TCL科技集团股份有限公司TCL Technology Group Corporation
ANNUAL REPORT 2020
11 March 2021
TCL Technology Group Corporation Annual Report 2020
Table of Contents
Part I Important Notes, Table of Contents and Definitions ...... 7
Part II Corporate Information and Key Financial Information ...... 10
Part III Business Summary ...... 14
Part IV Directors’ Report ...... 19
Part V Significant Events ...... 44
Part VI Share Changes and Shareholder Information ...... 67
Part VII Convertible Corporate Bonds ...... 73
Part VIII Directors, Supervisors, Senior Management and Staff ...... 74
Part IX Corporate Governance ...... 88
Part X Corporate Bonds ...... 103
Part XI Financial Report ...... 110
TCL Technology Group Corporation Annual Report 2020
Ramp up, Catch upand Go all out to be A Global Leader
Chairman’s Statement
The year 2020 marked the start of our global leading strategy, as well as a critical turning point forTCL. In face of the internal and external shocks at the beginning of the year, TCL adhered to theestablished strategies and business plans, and put forward the business strategy of "Ramp up, Catchup". It identified opportunities amid the challenges, scaled up business against headwinds, and forgedahead to bring up the competitiveness to a new level.
Business Review for 2020In the Reporting Period, on the same basis after the 2019 spin-off, the Group recorded a revenue ofRMB76.68 billion, up by 33.9% year-on-year; a net profit of RMB5.07 billion, up by 42.1%year-on-year; a net profit attributable to the company’s shareholders of RMB4.39 billion, up by 67.6%year-on-year; a debt/asset ratio of 65.1% and the net cash flow generated from operating activities ofRMB16.7 billion. As stated above, the operating efficiency of the Company continued to improveand all the financial objectives were over-fulfilled for the year.TCL CSOT maintained a leading operating efficiency in the current period, as demonstrated by itsrevenue of RMB46.77 billion, rising by 37.6% year-on-year, and net profit of RMB2.42 billion, upby 151.1% year-on-year. Through technological reform and efficiency enhancement, the capacity ofthe t3 (LTPS) production line in Wuhan grew from 48K to 53K. The t4 production line (OLED)Phase I produced at full capacity while Phases II and III were under rapid contruction as scheduled.The t1\t2 and t6 (G11) production lines in Shenzhen continued to operate at full capacity for strongsales. Especially, the capacity of the t6 production line increased from 90K to 98K. The shipmentarea of large-size products climbed by 32.9%. Thanks to the increasing market demand for LCDproducts across the world, prices of large-size LCD panels began to rise in June, boosting theoperating profit of TCL CSOT month by month.TCL CSOT constantly raised its R&D investments in new display technologies, such as printedOLED, QLED, Micro-LED and related key materials and equipment, and made a great strideforward. In the Reporting Period, the PCT applications of the Company increased by 1,536 and theaccumulated PCT applications reached 12,797. Meanwhile, the company made a strategic investmentin JOLED Inc., aiming to expand the footprint in next-generation display technologies.
TCL Technology Group Corporation Annual Report 2020
During the Reporting Period, the Group successfully acquired Tianjin Zhonghuan Electronics GroupCo., Ltd. (Zhonghuan Electronics), which holds a controlling interest in Tianjin ZhonghuanSemiconductor Co., Ltd. (002129.sz) and Tianjin Printronics Circuit Corporation (002134.sz)respectively, as well as other assets including Zhonghuan Computer. Following the acquisition in lateSeptember, Zhonghuan Electronics has been included in the consolidated financial statements sinceOctober 2020. Through the acquisition, the Group has entered the industries of semi-conductorphotovoltaic and semi-conductor materials.
Business Forecast for 2021In 2021, imbalance between the supply and demand of LCD panel is expected to remain, due to theshort of chips and glass and the delayed new capacity. It is predicted that product prices will remainhigh in the first half of the year, while the second half will witness a balance of supply and demand.Higher demand for LTPS panels will come from vehicle display and IT products, as supply anddemand come close to a balance. In recent years, the OLED capacity has been raised quickly. Themonopolistic advantage of leading enterprises has turned increasingly apparent. Hence, thecompetition will be extremely fierce.Phase I of the t7(G11) plant of TCL CSOT in Shenzhen has been put into production. The LCD andmodule plant of Samsung in Suzhou acquired by the Company are estimated to be consolidated inthe second quarter of this year. In view of this, the shipment and revenue of LCD panels will jumpsignificantly. The t3 (LTPS) production line of Wuhan CSOT has stepped into vehicle display and ITindustries with positive performance. A 39.95% non-controlling interest of the t3 production line hasbeen repurchased, lifting the profit in the current period. Though t4 still faces fierce competition inOLED, we will endeavor to improve our operating results. We expect a strong growth in bothrevenue and profitability of TCL CSOT in 2021.Zhonghuan Semiconductor will release its endogenous power through reform, while optimizing itsdevelopment strategy, promoting innovation in products and technologies forward, and reinforcingquality and profitability. It is estimated that its business performance will go up continuously andcontribute more to the revenue and profit of the Group this year.The industrial finance and investment business will help raise profit in line with the developmentplan. The operating results of Highly, TPC, and other businesses are expected to rise steadily.I am confident that the revenue and profit of the Group will increase remarkably this year.
TCL Technology Group Corporation Annual Report 2020
Strategic Development PlanningThe Group has kept promoting business reform and transformation since 2017 to intensify its corecompetitiveness. In 2019, it completed the spin-off of businesses like terminal products, and focusedon "high-tech, heavy-asset and long-cycle" industries. Business strategies, organizational procedures,and resource allocation were adjusted accordingly. The Group will further its business developmentin accordance with the operating strategy regarding "improving operating quality and profitability,consolidating advantages and improving disadvantages, accelerating global layout, and drivingdevelopment via innovation".The semi-conductor display business is a core business of the Group. Through the acquisition ofZhonghuan Semiconductor, the Group extended its presence to the semi-conductor photovoltaic andsemi-conductor materials industry. The above two industries own the features of high technology,huge investment, and a long industrial cycle. In the meantime, long-term strategic management,business capacity across the industrial cycle, and constant financing ability are a must. Furthermore,we must maintain a technological leadership, achieve the best business scale, and plan developmentstrategies with the goal of global leadership. These are exactly the core capabilities and businesslogic of the Group.The reason why we have chosen these two core industries lies in that China has built up an industryscale and a competitive edge across the globe in the semi-conductor photovoltaic and in LCD field ofsemi-conductor display industries. Moreover, Zhonghuan Semiconductor and TCL CSOT havedistinguished themselves to become industry leaders. With the growth in global demand and industryconcentration, more opportunities and challenges will be brought.The "9205" five-year strategic development plan of the Group specifies that ZhonghuanSemiconductor will reinforce its strengths in monocrystalline silicon products, improve its capacityin the photovoltaic industrial chain, and intensify its global business capacity in order to meet thedual goals of global leadership in the photovoltaic industry and national leadership in thesemi-conductor silicon-wafer industry. Meanwhile, TCL CSOT is expected to improve its strengthsin LCD and LTPS, make technical breakthroughs in new display technologies and materials so as tobecome a leading player in the semi-conductor display industry worldwide.TCL's industrial finance and investment business supports the development of the Group’s otherbusinesses and contributes steadily improving income. In terms of industrial finance, the Groupfeatures both highly efficient internal fund management and external financing and supply chain
TCL Technology Group Corporation Annual Report 2020
financial services. With respect to capital and investment, TCL has established a differentiatedcompetitive edge in the corresponding field and turned capital and investment into a core business.In short, the core businesses of the Group consist of three business segments, namely, thesemi-conductor display business, the semi-conductor photovoltaic and semi-conductor materialsbusiness, and the industrial finance and investment business. TCL selects suitable projects related tothe core industrial chain and gradually perfects the industrial ecosystem. In addition, it aims toachieve the strategic goal of global leadership in the two core businesses.Subsidiaries including Highly and TPC embraced robust operations and sustainable profitability. TheGroup will continuously support their independent development and business expansion.
ProspectsThere are great uncertainties in global economic recovery. Trade protectionism and unilateralismaggravate. I believe that: the advantages of China include social stability, efficient governance,sufficient economic vitality, huge domestic demand, rapid progress in science and technology, and anapparent relative competitive advantage in manufacturing. However, China's disadvantages lie ininadequate quality and profitability of economic development, insufficient core technical capabilities,rapid growth in government debts, and huge risks in finance and enterprise debts, which may affectChina's economic progress.This year, China has put forward and implemented the "14th Five-year Plan" to build a newdevelopment pattern. The government will continue to vigorously support the real economy,especially manufacturing, strengthen China's comparative advantage in manufacturing in the globaleconomy and improve the competitiveness and value of enterprises. More capital will flow tomanufacturing. In other words, the excellent manufacturing industry will access more resources.China's manufacturing industry has shifted its competitive edge from efficiency and cost control toproducts, technologies and global operations, and will usher in a new development period.Manufacturing constitutes the basis of China's economic competitiveness. Based on the establishedindustry foundation and rapid growth in domestic demand, Chinese enterprises will catch up withleading players in the high-tech manufacturing field and develop a competitive edge, which signifiesboth challenges and opportunities. Personally, I am confident of the prospects of China's high-techmanufacturing!The semi-conductor display industry and the semi-conductor photovoltaic and semi-conductor
TCL Technology Group Corporation Annual Report 2020
materials industry, as two strategic and emerging industries, embrace huge markets and promisingprospects. We have laid a favorable foundation and accumulated strength in the two industries. TCLwill embark on new industry planning and distribution in conformity with the "9205" strategic plan.The Board has proposed a final dividend of RMB1.20 per 10 shares, in light of the consistentdividend payout policy of the Group.I would like to express my sincere gratitude to all shareholders and partners for their trust andsupport, and to thank all employees for their efforts!
Li Dongsheng11 March 2021
TCL Technology Group Corporation Annual Report 2020
Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,supervisors and senior management of TCL Technology Group Corporation (hereinafterreferred to as the “Company”) hereby guarantee the factuality, accuracy and completeness ofthe contents of this Report and its summary, and shall be jointly and severally liable for anymisrepresentations, misleading statements or material omissions therein.All the Company’s directors have attended the Board meeting for the review of this Report andits summary. And all the Company’s supervisors have attended the meeting of the SupervisoryCommittee for the review of this Report and its summary.The Board has approved a final dividend plan for the ordinary shareholders as follows: basedon the share capital of 13,546,581,599 shares on 10 March 2021 that are eligible for profitdistribution (the total share capital of 14,030,788,362 shares minus the 484,206,763 shares inthe Company’s special securities account for repurchase that are not eligible for profitdistribution), a cash dividend of RMB1.2 (tax inclusive) per 10 shares is to be distributed to theshareholders, totaling RMB1,625,589,791.88. The retained earnings of RMB7,145,804,477.12will carry forward for future distribution. Meanwhile, there will be no bonus issue from eitherprofit or capital reserves for the year under review. Where any changes occur, before theimplementation of the dividend plan, to the share capital of the Company due to anyconvertible bonds-to-stock programs, share repurchases, exercises of equity incentives, newshare issues in refinancing, etc., the dividend will be adjusted according to the principle of“adjusting the total payout amount under the same dividend ratio”, subject to the actualpayout amount.Mr. Li Dongsheng, the Chairman of the Board, Ms. Du Juan, the person-in-charge of financialaffairs (Chief Financial Officer), and Mr. Xi Wenbo, the person-in-charge of the financialdepartment, hereby guarantee that the financial statements carried in this Report are factual,accurate and complete.This Report and its summary have been prepared in both Chinese and English. Should therebe any discrepancies or misunderstandings between the two versions, the Chinese version shallprevail.
TCL Technology Group Corporation Annual Report 2020
Definitions
| Term | Definition |
| The “Company”, the “Group”, “TCL”, “TCL Tech.” or “we” | TCL Technology Group Corporation and its consolidated subsidiaries, except where the context otherwise requires. |
| The “Current Period” | The period from 1 January 2020 to 31 December 2020. |
| The significant assets spin-off | The significant assets spin-off approved at the 13th meeting of the 6th Board of Directors on 7 December and the First Extraordinary General Meeting of 2019 on 7 January 2019, which was settled in April 2019. |
| TCL CSOT | TCL China Star Optoelectronics Technology Co., Ltd. |
| Zhonghuan Electronics | Tianjin Zhonghuan Electronics Group Co., Ltd. |
| Zhonghuan Semiconductor | Tianjin Zhonghuan Semiconductor Co., Ltd., a majority-owned subsidiary of the Company listed on the SME Board of the Shenzhen Stock Exchange (stock code: 002129.SZ) |
| TPC | Tianjin Printronics Circuit Corporation, a majority-owned subsidiary of the Company listed on the SME Board of the Shenzhen Stock Exchange (stock code: 002134.SZ) |
| Samsung Display | Samsung Display Co., Ltd. |
| Samsung Suzhou | Samsung Suzhou LCD Co., Ltd. |
| San’an Semiconductor | Quanzhou San’an Semiconductor Technology Co., Ltd. |
| JOLED | JOLED Incorporation |
| Wuhan CSOT | Wuhan China Star Optoelectronics Technology Co., Ltd. |
| Guangdong Juhua | Guangdong Juhua Printed Display Technology Co., Ltd. |
| China Ray | Guangzhou China Ray Optoelectronic Materials Co., Ltd. |
| Highly | Highly Information Industry Co., Ltd., a majority-owned subsidiary of the Company listed on the National Equities Exchange and Quotations (stock code: 835281) |
| CDOT | China Display Optoelectronics Technology Holdings Limited, a majority-owned subsidiary of the Company listed on the Stock Exchange of Hong Kong (stock code: 00334.HK) |
| Moka International | Moka International Limited |
| Bank of Shanghai | Bank of Shanghai Co., Ltd. (stock code: 601229.SH) |
| 712 Corp. | Tianjin 712 Communication & Broadcasting Co., Ltd. (stock code: 603712.SH) |
| Fantasia | Fantasia Holdings Group Co., Limited, a listed company on the Stock Exchange of Hong Kong (stock code: 01777.HK) |
| Admiralty Harbour Capital | Admiralty Harbour Capital Limited |
| China Innovative | China Innovative Capital Management Limited |
| t1 project | The generation 8.5 (or G8.5) TFT-LCD production line of TCL CSOT |
| t2 project | The generation 8.5 (or G8.5) TFT-LCD (including oxide semiconductor) production line of TCL CSOT |
| t3 project | The generation 6 (or G6) LTPS-LCD panel production line of TCL CSOT |
| t4 project | The generation 6 (or G6) flexible LTPS-AMOLED panel production line of TCL CSOT |
| t6 project | The generation 11 (or G11) new TFT-LCD production line of TCL CSOT |
TCL Technology Group Corporation Annual Report 2020
| t7 project | The generation 11 (or G11) new ultra-high-definition (UHD) TFT-LCD and AMOLED production line of TCL CSOT |
| GW | Gigawatt, power unit for solar cells, 1GW＝1,000 megawatt |
| MAXEON | MAXEON SOLAR TECHNOLOGIES,PTE.LTD. |
| G12 | 12-inch ultra-large DW-cut solar monocrystalline silicon square wafer, size: 44,096mm?, diagonal line: 295mm, side length: 210mm, with its size 80.5% larger than the conventional M2 |
| Phase 6 project | The 50GW（G12）solar monocrystalline silicon materials intelligent factory project launched in Yinchuan, Ningxia Hui Autonomous Region, China |
| The DW cutting technology | A cutting technology which uses a diamond that is put onto a tight steel wire by way of adhering and electroplating to cut silicon rods into wafers through high-speed and back-and-forth cutting |
TCL Technology Group Corporation Annual Report 2020
Part II Corporate Information and Key Financial Information
I Corporate Information
| Stock name | TCL Tech. | Stock code | 000100 |
| Place of listing | Shenzhen Stock Exchange | ||
| Company name in Chinese | TCL科技集团股份有限公司 | ||
| Abbr. | TCL科技 | ||
| Company name in English (if any) | TCL Technology Group Corporation | ||
| Abbr. (if any) | TCL TECH. | ||
| Legal representative | Li Dongsheng | ||
| Registered address | TCL Tech Building, 17 Huifeng Third Road, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province, China | ||
| Zip code | 516001 | ||
| Office address | TCL Tech Building, 17 Huifeng Third Road, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province, China | ||
| Zip code | 516001 | ||
| Company website | https://www.tcltech.com/ | ||
| Email address | ir@tcl.com | ||
| Company honors | Fortune China 500 2020 Brand Value List of Chinese Listed Companies—Top 100 & Top 50 Overseas Best Technology Company in Investment Value of the Year Award Excellent Board Award granted by the 16th Gold Round Table | ||
II Contact Information
| Board Secretary | |
| Name | Liao Qian |
| Office address | 10/F, Tower G1, International E Town, TCL Science Park, 1001 Nanshan District, Shenzhen, Guangdong Province, China |
| Tel. | 0755-3331 1666 |
| Email address | ir@tcl.com |
III Media for Information Disclosure and Place where this Report Is Lodged
| Newspapers designated by the Company for information disclosure | Securities Times, China Securities Journal, Shanghai Securities News and Securities Daily |
| Website designated by CSRC for publication of this Report | http://www.cninfo.com.cn |
| Place where this Report is lodged | Board Office of TCL Technology Group Corporation |
TCL Technology Group Corporation Annual Report 2020
IV Change to Company Registered Information
| Unified social credit code | 91441300195971850Y |
| Change to principal activity of the Company since going public (if any) | Not applicable |
| Every change of controlling shareholder since incorporation (if any) | Not applicable |
V Other InformationThe independent audit firm hired by the Company:
| Name | Da Hua Certified Public Accountants (Special General Partnership) |
| Office address | Room 1101, Building 7, No. 16 Xi Si Huan Zhong Road, Haidian District, Beijing |
| Accountants writing signatures | Qiu Junzhou and Jiang Xianmin |
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable ■ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
| Name | Office address | Representative | Period of supervision |
| CITIC Securities Co., Ltd. | CITIC Securities Tower, No. 8 Zhongxin 3rd Road, Futian District, Shenzhen, China | Gao Qi, Liu Jian, Fei Shaozhen | From 31 March 2019 to 31 December 2020 |
| Liu Jian, Wu Huiyu, Fei Shaozhen | From 17 October 2020 to 31 December 2021 |
VI Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes ■ No
| Item | 2020 | 2019 | 2020-over-2019 change (%) | 2018 |
| Revenue (RMB) (note) | 76,677,238,079 | 74,933,085,688 | 2.33 | 113,360,075,545 |
| Revenue on the same basis after the spin-off (RMB) (note) | 76,677,238,079 | 57,270,940,685 | 33.89 | 48,240.376,808 |
| EBITDA (RMB) | 19,059,818,227 | 14,224,327,742 | 33.99 | 14,096,523,261 |
| Net profit (RMB) | 5,065,202,767 | 3,657,735,320 | 38.48 | 4,065,194,164 |
| Net profit attributable to the company’s shareholders (RMB) (note) | 4,388,159,018 | 2,617,766,571 | 67.63 | 3,468,207,407 |
| Net profit attributable to the company’s shareholders on the same basis after the spin-off (RMB) (note) | 4,388,159,018 | 2,617,778,635 | 67.63 | 3,153,044,155 |
| Net profit attributable to the company’s shareholders before non-recurring gains and losses (RMB) | 2,933,248,153 | 235,119,321 | 1147.56 | 1,587,391,372 |
| Basic earnings per share (RMB/share) | 0.3366 | 0.1986 | 69.49 | 0.2566 |
| Diluted earnings per share (RMB/share) | 0.3226 | 0.1935 | 66.72 | 0.2562 |
| Weighted average return on equity (%) | 13.75 | 9.09 | 4.66 | 11.98 |
| Net cash generated from/used in operating activities (RMB) | 16,698,282,775 | 11,490,096,405 | 45.33 | 10,486,580,443 |
| 31 December 2020 | 31 December 2019 | Change of 31 December 2020 | 31 December 2018 |
TCL Technology Group Corporation Annual Report 2020
| over 31 December 2019 (%) | ||||
| Total assets (RMB) | 257,908,278,887 | 164,844,884,926 | 56.46 | 192,763,941,739 |
| Owners’ equity attributable to the company’s shareholders (RMB) | 34,107,795,454 | 30,111,946,237 | 13.27 | 30,494,364,951 |
Note: In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the 2019 data included theresults of the spun-off assets for January-March 2019 and a gain of RMB1.15 billion from the spin-off. Provided that the 2019 datawere on the same basis after the spin-off, revenue would be up by 33.9% year-on-year. In 2020, the Company continued to focus on itscore business and maximize shareholder’s value by spinning off the Educational Web business, which generated a gain of RMB234million. Provided that the spin-off gains were excluded from both of the 2020 and 2019 data, the net profit attributable to the company’s shareholders would be up by 191.8% year-on-year on the same basis.The total share capital at the end of the last trading session before the disclosure of this Report:
| Total share capital at the end of the last trading session before the disclosure of this Report (share) | 14,030,788,362 |
| Fully diluted earnings per share based on the latest total share capital above (RMB/share) | 0.3128 |
Indicate whether there are any corporate bonds.■ Yes □ NoIndicate whether the Company has seen a deficit for the past two years.
