##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transaction period from  to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 COMMISSION FILE NUMBER: 000-51839
 
 CHINA GRENTECH CORPORATION LIMITED
 (Exact name of Registrant as specified in its charter)
 
 Cayman Islands
(Jurisdiction of incorporation or organization)
 15th Floor, Block A, Guoren Building
Keji Central 3rd Road
Hi-Tech Park, Nanshan District
Shenzhen 518057, Peoples Republic of China
(Address of principal executive offices)
 Rong Yu, Chief Financial Officer
15th Floor, Block A, Guoren Building
Keji Central 3rd Road
Hi-Tech Park, Nanshan District
Shenzhen 518057, Peoples Republic of China
Telephone: (86 755) 2663-7600
 Facsimile: (86 755) 2654-6999 ext. 0017
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
  Name of Each ExchangeTitle of Each Class
    
    On Which RegisteredAmerican Depositary Shares, each representing 25
    
    The NASDAQ Global Select Marketordinary shares of par value US$0.00002 per shareOrdinary shares of par value US$0.00002 per share*
    
    The NASDAQ Global Select Market*
 *
    
    Not for trading, but only in connection with the registration of American Depositary Shares.  None
  None
  As of December 31, 2010, 563,244,750 ordinary shares, par value US$0.00002 per share.
  o þ
  o þ
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued
    
    Other oby the International Accounting
Standards Board o
  o o
  o þ




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##### 



TABLE OF CONTENTS
 PageFORWARD-LOOKING STATEMENTS
    
    
    1SUPPLEMENTAL INFORMATION
    
    
    2PART I
    
    
    2Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    2Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2Item 3. KEY INFORMATION
    
    
    2Item 4. INFORMATION ON THE COMPANY
    
    
    23Item 4A. UNRESOLVED STAFF COMMENTS
    
    
    44Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    44Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    68Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    77Item 8. FINANCIAL INFORMATION
    
    
    79Item 9. THE OFFER AND LISTING
    
    
    80Item 10. ADDITIONAL INFORMATION
    
    
    81Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    86Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    86PART II
    
    
    87Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    87Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    87Item 15. CONTROLS AND PROCEDURES
    
    
    87Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    89Item 16B. CODE OF ETHICS
    
    
    89Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    89Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    90Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    90Item 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    91Item 16G. CORPORATE GOVERNANCE
    
    
    92PART III
    
    
    92Item 17. FINANCIAL STATEMENTS
    
    
    92Item 18. FINANCIAL STATEMENTS
    
    
    92Item 19. EXHIBITS
    
    
    92Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 15.1Exhibit 15.2Exhibit 15.3




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
   
    
    our companys reliance on business relationships with the Chinese telecommunications
operators and base station equipment manufacturers, in particular, the annual capital
spending by Chinese telecommunications operators and demand from domestic base station
equipment manufacturers;
 
    
    risks associated with large accounts receivable, long collection periods and accounts
receivable cycles;
 
    
    fierce competition in the wireless communication industry;
 
    
    growth of, and risks inherent in, the wireless communication industry in China;
 
    
    uncertainty as to future profitability and our companys ability to obtain adequate
financing for our planned capital expenditure requirements;
 
    
    uncertainty as to our companys ability to continuously develop and manufacture new
radio frequency, or RF, technology and keep up with changes in RF technology;
 
    
    uncertainty as to future capital expenditure on telecommunication infrastructure by the
Chinese telecommunications operators;
 
    
    uncertainty as to cost of raw materials and price fluctuations imposed by suppliers;
 
    
    future changes to the regulations and policies governing the telecommunications industry
in China, including possible future industry restructuring;
 
    
    limitation on our companys production capacity for wireless coverage products or base
station RF products;
 
    
    risks associated with possible defects and errors in our wireless coverage products or
base station RF products;
 
    
    uncertainty as to our companys ability to protect and enforce our intellectual property
rights; and
 
    
    uncertainty as to our companys ability to attract and retain qualified executives and
personnel.
  -1-




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##### Table of Contents



SUPPLEMENTAL INFORMATION
     
 PART I
 
 Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 Item 3. KEY INFORMATION
 A. Selected Financial Data
   -2-




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Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands, except for per share and number of shares data)Consolidated statements
of operations informationRevenues
    
    
    832,795
    
    
    
    979,302
    
    
    
    984,657
    
    
    
    1,602,943
    
    
    
    1,720,974
    
    
    
    260,754Cost of revenues
    
    
    (437,040
    )
    
    
    (611,436
    )
    
    
    (751,367
    )
    
    
    (1,223,973
    )
    
    
    (1,265,247
    )
    
    
    (191,704
    )Gross profit
    
    
    395,755
    
    
    
    367,866
    
    
    
    233,290
    
    
    
    378,970
    
    
    
    455,727
    
    
    
    69,050Other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,344
    
    
    
    16,594
    
    
    
    2,514Operating expensesResearch and
development costs
    
    
    (47,671
    )
    
    
    (56,525
    )
    
    
    (70,232
    )
    
    
    (59,899
    )
    
    
    (71,590
    )
    
    
    (10,847
    )Sales and distribution
expenses
    
    
    (112,948
    )
    
    
    (126,816
    )
    
    
    (138,524
    )
    
    
    (180,525
    )
    
    
    (166,592
    )
    
    
    (25,241
    )General and
administrative
expenses
    
    
    (55,944
    )
    
    
    (68,498
    )
    
    
    (127,028
    )
    
    
    (81,506
    )
    
    
    (78,478
    )
    
    
    (11,891
    )Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    (27,589
    )
    
    
    
    
    
    
    
    
    
    
    Total operating
expenses
    
    
    (216,563
    )
    
    
    (251,839
    )
    
    
    (363,373
    )
    
    
    (321,930
    )
    
    
    (316,660
    )
    
    
    (47,979
    )Operating income (loss)
    
    
    179,192
    
    
    
    116,027
    
    
    
    (130,083
    )
    
    
    60,384
    
    
    
    155,661
    
    
    
    23,585Other income (expense)Interest income
    
    
    19,186
    
    
    
    22,313
    
    
    
    31,257
    
    
    
    40,997
    
    
    
    27,770
    
    
    
    4,208Interest expense
    
    
    (28,026
    )
    
    
    (35,347
    )
    
    
    (54,844
    )
    
    
    (56,766
    )
    
    
    (58,142
    )
    
    
    (8,809
    )Investment income
    
    
    238
    
    
    
    318
    
    
    
    4,873
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency
exchange loss
    
    
    (9,875
    )
    
    
    (18,791
    )
    
    
    (10,418
    )
    
    
    (211
    )
    
    
    (597
    )
    
    
    (90
    )Grant income
    
    
    7,670
    
    
    
    7,355
    
    
    
    15,209
    
    
    
    6,322
    
    
    
    2,157
    
    
    
    327Total other expense
    
    
    (10,807
    )
    
    
    (24,152
    )
    
    
    (13,923
    )
    
    
    (9,658
    )
    
    
    (28,812
    )
    
    
    (4,364
    )Income (loss) before
income tax expense
    
    
    168,385
    
    
    
    91,875
    
    
    
    (144,006
    )
    
    
    50,726
    
    
    
    126,849
    
    
    
    19,221Income tax expense
    
    
    (18,277
    )
    
    
    (10,321
    )
    
    
    (3,157
    )
    
    
    (18,068
    )
    
    
    (29,714
    )
    
    
    (4,502
    )Net income (loss)
    
    
    150,108
    
    
    
    81,554
    
    
    
    (147,163
    )
    
    
    32,658
    
    
    
    97,135
    
    
    
    14,719Net (loss) income
attributable to
non-controlling interests
    
    
    (1,267
    )
    
    
    982
    
    
    
    796
    
    
    
    14
    
    
    
    1,005
    
    
    
    152Net income (loss)
attributable to the
equity shareholders of
China GrenTech
Corporation Limited, or
GrenTech
    
    
    148,841
    
    
    
    82,536
    
    
    
    (146,367
    )
    
    
    32,672
    
    
    
    98,140
    
    
    
    14,871Dividends, accretion to
redemption value and
foreign currency rate
movements on mandatorily
redeemable convertible
preference shares
    
    
    (549
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
attributable to the
equity shareholders of
GrenTech
    
    
    148,292
    
    
    
    82,536
    
    
    
    (146,367
    )
    
    
    32,672
    
    
    
    98,140
    
    
    
    14,871Earnings (loss) per share:- Basic
    
    
    0.25
    
    
    
    0.13
    
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.17
    
    
    
    0.03- Diluted
    
    
    0.25
    
    
    
    0.13
    
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.16
    
    
    
    0.02Weighted average number
of ordinary shares
outstanding:- Basic
    
    
    584,580,799
    
    
    
    624,624,852
    
    
    
    610,158,841
    
    
    
    595,536,733
    
    
    
    581,814,594
    
    
    
    581,814,594- Diluted
    
    
    593,150,684
    
    
    
    624,624,852
    
    
    
    610,158,841
    
    
    
    604,781,041
    
    
    
    595,199,449
    
    
    
    595,199,449Total cash dividend
declared to ordinary
shareholders
    
    
    7,609
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  -3-




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Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Consolidated balance
sheet informationCash and cash equivalents
    
    
    467,423
    
    
    
    316,778
    
    
    
    293,353
    
    
    
    469,454
    
    
    
    380,098
    
    
    
    57,591Restricted cash
    
    
    238,618
    
    
    
    259,786
    
    
    
    122,368
    
    
    
    103,035
    
    
    
    90,132
    
    
    
    13,656Accounts receivable, net
    
    
    747,859
    
    
    
    925,838
    
    
    
    728,260
    
    
    
    892,149
    
    
    
    1,154,540
    
    
    
    174,931Inventories
    
    
    434,406
    
    
    
    542,094
    
    
    
    520,619
    
    
    
    771,236
    
    
    
    643,265
    
    
    
    97,464Total current assets
    
    
    1,948,407
    
    
    
    2,107,691
    
    
    
    1,779,666
    
    
    
    2,352,667
    
    
    
    2,374,988
    
    
    
    359,847Property, plant and
equipment, net
    
    
    161,503
    
    
    
    225,069
    
    
    
    412,259
    
    
    
    444,578
    
    
    
    436,290
    
    
    
    66,105Construction in progress
    
    
    7,100
    
    
    
    134,637
    
    
    
    2,816
    
    
    
    3,961
    
    
    
    63,008
    
    
    
    9,547Long-term accounts
receivable
    
    
    268,957
    
    
    
    389,505
    
    
    
    551,210
    
    
    
    452,191
    
    
    
    462,521
    
    
    
    70,079Total assets
    
    
    2,415,834
    
    
    
    2,997,299
    
    
    
    2,838,970
    
    
    
    3,337,347
    
    
    
    3,419,003
    
    
    
    518,032Short-term bank loans
    
    
    336,050
    
    
    
    456,050
    
    
    
    480,207
    
    
    
    613,378
    
    
    
    638,229
    
    
    
    96,702Total current liabilities
    
    
    866,435
    
    
    
    1,249,081
    
    
    
    1,266,617
    
    
    
    1,755,819
    
    
    
    1,772,001
    
    
    
    268,485Long-term bank loan
    
    
    
    
    
    
    150,000
    
    
    
    130,000
    
    
    
    110,000
    
    
    
    90,000
    
    
    
    13,636Total liabilities
    
    
    866,435
    
    
    
    1,405,019
    
    
    
    1,401,369
    
    
    
    1,870,498
    
    
    
    1,866,599
    
    
    
    282,818Total equity
    
    
    1,549,399
    
    
    
    1,592,280
    
    
    
    1,437,601
    
    
    
    1,466,849
    
    
    
    1,552,404
    
    
    
    235,214
 Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Consolidated cash
flow informationNet cash (used in)
provided by
operating
activities
    
    
    (114,778
    )
    
    
    (120,228
    )
    
    
    5,056
    
    
    
    90,731
    
    
    
    10,225
    
    
    
    1,548Net cash (used in)
provided by
investing
activities
    
    
    (243,150
    )
    
    
    (294,437
    )
    
    
    28,113
    
    
    
    (45,338
    )
    
    
    (91,672
    )
    
    
    (13,890
    )Net cash provided
by (used in)
financing
activities
    
    
    708,514
    
    
    
    272,619
    
    
    
    (52,085
    )
    
    
    130,919
    
    
    
    (7,312
    )
    
    
    (1,107
    )Cash and cash
equivalents at the
end of year
    
    
    467,423
    
    
    
    316,778
    
    
    
    293,353
    
    
    
    469,454
    
    
    
    380,098
    
    
    
    57,591
 Exchange Rate Information
   Noon buying ratePeriod
    
    Period end
    
    
    Average (1)
    
    
    Low
    
    
    High(RMB per US$1.00)2006
    
    
    7.8041
    
    
    
    7.9723
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.6072
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9477
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.7603
    
    
    
    6.8305
    
    
    
    6.60002010 December
    
    
    6.6000
    
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.60002011 January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483April
    
    
    6.4900
    
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900May
    
    
    6.4786
    
    
    
    6.4957
    
    
    
    6.5073
    
    
    
    6.4786June (through June 17)
    
    
    6.4700
    
    
    
    6.4785
    
    
    
    6.4830
    
    
    
    6.4700
  
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period.  -4-




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B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use Of Proceeds
  D. Risk Factors
 Risks Relating to Our Company
 We derive a significant portion of our revenues from the three telecommunications operators in
China, and our revenues could decline significantly if any of them reduces its purchases of our
wireless coverage products and services.
      -5-




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Because we have limited bargaining leverage with the three telecommunications operators in China,
some contractual terms and market practices are materially adverse to our interest.
  Changes in the procurement policies by our major customers may adversely affect our revenue and
profit margin on our wireless coverage products.
  We have long accounts receivable cycles and long collection periods, and our liquidity and cash
flows from operations will deteriorate if our accounts receivable cycles or collection periods
continue to lengthen.
    -6-




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
    
    41% of the contract value due upon the signing of the contract and the issuance of the
completion certificate or delivery certificate,
 
    
    an additional 38% due upon the issuance of the preliminary inspection certificate,
 
    
    a further 17% due upon the issuance of the final inspection certificate, and
 
    
    the final 4% due upon the expiration of our warranty period.
    -7-




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We often begin work on a project before we have a contract for our products and services, which may
materially and adversely affect our cash flows from operating activities and liquidity.
  We historically recognized significantly lower revenues in the first quarter, which sometimes
resulted in net losses in the first quarter, and our revenues may fluctuate significantly from
quarter to quarter in the future, resulting in quarterly net losses.
   -8-




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We rely on bank financing, including issuing bills payable and sale of receivables, to finance our
operations; any expansion of our business will require further financing and will increase our
financial leverage.
    -9-




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##### Table of Contents



If the wireless communication sector in China does not maintain its current pace of growth, or if
the telecommunications operators reduce their investments for 2G and 3G network coverage in the
near future, the profitability and future prospects of our business and our liquidity could be
materially and adversely affected.
  We may fail to offer products that meet industry standards or our customers specific requirements,
and as a result we may lose customers or orders or incur significant warranty or other costs, and
our revenue growth may be materially and adversely affected.
   Our research and development efforts may not lead to successful development of commercially viable
or acceptable products, which could cause a decline in customer use of our products.
  
    
    rapidly changing technology;
 
    
    revolving industry standards and transmission protocols;
 
    
    frequent improvements in products and services; and
 
    
    fierce competition from well-funded and technologically advanced companies.
  -10-




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Gross profit margins for our products and services vary substantially, and any deterioration in the
gross profit margin for our principal products and services will have a material and adverse effect
on our results of operations.
  Our industry is highly competitive, and our inability to compete effectively would hurt our current
business and future growth potential.
  
    
    research and development capability;
 
    
    product quality;
 
    
    pricing;
 
    
    scope and flexibility of product offering;
 
    
    after-sale service capability; and
 
    
    relationships with wireless operators and base station equipment manufacturers.
  We have limited experience in operating outside China, and failure to achieve our overseas
expansion strategy may have an adverse effect on our business growth in the future.
   -11-




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We rely on key managerial and technical personnel, and failure to attract or retain such personnel
may compromise our ability to develop new products and to effectively carry on our research and
development and other efforts.
   For our standalone service contracts and bundled sale contracts, we hire third parties to carry out
some of the initial installation of the wireless coverage products. We are liable for the failure
or inadequacy of their services, and may be vulnerable to the loss and unavailability of their
services.
   -12-




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We may lose our competitive advantage and our operations may suffer if we fail to prevent the loss
or misappropriation of, or disputes over, our intellectual property.
   
    
    departure of any of our management members or employees in possession of our
confidential proprietary information;
 
    
    breach by such departing management member or employee of his or her confidentiality and
non-disclosure undertaking to us;
 
    
    expiration of the protection period of our registered patents or trademarks;
 
    
    infringement by others of our proprietary technology and intellectual property rights;
or
 
    
    refusal by relevant regulatory authorities to approve our patent or trademark
applications.
   If we lose certain government tax concessions, our profitability may be materially and adversely
affected.
   -13-




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##### Table of Contents



We may be treated as a resident enterprise for PRC tax purposes following the effectiveness of the
new enterprise income tax law on January 1, 2008, which may subject us to PRC income tax for our
global income and withholding income tax for any dividends we pay to our non-PRC shareholders on
profits earned after January 1, 2008.
    -14-




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If our idle or insufficient production capacity significantly increases during any particular
period, our results of operations for that period may be materially and adversely affected.
  Our operations may be adversely affected by shortages of raw materials and the volatility in the
prices of raw materials.
  If we fail to acquire raw materials on time or on acceptable terms and consequently fail to fill
our customers orders in a timely and cost-effective manner, our business operations may be
materially and adversely affected.
  We maintain limited insurance coverage, and any significant product liability claim could have a
material and adverse effect on our financial condition.
   -15-




---



##### Table of Contents



The interest of our principal shareholders may differ from your interest, and their vote may
disadvantage our minority shareholders.
  
