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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
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IfΒ youΒ areΒ inΒ anyΒ doubtΒ asΒ toΒ anyΒ aspectΒ ofΒ thisΒ circular,Β youΒ shouldΒ consultΒ aΒ stockbrokerΒ orΒ otherΒ registered dealer inΒ securities,Β bankΒ manager,Β solicitor,Β professionalΒ accountantΒ orΒ otherΒ professionalΒ adviser.
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IfΒ youΒ haveΒ soldΒ orΒ transferredΒ allΒ yourΒ sharesΒ of AirChinaΒ Limited, youΒ shouldΒ atΒ onceΒ handΒ thisΒ circulartoΒ the purchaserΒ orΒ transfereeΒ orΒ toΒ theΒ bank,Β stockbrokerΒ orΒ other agentΒ throughΒ whomΒ theΒ sale was effectedΒ forΒ transmission totheΒ purchaserΒ orΒ theΒ transferee.
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HongΒ KongΒ ExchangesandΒ ClearingΒ LimitedΒ andΒ TheΒ StockΒ ExchangeΒ ofΒ HongΒ KongΒ LimitedΒ takeΒ noΒ responsibility fortheΒ contents of thisΒ circular, makeΒ noΒ representationΒ as to itsΒ accuracy orcompletenessΒ andΒ expressly disclaim any liabilityΒ whatsoeverΒ forΒ anyΒ lossΒ howsoeverΒ arisingΒ fromΒ orΒ inΒ relianceΒ uponΒ theΒ wholeΒ orΒ anyΒ partΒ ofΒ theΒ contents ofthisΒ circular.
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Click on, or paste the following link into your web browser, to view the PDF version of the announcement.
http://www.rns-pdf.londonstockexchange.com/rns/4379B_1-2013-4-3.pdf
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AIR CHINA LIMITED
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Β (aΒ jointΒ stockΒ limitedΒ companyΒ incorporatedΒ inΒ theΒ People'sΒ RepublicΒ ofΒ ChinaΒ withΒ limitedΒ liability)
(StockΒ Code:Β 00753)
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(I)Β GeneralMandateΒ toΒ IssueΒ Shares
(II)Β GeneralMandateΒ toΒ IssueΒ DebtΒ FinancingΒ Instruments
(III)Β ProposedΒ ChangeΒ ofΒ AuditorandΒ InternalΒ ControlΒ Auditor
(IV)Β ProposedΒ PaymentΒ ofΒ FinalΒ Dividends
(V)Β ProposedΒ SecondΒ GrantΒ underΒ theΒ StockΒ AppreciationRightsΒ Programme
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NoticeΒ ofΒ AnnualΒ GeneralMeeting
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AΒ letterΒ fromΒ theΒ BoardΒ isΒ setΒ outΒ onΒ pagesΒ 3Β toΒ 11Β ofΒ thisΒ circular.
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AΒ noticeΒ conveningtheΒ annualΒ generalΒ meetingΒ ofΒ theΒ CompanyΒ toΒ beΒ heldΒ atΒ 2:00Β p.m.Β onΒ Thursday,Β 23Β MayΒ 2013 atΒ TheΒ ConferenceΒ Room,Β 29/F,Β AirΒ ChinaΒ Building,36Β XiaoyunΒ Road,Β ChaoyangΒ District,Β Beijing,Β PRC,Β isΒ setΒ out onpagesΒ IV-1Β toΒ IV-5Β ofΒ thisΒ circular.Β WhetherorΒ notΒ youΒ areΒ ableΒ toΒ attendΒ the AGM,Β youΒ areΒ requestedΒ toΒ complete andreturnΒ theΒ accompanyingΒ formΒ ofΒ proxyΒ inΒ accordanceΒ withΒ theΒ instructionsΒ printedΒ thereonΒ asΒ soonΒ asΒ possible butin anyΒ eventΒ notΒ lessΒ thanΒ 24Β hoursΒ beforeΒ theΒ timeΒ appointedforΒ conveningΒ theΒ AGMΒ or anyΒ adjournmentΒ thereof. CompletionandΒ returnΒ ofΒ theΒ formΒ ofΒ proxyΒ willΒ notΒ precludeΒ youΒ fromΒ attendingΒ andΒ votingΒ inΒ personΒ atΒ theΒ AGM oranyΒ adjournmentΒ shouldΒ youΒ soΒ wish.
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3Β AprilΒ 2013
CONTENTS
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Page
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Definitions................................................................................................................. 1
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LetterΒ fromΒ theΒ Board.............................................................................................. 3
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AppendixΒ I - MeasuresΒ onΒ ManagementofΒ theΒ Stock
AppreciationΒ RightsΒ (Revised)........................................... ....... I-1
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AppendixΒ II - ProposalΒ ofΒ SecondΒ GrantΒ ofΒ theΒ Stock
AppreciationΒ Rights........................................................... ..... II-1
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AppendixΒ III - 2012Β DutyΒ ReportΒ ofΒ TheΒ Independent
Non-ExecutiveΒ Directors.................................................... .... III-1
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AppendixΒ IV - NoticeΒ ofΒ AnnualΒ GeneralΒ Meeting........................................ ..... IV-1
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-Β iΒ -
DEFINITIONS
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InΒ this circular,Β thefollowingΒ expressionsΒ haveΒ thefollowingΒ meanings, unlessΒ the context requiresΒ otherwise:
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"A Shares" | ordinary shares in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and traded in RMB on the Shanghai Stock Exchange |
"AGM" | the 2012 annual general meeting of the Company to be held at 2:00 p.m. on Thursday, 23 May 2013 at The Conference Room, 29/F, Air China Building, 36 Xiaoyun Road, Chaoyang District, Beijing, PRC for the Shareholders to consider and approve the resolutions set out in the notice of the annual general meeting |
"Articles of Association" | the articles of association of the Company |
"Board" | the board of directors of the Company |
"Company" | Air China Limited, a company incorporated in the PRC, whose H Shares are listed on the Stock Exchange as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A Shares are listed on the Shanghai Stock Exchange Β |
"CSRC" | China Securities Regulatory Commission of the PRC |
"Debt Financing Instruments" | the debt financing instruments denominated in RMB or foreign currencies to be issued by the Company and/or its controlled or wholly-owned subsidiary in one or multiple tranches, including but not limited to corporate bonds, ultra-short-term commercial paper, short-term commercial paper, mid-term notes, domestic non-public targeted debt financing instruments, overseas non-public targeted debt financing instruments and overseas bonds/notes |
"Director(s)" | the director(s) of the Company |
"Group" | The Company and its subsidiaries |
"H Shares" | overseas listed foreign shares of RMB1.00 each in the share capital of the Company |
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-Β 1Β -
DEFINITIONS
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"Hong Kong" | Hong Kong Special Administrative Region of the PRC |
"Incentive Recipients" | certain Directors, senior management and key technician and managerial personnel of the Group who will be proposed to be granted the Stock Appreciation Rights |
"Latest Practicable Date" | means 28 March 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein |
"Listing Rules" | The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
"Management Measures" | the revised measures on management of the stock appreciation rights in respect of the Company as set out in Appendix I to this circular |
"PRC" the People's | Republic of China, excluding, for the purpose of this circular only, Hong Kong, Macau and Taiwan |
"SASAC" | the State-owned Assets Supervision and Administration |
Commission of the State Council of the PRC | |
"Second Grant Proposal" | the proposal for the second grant of the Stock Appreciation Rights by the Company as set out in Appendix II to this circular |
"Shareholder(s)" | registered holder(s) of the shares of the Company |
"Stock Appreciation Right(s)" | the stock appreciation rights granted under the stock appreciation rights programme of the Company, representing the rights conferred to the Incentive Recipients to receive stipulated earnings from the increase in share price of H Shares, subject to specific timeframe and conditions |
"Stock Exchange" | The Stock Exchange of Hong Kong Limited |
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LETTER FROM THE BOARD
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AIR CHINA LIMITED
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Β (aΒ jointΒ stockΒ limitedΒ companyΒ incorporatedΒ inΒ theΒ People'sΒ RepublicΒ ofΒ ChinaΒ withΒ limitedΒ liability)
(StockΒ Code:Β 00753)
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Directors: Non-Executive Directors: Wang Changshun (Chairman) Wang Yinxiang Cao Jianxiong Sun Yude Christopher Dale Pratt Sai Cheung Shiu, Ian Β Executive Directors: Cai Jianjiang (President) Fan Cheng Β Independent Non-Executive Directors: Fu Yang Li Shuang Han Fangming Yang Yuzhong | Registered Address: 9th Floor, Blue Sky Mansion 28 Tianzhu Road, Zone A Tianzhu Airport Industrial Zone Shunyi District Beijing, PRC Β Principal Place of Business in Hong Kong: 5th Floor, CNAC House 12 Tung Fai Road Hong Kong International Airport Hong Kong Β Β Β Β Β Β Β 3 April 2013 |
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ToΒ theΒ Shareholders
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DearΒ SirΒ orΒ Madam,
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(I)Β GeneralMandateΒ toΒ IssueΒ Shares
(II)Β GeneralMandateΒ toΒ IssueΒ DebtΒ FinancingΒ Instruments
(III)Β ProposedΒ ChangeΒ ofΒ AuditorΒ andΒ InternalControlΒ Auditor
(IV)Β ProposedΒ PaymentofΒ FinalΒ Dividends
(V)Β ProposedΒ SecondΒ GrantΒ underΒ theΒ StockΒ AppreciationΒ RightsΒ Programme
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NoticeΒ ofΒ AnnualΒ GeneralMeeting
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I. INTRODUCTION
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ItΒ isΒ proposed thatΒ atΒ theΒ annualΒ generalΒ meetingΒ ofΒ theΒ Company toΒ beΒ heldΒ onΒ Thursday, 23Β MayΒ 2013,Β theΒ noticeΒ ofΒ whichΒ isΒ setΒ outΒ onΒ pagesΒ IV-1Β toΒ IV-5Β ofΒ thisΒ circular,Β resolutions willΒ beΒ proposedΒ to,Β amongΒ others,Β (i)Β giveΒ generalΒ mandatesΒ toΒ theΒ DirectorstoΒ issueΒ shares
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LETTER FROM THE BOARD
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and increaseΒ theregisteredΒ capitalΒ ofΒ theCompany; (ii) giveΒ aΒ generalΒ mandateΒ toΒ the Directors toΒ issueΒ debtΒ financingΒ instruments;Β (iii)Β appointΒ KPMGΒ asΒ theΒ Company'sΒ internationalΒ auditor andΒ KPMGΒ HuazhenΒ (SpecialΒ GeneralΒ Partnership) asΒ theΒ Company'sΒ domesticΒ auditorΒ and internalΒ controlΒ auditorΒ respectively forΒ theΒ yearΒ endingΒ 31Β DecemberΒ 2013;Β (iv)Β approveΒ the proposedΒ paymentΒ ofΒ finalΒ dividendsΒ forΒ theΒ yearΒ endedΒ 31Β DecemberΒ 2012;Β andΒ (v)Β approve therevisedΒ ManagementΒ MeasuresΒ andΒ theΒ SecondΒ GrantΒ Proposal.
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II. GENERALΒ MANDATEΒ TOΒ ISSUEΒ SHARES
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InΒ orderΒ toΒ ensureΒ flexibilityΒ andΒ toΒ giveΒ discretionΒ toΒ theΒ DirectorsΒ inΒ theΒ eventΒ thatΒ it becomes desirableΒ toΒ issueΒ anyΒ shares,Β a specialΒ resolutionwillΒ beΒ proposedΒ atΒ theΒ AGMΒ toΒ give anΒ unconditionalΒ generalΒ mandate toΒ theΒ DirectorsduringΒ theΒ Relevant PeriodΒ (asΒ definedΒ inΒ the accompanyingΒ noticeΒ ofΒ theΒ AGM),Β toΒ separatelyΒ orΒ concurrently,Β allot,Β issue,Β andΒ dealΒ with additionalΒ AΒ SharesΒ and/orΒ HΒ SharesΒ ofΒ theΒ CompanyΒ andΒ toΒ makeΒ orΒ grantΒ offers,Β agreements oroptionsΒ inΒ respectΒ thereof,Β withΒ anΒ aggregateΒ nominalΒ valueΒ ofΒ notΒ exceedingΒ 20%Β ofΒ the aggregateΒ nominalΒ amountΒ ofΒ eachΒ ofΒ theΒ existing AΒ SharesΒ andΒ HΒ SharesΒ ofΒ theΒ CompanyΒ in issue asΒ atΒ theΒ date ofΒ theΒ relevantΒ resolutionΒ toΒ beΒ proposedΒ andΒ passedΒ atΒ theΒ AGMΒ (theΒ "Share IssueΒ Mandate").Β TheΒ ShareΒ IssueMandateΒ willΒ lapse atΒ theΒ conclusionΒ ofΒ theΒ RelevantΒ Period (asdefinedΒ inΒ theΒ accompanyingΒ noticeΒ ofΒ the AGM).Β TheΒ CompanyΒ shallΒ obtainΒ theΒ approval ofΒ the CSRCΒ and otherΒ relevantΒ authorities forany issueΒ ofΒ newΒ sharesΒ underΒ the ShareΒ Issue Mandate.
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The specialΒ resolutionwill also proposeΒ toΒ giveΒ aΒ conditional generalΒ mandateΒ toΒ the DirectorsΒ toΒ increaseΒ theΒ registeredΒ capitalΒ ofΒ theΒ CompanyΒ toΒ reflectΒ theΒ issuanceΒ ofΒ shares authorisedΒ underΒ theΒ ShareΒ IssueΒ Mandate,Β andΒ toΒ makeΒ such appropriate andΒ necessary amendmentsΒ toΒ the ArticlesΒ ofΒ AssociationΒ asΒ theyΒ thinkΒ fitΒ toΒ reflectΒ suchΒ increaseΒ inΒ the registered capitalΒ ofΒ the Company andtoΒ takeΒ anyΒ otherΒ actionΒ andΒ completeΒ anyΒ formality requiredΒ toΒ effectΒ suchΒ increaseΒ ofΒ theΒ registeredΒ capitalΒ ofΒ theΒ Company.
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III. GENERALΒ MANDATEΒ TOΒ ISSUEΒ DEBTΒ FINANCINGINSTRUMENTS
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1. Background
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GivenΒ theΒ generalΒ mandateΒ toΒ issueΒ debtΒ financingΒ instrumentsΒ grantedΒ byΒ Shareholders atΒ theΒ lastΒ annualΒ generalΒ meetingΒ willΒ lapseΒ atΒ theΒ conclusionofΒ theΒ AGM,Β aΒ specialΒ resolution willΒ beΒ proposedΒ atΒ theΒ AGMΒ toΒ grantΒ aΒ generalΒ mandateΒ toΒ theΒ DirectorstoΒ issueΒ theΒ Debt FinancingΒ InstrumentsΒ (theΒ "DebtΒ FinancingΒ InstrumentΒ IssueΒ Mandate").
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LETTER FROM THE BOARD
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2. ParticularsofΒ DebtΒ FinancingΒ Instruments
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ParticularsΒ regardingΒ theΒ proposedΒ issuanceΒ ofΒ theΒ DebtΒ FinancingΒ InstrumentsΒ areΒ as follows:
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(i) | Issuer: | the Company and/or its wholly-owned or controlled subsidiary |
(ii) | Placing arrangement: | no preferential placement to the Shareholders |
(iii) | Issue size: | the total balance of the Debt Financing Instruments outstanding will fall within the requirements under relevant laws and regulations as well as those specified by regulatory authorities |
(iv) | Term and type: | not more than 15 years for one single-term instrument or a portfolio of instruments with various terms |
(v) | Use of proceeds: | the proceeds to be raised from the issuance are intended to be used towards meeting the demand of the Company's operations, adjusting its debt structure, replenishing its working capital and/or funding its capital investments, among others |
(vi) | Term of validity of the resolution: | from the date of the passing of the resolution at the AGM to the date of the annual general meeting of the Company for the year ending 31 December 2013 |
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IfΒ the BoardΒ and/orΒ itsΒ authorised personΒ haveΒ resolvedΒ toΒ issueΒ the DebtΒ Financing Instruments withinΒ theΒ term ofΒ theΒ DebtFinancingΒ InstrumentIssue MandateΒ andΒ theΒ Company hasΒ obtainedΒ theΒ approval,Β permission orΒ registration forΒ theΒ issuanceΒ fromΒ theΒ relevant regulatory authorities withinΒ the sameΒ period,Β the CompanyΒ mayΒ completeΒ theissuanceΒ within theΒ validityΒ periodΒ ofΒ suchΒ approval,Β permissionΒ orΒ registration.
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LETTER FROM THE BOARD
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3. AuthorisationΒ toΒ theΒ Board
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3.1 ItΒ isΒ proposedΒ toΒ theΒ ShareholdersΒ atΒ the AGMΒ toΒ authorisetheΒ Board,Β generallyΒ and unconditionally, toΒ dealΒ withΒ theΒ following inΒ accordancewithΒ theΒ specificΒ needsΒ of theCompanyΒ andΒ marketΒ conditions:
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(i) toΒ determinetheΒ issuer,Β issueΒ size,Β type,Β specificΒ instruments,Β detailedΒ terms, conditionsΒ andΒ otherΒ mattersΒ relatingΒ to theΒ issuanceΒ (including,butΒ notΒ limited to,theΒ issueΒ size,Β principle amount,Β currency, issueΒ price,Β interestΒ rateΒ or mechanismΒ forΒ determining theΒ interestΒ rate, issue place,Β issuetiming,Β term, whetherΒ orΒ notΒ toΒ issueΒ inΒ multipleΒ tranchesΒ andΒ numberΒ ofΒ tranches,Β whether or not to set repurchase or redemption terms, credit rating, guarantee, repaymentΒ term,Β specificΒ fund-raisingΒ arrangements within theΒ scopeΒ approved at a general meeting, detailed placing arrangements, underwriting arrangementsΒ andΒ allΒ otherΒ mattersΒ relatingtoΒ theΒ issuance);
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(ii) toΒ carryΒ outΒ allΒ necessaryΒ andΒ ancillaryactionsΒ andΒ proceduresΒ (including,Β but notΒ limitedΒ to,Β select andΒ engageΒ intermediary institutions,Β handleΒ allΒ approval, registration andΒ filingΒ procedures with theΒ relevantΒ regulatoryauthoritiesΒ in connection withΒ theΒ issuanceΒ onΒ behalfΒ ofΒ theΒ Company,Β executeΒ allΒ necessary documents,Β selectΒ bondsΒ trusteeΒ managerΒ forΒ theΒ issuance,Β formulateΒ rulesΒ for theΒ bondholders' meetingΒ andΒ handleΒ anyΒ otherΒ mattersΒ relatingΒ toΒ theΒ issuance andΒ trading);
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(iii) toΒ approve,Β confirmΒ andΒ ratifyΒ anyΒ actionΒ orΒ procedureΒ relatingΒ toΒ theΒ issuance asΒ mentionedΒ aboveΒ alreadyΒ takenΒ byΒ theΒ Company;
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(iv) toΒ makeΒ adjustmentstoΒ theΒ specificΒ proposalsΒ forΒ theΒ issuanceΒ inΒ accordance withthe comments fromΒ the relevantΒ regulatory authorities orΒ the market conditions withinΒ theauthorityΒ grantedΒ atΒ aΒ generalΒ meeting,Β inΒ the caseΒ ofΒ any changeΒ in policiesΒ of regulatorybodiesΒ in relationto the issuance,Β or any changeΒ ofΒ marketΒ conditions, exceptΒ whereΒ votingΒ atΒ aΒ generalΒ meetingΒ is requiredΒ byΒ any relevantlawsΒ and regulations and theΒ articlesΒ ofΒ association of theΒ Company;
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(v) toΒ determineandΒ handleΒ allΒ relevantΒ mattersΒ relatingΒ toΒ theΒ listingΒ ofΒ theΒ Debt
FinancingΒ InstrumentsΒ uponΒ theΒ completionΒ ofΒ theΒ issuance;
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Β (vi) in the case of issuance of corporate bonds, to determineΒ not to distribute dividendsΒ toΒ theΒ ShareholdersΒ toΒ safeguardΒ repaymentΒ ofΒ debtsΒ asΒ required undertheΒ relevantΒ lawsΒ andΒ regulationsΒ inΒ theΒ eventΒ thatΒ theΒ CompanyΒ expects to,orΒ doesΒ failΒ toΒ payΒ theΒ principalΒ and/orΒ couponΒ interestsΒ ofΒ suchΒ bondsΒ as theyfallΒ due;Β and
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(vii) toΒ approve,Β executeΒ andΒ dispatchΒ anyΒ announcementsΒ orΒ circularsΒ relatingΒ toΒ the issuanceΒ andΒ makeΒ anyΒ relatedΒ disclosureΒ inΒ accordanceΒ withΒ theΒ listingΒ rules ofΒ theΒ relevantjurisdictionsΒ whereΒ theΒ sharesΒ ofΒ theΒ CompanyΒ areΒ listed.
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LETTER FROM THE BOARD
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3.2 UponΒ theΒ approval ofΒ paragraphΒ 3.1Β aboveΒ atΒ the AGM,itΒ isΒ proposed thatΒ the ShareholdersΒ shallΒ authoriseΒ theΒ BoardΒ toΒ delegateΒ theΒ authorisationsΒ setΒ forthΒ in items (i) to (vi) of paragraph 3.1 above to the president and/or the general accountantΒ ofΒ theΒ Company.
