ELL Environmental Holdings Limited — Proxy Solicitation & Information Statement 2019

Jan 21, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sinotrans Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0598)

2019 FIRST EXTRAORDINARY GENERAL MEETING

(1) PROPOSED INCREASE OF REGISTERED CAPITAL OF THE COMPANY;

(2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; (3) ESTIMATED GUARANTEE OF THE COMPANY FOR 2019; AND

(4) PROVISION OF FINANCIAL SERVICES BY CHINA MERCHANTS BANK TO THE COMPANY

A letter from the Board is set out on pages 3 to 7 of this circular.

A notice convening the EGM to be held at 1st Meeting Room, 11th Floor, Building 10/Sinotrans Tower B, No.5 Anding Road, Chaoyang District, Beijing 100029, the People’s Republic of China at 2:00 p.m. on 7 March 2019, a notice of attendance and a form of proxy for use at the EGM are available on the website of the Company and the website of the Hong Kong Stock Exchange.

Shareholders who intend to attend the EGM shall complete and return the notice of attendance in accordance with the instruction printed thereon on or before 14 February 2019. Shareholders who intend to appoint a proxy to attend the EGM shall complete and return the enclosed form of proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment of it, if you so wish.

21 January 2019

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
APPENDIX I PROPOSED AMENDMENTS TO THE
ARTICLES OF ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

• i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

• “A Share(s)” the domestic share(s) of the Company with nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange and traded in RMB

• “Articles of Association” the articles of association of the Company, as amended, modified or otherwise supplemented from time to time

• “Board” the board of Directors of the Company

• “China Merchants” 招商局集團有限公司 (China Merchants Group Limited*), a state wholly-owned enterprise established under the laws of the PRC under direct control of the SASAC, the controlling shareholder of the Company as at the Latest Practicable Date

• “China Merchants Bank” China Merchants Bank Co., Ltd., a joint stock company incorporated in the PRC with limited liability, the A shares of which are listed on the Shanghai Stock Exchange and the H shares of which are listed on the Hong Kong Stock Exchange

• “Company” 中國外運股份有限公司 (Sinotrans Limited), a joint stock limited company incorporated in the PRC with limited liability, whose H Shares are listed on the Hong Kong Stock Exchange and whose A Shares are listed on the Shanghai Stock Exchange

• “CSRC” China Securities Regulatory Commission (中國證券監督管理委員 會)

• “Domestic Shares” domestic invested share(s) of RMB1.00 each in the share capital of the Company

• “Director(s)” director(s) of the Company

• “EGM” the 2019 first extraordinary general meeting of the Company to be held at 2:00 p.m. on 7 March 2019 at 1st Meeting Room, 11th Floor, Building 10/Sinotrans Tower B, No. 5 Anding Road, Chaoyang District, Beijing 100029, the PRC for the purpose of considering, and if thought fit, approving, among other things, (i) the proposed increase of registered capital of the Company, (ii) the proposed amendments to the Articles of Association, (iii) the estimated guarantee of the Company for 2019, and (iv) the provision of financial services by China Merchants Bank to the Company

• 1 -

DEFINITIONS

“Group”	the Company, its subsidiaries and its jointly controlled entities
“H Share(s)”	overseas listed foreign invested share(s) of RMB1.00 each in the
	share capital of the Company, which are listed on the Hong Kong
	Stock Exchange and traded in Hong Kong dollars
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on the Hong Kong
	Stock Exchange
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Latest Practicable Date”	16 January 2019, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained in this circular
“Merger”	the merger by the Company of Sinotrans Air Transportation
	Development Co., Limited pursuant to the Merger Agreement
“Merger Agreement”	a merger agreement dated 28 February 2018 entered into between
	the Company and Sinotrans Air Transportation Development Co.,
	Limited in relation to, among other things, the Merger
“PRC”	the People’s Republic of China, for the purpose of this circular,
	excludes Hong Kong, the Macao Special Administrative Region of
	the PRC and Taiwan
“RMB”	Renminbi, the lawful currency of the PRC
“SASAC”	the State-owned Assets Supervision and Administration
	Commission of the State Council of the PRC
“Shanghai Listing Rules”	the rules governing the listing of securities on the Shanghai Stock
	Exchange
“Shanghai Stock Exchange”	The Shanghai Stock Exchange Limited
“Share(s)”	H Share(s) and A Share(s)
“Shareholder(s)”	holder(s) of the Shares
“SINOTRANS & CSC”	Sinotrans & CSC Holdings Co., Ltd., the controlling shareholder of
	the Company as at the Latest Practicable Date

