorized by the boardand report to the board on the implementation of such resolutions. Other mattersshall be organized and implemented by related departments arranged by the board,which shall receive and consider the report of these departments. The secretaryto the board shall be responsible for transfer of the reporting materialabovementioned in written form to the board. Article 50 The chairman of the board shall have the power to, orauthorize the deputy chairman or other directors to, supervise theimplementation of the resolutions of the meeting. Article 51 At each board meeting, the president or other relateddepartments shall report on the implementation of the resolutions passed by theboard during the last meeting to the board in written form. The board shallevaluate the implementation of such resolutions. Article 52 Under the direction of the board and the chairman, thesecretary to the board shall take initiatives to obtain information about theprogress on the implementation of the resolutions, and shall, in a timelymanner, report to and submit proposals to the board and the chairman thereof inrelation to the important issues in implementation. CHAPTER 11 SUPPLEMENTARY ARTICLES Articles 53 These Rules are an appendix to the Company's Articles ofAssociation. They are prepared by the board and shall come into effect, togetherwith the Company's Articles of Association amended in accordance with therequirement for domestically listed companies, upon approval of a shareholders'general meeting by passing a special resolution. Any amendment to theseRules shall be proposed by the board in form of an amendment proposal, and shallcome into effect upon approval of a shareholders' general meeting by passinga special resolution. Article 54 The shareholders' general meeting authorizes the board tointerpret these Rules. Article 55 Where any matter is not covered by these Rules or wherethese Rules fail to comply with the laws, regulations and other relevantregulatory documents and provisions of the Articles of Association and Rules ofProcedure for General Meetings, those laws, regulations, other relevantregulatory documents and provisions of the Articles of Association and Rules ofProcedure for General Meetings shall prevail. Article 56 The phrase "more than" herein for the numbers includesthe numbers indicated themselves while "majority" excludes the numbersindicated themselves. APPENDIX IV PROPOSED RULES AND PROCEDURES FOR MEETINGS OF SUPERVISORS CHAPTER 1 GENERAL PROVISIONS Article 1 In order to regularize the operation of the supervisorycommittee of Air China Limited (hereinafter referred to as the "Company") andto ensure the supervisory committee to perform its obligations granted by allshareholders, these Rules shall be formulated according to laws, regulations andregulatory documents such as the "Company Law of the People's Republic ofChina" (hereinafter referred to as the "Company Law"), "MandatoryProvisions for the Articles of Association of Companies to be Listed Overseas","Guide to Articles of Association of Listed Companies", "Standards for theGovernance of Listed Companies", and provisions of the Articles of Associationof Air China Limited (hereinafter referred to as the "Articles of Association"). Article 2 The supervisory committee of the Company shall report to theshareholders' general meeting and monitor the legal and procedural complianceof the Company's financial undertakings and the discharge of duties of itsdirectors, president, deputy president and other officer(s) in order tosafeguard the legal interests of the Company and its shareholders. CHAPTER 2 ORGANIZATION OF THE SUPERVISORY COMMITTEE Article 3 The supervisory committee shall be established with properproportions of staff representatives and external supervisors in accordance withthe Articles of Association. Article 4 In addition to satisfying the requirements set out in theCompany Law and the Articles of Association, supervisors shall also have legaland accounting-related professional knowledge and work experience. Article 5 There shall be one chairman on the supervisory committee.The chairman shall be appointed or removed by more than two-thirds of themembers of the supervisory committee. The chairman of the supervisory committee shall preside over the business of thesupervisory committee and exercise the following powers: 1. to convene and preside over meetings of the supervisory committee; 2. to arrange for formulation of working plans of, and implementation ofresolutions of the supervisory committee; 3. to execute documents in relation to the supervisory committee; 4. to report, on behalf of the supervisory committee, to the shareholders'general meeting on its work; 5. to oversee and examine the implementation of resolutions of the supervisorycommittee; 6. to exercise other powers stipulated in relevant laws and regulations and theArticles of Association or delegated by the supervisory committee. In the event that the chairman of the supervisory committee is unable to performhis duties, he shall appoint a supervisor to act on his behalf. Article 6 The term of office for supervisors shall be three years.Upon