    
    Guoren Industrial Developments Limited (Yingjie Gao, our chairman and chief executive
officer, has the sole power to vote or to direct the vote and the sole power to dispose or
to direct the disposition of the shares held by this company) with 26.5%;
 
    
    Drag Investments Limited (majority-owned by Professor Kunjie Zhuang, a technology
consultant and former director of our company) with 10.0%; and
 
    
    Heng Xing Yue Investments Limited (partially-owned by Rong Yu, a director and our chief
financial officer) with 6.0%.
  
    
    composition of our board of directors;
 
    
    selection of our senior management;
 
    
    amount and timing of dividends and other distributions;
 
    
    our overall strategic and investment decisions;
 
    
    issuance of securities and adjustment to our capital structure;
 
    
    amendment to our memorandum and articles of association; and
 
    
    other corporate actions requiring approval of our shareholders, including election and
removal of directors, merger, consolidation or sale of our assets, or any other change of
control event that may benefit our other shareholders generally.
  Our primary source of funds for dividends and other distributions from our operating subsidiary in
China is subject to various legal and contractual restrictions and uncertainties, and our ability
to pay dividends or make other distributions to our shareholders is negatively affected by those
restrictions and uncertainties.
   -16-




---



##### Table of Contents



If we continue to have any material weakness in our internal control over financial reporting, we
may be unable to timely and accurately report our financial results, comply with disclosure
controls and procedures, internal control over financial reporting and other reporting obligations
or prevent fraud, which could harm our business and operating results, the trading price of our
stock and our access to capital.
     -17-




---



##### Table of Contents



We may be or become a passive foreign investment company, which could result in adverse United
States federal income tax consequences to U.S. investors.
      A prolonged slowdown in the PRC economy may materially and adversely affect our results of
operations, financial conditions, prospects and future expansion plans.
   -18-




---



##### Table of Contents



Risks Relating to Our Industry
 Our business might become subject to new regulatory restrictions, which may restrict the way in
which we conduct our business and subject us to severe penalties, and we may be materially and
adversely affected by any change in the composition of the primary telecommunications operators in
China.
   Risks Relating to Business Operations in China
 Changes in Chinas political and economic policies and conditions could cause a substantial decline
in the demand for our products and services.
   -19-




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##### Table of Contents



Governmental control of currency conversion may affect our ability to pay dividends in foreign
currencies.
  Fluctuation in the value of Renminbi could adversely affect the value of, and dividends payable on,
our shares and ADSs in foreign currency terms.
   -20-




---



##### Table of Contents



The uncertain legal environment in China could limit the legal protections available to you.
   We may be subject to acts of God, acts of war and epidemics which are beyond our control and which
may cause damage, loss or disruption to our business.
  PRC regulations relating to offshore investment activities by PRC residents may limit our ability
to acquire PRC companies and adversely affect our business and prospects.
    -21-




---



##### Table of Contents



PRC regulation of direct investment and loans by offshore holdings companies to PRC entities may
delay or limit us from making additional contribution or loans to our PRC subsidiaries.
   All participants in our existing equity compensation plan who are PRC citizens may be required to
register with SAFE. We may also face regulatory uncertainties that could restrict our ability to
adopt additional equity compensation plans for our directors, employees and other parties under PRC
law.
    -22-




---



##### Table of Contents



We may incur substantial increases in labor cost due to the promulgation of the new labor contract
law.
  
 Item 4. INFORMATION ON THE COMPANY
 HISTORY AND DEVELOPMENT
   -23-




---



##### Table of Contents



(1)
    
    The remaining 1% interest in Shenzhen Lingxian Technology Company Limited is owned by Ms.
Xiujun Zhang, an employee of ours.(2)
    
    The remaining 30% interest in Shenzhen GrenTech IOT Network Corporation Limited is owned by
Shenzhen Xing Guang Investment Company Limited as discussed below.(3)
    
    The remaining 0.001% interest in GrenTech India Private Limited is owned by Mr. Zhengyu You,
a former employee of ours. Mr. You resigned from his position with us with effect from June 1, 2011. It is
intended that such 0.001% interest owned by Mr. You will be transferred to another employee of
ours.  -24-




---



##### Table of Contents




    
    Shenzhen Lingxian Technology Co., Ltd., or Shenzhen Lingxian;
 
    
    Shenzhen Lingxian Communication Company Limited, or Shenzhen Lingxian Communication;
 
    
    Shenzhen GrenTech RF Communication Ltd., or Shenzhen GrenTech RF;
 
    
    Shenzhen Kaige Communication Technology Co., Ltd., or Shenzhen Kaige;
 
    
    Shenzhen Kaixuan Communication Technology Co., Ltd., or Shenzhen Kaixuan;
 
    
    Shenzhen GrenTech IOT Network Corporation Limited, or Shenzhen GrenTech IOT Network; and
 
    
    Express (Shenzhen) Network Company Limited, or Express (Shenzhen) Network.
 Shenzhen Lingxian
  Shenzhen Lingxian Communication
   -25-




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##### Table of Contents



Shenzhen GrenTech RF
  Shenzhen Kaige
  Shenzhen Kaixuan
  Shenzhen GrenTech IOT Network and Express (Shenzhen) Network
   Overseas Subsidiaries
   -26-




---



##### Table of Contents



BUSINESS
 Overview
    -27-




---



##### Table of Contents



Our Wireless Coverage Products and Services
   -28-




---



##### Table of Contents



Wireless Coverage Products
   Indoor Coverage .
 Outdoor Coverage .
   -29-




---



##### Table of Contents



Our Services
  Design Services.
 Installation of Wireless Coverage Products.
 Project Warranties.
 Our Sales Cycle
  Standalone equipment contracts
  Bidding Process.
  -30-




---



##### Table of Contents




    
    research and development capabilities;
 
    
    quality of products in terms of performance, functionality and reliability;
 
    
    pricing;
 
    
    overall financial strength and operational scale; and
 
    
    range and standards of services to be provided, including after-sale services.
  
    
    specifications contained in customers bid invitations; and
 
    
    operational manuals and staff training.
 Delivery.
 Contract Signing.
 Payment.
 Warranty Period.
 Standalone service contracts
  Bidding Process.
  
    
    pricing;
 
    
    project design, installation and after sales services capacities;
 
    
    overall financial strength and operational scale; and
 
    
    grading of quality certificate.
  -31-




---



##### Table of Contents



Design and Installation.
 Contract Signing.
 Inspection and Warranty Period.
 Payment.
 Bundled sale contracts
  Bidding Process.
  -32-




---



##### Table of Contents




    
    research and development capabilities;
 
    
    quality of products in terms of performance, functionality and reliability;
 
    
    pricing;
 
    
    range and standards of services to be provided, including after-sale services;
 
    
    project design, installation and after sales services capacities;
 
    
    overall financial strength and operational scale; and
 
    
    grading of quality certificate.
 Delivery and Installation.
 Contract Signing.
 Inspection and Warranty Period.
 Payment.
 Selected Completed Projects
  Project
    
    Location
    
    Customer
    
    Completion dateIndoor coverageShenyun Village
    
    Shenzhen
    
    China Mobile group
    
    September 2010Qiurui Jia Yuan
    
    Tianjin
    
    China Unicom group
    
    December 2010Zijin Town
    
    Harbin
    
    China Mobile group
    
    December 2010Shijingshan Wanda Galaxy Plaza
    
    Beijing
    
    China Mobile group
    
    September 2010Kangjian Commercial Plaza
    
    Shanghai
    
    China Mobile group
    
    February 2010Shengda International Finance Center
    
    Shanghai
    
    China Unicom group
    
    November 2010Guohai Plaza
    
    Beijing
    
    China Mobile group
    
    December 2010Guangzhou West Tower
    
    Guangzhou
    
    China Unicom group
    
    June 2010Yuxi Shanshui Jia Yuan Phase II
    
    Yuxi
    
    China Mobile group
    
    September 2010Zhengzhou Futian Sun City
    
    Zhengzhou
    
    China Telecom group
    
    May 2010Shenzhen Universiade Sports Center
    
    Shenzhen
    
    China Telecom group
    
    December 2010Zunyi Customhouse Building (WLAN)
    
    Zunyi
    
    China Mobile group
    
    December 2010Binzhou College (WLAN)
    
    Binzhou
    
    China Mobile group
    
    December 2010Dezhou Tiancheng Community (WLAN)
    
    Dezhou
    
    China Unicom group
    
    December 2010Mingzhu International Park (WLAN)
    
    Dali
    
    China Mobile group
    
    December 2010
  -33-




---



##### Table of Contents



Project
    
    Location
    
    Customer
    
    Completion dateOutdoor coverageWaitan Channel
    
    Shanghai
    
    China Mobile group
    
    April 2010Liaocheng University Eastern Campus
(Outdoor AP)
    
    Liaocheng
    
    China Mobile group
    
    September 2010Chengde City Mobile Dong Yingzi Tunnel G
    
    Chengde
    
    China Mobile group
    
    November 2010Citic Plaza
    
    Guangzhou
    
    China Unicom group
    
    December 2010The First Affiliated Hospital of Sun
Yat-sen University (Huangpu Branch)
    
    Guangzhou
    
    China Unicom group
    
    December 2010Convention and Exhibition Center
    
    Lanzhou
    
    China Mobile group
    
    March 2010Taohua Island Pipe
    
    Shanghai
    
    China Mobile group
    
    December 2010Zunyi Railway Tunnel Phase II (Indoor
Distribution)
    
    Zunyi
    
    China Mobile group
    
    January 2010Outside of Room C of the Tang Xian
Damao Mountain Scenic Area
    
    Baoding
    
    China Telecom group
    
    June 2010Chengde Jingcheng Highway Yi Jia Gou
Tunnel C (Piaojia Yard)
    
    Chengde
    
    China Telecom group
    
    May 2010Metro Line 3 Southern Baohe
Resettlement Community
    
    Shenzhen
    
    China Unicom group
    
    March 2010Chisha Metro Operation Headquarter
    
    Guangzhou
    
    China Mobile group
    
    August 2010Northern New Community Railway Line 6
Flower Garden Station Construction Area
    
    Chongqing
    
    China Unicom group
    
    November 2010Metro Line 10
    
    Shanghai
    
    China Unicom group
    
    April 2010
 Our Base Station RF Products
  Base Station RF Parts and Components
    
    
    We first go through stringent certification processes to become a certified supplier of
base station equipment manufacturers. Each base station equipment manufacturer has its own
unique certification process, the principal conditions of which include production
capacity, management efficacy, quality control, environment protection, and overall
reputation. To date, we have been certified by seven major base station equipment
manufacturers.
  -34-




---



##### Table of Contents




    
    We next obtain technology certification from our base station equipment manufacturer
customers and conduct product development according to the customer specifications. All of
our base station RF parts and components are customized for each clients unique
specifications.
 
    
    We then provide samples for certification by our base station equipment manufacturer
customers. We have to date developed more than 377 types of base station RF parts and
components for various base station equipment manufacturer customers.
 
    
    Thereafter, we obtain purchase orders with trial quantities, and if our customers are
satisfied with the trials, our customers will request proposals from us for RF parts and
components. We then submit bids to the customers.
 
    
    If we win the bid, we will proceed to bulk production.
 
    
    We generally provide a credit period for payment to our customers and payments are
usually made within 90 to 180 days of delivery.
 Base Station RF Subsystems
  Overseas Operations
  Production
 Production Facilities
   Type of products
    
    Production Capacity
    
    
    Average Utilization(sets per month)
    
    
    (sets per month)Wireless coverage products
    
    
    10,000
    
    
    
    9,124Base station RF products
    
    
    45,000
    
    
    
    35,734
 Production Process
   -35-




---



##### Table of Contents




    
    integrated circuit board processing;
 
    
    covering and welding;
 
    
    manufacturing and assembly;
 
    
    testing; and
 
    
    quality control.
   Quality Control
  Quality Control for Raw Materials.
  -36-




---



##### Table of Contents



Quality Control During Production.
 Final Testing Before Delivery.
 Testing at Customer Site.
 Warranty.
  Research and Development
  RF Technology
    -37-




---



##### Table of Contents



Sales, Marketing and Key Customers
 Sales and Marketing Team
     Pricing
  
    
    type, quantity and composition of base station RF products;
 
    
    internal target gross margin objectives;
 
    
    region in which the products are sold; and
 
    
    current market conditions, including the prevailing prices offered by our competitors.
  -38-




---



##### Table of Contents



Key Customers
  Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (%)
    
    
    (RMB)
    
    
    (%)
    
    
    (RMB)
    
    
    (US$)
    
    
    (%)(in millions, except for percentages)Wireless coverage
products and services:China Mobile group
    
    
    390.3
    
    
    
    39.6
    
    
    
    390.9
    
    
    
    24.4
    
    
    
    632.2
    
    
    
    95.8
    
    
    
    36.7China Unicom group
    
    
    244.5
    
    
    
    24.8
    
    
    
    518.2
    
    
    
    32.3
    
    
    
    483.0
    
    
    
    73.2
    
    
    
    28.1China Telecom group
    
    
    75.4
    
    
    
    7.7
    
    
    
    241.2
    
    
    
    15.0
    
    
    
    228.1
    
    
    
    34.6
    
    
    
    13.3China Netcom group(1)
    
    
    4.7
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Overseas customers
    
    
    8.1
    
    
    
    0.8
    
    
    
    17.1
    
    
    
    1.1
    
    
    
    11.5
    
    
    
    1.7
    
    
    
    0.7Others
    
    
    40.1
    
    
    
    4.1
    
    
    
    28.6
    
    
    
    1.8
    
    
    
    69.2
    
    
    
    10.5
    
    
    
    4.0Subtotal
    
    
    763.1
    
    
    
    77.5
    
    
    
    1,196.0
    
    
    
    74.6
    
    
    
    1,424.0
    
    
    
    215.8
    
    
    
    82.7Base station RF products:Equipment manufacturers
    
    
    221.6
    
    
    
    22.5
    
    
    
    406.9
    
    
    
    25.4
    
    
    
    297.0
    
    
    
    45.0
    
    
    
    17.3Total
    
    
    984.7
    
    
    
    100.0
    
    
    
    1,602.9
    
    
    
    100.0
    
    
    
    1,721.0
    
    
    
    260.8
    
    
    
    100.0
 
 (1)
    
    As part of the restructuring of the Chinese telecommunications operators, China Netcom group
merged with China Unicom group in 2008.      -39-




---



##### Table of Contents



Suppliers and Raw Materials
  Competition
   
    
    increasing market demand, although at uneven levels from year to year;
 
    
    increasing technical requirements;
 
    
    expanding customer base, beginning with the China Mobile group and the China Unicom
group, and now including the China Telecom group and overseas customers; and
 
    
    increasing demand for next generation network construction and the triggering of
expanded market opportunities that are expected to attract new competitors to enter into
the wireless coverage market.
   -40-




---



##### Table of Contents



Property
 Owned Property
    Leased Property
  Intellectual Property Rights
   -41-




---



##### Table of Contents



Insurance
  Employees
  Number ofemployeesManagement and administrative
    
    
    214Research and development
    
    
    247Production and quality control
    
    
    865Project design and technical service
    
    
    2,556Sales and marketing
    
    
    561Total
    
    
    4,443
    -42-




---



##### Table of Contents



Legal Proceedings
  Industry Regulation in China
  Research, Development and Production of Radio Transmission Equipment
   Connection of Radio Communication Equipment with a Public Telecommunication Network
  Installation of Wireless Coverage Equipment
   
    
    lead project contractors,
 
    
    specialized contractors, and
 
    
    service subcontractors.
  -43-




---



##### Table of Contents



Our Compliance with Regulations
       
 Item 4A. UNRESOLVED STAFF COMMENTS
  
 Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with our audited consolidated financial statements and related notes
included in this annual report
on Form 20-F . The audited consolidated financial statements have been prepared in accordance
with U.S. GAAP. The following discussion and analysis contain forward-looking statements that
involve risks and uncertainties.
  -44-




