2012 Annual Report - ZTE

ZTE CORPORATIONMaterial Mattersdate was 18 July 2012, for A shares. In respect of H shares, the record date was 4 June 2012, and the dividendpayment date was 18 July 2012. For details, please refer to the “Information on Payment of Final Dividend”published by the Company on 10 July 2012.(XI)CAPITAL REDUCTION OF FOUR SUBSIDIARIES OF THE COMPANY BY WAY OF JUXIAN’S DISPOSALOF EQUITY INTERESTS AND THE COMPANY’S ACQUISITION OF 10% EQUITY INTERESTS INGUANGDONG NEW PIVOT FROM JUXIANAt the Thirty-first Meeting of the Fifth Session of the Board of the Directors of the Company, it was approvedthat four subsidiaries, namely ZTE Kangxun, Zhongxing Microelectronics, Zhongxing Software and Changfei wouldreduce their respective capital by way of the disposal by Juxian of its respective equity interests in the saidcompanies, upon the completion of which Juxian would no longer hold any equity interest in the said companies;and that the Company would acquire from Juxian a 10% equity interest in Guangdong New Pivot.The aforesaid matter constituted a connected transaction under the Hong Kong Listing Rules but not underthe Shenzhen Listing Rules. For details please refer to the “CONNECTED TRANSACTIONS — INCREASE OFINTEREST IN FIVE SUBSIDIARIES BY WAY OF CAPITAL REDUCTIONS AND EQUITY ACQUISITION” publishedby the Company on 16 July 2012.(XII) “DEVELOPMENT FINANCING STRATEGIC COOPERATION AGREEMENT” BETWEEN THE COMPANYAND CHINA DEVELOPMENT BANKOn 4 December 2012, the Company entered into a “Development Financing Strategic Cooperation Agreement” withChina Development Bank (“CDB”), pursuant to which CDB would provide a USD20 billion facility for cooperation,comprising financing facilities for the Company’s overseas projects and credit facilities for the Company. Theaforesaid agreement shall form the framework of business cooperation for an effective period of five years. Separateagreements shall have to be signed by the two parties in respect of specific cooperation entered into under thisAgreement. For details please refer to the “Announcement on the ‘Development Financing Strategic CooperationAgreement’ with China Development Bank” published by the Company on 4 December 2012.(XIII) PROGRESS OF THE FACILITY AGREEMENTOn 8 July 2011, ZTE HK, a wholly-owned subsidiary of the Company, entered into a facility agreement with atotal amount of USD900 million with 10 banks including BOCHK (the “Facility Agreement”), in respect of whichthe Company entered into a guarantee letter providing guarantee for this agreement. For details, please refer tothe “Announcement on the Facility Agreement and the Provision of Guarantee to a Wholly-owned Subsidiary”published by the Company on 8 July 2011.Pursuant to the Facility Agreement and the guarantee letter signed by the Company, the lending banks haveimposed certain restrictions in relation to certain financial indicators of the Group. If the Group’s financial indicatorsfail to meet the requirements under the Facility Agreement and the guarantee letter, the lending banks shall havethe right to demand early loan repayment from ZTE HK. As at the end of the reporting period, the Group failedto comply with the requirement of the Facility Agreement in respect of one financial indicator. ZTE HK has appliedto the lending banks for exemption from early loan repayment, and such application for exemption will take effectwhen the approval of no less than 2/3 of facility amount is granted. As at 27 March 2013, approval has beenobtained in respect of 58% of the facility amount. Taking into consideration of the Group’s liquidity, the operatingconditions and liquid capital of ZTE HK (amounting to HKD19.7 billion as at the end of the 2012 reporting period)and the status of negotiations with the lending banks, the Company is of the view that the matter will not haveany significant impact of the Group’s operations.76