expiration of his term, a supervisor may be re-elected for a successiveterm. If a new supervisory committee is not elected during re-election, the members ofthe existing supervisory committee shall perform their duties until a newsession of the supervisory committee is formed. Supervisors may resign from their office prior to expiration of their term ofoffice. In the event that the number of supervisors falls short of the quorum ofthe supervisory committee as a result of such resignation, the resignation shallnot become effective until the vacancy resulting from the resignation is filledup by a succeeding supervisor. CHAPTER 3 FUNCTIONS AND POWERS OF THE SUPERVISORY COMMITTEE Article 7 The supervisory committee is accountable to the shareholdersin general meeting and exercise the following functions and powers in accordancewith the laws: (1) to examine the Company's financial undertakings and authorize, on behalfof the Company, accounting firms to independently review the same of theCompany, whenever necessary; (2) to oversee the Company's directors, president, deputy president and otherofficers during the discharge of their duties to the Company, and to propose theremoval of the directors, president, deputy president and other senior officersfor any violations of the laws, administrative regulations, Articles ofAssociation or any resolutions of shareholders' general meeting; (3) if any act of the Company's directors, president, deputy president andother officers damages the interests of the Company, to require them to rectifysuch act accordingly; (4) to verify financial information such as financial reports, business reportsand profit distribution plans as proposed by the board of directors to be tabledat the shareholders' general meeting, and if in doubt, to appoint anyregistered accountant or practicing auditors in the name of the Company toassist in reviewing them; (5) to review any agreement governing major connected transactions, examineexecution of such agreement and report to the shareholders' general meetingand, if necessary, give specific opinions on such major connected transactions; (6) to review revised projects financed by raised proceeds and give opinion; (7) to propose the extraordinary motions for the shareholders' generalmeeting; (8) to propose the convening of extraordinary general meetings and, in case theboard of directors does not perform the obligations to convene and chair theshareholders' general meetings in accordance with the requirements of thelaws, administrative regulations and Articles of Association, to convene andchair the shareholders' general meetings; (9) to propose the convening of extraordinary meetings of the board ofdirectors; (10) to attend any meeting(s) of the board of directors and oversee such issuesas the validity of convening its meeting(s) or as whether connected directors'abstaining from voting thereat and its resolutions comply with the laws andregulations and Articles of Association or are in line with the actual needs ofthe Company; (11) to represent the Company in negotiation with or taking an action against adirector; (12) to exercise such other powers as delegated by the laws, regulations,Articles of Association and shareholders' general meeting. Supervisors shall attend meeting(s) of the board of directors. Article 8 At the annual general meeting, the supervisory committeeshall deliver the supervision report of the Company for the previous year,including: (1) examination of financial undertakings of the Company; (2) performance of directors, president, deputy president and other seniorofficers of the Company for complying with the relevant laws, regulations,Articles of Association and resolutions of the shareholders' general meeting; (3) other material issues to be reported to the shareholders' general meetingas deemed necessary by the supervisory committee. The supervisory committee may, if it thinks necessary, comment on motionsproposed at the shareholders' general meeting, and file an independent reportaccordingly. Article 9 To exercise its supervisory powers, the supervisorycommittee shall, in case that the Company's financial undertakings are inviolation of the laws or regulations, and that the Company's directors,president, deputy president or other senior officers act in violation of thelaws or regulations or Articles of Association, report to the board of directorsand the shareholders' general meeting or directly to the regulatorysecurities authorities under the State Council and other relevant authorities. Article 10 To excise its powers, the supervisory committee may, ifnecessary, retain legal or accounting firms to provide professional assistanceat reasonable expenses which shall be borne by the Company. Article 11 In exercise of its supervisory powers, the supervisorycommittee shall not perform the duties in lieu of the board of directors or thepresident, nor undertake any operations on behalf of the Company. Article 12 In exercise of its/their supervisory powers, the supervisorycommittee or supervisors shall comply with the applicable laws and Articles ofAssociation and perform its supervisory powers honestly and diligently