CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CORPORATE GOVERNANCE GUIDELINES

Set forth below are corporate governance guidelines of China Technology Development Group Corporation (the “Company”). These guidelines are subject to change from time to time at the direction of the Board of Directors of the Company (the “Board”).

A. BOARD COMPOSITION

1. Size of the Board.

The Board periodically reviews the appropriate size of the Board and, in accordance with the Company’s Articles of Association, may adjust the number of directors from time to time.

2. Majority of Independent Directors.

The Board believes that there should be a majority of Independent Directors on the Board.

3. Definition of Independence for Independent Directors.

The Board defines an “independent” director in accordance with the applicable provisions of the Securities Exchange Act of 1934, as amended, the rules promulgated thereunder and the applicable marketplace rules of The Nasdaq Stock Market (“NASDAQ”).

Because it is not possible to anticipate or explicitly provide for all potential situations that may affect independence, the Board periodically reviews each Director’s status as an Independent Director and whether any Independent Director has any other relationship with the Company that, in the judgment of the Board, would interfere with the Director’s exercise of independent judgment in carrying out his/her responsibilities as a Director.

The Company should disclose the identities of the Directors that the Board has determined to be independent in its annual proxy statement. If an Independent Director ceases to be independent due to circumstances beyond his/her reasonable control, the Director should inform the Board of that fact as soon as practicable. The Company should notify NASDAQ immediately upon learning of the event or circumstance and resume compliance as soon as possible.

4. Board Membership Criteria.

The Nominating Committee is responsible for reviewing with the Board from time to time the appropriate qualities, skills and characteristics desired of Board members. This assessment includes consideration of the following minimum qualifications that the Nominating Committee believes must be met by all Directors:

·   Directors must be of the highest ethical character and share the values of the Company as reflected in the Company’s Code of Conduct and Code of Ethics;

·   Directors must have the ability to exercise sound business judgment based on an objective perspective; and

·   Directors must have substantial business or professional experience in the areas that are relevant to the Company’s business and be able to offer meaningful advices and guidance to the Company’s management based on that experience.

The Nominating Committee also considers numerous other qualities, skills and characteristics in evaluating Director nominees, such as:

·   An understanding of and experience in software, hardware or services, technology, accounting, governance, finance and/or marketing;

·   Leadership experience with listed companies or other major complex organizations; and

·   Experience in another listed company board unless a Director otherwise qualifies as a “financial expert” under the rules of the Securities and Exchange Commission (the “SEC”).

Board members are expected to prepare for, attend, and participate in Board meetings and meetings of Committees on which they serve. Directors are expected to attend at least 75% of Board meetings and meetings of Committees on which they serve.

In addition, Directors must stay abreast of the Company’s business and markets. Each Board member is expected to ensure that other existing and planned future commitments do not materially interfere with the member’s service as an outstanding director. Directors’ commitments to serve on other boards will be considered by the Nominating Committee and the Board when reviewing Board candidates and in connection with the Board’s self-assessment process.

Directors are expected to report changes in their primary business or professional association, including retirement, to the Chairman of the Board and the Chair of the Nominating Committee.

5. Selection of New Director Candidates.

The Board is responsible for selecting its own members. The Board delegates the selection and nomination process to the Nominating Committee, with the expectation that other members of the Board, and of management, will be requested to take part in the process where appropriate.

Generally, the Nominating Committee identifies candidates for Director nominees in consultation with the management, through the use of search firms or other advisors, through the recommendations submitted by shareholders or through such other methods as the Nominating Committee deems to be helpful to identify candidates. Once the candidates are identified, the Nominating Committee will confirm that the candidates meet all of the minimum qualifications for Director nominees established by it. The Nominating Committee may gather information about the candidates through interviews, questionnaires, background checks, or any other means that it deems to be helpful in the evaluation process. The Nominating Committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board. Based on the evaluation results, the Nominating Committee recommends candidates for the Board’s approval as Director nominees for election to the Board. The Nominating Committee also recommends candidates for the Board’s appointment to the committees of the Board.

6. Rotation of Directors.

At each annual general meeting of shareholders one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not more than one-third) shall retire from office by rotation provided that every Director shall be subject to retirement at least once every three years.

A retiring Director shall be eligible for re-election and shall continue to act as a Director throughout the meeting at which he/she retires.

7. Resignation of Directors.

A Director may tender his or her resignation by presenting a written notice of his or her resignation to the Board of the Directors. The Board shall promptly consider the resignation and any factors that they deem relevant in deciding whether to accept a Director’s resignation and shall promptly disclose its decision.

Any such resignation shall be effective upon (i) the Board accepts such resignation and (ii) the earlier to occur of the date that such director’s successor is elected and qualified or the date that the Board decreases the number of directors constituting the whole Board.