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3.3 UponΒ theΒ approval ofΒ paragraphΒ 3.1Β aboveΒ atΒ the AGM,itΒ isΒ proposed thatΒ the ShareholdersΒ shall authorisetheΒ BoardΒ toΒ delegateΒ theΒ authorisationΒ setΒ forth inΒ item (vii)Β ofΒ paragraphΒ 3.1Β aboveΒ toΒ theΒ secretaryΒ ofΒ theΒ Board.
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IV. PROPOSEDΒ CHANGEΒ OFΒ AUDITORΒ ANDΒ INTERNALΒ CONTROLΒ AUDITOR
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ChinaΒ National AviationΒ HoldingΒ Company,Β beingΒ theΒ controllingshareholderΒ ofΒ the Company, isΒ aΒ centralΒ state-ownedenterpriseΒ regulatedΒ byΒ theΒ State-ownedΒ AssetsΒ Supervision andAdministrationΒ CommissionΒ ofΒ theΒ StateΒ Council.Β AccordingΒ toΒ theΒ relevantΒ regulations issuedΒ byΒ theΒ MinistryΒ ofΒ FinanceΒ ofΒ theΒ People'sΒ RepublicofΒ ChinaΒ andΒ theΒ State-owned AssetsΒ SupervisionΒ andΒ Administration CommissionΒ ofΒ theΒ StateΒ Council, thereΒ areΒ restrictions onΒ theΒ numberΒ ofΒ years anΒ accountingΒ firmΒ canΒ continuously provideΒ auditΒ servicesΒ toΒ aΒ central state-owned enterprise and its subsidiaries. Since the number of years the Company has engagedΒ Ernst &Β Young and Ernst &Β Young Hua Ming CPAs Limited CompanyΒ (Special GeneralΒ Partnership)Β (collectively, "E&Y")Β hasΒ exceededΒ theΒ prescribedΒ timeΒ limit,Β E&Y will retireΒ asΒ theΒ auditorΒ ofΒ theΒ CompanyΒ (theΒ "Auditor")Β withΒ effectΒ fromΒ theΒ closeΒ ofΒ theΒ AGM andΒ willΒ notΒ beΒ re-appointed. Meanwhile,Β theΒ CompanyΒ willΒ notΒ re-appointDeloitteΒ Touche TohmatsuΒ CPAΒ Ltd.Β (SpecialΒ GeneralΒ Partnership)Β asΒ itsΒ internalΒ controlΒ auditor.
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AsΒ recommendedΒ byΒ the AuditCommitteeΒ ofΒ theΒ Company,Β theΒ BoardΒ hasΒ resolved to proposeΒ anΒ ordinary resolutionatΒ the AGMΒ toΒ appointΒ KPMGΒ asΒ theΒ Company'sΒ international auditorΒ andΒ KPMGΒ HuazhenΒ (SpecialΒ GeneralΒ Partnership) asΒ theΒ Company'sΒ domesticΒ auditor andinternalΒ controlΒ auditorΒ respectivelyΒ forΒ theΒ yearΒ 2013.
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E&YΒ hasΒ confirmedΒ inΒ writingΒ thatΒ thereΒ areΒ noΒ mattersΒ thatΒ needΒ toΒ beΒ broughtΒ toΒ the attention ofΒ theΒ shareholdersΒ ofΒ theΒ Company inΒ connectionwithΒ theΒ changeΒ of Auditors.Β The BoardΒ isΒ notΒ awareΒ ofΒ anyΒ mattersΒ thatΒ needΒ toΒ beΒ broughtΒ toΒ theΒ attentionΒ ofΒ theΒ shareholders ofΒ theΒ CompanyΒ inΒ connectionwithΒ theΒ aboveΒ changeΒ ofΒ Auditors.
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The proposedΒ appointmentof the aboveΒ AuditorsΒ and internalΒ controlΒ auditorΒ of the CompanyΒ isΒ subjectΒ toΒ theΒ Shareholders'Β approvalΒ atΒ theΒ AGM.
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LETTER FROM THE BOARD
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V. PROPOSEDΒ PAYMENTΒ OFΒ FINALΒ DIVIDENDS
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ReferenceΒ isΒ madeΒ toΒ theΒ resultsΒ announcement ofΒ theΒ CompanyΒ datedΒ 26Β MarchΒ 2013Β in respectΒ ofΒ theΒ recommendedΒ paymentΒ ofΒ aΒ finaldividendΒ ofΒ RMB0.5935 (includingΒ tax)Β perΒ ten sharesΒ forΒ theΒ yearΒ endedΒ 31Β DecemberΒ 2012.
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Based onΒ theΒ 2012Β profitdistributionΒ planΒ ofΒ theΒ Company,Β theΒ CompanyΒ willΒ appropriate
10%Β of thebalanceΒ of the net profitΒ of theCompany of the yearΒ 2012Β as set outΒ inΒ the financial statementsΒ preparedΒ underΒ theΒ PRCΒ AccountingΒ StandardsΒ intoΒ theΒ discretionaryΒ surplus reserve andΒ distributeaΒ cashΒ dividendΒ ofΒ RMB777Β million,orΒ RMB0.5935Β (includingΒ tax)Β perΒ ten sharesΒ basedΒ onΒ theΒ totalΒ numberΒ ofΒ 13,084,751,004Β sharesΒ ofΒ theΒ CompanyΒ asΒ atΒ theΒ Latest PracticableΒ Date,Β forΒ theΒ yearΒ 2012.
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TheΒ proposedΒ paymentΒ ofΒ theΒ 2012Β finalΒ dividendsΒ isΒ subjectΒ toΒ shareholders' approvalΒ at theΒ AGM.Β TheΒ 2012Β finalΒ dividendswillΒ beΒ paidΒ toΒ shareholdersΒ whoseΒ namesΒ appearΒ onΒ the registerΒ of members of theCompany atΒ the closeΒ of businessΒ on Monday,Β 10 JuneΒ 2013. DividendsΒ payableΒ toΒ theΒ Shareholders shallbeΒ denominated andΒ declaredΒ inΒ Renminbi. DividendsΒ payableΒ toΒ theΒ holdersΒ ofΒ AΒ shares shallΒ beΒ paidΒ inΒ RenminbiΒ while dividendsΒ payable toΒ theΒ holdersΒ ofΒ HΒ sharesΒ shallΒ beΒ paidΒ inΒ HongΒ KongΒ dollars.Β TheΒ amountΒ ofΒ HongΒ Kong dollarsΒ payableΒ shallΒ beΒ calculatedΒ onΒ theΒ basisΒ ofΒ theΒ averageΒ ofΒ theΒ middleΒ rateΒ ofΒ Renminbi toΒ HongΒ KongΒ dollars asΒ announcedΒ byΒ theΒ People'sΒ BankΒ ofΒ ChinaΒ forΒ theΒ calendarΒ weekΒ prior toΒ theΒ declarationofΒ theΒ 2012Β finalΒ dividendsΒ (ifΒ approved)Β atΒ theΒ AGM.
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InΒ accordanceΒ withΒ theΒ "EnterpriseΒ IncomeΒ TaxΒ LawΒ ofΒ theΒ People'sΒ RepublicΒ ofΒ China"Β theΒ "RulesΒ forΒ theΒ ImplementationΒ ofΒ theΒ EnterpriseΒ IncomeΒ TaxΒ LawΒ ofΒ theΒ People'sΒ RepublicΒ ofΒ China",Β bothΒ implementedonΒ 1Β JanuaryΒ 2008Β andΒ theΒ "NoticeΒ ofΒ theΒ StateΒ AdministrationΒ ofΒ TaxationΒ onΒ IssuesΒ RelevantΒ toΒ theΒ WithholdingΒ ofΒ EnterpriseIncomeΒ TaxΒ onΒ DividendsΒ Paid byΒ PRCΒ EnterprisesΒ toΒ OffshoreΒ Non-resident EnterpriseHoldersΒ ofΒ HΒ Shares"Β (GuoΒ ShuiΒ HanΒ 2008]Β No.Β 897)Β promulgatedΒ onΒ 6Β NovemberΒ 2008,Β theΒ CompanyΒ isobligedΒ toΒ withholdΒ andΒ payΒ PRCΒ enterpriseΒ incomeΒ taxΒ onΒ behalfΒ ofΒ non-residentΒ enterprise shareholders atΒ aΒ taxΒ rateΒ ofΒ 10%Β fromΒ 2008 onwardsΒ when theΒ CompanyΒ distributesΒ any dividendsΒ toΒ non-resident enterpriseΒ shareholders whoseΒ namesΒ appearΒ onΒ theΒ registerΒ of membersΒ ofΒ HΒ SharesΒ ofΒ theΒ Company. AsΒ such,Β anyΒ HΒ sharesΒ ofΒ theΒ CompanyΒ whichΒ areΒ not registeredΒ inΒ theΒ name(s)Β ofΒ individual(s)Β (which,Β forΒ thisΒ purpose,Β includesΒ sharesΒ registered inΒ theΒ nameΒ ofΒ HKSCCΒ NomineesΒ Limited,Β otherΒ nominees,trustees,Β orΒ otherΒ organisations or groups) shallΒ beΒ deemed toΒ beΒ HΒ sharesΒ heldΒ byΒ non-residentΒ enterpriseΒ shareholder(s), andthe PRCΒ enterpriseincomeΒ taxΒ shallΒ beΒ withheld fromanyΒ dividendsΒ payable thereon. Non-resident enterpriseΒ shareholders maywishΒ toΒ apply forΒ aΒ taxΒ refundΒ (ifΒ any)Β inΒ accordanceΒ withΒ the relevantΒ requirements,Β suchΒ asΒ taxΒ agreementsΒ (arrangements),Β uponΒ receiptΒ ofΒ anyΒ dividends.
Β
InΒ accordanceΒ withΒ theΒ "CircularΒ onΒ CertainΒ IssuesΒ ConcerningΒ theΒ PoliciesΒ ofΒ IndividualΒ IncomeΒ Tax"Β (CaiΒ ShuiΒ ZiΒ [1994]Β No.Β 020)Β promulgated by the Ministry of Finance and the State Administration ofΒ TaxationΒ onΒ 13Β MayΒ 1994,Β overseasΒ individuals are,Β asΒ anΒ interimΒ measure,Β exemptedΒ fromΒ the
Β
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-Β 8Β -
LETTER FROM THE BOARD
Β
PRC individual income tax for dividends or bonuses received from foreign-invested enterprises.Β AsΒ theΒ CompanyΒ isΒ aΒ foreign-investedΒ enterprise,Β theΒ CompanyΒ willΒ notΒ withhold andΒ payΒ theΒ individualincomeΒ taxΒ onΒ behalfΒ ofΒ individualΒ shareholders whentheΒ Company distributesΒ theΒ 2012 finalΒ dividendsΒ toΒ individualshareholders whoseΒ namesΒ appearΒ onΒ the registerΒ ofΒ membersΒ ofΒ HΒ sharesΒ ofΒ theΒ Company.
Β
ShareholdersΒ areΒ recommended toΒ consulttheirΒ taxΒ advisorsΒ regardingΒ theΒ ownershipand disposalΒ ofΒ HΒ sharesΒ ofΒ theΒ CompanyΒ inΒ theΒ PRCΒ andΒ inΒ HongΒ KongΒ andΒ otherΒ taxΒ effects.
Β
VI. PROPOSEDΒ SECONDΒ GRANTΒ UNDERΒ THEΒ STOCKΒ APPRECIATIONΒ RIGHTS PROGRAMME
Β
1. Introduction
Β
PursuantΒ toΒ relevantΒ notices issuedΒ byΒ SASACΒ inΒ relation toΒ theΒ implementationΒ ofΒ equity incentiveΒ systemΒ byΒ state-ownedΒ listedΒ companiesΒ andΒ SASAC'sΒ replyΒ onΒ implementationΒ by AirΒ ChinaΒ LimitedΒ ofΒ theΒ secondΒ grantΒ ofΒ theΒ stockΒ appreciation rights,Β theΒ BoardΒ hasΒ resolved toΒ proposeΒ aΒ specialΒ resolutionatΒ theΒ AGMΒ toΒ approveΒ theΒ revisedΒ ManagementΒ MeasuresΒ and theSecondΒ GrantΒ ProposalΒ andΒ toΒ authoriseΒ theΒ BoardΒ and/orΒ theΒ nomination andremuneration committeeofΒ theΒ BoardΒ toΒ implement,Β atΒ itsΒ direction,Β theΒ relevantΒ mattersΒ relatingΒ toΒ the SecondΒ GrantΒ Proposal,Β includingΒ butΒ notΒ limited toΒ theΒ determination ofΒ scopeΒ ofΒ grant, incentiveΒ recipients, quantityΒ ofΒ grant,Β dateΒ ofΒ grant,Β periodΒ ofΒ validity,Β effectiveΒ arrangement, conditionsΒ ofΒ grantΒ andΒ effectiveΒ performanceconditionsΒ andΒ allΒ otherΒ matters.
Β
2. SecondΒ GrantΒ Proposal
Β
ItΒ isΒ proposedΒ byΒ theΒ BoardΒ thatΒ approximatelyΒ 26.04Β millionΒ ofΒ theΒ StockΒ Appreciation Rights in total, representing approximately 0.2% of the total issued share capital of the CompanyΒ asΒ atΒ theΒ LatestΒ PracticableΒ Date,Β willΒ beΒ grantedΒ toΒ 162Β personsΒ (theΒ finalΒ number andΒ nameΒ listΒ ofΒ theΒ IncentiveRecipientsΒ shallΒ beΒ determinedΒ uponΒ theΒ actualΒ numberΒ andΒ list ofΒ personsΒ holdingΒ theΒ relevantΒ officesΒ inΒ theΒ CompanyΒ atΒ theΒ dateΒ ofΒ grant),Β uponΒ satisfaction ofΒ certainΒ conditions for the grantΒ and subjectΒ toΒ theapprovalΒ ofΒ the SecondΒ GrantΒ ProposalΒ by theShareholdersΒ atΒ theΒ AGM.Β ForΒ detailsΒ ofΒ theΒ proposedΒ IncentiveΒ Recipients,Β theΒ average numberΒ of sharesΒ to be grantedΒ in eachΒ hierarchy level,Β theΒ exerciseΒ priceΒ of theΒ Stock AppreciationΒ RightsΒ andΒ theΒ conditionsΒ ofΒ grant,Β pleaseΒ referΒ toΒ theΒ SecondΒ GrantΒ ProposalΒ as setoutΒ inΒ AppendixΒ IIΒ toΒ thisΒ circular.
Β
3. General
Β
PursuantΒ toΒ theΒ stock appreciation rights programme, theΒ IncentiveRecipientsΒ willΒ be grantedΒ certainΒ StockΒ AppreciationΒ Rights.Β EachΒ unitΒ ofΒ StockΒ AppreciationΒ Rights isΒ notionally linkedΒ toΒ oneΒ HΒ ShareΒ andΒ representstheΒ rightsΒ conferredΒ toΒ theΒ relevantΒ IncentiveΒ Recipient toreceiveΒ inΒ cashΒ stipulatedΒ earningsΒ fromΒ theΒ increaseΒ inΒ marketΒ shareΒ priceΒ ofΒ theΒ relevant HΒ Share. However,Β noΒ HΒ Shares willΒ actuallyΒ beΒ issued toΒ anyΒ IncentiveΒ Recipient. TheΒ stock appreciation rights programmeΒ doesΒ notΒ involveΒ theΒ grant ofΒ optionsΒ overΒ newΒ sharesΒ orΒ other newΒ securitiesΒ issuableΒ byΒ theΒ CompanyΒ (orΒ anyΒ ofΒ itsΒ subsidiaries)Β andΒ therefore,Β itΒ doesΒ not fallwithinΒ theΒ ambitΒ of,Β andΒ isΒ notΒ subjectΒ to,Β theΒ regulationsΒ ofΒ ChapterΒ 17Β ofΒ theΒ ListingΒ Rules.
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-Β 9Β -
LETTER FROM THE BOARD
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TheΒ listΒ ofΒ theΒ IncentiveΒ RecipientsΒ andΒ theirΒ entitlementsΒ forΒ theΒ secondΒ grantΒ ofΒ the Stock AppreciationΒ RightsΒ setΒ outΒ inΒ theΒ SecondΒ GrantΒ ProposalΒ wereΒ proposalsΒ onlyΒ andΒ the BoardΒ currentlyΒ plans toΒ confirmΒ theΒ IncentiveΒ RecipientsandΒ their entitlements atΒ theΒ timeΒ of grant.Β TheΒ proposedΒ grantΒ ofΒ theΒ StockΒ Appreciation Rights toΒ theΒ DirectorshadΒ beenΒ approved byΒ theΒ independentnon-executive DirectorsΒ andΒ noΒ IncentiveΒ RecipientsofΒ theΒ second grantΒ of theΒ StockΒ AppreciationΒ RightsΒ holdsΒ moreΒ thanΒ 5%Β ofΒ theΒ sharesΒ ofΒ theΒ CompanyΒ carrying votingΒ rightsΒ inΒ theΒ CompanyΒ asΒ atΒ theΒ LatestΒ PracticableΒ Date.
Β
TheΒ revisedΒ ManagementΒ MeasuresΒ andΒ theΒ SecondΒ GrantΒ ProposalΒ areΒ subjectΒ toΒ theΒ Shareholders'Β approvalΒ atΒ theΒ AGM.
Β
VII.Β RECOMMENDATION
Β
TheΒ Directors considerthatΒ theΒ proposed resolutionsΒ setΒ outΒ inΒ theΒ noticeΒ ofΒ theΒ AGMΒ are inΒ theΒ bestΒ interestsΒ ofΒ theΒ CompanyΒ andΒ theΒ Shareholders asΒ aΒ whole andΒ accordingly recommendΒ theΒ ShareholdersΒ toΒ voteΒ inΒ favourΒ ofΒ allΒ theΒ resolutionsΒ atΒ theΒ AGM.
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VIII DUTYΒ REPORTΒ OFΒ THEΒ INDEPENDENTNON-EXECUTIVEΒ DIRECTORS
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AtΒ the AGM,Β theΒ ShareholdersΒ willΒ beΒ presentedΒ withΒ theΒ dutyΒ reportΒ ofΒ theΒ independent non-executive DirectorsΒ ofΒ theΒ CompanyΒ forΒ theΒ yearΒ 2012,Β theΒ fullΒ textΒ ofΒ whichΒ isΒ setΒ in AppendixΒ IIIΒ toΒ thisΒ circular.
Β
IX. AGM
Β
The CompanyΒ willconveneΒ theΒ AGMΒ atΒ TheConferenceΒ Room,Β 29/F,Β Air ChinaΒ Building,Β 36Β XiaoyunΒ Road,Β ChaoyangΒ District,Β Beijing,Β PRCΒ atΒ 2:00Β p.m.Β onΒ Thursday,Β 23Β MayΒ 2013. A noticeΒ of AGM,aΒ formΒ ofΒ proxyΒ andΒ anΒ attendancenoticeΒ willΒ beΒ dispatchedΒ toΒ the ShareholdersΒ inΒ accordanceΒ withΒ theΒ ListingΒ RulesΒ onΒ Wednesday,Β 3 AprilΒ 2013.Β TheΒ noticeΒ of AGMisΒ reproducedΒ onΒ pagesΒ IV-1Β toΒ IV-5Β ofΒ thisΒ circular.
Β
WhetherΒ orΒ notΒ youΒ intendΒ toΒ attendΒ theΒ AGM,Β youΒ areΒ requestedΒ toΒ completeΒ andΒ return theformΒ ofΒ proxyΒ inΒ accordanceΒ withΒ theΒ instructionΒ printedΒ thereon.Β IfΒ youΒ intendΒ toΒ attend theAGM,Β youΒ areΒ requiredΒ toΒ completeΒ andΒ returnΒ theΒ noticeΒ ofΒ attendanceΒ toΒ theΒ Company's HΒ shareΒ registrar,Β ComputershareΒ HongΒ KongΒ InvestorΒ ServicesΒ LimitedΒ onΒ orΒ beforeΒ Friday,Β 3Β MayΒ 2013.
Β
Completion andΒ returnΒ ofΒ theΒ form(s)Β ofΒ proxyΒ willΒ notΒ precludeΒ youΒ fromattendingΒ and votingΒ inΒ personΒ atΒ theΒ meetingsΒ orΒ atΒ anyΒ adjournment shouldΒ youΒ soΒ wishΒ andΒ completionΒ and return of the notice of attendance do not affect the right of a shareholder to attend the respectiveΒ meeting.
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Β
-Β 10Β -
LETTER FROM THE BOARD
Β
X. GENERALΒ INFORMATION
Β
Β
TheΒ CompanyΒ willΒ closeΒ itsΒ registerΒ ofΒ membersΒ andΒ suspendΒ theΒ registrationΒ ofΒ transfer ofsharesΒ from Tuesday, 23Β AprilΒ 2013Β toΒ Thursday, 23MayΒ 2013Β (bothΒ daysΒ inclusive) in order toΒ determineΒ theΒ shareholdersΒ listΒ ofΒ theΒ CompanyΒ whoΒ willΒ beΒ entitledΒ toΒ attendΒ andΒ voteΒ at theAGM.
