ZTE Corporation — Proxy Solicitation & Information Statement 2007

Aug 27, 2007

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in ZTE Corporation , you should hand this circular together with the enclosed form of proxy to the purchaser or the transferee or to the bank, licensed securities dealers or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

ZTE CORPORATION

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 763)

PROPOSED OFFER AND ISSUE OF BONDS CUM WARRANTS IN THE PRC

A letter from the Board is set out on pages 3 to 12 of this circular.

A notice of the third extraordinary general meeting of the Company for 2007 (“EGM”) to be held at the 4/F, Block A, ZTE Plaza, Keji Road South, Hi-Tech Industrial Park, Nanshan District, Shenzhen, Guangdong Province, the People’s Republic of China at 9:00 a.m. on Tuesday, 16 October 2007, for the purposes of considering and, if thought fit, approve, amongst other things, the offer of the Bonds cum Warrants, will be delivered to the H shareholders of the Company together with this circular on the same day.

A proxy form for use at the EGM will be delivered to the H shareholders of Company together with this circular on the same day. Whether or not you are able to attend the meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting should you so wish.

28 August 2007

CONTENTS

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER	FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
A.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
B.	THE PROPOSAL FOR THE OFFER AND ISSUE OF THE BONDS CUM WARRANTS IN
	THE PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
C.	THE AUTHORITY TO THE BOARD TO IMPLEMENT THE PROPOSED OFFER AND
	ISSUE OF THE BONDS CUM WARRANTS AND THE RELATED MATTERS . . . . . . . . .	7
D.	OTHER MATTERS IN RELATION TO THE OFFER AND ISSUE OF THE BONDS CUM
	WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
E.	EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
F.	RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
G.	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

— i —

DEFINITIONS

In this circular, unless the context requires otherwise, the following terms and expressions shall have the following meanings:-

“A Share(s)”	ordinary shares of par value RMB1.00 each in the registered capital of the
	Company, which are listed on the Shenzhen Stock Exchange
“A Shareholder(s)”	holders of the A Shares
“Articles of Association”	the articles of association of the Company currently in force
“Bond(s)”	the bonds proposed to be offered and issued by the Company in the PRC
	together with the detachable Warrants, for which seperate listing on the
	Shenzhen Stock Exchange will be sought
“Bonds cum Warrants”	the bonds cum warrants proposed to be offered and issued by the Company in
	the PRC which will comprise the offer and issue of Bonds together with the
	detachable Warrants
“Board”	the board of Director
“Company”	ZTE Corporation, a joint stock limited company incorporated on 11 November
	1997 under the PRC Company Law in the PRC whose shares are listed on the
	Hong Kong Stock Exchange and the Shenzhen Stock Exchange
“CSRC”	China Securities Regulatory Commission
“Director(s)”	the director(s) of the Company
“EGM”	the third extraordinary general meeting of the Company for 2007 to be held on
	Tuesday, 16 October 2007 to consider and, if thought fit, approve, amongst
	other things, the offer and issue of the Bond cum Warrants
“General Mandate 2007”	the general mandate granted to the Board by a special resolution adopted at the
	annual general meeting of the Company held on 15 June 2007
“Group”	the Company and its subsidiaries
“H Shares”	ordinary shares of par value of RMB1.00 each in the registered capital of he
	Company, which are listed and traded on the Hong Kong Stock Exchange
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s Republic of
	China
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of Hong
	Kong Limited

— 1 —

DEFINITIONS

“Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange”

• “Latest Practicable Date” 21 August 2007, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion herein

“Offering Memorandum” the offering memorandum in relation to the offer and issue of the Bonds cum Warrants to be issued by the Company in the PRC