---



##### Table of Contents



OVERVIEW
      KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
  Expenditure by Wireless Operators and Base Station Equipment Manufacturers
   -45-




---



##### Table of Contents



Our Business Practice with Wireless Operators and Its Implication on Our Financial Condition
and Results of Operations
  Revenue Recognition Policy and Accounts Receivable Cycle
   
    
    the risk and rewards are transferred;
 
    
    delivery has occurred;
 
    
    persuasive evidence of an arrangement exists;
 
    
    price to the buyer is fixed and determinable;
 
    
    collectibility is reasonably assured; and
 
    
    we have an enforceable legal right to receive the contractually specified amount in cash
attributable to the product sale.
    -46-




---



##### Table of Contents



-47-




---



##### Table of Contents



Liquidity Concern Arising out of Our Accounts Receivable Cycle and Revenue Cycle
  Significant Quarterly Fluctuations of Our Results of Operations
   -48-




---



##### Table of Contents



Three months endedMarch 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,
    
    
    March 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,
    
    
    March 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,2008
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010(in thousands of RMB)Revenues
    
    
    71,389
    
    
    
    186,341
    
    
    
    212,478
    
    
    
    514,449
    
    
    
    285,293
    
    
    
    423,214
    
    
    
    394,852
    
    
    
    499,584
    
    
    
    159,364
    
    
    
    370,413
    
    
    
    396,900
    
    
    
    794,297Cost of revenues
    
    
    (49,420
    )
    
    
    (124,216
    )
    
    
    (149,635
    )
    
    
    (428,096
    )
    
    
    (212,179
    )
    
    
    (317,326
    )
    
    
    (289,641
    )
    
    
    (404,827
    )
    
    
    (120,608
    )
    
    
    (278,158
    )
    
    
    (293,150
    )
    
    
    (573,331
    )Gross profit
    
    
    21,969
    
    
    
    62,125
    
    
    
    62,843
    
    
    
    86,353
    
    
    
    73,114
    
    
    
    105,888
    
    
    
    105,211
    
    
    
    94,757
    
    
    
    38,756
    
    
    
    92,255
    
    
    
    103,750
    
    
    
    220,966Other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425
    
    
    
    1,255
    
    
    
    1,664
    
    
    
    3,131
    
    
    
    4,401
    
    
    
    4,968
    
    
    
    4,094Operating expenses:Research and development costs
    
    
    (15,328
    )
    
    
    (17,815
    )
    
    
    (15,477
    )
    
    
    (21,612
    )
    
    
    (13,333
    )
    
    
    (12,557
    )
    
    
    (16,485
    )
    
    
    (17,524
    )
    
    
    (13,713
    )
    
    
    (20,633
    )
    
    
    (22,218
    )
    
    
    (15,026
    )Sales and distribution expenses
    
    
    (28,810
    )
    
    
    (31,014
    )
    
    
    (26,841
    )
    
    
    (51,859
    )
    
    
    (33,715
    )
    
    
    (44,705
    )
    
    
    (43,199
    )
    
    
    (58,906
    )
    
    
    (30,441
    )
    
    
    (37,064
    )
    
    
    (40,078
    )
    
    
    (59,009
    )General and administrative expenses
    
    
    (14,158
    )
    
    
    (18,225
    )
    
    
    (17,816
    )
    
    
    (76,829
    )
    
    
    (15,071
    )
    
    
    (19,442
    )
    
    
    (16,989
    )
    
    
    (30,004
    )
    
    
    (18,080
    )
    
    
    (20,714
    )
    
    
    (21,084
    )
    
    
    (18,600
    )Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,589
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    (58,296
    )
    
    
    (67,054
    )
    
    
    (60,134
    )
    
    
    (177,889
    )
    
    
    (62,119
    )
    
    
    (76,704
    )
    
    
    (76,673
    )
    
    
    (106,434
    )
    
    
    (62,234
    )
    
    
    (78,411
    )
    
    
    (83,380
    )
    
    
    (92,635
    )Operating (loss)/income
    
    
    (36,327
    )
    
    
    (4,929
    )
    
    
    2,709
    
    
    
    (91,536
    )
    
    
    10,995
    
    
    
    29,609
    
    
    
    29,793
    
    
    
    (10,013
    )
    
    
    (20,347
    )
    
    
    18,245
    
    
    
    25,338
    
    
    
    132,425Other (expense)/incomeInterest income
    
    
    5,472
    
    
    
    4,764
    
    
    
    4,482
    
    
    
    16,539
    
    
    
    10,024
    
    
    
    7,984
    
    
    
    6,749
    
    
    
    16,240
    
    
    
    4,777
    
    
    
    3,951
    
    
    
    4,108
    
    
    
    14,934Interest expense
    
    
    (13,242
    )
    
    
    (13,990
    )
    
    
    (15,349
    )
    
    
    (12,263
    )
    
    
    (13,978
    )
    
    
    (14,565
    )
    
    
    (14,708
    )
    
    
    (13,515
    )
    
    
    (13,211
    )
    
    
    (14,848
    )
    
    
    (14,531
    )
    
    
    (15,552
    )Investment income
    
    
    296
    
    
    
    
    
    
    
    
    
    
    
    4,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency exchange (loss)/gain
    
    
    (7,029
    )
    
    
    (2,904
    )
    
    
    (974
    )
    
    
    489
    
    
    
    (27
    )
    
    
    (675
    )
    
    
    329
    
    
    
    162
    
    
    
    (43
    )
    
    
    (453
    )
    
    
    40
    
    
    
    (141
    )Grant income
    
    
    2,030
    
    
    
    91
    
    
    
    110
    
    
    
    12,978
    
    
    
    324
    
    
    
    1,342
    
    
    
    3,736
    
    
    
    920
    
    
    
    2,092
    
    
    
    8
    
    
    
    
    
    
    
    57Total other (expense)/income
    
    
    (12,473
    )
    
    
    (12,039
    )
    
    
    (11,731
    )
    
    
    22,320
    
    
    
    (3,657
    )
    
    
    (5,914
    )
    
    
    (3,894
    )
    
    
    3,807
    
    
    
    (6,385
    )
    
    
    (11,342
    )
    
    
    (10,383
    )
    
    
    (702
    )(Loss)/income before income tax (expense)/benefit
    
    
    (48,800
    )
    
    
    (16,968
    )
    
    
    (9,022
    )
    
    
    (69,216
    )
    
    
    7,338
    
    
    
    23,695
    
    
    
    25,899
    
    
    
    (6,206
    )
    
    
    (26,732
    )
    
    
    6,903
    
    
    
    14,955
    
    
    
    131,723Income tax benefit /(expense)
    
    
    7,046
    
    
    
    (277
    )
    
    
    363
    
    
    
    (10,289
    )
    
    
    (1,030
    )
    
    
    (10,383
    )
    
    
    (5,772
    )
    
    
    (883
    )
    
    
    3,798
    
    
    
    (1,662
    )
    
    
    (2,529
    )
    
    
    (29,321
    )Net (loss)/income
    
    
    (41,754
    )
    
    
    (17,245
    )
    
    
    (8,659
    )
    
    
    (79,505
    )
    
    
    6,308
    
    
    
    13,312
    
    
    
    20,127
    
    
    
    (7,089
    )
    
    
    (22,934
    )
    
    
    5,241
    
    
    
    12,426
    
    
    
    102,402Net loss/(income) attributable to non-controlling interests
    
    
    226
    
    
    
    202
    
    
    
    227
    
    
    
    141
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    6
    
    
    
    14
    
    
    
    19
    
    
    
    16
    
    
    
    474
    
    
    
    496Net (loss)/income attributable to the equity shareholders
of GrenTech
    
    
    (41,528
    )
    
    
    (17,043
    )
    
    
    (8,432
    )
    
    
    (79,364
    )
    
    
    6,305
    
    
    
    13,309
    
    
    
    20,133
    
    
    
    (7,075
    )
    
    
    (22,915
    )
    
    
    5,257
    
    
    
    12,900
    
    
    
    102,898
 As ofMarch 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,
    
    
    March 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,
    
    
    March 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,2008
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010(in thousands of RMB)Cash and cash equivalents
    
    
    216,193
    
    
    
    43,089
    
    
    
    67,954
    
    
    
    293,353
    
    
    
    116,733
    
    
    
    149,514
    
    
    
    49,009
    
    
    
    469,454
    
    
    
    131,612
    
    
    
    188,767
    
    
    
    122,329
    
    
    
    380,098Restricted cash
    
    
    216,602
    
    
    
    188,817
    
    
    
    131,999
    
    
    
    122,368
    
    
    
    127,656
    
    
    
    182,567
    
    
    
    91,286
    
    
    
    103,035
    
    
    
    99,138
    
    
    
    76,655
    
    
    
    77,874
    
    
    
    90,132Accounts receivable, net
    
    
    890,095
    
    
    
    960,019
    
    
    
    959,887
    
    
    
    728,260
    
    
    
    911,156
    
    
    
    931,487
    
    
    
    956,612
    
    
    
    892,149
    
    
    
    887,504
    
    
    
    998,639
    
    
    
    1,009,811
    
    
    
    1,154,540Long-term accounts receivable
    
    
    369,329
    
    
    
    341,675
    
    
    
    387,573
    
    
    
    551,210
    
    
    
    524,936
    
    
    
    585,622
    
    
    
    612,276
    
    
    
    452,191
    
    
    
    420,678
    
    
    
    448,973
    
    
    
    453,567
    
    
    
    462,521Short-term bank loans
    
    
    506,050
    
    
    
    429,925
    
    
    
    448,083
    
    
    
    480,207
    
    
    
    423,965
    
    
    
    560,886
    
    
    
    586,159
    
    
    
    613,378
    
    
    
    532,586
    
    
    
    716,493
    
    
    
    639,145
    
    
    
    638,229Long-term debt
    
    
    150,000
    
    
    
    130,000
    
    
    
    130,000
    
    
    
    130,000
    
    
    
    130,000
    
    
    
    110,000
    
    
    
    110,000
    
    
    
    110,000
    
    
    
    110,000
    
    
    
    90,000
    
    
    
    90,000
    
    
    
    90,000
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##### Table of Contents



FINANCIAL OVERVIEW
 Revenues
   Year ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in millions, except for percentages)Wireless coverage solutions:Wireless coverage products
    
    
    499.0
    
    
    
    50.7
    
    
    
    781.9
    
    
    
    48.8
    
    
    
    814.0
    
    
    
    123.3
    
    
    
    47.3Installation services
    
    
    277.9
    
    
    
    28.2
    
    
    
    469.5
    
    
    
    29.3
    
    
    
    633.9
    
    
    
    96.0
    
    
    
    36.8Base station RF products
    
    
    221.6
    
    
    
    22.5
    
    
    
    407.0
    
    
    
    25.4
    
    
    
    297.0
    
    
    
    45.0
    
    
    
    17.3Provision for settlement discounts
    
    
    (13.8
    )
    
    
    (1.4
    )
    
    
    (55.5
    )
    
    
    (3.5
    )
    
    
    (23.9
    )
    
    
    (3.5
    )
    
    
    (1.4
    )Total (1)
    
    
    984.7
    
    
    
    100.0
    
    
    
    1,602.9
    
    
    
    100.0
    
    
    
    1,721.0
    
    
    
    260.8
    
    
    
    100.0
 
 (1)
    
    Includes an insignificant amount of revenue generated from our Internet and Internet-based real
estate agent businesses in 2010. Wireless Coverage Products and Services.
 Base station RF products.
 Cost of Revenues
   -50-




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##### Table of Contents



Year ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in millions, except for percentages)Wireless coverage solutions:Wireless coverage products
    
    
    375.5
    
    
    
    50.0
    
    
    
    575.4
    
    
    
    47.0
    
    
    
    606.0
    
    
    
    91.8
    
    
    
    47.9Installation services
    
    
    186.2
    
    
    
    24.8
    
    
    
    308.1
    
    
    
    25.2
    
    
    
    413.7
    
    
    
    62.7
    
    
    
    32.7Base station RF products
    
    
    189.7
    
    
    
    25.2
    
    
    
    340.5
    
    
    
    27.8
    
    
    
    245.5
    
    
    
    37.2
    
    
    
    19.4Total
    
    
    751.4
    
    
    
    100.0
    
    
    
    1,224.0
    
    
    
    100.0
    
    
    
    1,265.2
    
    
    
    191.7
    
    
    
    100.0
 Wireless Coverage Products and Services.
  Base Station RF Products.
 Operating Expenses
  Year ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in millions, except for percentages)Research and development costs
    
    
    70.3
    
    
    
    19.3
    
    
    
    59.9
    
    
    
    18.6
    
    
    
    71.6
    
    
    
    10.9
    
    
    
    22.6Sales and distribution expenses
    
    
    138.5
    
    
    
    38.1
    
    
    
    180.5
    
    
    
    56.1
    
    
    
    166.6
    
    
    
    25.2
    
    
    
    52.6General and administrative expenses
    
    
    127.0
    
    
    
    35.0
    
    
    
    81.5
    
    
    
    25.3
    
    
    
    78.5
    
    
    
    11.9
    
    
    
    24.8Impairment of goodwill
    
    
    27.6
    
    
    
    7.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    363.4
    
    
    
    100.0
    
    
    
    321.9
    
    
    
    100.0
    
    
    
    316.7
    
    
    
    48.0
    
    
    
    100.0
 Research and Development Costs .
 Sales and Distribution Expenses .
  -51-




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##### Table of Contents



General and Administrative Expenses .
 Impairment of Goodwill .
 Interest Expense
    Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Bank loan interest
    
    
    35,186
    
    
    
    35,156
    
    
    
    39,007
    
    
    
    5,910Receivable discounting fee (1)
    
    
    13,521
    
    
    
    15,660
    
    
    
    14,835
    
    
    
    2,248Financial charges on bills financing
    
    
    1,763
    
    
    
    2,990
    
    
    
    1,706
    
    
    
    258Others (2)
    
    
    4,374
    
    
    
    2,960
    
    
    
    2,594
    
    
    
    393Total
    
    
    54,844
    
    
    
    56,766
    
    
    
    58,142
    
    
    
    8,809
 
 (1)
    
    We receive proceeds from the sale of accounts receivable and record a receivable discounting
fee. Discount on the sale of accounts receivable is recorded as interest expense in the
period during which it occurs. The increase of receivable discounting fee in 2009 as compared
to 2008 was due to an increase in accounts receivable sold during 2009. The decrease of
receivable discounting fee in 2010 as compared to 2009 was due to a decrease in accounts
receivable sold during 2010.(2)
    
    Others mainly consist of bank fees. Income Tax Expense
   -52-




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Non-controlling Interest
  Critical Accounting Policies
   -53-




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##### Table of Contents



Revenue Recognition .
 
    
    the risk and rewards are transferred;
 
    
    delivery has occurred;
 
    
    persuasive evidence of an arrangement exists;
 
    
    price to the buyer is fixed and determinable;
 
    
    collectibility is reasonably assured; and
 
    
    we have an enforceable legal right to receive the contractually specified amount in cash
attributable to the product sale.
   Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Balance at beginning of year
    
    
    10,657
    
    
    
    24,425
    
    
    
    53,624
    
    
    
    8,125Provision during the year
    
    
    13,768
    
    
    
    55,500
    
    
    
    23,888
    
    
    
    3,619Utilization during the year
    
    
    
    
    
    
    (26,301
    )
    
    
    (16,340
    )
    
    
    (2,476
    )Balance at end of year
    
    
    24,425
    
    
    
    53,624
    
    
    
    61,172
    
    
    
    9,268
 Allowance for Doubtful Accounts .
 Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Balance at beginning of year
    
    
    22,354
    
    
    
    25,323
    
    
    
    36,586
    
    
    
    5,543Derecognized on disposal of subsidiaries
    
    
    (11,017
    )
    
    
    
    
    
    
    
    
    
    
    Bad debt expense
    
    
    57,574
    
    
    
    11,916
    
    
    
    2,994
    
    
    
    454Written back during the year
    
    
    
    
    
    
    (653
    )
    
    
    
    
    
    
    Written off during the year
    
    
    (43,588
    )
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    25,323
    
    
    
    36,586
    
    
    
    39,580
    
    
    
    5,997
  -54-




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##### Table of Contents



Inventories .
  Provision for Warranties .
 Impairment of Long-lived Assets .
  -55-




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##### Table of Contents



Recoverability of the carrying amount of goodwill .
   Results of Operations
  Year ended December 31,2008
    
    
    2009
    
    
    2010(%)
    
    
    (%)
    
    
    (%)Revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenues
    
    
    (76.3
    )
    
    
    (76.4
    )
    
    
    (73.5
    )Gross profit
    
    
    23.7
    
    
    
    23.6
    
    
    
    26.5Other revenue
    
    
    
    
    
    
    0.2
    
    
    
    1.0Operating expenses:Research and development costs
    
    
    (7.1
    )
    
