Below is a summary of our committee structure and membership information. Chairperson / Vice Chairperson Member   Audit Committee Nominating Committee Remuneration Committee Risk Management Committee Wang Kai Yuen   Wang Kai Yuen Deputy Chairman and Lead Independent Director Appointed on 28 April 2008 Appointed as Chairman of the Board on 14 November 2008 Chairman of Remuneration Committee since 14 November 2008 Member of Audit and Nominating Committees since 28 April 2008 Dr Wang Kai Yuen holds directorship positions in a number of public-listed companies in Singapore. He is currently the Centre Manager of Fuji Xerox Singapore Software Centre with 150 employees. He is also a member of the Fo...    Ang Swee Tian   Ang Swee Tian Independent Director Appointed on 14 November 2008 Chairman of Audit Committee since 14 November 2008 Member of Remuneration, Nominating and Risk Management Committees since 14 November 2008 Mr Ang Swee Tian is the Non-Executive Chairman of Singapore Mercantile Exchange Pte Ltd and an Independent, Non-Executive Director of Cosco Corporation (Singapore) Limi...  Timothy Bullock  Timothy Bullock Non-Executive, Non-Independent Director Appointed on 1 May 2008 Chairman of Risk Management Committee since 14 November 2008 Member of Audit Committee since 1 May 2008 Mr Timothy Bullock is the Integrated Supply & Trading ("IST") Chief Operating Officer, Global Oil, of BP International Ltd. He is responsible for BP's global oil supply and trading activities. Mr Bullock has more than 20 years of global energy industry experience in BP's manufacturing, supply and tradi...      Liu Fuchun   Liu Fuchun Independent Director Appointed on 28 March 2006 Chairman of Nominating Committee since 29 March 2006 Member of Audit and Remuneration Committees since 29 March 2006 Mr Liu Fuchun was the Director and CEO of China National Cereals, Oils & Foodstuffs Corp ("COFCO") from June 2000 to April 2007. Prior to this position,...    Zhao Shousen   Zhao Shousen Non-Executive, Non-Independent Director Appointed on 28 March 2006 Vice Chairman of Audit Committees since 29 March 2006 Member of Risk Management Committee since 29 March 2006 Dr Zhao Shousen is a Senior Accountant (professor level) and Chief Accountant of China National Aviation Fuel Group Corporation ("CNAF"). He joined Shengli Petroleum Administrat...      Chen Liming  Chen Liming Non-Executive, Non-Independent Director Appointed on 5 August 2009 Member of Remuneration and Nominating Committees since 5 August 2009 Mr Chen Liming is the President of BP China and also serves as Chairman of BP (China) Holdings Limited. Prior to joining BP in November 2008, he was Executive Vice President of Sasol China, which is part of the Sasol Group, an integrated energy and chemicals company. Mr Chen has extensive experience in the chemicals and energy industries. He had served in ...      Luo Qun   Luo Qun Non-Executive, Non-Independent Director Appointed on 26 February 2010 Vice Chairman of Remuneration and Nominating Committees since 26 February 2010 Mr Luo Qun is the Vice President of China National Aviation Fuel Group Corporation ("CNAF"). Prior to this appointment, Mr Luo was the President of CNAF Logistics (previously known as CNAF Hai Tian Transportation Co, Ltd) from September 2004 to August 2008 and concurrently assumed the position of Assistant to the President of CNAF from December 2007...

The Board of Directors (the "Board") and Management of China Aviation Oil (Singapore) Corporation Ltd ("CAO") are committed to achieving the highest standards of corporate governance and in keeping with the Company's corporate philosophy of transparency and integrity. We strive to surpass the minimum requirements of openness, integrity and accountability prescribed by the Singapore Exchange Securities Trading Limited (the "SGX-ST") and the recommendations of the Code of Corporate Governance 2005 (the "2005 Code"). With the view to preserving and growing shareholder value through strong and effective corporate governance, the Board has put in place a set of well-defined controls and processes. This report describes the Company's corporate governance practices for the financial period ended 31 December 2009 with specific reference to the 2005 Code. Board Remuneration Accountability & Audit Internal Controls Communication with Shareholders Board Matters The Board's Conduct of its Affairs Principle 1 Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. Commentary The current Board comprises eight Non-Executive Directors and the Chief Executive Officer/Executive Director. All Independent Directors as well as those nominated by the two major shareholders, namely China National Aviation Fuel Group Corporation ("CNAF") and BP Investments Asia Limited ("BP"), were appointed on the strength of their expertise, experience and stature. The details, qualifications and major appointments of each Director are provided under the "Board of Directors" section of this Annual Report. The Directors collectively consider and decide on issues of strategy, performance, resources and standard of conduct. They provide the Company with the core competencies, drive and direction for its businesses, so as to enhance long-term shareholder value. The Board is in a unique position to implement new thinking, strategies and direction for the Company without being restrained by the past. As such, the Board has implemented many new internal controls and processes for the benefit of the Company. Some of the businesses that the Board transacts include: a) setting, reviewing and approving corporate strategies, annual budgets and financial plans; b) reviewing the adequacy and integrity of the Company's