6-K

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of January 2023

Commission File Number: 1-12158

Sinopec Shanghai Petrochemical Company Limited

(Translation of registrant’s name into English)

No. 48 Jinyi Road, Jinshan District, Shanghai, 200540

The People’s Republic of China

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                                

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                                

EXHIBITS

Exhibit Number
99.1	Announcement Regarding Provision for Asset Impairment
99.2	Connected Transaction-Assets Transfer Agreement
99.3	Rules of Procedure of the Remuneration and Appraisal Committee of the Board

Disclaimer—Forward-Looking Statements

We may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, expectations, developments and business strategies. Words such as “believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “endeavor”, “target”, “forecast” and “project” and similar expressions are intended to identify such forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections, and other forward-looking statements will not be achieved. If one or more of these risks materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors and others are discussed more fully under the section titled “Item 3. Key Information—C. Risk Factors” in our most recent annual report on Form 20-F filed on April 28, 2022, and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SINOPEC SHANGHAI PETROCHEMICAL COMPANY LIMITED
Date: January 20, 2023	By:	/s/ Wan Tao
	Name:	Wan Tao
	Title:	Chairman of the Board of Directors

3

EX-99.1

Exhibit 99.1

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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

(Stock Code: 00338)

ANNOUNCEMENT REGARDING PROVISION FOR ASSET IMPAIRMENT

This announcement is made by Sinopec Shanghai Petrochemical Company Limited (the “Company”), pursuant to Part XIVA of the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong and Rule 13.09(2) and 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The Company held the 13th meeting of the tenth session of the board of supervisors of the Company (the “Board of Supervisors”) on 17 January 2023, and the 26th meeting of the tenth session of the board of directors of the Company (the “Board”) on 18 January 2023 respectively. The meetings reviewed and approved that the Company will make provision for 2022 asset impairment. Details are as follows:

I. OVERVIEW OF THE PROVISION FOR ASSET IMPAIRMENT

In order to objectively reflect the Company’s financial position and operating results in 2022 and according to the relevant requirements of the Accounting Standard for Business Enterprise (the “ASBE”) as well as based on the principle of prudence, the Company conducted impairment tests at the end of the year on relevant assets that may show indications of impairment. After the test, the Company proposed to make provision for impairment amounting to RMB811 million in total in 2022 due to the above matters.

II. SPECIFIC INFORMATION OF THE PROVISION FOR ASSET IMPAIRMENT

1. Approach, basis and standard of the provision for impairment

According to the ASBE No. 1 – Inventory, at the balance sheet date, inventories are carried at the lower of cost and net realisable value. Any excess of the cost over the net realisable value of inventories is recognised as a provision for impairment.

- 1 -

According to the ASBE No. 8 – Asset Impairment, where there is any indication that an asset is impaired, its recoverable amount should be estimated. The recoverable amount of an asset is the higher of its fair value less disposal cost and its present value of expected future cash flow. If the measurement results of the recoverable amount indicates that the recoverable amount of an asset is lower than its carrying amount, the carrying amount of such asset shall be written down to its recoverable amount, and the amount written down shall be recognised as impairment loss of the assets and included in profit or loss for that period. A provision for impairment of the asset shall be made accordingly.

2. Details of the provision for impairment

In 2022, the Company performed impairment tests on assets with impairment indications and proposed to make provision for impairment amounting to RMB811 million, mainly including RMB525 million for inventories and RMB286 million for fixed assets.

III. IMPACT OF THE PROVISION FOR IMPAIRMENT ON FINANCIAL POSITION OF THE COMPANY

In 2022, the Company proposed to make provision for impairment of assets amounting to RMB811 million in total due to the above matters and the provision for impairment is proposed to be fully included in the Company’s operation results in 2022, reducing the consolidated net profit of the Company in 2022 by RMB609 million.

IV. OPINION OF THE BOARD

The Board is of the view that, the provision for asset impairment based on the actual situation reflected the asset condition of the Company fairly and accurately, which is in line with the ASBE and accounting policies of the Company. Accordingly, the Board approved the provision for asset impairment.