    
    (3.7
    )
    
    
    (4.2
    )Sales and distribution expenses
    
    
    (14.1
    )
    
    
    (11.3
    )
    
    
    (9.7
    )General and administrative expenses
    
    
    (12.9
    )
    
    
    (5.1
    )
    
    
    (4.6
    )Impairment of goodwill
    
    
    (2.8
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    (36.9
    )
    
    
    (20.1
    )
    
    
    (18.4
    )Operating (loss) income
    
    
    (13.2
    )
    
    
    3.7
    
    
    
    9.0Other (expense) income:Interest income
    
    
    3.2
    
    
    
    2.6
    
    
    
    1.6Interest expense
    
    
    (5.6
    )
    
    
    (3.5
    )
    
    
    (3.4
    )Investment income
    
    
    0.5
    
    
    
    
    
    
    
    Foreign currency exchange loss
    
    
    (1.1
    )
    
    
    (0.0
    )
    
    
    (0.0
    )Grant income
    
    
    1.5
    
    
    
    0.4
    
    
    
    0.1Total other expense
    
    
    (1.4
    )
    
    
    (0.5
    )
    
    
    (1.7
    )(Loss) income before income tax expense
    
    
    (14.6
    )
    
    
    3.2
    
    
    
    7.4Income tax expense
    
    
    (0.3
    )
    
    
    (1.2
    )
    
    
    (1.7
    )Net (loss) income
    
    
    (14.9
    )
    
    
    2.0
    
    
    
    5.6Net loss attributable to non-controlling interests
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.1Net (loss) income attributable to the equity shareholders of GrenTech
    
    
    (14.8
    )
    
    
    2.0
    
    
    
    5.7
 2010 compared to 2009
 Revenues.
  -56-




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##### Table of Contents



Cost of Revenues.
 Gross Profit.
 Research and Development Costs.
 Sales and Distribution Expenses.
 General and Administrative Expenses.
 Operating Income.
 Other Income/Expenses.
  -57-




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##### Table of Contents



Income Tax Expense.
 Net Loss Attributable to Non-controlling Interest.
 Net Income.
 2009 compared to 2008
 Revenues.
   Cost of Revenues.
 Gross Profit.
 Research and Development Costs.
 Sales and Distribution Expenses.
 General and Administrative Expenses.
  -58-




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##### Table of Contents



Impairment of Goodwill.
 Operating Income.
 Other Income/Expenses.
 Income Tax Expense.
 Net Loss Attributable to Non-controlling Interest.
 Net Income.
 Liquidity and Capital Resources
    -59-




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##### Table of Contents



Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Net cash provided by operating activities
    
    
    5,056
    
    
    
    90,731
    
    
    
    10,225
    
    
    
    1,548Net cash provided by (used in) investing activities
    
    
    28,113
    
    
    
    (45,338
    )
    
    
    (91,672
    )
    
    
    (13,890
    )Net cash (used in) provided by financing activities
    
    
    (52,085
    )
    
    
    130,919
    
    
    
    (7,312
    )
    
    
    (1,107
    )Cash and cash equivalents at the end of year
    
    
    293,353
    
    
    
    469,454
    
    
    
    380,098
    
    
    
    57,591
 Operating Activities
      -60-




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##### Table of Contents



Investing Activities
     Financing Activities
     Accounts Receivable and Receivable Selling
   As of December 31, 2010(RMB)
    
    
    (US$)
    
    
    (%)(in millions, except for percentages)China Mobile group
    
    
    617.1
    
    
    
    93.5
    
    
    
    38.5China Unicom group
    
    
    507.7
    
    
    
    76.9
    
    
    
    31.6China Telecom group
    
    
    260.7
    
    
    
    39.5
    
    
    
    16.2Others
    
    
    219.1
    
    
    
    33.2
    
    
    
    13.7Total
    
    
    1,604.6
    
    
    
    243.1
    
    
    
    100.0
  -61-




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##### Table of Contents



As of December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in millions, except for percentages)Less than one year
    
    
    571.9
    
    
    
    45.8
    
    
    
    773.9
    
    
    
    57.3
    
    
    
    828.3
    
    
    
    125.5
    
    
    
    51.6Between one to two years
    
    
    392.1
    
    
    
    31.4
    
    
    
    232.4
    
    
    
    17.2
    
    
    
    374.9
    
    
    
    56.8
    
    
    
    23.4Between two to three years
    
    
    184.4
    
    
    
    14.8
    
    
    
    236.7
    
    
    
    17.5
    
    
    
    167.4
    
    
    
    25.3
    
    
    
    10.4Over three years
    
    
    100.8
    
    
    
    8.0
    
    
    
    107.5
    
    
    
    8.0
    
    
    
    234.0
    
    
    
    35.5
    
    
    
    14.6Total
    
    
    1,249.2
    
    
    
    100.0
    
    
    
    1,350.5
    
    
    
    100.0
    
    
    
    1604.6
    
    
    
    243.1
    
    
    
    100.0
  As of December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in millions, except for percentages)Contractually due
    
    
    632.1
    
    
    
    50.6
    
    
    
    622.2
    
    
    
    46.1
    
    
    
    716.7
    
    
    
    108.6
    
    
    
    44.7Non-contractually due
    
    
    617.1
    
    
    
    49.4
    
    
    
    728.3
    
    
    
    53.9
    
    
    
    887.9
    
    
    
    134.5
    
    
    
    55.3Total
    
    
    1,249.2
    
    
    
    100.0
    
    
    
    1,350.5
    
    
    
    100.0
    
    
    
    1,604.6
    
    
    
    243.1
    
    
    
    100.0
      -62-




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##### Table of Contents



Inventories
   As of December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Raw materials
    
    
    163,589
    
    
    
    205,608
    
    
    
    137,981
    
    
    
    20,906Work in progress
    
    
    15,539
    
    
    
    8,055
    
    
    
    8,672
    
    
    
    1,314Finished goods
    
    
    341,491
    
    
    
    557,573
    
    
    
    496,612
    
    
    
    75,244Total
    
    
    520,619
    
    
    
    771,236
    
    
    
    643,265
    
    
    
    97,464
   -63-




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##### Table of Contents



Finished goods
    
    
    Work in progress
    
    
    Raw materials
    
    
    Total(RMB)
    
    
    (US$)
    
    
    (%)
    
    
    (RMB)
    
    
    (US$)
    
    
    (%)
    
    
    (RMB)
    
    
    (US$)
    
    
    (%)
    
    
    (RMB)
    
    
    (US$)
    
    
    (%)(in thousands, except for percentages)AgeLess than one year
    
    
    367,806
    
    
    
    55,728
    
    
    
    74.1
    %
    
    
    8,672
    
    
    
    1,314
    
    
    
    100.0
    %
    
    
    91,756
    
    
    
    13,902
    
    
    
    66.5
    %
    
    
    468,234
    
    
    
    70,945
    
    
    
    72.8
    %One to two years
    
    
    82,185
    
    
    
    12,452
    
    
    
    16.5
    %
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    35,591
    
    
    
    5,393
    
    
    
    25.8
    %
    
    
    117,776
    
    
    
    17,845
    
    
    
    18.3
    %Over two years
    
    
    46,621
    
    
    
    7,064
    
    
    
    9.4
    %
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    10,634
    
    
    
    1,611
    
    
    
    7.7
    %
    
    
    57,255
    
    
    
    8,675
    
    
    
    8.9
    %Total
    
    
    496,612
    
    
    
    75,244
    
    
    
    100.0
    %
    
    
    8,672
    
    
    
    1,314
    
    
    
    100.0
    %
    
    
    137,981
    
    
    
    20,906
    
    
    
    100.0
    %
    
    
    643,265
    
    
    
    97,465
    
    
    
    100.0
    %
 Borrowings
     Capital Expenditure and Contractual Commitments
   -64-




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##### Table of Contents



As of December 31, 2010Payment Due by PeriodTotal
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    After 3 YearsRMB
    
    
    US$
    
    
    RMB
    
    
    US$
    
    
    RMB
    
    
    US$
    
    
    RMB
    
    
    US$(in millions)Short-term bank loans
    
    
    591.0
    
    
    
    89.5
    
    
    
    591.0
    
    
    
    89.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt (1)
    
    
    124.0
    
    
    
    18.7
    
    
    
    26.7
    
    
    
    4.0
    
    
    
    97.3
    
    
    
    14.7
    
    
    
    
    
    
    
    Bills payable
    
    
    121.7
    
    
    
    18.4
    
    
    
    121.7
    
    
    
    18.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease commitments
    
    
    9.0
    
    
    
    1.3
    
    
    
    7.4
    
    
    
    1.1
    
    
    
    1.6
    
    
    
    0.2
    
    
    
    
    
    
    
    Other capital commitments
    
    
    1.8
    
    
    
    0.3
    
    
    
    1.8
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized income tax benefit
    
    
    87.3
    
    
    
    13.2
    
    
    
    87.3
    
    
    
    13.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    934.8
    
    
    
    141.4
    
    
    
    835.9
    
    
    
    126.5
    
    
    
    98.9
    
    
    
    14.9
    
    
    
    
    
    
    
    
 
 (1)
    
    The amount of long-term debt includes principal and interest. Interest is calculated
based on the prevailing market interest rates as of the relevant balance sheet dates. Off-Balance Sheet Arrangements and Contingent Liabilities
      Inflation
   -65-




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Quantitative and Qualitative Disclosure about Market Risk
 Foreign Exchange Risk .
 Interest Rate Risk .
 Credit Risk .
 Corporate Structure
  Taxation
   -66-




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Recent Accounting Pronouncements
       -67-




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##### Table of Contents



Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and senior management
  Directors and Executive Officers(1)
    
    Age
    
    PositionYingjie Gao
    
    
    55
    
    
    Chairman of the board and chief executive officerRong Yu
    
    
    46
    
    
    Director and chief financial officerQi Wang
    
    
    45
    
    
    Director and vice presidentJing Fang
    
    
    48
    
    
    Director and vice presidentCuiming Shi
    
    
    70
    
    
    Independent directorXiaohu You
    
    
    48
    
    
    Independent directorKin Kwong Mak
    
    
    49
    
    
    Independent director (audit committee financial expert)Qingchang Liu
    
    
    43
    
    
    Vice presidentKaichang Zou
    
    
    36
    
    
    Vice president
 
 (1)
    
    Professor Kunjie Zhuang resigned from our board of directors for personal reasons, effective
October 29, 2010. Yingjie Gao
 Rong Yu
  -68-




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##### Table of Contents



Qi Wang
 Jing Fang
 Cuiming Shi
 Xiaohu You
 Kin Kwong Mak
 Qingchang Liu
  -69-




---



##### Table of Contents



Kaichang Zou
  Board of Directors
  Audit Committee
  
    
    selecting the independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by the independent auditors;
 
    
    reviewing and approving all proposed related-party transactions;
 
    
    discussing the annual audited financial statements with management and the independent
auditors;
 
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
 
    
    meeting separately and periodically with management and the independent auditors;
 
    
    reviewing such other matters that are specifically delegated to our audit committee by
our board of directors from time to time; and
 
    
    reporting regularly to the full board of directors.
  -70-




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Compensation Committee
  
    
    reviewing and determining the compensation package for our senior executives;
 
    
    reviewing and making recommendations to our board with respect to the compensation of
our directors;
 
    
    reviewing and approving officer and director indemnification and insurance matters;
 
    
    reviewing and approving any employee loan in an amount equal to or greater than
RMB100,000; and
 
    
    reviewing periodically and approving any long-term incentive compensation or equity
plans, programs or similar arrangements, annual bonuses, employee pension and welfare
benefit plans.
 Corporate Governance and Nominating Committee
  
    
    identifying and recommending to the board nominees for election or re-election to the
board;
 
    
    making appointments to fill any vacancy on our board;
 
    
    reviewing annually with the board the current composition of the board in light of the
characteristics of independence, age, skills, experience and availability of service to us;
 
    
    identifying and recommending to the board any director to serve as a member of the
boards committees;
 
    
    advising the board periodically with respect to significant developments in the law and
practice of corporate governance as well as our compliance with applicable laws and
regulations, and making recommendations to the board on all matters of corporate governance
and on any corrective action to be taken; and
 
    
    monitoring compliance with our code of business conduct and ethics, including reviewing
the adequacy and effectiveness of our procedures to ensure proper compliance.
 Duties of Directors
   -71-




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Employment and Service Agreements
    Compensation
   Indemnification
   -72-




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##### Table of Contents



Share Option Scheme
  
    
    motivate the eligible participants to optimize their performance efficiency for the
benefit of our company; and
 
    
    attract and retain or otherwise maintain an on-going business relationship with the
eligible participants whose contributions are or will be beneficial to our long-term
growth.
  Eligible Participants
  
    
    any full-time or part-time employees, executives or officers of our company or any of
our subsidiaries;
 
    
    any directors, including independent and non-independent directors, of our company or
any of our subsidiaries;
 
    
    any advisers, consultants and agents to us or any of our subsidiaries; and
 
    
    such other persons who, in the sole opinion of our board of directors, will contribute
or have contributed to our development and operations and our quality of work, have shown
initiative and commitment in performing his/her duties, or have provided service or
contribution to our company for a specified length of time.
 Maximum Number of Shares
   -73-




---



##### Table of Contents



Price of Shares
  Restrictions on the Times of Grant of Options
  Transferability
  Exercise of Option and Duration of the Share Option Scheme
    -74-




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##### Table of Contents



Rights on Ceasing Employment or Death of an Employee
  
    
    by any reason other than death, ill-health, injury, disability or the termination of his
employment on one or more of the following grounds: he has been guilty of serious
misconduct, or has committed any act of bankruptcy or is unable to pay his debts or has
become insolvent or has made any arrangement or has compromised with his creditors
generally, or has been convicted of any criminal offence involving his integrity or honesty
or in relation to an employee of our company and/or any of our subsidiaries (if so
determined by our board of directors) on any other ground on which an employer would be
entitled to terminate his employment at common law or pursuant to any applicable laws or
under the grantees service contract with our company or our relevant subsidiary, or the
Special Termination Events, the grantee may exercise the option up to the entitlement of
the grantee as of the date of cessation (to the extent not already exercised) within a
period of one month from such cessation; or
 
    
    by reason of death, ill-health, injury or disability (all evidenced to the satisfaction
of our board of directors) and none of the Special Termination Events would be a ground for
termination of the grantees relationship with our company or any of our subsidiaries, the
grantee or his personal representative(s) may exercise the option within a period of 12
months from such cessation, which date shall be the last actual working day with us or our
subsidiary whether salary is paid in lieu of notice or not, failing which it will lapse.
  Rights on Takeover/Winding-Up
   Alteration of the Share Option Scheme
  Employees
  Share Ownership
  
    
    each of our executive officers and directors;
 
    
    each person known by us to beneficially own 5% or more of our ordinary shares; and
 
    
    all current directors and executive officers as a group.
  -75-




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##### Table of Contents



Shares beneficially owned (1)(2)Name
    
    Number of Shares
    
    
    %Directors and executive officers(3)Yingjie Gao (4)
    
    
    149,151,325
    
    
    
    26.5Rong Yu (5)
    
    
    59,673,550
    
    
    
    10.6Kunjie Zhuang (6)
    
    
    56,110,500
    
    
    
    10.0Qi Wang (7)(9)
    
    
    6,563,264
    
    
    
    1.2Jing Fang
    
    
    
    
    
    
    Cuiming Shi
    
    
    
    
    
    
    Xiaohu You
    
    
    
    
    
    
    Kin Kwong Mak
    
    
    
    
    
    
    Qingchang Liu
    
    
    
    
    
    
    Kaichang Zou
    
    
    
    
    
    
    All directors and executive officers as a group (8 persons)
    
    
    271,498,639
    
    
    
    48.2Principal shareholdersGuoren Industrial Developments Limited (4)
    
    
    149,151,325
    
    
    
    26.5Well Sino Enterprises Limited (5)(9)
    
    
    59,673,550
    
    
    
    10.6Leakey Investments Limited (8)(9)
    
    
    59,549,550
    
    
    
    10.6Drag Investments Limited (6)
    
    
    56,110,500
    
    
    
    10.0Heng Xing Yue Investments Limited (9)
    
    
    34,006,550
    
    
    
    6.0Wells Fargo & Company (10)
    
    
    95,305,425
    
    
    
    16.9
 
 (1)
    
    Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, and includes voting or investment power with respect to
the ordinary shares.(2)
    
    Percentage of beneficial ownership of each listed person is based on 563,244,750 ordinary
shares outstanding as of April 30, 2011, as well as the ordinary shares underlying share
options exercisable by such person within 60 days of April 30, 2011.(3)
    
    The address of our current executive officers and directors is c/o China GrenTech Corporation
Limited, 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Hi-Tech Park, Nanshan
District, Shenzhen 518057, Peoples Republic of China.(4)
    
