TIDMAIRC
RNS Number : 1163Y
Air China Ld
02 May 2023
If you are in any doubt as to any aspect of this circular, you
should consult a stockbroker or other registered dealer in
securities, bank manager, solicitor, professional accountant or
other professional adviser.
If you have sold or transferred all your shares of Air China
Limited, you should at once hand this circular and the form of
proxy and notice of attendance to the purchaser or transferee or to
the bank, stockbroker or other agent through whom the sale was
effected for transmission to the purchaser or the 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.
AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's
Republic of China with limited liability)
(Stock Code: 00753)
(1) CONTINUING CONNECTED TRANSACTION:
ENTERING INTO NEW TRADEMARK LICENSE FRAMEWORK AGREEMENT;
(2) DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED
TRANSACTIONS:
PROPOSED REVISION OF ANNUAL CAP AND ENTERING INTO FINANCIAL
SERVICES AGREEMENTS;
(3) GENERAL MANDATE TO ISSUE DEBT FINANCING INSTRUMENTS
AND
NOTICE OF ANNUAL GENERAL MEETING
Independent Financial Adviser to the Independent Board Committee
and the Independent Shareholders
A letter from the Board is set out on pages 6 to 45 of this
circular.
A letter from the Independent Board Committee, containing its
advice to the Independent Shareholders of the Company, is set out
on pages 46 to 47 of this circular.
A letter from the Independent Financial Adviser, containing its
advice to the Independent Board Committee and the Independent
Shareholders of the Company, is set out on pages 48 to 69 of this
circular.
A notice convening the AGM to be held at 11:00 a.m. on Thursday,
25 May 2023 at The Conference Room C713, No. 30, Tianzhu Road,
Airport Industrial Zone, Shunyi District, Beijing, the PRC, is set
out on pages 86 to 88 of this circular. Whether or not you are able
to attend the AGM, you are requested to complete and return the
accompanying form of proxy in accordance with the instructions
printed thereon as soon as possible but in any event not less than
24 hours before the time appointed for convening the AGM or any
adjournment thereof. Completion and return of the form of proxy
will not preclude you from attending and voting in person at the
AGM or any adjournment thereof should you so wish.
3 May 2023
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . 1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
6
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
. . . . . 7
II. Entering into the New Trademark License Framework Agreement . . . . . . . . . . . .
7
III. Non-exempt Continuing Connected Transactions . . . . . . .
. . . . . . . . . . . . . . . . .
11
IV. Details of Other Resolutions . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. 40
V. AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
. . . . 44
VI. Recommendation . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. 45
VII. Additional Information . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. 45
LETTER FROM THE INDEPENT BOARD COMMITTEE . . . . . . . . . . . .
. . . . . . . 46
LETTER FROM BAOQIAO PARTNERS . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
48
APPIX I - GENERAL INFORMATION . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
70
APPIX II - 2022 WORK REPORT OF THE BOARD OF DIRECTORS . . . . . . . .
74
APPIX III - 2022 WORK REPORT OF THE SUPERVISORY COMMITTEE . . . . 82
NOTICE OF ANNUAL GENERAL MEETING . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
86
In this circular, unless the context otherwise requires, the
following expressions have the following meanings:
"AGM"
the annual general meeting of the Company for the year ended 31
December 2022 to be held on
Thursday, 25 May 2023
"Air China Cargo"
Air China Cargo Co., Ltd., a company incorporated under the laws
of the PRC with limited liability and was owned as to approximately
45% by CNAHC as at the Latest Practicable Date, being a subsidiary
of CNAHC. Air China Cargo is principally engaged in air cargo and
mail transportation business.
"ACC Financial Services Agreement"
the financial services framework agreement entered into between
Air China Cargo and CNAF on 30 March 2023, with a term commencing
from 1 January 2024 and ending on 31 December 2026
"ACC Group"
Air China Cargo and its wholly-owned and controlling
subsidiaries
"ACC New Annual Caps"
RMB0 billion, RMB2 billion and RMB2.5 billion, being the
proposed maximum daily balance of loans (including accrued
interests) to be provided by CNAF to the ACC Group under the ACC
Financial Services Agreement for the three years ending 31 December
2024, 2025 and 2026, respectivey
"Air China Financial Services Agreement"
the financial services framework agreement entered into between
the Company and CNAF on 30 March 2023, with a term commencing from
1 January 2024 and ending on 31 December 2026
"Air China New Annual Caps"
RMB22 billion, RMB23 billion and RMB23 billion, being the
proposed maximum daily balance of deposits (including accrued
interests) to be placed by the Group with CNAF under the Air China
Financial Services Agreement for the three years ending 31 December
2024, 2025 and 2026, respectively
"Articles of Association"
the articles of association of the Company
"Board"
the board of Directors of the Company
"Cathay Pacific"
Cathay Pacific Airways Limited
"CBIRC"
China Banking and Insurance Regulatory Commission
"CNACG"
China National Aviation Corporation (Group) Limited, a company
incorporated under the laws of Hong Kong and a wholly-owned
subsidiary of CNAHC, directly holding approximately 9.61% of the
issued share capital of the Company as at the Latest Practicable
Date
"CNAF"
China National Aviation Finance Co., Ltd., a company
incorporated under the laws of the PRC with limited liability and
was held as to approximately 51% and 49% by the Company and CNAHC
as at the Latest Practicable Date, being a connected subsidiary of
the Company and thus a connected person of the Company under the
Hong Kong Listing Rules. CNAF is primarily engaged in providing
financial services to member companies of CNAHC Group
"CNAHC"
China National Aviation Holding Corporation Limited, a PRC
state- owned enterprise and the controlling shareholder of the
Company, directly and through its wholly-owned subsidiary CNACG,
holding approximately 50.14% of the issued share capital of the
Company in aggregate as at the Latest Practicable Date. CNAHC
primarily operates all the state-owned assets and state-owned
equity interests invested by the State in CNAHC and its invested
entities, aircraft leasing and aviation equipment and facilities
maintenance businesses. SASAC is a controlling shareholder and de
facto controller of CNAHC
"CNAHC Financial Services Agreement"
the financial services framework agreement entered into between
CNAHC and CNAF on 30 March 2023, with a term commencing from 1
January 2024 and ending on 31 December 2026
"CNAHC Group"
CNAHC and the corporations or other entities in which CNAHC
holds 30% or more equity interests or voting powers or the majority
of the directors of which is controlled, directly or indirectly, by
CNAHC, as well as any other CNAHC Group member company which, in
accordance with the listing rules of the places where the shares of
the Company are listed as in force and as amended from time to
time, is a connected person or related party of the Company
(excluding the Group, Air China Cargo and the corporations or other
entities in which Air China Cargo holds 30% or more equity
interests or voting powers or the majority of the directors of
which are controlled, directly or indirectly, by Air China
Cargo)
"CNAHC New Annual Caps"
RMB5.5 billion, RMB5.5 billion and RMB5.5 billion, being the
proposed maximum daily balance of loans (including accrued
interests) to be provided by CNAF to the CNAHC Group under the
CNAHC Financial Services Agreement for the three years ending 31
December 2024, 2025 and 2026, respectively
"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. The Company is principally engaged in
providing air passenger, air cargo and related services
"CSRC"
the China Securities Regulatory Commission
"Director(s)"
the director(s) of the Company
"Existing Air China Financial Services Agreement"
the financial services framework agreement renewed by the
Company and CNAF on 28 August 2020, for a term commencing from 1
January 2021 and ending on 31 December 2023
"Existing ACC Financial Services Agreement"
the financial services framework agreement entered into between
Air China Cargo and CNAF on 25 November 2022, with a term ending on
31 December 2023
"Existing CNAHC Financial Services Agreement"
the financial services framework agreement renewed by CNAHC and
CNAF on 28 August 2020, for a term commencing from 1 January 2021
and ending on 31 December 2023
"Existing Financial Services Agreements"
the Existing Air China Financial Services Agreement, the
Existing CNAHC Financial Services Agreement and the Existing ACC
Financial Services Agreement
"Existing Trademark License Framework Agreement "
the trademark license framework agreement entered into between
the Company and CNAHC on 28 August 2020, with a term commencing
from 1 January 2021 and ending on 31 December 2023
"Financial Services Agreements"
the Air China Financial Services Agreement, the CNAHC Financial
Services Agreement and the ACC Financial Services Agreement
"Group"
the Company and its subsidiaries
"Hong Kong"
Hong Kong Special Administrative Region of the PRC
"Hong Kong Listing Rules"
The Rules Governing the Listing of Securities on the Stock
Exchange
"Independent Board Committee"
a board committee comprising Mr. Li Fushen, Mr. He Yun, Mr. Xu
Junxin and Ms. Winnie Tam Wan-chi, all being the independent
non-executive Directors, to advise the Independent Shareholders on
the Non-exempt Continuing Connected Transactions
"Independent Financial Adviser" or "BaoQiao Partners"
BaoQiao Partners Capital Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 6 (advising on
corporate finance) regulated activities under the SFO, being the
independent financial adviser to the Independent Board Committee
and the Independent Shareholders to advise on the Non-exempt
Continuing Connected Transactions, and also being the independent
financial adviser to advise on the term of the New Trademark
License Framework Agreement
"Independent Shareholders"
the Shareholders who do not have material interests in the Non-
exempt Continuing Connected Transactions and the transaction under
the New Trademark License Framework Agreement
"Latest Practicable Date"
26 April 2023, being the latest practicable date prior to the
printing of this circular for ascertaining certain information
contained herein
"NAFMII"
National Association of Financial Market Institutional
Investors
"New Trademark License Framework Agreement"
the trademark license framework agreement dated 30 March 2023
entered into between the Company and CNAHC, with a term commencing
from 1 January 2024 and ending on 31 December 2033
"Non-exempt Continuing Connected Transactions"
the Proposed Revision of Annual Cap, the deposit services
provided by CNAF to the Group under the Air China Financial
Services Agreement within the Air China New Annual Caps, the loan
services provided by CNAF to the CNAHC Group under the CNAHC
Financial Services Agreement within the CNAHC New Annual Caps and
the loan services provided by CNAF to the ACC Group under the ACC
Financial Services Agreement within the ACC New Annual Caps
"PBOC"
People's Bank of China
"Percentage Ratio"
has the meaning ascribed to it under the Hong Kong Listing
Rules
"PRC"
the People's Republic of China (other than, for the purpose of
this circular only, Hong Kong, Macau and Taiwan)
"Proposed Annual Caps"
Revised Annual Cap, Air China New Annual Caps, CNAHC New Annual
Caps and ACC New Annual Caps
"Proposed Revision of Annual Cap"
Revision of the maximum daily balance of deposits (including
accrued interests) to be placed by the Group with CNAF under the
Existing Air China Financial Services Agreement for the year ending
31 December 2023, from RMB15 billion to RMB20 billion
"Revised Annual Cap"
RMB20 billion, being the proposed revised maximum daily balance
of deposits (including accrued interests) to be placed by the Group
with CNAF under the Existing Air China Financial Services Agreement
for the year ending 31 December 2023
"RMB"
Renminbi, the lawful currency of the PRC
"SASAC"
The State- owned Assets Supervision and Administration Commission of the State Council
"Shandong Aviation Group Corporation"
Shandong Aviation Group Company Limited and its wholly-owned and
controlled subsidiaries
"Shandong Aviation Group Company"
Shandong Aviation Group Company Limited
"SSE Listing Rules"
the Rules Governing the Listing of Stocks on Shanghai Stock
Exchange
"Shareholder(s)"
holder(s) of the shares of the Company
"SFO"
the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong)
"Stock Exchange"
The Stock Exchange of Hong Kong Limited
"Supervisor(s)"
the supervisor(s) of the Company
"Supplemental Agreement"
the agreement for the matters in relation to the related
(connected) transactions involving Air China Cargo entered into
among the Company, CNAHC, Air China Cargo and CNAF on 20 September
2022, pursuant to which, among other things, Air China Cargo will,
as an independent entity, enter into financial services
agreement(s) with CNAF separately, and such transactions will no
longer be regulated by the financial services agreement entered
into between CNAF and CNAHC; the sum of the actual amount incurred
from such transactions and the actual transaction amount incurred
under the Existing CNAHC Financial Services Agreement shall not
exceed the annual caps for the transaction amount of the Existing
CNAHC Group Framework Agreement as approved at the Company's
general meeting
"Trademark License Agreement"
the trademark license agreement entered into between the Company
and CNAHC on 1 November 2004, with a term ended on 31 December
2014
Directors:
Non-Executive Directors:
Mr. Feng Gang Mr. Patrick Healy
Executive Directors:
Mr. Ma Chongxian (Chairman)
Mr. Wang Mingyuan
Employee Representative Director :
Mr. Xiao Peng
Independent Non-Executive Directors:
Mr. Li Fushen
Mr. He Yun
Mr. Xu Junxin
Ms. Winnie Tam Wan-chi
Registered Address:
1st Floor-9th Floor 101,
Building 1
30 Tianzhu Road
Shunyi District
Beijing, the PRC
Principal Place of Business in Hong Kong:
5th Floor, CNAC House
12 Tung Fai Road
Hong Kong International Airport
Hong Kong
3 May 2023
To the Shareholders
Dear Sir or Madam,
(1) CONTINUING CONNECTED TRANSACTION:
ENTERING INTO NEW TRADEMARK LICENSE
FRAMEWORK AGREEMENT;
(2) DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED
TRANSACTIONS:
PROPOSED REVISION OF ANNUAL CAP AND ENTERING INTO FINANCIAL
SERVICES AGREEMENTS;
(3) GENERAL MANDATES TO ISSUE DEBT FINANCING INSTRUMENTS
AND
NOTICE OF ANNUAL GENERAL MEETING
I. INTRODUCTION
The AGM of the Company will be held at 11:00 a.m. on Thursday,
25 May 2023.
The resolutions to be proposed at the AGM for the Shareholders'
approval include: (1) the resolution on the 2022 work report of the
Board; (2) the resolution on the 2022 work report of the
supervisory committee; (3) the resolution on the financial reports
for the year 2022; (4) the resolution on the profit distribution
proposal for the year 2022; (5) the resolution on the unrecovered
losses of the Company exceeding one-third of the total amount of
its paid-up share capital; (6) the resolution on the re-appointment
of international auditor, domestic auditor and internal control
auditor for the year 2023; (7) the resolution on the entering into
of the new Continuing Related Transactions Framework Agreement on
Financial Services between the Company and CNAF and the application
for the annual caps of the transactions thereunder for the years
from 2023 to 2026; (8) the resolution on the entering into of the
new Continuing Related Transactions Framework Agreement on
Financial Services between CNAHC and CNAF and the application for
the annual caps of the transactions thereunder for the years from
2023 to 2026; (9) the resolution on the entering into of the new
Continuing Related Transactions Framework Agreement on Financial
Services between Air China Cargo and CNAF and the application for
the annual caps of the transactions thereunder for the years from
2023 to 2026; (10) the resolution on the entering into of the
Continuing Related Transactions Framework Agreement on Trademark
License between the Company and CNAHC; (11) resolution on the grant
of mandate to the Board of the Company to issue debt financing
instruments.
The above resolution no. 11 is a special resolution and the rest
resolutions are ordinary resolutions.
The purpose of this circular is to provide you with all the
information reasonably necessary to enable you to make an informed
decision on voting in respect of the relevant resolutions at the
AGM. For details of the above resolutions no. 1 to 6 and resolution
no.11, please refer to the section headed "V. DETAILS OF OTHER
RESOLUTIONS" in this circular; for details of the above resolutions
no. 7 and 9, please refer to the section headed "III. NON-EXEMPT
CONTINUING CONNECTED TRANSACTIONS" in this circular; for details of
the above resolution no. 10, please refer to the section headed
"II. ENTERING INTO THE NEW TRADEMARK LICENSE FRAMEWORK AGREEMENT"
in this circular.
II. ENTERING INTO THE NEW TRADEMARK LICENSE FRAMEWORK AGREEMENT
Reference is made to (i) the announcement of the Company dated
28 August 2020 in relation to the Existing Trademark License
Framework Agreement between the Company and CNAHC; and (ii) the
announcement of the Company dated 30 March 2023 in relation to the
New Trademark License Framework Agreement entered into between the
Company and CNAHC.
At the time of the incorporation of the Company, CNAHC
contributed certain registered trademarks to the Company at nil
consideration as the Company's intangible assets. As the trademarks
are related to the daily business of CNAHC Group, the Company
licensed certain trademarks to CNAHC Group at nil consideration for
their use in its ordinary course of business as a reciprocal
arrangement pursuant to the Trademark License Agreement since 1
November 2004. Given that it is necessary for CNAHC Group to
continue using such trademarks for its future business and that
CNAHC Group has duly performed its
obligations under the Trademark License Agreement without
causing any detriment to the reputation recognition of the
Company's brands, the Company has renewed the above reciprocal
arrangement by way of entering into new framework agreements.
As the Existing Trademark License Framework Agreement will
expire on 31 December 2023, to maintain the consistency of the
business operation and renew the above reciprocal arrangement, on
30 March 2023, the Company and CNAHC entered into the New Trademark
License Framework Agreement upon consideration and approval by the
Board, pursuant to which the Company granted CNAHC Group a
non-exclusive license at nil consideration for the use of a total
of 83 registered trademarks of the Company. The CNAHC Group
undertook to use such licensed trademarks subject to the terms of
the non-competition agreement between CNAHC and the Company dated
20 November 2004, and to ensure the quality of the services using
the licensed trademarks in order to maintain their reputation.
Given the stable continuity of the reciprocal arrangement
mentioned above, to save the relevant administrative costs in
relation to the renewal, and taking into account of the duration of
the relevant trademarks and the requirements on the term of
agreement of transactions of similar nature under applicable laws
and regulations, upon arm's length negotiation, the Company and
CNAHC have agreed that the term of the New Trademark License
Framework Agreement shall be ten years commencing from 1 January
2024 and expiring on 31 December 2033. Unless otherwise terminated
by the Company and CNAHC, the New Trademark License Framework
Agreement will be automatically renewed for a term of ten years
upon the expiry date, and is subject to limitations and
requirements of the relevant laws and regulations and the listing
rules. Pursuant to Rule 14A.52 of the Hong Kong Listing Rules, as
the term of the New Trademark License Framework Agreement exceeds
three years, the Company has appointed BaoQiao Partners as the
independent financial adviser, to explain why a term exceeding
three years is required and to confirm that it is normal business
practice for agreement of this type to be of such duration.
The Board considers that the transaction under the New Trademark
License Framework Agreement is on normal commercial terms or
better, and the terms and conditions contained therein are fair and
reasonable and in the interests of the Company and the Shareholders
as a whole.
Pursuant to the Hong Kong Listing Rules, the transaction under
the New Trademark License Framework Agreement constitutes a
continuing connected transaction of the Company. As the transaction
is on normal commercial terms or better and on nil consideration
basis, it falls below the de minimis threshold as stipulated under
Rule 14A.76(1) of the Hong Kong Listing Rules and therefore is
fully exempt from Independent Shareholders' approval, annual review
and all disclosure requirements under Chapter 14A of the Hong Kong
Listing Rules. Pursuant to the SSE Listing Rules, the transaction
under the New Trademark License Framework Agreement is subject to
the Independent Shareholders' approval at the AGM.
BaoQiao Partners' opinion on the term of the New Trademark
License Framework Agreement
As disclosed above, the Existing Trademark License Framework
Agreement will expire on 31 December 2023. In order to maintain the
consistency of the business operation, on 30 March 2023, the
Company and CNAHC entered into the New Trademark License Framework
Agreement upon consideration and approval by the Board, pursuant to
which the Company granted CNAHC Group a non-exclusive license at
nil consideration for the use of a total of 83 registered
trademarks of the Company for a term of ten years from 1 January
2024 to 31 December 2033 (unless otherwise
terminated by the Company and CNAHC, the New Trademark License
Framework Agreement will be automatically renewed for a term of ten
years upon the expiry date, and is subject to limitations and
requirements of the relevant laws and regulations and the Listing
Rules) (the "License Period" or "Term").
As the Term of the New Trademark License Framework Agreement
exceeds three years, the Company has appointed BaoQiao Partners as
the independent financial adviser to explain why a period exceeding
three years is required and to confirm that it is normal business
practice for agreement of this type to be of such duration.
Pursuant to Rule 14A.52 of the Hong Kong Listing Rules, BaoQiao
Partners has formulated its opinion based on its research and
analysis and the discussion with the management of the Company (the
"Management") in respect of the following:
Background of the Company and CNAHC
(i) The Company is principally engaged in providing air
passenger and cargo transportation services and other
aviation-related services; and
(ii) CNAHC is a controlling shareholder of the Company and it
primarily operates all the state-owned assets and state-owned
equity interests invested by the State in CNAHC and its invested
entities, aircraft leasing and aviation equipment and facilities
maintenance businesses.