toprotect the lawful interests of shareholders and the Company. Supervisors shallnot use their office and authority to serve their own interests, nor shall theydisclose trade secrets or other confidential information on the Company'soperation and management. CHAPTER 4 RULES FOR MEETINGS OF THE SUPERVISORY COMMITTEE Article 13 The supervisory committee shall hold at least one meetingevery six (6) months. Upon the proposal made by the chairman of the supervisorycommittee or more than two-thirds of its members, the supervisory committee mayhold an extraordinary meeting. Article 14 The chairman of the supervisory committee shall issue noticeof its meeting, while its liaison officers shall inform any relevant party toprepare for such meeting. Any notice of meeting of the supervisory committee shall include the date andplace of the meeting, subject of discussion and the issue date thereof. Such notice of meeting shall be given to all supervisors and related parties tobe present or in attendance at the meeting ten (10) days prior to the dateappointed for holding of such meeting, either by facsimile, courier, registeredpost or by hand. A notice of an extraordinary meeting may be served three (3)days prior to the date thereof. Any notice of delay or cancellation of such meeting due to any reason shall beserved on the attendees one (1) day prior to the scheduled date. Article 15 Motions of the supervisory committee are put forwardprimarily based on the matters considered by the board of directors or proposedby the supervisory committee. Any proposal required to be submitted to the supervisory committee bysupervisors and other relevant personnel for examination, discussion and/ordecision shall be submitted in advance to its liaison officers. Aftercompilation of proposals by its liaison officers, the chairman shall decidewhether the proposal should be included in the agenda. In principle, any proposal submitted shall be included in the agenda; otherwisethe chairman shall specify reasons in writing to the proposer. The chairmanshall not withhold it from discussion or without response; otherwise theproposer shall have the right to report it to the relevant regulatoryauthorities. Proposals together with the notice of the meeting shall be served on all membersof the supervisory committee and those who are due to attend the meeting. Article 16 At any meeting of supervisory committee prior to a annualgeneral meeting, the supervisory committee shall examine its supervision reportin relation to the Company for the previous year under Article 8 hereof. Article 17 The chairman of the supervisory committee shall beresponsible for convening and holding its meetings. If the chairman of thesupervisory committee is unable or has failed to perform his duties, asupervisor shall be elected by a simple majority of supervisors to convene andchair meetings of the supervisory committee. The quorum of the supervisorycommittee meetings shall be formed by more than two-thirds of the supervisors. The supervisory committee may, whenever necessary, require the directors,president, deputy presidents and other senior officers, internal and externalauditors to attend its meetings to answer any questions that pose concern to it. Article 18 Supervisors shall be present at meetings of the supervisorycommittee. If they fail to do so for any reason, they may authorize in writingother supervisors to act as proxies and vote on their behalf. Such writtenauthorization shall include the name of the proxies, the matters in question,their authority and the period of validity, and shall bear the signature or sealof the person appointing the proxy. Should supervisors neither be present atmeetings of the supervisory committee nor appoint proxies to attend the same ontheir behalf, they shall be deemed to abstain their voting rights at suchmeetings. Any written authorization as such shall be made in writing together with itsdetails and description of the authority of proxy, and be served on the liaisonofficers of the supervisory committee one (1) day prior to the holding of itsmeeting. The liaison officers of the supervisory committee shall be responsiblefor registration of proxy and announce it at the opening of meetings. The written authorisation may be prepared in standard format by the liaisonofficers of the supervisory committee and be served on supervisors together withany notice of meetings. Article 19 If any supervisor fails to attend meetings of thesupervisory committee in person twice consecutively, nor appoints anothersupervisors to be present on their behalf, he shall be deemed incapable ofperforming his responsibilities and the shareholders' general meeting or theemployee representatives' meeting shall replace that supervisor. Article 20 The chairman shall call a meeting of the supervisorycommittee as scheduled. Subject to the unanimous agreement on the agenda of meetings among supervisorspresent, any proposed motions shall be considered separately. Article 21 Meetings of the supervisory committee shall be conducted ina democratic way and views of its members shall be duly respected while anyviews, though diverse, shall also