□ Yes ■ No □ Not applicable
VII Accounting Data Differences under China’s Accounting Standards for BusinessEnterprises (CAS) and International Financial Reporting Standards (IFRS) and ForeignAccounting Standards
1. Net Profit and Equity under CAS and IFRS
No such differences for the Reporting Period.
2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards
No such differences for the Reporting Period.
3. Reasons for Accounting Data Differences Above
□ Applicable ■ Not applicable
VIII Key Financial Information by Quarter
Unit: RMB
| Q1 | Q2 | Q3 | Q4 | |
| Revenue | 13,742,129,162 | 15,591,081,694 | 19,376,776,395 | 27,967,250,828 |
| Net profit attributable to the company’s shareholders | 408,125,802 | 799,940,184 | 817,109,760 | 2,362,983,272 |
| Net profit attributable to the company’s shareholders before non-recurring gains and losses | -109,881,642 | 291,744,489 | 678,187,625 | 2,073,197,681 |
| Net cash generated from/used in operating activities | 2,299,183,493 | 5,048,627,286 | 4,523,259,350 | 4,827,212,646 |
TCL Technology Group Corporation Annual Report 2020
Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what have beendisclosed in the Company’s quarterly or interim reports.
□ Yes ■ No
IX Non-Recurring Gains and Losses
Unit: RMB
| Item | 2020 | 2019 | 2018 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 226,829,348 | 1,419,020,969 | -58,305,452 | Not applicable |
| Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) | 736,747,146 | 1,170,648,526 | 1,377,064,570 | Not applicable |
| Gain equal to the amount by which investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the Company’s enjoyable fair value of identifiable net assets of investees when making investments | 292,440,389 | 68,021,706 | - | Not applicable |
| Gain or loss on fair-value changes in held-for-trading and derivative financial assets and liabilities & investment income from disposal of held-for-trading and derivative financial assets and liabilities and other debt investments (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) | 350,757,476 | 186,339,457 | 162,729,226 | Not applicable |
| Non-operating income and expense other than the above | 80,764,287 | 9,263,922 | 871,846,769 | Not applicable |
| Less: Corporate income tax | 135,130,967 | 165,397,982 | 191,940,974 | Not applicable |
| Non-controlling interests (net of tax) | 97,496,814 | 305,249,348 | 280,578,104 | Not applicable |
| Total | 1,454,910,865 | 2,382,647,250 | 1,880,816,035 | -- |
Explanation of why the Company reclassifies as recurrent a non-recurring gain/loss item defined or listed in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gain/LossItems:
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
Part III Business Summary
I Principal Activity of the Company in the Reporting PeriodDuring the Reporting Period, the Company acquired 100% equity of Tianjin Zhonghuan ElectronicsGroup Co., Ltd. Therefore, the businesses of the Company primarily consist of the semi-conductordisplay business, the semi-conductor photovoltaic and semi-conductor materials business, theindustrial finance and investment business, as well as the other businesses.
For further information about the Company’s businesses, please refer to “Part IV Directors’ Report”herein.II Significant Changes in Major Assets
1. Significant Changes in Major Assets
| Major assets | Main reason for significant change |
| Equity assets | Consolidation of Zhonghuan Electronics |
| Fixed assets | Consolidation of Zhonghuan Electronics and transfer from construction in progress |
| Intangible assets | Consolidation of Zhonghuan Electronics |
| Construction in progress | No significant change |
| Debt investments | Purchase of bonds |
| Investment property | Consolidation of Zhonghuan Electronics and transfer from construction in progress |
| Goodwill | Consolidation of Zhonghuan Electronics |
| Other non-current assets | Increase in prepayments for equipment and consolidation of Zhonghuan Electronics |
TCL TechSemi-conductor display
| Semi-conductor display | Semi-conductor photovoltaic & Semi-conductor materials | Industrial finance & investment | Other | |||
| TCL CSOT | China Ray |
| Juhua | CDOT |
| Zhonghuan Photovoltaic | Zhonghuan Advanced |
| TCL Financial | TCL Capital | Highly | TPC | |||
TCL Technology Group Corporation Annual Report 2020
2. Major Assets Overseas
□ Applicable ■ Not applicable
III Core Competitiveness AnalysisThe year 2021 marks the 40th anniversary of the establishment of TCL. In the past four decades,TCL has weathered the storm and developed the distinct labels of sticking to manufacturing, keepinginnovating, forging ahead and daring to change. In particular, 2018 witnessed TCL's most criticaltransformation. The Group clarified to focus on “high-tech, heavy-asset and long-cycle” industriesand spun off terminal and non-core businesses. It is committed to becoming a global leadingtechnology group by centering on industry upgrading and strategic layout. In 2020, TCL wasrenamed "TCL Tech.". It acquired Zhonghuan Electronics in July to enter the semi-conductor andsemi-conductor photovoltaic fields. Additionally, it acquired Samsung Suzhou in August toconsolidate its position and competitive edge in the semi-conductor display industry.So far, the Group has developed a basic business structure composed of three business segments,namely, the semi-conductor display business, the semi-conductor photovoltaic and semi-conductormaterials business, and the industrial finance and investment business. Moreover, it boasts a cleardevelopment path, efficient operations, and distinct culture. Its core competitiveness andsustainability have been strengthened significantly.Leading scale: Dual drivers of global leadership in panels and an up cycle in the industryThe Company, as a global leader in the semi-conductor display industry, has six production lines inuse and progress. Specifically, TCL CSOT gained a firm foothold in the TV panel field by virtue oftwo generation 8.5 production lines. Later, it entered the small-size panel market via two generation6 production lines with a market share of over 10%. In recent years, through two generation 11production lines, TCL CSOT has further expanded the capacity of large-size panels to establish itsglobal leadership in large-size panels. Currently, TCL CSOT covers large-, medium-, and small-sizepanels as well as high-end display fields, such as touch modules, electronic whiteboards,multi-screen walls, vehicle display, and Esports. Globally, it is ranked second in the total shipmentarea of TV panels. To be specific, it is ranked first in the market share of 55-inch TV panels, secondin the market share of 65-inch TV panels, and among the top three in the shipment of LTPS mobilepanels. The high-end, new-form product of the t4 flexible AMOLED production line was rapidlyimproved. Cooperation with global leading brand customers was constantly deepened.
TCL Technology Group Corporation Annual Report 2020
In 2021, with the release of production capacity of t7 and the integration of Samsung Suzhou’sproduction, TCL CSOT will drastically raise its capacity and further boost its industry position andcomprehensive competitiveness.TCL CSOT will usher in a development phase underpinned by twin driving forces, namely, rapidgrowth in scale and improvement in industry pattern, thanks to the enhancement of corecompetitiveness through the economies of effect and supply chain synergy, as well as the recovery ofthe supply-demand relationship, and the optimization of the competition pattern.Leadership in technology and ecosystem: The Group will actively expand its presence innext-generation display technologies and materials and form the first-mover advantageThe Company will highlight the ecosystem layout in basic materials, next-generation displaymaterials and key equipment for new processes, as well as create a TCL ecosystem in the displayfield to develop leadership advantage of next-generation display technologies.The "National Printed and Flexible Display Innovation Center" of Guangdong Juhua, a subsidiary ofthe Company, is the sole national innovation center in the display field in China. It features a publicG4.5 printed display R&D platform and integrates resources in the entire industrial chain frommaterials, processes, and production process. In 2020, TCL CSOT acquired a stake in JOLED Inc. atJPY30 billion. Through joint R&D and patent cooperation, the two will speed up the industrial massproduction of printed OLED displays from all aspects including materials, equipment, processes andproducts, and will improve the Company's ecosystem in the key processes of the printed displayindustrial chain, with an aim of leading the future technological development trend. In addition, TCLCSOT will continuously input in the Micro-LED display technology. The laboratory jointlyestablished by TCL CSOT and San'an will focus on the development of Micro-LED technology. Thetwo aim to promote the Company's layout in the field from materials, processes, equipment, andproduction line solutions to independent intellectual property rights and form a process solution forthe commercial mass production of Micro-LED displays.Leading management: TCL CSOT is characterized by world-leading efficiency and has beatenthe down cycle with a relative competitiveness edgeTCL CSOT has built its market scale, technologies, and ecosystem advantages. Meanwhile, itsefficiency and profitability indicators continue to lead the industry. TCL CSOT has undergone twocycles with great fluctuations, while remaining profitable for 10 consecutive years, since its launch in2011. The key to its success lies in the maximization of cost efficiency and lean management.
TCL Technology Group Corporation Annual Report 2020
The Group has given full play to its highly efficient layout of production lines and the benefits ofexpanded capacity and further raised the utilization of production lines and the productionscheduling efficiency based on the advantage of the integration of industrial chain and the long-termorders of strategic customers. Furthermore, it has promoted end-to-end management and control ofcosts and fees through lean management and the maximization of cost efficiency and developedrelative competitiveness in the industry. It has led the industry in terms of the net profit rate and theEBITDA amid fluctuations in the past cycles. In the future, TCL will continue utilizing these corecapabilities to go through the industry cycle.Strategic and new segments: The Group will expand its footprint in the semi-conductor andsemi-conductor photovoltaic fields to form a new driving force for future progressTCL has earnestly explored new markets with “high-tech, heavy-asset and long-cycle” to continuallyimprove its core capabilities, by observing the corporate goal. In July 2020, it participated in theacquisitoin of Zhonghuan Semiconductor. Zhonghuan Semiconductor is dedicated to the R&D andproduction of photovoltaic and semi-conductor silicon-wafers fields. Silicon materials are the basisof the semi-conductor industry. Hence, Zhonghuan Semiconductor's strengths in either thephotovoltaic industry or the semi-conductor industry are commensurate with the demand of TCL forbuilding a new driving force.Looking ahead, Zhonghuan Semiconductor will embrace wider development space and graduallygrow into one of the main engines of TCL, as the latter implements its strategies and operatingarrangement for the former. In turn, TCL will gain an driving force and pushing the semi-conductorand semi-conductor photovoltaic fields forward simultaneously.Industry-finance synergy: TCL will utilize its strengths in industrial finance and empowerindustrial chain layout and developmentThe industrial finance and investment and venture capital business of the Group have emerged to bea vital business platform of the Group. TCL Financial is committed to empowering industrydevelopment, supporting business operations, and expanding investment. It provides financialservices for the Company’s main businesses and their partners of the industrial chain, ensuring theprovision of resources for major investment projects, and generating revenue by utilizing surpluscapital. TCL Capital focuses on the investment in the industrial ecological chain, drives industrydevelopment, and plays an active role in building an industrial ecology.The industrial finance & investment and venture capital business is conducive to the Company’sindustrial chain layout around its core business. The stable profit contribution it brings also helps
TCL Technology Group Corporation Annual Report 2020
offset the influence of the semi-conductor display industrial downturn. Focusing on the mainbusiness, TCL’s investment and venture capital business has realized the coordinated development ofindustrial technologies and investment opportunities. It accomplished many successful investmentsin such fields as core electronic devices and basic software, including the investments on Cambriconand YEESTOR Microelectronics.Organizational and cultural guarantee: The connotation of "Spirit of Eagle" is enriched. Thecorporate cultural gene is strengthened.Through the ups and downs for 40 years, the Company developed the “spirit of eagle”, which reflectsTCL’s core values and competitiveness, as well as cohesion of TCLers. The connotation of the“Spirit of Eagle” will be re-interpreted in the new era of development and further motivate allTCLers to forge ahead, embrace changes, challenge conventional ideas, endure hardship, makeprogress and continue to thrive.In 2019, the Company upgraded its corporate culture based on the “Spirit of Eagle”. In 2021, on theoccasion of the 40th anniversary of the establishment of the Company, TCL will keep updating andprobing into the connotation of the "Spirit of Eagle" and continue to deepen organizational teambuilding and corporate culture cultivation. It aims to create a pattern where the Senior Managementhas a broader vision, while the Middle Management becomes more ambitious; and the grass-rootsimplementation turns more effective. As a result, TCL will develop a more energetic corporateculture, plant the idea of "global leadership" in the mind of each TCL employee as a powerfulspiritual weapon to compete in the market.
TCL Technology Group Corporation Annual Report 2020
Part IV Directors’ Report
I OverviewThe year 2020 was extraordinary. The COVID-19 pandemic severely hit the global economy. Tradefrictions further impacted the global industrial chain layout. Consequently, technology enterprisessuffered from a complicated and changeable business environment. That said, de-globalization hasaccelerated the optimization of the industrial layout and the structure of the supply chain. The gist ofthe allocation of production factors lied in efficiency, profitability, and costs. The cluster effect andmanagement advantage of the Chinese manufacturing industry are gradually becoming prominent. Inthe context of both opportunities and challenges, we adhered to our strategic target, held the businessbottom line of maximizing cost efficiency, and put forward the business strategy of "Ramp up,Catch up". The Group identified opportunities among challenges and achieved expansion againstheadwinds. Besides, TCL grasped opportunities in emerging strategic industries. For instance, itacquired 100% equity of Zhonghuan Electronics to open up new markets. The Group establishedthe business layout consisting of three business segments, namely, the semi-conductor displaybusiness, the semi-conductor photovoltaic and semi-conductor materials business, and theindustrial finance and investment business, laying a solid foundation for becoming a globalleading technology group.In the Reporting Period, on the same basis after the 2019 spin-off, the Group recorded a revenue ofRMB76.68 billion, up by 33.9% year-on-year; a net profit of RMB5.07 billion, up by 42.1%year-on-year; and a net profit attributable to the company’s shareholders of RMB4.39 billion, up by
67.6% year-on-year. Especially, the net profit attributable to the company’s shareholders in Q4 2020amounted to RMB2.36 billion, up by RMB2.32 billion year-on-year and 189.2% quarter-on-quarter,thanks to the expanded scale, leading efficiency, improved industry cycle, and optimized productstructure of TCL CSOT as well as the incorporation of Zhonghuan Semiconductor into theconsolidated financial statements. Moreover, the Group continued to underline the development ofcore technologies. R&D investments jumped by 41.2% year-on-year to RMB6.54 billion on the samebasis after the spin-off. In the Reporting Period, the PCT applications of the Company increased by1,536 and the accumulated PCT applications reached 12,797. The number of days of cash turnoverwas reduced to 13. The net profit per capita surged by 45.4% to RMB108,000. The debt/asset ratiowas 65.1%. The net cash flow generated from operating activities was RMB16.7 billion. TheCompany enjoyed enhanced operating efficiency and a robust capital structure.
TCL Technology Group Corporation Annual Report 2020
The global political and economic landscape enters a long-term game. The complex and changingexternal environment leads to increasing uncertainties. That said, de-globalization has accelerated therestructuring of the global economic pattern. The Chinese manufacturing industry will usher in betterdevelopment opportunities under China's new development pattern whereby "domestic and foreignmarkets can boost each other". The year 2021 marks the 40th anniversary of TCL. Based on itsconstant efforts in the manufacturing industry as well as transformation and innovation in the pastfour decades, the Group will grasp the golden period for the adjustment of the global economicpattern and progress of the Chinese manufacturing industry. It will regard "improving operatingquality and profitability, consolidating advantages and improving disadvantages, accelerating globallayout, and driving development via innovation" as its operating strategy and promote the two corebusinesses, namely, the semi-conductor display business and the semi-conductor photovoltaic andsemi-conductor materials business in order to achieve its strategic goal of global leadership.With respect to the semi-conductor display business, the Group will constantly push forwardmanagement reform and consider leading efficiency and profitability as a solid foundation forsustainable development. Besides, it will further perfect the strategic layout of businesses and theplan of production lines, optimize the product structure and customer portfolios, make innovationand breakthroughs in new display technologies and materials, and lead the global display industry incomprehensive competitiveness.In regard to the semi-conductor photovoltaic business, the Group will enhance its strengths in thefield of monocrystalline silicon and wafer, drive product iteration via technological innovation, andspeed up the building of the photovoltaic industrial chain. In addition, it will intensify thecompetitiveness in differentiated products, mainly overlapped-cell modules, and global capabilitiesin order to become a leader in the semi-conductor photovoltaic industry across the world.In terms of the semi-conductor materials business, the Group will keep exerting more efforts tooptimize the investment and products structures of Zhonghuan Advanced and orderly promote thecoverage of power semiconductors and integrated circuit chips of all kind. As the Group maintainsthe leading superiority of 8-12-inch products of Zhonghuan Advanced in semi-conductor chips of allpowers, it will further improve 12-inch products for customers with the advanced production processto raise market share. Meanwhile, it will firmly seize opportunities in China's integrated circuitindustry, focus on the angle of global competition, and accelerate to reinforce its core capabilities. Itwill conscientiously extend and expand the semi-conductor industrial chain and catch up withinternational standards.
TCL Technology Group Corporation Annual Report 2020
TCL Tech. will embark on a new development phase and march forward with a stronger drivingforce for development!
II. Core Business AnalysisDuring the Reporting Period, the Company acquired 100% equity of Tianjin Zhonghuan ElectronicsGroup Co., Ltd. Therefore, the business structure of the Company primarily consist of thesemi-conductor display business, the semi-conductor photovoltaic and semi-conductor materialsbusiness, the industrial finance and investment business, as well as the other businesses.
(I) Semi-conductor display businessA turning point of the display industry occurred at the historical bottom in 2020. Prices of large-sizepanels have kept rising since June 2020. Industry profitability has gradually recovered.TCL CSOT demonstrated excellent anti-recession and anti-risk capabilities in a down cycle,and improved its scale, market share, and profitability against headwinds, attributable tomaximized lean management and business synergy. In the Reporting Period, TCL CSOT recordeda product sales area of 29,097,000 square meters, up by 31.2% year-on-year; a revenue of RMB46.77billion, up by 37.6% year-on-year; and a net profit of RMB2.42 billion, up by 151.1% year-on-year.In particular, the net profit in Q4 2020 stood at RMB1.86 billion, up by RMB2.19 billionyear-on-year.The large-size panel business maintained leading efficiency and profitability in the world,continued to expand its scale advantage, and further promoted its market position. In theReporting Period, t1, t2 and t6 plants continued to operate at full capacity for strong sales. The t7plant was put into production. The shipment of large-size products reached 27,675,000 square meters,
TCL TechSemi-conductor display
| Semi-conductor display | Semi-conductor photovoltaic & Semi-conductor materials | Industrial finance & investment | Other | |||
| TCL CSOT | China Ray |
| Juhua | CDOT |
| Zhonghuan Photovoltaic | Zhonghuan Advanced | |
| TCL Financial | TCL Capital | Highly | TPC | |||
TCL Technology Group Corporation Annual Report 2020
up by 32.9% year-on-year. 45,746,000 pieces were shipped with a year-on-year increase of 11.0%.Sales revenue was RMB28.98 billion, rising by 53.1% year-on-year. Globally, the Company rose tosecond place in the ranking of market shares in TV panels. Besides, it was ranked first, second, andsecond regarding the market shares in 55-inch, 32-inch, and 65-inch & 75-inch products respectively.In terms of commercial displays, the shipment of interactive whiteboards jumped to the top acrossthe world. Market shares in rail transit products and Esports products climbed swiftly.For the medium-sized panel business, product and customer structures were optimized. For thesmall-size panel business, close attention was paid to technological innovation andenhancement. Both businesses advanced quickly in high-end segments. In terms of the t3production line, the shipment of LTPS mobile panels took third place globally. Multiple brands ofhigh-end notebooks, tablets, and vehicle displays were introduced to the medium-size panel business,thus quickly developing the business. The shipment of LTPS notebook panels was ranked second inthe world. The t4 production line of flexible AMOLED displays produced at full capacity in Phase I.Equipment for Phases II and III are being moved in. Foldable screens and double-curved screens forbrand manufacturers were mass produced and delivered. The Company successively introducedglobal first-class brand customers. In the Reporting Period, the shipment area of small- andmedium-size products was 1,422,000 square meters with a year-on-year increase of 4.2%.99,235,000 pieces were shipped, down by 12.8% year-on-year. The revenue amounted to RMB17.79billion, increasing by 18.1% year-on-year.During the historically low ebb of the semi-conductor display, TCL CSOT adhered to its strategicfocus, achieved countercyclical expansion, and marched toward the strategic goal of globalleadership. TCL CSOT adopted multiple measures to enhance its strengths: First, it acquiredSamsung Suzhou to reinforce the comprehensive competitiveness in the large-size panel business.Second, it acquired a 39.95% non-controlling interest in the t3 plant to raise the contribution of thesmall- and medium-size panel business to the Group’s earnings. Third, it acquired a stake in JOLEDInc. in Japan to accelerate the industrialization of printed display technologies. Fourth, a laboratorywas jointly established by TCL CSOT and San'an Semiconductor, committed to Micro-LEDdevelopment. Fifth, it acquired Moka International Limited to offer customized and one-stop servicesrelated to large-size TV and commercial displays, medium-size IT displays, and vehicle displays.Looking into the future, the long-term prospects of the semi-conductor display industry arepromising. The LCD industry has basically completed the relocation to Mainland China. At present,industry capacity expansion is drawing to a close. The outdated capacity is being eliminatedgradually. Consequently, as industrial concentration is further improved, leading enterprises have
TCL Technology Group Corporation Annual Report 2020
developed a high industry barrier.TCL CSOT will continue intensifying its scale advantage through endogenous growth andM&A deals and join hands with upstream suppliers and downstream customers to create anindustrial ecosystem featuring closer cooperation. In 2021, the t7 production line will continue itsproduction ramp-up. Phases II and III of the t4 production line are in progress as scheduled. Thetakeover of Samsung Suzhou will be completed. TCL CSOT will expand its scale by over 50%,further consolidating its market share and position. In the meantime, the Company will deepen thecooperation with globally top-level brand customers, cultivate global industrial chain resources, andbuild a supply chain system that is more resilient and competitive.Product and revenue structures will be continuously optimized; a layout of high-end productswill be implemented to drive sustainable and quality progress. TCL CSOT will constantly raisethe proportions of high-end products, such as large-size products, 8K products and 120Hz products.For medium-size products, it will accelerate to introduce products with high added value likenotebook and vehicle displays. Regarding small-size flexible OLED, priorities will be given todifferentiated technologies, such as under-display camera, foldable screen and LTPO, whereby TCLCSOT has already enjoyed a competitive advantage. In 2021, it will successively start massproduction and delivery.The Group will actively expand its presence in next-generation display technologies andmaterials to lead the future technology trend. TCL CSOT will accelerate the industrial productionand ecosystem construction of printed display processes, through its "National Printed and FlexibleDisplay Innovation Center"—Guangdong Juhua and JOLED Inc. where TCL CSOT acquired a stake.China Ray will vigorously push forward the development of OLED and QLED materials withindependent intellectual property rights. It has submitted samples of R-prime and GH materials todomestic panel manufacturers. Moreover, it has over 30 core patents in printed OLED materials andis ranked second globally in terms of the number of public patents in the quantum dotelectroluminescent field.