    Mr. Yingjie Gao, our chairman and chief executive officer, beneficially owns 149,151,325
ordinary shares, which are held through his wholly-owned company, Guoren Industrial
Developments Limited. Guoren Industrial Developments Limited is a British Virgin Islands
company with its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd
Road, Nanshan District, Shenzhen 518057, Peoples Republic of China. Its principal business is
investment holding. Guoren Industrial Developments Limited is ultimately wholly-owned by The
GRRF Trust, a family trust established by Mr. Yingjie Gao, our chairman and chief executive
officer. Guoren Industrial Developments Limited, as the record holder, of which Mr. Gao is
the sole director, continues to have sole power to vote or to direct the vote and the sole
power to dispose or to direct the disposition with respect to such 149,151,325 ordinary
shares. Mr. Gao, as the sole director of Guoren Industrial Developments Limited, also acts as
the protector and the investment manager of The GRRF Trust. Credit Suisse Trust Limited acts
as the trustee of The GRRF Trust and disclaims beneficial ownership of our ordinary shares.
On August 31, 2009, Guoren Industrial Development Limited adopted a Rule10b5-1 Trading Plan ,
which expired on June 10, 2011. This share information is based upon a report on Schedule
13D/A filed by Guoren Industrial Developments Limited with the U.S. Securities and Exchange
Commission on January 19, 2010.(5)
    
    Ms. Rong Yu, our director and chief financial officer, beneficially owns 59,673,550 ordinary
shares, which are held indirectly through Heng Xing Yue Investments Limited and through her
wholly-owned company, Well Sino Enterprises Limited, which holds 35.2% of the outstanding
shares of Heng Xing Yue Investments Limited. Heng Xing Yue Investments Limited is the record
holder of 34,006,550 ordinary shares in our share capital. Ms. Rong Yu and Ms. Yin Huang are
directors of Heng Xing Yue Investments Limited. Each beneficial owner of Heng Xing Yue
Investments Limited has the voting rights with respect to the securities beneficially owned by
him or her. Wells Sino Enterprises Limited is a British Virgin Islands investment holding
company and is the record holder of 25,667,000 ordinary shares in our share capital. Ms. Rong
Yu is the sole director of Wells Sino Enterprises Limited. This share information is based
upon a report on Schedule 13G/A filed by Heng Xing Yue Investments Limited with the U.S.
Securities and Exchange Commission on February 11, 2011.  -76-




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##### Table of Contents



(6)
    
    Professor Kunjie Zhuang resigned from our board of directors in October 2010. Professor
Zhuang beneficially owns 56,110,500 ordinary shares, which are held through his majority-owned
company, Drag Investments Limited. Drag Investments Limited is a British Virgin Islands
company with its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd
Road, Nanshan District, Shenzhen 518057, Peoples Republic of China. Its principal business
is investment holding. Drag Investments Limited is 80%-owned by Professor Kunjie Zhuang, and
20%-owned by Mr. Haifan Zhuang, a son of Professor Kunjie Zhuang. Each beneficial owner of
Drag Investments Limited has the voting rights with respect to the securities beneficially
owned by him. Professor Kunjie Zhuang and Mr. Haifan Zhuang are both directors of Drag
Investments Limited. This share information is based upon a report on Schedule 13G/A filed by
Drag Investments Limited with the U.S. Securities and Exchange Commission on January 15, 2010.(7)
    
    Mr. Qi Wang, our director and vice president, beneficially owns 6,563,264 ordinary shares,
which are held indirectly through Heng Xing Yue Investments Limited.(8)
    
    Leakey Investment Limited, a British Virgin Islands investment holding company wholly-owned
by Ms. Yin Huang, beneficially owns 59,549,550 ordinary shares, of which 25,543,000 ordinary
shares are held directly by Leakey Investment Limited and 34,006,550 are held indirectly
through Heng Xing Yue Investments Limited. Leakey Investment Limited holds 35.2% of the
outstanding shares of Heng Xing Yue Investments Limited. Ms. Rong Yu and Ms. Yin Huang are
directors of Heng Xing Yue Investments Limited. Each beneficial owner of Heng Xing Yue
Investments Limited has the voting rights with respect to the securities beneficially owned by
him or her. Ms. Ying Huang is the sole director of Leakey Investments Limited. The business
address of Ms. Ying Huang is 15th Floor, Block A, Guoren Building, Keji Central 3rd Road,
Hi-Tech Park, Nanshan District, Shenzhen 518057, Peoples Republic of China. This share
information is based upon a report on Schedule 13G/A filed by Heng Xing Yue Investments
Limited with the U.S. Securities and Exchange Commission on February 11, 2011.(9)
    
    Heng Xing Yue Investments Limited, a British Virgin Islands investment holding company with
its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Nanshan
District, Shenzhen 518057, Peoples Republic of China, is the record holder of 34,006,550
ordinary shares. Ms. Rong Yu and Ms. Yin Huang are directors of Heng Xing Yue Investments
Limited. Heng Xing Yue Investments Limited is held by various shareholders including Wells
Sino Enterprises Limited as to 35.2%, Leakey Investment Limited as to 35.2% and Talenthome
Management Limited, a company incorporated under the laws of the British Virgin Islands and
wholly-owned by Mr. Qi Wang, as to 19.3%. Each beneficial owner of Heng Xing Yue Investments
Limited has the voting rights with respect to the securities beneficially owned by him or her.
This share information is based upon a report on Schedule 13G/A filed by Heng Xing Yue
Investments Limited with the U.S. Securities and Exchange Commission on February 11, 2011.(10)
    
    Represents 95,305,425 ordinary shares (in the form of ADSs) held by Wells Fargo & Company,
which is a Delaware company with its business address at 420 Montgomery Street, San Francisco,
California 94163, U.S.A. This share information is based upon a report on Form 13F-HR/A filed
by Wells Fargo & Company with the U.S. Securities and Exchange Commission on March 4, 2011. 
 Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 MAJOR SHAREHOLDERS
   -77-




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##### Table of Contents



RELATED PARTY TRANSACTIONS
 Share-based compensation
  Our Related-Party Transaction Policies
  Divestiture of Network Coverage Module Manufacturing Subsidiaries, Lake Communication and Lake
Microwave
   Establishment of Shenzhen GrenTech IOT Network Corporation Limited
   -78-




---



##### Table of Contents



Interests of Experts and Counsel
  
 Item 8. FINANCIAL INFORMATION
  Legal Proceedings
  Dividend Policy
  
    
    the level of our cash and retained earnings;
 
    
    our expected financial performance;
 
    
    our projected levels of capital expenditure and other investment plans;
 
    
    the adequacy of our working capital; and
 
    
    the dividend yield of similarly listed companies with similar growth prospects as well
as comparable providers of wireless coverage products and services globally.
   -79-




---



##### Table of Contents



Item 9. THE OFFER AND LISTING
    Price per ADS (US$)High
    
    
    LowAnnual2006 (from listing date)
    
    
    22.50
    
    
    
    8.212007
    
    
    19.00
    
    
    
    6.892008
    
    
    9.12
    
    
    
    0.782009
    
    
    6.47
    
    
    
    0.902010
    
    
    4.69
    
    
    
    1.51QuarterlyFirst Quarter, 2009
    
    
    1.50
    
    
    
    0.90Second Quarter, 2009
    
    
    4.00
    
    
    
    1.33Third Quarter, 2009
    
    
    6.47
    
    
    
    2.80Fourth Quarter, 2009
    
    
    5.78
    
    
    
    3.42First Quarter, 2010
    
    
    4.69
    
    
    
    2.96Second Quarter, 2010
    
    
    3.15
    
    
    
    1.56Third Quarter, 2010
    
    
    2.31
    
    
    
    1.51
  -80-




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##### Table of Contents



Price per ADS (US$)High
    
    
    LowFourth Quarter, 2010
    
    
    3.71
    
    
    
    2.06First Quarter, 2011
    
    
    3.70
    
    
    
    2.83MonthlyDecember 2010
    
    
    3.36
    
    
    
    2.72January 2011
    
    
    3.50
    
    
    
    2.83February 2011
    
    
    3.39
    
    
    
    2.85March 2011
    
    
    3.70
    
    
    
    2.86April 2011
    
    
    3.57
    
    
    
    3.00May 2011
    
    
    3.28
    
    
    
    2.23
 
 Item 10. ADDITIONAL INFORMATION
 SHARE CAPITAL
  MEMORANDUM AND ARTICLES OF ASSOCIATION
  Mergers and Similar Arrangements
    MATERIAL CONTRACTS
  EXCHANGE CONTROLS
    -81-




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##### Table of Contents



TAXATION
  Cayman Islands Taxation
  PRC Taxation
  United States Federal Income Taxation
   
    
    dealers in stocks, securities or currencies;
 
    
    securities traders that use a mark-to-market accounting method;
 
    
    banks and financial institutions;
 
    
    insurance companies;
 
    
    regulated investment companies;
  -82-




---



##### Table of Contents




    
    real estate investment trusts;
 
    
    tax-exempt organizations;
 
    
    persons holding shares or ADSs as part of a hedging or conversion transaction or a
straddle;
 
    
    persons deemed to sell shares or ADSs under the constructive sale provisions of the
Code;
 
    
    persons who or that are, or may become, subject to the expatriation provisions of the
Code;
 
    
    persons whose functional currency is not the United States dollar; and
 
    
    direct, indirect or constructive owners of 10% or more of the total combined voting
power of all classes of our voting stock.
   
    
    an individual citizen or resident of the United States;
 
    
    a corporation or other entity classified as a corporation for United States federal
income tax purposes created or organized in or under the laws of the United States, any
state thereof or the District of Columbia;
 
    
    an estate, the income of which is subject to United States federal income taxation
regardless of its source; or
 
    
    a trust, if a court within the United States is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons (within the meaning of
the Code) have the authority to control all substantial decisions of the trust, or if a
valid election is in effect to be treated as a U.S. person.
   U.S. Holders
 Taxation of Dividends and Other Distributions on the Shares or ADSs
   -83-




---



##### Table of Contents



Taxation of Disposition of Shares or ADSs
  Passive Foreign Investment Company
     -84-




---



##### Table of Contents



Information Reporting and Backup Withholding
    -85-




---



##### Table of Contents



DIVIDENDS AND PAYING AGENTS
  STATEMENT BY EXPERTS
  DOCUMENTS ON DISPLAY
  SUBSIDIARY INFORMATION
  
 Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 Fees and charges our ADS holders may have to pay
   -86-




---



##### Table of Contents



Persons depositing or withdrawing shares must pay:
    
    For:Up to US$0.05 per ADS
    
        Issuance of ADSs, including
issuances resulting from a distribution of
ordinary shares or rights or other
property    Cancellation or withdrawals of ADSs    Distribution of ADSs pursuant to
stock dividends, free stock distributions
or exercise of rights    Distributions of securities other
than ADSs or rights to purchase additional
ADSsUp to US$0.02 per ADS
    
        Distributions of cash dividends or
other cash distributions    Annual depositary servicesUS$1.5 per certificate presented for transfer
    
        Transfer of American depositary
receipts, or ADRsTaxes and other governmental charges the
depositary or the custodian have to pay on
any ADS or ordinary shares underlying an
ADS, for example, stock transfer taxes,
stamp duty or withholding taxes
    
        As necessaryAny charges, fees or expenses incurred 
by the depositary or its agents for 
servicing the deposited securities
    
        As necessary
 Fees and other payments made by the depositary to us
  
 PART II
 
 Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 Item 15. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   -87-




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Managements Annual Report on Internal Control over Financial Reporting
   
    
    Insufficient competent accounting personnel in applying U.S. GAAP in our financial
reporting process
     -88-




---



##### Table of Contents



Remediation Plan
  
    
    Recruit more competent accounting personnel who are proficient in applying U.S. GAAP in
the financial reporting process to assure our financial statements are prepared in
compliance with U.S. GAAP.
 
    
    Establish a team responsible for U.S. financial reporting matters.
 
    
    Provide additional training on U.S. GAAP knowledge to accounting personnel.
   Changes in Internal Control over Financial Reporting
  
 Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 Item 16B. CODE OF ETHICS
  
 Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit Fees
    
    
    Audit-Related Fees
    
    
    Tax Fees
    
    
    Other Fees(in millions of RMB)2009
    
    
    5.5
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    4.7
    
    
    
    
    
    
    
    
    
    
    
    
   -89-




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##### Table of Contents



Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 Total Number
    
    
    Approximateof ADSs
    
    
    Dollar Value ofTotal Number
    
    
    
    
    
    
    
    
    
    
    Purchased as
    
    
    ADSs that Mayof American
    
    
    
    
    
    
    
    
    
    
    Part of Publicly
    
    
    Yet BeDepositary
    
    
    Average
    
    
    Average
    
    
    Announced
    
    
    PurchasedShares
    
    
    Price Paid
    
    
    Price Paid
    
    
    Plans or
    
    
    Under thePeriod
    
    Purchased(1)
    
    
    Per ADS
    
    
    Per ADS(2)
    
    
    Programs
    
    
    ProgramsUS$
    
    
    RMB
    
    
    
    
    
    
    US$2007
    
    
    437,440
    
    
    
    8.2480
    
    
    
    60.8375
    
    
    
    437,440
    
    
    
    4,391,9962008
    
    
    483,409
    
    
    
    3.0251
    
    
    
    20.7840
    
    
    
    920,849
    
    
    
    2,292,6352009
    
    
    473,666
    
    
    
    2.5635
    
    
    
    17.5067
    
    
    
    1,394,515
    
    
    
    6,336,137January 1 through January 31, 2010
    
    
    53,800
    
    
    
    3.2229
    
    
    
    22.0021
    
    
    
    1,448,315
    
    
    
    6,162,745February 1 through February 28, 2010
    
    
    102,641
    
    
    
    3.2152
    
    
    
    21.9463
    
    
    
    1,550,956
    
    
    
    5,832,734March 1 through March 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April 1 through April 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 1 through May 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1 through June 30, 2010
    
    
    11,500
    
    
    
    1.6388
    
    
    
    11.1135
    
    
    
    1,562,456
    
    
    
    5,813,887July 1 through July 31, 2010
    
    
    150,860
    
    
    
    1.8140
    
    
    
    12.2868
    
    
    
    1,713,316
    
    
    
    5,540,227August 1 through August 31, 2010
    
    
    183,973
    
    
    
    1.9324
    
    
    
    13.1537
    
    
    
    1,897,289
    
    
    
    5,184,718September 1 through September 30, 2010
    
    
    150,821
    
    
    
    1.8913
    
    
    
    12.6537
    
    
    
    2,048,110
    
    
    
    4,899,470October1 through October 31, 2010
    
    
    163,000
    
    
    
    2.3183
    
    
    
    15.4647
    
    
    
    2,211,110
    
    
    
    4,521,587November 1 through November 30, 2010
    
    
    221,450
    
    
    
    2.8282
    
    
    
    18.8556
    
    
    
    2,432,560
    
    
    
    3,895,282December 1 through December 31, 2010
    
    
    37,650
    
    
    
    2.9140
    
    
    
    19.3644
    
    
    
    2,470,210
    
    
    
    3,785,570Total
    
    
    2,470,210
    
    
    
    3.5767
    
    
    
    25.1480
    
    
    
    2,470,210
 
 (1)
    
    Our companys ADS to ordinary share ratio is one ADS for every 25 ordinary shares.(2)
    
    The conversion from United States dollars into Renminbi (RMB) is based on the noon buying
rates adopted by our company for the reporting of our periodic results as follows: Exchange rate US$Period
    
    Period ended
    
    
    to RMBJanuary 1 through January 31, 2010
    
    January 31, 2010
    
    
    6.8268February1 through February 28, 2010
    
    February 28, 2010
    
    
    6.8258March 1 through March 31, 2010
    
    March 31, 2010
    
    
    April 1 through April 30, 2010
    
    April 30, 2010
    
    
    May 1 through May 31, 2010
    
    May 31, 2010
    
    
    June 1 through June 30, 2010
    
    June 30, 2010
    
    
    6.7815July 1 through July 31, 2010
    
    July 31, 2010
    
    
    6.7733August 1 through August 31, 2010
    
    August 31, 2010
    
    
    6.8069September 1 through September 30, 2010
    
    September 30, 2010
    
    
    6.6905October 1 through October 31, 2010
    
    October 31, 2010
    
    
    6.6707November 1 through November 30, 2010
    
    November 30, 2010
    
    
    6.6670December 1 through December 31, 2010
    
    December 31, 2010
    
    
    6.6000
 
 (3)
    
    On September 21, 2007, we announced a share repurchase program authorized by our board of
directors. Under the terms of the approved share repurchase program, we were authorized to
repurchase up to US$8.0 million worth of our issued and outstanding ADSs from time to time in
open-market transactions on NASDAQ. The share repurchase program did not have an expiration
date and could be modified or discontinued at any time by our board of directors.  -90-




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##### Table of Contents



On June 4, 2009, we announced a second share repurchase program authorized by our board of
directors. Under the terms of the approved share repurchase program, we may repurchase up to
US$7.0 million worth of our issued and outstanding ADSs from time to time in open-market
transactions on NASDAQ. This share repurchase program does not have an expiration date and may
be modified or discontinued at any time by our board of directors. This share repurchase
program supersedes the previous share repurchase program announced on September 21, 2007. 
 Item 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
       -91-




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Item 16G. CORPORATE GOVERNANCE
      
 PART III
 
 Item 17. FINANCIAL STATEMENTS
  
 Item 18. FINANCIAL STATEMENTS
  
 Item 19. EXHIBITS
 Exhibit No.
    