be kept upon making any decision. Supervisorsholding different views or with objections shall abide by and implement anylawful resolutions of the supervisory committee. They shall not interferetherein or act out of their personal will; otherwise, the supervisory committeehas the right to propose to the shareholders' general meeting to remove themfrom office. Article 22 For any agenda item to be considered by the supervisorycommittee, the proposer or any supervisor appointed shall speak on this,elaborating its main ideas, cause and effect, and overriding points of themotion. For any significant motion, relevant personnel shall be organized toconduct a prior investigation and verification and make report thereon inwriting for all supervisors' consideration. Article 23 Any supervisor that is in connection with a motion shallwithdraw and abstain from voting. Article 24 Relevant personnel shall attend any meeting(s) of thesupervisory committee only during consideration of matters that concern them,and withdraw from it in respect of other matters. Attending personnel shall hasthe right to speak but no right to vote. Resolutions of the supervisorycommittee shall be made after due consideration of their opinions. Article 25 Voting on resolutions at a meeting of the supervisorycommittee shall be conducted by registered poll or a show of hands. However, aregistered poll shall be adopted if more than two supervisors so request.Supervisors shall cast a vote each. Article 26 All supervisors present at meetings shall declare theiraffirmative, dissenting votes or abstaining opinions. The attending supervisorsacting as proxies shall exercise the rights within the power of attorney.Resolutions of the supervisory committee shall come into effect subject to theapproval by more than two-thirds of its members. Article 27 In principle, the supervisory committee shall makeresolutions regarding the matters considered. Resolutions passed at the meetingsshall be announced prior to the close of meetings and signed by all memberspresent. Article 28 Minutes shall be kept for meetings of the supervisorycommittee. The minutes shall include the date and place of the meeting; the nameof the presider; the names of the present supervisors and those of theappointors and their proxies; agenda of meetings; the main points of thesupervisors' speeches; and the voting modes and results of each motion (thevoting results shall include the number of affirmative votes, dissenting votesand abstention votes). Supervisors and recorder(s) present at meetings shall sign the minutes. Eachsupervisor shall be entitled to request for an explanation of his comments madeat the meetings to be noted in the minutes. Such minutes shall be properly andpermanently kept as important documents of the Company. CHAPTER 5 INFORMATION DISCLOSURE OF MEETINGS OF THE SUPERVISORY COMMITTEE Article 29 The chairman of the supervisory committee shall oversee andexamine implementation of resolutions of the supervisory committee. The Companyshall file and/or publish an announcement on such resolutions of the supervisorycommittee in accordance with applicable laws and the relevant requirementsspecified by the stock exchange(s) on which the Company's shares are listed. Article 30 Prior to disclosure of any resolution of the supervisorycommittee through normal channels, any attendee shall by no means disclose it inany form or acquire any interest for himself thereby. CHAPTER 6 EXECUTION OF RESOLUTIONS OF THE SUPERVISORY COMMITTEE Article 31 For resolutions which involve suggestions on the Company's operations and management or require responses from the board of directors andthe management, the supervisory committee shall designate supervisor(s), whoshall be responsible for negotiation with the board of directors and thepresident for implementation of the resolutions, and file a written report tothe supervisory committee in respect of implementation of the resolutions. Article 32 Any significant matter required to be dealt with orrectified under resolutions of the supervisory committee shall be arranged andimplemented by the board of directors in accordance with resolutions passed byin shareholders' general meetings. The general and specific matters shalldirectly vest with the president for arrangement and implementation. Results ofthe implementation shall be reported to shareholders' general meetings andcirculated among supervisors. Article 33 The chairman of the supervisory committee shall appointsupervisors to examine implementation of matters required to be dealt with orrectified under resolutions and may give evaluation opinions thereon. CHAPTER 7 SUPPLEMENTARY ARTICLES Articles 34 These Rules are an appendix to the Company's Articles ofAssociation. They are prepared by the supervisory committee and shall come intoeffect, together with the Company's Articles of Association amended inaccordance with the requirement for domestically listed companies, upon approvalof a shareholders' general meeting by passing a special resolution. Anyamendment to these Rules shall be proposed by the supervisory committee in formof an amendment proposal, and shall come into effect