Annual Report

2 017 Annual Report COOLPAD GROUP LIMITED 酷派集團有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock code : 2369) Corporate Profile Coolpad Group Limited (the “Company”), formerly in mobile operating systems, radio frequency, protocols known as China Wireless Technologies Limited, was and wireless data decomposed transmission technology, incorporated in the Cayman Islands as an exempted etc. The Group has developed advanced research and company with limited liability on 11 June 2002. The development capabilities in mobile communications and shares of the Company (the “Shares”) were listed on gradually becomes a leader of 4G and 3G smartphone The Stock Exchange of Hong Kong Limited (the “Stock in the Mainland China’s telecommunications market. Exchange”) on 9 December 2004 (Stock Code: 2369). The Group never stops enhancing its R&D ability and is striving to be an important participant and a leader in Yulong Computer Telecommunication Scientific the latest field of 5G and Artificial Intelligence. (Shenzhen) Co., Ltd. (“Yulong Shenzhen”) is an indirect wholly owned subsidiary of the Company. It was In spite of being a leading smartphone developer in founded by Mr. GUO Deying (the Company’s former Mainland China’s telecommunications market, the chairman, former executive director and former chief Group has succeeded in breaking into the global executive officer) in April 1993. Yulong Shenzhen is a telecommunications market in respect of Coolpad leading developer and provider of integrated solutions brand with the overseas telecommunications for Coolpad 酷派 smartphone sets, mobile data platform operators. The Group has established strong and close system, and value-added business operations in the strategic cooperation relationships with certain global People’s Republic of China (the “PRC” or the “Mainland telecommunication operators and is striving to further China”). Yulong Shenzhen mainly provides its Coolpad develop its business in the global telecommunication products for enterprises, government and mobile markets. operators as well as individual consumers in the PRC. The Group is committed to providing every individual In the last decade, capitalizing on the development of with the privilege to enjoy the extravagant experience wireless telecommunications technological know-how in of using integrated terminal of wireless data solutions. wireless telecommunications across multiple wireless To achieve this goal, the Group is striving to realize its telecommunications network standards including dream by providing customized products and services TD-LTE, FDD-LTE, TD-SCDMA, CDMA-EVDO, WCDMA, based on its differentiated mobile operating systems GSM, and CDMA1X networks, the Company and its and applications. subsidiaries (collectively, the “Group”) have developed a large number of proprietary technologies and patents COOLPAD GROUP LIMITED Annual Report 2017 Contents Corporate Information 2 Financial Highlights 3 Chief Executive Director’s Statement 4 Management Discussion & Analysis 9 Corporate Governance Report 14 Environmental, Social and Governance Report 25 Directors and Senior Management 35 Report of the Directors 41 Independent Auditor’s Report 58 Financial Statements 64 Notes to Financial Statements 74 COOLPAD GROUP LIMITED Annual Report 2017 Corporate Information Registered Office Auditor Cricket Square Ernst & Young Hutchins Drive Certified Public Accountants P.O. Box 2681 22/F, CITIC Tower Grand Cayman 1 Tim Mei Avenue Central KY1-1111 Hong Kong Cayman Islands Legal Advisers to the Company as to Head Office and Principal Place of Hong Kong Law Business in the PRC DLA Piper Hong Kong Coolpad Information Harbor 17th Floor NO.2 Mengxi Road Edinburgh Tower Hi-Tech Industry Park (Northern) The Landmark Nanshan District 15 Queen’s Road Shenzhen Central Hong Kong Principal Place of Business in Hong Kong Legal Advisers to the Company as to Room 1902, China Evergrande Centre Cayman Islands Law 38 Gloucester Road Conyers Dill & Pearman Wanchai, Hong Kong 2901 One Exchange Square 8 Connaught Place Company Secretary Central Mr. JIANG Chao, ACCA (Resigned on 19 January 2018) Hong Kong Mr. LEUNG Siu Kee (Appointed on 19 January 2018) Principal Share Registrar and Transfer Office Audit Committee & Remuneration Committee SMP Partners (Cayman) Limited 3rd Floor, Royal Bank House, Mr. CHAN King Chung (Chairperson) 24 Shedden Road, P.O. Box 1586, Dr. HUANG Dazhan Grand Cayman KY1-1110 Mr. XIE Weixin Cayman Islands Nomination Committee Hong Kong Branch Share Registrar and Mr. JIA Yueting (Chairperson appointed on 5 August Transfer Office 2016, resigned on 17 November 2017) Computershare Hong Kong Investor Services Limited Mr. CHAN King Chung (Chairperson appointed on 17 Shops 1712-16 November 2017) 17th Floor Mr. JIANG Chao (Appointed on 17 November 2017) Hopewell Centre Mr. XIE Weixin 183 Queen’s Road East Hong Kong Authorised Representatives Principal Bankers Mr. JIANG Chao Mr. LI Bin (Resigned on 1 March 2017) Bank