(II) Semi-conductor photovoltaic and semi-conductor materialsIn 2020, Zhonghuan Semiconductor continued promoting the goals of achieving global leadership inthe photovoltaic industry and domestic leadership in the semi-conductor silicon-wafer industry.Additionally, it implemented reforms by adjusting the organizational structure, improvingmanagement efficiency, and transforming the manufacturing model to drive quality development. In
TCL Technology Group Corporation Annual Report 2020
the Reporting Period, Zhonghuan Semiconductor recorded a total revenue of RMB19.06 billion,climbing by 12.8% year-on-year, and a net profit of RMB1.48 billion with a year-on-year increase of
17.0%. Zhonghuan Semiconductor has been included in the consolidated financial statements sinceQ4 2020.
1. Semi-conductor photovoltaic business
In terms of new energy materials, the Company focused on the decline of LCOE and has developedand promoted G12 photovoltaic silicon-wafer products and photovoltaic cells and components,which have been widely recognized in the market. It has proposed multiple new technologies relatedto the improvement of capacity, the upgrading of product quality, and cost reduction in order tofurther reinforce the global competitiveness of photovoltaic products. Besides, the company hasdeveloped patented technologies and know-how with independent intellectual property rights, as wellas further sped up Industry 4.0 application and upgrading, covering whole industrial productionprocedures. The total capacity of monocrystalline silicon wafer amounted to 55GW/year at the end ofthe Reporting Period, wherein nearly 20% was from the improvement of the original capacity.With respect to new energy photovoltaic cells and components, the Company has continued its inputand innovation to the overlapped-cell modules, which the company owns intellectual property andindustry leadership. It has performed the R&D of the overlapped-cell 3.0 production line so as toenhance the performance and reduce the costs of overlapped-cell modules. Collaborative and jointinnovation have been conducted with domestically leading G12 PERC cell manufacturers. Thecapacity turned 4GW/year at the end of the Reporting Period. The Company considers globalmanufacturing as an essential component of globalization, respects international commercialpractices and intellectual property, and strives to stand out among domestic peers. In the ReportingPeriod, the Company and Total, a French company, jointly completed the incorporation ofMAXEON SOLAR that is registered in Singapore and listed on the NASDAQ market. MAXEONfeatures intellectual property rights and outstanding R&D capacities in IBC cells and componentsand overlapped-cell modules. It will build up its manufacturing system of cells and components aswell as surface and distributed power stations worldwide.
2. Semi-conductor materials business
Semi-conductor silicon-wafers are core and fundamental materials of integrated circuits. TCL hasgrasped the opportunities brought by the industrial chain transfer, given full play to the synergyeffect of the semi-conductor display industry, and forged ahead toward the goal of domesticleadership in the semi-conductor materials industry.
TCL Technology Group Corporation Annual Report 2020
In the Reporting Period, the Group accelerated the product verification and customer development inthe semi-conductor materials industry and won recognition of major customers across the world. 8-and 12-inch products met the international standards and domestic leading customers highlyrecognized their performance and quality. All launched production lines produced at full capacity.With respect to product structure, the Group has emerged to be a major player regarding digital logicand storage products, while consolidating the strengths of traditional semi-conductor products. Theyear-on-year growth rate of the shipping area of silicon wafers surpassed 30% in 2020. Meanwhile,the Group accelerated to perfect its global business landscape, actively built a network of marketchannels, created a technical support platform, and improved services of its global system in Europe,Japan and Taiwan where semiconductor businesses cluster. Its overseas sales accounted for 40% in2020.(III) Industrial Finance and Investment Business
1. TCL Financial
TCL’s industrial finance business mainly includes the Group’s finance and the supply chain finance.The finance team focused on the funding needs of the Group’s key projects, strengthened the activemanagement of liquidity and currency risk, and gradually satisfied financial needs of businessglobalization. The supply chain finance took full advantage of Internet platform. Jointly withdomestic financial institutions, it continuously provided high quality and convenient receivablesfinancing services for small and medium enterprises, realizing the sound development of theindustry.
2. TCL Capital
TCL Capital seeks investment opportunities in key fields of high-tech industries, including newdisplay, semi-conductor industry chain, as well as key materials and process equipment. Theseinvestments took a balanced approach to promote technology development and derive economicbenefits. By the end of the Reporting Period, the AUM of TCL Capital exceeded RMB9 billion, and126 projects were invested cumulatively. Currently, it holds the stake of CATL, DKEM, Cambriconand some other listed companies, in addition to interests in Tengyuan Cobalt, Shangtai Tech, ASRMicroelectronics, GalaxyCore, etc. As for Admiralty Harbour Capital, it has issued and underwritten18 bonds and 7 debt management projects. Its investment banking and asset management businessgrew steadily. China Innovative focused on investment opportunities related to the Company’s twocore businesses, and it has invested in more than 130 listed companies cumulatively with a steadygrowth in performance.
TCL Technology Group Corporation Annual Report 2020
At the end of the Reporting Period, the Company holds a stake of several listed companies directly,including the 712 Corp. (603712.SH), the Bank of Shanghai (601229.SH) and the Fantasia Holdings(01777.HK).
2. Revenue and Cost Analysis
(1) Breakdown of Revenue
Unit: RMB
| 2020 | 2019 | Change (%) | |||
| Revenue | As % of total revenue (%) | Revenue | As % of total Revenue (%) | ||
| Total | 76,677,238,079 | 100% | 74,933,085,688 | 100% | 2.33% |
| By operating division | |||||
| Semi-conductor display | 46,765,152,291 | 60.99% | 33,993,533,865 | 45.37% | 37.57% |
| Semi-conductor photovoltaic and semi-conductor materials | 5,682,961,642 | 7.41% | - | - | - |
| Distribution business | 22,518,401,333 | 29.37% | 20,835,617,478 | 27.81% | 8.08% |
| Other businesses and internally offset accounts | 1,710,722,813 | 2.23% | 20,103,934,345 | 26.83% | -91.49% |
| By product category | |||||
| Semi-conductor display devices | 46,765,152,291 | 60.99% | 33,993,533,865 | 45.37% | 37.57% |
| Semi-conductor photovoltaic and semi-conductor materials | 5,682,961,642 | 7.41% | - | - | - |
| Distribution of electronics | 22,518,401,333 | 29.37% | 20,835,617,478 | 27.81% | 8.08% |
| Other businesses and internally offset accounts | 1,710,722,813 | 2.23% | 20,103,934,345 | 26.83% | -91.49% |
| By operating segment | |||||
| Mainland China | 53,611,557,357 | 69.92% | 47,799,405,342 | 63.79% | 12.16% |
| Overseas (including Hong Kong) | 22,326,649,303 | 29.12% | 26,256,983,394 | 35.04% | -14.97% |
| Others | 739,031,419 | 0.96% | 876,696,952 | 1.17% | -15.70% |
Unit: RMB’0,000
| 2020 | 2019 | |||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| Revenue | 1,374,212.92 | 1,559,108.17 | 1,937,677.64 | 2,796,725.08 | 2,960,095.69 | 1,418,065.69 | 1,503,605.24 | 1,611,541.96 |
| Net profit attributable to the company’s | 40,812.58 | 79,994.02 | 81,710.98 | 236,298.33 | 77,908.84 | 131,326.03 | 48,498.13 | 4,043.66 |
TCL Technology Group Corporation Annual Report 2020
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of Revenue orOperating Profit
Unit: RMB
shareholders
| Revenue | Cost of sales | Gross profit margin | YoY change in revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division | ||||||
| Semi-conductor display | 46,765,152,291 | 38,864,960,717 | 16.89% | 37.57% | 27.51% | 6.55% |
| Distribution business | 22,518,401,333 | 21,737,804,382 | 3.47% | 8.08% | 8.21% | -0.12% |
| By product category | ||||||
| Semi-conductor display devices | 46,765,152,291 | 38,864,960,717 | 16.89% | 37.57% | 27.51% | 6.55% |
| Distribution of electronics | 22,518,401,333 | 21,737,804,382 | 3.47% | 8.08% | 8.21% | -0.12% |
| By operating segment | ||||||
| Mainland China | 53,611,557,357 | 48,136,161,180 | 10.21% | 12.16% | 14.30% | -1.68% |
| Overseas (including Hong Kong) | 22,326,649,303 | 17,913,215,641 | 19.77% | -14.97% | -25.01% | 10.75% |
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
| Operating division | Item | Unit | 2020 | 2019 | Change (%) |
| Semi-conductor display | Sales volume | 0,000㎡ | 2,910 | 2,218 | 31.20% |
| Output | 0,000㎡ | 2,887 | 2,234 | 29.23% | |
| Inventory | 0,000㎡ | 61 | 84 | -27.38% |
(4) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable ■Not applicable
(5) Breakdown of Cost of Sales
Unit: RMB
| Operating division | Cost items | 2020 | 2019 | Change (%) | ||
| Cost of sales | As % of total cost of sales (%) | Cost of sales | As % of total cost of sales (%) | |||
| Semi-conductor display | Raw materials, labor cost, depreciation, etc. | 38,864,960,717 | 58.67% | 30,478,907,024 | 45.95% | 27.51% |
| Distribution business | Raw materials, labor cost, depreciation, etc. | 21,737,804,382 | 32.82% | 20,087,790,401 | 30.28% | 8.21% |
| Others | Raw materials, labor cost, depreciation, etc. | 5,639,513,329 | 8.51% | 15,770,420,074 | 23.77% | -64.24% |
TCL Technology Group Corporation Annual Report 2020
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
Compared with 2019, 91 subsidiaries (11 newly incorporated and the other 80 over which theCompany newly obtained control) are newly included in and 6 subsidiaries (3 transferred and theother 3 de-registered) are excluded from the consolidation scope of 2020.
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable ■Not applicable
(8) Major Customers and Suppliers
Major customers:
| Total sales to top five customers (RMB) | 29,538,238,300 |
| Total sales to top five customers as % of total sales of the Reporting Period (%) | 38.90% |
| Total sales to related parties among top five customers as % of total sales of the Reporting Period (%) | 12.46% |
Top five customers:
| No. | Customer | Sales revenue contributed for the Reporting Period (RMB) | As % of total sales revenue (%) |
| 1 | Customer A | 7,562,130,820 | 9.96% |
| 2 | Customer B | 7,323,720,176 | 9.64% |
| 3 | Customer C | 6,305,529,571 | 8.30% |
| 4 | Customer D | 5,188,672,272 | 6.83% |
| 5 | Customer E | 3,158,185,461 | 4.16% |
| Total | -- | 29,538,238,300 | 38.90% |
Other information about major customers:
For sales transactions between the Company and its related parties, see announcements disclosed by the Company on the designatedmedia for information disclosure.Major suppliers:
| Total purchases from top five suppliers (RMB) | 15,274,912,295 |
| Total purchases from top five suppliers as % of total purchases of the Reporting Period (%) | 23.13% |
| Total purchases from related parties among top five suppliers as % of total purchases of the Reporting Period (%) | 3.56% |
Top five suppliers:
| No. | Supplier | Purchase in the Reporting Period (RMB) | As % of total purchases (%) |
| 1 | Supplier A | 5,115,659,301 | 7.75% |
| 2 | Supplier B | 4,153,496,667 | 6.29% |
| 3 | Supplier C | 2,353,119,333 | 3.56% |
TCL Technology Group Corporation Annual Report 2020
| 4 | Supplier D | 1,938,205,521 | 2.93% |
| 5 | Supplier E | 1,714,431,473 | 2.60% |
| Total | -- | 15,274,912,295 | 23.13% |
Other information about major suppliers:
□ Applicable ■ Not applicable
3. Expense
Unit: RMB
| 2020 | 2019 | Change (%) | Reason for any significant change | |
| Selling expense | 886,816,654 | 2,857,488,890 | -68.97% | The spin-off |
| Administrative expense | 2,370,378,495 | 1,895,087,528 | 25.08% | Increase in business and consolidation of Zhonghuan Electronics |
| Finance costs | 2,357,022,129 | 1,248,800,752 | 88.74% | Increase in financings |
| R&D expense | 4,402,820,839 | 3,396,804,603 | 29.62% | Increase in R&D investments and consolidation of Zhonghuan Electronics |
4. R&D Investments
| 2020 | 2019 | Change (%) | |
| Number of R&D personnel | 8,156 | 6,155 | 32.51% |
| R&D personnel as % of total employees | 16.83% | 17.40% | -0.57% |
| R&D investments (RMB) | 6,543,368,860 | 5,464,281,132 | 19.75% |
| R&D investments as % of revenue | 8.53% | 7.29% | 1.24% |
| Capitalized R&D investments (RMB) | 2,836,134,458 | 2,067,476,529 | 37.18% |
| Capitalized R&D investments as % of total R&D investments | 43.34% | 37.84% | 5.51% |
Reasons for any significant YoY change in the percentage of R&D investments in revenue:
□ Applicable ■ Not applicable
5. Cash Flows
Unit: RMB
| Item | 2020 | 2019 | Change (%) |
| Subtotal of cash generated from operating activities | 86,452,810,939 | 86,264,894,716 | 0.22% |
| Subtotal of cash used in operating activities | 69,754,528,164 | 74,774,798,311 | -6.71% |
| Net cash generated from/used in operating activities | 16,698,282,775 | 11,490,096,405 | 45.33% |
| Subtotal of cash generated from investing activities | 32,460,222,661 | 28,039,344,036 | 15.77% |
| Subtotal of cash used in investing activities | 71,233,732,364 | 59,771,052,922 | 19.18% |
TCL Technology Group Corporation Annual Report 2020
| Net cash generated from/used in investing activities | -38,773,509,703 | -31,731,708,886 | -22.19% |
| Subtotal of cash generated from financing activities | 75,566,392,668 | 47,909,796,502 | 57.73% |
| Subtotal of cash used in financing activities | 52,701,802,798 | 35,958,990,471 | 46.56% |
| Net cash generated from/used in financing activities | 22,864,589,870 | 11,950,806,031 | 91.32% |
| Net increase in cash and cash equivalents | 570,673,851 | -8,064,640,553 | 107.08% |
Explanation of why any of the data above varies significantly on a year-on-year basis:
The change in net cash generated from/used in operating activities was primarily driven by new production lines running at fullcapacity for strong sales and the consolidation of Zhonghuan Electronics.The change in net cash generated from/used in investing activities was primarily driven by the acquisition of Zhonghuan Electronics.The change in net cash generated from/used in financing activities was primarily driven by an increase in financings.Explanation of why the net cash generated from/used in operating activities varies significantly from the net profit of the ReportingPeriod:
□ Applicable ■ Not applicable
III Analysis of Non-Core Businesses
□ Applicable ■ Not applicable
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
The Company has adopted the new accounting standards governing revenue and leases since 2020 and restated the beginning amountsof relevant financial statement line items in the year.
