CGN Power : 2021 Corporate Governance Report

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2021 Annual ReportCGN Power Co., Ltd.

Corporate Governance Report

Corporate Governance framework

The corporate governance framework of CGN Power is designed to safeguard the interests of shareholders and it involves all the key participants in the corporate governance practices of the Company, reflecting the ways in which they relate to each other and their roles and functions in corporate governance.

Our internal governance structure comprises mainly our shareholders, the Board and the Board Committees, the Supervisory Committee, our internal auditors and our management and staff. External auditors conduct independent review and assessment on the governance of the Company to help us continuously optimize our internal governance. Meanwhile, the interactions between the Company and other business-related parties, including customers, business partners, social environment and regulators, also reflect the effectiveness of our corporate governance. We are therefore fully aware of our significant corporate and social responsibilities as a public company and we need to constantly follow the best corporate governance practices.

Brief Introduction to the Corporate Governance Code of CGN Power

The Company strives to maintain a high level of corporate governance to ensure the realization of the Company's strategy, to protect the interests of shareholders and to enhance enterprise value. The Company has complied with code provisions as set out in Part 2 of the Corporate Governance Code contained in Appendix 14 (the "Hong Kong Stock Exchange Code") to the Listing Rules. The Hong Kong Stock Exchange Code sets out the principles of good corporate governance and two levels of recommendations:

With respect to code provisions

companies shall duly comply with, or give reasonable explanations for any deviations from the code provisions; and

With respect to recommended best practices

for guidance only and companies are encouraged to comply with, or give explanations for any deviations from the recommended best practices.

Finance, Assets and InvestmentBusiness Performance and OutlookCapitals

CORPORATE GOVERNANCE

Financial Report

Corporate Governance Report

In accordance with the Listing Rules and the Hong Kong Stock Exchange Code and based on the corporate governance framework of the Company, the Board has formulated the Corporate Governance Code of CGN Power Co., Ltd. (the "Corporate Governance Code of the Company") as the corporate governance guidelines of the Company to describe the systems, procedures and measures we adopted to ensure our corporate governance standards to meet the expectations of our shareholders and other stakeholders. The Code was reviewed and approved at the fifth meeting of the first session of the Board of Directors on November 18, 2014. Pursuant to the latest revision of the Code of Corporate Governance of Listed Companies of the CSRC, the Hong Kong Stock Exchange Code and the Procedural Rules of Board of Directors of the Company, the Board approved the revision of the Corporate Governance Code of the Company in January 2016, November 2018 and August 2020, respectively.

The Corporate Governance Code of the Company

The Corporate Governance Code of the Company is in compliance with all code provisions of the Hong Kong Stock Exchange Code, and exceeds the recommended best practices in the Hong Kong Stock Exchange Code in the following aspects.

Our procedures for convening general meetings (such as the notice period for convening a general meeting) are subject to the stricter requirements of the PRC laws and regulations.

As to the requirements on independent non-executive Directors (such as their terms of reappointment and the maximum number of companies in which they could concurrently assume the role of independent non-executive directors), we will abide by more stringent Chinese laws and regulations.

We have entered into service contracts with our Directors as well as our Supervisors, which define their respective rights, obligations and responsibilities, particularly the duties of independent non-executive Directors and executive Directors. The service contracts with our Directors and Supervisors do not contain any provisions under which the Company is not allowed to terminate such contracts within one year without compensation (except for statutory compensation).

The Company shall disclose the compliance by its controlling shareholder with its undertakings under the non-competition deed in its annual reports.

According to the authorization of the Board and the working rules of the special committees, the special committees of the Board consider and review the relevant issues and express their opinions and recommendations, and continuously enhance the decision-making support to the Board of Directors. In the meantime, the special committees of the Board prepare their respective annual work reports and make relevant disclosure in the annual report, so as to further enhance the standardization and transparency of corporate governance.

2021 Annual ReportCGN Power Co., Ltd.

Corporate Governance Practices

The Company conducts a self-assessment on corporate governance every year with the aim of reviewing the implementation of the Corporate Governance Code of the Company and locating discrepancies, while summarizing the Company's good corporate practices.

The Company completed the annual self-assessment on corporate governance in 2021. As at the end of 2021, the Company had complied with all applicable code provisions of the Hong Kong Stock Exchange Code, the recommended best practices and the Corporate Governance Code of the Company.

Finance, Assets and Investment

Based on the analysis on the rather developed as well as newly implemented measures in respect of corporate governance, we believe that the Company mainly carried out the following sound practices in this aspect throughout 2021:

• 1 Through analyzing substantial amount of cases in the Hong Kong Stock Exchange and the SZSE, with reference to the relevant rules of the Hong Kong Stock Exchange and the SZSE, the Company further improved the quality of the announcements and regular reports prepared. The Company continued to organize information disclosure training which covers all employees, and adopted a combination of rules and cases as a way to encourage all staff being fully aware of the importance of information disclosure and ensure the compliance and efficiency of information disclosure of the Company. The Company scored an A in the annual information disclosure assessment of the SZSE covering the period from May 2020 to April 2021.