• For the purpose of identification only

• 2 -

LETTER FROM THE BOARD

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 0598)

Chairman: Wang Hong

Executive Directors: Song Dexing (Vice Chairman) Li Guanpeng Song Rong Wang Lin Wu Xueming

Non-executive Director: Jerry Hsu

Independent non-executive Directors: Wang Taiwen Meng Yan Song Haiqing Li Qian

Registered Office: Sinotrans Plaza A A43, Xizhimen Beidajie Haidian District Beijing, 100082 People’s Republic of China

Headquarters: Building 10/Sinotrans Tower B, No. 5 Anding Road Chaoyang District Beijing, 100029 People’s Republic of China

Principal Place of Business in Hong Kong: Units F & G, 20/F., MG Tower, 133 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

21 January 2019

To the Shareholders

Dear Sir/Madam,

2019 FIRST EXTRAORDINARY GENERAL MEETING (1) PROPOSED INCREASE OF REGISTERED CAPITAL OF THE COMPANY; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; (3) ESTIMATED GUARANTEE OF THE COMPANY FOR 2019; AND (4) PROVISION OF FINANCIAL SERVICES BY CHINA MERCHANTS BANK TO THE COMPANY

1. INTRODUCTION

The purpose of this circular is to provide the Shareholders with information on, among other things, considering and approving (i) the proposed increase of registered capital of the Company; (ii) the proposed amendments to the Articles of Association; (iii) the estimated guarantee of the Company for 2019; and (iv) the provision of financial services by China Merchants Bank to the Company, so that the Shareholders may make an informed decision on voting in respect of the resolutions to be proposed at the EGM.

• 3 -

LETTER FROM THE BOARD

2. PROPOSED INCREASE OF REGISTERED CAPITAL OF THE COMPANY

Reference is made to the announcements of the Company dated 11 January 2019 and 14 January 2019 in relation to the issue and listing of A Shares of the Company on the Shanghai Stock Exchange.

As a result of the issue of an aggregate of 1,351,637,231 A Shares by the Company under the Merger Agreement and the conversion of all Domestic Shares into A Shares on 10 January 2019, the Company’s total issued share capital increased from 6,049,166,644 Shares (comprising 3,904,279,644 then Domestic Shares and 2,144,887,000 H Shares) to 7,400,803,875 Shares (comprising 5,255,916,875 A Shares and 2,144,887,000 H Shares) and the Company’s registered capital increased from RMB6,049,166,644 to RMB7,400,803,875 accordingly.

The Company has proposed a special resolution at the EGM for the Shareholders to consider and, if thought fit, approve the increase of the registered capital of the Company to reflect the changes in the total number of issued Shares and registered capital of the Company as a result of the issue of A Shares pursuant to the Merger Agreement.

3. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Reference is made to the announcement of the Company dated 21 January 2019 in relation to, among other things, the proposed amendments to the Articles of Associations. In light of the completion of the Merger, the proposed change of accounting standard of the Company and the relevant new amendments to the applicable laws, regulations and rules of the PRC, the Board proposed to seek the approval of Shareholders on the amendments to the Articles of Association and the primary changes of which are set out below:

• (a) allowing the Company to repurchase its Shares in accordance with the provisions of the Company Law of the PRC;

• (b) adding new provisions in accordance with the corporate governance requirements of the Shanghai Stock Exchange for listed companies, including provisions on Shareholders (including institutional investors)’ rights; restrictions on controlling shareholders, de facto controllers and their related parties to ensure independence of the Company; implementation measures for the cumulative voting right of Shareholders with respect to the election of two or more directors or supervisors; director’s qualification and service contract; prohibition on senior management of the Company to hold office other than director and supervisor in the Company’s controlling shareholders/de facto controllers without approval of the CSRC;

• (c) allowing the Company to prepare its financial statements under the PRC accounting standard or the accounting standard of the offshore stock exchange on which its Shares are listed.

Details of the amendments are set out in Appendix I to this circular.

The Company has proposed a special resolution at the EGM for the Shareholders to consider and, if thought fit, approve the amendments to the Articles of Association.