Unit: RMB
| 31 December 2020 | 1 January 2020 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As % of total assets | Amount | As % of total assets | |||
| Monetary assets | 21,708,904,743 | 8.42% | 18,648,184,663 | 11.31% | -2.89% | No significant change |
| Accounts receivable | 12,557,614,486 | 4.87% | 8,317,625,684 | 5.04% | -0.17% | No significant change |
| Inventories | 8,834,957,692 | 3.43% | 5,723,265,747 | 3.47% | -0.04% | No significant change |
| Investment property | 1,664,201,130 | 0.65% | 82,272,964 | 0.05% | 0.60% | No significant change |
| Long-term equity investments | 24,047,036,004 | 9.32% | 17,194,284,162 | 10.43% | -1.11% | No significant change |
| Fixed assets | 92,829,901,894 | 35.99% | 45,459,070,330 | 27.57% | 8.42% | Transfer from construction in progress and consolidation of Zhonghuan Electronics |
| Construction in progress | 31,508,310,783 | 12.22% | 33,578,289,802 | 20.37% | -8.15% | Transfer to fixed assets and investment property |
TCL Technology Group Corporation Annual Report 2020
| Short-term borrowings | 12,263,713,979 | 4.76% | 12,069,657,099 | 7.32% | -2.56% | No significant change |
| Long-term borrowings | 73,589,403,308 | 28.53% | 38,512,059,200 | 23.36% | 5.17% | Increase in financings and consolidation of Zhonghuan Electronics |
2. Assets and Liabilities at Fair Value
Unit: RMB
| Item | Beginning amount | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes charged to equity | Purchased in the Reporting Period | Sold in the Reporting Period | Other changes | Ending amount |
| Financial assets | |||||||
| 1. Held-for-trading financial assets (excluding derivative financial assets) | 8,617,440,186 | 404,919,410 | - | 22,059,045,159 | 23,249,324,235 | 523,560,456 | 8,355,640,976 |
| 2. Derivative financial assets | 159,035,592 | 273,916,251 | 108,026,662 | 21,613,872 | 109,014,132 | - | 453,578,245 |
| 3. Receivables financing | - | - | -186,944 | - | - | 2,176,930,590 | 2,176,743,646 |
| 4. Other debt investments | - | - | -619,398 | - | - | 152,681,999 | 152,062,601 |
| 5. Investments in other equity instruments | 279,883,515 | - | 51,926,498 | - | 67,189,622 | 1,069,055,239 | 1,333,675,630 |
| Subtotal of financial assets | 9,056,359,293 | 678,835,661 | 159,146,818 | 22,080,659,031 | 23,425,527,989 | 3,922,228,284 | 12,471,701,098 |
| Financial liabilities | 272,924,688 | 6,042,844 | 114,921,726 | 570,592,633 | 51,677,119 | - | 912,804,772 |
Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes ■ No
3. Restricted Asset Rights as at the Period-End
| Restricted assets | Carrying amount (RMB) | Reason for restriction |
TCL Technology Group Corporation Annual Report 2020
| Monetary assets | 209,977,735 | Deposited in the central bank as the required reserve |
| Monetary assets | 3,290,510,228 | Security deposit |
| Held-for-trading financial assets | 2,111,342,091 | Put in pledge for loan |
| Notes receivable | 24,000,000 | Put in pledge |
| Accounts receivable | 398,494,507 | Put in pledge |
| Contract assets | 102,793,676 | Put in pledge |
| Fixed assets | 71,991,617,869 | As collateral for loan |
| Intangible assets | 2,488,094,054 | As collateral for loan |
| Construction in progress | 9,721,671,236 | As collateral for loan |
| Total | 90,338,501,396 | - |
V Investments Made
1. Total Investment Amount
| Total investment amount in 2020 (RMB) | Total investment amount in 2019 (RMB) | Change (%) |
| 53,763,722,110 | 21,060,912,197 | 155.28% |
2. Major Equity Investments Made in the Reporting Period
□ Applicable ■ Not applicable
3. Major Non-Equity Investments Ongoing in the Reporting Period
□ Applicable ■ Not applicable
4. Financial Investments
(1) Securities Investments
Unit: RMB’0,000
| Security type | Security code | Security name | Initial investment cost | Measurement method | Beginning carrying amount | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes recorded in equity | Purchased in the Reporting Period | Sold in the Reporting Period | Gain/loss in the Reporting Period | Ending carrying amount | Accounting title | Funding source |
| Bank’s wealth management | Not applicable | Growing Income Conservative Corporate Customized Wealth Management Product | 40,000 | Fair value | 1,019 | 40,000 | 1,019 | 41,019 | Held-for-trading financial assets | Self-funded |
TCL Technology Group Corporation Annual Report 2020
| product | No. 123 | ||||||||||||
| Bank’s wealth management product | Not applicable | Bank of China Steady Wealth Management Plan-Zhihui Series | 40,000 | Fair value | 920 | 40,000 | 920 | 40,920 | Held-for-trading financial assets | Self-funded | |||
| Bank’s wealth management product | Not applicable | China Everbright Bank Corporate Structured Deposits | 34,950 | Fair value | 1,150 | 34,950 | 1,150 | 36,100 | Held-for-trading financial assets | Self-funded | |||
| NCD | Not applicable | 20 China Construction Bank CD156 | 29,772 | Amortized cost | 29,772 | 113 | 29,885 | Other current assets | Self-funded | ||||
| Stock | 0860.HK | Apollo | 25,220 | Fair value | 13,806 | -6,490 | 739 | -194 | 17,847 | Investments in other equity instruments | Self-funded | ||
| Tier 2 capital debt | Not applicable | 20 China CITIC Bank Tier 2 | 10,000 | Amortized cost | 10,000 | 148 | 10,148 | Debt investments | Self-funded | ||||
| Asset management plan | Not applicable | Guotai Jun’an Junxiang Yinghuo Collective Asset Management Plan No. 2 | 10,000 | Fair value | 81 | 10,000 | 81 | 10,081 | Held-for-trading financial assets | Self-funded | |||
| Asset managem | Not applicable | Yuheng FOF Single Asset Management Plan No. | 10,000 | Fair value | 40 | 10,000 | 40 | 10,040 | Held-for-trading fina | Self-funded |
TCL Technology Group Corporation Annual Report 2020
| ent plan | 1 | ncial assets | |||||||||||
| Stock | 000538.SZ | Yunnan Baiyao | 4,341 | Fair value | 525 | 4,341 | 525 | 4,866 | Held-for-trading financial assets | Self-funded | |||
| Stock | 6049.HK | Poly Property | 4,622 | Fair value | 6 | 4,622 | 6 | 4,629 | Held-for-trading financial assets | Self-funded | |||
| Other securities investments held at the period-end | 2,615,222 | -- | 602,288 | 10,758 | 2,008,640 | 2,290,579 | 54,007 | 345,419 | Not applicable | Self-funded | |||
| Total | 2,824,127 | -- | 616,094 | 14,501 | -6,490 | 2,192,325 | 2,291,319 | 57,816 | 550,954 | -- | -- | ||
| Disclosure date of the board announcement approving the securities investments | 12 December 2020 | ||||||||||||
| Disclosure date of the general meeting announcement approving the securities investments (if any) | 29 December 2020 | ||||||||||||
(2) Investments in Derivative Financial Instruments
| Funding source | Mostly foreign-currency revenue |
| Legal matters involved (if applicable) | Not applicable |
| Disclosure date of the board announcement approving the derivative investments (if any) | 28 April 2018 |
| Disclosure date of the general meeting announcement approving the derivative investments (if any) | Not applicable |
| Analysis of risks and control measures associated with derivative investments held in Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | In order to effectively manage the exchange and interest rate risks of foreign currency assets, liabilities and cash flows, the Company, after fully analyzing the market trend and predicting the operation (including orders and capital plans), adopts forward foreign exchange contracts, options and interest rate swaps to avoid future exchange rate and interest rate risks. As its business scale changes subsequently, the Company will adjust the exchange rate risk management strategy according to the actual market conditions and business plans. Risk analysis: 1. Market risk: the financial derivatives business carried out by the Group belongs to hedging and trading business related to main business operations, and there is a market risk of loss due to the fluctuation of underlying interest and exchange rates, which lead to the fluctuation of prices of financial derivatives; 2. Liquidity risk: the derivatives business carried out by the Group is an over-the-counter |
TCL Technology Group Corporation Annual Report 2020
| transaction operated by a financial institution, and there is a risk of loss due to paying fees to the bank for the operations of evening up or selling the derivatives below the buying prices; 3. Performance risk: the Group conducts the derivative business based on rolling budgets for risk management, and there is a risk of performance failure due to deviation between the actual operating results and budgets; 4. Other risks: in the case of specific business operations, if the operator fails to finish the prescribed procedures for report or approval, or fails to record the financial derivative business information accurately, timely and completely, it may result in loss of derivative business or trading opportunities. Moreover, if the trading operator fails to fully understand the terms of transaction contracts or product information, the Group will face the legal risks and transaction losses therefrom. Measures taken for risk control: 1. Basic management principles: the Group strictly follows the hedging principle and the main purpose of locking costs and avoiding risks. It is required that the financial derivatives business to be carried out matches the variety, size, direction and duration of spot goods, and no speculative trading should be involved. In the selection of hedging instruments, only simple financial derivatives that are closely related to the main business operation and meet the requirements of hedge accounting treatment should be selected, and avoid complex business that exceeds the prescribed business scope or is difficult to recognize in terms of risk and pricing; 2. The Group has formulated a special risk management system tailored to the risk characteristics of the financial derivatives business, covering all key aspects such as pre-emptive prevention, in-process monitoring and post-processing. Professional personnel are rationally arranged for investment decision-making, business operations and risk control. Investment participants are required to fully understand the risks of financial derivatives investment and strictly implement the business operations and risk management systems of derivatives. Before starting the derivatives business, the holding company must submit to the management department of the Group detailed business reports including its internal approval, main product terms, operational necessity, preparations, risk analysis, risk management strategy, fair value analysis and accounting methods, and special summary reports on business operated. Operations can be implemented only after getting opinions from the professional department of the Group; 3. Relevant departments should track the changes in the open market price or fair value of financial derivatives, timely assess the risk exposure changes of invested financial derivatives, and make reports to the board of directors on business development; 4. When the combined impairment of the fair value of derivatives and changes in the value of the assets (if any) used for risk hedging by the Group results in a total loss or floating loss amounting to 10% of the recently audited net assets of the Company, and the absolute amount exceeds RMB10 million, the Group will disclose it in a timely manner. | |
| Changes in market prices or fair value of derivative investments in Reporting Period (fair value analysis should include measurement method and related assumptions and parameters) | With the rapid expansion of overseas sales, the Company keeps following the above rules in the operation of forward foreign exchange contracts, interest rate swap contracts and futures contracts to avoid and hedge foreign exchange risks arising from operation and financing. It saw a net gain of RMB196.67 million for the Reporting Period. The fair value of derivatives is determined by real-time quoted price of the foreign exchange market, based on the difference between the contractual price and the forward exchange rate quoted immediately in the foreign exchange market on the balance sheet date. |
| Major changes in accounting policies and specific accounting principles adopted for derivative investments in Reporting Period compared to last reporting period | No significant change |
| Opinion of independent directors on derivative investments and risk control | In view of the fact that certain raw materials of the core business of the Company are purchased overseas, a wide range of settlement currencies is involved. The Company reduces exchange losses and locks transaction costs by reasonable financial derivatives, which helps to reduce risk control costs and improve company competitiveness. Risks are effectively controlled as the Company has taken series of measures such as conducting a rigorous internal evaluation for the operation of financial derivatives business, establishing a corresponding regulatory mechanism, formulating reasonable accounting policies and specific accounting principles, setting limits for risk exposure management, and operating simple financial derivatives. The contracting agent for |
TCL Technology Group Corporation Annual Report 2020
Positions of derivative investments at the period-end:
Unit: RMB’0,000
financial derivatives business of the Company is a sound financial agent with good creditstanding. The financial derivatives transactions carried out by the Company in 2020 areclosely related to the daily operation needs of the Company with controllable risks. Thebusiness is in line with the interests of minority shareholders of the company and therelevant laws and regulations.Type of contract
| Type of contract | Beginning amount | Ending amount | Gain/loss in Reporting Period | Ending contractual amount as % of the Company’s ending net assets | |||
| Contractual amount | Actual amount | Contractual amount | Actual amount | Contractual amount | Actual amount | ||
| 1. Forward forex contracts | 1,279,232 | 36,087 | 1,931,617 | 59,359 | 19,667 | 21.45% | 0.66% |
| 2. Interest rate swaps | 528,098 | 15,843 | 758,846 | 22,765 | 8.43% | 0.25% | |
| 3. Currency swaps | 215,565 | 14,399 | 310,520 | 15,526 | 3.45% | 0.17% | |
| Total | 2,022,895 | 66,329 | 3,000,983 | 97,650 | 19,667 | 33.33% | 1.08% |
5. Use of Funds Raised
(1) General Information about the Use of Raised Funds
Unit: RMB’0,000
| Year of raising | Way of raising | Total amount raised | Used in the Current Period | Cumulatively used | Amount with changed use in the Reporting Period | Cumulative amount with changed use | Cumulative amount with changed use as % of total amount raised | Unused amount | Purpose and whereabouts of the unused amount | Amount being idle for more than two years |
| 2020 | Public offering to qualified investors | 100,000.00 | 100,000.00 | 100,000.00 | ||||||
| 2020 | Private placement (raising the matching funds) | 260,000.00 | 259,932.40 | 260,000.00 | - | - | - | 67.60 | To be used according to the Company’s financial arrangements | - |
| Total | -- | 360,000.00 | 359,932.40 | 360,000.00 | - | - | - | 67.60 | - | - |
| Remark | ||||||||||
| In 2020, the Company carried out a program of asset purchase via share and convertible corporate bonds offering and cash payment and matching funds raising, with the total raised funds amounting to RMB2.6 billion. As of 31 December 2020, a cumulative amount of RMB2,599.3240 million had been used; and up to the date of this Report, the raised funds have been used up. | ||||||||||
Promised Use of Raised Funds
Unit: RMB’0,000
| Promised project funded with raised funds and | Project changed or not (including | Total promised investment amount | Adjusted total investment | Investment in the Reporting | Cumulative investment amount at the | Investment progress as at the period-end | Time when the project is ready for | Benefits derived in the Reporting | Meeting the expected benefits | Significant change to project feasibility |
TCL Technology Group Corporation Annual Report 2020
| investment with over-raised funds | partial change) | with raised funds | amount (1) | Period | period-end (2) | (3)＝(2)/(1) | its intended use | Period | or not | or not |
| Promised projects | ||||||||||
| Asset purchase via the payment of cash consideration | Not | 161,700.00 | 161,700.00 | 161,700.00 | 161,700.00 | 100% | October 2020 | Not applicable | Not applicable | Not |
| Repaying debt and supplementing the working capital | Not | 95,180.00 | 95,180.00 | 95,127.36 | 95,127.36 | 99.94% | October 2020 | Not applicable | Not applicable | Not |
| Subtotal of promised projects | -- | 256,880.00 | 256,880.00 | 256,827.36 | 256,827.36 | -- | -- | -- | -- | |
| Advance investments in promised projects funded with raised funds and subsequent swaps | In order to ensure the smooth operation of the projects funded with raised funds before the arrival of the 2020 raised funds, the Company made advance investments in such projects with self-pooled funds. The advance investment amount was verified by Da Hua Certified Public Accountants (Special General Partnership) with the Verification Report on Advance Investments of Self-pooled Funds in Projects Funded with Raised Funds (Da Hua Verification Report [2020] No. 008818). On 26 November 2020, the Proposal on the Swap of Raised Funds and Advance Investments of Self-Pooled Funds was approved at the Second Meeting of the Company’s Seventh Board of Directors. As such, raised funds of RMB1.617 billion in total were agreed to be swapped with the advance investments of self-pooled funds in projects funded with raised funds. | |||||||||
Changed Use of Raised Funds
□ Applicable ■ Not applicable
VI Sale of Major Assets and Equity Investments
1. Sale of Major Assets
No such cases in the Reporting Period.
2. Sale of Major Equity Investments
No such cases in the Reporting Period.
VII Principal Subsidiaries and Joint Stock Companies
Principal subsidiaries and joint stock companies with an over 10% effect on the Company’s net profit:
Unit: RMB
| Name | Relationship with the Company | Principal activity | Registered capital | Total assets | Net assets | Revenue | Operating profit | Net profit |
| TCL China Star Optoelectronics Technology Co., Ltd. | Subsidiary | Semi-conductor display devices | RMB23.888 billion | 175,174,047,103 | 64,840,069,584 | 46,765,152,291 | 2,702,160,245 | 2,427,604,114 |
| Tianjin | Subsidiar | Semi-c | RMB3.033 |
TCL Technology Group Corporation Annual Report 2020
| Zhonghuan Semiconductor Co., Ltd. | y | onductor photovoltaic and semi-conductor materials | billion | 58,719,683,852 | 28,081,393,376 | 5,682,961,642 | 413,664,844 | 427,174,886 |
| Highly Information Industry Co., Ltd. | Subsidiary | Distribution | RMB 371 million | 4,838,485,984 | 1,070,906,395 | 22,518,401,333 | 330,678,166 | 186,176,868 |
Note: Tianjin Zhonghuan Semiconductor Co., Ltd. has been included in the consolidated financial statements since Q4 2020.Subsidiaries obtained or disposed in the Reporting Period:
| Subsidiary | How subsidiary was obtained or disposed of in the Reporting Period | Effects on overall operations and operating performance |
| TCL Optoelectronics Korea Co., Ltd | Incorporated | No significant effect |
| TCL Technology Investments Limited(BVI) | Incorporated | No significant effect |
| Admiralty Harbour Strategic Investment Limited | Incorporated | No significant effect |
| Highly (Tianjin) E-commerce Co., Ltd. | Incorporated | No significant effect |
| Sichuan Sunpiestore Technology Co., Ltd. | Incorporated | No significant effect |
| Guangzhou Zhike Inclusive Financing Guarantee Co., Ltd. | Incorporated | No significant effect |
| Tianjin Zhonghuan Electronics Group Co., Ltd. and its subsidiaries | Acquired | Representing a new business segment |
| Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | Incorporated | No significant effect |
| Guangzhou Ruixin Business Co., Ltd. | Incorporated | No significant effect |
| TCL Light Electrical Appliances (Longmen) Co., Ltd. | De-registered | No significant effect |
| TCL Educational Web Ltd. | Transferred | No significant effect |
| Shenzhen TCL Educational Technology Co., Ltd. | Transferred | No significant effect |
| Silk Road (Beijing) International Education Technology Center Co., Ltd. | Transferred | No significant effect |
| Shanghai Bairen Information Technology Co., Ltd. | De-registered | No significant effect |
| Xinjiang Sunpiestore Electronic Technology Co., Ltd. | De-registered | No significant effect |
| Huludao Zhongrun Energy Technology Co., Ltd. | Acquired | No significant effect |
| Tianjin Huanhai Property Development Co., Ltd. | Incorporated | No significant effect |
| Ningjin Jinchen New Energy Co., Ltd. | Incorporated | No significant effect |
| Wuxi Zhonghuan Applied Materials Co., Ltd. | Acquired | No significant effect |
| Shangyi Shengyao New Energy Development Co., Ltd. | Acquired | No significant effect |
TCL Technology Group Corporation Annual Report 2020
| Huansheng New Energy (Tianjin) Co., Ltd. | Incorporated | No significant effect |
VIII Structured Bodies Controlled by the Company
□ Applicable ■ Not applicable
IX ProspectsLooking into 2021, mass vaccination will hopefully drive the recovery of the global economy. fiscaland monetary incentives in major countries and regions support economic growth after the restart.China was the only major economy in the world that had positive growth. China's economy is boundto grow steadily and sustainably by adhering to its strategic target, constantly deepening reforms,perfecting the income distribution mechanism, and sticking to drive the "dual circulation" viatechnological innovation.In order to respond to changes in the global political and economic environments, China hasformulated a new " development pattern in which domestic economic cycle plays a leading rolewhile international economic cycle remains its extension and supplement". In addition, China hasstressed that, "it will reinforce the development of core technologies and materials and enhance theindependent control of the industrial chain. Besides, it will earnestly develop high-end equipmentand advanced manufacturing industry and accelerate to propose new intelligent and digitaltechnologies. Industry policies have been issued to break the blockade on trade and technology,accelerate the transformation and upgrading of China's economy and industry, and build anindependent and controllable industrial chain". China's sci-tech and high-end manufacturingindustries will embrace development opportunities.In the past years, the manufacturing industry of China has turned growingly competitive, as drivenby the national strategy of supporting the real economy. Increasing industries in China can challengeglobal leaders. The value of the manufacturing industry rises along with the adjustment of theeconomic structure and competitiveness enhancement. New directions for industry policies havebeen indicated and proposed in the "14th Five-year Plan" and at the Central Economic WorkConference. China will strongly support the progress of intelligent and digital industries, thesemi-conductor display industry, the semi-conductor photovoltaic and semi-conductor materialsindustry, and the chip device industry and facilitate the development of new materials andequipment.Semi-conductor display, semi-conductor, and photovoltaic industries will become strategicfocuses. A global core asset segment in the scientific and technological industry will be built.