  Business Performance and Outlook

• 2 The Company standardized the arrangements on communication with Directors before the Board meetings, to help the Directors, especially the independent non-executive Directors, to fully understand the details of resolutions, and also actively responded to the matters concerned by the Directors, in order to enhance the quality of resolutions and improve the efficiency of the Board meetings in terms of decision making.

Capitals

We will persist in the corporate governance practices established in the previous years and recognized by the Board or the general meeting, mainly including:

Further strengthen the support for the Board on duty performance.

CORPORATE GOVERNANCE

• (1) In order to facilitate the Directors' prompt and easy access to relevant information on duty performance, the Company has formulated the Handbook on Duty Performance of Directors of CGN Power (updated in 2020), providing Directors with reference for the rules and guidelines of duty performance.

• (2) The expenses incurred by Directors for seeking independent professional advisers have been included in the annual budget of the Company.

Financial Report

Corporate Governance Report

• (3) Adhering to the working principle of "enhancing the scope of protection and striving for optimal protection conditions", the Company has extended the insurance coverage for Directors to major affiliates, and the policy limit upon renewal maintained at a relatively high level. Upon listing of A shares, the responsibilities of directors of A shares are also covered.

• (4) The management organizes extraordinary meetings on the issues that the Board is concerned about for individual reporting, and responds to the concerns of the Directors.

• (5) The documents provided to the Directors for review include, in addition to the resolution documents, the basis and process of discussion, and the professional opinions from third-party intermediaries, so as to provide a sufficient basis for the Directors to consider.

• (6) In order to help all Directors familiarize with and get hold of the Company's operation, the latest business report is given on the regular Board meeting of the Company.

• 2 Strengthen proactive communication with shareholders and strive to protect investors' rights.

  • (1) We regularly analyze our shareholder structure, consider capital market conditions and company dynamics, and visit long-term investors on our own initiative. The Company highly values making timely and accurate responses through irm.cninfo.com.cn, capital market hotline and emails from the Company to inform shareholders the sound operation and stable growth of the Company and manifest the long-term value of the Company.

  • (2) Roadshows, reverse roadshows, result announcement conferences and teleconferences are organized to proactively report our business operations to the shareholders, analysts, financial media and other parties. By further broadening our communication channels with shareholders, their better understanding of business operations of the Company could be attained.

  • (3) The Company invited analysts from investment banks to conduct training sessions for Directors, Supervisors and senior management in respect of corporate value management, hot spots in the capital market as well as capital operations, with a view to deepening their understanding of insights into the capital market and strengthening their awareness of the importance of protecting rights of the shareholders.

• 3 The Company has formulated its Code for Securities Transactions by Directors and Specific Persons. In accordance with the A share regulatory rules, it is amended to setting up rules on basic principles for securities transaction, approval procedures and others. The confirmation for disclosure of interests by Directors, Supervisors and senior management was signed at the Board meetings for annual and interim results, respectively.

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2021 Annual ReportCGN Power Co., Ltd.

Overview of Regulatory Documents on Governance and Key Rules and Regulations

In accordance with the requirements of Securities Law of the PRC (Revised in 2019), the Code of Corporate Governance of Listed Companies (2018 Revision), the Measures for the Administration of Information Disclosure by Listed Companies (Revised in 2021), the Provisions on the Registration and Management System of Insiders Who Have Access to Insider Information of Listed Companies (Formulated in 2021) of the CSRC, the Rules Governing the Listing of Stocks on Shenzhen Stock Exchange (Revised in 2020), the Guidelines on the Standardized Operation of Companies Listed on Shenzhen Stock Exchange (Revised in 2020), as well as other regulations and rules, and taking into account the actual situation of the Company, we revised the Articles of Association of CGN Power Co., Ltd., the Procedural Rules of the Board of Directors of CGN Power Co., Ltd., the Terms of Reference for the Nomination Committee under the Board of Directors of CGN Power Co., Ltd., the Management Rules on Information Disclosure of CGN Power Co., Ltd., the Management Rules on Fundraising Proceeds of CGN Power Co., Ltd., and the Management Measures on Guarantees of CGN Power Co., Ltd.

Finance, Assets and Investment

As at the end of 2021, our regulatory documents on governance and key rules and regulations mainly consist of:

Business Performance and Outlook

Articles of Association of CGN Power Co., Ltd.* (the "Articles of Association")

Procedural Rules of General Meeting of CGN Power Co., Ltd.* (the "Procedural Rules of General Meeting")

Procedural Rules of the Board of Directors of CGN Power Co., Ltd.* (the "Procedural Rules of Board of Directors")

Capitals

Procedural Rules of the Supervisory Committee of CGN Power Co., Ltd.* (the "Procedural Rules of Supervisory Committee")

Provisions on the Corporate Governance Authorization of CGN Power Co., Ltd. (the "Provisions on the Corporate Governance Authorization")

Terms of Reference for the Audit and Risk Management Committee under the Board of Directors of CGN Power Co., Ltd.*

Terms of Reference for the Remuneration Committee under the Board of Directors of CGN Power Co., Ltd.*

CORPORATE GOVERNANCE

Terms of Reference for the Nomination Committee under the Board of Directors of CGN Power Co., Ltd.*

Financial Report