    Description of Exhibit1.1
    
    
    Amended and restated memorandum and articles of association of the Registrant (1)2.1
    
    
    Form of share certificate (1)2.2
    
    
    Form of deposit agreement, including form of American Depositary Receipt (2)4.1
    
    
    Contract for grant of land use right of Shenzhen Municipality (3)4.2
    
    
    Translation of share transfer agreement for Lake Communication Limited by and
between Shenzhen GrenTech Company Limited and Haifan Zhuang dated December 17,
2008 and related disposition of liabilities agreement (4)4.3
    
    
    Share option scheme (5)8.1
    
    
    List of subsidiaries11.1
    
    
    Code of ethics (6)12.1
    
    
    CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    
    CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    
    CEO and CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of
200215.1
    
    
    Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company, Independent
Registered Public Accounting Firm15.2
    
    
    Consent of KPMG, Independent Registered Public Accounting Firm15.3
    
    
    Letter of KPMG dated June 30, 2011
 
 (1)
    
    Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-132381)
filed with the SEC in connection with our global offering in November 2004.  -92-




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##### Table of Contents



(2)
    
    Incorporated by reference to our Registration Statement on Form F-6 (File No. 333-132385)
filed with the SEC with respect to American Depositary Shares representing our ordinary
shares.(3)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended
December 31, 2007 filed with the SEC on July 15, 2008.(4)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended
December 31, 2008 filed with the SEC on June 30, 2009.(5)
    
    Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-132381)
filed with the SEC in connection with our global offering in November 2004.(6)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended
December 31, 2006 filed with the SEC on May 4, 2007.  -93-




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##### Table of Contents



SIGNATURE
  China GrenTech Corporation Limited/s/ Rong YuName:
    Rong YuTitle:
    Chief Financial OfficerDate: June 30, 2011  -94-




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##### Table of Contents



Table of Contents
 INDEX TO THE FINANCIAL STATEMENTS
 Reports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    
    F-4Consolidated Statements of Operations for the years ended December 31, 2008, 2009 and 2010
    
    
    F-5Consolidated Statements of Shareholders Equity for the years ended December 31, 2008, 2009 and 2010
    
    
    F-6Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
  F - 1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    PricewaterhouseCoopers
Zhong Tian CPAs Limited Company
   F - 2




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
     
   F - 3




---



##### Table of Contents



China GrenTech Corporation Limited and Subsidiaries
 
 Consolidated Balance Sheets
 as of December 31, 2009 and 2010
 Note
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    USDAssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    469,454
    
    
    
    380,098
    
    
    
    57,591Restricted cash
    
    
    3
    
    
    
    103,035
    
    
    
    90,132
    
    
    
    13,656Accounts receivable, net
    
    
    4
    
    
    
    892,149
    
    
    
    1,154,540
    
    
    
    174,931Inventories
    
    
    5
    
    
    
    771,236
    
    
    
    643,265
    
    
    
    97,464Prepaid expenses and other current assets
    
    
    6
    
    
    
    81,835
    
    
    
    70,735
    
    
    
    10,717Deferred tax assets
    
    
    7
    
    
    
    34,958
    
    
    
    36,218
    
    
    
    5,488Total current assets
    
    
    
    
    
    
    2,352,667
    
    
    
    2,374,988
    
    
    
    359,847Property, plant and equipment, net
    
    
    8
    
    
    
    444,578
    
    
    
    436,290
    
    
    
    66,105Construction in progress
    
    
    8
    
    
    
    3,961
    
    
    
    63,008
    
    
    
    9,547Lease prepayments, net
    
    
    9
    
    
    
    80,422
    
    
    
    78,721
    
    
    
    11,927Intangible assets, net
    
    
    10
    
    
    
    186
    
    
    
    
    
    
    
    Prepayment for fixed assets
    
    
    
    
    
    
    3,342
    
    
    
    3,475
    
    
    
    527Long-term accounts receivable
    
    
    4
    
    
    
    452,191
    
    
    
    462,521
    
    
    
    70,079Total assets
    
    
    
    
    
    
    3,337,347
    
    
    
    3,419,003
    
    
    
    518,032LiabilitiesCurrent liabilitiesShort-term bank loans
    
    
    13
    
    
    
    613,378
    
    
    
    638,229
    
    
    
    96,702Current portion of long-term bank loan
    
    
    14
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    3,030Accounts payable
    
    
    
    
    
    
    490,750
    
    
    
    529,282
    
    
    
    80,194Bills payable
    
    
    2
    (s)
    
    
    220,329
    
    
    
    121,656
    
    
    
    18,433Accrued expenses and other payables
    
    
    11
    
    
    
    304,299
    
    
    
    340,303
    
    
    
    51,561Amounts due to related parties
    
    
    20
    (a)
    
    
    34,000
    
    
    
    25,284
    
    
    
    3,831Income tax payable
    
    
    
    
    
    
    73,063
    
    
    
    97,247
    
    
    
    14,734Total current liabilities
    
    
    
    
    
    
    1,755,819
    
    
    
    1,772,001
    
    
    
    268,485Long-term bank loan
    
    
    14
    
    
    
    110,000
    
    
    
    90,000
    
    
    
    13,636Deferred tax liabilities
    
    
    7
    
    
    
    4,679
    
    
    
    4,598
    
    
    
    697Total liabilities
    
    
    
    
    
    
    1,870,498
    
    
    
    1,866,599
    
    
    
    282,818Commitments and contingencies
    
    
    24EquityOrdinary shares US$0.00002 par value; 

2,500,000,000 shares authorized, 

625,000,000 issued as of December 31,
2009 and 2010 respectively; 590,137,125
and 563,244,750 outstanding as of
December 31, 2009 and 2010 respectively
    
    
    
    
    
    
    103
    
    
    
    103
    
    
    
    16Additional paid-in capital
    
    
    
    
    
    
    861,646
    
    
    
    864,112
    
    
    
    130,926Statutory reserves
    
    
    25
    
    
    
    148,697
    
    
    
    161,519
    
    
    
    24,473Retained earnings
    
    
    
    
    
    
    496,993
    
    
    
    582,311
    
    
    
    88,229Treasury stock at cost, 34,862,875
shares and 61,755,250 shares as of
December 31, 2009 and 2010 respectively
    
    
    26
    
    
    
    (44,930
    )
    
    
    (61,976
    )
    
    
    (9,390
    )Total equity attributable to the
equity shareholders of China
GrenTech Corporation Limited, or
GrenTech
    
    
    
    
    
    
    1,462,509
    
    
    
    1,546,069
    
    
    
    234,254Non-controlling interests
    
    
    
    
    
    
    4,340
    
    
    
    6,335
    
    
    
    960Total equity
    
    
    
    
    
    
    1,466,849
    
    
    
    1,552,404
    
    
    
    235,214Total liabilities and equity
    
    
    
    
    
    
    3,337,347
    
    
    
    3,419,003
    
    
    
    518,032
   F - 4




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##### Table of Contents



China GrenTech Corporation Limited and Subsidiaries
 
 Consolidated Statements of Operations
for the years ended December 31, 2008, 2009 and 2010
 Note
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    USDRevenues
    
    17
    
    
    984,657
    
    
    
    1,602,943
    
    
    
    1,720,974
    
    
    
    260,754Cost of revenues
    
    17
    
    
    (751,367
    )
    
    
    (1,223,973
    )
    
    
    (1,265,247
    )
    
    
    (191,704
    )Gross profit
    
    
    
    
    233,290
    
    
    
    378,970
    
    
    
    455,727
    
    
    
    69,050Other revenue
    
    
    
    
    
    
    
    
    3,344
    
    
    
    16,594
    
    
    
    2,514Operating expenses:Research and development costs
    
    
    
    
    (70,232
    )
    
    
    (59,899
    )
    
    
    (71,590
    )
    
    
    (10,847
    )Sales and distribution expenses
    
    
    
    
    (138,524
    )
    
    
    (180,525
    )
    
    
    (166,592
    )
    
    
    (25,241
    )General and administrative expenses
    
    
    
    
    (127,028
    )
    
    
    (81,506
    )
    
    
    (78,478
    )
    
    
    (11,891
    )Impairment of goodwill
    
    
    
    
    (27,589
    )
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    
    
    (363,373
    )
    
    
    (321,930
    )
    
    
    (316,660
    )
    
    
    (47,979
    )Operating income (loss)
    
    
    
    
    (130,083
    )
    
    
    60,384
    
    
    
    155,661
    
    
    
    23,585Other income (expense)Interest income
    
    
    
    
    31,257
    
    
    
    40,997
    
    
    
    27,770
    
    
    
    4,208Interest expense
    
    
    
    
    (54,844
    )
    
    
    (56,766
    )
    
    
    (58,142
    )
    
    
    (8,809
    )Investment income
    
    
    
    
    4,873
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency exchange loss
    
    
    
    
    (10,418
    )
    
    
    (211
    )
    
    
    (597
    )
    
    
    (90
    )Grant income
    
    
    
    
    15,209
    
    
    
    6,322
    
    
    
    2,157
    
    
    
    327Total other expense
    
    
    
    
    (13,923
    )
    
    
    (9,658
    )
    
    
    (28,812
    )
    
    
    (4,364
    )Income (loss) before income tax
expense
    
    
    
    
    (144,006
    )
    
    
    50,726
    
    
    
    126,849
    
    
    
    19,221Income tax expense
    
    7
    
    
    (3,157
    )
    
    
    (18,068
    )
    
    
    (29,714
    )
    
    
    (4,502
    )Net income (loss)
    
    
    
    
    (147,163
    )
    
    
    32,658
    
    
    
    97,135
    
    
    
    14,719Net loss attributable to
non-controlling interests
    
    
    
    
    796
    
    
    
    14
    
    
    
    1,005
    
    
    
    152Net income (loss) attributable to the
equity shareholders of GrenTech
    
    
    
    
    (146,367
    )
    
    
    32,672
    
    
    
    98,140
    
    
    
    14,871Earnings (loss) per share- Basic
    
    19
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.17
    
    
    
    0.03- Diluted
    
    19
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.16
    
    
    
    0.02Weighted average number of ordinary
shares outstanding:- Basic
    
    19
    
    
    610,158,841
    
    
    
    595,536,733
    
    
    
    581,814,594
    
    
    
    581,814,594- Diluted
    
    19
    
    
    610,158,841
    
    
    
    604,781,041
    
    
    
    595,199,449
    
    
    
    595,199,449
   F - 5




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##### Table of Contents



China GrenTech Corporation Limited and Subsidiaries
 
 Consolidated Statements of Shareholders Equity
 for the years ended December 31, 2008, 2009 and 2010
  Equityattributable toChinaGrenTechNumber of
    
    
    
    
    
    
    Additional
    
    
    Statutory
    
    
    Retained
    
    
    
    
    
    
    Corporation
    
    
    Non-controllingNote
    
    
    shares
    
    
    Amount
    
    
    paid-in capital
    
    
    reserves
    
    
    earnings
    
    
    Treasury stock
    
    
    Limited
    
    
    Interests
    
    
    Total equityRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance as of January 1, 2008
    
    
    
    
    
    
    614,064,000
    
    
    
    103
    
    
    
    853,476
    
    
    
    146,077
    
    
    
    613,308
    
    
    
    (26,447
    )
    
    
    1,586,517
    
    
    
    5,763
    
    
    
    1,592,280Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (146,367
    )
    
    
    
    
    
    
    (146,367
    )
    
    
    (796
    )
    
    
    (147,163
    )Share repurchased during the year
    
    
    
    
    
    
    (12,085,225
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,097
    )
    
    
    (10,097
    )
    
    
    
    
    
    
    (10,097
    )Share-based compensation, net of
nil tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,194
    
    
    
    
    
    
    
    3,194Appropriation to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,511
    
    
    
    (2,511
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,430
    )
    
    
    6,430
    
    
    
    
    
    
    
    
    
    
    
    (613
    )
    
    
    (613
    )Balance as of December 31, 2008
    
    
    
    
    
    
    601,978,775
    
    
    
    103
    
    
    
    856,670
    
    
    
    142,158
    
    
    
    470,860
    
    
    
    (36,544
    )
    
    
    1,433,247
    
    
    
    4,354
    
    
    
    1,437,601Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,672
    
    
    
    
    
    
    
    32,672
    
    
    
    (14
    )
    
    
    32,658Share repurchased during the year
    
    
    26
    
    
    
    (11,841,650
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,386
    )
    
    
    (8,386
    )
    
    
    
    
    
    
    (8,386
    )Share-based compensation, net of
nil tax
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    4,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,976
    
    
    
    
    
    
    
    4,976Appropriation to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,539
    
    
    
    (6,539
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2009
    
    
    
    
    
    
    590,137,125
    
    
    
    103
    
    
    
    861,646
    
    
    
    148,697
    
    
    
    496,993
    
    
    
    (44,930
    )
    
    
    1,462,509
    
    
    
    4,340
    
    
    
    1,466,849Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,140
    
    
    
    
    
    
    
    98,140
    
    
    
    (1,005
    )
    
    
    97,135Initial capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    3,000Share repurchased during the year
    
    
    26
    
    
    
    (26,892,375
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,046
    )
    
    
    (17,046
    )
    
    
    
    
    
    
    (17,046
    )Share-based compensation, net of
nil tax
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    2,466
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,466
    
    
    
    
    
    
    
    2,466Appropriation to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,822
    
    
    
    (12,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2010
    
    
    
    
    
    
    563,244,750
    
    
    
    103
    
    
    
    864,112
    
    
    
    161,519
    
    
    
    582,311
    
    
    
    (61,976
    )
    
    
    1,546,069
    
    
    
    6,335
    
    
    
    1,552,404Balance as of December 31, 2010 -
US$
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    130,926
    
    
    
    24,473
    
    
    
    88,229
    
    
    
    (9,390
    )
    
    
    234,254
    
    
    
    960
    
    
    
    235,214
   F - 6




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##### Table of Contents



China GrenTech Corporation Limited and Subsidiaries
 
 Consolidated Statements of Cash Flows
 for the years ended December 31, 2008, 2009 and 2010
  Note
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    USDCash flow from operating activitiesNet income (loss)
    
    
    
    
    
    
    (147,163
    )
    
    
    32,658
    
    
    
    97,135
    
    
    
    14,719Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:Loss on disposal of property, plant and equipment
    
    
    
    
    
    
    390
    
    
    
    1,524
    
    
    
    963
    
    
    
    146Depreciation of property, plant and equipment
    
    
    18
    
    
    
    32,327
    
    
    
    30,685
    
    
    
    33,242
    
    
    
    5,037Impairment of goodwill
    
    
    
    
    
    
    27,589
    
    
    
    
    
    
    
    
    
    
    
    Amortization of lease prepayments and intangible
assets
    
    
    
    
    
    
    3,356
    
    
    
    3,332
    
    
    
    1,888
    
    
    
    286Allowance for doubtful accounts
    
    
    4
    
    
    
    57,574
    
    
    
    11,263
    
    
    
    2,994
    
    
    
    454Deferred income taxes
    
    
    
    
    
    
    (9,712
    )
    
    
    (17,633
    )
    
    
    (1,341
    )
    
    
    (203
    )Foreign currency exchange losses
    
    
    
    
    
    
    10,418
    
    
    
    211
    
    
    
    597
    
    
    
    90Share-based compensation
    
    
    16
    
    
    
    3,194
    
    
    
    4,976
    
    
    
    2,466
    
    
    
    374Net gain from disposal of equity interests in
subsidiaries
    
    
    15
    
    
    
    (4,556
    )
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (132,065
    )
    
    
    (102,963
    )
    
    
    (256,864
    )
    
    
    (38,919
    )Inventories
    
    
    
    
    
    
    13,442
    
    
    
    (250,617
    )
    
    
    127,971
    
    
    
    19,390Prepaid expenses and other current assets
    
    
    
    
    
    
    (64,186
    )
    
    
    15,838
    
    
    
    11,875
    
    
    
    1,799Accounts payable
    
    
    
    
    
    
    195,957
    
    
    
    129,434
    
    
    
    38,531
    
    
    
    5,838Amounts due to related parties
    
    
    
    
    
    
    9,648
    
    
    
    24,352
    
    
    
    (8,716
    )
    
    
    (1,321
    )Bills payable
    
    
    
    
    
    
    36,470
    
    
    
    109,730
    
    
    