TCL Technology Group Corporation Annual Report 2020
The Company has centered on the basic and key driving factors of the semi-conductor display andscientific and technological industries and created future-oriented core competitiveness throughendogenous growth and M&A deals, since it spun off the terminal business and clarified theself-positioning of becoming a global technology group in 2019.The Company, as one of the leading players in the global semi-conductor display industry, has seizedindustry development opportunities, achieved countercyclical expansion, and kept enhancing itsscale advantage. The t7 production line is raising its mass production and expected to operate at fullcapacity by the second half of 2021. Benefits of the acquisition of Samsung Suzhou include capacityenhancement, product optimization, improved control over the industrial chain, better deliverabilityto strategic customers, and a higher industry position. In the meantime, practitioners in thesemi-conductor display industry will gradually recover their profitability, along with the constantimprovement in the supply and demand relationship and the competition pattern, which will fullybenefit industry leaders.The Company acquired Zhonghuan Semiconductor to actively enter the new energy andsemi-conductor materials industry so as to build a core segment in the science and technologyindustry in the next decade. Zhonghuan Semiconductor is a globally leading enterprise inphotovoltaic and semi-conductor materials with more than four decades of experience in theproduction of monocrystalline silicon. Its business has demonstrated an apparent competitiveadvantage in China. Currently, Zhonghuan Semiconductor is growing rapidly. ZhonghuanSemiconductor will enjoy wider development space, develop quickly by seizing the rise in theindustry cycle of the industry, and grow into one of the main engines of operating performance ofTCL Tech, as the latter implements its strategies and operating arrangement for the former.Six major strategies as well as strategic planning and objectives for 2021 will be implementedThe Company pertinently updated its strategic planning for 2021, based on the strategic planning for2020 and confirmed the operating strategy of "improving operating quality and profitability,consolidating advantages and improving disadvantages, accelerating global layout, and drivingdevelopment via innovation". Moreover, it highlighted the tasks in six aspects and ensured theachievement of strategic planning and objectives:
First, strategic planning as well as risk management and control will be improved: the Group isexpected to conscientiously review its previous work in line with the idea of " finding the rootreason", strengthen the risk management and control regarding strategy implementation and thestrain capacity, and effectively raise operating performance;
TCL Technology Group Corporation Annual Report 2020
Second, the Group will accelerate to expand its presence worldwide: It will unswervingly stick to itsstrategy of globalization and enhance global operations and the global industrial supply chain;Third, the Group will strengthen the consciousness of competition and resolutely stride forward withgreat ambition and courage: All enterprises should keep a foothold in the fierce market competitionand have the determination and courage to beat peers;Fourth, the Group will practice innovation-driven development: It will gain a deeper understandingof the idea of engineering businessmen. Technological results will be converted into advantages inproducts and competition and reflected in operating results;Fifth, the business bottom line of the maximization of cost efficiency will be held: the Group shouldfirmly hold the bottom line of no loss at the low ebb of the industry in order to develop rapidlyduring industry recovery;Sixth, the Group will constantly enhance organizational and team capabilities: It will continuouslyoptimize the mechanism for the selection, cultivation, and incentive of cadres. It will aim to create apattern where the Senior Management has a broader vision, while the Middle Management becomesmore ambitious; and the grass-roots implementation turns more effectiveIn 2021, TCL will usher in the 40th anniversary of its establishment and start a new lifecycle with astronger driving force for development. Ramp up, Catch up and Go all out to be A GlobalLeader—TCL Tech’s journey to global leadership begins with the first step.X Communications with the Investment Community such as Researches, Inquiries andInterviews
1. During the Reporting Period
| Date | Place | Way of communication | Type of communication party | Communication party | Main discussions and materials provided | Index to main information communicated |
| 15 January 2020 | Company Conference Room in Shenzhen | By visit | Institutional investor | UBS Asset Management, Essence Securities, Oriental Alpha Fund, Tongben Investment, Rosefinch Fund, Shenzhen Shangdao Investment, and Shanghai Life Insurance | Inquired about the Company’s business development | Log Sheet No. 2020-001 on Investor Relations Activities on 15 January 2020 disclosed by the Company on http://www.cninfo.com.cn dated 16 January 2020 |
| 16 January 2020 | Company Conference | By visit | Institutional | TF Securities, China Asset | Inquired about the Company’s | Log Sheet No. 2020-002 on Investor |
TCL Technology Group Corporation Annual Report 2020
| Room in Shenzhen | investor | Management, TruValue Asset Management, Dingsa Fund, Essence Fund, Essence Securities, Sense Fund, Boyuan Fund, JTJ Investment, China Orient Asset Management, etc. | business development | Relations Activities on 16 January 2020 disclosed by the Company on http://www.cninfo.com.cn dated 17 January 2020 | ||
| 31 March 2020 | Company Conference Room in Shenzhen | By visit | Institutional investor | E Fund, Harvest Fund, Southern Asset Management, Bosera Funds, Perseverance Asset Management, Yinhua Fund, GF Fund, Dacheng Fund, UBS Securities, Minsheng Royal Fund Management, HSBC Jintrust Fund, CCB Principal Asset Management, etc. | Inquired about the 2019 performance and development planning of TCL Tech. and TCL CSOT | Log Sheet No. 2020-003 on Investor Relations Activities on 31 March 2020 disclosed by the Company on http://www.cninfo.com.cn dated 2 April 2020 |
| 29 April 2020 | - | By phone | Institutional investor | Harvest Fund, China Asset Management, Penghua Fund, Perseverance Asset Management, asptex, Daiwa, Morgan Stanley, Q Fund Management, UG, Essence International, Essence Securities, Aeon Insurance Asset Management, etc. | Inquired about the Q1 2020 performance and development planning of TCL Tech. | Log Sheet No. 2020-004 on Investor Relations Activities on 29 April 2020 disclosed by the Company on http://www.cninfo.com.cn dated 7 May 2020 |
| 17 August 2020 | Renaissance Tianjin Lakeview Hotel | By visit | Institution | Dajia Asset, China Life Asset, Fullgoal Fund, Perseverance Asset, Everbright Securities, GF Fund, Taikang Asset, Hongta Securities, GF Securities, GFund, EHE Capital, | Inquired about the Company’s business development | Log Sheet No. 2020-005 on Investor Relations Activities on 17 August 2020 disclosed by the Company on http://www.cninfo.com.cn dated 18 August 2020 |
TCL Technology Group Corporation Annual Report 2020
| Guosheng Securities, etc. | ||||||
| 31 August 2020 | Company Conference Room in Shenzhen | By visit | Institution | China Life Asset Management Company Limited, CIB Fund Management Co., Ltd., ABC Life Insurance, CITIC Prudential Fund, China Asset Management, Harvest Fund, ICBC Credit Suisse, Taikang Asset, Ping An Annuity Insurance, Ping An Fund, etc. | Inquired about the H1 2020 performance and development planning of TCL Tech. | Log Sheet No. 2020-006 on Investor Relations Activities on 31 August 2020 disclosed by the Company on http://www.cninfo.com.cn dated 2 September 2020 |
| 30 October 2020 | Company Conference Room in Shenzhen Headquarters | By phone | Institutional investor | Goldman Sachs, BNP Paribas, J.P. Morgan, Mizuho Securities, Morgan Stanley, UBS, Kenrich partners, Mighty Divine, F Fund, Guohua Life, ICBC Credit Suisse, Guangdong Branch of China Development Bank, CICC, CICC Fund, etc. | Inquired about the Q3 2020 performance and development planning of TCL Tech. | Log Sheet No. 2020-007 on Investor Relations Activities on 30 October 2020 disclosed by the Company on http://www.cninfo.com.cn dated 2 November 2020 |
| Times of communications | 7 |
| Number of institutions communicated with | 453 |
| Number of individuals communicated with | 7 |
| Number of other communication parties | 0 |
| Tip-offs or leakages of substantial supposedly-confidential information during communications | None |
TCL Technology Group Corporation Annual Report 2020
Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)The profit distribution policy for ordinary shareholders, especially the formulation, implementation and amendments to the cashdividend policy, in the Reporting Period:
| Special statement about the cash dividend policy | |
| In compliance with the Company’s Articles of Association and resolution of general meeting | Yes |
| Specific and clear dividend standard and ratio | Yes |
| Complete decision-making procedure and mechanism | Yes |
| Independent directors faithfully performed their duties and played their due role | Yes |
| Non-controlling interests are able to fully express their opinion and desire and their legal rights and interests are fully protected | Yes |
| In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in compliance with applicable regulations and transparent | No changes to the dividend policy and the relevant conditions and procedures are in compliance with applicable regulations and transparent |
As approved at the 2018 Annual General Meeting on 9 April 2019, the 2018 annual profitdistribution plan was as follows: based on the share capital of 13,370,778,507 shares on the date ofrecord that were eligible for profit distribution (the total share capital of 13,549,648,507 sharesminus the 178,870,000 shares in the Company’s special securities account for repurchase that werenot eligible for profit distribution), a cash dividend of RMB1.00 (tax inclusive) per 10 shares was tobe distributed to the shareholders, totaling RMB1,337,077,850.70.As approved at the 2019 Annual General Meeting on 20 April 2020, the 2019 annual profitdistribution plan was as follows: based on the share capital of 13,000,372,307 shares on 27 March2020 that were eligible for profit distribution (the total share capital of 13,528,438,719 shares minusthe 528,066,412 shares in the Company’s special securities account for repurchase that were noteligible for profit distribution), a cash dividend of RMB1.00 (tax inclusive) per 10 shares was to bedistributed to the shareholders, totaling RMB1,300,037,230.70.The Company carried out a share repurchase program of up to RMB1.934 billion in 2019, which hasbeen completed in early January 2020. As attaching great importance to the reasonable return ofinvestors, the Company reviews the return plan of shareholders for the coming three years in 2020,which not only ensures an ongoing and consistent profit distribution policy, but also pay fullattention to what the shareholders, especially the minority shareholders, want so as to sufficientlyprotect their rightful interests.
TCL Technology Group Corporation Annual Report 2020
The 2020 annual profit distribution plan is as follows: based on the share capital of 13,546,581,599shares on 10 March 2021 that are eligible for profit distribution (the total share capital of14,030,788,362 shares minus the 484,206,763 shares in the Company’s special securities account forrepurchase that are not eligible for profit distribution), a cash dividend of RMB1.2 (tax inclusive) per10 shares is to be distributed to the shareholders, totaling RMB1,625,589,791.88. The retainedearnings of RMB7,145,804,477.12 will carry forward for future distribution. Meanwhile, there willbe no bonus issue from either profit or capital reserves for the year under review. Where any changesoccur, before the implementation of the dividend plan, to the share capital of the Company due toany convertible bonds-to-stock programs, share repurchases, exercises of equity incentives, newshare issues in refinancing, etc., the dividend will be adjusted according to the principle of “adjustingthe total payout amount under the same dividend ratio”, subject to the actual payout amount.
Cash dividend for ordinary shareholders in the past three years (including the Reporting Period):
Unit: RMB
| Year | Cash dividends (tax inclusive) (A) | Net profit attributable to ordinary shareholders of the listed company in consolidated statements for the year (B) | A as % of B (%) | Cash dividends in other forms (like share repurchase) (C) | C as % of B (%) | Total cash dividends (including those in other forms) (A+C) | A+C as % of B (%) |
| 2020 | 1,625,589,791.88 | 4,388,159,018 | 37.04% | - | - | 1,625,589,791.88 | 37.04% |
| 2019 | 1,300,037,230.70 | 2,617,766,571 | 49.66% | 1,933,596,514.47 | 73.86% | 3,233,633,745.17 | 123.53% |
| 2018 | 1,337,077,850.70 | 3,468,207,405 | 38.55% | - | - | 1,337,077,850.70 | 38.55% |
Indicate whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that theCompany has made profits in the Reporting Period and the profits of the Company as the parent distributable to the ordinaryshareholders are positive.
□ Applicable ■ Not applicable
II Final Dividend Plan for the Reporting Period
| Bonus issue from profit (share/10 shares) | 0 |
| Cash dividend/10 shares (RMB) (tax inclusive) | 1.20 |
| Bonus issue from capital reserves (share/10 shares) | 0 |
| Share base (share) | 13,546,581,599 |
| Cash dividends (RMB) (tax inclusive) | 1,625,589,791.88 |
| Distributable profits (RMB) | 8,771,394,269 |
| Total cash dividends (including those in other forms) as % of total profits to be distributed (%) | 100% |
| Cash dividend plan | |
TCL Technology Group Corporation Annual Report 2020
| Based on the share capital of 13,546,581,599 shares on 10 March 2021 that are eligible for profit distribution (the total share capital of 14,030,788,362 shares minus the 484,206,763 shares in the Company’s special securities account for repurchase that are not eligible for profit distribution), a cash dividend of RMB1.2 (tax inclusive) per 10 shares is to be distributed to the shareholders, totaling RMB1,625,589,791.88. The retained earnings of RMB7,145,804,477.12 will carry forward for future distribution. Meanwhile, there will be no bonus issue from either profit or capital reserves for the year under review. Where any changes occur, before the implementation of the dividend plan, to the share capital of the Company due to any convertible bonds-to-stock programs, share repurchases, exercises of equity incentives, new share issues in refinancing, etc., the dividend will be adjusted according to the principle of “adjusting the total payout amount under the same dividend ratio”, subject to the actual payout amount. |
| Cash and/or stock dividend plan in detail |
| Based on the share capital of 13,546,581,599 shares on 10 March 2021 that are eligible for profit distribution (the total share capital of 14,030,788,362 shares minus the 484,206,763 shares in the Company’s special securities account for repurchase that are not eligible for profit distribution), a cash dividend of RMB1.2 (tax inclusive) per 10 shares is to be distributed to the shareholders, totaling RMB1,625,589,791.88. The retained earnings of RMB7,145,804,477.12 will carry forward for future distribution. Meanwhile, there will be no bonus issue from either profit or capital reserves for the year under review. Where any changes occur, before the implementation of the dividend plan, to the share capital of the Company due to any convertible bonds-to-stock programs, share repurchases, exercises of equity incentives, new share issues in refinancing, etc., the dividend will be adjusted according to the principle of “adjusting the total payout amount under the same dividend ratio”, subject to the actual payout amount. |
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as wellas the Company Itself and other Entities Fulfilled in the Reporting Period or Ongoing at the Period-end
| Commitment | Promisor | Type of commitment | Details of commitment | Date of commitment making | Term of commitment | Fulfillment |
| Commitments made in asset purchases via share and convertible bonds offering and cash payment and matching fund raising | Li Dongsheng and Jiutian Liancheng | About not reducing shareholdings in the Company | I/This partnership will not reduce the shares held in the listed company from the date of announcement of the first resolution of the Board of Directors of the listed company that reviews this transaction to the date when this transaction is completed/terminated. I/This partnership promise(s) to strictly observe all commitments in this letter. I/This partnership will shoulder the corresponding legal responsibilities, if I/This partnership make(s) false, inaccurate, or incomplete statements, or break relevant commitments and cause losses to the listed company. | 16 June 2020 | During the asset purchase via share and convertible bonds offering and cash payment and matching fund raising | Having expired |
| All the Company’s directors, supervisors and senior management | About not reducing shareholdings in the Company | I will not reduce the shares held in the listed company from the date of announcement of the first resolution of the Board of Directors of the listed company that reviews this transaction to the date when this transaction is | 16 June 2020 | During the asset purchase via share and convertible bonds offering and cash payment and | Having expired |
TCL Technology Group Corporation Annual Report 2020
| completed/terminated. I promise to strictly observe all commitments in this letter. I will shoulder the corresponding legal responsibilities, if I makes false, inaccurate, or incomplete statements, or break relevant commitments and cause losses to the listed company. | matching fund raising | ||||
| Wuhan Industrial Investment | About the lockup period of the shares subscribed for and the bond-to-stock period of convertible corporate bonds | 1. This company shall not transfer the shares in TCL Tech obtained through this transaction within 12 months since the end date of issuance of shares, including but not limited to direct or indirect transfer in the securities market or by agreement. 2. This company shall obey the above agreement regarding the shares in TCL Tech additionally obtained because of allocation of bonus shares and conversion to share capital, after the end of this issuance. 3. This company shall not transfer the convertible bonds obtained through this transaction within 12 months since the end date of issuance, including but not limited to direct or indirect transfer in the securities market or by agreement. 4. The conversion period of the convertible bonds in this issuance starts from the first trading day 12 months after the end date of issuance to the maturity date of convertible bonds. 5. This company shall not transfer its shares in TCL Tech., if this issuance is registered and investigated by judicial authorities or the China Securities Regulation Commission (CSRC), because the information provided or disclosed in this issuance contains false presentations, misleading statements, or material omissions, and the investigation conclusion is unclear. Moreover, this company shall submit its written application for suspension of transfer and share account to the Board of Directors of the listed company, within two trading days upon receipt of the notice on case registration and investigation. The Board of Directors will, on behalf of this company, apply for lock up with the stock exchange and the clearing house. If this company | 16 June 2020 | 12 months from the date of the completion of the offering | No violations |
TCL Technology Group Corporation Annual Report 2020
| fails to submit the lockup application within two trading days, the Board of Directors will be authorized to verify the situation and directly submit the identity and account information of this company to and apply for lockup with the stock exchange and the clearing house. If the Board of Directors fails to submit the identity and account information of this company to the stock exchange and the clearing house, the stock exchange and the clearing house will be authorized to directly lock up relevant shares. This company promises that it will voluntarily use the shares locked up to compensate relevant investors, should the investigation conclusion identify violations of laws and regulations. | ||||||
| Subscribers to the convertible corporate bonds privately placed to raise the matching funds | About the commitment letter and the share lockup application of issuing targets of the private placement of convertible corporate bonds | This organization agrees that it will not transfer its subscribed convertible bonds within six months from the date when this issuance ends and the registration is completed. Besides, it entrusts the Board of Directors of TCL Tech. to apply for lockup of the above subscribed convertible bonds with China Securities Depository and Clearing Corporation Limited (CSDC) Shenzhen Branch so as to ensure that the above subscribed convertible bonds will not be transferred within six months from the date when this issuance ends and the registration is completed. | 17 November 2020 | 6 months from the completion of the offering and registration | No violations | |
| Commitments made in refinancing | Star Century Enterprises Limited; Linzhou Xinglan Venture Investment Management Partnership (Limited Partnership); Linzhou Xingyong Venture Investment Management Partnership (Limited Partnership); Linzhou Xingyuan Venture Investment Management Partnership (Limited Partnership); and Linzhou Xinglian Venture Investment Management Partnership (Limited Partnership) | About share trading restrictions | We agree not to transfer the shares that we subscribe for within 36 months since the end of TCL’s asset purchase via share offering (25 December 2017). | 25 December 2017 | 25 December 2020 | Having expired |
TCL Technology Group Corporation Annual Report 2020
| Li Dongsheng | About horizontal competition, related-party transaction and capital occupation | 1) I shall avoid horizontal competition between the companies, enterprises or other business organizations that I own, control, control with others, have significant influence on and the Company with its subsidiaries; and 2) I shall reduce and control related-parties transactions between the companies, enterprises or other business organizations that I own, control, control with others, or have significant influence on and the Company with its subsidiaries. | 30 August 2013 | During the period when being the Company’s director, supervisor or senior management | No violations | |
| Fulfilled on time | Yes | |||||
| Specific reasons for failing to fulfill commitments on time and plans for next step | Not applicable | |||||
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was stillwithin the forecast period, explain why the forecast has been reached for the Reporting Period.
□ Applicable ■ Not applicable
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Partiesfor Non-Operating Purposes
□ Applicable ■ Not applicable
V Explanations Given by the Board of Directors, the Supervisory Committee and theIndependent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” onthe Financial Statements of the Reporting Period
□ Applicable ■ Not applicable
VI YoY Changes to Accounting Policies, Estimates and MethodsFor details, see “37. Changes to main accounting policies and estimates” in “III Significantaccounting policies and estimates” in “Part XI Financial Report”.VII Retrospective Restatements due to Correction of Material Accounting Errors in theReporting Period
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
VIII YoY Changes to the Scope of the Consolidated Financial StatementsCompared with 2019, 91 subsidiaries (11 newly incorporated and the other 80 over which theCompany newly obtained control) are newly included in and 6 subsidiaries (3 transferred and theother 3 de-registered) are excluded from the consolidation scope of 2020.IX Engagement and Disengagement of Independent AuditorCurrent independent auditor:
| Name of the domestic independent auditor | Da Hua Certified Public Accountants (Special General Partnership) |
| The Company’s payment to the domestic independent auditor (RMB’0,000) | 352 |
| How many consecutive years the domestic independent auditor has provided audit service for the Company | 13 |
| Names of the certified public accountants from the domestic independent auditor writing signatures on the auditor’s report | Qiu Junzhou and Jiang Xianmin |
| How many consecutive years the certified public accountants have provided audit service for the Company | 2 years for both |
Indicate whether the independent auditor was changed for the Reporting Period.
□ Yes ■ No
Indicate whether the independent auditor was changed during the audit period.
□ Yes ■ No
CPA firm, financial advisor or sponsor hired for the audit of internal control:
During the Reporting Period, CITIC Securities Co., Ltd. was hired as the financial advisor for the Company’s program of assetpurchase via share and convertible corporate bonds offering and cash payment and matching fund raising for a fee of RMB9 million.X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable ■ Not applicable
XI Insolvency and Reorganization
□ Applicable ■ Not applicable
XII Major Legal Matters
□ Applicable ■ Not applicable
XIII Punishments and Rectifications
□ Applicable ■ Not applicable
XIV Credit Quality of the Company as well as Its Controlling Shareholder and ActualController
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees(I) The First Top 400 and Key Personnel Stock Ownership Plan and the Global Partner Plan
1. On 14 April 2020, the Company disclosed the Announcement on the Completion of the Non-DealTransfers under the First Global Partner Plan and Shareholding Increases by Directors, Supervisorsand Senior Management on the designated media for information disclosure. As indicated in theConfirmation of Securities Ownership Transfer issued by the Shenzhen branch of China SecuritiesDepository and Clearing Co., Ltd., 32,022,354 shares (0.24% of the Company’s total share capital)of the Company held in the securities account under the Designated Asset Management Plan of theFirst Global Partner Plan of TCL Group were transferred through a non-deal manner to the securitiesaccounts of the holders under the plan. The unvested 67,125,761 shares and the correspondingdividends (if any) would be sold by the Management Committee of the First Stock Ownership Planat a proper timing before the expiry of the First Global Partner Plan, and the proceeds generatedtherein would be returned to the Company.
2. On 21 August 2020, the Company disclosed the Announcement on the Completion of the Clearingof the Shares under the First Global Partner Plan & the Early Termination of the Plan. As of the dateof the announcement, the unvested shares under the designated asset management plan for the FirstGlobal Partner Plan had been sold out, and the proceeds generated therein were returned to theCompany. The clearing of the aforesaid asset management plan has been completed lately, with noimpact on the share capital and incentive mechanism of the Company. Pursuant to the relevantprovisions of the First Global Partner Plan (Draft), the implementation of this employee stockownership plan has been completed, representing the early termination of the plan.(II) The Second Global Partner PlanOn 14 April 2020, the Company disclosed the Announcement on the Equity Vesting of the SecondGlobal Partner Plan on the designated media for information disclosure. The Second Global PartnerPlan (Draft) set out a company performance-related condition of a not-lower-than-15% growth in thenet profit attributable to shareholders of the Company as the parent in 2019 compared to 2018.According to the 2019 Annual Independent Auditor’s Report for TCL Technology Group Corporationissued by Da Hua Certified Public Accountants (Special General Partnership), the net profitattributable to shareholders of the Company as the parent in 2019 failed to grow by over 15%compared to 2018, which meant the said condition had not been satisfied. Therefore, the 33,391,897shares under the Second Global Partner Plan and the corresponding dividends (if any) would be
TCL Technology Group Corporation Annual Report 2020
taken back by the Company and would not be vested in the holders under the plan. These shareswould be sold by the Management Committee of the Second Stock Ownership Plan at a propertiming before the expiry of the Second Global Partner Plan, and the proceeds generated thereinwould be returned to the Company.(III) The Third Global Partner Plan
1. The Proposal on the Third Global Partner Plan (Draft) and Its Summary, and the Measures for theManagement of the Third Global Partner Plan were approved respectively at the 29
thMeeting of the
thBoard of Directors on 27 August 2020 and the Fifth Extraordinary General Meeting of 2020 on 14September 2020. Shares for the Third Global Partner Plan would be obtained through a non-dealtransfer from the special securities account for repurchases.