Background and the terms of the New Trademark License Framework
Agreement
(i) Based on BaoQiao Partners' review of the Existing Trademark
License Framework Agreement and the trademark license agreements
dated 1 November 2004 and 28 October 2014 respectively entered into
between the Company and CNAHC (the "Trademark License Framework
Agreements"), CNAHC contributed certain registered trademarks to
the Company at the time of the incorporation of the Company. As the
trademarks are related to the daily business of CNAHC Group, the
Company has licensed certain trademarks to CNAHC Group at nil
consideration for its use in its ordinary course of business as a
reciprocal arrangement since 2004;
(ii) As abovementioned, the Company and CNAHC have been in
cooperation since 2004 for the trademark licensing arrangements and
CNAHC, as the controlling shareholder of the Company, primarily
operates all the state-owned assets and state-owned equity
interests invested by the State in CNAHC and its invested entities,
aircraft leasing and aviation equipment and facilities maintenance
businesses, both the Company and CNAHC consider that the License
Period of using such trademarks under the New Trademark License
Framework Agreement of longer than three years is necessary to
satisfy the daily operation needs of CNAHC Group;
(iii) BaoQiao Partners notes that the terms of the New Trademark
License Framework Agreement (save for the terms relating to the
license period and/or updating the name of CNAHC and the parties'
correspondence addresses and/or the possible spin-off of Air
China Cargo from CNAHC as disclosed in the announcement of
Company dated 20 September 2022) are materially the same as those
of the Trademark License Framework Agreements;
(iv) As confirmed by the Management, CNAHC Group has duly
performed its obligations under the Trademarks License Framework
Agreements and undertook to use such trademarks subject to the
terms of the non-competition agreement between CNAHC and the
Company dated 20 November 2004 to ensure the quality of the
services using the trademarks and maintain their reputation without
causing any detriment to the awareness and reputation of the
Company's brands and business;
(v) Based on BaoQiao Partners' review of (Trademark Law of the
People's Republic of China(1) ) (" PRC Trademark Law "), the period
of validity
under the PRC Trademark Law of a registered trademark shall be
10 years from the day the registration is approved and the validity
of each renewal of registration shall be ten years. BaoQiao
Partners notes that the validity period of about 98% of the said 83
trademarks will expire in 2030 or later and as confirmed by the
Management, the renewal of registered trademarks involves largely
administrative procedures and the Company has no record of
unsuccessful renewal of any trademark registrations in the past. In
this regard, it is commercially justifiable for the Term under the
New Trademark License Framework Agreement to be over three years;
and
(vi) Having considered the aforesaid matters and the reasons for
the Term of 10 years as disclosed in this circular, in particular
the stable continuity of the reciprocal arrangement, the duration
of the relevant trademarks and the requirements on the term of
agreement of transactions of similar nature under applicable laws
and regulations, BaoQiao Partners concurs with the Management that
it would be more cost effective for the Company to agree with CNAHC
on a longer term under the New Trademark License Framework
Agreement with a view to saving the relevant administrative costs
and better allocating its management resources required for the
renewal of the trademark licensing agreement for every other three
years or less in accordance with Rule 14A.52 of the Hong Kong
Listing Rules.
Review of comparable transactions
BaoQiao Partners has reviewed the continuing connected
transaction announcements published by companies listed on the
Stock Exchange since 2020, and noted that there were 3 comparable
transactions in relation to the licensing arrangement of certain
intellectual property rights, including, trademarks, patents and
game adaptation rights, of which the terms of the underlying
licensing framework agreements exceeded three years, from a term of
3.5 years to 10 years.
Having considered the principal factors discussed above, BaoQiao
Partners is of the view that the Term under the New Trademark
License Framework Agreement is on normal commercial term for a
transaction of this nature and it is normal business practice for
agreement of this type to be of such duration.
(1) For identification purpose only
III. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS
(I) Proposed Revision of Annual Cap
1. Introduction
Reference is made to (i) the announcement of the Company dated
28 August 2020 and the circular dated 14 September 2020 in relation
to the Existing Air China Financial Services Agreement; and (ii)
the announcement of the Company dated 30 March 2023 in relation to
the Proposed Revision of Annual Cap.
On 30 March 2022, the Board resolved to revise the maximum daily
balance of deposits (including accrued interests) of the deposit
services provided by CNAF to the Group under the Existing Air China
Financial Services Agreement for the year ending 31 December 2023
from RMB15 billion to RMB20 billion.
As one or more of the applicable Percentage Ratios in respect of
the Revised Annual Cap are more than 5% but less than 25%, the
Proposed Revision of Annual Cap is subject to
(i) the requirements applicable to discloseable transaction
under Chapter 14 of the Hong Kong Listing Rules; and (ii) the
reporting, announcement and independent shareholders' approval
requirements for continuing connected transactions under Chapter
14A of the Hong Kong Listing Rules.
2. Principal terms of the Existing Air China Financial Services Agreement
The principal terms of the deposit services under the Existing
Air Chain Financial Services Agreement are set out as follows:
Parties: the Company and CNAF
Date: 28 August 2020
Financial services to be provided by Pursuant to the Existing
Air China Financial CNAF to the group:
Services Agreement, CNAF has agreed to
provide the Group with a range of financial
services including the deposit services.
Pricing basis: The interest rates applicable to the Group for
deposits with CNAF shall (i) be in compliance with the requirements
on interest rates prescribed by PBOC for such type of deposits;
(ii) be not lower than the interest rates offered by state-owned
commercial banks to the Group for the same type of services under
the same conditions; and (iii) be not lower than the interest rates
for the same type of services provided by CNAF to other member
companies of CNAHC Group under the same conditions.
Risk control: Pursuant to the Existing Air China Financial
Services Agreement, CNAF shall not carry out any business that has
not been approved by CBIRC or any illegal activities. CNAF is not
allowed, during the term of the Existing Air China Financial
Services Agreement, to make use of the deposits of the Group for
investments involving high risks, including but not limited to
equity securities and corporate bond investments. CNAF is obliged
to provide convenience for the auditors of the Company. If the
auditors of the Company intend to inspect the accounts of CNAF,
CNAF shall make arrangements for such inspection after receiving
notice from the Company.
Effective date and term: The term of the Existing Air China Financial
Services Agreement shall be three years commencing from 1
January 2021 and ending on 31 December 2023, which is automatically
renewable for successive terms of three years after the expiry of
the term subject to the fulfillment of the requirements under Hong
Kong Listing Rules and the required approval procedures thereunder.
Upon expiry of the Existing Air China Financial Services Agreement,
the Board will re-assess the terms and conditions of the Existing
Air China Financial Services Agreement, and the Company will
re-comply with the relevant rules governing connected transactions
under the Hong Kong Listing Rules. During the term of Existing Air
China Financial Services Agreement, the agreement can be terminated
on its expiry on any 31 December by either party thereto by serving
the other party a written notice of termination of not less than
three months.
3. Proposed Revision of Annual Cap
Set forth below is a summary of the historical annual caps and
the actual maximum amount for the daily balance of deposits
(including accrued interests) placed by the Group with CNAF and the
Revised Annual Cap:
Historical annual caps Actual maximum amount Revised Annual
Cap
For
the
period
from
For the For the For the For the For the 1 January For
year year year year year the year
ended ended ending ended ended 2023 ending
to
31 December 31 December 31 December 31 December 31 December 30 March 31 December
Transaction 2021 2022 2023 2021 2022 2023 2023
Daily balance
of deposits
(including
RMB15 RMB15 RMB15 RMB10.798 RMB13.588 RMB8.682 RMB20
accrued billion billion billion billion billion billion billion
interests)
The above Revised Annual Cap is determined based on the
following factors:
a. The historical maximum amount of daily balance of deposits
placed by the Group with CNAF by 30 March 2023 was RMB8.682
billion;
b. Based on the historical maximum amount of the Group's daily
deposit balance placed with CNAF and the projected future amount of
the Group's cash and bank balance without taking into account the
factors set out in paragraph c below, it is estimated that the
amount of the Group's daily deposit balance placed with CNAF for
the year ending 31 December 2023 will reach RMB15.2 billion;
and
c. The acquisition of Shandong Aviation Group Company by the
Company expands the scale of members of the Group, and combined
with the cash and bank balance of the Shandong Aviation Group
Corporation, the daily balance of deposits to be placed by the
Group with CNAF during 2023 is expected to increase by RMB4.4
billion.
4. Reasons and benefits for the transaction
The Directors believe that it is in the best interest of the
Group to enter into the transactions under the Existing Air China
Financial Services Agreement with CNAF having taken into account
the following factors:
a. in respect of transactions between the Group and CNAF, CNAF
is able to provide more efficient settlement services compared with
independent third party banks;
b. CNAF is able to provide safe, convenient, fast, comprehensive
and tailor-made financial services to the Group. From 2004 and up
to the Latest Practicable Date, the connected transactions between
CNAF and the Group have been carried out in compliance with the
relevant laws and regulations and the relevant listing rules, and
CNAF has had a good track record on compliance. With its continuous
improvement of professional level and financial services, CNAF is
fully qualified for providing the relevant services to the
Group;
c. as a professional financial institution in the Group, CNAF
could act more proactively in protecting the interest of the Group
than external institutions; and
d. a good cooperative relationship has been established between
CNAF and the relevant departments of the Group over the years which
makes their cooperation more efficient.
The Directors (including the independent non-executive
Directors) consider that the Existing Air China Financial Services
Agreement is on normal commercial terms or better and in the
ordinary and usual course of business of the Group, and the terms
and conditions contained therein are fair and reasonable, and the
Revised Annual Cap is also fair and reasonable, and in the
interests of the Company and the Shareholders as a whole.
(II) Entering into The Financial Services Agreements
1. Introduction
Reference is made to (i) the announcement of the Company dated
28 August 2020 and the circular dated 14 September 2020 in relation
to the Existing Air China Financial Services Agreement and the
Existing CNAHC Financial Services Agreement; (ii) the circular of
the Company dated 28 September 2022 in relation to, among other
things, the Supplemental Agreement. After the entering into of the
Supplemental Agreement, Air China Cargo and CNAF entered into the
Existing ACC Financial Services Agreement separately on 25 November
2022 for a term ending on 31 December 2023; and (iii) the
announcement of the Company dated 30 March 2023 in relation to the
Air China Financial Services Agreement, the CNAHC Financial
Services Agreement and the ACC Financial Services Agreement.
As the Existing Financial Services Agreements will expire on 31
December 2023, on 30 March 2023, upon consideration and approval by
the Board, (1) the Company and CNAF entered into the Air China
Financial Services Agreement; (2) CNAF and CNAHC entered into the
CNAHC Financial Services Agreement; and (3) CNAF and Air China
Cargo entered into the ACC Financial Services Agreement, pursuant
to which, CNAF will continue to provide financial services to the
Group, the CNAHC Group and the ACC Group for a term of three years
commencing from 1 January 2024 and ending on 31 December 2026.
Meanwhile, the Board determined the annual caps of the relevant
transactions under the Financial Services Agreements for three
years ending 31 December 2026, including the Air China New Annual
Caps, the CNAHC New Annual Caps and the ACC New Annual Caps. As one
or more of the applicable Percentage Ratios in respect of each of
the above new annual caps are more than 5% but less than 25%, such
transactions are therefore subject to (i) the requirements
applicable to discloseable transaction under Chapter 14 of the Hong
Kong Listing Rules; and (ii) the reporting, announcement and
independent shareholders' approval requirements for continuing
connected transactions under Chapter 14A of the Hong Kong Listing
Rules.
In addition, according to the relevant laws and regulations in
the banking industry and the SSE Listing Rules, the CNAHC Financial
Services Agreement and the ACC Financial Services Agreement put
businesses (apart from loan businesses, including bill discounting,
non-financing letters of guarantee, bill acceptances and other
credit extension services) provided by CNAF to CNAHC Group and ACC
Group and where credit risks are essentially borne by CNAF under
unified management, and the Board has determined the credit lines
of such comprehensive credit line business. As the comprehensive
credit lines will be taken up in the form of balance for
comprehensive credit line services, and the credit lines may be
taken
up among different types of products, such credit lines can be
used on a revolving basis. The above comprehensive credit lines are
also subject to approval by the Independent Shareholders under the
SSE Listing Rules.
2. The Air China Financial Services Agreement and the Annual
Caps of the Relevant Transactions thereunder
(1) Principal terms of the Air China Financial Services Agreement
Parties: The Company and CNAF
Date: 30 March 2023
Financial services to be provided by CNAF to the Group:
Pursuant to the Air China Financial Services Agreement, CNAF has
agreed to provide the Group with a range of financial services
including the following:
a. deposit services;
b. credit services, including loan, bill discounting and other credit services;
c. other financial services, including but not limited to:
(i) non-financing letters of guarantee services
(ii) bill acceptance services;
(iii) settlement and payment services;
(iv) trust loan services;
(v) bond underwriting services;
(vi) financial advisory services;
(vii) spot exchange settlement and sale services;
(viii) cross-border bilateral RMB capital pooling services; and
(ix) credit appraisal and consulting agency services.
Agency fees, handling fees, consultancy fees or other service
fees will be charged by CNAF to the Group for the above "other
financial services".
Pricing basis: Deposit services
The interest rates applicable to the Group for deposits with
CNAF shall (i) be in compliance with the requirements on interest
rates prescribed by PBOC for such type of deposits; and (ii) be not
lower than the interest rates offered by state- owned commercial
banks to the Group for the same type of services under the same
conditions.
Credit services
The interest rates applicable to the credit services provided by
CNAF to the Group shall (i) be in compliance with the requirements
on interest rates prescribed by PBOC for such type of services;
and
(ii) be not higher than the interest rates charged by
state-owned commercial banks to the Group for the same type of
services under the same conditions.
Other financial services
The fees charged by CNAF to the Group for providing paid
services in the other financial services shall (i) be in line with
the relevant rate standards (if any) prescribed by PBOC, CBIRC,
CSRC, NAFMII or other regulatory authorities;
(ii) be not higher than the fees charged by state- owned
commercial banks to the Group for the same type of services under
the same conditions.
Currently, other financial services which are free of charge and
provided by CNAF to the Group include the settlement services and
financial information services (namely, providing statistics and
information in relation to different types of financing products in
the market). If CNAF charges fees for the settlement services and
financial information services during the term of the Air China
Financial Services Agreement, the pricing basis set out in the
above paragraph shall apply, and the relevant transaction amount
will be monitored closely to ensure that the aggregate annual fees
to be paid by the Group to CNAF for other financial services will
not exceed the de minimis threshold as stipulated under Rule
14A.76(1) of the Hong Kong Listing Rules.
Risk control: Pursuant to the Air China Financial Services
Agreement, CNAF shall not carry out any business that has not been
approved by CBIRC or any illegal activities. Various risk
monitoring indicators of CNAF shall be in line with the
Administrative Measures for Finance Companies
of Enterprise Groups (
) and the relevant requirements of CBIRC.
CNAF is not allowed, during the term of the Air China Financial
Services Agreement, to make use of the deposits of the Group for
investments involving high risks, including but not limited to
investments in fixed-income marketable securities and other
products, and is required to satisfy the relevant requirements of
the Administrative Measures for Finance Companies of Enterprise
Groups. CNAF is obliged to provide convenience for the auditors of
the Company. If the auditors of the Company intend to inspect the
accounts of CNAF, CNAF shall make arrangements for such inspection
after receiving notice from the Company.
Effective date and term: The Air China Financial Services Agreement is
subject to the approval by the Independent Shareholders at a
general meeting. If approved by the Independent Shareholders, the
term of the Air China Financial Services Agreement shall be three
years commencing from 1 January 2024 and ending on 31 December
2026, which is automatically renewable for successive terms of
three years after the expiry of the term subject to the fulfillment
of the requirements under Hong Kong Listing Rules and the required
approval procedures thereunder. Upon expiry of the Air China
Financial Services Agreement, the Board will re-assess the terms
and conditions of the Air China Financial Services Agreement, and
the Company will re-comply with the relevant rules governing
connected transactions under the Hong Kong Listing Rules. During
the term of the Air China Financial Services Agreement, the
agreement can be terminated on its expiry on any 31 December by
either party thereto by serving the other party a written notice of
termination of not less than three months.
(2) Reasons and benefits for the transaction
The Directors believe that it is in the best interest of the
Group to enter into the transactions under the Air China Financial
Services Agreement having taken into account the following
factors:
a. in respect of transactions between the Group and CNAF, CNAF
is able to provide more efficient settlement services compared with
independent third party banks;
b. CNAF is able to provide safe, convenient, fast, comprehensive
and tailor- made financial services to the Group. From 2004 and up
to the Latest Practicable Date, the connected transactions between
CNAF and the Group have been carried out in compliance with the
relevant laws and regulations and the relevant listing rules, and
CNAF has had a good track record on compliance. With its continuous
improvement of professional level and financial services, CNAF is
fully qualified for providing the relevant services to the
Group;
c. as a professional financial institution in the Group, CNAF
could act more proactively in protecting the interest of the Group
than external institutions; and
d. a good cooperative relationship has been established between
CNAF and the relevant departments of the Group over the years which
makes their cooperation more efficient.
The Directors (including the independent non-executive
Directors) consider that the Air China Financial Services Agreement
is on normal commercial terms or better and in the ordinary and
usual course of business of the Group, and the terms and conditions
contained therein are fair and reasonable and in the interests of
the Company and the Shareholders as a whole.
(3) Annual Caps of Deposit Services
Set forth below is a summary of the historical annual caps and
the actual maximum amount for the daily balance of deposits
(including accrued interests) placed by the Group with CNAF and the
Air China New Annual Caps:
The above Air China New Annual Caps are determined based on the
following factors:
a. Based on the historical maximum amount of daily balance of
deposits placed by the Group with CNAF, and the expected cash and
bank balance of the Group in the future without taking into account
of the factors set out in the paragraphs b and c below, it is
expected that the daily balance of deposits to be placed by the
Group with CNAF during each of the three years ending 31 December
2026 will amount to RMB17 billion, RMB17.4 billion and RMB17
billion, respectively;
b. Taking into account the Company's capital needs and current
market condition, the Company may raise funds by way of direct
financing in the next three years, which may lead to a temporary
increase in the balance of deposits placed by the Group with CNAF,
and the daily balance of deposits to be placed by the Group with
CNAF during each of the three years ending 31 December 2026 is
expected to increase by RMB0.5 billion, RMB0.9 billion and RMB1.3
billion, respectively; and
c. The acquisition of Shandong Aviation Group Company by the
Company expands the scale of members of the Group, and combined
with the cash and bank balance of the Shandong Aviation Group
Corporation, the daily balance of deposits to be placed by the
Group with CNAF during each of the three years ending 31 December
2026 is expected to correspondingly increase by RMB4.4 billion,
RMB4.7 billion and RMB4.7 billion, respectively.
3. The CNAHC Financial Services Agreement and the Annual Caps of
the Relevant Transactions thereunder
(1) Principal terms of the CNAHC Financial Services Agreement
Parties: CNAF and CNAHC
Date: 30 March 2023
Financial services to be provided by CNAF to CNAHC Group:
Pursuant to the CNAHC Financial Services Agreement, CNAF has
agreed to provide the CNAHC Group with a range of financial
services including the following:
a. deposit services;
b. comprehensive credit line services, including loan, bill
discounting and non- financing
letters of guarantee, bill acceptances and other credit line services;
c. other financial services, including but not limited to:
(i) settlement and payment services;
(ii) trust loan services;
(iii) bond underwriting services;
(iv) financial advisory services;
(v) spot exchange settlement and sale services;
(vi) cross-border bilateral RMB capital pooling services; and
(vii) credit appraisal and consulting agency services.
Pricing basis: Deposit services
The interest rates applicable to CNAHC Group's deposits with
CNAF shall (i) be in compliance with the requirements on interest
rates prescribed by PBOC for such type of deposits; and (ii) be not
higher than the interest rates offered by state- owned commercial
banks to the CNAHC Group for the same type of services under the
same conditions.
Loan and bill discounting services
The interest rates applicable to the loan and bill discounting
services provided by CNAF to the CNAHC Group shall (i) be in
compliance with the requirements on interest rates prescribed by
PBOC for such type of services; and (ii) be not lower than the
interest rates charged by state-owned commercial banks to the CNAHC
Group for the same type of services under the same conditions.
Other financial services
The fees charged by CNAF to the CNAHC Group for providing paid
services in the other financial services shall (i) be in line with
the relevant rate standards (if any) prescribed by PBOC, CBIRC,
CSRC, NAFMII or other regulatory authorities; and (ii) be not lower
than the fees charged by state-owned commercial banks to the CNAHC
Group for the same type of services under the same conditions.
Currently, other financial services which are free of charge and
provided by CNAF to the CNAHC Group include the settlement services
and financial information services (namely, providing statistics
and information in relation to different types of financing
products in the market). If CNAF charges fees for the settlement
services and financial information services during the term of the
CNAHC Financial Services Agreement, the pricing basis set out in
the above paragraph shall apply, and the relevant transaction
amount will be monitored closely to ensure that the aggregate
annual fees to be paid by the CNAHC Group to CNAF for other
financial services will not exceed the de minimis threshold as
stipulated under Rule 14A.76(1) of the Hong Kong Listing Rules.
Risk control: Pursuant to the CNAHC Financial Services
Agreement, CNAF shall not carry out any business that has not been
approved by CBIRC or any illegal activities. Various risk
monitoring indicators of CNAF shall be in line with the
Administrative Measures for Finance Companies
of Enterprise Groups (
) and the relevant requirements of CBIRC. In
providing comprehensive credit line services for the CNAHC
Group, CNAF shall set credit lines prior to conducting specific
business in accordance with the requirements of the business
development procedures. CNAF shall approve each business in
accordance with the established business approval authority. After
the loan business is processed, the loan business shall be tracked
and managed on a regular basis to ensure the recovery of funds.
CNAF shall be entitled to recover the relevant loans in advance, in
the event that the CNAHC Group is unable to settle any debts of
other financial institutions, and undergoes the deterioration in
its operating or financial condition, closedown, dissolution,
suspension of operations, liquidation, bankruptcy, reorganization,
settlement, rectification or similar legal proceedings, or all or a
significant portion of its property is occupied, seized, frozen,
impounded, enforced, expropriated, forfeited or taken over by an
appointed trustee, receiver or similar officer, or other similar
measures are implemented in respect of the property.