• 4 -

LETTER FROM THE BOARD

4. ESTIMATED GUARANTEE OF THE COMPANY FOR 2019

According to the business and operation needs of the Company, the Board had considered and approved the resolution in relation to the estimated guarantee of the Company for 2019. The guarantees proposed to be provided include:

(a) Financial credit guarantees

The Company proposed to provide credit guarantees with an amount of not more than RMB4.47 billion for its wholly-owned subsidiaries and not more than RMB0.43 billion for its non-wholly-owned subsidiaries.

The Company proposed to provide financing guarantees with an amount of not more than RMB14.27 billion for its wholly-owned subsidiaries, not more than RMB3.63 billion for its non-wholly-owned subsidiaries, and not more than RMB1.52 billion for its joint ventures.

(b) Business guarantees

The Company and its subsidiaries proposed to provide business guarantees for their whollyowned subsidiaries, non-wholly-owned subsidiaries and joint ventures with an amount of not more than RMB20 million, respectively.

The Company and its subsidiaries proposed to provide business guarantees for their subsidiaries in project logistics, tendering business, shipping booking agency business and warehousing services business without determining a fixed amount.

(c) Qualification guarantees

The Company proposed to provide guarantees for the futures delivery warehouse business of its wholly-owned subsidiaries, under which the Company will undertake the joint guarantee liabilities in total for the loading, storage, unloading, delivery and other businesses of futures commodities as carried out by its wholly-owned subsidiaries.

The respective amount of guarantees for wholly-owned subsidiaries, non-wholly-owned subsidiaries and joint ventures will be shared among the wholly-owned subsidiaries, non-wholly-owned subsidiaries and joint ventures, respectively.

According to the Shanghai Listing Rules, the abovementioned estimated guarantee of the Company for 2019 shall be submitted to the EGM for Shareholders’ approval. The provision of above-mentioned guarantees will be carried out strictly in compliance with the Hong Kong Listing Rules and the Articles of Association. The Company will comply with relevant applicable requirements under Chapter 14 and Chapter 14A of the Hong Kong Listing Rules and fulfil its information disclosure obligations (if required).

• 5 -

LETTER FROM THE BOARD

The Company has proposed an ordinary resolution at the EGM for the Shareholders to consider and, if thought fit, approve the abovementioned estimated guarantee of the Company for 2019. Such guarantee will commence from the date of approval by the Shareholders at the EGM until the date of the annual general meeting of the Company for the year 2019.

5. PROVISION OF FINANCIAL SERVICES BY CHINA MERCHANTS BANK TO THE COMPANY

According to the ordinary operation and capital management needs of the Company, the Board had considered and approved the resolution in relation to the provision of financial services by China Merchants Bank to the Company. China Merchants Bank will provide the deposit services and loan services to the Company. No caps have been specified in respect of the loan services provided by China Merchants Bank to the Company for each of 2019 and 2020. And the maximum amount of deposits to be placed by the Company with China Merchants Bank for each of 2019 and 2020 will not exceed RMB3.5 billion and RMB4 billion, respectively.

According to the Shanghai Listing Rules, as Mr. Li Jianhong, the chairman of China Merchants, which is the controlling shareholder of the Company, concurrently serves as the chairman of China Merchants Bank, the abovementioned provision of financial services by China Merchants Bank to the Company constitutes a related-party transaction of the Company and shall be submitted to the EGM for Shareholders’ approval.

The Company has proposed an ordinary resolution at the EGM for the Shareholders to consider and, if thought fit, approve the abovementioned provision of financial services by China Merchants Bank to the Company.

6. EGM

The H Share register of members of the Company will be closed from 2 February 2019 to 7 March 2019 (both days inclusive), during which no transfer of H Shares will be registered. Any holders of H Shares whose names appear on the H Share register of members of the Company at 4:30 p.m. on 1 February 2019, are entitled to attend and vote at the EGM of the Company after completing the registration procedures for attending the meeting. In order for the H Shareholders to be entitled to attend and vote at the EGM, persons holding H Shares shall lodge share transfer documents and the relevant H Share certificates with the Company’s H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited of Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, no later than 4:30 p.m. on 1 February 2019.