internal controls, risk management systems, financial reporting systems and monitoring the performance of the Group and the Management; c) ensuring that the Group and Management comply with all laws, regulations, policies, directives, guidelines and internal code of conduct; d) considering and approving the nominations of suitable candidates to the Board of Directors; and e) ensuring accurate, adequate and timely reporting to, and communication with shareholders. Matters that are specifically reserved for the Board's consideration and decision include, but are not limited to, corporate planning, material acquisitions and disposals of assets, corporate or financial restructuring, declaration of dividends and interested person transactions. To ensure the efficient discharge of its responsibilities and to provide independent oversight of Management, various Board committees namely, the Audit Committee, the Nominating Committee, the Remuneration Committee and the Risk Management Committee have been constituted with clear written terms of reference.. Each Committee has the authority to examine issues relevant to their terms of reference and to make recommendations to the Board for action. The ultimate responsibility and decision on all matters still lie with the Board. Board meetings are held at least once a quarter, and as required by business imperatives, to review and approve the release of the quarterly and full-year results and to discuss reports by Management including significant acquisitions and divestments, approving the annual budget and reviewing performance of the Group's businesses. The Board met four times in 2009. When Directors cannot be physically present, telephonic attendance and conference via audio-visual communication at Board and Board committee meetings are allowed under the Company's Articles of Association. The number of Board and Board committee meetings held in 2009, as well as the attendance of each Board member at these meetings, are disclosed below: Notes: (1) Resigned as Executive Director/General Manager (Trading) on 26 February 2010. (2) Resigned as Non-Executive/Non-Independent Director and member of the Remuneration Committee and Nominating Committee on 5 August 2009. (3) Appointed as Non-Executive/Non-Independent Director and member of the Remuneration Committee and Nominating Committee on 5 August 2009. (4) Appointed as Non-Executive/Non-Independent Director and Vice Chairman of the Remuneration Committee and Nominating Committee on 26 February 2010. A formal letter is sent to newly appointed Directors upon their appointment explaining their duties and obligations as a Director as well as the governance policies and practices of the Group. Appropriate training is provided for all new Directors appointed to the Board as part of their orientation to ensure that they are familiar with the Company's businesses, operations, governance practices and regulatory requirements. Facility visits to our associated companies' premises are also arranged to enable newly appointed Directors to acquire an understanding of the Group's business operations. To ensure that the Directors are competent in carrying out their roles and responsibilities, regular and on-going training is provided for the Directors. These include attendance of courses co-organised by the Singapore Exchange Limited, the Singapore Institute of Directors and/or PricewaterhouseCoopers. Courses attended by some Directors included (a) the Audit Committee Essentials Series (Module 2) held on 8 October 2009 relating to the importance of (i) Composition of the Audit Committee; and (iii) Conduct of Audit Committee Meetings; (b) a workshop session on "Losing Control-a Board Perspective" held on 13 October 2009; and (c) a seminar on "Regulatory Regime and Listing Rules of Singapore" conducted in Mandarin and held on 23 October 2009 in Beijing. All Directors are required to officially disclose their interests in the Company including any interested person transactions with the Company. All Directors practise good governance by updating the Company about changes to their interests in a timely manner. Board Composition and Balance Principle 2 There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board's decision making. Commentary Of the nine members on the Board, six are nominated by substantial shareholders and three are Independent Directors. Independent Directors constitute at least one-third of the Board. None of nine Board members is related to one another. At least two Independent Directors are resident in Singapore. These two Independent Directors are Dr Wang Kai Yuen and Mr Ang Swee Tian. The Chairman of the Board, Dr Wang Kai Yuen has extensive experience as Director of public-listed companies in Singapore and currently holds directorship positions in a number of public-listed companies. He has good working relationships with the various regulators in Singapore. The Nominating Committee reviews each Director's independence. The composition of the Board is also reviewed annually by the Nominating Committee. The Nominating Committee is satisfied that the Board comprises Directors who as a group possess the necessary calibre, experience and core competencies for effective decision-making. Individual directors' profiles can be found in "Board of Directors" section of the Annual Report. Chairman and Chief Executive Officer Principle 3 There should be a clear division of responsibilities at the top of the Company- the working of the Board and the executive responsibility of the Company's business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. Commentary The Chairman of the Board, Dr Wang Kai Yuen, is an Independent