Code of Corporate Governance for Listed Companies in China

Structure ■Equally treat all shareholders and protect the lawful rights of shareholders. ■Stress directors’ fiduciary duty and due diligence. ■Give play to the supervisory role of Board of Supervisors. ■Establish and improve the performance evaluation and incentive & restraint mechanism. ■Safeguard the lawful rights of stakeholders. ■Improve information disclosure and the transparency of the company.

Equally Treat All Shareholders Fairly treat all shareholders, including minority shareholders and foreign shareholders Forbid shareholders and insiders to conduct insider dealings; the related party dealing shall be conducted on a fair, equal and open basis. Full and open disclosure shall be made in this process. Controlling shareholders shall be separated from the listed companies in terms of assets, personnel and finance. The controlling shareholders shall exercise the rights in strict accordance with the laws and regulations and shall not seek additional benefits by leveraging on their special position, or impair the interests of minority shareholders.

Protect Shareholders’ Rights The goal of CG is to protect shareholders’ rights. Shareholders have the right to know the big events of the companies and participate in decision-making. Stipulate the rules of procedures for the general meeting and clarify the procedures for decision-making. Improve the shareholders voting system, including the proxy voting, vote collection, etc. Encourage the shareholders to actively participate in corporate governance. Encourage the minority shareholders to file a civil action for compensation against serious violations of their rights.

Obligations and Responsibilities of Directors Directors shall perform their fiduciary and due diligence duties to maximize the interests of the company and shareholders and equally treat all shareholders. Directors shall have sufficient time and energy to perform their due obligations. Directors shall be present at the board meeting in a serious and responsible manner and explicitly express their views on the discussed matters. In case any resolution of the board violates the law, administrative regulations, articles of association of the listed company, or causes economic loss to the company, the directors responsible for the resolution shall bear the due responsibility according to the law.

Procedures for the Election of Directors The company shall work out the standard and transparent procedures for the election of directors to ensure the election procedure is open, fair, equal and independent. Shareholders solely or jointly holding more than 1 % of the issued shares of the listed companies can nominate the candidates of directors. The company shall disclose the detailed materials of the candidates prior to the general meetings and ensure the shareholders have gained full understanding of the candidates while voting. In the process of election, the minority shareholders’ view shall be fully reflected. Cumulative voting can be adopted for the election in the general meeting.

Composition of the Board of Directors The number and composition of the members in the Board of Directors shall conform to relevant laws and regulations and ensure effective discussion is conducted, and scientific, quick and prudent decision is made. The Board of Directors shall have a proper and professional structure. Members of the Board shall have necessary knowledge, skills and qualifications for their duties. The Board of Directors of listed companies shall have a certain number of independent directors, which shall reach two by June 2002, and one third for 2003. Clear requirement on independence shall be made.

Introduce the System of Independent Directors The Independent Directors shall be separated from the company, management and controlling shareholders. Independent directors shall make public announcement on their independence. Independent directors shall perform their duties in due diligence, protect the overall interests of the company and see to protect the lawful rights of the minority shareholders from infringement. Independent directors shall not hold concurrent posts in more than five companies to ensure they have sufficient time and energy to perform their duties effectively. continued

Introduce the System of Independent Directors Listed companies shall provide necessary information and materials to Independent Directors. The company shall provide adequate working conditions for independent directors to perform their duties. Listed companies shall actively coordinate with the independent directors while the directors exercise their powers and the necessary expenses incurred thereof shall be borne by the company. The company can procure liability insurance for independent directors.

Special Committee under the Board of Directors Listed company shall establish the special committees for strategy making, auditing, nomination, remuneration and evaluation, in accordance with the relevant decision of the general meetings. Independent directors shall be the majority and hold responsible post in the Audit Committee, Remuneration Committee and Evaluation Committee. There shall be at least one independent director who is an accounting processional in the Audit Committee. The special committees can employ an intermediary institution to offer professional advice on the decision-making.

Rules of Procedures and Decision-making of the Board Board of Directors shall hold regular meetings, which shall proceed in strict accordance with the rules. The Board of Directors shall inform all directors at the legal time beforehand and provide sufficient materials. If more than two independent directors think that the materials are insufficient or the assessment is ambiguous, they can jointly propose to postpone the board meetings or part of the agenda for the meeting. The Board of Director shall adopt the proposal. continued

Rules of Procedures and Decision-making of the Board Minutes shall be complete. The actually present directors and note keepers shall sign on the minutes. The company shall stipulate detailed principles in articles of association and clarify the content of certain powers and limit of power exercised by the authorized chairman during the adjournment. Matters concerning the major interests of company shall be submitted to the Board of Directors for collective decision-making.

Supervisory Role of the Board of Supervisors Responsible for the shareholders, the Board of Supervisors of listed companies shall focus on the financial supervision and conduct supervision on the due diligence of the senior management, and protect the legal rights of the company and shareholders. The Board of Supervisors shall work out and improve the rules of procedures and working procedures. The Board shall carry out work in strict accordance with rules and procedures. continued

Supervisory Role of the Board of Supervisors The Board of Supervisors is eligible to propose the external audit institution for the company to the general meeting. The members and composition of the Board of Supervisors shall be adequate to guarantee the Board has sufficient experiences, ability and strong professional background to independently and effectively supervise the performance of directors and managers, and conduct supervision and examination on the company’s financial condition.

Performance Evaluation and Incentive & Restraint Mechanism The company shall establish transparent standard and procedures for the performance evaluation on the directors and Board of Directors. Remuneration Committee and Evaluation Committee under the Board of Directors shall organize the evaluation on directors. The Board of Directors shall report to the general meeting the performance of the directors, the result of the evaluation and remuneration, and disclose the information. continued

Performance Evaluation and Incentive & Restraint Mechanism Establish market-oriented recruitment system for senior management. Institute fair and transparent performance evaluation system for senior management, and clarify the standard and procedures for the evaluation. nitiate the long-term incentive mechanism that ensures the remuneration of the senior management, company’s profits and individuals’ performance are closely connected.

Lawful Rights of the Stakeholders The lawful rights of the company’s stakeholders, including banks and other creditors, employees, consumers, suppliers and communities, shall be respected. The company and Board of Directors shall recognize the importance for the protection of the lawful rights of the stakeholders, and fully cooperate with them to promote the healthy and sustainable development of the company. The company shall provide necessary information and conditions for the protection of the lawful rights of the stakeholders. continued

Lawful Rights of the Stakeholders The company shall encourage the employees to comment on the operation, financial status and major decision-making concerning their own interests through the direct communications with Board of Supervisors and management. While focusing on maximizing the shareholders’ interests, the listed company shall be concerned with the environment of the community and public undertaking, and have a regard for the social responsibility.

Information Disclosure and Transparency Information disclosure is the consistent responsibility of the listed company, who shall honestly and persistently perform this duty. The discourse shall be antithetic, accurate, complete and timely. The company shall establish information management and control system and designate special personnel to take charge of the information collection and disclosure. The secretary of the Board of Directors shall coordinate and organize information disclosure under the authorization of the board. continued

Information Disclosure and Transparency The listed company shall disclose the information on corporate governance, including the composition and independence of the Board of Directors, performance evaluation on the Board of Directors, actual condition of the corporate governance and the gap with Codes. The company shall timely disclose the lists of shareholders with a relatively large proportion of the company’s shares, list of shareholders who can actually control the company in concerted action or real controllers. The company and controlling shareholders shall disclose the actual condition of the company’s controlling power.