upon approval of ashareholders' general meeting by passing a special resolution. Article 35 The shareholders' general meeting authorizes thesupervisory committee to interpret these Rules. Article 36 Where any matter is not covered by these Rules or wherethese Rules fail to comply with the laws, regulations and other relevantregulatory documents and provisions of the Articles of Association and Rules ofProcedure for General Meetings, those laws, regulations, other relevantregulatory documents and provisions of the Articles of Association and Rules ofProcedure for General Meetings shall prevail. Article 37 The phrase "more than" herein for the numbers includesthe numbers indicated themselves. APPENDIX V PROPOSED CONNECTED TRANSACTION DECISION MAKING SYSTEM CHAPTER 1 GENERAL PROVISIONS Article 1 In order to regularize the connected transactions of AirChina Limited (hereinafter referred to as the "Company"), to ensure thefairness of such connected transactions, to protect the benefits of investorswith minority interests, to improve the management level of the Company, theseRules are formulated in accordance with relevant laws, regulations andregulatory documents currently applicable in China such as the "Company Lawof the People's Republic of China", "Securities Law of the People'sRepublic of China", and related listing rules of securities or shares of anystock Exchange on which the Company's shares are listed (including but notlimited to the Stock Exchange of Hong Kong Limited and Shanghai Stock Exchange,hereafter referred to as "Stock Exchange" and "Shanghai Stock Exchange"respectively) (hereafter referred to as the "Listing Rules"), and theArticles of Association of Air China Limited (hereafter referred to as the"Articles of Association"). Article 2 This system is applicable to the connected transactionsbetween the Company and its connected party. The Company's connectedtransactions shall be in compliance with the relevant provisions of both theListing Rules of the Stock Exchange and of the Shanghai Stock Exchange. Shouldthere be any inconsistency between these two sets of rules, the stricter shallprevail. Article 3 Any connected transaction between the Company and aconnected party shall be examined in accordance with the provisions hereof andbe disclosed domestically and overseas at the same time, unless the transactionis exempted from compliance with the examination and disclosure requirements onconnected transactions under the Listing Rules of the Shanghai Stock Exchangeand of the Stock Exchange. CHAPTER 2 THE BASIC PRINCIPLES OF CONNECTED TRANSACTIONS Article 4 Connected transactions of the Company shall be conducted inaccordance with the following basic principles: (1) the principles of integrity and credibility, equality, voluntariness, fairvalue and transaction for consideration; (2) the pricing principles of equality, justice and fairness; (3) the operational principles of market-led orientation and openness; (4) being in the interests of the Company's shareholders as a whole; (5) If a connected party (or if not a connected party, a person or his associatewho has a material interest in the transaction to be voted (see the definitionset out in Listing Rules of the Stock Exchange) as defined by the Listing Rulesof Stock Exchange under special circumstances) has right to vote at the generalmeeting, he shall abstain from voting. The voting of this general meeting shallbe carried out in written form; (6) If there is a relationship of interests between any director and theconnected person, the director shall abstain from voting at the board meeting inrespect of the connected transaction; (7) The board of directors of the Company shall evaluate if the connectedtransaction is in the interest of the Company on an objective basis. Ifnecessary, the board shall retain a professional valuation firm or independentfinancial adviser to provide their opinion thereon; (8) The connected transactions shall be in compliance with the applicable lawsand regulations and the provisions of the Listing Rules of the Shanghai StockExchange and the Stock Exchange. Article 5 The Company shall adopt effective measures to preventconnected parties from interfering the Company's operations and damage thebenefits of the Company through monopolizing the channels of the purchasing andsales business. The principle for determining the price or fee of a connectedtransaction shall be comparable to the price or fee of such kind of transactionmade with any independent third party in the market. The Company shall disclosecompletely the criteria for setting the price of a connected transaction. Article 6 The Company shall adopt effective measures to preventshareholders and their connected persons from transferring the Company'scapitals, assets and other resources in any way. CHAPTER 3 CONNECTED PARTY AND CONNECTED TRANSACTION Article 7 The connected parties of the Company, including the Company's connected legal persons, connected natural persons and potential connected parties, basically include all kinds of legal and natural persons specified by the Listing Rules of the Shanghai Stock Exchange and the Stock Exchange. Article 