“PRC” The People’s Republic of China

“RMB” Renminbi, the lawful currency of the PRC “Shareholder(s)” the shareholder(s) of the Company “Shenzhen Stock Exchange” The Shenzhen Stock Exchange “subsidiary” has the meaning ascribed thereto under the Hong Kong Listing Rules “Trading Day(s)” any day other than Saturday or Sunday on which, in respect of the A Shares, the Shenzhen Stock Exchange is open for trading and, in respect of he H Shares, the Hong Kong Stock Exchange is open for trading

“Warrant(s)” the warrants detachable from the Bonds and convertible into the A Shares proposed to be simultaneously offered and issued to the subscribers for the Bonds, for which seperate listing on the Shenzhen Stock Exchange will be sought “%” per cent

— 2 —

LETTER FROM THE BOARD

ZTE CORPORATION

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 763)

Executive Directors: Yin Yimin Shi Lirong He Shiyou

Non-executive Directors: Hou Weigui Wang Zongyin Xie Weiliang Zhang Junchao Li Juping Dong Lianbo

Legal address ZTE Plaza Keji Road South Hi-Tech Industrial Park Nanshan District Shenzhen, 518057 The Peoples’ Republic of China

Place of business in Hong Kong

8/F Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong

Independent Non-executive Directors: Zhu Wuxiang Chen Shaohua Qiao Wenjun Mi Zhengkun Li Jin

28 August 2007

To the Shareholders

Dear Sir or Madam,

PROPOSED OFFER AND ISSUE OF BONDS CUM WARRANTS IN THE PRC

A. INTRODUCTION

The Board proposes to offer and issue the Bonds cum Warrants in the PRC in order to finance its investments in a total of 11 projects in technology research, development and industrialisation. The offer of the Bonds cum Warrants will comprise the offer and issue of the Bonds together with the detachable Warrants. Listing on the Shenzhen Stock Exchange will be sought for each of the Bonds and warrants, respectively. Pursuant to the applicable laws and regulations of the PRC and the Articles of Association, the Board proposes to convene the EGM to seek the Shareholders’ approval, by way of special resolutions, (i) the specific terms of the

— 3 —

LETTER FROM THE BOARD

proposal for the offer and issue of the Bonds cum Warrants in the PRC, and (ii) the authority to the Board to implement the proposed offer and issue of the Bonds cum Warrants and the related matters; and, by way of ordinary resolutions, (iii) the feasibility of the projects to be invested by the Company with the proceeds from the proposed offer and issue, and (iv) the report of the Board on the use of the proceeds from previous fund raising activities.

The purpose of this circular is to provide you with the relevant information and the recommendation of the Directors in respect of the above mentioned matters.

B. THE PROPOSAL FOR THE OFFER AND ISSUE OF THE BONDS CUM WARRANTS IN THE PRC

Having conducted a review in accordance with the relevant provisions of the Company Law of the PRC, the Securities Law of the PRC and the Administrative Measures for the Issue of Securities by Listed Companies issued by the CSRC, the Board has confirmed that the Company has satisfied all the requirements set out in the above mentioned laws and regulations in relation to the offer and issue of the Bonds cum Warrants in the PRC. The Board has considered and approved the proposal for the offer and issue of the Bonds cum Warrants, the details of which are set out below:

1. Offer Size

The Bonds, with a nominal value of RMB100 each, are expected to have an aggregate value not exceeding RMB4.0 billion. The Warrants will be simultaneously offered to the subscribers for the Bonds at nil consideration. It is proposed to the EGM to authorize the Board to determine the total amount of the Bonds and the Warrants to be offered in light of the market conditions and subject to the requirements under the applicable laws and conditions.

2. Offer Price

The Bonds will be offered for subscription at a nominal value of RMB100 per Bond. The Warrants will be offered to the subscribers of the Bonds proportionately.

3. Target Offerees

Any investor who has maintained a shareholder’s account for the shares denominated in RMB at China Securities Depository and Clearing Corporation Limited, Shenzhen Branch (save for those prohibited under the PRC laws).

The Bonds cum Warrants will be only offered and issued in the PRC pursuant to the relevant laws and regulations of the PRC and will not be offered to the holders of the H shares of the Company.