8. Board Compensation.

The compensation for Directors should be mainly equity-based compensation. The Compensation Committee periodically reviews the compensation for Directors.

9. Stock Option

The stock option plans of the Company are administered by the Compensation Committee. The Compensation Committee has the authority, in its sole discretion, with respect to options, to determine the things which include but are not limited to the followings: the employees, directors and consultants who are eligible to receive options; the times when they may receive options; the number of shares to be subject to each option plan; the term of each option plan; the date each option is to become exercisable; whether an option is to be exercisable in whole, in part or in installments; whether the installments are to be cumulative; the date each installment is to become exercisable and the term of each installment; whether to subject the exercise of all or any portion of an option to the fulfillment of contingencies as specified in an applicable stock option contract; and other things defined in each stock option plan. To align the interests of the Board with the interests of the Company’s shareholders, the Board has adopted Procedures and Guidelines Governing Securities Trades by Company Personnel and Advisors to govern securities trading by Directors, officers and other insiders.

B. RESPONSIBILITIES OF THE BOARD OF DIRECTORS

1. General Responsibilities of the Board.

The Board as a whole is collectively responsible for the success of the Company. All Directors must make decisions objectively in the interests of the Company. The Board of Directors assumes the general legal responsibilities to the Company and shall:

·   Provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enable risk to be assessed and managed;

·   Set the Company’s strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives, and reviews management performance; and

·   Set the Company’s values and standards and ensures that its obligations to its shareholders and others are understood and met.

2. Operation of Board of Directors.

The business, property and affairs of the Company are managed under the direction of the Board of Directors. Members of the Board are kept informed of the Company’s business through the discussions with the Chief Executive Officer and other officers, by reviewing materials provided to them, by visiting the Company’s offices and by participating in meetings of the Board and its committees and the Company’s annual general meeting of shareholders.

3. Code of Conduct.

Directors shall act at all times in accordance with the requirements of the Company’s Code of Conduct and Code of Ethics, which shall be applicable to each Director in connection with his or her activities relating to the Company. This obligation shall at all times include, without limitation, adherence to the Company’s policies with respect to conflicts of interests, confidentiality, protection of the Company’s assets, ethical conduct in business dealings and compliance with applicable laws. Any waiver of the requirements of the Code of Conduct with respect to any individual Director shall be reported to, and be subject to the approval of, the Board of Directors.

C. BOARD MEETINGS AND MATERIALS

1. Scheduling and Selection of Agenda Items for Board Meetings.

In-person Board meetings should be scheduled in advance. In addition to scheduled in-person meetings, telephonic Board meetings are scheduled in advance of announcement of material information about operations. Furthermore, additional Board meetings may be called upon appropriate notice at any time to address specific needs of the Company. The Board may also take action from time to time by written consent.

The Chairman of the Board, Chief Executive Officer and the Company Secretary, in consultation with the other members of the Board, draft the agenda for each meeting and distribute it to the Board in advance. Each Director may propose the inclusion of items on the agenda, request the presence of or a report by any member of the Company’s management, or at any Board meeting raise subjects that are not on the agenda for that meeting.

2. Board Material Distributed in Advance.

Information that is important to the Board’s understanding of the business and its meeting agenda items will be distributed in writing to the Board sufficiently before the Board meets to allow the Directors to prepare for discussion of the agenda items. Supplemental written materials will be provided to the Board on a periodic basis and at any time upon request of Board members.

3. Access to Employees and Outside Advisors.

The Board has complete access to contact and meet with any employee of the Company. Board members are encouraged, when traveling, to make arrangements in advance to visit Company office locations and meet with local management on a world-wide basis. The Company Secretary shall, whenever requested, assist in arranging and facilitating such meetings and site visits.

The Board has the authority to engage outside experts, advisors and counsels to assist the Board in its work to the extent it considers appropriate.

The Board encourages the management members to present at Board Meetings who (a) can provide additional insight into the items being discussed because of personal involvement in these areas, or (b) have future leadership potential within the Company such that he or she should be given exposure to the Board.

4. Executive Sessions.

Independent Directors shall hold regularly scheduled executive sessions each year at which only independent directors are present. Executive sessions do not include any Executive Directors of the Company. The Chair of the Audit Committee will assume the responsibility of chairing the executive sessions.

5. Director Orientation and Continuing Education.

The Compliance Officers for Code of Conduct are responsible for new-Director orientation programs and for Director continuing education programs. The orientation programs are designed to familiarize new Directors with the Company’s businesses, strategies and challenges and to assist new Directors in developing and maintaining skills necessary or appropriate for the performance of their responsibilities.

