The Board of the Company is granted full authority to maintain the soundness and effectiveness of the internal control system and risk management procedures of the Group, including setting a management structure and its terms of reference. The purpose is to ensure efficient and effective use of the Group's resources to assist the Group in achieving its operation objectives, safeguarding the Group's assets against any unauthorized use or disposal, ensuring an appropriate maintenance of accounting records and the availability of reliable financial information for internal use or external release, and ensuring compliance of all operating activities with the relevant laws and regulations. Such control system is intended to have in place reasonable safeguards, but not absolute guarantee, against material misrepresentation or loss, and to minimize but not eliminate any defects in the Group's operating system and the risk of failing to achieve its objectives.

The Group is committed to strengthening its internal control and risk management and has established a sound internal control foundation. The Group further improved internal control system and implemented comprehensive risk management pursuant to the relevant requirements of the Stock Exchange, promoted the application of risk management process in operating activities and daily management, and developed a Five-Step Working Methods on risk management including risk identification, risk analysis, solution formulation, solution implementation and results evaluation. The Group made in-depth analysis and investigations regarding the important risks faced by the Company. The Company gradually improved the overall level of internal control and risk management through a combination of pilot programs and issue of important precautions in internal control and risk management. Through the formulation and improvement of relevant internal control and risk management procedures, the Group has further unified and standardized its risk management and strengthened the information communication relating to internal control and risk management. Together with the newly acquired subsidiary — China International Telecommunications Construction Corporation, we focused on the training on internal control and risk management for the management personnel of provincial-level companies and specialized companies. The Company also paid particular attention to any possible risk exposure in conducting monthly and quarterly operation analysis, took timely measures, and issued timely pre-warnings against certain material risks in view of the Company's daily operation.

The Company endeavoured to integrate its internal control and risk management with its information system, and proactively used IT technology to assimilate the internal control and risk management processes into IT system, thereby having achieved the integration of company risk management and operational management, the reduction of operational risks and an enhancement of internal control and risk management.

The Board considers that the implementation of the above measures was in compliance with the internal control requirements under C.2 of the Code Provisions in the Code on Corporate Governance Practices as set out in Appendix 14 of the Listing Rules and that the internal control and risk management system of the Company was effective.