The EGM will be convened and held at 2:00 p.m. on 7 March 2019 at the 1st Meeting Room, 11th Floor, Building 10/Sinotrans Tower B, No.5 Anding Road, Chaoyang District, Beijing 100029, the PRC to consider and, if thought fit, approve (i) the proposed increase of registered capital of the Company, (ii) the proposed amendments to the Articles of Association, (iii) the estimated guarantee of the Company for 2019, and (iv) the provision of financial services by China Merchants Bank to the Company.

• 6 -

LETTER FROM THE BOARD

Notice of the EGM, together with the notice of attendance and proxy form, are despatched to Shareholders on 21 January 2019 and are available on the website of the Company and the website of the Hong Kong Stock Exchange. Shareholders who intend to attend the EGM shall complete and return the notice of attendance in accordance with the instruction printed thereon on or before 14 February 2019. Shareholders who intend to appoint a proxy to attend the EGM shall complete and return the enclosed form of proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment of it, if you so wish.

China Merchants, together with its associates (including SINOTRANS & CSC), are required under the Shanghai Listing Rules to abstain from voting at the EGM on the resolution to be proposed to approve the provision of financial services by China Merchants Bank to the Company. As at the Latest Practicable Date, China Merchants and its associates (including SINOTRANS & CSC) are interested in 3,904,279,644 A Shares and 107,183,000 H Shares, representing a total of approximately 54.20% of the total issued shares of the Company. Saved as disclosed above, to the best knowledge, information and belief of the Directors, having made all reasonable enquiries, as at the Latest Practicable Date, none of the Shareholders is required to abstain from voting on the proposed resolutions at the EGM.

Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, all votes at the EGM will be taken by poll. The Company will announce the results of the poll in accordance with the Hong Kong Listing Rules after the EGM.

7. DIRECTORS’ RECOMMENDATION

The Directors consider that (i) the proposed increase of registered capital of the Company, (ii) the proposed amendments to the Articles of Association, (iii) the estimated guarantee of the Company for 2019, and (iv) the provision of financial services by China Merchants Bank to the Company are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

Yours faithfully, By order of the Board of Sinotrans Limited Li Shichu Joint Company Secretary

• 7 -

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

Proposed amendments to the Articles of Association are underlined for ease of reference:

(I) ARTICLE 13 IS PROPOSED TO BE AMENDED AS:

“The operation objectives of the Company are: customers oriented, by adopting the market-oriented approach, and in reliance on the network and the information technology, to provide safe, fast, accurate, economic, convenient and satisfactory integrated logistic service and supply chain management service, thereby maximizing the shareholders’ interests.

The Company has implemented the development concepts of innovation, coordination, green, openness and sharing, so as to safeguard the legitimate rights of shareholders and ensure they are treated fairly, proactively fulfill its social responsibility, respect the basic rights and interests of stakeholders and effectively enhance the overall value of the enterprise. The Company is active in practicing the concept of green development to integrate ecological and environmental protection requirements into the development strategy and corporate governance process, and proactively participate in ecological civilization construction, thereby play a demonstrating and leading role in pollution prevention, resource conservation, ecological protection and other aspects.”

(II) ARTICLE 35 IS PROPOSED TO BE AMENDED AS:

“ ~~Subject to the approval of the relevant PRC regulatory authorities, t~~ The Company may in accordance with provisions of laws, administrative regulations, departmental rules, listing rules of the place where the Company is listed and the ~~procedures set out in these~~ Articles of Association repurchase its ~~issued~~ shares in the following circumstances:

• (i) ~~cancel its shares in order to r~~ educing the registered capital of the Company;

• (ii) merging with another company or other companies which holds the shares of the Company;

• (iii) utilizing ~~granting~~ shares in employee stock ownership plan or ~~to the staff of the Company~~ as equity incentives;

• (iv) repurchasing the shares upon request of its shareholders who vote against resolutions at a general meeting in connection with a merger and division of the Company;

• (v) ~~other circumstances as permitted by the laws and administrative regulations and approved by the relevant competent authority where the shares of the Company are listed. u~~ tilizing shares for conversion of convertible bonds issued by the Company which are convertible into shares; and

• (vi) as required for maintenance of the Company’s value and shareholders’ rights and interests.

Save for the abovementioned circumstances, the Company may not engage in trading of its own shares.”