V. OPINION OF THE INDEPENDENT DIRECTORS

The independent directors of the Company are of the view that, the provision for asset impairment is in line with the ASBE and relevant accounting policies of the Company, and the relevant deliberation procedures comply with laws and regulations. After the provision for asset impairment, the financial statements of the Company can more fairly reflect the financial position and operating results of the Company, which will help to provide investors with more true, reliable and accurate accounting information, and does not prejudice the interests of the Company and all shareholders, in particular minority shareholders. Accordingly, all the independent directors approved the provision for asset impairment.

- 2 -

VI. OPINION OF THE BOARD OF SUPERVISORS

The Board of Supervisors is of the view that, the Company has made provision for asset impairment in accordance with the ASBE and relevant accounting policies of the Company, which is in line with the Company’s actual situation, and can reflect the Company’s financial position and asset value in a fairer way. The relevant decision-making procedures are in compliance with laws and regulations. Accordingly, the Board of Supervisors approved the provision for asset impairment.

VII. OTHER INFORMATION

The figures above are based on a preliminary assessment only without certified public accountants auditing. Specific and accurate financial figures will be disclosed in the audited 2022 annual report to be officially published by the Company. Investors are advised to pay attention to the investment risk.

By Order of the Board

Sinopec Shanghai Petrochemical Company Limited

Liu Gang

Joint Company Secretary

Shanghai, the PRC, 18 January 2023

As at the date of this announcement, the executive directors of the Company are Wan Tao, Guan Zemin, Du Jun, and Huang Xiangyu; the non-executive directors of the Company are Xie Zhenglin and Peng Kun; and the independent non-executive directors of the Company are Li Yuanqin, Tang Song, Chen Haifeng, Yang Jun and Gao Song.

- 3 -

EX-99.2

Exhibit 99.2

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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

(Stock Code: 00338)

CONNECTED TRANSACTION

ASSETS TRANSFER AGREEMENT

THE TRANSACTION

On 18 January 2023, the Board considered and approved the Assets Transfer Agreement that the Company proposes to enter into with ZhongKe Refinery & Petrochemical. The Assets Transfer Agreement will be signed before 28 February 2023. Pursuant to the Assets Transfer Agreement, the Company proposes to transfer the Subject Assets held by it to ZhongKe Refinery & Petrochemical, and ZhongKe Refinery & Petrochemical shall pay the transfer price of RMB263.29 million (including tax in total) to the Company by way of installment payments.

IMPLICATIONS UNDER THE HONG KONG LISTING RULES

As at the date of this announcement, Sinopec Corp. holds approximately 50.44% of the Company’s issued share capital, and it is therefore the controlling shareholder of the Company. Sinopec Corp. holds 90.3% equity interest of ZhongKe Refinery & Petrochemical, and ZhongKe Refinery & Petrochemical is the non-wholly owned subsidiary of Sinopec Corp. Therefore, according to Chapter 14A of the Hong Kong Listing Rules, ZhongKe Refinery & Petrochemical is an associate of Sinopec Corp. and a connected person of the Company. The Transaction constitutes a connected transaction of the Company.

As the applicable percentage ratio of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements but is exempted from the independent shareholders’ approval requirement under Chapter 14A of the Hong Kong Listing Rules.

- 1 -

I. INTRODUCTION

On 18 January 2023, the Board considered and approved the Assets Transfer Agreement that the Company proposes to enter into with ZhongKe Refinery & Petrochemical. The Assets Transfer Agreement will be signed before 28 February 2023. Pursuant to the Assets Transfer Agreement, the Company proposes to transfer the Subject Assets held by it to ZhongKe Refinery & Petrochemical, and ZhongKe Refinery & Petrochemical shall pay the transfer price of RMB263.29 million (including tax in total) to the Company by way of installment payments.