D. BOARD COMMITTEES

Number of Committees

The Company currently has three Committees: Audit, Compensation, and Nominating Committee. There will, from time to time, be occasions on which the Board may form a new committee depending upon the circumstances. The Audit, Compensation and Nominating Committees shall be composed entirely of Independent Directors.

Each Committee has a written charter, approved by the Board, which describes the Committee’s general authority and responsibilities. Each Committee will undertake an annual review of its charter, and will work with the Board to make such revisions as are considered appropriate.

Each Committee has the authority to engage outside experts, advisors and counsels to assist the Committee in its work to the extent it considers appropriate.

Each Committee will regularly report to the Board concerning the Committee’s activities.

Audit Committee:

Under the terms of its Charter, the Audit Committee is responsible for (i) reviewing with the independent accounting firm and the management the annual financial statements and independent accounting firm’s opinion; (ii) reviewing the results of the audit of the Company’s financial statements by the independent accounting firm; (iii) reviewing the Company’s interim financial statements; (iv) retaining the independent accounting firm and considering in advance whether or not to approve audit and non-audit services to be performed by the independent accounting firm; (v) reviewing the Company’s internal control over financial reporting, management’s reports concerning such controls and the Company’s critical accounting policies and accounting estimates resulting from the application of such policies; and (vi) taking other actions consistent with the Audit Committee charter.

Compensation Committee:

Under the terms of its Charter, the Compensation Committee is responsible for (i) establishment and administration of the Company’s policies, programs and procedures for compensating its senior management and Board of Directors; (ii) recommendation to the Board for determination as to suitable compensation for the Chief Executive Officer and all other executive officers of the Company; and (iii) production of a report on executive compensation for inclusion in the Company’s proxy statement for its annual general meeting of shareholders in accordance with applicable rules and regulation.

Nominating Committee:

Under the terms of its Charter, the Nominating Committee is responsible for (i) reviewing policies and processes regarding recruitment and nomination of candidates for vacancies and election as directors at the Company’s annual meeting of shareholders; (ii) identifying individuals qualified to become Board members or senior officers of the Company; (iii) recommending the candidates to the Board to fill Board or senior management vacancies and newly-created positions; (iv) recommending to the Board as to whether incumbent Directors should be nominated for rotation and re-election; (v) reviewing and making recommendations to the Board of Directors regarding the Board’s composition and structure; (vi) evaluating corporate practices relating to the recruitment of directors; and (vii) overseeing the evaluation of the Board of Directors, and all other related matters.

2. Appointment of Committee Members.

The Board is responsible for the appointment of members and Chairs of Committees.

3. Committee Meetings and Committee Agenda.

The Chair of Committee, in consultation with the Chairman of the Board and appropriate members of the management, will determine the frequency and length of the Committee meetings and develop the Committee’s agenda. The agendas and meeting minutes of the Committees will be shared with the full Board, and other Board members are welcome to attend Committee meetings, except that employee Directors are not permitted to attend the executive sessions of any Committee.

E. MANAGEMENT AND BOARD REVIEW AND RESPONSIBILITY

1. Evaluation of Chief Executive Officer and Chief Financial Officer.

The Compensation Committee will perform an annual evaluation of the Chief Executive Officer and Chief Financial Officers performance and compensation.

2. Succession Planning and Management Development.

The Board reviews succession planning and management development on an annual basis.

3. Annual Evaluation and Assessment of the Board.

The Chairman of the Board and the Chair of the Nominating Committee manage the Board’s process for annual Director self-assessment and evaluation of the Board. The annual evaluation and assessment will include an evaluation and self-assessment of the Board as a whole, each Committee of the Board and each Director.

F. SHAREHOLDER COMMUNICATIONS

1. Communications with the Board.

The Board provides every shareholder with the access to communicate with the Board, as a whole, and with individual directors on the Board through an established process for shareholder communication (as that term is defined by the rules of the SEC) as follows:

For communications directed to the Board as a whole, or an individual director, shareholders may send such communication to the attention of the Chairman of the Board via one of the two methods listed below:

By Mail (including courier or expedited delivery service):

China Technology Development Group Corporation  

Unit 1903, 19/F, West Tower, Shun Tak Centre,

168-200 Connaught Road Central, Hong Kong

Attn: Chairman of the Board of Directors or Name of the Board Member, c/o Company Secretary

By facsimile at (852) 3112-8410.

Attn: Chairman of the Board of Directors or Name of the Board Member, c/o Company Secretary

The Company will forward any such shareholder communication to the Chairman of the Board, as a representative of the Board, and/or to the Director to whom the communication is addressed on a periodic basis.

2. Attendance at Annual General Meeting of Shareholders.

All Directors are encouraged to attend the annual general meeting of shareholders.