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

(III) ARTICLE 36 IS PROPOSED TO BE AMENDED AS:

“If the Company repurchases its own shares due to the reasons as stated in (i), (ii) or (iv) of paragraph one of Article 35 hereof ~~Upon the approval of the relevant PRC regulatory authorities,~~ it may do so by one of ~~the Company may repurchase its own shares by one of~~ the following methods:

• (i) making a buyback offer to its shareholders for the repurchase of shares on a pro rata basis;

• (ii) by way of public trading at the appropriate securities exchange;

• (iii) by entering into independent agreements for the repurchase of the Company’s shares outside the appropriate securities exchange; or

• (iv) other ways allowed by the laws and administrative regulations, listing rules of the place where the Company is listed, and as approved by the relevant competent authorities.

If the Company repurchases its own shares due to the reasons as stated in (iii), (v) and (vi) of paragraph one of Article 35 hereof, the transaction(s) shall be carried out in a public and centralized manner.

The Company shall perform its information disclosure obligation according to the provisions of the relevant laws and administration regulations in repurchasing its own shares.”

(IV) ARTICLE 38 IS PROPOSED TO BE AMENDED AS:

“In the event that the Company purchases its shares due to the reasons stated in (i) to (ii ~~i)~~ of paragraph one of Article 35 hereof, a resolution thereon shall be made at a shareholders’ general meeting. Any acquisition of domestic shares of the Company due to reasons as stated in (iii), (v) and (vi) of paragraph one of Article 35 hereof shall be subject to a resolution of the Board meeting where over twothirds of the directors are present, but shall be exempt from approval of general meetings.

In the event that the Company purchases its ordinary shares in accordance with Article 35 of the Articles of Association due to the reason stated in (i), the shares shall be cancelled within ten days from the date of purchase; in the event that it is due to the reason stated in (ii) or (iv), the shares shall be transferred or cancelled within six months; in the event due to the reasons stated in (iii), (v) and (vi) the number of shares of the Company held by the Company itself in aggregate shall not exceed 10% of its total shares in issue and shall be transferred or cancelled within 3 years.

~~The ordinary shares of the Company purchased by the Company in accordance with Article 35(iii) shall not exceed five percent of the total issued shares of the Company; the funds used for the purchase shall be paid out of the after-tax profits of the Company; the shares so purchased shall be transferred to the employees within one year.~~

In the event of share cancellation, the Company shall apply to the relevant authority for registration of the change in its registered capital.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

The registered capital of the Company shall be reduced by the amount of the aggregate par value of the cancelled shares.

If there are other provisions in the laws and regulations, normative rules and relevant regulations as prescribed by the securities regulatory authorities located at the places where the Company’s shares are listed on the aforesaid relevant matters in respect of share repurchase, such provisions shall prevail.”

(V) ARTICLE 55 IS PROPOSED TO BE AMENDED AS:

“A shareholder of the Company is a person who lawfully holds shares and who is registered in the shareholders’ register.

Shareholders enjoy rights and assume obligations according to the class and amount of shares held by them. Shareholders holding shares of the same class enjoy the same rights and assume the same obligations.

The Company shall protect the rights of shareholders according to the laws, and pay attention to protect the legitimate rights and interests of minority shareholders. The Articles of Association of the Company, resolutions of shareholders’ general meeting or resolutions of the Board meeting shall be in compliance with relevant regulations and laws, and shall not deprive or restrict any legal rights of shareholders. The Company shall establish an unimpeded and effective communication channel with shareholders to guarantee shareholders’ rights to be aware of major matters of the Company and participate in decision-making and supervision. Shareholders shall have the right to safeguard their legitimate rights and interests through civil proceedings or other legal means in accordance with the relevant laws and administrative regulations.

Institutional investors shall, in accordance with laws and regulations and the Articles of Association of the Company, exercise the right of voting, the right of inquiry, the right of recommendation and other relevant shareholder rights, and participate in corporate governance reasonably and play an active role in corporate governance by participating in decision-making for major issues, recommending candidates for directors and supervisors, and monitoring the performance of directors and supervisors.

In the event of joint holders, on the death of any one of such joint holders, the survivor(s) shall be the only person or persons recognized by the Company as having the title to any such shares, but the board of directors may require the existing joint holders to supply such evidence of death as it may deem fit for the purpose of making amendments to the particulars in the register of shareholders. Only the person whose name stands first in the register of shareholders as one of the joint holders of any share shall be entitled to the delivery of the certificate relating to such share, to receive notices from the Company, to attend and exercise all the voting powers attached to such shares at general meetings of the Company, and any notice given to such person shall be deemed notice to all the joint holders.”