Effective date and term: The CNAHC Financial Services Agreement is
subject to the approval by the Independent Shareholders at a
general meeting. If approved by the Independent Shareholders, the
term of the CNAHC Financial Services Agreement shall be three years
commencing from 1 January 2024 and ending on 31 December 2026,
which is automatically renewable for successive terms of three
years after the expiry of above initial term subject to the
fulfillment of the requirements under Hong Kong Listing Rules/SSE
Listing Rules and the required approval procedures thereunder. Upon
expiry of the CNAHC Financial Services Agreement, the Board will
re-assess the terms and conditions of the CNAHC Financial Services
Agreement, and the Company will re-comply with the relevant rules
governing connected transactions under the Hong Kong Listing
Rules/SSE Listing Rules. During the term of the CNAHC Financial
Services Agreement, the agreement can be terminated on its expiry
on any 31 December by either party thereto by serving the other
party a written notice of termination of not less than three
months.
(2) Reasons and benefits for the transaction
CNAF has been providing financial services to the CNAHC Group
for years. The business with the CNAHC Group contributed a steady
and significant portion to CNAF's revenues in the past. Such
transaction is beneficial for CNAF to make full use of its function
as a financial platform to further improve the utilization
efficiency and effectiveness of funds, as well as enhance its gains
on capital, which is in line with the needs of the Company's
operation and development. The Directors believe that it would be
in the best interest of CNAF and the Group to continue the
provision of financial services by CNAF to the CNAHC Group.
The Directors (including the independent non-executive
Directors) consider that the CNAHC Financial Services Agreement is
on normal commercial terms or better and in the ordinary and usual
course of business of the Group, and the terms and conditions
contained therein are fair and reasonable and in the interests of
the Company and the Shareholders as a whole.
(3) Annual caps of comprehensive credit line services
Set forth below is a summary of the historical annual caps and
actual maximum amount of the maximum balance of daily loans
(including accrued interests) granted or to be granted by CNAF to
the CNAHC Group and the CNAHC New Annual Caps:
1. For the two years ended 31 December 2022 and for the period
from 1 January 2023 to 30 March 2023, CNAF did not provide any
credit services to the ACC Group.
2. The low utilization rate of the historical annual caps is due
to the facts that (i) as CNAHC Group strengthened the use of direct
financing such as super short-term commercial papers and corporate
bonds while Air China Cargo successfully brought in strategic
investors, the CNAHC Group had ample liquidity on an overall basis,
therefore its demands for loans were much lower than expected; and
(ii) some members of the CNAHC Group who had loan demands could
choose to borrow their loans from independent third-party banks
rather than CNAF.
The above CNAHC New Annual Caps are determined based on the
following factors:
a. The historical maximum amount of daily balance of credit
services provided by CNAF to the CNAHC Group;
b. CNAF will further make full use of its functions in loan
business as a finance company. On the premise that CNAHC will
maintain the same level of demand for liquidity loans in the next
three years, and assuming that an amount equivalent to 50% of the
direct financing previously obtained by the CNAHC can be borrowed
through CNAF in the future, it is expected that CNAF may provide
further loan services to CNAHC with an amount of RMB3.85 billion
for each of the three years ending 31 December 2026;
c. According to the loan demand of certain subsidiaries of CNAHC
regarding their liquidity planning, it is expected that such
subsidiaries of CNAHC will therefore have additional demands for
loans from CNAF with an amount of approximately RMB770 million,
RMB847 million and RMB932 million for the next three years; and
d. A buffer of approximately RMB500 million is applied for each
of the three years ending 31 December 2026 to cater the CNAHC
Group's needs from time to time.
According to the relevant laws and regulations in the banking
industry and the SSE Listing Rules, the CNAHC Financial Services
Agreement put businesses (apart from loan businesses, including
bill discounting, non-financing letters of guarantee, bill
acceptances and other credit extension services) provided by CNAF
to the CNAHC Group and where credit risks are essentially borne by
CNAF under unified management as comprehensive credit line
services, and has determined the credit lines in relation thereto.
As the comprehensive credit lines will be taken up in the form of
balance for such comprehensive credit line services business, and
the credit lines may be shared among different types of products,
such credit lines can be used on a revolving basis. After taking
into account the actual amount of credit lines granted by CNAF to
the CNAHC Group in the past (i.e. the sum of the maximum credit
line granted by CNAF to the relevant member companies of the CNAHC
Group upon assessing the credit status of the relevant member
companies prior to processing the specific comprehensive credit
line business for such member companies), the future demand for
comprehensive credit line services (mainly in loans and guarantee
letter business) of the CNAHC Group and the latest credit status of
relevant member companies, the credit lines of comprehensive credit
line services provided by CNAF to the CNAHC Group shall be RMB7.5
billion, RMB8 billion, RMB9 billion and RMB9 billion for the year
ending 31 December 2023 and each of the three years ending 31
December 2026, respectively.
4. The ACC Financial Services Agreement and the Annual Caps of
the Relevant Transactions thereunder
(1) Principal terms of the ACC Financial Services Agreement
Parties: CNAF and Air China Cargo
Date: 30 March 2023
Financial services to be provided by CNAF to the ACC Group:
Pursuant to the ACC Financial Services Agreement, CNAF has
agreed to provide the ACC Group with a range of financial services,
including the following:
a. deposit services;
b. comprehensive credit line services, including loan, bill
discounting, non- financing letters of guarantee, bill acceptances
and other credit line services;
c. other financial services, including but not limited to:
(i) settlement and payment services;
(ii) trust loan services;
(iii) bond underwriting services;
(iv) financial advisory services;
(v) spot exchange settlement and sale services;
(vi) cross-border bilateral RMB capital pooling services; and
(vii) credit appraisal and consulting agency services.
Pricing basis: Deposit services
The interest rates applicable to the ACC Group's deposits with
CNAF shall (i) be in compliance with the requirements on interest
rates prescribed by PBOC for such type of deposits; and (ii) be not
higher than the interest rates offered by state- owned commercial
banks to the ACC Group for the same type of services under the same
conditions.
Loan and bill discounting services
The interest rates applicable to the loan and bill discounting
services provided by CNAF to the ACC Group shall (i) be in
compliance with the requirements on interest rates prescribed by
PBOC for such type of services; and (ii) be not lower than the
interest rates charged by state-owned commercial banks to the ACC
Group for the same type of services under the same conditions.
Other financial services
The fees charged by CNAF to the ACC Group for providing paid
services in the other financial services shall (i) be in line with
the relevant rate standards (if any) prescribed by the PBOC, CBIRC,
CSRC, NAFMII or other regulatory authorities; and (ii) be not lower
than the fees charged by state-owned commercial banks to the ACC
Group for the same type of services under the same conditions.
Currently, other financial services which are free of charge and
provided by CNAF to the ACC Group include the settlement services
and financial information services (namely, providing statistics
and information in relation to different types of financing
products in the market). If CNAF charges fees for the settlement
services and financial information services during the term of the
ACC Financial Services Agreement, the pricing basis set out in the
above paragraph shall apply, and the relevant transaction amount
will be monitored closely to ensure that the aggregate annual fees
to be paid by the ACC Group to CNAF for other financial services
will not exceed the de minimis threshold as stipulated under Rule
14A.76(1) of the Hong Kong Listing Rules.
Risk control: Pursuant to the ACC Financial Services Agreement,
CNAF shall not carry out any business that has not been approved by
CBIRC or any illegal activities. Various risk monitoring indicators
of CNAF shall be in line with the Administrative Measures for
Finance Companies
of Enterprise Groups (
) and the relevant requirements of CBIRC. In
providing comprehensive credit line services for the ACC Group,
CNAF shall set credit lines prior to conducting specific business
in accordance with the requirements of the business development
procedures. CNAF shall approve each business in accordance with the
established business approval authority. After the loan business is
processed, the loan business shall be tracked and managed on a
regular basis to ensure the recovery of funds. CNAF shall be
entitled to recover the relevant loans in advance, in the event
that the ACC Group is unable to settle any debts of other financial
institutions, and undergoes deterioration in its operating or
financial condition, closedown, dissolution, suspension of
operations, liquidation, bankruptcy, reorganization, settlement,
rectification or similar legal proceedings, or all or a significant
portion of its property is occupied, seized, frozen, impounded,
enforced, expropriated, forfeited or taken over by an appointed
trustee, receiver or similar officer, or other similar measures are
implemented in respect of the property.
Effective date and term: The renewal of the ACC Financial Services
Agreement is subject to the approval by the Independent
Shareholders at the AGM. If approved by the Independent
Shareholders, the term of the ACC Financial Services Agreement
shall be renewed for three years commencing from 1 January 2024 and
ending on 31 December 2026, which is automatically renewable for
successive terms of three years after the expiry of the above
initial term subject to the fulfillment of the requirements under
Hong Kong Listing Rules/ SSE Listing Rules and the required
approval procedures thereunder. Upon expiry of the ACC Financial
Services Agreement, the Board will re- assess the terms and
conditions of the ACC Financial Services Agreement, and the Company
will re-comply with the relevant rules governing connected
transactions under the Hong Kong Listing Rules/SSE Listing Rules.
During the term of the ACC Financial Services Agreement, the
agreement can be terminated on its expiry on any 31 December by
either party thereto by serving the other party a written notice of
termination of not less than three months.
(2) Reasons and benefits for the transaction
CNAF has been providing financial services to the ACC Group for
years. The business with the ACC Group contributed a steady portion
to CNAF's revenues in the past. Such transaction is beneficial for
CNAF to make full use of its function as a financial platform to
further improve the utilization efficiency and effectiveness of
funds, as well as enhance its gains on capital, which is in line
with the needs of the Company's operation and development. The
Directors believe that it would be in the best interest of CNAF and
the Group to continue the provision of financial services by CNAF
to the ACC Group.
The Directors (including the independent non-executive
Directors) consider that the ACC Financial Services Agreement is on
normal commercial terms or better and in the ordinary and usual
course of business of the Group, and the terms and conditions
contained therein are fair and reasonable and in the interests of
the Company and the Shareholders as a whole.
(3) Annual caps of Comprehensive Credit Line Services
Set forth below is a summary of the historical annual caps and
actual maximum amount of the maximum balance of daily loans
(including accrued interests) granted or to be granted by CNAF to
the ACC Group and the ACC New Annual Caps:
Note: As at the Latest Practicable Date, the sum of the actual
amount incurred under the Existing ACC Financial Services Agreement
and the actual transaction amount incurred under the Existing CNAHC
Financial Services Agreement did not exceed the annual caps for the
transaction amount of the Existing CNAHC Group Framework Agreement
as approved at the Company's general meeting.
The above ACC New Annual Caps are determined based on the
following factors:
a. As the ACC Group has sufficient funding in recent years, it
is not expected to be any loan demands for the year of 2024;
b. With the possible continuous expansion of the business of ACC
Group to enhance its capacity level and expand its operating
network layout, according to the loan demands of the ACC Group
regarding their liquidity planning, it is expected that the ACC
Group will therefore have demands for loans from CNAF with an
amount of approximately RMB1.5 billion and RMB2 billion for the
years of 2025 and 2026 respectively; and
c. A buffer of approximately RMB0.5 billion is applied for each
of the years ending 31 December 2025 and 2026 to cater for the ACC
Group's needs from time to time.
According to the relevant laws and regulations in the banking
industry and the SSE Listing Rules, the ACC Financial Services
Agreement put businesses (apart from loan businesses, including
bill discounting, non-financing letters of guarantee, bill
acceptances and other credit extension services) provided by CNAF
to the ACC Group and where credit risks are essentially borne by
CNAF under unified management as comprehensive credit line
services, and has determined the credit lines in relation thereto.
Pursuant to the SSE Listing Rules, CNAF will determine the annual
total credit lines for such credit line services. As the
comprehensive credit lines will be taken up in the form of balance
for such comprehensive credit line services business, and the
credit lines may be shared among different types of products, such
credit lines can be used on a revolving basis. After taking into
account the
amount of credit lines actually granted by CNAF to the ACC Group
in the past (i.e. the sum of the maximum credit line granted by
CNAF to the relevant member companies of the ACC Group upon
assessing the credit status of the relevant member companies prior
to processing the above-mentioned specific comprehensive credit
line business for such member companies), the future demand for
comprehensive credit line services of the ACC Group and the latest
credit status of relevant member companies, the annual credit lines
of comprehensive credit line services provided by CNAF to the ACC
Group shall be RMB4 billion for each of the three years ending 31
December 2026. No comprehensive credit line service is expected to
occur under the Existing ACC Financial Services Agreement for the
year ending 31 December 2023.
(III) Risk Profile and Management of CNAF
CNAF, as a non-banking financial institution providing financial
services to the Group, the CNAHC Group and the ACC Group, is
subject to regulations promulgated by CBIRC from time to time.
These regulations may not be the same as those regulating
commercial banks. As CNAF and commercial banks have different
target customers for their respective financial services, they may
be subject to different risk profiles. Set out below are the major
risk exposures of CNAF:
Compliance risks
According to the Measures for the Administration of Finance
Companies of Enterprise
Groups ( ) issued by the CBIRC on 27 July 2004 (as last
amended on 13 November 2022), CNAF shall comply with various
ratios in respect of its assets and liabilities, including the
capital adequacy ratio, total extra-group liabilities to net
capital ratio, total investment to net capital ratio, and net
self-owned fixed assets to net capital ratio. Since its
establishment until the Latest Practicable Date, CNAF has complied
with all the relevant requirements from the CBIRC in respect of the
above-mentioned ratios and the applicable rules and regulations
stipulated by the CBIRC.
Liquidity risks
CNAF utilises deposits received by it by lending the funds out
to members of the Group, the CNAHC Group and the ACC Group. Since
the terms of the deposits and loans are often different, CNAF faces
liquidity risks if any deposit becomes due and it has no
immediately available fund for making payment. The nature of such
risk does not differ materially from the liquidity risks faced by
PRC commercial banks.
To manage its liquidity risks, CNAF strictly adheres to a 25%
current ratio requirement (i.e. its current liabilities shall not
exceed 25% of its current assets). The liquidity risks of CNAF are
also mitigated as it could obtain financing through inter-bank
loans or pledged repurchase from the inter-bank market if and when
necessary. In addition, since the customers of CNAF are limited to
the members of the Group, the CNAHC Group and the ACC Group, CNAF
is shielded from the risk of bank runs by individual depositors
faced by commercial banks. Since its establishment until the Latest
Practicable Date, CNAF has always been able to meet the repayment
schedules in respect of deposits placed by its customers.
Credit risks
Like state-owned commercial banks, CNAF faces credit risks in
providing its loans and other credit services to its customers.
CNAF, being a member of the CNAHC Group, is in a better position to
gain information on the member companies who are its customers in a
more timely and comprehensive manner as opposed to other PRC
commercial banks who conduct business with clients of various
credit ratings and backgrounds. To control the credit risks, CNAF
carefully evaluates the operation situation and financial position
of the member companies within the Group, the CNAHC Group and the
ACC Group when receiving loan applications from them and only
provides loans to member companies who have sound financial
position and cash flow. CNAF normally requires guarantees from the
shareholders of the applicant if the applicant's credit standing
exposes CNAF to relatively high risks. If a loan is approved, CNAF
conducts regular post-loan examination on the borrower to monitor
and safeguard against the credit risks. If a borrower defaults on
the loan or falls into financial difficulty in repayments, CNAF may
enforce the guarantee provided by the shareholders of the borrower.
Moreover, according to the relevant laws and regulations
promulgated by the CBIRC and as set out in the articles of
association of CNAF, in the event that CNAF falls into financial
difficulty in payments, CNAHC has the obligation to take all
necessary steps including injecting capital into CNAF based on its
funding needs, to restore its financial position. Due to the
careful management of the credit risks, CNAF has not had any non-
performing loan since its establishment until the Latest
Practicable Date.
Directors' view
Based on the foregoing, the Directors are of the view that the
risk profile of CNAF, as a provider of financial services to the
Group, the CNAHC Group and the ACC Group, has remained not greater
than that of PRC commercial banks.
(IV) Internal Control Measures for the Non-exempt Continuing Connected Transactions
To safeguard the interest of the Group, the Group will adopt the
following internal control measures in respect of the deposit
services to be provided by CNAF to the Group and the comprehensive
credit line services to be provided by CNAF to the CNAHC Group and
the ACC Group, respectively.
Deposit services under the (Existing) Air China Financial
Services Agreement
The Company would take the following review procedure against
the following assessment criteria when obtaining the deposit
services from CNAF under the (Existing) Air China Financial
Services Agreement:
a. the Company and CNAF set up designated posts to monitor the
deposit balance of the Group with CNAF within the scope of the list
of the Company's subsidiaries on a daily basis to ensure that it
does not exceed the relevant annual caps;
b. the Company sets up designated posts to update the list of
the Company's subsidiaries on a regular basis to ensure the
aggregate deposit balance of the Group (including the subsidiaries
in the updated list) with CNAF does not exceed the relevant annual
caps; and
c. the designated staff of the Company would compare the rates
and terms offered by CNAF and several state-owned commercial banks
when the need for deposit arises to ensure those rates and terms of
the Group's deposits with CNAF are in line with the relevant
pricing basis.
Comprehensive credit line services under the CNAHC Financial
Services Agreement and the ACC Financial Services Agreement
CNAF would take the following review procedure process against
the following assessment criteria when providing the comprehensive
credit line services to the CNAHC Group under the CNAHC Financial
Services Agreement and to the ACC Group under the ACC Financial
Services Agreement:
a. The credit department of CNAF conducts analysis and
assessment based on the general situation, financial and operating
conditions and credit status of the members of the CNAHC Group and
ACC Group, and risk management department of CNAF issues a report
to the loan review committee of CNAF after its examination. After
the loan review committee of CNAF has approved the comprehensive
credit line services and determined the amount of the comprehensive
credit line services, the general manager makes the final
decision;
b. after receiving the credit demand from members of the CNAHC
Group and ACC Group, the credit department of CNAF would carry out
the following works: verifying the credit demand of the applicant,
considering the credit risk and financing ability of the applicant,
checking the records such as if CNAF has provided the same type of
services to the members of the CNAHC Group and ACC Group
respectively under the same condition, learning about the current
level of market interest charged by state-owned commercial banks
and offering quotation;
c. after securing the loan business, CNAF would issue a report
to the loan review committee of CNAF, which in turn would determine
the approval of the loan business, including loan interest rate,
and the general manager would make the final decision;
d. if it is discovered in the various quotations for a
transaction under the same conditions that the loan interest rates
intended to be offered by CNAF to the CNAHC Group and ACC Group are
more favorable than those provided by independent third parties to
the CNAHC Group and ACC Group respectively, such findings shall be
reported to the loan review committee of CNAF. The loan review
committee of CNAF would assess whether to adjust the price for
services
provided by CNAF or to amend relevant conditions with reference
to various factors, such as loan demand and the applicant's
qualifications and credibility, and the general manager would make
the final decision;
e. CNAF would complete the approval procedures of the risk
management department, and grant the loan to the applicant after
obtaining approval from the leader of credit department and leaders
of CNAF;
f. after the grant of the loan, the credit department of CNAF
will conduct regular post-loan examination on the applicant and
issue examination reports; and
g. the accounting department of CNAF will deduct the principal
and accumulated interests of the loan from the applicants' deposit
accounts in CNAF on the loan repayment date. If the applicant falls
short of cash to repay the loan, the applicant should request for
extension in writing to CNAF prior to the maturity of the loan, and
may carry out relevant formalities upon obtaining approval.
Since the Group has established adequate and appropriate
internal control procedures to review the Non-exempt Continuing
Connected Transactions, the Directors (including the independent
non-executive Directors) consider that such methods and procedures
can ensure and safeguard the Non-exempt Continuing Connected
Transactions will be conducted on normal commercial terms, fair and
reasonable, and in the interest of the Company and the Shareholders
as a whole.
(V) Listing Rules Implications
1. Proposed Revision of Annual Cap
Pursuant to the Hong Kong Listing Rules, as one or more of the
applicable Percentage Ratios in respect of the Revised Annual Cap
are more than 5% but less than 25%, the Proposed Revision of Annual
Cap is subject to (i) the requirements applicable to discloseable
transaction under Chapter 14 of the Hong Kong Listing Rules; and
(ii) the reporting, announcement and independent shareholders'
approval requirements for continuing connected transactions under
Chapter 14A of the Hong Kong Listing Rules.
2. Entering into Financial Services Agreements
(1) Air China Financial Services Agreement
Deposit services As the highest applicable Percentage Ratio in
respect of the Air China New Annual Caps under the Chapter 14 of
the Hong Kong Listing Rules exceeds 5% but below 25% and the
highest applicable Percentage Ratio under the Chapter 14A of the
Hong Kong Listing Rules exceeds 5%, the deposit services to be
provided to the Group by CNAF under the Air China Financial
Services Agreement are subject to (i) the requirements applicable
to discloseable transaction under Chapter 14 of the Hong Kong
Listing Rules; and (ii) the reporting, announcement and independent
shareholders' approval requirements for continuing connected
transactions under Chapter 14A of the Hong Kong Listing Rules.
Credit Services Credit services to be provided to the Group by
CNAF are expected to be conducted on normal commercial terms or
better, and not to be secured by the assets of the Group.
Therefore, such transactions will be fully exempt from the
reporting, annual review, announcement and independent
shareholders' approval requirements for continuing connected
transactions in accordance with Rule 14A.90 of the Hong Kong
Listing Rules.
Other financial services The other financial services to be provided by CNAF to the
Group will be carried out on normal commercial terms or
better and the aggregate annual fees to be paid by the Group
to
CNAF for such services for each of the three years ending 31
December 2024, 2025 and 2026 are expected to fall below the
de minimis threshold as stipulated under Rule 14A.76(1) of
the
Hong Kong Listing Rules. Therefore, such transactions will
be
fully exempt from the reporting, annual review, announcement
and independent shareholders' approval requirements for
continuing connected transactions under the Hong Kong
Listing Rules.