Β
Β
Shareholders ofΒ theΒ CompanyΒ whose namesappearΒ onΒ theΒ registerΒ ofΒ membersΒ ofΒ the CompanyΒ onΒ theΒ closeΒ ofΒ business ofΒ Monday, 22 AprilΒ 2013Β mayΒ attendΒ the AGMafter completingΒ theΒ registrationΒ procedures.Β InΒ orderΒ toΒ qualifyΒ forΒ attendance atΒ the AGM, instrumentsΒ ofΒ transferΒ accompaniedΒ byΒ shareΒ certificatesΒ andΒ otherΒ appropriateΒ documents mustbeΒ lodgedΒ withΒ theΒ Company'sΒ HΒ shareΒ registrar,Β Computershare HongΒ KongΒ Investor ServicesΒ Limited,Β byΒ 4:30Β p.m.Β onΒ Monday,Β 22Β AprilΒ 2013.
Β
Β
ShareholdersΒ whoΒ intendΒ toΒ attendΒ theΒ AGMΒ haveΒ toΒ deliverΒ theΒ noticeΒ ofΒ attendanceto theΒ Company'sΒ HΒ shareΒ registrar,Β ComputershareΒ HongΒ KongΒ InvestorΒ ServicesΒ LimitedΒ in personΒ orΒ byΒ postΒ orΒ faxΒ onΒ orΒ beforeΒ Friday,Β 3Β MayΒ 2013.
Β
ByΒ orderΒ ofΒ theΒ Board WangΒ Changshun Chairman
Β
Β
Beijing,Β theΒ PRC
Β
Β
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Β
Β
Β
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Β
Β
Β
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Β
-Β 11Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
TheΒ MeasuresΒ onΒ Management ofΒ theΒ Stock Appreciation RightsΒ areΒ preparedΒ inΒ the ChineseΒ languageΒ andΒ theΒ EnglishΒ versionΒ isΒ thereforeΒ aΒ translationonly.Β InΒ theΒ eventΒ ofΒ any discrepancyΒ betweenΒ the EnglishΒ translation and the ChineseΒ version,Β the ChineseΒ versionΒ shall prevail.
Β
MEASURESΒ ONΒ MANAGEMENTOFΒ THEΒ STOCKΒ APPRECIATIONΒ RIGHTSΒ IN RESPECTΒ OFΒ AIRΒ CHINAΒ LIMITED
(Revision)
Β
CHAPTERΒ 1Β GENERALΒ PROVISIONS
Β
ArticleΒ 1 InΒ orderΒ toΒ establishΒ andΒ perfectΒ theΒ managementΒ ofΒ theΒ intellectualΒ intensive expertiseΒ ofΒ aΒ large listedΒ companyΒ andΒ theΒ mediumΒ toΒ long term incentiveΒ system, toΒ establishΒ anΒ effectiveΒ incentiveΒ andΒ restraintmechanism throughΒ theΒ Stock AppreciationΒ RightsΒ ProgrammeΒ ("SARsΒ Programme"),Β toΒ alignΒ theΒ interestsΒ of theshareholders,Β theΒ CompanyΒ andΒ theΒ management,Β to maintainΒ competitive edgeΒ ofΒ theΒ CompanyΒ inΒ terms ofΒ recruitingΒ andΒ retainingΒ theΒ bestΒ executives,Β and toΒ preserveΒ theΒ Company'sΒ abilityΒ toΒ achieveΒ sustainableΒ development soΒ asΒ to createΒ valueΒ forΒ theΒ shareholders,Β theseΒ MeasuresΒ onΒ ManagementΒ ofΒ theΒ Stock AppreciationΒ RightsΒ inΒ respectΒ ofΒ AirΒ ChinaΒ LimitedΒ (hereinafterΒ referredΒ toΒ as these"Management Measures")areΒ hereby formulatedbyΒ AIRΒ CHINAΒ LIMITED (hereinafterΒ theΒ "Company").
Β
ArticleΒ 2 ForΒ theΒ purposesΒ hereof, theΒ termΒ "StockΒ AppreciationΒ Rights",Β orΒ "SARs",Β refers toΒ aΒ form ofΒ rightsΒ toΒ beΒ grantedΒ byΒ theΒ CompanyΒ toΒ theΒ participants ofΒ this Programme. ItΒ isΒ notΒ necessaryΒ forΒ theΒ HoldersΒ ofΒ SARsΒ toΒ actuallyΒ purchaseΒ and sellΒ sharesΒ inΒ theΒ stock market. They canΒ obtainΒ theΒ price differencesΒ betweenΒ the marketΒ priceΒ andΒ theΒ ExerciseΒ PriceΒ ofΒ theΒ HΒ sharesΒ duringΒ aΒ stipulated timeΒ limit toΒ beΒ paidΒ inΒ cashΒ byΒ theΒ Company.
Β
ArticleΒ 3 The principleΒ ofΒ integration ofΒ rewardsΒ andrestraints,Β theΒ principlesofΒ fairness, impartiality and transparency and the principle of legal compliance shall be upheldΒ inΒ theseΒ ManagementΒ Measures.
Β
CHAPTERΒ 2Β THEΒ MANAGEMENTΒ ORGANIZATION
Β
ArticleΒ 4 The Company's shareholders'Β general meeting shall be the highest decision- makingΒ authorityΒ ofΒ theΒ SARsΒ Programme, forΒ whichΒ itΒ shallperformΒ the responsibilitiesΒ setΒ outΒ below:
Β
(1) ToΒ examine andΒ approve theΒ SARsΒ ProgrammesubmittedΒ byΒ theΒ Company's
BoardΒ ofΒ Directors;
Β
(2) ToΒ examineΒ andΒ approveΒ theΒ amendment,suspensionΒ andΒ terminationΒ ofΒ the
SARsΒ ProgrammeΒ ofΒ theΒ Company;
Β
(3) ToΒ handleΒ otherΒ issuesΒ toΒ beΒ decidedΒ onΒ atΒ aΒ shareholders'Β generalΒ meeting.
Β
-Β I-1Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 5 TheΒ Company'sΒ BoardΒ ofΒ DirectorsisΒ theΒ managementΒ organizationΒ ofΒ theΒ SARs
Programme,Β forΒ whichΒ itΒ shallΒ performΒ theΒ followingΒ duties:
Β
(1) ToΒ examineΒ theΒ SARsΒ ProgrammeΒ draftedΒ andΒ amendedΒ byΒ theΒ Nomination andRemuneration CommitteeandΒ toΒ submit theΒ sameΒ toΒ aΒ shareholders' generalΒ meetingΒ forΒ approval;
Β
(2) ToΒ considerΒ andΒ approveΒ theΒ relatedΒ rulesΒ andΒ regulationsapplicableΒ toΒ the SARsΒ Programme, andtheΒ annualΒ grant planΒ forΒ theΒ SARs,Β draftedΒ and amendedΒ byΒ theΒ NominationΒ andΒ RemunerationΒ Committee;
Β
(3) ToΒ handleΒ otherΒ issuesΒ toΒ beΒ decidedΒ onΒ byΒ theΒ BoardΒ ofΒ Directors.
Β
ArticleΒ 6 The NominationΒ and RemunerationΒ CommitteeΒ is a special committeeΒ of the Board of Directors established upon approval by the shareholders' general meeting,Β forΒ whichΒ itΒ shallΒ performΒ theΒ followingΒ duties:
Β
(1) ToΒ draftΒ andΒ amendΒ theΒ Company'sΒ SARsΒ Programme;
Β
(2) ToΒ draftΒ and amendΒ theΒ relevantΒ rulesΒ and regulations ofΒ theΒ Company applicableΒ toΒ theΒ SARsΒ Programme;
Β
(3) ToΒ enactΒ theΒ AnnualΒ ImplementationΒ PlanΒ forΒ theΒ SARsΒ ProgrammeΒ ofΒ the CompanyΒ andΒ toΒ beΒ responsibleΒ forΒ theΒ day-to-dayΒ management ofΒ theΒ SARs Programme;
Β
(4) To handle other matters delegatedΒ by the Board of Directors and other mattersΒ thatΒ shouldΒ beΒ determinedΒ byΒ theΒ Nomination andRemuneration Committee;
Β
(5) TheΒ NominationandΒ Remuneration CommitteemayΒ engage anΒ intermediary toΒ provideΒ professionalΒ opinionsΒ forΒ itsΒ decision-making.
Β
ArticleΒ 7 TheΒ CompanyΒ shallΒ establishΒ aΒ specialΒ workingΒ groupΒ toΒ assistΒ theΒ Nomination andΒ Remuneration CommitteeΒ toΒ handle theΒ affairsΒ related toΒ theΒ SARs.Β The workingΒ groupΒ shallΒ compriseΒ ofΒ professionalsΒ inΒ theΒ areasΒ ofΒ humanΒ resources managementΒ andΒ financeΒ etc.Β MembersΒ ofΒ theΒ workingΒ groupΒ shallΒ beΒ appointed andremovedΒ byΒ theΒ NominationΒ andΒ RemunerationΒ CommitteeΒ uponΒ decision.
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ArticleΒ 8 SpecificΒ workingΒ rulesΒ ofΒ theΒ NominationΒ andΒ Remuneration CommitteeΒ shallΒ be enforcedΒ pursuantΒ toΒ theΒ DetailedΒ RulesΒ onΒ theΒ Nomination andRemuneration Committee.
Β
-Β I-2Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 9 TheΒ Company'sΒ SupervisoryCommitteeΒ shallΒ beΒ theΒ supervisoryΒ organizationΒ of theΒ SARsΒ Programme, whichΒ isΒ responsibleΒ forΒ theΒ supervisionΒ ofΒ theΒ enactment, amendmentΒ andΒ implementation ofΒ theΒ Company'sΒ SARsΒ Programme. The SupervisoryΒ CommitteeΒ shallΒ performΒ theΒ followingΒ duties:
Β
(1) ToΒ superviseΒ theΒ operationΒ ofΒ theΒ Company'sΒ SARsΒ Programme,including butΒ notΒ limitedΒ toΒ supervisingtheΒ fairnessΒ ofΒ theΒ performance assessmentΒ of theΒ NominationandΒ RemunerationΒ Committee,Β theΒ CompanyΒ andΒ theΒ staff andΒ whetherΒ orΒ notΒ theΒ programmeΒ isΒ implementedΒ inΒ complianceΒ withΒ the relevantΒ regulations;
Β
(2) To regularly report to the shareholders' general meeting problems discoveredΒ duringΒ theΒ supervisionΒ ofΒ theΒ SARsΒ Programme.
Β
CHAPTERΒ 3Β INCENTIVEΒ RECIPIENTS
Β
ArticleΒ 10 InΒ principle,theΒ incentiveΒ recipientsΒ underΒ theΒ SARsΒ Programme shallΒ beΒ limited toΒ theΒ Company'sΒ directors,senior management personnelΒ andΒ keyΒ technical personnel andΒ coreΒ managementmembers thatΒ haveΒ aΒ directΒ impactΒ onΒ theΒ results ofΒ operationsandΒ sustainableΒ developmentΒ ofΒ theΒ Company.Β MajorΒ GranteesΒ are theΒ Chairman,Β theΒ ViceChairman,Β theΒ directors(excludingΒ independent non- executiveΒ directors),Β theΒ President,Β theΒ ViceΒ President,theΒ ChiefΒ Engineers,Β the AssistantsΒ toΒ theΒ President,Β theΒ BoardΒ Secretary,Β theΒ responsible personsΒ ofΒ all divisions,Β majorΒ departments andoverseasΒ businessΒ unitΒ ofΒ theΒ Company,Β officers atΒ theΒ operationΒ levelΒ ofΒ theΒ holdingΒ company,Β andΒ otherΒ keyΒ personnelthatΒ the Board considers having a direct impact on the results of operations and sustainableΒ developmentΒ ofΒ theΒ Company.
Β
ArticleΒ 11 TheΒ followingpersonsΒ shallΒ notΒ participateΒ inΒ theΒ Company'sΒ SARsΒ Programme:
Β
(1) PersonsΒ whoΒ haveΒ neitherΒ workedΒ workingΒ for, nor are not employees of,Β theΒ listedΒ companyΒ (includingemployeesΒ ofΒ theΒ holdingΒ company);
Β
(2) SupervisorsΒ andΒ independentΒ non-executive directorsΒ ofΒ theΒ listedΒ company, and externalΒ directorsΒ whoΒ are not employees ofΒ the holdingΒ companyΒ ofΒ the listedΒ company);
Β
(3) SubstantialΒ shareholders, thedeΒ factoΒ controllingΒ personsΒ andΒ theirΒ close relativesΒ whoΒ holdΒ moreΒ thanΒ 5%Β ofΒ theΒ SharesΒ inΒ theΒ CompanyΒ onΒ theΒ Date ofΒ GrantΒ (exceptΒ thoseΒ approvedΒ atΒ theΒ shareholders'Β generalΒ meeting);
Β
(4) OtherΒ personsΒ notΒ eligibleΒ toΒ becomeΒ theΒ incentiveΒ recipientsΒ asΒ prescribed bysecuritiesΒ regulatoryΒ authorities.
-Β I-3Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 12 ShouldΒ anyΒ ofΒ theΒ followingeventsΒ occur,Β theΒ NominationandΒ Remuneration Committee shall determine whether not or to cancel the qualifications of a GranteeΒ underΒ theΒ SARsΒ Programme:
Β
(1) theΒ GranteeΒ isΒ inΒ violationΒ ofΒ theΒ lawsΒ resultingΒ thatΒ heΒ orΒ sheΒ isΒ convicted ofΒ anyΒ criminaloffence;
Β
(2) theΒ GranteeΒ isΒ inΒ violationΒ ofΒ theΒ articlesΒ ofΒ associationΒ andΒ otherΒ rulesΒ and regulations ofΒ theΒ Company,Β commitsΒ seriousΒ negligence ofΒ dutiesΒ or misconductΒ causingΒ hugeΒ lossesΒ toΒ theΒ Company;
Β
(3) TheΒ Company hassufficient evidenceΒ toΒ proveΒ thatΒ anincentive recipient causesΒ lossΒ onΒ theΒ CompanyΒ dueΒ toΒ violationΒ ofΒ lawsΒ andΒ disciplinesuchΒ as theΒ acceptanceandΒ solicitationΒ ofΒ aΒ bribe,Β corruption,theft,Β divulgenceΒ of theoperationalΒ andΒ technologicalΒ secretsΒ ofΒ theΒ Company,Β implementation ofΒ connectedΒ transactions,Β allΒ ofΒ whichΒ infringeΒ theΒ benefitsΒ andΒ reputation ofthe Company andΒ bringΒ materialΒ adverseΒ effectΒ toΒ the imageΒ of the CompanyΒ duringΒ his/herΒ periodΒ ofΒ employment;
Β
(4) OtherΒ conditions stipulatedΒ byΒ the applicable ChineseΒ andoverseasΒ lawsΒ and regulations.
Β
ArticleΒ 13 NoΒ rightsΒ may beΒ grantedΒ underΒ theΒ SARsΒ Programme withoutΒ theΒ approvalΒ ofΒ the shareholders'Β generalΒ meeting.Β ConnectedΒ shareholdersΒ shallΒ beΒ abstainedΒ from voting theΒ resolution.OtherΒ qualifications ofΒ theΒ GranteesΒ shallΒ beΒ confirmedby theΒ NominationandΒ RemunerationΒ Committee.
Β
ArticleΒ 14 TheΒ Company shallΒ makeΒ fullΒ disclosureΒ internally oftheΒ names,Β titles,Β numberΒ of rightsΒ grantedΒ andΒ otherΒ informationΒ ofΒ theΒ incentiveΒ recipients.
Β
CHAPTERΒ 4Β GRANTINGΒ OFΒ THEΒ STOCKΒ APPRECIATIONΒ RIGHTS
Β
ArticleΒ 15 TheΒ NominationandΒ RemunerationΒ CommitteeΒ shallΒ enactΒ an Implementation PlanΒ forΒ AllocationofΒ theΒ Stock AppreciationΒ Rights.Β TheΒ CompanyΒ shallΒ obtain approvalΒ fromΒ theΒ shareholders' generalΒ meetingΒ byΒ resolutionΒ priorΒ to implementingΒ theΒ SARsΒ Programme.
Β
ArticleΒ 16 ThisΒ SARsΒ ProgrammeshallΒ beΒ implementedΒ afterΒ theΒ initialΒ publicΒ offeringΒ of theCompany'sΒ foreignΒ shareΒ listedΒ outsideΒ ChinaΒ (hereinafterΒ referredΒ toΒ asΒ "H shares"). In the future, should the condition of the business, the applicable ChineseΒ andoverseasΒ lawsΒ andregulations and theΒ conditionofΒ theΒ CompanyΒ so permit,Β theΒ CompanyΒ may considerΒ toΒ incorporate orΒ replaceΒ otherΒ long-term incentiveΒ plans.
Β
ArticleΒ 17 TheΒ accumulatedrights ofΒ SARs grantedΒ shallΒ notΒ exceedΒ 10%Β ofΒ theΒ totalΒ number oftheΒ underlyingΒ sharesΒ inΒ issue.Β TheΒ initialΒ numberΒ ofΒ rightsΒ grantedΒ shallΒ not exceedΒ 1%Β ofΒ theΒ numberΒ ofΒ theΒ underlyingΒ sharesΒ inΒ issue.
Β
-Β I-4Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 18 UnlessΒ approvedΒ byΒ theΒ shareholders'Β generalΒ meetingΒ byΒ specialΒ resolution,Β none oftheΒ GranteesΒ shallΒ beΒ grantedΒ withΒ moreΒ thanΒ 5%Β ofΒ theΒ accumulatedΒ unitsΒ of theStock AppreciationΒ Rights.Β WithinΒ anyΒ 12-monthΒ periodΒ duringΒ theΒ effective termofΒ thisΒ SARsΒ Programme, theΒ CompanyΒ shall cease toΒ grant furtherΒ rights to anyone whoseΒ rightsΒ (includingbothΒ theΒ exercisedΒ andΒ non-exercised) of entitlementΒ isΒ inΒ excessΒ ofΒ 1%Β ofΒ theΒ Company'sΒ totalΒ issuedΒ capital.
Β
ArticleΒ 19 The expected gain for each incentive recipients shall be determined on the followingΒ basis:
Β
(1) TheΒ expectedΒ gainΒ forΒ individualΒ seniorΒ managementΒ personnelΒ uponΒ grant ofΒ SARs shallΒ notΒ exceedΒ 40%Β ofΒ his/herΒ totalΒ remuneration level(including gainsΒ fromΒ long-termincentiveΒ schemes)Β asΒ atΒ theΒ DateΒ ofΒ Grant;
Β
(2) TheΒ expected gainforΒ anyΒ otherΒ GranteeΒ suchΒ as anyΒ director, keyΒ technical personnel and core management members shall be determined with referenceΒ toΒ thatΒ forΒ theΒ senior management personnel,Β butΒ inΒ noΒ event the expected gain shall exceed 40% of his/her total remuneration level (includinggainsΒ fromΒ long-termΒ incentiveΒ schemes).
Β
ArticleΒ 20 TheΒ DateΒ ofΒ GrantΒ shallΒ beΒ determinedbyΒ theΒ NominationΒ andΒ Remuneration Committee. InΒ general,Β such date shall fallΒ withinΒ 10Β workingΒ days after the issuanceΒ ofΒ theΒ announcementΒ ofΒ theΒ annualΒ generalΒ meetingΒ ofΒ theΒ Company.
Β
ArticleΒ 21 In principle, the SARsΒ of theCompany shallΒ be grantedΒ onΒ aΒ biennialΒ basisΒ with referenceΒ toΒ theΒ Company'sΒ fiscalΒ year.Β TheΒ qualificationΒ ofΒ aΒ GranteeΒ shallΒ be assessedΒ byΒ theΒ NominationΒ andΒ Remuneration CommitteeΒ pursuantΒ toΒ the regulationsΒ relatingΒ toΒ theΒ SARsΒ Programme. TheamountΒ grantedΒ shallΒ be determinedΒ byΒ theΒ NominationΒ andΒ Remuneration CommitteeΒ pursuantΒ toΒ the evaluationΒ ofΒ theΒ relevantΒ positionΒ togetherΒ withΒ theΒ annualΒ assessmentΒ results.
Β
ArticleΒ 22 WhenΒ theΒ CompanyΒ isΒ grantingSARs,Β itsΒ businessΒ performanceΒ shallΒ notΒ fall below the average performance for the last three years and the average performanceΒ ofΒ otherΒ companiesΒ inΒ theΒ industryΒ (orΒ theΒ 50Β percentΒ benchmarkΒ of thesubjectΒ company).
Β
ArticleΒ 23 The ExerciseΒ PriceΒ (grantΒ price)Β ofΒ the SARsΒ shallΒ beΒ determined accordingΒ toΒ the fairmarketΒ priceΒ principleΒ andΒ shallΒ notΒ beΒ lowerΒ thanΒ theΒ highestΒ of:
Β
(1) theΒ closingΒ priceΒ ofΒ theΒ Company'sΒ HΒ sharesΒ onΒ theΒ DateΒ ofΒ Grant;
Β
(2) theΒ averageΒ closingΒ priceΒ ofΒ theΒ Company'sΒ HΒ shares forΒ theΒ 5Β tradingΒ days priorΒ toΒ theΒ DateΒ ofΒ Grant;
Β
(3) theΒ unitΒ parΒ valueΒ ofΒ theΒ Company'sΒ HΒ shares.