II. THE ASSETS TRANSFER AGREEMENT

The main terms of the Assets Transfer Agreement are summarized as follows:

Parties:	(i) ZhongKe Refinery & Petrochemical (as the transferee)
	(ii)  the Company (as the transferor)
Agreement content:	The Company shall transfer the Subject Assets held by it to ZhongKe Refinery & Petrochemical, and ZhongKe Refinery & Petrochemical shall pay the transfer price of RMB263.29 million (including tax in total) to the Company by way of installment payments.
Consideration and payment:	The consideration of the Assets Transfer Agreement is RMB263.29 million, and ZhongKe Refinery & Petrochemical shall pay it by installment: (1) 30% of the transfer price, namely RMB78.987 million including tax, shall be paid within 30 days after the receipt of a valid VAT invoice issued by the Company upon the Assets Transfer Agreement becoming effective; (2) 70% of the transfer price, namely RMB184.303 million including tax, shall be paid within 30 days after the signing of the confirmation letter for assets handover and the receipt of a valid VAT invoice issued by the Company upon the transfer of the Subject Assets.
Delivery arrangement of Subject Assets	1.  Location of transfer of the Subject Assets: the Company.

- 2 -

	2.  The Company shall, within 30 days upon receiving the payment of the first installment by ZhongKe Refinery & Petrochemical, complete the assets verification process in accordance with the scope of assets transfer as provided in the Assets Transfer Agreement, and sign the confirmation letter for assets handover upon confirmation by both parties.
	3.  The confirmation letter for assets handover shall serve as certification of the change of ownership of the assets transferred by the Company to ZhongKe Refinery & Petrochemical, and the date of signing the confirmation letter for assets handover is the assets handover date.
	4.  All risks, losses and any legal liabilities and benefits relating to the Subject Assets shall be transferred from the Company to ZhongKe Refinery & Petrochemical upon the handover of the Subject Assets.
	5.  Before the Assets Transfer Agreement becomes effective, all outstanding liabilities incurred by the Company with other legal persons or natural persons in connection with the Subject Assets shall be borne by the Company, for which ZhongKe Refinery & Petrochemical shall not be liable. If ZhongKe Refinery & Petrochemical cannot exercise its rights normally due to the Company’s prior acts (such as unresolved civil disputes, unresolved administrative penalties, etc.) after it has obtained the ownership or right of use of the Subject Assets, the Company shall have the exclusionary obligation and shall be liable for compensation for the losses caused therefrom.
Default liabilities:	1.  If the Company breaches the terms of the Assets Transfer Agreement and fails to deliver the Subject Assets to ZhongKe Refinery & Petrochemical at the agreed time, the Company shall pay ZhongKe Refinery & Petrochemical liquidated damages of 0.05% of the value of the assets not delivered on time for each day of delay and shall deliver the untransferred portion of the assets to ZhongKe Refinery & Petrochemical;

- 3 -

	2.  If the Company breaches the undertakings in the Assets Transfer Agreement and subjects the Subject Assets to claims by a third party, resulting in ZhongKe Refinery & Petrochemical not being able to acquire ownership of the Subject Assets, the Company shall bear the liability of default to ZhongKe Refinery & Petrochemical to the extent of the value of that portion of the assets;
	3.  If ZhongKe Refinery & Petrochemical breaches the terms of the Assets Transfer Agreement and fails to pay the assets transfer price to the Company on time and in full, ZhongKe Refinery & Petrochemical shall be liable to the Company for liquidated damages of 0.05% of the unpaid portion of the assets transfer price for each day of delay and shall pay the unpaid portion of the price to the Company.
Effectiveness:	The Assets Transfer Agreement shall be signed by the legal representatives or authorized representatives of both parties and affixed with the contract seal of the entities, and shall become effective upon approval by the Board of the Company and the state-funded enterprises.