(2) CNAHC Financial Services Agreement and ACC Financial Services Agreement
As at the Latest Practicable Date, as Air China Cargo is a
subsidiary of CNAHC, the transactions of similar type under the
CNAHC Financial Services Agreement and the ACC Financial Services
Agreement shall be aggregated under the Hong Kong Listing
Rules.
Deposit services
The deposits placed by the CNAHC Group and ACC Group with CNAF
are expected to be conducted on normal commercial terms or better,
and not to be secured by the assets of the Group. Therefore, such
transactions will be fully exempt from the reporting, annual
review, announcement and independent shareholders' approval
requirements for continuing connected transactions as provided
under Rule 14A.90 of the Hong Kong Listing Rules.
Comprehensive credit line services
Pursuant to Chapter 14A of the Hong Kong Listing Rules, as (i)
the highest of the applicable Percentage Ratios in respect of the
CNAHC New Annual Caps exceeds 5% on a standalone basis; and (ii)
the highest of the applicable Percentage Ratios in respect of the
ACC New Annual Caps, although does not exceed 5% on a standalone
basis, exceeds 5% when aggregated with the CNAHC New Annual Caps,
the loan services to be provided to the CNAHC Group by CNAF under
the CNAHC Financial Services Agreement and the loan services to be
provided to the ACC Group by CNAF under the ACC Financial Services
Agreement are subject to the reporting, announcement and
independent shareholders' approval requirements for continuing
connected transactions under Chapter 14A of the Hong Kong Listing
Rules.
Pursuant to Chapter 14 of the Hong Kong Listing Rules, as the
highest of the applicable Percentage Ratios does not exceed 5% on a
standalone basis in respect of each of the CNAHC New Annual Caps
and the ACC New Annual Caps, while exceeds 5% but below 25% when
aggregated with each other, and the highest of the applicable
Percentage Ratios under Chapter 14A of the Hong Kong Listing Rules
exceeds 5%, the loan services to be provided to the CNAHC Group by
CNAF under the CNAHC Financial Services Agreement and the loan
services to be provided to the ACC Group by CNAF under the ACC
Financial Services Agreement are also subject to the requirements
applicable to discloseable transaction under Chapter 14 of the Hong
Kong Listing Rules.
Furthermore, the credit lines of the comprehensive credit line
services provided by CNAF to the CNAHC Group under the CNAHC
Financial Services Agreement and the credit lines of the
comprehensive credit line services provided by CNAF to the ACC
Group under the ACC Financial Services Agreement are also subject
to approval by the Independent Shareholders under the SSE Listing
Rules.
Other financial services
The other financial services to be provided by CNAF to the CNAHC
Group under the CNAHC Financial Services Agreement and the other
financial services provided by CNAF to the ACC Group under the ACC
Financial Services Agreement will be carried out on normal
commercial terms or better and the aggregated total annual fees to
be paid by the CNAHC Group and ACC Group to CNAF for such services
for each of the three years ending 31 December 2024, 2025 and 2026
are expected to fall below the de minimis threshold as stipulated
under Rule 14A.76(1) of the Hong Kong Listing Rules. Therefore,
such transactions will be fully exempt from the reporting, annual
review, announcement and independent shareholders' approval
requirements for continuing connected transactions under the Hong
Kong Listing Rules.
IV. DETAILS OF OTHER RESOLUTIONS
(I) Resolution on the 2022 work report of the Board
For the full text of the 2022 work report of the Board, please
refer to Appendix II of this circular.
(II) Resolution on the 2022 work report of the supervisory committee
For the full text of the 2022 work report of the supervisory
committee, please refer to Appendix III of this circular.
(III) Resolution on the financial reports for the year 2022
For the full text of the financial reports for the year 2022
prepared under CASs and the IFRSs by the Company, please refer to
relevant disclosures made by the Company on the website of the
Shanghai Stock Exchange and the HKEXnews website of the Hong Kong
Stock Exchange.
(IV) Resolution on the profit distribution proposal for the year 2022
According to the audited financial statements of the Company
prepared in accordance with the CASs and the IFRSs, the Company
recorded negative profits available for distribution to
Shareholders in 2022. As considered and approved by the 18th
meeting of the sixth session of the Board, the Company proposed not
to make profit distribution for the year of 2022.
(V) Resolution on the unrecovered losses of the Company
exceeding one-third of the total amount of its paid-up share
capital
Pursuant to the relevant requirements of the Company Law and the
Articles of Association, under circumstances that the amount of the
unrecovered losses of the Company exceeds one-third of the total
paid-up share capital, it shall be subject to consideration at the
general meeting of Shareholders.
According to the audit report issued by Deloitte Touche Tohmatsu
Certified Public Accountants LLP, the net profit attributable to
parent company in 2022 was a loss of RMB38,619,000,000. The
accumulated unrecovered losses of the Company was
RMB29,309,000,000. As of the end of 2022, the paid-up share capital
of the Company was RMB14,525,000,000. The amount of the unrecovered
losses of the Company exceeded one-third of the total paid-up share
capital.
(VI) Resolution on the re-appointment of international auditor,
domestic auditor and internal control auditor for the year 2023
The Board proposed the re-appointment of Deloitte Touche
Tohmatsu as the Company's international auditor for the year 2023
and Deloitte Touche Tohmatsu Certified Public Accountants LLP as
the Company's domestic auditor and internal control auditor for the
year 2023, and submitted to the general meeting of shareholders the
aforementioned re-appointment proposal for approval and to
authorise the Audit and Risk Management Committee (the Supervision
Committee) of the Board to determine their remunerations for the
year 2023.
(VII) Resolution on the grant of general mandate to the Board to issue debt financing instruments
In order to meet the Company's production and operation needs,
and to supplement liquidity, according to the 2023 financing plan
of the Company, the Company shall issue debt financing instruments
at appropriate time. To grasp the favourable opportunity in the
market, improve flexibility and efficiency of financing, the
application is now been submitted by the Board at the general
meeting of shareholders of the Company to obtain general and
unconditional mandate from the general meeting, under which the
Board of the Company shall determine to issue debt financing
instruments in one or multiple tranches within the cap amount of
bond issuance under the requirements of applicable laws (the
"Issuance"). If the Board has resolved to issue debt financing
instruments according to the authorisation obtained at the general
meeting(s), the authorisation in relation to the issuance of such
debt financing instruments shall continue to be valid and extended
to the term of authorisation of the Issuance accordingly.
Particulars regarding the Issuance are as follows:
1. Plan of the issuance
The relevant debt financing instruments include, but not limited
to, ultra-short-term commercial papers, short-term commercial
papers, mid-term notes, corporate bonds, domestic non-public
targeted debt financing instruments, overseas debt financing
instruments and overseas bonds/notes denominated in RMB or foreign
currencies.
2. Major Terms of the issuance
(1) Issuer: the Company and/or its controlled or wholly-owned
subsidiary, and the specific issuer shall be determined by the
Board according to the needs of issuance.
(2) Placing arrangement: no preferential placement to the shareholders of the
Company.
(3) Issue size: subject to that the balance of the outstanding
debt
financing instruments of the Issuance shall be within the
permissible size prescribed by the relevant laws and regulations
and specified by regulatory authorities, and the specific issue
size shall be determined by the Board according to the capital
requirement and the market conditions.
(4) Term and type: not more than 15 years for one single-term instrument
or a portfolio of instruments with various terms. The specific
term composition and the issue size of instruments with various
terms shall be determined by the Board according to the relevant
regulations and market conditions.
(5) Use of proceeds: the proceeds to be raised from the issuance are intended
to be applied towards meeting the demand of the Company's
production and operations, adjusting its debt structure,
replenishing its working capital and/or funding its project
investments, among others. The specific use of proceeds shall be
determined by the Board according to the capital requirement.
(6) Term of validity of the authorization:
from the date of the passing of the resolution at the general
meeting of the Company to the date of the annual general meeting of
the Company for the year 2023.
If the Board (including its authorized person) has resolved to
issue within the valid term of the mandate, it shall be deemed as
an extension to the term of the mandate granted to the Board
(including its authorized person) in respect of such issue on the
general meeting, provided that there is no conflict between the
mandate renewed by the Board (including its authorized person) on
the general meeting after the expiry of the mandate and the mandate
granted to the Board (including its authorized person) in respect
of such issue.
3. Authorization to the Board
The Board proposed to the shareholders at the AGM to authorize
the Board, generally and unconditionally, to deal with the
following in accordance with the specific needs of the Company and
other market conditions:
(1) to determine the issuer, issue size, type, specific
instruments, detailed terms, conditions and other matters relating
to the Issuance (including, but not limited to, the issue size,
actual principal amount, currency, issue price, interest rate or
mechanism for determining the interest rate, issue place, issue
timing, term, whether or not to issue in multiple tranches and
number of tranches, whether or not to set put-back or redemption
terms, credit rating, guarantee, repayment term, detailed
fund-raising arrangements within the scope of use approved by the
general meeting, detailed placing arrangements, underwriting
arrangements and all other matters relating to the Issuance).
(2) to carry out all necessary and ancillary actions and
procedures relating to the Issuance (including, but not limited to,
engage underwriters, lawyers, auditors, rating agencies, financial
advisers and other intermediary institutions; handle all approval,
registration and filing procedures with the relevant regulatory
authorities in connection with the Issuance on behalf of the
Company; execute all necessary legal documents; select bonds
trustee manager for the Issuance; formulate rules for the
bondholders' meeting and handle any other matters relating to the
issuance and trading).
(3) to approve and confirm any action or procedure relating to
the Issuance as mentioned above already taken by the Company.
(4) to make adjustments to the relevant matters such as the
specific proposals for the Issuance in accordance with the comments
from the regulatory authorities or the prevailing market conditions
within the authority granted at the general meeting of the Company,
except where voting at a general meeting of the Company is required
by any relevant laws and regulations and the Articles of
Association of Air China Limited.
(5) to determine and handle all relevant matters relating to the
listing of the issued debt financing instruments upon the
completion of the Issuance.
(6) in the case of issuance of the Company's debt financing
instruments, during the term of the Company's debt financing
instruments, to determine not to distribute dividends to the
shareholders to safeguard repayment of debts as required under the
relevant laws and regulations in the event that the Company expects
to, or does fail to pay the principal and interests as they fall
due.
(7) to approve, execute and dispatch any announcements or
circulars relating to the Issuance and make any related disclosure
in accordance with the listing rules of the relevant jurisdictions
where the Company is listed.
The Board also proposed to the shareholders at the AGM to
authorize the Board to delegate the authorizations set forth in
paragraph (1) to (6) above to the president and/or the general
accountant of the Company and to authorize the Board to delegate
the authorization set forth in paragraph (7) above to the secretary
of the Board upon obtaining the authorization at the AGM.
V. AGM
The Company will convene the AGM at The Conference Room C713,
No. 30, Tianzhu Road, Airport Industrial Zone, Shunyi District,
Beijing, the PRC at 11:00 a.m. on Thursday, 25 May 2023 to consider
and, if thought fit, approve, among other things, the aforesaid
matters. Votes on the resolutions to be considered at the AGM shall
be taken by way of poll. A form of proxy is also enclosed herein,
and published on the websites of the Hong Kong Stock Exchange
(www.hkexnews.hk) and the Company (www.airchina.com.cn). The notice
of AGM is reproduced in this circular.
As at the Latest Practicable Date, CNAHC and its subsidiaries,
CNACG, held an aggregate of 8,123,096,767 shares of the Company
(representing approximately 50.14% of the issued share capital of
the Company), and controlled or were entitled to control over the
voting right in respect of their shares in the Company. Cathay
Pacific held 2,633,725,455 shares of the Company (representing
16.26% of the issued share capital of the Company), and controlled
or were entitled to control over the voting right in respect of
their shares in the Company. Pursuant to the Hong Kong Listing
Rules, CNAHC and CNACG have a material interest in the transactions
under the New Trademark License Framework Agreement and the Non-
exempt Continuing Connected Transactions, and are therefore
required to abstain from voting on the relevant resolutions (i.e.
resolutions no. (7) to (10)) at the AGM. Cathay Pacific has a
material interest in the transactions under the ACC Financial
Services Agreement, and is therefore required to abstain from
voting on the relevant resolution (i.e. resolution no. (9)) at the
AGM.
To the best knowledge, information and belief of the Directors,
having made all reasonable enquiries, save as the above
Shareholders, no Shareholder has a material interest in the
resolutions set out in the notice of the AGM or should be required
to abstain from voting on the relevant resolutions at the AGM.
The register of members of H shares will be closed from
Thursday, 18 May 2023 to Thursday, 25 May 2023 (both days
inclusive), during which no transfer of H shares will be effected
in order to determine the list of holders of H shares of the
Company who will be entitled to attend and vote at the AGM. H
Shareholders of the Company whose names appear on the H share
register of members of the Company on Thursday, 18 May 2023 are
entitled to attend the AGM after completing the registration
procedures. In order to qualify for attendance at the AGM, all the
transfer documents must be lodged with the Company's H Share
registrar, Computershare Hong Kong Investor Services Limited, by
4:30 p.m. on Wednesday, 17 May 2023.
Whether or not you intend to attend the AGM, you are requested
to complete and return the form of proxy in accordance with the
instruction printed thereon as soon as practicable but in any event
not less than 24 hours before the time appointed for convening the
AGM or any adjournment thereof. Completion and return of the form
of proxy will not preclude you from attending and voting in person
at the AGM or at any adjourned meeting thereof should you so
wish.
VI. RECOMMATION
The Board considers that the matters to be put to the
Shareholders for voting at the AGM are in the interests of the
Company and its shareholders as a whole. Accordingly, the Board
recommends the Shareholders to vote in favour of all the
resolutions at the AGM.
VII. ADDITIONAL INFORMATION
At the board meeting on 30 March 2023, Mr. Ma Chongxian, Mr.
Feng Gang and Mr. Xiao Peng were considered to have material
interest in the transactions under the New Trademark License
Framework Agreement and the Non-exempt Continuing Connected
Transactions, Mr. Patrick Healy was considered to have material
interest in the transactions under the ACC Financial Services
Agreement, and have abstained from voting on the relevant board
resolutions. Save the above-mentioned Directors, no Director is
required to abstain from voting on the relevant board resolutions.
Besides, Mr. Wang Mingyuan was not eligible to attend the above
board meeting to vote as he was not appointed as a Director at the
time of the board meeting until the extraordinary general meeting
convened later on the same day.
Your attention is drawn to the letter from the Independent Board
Committee as set out in this circular which contains its
recommendation to the Independent Shareholders as to the voting at
the AGM regarding the Non-exempt Continuing Connected
Transactions.
Your attention is also drawn to the letter from the Independent
Financial Adviser as set out in this circular, which contains,
among others, its advice to the Independent Board Committee and the
Independent Shareholders in relation to the Non-exempt Continuing
Connected Transactions as well as the principal factors and reasons
considered by it in concluding its advice.
Your attention is also drawn to the additional information set
out in Appendix of this circular.
By order of the Board
Air China Limited
Huang Bin Huen Ho Yin
Joint Company Secretaries
Beijing, the PRC
Independent Board Committee:
Mr. Li Fushen Mr. He Yun Mr. Xu Junxin
Ms. Winnie Tam Wan-chi
3 May 2023
To the Independent Shareholders of the Company Dear Sir or
Madam,
DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED
TRANSACTIONS:
PROPOSED REVISION OF ANNUAL CAP AND ENTERING INTO FINANCIAL
SERVICES AGREEMENTS
We refer to the circular dated 3 May 2023 issued by the Company
to its Shareholders (the "Circular") of which this letter forms a
part. Terms defined in the Circular shall have the same meanings
when used in this letter, unless the context otherwise
requires.
On 30 March 2023, the Board approved (1) the Proposed Revision
of Annual Cap; and (2) the entering into of the Financial Services
Agreements, and approved the Air China New Annual Caps, CNAHC New
Annual Caps and ACC New Annual Caps. The above Non-exempt
Continuing Connected Transactions are subject to the reporting,
annual review, announcement and Independent Shareholders' approval
requirements under Chapter 14A of the Hong Kong Listing Rules.
The details of the above Non-exempt Continuing Connected
Transactions are set out in the letter from the Board contained in
the Circular.
The Independent Board Committee was formed to make a
recommendation to the Independent Shareholders as to whether the
Non-exempt Continuing Connected Transactions, the terms of the
Financial Services Agreements, and the Proposed Annual Caps are
fair and reasonable and whether such transactions
are in the interest of the Company and the Shareholders as a
whole. BaoQiao Partners has been appointed as the independent
financial adviser to advise the Independent Board Committee and the
Independent Shareholders in this regard.
As your Independent Board Committee, we have discussed with the
management of the Company the reasons for the Non-exempt Continuing
Connected Transactions, the relevant terms of the Financial
Services Agreements, and the basis upon which the relevant terms
and the Proposed Annual Caps have been determined. We have also
considered the key factors taken into account by BaoQiao Partners
in arriving at its opinion regarding the Non-exempt Continuing
Connected Transactions as set out in the letter from the
Independent Financial Adviser annexed to the Circular, which we
urge you to read carefully.
The Independent Board Committee, after taking into account,
amongst other things, the advice of BaoQiao Partners, considers the
Non-exempt Continuing Connected Transactions are carried out in the
usual and ordinary course of business and on normal commercial
terms, the terms of the Financial Services Agreements and the
Proposed Annual Caps are fair and reasonable, and thus such
transactions are in the best interest of the Company and its
Shareholders as a whole. Accordingly, the Independent Board
Committee recommends the Independent Shareholders to vote in favour
of the relevant ordinary resolutions as set out in the notice of
the AGM.
Yours faithfully,
Independent Board Committee
Mr. Li Fushen
Independent
non-executive Director
Mr. He Yun
Independent
non-executive Director
Mr. Xu Junxin
Independent
non-executive Director
Ms. Winnie Tam Wan-chi
Independent
non-executive Director
The following is the full text of a letter of advice from
BaoQiao Partners Capital Limited, the independent financial adviser
to the Independent Board Committee and the Independent Shareholders
in respect of the Non-exempt Continuing Connected Transactions
which has been prepared for the purpose of inclusion in this
circular.
Unit 2803-2805, 28/F, Tower 1, Admiralty Centre, 18 Harcourt
Road, Admiralty, Hong Kong
3 May 2023
To the Independent Board Committee and the Independent
Shareholders of Air China Limited
Dear Sir or Madam,
DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED
TRANSACTIONS:
PROPOSED REVISION OF ANNUAL CAP AND ENTERING INTO FINANCIAL
SERVICES AGREEMENTS
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser
to advise the Independent Board Committee and the Independent
Shareholders in respect of (i) the Proposed Revision of Annual Cap
of the deposit services ("Deposit Services") provided by CNAF to
the Group under the Existing Air China Financial Services
Agreement; (ii) the Deposit Services (together with the Air China
New Annual Caps) provided by CNAF to the Group under the Air China
Financial Services Agreement; (iii) the comprehensive credit line
services ("CNAHC Credit Line Services") (together with the CNAHC
New Annual Caps) provided by CNAF to the CNAHC Group under the
CNAHC Financial Services Agreement; and (iv) the comprehensive
credit line services ("ACC Credit Line Services") (together with
the ACC New Annual Caps) provided by CNAF to the ACC Group under
the ACC Financial Services Agreement (collectively known as the
"Non-exempt Continuing Connected Transactions"), details of which
are set out in the letter from the Board (the "Letter from the
Board") contained in the circular dated 3 May 2023 issued by the
Company to the Shareholders (the "Circular"), of which this letter
forms part. Terms used in this letter shall have the same meanings
as defined in the Circular unless the context requires
otherwise.
On 30 March 2023, upon consideration and approval by the Board,
the Board resolved to (i) revise the maximum daily balance of
deposits (including accrued interests) of the Deposit Services
provided by CNAF to the Group under the Existing Air China
Financial Services Agreement for the year ending 31 December 2023
from RMB15 billion to RMB20 billion; and (ii) as the Existing
Financial Services
Agreements will expire on 31 December 2023, the entering into
the Financial Services Agreements, pursuant to which, CNAF will
continue to provide financial services to the Group, the CNAHC
Group and the ACC Group for a term of three years commencing from 1
January 2024 and ending on 31 December 2026 and approved the Air
China New Annual Caps, CNAHC New Annual Caps, and ACC New Annual
Caps.
According to the Hong Kong Listing Rules, as one or more of the
applicable Percentage Ratios in respect of the Revised Annual Cap
of the Deposit Services under the Existing Air China Financial
Services Agreement are more than 5% but less than 25%, the Proposed
Revision of Annual Cap is subject to (i) the requirements
applicable to discloseable transaction under Chapter 14 of the Hong
Kong Listing Rules; and
(ii) the reporting, announcement and independent shareholders'
approval requirements for continuing connected transactions under
Chapter 14A of the Hong Kong Listing Rules.
Similarly, according to the Hong Kong Listing Rules, as one or
more of the applicable Percentage Ratios in respect of each of the
maximum daily balances of Deposit Services under the Air China
Financial Services Agreement, CNAHC Credit Line Services under the
CNAHC Financial Services Agreement and ACC Credit Line Services
under the ACC Financial Services Agreement are more than 5% but
less than 25%, such transactions are therefore subject to (i) the
requirements applicable to discloseable transaction under Chapter
14 of the Hong Kong Listing Rules; and (ii) the reporting,
announcement and independent shareholders' approval requirements
for continuing connected transactions under Chapter 14A of the Hong
Kong Listing Rules.