Β
-Β I-5Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 24 TheΒ GrantΒ ofΒ SARsΒ isΒ confirmedΒ inΒ writingΒ byΒ virtueΒ ofΒ theΒ "AgreementforΒ the Stock Appreciation Rights Programme" entered into by and between the CompanyΒ andΒ theΒ GranteeΒ togetherΒ withΒ theΒ "Stock Appreciation Rights Certificate".
Β
ArticleΒ 25 TheΒ "AgreementforΒ theΒ StockΒ AppreciationΒ Rights"Β isΒ aΒ legalΒ documentwhich regulatesΒ theΒ relationship inΒ connectionwith theΒ rightsΒ andΒ obligationsofΒ the holdersΒ SARsΒ andΒ theΒ Company.Β MattersΒ stipulatedΒ inΒ theΒ saidΒ AgreementΒ shall includeΒ butΒ notΒ limitedΒ to:
Β
(1) The number of shares that can be subscribedΒ by a holder of the Stock
AppreciationΒ Rights;
Β
(2) ProvisionsΒ inΒ connectionΒ withΒ theΒ ExerciseΒ PriceΒ andΒ theΒ exerciseΒ period pertainingΒ toΒ theΒ SARsΒ Programme;
Β
(3) ProvisionsΒ inΒ connectionΒ withΒ theΒ acceleration,Β suspensionΒ andΒ cancellation ofΒ theΒ StockΒ AppreciationΒ Rights;
Β
(4) TheΒ agreedΒ provisionrelatingΒ toΒ disputeΒ resolution;
Β
(5) OtherΒ issuesΒ thatΒ needΒ toΒ beΒ statedΒ clearly.
Β
ArticleΒ 26 TheΒ "StockΒ AppreciationΒ RightsΒ Certificate"Β isΒ theΒ certificateΒ whichΒ theΒ holderΒ of SARsmayΒ useΒ toΒ applyΒ forΒ theΒ Exercise.Β TheΒ saidΒ CertificateΒ shallΒ containΒ the name,theΒ IDΒ cardΒ number,Β theΒ residentialaddress,Β theΒ modeΒ ofΒ communication, thereferenceΒ numbersΒ ofΒ theΒ AgreementΒ andΒ theΒ Certificate,Β theΒ ExerciseΒ Price, exerciseΒ period,Β theΒ exerciseΒ records,Β theΒ adjustment records,Β bonusΒ payment records,Β informationΒ aboutΒ theΒ successors,Β allΒ formsΒ ofΒ signaturesΒ andΒ sealsΒ and therelatedΒ mattersΒ ofΒ importanceΒ etc.
Β
ArticleΒ 27 TheΒ NominationandΒ RemunerationΒ CommitteeΒ shallΒ haveΒ theΒ StockΒ Appreciation RightsΒ RegisterΒ inΒ placeΒ asΒ aΒ documentary evidenceΒ ofΒ theΒ executionofΒ the managementplanΒ byΒ theΒ Company. TheΒ RegisterΒ shallΒ alignΒ withΒ theΒ Stock AppreciationΒ RightsΒ Certificate.Β TheΒ saidΒ documentΒ shall containΒ theΒ name,Β theΒ ID cardnumber,Β theΒ residentialaddress,Β theΒ modeΒ ofΒ communication,Β theΒ reference numbersΒ ofΒ theΒ AgreementΒ andΒ theΒ Certificate,Β theΒ ExerciseΒ Price,Β theΒ exercise period,Β theΒ exerciseΒ records,Β theΒ adjustment records,Β theΒ bonusΒ paymentΒ records, informationΒ aboutΒ the successors, allΒ formsΒ ofΒ signatures and sealsΒ and the related mattersΒ ofΒ importanceΒ etc.
Β
ArticleΒ 28 The CompanyΒ is requiredΒ to reportΒ to the Company'sΒ boardΒ of directorsΒ andΒ SupervisoryΒ CommitteewheneverΒ theΒ stockΒ appreciationΒ rightsΒ areΒ granted.
Β
-Β I-6Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
CHAPTERΒ 5Β THEΒ EXERCISEΒ OFΒ STOCKΒ APPRECIATIONΒ RIGHTS
Β
ArticleΒ 29 The effective period for exercising each tranche of SARs under the SARs Programme shall beΒ 5Β years.Β SARsΒ may beΒ realizedΒ forΒ theΒ first timeΒ 2Β yearsΒ after grantingΒ thereofΒ (i.e.Β theΒ GranteeΒ mayΒ exerciseΒ theΒ SARs)Β andΒ shallΒ beΒ exercised inΒ fullΒ withinΒ 5Β years. SpecificΒ arrangement inΒ respectΒ ofΒ theΒ effectiveness ofΒ the ExerciseΒ isΒ as follows:30%Β of theΒ RightsΒ mayΒ beexercised in theΒ 3rdΒ yearΒ after grantingΒ theΒ SARsΒ inΒ full. AΒ maximumΒ ofΒ 70%Β ofΒ theΒ accumulatedΒ rightsΒ mayΒ be exercisedΒ inΒ theΒ 4thΒ year.Β 100%Β ofΒ theΒ accumulatedrightsΒ canΒ beΒ exercisedΒ inΒ the
5thΒ year.
Β
ArticleΒ 30 TheΒ ExerciseΒ ofΒ theΒ SARsΒ shallΒ beΒ uniformlyΒ takenΒ placeΒ duringΒ theΒ Window Period. TheCompanyΒ shall setΒ twoΒ WindowΒ PeriodsΒ everyΒ year.Β TheΒ Window PeriodsΒ forΒ theΒ ExerciseΒ shallΒ beΒ setΒ withinΒ theΒ 5Β tradingΒ daysΒ commencingfrom theΒ 20thΒ trading dayΒ afterΒ theΒ dateΒ ofΒ announcement ofΒ theΒ Company'sΒ annual report,Β andΒ withinΒ theΒ 5Β tradingΒ daysΒ commencing fromΒ theΒ 20thΒ tradingΒ dayΒ after thedateΒ ofΒ announcementΒ ofΒ theΒ Company'sΒ interimΒ report.Β TheΒ CompanyΒ shall acceptΒ theΒ exerciseΒ applicationsΒ duringΒ suchΒ twoΒ WindowΒ Periods.
Β
ArticleΒ 31 TheΒ Exercise ofΒ theΒ SARsΒ shallΒ beΒ takenΒ placeΒ duringΒ theΒ Window PeriodsΒ ofΒ each year.Β SuchΒ exerciseΒ shallΒ notΒ be takenΒ placeΒ at theΒ timeΒ of releasing sensitive information,Β annualΒ reports,Β interimΒ reports,Β quarterlyΒ reportsΒ orΒ whenΒ convening aΒ shareholders'Β generalΒ meeting.Β ShouldΒ thereΒ beΒ anyΒ eventΒ thatΒ isΒ likelyΒ toΒ affect theshareΒ price,Β theΒ NominationΒ andΒ Remuneration CommitteeΒ mayΒ determineΒ to delaytheΒ ExerciseΒ DateΒ to withinΒ 5 workingΒ daysΒ commencingΒ fromΒ theΒ 5th tradingΒ dayΒ afterΒ makingΒ aΒ publicΒ announcementΒ ofΒ suchΒ event.
Β
ArticleΒ 32 When theΒ SARs areΒ exercised,Β theΒ Company'sΒ performance target shallΒ beΒ higher thantheΒ performance target setΒ atΒ theΒ timeΒ ofΒ grantingΒ theΒ SARs andΒ shallΒ notΒ fall belowΒ theΒ averageΒ performanceΒ ofΒ theΒ industryΒ (orΒ theΒ 75Β percentΒ benchmarkΒ of theΒ subjectΒ company).Β IfΒ theΒ Company'sΒ performance isΒ belowΒ theΒ average performance of the industry (or the 75 percent benchmark of the subject company),Β theΒ SARsΒ forΒ theΒ thenΒ periodΒ shallΒ notΒ beΒ exercisedΒ andΒ shallΒ lapse.
Β
ArticleΒ 33 WhenΒ theΒ SARsΒ areΒ exercised,Β evaluationΒ shallΒ beΒ madeΒ onΒ theΒ accomplishment of an incentive recipient's personal performance contract. If the incentive recipientΒ hasΒ achievedΒ theΒ performance targetsΒ ofΒ hisΒ personalΒ performance contractΒ forΒ theΒ year,Β hisΒ SARsΒ shallΒ be realized; whereΒ an incentive recipient has notΒ achievedΒ hisΒ performanceΒ targets,Β hisΒ SARsΒ forΒ theΒ currentΒ periodΒ shall notΒ be exercisedΒ andΒ shallΒ beΒ void.
Β
Β
-Β I-7Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 34 The Nomination and Remuneration Committee shall be responsible for the settlementΒ ofΒ theΒ SARs when theΒ sameΒ isΒ exercised.Β TheΒ saidΒ CommitteeΒ shallΒ also paythe difference betweenΒ the ExercisePriceΒ andΒ the GrantΒ price. TheΒ formula shallbeΒ asΒ follows:
Β
CashΒ receivableΒ byΒ aΒ GranteeΒ =Β (SettlementΒ PriceΒ -Β ExerciseΒ Price)Β ΓΒ unitsΒ exercised
Β
InΒ order toΒ enhanceΒ theΒ effectΒ ofΒ theΒ incentiveΒ andΒ restraintΒ mechanism, theΒ cash rewardΒ mayΒ beΒ paidΒ byΒ installments forΒ aΒ continuousΒ periodΒ ofΒ 12Β months commencingΒ fromΒ theΒ ExerciseΒ Date.
Β
ArticleΒ 35 ToΒ theΒ extentΒ thatΒ theΒ actualΒ gainΒ ofΒ anΒ individualΒ resultingΒ fromΒ exercisingΒ the SARsexceedsΒ theΒ levelΒ ofΒ theΒ estimatedΒ gain,Β reasonableΒ controlΒ shallΒ beΒ made soΒ thatΒ theΒ aggregategainΒ shallΒ beΒ cappedΒ atΒ 40%Β ofΒ theΒ totalΒ remuneration atΒ the timeΒ ofΒ the grantΒ (including gainsΒ fromΒ the long-term incentiveΒ schemes). IfΒ the gainΒ resultingΒ fromΒ exercising theSARsΒ exceedsΒ the aboveΒ ratio,Β the outstanding SARsΒ shallΒ notΒ beΒ exercised,orΒ theΒ gainΒ shallΒ beΒ vestedΒ inΒ theΒ Company.
Β
ArticleΒ 36 For SARs grantedΒ to the directorsΒ and seniorΒ management,Β 20% of the cash earnings from exercising of these rights shall not be withdrawn until the expirationΒ ofΒ theΒ termΒ ofΒ appointment (orΒ theΒ termΒ ofΒ office)Β of,Β andΒ uponpassing theΒ appraisalΒ by,Β suchΒ directorsandΒ seniorΒ management.
Β
ArticleΒ 37 ShouldΒ HoldersΒ ofΒ SARsΒ exerciseΒ theirrights,Β they shall submitΒ theirapplications toΒ theΒ NominationΒ andΒ Remuneration CommitteeΒ onΒ theΒ strengthΒ ofΒ theΒ "Stock Appreciation RightsΒ Certificate",Β theΒ "Application FormforΒ ExercisingΒ theΒ Stock Appreciation Rights",Β theirΒ respectiveΒ IDΒ cards, andΒ inΒ caseΒ ofΒ submitting applicationΒ viaΒ anΒ agent,Β theΒ powerΒ ofΒ attorneyΒ andΒ theΒ IDΒ cardΒ ofΒ theΒ agent,Β or otherlegalΒ formalities. AfterΒ approvalshaveΒ beenΒ obtained,Β theΒ NominationΒ and RemunerationΒ CommitteeΒ shallΒ handleΒ suchΒ applicationΒ inΒ aΒ centralizedmanner uponΒ verification.
Β
ArticleΒ 38 ToΒ theΒ extentΒ thatΒ theΒ CompanyΒ increasesΒ theΒ shareΒ capitalΒ byΒ conversionΒ fromΒ the surplusΒ reserve,Β distributesΒ shareΒ dividends,Β undergoesΒ shareΒ subdivision orΒ share reduction, conductsΒ shareΒ placement andprivateΒ placement ofΒ newΒ sharesΒ toΒ the existingΒ shareholders andΒ distributescashΒ dividends,Β theΒ NominationΒ and Remuneration CommitteeΒ shall,Β afterΒ making theΒ corresponding adjustmentΒ in proportion toΒ the numbersΒ ofΒ SARsΒ heldΒ byΒ the holdersΒ ofΒ SARs,Β notifyΒ such holdersΒ inΒ writingΒ withinΒ 20Β workingΒ daysΒ afterΒ makingΒ theΒ adjustment.
Β
Β
-Β I-8Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
CHAPTERΒ 6Β WITHDRAWINGΒ FUNDSΒ FROMΒ ANDΒ THEΒ MANAGEMENTOFΒ THE REWARDΒ FUND
Β
ArticleΒ 39 TheΒ shareholders'Β general meetingΒ shallΒ beΒ theΒ highestdecision-makingΒ authority forΒ theΒ withdrawal ofΒ moniesΒ fromΒ theΒ rewardΒ fund.Β Thewithdrawal ofΒ fundsΒ and themanagementΒ of theΒ rewardΒ fundΒ shallΒ bedeterminedΒ atΒ aΒ shareholders'Β general meeting.
Β
ArticleΒ 40 The Nomination and Remuneration Committee shall be responsible for the withdrawal,management andΒ applicationofΒ funds inΒ theΒ rewardΒ fundΒ duringΒ the effectiveΒ termΒ ofΒ theΒ SARsΒ Programme basedΒ onΒ theΒ relevantΒ resolutionsadopted atΒ aΒ shareholders'Β generalΒ meeting.
Β
ArticleΒ 41 Withdrawals fromΒ theΒ rewardΒ fundΒ shallΒ beΒ accountedΒ forΒ andΒ recognizedonΒ the balance sheet date on the basis of the granted SARs and according to requirementsΒ set forth in theAccountingΒ StandardsΒ for EnterprisesΒ No. 11 - Share-basedΒ Payment. Theamount drawnΒ shallΒ beΒ disbursedΒ asΒ aΒ management expensesΒ beforeΒ taxation.
Β
ArticleΒ 42 A specialΒ account shallΒ beΒ opened byΒ theΒ finance departmentforΒ theΒ rewardΒ fund withheldΒ by theCompany andΒ suchΒ rewardΒ fundΒ shallΒ be bookedΒ andΒ managed underΒ theΒ "StaffΒ RemunerationΒ Payable"Β item.
Β
ArticleΒ 43 Should thereΒ haveΒ balance amount inΒ theΒ rewardΒ fundΒ whenΒ theΒ SARsΒ Programme ceasesΒ toΒ beΒ implemented, theNominationΒ andΒ Remuneration CommitteeΒ shall makeΒ appropriatedecisionsΒ inΒ thisΒ respectΒ (theΒ fundΒ mayΒ beΒ usedΒ toΒ set-offΒ the managementΒ expensesΒ ofΒ theΒ currentΒ year).
Β
CHAPTERΒ 7Β SPECIALΒ CASESΒ HANDLING
Β
ArticleΒ 44 WhenΒ the employmentΒ relationΒ betweenΒ a holderΒ of SARs and the Company terminates forΒ jobtransition,Β retirement, death,Β incapacityand otherΒ reasons, his/her SARs (to the extent of the vested but unexercised portion) can be exercisedΒ withinΒ sixΒ monthsΒ from theΒ date ofΒ termination; failureΒ toΒ doΒ soΒ byΒ such periodΒ shall beΒ deemedΒ toΒ beΒ aΒ waiverΒ automaticallyΒ andΒ theΒ exerciseΒ ofΒ theΒ SARs shallbeΒ terminated. TheΒ portionΒ thatΒ remainsΒ ineffectiveΒ shallΒ noΒ longerΒ be exercised.
Β
ArticleΒ 45 WhenΒ aΒ holderΒ ofΒ SARs resigns,Β orΒ his/herΒ employment contractΒ expiresΒ andΒ the Company intendsΒ notΒ to renewΒ theΒ contractΒ or theΒ holderΒ isΒ dismissed for personal reasons,Β theΒ exerciseΒ ofΒ his/herΒ SARsΒ (toΒ theΒ extentΒ ofΒ theΒ unexercisedΒ portion) shallbeΒ terminated.
Β
ArticleΒ 46 Should a holder of SARs passes away or becomes incapacity during the employment period,Β theΒ vestedΒ butΒ unexercised portionΒ ofΒ SARs inΒ his/her possession shallΒ beΒ exercisedbyΒ hisΒ appointedΒ successor, legalΒ successorΒ or guardian.
Β
Β
-Β I-9Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 47 ShouldΒ aΒ holderΒ of SARsΒ commitΒ anyΒ of the following acts,Β his/herΒ SARsΒ shallΒ be terminatedΒ inΒ partΒ orΒ inΒ whole:
Β
(1) Transferring,Β selling,Β exchanging,mortgaging theΒ SARs,Β usingΒ theΒ sameΒ to provideΒ guarantee,Β bookingΒ theΒ sameΒ onΒ theΒ accountsΒ asΒ wellΒ asΒ usingΒ the sametoΒ repayΒ theΒ outstanding debts,Β allΒ ofΒ whichΒ areΒ conductedΒ without authorization;
Β
(2) MakingΒ useΒ ofΒ SARsΒ forΒ deceptionandΒ extortionΒ purposes;
Β
(3) CommittingΒ anyΒ actsΒ thatΒ isΒ inΒ violationΒ ofΒ theΒ lawΒ andΒ isΒ adjudicatedtoΒ be liableΒ forΒ criminalliability;
Β
(4) CommittingΒ anyΒ actsΒ thatΒ isΒ inΒ breachΒ ofΒ theΒ articlesΒ ofΒ associationΒ ofΒ the Company or thatΒ impairsΒ the interestsof the Company resultinginΒ causing lossΒ toΒ theΒ Company;
Β
(5) OtherΒ conditions stipulatedΒ byΒ the applicable ChineseΒ andoverseasΒ lawsΒ and regulations;
Β
(6) FailingΒ toΒ passΒ theΒ appraisal.
Β
ArticleΒ 48 TheΒ AgreementΒ forΒ theΒ StockΒ AppreciationΒ RightsΒ shallΒ provideΒ that,Β ifΒ anyΒ ofΒ the followingΒ conditions occur,Β the SARsΒ vestedΒ duringΒ the yearΒ shallΒ ceaseΒ toΒ be exercised,Β andΒ atΒ theΒ sameΒ timeΒ noΒ newΒ SARsΒ shallΒ beΒ grantedΒ withinΒ aΒ year:
Β
(1) TheΒ annualΒ performanceΒ assessmentΒ resultΒ ofΒ theΒ CompanyΒ fails toΒ reachΒ the performanceΒ assessmentΒ standardΒ setΒ forthΒ inΒ theΒ SARsΒ Programme;
Β
(2) The certifiedpublicΒ accountant issuesΒ aΒ negativeΒ opinionΒ orΒ isΒ unableΒ to expressΒ anΒ opinion;
Β
(3) SASAC or audit authorities issues dissenting views on the Company's businessΒ performanceΒ orΒ onΒ itsΒ annualΒ financialΒ reports;
Β
(4) AΒ major violationΒ occurs which results inΒ theΒ penaltiesΒ imposedΒ byΒ securities regulatorsΒ andΒ otherΒ relevantΒ authorities.
Β
ArticleΒ 49 Should the Company intend to terminate the existing SARs Programme and implement aΒ new plan,Β theΒ CompanyΒ shallΒ completeΒ aΒ new application and reportingΒ procedureΒ inΒ accordanceΒ withΒ theΒ relevantΒ provisionsΒ ofΒ SASAC,Β and shallnoΒ longerΒ grantΒ anyΒ SARsΒ basedΒ onΒ anyΒ terminatedΒ programmes.
Β
-Β I-10Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 50 ShouldΒ any of the followingΒ situationΒ occurs,Β the SARs ProgrammeΒ shall be terminated:
Β
(1) The CompanyΒ suspendsΒ tradingΒ itsΒ shares,Β goes intobankruptcy orΒ dissolves duetoΒ anΒ operatingΒ loss;
Β
(2) AΒ competentgovernmentΒ authorityΒ hasΒ orderedΒ theΒ CompanyΒ toΒ stopΒ the SARsProgramme onΒ theΒ groundΒ thatΒ theΒ CompanyΒ committedanyΒ material actΒ thatΒ isΒ inΒ breachΒ ofΒ theΒ lawsΒ andΒ regulations;
Β
(3) TheΒ newΒ shareholders'Β generalΒ meetingΒ decidesΒ onΒ terminatingΒ theΒ SARs Programme upon resolutionΒ whenΒ theΒ CompanyΒ conductsΒ anyΒ mergerΒ and acquisitionΒ activities;
Β
(4) The shareholderΒ 's general meeting decides on terminating the SARs
ProgrammeΒ uponΒ resolution.