2. The Announcement on the Completion of the Non-Deal Transfer to the Third Global Partner Planwas disclosed on 22 January 2021. The Company had received on 20 January 2021 the SecuritiesTransfer Confirmation issued by the Shenzhen branch of China Securities Depository and ClearingCo., Ltd. 43,859,649 shares (or 0.31% of the Company’s total share capital) had been transferred in anon-deal manner on 19 January 2021 from the special securities account for repurchases to “TCLTechnology Group Corporation—the Securities Account for the Third Employee Stock OwnershipPlan”. As required by the Third Global Partner Plan (Draft), the shares under the Third GlobalPartner Plan would be locked up for a period of no less than 12 months starting from the disclosureof the announcement on the completion of the transfer of target shares, i.e. from 19 January 2021 to18 January 2022.(IV) The 2018 Restricted Stock Incentive Plan and the Global Innovation Partner Plan
1. The Proposal on the Repurchase and Retirement of Restricted Shares That Have Been Grantedunder the 2018 and 2019 Restricted Stock Incentive Plans But Are Still in Lockup was approvedrespectively at the 25th Meeting of the 6th Board of Directors and the 16th Meeting of the 6thSupervisory Committee both dated 28 March 2020. As such, it was agreed to repurchase and retirethe 6,780,952 restricted shares that had been granted to 723 awardees under the 2018 RestrictedStock Incentive Plan but were still in lockup due to the failure to satisfy the unlocking condition forthe second unlocking period, i.e. an unfulfilled company performance requirement for 2019.
2. On 28 July 2020, the Company disclosed the Announcement on the Completion of the Repurchaseand Retirement of Some Restricted Shares That Have Been Granted under the 2018 and 2019Restricted Stock Incentive Plans But Are Still in Lockup. As of 24 July 2020, the Company hadrepurchased and retired 9,159,308 restricted shares via the Shenzhen branch of China Securities
TCL Technology Group Corporation Annual Report 2020
Depository and Clearing Co., Ltd.(V) The 2019 Restricted Stock Incentive Plan and the TCL Global Innovation Partner Plan
1. The Proposal on the Repurchase and Retirement of Restricted Shares That Have Been Grantedunder the 2018 and 2019 Restricted Stock Incentive Plans But Are Still in Lockup was approvedrespectively at the 25th Meeting of the 6th Board of Directors and the 16th Meeting of the 6thSupervisory Committee both dated 28 March 2020. As such, it was agreed to repurchase and retirethe 881,067 restricted shares that had been granted to 27 awardees under the 2019 Restricted StockIncentive Plan but were still in lockup because they were deemed by the Board of Directors as nolonger eligible for the incentives due to reasons such as the spin-off of Huizhou TCL EnvironmentalResource Co., Ltd. and resignation; and it was agreed to repurchase and retire the 1,497,289restricted shares that had been granted to 95 in-service awardees but were still in lockup due to thefailure to satisfy the unlocking condition for the current unlocking period, i.e. an unfulfilled companyperformance requirement for 2019.
2. On 28 July 2020, the Company disclosed the Announcement on the Completion of the Repurchaseand Retirement of Some Restricted Shares That Have Been Granted under the 2018 and 2019Restricted Stock Incentive Plans But Are Still in Lockup. As of 24 July 2020, the Company hadrepurchased and retired 9,159,308 restricted shares via the Shenzhen branch of China SecuritiesDepository and Clearing Co., Ltd.XVI Major Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable ■ Not applicable
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable ■Not applicable
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable ■ Not applicable
4. Credits and Liabilities with Related Parties
□ Applicable ■ Not applicable
Indicate whether there were any credits and liabilities with related parties for non-operating purposes:
□ Yes ■ No
TCL Technology Group Corporation Annual Report 2020
5. Other Major Related-Party Transactions
| Title of announcement | Date of disclosure | Website for disclosure |
| Announcement on Progress on the Participation in an Equity Investment Fund & the Related-Party Transaction | 8 February 2020 | http://www.cninfo.com.cn |
| Announcement on TCL Tech Finance Co., Ltd. Continuing to Provide Financial Services for TCL Industries Holdings Inc. and Extending the Financial Service Agreement between Them and the Related-Party Transaction | 31 March 2020 | |
| Announcement on the Expected Continuing Related-Party Transactions for 2020 | 31 March 2020 | |
| Announcement on the Acquisition of the 100% Equity Interests of Moka International Limited & the Related-Party Transaction | 12 December 2020 |
XVII Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable ■ Not applicable
(2) Contracting
□ Applicable ■ Not applicable
(3) Leases
□ Applicable ■ Not applicable
2. Major guarantees
Guarantees
Unit: RMB'0,000
| Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) | ||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| TCL King Electrical Appliances (Huizhou) Co., Ltd. | 2018-12-7 | 345,000 | 2019-8-29 | 293,462 | Joint-liability | 1 month-5 years | Not | Yes |
| TCL Overseas Electronics (Huizhou) Ltd. | 2018-12-7 | 120,000 | 2020-6-15 | 55,779 | Joint-liability | 1 month-1 year | Not | Yes |
TCL Technology Group Corporation Annual Report 2020
| TCL King Electrical Appliances (Chengdu) Co., Ltd. | 2018-12-7 | 60,000 | 2020-11-5 | 50,012 | Joint-liability | 6 months | Not | Yes |
| Huizhou TCL Mobile Communication Co., Ltd. | 2018-12-7 | 450,000 | 2020-5-20 | 177,825 | Joint-liability | 3 months-1 year | Not | Yes |
| TCL Communication Technology Holdings Limited | 2018-12-7 | 120,000 | 2017-11-20 | - | Joint-liability | 1-5 years | Not | Yes |
| TCL Mobile Communication (HK) Company Limited | 2018-12-7 | 248,500 | 2020-10-16 | 79,328 | Joint-liability | 3-6 months | Not | Yes |
| TCT Mobile Overseas Limited | 2018-12-7 | 6,625 | - | - | Joint-liability | - | Not | Yes |
| TCT Mobile (US) Inc. | 2018-12-7 | 84,500 | - | - | Joint-liability | - | Not | Yes |
| TCT Mobile International Limited | 2018-12-7 | 31,000 | - | - | Joint-liability | - | Not | Yes |
| TCT Mobile Italy S.R.L | 2018-12-7 | 1,600 | 2020-7-11 | - | Joint-liability | 3 months-1 year | Not | Yes |
| TCT MOBILE - TELEFONES LTDA. | 2018-12-7 | 12,000 | - | - | Joint-liability | - | Not | Yes |
| TCL Home Appliances (Hefei) Co., Ltd. | 2018-12-7 | 140,000 | 2020-6-15 | 38,604 | Joint-liability | 6 months-1 year | Not | Yes |
| TCL Home Appliances (Zhongshan) Co., Ltd. | 2018-12-7 | 16,000 | 2020-6-18 | 3,627 | Joint-liability | 6-7 months | Not | Yes |
| TCL Air-Conditioner (Zhongshan) Co., Ltd. | 2018-12-7 | 158,600 | 2016-9-9 | 91,458 | Joint-liability | 3 months-5 years | Not | Yes |
| TCL Air Conditioner (Wuhan) Co., Ltd. | 2018-12-7 | 131,600 | 2020-4-24 | 70,640 | Joint-liability | 86-190 days | Not | Yes |
| Zhongshan TCL Refrigeration Equipment Co., Ltd. | 2018-12-7 | 75,300 | 2020-11-20 | 7,290 | Joint-liability | 6 months | Not | Yes |
| Guangdong TCL Smart Heating & Ventilation Equipment Co., Ltd. | 2018-12-7 | 7,000 | 2020-7-27 | 1,956 | Joint-liability | 3-6 months | Not | Yes |
| TCL Home Appliances (Huizhou) Co., Ltd. | 2018-12-7 | 11,500 | - | - | Joint-liability | - | Not | Yes |
| TCL Intelligent Technology (Hefei) Co., Ltd. | 2018-12-7 | 800 | - | - | Joint-liability | - | Not | Yes |
| TCL Air-Conditioner (Jiujiang) Co., Ltd. | 2018-12-7 | 25,000 | 2020-7-23 | 13,424 | Joint-liability | 93-190 days | Not | Yes |
| TCL Home Appliances (Hong Kong) Limited | 2018-12-7 | 20,000 | - | - | Joint-liability | - | Not | Yes |
| Shenzhen TCL Hangxiang Supply Chain Service Co., Ltd. | 2018-12-7 | 500 | - | - | Joint-liability | - | Not | Yes |
| Zhongshan Hhappy Tree Network Technology Co., Ltd. | 2018-12-7 | 2,000 | - | - | Joint-liability | - | Not | Yes |
| TCL Tonly Electronics (Huizhou) Co., Ltd. | 2018-12-7 | 40,000 | 2015-11-4 | 1,363 | Joint-liability | 1-6 year | Not | Yes |
| TCL Commercial Information Technology (Huizhou) Co., Ltd. | 2018-12-7 | 14,000 | 2020-4-8 | - | Joint-liability | 1 month | Not | Yes |
TCL Technology Group Corporation Annual Report 2020
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | 2018-12-7 | 4,000 | 2020-6-29 | 1,318 | Joint-liability | 91-122 days | Not | Yes | |||||
| TCL Capital (Hong Kong) Limited | 2018-12-7 | 100,000 | - | - | Joint-liability | - | Not | Yes | |||||
| Huizhou Cool Friends Network Technology Co., Ltd. | 2018-12-7 | 13,000 | 2020-1-20 | - | Joint-liability | 11-182 days | Not | Yes | |||||
| SHIFENDAOJIA Online Service Co., Ltd. | 2018-12-7 | 3,000 | 2020-1-21 | 30 | Joint-liability | 6-162 days | Not | Yes | |||||
| TCL Technology Park Co., Ltd. | 2018-12-7 | 27,000 | - | - | Joint-liability | - | Not | Yes | |||||
| Guangzhou Yunsheng Tianji Technology Co., Ltd. | 2018-12-7 | 110,000 | 2017-9-28 | 4,191 | Joint-liability | 12 years | Not | Yes | |||||
| Guangzhou TCL Science and Technology Development Co., Ltd. | 2018-12-7 | 200,000 | 2018-12-18 | 121,000 | Joint-liability | 13 years | Not | Yes | |||||
| Shenzhen Bao’an TCL Haichuanggu Technology Park Development Co., Ltd. | 2018-12-7 | 20,000 | 2018-9-25 | 16,144 | Joint-liability | 3 years | Not | Yes | |||||
| TCL Industries Holdings (HK) Limited | 2018-12-7 | 800,000 | 2016-10-4 | 529,515 | Joint-liability | 1-5 years | Not | Yes | |||||
| Canyon Circuit Technology (Huizhou) Co., Ltd. | 2018-12-7 | 5,000 | 2020-4-29 | 346 | Joint-liability | 180-186 days | Not | Yes | |||||
| Huizhou Shenghua Industrial Co., Ltd. | 2018-12-7 | 9,000 | 2020-3-31 | - | Joint-liability | 91-185 days | Not | Yes | |||||
| Taiyang Electro-optic (Huizhou) Co., Ltd. | 2018-12-7 | 4,000 | 2020-5-12 | - | Joint-liability | 135-143 days | Not | Yes | |||||
| Huizhou Gaoshengda Technology Co., Ltd. | 2018-12-7 | 9,000 | - | - | Joint-liability | - | Not | Yes | |||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 2020-3-31 | 40,000 | 2020-6-24 | 31,512 | Joint-liability | 6 months-1 year | Not | Not | |||||
| Qihang Import&Export Limited | 2020-3-31 | 6,000 | - | - | Joint-liability | - | Not | Not | |||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 2020-3-31 | 110,000 | 2020-6-17 | 3,900 | Joint-liability | 6 months-1 year | Not | Not | |||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 2020-3-31 | 40,000 | 2020-4-28 | 21,763 | Joint-liability | 8 years | Not | Not | |||||
| Qihang Import&Export Limited | 2020-8-28 | 50,000 | - | - | Joint-liability | - | Not | Not | |||||
| Total approved line for such guarantees in Reporting Period (A1) | 246,000 | Total actual amount of such guarantees in Reporting Period (A2) | 1,857,178 | ||||||||||
| Total approved line for such guarantees at end of Reporting Period (A3) | 3,671,525 | Total actual balance of such guarantees at end of Reporting Period (A4) | 1,614,488 | ||||||||||
| Guarantees provided by the Company as the parent for its subsidiaries | |||||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired | Guarantee | |||||
TCL Technology Group Corporation Annual Report 2020
| or not | for a related party or not | |||||||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 1,110,000 | 2016-4-13 | 488,960 | Joint-liability | 3 months-8 years | Not | Not |
| Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 2020-3-31 | 3,820,000 | 2018-4-28 | 1,588,462 | Joint-liability | 3 months-8 years | Not | Not |
| TCL China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 710,800 | 2015-4-21 | 307,606 | Joint-liability | 1 month-8 years | Not | Not |
| Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 2020-3-31 | 1,510,000 | 2018-6-20 | 1,010,537 | Joint-liability | 3 months-8 years | Not | Not |
| Huizhou China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 730,000 | 2020-3-31 | 227,127 | Joint-liability | 1 year | Not | Not |
| China Star Optoelectronics International (HK) Limited | 2020-3-31 | 330,000 | 2020-12-5 | 163,123 | Joint-liability | 3 years | Not | Not |
| China Display Optoelectronics Technology (Huizhou) Co., Ltd. | 2020-3-31 | 150,000 | 2019-11-10 | 25,687 | Joint-liability | 1 month-4 years | Not | Not |
| Wuhan China Display Optoelectronics Technology Co., Ltd. | 2020-3-31 | 50,000 | 2020-6-1 | 2,387 | Joint-liability | 1 month-5 years | Not | Not |
| Guangdong Juhua Printed Display Technology Co., Ltd. | 2020-3-31 | 10,000 | - | - | Joint-liability | - | Not | Not |
| TCL Tech Finance Co., Ltd. | 2020-3-31 | 200,000 | - | - | Joint-liability | - | Not | Not |
| TCL Commercial Factoring (Shenzhen) Co., Ltd. | 2020-3-31 | 50,000 | 2020-11-20 | 1,159 | Joint-liability | 1 year | Not | Not |
| Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | 2020-3-31 | 100,000 | 2020-6-29 | 18,000 | Joint-liability | 4-6 months | Not | Not |
| Guangzhou TCL Internet Microcredit Co., Ltd. | 2020-3-31 | 100,000 | - | - | Joint-liability | - | Not | Not |
| Highly Information Industry Co., Ltd. | 2020-3-31 | 294,000 | 2018-7-2 | 238,947 | Joint-liability | 1 month--3 years | Not | Not |
| Beijing Hecheng Nuoxin Technology Co., Ltd. | 2020-3-31 | 5,000 | 2018-9-5 | 2,000 | Joint-liability | 3 years | Not | Not |
| Beijing Lingyun Data Technology Co., Ltd. | 2020-3-31 | 90,000 | 2020-6-18 | 8,000 | Joint-liability | 394 days | Not | Not |
| Beijing Sunpiestore Technology Co., Ltd. | 2020-3-31 | 70,000 | 2020-6-20 | 17,000 | Joint-liability | 364-394 days | Not | Not |
| Shaanxi Titi Electronic Technology Co., Ltd. | 2020-3-31 | 3,000 | 2018-9-5 | 1,000 | Joint-liability | 3 years | Not | Not |
| TCL Technology Park (Huizhou) Co., Ltd. | 2020-3-31 | 130,000 | 2020-4-24 | 100,000 | Joint-liability | 1 year-3 years | Not | Not |
| TCL Technology Investments Limited | 2020-3-31 | 400,000 | 2020-7-14 | 195,747 | Joint-liability | 5 years | Not | Not |
TCL Technology Group Corporation Annual Report 2020
| Ningbo TCL Equity Investment Ltd. | 2020-8-28 | 50,000 | - | - | Joint-liability | - | Not | Not | |||||||
| Total approved line for such guarantees in the Reporting Period (B1) | 9,912,800 | Total actual amount of such guarantees in the Reporting Period (B2) | 4,542,959 | ||||||||||||
| Total approved line for such guarantees at the end of the Reporting Period (B3) | 9,912,800 | Total actual balance of such guarantees at the end of the Reporting Period (B4) | 4,395,742 | ||||||||||||
| Guarantees provided between subsidiaries | |||||||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not | |||||||
| Huhehaote Huanju New Energy Development Co., Ltd. | 2014 -11 -26 | 39,529 | 2015 -4 -13 | 39,529 | Joint-liability | 9.5 years | Not | Yes | |||||||
| Zhonghuan Energy (Inner Mongolia) Co., Ltd. | 2017 -6 -24 | 13,480 | 2017 -7 -21 | 13,480 | Joint-liability | 15 years | Not | Yes | |||||||
| Otog Banner Huanju New Energy Co., Ltd. | 2017 -6 -24 | 24,338 | 2017 -8 -18 | 24,338 | Joint-liability | 10 years | Not | Yes | |||||||
| Qinhuangdao Tianhui Solar Energy Co., Ltd. | 2017 -11 -11 | 11,200 | 2018 -1 -19 | 11,200 | Joint-liability | 12 years | Not | Yes | |||||||
| Inner Mongolia Zhonghuan Solar Material Co., Ltd. | 2017 -11 -29 | 181,250 | 2018 -5 -31 | 181,250 | Joint-liability | 5 years | Not | Yes | |||||||
| Qinhuangdao Tianhui Solar Energy Co., Ltd. | 2018 -9 -6 | 14,229 | 2019 -4 -23 | 14,229 | Joint-liability | 10 years | Not | Yes | |||||||
| Guyuan Shengju New Energy Co., Ltd. | 2018 -9 -6 | 12,369 | 2018 -10 -8 | 12,369 | Joint-liability | 11 years | Not | Yes | |||||||
| Zhangjiakou Shengyuan New Energy Co., Ltd. | 2018 -9 -6 | 16,640 | 2018 -10 -8 | 16,640 | Joint-liability | 11 years | Not | Yes | |||||||
| Zhonghuan Hong Kong Holding Limited | 2018 -12 -8 | 45,674 | 2018 -12 -27 | 45,674 | Joint-liability | 3 years | Not | Yes | |||||||
| Zhonghuan Hong Kong Holding Limited | 2019 -8 -22 | 43,050 | 2019 -10 -16 | 43,050 | Joint-liability | 3 years | Not | Yes | |||||||
| Tianjin Huanrui Electronic Technology Co., Ltd. | 2019 -9 -4 | 1,000 | 2020 -6 -30 | 1,000 | Joint-liability | 1 year | Not | Yes | |||||||
| Tianjin Huanrui Electronic Technology Co., Ltd. | 2019 -12 -11 | 10,000 | 2020 -4 -24 | 10,000 | Joint-liability | 1 year | Not | Yes | |||||||
| Total approved line for such guarantees in the Reporting Period (C1) | - | Total actual amount of such guarantees in the Reporting Period (C2) | - | ||||||||||||
| Total approved line for such guarantees at the end of the Reporting Period (C3) | 412,759 | Total actual balance of such guarantees at the end of the Reporting Period (C4) | 412,759 | ||||||||||||
| Total guarantee amount (total of the three kinds of guarantees above) | |||||||||||||||
| Total guarantee line approved in the Reporting Period (A1+B1+C1) | 10,158,800 | Total actual guarantee amount in the Reporting Period (A2+B2+C2) | 6,400,137 | ||||||||||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 13,997,084 | Total actual guarantee balance at the end of the | 6,422,989 | ||||||||||||
TCL Technology Group Corporation Annual Report 2020
| Reporting Period (A4+B4+C4) | ||
| Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets | 188.31% | |
| Of which: | ||
| Balance of guarantees provided for shareholders, the actual controller and their related parties (D) | 1,614,488 | |
| Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) | 2,560,612 | |
| Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) | 3,012,099 | |
| Total of the three amounts above (D+E+F) | 7,187,199 | |
| Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) | - | |
| Guarantees provided in breach of prescribed procedures (if any) | - | |
Irregularities in Provision of GuaranteesNo such cases in the Reporting Period.
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
Overview of wealth management entrustments in the Reporting Period:
Unit: RMB’0,000
| Type | Funding source | Amount | Undue amount | Unrecovered overdue amount |
| Bank’s wealth management product | Self-funded | 677,123 | 138,023 | - |
| Securities firm’s wealth management product | Self-funded | 145,000 | 31,000 | - |
| Trust plan | Self-funded | 126,000 | 0 | - |
| Other | Self-funded | 231,466 | 70,480 | - |
| Total | 1,179,589 | 239,503 | - | |
(2) Entrusted Loans
Overview of entrusted loans provided in the Reporting Period:
Unit: RMB’0,000
| Total amount | Funding source | Undue amount | Unrecovered overdue amount |
| 0 | Self-funded | 559.40 | 0 |
4. Major Contracts Arising in the Ordinary Course of Business
□ Applicable ■ Not applicable
5. Other Major Contracts
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
XVIII Corporate Social Responsibility (CSR)
1. Measures Taken to Fulfill CSR Commitment
Please refer to The 2020 Corporate Social Responsibility Report of TCL Technology GroupCorporation.