4. Offer Method

The Bonds cum Warrants will be offered to the above mentioned investors in the PRC only. Any A Shareholder not subject to any trading moratorium will have priority to subscribe for the Bonds up to a number of board lots (one board lot equals to 10 Bonds) equivalent to the amount of the A Shares held by such A Shareholder on the relevant record date multiplied by a number not less than 1.65 and further

— 4 —

LETTER FROM THE BOARD

divided by 1,000 with fractional numbers to be adjusted rounded or downwards to the nearest whole number pursuant to the “precise calculation method”. It is proposed to the EGM to authorize the Board to determine the number of the Bonds for which such A Shareholders not subject to any trading moratorium will have priority to subscribe in light of the market conditions prior to the offering.

5. Interest Rate

It is proposed to the EGM to authorize the Board to determine the interest rate level and the method for the determination of the interest rate of the Bonds in light of the market conditions following the negotiations with the lead underwriter(s) prior to the offering. The relevant information which will be set out in the Offering Memorandum.

6. Term of the Bonds

Five years from the date of issue.

7. Term and Method of Payment of the Principal Amount and Interests of the Bonds

Interest accrued on the Bonds will be paid on an annual basis from the date of issue. All the principal amount of the Bonds together with the interests accrued but unpaid on such principal amount during the last year will be paid within five Trading Days after the maturity date of the Bonds.

8. Early Redemption

In the event that any application of the proceeds raised in the proposed offer and issue of the Bonds cum Warrants is deemed to constitute a deviation from the use of the proceeds as set out in this circular pursuant to the relevant rules and regulations of the CSRC, the holders of the Bonds are entitled to demand the Company to redeem the Bonds prior to the maturity date . In such circumstances, the Company shall redeem the Bonds and repay to the holders of the Bonds the aggregate of the principal amount of the Bonds and all accrued but unpaid interest for the period from the issue date to the redemption date.

9. Security

It is proposed to the EGM to authorize the Board to determine whether to require any security for the proposed offer and issue of the Bonds cum Warrants in light of the market conditions and take any necessary or desirable action accordingly.

10. Term of the Warrants

24 months following the listing of the Warrants on the Shenzhen Stock Exchange.

It is noted that following the listing of the Warrants, transfer or transmission of any Warrant shall be dealt with according to the applicable laws and regulations of the PRC and the rules issued by the CSRC and the Shenzhen Stock Exchange. It is further noted that in the event of the liquidation of the Company completed during the term of the Warrants, any rights attached to the Warrants will be extinguished under the PRC laws and regulations.

11. Exercise Period of the Warrants

The holders of the Warrants are entitled to exercise the Warrants during the period of 10 Trading Days prior to the expiry of the term of the Warrants.

— 5 —

LETTER FROM THE BOARD

12. Exercise Price of the Warrants and Adjustment

The exercise price of the Warrants shall not be less than the highest of (i) the average trading price of the A Shares over the 20 Trading Days, (ii) the average trading price of the A Shares on the Trading Day, (iii) the average trading price of the H Shares over the 20 Trading Days, and (iv) the average trading price of the H Shares on the Trading Day, immediately preceding the date of the issue of Offering Memorandum. It is proposed to the EGM to authorize the Board to determine the exercise price of the Warrants and the method for the determination of such exercise price in light of the market conditions following the negotiations with the lead underwriter(s) and subject to the restrictions set out above.

During the term of the Warrants, upon the occurrence of any event as a result of which the A Shares are traded on ex-rights or ex-dividend basis, the exercise price and conversion ratio of the Warrants shall be adjusted as follows:

• (1) In the event that the A Shares are traded on ex-rights basis, the exercise price and conversion ratio of the Warrants shall be adjusted according to the following formula:

Adjusted exercise price = Original exercise price x (the reference price of the A Shares on the ex-rights day / the closing price of the A Shares on the Trading Day immediately preceding the ex-rights day);

Adjusted conversion ratio = Original conversion ratio x (the closing price of the A Shares on the Trading Day before the ex-rights day / the reference price of A Shares on the Trading Day immediately preceding the ex-rights day).