(VI) ARTICLE 63 IS PROPOSED TO BE AMENDED AS:

“The controlling shareholders and de facto controllers of the Company shall not prejudice the Company’s interests by taking advantage of their connections. They shall be liable for compensation for losses caused to the Company as a result of their violation.

• 10 -

APPENDIX I

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The controlling shareholders and de facto controllers of the Company shall have an obligation of good faith towards the Company and public shareholders and shall respect the independence of the Company. The controlling shareholders shall exercise the rights of an investor in strict compliance with the law. They may not prejudice the legitimate rights and interests of the Company and public shareholders by means of the distribution of profits, restructuring of assets, foreign investment, appropriation of funds, offering security for loans and other means, and they may not prejudice the interests of the Company and public shareholders by taking advantage of their controlling position.

The controlling shareholders, de facto controllers and their related parties shall not interfere with normal decision-making procedure of the Company in contravention of laws, administrative regulations, departmental rules, normative rules and Articles of Association. Any controlling shareholders intending to nominate candidates to be directors and supervisors shall in strict compliance with conditions and procedures as required by laws, regulations and Articles of Association. Any candidates for the directors and supervisors nominated by the controlling shareholders shall be equipped with the relevant professional knowledge and decision-making and supervision capacity.

If there are any changes in control over the Company, all parties concerned shall take effective actions to maintain stable operation of the Company during the transition period. If any material issues arisen, the Company shall report to CSRC and its representative office and the stock exchange.

In addition to the obligations imposed by laws, administrative regulations or required by the stock exchange on which shares in the Company are listed, a controlling shareholder shall not exercise his voting rights in respect of the following matters in a manner prejudicial to the interests of the shareholders generally or of some of the shareholders:

• (i) to relieve a Director or Supervisor of his duty to act honestly in the best interests of the Company;

• (ii) to approve the expropriation by a Director or Supervisor (for his own benefit or for the benefit of another person), in any manner, of the Company’s assets, including (without limitation) opportunities beneficial to the Company;

• (iii) to approve the expropriation by a Director or Supervisor (for his own benefit or for the benefit of another person) of the individual rights of other shareholders, including (without limitation) distribution rights and voting rights, but excluding the Company’s restructuring submitted to shareholders’ general meeting for approval in accordance with the Articles of Association.”

(VII) ARTICLE 112 IS PROPOSED TO BE AMENDED AS:

“A list of candidates for directors and supervisors shall be submitted as a proposal to a shareholders’ general meeting for voting. The election of directors and supervisors shall fully reflect opinions of minority shareholders.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

~~If the controlling stake of the controlling shareholders accounts for more than 30%, the cumulative~~

~~voting system may be implemented in the general meeting for the voting of electing more than two directors.~~

If the number of shares of the Company which the sole shareholder and its concerted parties are interested in accounts for 30% or more, the cumulative voting system shall be implemented for voting on the election of directors and supervisors at a shareholders’ general meeting. The Board of directors shall announce to shareholders the biographical details and general information on the candidates for directors and supervisors.

~~For voting on the election of directors and supervisors at a shareholders’ general meeting, the cumulative voting system may be implemented in accordance with the provisions hereof or the resolution at the shareholders’ general meeting.~~

For the purpose of the preceding paragraph, the term “cumulative voting system” shall mean that when two or more directors or supervisors are elected at a shareholders’ general meeting, each of the voting rights equivalent to the number of directors or supervisors to be elected may be used in a pool. ~~The Board of Directors shall announce to shareholders the biographical notes and general information on the candidates for directors and supervisors.~~

The implementation details of the cumulative voting system are as follows:

Prior to voting with respect to the election for director or supervisor at the shareholders’ general meeting, the chairperson of the meeting shall inform the attending shareholders expressly that the cumulative voting is applied for the candidates for director or supervisor and the Boards of directors must prepare votes suitable for applying the cumulative voting. The secretary of the Board of directors shall describe and explain the cumulative voting method and vote filling method to ensure that the shareholders correctly exercise their rights to cast votes.

At the time of the application of cumulative voting to the election of directors, independent directors and other directors shall be elected separately, so as to ensure the proportion of independent directors in the Board of directors of the Company.