Β
ArticleΒ 51 WhenΒ theΒ CompanyΒ increasestheΒ shareΒ capitalΒ byΒ conversionΒ fromΒ theΒ surplus reserve,Β distributesΒ shareΒ dividends,Β undergoesΒ shareΒ subdivision orΒ share reduction, conductsΒ shareΒ placement andprivateΒ placement ofΒ newΒ sharesΒ to existingΒ shareholders andΒ distributescashΒ dividends,Β itΒ isΒ necessaryΒ toΒ adjust the numberΒ ofΒ theΒ grantedΒ butΒ unexercised SARstoΒ beΒ exercisedΒ andΒ their Exercise PricesΒ and toΒ reportΒ theΒ sameΒ toΒ SASACΒ forΒ filing. The specificmeasuresΒ areΒ as follows:
Β
(1) AdjustmenttoΒ theΒ numberΒ ofΒ grantedΒ SARs
Β
i. Share capital increase by conversion from the surplus reserve, distributionΒ ofΒ shareΒ dividendsΒ andΒ shareΒ subdivision
Β
Number of granted SARs (after adjustment) = Number of granted SARs(beforeΒ adjustment)Β ΓΒ (1Β +Β numberΒ ofΒ sharesΒ derivedΒ fromΒ the increaseΒ ofΒ shareΒ capitalΒ byΒ conversion fromtheΒ surplusΒ reserve, distribution ofΒ shareΒ dividendsΒ orΒ shareΒ subdivision forΒ everyΒ existing share)
Β
ii. ShareΒ reduction
Β
Number of SARs granted (after adjustment) = Number of SARs grantedΒ (beforeΒ adjustment)Β ΓΒ shareΒ reductionratio
Β
iii. Share placement and private placement of new shares to existing shareholders
Β
Number of granted SARs (after adjustment) = Number of granted SARs(beforeΒ adjustment)Β ΓΒ (1Β +Β numberΒ ofΒ sharesΒ toΒ beΒ placedΒ or issuedΒ forΒ everyΒ existingΒ share)
Β
-Β I-11Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
(2) Adjustment to the grant/Exercise Price. The adjustment of the Grant/ExerciseΒ PriceΒ shallΒ notΒ causeΒ theΒ grant/ExerciseΒ PriceΒ toΒ fallΒ below theparΒ valueΒ ofΒ share.
Β
i. Share capital increase by conversion from the surplus reserve, distributionΒ ofΒ shareΒ dividendsΒ andΒ shareΒ subdivision
Β
ExerciseΒ PriceΒ (afterΒ adjustment)Β =Β ExerciseΒ PriceΒ (beforeΒ adjustment)
/ (1Β + number ofΒ sharesΒ derivedΒ fromΒ theΒ increase ofΒ shareΒ capitalΒ by conversion fromtheΒ surplusΒ reserve,Β distribution ofΒ shareΒ dividendsΒ or shareΒ subdivisionΒ forΒ everyΒ existingΒ share)
Β
ii. ShareΒ reduction
Β
ExerciseΒ PriceΒ (afterΒ adjustment)Β =Β ExerciseΒ PriceΒ (beforeΒ adjustment)
/Β shareΒ reductionΒ ratio
Β
iii. Share placement and private placement of new shares to existing shareholders
Β
ExerciseΒ PriceΒ (afterΒ adjustment)Β =Β (ExercisePriceΒ beforeΒ adjustment
+Β placementΒ priceΒ ΓΒ placementratio)Β /Β (1Β +Β placementΒ ratio)
Β
iv. CashΒ bonusΒ distribution
Β
ExerciseΒ PriceΒ (afterΒ adjustment)=Β ExerciseΒ PriceΒ (beforeΒ adjustment)- cashΒ bonusΒ distributionΒ forΒ everyΒ existingΒ share
Β
ArticleΒ 52 InΒ theΒ courseΒ ofΒ theΒ implementationΒ ofΒ theΒ SARsΒ Programme,Β whereΒ theΒ SARs ProgrammeΒ becomesΒ unableΒ toΒ beΒ implementedΒ asΒ planned,Β orΒ completelyΒ losses itsΒ incentiveΒ value,Β dueΒ toΒ forcemajeure,Β theΒ Nomination andΒ Remuneration Committee shall suspend the programme and propose the shareholders at a generalΒ meetingΒ toΒ reformulateΒ aΒ newΒ SARsΒ Programme. TheΒ NominationΒ and Remuneration CommitteeΒ shallΒ proposeΒ theΒ shareholdersΒ atΒ aΒ generalmeetingΒ to resetΒ aΒ newΒ ExerciseΒ PriceΒ ifΒ necessary.
Β
ArticleΒ 53 SARs shall not be transferred, sold, exchanged, mortgaged, provided as a guarantee, bookedΒ intoΒ the accountΒ and usedΒ for repayingdebtsΒ without authorisation.
Β
ArticleΒ 54 AnyΒ personΒ whoΒ isΒ notΒ withinΒ theΒ scopeΒ ofΒ grantingΒ theΒ SARsΒ Programmeshall notΒ hold,Β directlyΒ orΒ inΒ theΒ nameΒ ofΒ anotherΒ person,Β anyΒ SARsΒ ofΒ theΒ Company. Any person who is in breach of this requirement shall be investigated and punishedΒ inΒ accordance withtheΒ laws and regulations asΒ well asΒ theΒ rulesΒ ofΒ the Company.
Β
-Β I-122Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
ArticleΒ 55 AΒ holderΒ ofΒ SARsΒ shallΒ notΒ manipulate,whetherΒ individuallyΒ orΒ inΒ conjunction with a third party, share price of this CompanyΒ to participateΒ in the insider dealingsΒ soΒ asΒ toΒ obtainΒ improperΒ gainsΒ orΒ toΒ transferΒ risks. AnyΒ personΒ whoΒ isΒ in breachΒ ofΒ thisΒ requirement shallbeΒ investigated andΒ punishedΒ inΒ accordanceΒ with thelawsΒ andΒ regulationsΒ asΒ wellΒ asΒ theΒ rulesΒ ofΒ theΒ Company.
Β
CHAPTERΒ 8Β DISCLOSUREOFΒ INFORMATION
Β
ArticleΒ 56 The Company's Board of Directors shall, in accordance with the applicable Chinese and overseas laws and regulations,Β fulfill its ongoing obligationsΒ in respectΒ ofΒ theΒ disclosureofΒ informationΒ andΒ reporting.
Β
ArticleΒ 57 TheΒ CompanyΒ shallΒ discloseinΒ itsΒ periodicΒ reports theinformationΒ requiredΒ byΒ the applicableΒ ChineseΒ andΒ overseasΒ lawsΒ andΒ regulations.
Β
CHAPTERΒ 9Β FINANCIALANDΒ TAXATION
Β
ArticleΒ 58 TheΒ priceΒ difference whichΒ resultsΒ fromΒ the ExercisebyΒ aΒ holderΒ thereofΒ shallΒ be paidΒ fromΒ theΒ rewardΒ fundΒ withheldΒ byΒ theΒ Company.Β AnyΒ shortfallshallΒ beΒ paid outofΒ theΒ managementΒ expensesΒ ofΒ theΒ currentΒ year.
Β
ArticleΒ 59 The CompanyΒ shall bear all the managementΒ expenses and handling charges arisingΒ outΒ ofΒ theΒ executionΒ ofΒ theΒ SARsΒ Programme.Β AllΒ theseΒ expensesΒ shallΒ be includedΒ inΒ theΒ Company'sΒ managementexpenses. TheΒ expensesΒ incurredΒ byΒ the HoldersΒ ofΒ SARsΒ afterΒ theΒ ExerciseΒ shallΒ beΒ borneΒ byΒ suchΒ holders.
Β
ArticleΒ 60 A Holder of SARs will receive the price difference upon settlement for 12 consecutivemonthsΒ commencing fromΒ theΒ ExerciseΒ Date, andΒ individualΒ income taxshallΒ be withheldΒ andΒ paid,Β atΒ the timeΒ ofExercise, by theCompany in accordancewithΒ theΒ law.
Β
CHAPTERΒ 10Β INTERPRETATION
Β
ArticleΒ 61 TheΒ termsΒ belowΒ shallΒ beΒ interpretedasΒ follows:
Β
(1) ProgrammeΒ meansΒ theΒ StockΒ AppreciationΒ RightsΒ ProgrammeΒ forΒ HΒ Shares ofΒ AIRΒ CHINAΒ LIMITED,Β alsoΒ referredΒ toΒ asΒ theΒ "SARsΒ Programme".
Β
(2) CompanyΒ meansΒ AIRΒ CHINAΒ LIMITEDΒ ("AirΒ China"),Β alsoΒ referredtoΒ as
"theΒ Company"Β orΒ theΒ "ListedΒ Company".
Β
(3) H SharesΒ meanΒ theΒ ordinaryΒ sharesΒ issuedΒ by theΒ Company andtradedΒ in the
HongΒ KongΒ StockΒ Exchange.
Β
(4) Stock AppreciationΒ Rights,Β alsoΒ referred toΒ asΒ "AppreciationΒ Rights" or "SARS",Β meanΒ theΒ rightsΒ grantedΒ byΒ theΒ CompanyΒ toΒ anΒ incentiveΒ recipient toΒ receiveΒ gainsΒ inΒ cashΒ derivedΒ fromΒ the difference betweenΒ the GrantΒ Price andΒ theΒ Exercise PricewithinΒ a certainΒ periodΒ ofΒ timeΒ andΒ underΒ certain conditions.
Β
-Β I-133Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
(5) StockΒ AppreciationΒ RightsΒ UnitΒ meanΒ theΒ basicΒ unitΒ forΒ entitlementΒ toΒ the increaseΒ inΒ theΒ valueΒ ofΒ theΒ Company's circulatingΒ sharesΒ underΒ the Programme,Β alsoΒ referredΒ toΒ asΒ theΒ "NumberΒ ofΒ Shares".
Β
(6) GranteesΒ meanΒ theΒ incentiveΒ recipientsΒ qualifiedΒ toΒ beΒ grantedΒ theΒ SARs undertheΒ Programme.
Β
(7) GrantΒ meansΒ theΒ actΒ ofΒ grantingSARsΒ byΒ theΒ CompanyΒ toΒ theΒ HoldersΒ of
SARs.
Β
(8) DateΒ ofΒ GrantΒ meansΒ theΒ dateΒ onΒ whichΒ SARsΒ areΒ grantedΒ pursuantΒ toΒ the
Programme.
Β
(9) VestedΒ meansΒ theΒ circumstanceΒ thatΒ theΒ grantedΒ StockΒ AppreciationΒ Rights canΒ beΒ exercisedinΒ whole orΒ inΒ partΒ accordingtoΒ theΒ timing andΒ performance conditionsΒ specifiedunderΒ theΒ ProgrammeΒ wherebyΒ HoldersΒ ofΒ SARsΒ may begin toΒ obtain theΒ gainΒ derivedΒ fromΒ theΒ differenceΒ betweenΒ marketΒ priceΒ on theExerciseΒ DateΒ andΒ theΒ ExerciseΒ Price.
Β
(10) Β ExerciseΒ meansΒ anΒ actΒ performedΒ byΒ HoldersΒ ofΒ SARSΒ viaΒ settlementΒ with the CompanyΒ withinΒ the prescribedΒ periodΒ based on the price (Exercise Price)Β and conditions asΒ agreedΒ inΒ advanceΒ and therebyΒ the CompanyΒ shall makeΒ paymentΒ toΒ theΒ saidΒ HoldersΒ inΒ cash.
Β
(11) Β ExerciseΒ DateΒ meansΒ theΒ dateΒ onΒ whichΒ aΒ HoldersΒ ofΒ SARSΒ proposesto effectΒ anΒ ExerciseΒ inΒ respectΒ ofΒ theΒ appreciationΒ rightsΒ whichΒ haveΒ been vestedΒ andΒ fallΒ withinΒ theΒ exerciseΒ period.
Β
(12) Β ExerciseΒ Price,Β alsoΒ referredΒ toΒ asΒ theΒ "GrantΒ Price",Β meansΒ theΒ priceΒ by which an incentive recipient may make a phantom purchase of the Company's shares,Β whichΒ isΒ determined atΒ theΒ time whenΒ theΒ stock appreciationΒ rightsΒ areΒ grantedΒ byΒ theΒ CompanyΒ toΒ HoldersΒ ofΒ SARS.
Β
(13) Β SettlementΒ PriceΒ meansΒ theΒ priceΒ ofΒ theΒ Company'sΒ sharesΒ thatΒ areΒ usedΒ to calculate the cash payable when the Stock Appreciation Rights are exercised.Β TheΒ SettlementΒ PriceΒ shallΒ equalΒ toΒ theΒ averageΒ closingΒ priceΒ for
5Β tradingΒ daysΒ withinΒ theΒ WindowΒ PeriodΒ forΒ theΒ currentΒ ExerciseΒ ofΒ Stock
AppreciationΒ Rights.
Β
(14) Β Window PeriodΒ meansΒ theΒ periodΒ inΒ whichΒ HoldersΒ ofΒ SARSΒ areΒ allowedΒ to confirmΒ withΒ the Company the numberΒ of unitsΒ toΒ be exercised andΒ the ExerciseΒ Price.Β ThisΒ isΒ alsoΒ aΒ periodΒ forΒ settlement.
Β
ArticleΒ 62 TheΒ meaningΒ ofΒ theΒ termsΒ notΒ definedΒ inΒ theseΒ ManagementMeasuresΒ shallΒ be interpretedΒ inΒ accordanceΒ withΒ theΒ relevantΒ lawsΒ andΒ regulationsΒ ofΒ theΒ StateΒ as wellasΒ otherΒ provisionsΒ stipulatedΒ byΒ theΒ Company.
Β
-Β I-144Β -
APPENDIX I MEASURES ON MANAGEMENT OF THE STOCK APPRECIATION RIGHTS
(REVISED)
Β
CHAPTERΒ 11Β SUPPLEMENTARYΒ PROVISIONS
Β
ArticleΒ 63 The Nomination and Remuneration Committee of the Company shall be responsibleΒ forΒ theΒ interpretationΒ ofΒ theseΒ ManagementΒ Measures.
Β
ArticleΒ 64 These Management Measures shall be implemented upon approval at a shareholders'Β generalΒ meeting.
Β
ArticleΒ 65 AmendmentsΒ toΒ theseΒ ManagementMeasuresΒ shallΒ beΒ madeΒ byΒ theΒ Nomination andΒ RemunerationΒ CommitteeΒ andΒ shallΒ beΒ submittedΒ toΒ theΒ shareholders'Β general meetingΒ forΒ approval.
Β
ArticleΒ 66 The Implementing Rules for the Measures on Management of the Stock AppreciationΒ RightsΒ inΒ RespectΒ of AirΒ ChinaΒ LimitedΒ (Provision)Β (GuoΒ HangΒ Gu FenFaΒ [2007]Β No.188)Β shallΒ beΒ annulledΒ automatically.
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Β
-Β I-155Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
Β
TheΒ ProposalΒ ofΒ Second GrantofΒ theΒ StockΒ AppreciationΒ RightsΒ isΒ preparedΒ inΒ theΒ Chinese languageΒ andΒ theΒ EnglishΒ versionΒ isΒ thereforeΒ aΒ translationonly.Β InΒ theΒ event ofΒ anyΒ discrepancy betweenΒ theΒ EnglishΒ translationΒ andΒ theΒ ChineseΒ version,Β theΒ ChineseΒ versionΒ shallΒ prevail.
Β
AirΒ ChinaΒ Limited
ProposalΒ ofΒ SecondΒ GrantΒ ofΒ theΒ StockΒ AppreciationΒ Rights
Β
In orderΒ to motivateΒ executivesΒ to continuouslyΒ improveΒ theirΒ managementΒ andΒ constantly improveΒ theΒ Company'sΒ performance, theΒ CompanyΒ hasΒ formulatedtheΒ followingΒ proposalΒ of secondΒ grant ofΒ theΒ stockappreciation rights accordingtoΒ Reply withΒ ApprovalΒ on ImplementationΒ ofΒ ProposalΒ ofΒ SecondΒ GrantΒ ofΒ theΒ StockΒ AppreciationΒ RightsΒ ofΒ AirΒ China LimitedΒ (GuoΒ Zi FenΒ PeiΒ [2012]Β No.Β 1100),Β NoticeΒ on IssuingΒ theΒ TrialΒ Measures for ImplementingΒ theΒ EquityΒ IncentiveΒ System byΒ theΒ State-controlledΒ ListedΒ Companies(Overseas) (GuoΒ ZiΒ FaΒ FenΒ PeiΒ [2006]Β No.Β 8)Β (hereinafterΒ referredΒ toΒ asΒ "DocumentΒ No.Β 8"),Β NoticeΒ on Issues Concerning Regulating the Implementation of the Equity Incentive System by the State-controlledΒ Listed Companies(GuoΒ ZiΒ FaΒ FenΒ PeiΒ [2008]Β No.Β 171)Β (hereinafterΒ referredΒ to asΒ "DocumentNo.Β 171"), andΒ onΒ theΒ basisΒ ofΒ H-shareΒ Appreciation Rights PlanΒ of AirΒ China LimitedΒ andΒ theΒ revisedΒ MeasuresΒ on Administration ofΒ StockΒ AppreciationΒ RightsΒ ofΒ AirΒ China Limited.
Β
I. BasicΒ Principles
Β
(I) LegalityandΒ compliance
Β
ThisΒ grantΒ planΒ willΒ strictlyΒ follow theΒ guidelinesofΒ DocumentΒ No.Β 8Β andΒ DocumentΒ No.Β 171Β formallyΒ issuedΒ byΒ SASACΒ andΒ complyΒ withΒ theΒ regulatoryrequirements.
Β
(II) PerformanceΒ orientation
Β
The grantΒ planΒ aimsΒ atΒ motivating employees andimproving theΒ Company's performanceΒ throughΒ effectiveΒ long-termΒ incentives.
Β
(III)Β InternalΒ fairness
Β
From theΒ perspectiveofΒ theΒ Company'sΒ internalΒ management, theΒ grantΒ planΒ reflects relativelyΒ fair treatments ofΒ executives atΒ differentΒ levelsΒ and promotesthe effective implementationΒ ofΒ theΒ grantΒ plan.
Β
II. MainΒ Contents
Β
(I) Incentiveinstrument
Β
H-shareΒ appreciationΒ rightsΒ areΒ usedΒ asΒ theΒ incentiveΒ instrumentΒ ofΒ theΒ grantΒ plan.
(II) Coverage
Β
TheΒ stockΒ appreciationΒ rightsΒ willΒ beΒ grantedΒ to:
Β
1. Directors of the listed company (excluding independent non-executive directors), includingΒ the chairman, viceΒ chairman, executiveΒ directorΒ serving concurrentlyΒ asΒ theΒ president,Β directors,Β totallingΒ sixΒ persons;
Β
-Β II-1Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
Β
2. Senior executives of the Company, referring to persons responsible for decision-making,Β operationsΒ andΒ managementΒ ofΒ theΒ Company,Β includingthe viceΒ president,chiefΒ engineer,Β assistant toΒ theΒ president,Β secretaryΒ forΒ theΒ board ofΒ directorsandΒ other personsΒ stipulatedinΒ theΒ articlesΒ ofΒ association, totalling nineΒ persons;
Β
3. KeyΒ techniciansandΒ executivesΒ ofΒ theΒ Company,Β including:
Β
(1) ExecutivesΒ aboveΒ LevelΒ 13BΒ inΒ AirΒ ChinaΒ (equivalenttoΒ theΒ departmental generalΒ managerΒ inΒ theΒ headquarters),Β totallingΒ 107Β persons;
Β
(2) ExecutivesΒ atΒ LevelΒ 19Β inΒ overseasΒ marketingΒ organisationsΒ (i.e.Β district general managersΒ inΒ overseasΒ marketingΒ organisations), totallingΒ three persons;Β and
Β
(3) Employees aboveΒ thecorrespondingΒ levelΒ inΒ thecompanies controlled by, andwithinΒ the scopeΒ ofΒ assetsΒ ofΒ the listedΒ company:Β executives above Level13BΒ inΒ AirΒ ChinaΒ Cargo,Β DalianΒ AirlinesΒ andΒ Beijing Airlines,Β the president/viceΒ president/assistant toΒ theΒ president/chiefΒ supervisorΒ in Shenzhen AirlinesΒ andΒ seniorΒ executives(atΒ primaryΒ level)Β inΒ Ameco, totallingΒ 37Β persons.
Β
Upon calculation,Β theΒ stockappreciation rights willΒ beΒ grantedΒ toΒ 162Β persons. TheΒ finalΒ numberΒ ofΒ personsΒ coveredΒ andΒ theΒ listΒ thereofΒ shallΒ beΒ subjectΒ toΒ the numberΒ ofΒ personsΒ inΒ positionΒ andΒ theΒ listΒ thereofΒ atΒ theΒ timeΒ ofΒ grant.