2. Measures Taken for Targeted Poverty Alleviation
(1) Plans
To respond to the "Opinions of the China Securities Regulatory Commission on the Role of CapitalMarkets in Serving the Country in Poverty Alleviation", the Company has been fulfilling its socialresponsibilities in poverty alleviation and public service, especially in the field of education povertyalleviation.In 2020, the Shenzhen TCL Public Welfare Foundation (hereinafter referred to as the "Foundation")continued the "A.I. Go Home" project. The storytelling robot named "Yi Ge" simulates the voices ofparents and tells stories to left-behind children and migrant children, thus strengthening theemotional connections between parents and children. With the help of the robot, children can hearthe voices of their parents more often in the process of growing up, so that mental health problemsand deviant behavior of left-behind children and migrant children caused by the long-time separationfrom their parents can be prevented. Furthermore, an offline activity, "Yi Ge Story Club", is plannedto be launched so that more left-behind children in rural areas can reach the robot. According to theproject plan, 2,000 "Yi Ge" storytelling robots will be distributed in five years to directly serve 2,000children and indirectly influence nearly 10,000 people. The accumulative duration of services forleft-behind children and migrant children will exceed 30,000 hours, bringing changes in fiveindicators to such children.In the meantime, the Foundation will continue to promote the "Little Music +" project designated tobring famous Chinese and foreign music pieces and appreciations to students who lack musicresources, inspire optimism in every child with the power of music, and make music literacy thewealth of a lifetime for every child. In 2020, the public welfare activity, "Xiao Xue Music Class",under the "Little Music +" project was launched to benefit more primary school students in ruralareas. According to the project plan, 2,000 "Xiao Xue" music robots will be distributed in five yearsto directly serve 2,000 children and indirectly influence nearly 10,000 people. The accumulativeduration of services for left-behind children and migrant children will exceed 30,000 hours, bringingchanges in five indicators to such children.
TCL Technology Group Corporation Annual Report 2020
In 2020, the Candlelight Micro-Loan Project continued to provide loans to rural teachers. Itscoverage and influence were expanded constantly. Except for the outstanding teachers who wererewarded by the "TCL Hope Engineering Candlelight Awards", all the teachers under training whobelong to the Hope Primary School Teacher Training Office of CYDF can apply for the loan.
(2) Summary of the Related Work Done in the Reporting PeriodOffline project activities of the "A.I. Go Home" project could not be implemented, due to theCOVID-19 pandemic in the first half of 2020. Therefore, "Yi Ge Story Club" was shifted to theonline "Yi Ge Chinese Idiom Class". Idioms, fables, and ancient poems in the "Yi Ge" storytellingrobot were selected as extracurricular and extended learning materials for formal courses, in linewith the courses of pilot primary schools and the teaching materials used by each grade. Studentslearned knowledge, while listening to stories. The project covered ten classes from the first to sixthgrades of 2 schools in 2 provinces, with a total of 586 students. The duration exceeded 1,500 minutes.Accumulatively, 17,000 benefited from the project. In the second half of 2020, "Yi Ge Story Club"advanced steadily, as the pandemic was alleviated. "Yi Ge Story Club" selected storiescommensurate with the Chinese class at school and exposed children to literary allusions at all timesand all over the world. "Yi Ge" storytelling robots entered rural schools and became a storyteller thataccompanied children. Additionally, "Yi Ge Story Club" held offline projects in six rural pilotschools in Hebei, Heilongjiang, Yunnan, Sichuan, and Gansu Provinces. A total of 30 Story Boxeswere distributed, benefiting over 1,000 people.Meanwhile, the offline activity, "Little Music Class", in pilot schools under the "Little Music +"project was shifted to the online "A Song Between Classes" project, because of the pandemic. Musicfrom the "Xiao Xue" music robot was selected. Without occupying the course time of the teachersand students, 1 classic song of the world was played online every day between classes. In total,applications from 35 schools were received, but in the end 18 classes of 5 schools (located in 5counties in Heilongjiang, Henan, Hebei, Yunnan, and Sichuan, respectively) were chosen toparticipate in the project, covering 956 students from the first to sixth grades. The duration exceeded6,400 minutes. In the second half of the year, "Xiao Xue Music Class" was officially launched. Itfeatured rich Music Boxes, including supporting teaching materials for music education, such as"Xiao Xue" music robots, enlightenment music picture books, and picture books on classic musicstories. Shenzhen TCL Public Welfare Foundation, through "Xiao Xue Music Class", offered musicresources to rural education and joined hands with Hua Mongsheng from the Central Conservatory ofMusic to allow children to access high-quality music classes and acquire music knowledge. In
TCL Technology Group Corporation Annual Report 2020
addition, "Xiao Xue Music Class" organized offline projects in six rural pilot schools in Hebei,Heilongjiang, Yunnan, Sichuan, and Gansu Provinces. A total of 30 Music Boxes were distributed,benefiting more than one thousand people.In 2020, we exerted more efforts for the publicity and coverage of the Candlelight Micro-LoanProject. Thanks to this project, some rural teachers had their financial demands satisfied and couldbetter serve rural education.In the same year, the Foundation donated all-in-one tablets for education to rural children andupdated teaching equipment in order to improve the schooling conditions of the Jiexi County School.
(3) Results
| Indicators | Measurement Unit | Quantity/Development |
| I. Overall summary | —— | —— |
| Of which: 1. Cash | RMB’0,000 | 65.675 |
| II. Specific investments | —— | —— |
| 4. Poverty alleviation by education | —— | —— |
| 4.3 Investment amount in improvement of educational resources in poverty-stricken areas | RMB’0,000 | 45.675 |
| 8. Poverty alleviation by public programs | —— | —— |
| 8.2 Investment amount in targeted poverty alleviation | RMB’0,000 | 10 |
| 8.3 Investment amount in public fund for poverty alleviation | RMB’0,000 | 10 |
(4) Subsequent Plans
In 2021, the seventh "TCL Project Hope Candlelight Award", jointly established by Foundation andthe CYDF, will continue to be implemented. Outstanding rural teachers who quietly devotedthemselves to grassroots education in poverty-stricken areas were selected to fully demonstrate theirprofessional ethics and dreams so as to encourage more excellent young teachers to engage in ruralbasic education and promote rural education. The influence of the current award evaluation andpublicity will be further enhanced. Interaction with netizens will be continuously intensified tomaintain social attention.Furthermore, we will continue to strengthen the publicity and coverage of the CandlelightMicro-Loan Project. This project will satisfy the financial demand of some rural teachers and enablethem to better serve rural education.
TCL Technology Group Corporation Annual Report 2020
From 2021, the coverage of the "A.I. Go Home" project will keep expanding. It is expected that 8 to10 pilot schools will be established, and that more than 50 classes will join the "Yi Ge Story Club"and drive the participation of the schools on a class basis. It is estimated that more than 3,000students will be covered. In the meantime, customized "Yi Ge" storytelling robots will be provided toleft-behind children so that the left-behind children can grow up happily with the company of therobots that can simulate the voices of their parents. "Yi Ge" will deepen the tie between children andtheir parents and alleviate the mental health problems of children.What's more, we will continue to expand the coverage of the "Little Music +" project, and establish 8to 10 pilot schools and 50 "Xiao Xue Music Class". We will start from a class and gradually coverthe whole school. It is expected that over 4,000 students will be served. We will provide morechildren who lack professional music resources with famous Chinese and foreign music pieces andmaster appreciations in order to drive the positive development of rural music education.
3. Issues Related to Environmental Protection
The Company as the parent is not a major polluter. The subsidiaries in the table below were majorpolluters declared by the environmental protection authorities in 2020, and “subsidiaries” mentionedin this section refer to the following subsidiaries in particular.
| Name of the Company or subsidiary | Major pollutants | Way of discharge | Number of discharge outlets | Distribution of discharge outlets | Discharge concentration (mg/L) | Governing discharge standards (mg/L) | Total discharge (metric ton) | Approved total discharge (metric tons/year) | Excessive discharge |
| TCL China Star Optoelectronics Technology Co., Ltd. | COD | Intermittently discharged to Guangming Sewage Plant | 1 | Northwestern corner of the plant area | 113mg/L | 260mg/L | 805t | 1226t | None |
| Ammonia nitrogen | 6mg/L | 30mg/L | 42.76t | 201t | None | ||||
| COD | Continuously discharged to Dongkengshui | 1 | Artificial wetland to the north of the plant area | 19.1mg/L | 30mg/L | 65.98t | 174.89t | None | |
| Ammonia nitrogen | 0.23mg/L | 1.5mg/L | 0.79t | 7.7t | None | ||||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | COD | Intermittently discharged to Zuoling Sewage Plant | 1 | Northwestern corner of the plant area | 36-75mg/L | 400mg/L | 241.98t | 353.55t | None |
| Ammonia nitrogen | 0.56-1.72mg/L | 30mg/L | 24.21t | 35.36t | None |
Construction and operation of facilities for preventing pollution:
During the Reporting Period, no major environmental pollution incidents occurred in either theCompany or any of its subsidiaries. An advanced sewage management system has been establishedfor each subsidiary, and regular monitoring and supervision and inspection mechanisms have been
TCL Technology Group Corporation Annual Report 2020
adopted to ensure the emission and disposal of waste water, waste gas, and solid waste and factorynoises generated during the operation are in compliance with the national and local laws andregulations.The waste water of each subsidiary company includes domestic waste water and industrial wastewater, of which domestic waste water is discharged into the local municipal sewage treatment pipenetwork after being pre-treated by oil separation and septic treatment, and industrial waste waterenters different treatment systems according to its characteristics, and is discharged subjected to thestandards after physical and chemical and biochemical treatment. The atmospheric pollutantsproduced by each subsidiary are mainly process waste gases in the production process. For differenttypes of waste gases, each subsidiary has constructed corresponding waste gas treatment systems,such as waste gas stripping system, acidic waste gas treatment system, alkaline waste gas treatmentsystem, organic waste gas treatment system, waste gas treatment system for waste water treatmentstation, etc. for the collection of waste gases through pipelines to the corresponding waste gastreatment system, where waste gases are discharged at a high altitude after meeting relative standards.The concentration and total amount of waste water and exhaust gas discharged meet the relevantnational and local standards. The solid wastes generated by each subsidiary include general waste,hazardous waste and domestic garbage, of which, hazardous wastes are treated by an entrustedqualified hazardous waste disposal agency according to the regulations; general wastes are disposedof by a resource recycling firm after being classified in the plant area; while domestic garbage isdisposed of by the property management company by sending the garbage to qualified landfills. Allthe disposals meet the regulatory requirements. The factory noise generated by each subsidiarycomes from the mechanical noises of production and power equipment, including refrigerators,cooling towers, air compressors, fans, various types of pumps, etc.. The Company reduces the impactof noise on the surrounding environment by the use of low-noise equipment, vibration reduction,noise reduction, etc., and noise reduction measures such as sound insulation and sound absorption inthe factories and equipment rooms. The monitoring results show that the factory boundary noise andemission of all subsidiaries meet the standards in a stable manner.Environmental Impact Assessment on Construction Projects and Other EnvironmentalProtection Administrative LicensesEach subsidiary complies with the laws and regulations of environmental impact assessment onconstruction projects and other environmental protection administrative licenses, and no violationsoccurred during the Reporting Period.
TCL Technology Group Corporation Annual Report 2020
Emergency Response Plan for Environmental IncidentsEach subsidiary has set up an environmental incident emergency organization led by the seniormanagement of the enterprise and prepared an environmental emergency response plan, which hasbeen filed with the local environmental protection department in accordance with relevant nationallaws and regulations. In addition, regularly emergency drills are conducted for environmentalincidents according to the plan to ensure the validity of emergency response plan.Environmental Self-Monitoring ProgramEach subsidiary has formulated an environmental self-monitoring program in accordance withnational regulations, and monitors the discharge of pollutants by manual monitoring or manualmonitoring performed by a third-party qualified agency. The monitoring plans and annual monitoringreports can be checked on the key environmental monitoring information platform managed by localenvironmental authorities or subsidiary websites.Other environment-related information that should be disclosed:
None.Other relevant information:
None.XIX Other Significant EventsOn 25 March 2019, the Company disclosed the Announcement on the Investment in an Overseas Equity Investment Fund(Announcement No. 2019-039). Through its majority-owned subsidiary, Li Rong Development Limited (hereinafter referred to as"Li Rong"), as a limited partner, the Company intended to make an investment of US$25 million in Sierra Ventures XII, L.P.,(hereinafter referred to as "Sierra XII") a venture capital fund registered in Delaware, the United States. The paid-in contribution of LiRong to Sierra XII totaled US$2.5 million, wherein US$1.25 million was invested on 15 January and 6 April 2020 each. On 30 June2020, Li Rong and TCL Venture Fund, held by a subsidiary of TCL Industries Holdings Inc., a related party of TCL, signed theSIERRA VENTURES XII, L.P. TRANSFER AND ADMISSION AGREEMENT. In line with the agreement, the TCL Venture Fundwould undertake the shares and all rights and obligations of Li Rong, upon the consent of Sierra XII's manager, Sierra VenturesAssociates XII, LLC. The TCL Venture Fund paid US$2.5 million to Li Rong on 30 July 2020 to purchase the paid-in shares.TCL released the Announcement on Participation in Contribution to Equity Investment Fund and Related-party Transaction (seeAnnouncement No. 2020-011) on 8 February 2020. It had received a notice from the fund manager, reading that GuangdongRongchuang Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (LimitedPartnership) (hereinafter referred to as the "Fund") had completed the filing procedures for private investment funds with the AssetManagement Association of China in conformity with laws and regulations, such as the Securities Investment Fund Law of thePeople's Republic of China and the Provisional Measures for Supervision and Administration of Private Investment Funds andobtained the Certificate of Filing of Private Investment Funds. The fund is currently in normal operation.
XX Significant Events of Subsidiaries
| Title of current announcement | Disclosure date | Disclosure website |
| Announcement on Intending to Increase the Capital in TCL CSOT | 31 March 2020 | http://www.cninfo.com.cn |
TCL Technology Group Corporation Annual Report 2020
| Voluntary Announcement on Subsidiary TCL CSOT and San’an Semiconductor Establishing a Joint Lab | 8 June 2020 |
| Voluntary Announcement on Investment and Technology Cooperation with JOLED | 20 June 2020 |
| Announcement on Wholly-owned Overseas Subsidiary Issuing U.S. Dollar Bonds | 13 July 2020 |
| Announcement on the Acquisition of a 60% Interest in Samsung Electronics Suzhou LCD Co., Ltd. and the 100% Interest of Samsung Display Suzhou Co., Ltd. | 29 August 2020 |
| Announcement on the Acquisition of the 100% Equity Interests of Moka International Limited and the Related-Party Transaction | 12 December 2020 |
| Voluntary Announcement on Increasing the Shareholding in Tianjin Zhonghuan Semiconductor Co., Ltd. | 15 December 2020 |
TCL Technology Group Corporation Annual Report 2020
Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
Unit: share
| Before | Increase/decrease in the Reporting Period (+/-) | After | |||||
| Shares | Percentage (%) | New issues | Other | Subtotal | Shares | Percentage (%) | |
| 1. Restricted shares | 867,764,980 | 6.41% | 511,508,951 | -4,695,853 | 506,813,098 | 1,374,578,078 | 9.80% |
| 1.1 Shares held by state-owned legal persons | - | - | 511,508,951 | - | 511,508,951 | 511,508,951 | 3.65% |
| 1.2 Shares held by other domestic investors | 777,102,199 | 5.74% | - | -4,597,851 | -4,597,851 | 772,504,348 | 5.51% |
| Among which: Shares held by domestic legal persons | 150,908,441 | 1.12% | - | - | - | 150,908,441 | 1.08% |
| Shares held by domestic natural persons | 626,193,758 | 4.63% | - | -4,597,851 | -4,597,851 | 621,595,907 | 4.43% |
| 1.3 Shares held by foreign investors | 90,662,781 | 0.67% | - | -98,002 | -98,002 | 90,564,779 | 0.65% |
| Among which: Shares held by foreign legal persons | 90,532,347 | 0.67% | - | - | - | 90,532,347 | 0.65% |
| Shares held by foreign natural persons | 130,434 | 0.000964% | - | -98,002 | -98,002 | 32,432 | 0.000231% |
| 2. Unrestricted shares | 12,660,673,739 | 93.59% | - | -4,463,455 | -4,463,455 | 12,656,210,284 | 90.20% |
| 2.1 RMB-denominated ordinary shares | 12,660,673,739 | 93.59% | - | -4,463,455 | -4,463,455 | 12,656,210,284 | 90.20% |
| 3. Total shares | 13,528,438,719 | 100.00% | 511,508,951 | -9,159,308 | 502,349,643 | 14,030,788,362 | 100.00% |
Reasons for share changes:
1. During the Reporting Period, locked-up shares held by senior management increased by 4,463,455 restricted shares, as unrestrictedshares decreased by the same number.
2. On 24 July 2020 during the Reporting Period, the Company repurchased and retired 9,159,308 restricted shares that had beengranted under the 2018 and 2019 Restricted Stock Incentive Plans and the TCL Global Innovation Partner Plan but were still in lockup.
3. As approved by the CSRC, the Company issued 511,508,951 new shares in the Reporting Period for asset purchase, which werelisted on the Shenzhen Stock Exchange dated 11 November 2020.Approval of share changes:
As approved by the CSRC, the Company issued 511,508,951 new shares in the Reporting Period for asset purchase, which were listedon the Shenzhen Stock Exchange dated 11 November 2020.
TCL Technology Group Corporation Annual Report 2020
Transfer of share ownership:
□Applicable ■ Not applicable
Progress on any share repurchase:
It is the key operational philosophy and mission of the Company to create value for and grow with the shareholders. In order toeffectively protect shareholders’ interests and enhance shareholder value, the Company convened the 14
th Meeting of the 6
thBoard ofDirectors on 10 January 2019, at which the Proposal on the Repurchase of Certain Public Shares was approved. The Report on theRepurchase of Certain Public Shares was disclosed on 14 February 2019. In view of the trends on the secondary market of stocks, theCompany convened the 15
th Meeting of the 6
thBoard of Directors on 19 March 2019, at which the Proposal on the Adjustment to theUpper Limit of the Share Repurchase Price. As such, the upper limit of the share repurchase price was adjusted from RMB3.80/shareto RMB5.00/share. The Company implemented the share repurchase from 14 February 2019. Up to 10 January 2020, the Company hascumulatively repurchased 565,333,922 shares (or 4.18% of the Company’s total share capital) in its special securities account forrepurchases by way of centralized bidding, with the highest trading price being RMB4.17/share, the lowest trading price beingRMB3.13/share, and the average trading price being RMB3.42/share. The total transaction amount was RMB1,933.5965 million(exclusive of trading fees). The share repurchase has been implemented in a process in compliance with the applicable regulationsincluding the Specific Rules of the Shenzhen Stock Exchange for Share Repurchase by Listed Companies. The actual number of sharesrepurchased, repurchase price and amount used were in compliance with the repurchase plan approved at the 14
th
Meeting of the 6
th
Board of Directors, with no difference with the disclosed Report on Share Repurchase. As such, the Company has completed the sharerepurchase as per the repurchase plan that it disclosed.Progress on reducing the repurchased shares by means of centralized bidding:
□ Applicable ■ Not applicable
Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to the Company’sordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively:
□ Applicable ■ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable ■ Not applicable
2. Changes in Restricted Shares
Unit: share
| Shareholder | Beginning restricted shares | Unlocked in Reporting Period | Increase in Reporting Period | Ending restricted shares | Reason for restriction | Date of unlocking (when on holidays, postponed to the first subsequent trading day) |
| Wuhan Optics Valley Industrial Investment Co., Ltd. | - | 511,508,951 | 511,508,951 | Restricted shares in a share offering | 2021-11-11 | |
| Star Century Enterprises Limited | 90,532,347 | - | - | 90,532,347 | Restricted shares in a share offering | 2020-12-25 |
| Duilong Xinglan Venture Investment Management Partnership (Limited Partnership) | 42,521,163 | - | - | 42,521,163 | Restricted shares in a share offering | 2020-12-25 |
| Duilong Xingyong Venture Investment Management Partnership (Limited Partnership) | 38,380,684 | - | - | 38,380,684 | Restricted shares in a share offering | 2020-12-25 |
| Duilong Xingyuan Venture Investment Management Partnership (Limited Partnership) | 37,695,315 | - | - | 37,695,315 | Restricted shares in a share offering | 2020-12-25 |
TCL Technology Group Corporation Annual Report 2020
| Duilong Xinglian Venture Investment Management Partnership (Limited Partnership) | 32,311,279 | - | - | 32,311,279 | Restricted shares in a share offering | 2020-12-25 |
| Other | 615,667,627 | - | 4,463,455 | 620,131,082 | Locked-up shares of senior management | 9999-99-99 |
| 2018 Restricted Stock Incentive Plan | 6,780,952 | -6,780,952 | - | - | Restricted shares granted as incentives | 2020-5-16 |
| 2019 Restricted Stock Incentive Plan | 3,875,613 | -2,378,356 | - | 1,497,257 | Restricted shares granted as incentives | 2020-6-26 |
| Total | 867,764,980 | -9,159,308 | 515,972,406 | 1,374,578,078 | -- | -- |
II Issuance and Listing of Securities
1. Securities (Exclusive of Preference Shares) Issued in the Reporting Period
| Name of stock and its derivative securities | Issue date | Issue price (or interest rate) | Issued number | Listing date | Number approved for public trading | Termination date of transaction |
| Type: stock | ||||||
| Ordinary shares of A-stock | 2020-11-5 | RMB3.91/share | 511,508,951 shares | 2020-11-11 | 511,508,951 shares | Not applicable |
| Type: convertible corporate bonds, convertible corporate bonds with warrants, corporate bonds | ||||||
| Corporate bonds (20TCLD1, 149140) | 2020-6-8 | 2.5% | 10,000,000 bonds | 2020-6-16 | 10,000,000 bonds | 2020-12-05 |
| Private convertible corporate bonds (TCL Private Convertible 1, 124016) | 2020-10- 19 | 2.00%/year for the first year and 1.50%/year for the second year | 6,000,000 bonds | 2020-11-11 | 6,000,000 bonds | 2022-11-10 |
| Private convertible corporate bonds (TCL Private Convertible 2, 124017) | 2020-11-30 | 0.5%/year for the first year and 0.1%/year for the second year | 26,000,000 bonds | 2020-12-1 | 26,000,000 bonds | 2022-11-29 |
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
1. During the Reporting Period, locked-up shares held by senior management increased by 4,463,455 restricted shares, as unrestrictedshares decreased by the same number.