Shareholders may freely allot their voting rights among the candidates for directors and supervisors and may vote for several candidates separately or only one candidate. Where a shareholder exercises more voting rights than all the voting rights he holds, such voting shall be invalid; if a shareholder exercises less voting rights than all the voting rights he holds, such voting shall be valid and the difference shall be regard as abstention. Where the last two or more candidates have the same number of votes and all of them being elected would result in the number of directors or supervisors elected exceeding the number of candidates that should be elected, such candidates shall be re-elected in accordance with the prescribed procedures in the Articles of Association. If the number of directors or supervisors elected is less than the number specified in the Articles of Association, the Company shall restart the cumulative voting procedure for the vacancy.”

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

(VIII) ARTICLE 141 IS PROPOSED TO BE AMENDED AS:

“The Company shall enter into contracts with the directors to clarify the rights and obligations between the Company and the directors, the term of office of the directors, the liability of the directors for any breach of the laws and regulations and the Articles of Association, and the compensation if such contracts are terminated by the Company in advance for reasons.

The members in the Board of directors shall be equipped with the knowledge, skills and qualities required for carrying out their duties. Directors shall comply with the relevant requirements of the laws and regulations and the Articles of Association, be faithful, diligent, discreet and fulfill their promises. A director who violates any laws, administrative regulations, rules of regulatory authorities or the Articles of Association during the course of performing his duties shall be liable for indemnification to any loss so caused to the Company.”

(IX) ARTICLE 144 IS PROPOSED TO BE AMENDED AS:

“The Board is accountable to the shareholders’ general meeting and shall exercise the following powers:

• (i) to be responsible for the convening of the shareholders’ general meeting and to report on its work to the shareholders’ general meeting;

• (ii) to implement the resolutions of the shareholders’ general meetings;

• (iii) to decide on the Company’s business plans and investment plans;

• (iv) to formulate the Company’s annual budget and final financial accounts;

• (v) to formulate the Company’s profit distribution plan and plan for making up losses;

• (vi) to formulate plans for the Company’s proposals for increases or reductions of its registered capital and the issue of and listing of corporate debentures or other securities;

• (vii) to draft plans for material acquisition, share repurchase, merger, division, dissolution or change in corporate form;

• (viii) to determine matters relating to the Company’s external investment, asset acquisition and disposal, asset pledge, asset management mandate, related party transactions and external guarantee within the authorisation of the general meeting;

• (ix) to determine the establishment of the Company’s internal management structure;

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APPENDIX I

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

• (x) to appoint or dismiss the Company’s president and the secretary of the Board; and pursuant to the president’s nominations to appoint or dismiss the vice presidents, the chief financial officer, and the chief information technology officer and other senior officers of the Company and decide on their remuneration rewards and penalties;

• (xi) to establish the Company’s basic management system, including basic compliance management system;

• (xii) to formulate proposals for any amendment to the Company’s Articles of Association;

• (xiii) to deal with information disclosure of the Company;

• (xiv) to propose to the general meeting for appointment or replacement of the accounting firms serving as the auditors of the Company;

• (xv) to receive work report submitted by the president, ~~and t~~ o review his performance and to appraise effectiveness of the compliance management of the Company;

• (xvi) to exercise other duties and powers specified in the laws, administrative regulations, rules of regulatory authorities, listing rules of the stock exchange(s) on which the Company is listed or the Articles of Association and conferred by the shareholders at general meetings.

Matters beyond the scope authorized by the general meeting shall be submitted to the general meeting for consideration.

Except the Board’s resolutions in respect of the matters specified in the above items (vi), (vii) and (xii), which shall be passed by two-thirds or more of the Directors, the Board resolutions in respect of all other matters may be passed by more than half of the directors unless otherwise expressly specified in the listing rules of the jurisdiction where the Company is listed or the Articles of Association.

No resolution on any connected transaction of the Company shall be valid unless it is signed by the independent directors.”