III. THE BASIS OF DETERMINING THE CONSIDERATION

The consideration of the Transaction was based on the Asset Valuation Report on the Market Value of 100,000 T/Y EVA Plant under Construction Involved in the Proposed Assets Transfer by Sinopec Shanghai Petrochemical Company Limited (《中國石化上海石油化工股份有限公司 擬進行資產轉讓所涉及的10萬噸/年EVA項目在建工程市場價值資產評估報告》) issued by Shanghai Lixin Appraisal Co., Ltd. (上海立信資產評估有限公司). The consideration was determined through commercial negotiations between the parties and through the performance of internal decision-making procedures by the parties.

As appraised by the cost method, the appraised value (excluding VAT) of the Company’s 100,000 T/Y EVA plant under construction as at the valuation date (i.e. 30 November 2022) was RMB280 million. According to the Technical Report on the Restoration Costs of the Reciprocating Compressor and Extrusion Granulation Unit of the 100,000 T/Y EVA Plant of Sinopec Shanghai Petrochemical Company Limited (《中國石化上海石油化工股份有限公司10 萬噸/年EVA裝置往復式壓縮機、擠壓造粒機組修復費用技術報告》), ZhongKe Refinery & Petrochemical will incur additional technical restoration and renovation costs of RMB47 million (excluding VAT) after receiving the Subject Assets. Accordingly, the Company proposes to transfer the Subject Assets at a price of RMB233 million (excluding VAT and with a total amount including tax of RMB263.29 million).

- 4 -

The pricing of the Transaction is objective and fair, and is not prejudicial to the interests of the Company or shareholders.

IV. INFORMATION OF THE SUBJECT ASSETS

The Subject Assets are the equipment and technologies purchased in advance for 100,000 T/Y EVA plant held by the Company, which the Company financially recorded as “construction in progress” assets. The ownership of the Subject Assets is explicit. There are no mortgages, pledges and any other restrictions on transfer, no litigation, arbitration or judicial measures such as seizure or freezing involved, and no other circumstances that may hinder the transfer of ownership.

As of 31 December 2021, the original book value of the Subject Assets was RMB232,555,200, the net book value was RMB232,555,200, and the provision for depreciation, amortization or impairment was RMB0 (audited).

V. FINANCIAL IMPACTS AND USE OF PROCEEDS

Based on the existing information available to the Company, the Directors estimate that the revenue from the sales of the Subject Assets by the Company to ZhongKe Refinery & Petrochemical will be approximately RMB444,800, which was determined with reference to the net book value of the Subject Assets as of 31 December 2021 and the consideration for the transfer (excluding VAT). The Company has held the Subject Assets for more than one year.

The Company proposes to use the proceeds from the transfer of the Subject Assets as general operating capital of the Company.

VI. REASONS FOR AND BENEFITS OF THE TRANSACTION

As the environmental impact assessment for 100,000 T/Y EVA plant of the Company has not been approved, the project plan cannot be implemented in the near future. Considering the large number of EVA plant in production and under construction recently, there will be a concentrated release of production capacity in the next two years and the investment risk of this project will increase significantly. Therefore, the Company proposes to abandon the construction of the project. Meanwhile, the Transaction will help to revitalize the idle assets of the Company and optimize the asset structure of the Company.

The Board is of the view that ZhongKe Refinery & Petrochemical is in sound financial positions and has the ability to pay. The Transaction will help to improve the future financial positions of the Company, will have no material effect on the Company’s future operating results and will not result in new connected transactions, horizontal competition, or occupation of non-operating capital of the Company by controlling shareholders of the Company and their connected persons.

- 5 -

VII. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

As at the date of this announcement, Sinopec Corp. holds approximately 50.44% of the Company’s issued share capital, and it is therefore the controlling shareholder of the Company. Sinopec Corp. holds 90.3% equity interest of ZhongKe Refinery & Petrochemical, and ZhongKe Refinery & Petrochemical is the non-wholly owned subsidiary of Sinopec Corp. Therefore, according to Chapter 14A of the Hong Kong Listing Rules, ZhongKe Refinery & Petrochemical is an associate of Sinopec Corp. and a connected person of the Company. The Transaction constitutes a connected transaction of the Company.

