www.zte.com.cn

stock code : 000063.SZ 763.HK

2014Annual Report

201

4Annual R

eport

ImportantThe Board of Directors, Supervisory Committee and the Directors, Supervisors and senior management of the Company confirm that this report does not contain any false information, misleading statements or material omissions, and collectively and individually accept responsibility for the truthfulness, accuracy and completeness of the contents of this report.

There are no Directors, Supervisors or senior management who do not warrant or who dispute the truthfulness, accuracy and completeness of the contents of this report.

This report has been considered and approved at the Twenty-fifth Meeting of the Sixth Session of the Board of Directors of the Company. Mr. Dong Lianbo, Director, was unable to attend the Meeting due to work reasons and has authorised Mr. Xie Weiliang, Vice Chairman, to vote on his behalf. Mr. Wei Wei, Independent Non-executive Director, was unable to attend the Meeting due to work reasons and has authorised Mr. Tan Zhenhui, Independent Non-executive Director, to vote on his behalf. Mr. Chen Naiwei, Independent Non-executive Director, was unable to attend the Meeting due to work reasons and has authorised Ms. Qu Xiaohui, Independent Non-executive Director, to vote on his behalf.

The respective financial statements of the Group for the year ended 31 December 2014 were prepared in accordance with PRC Accounting Standards for Business Enterprises and with Hong Kong Financial Reporting Standards respectively, and had been audited by Ernst & Young Hua Ming LLP and Ernst & Young, and an unqualified auditors report has been issued by each of them.

During the year, there was no significant deficiency in internal control in relation to financial reporting of the Company, nor was any significant deficiency in internal control in relation to non-financial reporting identified.

Mr. Hou Weigui, Chairman of the Company, Mr. Wei Zaisheng, Chief Financial Officer of the Company and Mr. Shi Chunmao, Head of Finance Division of the Company, hereby declare that they warrant the truthfulness, accuracy and completeness of the financial reports contained in this report.

In view of the state of affairs of the Company, proposal for profit distribution and conversion from capital reserve of 2014: cash dividend of RMB2.0 for every 10 shares (before tax) based on the Companys total share capital of 3,437,541,278 shares as at 31 December 2014, creation of 2 shares for every 10 shares by way of conversion of capital reserve. The aforesaid matter shall require consideration and approval at the general meeting.

This report contains forward-looking statements in relation to subjects such as future plans, which do not constitute any specific undertakings to investors by the Company. Investors should beware of investment risks.

This report has been prepared in Chinese and English respectively. In case of discrepancy, the Chinese version shall prevail, except for the financial report prepared in accordance with Hong Kong Financial Reporting Standards, of which the English version shall prevail.

China Securities Journal, Securities Times, Shanghai Securities News and http://www.cninfo.com.cn are designated media for the Companys information disclosure. Only information of the Company published in the aforesaid media should be relied upon. Investors are asked to beware of investment risks.

ContentsDefinitions

Glossary

Company Profile

Corporate information

Chairmans statement

Major events of the Group

Highlights of accounting and financial indicators

Report of the board of directors

Management discussion and analysis

Material matters

Changes in shareholdings and information of shareholders

Directors, supervisors, senior management and employees

Corporate governance structure

Internal control

Report of the PRC auditors

Financial statements prepared in accordance with PRC ASBEs and notes thereto

Independent auditors report

Financial statements prepared in accordance with HKFRSs and notes thereto

Documents available for inspection

2

4

8

9

14

18

19

26

54

62

95

104

121

146

150

152

318

320

440

ZTE CORPORATION

2

DefinitionsIn this report, unless the context otherwise requires, the following terms shall have the meanings set out below. Certain other terms are explained in the section headed Glossary.

