To ensure regular and open communication, PANDATEL AG is also implementing the recommendations and suggestions of the German Corporate Governance Codex. The code contains the regulations applicable in Germany for responsible leadership and for monitoring the company at the same time. The aim is to render these rules transparent for national and international investors and thereby strengthen confidence in the management of German companies. Most of the recommended rules have already been an integral part of corporate communications as practiced at PANDATEL AG for quite some time. Any deviations from these recommendations will most likely result from practical considerations based on circumstances within the Company, and will be explained in detail in the declaration of compliance. You can find a copy of the declaration published by the Executive and Supervisory Boards, including the exceptions, on the company’s homepage www.PANDATEL.com and by clicking “Investor Relations”.

The German Corporate Governance Codex recommends that the Executive and Supervisory Boards should include a report on corporate governance in the Company’s Annual Report (3.10) and that this report should contain information on the emoluments paid to members of the Supervisory Board (5.4.7), on the purchase or sale of Company shares by members of the Boards or of the Company’s management (6.6) and on share option programs or other incentive systems. PANDATEL AG has not so far produced such a corporate governance report, the information referred to above being included in the Notes to the Consolidated Financial Statements.

Declaration of compliance pursuant to Art. 161 of the Stock Corporation Act (AktG)
Declaration of conformity pursuant to Article 161 of the Stock Corporation Act (AktG) Declaration by the Executive Board and Supervisory Board of PANDATEL AG, Hamburg, on the recommendations of the “Government Commission on the German Corporate Governance Codex” in accordance with Art. 161 of the Stock Corporation Act (AktG) According to the Executive Board and the Supervisory Board, PANDATEL AG complies with all recommendations of the “Government Commission on the German Corporate Government Codex” as amended on 24 July 2006 published by the Federal Ministry of Justice in the official part of the Federal Gazette (“Bundesanzeiger”) on 2 June 2006 excluding the following:

Sub-paragraph 2.2.2
The German Corporate Governance Codex recommends that shareholders are basically entitled to subscribe a number of shares representing their share in the share capital on the issue of new shares.

The company reserves itself to exclude subscription rights for capital increases against contribution in kind (e.g. in case of company or stock acquisitions).

Sub-paragraph 2.3.4
The German Corporate Government Codex recommends the company that it should make it possible for shareholders to follow the General Meeting using modern communication media (e.g. Internet).

At present, PANDATEL AG shareholders are not provided such media, for these measures would be far too expensive given the company’s present situation.

Sub-paragraph 3.8
The German Corporate Government Codex recommends to agree upon an appropriate deductible when taking out a Directors & Officers Insurance.

The insurance policy taken out for the board members of PANDATEL AG does not provide for a deductible.

Sub-paragraph 4.2.1
The German Corporate Governance Codex recommends that the management board consists of several persons and shall have a chairman and a spokesperson. Rules of procedure shall determine the allocation of duties and the co-operation within the management board.

The management board consists of one single person, because further management board members are not reasonable due to the company’s size.

Sub-paragraph 4.2.3
The German Corporate Governance Codex recommends that monetary remuneration elements contain fixed and variable components. Further, the German Corporate Governance Codex recommends that variable remuneration elements contain non-recurring as well as annually recurring components with long-term incentive and risk character.

Basically, this recommendation is applied, however, the remuneration of the present management board forms an exception, because of the company’s special restructuring situation.

The German Corporate Government Codex recommends that, in particular, company stocks with a multi-year blocking period, stock options or comparable instruments (e.g. phantom stocks) serve as variable compensation components with long-term incentive effect and risk elements. Stock options and comparable instruments shall be related to demanding, relevant comparison parameters.

Presently, the company does not have a stock option plan.

The German Corporate Government Codex recommends to report the compensation of the members of the Management Board as well as details of a stock option program or comparable instruments containing long-term incentive components and components with risk character on the company’s internet page in a suitable form and to specify them in the annual report.

PANDATEL AG discloses neither the compensation system of the members of the Management Board on its internet page nor in its annual report. The compensation system does not comprise a stock option program or comparable components.

Sub-paragraph 4.2.4
The German Corporate Government Codex recommends to report the total compensation of the individual Management Board members, divided into non-profit-related and profit-related components with long-term incentive effect by indicating names as far as the shareholders’ meeting did not resolved otherwise based on a majority of three quarters.