Β
(III)Β Β DistributionΒ ofΒ incentivesΒ toΒ personsΒ atΒ variousΒ levels
Β
The grant value (expected income) for a single person shall be determined as follows:
Β
1. ExpectedΒ stockΒ incentiveΒ incomeΒ forΒ theΒ chairmanΒ isΒ equivalentΒ toΒ 40%Β ofΒ the totalremunerationΒ (includingΒ expected long-termΒ incentiveΒ income) atΒ theΒ time ofΒ grant;
Β
2. ForΒ personsΒ atΒ otherΒ positions, theexpectedΒ stockΒ incentive incomeΒ shallΒ be calculatedΒ basedΒ onΒ their positioncoefficients relativeΒ toΒ theΒ coefficientΒ ofΒ the chairmanΒ positionΒ setΒ outΒ inΒ theΒ followingΒ table:
Β
Position level | Position coefficient | Β Position level | Position coefficient |
Β Chairman | Β 2.30 | Β 13A | Β 1.20 |
Vice chairman | 2.25 | 13B | 1.15 |
Executive director serving concurrently as the president | 2.16 | Level 19 in overseas marketing organisations | 1.14 |
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-Β II-2Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
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Β
Position level | Position coefficient | Β Position level | Β Position coefficient |
Β Director | Β 2.05 | Β Primary level in Ameco | Β 0.90 |
Senior executives of the Company | 1.85 | Primary level in Shenzhen Airlines | 0.46 |
14A | 1.35 | Vice president in Shenzhen Airlines | 0.40 |
14B | 1.30 | Assistant to the president/chief supervisor in Shenzhen Airlines | 0.34 Β |
Β
Β (IV)Β Β QuantityΒ ofΒ theΒ grant
Β
AΒ totalΒ ofΒ 26.04Β millionΒ sharesΒ areΒ plannedΒ toΒ beΒ grantedΒ underΒ theΒ proposalΒ of secondΒ grantΒ ofΒ theΒ stockΒ appreciationΒ rights,Β accountingΒ forΒ 0.2%Β ofΒ theΒ shareΒ capital (A+Hshares)Β ofΒ theΒ Company.
Β
CalculatedΒ basedΒ onΒ theΒ valuationΒ benchmarkΒ dateΒ ofΒ 29Β FebruaryΒ 2012Β (closing priceof thatΒ day:Β HK$5.86; exchange rate:HK$1=RMB0.813)Β andΒ evaluated throughΒ B-S model,Β theΒ valueΒ ofΒ eachΒ shareΒ ofΒ theΒ appreciationΒ rightsΒ isΒ approximatelyΒ RMB1.98.
Β
TheΒ totalΒ costΒ ofΒ theΒ proposedΒ secondΒ grant ofΒ theΒ stockappreciation rights is approximatelyΒ RMB51.55Β million,Β withΒ specificΒ quantitiesΒ grantedΒ toΒ variousΒ employees asΒ follows:
Β
Position level | Number of persons at the level | Average quantity granted to persons at the Level |
Chairman | 1 | 343,000 |
Vice chairman | 1 | 336,000 |
Executive director serving concurrently as the president | 1 | 303,000 |
Directors | 3 | 297,000 |
Senior executives of the Company | 9 | 273,000 |
14A | 9 | 180,000 |
14B | 17 | 172,000 |
13A | 36 | 160,000 |
13B | 45 | 153,000 |
Level 19 in overseas marketing organisations | 3 | 151,000 |
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Β
-Β II-3Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
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Position level | Number of persons at the level | Average quantity granted to persons at the Level |
Employees above Level 13B in Air China Cargo | 11 | 164,000 |
Employees above Level 13B in Beijing Airlines | 1 | 160,000 |
Employees above Level 13B in Dalian Airlines | 5 | 162,000 |
Primary level in Ameco | 2 | 135,000 |
Primary level in Shenzhen Airlines | 1 | 68,000 |
Vice president in Shenzhen Airlines | 10 | 60,000 |
Assistant to the president/chief supervisor in Shenzhen Airlines | 7 | 51,000 |
Total | 162 | 26,041,000 |
Β
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(V) EffectiveΒ periodΒ andΒ effectiveΒ periodΒ arrangement
Β
1. Effective period:Β StockΒ appreciationΒ rightsΒ toΒ beΒ grantedΒ shallΒ beΒ validΒ forΒ five yearsfromΒ theΒ dateΒ ofΒ grant,Β i.e.,Β employeesΒ may,Β withinΒ fiveΒ yearsΒ afterΒ the dateΒ ofΒ grant, exerciseΒ theirΒ rightsaccordingΒ toΒ theΒ pre-arranged timetablesΒ for takingΒ effectΒ andΒ exerciseΒ ofΒ theΒ rights,Β andΒ anyΒ stockΒ appreciationΒ rightsΒ that arenotΒ exercisedΒ withinΒ fiveΒ yearsΒ fromΒ theΒ dateΒ ofΒ grantΒ shallΒ beΒ annulled.
Β
2. EffectiveΒ periodΒ arrangement:Β IfΒ relevantΒ performanceΒ conditionsΒ areΒ met,Β the grantedΒ rightsΒ shallΒ takeΒ effectΒ inΒ batchΒ asΒ follows:
Β
Batch of taking effect | Valid exercise period | Proportion |
First batch | From the first trading day following the second anniversary of the date of grant to the last trading day by the end of the fifth anniversary of the date of grant | 30% |
Second batch | From the first trading day following the third anniversary of the date of grant to the last trading day by the end of the fifth anniversary of the date of grant | 40% Β |
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-Β II-4Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
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Batch of taking effect | Valid exercise period | Proportion |
Third batch | From the first trading day following the fourth anniversary of the date of grant to the last trading day by the end of the fifth anniversary of the date of grant | 30% |
Β
(VI)Β Β ExerciseΒ price
Β
According to the relevant regulatory rules, the exercise price of H-share appreciationΒ rightsΒ shallΒ notΒ beΒ lowerΒ thanΒ theΒ highestΒ ofΒ theΒ followingΒ prices:
Β
1. ClosingΒ priceΒ ofΒ theΒ Company'sΒ HΒ sharesΒ asΒ ofΒ theΒ dateΒ ofΒ grant;
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2. Average closingΒ priceΒ ofΒ theΒ Company'sΒ HΒ sharesΒ forΒ fiveΒ tradingΒ daysΒ priorΒ to theΒ dateΒ ofΒ grant;Β and
Β
3. ParΒ valueΒ perΒ HΒ shareΒ ofΒ theΒ Company.
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(VII) PerformanceΒ conditionsforΒ grantΒ andΒ becomingΒ effective
Β
1. Performanceindex:
Β
AccordingΒ toΒ theΒ provisionsofΒ DocumentΒ No.Β 171Β onΒ establishment ofΒ a performance evaluation system, the Company plans to use the following three indexesΒ asΒ performanceindexesΒ forΒ theΒ long-termΒ incentives:
Β
(1) Comprehensive indexesΒ thatΒ reflectΒ returnΒ forΒ shareholdersΒ andΒ value createdΒ forΒ theΒ Company:Β "Economic valueaddedΒ (EVA)"Β and "returnΒ on equityΒ (ROE)";Β and
Β
(2) GrowthΒ indexΒ thatΒ reflectsΒ theΒ Company's profitability andΒ marketΒ value: "GrowthΒ rateΒ ofΒ operatingΒ revenue".
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-Β II-5Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
Β
2. Benchmarkcompanies
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According toΒ Document No. 171,Β for grantΒ and entryΒ into effectΒ ofΒ long-term incentivesΒ ofΒ theΒ listedΒ company,Β theΒ performanceofΒ theΒ listedΒ companyΒ isΒ required toΒ beΒ comparedΒ with thoseΒ ofΒ domesticΒ andΒ overseasΒ comparable benchmark peers. GivenΒ theΒ industry,Β scaleΒ andΒ otherΒ factors,Β 17Β comparableΒ enterprisesΒ areΒ selected asΒ theΒ marketΒ benchmarkcompaniesΒ ofΒ theΒ Company,Β asΒ specifiedbelow:
Β
Company | Country/Region | Company | Country/Region |
China Eastern Airlines Β | China | US Airways | U.S. |
China Southern Airlines Β | Β China | Delta Airlines | U.S. |
Cathay Pacific Airways Β | Hong Kong | Air Canada | Canada |
Thai Airways International Β | Β Thailand | Air France | France |
Korean Air | Republic of Korea | All Nippon Airways (ANA) | Japan Β |
Singapore Airlines Β | Singapore | Lufthansa | Germany |
Qantas | Australia | Scandinavian Airlines (SAS) | Sweden |
Continental Airlines Β | U.S. | Southwest Airlines | U.S. |
United Airlines | U.S. |
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3. PerformanceconditionsΒ forΒ grant
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AccordingΒ toΒ theΒ regulatoryΒ rulesΒ ofΒ SASAC,Β theΒ performance levelofΒ the CompanyΒ shallΒ notΒ beΒ lowerΒ thanΒ thatΒ ofΒ theΒ lastΒ threeΒ yearsΒ orΒ theΒ 50thΒ percentile ofΒ theΒ benchmarkΒ companies.
Β
BasedΒ onΒ ourΒ calculation,Β theΒ performance conditionsΒ ofΒ theΒ CompanyΒ inΒ 2011 andΒ previousΒ yearsΒ areΒ inΒ complianceΒ withΒ theΒ regulatoryΒ requirements.Β Historical levelofΒ theΒ performanceΒ indexΒ andΒ performanceΒ conditionsΒ forΒ grantΒ areΒ asΒ follows:
Β
(1) EVA: EVAΒ inΒ 2011Β wasΒ RMB2.59Β billion,Β higher thanΒ theΒ averageΒ EVAΒ of
2008-2010Β (-RMB690Β million). AftertakingΒ intoΒ accountΒ variousΒ factors suchasΒ historicalΒ levelΒ andΒ future developmentΒ trends,Β itΒ isΒ confirmedΒ that the EVA for performance conditions for grant is RMB500 million (averageΒ capitalΒ costΒ ratioΒ isΒ 5.5%,Β sameΒ below).
Β
(2) ROE:Β ROEΒ inΒ 2011Β wasΒ 16%,Β higherΒ thanΒ theΒ average ROEΒ of AirΒ China LimitedΒ inΒ 2008-2010 (8.9%),Β and higherΒ thanΒ 50thΒ percentileofΒ the benchmarkcompaniesΒ (4.34%). AftertakingΒ intoΒ accountΒ variousΒ factors suchasΒ historicalΒ levelΒ andΒ future developmentΒ trends,Β itΒ isΒ confirmedΒ that theROEΒ forΒ performanceΒ conditionsΒ forΒ grantΒ isΒ 10%.
-Β II-6Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
Β
(3) GrowthΒ rateΒ ofΒ operatingrevenue:Β GrowthΒ rateΒ ofΒ operatingΒ revenueΒ of AirΒ ChinaΒ Limited inΒ 2011Β isΒ 20%,Β higherΒ thanΒ theΒ average growthΒ rateΒ of AirChinaΒ LimitedΒ inΒ 2008-2010 (12.7%),Β and higherΒ thanΒ 50thΒ percentile ofΒ theΒ benchmarkΒ companiesΒ (9.78%).Β AfterΒ takingΒ intoΒ accountΒ various factorsΒ suchΒ asΒ historicalΒ levelΒ andΒ future development trends,Β itΒ is confirmed thatthe growthΒ rateΒ ofΒ operatingrevenueΒ for performance conditionsΒ forΒ grantΒ isΒ 8%.
Β
4. PerformanceconditionsΒ forΒ rightsΒ becomingΒ effect
Β
SASACΒ requiresΒ thatΒ inΒ theΒ fiscalΒ yearΒ priorΒ toΒ theΒ yearΒ ofΒ rightsΒ becoming effective,Β theΒ performanceΒ indexΒ shallΒ notΒ beΒ lessΒ than:
Β
(1) EVA:Β InΒ theΒ fiscalΒ yearΒ priorΒ toΒ theΒ effectiveΒ year,Β theΒ auditedΒ EVAΒ ofΒ the CompanyΒ basedΒ onΒ InternationalΒ Accounting StandardsΒ (IAS)Β shall notΒ be lessΒ thanΒ theΒ targetΒ valueΒ below, andΒ notΒ beΒ lessΒ thanΒ theΒ average performance ofΒ theΒ industryΒ orΒ 75thΒ percentileofΒ theΒ benchmark companies:
Β
Performance index | Target value for grant | First batch | Second batch | Third batch |
EVA | 500 million | 500 million | 800 million | 1 billion |
Β
(2) ROE: InΒ theΒ fiscal yearΒ priorΒ toΒ theΒ effectiveΒ year,Β theΒ auditedΒ ROEΒ ofΒ the
CompanyΒ basedΒ onΒ IASΒ shallΒ notΒ beΒ lessΒ thanΒ theΒ targetΒ valueΒ below:
Β
Performance index | Target value for grant | First batch | Second batch | Third batch |
ROE | 10% | 11% | 12% | 13% |
Β
Β
(3) GrowthΒ rateΒ ofoperating revenue:Β In theΒ fiscalΒ yearΒ priorΒ to theΒ effective year,Β the auditedΒ growthΒ rateΒ ofoperating revenueΒ of theCompany based onΒ IASΒ shallΒ notΒ beΒ lessΒ thanΒ theΒ targetΒ valueΒ below:
Β
Performance index | Target value for grant | First batch | Second batch | Third batch |
Growth rate of operating revenue | 8% | 10% | 12% | 15% |
Β
Β
Β
-Β II-7Β -
APPENDIX II PROPOSAL OF SECOND GRANT OF THE STOCK APPRECIATION RIGHTS
Β
(4) IndexesΒ ofΒ bothΒ ROEΒ andΒ growthΒ rateΒ ofΒ operatingrevenueΒ shallΒ beΒ no lessthanΒ the averageΒ levelΒ ofΒ theindustryΒ andΒ 75thΒ percentile of performanceΒ ofΒ theΒ benchmarkΒ companies.
Β
(5) PerformanceΒ evaluationonΒ incentiveΒ recipientsΒ shallΒ beΒ associatedΒ with theirannualΒ personalΒ performance evaluationΒ made pursuanttoΒ their contracts,whichΒ theyΒ mustΒ signΒ withΒ theΒ CompanyΒ inΒ thatΒ year. AfterΒ the annualΒ performance evaluation,those whoΒ meetΒ theirΒ performance evaluationΒ expectations forΒ theΒ fiscal yearΒ prior toΒ theΒ effectiveΒ yearΒ will haveΒ theirΒ rightsΒ andΒ interestsΒ vested,Β otherwise theirrightsΒ andΒ interests willbeΒ annulled.
Β
Therefore,Β when theΒ aboveΒ conditionsΒ areΒ met,Β theΒ stock appreciation rights grantedΒ may becomeΒ effectiveΒ inΒ theΒ relevantΒ effectiveΒ yearsΒ inΒ accordance with the predeterminedΒ proportion.
Β
(VIII)Β Β IncomeΒ fromΒ exerciseΒ ofΒ rights
Β
According toΒ the relevantΒ provisions ofΒ SASAC,Β stockΒ incentiveΒ incomeΒ shallΒ be reasonablyΒ controlledΒ based on performanceΒ evaluationΒ indexes and growth of share prices. TheΒ CompanyΒ capsΒ theΒ stockΒ incentiveΒ incomeΒ forΒ theΒ incentiveΒ recipientsatΒ 40% ofΒ theirΒ respectiveremuneration atΒ theΒ timeΒ ofΒ grant. IfΒ thatΒ percentageΒ isΒ exceeded,Β any outstandingΒ stockΒ appreciationΒ rightsΒ thatΒ areΒ notΒ exercisedΒ shallΒ beΒ nullified.
Β
(IX)Β Β SpecialΒ treatments
Β
Document No. 171providesΒ that onceΒ any incentiverecipientΒ underΒ the proposed secondΒ grant ofΒ theΒ stockappreciation rights leavesΒ office,Β retires,Β etc.,Β theΒ following measuresΒ shallΒ apply:
Β
1. WhereΒ theΒ incentiverecipientΒ isΒ redeployed,Β retires,Β deceases,Β losesΒ capacity forΒ civilΒ conductΒ andΒ theΒ stockappreciation rights grantedΒ toΒ them become eligibleΒ forΒ exerciseΒ afterΒ theΒ performanceΒ evaluationΒ conditionsΒ areΒ met,Β the portionΒ eligibleΒ forΒ exerciseΒ mayΒ be exercised withinΒ halfΒ aΒ yearΒ afterΒ theΒ said personΒ leavesΒ officeΒ butΒ theΒ stock appreciation rights thatΒ areΒ notΒ eligibleΒ for exerciseΒ dueΒ toΒ notΒ reachingΒ theΒ effectiveΒ periodΒ orΒ theΒ performanceΒ conditions notbeingΒ metΒ shallΒ notΒ beΒ exercised.
Β
2. WhereΒ anyΒ incentiverecipientΒ resignsΒ orΒ isΒ dismissed,Β anyΒ outstandingΒ stock appreciationΒ rightsΒ thatΒ areΒ notΒ exercisedΒ shallΒ notΒ beΒ exercised.
Β
Β
Β
Β
-Β II-8Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
Β
TheΒ 2012Β DutyΒ ReportΒ ofΒ theΒ IndependentΒ Non-executive DirectorsΒ isΒ preparedΒ inΒ the ChineseΒ languageΒ andΒ theΒ EnglishΒ versionΒ isΒ thereforeΒ aΒ translationonly.Β InΒ theΒ eventΒ ofΒ any discrepancyΒ betweenΒ the EnglishΒ translation and the ChineseΒ version,Β the ChineseΒ versionΒ shall prevail.
Β
DUTYΒ REPORTΒ OFΒ THEΒ INDEPENDENT NON-EXECUTIVEΒ DIRECTORSΒ FORΒ THE YEAR2012
Β
DearΒ Shareholders:
Β
BeingΒ theΒ independentΒ non-executiveΒ directorsΒ of AirΒ ChinaΒ Limited(hereinafterΒ referred toΒ asΒ theΒ "Company"), weΒ haveΒ diligentlycarriedΒ outΒ ourΒ duties andΒ functions,provided objectiveΒ opinionsΒ inΒ strictΒ compliance with theΒ CompanyΒ Law,Β theΒ SecuritiesΒ Law,Β the GuidelinesΒ onΒ theΒ EstablishmentΒ ofΒ IndependentΒ DirectorshipΒ ofΒ ListedΒ Companies,Β theΒ Code ofΒ CorporateΒ Governance forΒ ListedΒ Companies, andother laws andΒ regulationsΒ includingΒ the listingΒ rulesΒ ofΒ bothΒ the domesticand overseasΒ listingΒ venuesΒ ofΒ the Company, asΒ wellΒ asΒ the relevantΒ requirementsΒ ofΒ the ArticlesΒ ofΒ AssociationΒ andΒ theΒ WorkΒ ProceduresofΒ Independent Non-executive DirectorsΒ ofΒ theΒ Company,Β thereby protectingtheΒ overallΒ interestsΒ ofΒ the CompanyΒ asΒ wellΒ asΒ theΒ legitimateΒ interestsΒ ofΒ allΒ shareholders, especiallyΒ thoseΒ ofΒ itsΒ minority shareholders.Β OurΒ performanceΒ ofΒ dutiesΒ andΒ functionsΒ inΒ 2012Β isΒ herebyΒ reportedΒ asΒ follows:
Β
I. BasicΒ informationofΒ independentΒ non-executiveΒ directors
Β
Mr.Β FuΒ Yang,Β agedΒ 63,Β previouslyΒ servedΒ asΒ deputyΒ directorΒ ofΒ theΒ EconomicΒ LawΒ Office ofΒ theΒ NationalΒ People'sΒ CongressΒ LawΒ Committee,Β ViceΒ PresidentofΒ theΒ third,Β fourth andΒ fifth sessionsΒ ofΒ theΒ AllΒ ChinaΒ LawyersΒ Association,Β aΒ visitingΒ professorΒ ofΒ CenterΒ forΒ Environment LawΒ atΒ theΒ LawΒ School ofΒ RenminΒ UniversityΒ ofΒ China. HeΒ isΒ aΒ partner andtheΒ directorΒ ofΒ Kang DaΒ LawΒ FirmΒ inΒ Beijing.Β HeΒ isΒ alsoΒ anΒ arbitratorofΒ China International EconomicΒ andΒ Trade ArbitrationΒ Commission.Β Mr.Β FuΒ hasΒ beenΒ serving asΒ anΒ independentΒ non-executive directorΒ of theΒ CompanyΒ sinceΒ JuneΒ 2009.