• (2) In the event that the A Shares are traded on ex-dividend basis, the conversion ratio of the Warrants will remain unchanged, but the exercise price shall be adjusted according to the following formula:

Adjusted exercise price = Original exercise price x (the reference price of the A Shares on the ex-dividend day / the closing price of the A Shares on the Trading Day immediately preceding the ex-dividend day).

13. Conversion ratio of the Warrants

It is proposed to the EGM to authorize the Board to determine the number of the A Shares which shall be issued by the Company upon the exercise of each Warrant in light of the market conditions. Further details will be set out in the Offering Memorandum.

14. Use of Proceeds

All the proceeds from the offer and issue of the Bonds cum Warrants and the exercise of the Warrants will be applied to the following 11 projects in technology research development and industralisation:

(1) The building-up of the research and development and production environment and scale production capacity of TD-SCDMA HSDPA system equipment

(2) The building-up of the development environment and scale production capacity of TD-SCDMA terminal products

— 6 —

LETTER FROM THE BOARD

• (3) Industrialisation of TD upgrade technology

• (4) Construction of innovative handset platform

• (5) Construction of next generation broadband wireless mobile SDR platform

• (6) Industralisation of next generation IP-based amalgamation network for full multi-media services

• (7) Research, development and production of integrated network management system

• (8) Industrialisation of XPON optical access

• (9) Industrialisation of our generation optical network transmission equipment

• (10) Construction of ICT integrated business platform

• (11) Industrialisation of RFID systems integration

The details of which are described below under the paragraph headed “Feasibility of the Projects to be Invested with the Proceeds from the Proposed Offer and Issue of the Bonds cum Warrants”.

The total amount of the capital required for the above mentioned projects is expected to be approximately RMB10.7 billion. In the event that the availability of the above mentioned proceeds is not consistent with the progress of such projects, the Company may use funds from other resources to cover the capital requirement of such projects. The Company will use the proceeds according to the different capital injection schedules of such projects. In the event that the above mentioned proceeds are not sufficient to finance such projects, the Company will complete the investments through the Group’s internal resources, bank borrowings or other debt financings. The balance of such proceeds will be applied for working capital requirements of the Group. The Company will maintain a separate account for the sole purpose of administering the application of such proceeds.

15. Validity of the Resolutions

The resolutions approving the proposed offer and issue of the Bonds cum Warrants shall be valid for 12 months from the date of the Shareholders’ approval.

Following the Shareholders’ approval, the proposal for the offer and issue of the Bonds cum Warrants will be submitted to the CSRC for its review and approval.

C. AUTHORITY TO THE BOARD TO IMPLEMENT THE PROPOSED OFFER AND ISSUE OF THE BONDS AND WARRANTS AND THE RELATED MATTERS

It is proposed to the Shareholders to grant full authority to the Board to implement the proposed offer and issue of the Bonds cum Warrants. Such authority includes, but not limited to, the following:

1. to determine the engagement of the relevant intermediary and professional parties;

2. the implementation of the proposed issue in accordance with relevant provisions of pertinent laws, regulations and other regulatory documents and the resolutions of the general meeting, including but

— 7 —

LETTER FROM THE BOARD

not limited to determining the timing of the offer and issue, the offer size and the number of warrants to be issued, the offer method (including the specific ratio for preferential placing to the existing holders of A shares not subject to lock-up), the bond interest rate level and method of determination, the exercise price and exercise ratio of the warrants and the method of determination, dealing with guarantees for the Bonds cum warrants, agreeing on the method for protection of the rights of the bonds holders and the right, proceeding and the validity the resolution of meeting of the bond holders, handling with the listing of the bonds and warrants and other matters relating to the issue;