Non-Executive Director. He acts independently in the best interests of the Company and the Group. The Chairman is primarily responsible for overseeing the overall management and strategic development of the Company. With the assistance of the Company Secretary, he regulates Board meetings and ensures that all procedures and good governance practices are complied with. The Chief Executive Officer of the Company, Mr Meng Fanqiu, executes the Board's decisions and is responsible for the day-to-day running of the Company's business, making operational decisions for the Company and implementing the Company's business, direction, strategies and policies. The Chairman is in constant consultation with the Board and the various Board committees on major issues. As such, the Board believes there are adequate safeguards in place against having a concentration of power and authority in a single individual. The Chairman and the Chief Executive Officer are not related to each other. Board Membership Principle 4 There should be a formal and transparent process for the appointment of new Directors to the Board. Commentary The Nominating Committee was established by the Board to make recommendations for all Board appointments. The Nominating Committee comprises five members, the majority of whom, including its Chairman, are Independent Non-Executive Directors: Nominating Committee Liu Fuchun Chairman Zhao Shousen Vice Chairman (up to 26 February 2010)* Wang Kai Yuen Member Chen Liming Member Ang Swee Tian Member *Luo Qun was appointed as Vice Chairman in place of Zhao Shousen on 26 February 2010. Mr Liu Fuchun, the Chairman of the Nominating Committee is not associated with any substantial shareholder of the Company. The responsibilities of the Nominating Committee include: a) evaluation and nomination of suitable candidates or, as the case may be, re-nominate retiring Directors to the Board; b) determination of each Board member's independence status on an annual basis; and c) evaluation of the effectiveness of the Board as a whole and independently evaluate each Board member's performance and contribution to the Board. CNAF and BP have agreed under a Shareholders' Agreement that each shall nominate four and two Directors respectively to the Board, out of a maximum nine Directors. The remaining three shall be Independent Directors. With the resignation of Mr Michael Bennetts on 5 August 2009 as a Director of the Company, the Nominating Committee nominated one new Director, Mr Chen Liming to the Board. Mr Chen Liming is a BP-nominee. The Board approved the said nomination and appointed Mr Chen Liming as a member of the Board. With the resignation of Mr Zhang Zhenqi on 26 February 2010, the Nominating Committee nominated one new Director, Mr Luo Qun to the Board. Mr Luo Qun is a CNAF-nominee. Pursuant to Article 97 of the Company's Articles of Association, Mr Chen Liming who was appointed as a Director of the Company on 5 August 2009 and Mr Luo Qun who was appointed as a Director of the Company on 26 February 2010 shall retire at the forthcoming Annual General Meeting ("AGM"). The Nominating Committee nominated and the Board approved Mr Chen Liming and Mr Luo Qun to seek for re-election at the forthcoming annual general meeting . Pursuant to Article 91, one-third of the members of the Board of Directors shall retire. For the annual general meeting , Mr Sun Li, Dr Zhao Shousen and Mr Meng Fanqiu are due for retirement and re-election. The Nominating Committee has recommended and the Board agreed that all retiring directors be nominated for re-election at the annual general meeting . Board Performance Principle 5 There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. Commentary The Nominating Committee evaluated the performance of each Director and the effectiveness of the Board as a whole. The Nominating Committee completed a Board assessment and effectiveness questionnaire for 2009 and evaluated the Board's performance based on the how the Board has enhanced the long-term shareholder value. The Nominating Committee is satisfied with the current composition and performance of the Board as a whole. In its evaluation, the Nominating Committee considered the expertise and experience of each member, his attendance, participation and contributions to the Board both inside and outside of Board meetings. The Nominating Committee is satisfied with the performance of the Board and its members. Access to Information Principle 6 In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis. Commentary The Company has put in place enhanced communication processes between the Board and Management in terms of information flow. Agenda for meetings and all Board papers for discussions are circulated to Directors at least 10 days in advance so that the Directors are prepared for the meetings. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed. Management and senior executives of the Company would be present during the Board meeting or Board Committee meeting, as the case may be, to present their proposals or to answer any questions that Board members may have. The Board as a whole as well as individual Directors have direct access to Management represented by senior executive officers of the Company and Group. The Management provides the Directors with monthly updates on the operational and financial performance of the Group, and also responds to regular questions from the Board or individual Directors in a timely manner. Where the Board deems it necessary, the Board can obtain independent advice from external consultants. This enhances the Board's ability to discharge its functions and duties. All Board members have direct access