of Communications Co., Ltd. DBS Bank (Hong Kong) Ltd. Mr. LIU Hong (Appointed on 1 March 2017) Bank of China Limited Mr. LIU Hong (Resigned on 8 February 2018) Hong Kong and Shanghai Banking (Hong Kong) Co., Ltd. Mr. LEUNG Siu Kee (Appointed on 8 February 2018) Company Website Contact Information for Investor Relations www.coolpad.com.hk Tel: +86 755 3302 3607 Stock Code Email: [email protected] 2369 2 COOLPAD GROUP LIMITED Annual Report 2017 Financial Highlights The financial data below are extracted from the Group’s audited financial statements prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). Results Year ended 31 December (HK$’000) 2017 2016 2015 2014 2013 Revenue 3,378,077 7,969,477 14,667,866 24,900,471 19,623,652 (Loss)/profit before tax (2,702,251) (4,356,068) 2,311,011 606,629 437,373 Income tax expense (20,825) (45,352) (34,505) (92,551) (89,121) (Loss)/profit for the year (2,723,076) (4,401,420) 2,276,506 514,078 348,252 Financial Position As at 31 December (HK$’000) 2017 2016 2015 2014 2013 Non-current assets 1,991,344 2,741,032 5,745,328 1,625,586 1,251,002 Current assets 2,859,486 7,113,372 8,537,979 11,218,500 8,810,732 Non-current liabilities 296,464 67,213 225,116 1,704,409 57,904 Current liabilities 3,764,950 6,248,881 6,641,496 7,779,761 7,242,936 Net assets 789,416 3,538,310 7,416,695 3,359,916 2,760,894 3 COOLPAD GROUP LIMITED Annual Report 2017 Chief Executive Director’s Statement Jiang Chao Vice Chairman, Executive Director and CEO Dear Fellow Shareholders: I am deeply honored to report the consolidated results for the year ended 31 December 2017 to the Shareholders of the Group. For the first time ever, trading in the shares of the Company on the Stock Exchange has been suspended for more than a full year with effect from 9 a.m. on 31 March 2017. The Group never stops making its efforts in working with third-party independent institutes and other appropriate steps to achieve the resumption of trading. The Group saw a large decline in both shipments HK$2,723.08 million, which decreased by 38.13% from and revenue in the past year of 2017, due to the the net loss of HK$4,401.42 million in the year 2016. fierce competition of the smartphone market and Gross profit margin for the year 2017 was -9.43%, the restructuring of its businesses, strategies and representing a decrease of 13.88% as compared with organization structure. For the year ended 31 December 4.45% for the year ended 31 December 2016. The 2017, the Group had a turnover of approximately decline in gross profit margin was primarily attributable HK$3,378.08 million, which decreased by 57.61% to the decrease of shipments resulting from the from HK$7,969.47 million in 2016. The decrease intensive competition of the 4G smartphone market was mainly due to the fact that the process of the and the fact that the Group strengthened the stock business restructuring, the intensive competition of management and accelerated the disposal of slow- the smartphone business in China and the decrease moving inventories in the year of 2017. Both of the basic in market share and sales volume for the current and diluted losses per share of the Group was HK53.14 year. The net loss of the year 2017 was approximately cents for the year ended 31 December 2017. 4 COOLPAD GROUP LIMITED Annual Report 2017 Chief Executive Director’s Statement Development and sales of smartphones still remain as Whereas regional sales in the United States continue to the main business of the Company for the year ended maintain its growth momentum, but sales contribution 31 December 2017. During the mentioned period, the and growth rate were limited for the year ended 31 Group recorded a significant decrease in the revenue December 2017. At the same time, the contribution from the sales of smartphones as compared to the of revenue from United States region continued to corresponding period. The decrease in revenue was enlarge aggressively. The sales channel in United mainly attributable to the fierce competition arising from States became more diversified as compared to the smartphones markets in China. Sales in China’s regional corresponding year, despite of the fact that the major and Southeast Asian markets continued to decline, clients are concentrated in telecommunications carriers. as a result of which, the Company gave up part of its Nevertheless, carriers accounted for about 89 percent of products that generate revenue but may cause losses the whole market while open market accounted for the so as to minimize losses. rest of 11 percent. Meanwhile, side by side with carrier field team, the Group developed strong relationship Although the domestic revenue continued to decrease, inside national retail channels and dealer channels nevertheless, the Group still keeps a solid cooperation progressively so as to build a healthy retailing networks relationship with local carriers and their sales and in the retail open channel.

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