• 3 in light of the actual progress of the implementation of the offer and issue of the Bonds cum Warrants, the market conditions, the changes in the relevant regulatory policies and the opinions of the relevant regulatory authorities and to the extent as permitted under the Articles of Association, to make any amendment or adjustment to the proposal for the offer and issue of the Bonds cum Warrants;

• 4 to deal with all the reporting and filing matters in relation to the proposed offer and issue of the Bonds cum Warrants, including but not limited to, (i) dealing with the approval, registration, filing, endorsement and consent procedures with the relevant government authorities, regulatory authorities and stock exchanges and securities settlement and clearing institutions; (ii) executing, implementing, amending and completing all the agreements, contracts and documents necessary or desirable for the offer and issue of the Bonds cum Warrants (including but not limited to the guarantee contracts, offering memoranda, sponsorship agreements, underwriting agreements, listing agreements and various announcements);

• 5 upon the completion of the offer and issue of the Bonds cum Warrants, (i) to amend the Articles of Association in accordance with the Guidelines on the Articles of Association of the Listed Companies issued by the CSRC and in light of implementation of the offer and issuance of the Bonds cum Warrants and the exercise of the Warrants, including but not limited to adding specific provisions in respect of the offer and issue procedures of the Bonds cum Warrants and the changes in the registered capital of the Company as a result of the exercise of the Warrants; and (ii) to deal with all the filings with the relevant administrative authority for industry and commerce in relation to such changes;

• 6 to determine the specific application of the proceeds in the proposed investment projects and make any adjustment to such application in accordance with the applicable laws and regulations, the requirements of any regulatory authority and the market conditions;

• 7 to take any necessary, desirable or appropriate action in relation to the offer and issue of the Bonds cum Warrants;

Subject to authority as mentioned above being granted to the Board and to the extent as permitted under the applicable laws and regulations, it is also proposed to the Shareholders to authorise the Board to delegate such authority to any of Mr. Hou Weigui, Mr. Wang Zongyin, Mr. Xie Weiliang and Mr. Yin Yimin, each being a Director.

The authority as mentioned above shall be valid till all the relevant matters mentioned above have been duly implemented.

— 8 —

LETTER FROM THE BOARD

D. OTHER MATTERS IN RELATION TO THE OFFER AND ISSUE OF THE BONDS CUM WARRANTS

1. Feasibility of the Projects to be Invested with the Proceeds from the Proposed Offer and Issue of the Bonds cum Warrants

All the proceeds from the offer and issue of the Bonds cum Warrants will be applied to the following projects:

• (1) The building-up of the research and development and production environment and scale production of TD-SCDMA HSDPA system equipment

The experimental network for the large scale application of TD-SCDMA network technology has commenced operation in 2007. Following the completion of the investment project in the research and development and production of TD-SCDMA HSDPA base station system, the downlink speed of the data business of such system is expected to be increased to more than 10Mbps, which is important to the improvement of the downlink capacity and the increase of the speed of the data business of TD-SCDMA system.

• (2) The building-up of the development environment and scale production capacity of TD-SCDMA terminal products

The project is targeting at the high-end products market, the development and production of HSDPAbased TD-SCDMA/GSM multi-mode terminals and the provision of more personalized and high quality multi-media data services, including on-line trading and business, mobile phone games, on-line audio and video program and music downloading, to provide the customers with novel experiences.

• (3) Industrialisation of TD upgrade technology

Industralisation of TD upgrade technology involves the industrialisation of the next generation mobile communications technologies by leveraging on the latest telecommunication technologies. It will also create a substantial amount of new intellectual property rights. It would play a crucial role in the launch of TDD-based independent international 4G standards by China and would enable China to take a leading position in the future development of the mobile communication technologies.