The Independent Board Committee comprising Mr. Li Fushen, Mr. He
Yun, Mr. Xu Junxin and Ms. Winnie Tam Wan-chi has been established
to advise the Independent Shareholders on (i) whether the terms of
the Non-exempt Continuing Connected Transactions are on normal
commercial terms and are fair and reasonable; (ii) whether the
Non-exempt Continuing Connected Transactions are in the interests
of the Company and the Shareholders as a whole and are conducted in
the ordinary and usual course of business of the Group; and (iii)
how the Independent Shareholders should vote in respect of the
resolutions to approve the Non-exempt Continuing Connected
Transactions at the AGM. We, BaoQiao Partners Capital Limited, have
been appointed as the Independent Financial Adviser to advise the
Independent Board Committee and the Independent Shareholders in
this respect.
OUR INDEPENCE
In the last two years, prior to the Latest Practicable Date,
BaoQiao Partners was appointed as the independent financial adviser
by the Company (i) to advise of the Board in respect of the opinion
pursuant to Rule 14A.52 of the Hong Kong Listing Rules, as set out
in the announcements of the Company dated 29 October 2021 and 30
March 2023 respectively; and (ii) to advise the independent board
committee and independent shareholders of the Company the revision
of annual caps for continuing connected transactions of the
Company, as set out in the announcement and circular of the Company
dated 10 December 2021 and 14 December 2021 respectively.
As at the Latest Practicable Date, we do not have any
relationship with, or have any interest in, the Group, CNAF, CNAHC,
Air China Cargo and their respective associates that could
reasonably be regarded as relevant to our independence. Apart from
the normal professional fees payable to us in connection with
this appointment as the Independent Financial Adviser, no other
arrangement exists whereby we had received or will receive any fees
or benefits from the Company or any other parties that could
reasonably be regarded as relevant to our independence as defined
under Rule 13.84 of the Hong Kong Listing Rules.
BASIS OF OUR OPINION
In formulating our opinion to the Independent Board Committee
and the Independent Shareholders, we have relied on the statements,
information, opinions and representations contained or referred to
in the Circular and the information and representations as provided
to us by the Directors and/or the Company's management (the
"Management"). We have reviewed, among others, the Existing
Financial Services Agreement, the Financial Services Agreements,
the interim report (the "2022 Interim Report") for the six months
ended 30 June 2022 ("HY2022"), the annual report (the "2022 Annual
Report") of the Company for the year ended 31 December 2022
("FY2022") and the information set out in the Circular. We have
assumed that all information and representations that have been
provided by the Directors and/or the Management, for which they are
solely and wholly responsible, are true and accurate at the time
when they were made and continue to be so as at the Latest
Practicable Date. We have also assumed that all statements of
belief, opinion, expectation and intention made by the Directors
and/or the Management in the Circular were reasonably made after
due enquiry and careful consideration. We have no reason to suspect
that any material facts or information have been withheld or to
doubt the truth, accuracy and completeness of the information and
facts contained in the Circular, or the reasonableness of the
opinions expressed by the Company, its advisers and/or the
Directors/the Management, which have been provided to us.
All Directors collectively and individually accept full
responsibility for the purpose of giving information with regard to
the Group in the Circular and, having made all reasonable
enquiries, confirm that to the best of their knowledge and belief,
the information contained in the Circular is accurate and complete
in all material respects and not misleading or deceptive, and there
are no other facts not contained in the Circular, the omission of
which would make any statement in the Circular misleading.
We consider that we have been provided with sufficient
information to reach an informed view and to provide a reasonable
basis for our opinion. We have not, however, conducted any
independent in-depth investigation into the business and affairs of
the Company, CNAF, CNAHC, Air China Cargo and each of their
respective subsidiaries or associates, nor have we considered the
taxation implication on the Group or the Shareholders as a result
of the Non-exempt Continuing Connected Transactions. Our opinion is
necessarily based on financial, economic, market and other
conditions in effect, and the facts, information, representations
and opinions made available to us, at the Latest Practicable
Date.
This letter is issued for the information for the Independent
Board Committee and the Independent Shareholders solely in
connection with their consideration of approving the Non-exempt
Continuing Connected Transactions, and this letter, except for its
inclusion in the Circular and for publication on the websites of
the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company
(www.airchina.com.cn) as required under the Hong Kong Listing
Rules, is not to be quoted or referred to, in whole or in part, nor
shall this letter be used for any other purposes, without our prior
written consent.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our opinion and recommendation on the terms of
the Non-exempt Continuing Connected Transactions, we have taken
into consideration the following principal factors and reasons:
1. Background information of the Company, CNAHC, Air China Cargo and CNAF
Information on the Company
The Company is principally engaged in providing air passenger,
air cargo and related services.
Information on CNAHC
CNAHC primarily operates all the state-owned assets and
state-owned equity interests invested by the State in CNAHC and its
invested entities, aircraft leasing and aviation equipment and
facilities maintenance businesses. As at the Latest Practicable
Date, CNAHC holds approximately 50.14% of the Company's shares
directly and through its wholly-owned subsidiary CNACG, and is a
controlling shareholder of the Company. Therefore, CNAHC is a
connected person of the Company as defined under the Hong Kong
Listing Rules. The State-owned Assets Supervision and
Administration Commission of the State Council is a controlling
shareholder and de facto controller of CNAHC.
Information on Air China Cargo
Air China Cargo is a limited liability company established under
the laws of the PRC and is principally engaged in air cargo and
mail transportation business. As at the Latest Practicable Date,
CNAHC holds approximately 45% equity interest in Air China Cargo,
and Air China Cargo is therefore a connected person of the Company
as defined under the Hong Kong Listing Rules.
Information on CNAF
CNAF is a company with limited liability incorporated in the
PRC, and is primarily engaged in providing financial services to
CNAHC Member Companies. As at the Latest Practicable Date, the
Company and CNAHC hold approximately 51% and 49% of the shares of
CNAF respectively. Therefore, CNAF is a connected subsidiary of the
Company and a connected person of the Company as defined under Rule
14A.16 of the Hong Kong Listing Rules.
CNAF, as a non-banking financial institution providing financial
services to the Group and the CNAHC Group, is subject to
regulations promulgated by CBIRC from time to time. These
regulations may not be the same as those regulating commercial
banks. As CNAF and commercial banks have different target customers
for their respective financial services, they may be subject to
different risk profiles (mainly compliance risks, liquidity risks
and credit risks). Details of the key risk factors are set out
under the sub-section headed "(III) Risk Profile and Management of
CNAF" under the section head "III. NON-EXEMPT CONTINUING CONNECTED
TRANSACTIONS" of the Letter from the Board. To assess the key risk
factors, we conducted following analyses:
(a) Compliance risks
As confirmed by the Management, CNAF shall comply with
(Administrative Measures on Finance Companies of Enterprise
Groups*) (the " Administrative
Measures") and other requirements from the PBOC and CBIRC.
We noted that the Administrative Measures set out certain
compliance and risk control requirements/measures in relation to
the operation of group financing companies, including but not
limited to, maintaining certain financial ratios at all times.
The table below sets out the key financial ratio requirements of
the Administrative Measures and the respective financial ratios of
CNAF for the three years ended 31 December 2022 as provided by the
Company.
As shown in the table above, CNAF complied with the relevant
financial ratio requirements as set out in the Administrative
Measures during 2020, 2021 and 2022. As also confirmed by the
Management, they are not aware of any record of non-compliance with
relevant laws and regulations of the PRC on CNAF during the recent
three years.
(b) Liquidity risks
CNAF recorded liquidity ratio of approximately 85.57% and 68.25%
as at 31 December 2021 and 31 December 2022 respectively. According
to the statistics as published by CBIRC, the PRC commercial banks
recorded average liquidity ratio of approximately 62.85% for the
fourth quarter in 2022. As such, CNAF had a higher liquidity ratio
as compared to the average liquidity ratio of the PRC commercial
banks for the fourth quarter in 2022.
(c) Credit risks
The key indicators of credit risk are the non-performing loans
ratio and the allowance of non- performing loans to total loans
ratio. As advised by the Management, as at 31 December 2022, CNAF
did not record any non-performing loans and the allowance of
non-performing loans to total loans ratios is not applicable.
In addition, pursuant to the Administrative Measures, in the
event that a group finance company faces any difficulty in making
payment, its controlling shareholder(s) will increase such group
finance company's capital accordingly based on the actual need. We
noted from CNAF's articles of association that CNAHC undertook that
CNAHC will provide funding (according to the practical situations)
to CNAF to satisfy its capital needs in the event that CNAF
experiences any urgent payment difficulties.
2. Reasons for and benefits of entering into the Non-Exempt
Continuing Connected Transactions
Proposed Revision of Annual Cap under the Existing Air China
Financial Services Agreement and Deposit Services (together with
Air China New Annual Caps) under the Air China Financial Services
Agreement
Pursuant to the Existing Air China Financial Services Agreement
and the Air China Financial Services Agreement, CNAF will provide
certain financial services to the Group, among others, CNAF shall
accept deposit of money from the Group at interest rates in line
with the interest rate rules prescribed by the PBOC from time to
time for the same type of deposit. As disclosed in the Letter from
the Board, the main reasons for and benefits of the Proposed
Revision of Annual Cap and the continuing provision of Deposit
Services within the Air China New Annual Cap by the CNAF Group to
the Group are summarised as below:
(i) CNAF is able to provide more efficient settlement services
as compared with independent third party banks;
(ii) CNAF has a good track record on compliance and CNAF is able
to provide safe, convenient, fast, comprehensive and tailor-made
financial services to the Group for years;
(iii) CNAF is a professional financial institution within the
Group and it could act more proactively in protecting the interest
of the Group than external institutions; and
(iv) a good cooperative relationship has been established
between CNAF and the relevant departments of the Group over the
years.
CNAHC Credit Line Services under the CNAHC Financial Services
Agreement and ACC Credit Line Services under the ACC Financial
Services Agreement
With reference to the Letter from the Board, CNAF has been
providing financial services to the CNAHC Group and ACC Group for
years. The business with the CNAHC Group and ACC Group contributed
a steady and significant portion to CNAF's revenues in the past.
Such transaction is beneficial for CNAF to make full use of its
function as a financial platform to further improve the utilization
efficiency and effectiveness of funds, as well as enhance its gains
on capital, which is in line with the needs of the Company's
operation and development. The Directors believe that it would be
in the best interest of CNAF and the Group to continue the
provision of financial services by CNAF to the CNAHC Group and ACC
Group.
In addition, as disclosed in the announcement of the Company
dated 20 September 2022, Air China Cargo, being a subsidiary of
CNAHC as at the Latest Practicable Date, intends to apply for the
initial public offering and listing of A shares ("Proposed A-Share
Listing"), according to the relevant requirements under the
"Administrative Measures for initial Public Offerings and Listing"
issued by the CSRC, Air China Cargo shall maintain independence
from CNAHC and enter into the ACC Financial Services Agreement with
CNAF separately.
Taking into account the followings:
Well established and reliable relationship
CNAF is regulated by the PBOC and the CBIRC, which requires,
among others, CNAF to provide its services in accordance with the
Administrative Measures. We have obtained and reviewed the approval
granted by the relevant authority(ies) permitting the CNAF to carry
out such financial services including but not limited to, the
provision of Deposit Services, CNAHC Credit Line Services and ACC
Credit Line Services. Also, we have been advised by the Management
that, to the best knowledge of the Company, there is no record of
material non- compliance with the relevant law, rules and
regulations in the PRC applicable to CNAF. From our review of the
official website of CBIRC, we did not note any non-compliance
record of CNAF.
As advised by the Management, CNAF has been in cooperation with
the Group, CNAHC Group and ACC Group for years, thereby having
in-depth understanding in each other's business model and working
practice which facilitate CNAF to provide financial services to
Group, CNAHC Group and ACC Group in an efficient and effective
manner. In addition, the Financial Services Agreements provide the
Group, CNAHC Group and ACC Group with flexibility in selecting
financial services providers, including CNAF, to suit their own
business needs, which will be conducive to the Group's full and
reasonable utilisation of market resources.
Favourable pricing policies for Deposit Services, CNAHC Credit
Line Services and ACC Credit Line Services
CNAF has been providing financial services to the Group, CNAHC
Group and ACC Group for many years, and have an in-depth
understanding of the business and development needs of the Group,
CNAHC Group and ACC Group. In respect of the Deposits Services
offered by CNAF to the Group, CNAF can assist the Group in
formulating a beneficial deposit mix that will increase the return
on funds and maintain the sufficiency and flexibility of the
Group's working capital. In addition, CNAF can offer reliable and
stable financial resource and mid-term and long-term credit line
for the CNAHC Group and ACC Group to serve their respective
financing needs and other financial services needs from time to
time for their respective business operations, therefore optimizing
the funding structure of the CNAHC Group and ACC Group.
As CNAF is a regulated financial institution in the PRC and is
entitled to interbank interest rates, which are generally higher
than normal commercial interest rates when re- depositing deposits
with commercial banks in the PRC. The Company also holds
approximately 51% equity interest in CNAF. Accordingly, the Company
will share the benefit from CNAF's profits.
Furthermore, the pricing policy of CNAF and commercial banks in
China are subject to guidelines set by the PBOC. Therefore, the
fees charged by the CNAF for its services to the Group, CNAHC Group
and ACC Group are comparable to those charged by PRC banks for
similar services.
Based on the above and the fact that (i) each of the Group,
CNAHC Group and ACC Group is not restricted under the Existing
Financial Services Agreement and the Financial Services Agreements
to utilise any financial services (including Deposit Services,
CNAHC Credit Line Services and ACC Credit Line Services) with or
other banks or financial institutions; and (ii) the deposit rates
for Deposit Services and interest rates for CNAHC Credit Line
Services and ACC Credit Line Services offered by CNAF were in line
with/or better than those promulgated by the PBOC or those offered
by major commercial banks in the PRC (as set out in our analysis in
the section below), we concur with the Directors' view that the
Non- exempt Continuing Connected Transactions are entered into in
the ordinary and usual course of business of the Group and in the
interests of the Company and the Shareholders as a whole.
3. Principal Terms of the Non-exempt Continuing Connected Transactions
Proposed Revision of Annual Cap under the Existing Air China
Financial Services Agreement and The Air China Financial Services
Agreement (together with the Air China New Annual Caps)
(i) Principal terms of the Deposit Services under the Existing
Air China Financial Services Agreement and the Air China Financial
Services Agreement
Summarised below are the major terms of the Deposit Services
under the Existing Air China Financial Services Agreement and the
Air China Financial Services Agreement, details of which are set
out under the paragraph headed "(I) Proposed Revision of Annual
Cap" under the section headed "III. NON-EXEMPT CONTINUING CONNECTED
TRANSACTIONS" of the Letter from the
Board; and "2. The Air China Financial Services Agreement and
the Annual Caps of the Relevant Transactions thereunder" under the
sub-section headed "(II) Entering into the Financial Services
Agreements" under the section headed "III. NON-EXEMPT CONTINUING
CONNECTED TRANSACTIONS" of the Letter from the Board
respectively:
Air China Financial Existing Air China Financial
Services Agreement Services Agreement
-------------------- -----------------------------
Date: 30 March 2023 28 August 2020
Parties: The Company and CNAF
Effective date and Term:
(Air China Financial Services Agreement) Three years commencing
from 1 January 2024 and ending on 31 December 2026, which is
automatically renewable for successive terms of three years after
the expiry of the term subject to the fulfillment of the
requirements under Hong Kong Listing Rules and the required
approval procedures thereunder.
Upon expiry of the Air China Financial Services Agreement, the
Board will re- assess the terms and conditions of the Air China
Financial Services Agreement, and the Company will re-comply with
the relevant rules governing connected transactions under the Hong
Kong Listing Rules. During the term of the Air China Financial
Services Agreement, the agreement can be terminated on any 31
December by either party thereto by serving the other party a
written notice of termination of not less than three months.
(Existing Air China Financial Services Agreement) Three years
commencing from 1 January 2021 and ending on 31 December 2023,
which is automatically renewable for successive terms of three
years after the expiry of the term subject to the fulfillment of
the requirements under Hong Kong Listing Rules and the required
approval procedures thereunder.
Upon expiry of the Existing Air China Financial Services
Agreement, the Board will re-assess the terms and conditions of the
Existing Air China Financial Services Agreement, and the Company
will re-comply with the relevant rules governing connected
transactions under the Hong Kong Listing Rules. During the term of
Existing Air China Financial Services Agreement, the agreement can
be terminated on any 31 December by either party thereto by serving
the other party a written notice of termination of not less than
three months.
Air China Financial Existing Air China Financial
Services Agreement Services Agreement
-------------------- -----------------------------
Principal terms:
CNAF has agreed to provide the Group with a range of financial
services including the Deposit Services
Pricing basis:
(Existing Air China Financial Services Agreement) The interest
rates applicable to the Group for deposits with CNAF shall (i) be
in compliance with the requirements on interest rates prescribed by
PBOC for such type of deposit; and (ii) be not lower than the
interest rates offered by state-owned commercial banks to the Group
for the same type of services under the same conditions.
(Existing Air China Financial Services Agreement) The interest
rates applicable to the Group for deposits with CNAF shall (i) be
in compliance with the requirements on interest rates prescribed by
PBOC for such type of deposit; (ii) be not lower than the interest
rates offered by state- owned commercial banks to the Group for the
same type of services under the same conditions; and (iii) be not
lower than the interest rate for the same type of services by CNAF
to other member companies of CNAHC under the same conditions.
Based on the above and as confirmed by the Management, the
principal terms of the provision of the Deposits Services pursuant
to the Air China Financial Services Agreement are general in line
with the Existing Air China Financial Services Agreement.
In respect of the pricing basis of the Deposit Services provided
by CNAF to the Group, we note that, as compared with the Existing
Air China Financial Services Agreement, the interest rates for the
same type of services provided by CNAF to the Group to be not lower
than that offered by CNAF to other member companies of CNAHC is no
longer required under the Air China Financial Services Agreement.
As advised by the Management, such term is considered excessive
based on the requirements of the Hong Kong Listing Rules and
burdensome that requires additional management resources to liaise
with CNAHC Group for the purpose of continuing compliance.
We have obtained 4 sets of deposit records between (i) the Group
and CNAF; (ii) the Group and a state-owned commercial bank; and
(iii) the CNAHC Group and CNAF in the same period during 2021 and
2022, respectively. According to the aforesaid deposit records, we
noted that the interest rates offered by CNAF to the Group were (i)
in compliance with the requirements on interest rates prescribed by
PBOC for such type of deposit; (ii) not lower than those offered by
the commercial bank to the Group; and (iii) not lower than those
offered by CNAF to CNAHC Group. As such, we consider that the
provision of Deposit Services by CNAF to the Group was carried out
in accordance with the terms of the Existing Air China Financial
Services Agreement.
(ii) Internal control measures
The Group adopted certain internal control measures in respect
of the Deposit Services to be provided by CNAF to the Group.
Details of the measures are set out under the sub-sections headed
"(IV) Internal Control Measures for the Non-Exempt Continuing
Connected Transactions" under the section headed "III. NON-EXEMPT
CONTINUING CONNECTED TRANSACTIONS" in the Letter from the
Board.
For the purpose of Rule 14A.56 of the Listing Rules, the
Company's external auditors, will be engaged to issue a letter to
report on the Group's continuing connected transactions (including
the provision of Deposit Services) in accordance with Hong Kong
Standard on Assurance Engagements 3000 "Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information" and
with reference to Practice Note 740 "Auditor's Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules" issued by
the Hong Kong Institute of Certified Public Accountants. We have
obtained from the Company and reviewed the letters issued by the
Company's external auditors in 2020, 2021 and 2022 and noted that
the auditors have confirmed that the internal control procedures
implemented by the Company have been effective in all material
aspects.
Based on the above and our findings on deposit rates, we
consider that effective implementation of the measures will ensure
the fair pricing of the Deposit Services offered by CNAF to the
Group and we do not doubt the effectiveness of the implementation
of the internal procedures for the Deposit Services.
In view of the above, we consider that the terms of the Deposit
Services are on normal commercial terms and are fair and reasonable
so far as the Independent Shareholders are concerned and in the
interests of the Company and the Shareholders as a whole.
(iii) Proposed Revised Annual Cap and Air China New Annual Caps
Historical Figures
Set out below are the historical maximum daily balance of
deposits placed with CNAF by the Group for the two years ended 31
December 2022 and the period from 1 January 2023 to 30 March
2023:
For the year For the year For the year
ended 31 ended 31 December ending 31
December December
2021 2022 2023
RMB' billion RMB' billion RMB' billion
Maximum daily balance
of deposits 10.798 13.588 8.682 (Note)
Existing annual
caps 15 15 15
Utilisation rate
(%) 71.99% 90.59% 57.88% (Note)
Note: the maximum daily balance of deposits with the CNAF placed
by the Group and the utilisation rate of the existing annual cap
for the year ending 31 December 2023 were calculated as at 30 March
2023
Revised Annual Caps and Air China New Annual Caps
Set out below are the proposed (i) Revised Annual Cap for the
year ending 31 December 2023; and (ii) the Air China New Annual
Caps for the three years ending 31 December 2026:
For the year ending 31 December
2023 2024 2025 2026
RMB' billion RMB' billion RMB' billion RMB' billion
Revised Annual
Cap / Air China
New Annual Caps 20 22 23 23
As set out in the Letter from the Board, the Revised Annual Cap
and the Air China New Annual Caps are determined principally in
consideration of (i) the growth in maximum historical daily
balances of deposits of the Group placed with CNAF, in particular
during the period from 1 January 2023 to 30 March 2023, which over
50% of the existing annual cap for the year ending 31 December 2023
has been utilised; (ii) the existing annual caps for the Existing
Air China Financial Service Agreement; (iii) the expected growth in
the cash position of the Group after completion of the Shandong
Transactions (as defined below), which were completed on 7 April
2023; and (iv) the possible fund raisings activities to be
conducted by the Group in the coming years.