As the applicable percentage ratio of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements but is exempted from the independent shareholders’ approval requirement under Chapter 14A of the Hong Kong Listing Rules.

VIII. APPROVING PROCEDURES FOR THE TRANSACTION

On 18 January 2023, the Company held the 26th meeting of the tenth session of the Board, at which the Resolution on the Assets Transfer and the Related Transaction was considered and approved. Wan Tao, Du Jun and Xie Zhenglin, being connected directors, have abstained from voting on such resolution at the meeting of the Board.

The Board (including the independent non-executive directors of the Company) is of the view that the Transaction contemplated under the Assets Transfer Agreement is on normal commercial terms and through fair negotiation between the parties to the agreement, and the terms of the Transaction are fair and reasonable, and in the interests of the Company and its shareholders as a whole.

The Transaction is subject to the relevant state-owned assets approval procedures to the state-funded enterprise.

IX. GENERAL INFORMATION

The Company

Located at Jinshanwei in the southwest of Shanghai in China, the Company is a highly integrated petrochemical enterprise which mainly processes crude oil into a broad range of synthetic fibers, resins, plastics, intermediate petrochemical products and petroleum products.

ZhongKe Refinery & Petrochemical

ZhongKe Refinery & Petrochemical is a limited liability company established in the PRC, and its principal activities are crude oil processing and petroleum products manufacturing.

- 6 -

DEFINITIONS

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

“Company”	Sinopec Shanghai Petrochemical Company Limited, a joint stock limited company incorporated in the PRC and listed on the Main Board of the Hong Kong Stock Exchange (stock code: 00338) as well as in Shanghai Stock Exchange (stock code: 600688)
“Sinopec Corp.”	China Petroleum & Chemical Corporation, a joint stock limited company incorporated in the PRC and listed on the Main Board of the Hong Kong Stock Exchange (stock code: 00386) as well as in Shanghai Stock Exchange (stock code: 600028)
“ZhongKe Refinery & Petrochemical”	ZhongKe (Guangdong) Refinery & Petrochemical Company Limited, a limited liability company established in the PRC and a non-wholly owned subsidiary of Sinopec Corp.
“Assets Transfer Agreement”	The Assets Transfer Agreement for Shanghai Petrochemical EVA Plant that the Company proposes to enter into with ZhongKe Refinery & Petrochemical
“Transaction”	The Company proposed to transfer the Subject Assets held by it to ZhongKe Refinery & Petrochemical at a consideration of RMB263.29 million (including tax in total)
“Subject Assets”	the equipment and technologies purchased in advance for 100,000 T/Y EVA plant held by the Company
“Board”	the board of Directors of the Company
“Director(s)”	the director(s) of the Company
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“PRC”	The People’s Republic of China, for the purpose of this announcement, excluding Hong Kong, Macau Special Administrative Regions and Taiwan
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“RMB”	Renminbi, the lawful currency of the PRC

- 7 -

“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited
“%”	percentage

By Order of the Board

Sinopec Shanghai Petrochemical Company Limited

Liu Gang

Joint Company Secretary

Shanghai, the PRC, 18 January 2023

As at the date of this announcement, the executive directors of the Company are Wan Tao, Guan Zemin, Du Jun and Huang Xiangyu; the non-executive directors of the Company are Xie Zhenglin and Peng Kun; and the independent non-executive directors of the Company are Li Yuanqin, Tang Song, Chen Haifeng, Yang Jun and Gao Song.

- 8 -

EX-99.3

Exhibit 99.3

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

Sinopec Shanghai Petrochemical Company Limited

Rules of Procedure of the Remuneration and

Appraisal Committee of the Board

Considered and approved at the Sixth Meeting of the Fifth Session of the Board on 7 December 2005

First Amendment at the Fifth Meeting of the Seventh Session of the Board on 29 March 2012

Second Amendment at the Twenty-Sixth Meeting of the Tenth Session of the Board on 18 January 2023

Chapter 1: General Provisions

Article 1: In order to improve its corporate governance structure, Sinopec Shanghai Petrochemical Company Limited (the “Company”) has established the remuneration and appraisal committee (the “Remuneration Committee”) under the board of directors of the Company (the “Board”) and developed these Rules of Procedure pursuant to Company Law of the People’s Republic of China, Code of Corporate Governance for Listed Companies in China, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, Articles of Association of Sinopec Shanghai Petrochemical Company Limited (the “Articles of Association”) and other relevant regulations.