    (98,673
    )
    
    
    (14,950
    )Accrued expenses and other payables
    
    
    
    
    
    
    (38,012
    )
    
    
    62,240
    
    
    
    33,972
    
    
    
    5,144Income tax payable
    
    
    
    
    
    
    10,385
    
    
    
    35,701
    
    
    
    24,185
    
    
    
    3,664Net cash (used in) provided by operating activities
    
    
    
    
    
    
    5,056
    
    
    
    90,731
    
    
    
    10,225
    
    
    
    1,548Cash flow from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (100,138
    )
    
    
    (64,671
    )
    
    
    (104,992
    )
    
    
    (15,908
    )Decrease (increase) in restricted cash
    
    
    
    
    
    
    132,695
    
    
    
    19,333
    
    
    
    12,903
    
    
    
    1,955Disposal of subsidiaries, net of cash disposed
    
    
    
    
    
    
    (4,479
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of property, plant and
equipment
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    417
    
    
    
    63Net cash (used in) provided by investing activities
    
    
    
    
    
    
    28,113
    
    
    
    (45,338
    )
    
    
    (91,672
    )
    
    
    (13,890
    )Cash flow from financing activitiesCapital contributed by non-controlling interests
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    455Payment for repurchase of ordinary shares
    
    
    
    
    
    
    (10,097
    )
    
    
    (8,386
    )
    
    
    (17,046
    )
    
    
    (2,583
    )Principal payments of short-term bank loans
    
    
    
    
    
    
    (930,550
    )
    
    
    (805,000
    )
    
    
    (890,000
    )
    
    
    (134,848
    )Proceeds from short-term bank loans
    
    
    
    
    
    
    937,450
    
    
    
    945,000
    
    
    
    876,000
    
    
    
    132,727Proceeds from (remittance of) collection of sold
accounts receivable on behalf of financial
institutions, net
    
    
    11
    
    
    
    (48,888
    )
    
    
    (695
    )
    
    
    20,734
    
    
    
    3,142Net cash provided by (used in) financing activities
    
    
    
    
    
    
    (52,085
    )
    
    
    130,919
    
    
    
    (7,312
    )
    
    
    (1,107
    )Effect of foreign currency exchange rate change on
cash
    
    
    
    
    
    
    (4,509
    )
    
    
    (211
    )
    
    
    (597
    )
    
    
    (90
    )Net increase (decrease) in cash and cash
equivalents
    
    
    
    
    
    
    (23,425
    )
    
    
    176,101
    
    
    
    (89,356
    )
    
    
    (13,539
    )Cash and cash equivalents:At beginning of year
    
    
    
    
    
    
    316,778
    
    
    
    293,353
    
    
    
    469,454
    
    
    
    71,130At end of year
    
    
    
    
    
    
    293,353
    
    
    
    469,454
    
    
    
    380,098
    
    
    
    57,591
  F - 7




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##### Table of Contents



China GrenTech Corporation Limited and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 2008, 2009 and 2010
 2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    USDSupplemental Disclosures of Cash Flow
Information:Cash paid during the year for:Income tax
    
    
    2,485
    
    
    
    
    
    
    
    6,871
    
    
    
    1,041Interest paid, net of interest capitalized
    
    
    50,310
    
    
    
    59,387
    
    
    
    58,142
    
    
    
    8,809Significant non-cash transactions:Payable for purchase of property, plant
and equipment
    
    
    24,333
    
    
    
    19,597
    
    
    
    118
    
    
    
    18
   F - 8




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##### Table of Contents



(1)
    
    Principal Activities and Basis of Presentation
 Principal Activities
  Basis of Presentation
  Place ofincorporation or
    
    
    Attributable equityName of company
    
    establishment
    
    
    interest held
    
    Principal activitiesGrenTech (BVI) Limited
    
    BVI
    
    
    100%

    
    Investment holdingShenzhen GrenTech
Co., Ltd. (Shenzhen
GrenTech)
    
    PRC
    
    
    100%

    
    Technical
development,
manufacturing and
sales of
telecommunication
products in the PRCShenzhen Lingxian
Technology Limited
(Shenzhen Lingxian)
    
    PRC
    
    
    99%

    
    Technical
development of
software used for
the Groups
telecommunication
productsShenzhen GrenTech RF
Communication Co.,
Ltd (Shenzhen
GrenTech RF)
    
    PRC
    
    
    100%

    
    Manufacturing and
sales of radio
frequency based
products in the PRCShenzhen Kaige
Communication
Technology Co., Ltd
(Kaige)
    
    PRC
    
    
    100%

    
    Investment holdingShenzhen Kaixuan
Communication
Technology Co., Ltd
(Kaixuan)
    
    PRC
    
    
    100%

    
    Provision of
installation
services on
telecommunication
products in the PRCPT. GrenTech
Indonesia (GrenTech
Indonesia)
    
    Indonesia
    
    
    100%

    
    Sales of
telecommunication
products and
provision of
related
installation
services in
Indonesia
  F - 9




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##### Table of Contents



(1)
    
    Principal Activities and Basis of Presentation (continued)
 Place ofincorporation or
    
    
    Attributable equityName of company
    
    establishment
    
    
    interest held
    
    Principal activitiesShenzhen GrenTech
IOT Network Corp.,
Ltd (IOT)
    
    PRC
    
    
    70%

    
    Development and sale of object
network identification systems,
communication systems and related
electronic component products,
design and installation of
network and automation related
products, as well as design and
development of websites and
softwareExpress
(Shenzhen) Network
Co., Ltd.
(Express
(Shenzhen)
Network)
    
    PRC
    
    
    70%

    
    Real Estate information consultingShenzhen Lingxian
Communication Co.,
Ltd. (Shenzhen
Lingxian
Communication)
    
    PRC
    
    
    100%

    
    Technical development and sales
of telecommunication products in
the PRC, import and export of
technology and merchandiseGrenTech India
Private Limited
(GrenTech India)
    
    India
    
    
    99.999%

    
    Sales of telecommunication
products and provision of related
installation services in IndiaGrenTech Singapore
PTE. Ltd.
(GrenTech
Singapore)
    
    Singapore
    
    
    100%

    
    Sales of telecommunication
products and provision of related
installation services in
SingaporeGrenTech RF 
Communication (BVI) 
Limited (RF (BVI))
    
    BVI
    
    
    100%

    
    Investment holding
     F - 10




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies
  (a)
    
    Principles of Consolidation
 The consolidated financial statements include the financial statements of the Company
and its subsidiaries. All significant intercompany balances and transactions have been
eliminated upon consolidation.
 (b)
    
    Foreign Currency Transactions
     (c)
    
    Convenience translation to USD
   F - 11




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (d)
    
    Use of Estimates
  (e)
    
    Cash and Cash Equivalents
  (f)
    
    Accounts Receivable
        F - 12




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (f)
    
    Accounts Receivable (continued)
  (g)
    
    Inventories
   (h)
    
    Property, Plant and Equipment
  YearsBuildings
    
    
    50-56Equipment and machinery
    
    
    5-10Motor vehicles
    
    
    5-10Office equipment and computer software
    
    
    5-10
   (i)
    
    Lease Prepayments
   F - 13




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (j)
    
    Goodwill and Other Intangible Assets
 Intangibles   Goodwill and Other
   (k)
    
    Impairment of Long-Lived Assets
 Property, Plant and Equipment  Overall ,
   F - 14




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (l)
    
    Revenue Recognition
  Wireless coverage products
   RF-based parts and components
  Installation services
   F - 15




---



##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (l)
    
    Revenue Recognition (continued)
  Bundled sale arrangements
 Revenue Recognition  Multiple-Element Arrangements Revenue Arrangements with Multiple Deliverables"
    F - 16




---



##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (l)
    
    Revenue Recognition (continued)
       F - 17




---



##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (m)
    
    Provision for product warranties
  (n)
    
    Cost of Revenues
  (o)
    
    Income Taxes
  Income Taxes -
Overall
  F - 18




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (p)
    
    Advertising Costs
  (q)
    
    Research and Development Costs
  (r)
    
    Freight Costs
  (s)
    
    Bills Payable and Bills Receivable
   (t)
    
    Government Grants
  (u)
    
    Commitments and Contingencies
   F - 19




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (v)
    
    Earnings per Share
  (w)
    
    Share-Based Payments
 Compensation   Stock
Compensation
  (x)
    
    Segment Reporting
 Segment Reporting
   F - 20




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (y)
    
    Fair value measurements
    Level 1
 Level 2
 Level 3
  Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    SignificantTotal Fair
    
    
    in Active Market
    
    
    Other
    
    
    SignificantValue on
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableBalance Sheet
    
    
    Assets (Level 1)
    
    
    Inputs (Level 2)
    
    
    Inputs (Level 3)RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000As of December 31, 2009Cash and cash equivalents
    
    
    469,454
    
    
    
    469,454
    
    
    
    
    
    
    
    Restricted cash
    
    
    103,035
    
    
    
    103,035
    
    
    
    
    
    
    
    As of December 31, 2010Cash and cash equivalents
    
    
    380,098
    
    
    
    380,098
    
    
    
    
    
    
    
    Restricted cash
    
    
    90,132
    
    
    
    90,132
    
    
    
    
    
    
    
    
  F - 21




---



##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (z)
    
    Recently Issued Accounting Standards
     F - 22




---



##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies (continued)
 (z)
    
    Recently Issued Accounting Standards (continued)
      F - 23




---



##### Table of Contents



(3)   Restricted Cash
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Pledged deposits with financial
institutions for security on:- accounts receivable sold (Note (a))
    
    
    33,209
    
    
    
    39,374
    
    
    
    5,966- bills payable (Note (b))
    
    
    69,826
    
    
    
    50,758
    
    
    
    7,690103,035
    
    
    
    90,132
    
    
    
    13,656
 (a)
    
    In its ordinary course of business, the Group enters into one-year agreements with
independent financial institutions to sell, on an ongoing basis, accounts receivable up
to a specified amount (which totalled RMB500 million as of December 31, 2009 and
RMB500 million (USD76 million) as of December 31, 2010). Accounts receivable are sold at a
discount, the rate of which is adjusted based upon the timing of collection by the financial
institutions. Under the terms of certain of these agreements, a portion of the
receivables sold are subject to certain limited recourse provisions. The Group is
required to deposit 10% of the sale proceeds into a restricted bank account as security in the
event of default of payment by the customer. The cash in the restricted bank account is
released to the Group upon full payment by the customer and is released on a proportionate
basis to the extent that the collections fall short of the amount of accounts receivable sold.
During the years ended December 31, 2008, 2009 and 2010, the Group sold accounts receivable
of RMB202,178,000, RMB371,604,000 and RMB238,541,000 (USD36,143,000) and received proceeds
from the sale of the accounts receivable of RMB188,422,000, RMB355,944,000 and RMB223,706,000
(USD33,895,000), respectively. Pursuant to the FASB ASC Topic 860, Transfers and
Servicing ,the Group surrendered control over the accounts receivable sold to the financial
institutions, and accordingly, the accounts receivable were derecognized from the balance
sheet on their respective dates of the transfer. Loss on sale of the above accounts
receivable of RMB13,521,000, RMB15,660,000 and RMB 14,835,000 (USD2,248,000), respectively,
was included in interest expense for the years ended December 31, 2008, 2009 and
2010. The Company has not experienced any significant losses under the recourse provisions
during the three-year period ended December 31, 2010.As of December 31, 2009 and 2010, accounts receivable sold to financial institutions that have not
been repaid by the Groups customers amounted to RMB318,548,000 and RMB388,598,000 (USD58,879,000),
respectively.Pursuant to the sales agreements with the financial institutions, the Group is
responsible for servicing the accounts receivable sold until the expiration of the sales
agreements. The service obligations primarily consist of serving notice to customers and
collecting the cash on behalf of the financial institutions and remitting the cash to
the financial institutions by a specified time. No servicing obligation was recorded at the date
of sale as the amount was considered to be immaterial. As of December 31, 2009 and
2010, an amount of RMB27,040,000 and RMB47,774,000 (USD7,239,000), respectively, had
been collected by the Group pending transfer to the financial institutions, and are included in
accrued expenses and other payables in the accompanying consolidated balance sheets.  F - 24




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##### Table of Contents



(3)
    
    Restricted Cash (continued)
 (b)
    
    The Group entered into several financing facilities for bills with banks during the years
presented. Under the terms of the arrangements, cash deposits ranging from 20% to 30% of the
respective financing facilities amount were pledged to the banks. The pledged deposits
will be released upon the termination or expiry of these facilities. (4)
    
    Accounts Receivable, net
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Accounts receivable net of
allowances for estimated settlement
discounts of RMB53,624,000 and
RMB61,172,000 respectively as of
December 31, 2009 and 2010
    
    
    1,350,552
    
    
    
    1,604,608
    
    
    
    243,122Less: Allowance for doubtful accounts
    
    
    (36,586
    )
    
    
    (39,580
    )
    
    
    (5,997
    )1,313,966
    
    
    
    1,565,028
    
    
    
    237,125Long term accounts receivable, net
    
    
    (452,191
    )
    
    
    (462,521
    )
    
    
    (70,079
    )861,775
    
    
    
    1,102,507
    
    
    
    167,046Bills receivable
    
    
    30,374
    
    
    
    52,033
    
    
    
    7,885Short term accounts receivable, net
    
    
    892,149
    
    
    
    1,154,540
    
    
    
    174,931
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Balance at beginning of year
    
    
    10,657
    
    
    
    24,425
    
    
    
    53,624
    
    
    
    8,125Utilization during the year
    
    
    
    
    
    
    (26,301
    )
    
    
    (16,340
    )
    
    
    (2,476
    )Provision during the year
    
    
    13,768
    
    
    
    55,500
    
    
    
    23,888
    
    
    
    3,619Balance at end of year
    
    
    24,425
    
    
    
    53,624
    
    
    
    61,172
    
    
    
    9,268
     F - 25




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##### Table of Contents



(4)
    
    Accounts Receivable, net (continued)
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Balance at beginning of year
    
    
    22,354
    
    
    
    25,323
    
    
    
    36,586
    
    
    
    5,543Derecognized on disposal of
subsidiaries
    
    
    (11,017
    )
    
    
    
    
    
    
    
    
    
    
    Charged to Statements of
Operations
    
    
    57,574
    
    
    
    11,916
    
    
    
    2,994
    
    
    
    454Written back during the year
    
    
    
    
    
    
    (653
    )
    
    
    
    
    
    
    Written off during the year
    
    
    (43,588
    )
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    25,323
    
    
    
    36,586
    
    
    
    39,580
    
    
    
    5,997
  (5)   Inventories
  2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    USDRaw materials
    
    
    205,608
    
    
    
    137,981
    
    
    
    20,906Work-in-progress
    
    
    8,055
    
    
    
    8,672
    
    
    
    1,314Finished goods
    
    
    557,573
    
    
    
    496,612
    
    
    
    75,244771,236
    
    
    
    643,265
    
    
    
    97,464
    F - 26




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##### Table of Contents



(6)
    
    Prepaid Expenses and Other Current Assets
  2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    USDDeposits
    
    
    14,430
    
    
    
    7,252
    
    
    
    1,099Prepayment for purchase of raw materials
    
    
    40,687
    
    
    
    46,176
    
    
    
    6,996Advances to employees
    
    
    15,468
    
    
    
    9,195
    
    
    
    1,393Prepayment for installation costs to
subcontractors
    
    
    8,984
    
    
    
    5,006
    
    
    
    759Others
    
    
    2,266
    
    
    
    3,106
    
    
    
    470Total prepaid expenses and other current
assets
    
    
    81,835
    
    
    
    70,735
    
    
    
    10,717
 (7)
    
    Income Tax Expense
 Cayman Islands and British Virgin Islands Taxes
  PRC Tax
   F - 27




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##### Table of Contents



(7)
    
    Income Tax Expense (continued)
    PRC Income tax expense/(benefit)
    
    Current
    
    
    Deferred
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000Year ended December 31, 2008
    
    
    12,608
    
    
    
    (9,451
    )
    
    
    3,157Year ended December 31, 2009
    
    
    35,701
    
    
    
    (17,633
    )
    
    
    18,068Year ended December 31, 2010
    
    
    31,055
    
    
    
    (1,341
    )
    
    
    29,714(USD000)
    
    
    4,705
    
    
    
    (203
    )
    
    
    4,502
  F - 28




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##### Table of Contents



(7)
    
    Income Tax Expense (continued)
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Income (loss) before income
tax expense:- PRC
    
    
    (130,458
    )
    
    
    62,870
    
    
    
    135,280
    
    
    
    20,498- Non-PRC
    
    
    (13,548
    )
    
    
    (12,144
    )
    
    
    (8,431
    )
    
    
    (1,277
    )Income (loss) before income
tax expense
    
    
    (144,006
    )
    
    
    50,726
    
    
    
    126,849
    
    
    