In assessing the fairness and reasonableness of the Revised
Annual Cap and the Air China New Annual Caps, we have taken into
consideration the following:
The historical maximum daily balance of deposits and utilisation
rates
The historical maximum daily balance of deposits placed with
CNAF by the Group for each of the two years ended 31 December 2022
and for the period from 1 January 2023 to 30 March 2023 amounted to
approximately RMB10.798 billion, RMB13.588 billion and RMB8.682
billion, respectively, representing (i) the historical utilisation
rates of approximately 71.99% and 90.59% of the existing annual
caps for the two years ended 31 December 2022; and (ii) as at 30
March 2023, the utlisation rate of the existing annual cap for the
year ending 31 December 2023 was approximately 57.88%, indicating
the deposits demand of the Group will grow in faster pace.
Cash position of the Group
According to the 2022 Interim Report and 2022 Annual Report, as
at 30 June 2022 and
31 December 2022, Group's (i) cash and cash equivalents amounted
to approximately RMB18.6 billion and RMB10.6 billion respectively;
and (ii) accounts receivable amounted to
approximately RMB1.6 billion and RMB1.6 billion respectively and
the sum of the aforesaid two items amounted to approximately
RMB20.2 billion and RMB12.2 billion as at 30 June 2022 and 31
December 2022. The sum of the aforesaid two items indicates the
Group's possible demand of Deposit Services to be provided by
commercial banks and CNAF and we note that the sum of the aforesaid
two items during the year of 2022, in particular, as at 30 June
2022, which amounted to approximately RMB20.2 billion, is close to
the proposed Revised Annual Cap for the year ending 31 December
2023.
Based on the information provided by the Management, as at 30
June 2022 and 31 December 2022, the balance of deposits placed by
the Group with CNAF amounted to approximately RMB8.1 billion and
RMB3.8 billion respectively, representing approximately 43.5% and
35.8% of the cash and cash equivalents of the Group of
approximately RMB18.6 billion and RMB10.6 billion as at 30 June
2022 and 31 December 2022. The Company is not restricted under the
Existing Air China Financial Services Agreement and the Air China
Financial Services Agreement to place deposits with any other banks
or financial institutions. As advised by the Management, during the
two years ended 31 December 2022 and the period from 1 January 2023
to 30 March 2023, the Group had from time to time placed term
deposits with other commercial banks if the terms provided are more
favourable.
Expected increase in utlisation rates of the Deposit Services
after completion of the Shandong Transactions
On 30 December 2022, the Company announced the proposed
acquisition of an additional equity interest of 2.311% in Shandong
Aviation Group Company at an aggregate consideration of
approximately RMB3.3 billion and the proposed capital increase of
RMB6.6 billion in Shandong Aviation Group Company (collectively
known as the "Shandong Transactions"). Upon completion of the
Shandong Transactions, the percentage of the equity interest of
Shandong Aviation Group Company held by the Company will increase
from 49.4067% to 66%, thereby acquiring the control of both
Shandong Aviation Group Company and Shandong Airlines Co., Ltd.
(which is owned as to 42% by Shandong Aviation Group Company and
22.8% by the Company). As disclosed in the announcement of the
Company dated 7 April 2023, the Shandong Transactions were
completed on 7 April 2023.
As advised by the Management, upon completion of the Shandong
Transactions, the Group's cash resources would increase by
approximately RMB5.5 billion, resulting to an increase in demand
for the Deposit Services from CNAF for 2023 and years forward.
To accommodate the short-term increase in deposits demand
resulting from the Group's fund raising activities
As stated in the Letter from the Board, taking into account the
Company's capital needs and current market condition, the Company
may raise funds by way of direct financing in the next three years.
As advised the Management, it is estimated that this may lead to an
increase of the Group's funds and result in an increase of daily
balance of deposits to be placed by the Group with CNAF for the
next three years ending 31 December 2026. Based on our review
of
the public information of the Group published on the website of
the Stock Exchange, we note that the Company has completed a
non-public issuance of A shares with net proceeds amounting to
approximately RMB14.9 million in January 2023.
In addition, based on our review of 2022 Annual Report, as at 31
December 2022, the Group's capital commitment amounted to
approximately RMB58,509 million, which mainly consisted of the
payables in the next few years for purchasing certain aircraft and
related equipment. The Group intends to satisfy the capital
expenditure requirement by means such as internal funds or
financing. In addition, as disclosed in the 2022 Interim Report,
the Group proactively responded to the market changes and
dynamically adjusted its operation arrangement. In consideration
the expected recovery of the civil aviation market from the
COVID-19 pandemic and the gradual resumption of the international
routes in the future, it is expected that the Group will expand its
operation scale, aligning with the pace of market recovery, and
result in an increase in the financing scale of the Group to ensure
the liquidity safety. Based on the record published by the Civil
Aviation Administration of China (CAAC), the total transportation
turnover volume and passenger transportation volume of China's
civil aviation increased by approximately 13.9% and 34.8%
respectively in January 2023 as compared to the same period in the
prior year.
Having considered the above factors, we are of the view that the
proposed Revised Annual Cap for the year ending 31 December 2023
and the Air China New Annual Caps for the three years ending 31
December 2026 are fair and reasonable so far as the Independent
Shareholders are concerned and in the interests of the Company and
Shareholders as a whole.
THE CNAHC CREDIT LINE SERVICES (TOGETHER WITH THE CNAHC NEW
ANNUAL CAPS) UNDER THE CNAHC FINANCIAL SERVICES AGREEMENT
(i) Principal terms of the CNAHC Credit Line Services
Summarised below are the major terms of the comprehensive credit
line services, details of which are set out under the paragraph
headed "3. The CNAHC Financial Services Agreement and the Relevant
Annual Caps of Transactions thereunder" under the sub-section
headed "(II) Entering into the Financial Services Agreements" under
the section headed "III. NON- EXEMPT CONTINUING CONNECTED
TRANSACTIONS" of the Letter from the Board:
Date
30 March 2023
Parties
CNAF and CNAHC
Principal terms
Pursuant to the CNAHC Financial Services Agreement, CNAF has
agreed to provide the CNAHC Group with a range of financial
services including the Credit Line Services.
As confirmed by the Management, the principal terms of the
provision of the CNAHC Credit Line Services pursuant to the CNAHC
Financial Services Agreement are general in line with the Existing
CNAHC Financial Services Agreement.
Pricing basis
As disclosed in the Letter from the Board, the interest rates
applicable to the loan and bill discounting services provided by
CNAF to the CNAHC Group shall (i) be in compliance with the
requirements on interests prescribed by PBOC for such type of
loans; and (ii) be not lower than the interest rates charged by
state-owned commercial banks to the CNAHC Group for the same type
of services under the same conditions.
Upon our request, we have obtained and reviewed two samples loan
documents entered into between the CNAHC Group and CNAF ("CNAF Loan
Samples"), two samples loan documents entered into between the
CNAHC Group and state-owned commercial banks and two samples loan
documents entered into between the Group and CNAF during 2021 to
2022. Based on the aforesaid documents, we note that the interest
rates charged by CNAF to the CNAHC Group were (i) in compliance
with the requirements on interests prescribed by PBOC for such type
of loan; (ii) not lower than those charged by CNAF to the
commercial banks for loans with similar duration and granted in
similar period; and (iii) not lower than those charged by CNAF to
the Group for loans with similar duration and granted in similar
period. As such, we consider that the CNAHC Credit line Services
was carried out in accordance with the terms of the Existing CNAHC
Financial Services Agreement.
(ii) Internal control measures
With reference to the Letter from the Board, the Group adopted
certain internal control measures in respect of the comprehensive
credit line services to be provided by CNAF to the CNAHC Group.
Details of the measures are set out under the sub-sections headed
"(IV) Internal Control Measures for the Non-Exempt Continuing
Connected Transactions" under the section headed "III. NON-EXEMPT
CONTINUING CONNECTED TRANSACTIONS" of the Letter from the
Board.
For the review of the CNAF Loan Samples, we noted that (i)
CNAF's staff had conducted pre-loan investigation on loan
applications to, among other things, assess the borrowers'
creditworthiness; (ii) CNAF's loan review committee approved the
key terms of the loans; and (iii) after the approval from the loan
review committee was obtained, the borrower and CNAF entered into a
legally-binding loan agreement and then the loan principal was
transferred to the borrower.
For the purpose of Rule 14A.56 of the Listing Rules, the
Company's external auditors, will be engaged to issue a letter to
report on the Group's continuing connected transactions (including
the provision of CNAHC Credit Line Services by CNAF to CNAHC Group)
in accordance with Hong Kong Standard on
Assurance Engagements 3000 "Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information" and with
reference to Practice Note 740 "Auditor's Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules" issued by
the Hong Kong Institute of Certified Public Accountants. We have
obtained from the Company and reviewed the letters issued by the
Company's external auditors in 2020, 2021 and 2022 and noted that
the auditors have confirmed that the internal control procedures
implemented by the Company have been effective in all material
aspects.
Based on the above and our findings on interest rates, we
consider that the effective implementation of the measures will
ensure the fair pricing of the CNAHC Credit Line Services and we do
not doubt the effectiveness of the implementation of the internal
procedures for the comprehensive credit line services.
In view of the above, we consider that the terms of the CNAHC
Credit Line Services are on normal commercial terms and are fair
and reasonable so far as the Independent Shareholders are concerned
and in the interests of the Company and the Shareholders as a
whole.
(iii) Proposed CNAHC New Annual Caps
Historical Figures
Set out below are the historical maximum daily balance of loans
from CNAF to CNAHC Group for the two years ended 31 December 2022
and the period from 1 January 2023 to 30 March 2023:
Notes:
1. For the two years ended 31 December 2022 and for the period
from 1 January 2023 to 30 March 2023, CNAF did not provide any
credit services to the ACC Group.
2. The maximum daily balance of loans from CNAF to CNAHC Group
and the utilisation rate of the existing annual cap for the year
ending 31 December 2023 were calculated as at 30 March 2023.
CNAHC New Annual Caps
Set out below are the proposed CNAHC New Annual Caps for the
three years ending 31 December 2026:
As set out in the Letter from the Board, the proposed CNAHC New
Annual Caps for the three years ending 31 December 2026 were
determined principally in consideration of (i) the historical daily
balance of CNAHC Credit Services provided by CNAF to CNAHC Group;
(ii) it is the plan of CNAF to further make use its function in
loan business as a finance company; (iii) the expected demand of
loans of CNAHC Group for each of three years ending 31 December
2026; and (iv) a buffer of RMB500 million for each of three years
ending 31 December 2026.
As (i) the utilisation rates of existing annual caps for the two
years ended 31 December 2022 and for the period from 1 January 2023
to 30 March 2023 were at low levels; and (ii) for the Proposed
A-Share Listing, Air China Cargo and CNAF entered into the ACC
Financial Services Agreement separately, the Management lower the
CNAHC New Annual Caps for the three years ending 31 December 2026.
Despite the fact that the proposed CNAHC New Annual Caps for the
three years ending 31 December 2026 are lower than the existing
annual cap for the year ending 31 December 2023, we note that the
proposed CNAHC New Annual Caps are much more than the actual
maximum daily balance of loans from CNAF Group to CNAHC Group for
the two years ended 31 December 2022.
In assessing the fairness and reasonableness of the proposed
CNAHC New Annual Caps, we have taken into consideration the
following:
The historical maximum daily balance of loans and utilisation
rates
We note the utilisation rates of existing annual caps for the
two years ended 31 December 2022 and for the period from 1 January
2023 to 30 March 2023 were approximately 1.38%, 1.85% and 2%
respectively. As disclosed in the Letter from the Board, the low
utilization rate of the historical annual caps is due to the fact
that (i) as CNAHC and its subsidiaries increased the use of direct
financing such as super short-term commercial papers and corporate
bonds while Air China Cargo successfully brought in strategic
investors, the CNAHC Group had ample liquidity overall, therefore
their demands for loans were much lower than expected; and (ii) for
those members of the CNAHC Group who had loan demands, they could
choose to borrow their loans from independent third-party banks
rather than CNAF.
CNAF as a financing platform
We understand from the Management that it is the plan of CNAF to
further make use its function in loan business as a finance
company. CNAF has been providing stable and high- quality financial
services to the members of the CNAHC Group in years and CNAF as an
intra-group service provider, is more familiar with the CNAHC
Group's operation to facilitate efficient loan services to the
benefit of the CNAHC Group.
In addition, as advised by the Management, the integrated
financial services offered by CNAF under the CNAHC Financial
Services Agreement enable the Group to better utilize the platform
of CNAF for efficiently manage the CNAHC Group's financial
resources in order to achieve cost savings and optimize the
indebtedness position of the CNAHC Group.
Expected demand of loans from CNAF to CNAHC Group for each of
three years ending 31 December 2026
Based on the information provided by the Management, assuming
CNAHC will maintain the same level of demand for liquidity loans in
the next three years ending 31 December 2026 and based on the loans
with an amount equivalent to 50% of the direct financing previously
obtained by CNAHC can be borrowed through CNAF, the estimated loan
size can be provided by CNAF to CNAHC would be up to RMB3.85
billion. In addition, in determining the CNAHC New Annual Caps, the
Management took into account the possible liquidity needs of the
other member companies of CNAHC Group (excluding CNAHC), which is
estimated to be approximately RMB770 million, RMB847 million and
RMB932 million respectively for each of the year ending 31 December
2024, 31 December 2025 and 31
December 2026.
The Management has applied a buffer of RMB500 million for each
of the three years ending 31 December 2026 as an assumption for the
determination of the CNAHC New Annual Caps. Having considered that
the additional buffer was applied for unforeseeable circumstances,
for instance, the unpredictable increase in the CNAHC Group's
actual demand on the loan services, we consider the buffer to be
acceptable.
As discussed with the Management, despite the low utilisation of
loan services under the Existing CNAHC Financial Services
Agreement, the Management considered that the CNAHC Financial
Services Agreement provides the CNAHC with a source of financing
that it can choose to use when it deems appropriate which help the
Group to maintain initiative and flexibility to accommodate the
CNAHC Group's financing needs as well as any market/ industry
changes from time to time.
Having considered the above factors, we are of the view that the
proposed CNAHC New Annual Caps for the three years ending 31
December 2026 are fair and reasonable so far as the Independent
Shareholders are concerned and in the interests of the Company and
Shareholders as a whole.
THE ACC CREDIT LINE SERVICES (TOGETHER WITH THE ACC NEW ANNUAL
CAPS) UNDER THE ACC FINANCIAL SERVICES AGREEMENT
(i) Principal terms of ACC Credit Line Services
Summarised below are the major terms of the comprehensive credit
line services, details of which are set out under the paragraph
headed "4. The ACC Financial Services Agreement and the Relevant
Annual Caps of Transactions thereunder" under the sub-section
headed "(II) Entering into the Financial Services Agreements" under
the section headed "III. NON- EXEMPT CONTINUING CONNECTED
TRANSACTIONS" of the Letter from the Board:
Date
30 March 2023
Parties
CNAF and Air China Cargo
Principal terms
Pursuant to the ACC Financial Services Agreement, CNAF has
agreed to provide the ACC Group with a range of financial services
including the ACC Credit Line Services.
As confirmed by the Management, the principal terms of the
provision of the ACC Credit Line Services pursuant to the ACC
Financial Services Agreement are general in line with the Existing
ACC Financial Services Agreement.
Pricing basis
The interest rates applicable to the ACC Credit Line Services
provided by CNAF to ACC Group shall (i) be in compliance with the
requirements on interests prescribed by PBOC for such type of
loans; and (ii) be not lower than the interest rates charged by
state-owned commercial banks to ACC for the same type of services
under the same conditions.
As advised by the Management, there was no loan transaction
between ACC Group and CNAF for the two years ended 31 December 2022
and for the period from 1 January 2023 to 30 March 2023.
(ii) Internal control measures
With reference to the Letter from the Board, the Group adopted
certain internal control measures in respect of the comprehensive
credit line services to be provided by CNAF to the ACC Group.
Details of the measures are set out under the sub-sections headed
"(IV) Internal Control Measures for the Non-Exempt
Continuing Connected Transactions" under the section headed
"III. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS" of the Letter
from the Board. We note that such measures are the same as those
adopted for the CNAHC Credit Line Services.
Based on the above, we consider the effective implementation of
the measures will ensure the fair pricing of the ACC Credit Line
Services and we do not doubt the effectiveness of the
implementation of the internal procedures for the ACC Credit Line
Services.
In view of the above, we consider that the terms of the ACC
Credit Line Services are on normal commercial terms and are fair
and reasonable so far as the Independent Shareholders are concerned
and in the interests of the Company and the Shareholders as a
whole.
(iii) Proposed ACC New Annual Caps
Set out below are the ACC New Annual Caps for the three years
ending 31 December 2026:
For the year For the year For the
ending 31 December ending 31 year
December ending 31
December
2024 2025 2026
RMB' billion RMB' billion RMB' billion
ACC New Annual Caps 0 2 2.5
Note:
1. As of the Latest Practicable Date, the sum of the actual
amount incurred under the Existing ACC Financial Services Agreement
and the actual transaction amount incurred under the Existing CNAHC
Financial Services Agreement did not exceed the annual caps for the
transaction amount of the existing CNAHC Group framework agreement
as approved at the Company's general meeting.
As set out in the Letter from the Board, the proposed ACC New
Annual Caps for the three years ending 31 December 2026 were
determined principally in consideration of the expected demand of
loans of ACC Group for each of three years ending 31 December 2026.
Based on the information provided by the Management in relation to
the loan requirement plan of ACC Group, ACC Group has sufficient
funding for its ongoing business operation and development for the
year ending 31 December 2024 and thus, there is no expected loan
demand and the annual cap will be zero for the year ending 31
December 2024. We have reviewed the financial statements of Air
China Cargo for the year ended 31 December 2021 and we note that
the working capital position of Air China Cargo is strong with net
current assets and cash and banks balances of approximately RMB9.5
billion and RMB8.8 billion as at 31 December 2021. In respect of
the years ending 31 December 2025 and 31 December 2026, the
Management is of the view that, (i) with the possible continuous
expansion of the business of ACC Group to enhance its capacity
level and expand its operating network layout, the liquidity needs
of loans from CNAF to ACC Group would amount to approximately
RMB1.5 billion and RMB2 billion respectively for each of the year
ending 31 December 2025 and 31 December 2026; and (ii) a buffer of
approximately RMB500 million for unforeseeable circumstances for
the years ending 31 December 2025 and 31 December 2026
respectively.
Having considered the above factors, we are of the view that the
proposed ACC New Annual Caps for the three years ending 31 December
2026 are fair and reasonable so far as the Independent Shareholders
are concerned and in the interests of the Company and Shareholders
as a whole.
Reporting Requirement by the Hong Kong Listing Rules
The Directors confirmed that the Company shall comply with the
requirements of Rules 14A.53 to 14A.59 of the Hong Kong Listing
Rules pursuant to which (i) the maximum amounts of the Non-exempt
Continuing Connected Transactions must be restricted by their
respective proposed annual caps for the period concerned under the
relevant agreements; (ii) the terms of the Non-exempt Continuing
Connected Transactions (including their respective proposed annual
caps) must be reviewed by the independent non- executive Directors
annually; and (iii) details of independent non-executive Directors'
annual review on the terms of the Non-exempt Continuing Connected
Transactions must be included in the Company's subsequent published
annual reports and financial accounts.
Furthermore, it is also required by the Hong Kong Listing Rules
that the auditors of the Company must provide a letter to the Board
confirming, among other things, whether anything has come to their
attention that causes them to believe that the Non-exempt
Continuing Connected Transactions (i) have not been approved by the
Board; (ii) were not, in all material respects, in accordance with
the pricing policies of the Group if the transactions involve the
provision of goods or services by the listed issuer's group; (iii)
were not entered into, in all material respects, in accordance with
the relevant agreement governing the transactions; and (iv) have
exceeded their respective proposed annual caps.
In the event that the maximum amounts of the Non-exempt
Continuing Connected Transactions are anticipated to exceed their
respective proposed annual caps, or that there is any proposed
material amendment to the terms of the Non-exempt Continuing
Connected Transactions, as confirmed by the Directors, the Company
shall comply with the applicable provisions of the Hong Kong
Listing Rules governing continuing connected transaction.
Given the above stipulated requirements for continuing connected
transactions pursuant to the Hong Kong Listing Rules, we are of the
view that there are adequate measures in place to monitor the
Non-exempt Continuing Connected Transactions and thus the interest
of the Independent Shareholders would be safeguarded.
RECOMMATION
Having taken into consideration the factors and reasons as
stated above, we are of the opinion that (i) the terms of the
Non-exempt Continuing Connected Transactions are on normal
commercial terms and are fair and reasonable; and (ii) the
Non-exempt Continuing Connected Transactions are conducted in the
ordinary and usual course of business of the Group and in the
interests of the Company and the Shareholders as a whole.
Accordingly, we recommend the Independent Board Committee to advise
the Independent Shareholders to vote in favour of the resolution(s)
to be proposed at the AGM to approve the Non-exempt Continuing
Connected Transactions and we recommend the Independent
Shareholders to vote in favour of the resolution(s) in this
regard.
Yours faithfully, For and on behalf of
BaoQiao Partners Capital Limited Irene Poon
Executive Director
Ms. Irene Poon is a responsible officer registered under the SFO
to carry out Type 1 (dealing in securities) and Type 6 (advising on
corporate finance) regulated activities for BaoQiao Partners
Capital Limited and has over 20 years of experience in the
accounting and corporate financial services industry.
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and
individually accept full responsibility, includes particulars given
in compliance with the Hong Kong Listing Rules for the purpose of
giving information with regard to the Group. The Directors, having
made all reasonable enquiries, confirm that to the best of their
knowledge and belief, the information contained in this circular is
accurate and complete in all material respects and not misleading
or deceptive, and there are no other matters the omission of which
would make any statement herein or this circular misleading.