to and the advice and services of the Company Secretary. The Company Secretary attends all Board and Board Committee meetings and assists the respective Chairman of the Board/Board Committees in ensuring that Board/Board Committee papers, procedures and the applicable laws and regulations are adhered to. Information about the Company and the Group are freely available to each Board member. Management will promptly supply any additional information that the Board requires. The Board also has ready access to external professionals for consultations. Remuneration Matters Procedures for developing Remuneration Policies Principle 7 There should be a formal and transparent procedure for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his own remuneration. Level and Mix of Remuneration Principle 8 The level of remuneration should be appropriate to attract, retain and motivate the Directors needed to run the company successfully but companies should avoid paying more for this purpose. A proportion of the remuneration, especially that of executive Directors, should be linked to performance. Disclosure on Remuneration Principle 9 Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company's annual report. Commentary The Board adopted the recommendations of the Code and established a Remuneration Committee to consider and to make recommendations on remuneration matters for the Directors and senior executives of the Group. Apart from ensuring consistencies with good practices, the Remuneration Committee is also mindful of the need to ensure that the Company and the Group are able to attract and retain good Directors and senior executives to the business. The Remuneration Committee comprises five members, the majority of whom, including its Chairman, are Independent Non-Executive Directors: Remuneration Committee Wang Kai Yuen Chairman Zhao Shousen Vice Chairman (up to 26 February 2010)* Liu Fuchun Member Chen Liming Member Ang Swee Tian Member * Luo Qun was appointed as Vice Chairman in place of Zhao Shousen on 26 February 2010. The Remuneration Committee assists the Board and Management by assessing and making remuneration recommendations for the Executive Directors and senior executives of the Company. The Remuneration Committee also administers the performance bonus scheme and China Aviation Oil Share Option Scheme of the Company. Broadly, remuneration for the Executive Directors and senior executive officers is based on the Company's and individual performances and the remuneration for Non-Executive Directors in the form of fees is based on responsibilities and memberships in the Board and its committees. The remuneration of Directors for the financial year ended 31 December 2009, in bands of S$250,000 are set out below: Notes: (1) Zhang Zhenqi resigned as Executive Director/General Manager (Trading) on 26 February 2010. (2) Michael Bennetts resigned as a Director and a member of the Remuneration Committee and Nominating Committee on 5 August 2009. (3) Chen Liming was appointed as a Director and as a member of the Remuneration Committee and Nominating Committee on 5 August 2009. The number of 5 key executives (who are not also Directors) for the financial year ended 31 December 2009 in remuneration bands is set out below: For confidentiality reasons, the Company is not disclosing each individual executive's remuneration and their names. There are no employees in the Group who are immediate family members of the Chairman or any of the Directors during the financial year ended 31 December 2009. "immediate family member" means the spouse, child, adopted child, step child, brother, sister and parent. The remuneration of the Group's top five key executives takes into consideration the pay and employment conditions within the same industry and is performance related. The remuneration package of Directors and senior executive officers include the following: Basic/fixed salary - The basic salary (inclusive of statutory employer contributions to Central Provident Fund) for each Executive Director or key management personnel is recommended by the Remuneration Committee, taking into account the performance of the individual for the financial year 2009, the inflation price index and information from independent sources on the pay scale for similar jobs in a selected group of comparable organisations. Fees - The structure for the payment of Directors' fees for Non-Executive Directors is based on a framework comprising basic fee and additional fees for serving on the Board Committees and also undertaking additional services for the Group. Fees paid or payable to Non-Executive Directors take into account factors such as effort and time spent, and responsibilities of these Directors. The two Executive Directors of the Company do not receive Directors’ fees for their Board directorships with the Company. Variable/Performance - The Group operates a bonus scheme for all employees including the Executive Directors. The criteria for the bonus scheme are the level of profit achieved from certain aspects of the Group's business activities against targets, together with an assessment of the Company's and individual's performance during the year. The remuneration disclosed above for the Executive Directors and the 5 key executives exclude the 2009 variable bonuses payable in relation to profit targets achieved for the Company's oil trading activities. The quantum of the said 2009 variable bonuses are being considered by the Remuneration Committee and will be decided in the financialyear ending 31 December 2010. Others - Benefits in kind such as private medical cover and car are made available where appropriate and consistent with