Article 2: The Remuneration Committee shall be a special committee under the Board. It is primarily responsible for determining and reviewing the Company’s remuneration policy as well as the compensation and benefits for the directors and officers of the Company, setting appraisal standards for the directors and officers and conducting appraisals thereof, and considering, reviewing and/or proposing equity incentive schemes, share award or share option schemes and others.

Article 3: For the purpose hereof, “directors” shall be defined as the chairman, vice-chairman and directors who receive remuneration from the Company; and “officers” shall be defined as the general manager, deputy general manager, chief financial officer and secretary to the Board as well as other officers referred by the general manager to the Board for appointment.

Chapter 2: Composition

Article 4: The Remuneration Committee shall be composed of three directors, at least two of whom shall be independent non-executive directors.

- 1 -

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

Article 5: The members of the Remuneration Committee shall be elected by the Board.

Article 6: The Remuneration Committee shall have a chairperson, who shall be in charge of the work of the Remuneration Committee. The chairperson shall be an independent non-executive director of the Company, and nominated among the members by the chairman of the Board and elected by the Board.

Article 7: The term of office of the members of the Remuneration Committee shall correspond with the term of office of the Board. Upon expiration of the term of office, a member may serve another term of office upon reappointment. If a member no longer takes up the directorship of the Company during his term of office, he shall automatically be disqualified as a member and the Board shall appoint a replacement pursuant to the provisions hereof.

Article 8: An office shall be established under the Remuneration Committee and within the Human Resources Department of the Company. The head of the Human Resources Department shall concurrently serve as the office administrator and shall be primarily responsible for the day-to-day liaison work, the arrangement of meetings, the execution of the relevant resolutions made at such meetings, etc..

Article 9: No members of the Remuneration Committee may receive, directly or indirectly, any counseling fees, consultant fees or other rewards other than the remuneration from the Company.

Chapter 3: Duties and Powers

Article 10: The major duties and powers of the Remuneration Committee:

(1) to formulate a remuneration policy and an implementation scheme according to the main terms of reference, duties and significance of the management positions of the directors and officers, as well as on the basis of the pay levels for the relevant positions at other relevant companies;

(2) to carry out the remuneration policy and the implementation scheme, which primarily comprise performance appraisal standards and procedures, a main evaluation mechanism, award and penalty regimes and standards, etc.;

- 2 -

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

(3) to review and approve the remuneration proposals for the management with reference to the Company’s business goals and objectives set by the Board;

(4) to review the performance of duties by the directors and officers of the Company and to conduct annual performance appraisals thereof;

(5) to review and approve compensation payable to executive directors and officers of the Company for any loss or termination of office, or compensation arrangements in connection with the dismissal or removal of directors of the Company for misconduct to ensure that such compensation or compensation arrangements are consistent with contractual terms or are otherwise fair and not excessive;

(6) to ensure that no director or any of his directly interested parties thereof is involved in deciding his own remuneration;

(7) to consider, review and/or propose matters relating to share schemes under Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; and

(8) to perform other duties and powers as assigned by the Board.

Article 11: The Remuneration Committee shall be accountable to the Board. The resolutions made by the Remuneration Committee shall be submitted to the Board for consideration; the remuneration packages for the directors of the Company proposed by the Remuneration Committee may be implemented only after the same are submitted to the Board for approval and submitted to a general meeting of shareholders for consideration and approval; and the remuneration packages for the officers of the Company proposed by the Remuneration Committee shall be submitted to the Board for approval.

Article 12: The Board shall have the right to veto any remuneration policy or package that jeopardizes the interests of the Company’s shareholders.

