2012 Annual Report - ZTE

ZTE CORPORATIONInternal Control(I)OVERVIEW OF THE COMPANY’S INTERNAL CONTROL DEVELOPMENTIn order to enhance internal control, improve the Company’s operational management standard and risk aversionability and ensure the security, compliance and effective operation of the Company’s assets, the Company hasestablished a reasonable and effectively operating internal control regime in accordance with provisions of theCompany Law, the Securities Law, Corporate Governance Standards for Listed Companies, Rules for CorporateInternal Control, Supplementary Guidelines for Corporate Internal Control and Guidelines for Internal Control ofListed Companies and other pertinent laws, regulations and regulatory documents.1. Overview of internal control development and improvementThe Company’s internal control establishment has basically covered all operating segments of the Company,including but not limited to: organizational structure, development strategy, social responsibility, corporate culture,human resources, asset management, treasury activities, sales operation, procurement activities, constructionprojects, outsourcing, financial reporting, guarantees, research and development, contract management, totalbudgeting, internal information dissemination and information system, etc. The Company has, taking into accountits specific conditions, developed a comprehensive internal control system comprising the Rules of Procedure of theGeneral Meetings, Rules of Procedure of the Board of Directors Meetings, Rules of Procedure of the SupervisoryCommittee, Independent Director System, Administrative Rules of the Company on Information Disclosure, InternalControl System of the Company, Administrative Rules of the Company on Issue Proceeds, System of Registration ofOwners of Inside Information, System for the Administration of External Information Users, System of Accountabilityfor Significant Errors in Information Disclosure of Annual Reports, System of Derivative Investment Risk Control andInformation Disclosure, Administrative Measures on Third-party Guarantees, Administrative Measures on ConnectedTransactions and Administrative Measures on Equity Investment in Operating Subsidiaries, etc.2. Establishment of internal control departmentsThe Company has established an all-encompassing and multi-level structure for internal control developmentcomprising mainly the Board, the Audit Committee, the Risk Management Committee, the Internal ControlDevelopment Project Team and the Audit Department. The Board is responsible for the establishment, improvement,effective implementation and inspection and supervision of the internal control system and conducts full-scaleinspection and effectiveness assessment on the Company’s internal control on a regular basis. The Audit Committeeaudits the internal control system of the Company and its implementation and supervises and inspects the internalaudit system of the Company and its implementation. The Risk Management Committee is focused on streamliningand regulating internal control activities, as well as information and communication relating to internal controlactivities. The Internal Control Development Project Team is mainly responsible for promoting internal controldevelopment at all businesses, departments, subsidiaries (including branch organizations) and job positions ofthe Company and reporting the Company’s work in internal control development to the Audit Committee of theCompany. The Audit Department is mainly responsible for conducting internal control audit of various systemsof the Company (including subsidiaries and other branches), carrying out internal control audit and control testson a regular basis, reporting internal control audit work to the Audit Committee, Supervisory Committee andmanagement of the Company and exercising supervisory functions.144