common industry practices. - Allowances include travel allowance. Share Options - The Non-Executive Directors of the Company are eligible to participate in the China Aviation Oil Share Option Scheme which was established since 6 November 2001. As of to date, the Company has not granted any share options to any eligible participants of the China Aviation Oil Share Option Scheme. Details on the China Aviation Oil Share Option Scheme are disclosed in the Appendix to this report. Accountability and Audit Accountability Principle 10 The Board should present a balanced and understandable assessment of the company's performance, position and prospects. Commentary The Board, through the Audit Committee and the Group's external auditors KPMG LLP ("KPMG") and internal auditors, Grant Thornton Specialist Services Pte Ltd ("Grant Thornton"), scrutinises Management's conduct of the Company's and Group's business processes and financials. Each area of the Company and Group is audited on an ongoing basis to ensure that the Company and Group maintain good corporate practices and governance and financial integrity. The Board, with the assistance of the Audit Committee, reviews all financial statements of the Company and Group. The Board is accountable to shareholders and always aims to present a balanced and understandable assessment of the Company's and Group's financial position and prospects to shareholders on a timely basis. The quarterly, half-year and full-year results are announced or issued within the mandatory period. Management provides the Board members with management accounts on a monthly basis. Such reports keep the Board informed, on a balanced and understandable basis, of the Group's performance, financial position and prospects and consist of the consolidated profit and loss accounts, analysis of sales, operating profit, pre-tax and attributable profit by business segments compared against the budgets, together with explanation given for significant variances for the month and year-to-date. Audit Committee Principle 11 The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties. Commentary The Audit Committee comprises five members, all of whom are Non-Executive Directors and the majority, including its Chairman, are Independent Directors: Audit Committee Ang Swee Tian Chairman Zhao Shousen Vice-Chairman Wang Kai Yuen Member Liu Fuchun Member Timothy Bullock Member The Audit Committee held four meetings in 2009 where it met with external and internal auditors to review both the Company and Group's financials and audit reports. A key issue for discussion is the financial statements and announcements made by the Company to shareholders. The members of the Audit Committee, collectively, have expertise or experience in financial management and are qualified to discharge the Audit Committee's responsibilities. The Audit Committee met with both the external and internal auditors at least once without the presence of the Management. The Audit Committee reviews the quarterly and annual financial statements and the integrity of financial reporting of the Company, including the accounting principles, for recommendation to the Board for approval. The Audit Committee also reviews and approves the internal auditors' and external auditor's plans to ensure that the plans adequately cover, in particular, significant internal controls of the Company relating to financial, operational and compliance-related matters. Significant issues are discussed at Audit Committee meetings. The Audit Committee has full authority to investigate into any matter within its terms of reference, including any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations. The Audit Committee has full access to and co-operation of the Management. The Audit Committee also has full discretion to invite any Director or executive officer from the Company or the Group to attend its meetings. The Audit Committee has full access to both external and internal auditors. Where required, the Audit Committee is empowered to obtain external legal advice or such other independent professional advice as the Audit Committee deems necessary. The Audit Committee monitors all interested person transactions, including transactions under the general mandate on interested person transactions approved by shareholders at the Extraordinary General Meeting held on 29 April 2009 ("IPT Mandate"), and conflict of interest situations including transactions, procedures or actions taken which may raise issues about the Management's integrity. The Audit Committee also evaluates the scope and results of internal audit reports as well as Management's responses to the findings of the internal audit reports. For further discussions about internal audit, please see section (D) INTERNAL CONTROLS. The Audit Committee nominated KPMG for re-appointment as auditors of the Company at the annual general meeting . The Audit Committee has also conducted an annual review of non-audit services and is satisfied that the nature and extent of such services provided by KPMG will not prejudice their independence and objectivity before confirming their re-nomination. The Company has put in place a suitable whistle blowing policy and procedure, by which staff of the Company may, in confidence, raise concerns about possible improprieties regarding financial reporting or other matters. Further, the Company has also put in place a Fraud Control Plan and an Enterprise Risk Management Framework and Process. The Fraud Control Plan comprises periodic fraud risk assessments on the Company. The Enterprise Risk Management Framework and Process ensures that the Company has a structured approach and framework to