Chapter 4: Work Procedures

Article 13: The office of the Remuneration Committee shall be responsible for preliminary preparations for the Remuneration Committee’s discussions and providing the Remuneration Committee with information on areas that include (but are not limited to):

(1) the major financial indicators for and progress made against the operation objectives set by the Company;

- 3 -

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

(2) the division of scope of work and major duties of the directors and officers;

(3) the indicators achieved in connection with the performance appraisal policy for the directors and officers;

(4) estimates of the performance of the Company used as the basis of drafting the remuneration policy and distribution scheme; and

(5) other relevant information as deemed necessary by the Remuneration Committee.

Article 14: The Remuneration Committee shall conduct an appraisal of the directors and officers of the Company. The appraisal procedures are as follows:

(1) the directors and officers submit a written work activity report;

(2) the Remuneration Committee evaluates the performance of the directors and officers according to the performance appraisal standards and procedures; and

(3) the amount of compensation and the method of awarding for the directors and officers based on the results of performance appraisals and the remuneration policy are submitted to the Board for consideration after the same are approved by the Remuneration Committee through voting.

Chapter 5: Rules of Procedure

Article 15: The Remuneration Committee shall convene at least one meeting a year and may convene extraordinary meetings as required by giving notice to all its members ten days in advance. Meetings shall be chaired by the chairperson of the Remuneration Committee. If the chairperson is unable to attend a meeting, he may appoint another member (an independent non-executive director) to chair the meeting.

Article 16: The Remuneration Committee shall convene a meeting only when more than two-thirds of the members are present thereat; each member shall have one vote; any resolutions proposed at a meeting shall be passed by a majority of all members.

- 4 -

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

Article 17: Voting shall be made by a show of hands or by ballot at a meeting of the Remuneration Committee. The Remuneration Committee may accept a written motion in lieu of convening a meeting. A written motion that is passed by a majority of all members shall form an effective resolution.

Article 18: When an issue regarding a member of the Remuneration Committee is discussed at a meeting of the Remuneration Committee, the member concerned shall abstain from attending the meeting.

Article 19: The Remuneration Committee may invite the head of the Human Resources Department of the Company to attend a meeting as a non-voting attendee and may, if necessary, invite the directors, supervisors and other officers of the Company and relevant professionals to attend a meeting as non-voting attendees.

Article 20: If necessary, the Remuneration Committee may engage an expert or an intermediary to provide professional advice on its decision-making at the expense of the Company.

Article 21: The procedures for convening a meeting of the Remuneration Committee, the method of voting thereat and the resolutions passed thereat shall be in compliance with the relevant laws, regulations, Articles of Association and these Rules of Procedure.

Article 22: Meetings of the Remuneration Committee shall have their minutes on which the members present at such meetings shall sign their names. Meeting minutes and resolutions shall be maintained by the Office of the Secretary to the Board.

Article 23: Resolutions passed at a meeting of the Remuneration Committee and the voting results thereat shall be reported in writing to the Board.

Article 24: The members present at a meeting and the persons who attend the meeting as a non-voting attendees shall be obliged to maintain confidentiality towards the matters discussed thereat. No such members may disclose the relevant information without authorization.

- 5 -

     If there is any discrepancy between English version and Chinese version, Chinese version shall prevail.  

Chapter 6: Supplementary Provisions

Article 25: These Rules of Procedure shall be effective from the date of adoption by the Board.

Article 26: Matters not covered hereunder shall be dealt with pursuant to the provisions of the relevant laws and regulations of the People’s Republic of China as well as the Articles of Association. In case of any conflict between these Rules of Procedure and the relevant laws or regulations to be promulgated by the People’s Republic of China in future or the Articles of Association to be amended by legal procedures, the relevant laws and regulations of the People’s Republic of China as well as the Articles of Association shall prevail, and amendments shall be made immediately to these Rules of Procedure and submitted to the Board for consideration and approval.

Article 27: The right to construe these Rules of Procedure shall reside in the Board.

- 6 -