    19,221Computed expected tax
expense/(benefit) at
statutory rate
    
    
    (36,002
    )
    
    
    12,681
    
    
    
    31,713
    
    
    
    4,805Non-deductible expenses:Impairment of goodwill
    
    
    4,138
    
    
    
    
    
    
    
    
    
    
    
    Entertainment expenses
    
    
    4,051
    
    
    
    4,098
    
    
    
    5,460
    
    
    
    827Settlement discounts on
accounts receivables
    
    
    1,893
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    575
    
    
    
    746
    
    
    
    370
    
    
    
    56Bad debt expenses for
accounts receivables and other receivables
    
    
    15,165
    
    
    
    1,916
    
    
    
    943
    
    
    
    143Others
    
    
    506
    
    
    
    
    
    
    
    148
    
    
    
    22Gain on disposal of investment
    
    
    4,963
    
    
    
    
    
    
    
    
    
    
    
    Additional deduction for
research & development
expenses
    
    
    (4,073
    )
    
    
    (5,063
    )
    
    
    (5,315
    )
    
    
    (805
    )Change in
deductibility of settlement discounts on accounts receivables
    
    
    
    
    
    
    (3,664
    )
    
    
    
    
    
    
    Non-taxable income
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    Tax rate differential
    
    
    15,002
    
    
    
    2,852
    
    
    
    (9,308
    )
    
    
    (1,410
    )Change in valuation allowance
    
    
    320
    
    
    
    832
    
    
    
    5,811
    
    
    
    880Effect of change in enacted
tax rate / tax status
    
    
    
    
    
    
    4,070
    
    
    
    
    
    
    
    Effect of change in tax rate
on deferred tax assets
    
    
    (3,333
    )
    
    
    (400
    )
    
    
    (108
    )
    
    
    (16
    )Actual income tax expense
    
    
    3,157
    
    
    
    18,068
    
    
    
    29,714
    
    
    
    4,502
   F - 29




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##### Table of Contents



(7)
    
    Income Tax Expense (continued)
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Deferred tax assets  CurrentAccounts receivable
    
    
    8,044
    
    
    
    9,176
    
    
    
    1,390Deferred income
    
    
    11,317
    
    
    
    10,276
    
    
    
    1,557Accrual
    
    
    2,801
    
    
    
    2,365
    
    
    
    358Warranty provision
    
    
    3,734
    
    
    
    6,238
    
    
    
    945Inventories
    
    
    9,062
    
    
    
    9,212
    
    
    
    1,396Tax loss carryforwards
    
    
    842
    
    
    
    4,275
    
    
    
    648Unrealized profit
    
    
    
    
    
    
    1,329
    
    
    
    202Total gross deferred tax assets
    
    
    35,800
    
    
    
    42,871
    
    
    
    6,496Less: valuation allowance
    
    
    (842
    )
    
    
    (6,653
    )
    
    
    (1,008
    )34,958
    
    
    
    36,218
    
    
    
    5,488Deferred tax liabilities  Non-currentProperty, plant and equipment
    
    
    (4,679
    )
    
    
    (4,598
    )
    
    
    (697
    )Total gross deferred tax liabilities
    
    
    (4,679
    )
    
    
    (4,598
    )
    
    
    (697
    )Net deferred tax assets
    
    
    30,279
    
    
    
    31,620
    
    
    
    4,791
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Balance at the beginning of year
    
    
    5,181
    
    
    
    729
    
    
    
    842
    
    
    
    128Charged to statements of
operations
    
    
    320
    
    
    
    832
    
    
    
    5,811
    
    
    
    880Effect of change in tax rate
    
    
    124
    
    
    
    Disposal of subsidiaries (Note15)
    
    
    (4,896
    )
    
    
    
    
    
    
    
    
    
    
    Deregistration of a subsidiary
    
    
    
    
    
    
    (719
    )
    
    
    
    
    
    
    Balance at the end of year
    
    
    729
    
    
    
    842
    
    
    
    6,653
    
    
    
    1,008
   F - 30




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##### Table of Contents



(7)
    
    Income Tax Expense (continued)
   2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Balance as at the beginning
of year
    
    
    37,830
    
    
    
    37,360
    
    
    
    69,679
    
    
    
    10,557Additions based on tax
positions related to the
current year
    
    
    10,123
    
    
    
    32,319
    
    
    
    17,670
    
    
    
    2,677Reductions due to disposal
of subsidiaries
    
    
    (10,593
    )
    
    
    
    
    
    
    
    
    
    
    Balance as at the end of year
    
    
    37,360
    
    
    
    69,679
    
    
    
    87,349
    
    
    
    13,234
    F - 31




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##### Table of Contents



(8)
    
    Property, Plant and Equipment, net and Construction in Progress
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Buildings
    
    
    288,563
    
    
    
    288,563
    
    
    
    43,722Equipment and machinery
    
    
    195,364
    
    
    
    209,033
    
    
    
    31,672Motor vehicles
    
    
    17,349
    
    
    
    18,162
    
    
    
    2,752Office equipment and computer software
    
    
    49,479
    
    
    
    53,778
    
    
    
    8,148550,755
    
    
    
    569,536
    
    
    
    86,294Accumulated depreciation
    
    
    (106,177
    )
    
    
    (133,246
    )
    
    
    (20,189
    )444,578
    
    
    
    436,290
    
    
    
    66,105Construction in progress
    
    
    3,961
    
    
    
    63,008
    
    
    
    9,547448,539
    
    
    
    499,298
    
    
    
    75,652
   (9)
    
    Lease Prepayments, net
 2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Prepaid land use rights
    
    
    85,078
    
    
    
    85,078
    
    
    
    12,890Accumulated amortization
    
    
    (4,656
    )
    
    
    (6,357
    )
    
    
    (963
    )80,422
    
    
    
    78,721
    
    
    
    11,927
     F - 32




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##### Table of Contents



(10)
    
    Intangible Assets, net
 2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Patent
    
    
    3,260
    
    
    
    
    
    
    
    Accumulated amortization
    
    
    (3,074
    )
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    
  (11)
    
    Accrued Expenses and Other Payables
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000Amounts collected on sold accounts receivable on
behalf of financial institutions (Note 3(a))
    
    
    27,040
    
    
    
    47,774
    
    
    
    7,239Provision for warranties (Note 12)
    
    
    23,283
    
    
    
    35,712
    
    
    
    5,411Accruals for salaries and welfare
    
    
    15,914
    
    
    
    16,101
    
    
    
    2,440Receipts in advance
    
    
    71,346
    
    
    
    53,746
    
    
    
    8,143Value-Added Tax (VAT) payable
    
    
    110,031
    
    
    
    133,910
    
    
    
    20,289Business and other taxes payable
    
    
    28,981
    
    
    
    38,925
    
    
    
    5,898Staff deposits
    
    
    217
    
    
    
    214
    
    
    
    32Payable for purchase of property, plant and equipment
    
    
    19,597
    
    
    
    118
    
    
    
    18Others
    
    
    7,890
    
    
    
    13,803
    
    
    
    2,091304,299
    
    
    
    340,303
    
    
    
    51,561
 (12)
    
    Provision for Warranties
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Balance at beginning of year
    
    
    12,328
    
    
    
    12,395
    
    
    
    23,283
    
    
    
    3,528Amount
charged to cost of revenues
    
    
    8,697
    
    
    
    24,377
    
    
    
    30,163
    
    
    
    4,570Amount utilized
    
    
    (8,630
    )
    
    
    (13,489
    )
    
    
    (17,734
    )
    
    
    (2,687
    )Balance at end of year
    
    
    12,395
    
    
    
    23,283
    
    
    
    35,712
    
    
    
    5,411
  F - 33




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##### Table of Contents



(13)
    
    Short-Term Bank Loans
  2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    USD000- Uncollateralized
    
    
    333,378
    
    
    
    542,229
    
    
    
    82,157- Collateralized
    
    
    280,000
    
    
    
    96,000
    
    
    
    14,545613,378
    
    
    
    638,229
    
    
    
    96,702
    (14)
    
    Long-Term Bank Loan
    F - 34




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##### Table of Contents



(15)
    
    Disposal of Subsidiaries and Equity Investments
 Disposal of the entire equity interest in Quanzhou Lake Communication Company Limited (Lake
Communication) and Quanzhou Lake Microwave Company Limited (Lake Microwave)
   (16)
    
    Share-based Compensation
    March 2008
    
    
    December 2008options
    
    
    optionsFair value of shares on grant date
    
    USD0.11

per ordinary
share
    
    
    USD0.03

per ordinary
shareExpected volatility
    
    
    65.7
    %
    
    
    94.7
    %Expected dividends
    
    Nil
        
    NilExpected Term
    
    
    3.5
    
    
    
    3.5Risk- free interest rate
    
    
    2.4
    %
    
    
    1.5
    %
  F - 35




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##### Table of Contents



(16)
    
    Share-based Compensation (continued)
   Weighted averageOptions
    
    
    exercise priceOutstanding as of January 1, 2010
    
    
    35,580,000
    
    
    USD0.0876Forfeited
    
    
    (1,800,000
    )
    
    USD0.0388Outstanding as of December 31, 2010
    
    
    33,780,000
    
    
    USD0.0903
    Options outstanding and exercisableRemainingNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Options
    
    
    Price
    
    
    Term(Years)
    
    
    valueMarch 2008 options
    
    
    10,000,000
    
    
    
    0.2126
    
    
    
    2.25
    
    
    
    December 2008 options
    
    
    23,780,000
    
    
    
    0.0388
    
    
    
    3
    
    
    
    2,530,000Total
    
    
    33,780,000
    
    
    
    0.0903
    
    
    
    2.78
    
    
    
    2,530,000
   (17) Revenues and cost of revenues
  2008
    
    
    2009
    
    
    2010Cost of
    
    
    
    
    
    
    Cost ofRevenues
    
    
    revenues
    
    
    Revenues
    
    
    revenues
    
    
    Revenues
    
    
    Cost of revenuesRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000
    
    
    RMB000
    
    
    USD000Sale of wireless
coverage products
    
    
    498,928
    
    
    
    (375,452
    )
    
    
    781,973
    
    
    
    (575,338
    )
    
    
    814,039
    
    
    
    123,339
    
    
    
    (605,980
    )
    
    
    (91,815
    )Installation services
of wireless coverage
products
    
    
    277,931
    
    
    
    (186,165
    )
    
    
    469,502
    
    
    
    (308,143
    )
    
    
    633,875
    
    
    
    96,042
    
    
    
    (413,690
    )
    
    
    (62,680
    )RF parts and components
    
    
    221,566
    
    
    
    (189,750
    )
    
    
    406,968
    
    
    
    (340,492
    )
    
    
    296,948
    
    
    
    44,992
    
    
    
    (245,577
    )
    
    
    (37,209
    )Reversal of provision/
(provision) for
settlement discounts
    
    
    (13,768
    )
    
    
    
    
    
    
    (55,500
    )
    
    
    
    
    
    
    (23,888
    )
    
    
    (3,619
    )
    
    
    
    
    
    
    984,657
    
    
    
    (751,367
    )
    
    
    1,602,943
    
    
    
    (1,223,973
    )
    
    
    1,720,974
    
    
    
    260,754
    
    
    
    (1,265,247
    )
    
    
    (191,704
    )
  F - 36




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##### Table of Contents



(18)
    
    Depreciation
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Cost of revenues
    
    
    16,949
    
    
    
    12,070
    
    
    
    13,797
    
    
    
    2,091Research and development costs
    
    
    6,937
    
    
    
    6,494
    
    
    
    7,149
    
    
    
    1,083Sales and distribution expenses
    
    
    3,462
    
    
    
    3,479
    
    
    
    3,823
    
    
    
    579General and administrative
expenses
    
    
    4,979
    
    
    
    8,642
    
    
    
    8,473
    
    
    
    1,28432,327
    
    
    
    30,685
    
    
    
    33,242
    
    
    
    5,037
 (19)
    
    Earnings (loss) Per Share
 2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Net income (loss)
attributable to
shareholders of the Company
    
    
    (146,367
    )
    
    
    32,672
    
    
    
    98,140
    
    
    
    14,871Denominator:Weighted average number of
ordinary shares outstanding
    
    
    610,158,841
    
    
    
    595,536,733
    
    
    
    581,814,594
    
    
    
    581,814,594Effect of stock options
    
    
    
    
    
    
    9,244,308
    
    
    
    13,384,855
    
    
    
    13,384,855Weighted average
number of diluted shares
outstanding
    
    
    610,158,841
    
    
    
    604,781,041
    
    
    
    595,199,449
    
    
    
    595,199,449Basic earnings (loss)
per share (expressed in RMB
per share)
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.17
    
    
    
    0.03Diluted earnings
(loss) per share (expressed
in RMB per share)
    
    
    (0.24
    )
    
    
    0.05
    
    
    
    0.16
    
    
    
    0.02
    F - 37




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##### Table of Contents



(20)
    
    Related Party Transactions
  2008
    
    
    2009
    
    
    2010
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    USD000Disposition of 100% equity
share of Lake Communication
(Note 15)
    
    
    86,130
    
    
    
    
    
    
    
    
    
    
    
    Disposition of 80% equity
share of Lake Microwave
(Note 15)
    
    
    870
    
    
    
    
    
    
    
    
    
    
    
    Purchases from Lake
Communication (Note (a))
    
    
    
    
    
    
    138,252
    
    
    
    24,588
    
    
    
    3,725
 (a)
    
    The Company purchased RF components under normal business term from Lake
Communication, for its own manufacturing of wireless network products. Amounts due to
Lake Communication amounting to RMB34,000,000 and RMB25,284,000 (USD3,831,000) as at
December 31, 2009 and 2010 respectively, were arose from the purchase of RF
components. The balance is repayable from 60 days to 90 days from date of billing. (21)
    
    Pension and Other Post Retirement Benefits
   F - 38




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##### Table of Contents



(22)
    
    Fair Value of Financial Instruments
    (23)
    
    Concentration of Credit Risk
  2008
    
    
    2009
    
    
    2010RMB000
    
    
    %
    
    
    RMB000
    
    
    %
    
    
    RMB000
    
    
    %
    
    
    USD000China Mobile Group
    
    
    390,266
    
    
    
    39.6
    
    
    
    390,902
    
    
    
    24.4
    
    
    
    632,158
    
    
    
    36.7
    
    
    
    95,782China Unicom Group
    
    
    244,455
    
    
    
    24.8
    
    
    
    518,246
    
    
    
    32.3
    
    
    
    483,031
    
    
    
    28.1
    
    
    
    73,187China Telecom Group
    
    
    75,440
    
    
    
    7.7
    
    
    
    241,198
    
    
    
    15.0
    
    
    
    228,106
    
    
    
    13.3
    
    
    
    34,562The Companys RF
based products
customer  Customer
A
    
    
    58,941
    
    
    
    6.0
    
    
    
    113,093
    
    
    
    7.1
    
    
    
    158,215
    
    
    
    9.2
    
    
    
    23,972The Companys RF
based products
customer  Customer
B
    
    
    102,253
    
    
    
    10.4
    
    
    
    137,588
    
    
    
    8.6
    
    
    
    37,761
    
    
    
    2.2
    
    
    
    5,721
   F - 39




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##### Table of Contents



(23)
    
    Concentration of Credit Risk (continued)
  2009
    
    
    2010RMB000
    
    
    RMB000China Mobile Group- Current portion
    
    
    287,671
    
    
    
    390,746- Long-term portion
    
    
    144,312
    
    
    
    226,372431,983
    
    
    
    617,118China Unicom Group- Current portion
    
    
    318,477
    
    
    
    367,510- Long-term portion
    
    
    184,932
    
    
    
    140,156503,409
    
    
    
    507,666China Telecom Group- Current portion
    
    
    99,655
    
    
    
    188,085- Long-term portion
    
    
    90,456
    
    
    
    72,618190,111
    
    
    
    260,703The Companys RF based products customer  Customer A- Current portion
    
    
    28,580
    
    
    
    71,341- Long-term portion
    
    
    
    
    
    
    28,580
    
    
    
    71,341The Companys RF based products customer  Customer B- Current portion
    
    
    50,529
    
    
    
    (975
    )- Long-term portion
    
    
    
    
    
    
    50,529
    
    
    
    (975
    )1,204,612
    
    
    
    1,455,853
  F - 40




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##### Table of Contents



(24)
    
    Commitments and Contingencies
 (i)
    
    Operating lease commitments
  RMB000
    
    
    USD0002011
    
    
    7,353
    
    
    
    1,1142012
    
    
    1,553
    
    
    
    2352013
    
    
    99
    
    
    
    152014
    
    
    3
    
    
    
    2015
    
    
    
    
    
    
    9,008
    
    
    
    1,364
  (ii)
    
    Capital commitments
  (iii)
    
    Loan guarantees
  (iv)
    
    Contingencies
   F - 41




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##### Table of Contents



(25)
    
    Restricted Net Assets
     (26)
    
    Share Repurchase
     F - 42