regularly assess its enterprise-wide risks. An Enterprise Risk Assessment has been conducted to identify and deliver an inventory of key risks for the Company and to develop a list of key risk indicators that can help the Company monitor its key risks. Internal Controls Principle 12 The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders' investments and the Company's assets. Commentary The Board recognises the importance of sound internal control and risk management practices. In this regard, the Board affirms that it is responsible for the Group's systems of internal control and risk management system and has in accordance with the Corporate Governance Assessment Committee’s recommendation, established the Risk Management Committee. The Risk Management Committee comprises three members, all of whom are Non-Executive Directors: Risk Management Committee Timothy Bullock Chairman Zhao Shousen Member Ang Swee Tian Member The Risk Management Committee is responsible for assessing and making recommendations to the Board concerning how to manage the Company's and the Group's business risks. The Head of the Risk Management Department reports directly to the Risk Management Committee. The Risk Management Committee has reviewed the Risk Management Manual by which the Company identifies and manages business risks. With the assistance of the Audit Committee and the Risk Management Committee, the Board reviews the adequacy and integrity of those control systems from time to time. In addition to the Risk Management Manual, the Board has also developed the Financial Management Manual. These two manuals are strict guidelines which the Management and all staff of the Company and the Group must comply with. Corporate Policy on Anti-Money Laundering Measures, including the appointment of an Anti-Money Laundering Compliance Officer, together with other trading related policies such as Out-of-Office Dealing policy, Telephone Taping/Instant Messaging/Mobile Phone policy and Deal Entry policy have been adopted by the Risk Management Committee. The internal audit function, as discussed under Principle 13, assists the Audit Committee and the Board in evaluating internal controls, financial and accounting matters, compliance and business and financial risk management. The Audit Committee's responsibilities in the Group's internal controls are complemented by the work of the in-house legal counsels. Based on the controls and systems that have been put in place, the Board is satisfied that there are adequate internal controls in the Company and the Group. Internal Audit Principle 13 The company should establish an internal audit function that is independent of the activities it audits. Commentary Both the Board and the Audit Committee agree that it is important to have a strong professional internal audit function to enhance their ability to manage risk and safeguard shareholders' interest. It has been determined that the best approach is to engage independent professional auditors to discharge this function instead of creating an internal audit department staffed by employees of the Company. The Audit Committee thus appointed Grant Thornton as the Company's independent internal auditor. The internal auditors review the Company's processes and procedures on a continual basis to ensure compliance with the best corporate governance practices. It also reviews interested person transactions. The Audit Committee is satisfied that Grant Thornton has the adequate resources to perform its functions and has appropriate standing within the Company. Grant Thornton has set out a three-year rolling plan to do a comprehensive internal audit of the Company's policies and procedures. Grant Thornton had presented their internal audit plan 2009 to the Audit Committee. The Audit Committee adopted the proposed audit plan. Communication with Shareholders Principle 14 Companies should engage in regular, effective and fair communication with shareholders. Commentary The Board is careful to observe regulations of the SGX-ST governing the requirements to make appropriate announcements on a timely basis. Transparency and integrity of information is also important to the Board. All material announcements are vetted by the Chief Executive Officer, in consultation with the Chairman and/or the Deputy Chairman, as may be required, before release by the Company via SGXnet. Principle 15 Companies should encourage greater shareholder participation at Annual General Meetings and allow shareholders the opportunity to communicate their views on various matters affecting the company. Commentary The Company's Articles of Association allows a shareholder to appoint up to two proxies to attend and vote in his/her place at general meetings. While the Company does not have a specific limit in the Articles of Association on the number of proxy votes for nominee companies, there is a limit for the number of proxies. This is to prevent the creation of separate classes of rights in shareholders. Moreover, on a show of hands, only one vote is counted, under the current law. At each annual general meeting, shareholders are encouraged to participate in the question and answer session. The Board of Directors, senior management, the external auditors and the Company Secretary are present to respond to shareholders' questions. Where there are items of special business to be transacted at the annual general meeting, comprehensive explanatory notes will be sent together with the notice of the annual general meeting . The Company Secretary prepares minutes of shareholders' meetings, which incorporates substantial comments or queries from shareholders and responses from the Board