2. DISCLOSURE OF INTERESTS OF DIRECTORS AND SUPERVISORS
As at the Latest Practicable Date, none of the Directors,
Supervisors or chief executive of the Company had interests or
short positions in the shares, underlying shares and/or debentures
(as the case may be) of the Company or its associated corporations
(within the meaning of Part XV of the SFO) which were notifiable to
the Company and the Stock Exchange pursuant to the SFO, or were
recorded in the register maintained by the Company pursuant to
section 352 of the SFO, or which were notifiable to the Company and
the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies.
As at the Latest Practicable Date, none of the Directors or
Supervisors of the Company had any direct or indirect interest in
any assets which have been, since 31 December 2022 (being the date
to which the latest published audited financial statements of the
Group were made up), acquired or disposed of by or leased to any
member of the Group or are proposed to be acquired or disposed of
by or leased to any member of the Group.
None of the Directors or Supervisors of the Company was
materially interested in any contract or arrangement which is
significant in relation to the business of the Group and subsisting
as at the Latest Practicable Date.
Mr. Patrick Healy, a non-executive Director of the Company, is
concurrently the chairman and an executive director of Cathay
Pacific. Cathay Pacific is a substantial shareholder of the
Company, holding 2,633,725,455 H shares of the Company
(representing approximately 16.26% of the total issued shares of
the Company) as at the Latest Practicable Date, and wholly owns
Cathay Dragon. Mr. Ma Chongxian, an executive Director of the
Company, is concurrently non-executive directors of Cathay Pacific.
Cathay Pacific competes or is likely to compete either directly or
indirectly with the Company in some aspects of the business of the
Company as it operates airline services to certain destinations,
which are also served by the Company.
Save as mentioned above, as at the Latest Practicable Date, none
of the Directors or Supervisors of the Company and their respective
close associates (as defined in the Hong Kong Listing Rules) had
any competing interests which would be required to be disclosed
under Rule 8.10 of the Hong Kong Listing Rules as if each of them
was a controlling shareholder of the Company.
3. SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors or
Supervisors of the Company had any existing or proposed service
contract with any member of the Group which is not expiring or
terminable by the Group within one year without payment of
compensation (other than statutory compensation).
4. DIRECTORS' AND SUPERVISORS' EMPLOYMENT WITH SUBSTANTIAL SHAREHOLDERS
The followings are the particulars of Directors' and
Supervisors' employment with substantial Shareholders (holding
interests or short positions in the shares and underlying shares of
the Company required to be disclosed to the Company pursuant to
Divisions 2 and 3 of Part XV of the SFO) as at the Latest
Practicable Date:
Mr. Ma Chongxian, the chairman of the Board and an executive
Director of the Company, serves as the chairman and the Secretary
of the Communist Party Group of CNAHC. He is also a non-executive
director of Cathay Pacific.
Mr. Wang Mingyuan, an executive Director, the vice chairman of
the Board and the president of the Company, serves as the director,
the general manager and the Vice Secretary of the Communist Party
Group of CNAHC.
Mr. Feng Gang, a non-executive Director and the Deputy Secretary
of the Communist Party Committee of the Company, serves as a
director and the Deputy Secretary of the Communist Party Group of
CNAHC.
Mr. Patrick Healy, a non-executive Director of the Company, is
the chairman of the board of directors and an executive director of
Cathay Pacific, a director of Swire Pacific Limited, and a director
and the chairman of the Charity Committee of John Swire & Sons
(H.K.) Limited.
Mr. Xiao Peng, an employee representative Director of the
Company, serves as the chairman of the labour union of CNAHC.
Mr. Xiao Jian, a Supervisor of the Company, serves as the
president of CNAHC.
Mrs. Lyu Yanfang, a Supervisor of the Company, serves as the
general manager of the law department of CNAHC.
Mrs. Guo Lina, a Supervisor of the Company, serves as the
general manager of the audit department of CNAHC.
5. NO MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, there has been no material
adverse change in the Group's financial or trading position since
31 December 2022, being the date to which the latest published
audited financial statements of the Group have been made up.
6. EXPERT
The following are the qualifications of the expert who has given
its opinion or advice, which is contained in this circular:
Name Qualification
BaoQiao Partners a corporation licensed to carry out Type 1
(dealing in securities) and Type 6 (advising on corporate finance)
regulated activities under the SFO
a. As at the Latest Practicable Date, BaoQiao Partners did not
have any direct or indirect interest in any assets which have been
acquired or disposed of by or leased to any member of the Group, or
are proposed to be acquired or disposed of by or leased to any
member of the Group since 31 December 2022 (the date to which the
latest published audited financial statements of the Group were
made up);
b. As at the Latest Practicable Date, BaoQiao Partners was not
beneficially interested in the share capital of any member of the
Group and had no right, whether legally enforceable or not, to
subscribe for or to nominate persons to subscribe for securities in
any member of the Group; and
c. BaoQiao Partners has given and has not withdrawn its written
consent to the issue of this circular with inclusion of its opinion
and the references to its name included herein in the form and
context in which they respectively appear.
7. MISCELLANEOUS
a. The joint company secretaries of the Company are Mr. Huang
Bin and Mr. Huen Ho Yin. Mr. Huen Ho Yin is a practicing solicitor
of the High Court of Hong Kong.
b. The registered address of the Company is at 1st Floor - 9th
Floor 101, Building 1, 30 Tianzhu Road, Airport Industrial Zone,
Shunyi District, Beijing, the PRC. The head office of the Company
is at No. 30 Tianzhu Road, Airport Industrial Zone, Shunyi
District, Beijing, the PRC.
c. The H share registrar and transfer office of the Company is
Computershare Hong Kong Investor Services Limited, Shops 1712-1716,
17/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong
Kong.
8. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be published on the
websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the
Company (www.airchina.com.cn) for a period of 14 days from the date
of this circular:
a. the Existing Air China Financial Services Agreement;
b. the Air China Financial Services Agreement;
c. the CNAHC Financial Services Agreement;
d. the ACC Financial Services Agreement; and
e. this circular.
AIR CHINA LIMITED
2022 WORK REPORT OF THE BOARD OF DIRECTORS
The Board of Air China, which served as a national flag carrier
and an aviation central enterprise, resolutely implemented the
philosophy of the important instructions and directives issued by
General Secretary Xi Jinping, the decisions and deployment plans of
the CPC Central Committee and the State Council, fulfilled the work
requirements of state-owned assets regulation and securities
regulation and adhered to the "two-consistency" principle. With
continuous efforts in optimizing the corporate governance
mechanism, the Board continued to improve the standardization and
effectiveness of its operation and steadily enhanced the level and
capability of corporate governance, which provided a strong support
for the strategy of building a world-class aviation transportation
group and promoting the high-quality development of the
Company.
I. STRENGTHENED THE PARTY'S LEADERSHIP WHILE IMPROVING GOVERNANCE
(I) Strengthened the Party's leadership. The Board successfully
completed the three-year action plan for the reform of State-owned
enterprises, and promoted the Work Plan for Improving the
Quality of Listed Companies Controlled by Central Enterprises
(
) with careful planning. Furthermore, rectification measures in
response to the
central inspection, audit and assessment opinions of the Board
were carried out. Upholding the concept that "safety responsibility
is a kind of political responsibility", the Board conscientiously
implemented its working mechanism regarding safety operation as the
"First Proposal" so as to perform its own responsibility in safety
management. In accordance with the checklists of rights and
responsibilities, it gave full play to the leadership role of the
Party Committee in "setting the right direction, keeping in mind
the big picture and promoting implementation", thereby fostering
effective connection and standardized operation among the Party
Committee, the Board, the management and other governance bodies.
To promote the standardized establishment of the Board, it
fulfilled the responsibility of establishing the board of directors
of subsidiaries and integrated Party building into corporate
governance at all levels.
(II) Giving play to the leadership role of the Party Committee.
In 2022, based on the principle of "dynamic revision and continuous
improvement", the Board revised the decision-making matters,
procedures and authority set out in the Checklist of Rights and
Responsibilities for Material Matters, thereby enhancing the
scientificity and effectiveness of the checklist of rights and
responsibilities to better cater to the management and development
needs of the Company. The Board clarified the scope of
"decision-making" and "discussion" of the Party Committee, while
strictly ensuring that preliminary research and discussion were
carried out by the Party Committee for material operation and
management matters. In 2022, the Board deliberated 53 proposals, of
which the Party Committee made decisions on 7 proposals, and
conducted preliminary research and discussion for 23 proposals. The
preliminary research and discussion involved major proposals
relating to introduction of aircraft, non-public issuance of shares
and acquisition of equity interests in Shandong Aviation Group
Corporation. The opinions put forward by the Party Committee after
preliminary research were reflected in the Board's proposals,
ensuring that the decisions made by the Board were fully in line
with the intention
of the Party organization. The Board also improved the
checklists of rights and responsibilities for material matters of
subsidiaries, with a view to giving full play to the leadership
role of the Party in the governance of subsidiaries.
(III) Integrated Party building into corporate governance. In
2022, the Company completed the adjustment of the main management
and the re-election of the Board pursuant to the deployment plans
of the CPC Central Committee and SASAC. It also adopted the
"several responsibilities on one shoulder" model of the Secretary
of Party (Group) Committee and Chairman, and fulfilled the work
requirement of cross-appointment for members of the management and
members of the leading group of the Party organization, thereby
realizing a steady and coordinated operation among different
governance entities and ensuring the organic integration of Party
leadership with the main responsibility of establishing the board
of directors.
II. STRENGTHENED THE DEVELOPMENT OF GOVERNANCE SYSTEM
(I) Continued to enhance the corporate governance system
1. Improved the rules and regulations. The Board systematically
improved the rules and regulations in accordance with the latest
laws and regulations, the requirements of State- owned assets
regulation and securities regulation, as well as the revised
checklist of the rights and responsibilities for material matters.
The Board revised and improved the
Provisions on Internal Audit ( ) and Provisions on Internal
Control
and Management ( ). With reference to the requirements of
State-owned
assets regulation and securities regulation, it systematically
reviewed the rules and procedures of meetings of the Board and each
of the special committees, and formulated
the Provisions on Liability Management ( ). Furthermore,
revisions
were made to 20 rules and regulations, including the Provisions
on Guarantee
Management ( ) and the System for Use and Management of
Proceeds
( ). At the subsidiary level, the Board formulated and
revised 43 management systems that supported the implementation
of the major functions and powers of the Board.
2. Consolidated the development of systems for the board of directors of subsidiaries.
The Board established a "1+N" system framework with the
Provisions on Management
of Investment Enterprise ( ) as the core and the Working Rules
of
the Board of Directors of the Investment Enterprise ( ) and
others as supporting rules. It also formulated the Rules for
Management of Dedicated External Directors and Supervisors,
Assessment and Appraisal of Directors and
Guarantee of Duty Performance ( )
and other supporting systems, putting in place a system to
support the performance of duties by the external director team of
investment enterprises.
3. Established a mechanism to implement regulatory policies.
Given that the Company was subject to both State-owned assets
regulation as well as domestic and foreign securities regulation,
the Board kept abreast of the latest policies, systems and rules
in
relation to State-owned assets regulation as well as domestic
and foreign securities
regulation. It also prepared Monthly Report on State-owned
Assets Regulation (
) and Monthly Report on Securities Regulation ( ),
with a view to gaining understanding on the spirit of the
regulations and supporting its implementation of regulatory
requirements.
(II) Strengthened the Standardized Development of the Board
1. Standardized Operation
(1) Deepen the implementation of the functions and powers of the
Board. The Board earnestly implemented the deployment plans of the
SASAC and fulfilled the mission requirements of the three-year
action plan for deepening reform. It strictly carried out 6 major
functions and powers. When making major decisions in relation to
introduction of aircraft and other matters, the Board has fully
leveraged the professional expertise and experience of directors,
and conducted a comprehensive analysis and evaluation based on the
compatibility with the Company's strategy, the matching degree with
market demand, the margin of operational security resources and the
balance between risk and benefit, performing its role as the main
decision-making entity. With a focus on the reform of three
systems, the Board achieved full implementation of the tenure
system and contracting of the management. It also stimulated the
vitality of employees and enhanced the competitiveness of the
enterprise by adopting a market-oriented recruitment and
remuneration incentive mechanism. Relevant "implementation plan and
checklist" were formulated to push forward the implementation of 6
major functions and powers of the board of directors in 14
subsidiaries.
(2) Standardized the authorization of the Board. The Board strengthened the supervision over authorization on management matters and received reports on the exercise of power from the management on a semi-annual basis to ensure duly assured authorization with effective exercise of power. In 2022, the management of the Company has cautiously exercised the authorization regarding the transfer and use of off-budget funds for four times within the authority granted by the Board.
(3) Strengthened the supervision of the Board. Firstly, the
Board strengthened the supervision over the implementation of Board
resolutions. The Board received special reports on the
implementation of resolutions from the management on a semi-annual
basis and regularly issued the Feedback Survey on the
Implementation of Board Resolutions ( ) to follow up
the implementation progress of the resolutions, which formed a
closed-loop management. In 2022, the Board approved 53 resolutions.
Among which, three resolutions were delayed due to the project
execution schedule while 50 resolutions were completed on schedule.
Secondly, the Board strengthened the supervision over the
implementation of major rectification measures. The Board
focused on strengthening the supervision over the implementation
of rectification of issues identified during central audit and
inspections, opinions on approval of financial accounts and
opinions on evaluation of the Board. The Chairman strengthened the
monitoring and control on the rectification process by making
arrangements in person and formulating task lists to ensure
practical and effective rectification. Based on the special reports
from the management, independent directors gained understanding of
the rectification progress and raised opinions and recommendations
by leveraging on their expertise and experience to ensure effective
implementation of rectification. Thirdly, according to the
regulatory requirement of the Hong Kong Stock Exchange, the Board
fulfilled securities regulatory responsibility by establishing a
whistleblowing mechanism, under which employees, customers and
suppliers can report to the Audit and Risk Control Committee
(Supervision Committee).
2. Strengthened the guarantee of duty performance
(1) Enhanced the support for duty performance of external
directors. The Board revised and optimized the Working System for
Guarantee of Duty Performance
of External Directors ( ) of the Company and
improved the "three guarantees" working mechanism. Firstly, in
terms of guarantee for information, an electronic office
information system was put in place. The Board established and
optimized a mechanism for external directors to inquire about the
Company's situation and a mechanism for reporting significant
events. Secondly, in terms of guarantee for business, the Board
coordinated with special committees by capitalizing on the joint
working group mechanism and supported the scientific
decision-making by external directors. The Board determined the
focus of research and made research plans based on the
recommendations of external directors to ensure project execution.
In addition, external directors received training on regulation of
state-owned assets and securities as scheduled. Thirdly, in terms
of guarantee for capability, the Board enhanced the development of
its own capabilities and optimized the working mechanism and
procedures with a focus on improving the quality of both employees
and projects, thereby providing efficient services to external
directors for duty performance.
(2) Implemented a thorough communication mechanism for major
decisions. The Board strengthened the communication between the
Chairman and external directors, internal directors and external
directors as well as directors and the management. For major
decisions, the Chairman carried out "one-on-one" communication with
external directors as soon as possible to exchange views and build
a consensus, with a view to enhancing the efficiency of
decision-making. Regarding various key tasks of the Company such as
safe operation, pandemic prevention and control and maximization of
operating performance, the Chairman and external directors carried
out 18 thorough discussions, which enabled external directors to
gain in-depth understanding of various aspects of the Company,
including production, operation and pandemic prevention and
control.
The Board stringently implemented the mechanism of reporting and
proposal by the management to the Board to ensure the organic
connection among governance bodies.
(3) Implemented the work plan for research of external
directors. Based on the duty performance requirements of external
directors, the Board carried out three researches on nine business
units, which were responsible for production, operation, marketing
services and other businesses, as planned. The Board gained
in-depth understanding of the progress and difficulties in respect
of the Company's strategic development, safe operation, marketing
and operating management, and provided opinions and recommendations
on digital transformation, market-oriented selection and
recruitment mechanism, which provided support to external directors
for decision-making.
3. Promoted the establishment of the board of directors of subsidiaries
In accordance with the Opinions on Strengthening the
Establishment of the Board of
Directors of Subsidiaries of Central Enterprises (
) published by the SASAC, 32 subsidiaries have completely
fulfilled the responsibility of
establishing the board of directors with external directors as
the majority while 14 subsidiaries comprehensively performed the
major functions and powers of the board of directors. Leveraging on
the talent pool of dedicated external directors, the Board assigned
dedicated external directors and supervisors to six investment
enterprises. By setting up an administrative department of external
directors, the Board established a mechanism for regular
communication in order to timely resolve problems faced by
dedicated external directors during their performance of duties.
The Board formulated an assessment and evaluation mechanism for the
board of directors and directors of subsidiaries, at the same time
supervising subsidiaries to strengthen the establishment of the
board of directors and external directors to perform their duties
diligently so as to enhance the quality of decisions and risk
prevention capability.
III. IMPLEMENTED THE MAIN RESPONSIBILITY OF THE BOARD
(I) Strengthened the strategic leadership
1. Solidly advanced the implementation of strategies. Focusing
on the establishment of a world-class aviation and transportation
group, the Board took world-class peers as its benchmark in the
preparation of special reports, and refined 12 tasks through
precise management and made 53 milestone achievements during the
year. Striving to make contribution to the major regional
development strategies of China, the Board prepared a major
regional development plan for the first time. During the strategic
seminar, the Board clarified the relationship between the reduction
of loss while achieving a turnaround from loss to profit and the
corporate strategic goal of building a world- class enterprise of
the CNAHC Group, and analyzed the development of the coming three
years and the strategic focus in 2023, aiming to specify the
implementation approach and plan.
2. Promoted the innovative development. The Board attached great
importance to the innovative development and actively pushed
forward the innovative technological management by developing an
innovative management platform and making active contributions to
the major breakthroughs in technological application. Centering on
dual-carbon goals, the Board promoted green development by adhering
to the dual-carbon strategy and implemented the Action Plan for
Peak
Carbon Emissions of China National Aviation Holding Corporation
Limited (
) to shape the image as a green aviation central enterprise. By
devoting
significant efforts in completing the top-level design for
digital transformation, the Board specified the action plan and
implementation approach to solidly advance the digital
transformation and upgrade.
3. Optimized the strategic post-evaluation system. Based on the
national and industrial development strategies, the Board
dynamically optimized the mid-to-long term planning system to
ensure that the planned objectives and paths of the Company will be
consistent with the requirements of the superior authorities. The
inspection and evaluation on the implementation of strategies have
been strengthened at all levels to ensure that the major operation
decisions of the Company will be aligned with the Company's
strategic plans and focused on its main responsibilities and core
businesses, thereby avoiding strategic risks and timely rectifying
any deviations arising in the course of implementation. It has also
comprehensively commenced the publicity work of its plans and
promoted the high-quality implementation of the strategic plans in
the system by adopting a model of "promoting key tasks based on
stratification and classification, and strengthening quantitative
evaluation of index systems".
(II) Improved the scientific decision-making level
1. Decision-making in strict compliance with laws. The Board
exercised its powers and performed its duties in strict accordance
with the requirements of laws and regulations, the Articles of
Association and the Rules and Procedures of Board Meeting. During
the year, the Board held 16 meetings, during which 53 resolutions
were considered and approved, including major investments and 6
issues in relation to major functions and powers such as aircraft
introduction, acquisition of equity interests, total salaries and
payment plans, annual appraisal results of the management and
remuneration redemption plans; and received 9 special reports
regarding issues such as the implementation of rectification for
problems identified during the approval of financial accounts by
the SASAC, the execution of Board resolutions and the exercise of
power by the management. For major investment projects, the Board
exercised proper control over the entities, procedures, matters and
components of decision-making to ensure lawful and compliant
decision-making process. Through early intervention, sufficient
communication and scientific research and judgement of the
directors, the decision-making efficiency of Board resolutions has
been enhanced.
2. Giving play to the role of external directors. Leveraging the
advantages stemming from their expertise and experience, the
external directors have conducted in-depth study on the legality
and compliance of the resolutions, the consistency with the
requirements of the investors, the compatibility with the Company's
strategies and the balance between risks and revenues with a focus
on the risks relating to decision-making. It has also thoroughly
discussed and studied the matters with the management and provided
professional advices and recommendations. The aviation industry was
hard hit by the pandemic during the past three years and the
Company was under huge operating
pressure. While formulating plans and making suggestions to help
the Company out from the predicament, the external directors also
compiled special reports on the operating conditions of the Company
for submission to the superior authorities to seek their policy
support. Based on the development trends of the industry, the
external directors have reached a consensus for the promotion of
digital transformation with the management, striving to establish
our first-mover advantages in the post-pandemic era through the
innovation of processes and concepts. Having paid due respect to
the advices of the independent directors, the Board has also
established a supervision mechanism for the implementation of their
advices.
3. Giving play to the supporting role of the special committees
for decision-making. During the year, the special committees of the
Board held 29 meetings, during which 54 resolutions were
considered. Suggestions and proposals for promoting the
implementation of strategies, ensuring safe production and
operation, preventing major risks and strengthening supervision and
rectification were submitted with an aim to support scientific
decision-making of the Board. The special committees gave full play
to the mechanism of joint working group comprised of various
business departments, which has enriched the perspectives and
dimensions of their works, thereby better playing the supporting
role of the special committees for decision-making. The directors
of the committees reported to the Board the deliberation results,
advices and recommendations of the committees as references for the
decision-making of the Board.