(X) ARTICLE 158 IS PROPOSED TO BE AMENDED AS:

“The Board of Directors shall keep minutes of all decisions on matters considered by the convened and the unconvened board meetings in the Chinese language. The opinions of the independent directors shall be specified in the resolutions of the Board meetings. The minutes of each Board meeting shall be delivered to all directors for their comments as soon as possible. Directors who wish to amend or supplement the minutes shall, within one week upon receipt of the minutes, deliver their proposed amendments to the Chairman. After the minutes have been finalized, directors who were present at the relevant meeting, secretary of the Board and the person who recorded the proceedings of the relevant meeting shall sign the minutes. The minutes of the Board meetings shall be kept at the address of the Company in the PRC. A full copy of the minutes of shall be delivered to each director as soon as possible.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

Minutes of meetings of the Board of Directors shall contain the following particulars:

• (i) the date and venue of the meeting and the name of the convener;

• (ii) the names of the attending directors and the names of the directors (proxies) attending the meeting upon appointment by other directors;

• (iii) the meeting agenda;

• (iv) the gist of the statements;

• (v) the voting method for, and outcome of, each matter that was the subject of a resolution (the results of the vote shall state the number of votes for, votes against and abstentions).

The Directors shall accept responsibility for the Board resolutions. Where the Board resolutions are in breach of laws, administrative rules or the Articles of Association resulting in heavy losses to the Company, the Directors involved in the resolutions shall keep the Company indemnified, unless they have been proved to have raised objection to such resolutions, and this has been noted in the minutes.

Minutes of board meetings shall be kept as the Company’s archives for at least ten (10) years.”

(XI) ARTICLE 165 IS PROPOSED TO BE AMENDED AS:

“The Company shall have one president, who shall be appointed or dismissed by the Board.

The Company shall have certain vice presidents, a chief financial officer, a chief information technology officer and certain senior officers (based on the needs of work), who shall assist the president in his work. The vice presidents, the chief financial officer, and the chief information technology officer and other senior officers shall be nominated by the president and appointed or dismissed by the Board.

The term of office of the president is three (3) years, renewable upon re-election.

~~Persons assuming offices other than director in the controlling shareholder and/or in the ultimate beneficial owner of the Company shall not serve as senior officers of the Company, except as approved by the exemption of the CSRC.~~ Senior officers of the Company shall not assume administration offices other than director and supervisor in the controlling shareholder and in the de facto controller, except as exempted or approved by the CSRC.

The Company shall enter into engagement contracts with the senior officers to clarify the rights and obligations between both parties. The appointment and dismissal of senior officers shall comply with the statutory procedures, and be disclosed in a timely manner.”

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX I

(XII) ARTICLE 202 IS PROPOSED TO BE AMENDED AS:

“The Company shall, with the prior approval of shareholders in general meeting, enter into a contract in writing with a director or supervisor wherein his emoluments are stipulated. The aforesaid emoluments include:

• (i) emoluments in respect of his service as a director, supervisor or senior officer of the Company;

• (ii) emoluments in respect of his service a director, supervisor or senior officer of any subsidiary of the Company;

• (iii) emoluments in respect of the provision of other services in connection with the management of the affairs of the Company and any of its subsidiaries; and

• (iv) payment by way of compensation for loss of office, or as consideration for or in connection with his retirement from office.

Except under a contract entered into in accordance with the foregoing, no proceedings may be initiated by a director or supervisor against the Company for anything due to him in respect of the above matters.

The compensation in relation to early dismissal of directors, supervisors and senior officers stipulated in Articles of Association or relevant contracts shall follow the principle of fairness and shall not damage the legitimate rights and interests of the Company or transfer interests.”

(XIII) ARTICLE 208 IS PROPOSED TO BE AMENDED AS:

“Financial statements of the Company may ~~shall~~ be prepared in accordance with ~~international accounting principles or accounting principles of the place its shares are listed overseas as well as~~ the PRC accounting principles ~~and regulations o~~ r accounting principles of the place where the shares of the Company are listed overseas. In the case of any material inconsistency between financial statements prepared in accordance with the two kinds of accounting principles, the same shall be indicated in such financial statements. In distributing the after-tax profits by the Company for any accounting year, the after-tax profits in such financial statements which are less shall prevail.”

(XIV) ARTICLE 209 IS PROPOSED TO BE AMENDED AS:

“The Company shall publish financial reports or other financial information in accordance with the regulatory rules in the place where its shares are listed. The interim results or financial information published or disclosed by the Company may ~~shall~~ be prepared pursuant to PRC accounting principles ~~and regulations as well as international accounting principles~~ or accounting principles of the place where the shares of the Company are listed overseas.”

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