• (4) Construction of innovative handset platform

By strengthening the research, development and production of multi-mode terminals, handset software platform, 3G handset chips, specialised digital cluster communications system and GOTA specialised terminals, the Company would be able to gear up its core competitiveness in handset innovation and obtain more potential for its development, as a customized solution provider, in the customized terminal industry led by the carriers.

• (5) Construction of next generation broadband wireless mobile SDR platform

Software defined radio (“SDR”) refers to the application of different standards or the accommodation of different standards on the same base station by using different software. It would enable the carriers to streamline their operational management by consolidating various base stations into one. For the end users, it means enhanced network transparency and progress efficiency. The original terminals can be used in the new network without replacement.

— 9 —

LETTER FROM THE BOARD

• (6) Industrialisation of next generation IP-based amalgamation network for full multi-media services

The next generation IP-based amalgamation network for full multi-media services would allow the users to have access to the same service at any time in any location using any terminal. With the aid of PDA software, the network could also provide the users with customised services through personalised settings.

• (7) Research, development and production of integrated network management system

The integrated network management system is developed to meet the needs for a centralised control, maintenance and management of network resources. The system is mainly set to provide an integrated solution for the process, application and operation of the entire carrier network. Apart from offer the protection to the entire network to keep the normal operation of its basic function, the system can further provide support to the business analysis and decision-making process based on specific conditions.

• (8) Industrialisation of XPON optical access

This project involves the development of a FTTx solution based on EPON and GPON technologies that would offer saving on optical resources, easy maintenance, protocol transparency, a high level of interoperability and unlimited extension of optical nodes for the benefit of the end users.

• (9) Industrialisation of next generation optical network transmission equipment

The next generation optical network transmission equipment is developed by the Company in line with the application of full optical network technology and the latest technologies, including the WDM and DWDM technologies. The equipment can provide a full scale solution covering longdistance transmission to city domains and convergence access to the network, which would facilitate significant cost reduction in network construction and operation.

• (10) Construction of ICT integrated business platform

The information and communication technology (“ICT”) integrated business platform could enable the carriers to provide communication services and IT services to the end users (including government authorities, farming villages, enterprises, social communities, families or individuals) in a speedy manner. The ICT technology can be applied by the enterprises to re-engineer their business process.

• (11) Industrialisation of RFID systems integration

Radio frequency identification (“RFID”) can allow any physical object on earth to have a unique digital identity code. RFID can be widely applied in financial activities security, logistics, manufacturing, public security, assets management and medical care.

The total amount of the capital required for the above mentioned projects is expected to be approximately RMB 10.7 billion.

Having conducted an in-depth and comprehensive research and analysis on the industry development trend and the Company’s development plan, the market growth capacity, technology development feasibility,

— 10 —

LETTER FROM THE BOARD

capital requirement and investment return in relation to the above mentioned projects, the Board is of the view that the application of the proceeds from the offer and issue of the Bonds cum Warrants in such projects (i) is line with the relevant industrial policy of the PRC; (ii) may yield good economic return and social benefits; and (iii) would enable the Company to enhance the competitiveness of its core business, the capability for continuing growth, the innovation ability and the profile in the international market. Accordingly, the Board has confirmed the feasibility of the proposed investments in such projects.

2. Report of the Board on the Use of the Proceeds Raised in the Last Fund Raising Exercise

Pursuant to the applicable laws and regulations of the PRC, a report has been by the Board on the use of the funds raised in the last fund raising exercise of the Company. The last fund raising exercise of the Company related to the global offer of an aggregate of 160,151,040 H Shares at the offer price of HK$22.00 in 2004. A total of HK$3,523,322,880.00 (approximately RMB3,734,722,253) was raised from such global offering. After the deduction of the relevant underwriting commissions and other relevant costs, the net proceeds raised in such global offer amounted to approximately RMB3,542,177,723. The Board has confirmed that (i) the proceeds from such global offering have been fully applied in accordance with the purposes set out in the prospectus of the Company for such global offering; (ii) the relevant information on such purposes and the use of proceeds has been duly disclosed in such prospectus the annual reports of the Company for the each of the years ended 31 December 2004, 2005 and 2006.

