Annual Report 2017 Important

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Annual Report 2017 Important stock code : 000063.SZ 763.HK Annual Report 2017 Annual Report Annual Report 2017 Important The Board of Directors, Supervisory Committee and the Directors, Supervisors and senior management of the Company confirm that this report does not contain any false information, misleading statements or material omissions, and collectively and individually accept responsibility for the truthfulness, accuracy and completeness of the contents of this report. There are no Directors, Supervisors or senior management who do not warrant or who dispute the truthfulness, accuracy and completeness of the contents of this report. This report has been considered and approved at the Twenty-eighth Meeting of the Seventh Session of the Board of Directors of the Company. Mr. Zhang Jianheng, Vice Chairman, was unable to attend the meeting due to work reasons and has authorised Mr. Luan Jubao, Vice Chairman, to vote on his behalf. Mr. Wang Yawen, Director, was unable to attend the meeting due to work reasons and has authorised Mr. Tian Dongfang, Director, to vote on his behalf. Mr. Richard Xike Zhang, Independent Non-executive Director, was unable to attend the meeting due to work reasons and has authorised Mr. Bingsheng Teng, Independent Non-executive Director, to vote on his behalf. Mr. Lü Hongbing, Independent Non-executive Director, was unable to attend the meeting due to work reasons and has authorised Mr. Chen Shaohua, Independent Non-executive Director, to vote on his behalf. Mr. Zhu Wuxiang, Independent Non-executive Director, was unable to attend the meeting due to work reasons and has authorised Mr. Chen Shaohua, Independent Non-executive Director, to vote on his behalf. The respective financial statements of the Group for the year ended 31 December 2017 were prepared in accordance with PRC Accounting Standards for Business Enterprises and with Hong Kong Financial Reporting Standards respectively, and had been audited by Ernst & Young Hua Ming LLP and Ernst & Young, and an unqualified auditors’ report has been issued by each of them. During the year, there was no significant deficiency in internal control in relation to financial reporting of the Company, nor was any significant deficiency in internal control in relation to non-financial reporting identified. Mr. Yin Yimin, Chairman of the Company, Mr. Shao Weilin, Chief Financial Officer of the Company and Mr. Xu Jianrui, Head of Finance Division of the Company, hereby declare that they warrant the truthfulness, accuracy and completeness of the financial reports contained in this report. In view of the state of affairs of the Company, the proposal for profit distribution for 2017 is as follows: RMB3.3 in cash (before tax) for every 10 shares based on the number of shares held by shareholders (including A shareholders and H shareholders) registered as at the close of business on the record date for profit distribution and dividend payment. The aforesaid matter shall require consideration and approval at the general meeting. This report contains forward-looking statements in relation to subjects such as future plans, which do not constitute any specific undertakings to investors by the Company. Investors should beware of investment risks. The attention of investors is drawn to the section headed “Report of the Board of Directors (VI) Business outlook of 2018 and risk exposures”, which contains a description of the potential risks inherent in the operations of the Company. This report has been prepared in Chinese and English respectively. In case of discrepancy, the Chinese version shall prevail, except for the financial report prepared in accordance with Hong Kong Financial Reporting Standards, for which the English version shall prevail. China Securities Journal, Securities Times, Shanghai Securities News and http://www.cninfo.com.cn are designated media for the Company’s information disclosure. Only information of the Company published in the aforesaid media should be relied upon. Investors are asked to beware of investment risks. Contents 2 Definitions 5 Glossary 9 Company Profile 10 Corporate Information 14 Chairman’s Statement 18 Major Events of the Group 19 Highlights of Accounting Data and Financial Indicators 25 Summary of the Company’s Business 30 Report of the Board of Directors 60 Material Matters 106 Changes in Shareholdings and Information of Shareholders 113 Directors, Supervisors, Senior Management and Employees 129 Corporate Governance Structure 153 Report of the PRC Auditors 159 Financial Statements prepared in accordance with PRC ASBEs and Notes Thereto 324 Independent Auditors’ Report 330 Financial Statements prepared in accordance with HKFRSs and Notes Thereto 444 Documents