8 The connected transactions as stated in this system ismainly referred to the transactions between the Company or its controlledsubsidiaries and the Company's connected parties, which basically include thetypes of transactions specified by the Listing Rules of Shanghai Stock Exchangeand the Stock Exchange. CHAPTER 4 LIMITS FOR APPROVING CONNECTED TRANSACTION Article 9 Any connected transaction fulfilling one of the followingconditions shall be subject to the examination and approval by the shareholders'general meeting(s): (1) after testing the transaction, any of the assets ratio, revenue ratio,consideration ratio and equity capital ratio specified in the Listing Rules ofthe Stock Exchange is more than 2.5%; or (2) the transaction amount represents more than 5% of the latest audited netasset absolute value of the Company; or (3) the amount of purchases or sales, in which such transaction is included, ofmajor assets (including general transactions) within one year exceeds 30% of thetotal assets of the Company. Article 10 The board shall have the authority to approve any connectedtransaction which fulfills the following conditions: (1) based on the ratio tests specified in the Listing Rules of the StockExchange, any of the assets ratio, revenue ratio, consideration ratio and equitycapital ratio of the transaction is less than 2.5%; and (2) the transaction amount represents less than 5% of the latest audited netasset absolute value of the Company; and (3) the total amount of purchases or sales, in which such transaction isincluded, of major assets (including general transactions) within one year isless than 30% of the total assets of the Company. Article 11 The working committee of the president has the power toexamine and approve any connected transaction fulfilling the following twoconditions: (1) after testing the transaction, any of the assets ratio, revenue ratio,consideration ratio and equity capital ratio specified in the Listing Rules ofthe Stock Exchange is less than 0.1%; and (2) the amount of purchases or sales, in which such transaction is included, ofmajor assets (including general transactions) within one year is less than 30%of the total assets of the Company. CHAPTER 5 PROCEDURES FOR APPROVING CONNECTED TRANSACTIONS Article 12 Any connected transactions between the Company and itsconnected parties shall be concluded by signing of a written agreement.Necessary avoidance measures shall be made for entering into such agreementbetween them: (1) any individual may only represent one of the parties when entering into aconnected transaction agreement; (2) A connected party shall not interfere with the Company's decision in anymanner; Article 13 The shareholders' general meetings, the board ofdirectors and the working committee of the president of the Company are theauthorities for approving connected transactions, they examine and approve theconnected transactions within their respective authority limits. Article 14 Any connected director shall not exercise his voting righton any connected transaction under examination by the board of directors of theCompany, nor shall he exercise the voting right on behalf of any other director.The quorum at such board meeting consists of a majority of non-connecteddirectors. Any resolution made in the board meeting shall be passed by amajority of non-connected directors. According to provisions of the Articles ofAssociation, the matters required to be passed by affirmative votes of more thantwo-thirds of the directors shall be required to be passed by affirmative votesof more than two-thirds of the non-connected directors. If the number ofnon-connected directors present falls short of three, the matter shall besubmitted to the shareholders' general meeting of the Company for discussion. The definition of the connected director referred to in the preceding paragraphis subject to the Listing Rules of the Shanghai Stock Exchange and the StockExchange, it shall include but not limit to any director under any of thefollowing circumstances: (1) being a party to the transaction(s); (2) being a person who has direct or indirect control over the party to thetransaction(s); (3) being employed by a party to the transaction(s) or by a body corporate ableto be directly or indirectly controlled the party to the transaction(s); (4) being a close family member of a party to the transaction(s) or of a personwho directly or indirectly controls over the party to the transaction(s) (thescope is detailed in the relevant definition of the Listing Rule of ShanghaiStock Exchange); (5) being a close family member of any director, supervisor or senior officer ofa party to the transaction(s) or of a person who directly or indirectly controlsover the party to the transaction(s) (the scope is detailed in the relevantdefinition of the Listing Rule of Shanghai Stock Exchange) ; (6) being the other director specified by the domestic and overseas regulatorybody, the Shanghai Stock Exchange, the Stock Exchange or their Listing Rules; (7) being a director whose independent commercial judgement may be affected asdetermined by the domestic and overseas regulatory body, the