The CEO of PANDATEL AG receives no remuneration, but only a travelling cost ratio. For this reason, the company does not disclose as recommended.

Sub-paragraph 4.2.5
The German Corporate Governance Codex recommends to publish a compensation report containing the disclosure, which as part of the Corporate Governance Report shall as well explain the compensation system for the management board in a general comprehensible way.

The company does not publish a compensation report, because the information is contained in the financial statements and annual report.

The German Corporate Governance Codex recommends that the description of the precise contents of a stock option plan or comparable structure for components with long-term incentive and risk character shall comprise their respective value. In case of pension promises, the addition to pension accruals or pension funds shall be published.

Such remuneration components are not intended.

The German Corporate Governance Codex recommends that the basic contents of promises, in case his work for the management board is terminated, has to be published if the promises concerning their legal relevance vary considerably from the promises made to employees. The compensation report shall also contain details on the kind of perquisite made by the company.

No such promises exist.

Sub-paragraph 4.3

Conflicts of interest

Sub-paragraph 4.3.1
The German Corporate Governance Codex recommends that management board members are subject to a comprehensive non-competition clause while they work for the company.

Dr. Dan D. Yang is exempted as regards her work for Dowslake Microsystems Corp.

Sub-paragraph 5.1.2
The German Corporate Government Codex recommends that the Supervisory Board can delegate preparations for the appointment of members of the Management Board to a committee, which also determines the conditions of the employment contracts including compensation.

The Supervisory Board of PANDATEL AG comprises three members and does not set up committees because of its size.

Sub-paragraph 5.1.3
The German Corporate Government Codex recommends that the supervisory board shall draft rules of procedure for itself.

The supervisory board of Pandatel consists of no more than three members and has, therefore, not drafted rules of procedure.

Sub-paragraph 5.2
The German Corporate Government Codex recommends that the Chairman of the Supervisory Board shall also chair the committees that handle contracts with members of the Management Board and prepare the Supervisory Board meetings. He should not be Chairman of the Audit Committee.

The Supervisory Board of PANDATEL AG comprises three members and does not set up committees because of its size.

Sub-paragraph 5.3.1
The German Corporate Government Codex recommends the Supervisory Board to form committees with sufficient experience depending on the specifics of the enterprise and the number of its members.

The Supervisory Board of PANDATEL AG consists of three members and does not form any committees.

Sub-paragraph 5.3.2
The German Corporate Governance Codex recommend that the shareholders are granted subscription rights when issuing new shares, which generally corresponds to their share in the share capital.

The company reserves to exclude subscription rights in case of share capital increases against contribution in kind (e.g. when purchasing companies or shareholdings).

Sub-paragraph 5.3.3
The German Corporate Government Codex recommends that the Supervisory Board shall set up an Audit Committee.

The Supervisory Board of PANDATEL AG did not set up an Audit Committee.

Sub-paragraph 5.3.4
The German Corporate Government Codex recommends that the Supervisory Board can delegate other subjects to be handled by one or several committees. These subjects include the strategy of the enterprise, the compensation of the members of the Management Board, investments and financing.

The Supervisory Board of PANDATEL AG did not set up any committees for this is not necessary due to its size.

Sub-paragraph 5.3.5
The German Corporate Governance Codex recommends that the supervisory board can determine that committees prepare supervisory board meetings and are in addition entitled to decide instead of the supervisory board.

PANDATEL AG’s supervisory board did not appoint any committee because this is not necessary due to its size.

Sub-paragraph 5.6
The German Corporate Government Codex recommends the Supervisory Board to examine the efficiency of its activities on a regular basis.

In the past years, the Supervisory Board examined its efficiency on a yearly basis. However, it did not carry out an examination in 2006, because the Supervisory Board Members changed near the examination.

Sub-paragraph 7.1.2
The German Corporate Government Codex recommends to make the Consolidated Financial Statements publicly accessible within 90 days of the end of the financial year; interim reports shall be publicly accessible within 45 days of the end of the reporting period.

Generally, PANDATEL AG complies with this recommendation. The only exception is its Nine Month Report 2006 owing to intra-corporate restructuring reasons.

PANDATEL AG Hanover, December 2007
Executive Board        Supervisory Board