Available for Inspection ZTE CORPORATION Definitions In this report, unless the context otherwise requires, the following terms shall have the meanings set out below. Certain other terms are explained in the section headed “Glossary”. Company or ZTE ZTE Corporation, a limited company incorporated in China, the shares of which are listed on the Shenzhen Stock Exchange and the Hong Kong Stock Exchange, respectively Articles of Association The Articles of Association of ZTE Corporation Company Law Company Law of the People’s Republic of China Securities Law Securities Law of the People’s Republic of China Group ZTE and one or more of its subsidiaries Board of Directors The board of directors of the Company Directors Members of the board of directors of the Company Supervisory Committee The supervisory committee of the Company Supervisors Members of the supervisory committee of the Company China or PRC The People’s Republic of China ITU International Telecommunications Union, is a specialised agency of the United Nations for information and communication technologies MOF PRC Ministry of Finance NDRC National Development Reform Commission of China CSRC China Securities Regulatory Commission Shenzhen CSRC The CSRC Shenzhen Bureau Shenzhen Stock Exchange The Shenzhen Stock Exchange Shenzhen Listing Rules Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited Hong Kong Listing Rules Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited SFO Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) PRC ASBEs PRC Accounting Standards for Business Enterprise (Generally accepted accounting principles in China) HKFRSs Hong Kong Financial Reporting Standards (including Hong Kong Accounting Standards (“HKASs”) and Interpretations) 2 ANNUAL REPORT 2017 Definitions ZTE HK ZTE (H.K.) Limited Nubia Nubia Technology Limited Zhongxing Software Shenzhen Zhongxing Software Company Limited Great Power Guangzhou Great Power Energy & Technology Co., Ltd. Eoptolink Eoptolink Technology Inc., Ltd. Giga Device Giga Device Semiconductor (Beijing) Inc. Laimu Shanghai Laimu Electronics Co., Ltd. Olympic Circuit Technology Olympic Circuit Technology Co., Ltd. Mentech Optical Dongguan Mentech Optical & Magnetic Co., Ltd Lianchuang Electronic Lianchuang Electronic Technology Co., Ltd. Enablence Technologies Enablence Technologies Inc. Union Optech Union Optech Co., Ltd. ZTE Capital Shenzhen ZTE Capital Management Company Limited Zhonghe Chunsheng Fund Shenzhen Zhonghe Chunsheng Partnership Private Equity Fund I (Limited Partnership) Jiaxing Fund Jiaxing Xinghe Equity Investment Partnership (Limited Partnership) Medium Term Note(s) or Perpetual Medium Term Notes perpetual capital instruments Zhongxingxin Shenzhen Zhongxingxin Telecommunications Equipment Company Limited Mobi Antenna Mobi Antenna Technologies (Shenzhen) Co., Ltd. Huatong Huatong Technology Company Limited Nanchang Software Zhongxing Software Technology (Nanchang) Company Limited Zhongxing Hetai Shenzhen Zhongxing Hetai Hotel Investment and Management Company Limited Zhongxing Development Zhongxing Development Company Limited Chongqing Zhongxing Chongqing Zhongxing Development Company Limited Development 航天歐華 深圳市航天歐華科技發展有限責任公司 3 ZTE CORPORATION Definitions Xi’an Microelectronics Xi’an Microelectronics Technology Research Institute Aerospace Guangyu Shenzhen Aerospace Guangyu Industrial Company Limited Zhongxing WXT Shenzhen Zhongxing WXT Equipment Company Limited Guoxing Ruike Zhuhai Guoxing Ruike Capital Management Centre (Limited Partnership) ZTE Group Finance ZTE Group Finance Co., Ltd. ZTE Microelectronics ZTE Microelectronics Technology Company Limited 2013 Share Option Incentive the share option incentive scheme considered and approved at the Third Scheme Extraordinary General Meeting of 2013, the First A Shareholders’ Class Meeting of 2013 and the First H Shareholders’ Class Meeting of 2013 of the Company Relevant U.S. authorities Bureau of Industry and Security of the United States Department of Commerce, United States Department of Justice and the Office of Foreign Assets Control of the United States Department of Treasury Latest Practicable Date 19 March 2018, being the latest practicable date for the purpose of ascertaining the contents of this report prior to its printing 4 ANNUAL REPORT 2017 Glossary This glossary contains definitions of certain technical terms used in this report as they relate to the Group. Some of these definitions may not correspond to standard industry definitions or usage. 4G Fourth-generation mobile networks operating according to IMT-Advanced standards as defined by ITU, including LTE-Advanced and Wireless MAN-Advanced (802.16m) standards, which support theoretical download rates of 1Gbit/s at fixed locations
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