Shanghai StockExchange, the Stock Exchange or the Company based on other reasons. Article 15 To be valid, voting on connected transaction(s) by the boardof directors shall be passed by non-connected directors and be subject tosigning of the Company's independent director(s). Article 16 Unless the connected director(s) have made disclosure to theboard of directors and the connected director(s) abstained from voting on suchtransaction and such connected director(s) are also not counted in the quorum,the Company shall have the right to request such connected director(s) or otherenterprises where such connected director(s) assume offices to cancel therelevant contracts, transactions or arrangements, save that such connecteddirector(s) or other enterprises where they assume offices are bona fide thirdparties. Article 17 Where the amount of the connected transaction(s) between theCompany and the connected party(s) accounts for 5% or more of the absolute valueof the Company's audited net assets for the latest period, the Company shall,apart from making timely disclosure, appoint an intermediary with qualificationsfor execution of securities and futures related business to audit or evaluatethe subject of the transaction(s) and shall submit such transaction(s) to theshareholder's general meeting(s) for examination. Article 18 Where any connected transaction is required to be proposedfor examination and approval at the shareholders' general meeting, it shallbe submitted for examination for approval by the board of directors afterobtaining authorization from the independent directors. After the judgement of independent directors, an intermediary may be appointedto issue an independent financial advisor report for the basis of the judgement. Article 19 When any general meeting considers connected transactions,the connected shareholder shall not participate and shall abstain from voting.The number of voting shares that the connected shareholder represents shall notbe counted as part of the total number of valid votes. In the event that theconnected shareholder cannot abstain from voting under special circumstances,the Company may carry out the vote in accordance with the normal procedure andprovide a detailed explanation on the general meeting. The Company shall complystatistics on the election situations of non-connected shareholders, anddisclose the information in announcement of the resolution. The definition of the connected shareholder referred to in the precedingparagraph is subject to the Listing Rules of the Shanghai Stock Exchange and theStock Exchange, it shall include but not limit to any shareholder under any ofthe following circumstances: (1) being a party to the transaction(s); (2) being a person who has direct or indirect control over the party to thetransaction(s); (3) being under direct or indirect control of the party to the transaction(s); (4) being under direct or indirect common control of the same legal person(s) ornatural person(s) as the party to the transaction(s); (5) being a shareholder whose voting rights are restricted and affected due toany outstanding share transfer agreement or any other agreement entered intowith the party to the transaction or its connected party; (6) being the other shareholder specified by the domestic and overseasregulatory body, the Shanghai Stock Exchange, the Stock Exchange or theirListing Rules; (7) being the other shareholders who may make use of the Company for their owninterests as determined by the domestic and overseas regulatory body, theShanghai Stock Exchange or the Stock Exchange. Article 20 To be valid, voting on connected transaction(s) by theshareholders' general meeting(s) shall be deemed valid if it is duly passedby the shareholders representing the voting rights exceeding a half of thevoting rights of the shareholders present at the general meeting(s) other thanthe connected shareholders. Article 21 Independent director(s) shall have the right to give theirindependent opinion to the board of directors or the shareholders' generalmeeting(s) in respect of the Company's existing or new significant loans orother capital transaction(s) with its shareholders, the actual controller(s) andthe connected party(s), and in respect of whether the Company has takeneffective actions to recover the accounts receivable. CHAPTER 6 SUPPLEMENTARY ARTICLES Article 22 This system is formulated by the board and shall come intoeffect, together with Articles of Association of the Company revised by theCompany in accordance with Domestic Listing Requirement upon the approval by ageneral meeting. Article 23 The board is responsible for interpreting this system. Article 24 Where any matter is not covered by these Rules, the laws,regulations and other relevant regulatory documents, Listing Rules of ShanghaiStock Exchange and Stock Exchange and provisions of the Articles of Associationshall prevail. Article 25 The phrase "more than" and "less than" herein for thenumbers include the numbers indicated themselves while the phrases of "majority"and "exceed" exclude the numbers indicated themselves. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Air China