E. EGM

1. EGM Notice and Proxy Form

A notice convening the EGM to be held at the 4/F, Block A, ZTE Plaza, Keji Road South, Hi-Tech Industrial Park, Nanshan District, Shenzhen, Guangdong Province, the People’s Republic of China at 9:00 a.m. on Tuesday, 16 October 2007, at which resolutions will be proposed to the Shareholders to consider and, if thought fit, approve the offer and issue of the Bonds cum Warrants and other related matters, will be delivered to the H Shareholders together with this circular on the same day.

A proxy form for use at the EGM will be delivered to the H Shareholders together with this circular on the same day. Whether or not you are able to attend the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting should you so wish.

2. Right to Demand Voting by Poll

Pursuant to the Articles of Association, a resolution put to vote at the EGM shall be decided by show of hands unless the following persons requested for voting by poll before or after the voting by show of hands or the listing rules of the stock exchanges on which the shares of the Company are listed require otherwise:

• (a) by the chairman of the meeting; or

• (b) by at least two shareholders (or proxies) who have voting rights; or

• (c) by one or more shareholders (including proxies) holding solely or in combination not less than 10% of the shares carrying voting rights at the meeting.

— 11 —

LETTER FROM THE BOARD

3. Closure of Registers of the H Shares

According to the Articles of the Association, the Company will close its register of the H Shares from Saturday, 15 September 2007 to Monday, 15 October 2007 (both days inclusive). The holders of the H Shares should note that during such period no share transfer will be registered.

All the holders of the H Shares registered on the Company’s share register maintained by Computershare Hong Kong Investor Services Limited upon the close of trading of the H Shares on the Hong Kong Stock Exchange on Friday, 14 September 2007 at 4: 00 pm and all holders of the A Shares registered on the Company’s share register maintained by China Securities Depositary & Clearing Corporation Limited, Shenzhen Branch upon the close of trading of the A Shares on the Shenzhen Stock Exchange on Friday, 14 September 2007 at 3: 00 p.m. are eligible to attend the EGM.

Any Shareholder intending to attend the EGM shall deliver the reply slip to the Company by courier, registered mail or fax on or before Tuesday, 25 September 2007.

F. RECOMMENDATION

The Directors consider that the proposed offer and issue of the Bonds cum Warrants are in the best interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of the resolutions in relation to the offer and issue of the Bonds cum Warrants and other related matters at the EGM.

G. GENERAL INFORMATION

The Group is principally engaged in the design, development, production, distribution and installation of a broad range of advanced telecommunications equipment, including wireless communications systems, wireline switch and access equipment, optical and data communications equipment, handsets and telecommunications software systems and services.

It is noted that, pursuant to the General Mandate 2007, the aggregate nominal amount of the A Shares to be allotted and issued or agreed conditionally or unconditionally to be allotted and issued (whether pursuant to an option or otherwise) by the Board, otherwise than pursuant to (i) a rights issue or (ii) any option scheme or similar arrangement from time to time being adopted for the grant or issue to Directors, supervisors, senior management and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, shall not exceed 20% of the aggregate nominal amount of the A Shares in issue as at 15 June 2007, i.e., the date on which the General Mandate 2007 was granted to the Board. As at the 15 June 2007, there was a total of 799,370,610 A Shares in issue. As at the Latest Practicable Date, save for a total of 47,98,000 A Shares to be granted and issued under the share incentive scheme of the Company adopted by the Shareholders on 13 March 2007, the Company has no outstanding options, convertible securities or warrants which confer the right to subscribe for the A Shares.

The relevant information relating to the proposals relating to offer and issue of the Bonds cum Warrants are also available at the designated website for information disclosure designated by the Company in the PRC (http:// www.cninfo.com.cn).

Yours faithfully ZTE CORPORATION Hou Weigui

Chairman

— 12 —