Β
Mr.Β LiΒ Shuang,Β agedΒ 68,Β isΒ aΒ professorΒ ofΒ accountingΒ andΒ aΒ tutorΒ toΒ doctoratestudents. Mr.Β LiΒ graduatedΒ fromΒ theΒ ForeignΒ LanguageΒ DepartmentΒ ofΒ BeijingΒ NormalΒ UniversityΒ inΒ 1968.Β InΒ 1982,Β heΒ obtainedΒ aΒ masterΒ 'sΒ degreeΒ inΒ economicsΒ fromΒ theΒ ResearchΒ InstituteΒ for FiscalΒ ScienceΒ ofΒ theΒ Ministry ofΒ Finance, andΒ in October ofΒ theΒ sameΒ yearΒ lectured atCentral InstituteΒ ofΒ FinanceΒ &Β BankingΒ (currentlyknownΒ asΒ CentralΒ University ofΒ FinanceΒ and Economics) where he served various positions including the Head of the accounting department,Β directorΒ ofΒ theΒ academicaffairΒ office,Β DeanΒ andΒ ViceΒ President.FromΒ 1994Β toΒ 1997,Β heΒ hadΒ beenΒ invitedΒ toΒ theΒ UnitedΒ StatesΒ twiceΒ asΒ a visiting scholar. InΒ October 1996,he wasΒ entitledΒ toΒ the specialΒ allowance grantedΒ by the StateΒ Council.Β FromΒ 1999Β toΒ 2004,Β he workedΒ asΒ aΒ DeputyΒ secretary-in-GeneralΒ andΒ AdviserΒ ofΒ theΒ ChineseΒ InstituteΒ ofΒ Certified PublicΒ Accountants.Β FromΒ MayΒ 2001Β toΒ JuneΒ 2010,Β heΒ servedΒ asΒ anΒ independent non-executive directorΒ ofΒ DaΒ ChengΒ FundΒ Management Co.,Β Ltd.,Β China MinmetalsNon-ferrousΒ MetalsΒ Co. Ltd.,ZhongΒ BaoΒ KeΒ KongΒ InvestmentΒ Co.,Β Ltd.,Β BeijingΒ CentergateΒ Technologies(Holding) Co., Ltd.,
Β
-Β III-1Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
Β
ShenyinΒ &Β WanguoΒ SecuritiesΒ Investment Co.,Ltd., ChengdeΒ Xinxin VanadiumΒ and TitaniumΒ Co.,Β Ltd.Β andΒ Beijing Wangfujing Department Store (Group)Β Co.,Β Ltd., respectively. Mr.Β LiΒ hadΒ servedΒ asΒ aΒ non-executiveΒ directorΒ ofΒ ChinaΒ ShotoΒ plc.Β fromΒ JanuaryΒ 2005Β toΒ JuneΒ 2011.Β HeΒ hasΒ beenΒ servingΒ asΒ anΒ independentnon-executiveΒ directorΒ ofΒ theΒ CompanyΒ sinceΒ OctoberΒ 2010.
Β
Mr. Han Fangming, aged 46,Β graduatedfrom PekingΒ UniversitywithΒ aΒ Ph.DΒ degree.Β Mr. HanwasΒ aΒ memberΒ ofΒ theΒ 10th,Β 11th and 12thNationalΒ Committee ofΒ theΒ ChineseΒ People's Political ConsultativeΒ ConferenceΒ ("CPPCC")Β and is currently a Deputy ChairmanΒ of the ForeignΒ AffairsΒ CommitteeΒ ofΒ CPPCCΒ andΒ theΒ convenerΒ ofΒ theΒ PublicΒ DiplomacyΒ Team,Β the DeputyΒ ChiefΒ EditorΒ andΒ HeadΒ ofΒ theΒ editorialΒ departmentΒ ofΒ "PublicΒ DiplomacyΒ Quarterly", ExecutiveΒ MemberΒ ofΒ theΒ Chinese-AfricanΒ People'sΒ FriendshipAssociation,Β ExecutiveΒ Member ofΒ theΒ ChineseΒ People'sΒ AssociationΒ forΒ FriendshipΒ withΒ ForeignΒ Countries,Β ExecutiveΒ Member ofΒ China EconomicΒ andΒ Social Council,Β chairmanΒ ofΒ China-AfricaΒ EconomicΒ andΒ Technological Cooperation Committee, DeputyΒ directorΒ ofΒ ChinaΒ Overseas-Educated ScholarsΒ Development Foundation, Vice President of China Society for Southeast Asian Studies and founding chairmanΒ ofΒ theΒ CharharΒ InstituteΒ underΒ theΒ Think-TankΒ forΒ ForeignΒ PolicyΒ andΒ International relationship,Β aΒ researcheratΒ theΒ CenterΒ forΒ Studies ofΒ WorldΒ Modernisation Process ofΒ Peking University, aΒ visitingΒ professorΒ atΒ TibetΒ UniversityΒ and anΒ arbitratorofΒ theΒ ChinaΒ International Economic and Trade Arbitration Commission. In 1999, he joined TCL Group and was appointed asΒ anΒ independentnon-executiveΒ directorΒ ofΒ TCLΒ Multimedia TechnologyΒ Holdings Limited.Β HeΒ hasΒ beenΒ servingΒ asΒ anΒ executiveΒ directorΒ ofΒ TCLΒ CorporationΒ fromΒ 2006Β toΒ JuneΒ 2011.Β HeΒ hasΒ served asΒ ViceΒ ChairmanΒ of TCL CorporationΒ sinceΒ JuneΒ 2011.Β Mr.Β HanΒ hasΒ been servingΒ asΒ anΒ independentΒ non-executiveΒ directorΒ ofΒ theΒ CompanyΒ sinceΒ OctoberΒ 2010.
Β
Mr.Β YangΒ Yuzhong,Β agedΒ 68,Β graduatedfromΒ Beijing Aeronautical InstituteΒ majoringΒ in aircraftΒ design andΒ manufacturing.Β From JulyΒ 1999Β toΒ JulyΒ 2006, Mr.Β Yang served asΒ theΒ Deputy GeneralΒ ManagerΒ ofΒ ChinaΒ AviationΒ IndustryΒ CorporationI,Β duringΒ whichΒ periodΒ heΒ wasΒ also theΒ headΒ ofΒ Chinese AeronauticalΒ EstablishmentΒ andΒ theΒ chairmanΒ ofΒ AVIC1Β Commercial AircraftΒ Co.,Β Ltd..Β Mr.Β YangΒ hasΒ beenΒ aΒ consultantof Aviation IndustryCorporationΒ ofΒ China since AugustΒ 2006.Β HeΒ servedΒ asΒ anΒ independentnon-executiveΒ directorΒ ofΒ ChinaΒ National MaterialsΒ CompanyΒ LimitedΒ fromΒ JuneΒ 2007Β toΒ DecemberΒ 2009. Mr. YangΒ hasΒ beenΒ an independentΒ non-executive directorΒ ofΒ ChinaΒ SouthΒ Locomotive&Β Rolling StockΒ Corporation LimitedΒ sinceΒ December 2007and anΒ externalΒ directorΒ ofΒ ChinaΒ NationalΒ MaterialsGroup Corporation Ltd. since December 2009. Mr. Yang has been serving as an independent non-executiveΒ directorofΒ theΒ CompanyΒ sinceΒ MayΒ 2011.
Β
DuringΒ the reportingperiod,Β we haveΒ submitted toΒ the StockΒ Exchange ofΒ HongΒ Kong LimitedΒ theΒ confirmationΒ ofΒ independence inΒ accordancewithΒ theΒ requirementsΒ ofΒ theΒ Listing RulesofΒ TheΒ StockΒ ExchangeΒ ofΒ HongΒ KongΒ LimitedΒ toΒ confirmΒ ourΒ independentΒ status,Β and suchdisclosureΒ isΒ containedΒ inΒ theΒ 2012Β annualΒ reportΒ ofΒ theΒ Company.
Β
II. AttendanceΒ ofΒ independentnon-executiveΒ DirectorsΒ inΒ meetings
Β
AsΒ independentΒ non-executiveΒ directors,Β weΒ haveΒ actively participatedΒ inΒ BoardΒ meetings, attendedΒ generalΒ meetingsΒ andΒ presidedΒ over meetingsΒ ofΒ specialized committees underΒ the BoardinΒ accordanceΒ withΒ theΒ principlesΒ ofΒ diligenceΒ andΒ integrity.Β PriorΒ toΒ anyΒ BoardΒ meeting,
Β
Β
-Β III-2Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
Β
weΒ carefullyΒ reviewedΒ allΒ information providedΒ byΒ theΒ Company,Β attentivelylistenedΒ toΒ the reportsΒ ofΒ relevantΒ departments whennecessary,Β andΒ madeΒ fullΒ preparation forΒ discussionofΒ all proposalsΒ andΒ decision-making atΒ BoardΒ meetings. AtΒ theΒ BoardΒ meeting,Β weΒ carefully consideredΒ eachΒ ofΒ theΒ proposalsΒ basedΒ onΒ ourΒ experienceΒ andΒ expertise,Β activelyΒ participated inΒ discussions,Β madeΒ relevantΒ recommendations andΒ expressedourΒ independentΒ opinionsΒ with objectiveΒ attitude.
Β
InΒ 2012,Β theΒ CompanyΒ convenedΒ 14Β BoardΒ meetings,Β 4Β generalΒ meetings,11Β meetingsΒ of the audit and risk control committee, 5 meetings of the nomination and remuneration committee,withΒ theΒ attendanceΒ rateΒ ofΒ eachΒ ofΒ theΒ independentΒ non-executiveΒ DirectorΒ asΒ shownΒ below:
Β
Name | Attendance of Board meetings in Person | Attendance via Telecommunications | Attendance via Proxy | Absence | Objections Raised | Attendance of General Meetings | Meetings of The Audit and Risk Control Committee | Meetings of The Nomination and Remuneration Committee |
Fu Yang | 5 | 8 | 1 | 0 | None | 3 | 11 | 5 |
Li Shuang | 6 | 8 | 0 | 0 | None | 4 | 11 | 5 |
Han Fangming | 4 | 8 | 2 | 0 | None | 1 | N/A | 5 |
Yang Yuzhong | 6 | 8 | 0 | 0 | None | 3 | N/A | N/A |
Β
In addition,Β byattending the annualΒ workingΒ meetingsΒ of the Company andΒ receiving specialΒ reportsΒ andΒ information deliveredΒ byΒ theΒ CompanyΒ onΒ aΒ regularΒ basis,Β weΒ developedan in-depthΒ understanding ofΒ theΒ Company'sΒ businessΒ andΒ financialΒ operationsΒ asΒ wellΒ asΒ service guaranteeΒ etc.Β WeΒ alsoΒ madeΒ variousΒ recommendations onΒ areasΒ suchΒ asΒ corporatestrategic development, riskΒ managementandΒ standardizedΒ operations.Β InΒ viewΒ ofΒ theΒ above, weΒ have demonstrated our professional strength and played an active role in the decision-making processΒ ofΒ theΒ BoardΒ andΒ theΒ standardizedΒ operationsΒ ofΒ theΒ Company.
Β
III. ImportantΒ concernsΒ duringΒ theΒ performanceofΒ dutiesΒ byΒ independentΒ non-executive directorsΒ duringΒ theΒ year
Β
InΒ 2012,Β weΒ paidΒ specialΒ attentionΒ toΒ theΒ followingΒ issues,Β madeΒ independentΒ objective judgmentsΒ inΒ connectionΒ withΒ theΒ legalityΒ andΒ conformityΒ ofΒ theΒ decision, implementation and disclosureΒ of relevant issues, and expressedour independentΒ opinions.The details are as follows:
Β
(1) Connectedtransactions:
Β
WeΒ providedΒ independentΒ opinionsΒ inΒ connectionΒ withΒ theΒ Non-publicΒ AΒ ShareΒ IssueΒ toΒ the controllingΒ shareholder,Β ChinaΒ NationalΒ AviationΒ HoldingΒ Company,Β theΒ establishmentΒ ofΒ an airportΒ groundΒ handling jointΒ ventureΒ inΒ Shanghai,theΒ entering intoΒ theΒ frameworkΒ agreements
Β
Β
Β
Β
Β
-Β III-3Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
Β
byΒ theΒ CompanyΒ forΒ continuingΒ connectedΒ transactionsΒ fromΒ 2013Β toΒ 2015Β andΒ theΒ adjustment ofΒ relevantannualΒ capsΒ asΒ wellΒ asΒ theΒ conductΒ ofΒ connectedΒ transactionsΒ byΒ theΒ CompanyΒ inΒ 2012.Β WeΒ consideredthatΒ theΒ connectedΒ transactions betweenΒ theΒ CompanyΒ andΒ connected partiesΒ wereΒ conducted inΒ theordinaryΒ courseΒ ofΒ businessΒ ofΒ the Company, the rightsΒ and obligations ofΒ allΒ relevantΒ partiesΒ wereΒ determined byΒ agreementsΒ onΒ anΒ arm'sΒ lengthΒ basis,Β and theΒ transactionΒ pricesΒ wereΒ fairΒ andΒ reasonableΒ andΒ theΒ relevantΒ transactionsΒ wereΒ conductedΒ on normalΒ commercialΒ terms andΒ practice.DirectorsΒ andΒ shareholders whohadΒ anΒ interestΒ inΒ the transactionsΒ hadΒ abstainedΒ fromΒ votingΒ respectively, theΒ votingΒ proceduresΒ wereΒ legitimateΒ and effective,Β andΒ thereΒ wasΒ noΒ actionΒ damagingtoΒ theΒ interestsΒ ofΒ allΒ shareholders.
Β
(2) GuaranteesΒ inΒ favourΒ ofΒ externalΒ partiesΒ andΒ appropriationΒ ofΒ funds
Β
DuringΒ theΒ reportingΒ period,Β theΒ CompanyΒ hadΒ notΒ providedΒ anyΒ guaranteeΒ inΒ favourΒ of externalΒ parties,Β andΒ thereΒ wereΒ noΒ appropriation ofΒ fundsΒ byΒ theΒ controllingshareholderΒ orΒ its connectedΒ partiesΒ forΒ reasonsΒ otherΒ thanΒ operations.
Β
(3) UseΒ ofΒ proceeds
Β
DuringΒ theΒ reportingΒ period,Β theΒ CompanyΒ hadΒ noΒ fundΒ raisingΒ activity.
Β
(4) NominationΒ ofΒ seniorΒ managementpersonnelΒ andΒ theirΒ remuneration
Β
WeΒ carefullyΒ reviewedΒ theΒ proposalΒ inΒ connectionΒ withΒ theΒ 2012Β remuneration adjustment planΒ andΒ theΒ proposedappointmentΒ ofΒ Mr.Β ChaiΒ Weixi andΒ Mr.Β ChenΒ ZhiyongΒ asΒ ViceΒ Presidents ofΒ theΒ Company. WeΒ expressedΒ ourΒ independentΒ opinionsΒ andΒ consideredΒ thatΒ theΒ remuneration adjustmentΒ planΒ ofΒ theΒ CompanyΒ wasΒ reasonableΒ andΒ advantageousΒ toΒ attractΒ andΒ retainΒ talented staff as well as to improve the Company's competitive strength, and there were no circumstancesΒ damagingΒ theΒ interestsΒ ofΒ theΒ CompanyΒ andΒ itsΒ shareholdersΒ asΒ aΒ whole.Β Mr.Β Chai WeixiΒ andΒ Mr.Β ChenΒ ZhiyongΒ bothΒ satisfiedwithΒ theΒ qualificationsΒ specifiedΒ inΒ theΒ Company LawandΒ theΒ ArticlesΒ ofΒ AssociationΒ ofΒ theΒ Company,Β andΒ theΒ appointmentproceduresΒ were compliedΒ withΒ theΒ provisionsΒ ofΒ relevantΒ lawsΒ andΒ regulations.
Β
(5) ResultsΒ alertΒ andΒ preliminaryresultsΒ estimate
Β
DuringΒ theΒ reportingΒ period,Β neitherΒ resultsΒ alert norΒ preliminary resultsΒ estimateΒ was publishedΒ byΒ theΒ Company.
Β
(6) AppointmentΒ orΒ changeΒ ofΒ ourΒ auditors
Β
WeΒ expressedΒ independentΒ opinionsΒ onΒ theΒ appointmentΒ ofΒ ErnstΒ &Β YoungΒ andΒ ErnstΒ & YoungΒ HuaΒ Ming asΒ theΒ international andΒ domesticΒ auditorsΒ ofΒ theΒ CompanyΒ forΒ theΒ yearΒ 2012, respectively,Β andΒ DeloitteToucheΒ TohmatsuΒ CPAΒ Ltd.Β asΒ theΒ internalcontrolΒ auditorΒ forΒ the year2012.We areΒ ofΒ theΒ opinionΒ that,Β theΒ appointmentΒ ofΒ theΒ abovementioned auditorsΒ byΒ the CompanyΒ wasΒ inΒ theΒ interestsΒ ofΒ theΒ CompanyΒ andΒ itsΒ shareholders,Β whichΒ hadΒ been considered andΒ approvedΒ inΒ aΒ legitimateΒ andΒ effectiveΒ procedureΒ inΒ lineΒ withΒ theΒ requirements ofΒ relevant lawsΒ andΒ regulationsΒ andΒ theΒ ArticlesΒ ofΒ AssociationΒ ofΒ theΒ Company.
Β
-Β III-4Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
Β
(7) CashΒ dividendsandΒ otherΒ distributionΒ toΒ theΒ investors
Β
DuringΒ theΒ reportingΒ period,Β weΒ reviewedΒ andΒ expressedΒ independent opinionsΒ onΒ the preliminary profitΒ distribution plan forΒ 2011,Β theΒ distribution planofΒ theΒ CompanyΒ forΒ theΒ next threeΒ yearsΒ (2012-2014),Β andΒ theΒ relevantΒ amendmentsΒ toΒ theΒ ArticlesΒ ofΒ AssociationΒ ofΒ the CompanyΒ inΒ respectΒ ofΒ theΒ profitΒ distributionΒ policy.Β WeΒ areΒ ofΒ theΒ opinionΒ that,Β theΒ Company hasΒ attachedΒ greatΒ importanceΒ toΒ givingΒ reasonableΒ investmentΒ returnsΒ toΒ shareholdersΒ while maintaining sound and sustainable development. It has established a policy of profit distributionΒ inΒ aΒ sustainable,Β steadyΒ andΒ scientificΒ way,Β whichΒ areΒ inΒ lineΒ withΒ theΒ provisions ofΒ theΒ existingΒ lawsΒ andΒ regulations,Β andΒ constructiveΒ toΒ protectingΒ theΒ legitimateΒ rightsΒ and interestsΒ ofΒ theΒ investors.Β NoΒ actsΒ wereΒ foundΒ detrimentalΒ toΒ theΒ interestsΒ ofΒ theΒ CompanyΒ or theinterestsΒ ofΒ minorityΒ shareholders.
Β
(8) FulfilmentofΒ undertakingsΒ byΒ theΒ CompanyΒ andΒ shareholders
Β
TheΒ CompanyΒ hadΒ sorted outΒ theΒ undertakings made byΒ theΒ CompanyΒ andΒ theΒ controlling shareholder inΒ previousΒ years,Β theΒ fulfilmentprogressΒ ofΒ whichΒ hadΒ been disclosedinΒ the periodicΒ reportsΒ inΒ 2012Β asΒ required.HavingΒ conducted carefulΒ review,Β we believeΒ thatΒ neither theΒ Company northeΒ controllingΒ shareholderΒ hasΒ breached theirrespectiveΒ undertakingsΒ during thereportingΒ period.
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(9) ImplementationΒ ofΒ informationΒ disclosure
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DuringΒ theΒ reporting period,Β theΒ Company preparedΒ andΒ published the2011Β annualΒ report, theΒ firstΒ quarterly report,Β theΒ interimΒ reportΒ andΒ theΒ thirdΒ quarterly reportΒ of 2012,Β andΒ 46 corporateΒ announcements.Β WeΒ haveΒ monitoredΒ theΒ disclosureΒ ofΒ informationΒ byΒ theΒ Company inΒ 2012,Β andΒ are ofΒ the opinionΒ thatΒ the Company hasfollowedΒ the principles ofΒ "open,Β justΒ and fair"Β inΒ respectΒ ofΒ itsΒ informationΒ disclosureΒ whichΒ wasΒ inΒ lineΒ withΒ theΒ relevantΒ provisions underthe rulesΒ governing the listingΒ ofΒ securitieson the ShanghaiΒ StockΒ Exchange andthe InformationΒ DisclosureGuidelinesΒ ofΒ theΒ Company. Therefore,Β theΒ CompanyΒ hasΒ dulyΒ fulfilled itsobligationΒ ofΒ informationΒ disclosureΒ inΒ aΒ true,Β timely,Β accurateΒ andΒ completeΒ manner.
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(10) ImplementationΒ ofΒ internalcontrols
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TheΒ CompanyΒ continuedΒ toΒ improveΒ itsΒ internalΒ controlΒ systemΒ andΒ steadilyΒ proceeded withtheΒ construction ofΒ theΒ internalΒ controlΒ systemΒ inΒ strictaccordanceΒ withΒ regulatory requirements.Β InΒ 2012,Β theΒ internalΒ controlΒ measuresΒ ofΒ theΒ CompanyΒ wasΒ assessedΒ byΒ the BoardofΒ DirectorsΒ andΒ auditedΒ byΒ theΒ auditorsΒ ofΒ theΒ Company.Β TheΒ "Self-assessmentΒ Report ofΒ theΒ BoardΒ ofΒ DirectorsonΒ theΒ Company'sΒ InternalControl inΒ 2012"Β andΒ theΒ "InternalControl Audit Report" from the Board of directors have been completed in compliance with the relevantΒ laws,Β rulesΒ andΒ regulations.
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(11) OperationΒ ofΒ theΒ BoardΒ ofΒ DirectorsasΒ wellΒ asΒ itsΒ specializedΒ committees
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The Board has establishedfour specializedΒ committees,namely, theΒ Audit and Risk Control Committee, the Nomination and Remuneration Committee, the Strategy and InvestmentΒ CommitteeΒ andΒ theΒ AviationΒ SafetyΒ Committee.AmongΒ them,Β theΒ chairmenΒ ofΒ the
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-Β III-5Β -
APPENDIX III 2012 DUTY REPORT OF THE INDEPENDENT
NON-EXECUTIVE DIRECTORS
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AuditΒ andΒ RiskΒ ControlΒ CommitteeandΒ theΒ NominationΒ andΒ Remuneration CommitteeΒ areΒ held byΒ independentnon-executive directors,withΒ theΒ majorityΒ ofΒ theΒ committeeΒ membersΒ being independentΒ non-executiveΒ directors.Β EachΒ ofΒ theΒ specializedΒ committeeΒ hasΒ carriedΒ outΒ its duties andΒ functionsinΒ strictΒ complianceΒ withΒ theΒ requirements ofΒ theΒ "Code ofΒ Corporate GovernanceΒ forΒ ListedΒ Companies"Β andΒ theΒ rulesΒ ofΒ proceduresΒ forΒ specializedΒ committeesΒ of theCompany.
