TNAG-1765-FCO40-2519-Hong-Kong-stock-market-and-exchange-rate-1989 — Page 30

7.

8.

9.

Comment or recommendation

Paragraph 6.75 "We recommend that the Nominating Committee should compcise one Independent Member of the Board, two Full or Market Members not on the Board and one Independent. One of the Independents should chair."

"We recommend that the Chairman of the Board of HKFE should be elected by the Board from amongst its Members to serve for one year.

His term of office should be renewable twice. There should be two Vice-Chairmen elected by the Board, one of whom should be an Independent Member of the Board unless the Chairman is himself an Independent Member."

"We recommend that voting in Board elections should be on the basis of one share, one vote. Elections should be in person, with no proxies, by secret ballot and subject to vetting by independent scrutineers."

10. Paragraph 6.77 "In summary, we

recommend that (a) the first fout Independent Members of the Board, the first Nominating Committee and the first scrutineers should be appointed by the Governor and (b) the new Securities Commission should ensure that the Board satisfies the conditions to be laid down in the Articles that it is broadly-based and representative; that the Independent Members are genuinely independent; and that the Chairman

Action taken by the HKFE

Article 56 and Article 37 reflect this recommendation.

Articles 79, 81 and 83 reflect all of these recommendations.

All voting continues to be conducted on a one share, one vote basis, except insofar as shareholders are disenfranchised (see 14 below). The Companies Ordinance requires that every member of a company is entitled to appoint one or two proxies to attend a general meeting on his behalf. The Exchange understands that the Government has no intention to amend the Companies Ordinance. It is therefore not possible for the Articles of the Exchange to outlaw proxies and for this

reason the usual proxy

provisions are contained in the Articles. Article 44 provides for the appointment of independent scrutineers.

Article 58 provides for the first Nominating Committee to be appointed by the Governor. Article 73(b) provides for the appointment of the first four independent directors by the Governor. Article 44 provides for the first scrutineers to be appointed by the Governor. Since the Report states in paragraph 6.72, sub-paragraph (b) that the four Independent Members should be co-opted by

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