• Shenzhen Zhongxing WTC Equipment Company Limited 45 % interest

Company Subsidiaries:

• Shenzhen Guoxing Electronic Development Company Limited 99% Development: manufacture and sale of integrated circuit products.
• Shenzhen Zhongxing Mobile Telecom Equipment Company Limited 99%: Manufacture and sale of mobile telecommunications equipment
• ZTE (USA) Inc100%. Sale of telecommunications and provision of related technical services
• ZTE do Brasil Ltda 100% Development, manufacture and sale of telecommunications related products and provision of related technical services
• ZTA (H.K) Limited1 100%: marketing and sale of telecommunications systems equipment and provision of management services.
• ZTE Wistron Telecom AB 100%: Development of telecommunications systems equipment
• ZTE Prtugal-Projectos de Telecommunicacoes, Unipessoal Lda 100%: Provision of telecommunications solutions and related technical services.
• ZTE Cooperation Mexico, S.DE R.L DE C.V 100%: Sale of telecommunications products and provision of related technical services
• Shenzhen Zhongxing Telecom Equipment & Technology & Service Company Limited 100%: Development, manufacture and sale of telecommunications systems equipment

The Group is one of the leading providers of high-technology communications equipment in China. By capitalizing on the strong markets positions in China, broad products range based on common technology platform, low cost and strong technical know-how the Group is committed to becoming a leading global communications equipment provider, offering quality and advanced end-to-end solutions to telecommunications services providers an end-users around the world at highly competitive prices.

The Group currently targets the telecommunications equipment market in China and other fast-growing emerging markets by providing customize products and solutions. The Group has established long-standing relationships with leading Chinese telecommunication services providers, including China Telecom, China Netcom and China Mobile. In addition, the Group has sold the products to more than 150 customers in over 60 countries and regions, including India, Indonesia, Pakistan, Thailand, Russia, Romania, Nigeria and Egypt.

The Group is principally engaged in the design, development, production, distribution , installation and maintenance of a broad range of advanced telecommunications systems and equipment, The Group has the following segments of businesses:

Wireless communications: The Group offers CDMA, GSM and PHS systems to telecommunications services providers in China and international markets.

Wireline switch and access, The Group offers circuit-switch and narrow-band access systems to telecommunications services providers in China and international markets.

Optical and data communications: The Group offers a broad range of optical equipment, including SDH and DWDM optical systems and data communications equipment including softswitch, DSL systems, routers, routing switches and wireless access data products.

Handsets: The offers CDMA, GSM and PHS handsets to wireless services end-users primarily though bundling sales of the handsets with sales of wireless communications systems to services to services providers in China and international markets.

Telecommunications software systems, services and others: the Group offers telecommunications software, services and other products such as centralized monitoring systems, video conferencing equipment and power supply systems.

The Group believes that the Group is well-positioned to further enhance the leading market position in the large communications equipment market in China and expand the market share in international communications equipment market through building a leading position in emerging markets and gradually penetrating developed markets, The key strengthens include:

• A leading position in the telecommunications equipment market in China
• Deep market insights and ability to capture market opportunities;
• Common technology platforms and integrated end-to-end solutions;
• Low cost structure
• Expand portfolio of proprietary technical know-how with string, innovative R&D capabilities
• Experienced management team and high quality staff

• Some or all of the key customers may change their procurement policies which could cause them to purchase less from the Group of force them to reduce the average selling prices of the products
• The Group derive a substantial portion of the turnover from the five major telecommunications services providers in China and the loss of any of the customers or any material business from such custoemrs could have a material adverse effect on the business
• If the wireless telecommunications sector in China does not sustain its pace of rapid growth, the growth and profitability of the business could be materially and adversely affected
• If the Group is unable to introduce new products in a timely manner or if the products are nor well received by the market of if they fail to meet government products standards, the Group may be unable to compete effectively
• Intense competition in the markets may lead to reduced pries, gross profit and market share.
• The existing international operation and the plans to expand into addition oversea market subject the Group to various business, economics, political, regulatory and legal risks.
• The growth may be affected by uncertainties as to the timing of the introduction of, and the pace of migration to, 3G technologies in China as well as the level of acceptance of the 3G products and the sales of PHS equipment may decline following the deployment of 3G products
• The Group may not accomplish the growth strategy and the business may suffer if the Group fail to manage the growth efficiently or effectively
• Unforeseeable changes in the market demand for the products make forecasting the future sales and therefore inventory planning and cost management, difficult.
• Services providers sometimes evaluate the products for long periods, which makes the timing and probability of sales difficult to anticipated and could result in cost which the Group do not ultimately recover.
• The Group relies on the licensing agreements with QUALCOMM for certain of the required CDMA technologies the Group uses in manufacturing and selling the CDMA products.
• The Group relies on a limited number of suppliers for certain key components and raw materials
• The business may be adversely affected if the Group is required to relocated the handsets or other facilities
• The success of the Group is in large part dependent on the Group continuing ability to hire and retain qualified personnel, and if the Group does not successful in attracting and retaining these personnel, the ability to maintain the competitive position and to grow the business could substantially harm the business.
• The Group may be unable to adequately protect the intellectual property and may be subject to claims that the Group infringes the intellectual property rights of others, either of which could substantially harm the business.
• The Group does not have a network access license for the PHS equipment because, as far as the Group aware, the MII has not issued any network access license for this type against the Group.
• The Group is not required to, and does not, purchase product liability insurance and this may result in the being required to cover potential product liability claims made again the Group.
• The Group may have to write off receivables or increase bad debt provisions if the Group unable to collect payments due from the customers.
• Loss or substantial reduction in tax benefits available to the Group in China would reduce the net profits
• The operating results may fluctuate from period to period and f the Group fail to meet the market expectations for a particular periods, the share price may declines.
• The controlling shareholder has significant influence over the management and affairs and could exercise this influence against the best interests.
• Unexpected business interruption could adversely affect the business.

FINANCIAL RECORD

The objective is to become a leading global communications equipment providers. Key elements of the strategy to achieve this objective include:

Enhance the market position in China

Further expand the international presence

Further develop the handset business

Continue to strengthen the R&D capabilities

Continue to enhance product quality and improve operation efficiency

The net proceeds of the Global Offering (after deducting the underwriting fees, the discretionary incentive fee (assuming it is granted and paid in full) and estimated expenses payable in relation to Global Offering, assuming the Over-allotment Option is not exercised and assuming an Offer Price of HK$19.75 per H share, being the midpoint of the proposed Offer Price range of HK$17.50 to HK$22.00 per H share) are estimated to be approximately HK$2,613.3 million. The Group at present intends to apply the net proceeds as follows:

The Group will not receive any of the proceeds from the sale H share by the Selling Shareholder in the Global Offering, including any proceeds from the sale of sale H share as par of the Over-allotment Option. Assuming the discretionary incentive fee is granted and paid in full and the Over-allotment Option is not exercised an assuming an Offer Price of HK$19.75 (being the midpoint of the proposed Offer Price range of HK$17.50 to HK$22.00 per H share), the net proceeds from the sale of the sale H shares will be HK$22.8 million. These proceeds will not from of the shareholders capitals and will instead be remitted to the State Social Security Fund in accordance with the Chinese Government requirement.