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InΒ 2013,Β weΒ willΒ continue toΒ followΒ theΒ principlesofΒ prudence,Β diligenceΒ andΒ integrity and theΒ spiritΒ ofΒ beingΒ accountableΒ toΒ theΒ CompanyΒ andΒ allΒ shareholdersΒ inΒ dischargingΒ ourΒ duties asΒ independentnon-executive directors.InΒ addition,Β weΒ willΒ enhanceΒ communicationsΒ withΒ the directors,Β supervisorsΒ andΒ management ofΒ theΒ CompanyΒ andΒ payΒ specialΒ attentionto implementation ofΒ cashΒ dividend policy,Β connectedΒ transactions,Β external guaranteesasΒ wellΒ as information disclosureΒ matters,Β therebyΒ protectingtheΒ legitimateΒ interestsΒ ofΒ investors, especially the minority shareholders from any damage, and providing rational recommendationsΒ forΒ theΒ sustainableΒ andΒ healthyΒ developmentΒ ofΒ theΒ Company.
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IndependentΒ non-executiveΒ Directors:Β Fu Yang, Li Shuang,Β Han FangmingΒ and YangΒ Yuzhong
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26Β MarchΒ 2013
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-Β III-6Β -
APPENDIX IV NOTICE OF ANNUAL GENERAL MEETING
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AIR CHINA LIMITED
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(aΒ jointΒ stockΒ limitedΒ companyΒ incorporatedΒ inΒ theΒ People'sΒ RepublicΒ ofΒ ChinaΒ withΒ limitedΒ liability)
(StockΒ Code:Β 00753)
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NOTICEΒ OFΒ ANNUALΒ GENERALΒ MEETING
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NOTICEΒ ISΒ HEREBYΒ GIVENΒ thatΒ anΒ annualΒ generalΒ meetingΒ ("AGM")Β ofΒ AirΒ China LimitedΒ (theΒ "Company") fortheΒ yearΒ ended 31Β DecemberΒ 2012Β willΒ beΒ heldΒ atΒ 2:00Β p.m.Β on Thursday,Β 23Β MayΒ 2013Β atΒ TheΒ ConferenceRoom,Β 29/F,Β AirΒ ChinaBuilding,Β 36Β XiaoyunΒ Road, ChaoyangΒ District,Β Beijing,Β PRCΒ forΒ theΒ followingΒ purposes:
Β
ORDINARYΒ RESOLUTIONS
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1. ToΒ considerΒ andΒ approveΒ theΒ reportΒ ofΒ theΒ boardΒ ofΒ directors(theΒ "Board")Β ofΒ the
CompanyΒ forΒ theΒ yearΒ 2012;
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2. ToΒ considerandΒ approveΒ theΒ reportΒ ofΒ theΒ supervisoryΒ committeeΒ ofΒ theΒ CompanyΒ for theyearΒ 2012;
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3. To consider and approve the audited consolidated financial statements of the CompanyΒ forΒ theΒ yearΒ 2012Β preparedΒ underΒ theΒ PRC AccountingΒ StandardsΒ andΒ the InternationalΒ FinancialΒ ReportingΒ Standards;
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4. To consider and approve the profit distribution proposal and the dividends distributionΒ proposalΒ forΒ theΒ yearΒ 2012Β asΒ recommended byΒ theΒ BoardΒ (including approving theΒ appropriationΒ ofΒ 10%Β ofΒ theΒ balanceΒ ofΒ theΒ netΒ profitΒ ofΒ theΒ Company ofΒ the yearΒ 2012Β asΒ setΒ out inΒ thefinancialΒ statements preparedΒ underΒ the PRC AccountingΒ StandardsΒ into thediscretionaryΒ surplusΒ reserveΒ ofΒ the CompanyΒ and the distributionΒ ofΒ aΒ cashΒ dividendΒ ofΒ RMB777Β million,Β orΒ RMB0.5935Β (includingtax) perΒ tenΒ sharesΒ basedΒ onΒ theΒ totalΒ numberΒ ofΒ 13,084,751,004Β sharesΒ ofΒ theΒ Company, forΒ theΒ yearΒ 2012Β andΒ toΒ authoriseΒ theΒ BoardΒ toΒ implementΒ suchΒ proposals;
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5. ToΒ considerΒ andΒ approveΒ theΒ appointmentofΒ KPMGΒ asΒ theΒ Company'sΒ international auditorΒ andΒ KPMGΒ HuazhenΒ (SpecialΒ GeneralΒ Partnership) asΒ theΒ Company's domesticΒ auditorΒ andΒ internalΒ controlΒ auditorΒ respectivelyΒ forΒ theΒ yearΒ endingΒ 31Β December 2013Β and toΒ authorisethe managementΒ ofΒ the CompanyΒ toΒ determineΒ their remunerationsΒ forΒ theΒ yearΒ 2013;
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-Β IV-1Β -
APPENDIX IV NOTICE OF ANNUAL GENERAL MEETING
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SPECIALΒ RESOLUTIONS
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ToΒ considerΒ andΒ approveΒ theΒ followingΒ resolutionsΒ asΒ specialΒ resolutionsΒ (itemsΒ 6Β toΒ 8):
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6. "THAT
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(a) theΒ authorisationΒ ofΒ theΒ BoardΒ ofΒ theΒ CompanyΒ toΒ allot,Β issueΒ andΒ dealΒ with additionalΒ sharesΒ ofΒ theΒ CompanyΒ beΒ andΒ isΒ herebyΒ approved:
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(1) subjectΒ toΒ paragraph(3)Β ofΒ thisΒ resolution,Β theΒ exerciseΒ byΒ theΒ BoardΒ of theCompany duringΒ the RelevantPeriodΒ (as definedΒ inΒ paragraph (4) of this resolution) ofΒ allΒ theΒ powersΒ ofΒ theΒ CompanyΒ toΒ allot,Β issueΒ and deal withadditionalΒ AΒ SharesΒ and/orΒ HΒ SharesΒ ofΒ theΒ CompanyΒ (hereinafter referredΒ toΒ asΒ "Shares")Β andΒ toΒ makeΒ orΒ grantΒ offers,Β agreements and optionsΒ whichΒ mightΒ requireΒ theΒ exercise ofΒ suchΒ powersΒ beΒ andΒ isΒ hereby generallyΒ andΒ unconditionallyΒ approved;
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(2) this approval shall authorise the Board of the Company during the RelevantPeriodΒ toΒ makeΒ orΒ grantΒ offers,Β agreementsΒ andΒ optionsΒ which mightrequireΒ theΒ exerciseΒ ofΒ suchΒ powersΒ afterΒ theΒ endΒ ofΒ theΒ Relevant Period;
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(3) theΒ amountΒ ofΒ additionalAΒ SharesΒ andΒ HΒ SharesΒ (asΒ theΒ caseΒ mayΒ be) allotted,Β issuedΒ andΒ dealtΒ withΒ orΒ agreedΒ conditionally orΒ unconditionally toΒ beΒ allotted,Β issuedΒ andΒ dealtΒ withΒ eitherΒ separatelyorΒ concurrentlyΒ by theBoardΒ ofΒ theΒ CompanyΒ pursuantΒ toΒ theΒ approvalΒ inΒ paragraphΒ (1)Β of thisresolutionΒ shallΒ notΒ exceed 20%Β ofΒ eachΒ ofΒ theΒ Company'sΒ existingΒ A SharesΒ andΒ HΒ SharesΒ (asΒ theΒ caseΒ mayΒ be)Β inΒ issueΒ atΒ theΒ dateΒ ofΒ passing thisΒ resolution;Β and
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(4) forΒ theΒ purposeΒ ofΒ thisΒ resolution:
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"RelevantΒ Period"Β meansΒ theΒ periodΒ fromΒ theΒ passingΒ ofΒ thisΒ resolution untilΒ theΒ earlierΒ of:
(i) theΒ conclusionofΒ theΒ nextΒ annualΒ generalΒ meetingΒ ofΒ theΒ Company; (ii) theΒ expirationΒ ofΒ theΒ 12Β monthsΒ periodΒ followingΒ theΒ passingΒ ofΒ this
resolution;Β and
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(iii) theΒ revocationΒ orΒ variationΒ ofΒ theΒ authorityΒ givenΒ toΒ theΒ BoardΒ ofΒ the Company underΒ thisΒ resolution byΒ aΒ specialΒ resolution ofΒ the Company'sΒ shareholdersΒ inΒ generalΒ meetings;Β and
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-Β IV-2Β -
APPENDIX IV NOTICE OF ANNUAL GENERAL MEETING
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(b) the Board of the Company be and is hereby authorised to increase the registeredΒ capitalΒ ofΒ theΒ CompanyΒ toΒ reflectΒ theΒ issueΒ ofΒ SharesΒ authorised underthis resolution, and toΒ makeΒ suchΒ appropriateand necessaryΒ amendments toΒ the ArticlesΒ ofΒ AssociationΒ ofΒ theΒ CompanyΒ asΒ theyΒ thinkΒ fitΒ toΒ reflectΒ such increasesΒ inΒ the registered capitalΒ ofΒ the Company andtoΒ takeΒ anyΒ otherΒ action andcompleteΒ anyΒ formalityΒ requiredΒ toΒ effectΒ suchΒ increaseΒ ofΒ theΒ registered capitalΒ ofΒ theΒ Company;"
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7. "THATΒ theΒ BoardΒ ofΒ theΒ CompanyΒ beΒ and isΒ herebyΒ authorised, generallyΒ and unconditionally, toΒ issue,Β inΒ oneΒ orΒ multipleΒ tranche(s),Β debtΒ financing instruments within the permissible size under the applicable laws and regulations. Debt financingΒ instrumentsΒ includeΒ butΒ areΒ notΒ limitedΒ toΒ corporateΒ bonds,Β ultra-short- termcommercialΒ papers,Β short-termΒ commercialΒ papers,Β mid-termΒ notes,Β domestic non-publicΒ targetedΒ debtΒ financingΒ instruments, overseasΒ non-publicΒ targetedΒ debt financingΒ instrumentsΒ andΒ overseasΒ bonds/notesΒ denominated inΒ RMB orΒ foreign currencies;"
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8. "THATΒ theΒ revisedΒ MeasuresΒ onΒ ManagementΒ ofΒ theΒ StockΒ AppreciationΒ RightsΒ of theCompanyΒ andΒ theΒ ProposalΒ forΒ theΒ SecondΒ GrantΒ of theStockΒ Appreciation RightsΒ by the Company be andΒ are herebyΒ approved andthe BoardΒ of the Company andΒ theΒ nominationΒ andΒ remuneration committeeΒ ofΒ theΒ Board beΒ andΒ isΒ hereby authorisedΒ toΒ implement, atΒ itsΒ direction,theΒ relevantΒ mattersΒ relatingΒ toΒ theΒ second grantofΒ theΒ stockΒ appreciationΒ rights,Β includingΒ butΒ notΒ limitedΒ toΒ theΒ determination ofΒ scopeΒ ofΒ grant,Β incentiverecipients, quantityΒ ofΒ grant,Β dateΒ ofΒ grant,Β periodΒ of validity,Β effectiveΒ arrangement, conditionsΒ ofΒ grantΒ andΒ effectiveΒ performance conditionsΒ andΒ allΒ otherΒ matters."
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ByΒ orderΒ ofΒ theΒ Board AirΒ ChinaΒ Limited WangΒ Changshun Chairman
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Beijing,Β PRC,Β 3Β AprilΒ 2013
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AsΒ atΒ theΒ date ofΒ thisΒ notice,Β theΒ directorsΒ ofΒ theΒ CompanyΒ areΒ Mr.Β WangΒ Changshun, Ms. WangΒ Yinxiang,Β Mr.Β CaoΒ Jianxiong,Β Mr.Β SunΒ Yude,Β Mr.Β Christopher Dale Pratt,Β Mr.Β IanΒ Sai CheungΒ Shiu,Β Mr.Β CaiΒ Jianjiang, Mr.Β FanΒ Cheng,Β Mr.Β FuΒ Yang*,Β Mr.Β LiΒ Shuang*,Β Mr.Β Han Fangming*Β andΒ Mr.Β YangΒ Yuzhong*.
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* γIndependentΒ non-executiveΒ directorΒ ofΒ theΒ Company
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-Β IV-3Β -
APPENDIX IV NOTICE OF ANNUAL GENERAL MEETING
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Notes:
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1. ClosureΒ ofΒ RegisterΒ ofΒ Members
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(i) EligibilityΒ forΒ attendingΒ theΒ AGM
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HoldersΒ ofΒ H SharesΒ of theΒ CompanyareΒ advisedΒ thatΒ theΒ registerΒ of members of theΒ CompanywillΒ close fromΒ Tuesday,Β 23Β AprilΒ 2013Β toΒ Thursday,Β 23Β MayΒ 2013Β (bothΒ daysΒ inclusive),Β duringΒ whichΒ timeΒ no transferΒ ofΒ HΒ SharesΒ ofΒ theΒ CompanyΒ willΒ beΒ effectedΒ andΒ registered.Β InΒ orderΒ toΒ qualifyΒ forΒ attendance atΒ theΒ AGM,Β instrumentsΒ ofΒ transferΒ accompaniedΒ byΒ shareΒ certificatesΒ andΒ otherΒ appropriateΒ documents mustbeΒ lodgedΒ withΒ theΒ Company'sΒ HΒ ShareΒ registrar,Β ComputershareΒ HongΒ KongΒ InvestorΒ Services LimitedΒ atΒ ShopsΒ 1712-1716,Β 17/F.,Β HopewellΒ Centre,Β 183Β Queen'sΒ RoadΒ East,Β WanΒ Chai,Β HongΒ Kong, by4:30Β p.m.Β onΒ Monday,Β 22Β AprilΒ 2013.
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Shareholders ofΒ theΒ CompanyΒ whose namesappearΒ onΒ theΒ registerΒ ofΒ membersΒ ofΒ theΒ CompanyΒ onΒ the closeΒ ofΒ businessΒ onΒ Monday,Β 22Β AprilΒ 2013Β areΒ entitledtoΒ attendΒ theΒ AGM.
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(ii) EligibilityΒ forΒ receivingΒ 2012Β finalΒ dividends
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TheΒ BoardΒ ofΒ theCompany has recommendedΒ the paymentofΒ aΒ finalΒ dividendofΒ RMB0.5935Β (including tax)perΒ tenΒ sharesΒ forΒ theΒ yearΒ 2012.Β IfΒ theΒ finalΒ dividendΒ isΒ payableΒ byΒ theΒ passingΒ ofΒ ResolutionΒ No.Β 4Β byΒ theΒ shareholders,Β itΒ willΒ beΒ paidΒ toΒ shareholdersΒ whoseΒ namesΒ appearΒ onΒ theΒ registerΒ ofΒ members oftheΒ CompanyΒ atΒ theΒ closeΒ ofΒ businessΒ onΒ Monday,Β 10Β JuneΒ 2013.
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TheΒ registerΒ ofΒ membersΒ ofΒ theΒ CompanyΒ willΒ beΒ closed fromΒ Tuesday,Β 11Β JuneΒ 2013Β toΒ Sunday,Β 16Β JuneΒ 2013 (both dates inclusive)Β duringΒ whichΒ periodΒ no transferΒ of H sharesΒ of the CompanyΒ will be registered.Β InΒ orderΒ toΒ beΒ entitledΒ toΒ receiveΒ theΒ 2012Β finalΒ dividendsΒ (ifΒ approved),Β allΒ transfersΒ ofΒ H sharesΒ ofΒ theΒ CompanyΒ accompaniedΒ byΒ theΒ relevantΒ shareΒ certificatesΒ andΒ appropriateΒ transferΒ forms mustbeΒ lodgedΒ withΒ theΒ Company'sΒ HΒ sharesΒ registrar,Β ComputershareΒ HongΒ KongΒ InvestorΒ Services LimitedΒ atΒ ShopsΒ 1712-1716,Β 17/F.,Β HopewellΒ Centre,Β 183Β Queen'sΒ RoadΒ East,Β WanΒ Chai,Β HongΒ Kong notΒ laterΒ thanΒ 4:30Β p.m.Β onΒ Monday,Β 10Β JuneΒ 2013.
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2. NoticeΒ ofΒ attendance
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HΒ ShareΒ shareholdersΒ whoΒ intendΒ toΒ attendΒ the AGMshouldΒ complete andΒ lodgeΒ theΒ accompanyingΒ noticeΒ of attendanceΒ and returnΒ itΒ toΒ theΒ Company's HΒ ShareΒ registrarΒ onΒ orΒ beforeΒ Friday,Β 3Β May 2013. The noticeΒ of attendanceΒ mayΒ beΒ deliveredΒ byΒ hand,Β byΒ postΒ orΒ byΒ faxΒ toΒ theΒ Company'sΒ HΒ ShareΒ registrarΒ Computershare HongKongΒ InvestorΒ ServicesΒ Limited,Β atΒ 17MΒ Floor,Β HopewellCentre,Β 183Β Queen'sΒ RoadΒ East,Β WanΒ Chai, HongKong.Β CompletionΒ andΒ returnΒ of theΒ noticeΒ ofattendanceΒ doΒ notΒ affectΒ theΒ rightΒ ofΒ a shareholderΒ to attend theΒ AGM.Β However,Β theΒ failureΒ toΒ returnΒ theΒ noticeΒ ofΒ attendancemayΒ resultΒ inΒ anΒ adjournmentΒ ofΒ theΒ AGM, iftheΒ numberΒ ofΒ sharesΒ carryingΒ theΒ right toΒ voterepresented byΒ theΒ shareholdersΒ proposingΒ toΒ attendΒ theΒ AGM bytheΒ noticeΒ ofΒ attendanceΒ doesΒ notΒ reachΒ moreΒ thanΒ halfΒ ofΒ theΒ totalΒ numberΒ ofΒ sharesΒ ofΒ theΒ Company carryingΒ theΒ rightΒ toΒ voteΒ atΒ theΒ AGM.
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3. Proxy
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EveryΒ shareholderΒ whoΒ hasΒ theΒ rightΒ toΒ attendΒ andΒ voteΒ atΒ the AGMisΒ entitledΒ toΒ appointΒ oneΒ orΒ moreΒ proxies, whetherΒ orΒ notΒ theyΒ areΒ membersΒ ofΒ theΒ Company,Β toΒ attendΒ andΒ voteΒ onΒ hisΒ behalfΒ atΒ theΒ AGM.
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AΒ proxyΒ shallΒ beΒ appointedΒ byΒ anΒ instrumentΒ inΒ writing.Β SuchΒ instrumentΒ shallΒ beΒ signedΒ byΒ theΒ appointerΒ or hisattorneyΒ dulyΒ authorised inΒ writing.Β IfΒ theappointerΒ isΒ aΒ legalΒ person,Β thenΒ the instrument shallΒ beΒ signed underΒ aΒ legalperson'sΒ sealΒ orΒ signedΒ byΒ itsΒ directorΒ orΒ anΒ attorneyΒ duly authorisedΒ inΒ writing. Theinstrument appointingtheΒ proxyΒ shallΒ beΒ depositedΒ atΒ theΒ Company'sΒ HΒ ShareΒ registrarΒ forΒ holdersΒ ofΒ HΒ SharesΒ notΒ less thanΒ 24Β hoursΒ beforeΒ theΒ timeΒ appointedΒ forΒ theΒ holdingΒ ofΒ theΒ AGM.Β IfΒ theΒ instrumentΒ appointingΒ theΒ proxy isΒ signedΒ byΒ aΒ personΒ authorised bythe appointer, the powerΒ ofΒ attorneyΒ orΒ otherΒ document ofΒ authorityΒ under whichΒ theΒ instrumentΒ isΒ signedΒ shallΒ beΒ notarised.Β TheΒ notarisedΒ powerΒ ofΒ attorneyΒ orΒ otherΒ documentΒ of authorityΒ shallΒ beΒ depositedΒ togetherΒ and atΒ the sameΒ timeΒ withΒ the instrument appointing the proxyΒ atΒ the Company'sΒ HΒ ShareΒ registrar.
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-Β IV-4Β -
APPENDIX IV NOTICE OF ANNUAL GENERAL MEETING
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4. OtherΒ businesses
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(i) TheΒ AGMΒ isΒ expectedtoΒ lastΒ forΒ twoΒ hours.Β ShareholdersΒ andΒ theirΒ proxiesΒ attendingΒ theΒ meetingΒ shall beresponsibleΒ forΒ theirΒ ownΒ travelingΒ andΒ accommodationΒ expenses.
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(ii) TheΒ addressΒ ofΒ ComputershareΒ HongΒ KongΒ InvestorΒ ServicesΒ LimitedΒ is:
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17MΒ Floor
HopewellΒ Centre
183Β Queen'sΒ RoadΒ East
Wanchai
HongΒ Kong
TelΒ No.:Β (852)Β 2862Β 8628
FaxΒ No.:Β (852)Β 2865Β 0990
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-Β IV-5Β -
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