Longfor Group continues to enhance the Company's ESG governance and refine the ESG governance structure. We have established a Board-level ESG Committee, chaired by Mr. Chan Chi On, Derek, an independent non-executive director, with other members, including the Chairman of the Board，one executive director and two independent non-executive directors, to assist the Board in supervising the sustainable development management policy and to ensure the balance and effectiveness of ESG decisions. The ESG Committee is accountable for the overall management of ESG-related issues. Its primary duties include formulating and deliberating the Group's ESG strategic direction, reviewing ESG risks and opportunities, and evaluating ESG performance. In addition, the Company has established an ESG Working Group to promote the implementation of ESG work by connecting all business lines and functional departments and providing the ESG Committee with regular reports and updates. The Terms of Reference of the ESG Committee of Longfor Group outlines the roles and responsibilities of the ESG Committee. In 2022, the ESG Committee held two meetings with 100% attendance. We continue to improve our ESG management system and establish multi-dimensional goals for the environment, society, and governance to enhance the Longfor Group's ESG management capability on a comprehensive and multi-level scale.

Longfor Group adheres to the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Companies Ordinance of Hong Kong, the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, and other relevant laws and regulations, as well as advanced international laws and regulations. Furthermore, we refer to our peers and the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal control framework. We have established the Longfor Risk Management System, Empowerment Platform Audit Accountability Mechanism, and other internal policies to ensure the quality of risk management and the effective implementation of duties on all levels.

The Group applies a "Three Lines of Defense" approach to ESG risk management. We conducted self-examination and self-correction activities in 2022, primarily in the first and second defense lines, and enhanced the effectiveness and compliance of relevant systems in response to the self-examination issues identified. In the third defense line, we bolstered business empowerment on levels including case propagation, methods, and approaches to increase the integration and suppleness of business connections. The Group regularly conducts internal risk identification, analysis, and evaluation and forms an annual risk report and risk database for the following year. At the same time, we also analyze and evaluate the effectiveness of such risk management and internal control systems. We continuously improve our risk control monitoring platform to identify and sort out the risk of existing and new businesses. Furthermore, we take a risk dashboard to manage the whole process of all risks.