Company or ZTE ZTE Corporation, a limited company incorporated in China, the shares of which are listed on the Shenzhen Stock Exchange and the Hong Kong Stock Exchange, respectively

Articles of Association The Articles of Association of ZTE Corporation

Company Law Company Law of the Peoples Republic of China

Securities Law Securities Law of the Peoples Republic of China

Accounting Law Accounting Law of the Peoples Republic of China

Group ZTE and one or more of its subsidiaries

Board of Directors The board of directors of the Company

Directors Members of the board of directors of the Company

Supervisory Committee The supervisory committee of the Company

Supervisors Members of the supervisory committee of the Company

China or PRC The Peoples Republic of China

ITU International Telecommunications Union, is a specialised agency of the United Nations for information and communication technologies

SASAC State-owned Assets Supervision and Administration Commission of the State Council

CSRC China Securities Regulatory Commission

Shenzhen CSRC The CSRC Shenzhen Bureau

Shenzhen Stock Exchange The Shenzhen Stock Exchange

Shenzhen Listing Rules Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange

Hong Kong Stock Exchange

The Stock Exchange of Hong Kong Limited

Hong Kong Listing Rules Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

SFO Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

PRC ASBEs Generally accepted accounting principles in the PRC

HKFRSs Hong Kong Financial Reporting Standards (including Hong Kong Accounting Standards (HKASs) and Interpretations)

China All Access China All Access (Holdings) Limited

ZTE HK ZTE (H.K.) Limited

ANNUAL REPORT 2014

3

Speed Huizhou Speed Wireless Technology Co., Ltd.

ZTE Capital Shenzhen ZTE Capital Management Company Limited

Zhonghe Chunsheng Fund Shenzhen Zhonghe Chunsheng Partnership Private Equity Fund I

Zhongxingxin Shenzhen Zhongxingxin Telecommunications Equipment Company Limited

Mobi Antenna Mobi Antenna Technologies (Shenzhen) Co., Ltd.

Huatong Huatong Technology Company Limited

Nanchang Software Zhongxing Software Technology (Nanchang) Company Limited

Zhongxing Hetai Shenzhen Zhongxing Hetai Hotel Investment and Management Company Limited

Zhongxing Development Zhongxing Development Company Limited

Chongqing Zhongxing Development

Chongqing Zhongxing Development Company Limited

Xian Microelectronics Xian Microelectronics Technology Research Institute

Aerospace Guangyu Shenzhen Aerospace Guangyu Industrial Company Limited

Zhongxing WXT Shenzhen Zhongxing WXT Equipment Company Limited

Zhongxing Software Shenzhen Zhongxing Software Company Limited

ZTE Kangxun Shenzhen ZTE Kangxun Telecom Company Limited

ZTE Group Finance ZTE Group Finance Co., Ltd.

ZTE CORPORATION

4

GlossaryThis glossary contains definitions of certain technical terms used in this report as they relate to the Group. Some of these definitions may not correspond to standard industry definitions or usage.

2G Second-generation mobile networks featuring digital wireless radio technology that enables larger network capacity, improved voice quality and more secure encryption, as well as seamless international roaming for users which includes GSM and CDMA. GSM (Global System for Mobile Communication) is a global system for cellular mobile communications originated in Europe using TDMA, while CDMA is a standard for spread spectrum technology. The data rate of 2G can reach 115.2Kbps. The data rate of GSM using EDGE (enhanced data rate for GSM evolution) can reach 384Kbps.

3G Third-generation mobile networks supporting peak data rate of 144Kbps at mobile user speeds, 384Kbps at pedestrian user speeds and 2Mbps at fixed locations.

4G Fourth-generation mobile networks operating according to IMT-Advanced standards as defined by ITU, including LTE-Advanced and Wireless MAN-Advanced (802.16m) standards, which support theoretical download rates of 1Gbit/s at fixed locations and 100Mbit/s in motion.

5G Fifth-generation mobile communications, which is a general reference to the ensemble of post-4G broadband wireless communication technologies. The general view of the industry is that 5G is capable of providing faster data throughput (1,000 times faster than what is currently available) and more connections (100 times more than what is currently available), more efficient utilisation of energy (10 times of the current level of efficiency) and shorter end-to-end time delay (1/5 of the current length of time delay). It goes beyond human-to-human communication to cover a wide range of applications such as ultra-intensive networks, machine-to-machine communication and the internet of vehicles.

Pre-5G The adoption of the 5G technology without modifying existing air interfaces standards, providing in advance a 5G-like user experience on existing terminals.

UMTS A reference to WCDMA standards general