(III) Strengthened the building of risk resistance capability
1. Strengthened efforts in the building of the risk prevention
and control system. The Board attached great importance to the
building of the "four-in-one" risk control and compliance
management system. It has arranged business units of the Company to
submit special reports in order to gain understanding of the
progress and effectiveness of the development of the risk control
and compliance management system. It has also provided suggestions
on strengthening the building of the compliance culture, creating
the compliance environment and accelerating the development of the
digital system, thereby improving the transparency of management
and efficiency of the control measures through consolidation of the
digital systems and procedures.
2. Enhanced supervision efforts in relation to rectification
works. Centering on central inspection, audit on economic
responsibilities, opinions on evaluation of the Board and the
rectification for problems identified during the approval of
financial accounts, the Board supervised the establishment of a
working mechanism by the management to report their progress of
rectification periodically so as to ensure effective implementation
of the relevant works. The dedicated external directors received
reports on the progress of rectification actions from time to time
and supervised the management to complete various rectification
tasks as planned.
3. Prevented major operational risks. Pursuant to the working
requirements for special actions on comprehensive governance of
"Strict Financial Discipline, Lawful And Compliant Operation", the
Company has formulated action plans, defined the responsible
entities and clarified the work responsibilities, and the external
directors have received the relevant special reports and prompted
the Company to conduct investigations on risks relating to
compliant operation of domestic and overseas businesses as well as
risk relating to financial businesses. The Audit and Risk Control
Committee (Supervision Committee) put forward advices and
recommendations in respect of safety of
cash flows, connected transactions, management of overseas
assets and the development of the risk prevention and control
system in an effort to support the implementation of the major
works in relation to risk prevention by the management.
4. Promoted the formation of the "comprehensive supervision"
system with joint efforts. The Board has enhanced the coordination
of works between the Audit and Risk Management Committee (the
Supervision Committee), the external directors and the Supervisory
Committee, which promoted the synergy of work among various
supervisory departments including discipline inspection, internal
audit, legal compliance, etc. With such efforts, the Board has
established a risk control and "comprehensive supervision" system
covering pre-warning, in-process control and post- tracking
accountability to support the Board to effectively prevent risk
relating to decision-making.
Looking back at 2022, the Company successfully completed the
re-election of the Board. Four independent directors have joined
the new session of the Board. These directors possessed
professional experience in aspects such as planning of corporate
strategies, finance and audit, operation management and legal,
which brought new ideas, new perspectives, new vision and new
concepts to the Board, hence realizing professional
diversification, extensive experience and complementary
capabilities and laying a sound foundation for regulating the
development of the Board.
The Board gave full play to the functions of "developing
strategies, making decisions and preventing risks" and improved the
multi-dimensional communication and reporting mechanism. Positive
progress has been achieved in aspects such as regulating the
development of the Board and that of the board of directors of
subsidiaries, and enhancing the ability in guaranteeing duty
performance of the external directors. As a result, the quality of
the development and operation of the Board improved steadily, and
the foundation of corporate governance work was further solidified.
Pursuant to the regulatory requirements on state-owned assets and
securities, the Board carried out work in relation to information
disclosure and investors' relation in a practical manner. Its
information disclosure received Grade A rating from the Shanghai
Stock Exchange for nine years in a row and its results briefing
made the list of 2021 Best Practice of China Association for Public
Companies (CAPCO).
IV. WORK ALLOCATION FOR THE YEAR 2023
In 2023, guided by the philosophy of the 20th National Congress
of the Communist Party, the Board adhered to the "two-consistency"
principle, conscientiously implemented the major decisions and
deployment plans of the CPC Central Committee and the State
Council, fulfilled the work requirements of the SASAC and the
requirements of CNAHC Group, and effectively coordinated the
state-owned assets regulation and securities regulation, aiming to
form an excellent Board. As such, the Board will continue to
improve the quality of its operations by giving full play to its
roles and responsibilities of "strategy formulation, decision
making and risk prevention" and focusing on its decision-making and
supervisory roles.
Board of Directors,
Air China Limited
AIR CHINA LIMITED
2022 WORK REPORT OF THE SUPERVISORY COMMITTEE
In 2022, the Supervisory Committee of the Company, based on its
functions and positioning, faithfully and diligently performed
their duties, supervised and inspected the performance of duties by
directors and senior management, the Company's finance, the
establishment of internal control system, the decision-making
procedures of the Board and the Company's operation and management
activities in strict accordance with the laws and regulations, such
as the Company Law and the Securities Law, and relevant
requirements, such as the Articles of Association. The Supervisory
Committee played its supervisory role and safeguarded the interests
of the Company and its shareholders and the legitimate rights and
interests of employees. The work of the Supervisory Committee is
hereby reported as follows:
I. PERFORM THE SUPERVISORY AND INSPECTION DUTIES OF THE SUPERVISORY COMMITTEE
(1) Perform its duties according to law and play the supervisory
role. Firstly, the Supervisory Committee attended 4 general
meetings of shareholders, 11 on-site meetings of the Board and
important special sessions of the Company throughout the year to
fully understand the Company's production and operation and
material operation and management matters, and focus on the
supervision of meeting convening procedures and decision-making
procedures. Secondly, the Supervisory Committee attended the
Company's annual work meeting, interim work meeting and employee
representative meeting. The Supervisory Committee carefully
reviewed the work report of the management and the duty performance
reports of directors and senior management of the Company, and
timely monitored the duty performance of directors and senior
management. Based on the audit inspection and the assessment
results of SASAC, the Supervisory Committee followed up on the
implementation of SASAC's assessment and rectification of the
Board.
(2) Effectively strengthen financial supervision. In view of the
basic supervisory responsibilities, the Supervisory Committee
regularly listened to the special reports of the Financial
Department and the annual audit accountant, reviewed the Company's
annual, interim and quarterly financial reports, and supervised the
Company's financial operation and report preparation, audit and
disclosure procedures, to ensure that the financial report
information disclosed by the Company was true, accurate and
complete.
(3) Promote the development of the internal control system. The
Supervisory Committee implemented the Company's requirements for
legal compliance, quality improvement and efficiency increase, and
further strengthened the development of the Company's internal
control system and the implementation of internal control
assessment and rectification. While carefully reviewing the
internal control implementation plan and assessment report, the
Supervisory Committee also listened to the special reports of the
Company's functional departments, supervised the internal control
assessment and rectification, carefully inspected the rectification
results and improved the internal control and management level.
(4) Strengthen supervision coordination. The Supervisory
Committee put emphasis on strengthening communication with the
Audit Committee and independent directors, constantly innovated the
supervision mechanism and methods, and realized supervision
coordination and sharing of resources. Adhering to the direction of
preventing and eliminating major risks, the Supervisory Committee
worked together with the Company's internal audit, compliance,
discipline inspection and other supervisory departments to promote
the risk control and supervision system of pre-warning, in-process
control and ex-post accountability.
II. FOCUS ON LEGAL COMPLIANCE AND IMPROVE THE QUALITY OF DECISION- MAKING AND SUPERVISION
(1) Perform the duties of supervisors. The Supervisory Committee
faithfully and diligently performed its duties within the scope of
its functions and powers. Adhering to the principles of collective
review and consideration, independent voting and individual
accountability, it organized and held 8 meetings of the Supervisory
Committee during the year, and made decisions on and supervised 22
major issues such as the annual financial plan, investment plan,
financial report, profit distribution proposal, non-public issue of
A shares, management and use of proceeds, internal control
assessment report and internal control audit report, framework
agreements on continuing related transactions between Air China and
CNACG, between Air China and Air China Cargo and between Air China
and Cathay Pacific, as well as the annual transaction caps, in
accordance with its functions and powers.
(2) Support the management to exercise their powers and perform
their duties. The Supervisory Committee always expressed its
opinions from the perspective of safeguarding the interests of the
Company and its shareholders and the legitimate rights and
interests of employees. It supported the management in both
pandemic prevention and control and in production and operation,
pushed forward the successful accomplishment of the three-year
action mission for the reform of the state-owned enterprise and the
implementation of the Company's material projects, and effectively
promoted the management to perform the duties of pursuing operation
results, implementing the requirements and strengthening the
management.
(3) Promote and improve the corporate governance system.
Focusing on speeding up the improvement of the modern corporate
system with Chinese characteristics, the Supervisory Committee took
the initiative to strengthen coordination and communication with
the Party Committee, the Board, the management and other corporate
governance bodies, and defined the rights and responsibilities of
each governance bodies while cooperating with the revision of the
checklist of the rights and responsibilities for significant events
of the Company. The Supervisory Committee promoted and improved the
checklist of significant events of secondary and tertiary
subsidiaries to be decided by Air China, and realized the corporate
governance system of horizontal to border, vertically top-down and
full level coverage.
(4) Enhance the ability to perform duties. Members of the
Supervisory Committee actively participated in the special training
for directors and supervisors of listed companies organized by the
China Association for Public Companies and the Listed Companies
Association of Beijing to keep abreast of the latest securities
regulatory policies and regulation, the standardized operation of
listed companies and the practice of the supervisory committee,
and
strengthen the sense of responsibility for lawful and compliant
performance of duties, thereby enhancing the ability to perform
duties and make decisions. During the year, Wang Jie, Qin Hao, Lyu
Yanfang and Guo Lina, the Supervisors of the Company, have
completed the training programs for supervisors during their term
of office as required by the CSRC Beijing Bureau.
III. EXPRESS SPECIAL OPINIONS BASED ON THE INDEPENCE PRINCIPLE
(1) Independent opinions on the lawful and compliant operation
of the Company. During the reporting period, the Supervisory
Committee attended important meetings of the Board and the Company,
listened to the special reports and fully exercised its power of
inspection and supervision. The Supervisory Committee held that the
Company operated in accordance with the Company Law and the
Articles of Association, and its decision-making procedures were
legal and effective. No directors or senior management of the
Company have been identified to violate laws and regulations or the
Company's Articles of Association or harm the interests of the
Company or the legitimate rights and interests of employees when
performing their duties.
(2) Independent opinions on the Company's financial status.
During the reporting period, the Supervisory Committee reviewed the
Company's annual report, interim report and Q1 and Q3 reports
(including financial statements). It considered that the financial
data contained in the above reports truly, accurately and
completely reflected the Company's financial status and operating
results, and concurred with the standard unqualified audit opinion
issued by Deloitte on the financial statements.
(3) Independent opinions on the Company's related transactions.
During the reporting period, the Supervisory Committee respectively
reviewed the framework agreements on continuing related
transactions between Air China and CNACG, between Air China and Air
China Cargo, and between Air China and Cathay Pacific, and the
annual transaction caps. It considered that the continuing related
transactions of the Company were normal business transactions, with
fair and reasonable pricing and transaction contents in line with
business practices and the arm's length principle, and were not
detrimental to the interests of the Company and minority
shareholders. Related directors and shareholders abstained from
voting during the review and consideration at the meetings of the
Board and the general meetings of shareholders according to the
legal and compliant review and consideration procedure.
(4) Review and independent opinions on the self-assessment
report of internal control. During the reporting period, the
Supervisory Committee reviewed the Company's internal control
assessment report and internal control audit report, paid attention
to and supervised the development of the Company's internal control
system and internal control rectification. It considered that the
Company's internal control mechanism was continuously improved and
its risk control ability was continuously improved. The
self-assessment report on the Company's internal control issued by
the Board reflected the actual status of the Company's internal
control in an objective and true manner.
(5) Independent opinions on the deposit and actual use of the
proceeds. During the reporting period, the Supervisory Committee
reviewed the special report on the deposit and actual use of
proceeds from previous fund raising and the audit report issued by
Deloitte. It considered that the Company had truly, accurately and
completely disclosed the relevant information on the deposit and
use of the proceeds, there were no violations in the management and
use of the proceeds.
Supervisory Committee,
Air China Limited
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVENthat an annual general meeting (the "AGM")
of Air China Limited (the "Company") for the year ended 31 December
2022 will be held at 11:00 a.m. on Thursday, 25 May 2023 at The
Conference Room C713, No. 30, Tianzhu Road, Airport Industrial
Zone, Shunyi District, Beijing, the PRC to consider and, if thought
fit, to pass the following resolutions. Unless otherwise defined,
capitalized terms herein shall have the same meaning as defined in
the circular (the "Circular") of the Company dated 3 May 2023.
ORDINARY RESOLUTIONS
1. the resolution on the 2022 work report of the Board
2. the resolution on the 2022 work report of the supervisory committee
3. the resolution on the financial reports for the year 2022
4. the resolution on the profit distribution proposal for the year 2022
5. the resolution on the unrecovered losses of the Company
exceeding one-third of the total amount of its paid-up share
capital
6. the resolution on the re-appointment of international
auditor, domestic auditor and internal control auditor for the year
2023
7. the resolution on the entering into of the new Continuing
Related Transactions Framework Agreement on Financial Services
between the Company and CNAF and the application for the annual
caps of the transactions thereunder for the years from 2023 to
2026
8. the resolution on the entering into of the new Continuing
Related Transactions Framework Agreement on Financial Services
between CNAHC and CNAF and the application for the annual caps of
the transactions thereunder for the years from 2023 to 2026
9. the resolution on the entering into of the new Continuing
Related Transactions Framework Agreement on Financial Services
between Air China Cargo and CNAF and the application for the annual
caps of the transactions thereunder for the years from 2023 to
2026
10. the resolution on the entering into of the Continuing
Related Transactions Framework Agreement on Trademark License
between the Company and CNAHC
SPECIAL RESOLUTION
11. the resolution on the grant of mandate to the Board of the
Company to issue debt financing instruments
For details of the foregoing resolutions, please refer to the
Circular.
By order of the Board
Air China Limited
Huang Bin Huen Ho Yin
Joint Company Secretaries
Beijing, the PRC, 3 May 2023
As at the date of this notice, the directors of the Company are
Mr. Ma Chongxian, Mr. Wang Mingyuan, Mr. Feng Gang, Mr. Patrick
Healy, Mr. Xiao Peng, Mr. Li Fushen*, Mr. He Yun*, Mr. Xu Junxin*
and Ms. Winnie Tam Wan-chi*.
* Independent non-executive director of the Company Notes:
1. Closure of Register of Members
Holders of H Shares of the Company are advised that the H share
register of members of the Company will be closed from Thursday, 18
May 2023 to Thursday, 25 May 2023 (both days inclusive), during
which time no transfer of H Shares will be effected and registered.
In order to qualify for attendance and voting at the AGM, holders
of H Shares shall lodge all instruments of transfer with the
Company's H share registrar in Hong Kong, Computershare Hong Kong
Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell
Centre, 183 Queen's Road East, Wanchai, Hong Kong, by 4:30 p.m. on
Wednesday, 17 May 2023.
H shareholders whose names appear on the register of members of
the Company on Thursday, 18 May 2023 are entitled to attend and
vote at the AGM.
2. Proxy
Every shareholder who has the right to attend and vote at the
AGM is entitled to appoint one or more proxies, whether or not they
are members of the Company, to attend and vote on his/her behalf at
the AGM.
A proxy shall be appointed by an instrument in writing. Such
instrument shall be signed by the appointor or his attorney duly
authorized in writing. If the appointor is a legal person, then the
instrument shall be signed under a legal person's seal or signed by
its director or an attorney duly authorized in writing. The
instrument appointing the proxy for holders of H Shares shall be
deposited at the Company's H share registrar not less than 24 hours
before the time specified for the holding of the
AGM (or any adjournment thereof). If the instrument appointing
the proxy is signed by a person authorized by the appointer, the
power of attorney or other document of authority under which the
instrument is signed shall be notarized. The notarized power of
attorney or other document of authority shall be deposited together
and at the same time with the instrument appointing the proxy at
the Company's H share registrar.
3. Other businesses
(i) The AGM is expected to last for no more than half of a
working day. Shareholders and their proxies attending the meeting
shall be responsible for their own traveling and accommodation
expenses.
(ii) The address of Computershare Hong Kong Investor Services Limited is: 17M Floor
Hopewell Centre 183 Queen's Road East Wanchai
Hong Kong
Tel No.: (852)28628628
Fax No.: (852)28650990
FORM OF PROXY FOR ANNUAL GENERAL MEETING
Number of shares to which this form of proxy relates (Note
(1)
I/We (Note 2)
of
being the registered holder(s) of (Note (3)
H shares in the share capital of Air China Limited (the
"Company") HEREBY APPOINTthe chairman of the meeting and/or
(Note(4) of as my/our proxy/proxies: (a) to act for me/us at the
annual general meeting (or at any adjournment thereof) of the
Company to be held at 11:00 a.m. on Thursday, 25 May 2023 at The
Conference Room C713, No. 30 Tianzhu Road, Airport Industrial Zone,
Shunyi District, Beijing, the PRC (the "Meeting") for the purpose
of considering and, if thought fit, passing the resolutions (the
"Resolutions") as set out in the notice (the "Notice") convening
the Meeting; and (b) at the Meeting (or at any adjournment thereof)
to vote for me/us and in my/our name(s) in respect of the
Resolutions as hereunder indicated or, if no such indication is
given, as my/our voting proxy thinks fit.
AGAINST ABSTAIN
ORDINARY RESOLUTIONS FOR (Note (Note 5) (Note 5)
5)
1. the resolution on the 2022 work
report of the Board
-------------------------------------------- ----------- ---------- ----------
2. the resolution on the 2022 work
report of the supervisory committee
-------------------------------------------- ----------- ---------- ----------
3. the resolution on the financial
reports for the year 2022
-------------------------------------------- ----------- ---------- ----------
4. the resolution on the profit distribution
proposal for the year 2022
-------------------------------------------- ----------- ---------- ----------
5. the resolution on the unrecovered
losses of the Company exceeding
one-third of the total amount of
its paid-up share capital
-------------------------------------------- ----------- ---------- ----------
6. the resolution on the re-appointment
of international auditor, domestic
auditor and internal control auditor
for the year 2023
-------------------------------------------- ----------- ---------- ----------
7. the resolution on the entering into
of the new Continuing Related Transactions
Framework Agreement on Financial
Services between the Company and
CNAF and the application for the
annual caps of the transactions
thereunder for the years from 2023
to 2026
-------------------------------------------- ----------- ---------- ----------
8. the resolution on the entering into
of the new Continuing Related Transactions
Framework Agreement on Financial
Services between CNAHC and CNAF
and the application for the annual
caps of the transactions thereunder
for the years from 2023 to 2026
-------------------------------------------- ----------- ---------- ----------
9. the resolution on the entering into
of the new Continuing Related Transactions
Framework Agreement on Financial
Services between Air China Cargo
and CNAF and the application for
the annual caps of the transactions
thereunder for the years from 2023
to 2026
-------------------------------------------- ----------- ---------- ----------
10. the resolution on the entering into
of the Continuing Related Transactions
Framework Agreement on Trademark
License between
the Company and CNAHC
-------------------------------------------- ----------- ---------- ----------
AGAINST ABSTAIN
SPECIAL RESOLUTION FOR (Note (Note 5) (Note 5)
5)
----------- ---------- ----------
11. the resolution on the grant of mandate
to the Board of the Company to issue
debt financing instruments
-------------------------------------------- ----------- ---------- ----------
Dated this day of 2023 Signature(Note(6) :
Notes:
1. Please insert the number of shares registered in your name(s)
to which this proxy form relates. If no number is inserted, this
form of proxy will be deemed to relate to all shares registered in
your name(s).
2. Full name(s) and address(es) to be inserted in BLOCK CAPITALS .
3. Please insert the total number of shares registered in your name(s).
4. A member entitled to attend and vote at the Meeting is
entitled to appoint one or more proxies of his own choice to attend
and vote instead of him. A proxy need not be a member of the
Company. If any proxy other than the chairman of the Meeting is
preferred, please strike out the words "the chairman of the meeting
and/or" and insert the name(s) and address(es) of the proxy/proxies
desired in the space provided. In the event that two or more
persons (other than the chairman of the Meeting) are named as
proxies and the words "the chairman of the meeting and/or" are not
deleted, those words and references shall be deemed to have been
deleted.
5. IMPORTANT: IF YOU WISH TO VOTE FOR THE RESOLUTION, TICK IN
THE BOX MARKED "FOR". IF YOU WISH TO VOTE AGAINST THE RESOLUTION,
TICK IN THE BOX MARKED "AGAINST". IF YOU WISH TO ABSTAIN FROM
VOTING, TICK THE APPROPRIATE BOX MARKED "ABSTAIN". Failure to
complete the boxes will entitle your voting proxy to cast his
vote at his discretion. A member is entitled to one vote for every
fully-paid share held and a member entitled to more than one vote
need not use all his votes in the same way. A tick in the relevant
box indicates that the votes attached to all the shares stated
above as held by you will be cast accordingly.
6. This form of proxy must be signed by you or your attorney
duly authorised in writing, or in the case of a corporation, must
be either under seal or under the hand of a director or attorney
duly authorised. If this form of proxy is signed by your attorney,
the power of attorney or other document of authorisation must be
notarized.
7. In order to be valid, this form of proxy, together with the
notarised copy of the power of attorney or other document of
authorisation (if any) under which it is signed, for holders of H
shares, must be delivered to the Company's H share registrar,
Computershare Hong Kong Investor Services Limited, 17M Floor,
Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong, not
less than 24 hours prior to the time appointed for holding the
Meeting (or any adjournment thereof).
8. Completion and delivery of a form of proxy will not preclude
you from attending and/or voting at the Meeting (or any adjournment
thereof) if you so wish.
9. ANY ALTERATION MADE TO THIS FORM OF PROXY MUST BE INITIALLED
BY THE PERSON(S) WHO SIGN(S) IT.
10. To attend and represent the shareholder(s) at the Meeting,
the proxy so appointed must produce beforehand his identification
document and any power of attorney duly signed by his appointor(s)
or the legal representative(s) of his appointor(s). The power of
attorney must state the date of issuance.
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END
STRFIFVAERIFIIV
(END) Dow Jones Newswires
May 02, 2023 05:39 ET (09:39 GMT)
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