and Management. These minutes are available to shareholders upon their requests. Dealings in the Company's Securities In line with the recommended best practices on dealings in securities set out under Rule 1207(18) of the SGX-ST Listing Manual, the Company has issued a directive to all employees and directors not to deal in the Company's securities on short-term considerations and to abstain from dealing with the Company's securities for a period commencing two weeks before the announcement of the results of the first three quarters and one month before the announcement of the full year results and ending on the date of the announcement of the relevant results. Interested Person Transactions Shareholders have adopted a revised IPT Mandate for interested person transactions of the Group on 29 April 2009 ("IPT Mandate"). The IPT Mandate sets out the levels and procedures to obtain approval for such transactions. Information regarding the IPT Mandate is available on the Company's website at www.caosco.com. All business units are required to be familiar with the IPT Mandate and report any such transactions to the Finance Department. The Finance Department keeps a register of the Group's interested person transactions. Information on interested person transactions for 2009 is found under "Supplementary Information" on page 101. Appendix Details of China Aviation Oil Share Option Scheme The Share Option Scheme was approved by shareholders at an extraordinary general meeting of the Company held on 6 November 2001 which allows share options to be granted to full-time confirmed employees (including Executive Directors) and Non-Executive Directors of the Group. Full-time confirmedemployees and Directors (excluding Non-Executive Directors) of the parent company and its subsidiaries (the " Parent Group Executives/Directors" ) are also eligible to participate in the Share Option Scheme if, in the opinion of the Remuneration Committee, such persons have contributed or will contribute to the success of the Company. Persons who are controlling shareholders of the Group or their associates are not eligible to participate in the Share Option Scheme. The aggregate number of ordinary shares in the capital of the Company (the " Shares" ) over which the Remuneration Committee may grant options on any date, when added to the number the Shares issued and issuable in respect of all options granted under the Share Option Scheme, shall not exceed 15% of the total number of issued Shares excluding treasury shares from time to time. Any grant of the share options to a Parent Group Executive/Director which, together with share options already granted to that Parent Group Executive/Director in any capacity under the Share Option Scheme which represents five (5) percent or more of the total number of Shares available to the Parent Group Executives/Directors under the Share Option Scheme, shall be approved by independent shareholders of the Company in a separate resolution for each such Parent Group Executive/Director. The aggregate number of Shares which may be offered by way of grant of share options to Parent Group Executives/Directors in any capacity under the Share Option Scheme shall not exceed twenty (20) percent of the total number of Shares available under the Scheme and this shall be approved by independent shareholders of the Company in separate resolution. The exercise price for each Share in respect of which a share option is exercisable shall be determined by the Remuneration Committee at its absolute discretion, and fixed by the Remuneration Committee at: (i) a price (the "Market Price") equal to the average of the last dealt prices for a Share for the five (5) consecutive trading days immediately preceding the offer date of that share option; or (ii) a discount price to the Market Price which shall not exceed 20%of the Market Price. Options granted at the exercise price at no discount to the Market Price shall only be exercisable at any time (in whole or in part) by a participant after the first anniversary of the offer date of that share option, provided always that share options shall be exercised before the tenth anniversary of the relevant offer date, in the case of share options granted to full-time confirmed employees of the Group (including executive directors and Parent Company Executives/Directors)(collectively referred to as "Executive Options"); and before the fifth anniversary of the relevant offer date, in the case of non-Executive Options, or such earlier date as may be determined by the Remuneration Committee. Options granted with the exercise price set at a discount to the Market Price shall only be exercisable at any time (in whole or in part) by a participant after the second anniversary of the offer date of that option, provided always that options shall be exercised before the tenth anniversary of the relevant offer date in the case of Executive Options or the fifth anniversary of the relevant offer date in the case of non-Executive Options, or such earlier date as may be determined by the Remuneration Committee. The Share Option Scheme shall continue to be in force at the discretion of the Remuneration Committee, subject to a maximum period of ten (10) years, commencing on the date on which the Share Option Scheme is adopted by shareholders at the extraordinary general meeting of the Company. Subject to compliance with any applicable laws and regulations in Singapore, the Share Option Scheme may be continued beyond the above-stipulated period with the approval of the shareholders of the Company by ordinary resolution at a general meeting and of any relevant authorities which may then be required.