2. On 24 July 2020 during the Reporting Period, the Company repurchased and retired 9,159,308 restricted shares that had beengranted under the 2018 and 2019 Restricted Stock Incentive Plans and the TCL Global Innovation Partner Plan but were still in lockup.
3. As approved by the CSRC, the Company issued 511,508,951 new shares in the Reporting Period for asset purchase, which werelisted on the Shenzhen Stock Exchange dated 11 November 2020.
TCL Technology Group Corporation Annual Report 2020
3. Existing Staff-Held Shares
□ Applicable ■ Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
| Number of ordinary shareholders at the period-end | 481,178 | Number of ordinary shareholders at the month-end prior to the disclosure of this Report | 542,531 | Number of preference shareholders with resumed voting rights at the period-end (if any) (see note 8) | Not applicable | Number of preference shareholders with resumed voting rights at the month-end prior to the disclosure of this Report (if any) (see note 8) | Not applicable | ||
| 5% or greater shareholders or top 10 shareholders | |||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Total shares held at the period-end | Increase/decrease in the Reporting Period | Restricted shares held | Unrestricted shares held | Shares in pledge or frozen | ||
| Status | Shares | ||||||||
| Li Dongsheng and his acting-in-concert party | Domestic natural person/general legal person | 8.26 | 1,158,599,393 | -63,875,598 | 613,931,602 | 544,667,791 | Put in pledge by Li Dongsheng | 224,000,000 | |
| Put in pledge by Jiutian Liancheng | 344,899,521 | ||||||||
| Huizhou Investment Holding Co., Ltd. | State-owned legal person | 5.30 | 743,139,840 | -135,279,907 | - | 743,139,840 | - | - | |
| Hong Kong Securities Clearing Company Ltd. | Foreign legal person | 3.73 | 523,742,567 | 170,252,713 | - | 523,742,567 | - | - | |
| Wuhan Optics Valley Industrial Investment Co., Ltd. | State-owned legal person | 3.65 | 511,508,951 | 511,508,951 | 511,508,951 | - | - | - | |
| China Securities Finance Corporation Limited | Domestic general legal person | 2.66 | 373,231,553 | - | - | 373,231,553 | - | - | |
| Tibet Tianfeng Enterprise Management Co., Ltd. | Domestic general legal person | 2.54 | 355,863,715 | -170,231,927 | - | 355,863,715 | - | - | |
| Central Huijin Asset Management Co., Ltd. | State-owned legal person | 1.47 | 206,456,500 | - | - | 206,456,500 | - | - | |
TCL Technology Group Corporation Annual Report 2020
| National Social Security Fund-Portfolio 601 | Fund, wealth management product, etc. | 0.99 | 1,38,831,524 | 85,831,524 | - | 1,38,831,524 | - | - |
| Swiss Finance (Hong Kong) Limited | Foreign legal person | 0.91 | 128,247,257 | 128,247,257 | - | 128,247,257 | - | - |
| Star Century Enterprises Limited | Foreign legal person | 0.65 | 90,532,347 | - | 90,532,347 | - | - | - |
| Strategic investor or general legal person becoming a top-10 ordinary shareholder in a rights issue (if any) (see note 3) | As approved by the CSRC, the Company issued 511,508,951 new shares, along with convertible corporate bonds, and made cash payments in the Reporting Period to purchase a 39.95% interest in Wuhan CSOT held by Wuhan Industrial Finance. And the aforesaid new shares were listed on the Shenzhen Stock Exchange dated 11 November 2020. | |||||||
| Related or acting-in-concert parties among the shareholders above | Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership) (hereinafter referred to as “Jiutian Liancheng”) are the biggest shareholder of the Company with a total of 1,158.5994 million shares. | |||||||
| Top 10 unrestricted shareholders | ||||||||
| Name of shareholder | Unrestricted shares held at the period-end | Shares by type | ||||||
| Type | Shares | |||||||
| Huizhou Investment Holding Co., Ltd. | 743,139,840 | RMB-denominated ordinary stock | 743,139,840 | |||||
| Li Dongsheng and his acting-in-concert party | 544,667,791 | RMB-denominated ordinary stock | 544,667,791 | |||||
| Hong Kong Securities Clearing Company Ltd. | 523,742,567 | RMB-denominated ordinary stock | 523,742,567 | |||||
| China Securities Finance Corporation Limited | 373,231,553 | RMB-denominated ordinary stock | 373,231,553 | |||||
| Tibet Tianfeng Enterprise Management Co., Ltd. | 355,863,715 | RMB-denominated ordinary stock | 355,863,715 | |||||
| Central Huijin Asset Management Co., Ltd. | 206,456,500 | RMB-denominated ordinary stock | 206,456,500 | |||||
| National Social Security Fund-Portfolio 601 | 138,831,524 | RMB-denominated ordinary stock | 138,831,524 | |||||
| Swiss Finance (Hong Kong) Limited | 128,247,257 | RMB-denominated ordinary stock | 128,247,257 | |||||
| Sinatay Life Insurance Co., Ltd.－Conventional Product | 78,691,100 | RMB-denominated ordinary stock | 78,691,100 | |||||
| Norges Bank－Self-Owned Funds | 76,767,033 | RMB-denominated ordinary stock | 76,767,033 | |||||
| Related or acting-in-concert parties among top 10 unrestricted public shareholders, as well as between top 10 unrestricted public shareholders and top 10 shareholders | Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership) (hereinafter referred to as “Jiutian Liancheng”) are the biggest shareholder of the Company with a total of 1,158.5994 million shares. | |||||||
TCL Technology Group Corporation Annual Report 2020
| Top 10 ordinary shareholders involved in securities margin trading (if any) | None |
Note: The top 10 shareholders in the table above do not include “The Securities Account of TCL Technology Group Corporation forRepurchases”. As of the end of the Reporting Period, there were 528,066,412 shares in the account.Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conductedany promissory repo during the Reporting Period.No such cases in the Reporting Period.
2. Controlling Shareholder
The Company has no controlling shareholder.Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li Dongsheng and Xinjiang JiutianLiancheng Equity Investment Partnership (Limited Partnership) are the biggest shareholder of the Company with a total of 1,158.5994million shares.As per Article 217 of the Company Law, a controlling shareholder refers to a shareholder who owns over 50% of a limited liabilitycompany’s total capital or over 50% of a joint stock company’s total share capital; or, despite the ownership of less than 50% of alimited liability company’s total capital or less than 50% of a joint stock company’s total number of shares, who can still prevail in theresolution of a meeting of shareholders or a general meeting of shareholders according to the voting rights corresponding to his interestin the limited liability company’s total capital or the joint stock company’s total number of shares. According to the definition above,the Company has no controlling shareholder or actual controller.
3. Actual Controller and Its Acting-in-Concert Parties
The “actual controller” refers to an entity which is not a shareholder of a company but actually controls the company behaviorsthrough investment relationship, agreement or other arrangements. According to the definition above, the Company has no actualcontroller.Whether there is any shareholder with a greater than 10% interest at the ultimate control level:
□ Yes ■ No
Shareholders with a greater than 5% interest at the ultimate control level:
□ Applicable ■ Not applicable
Change of the actual controller in the Reporting Period:
□ Applicable ■ Not applicable
Indicate whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable ■ Not applicable
4. Other 10% or Greater Corporate Shareholders
□ Applicable ■ Not applicable
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,Reorganizer and Other Commitment Makers
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
Part VII Convertible Corporate BondsBond-to-Stock Price Adjustments
□ Applicable ■ Not applicable
Cumulative Bond-to-Stock Conversions
□ Applicable ■ Not applicable
Top 10 Holders of Convertible Corporate Bonds
| Serial No. | Name of holder | Nature of holder | Number of convertible corporate bonds held at the period-end (0,000 bonds) | Amount of convertible corporate bonds held at the period-end (RMB’0,000) | Percentage of convertible corporate bonds held at the period-end |
| 1 | GF Securities Co., Ltd. | Domestic non-state-owned legal person | 390 | 39,000.00 | 15.00% |
| 2 | Guosen Securities Co., Ltd. | State-owned legal person | 300 | 30,000.00 | 11.54% |
| 3 | Fullgoal Fund Management Co., Ltd. | Domestic non-state-owned legal person | 250 | 25,000.00 | 9.62% |
| 4 | Western Securities Co., Ltd. | State-owned legal person | 170 | 17,000.00 | 6.54% |
| 5 | China Life Pension Sustaining Fixed Income Pension Product No. 9- China Merchants Bank Co., Ltd. | Fund, wealth management product, etc. | 130 | 13,000.00 | 5.00% |
| 6 | China Life Pension Hongxin Fixed Income Pension Product- Industrial And Commercial Bank Of China Limited | Fund, wealth management product, etc. | 130 | 13,000.00 | 5.00% |
| 7 | ICBC Credit Suisse Asset Management Co., Ltd. | State-owned legal person | 100 | 10,000.00 | 3.85% |
| 8 | Shenwan Hongyuan Group Co., Ltd. | Domestic non-state-owned legal person | 100 | 10,000.00 | 3.85% |
| 9 | China Life Yongfeng Enterprise Annuity Collective Plan- Agricultural Bank Of China Limited | Fund, wealth management product, etc. | 100 | 10,000.00 | 3.85% |
| 10 | China Life Insurance (Group) Company Enterprise Annuity Plan- Agricultural Bank Of China Limited | Fund, wealth management product, etc. | 100 | 10,000.00 | 3.85% |
Significant Changes to the Profitability, Assets and Credit Standing of the Guarantor
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
Liability Condition and Credit Rating Changes of the Company at the End of the ReportingPeriod, as well as Future Cash Arrangements for RepaymentSee “Part X Corporate Bonds” for details.Part VIII Directors, Supervisors, Senior Management and Staff
I Change in Shareholdings of Directors, Supervisors and Senior Management
| Name | Office title | Incumbent/Former | Gender | Age | Start of tenure | End of tenure | Beginning shareholding (share) | Increase in the Reporting Period (share) | Decrease in the Reporting Period (share) | Other increase/decrease (share) | Ending shareholding (share) |
| Li Dongsheng | Chairman of the Board | Incumbent | Male | 63 | 2002-4-19 | 2023-11-12 | 812,848,488 | 726,982 | - | - | 813,575,470 |
| CEO | 2005-6-20 | 2023-11-13 | |||||||||
| Liang Weihua | Vice Chairman of the Board | Incumbent | Male | 39 | 2020-11-13 | 2023-11-13 | - | - | - | - | - |
| Du Juan | Director | Incumbent | Female | 50 | 2018-3-19 | 2023-11-12 | - | 417,730 | - | - | 417,730 |
| COO | 2018-3-2 | 2023-11-13 | |||||||||
| CFO | 2019-1-10 | ||||||||||
| Jin Xuzhi | Director | Incumbent | Male | 66 | 2019-1-25 | 2023-11-12 | - | 521,997 | - | - | 521,997 |
| Senior Vice President | 2015-8-13 | ||||||||||
| Liao Qian | Director | Incumbent | Male | 40 | 2017-9-1 | 2023-11-12 | - | 229,596 | - | - | 229,596 |
| Board Secretary | 2014-4-23 | 2023-11-13 | |||||||||
| Senior Vice President | 2020-08-27 | ||||||||||
| Shen Haoping | Director | Incumbent | Male | 58 | 2020-11-13 | 2023-11-12 | - | - | - | - | - |
| Senior Vice President | 2020-11-14 | 2023-11-13 | |||||||||
| Gan Yong | Independent Director | Incumbent | Male | 73 | 2020-11-13 | 2023-11-12 | - | - | - | - | - |
| Chen Shiyi | Independent Director | Incumbent | Male | 64 | 2020-11-13 | 2023-11-12 | - | - | - | - | - |
| Wan Liangyong | Independent Director | Incumbent | Male | 41 | 2020-11-13 | 2023-11-12 | - | - | - | - | - |
| Liu Xunci | Independent Director | Incumbent | Male | 62 | 2017-9-1 | 2023-11-12 | - | - | - | - | - |
| He Zhuohui | Chairman of the Supervisory Committee | Incumbent | Male | 55 | 2015-9-2 | 2023-11-12 | - | - | - | - | - |
| Mao Tianxiang | Employee Supervisor | Incumbent | Male | 40 | 2017-9-1 | 2023-11-12 | - | 128,979 | - | - | 128,979 |
| Qiu Haiyan | Supervisor | Incumbent | Female | 46 | 2014-9-1 | 2023-11-12 | - | - | - | - | - |
TCL Technology Group Corporation Annual Report 2020
| Yan Xiaolin | Senior Vice President | Incumbent | Male | 54 | 2014-9-1 | 2023-11-13 | 599,500 | 418,676 | - | - | 1,018,176 |
| CTO | 2012-12-6 | ||||||||||
| Liu Bin | Vice Chairman of the Board | Former | Male | 51 | 2015-8-31 | 2020-11-12 | - | - | - | - | - |
| Yan Yan | Independent Director | Former | Male | 64 | 2015-3-24 | 2020-11-12 | - | - | - | - | - |
| Lu Xin | Independent Director | Former | Female | 58 | 2014-9-1 | 2020-11-12 | - | - | - | - | - |
| Zhou Guofu | Independent Director | Former | Male | 57 | 2014-9-1 | 2020-11-12 | - | - | - | - | - |
| Total | -- | -- | -- | -- | -- | -- | 813,447,988 | 2,443,960 | - | - | 815,891,948 |
II Change of Directors, Supervisors and Senior Management
| Name | Office title | Type of change | Date of change | Reason for change |
| Liu Bin | Vice Chairman of the Board | Resignation upon the expiry of the office term | 12 November 2020 | Resignation upon the expiry of the office term |
| Yan Yan | Independent Director | Resignation upon the expiry of the office term | 12 November 2020 | Resignation upon the expiry of the office term |
| Lu Xin | Independent Director | Resignation upon the expiry of the office term | 12 November 2020 | Resignation upon the expiry of the office term |
| Zhou Guofu | Independent Director | Resignation upon the expiry of the office term | 12 November 2020 | Resignation upon the expiry of the office term |
III Biographical InformationProfessional backgrounds, major work experience and current posts in the Company of the incumbent directors, supervisors and seniormanagement:
Born in July 1957, Mr. Li Dongsheng is the founder of TCL and currently serves as TCL Tech’sChairman and CEO; he was elected as a delegate to China’s 16
thNational Congress of the CPC and adeputy to the 10
th
, 11th, 12th
and 13
th
National People’s Congress. Mr. Li holds a number ofprestigious positions: Vice Chairman of All China Federation of Industry and Commerce (ACFIC),Honorary President of China Video Industry Association, Vice Chairman of China Commerce ofInternational Chamber, President of Guangdong Provincial Enterprise Confederation, President ofGuangdong Provincial Association of Entrepreneurs, First President of China ManufacturingInnovation Alliance, Honorary President of South China University of Technology EducationDevelopment Foundation, Vice President of Alumni Association South China University ofTechnology, Member of the Council of South China University of Technology, Visiting Professor inWuhan University and Honorary Professor in Beijing Institute of Technology. From 1982 to 1985, heserved as Technician, Workshop Manager and Production Director in TTK Household Appliances
TCL Technology Group Corporation Annual Report 2020
Co., Ltd.; from 1985 to 1986, he served as First General Manager of TCL Communication DevicesCompany; from 1986 to 1989, he served as Director of the Introduction Department in GuangdongHuizhou Industrial Development Corporation; from 1990 to 1993, he served as Deputy GeneralManager, Deputy Secretary of the Party Committee and Secretary of the Youth League Committee ofHuizhou Electronic Communication Corporation; from 1993 to 1996, he served as General Managerof TCL Electronics Group; from 1996 to 2002, he served as Chairman and President of TCLCorporation and in 2002, Mr. Li Dongsheng was selected as “CCTV’s Economic Person of the Year2002”; from April 2002 to January 2004, he served as Chairman and President of TCL Corporation;from January 2004 till now, he serves as Chairman and CEO of TCL Technology Group Corporation.On October 24, 2018, he was selected on the “List of 100 Outstanding Private Entrepreneurs of 40Years of Reform and Opening Up” of the United Front Work Department and All China Federationof Industry and Commerce. On December 18, 2018, he was selected on the list of “100 OutstandingContributors of Reform and Opening Up” of the Central Committee of the Party and the StateCouncil; he won the title of Pioneer of Reform and awarded with the medal with the comment “Apioneer opening the international market in electronics industry”. As one of the founders of TCL, Mr.Li Dongsheng has led TCL in acquiring the global color TV business of Thomson-CSF and theglobal mobile terminal business of Alcatel and established a global business structure. He washonored as the “Asian Economic Person of the Year 2004” by the Fortune magazine and won theNational Medal of Honor of France. In June 2006, Mr. Li Dongsheng wrote the famous article titled“Rebirth of the Eagle” as a call for TCL team members to carry out reform and innovation with thespirit of rebirth and firmly promote the international business. In February 2014, Mr. Li Dongshenglaunched TCL’s strategic transformation of “Double+” and in the same year, TCL achieved a salesrevenue of over RMB100 billion. In 2015, the sales revenue of TCL again exceeded RMB100 billion.In February 2021, Mr. Li was granted the “David Sarnoff Industrial Achievement Award 2020” bythe Society for Information Display (SID).Mr. Li Dongsheng always holds the firm belief that a strong country is built on the basis of strongeconomy, which in turn requires a group of world-class enterprises. It is his steadfast belief andpersistent goal to firmly stick to industry and develop TCL Tech into a world-class enterprise as thebackbone of China’s economy.Mr. Liang Weihua, Vice Chairman of TCL Tech. He was born in March 1981. He holds a master'sdegree and is a Party member. He graduated from the Department of Sociology of the School ofGovernment, the Sun Yat-sen University, in July 2003 and graduated from the Economics andManagement School of Wuhan University in July 2003 and obtained the MBA degree in December
TCL Technology Group Corporation Annual Report 2020
2012. Currently, he serves as Deputy General Manager and director at Huizhou Investment HoldingCo., Ltd. From July 2003 to December 2010, he worked as Assistant Manager of EnterpriseManagement Department and Administration Department of Huizhou Investment ManagementCompany. From December 2010 to December 2011, he took the post of Executive Deputy GeneralManager of Huidong County Hongyuan Water Supply Co., Ltd. From December 2011 to June 2016,he served as the General Manager of Huidong County Hongyuan Water Supply Co., Ltd. (andparticipated in the Special Seminar for Young and Middle-aged Cadres at Section Chief Rank inHuizhou City to Learn and Implement Spirit of Third Plenary Session of the 18th CPC CentralCommittee (Zhong Qing Class 2) from May to August, 2014). From June 2016 to the present, he hastaken the office of Deputy General Manager of Huizhou Investment Holding Co., Ltd. (and alsoserved as a director of the company since August 2016). Since March 2017, he has been a director ofHuizhou Financing Guarantee Company and Utrust Inclusive Finance (Huizhou) FinancingGuarantee Co., Ltd. Since April 2017, he has been a director of Truly (Huizhou) Smart DisplayLimited. Since October 2019, he has been Chairman and General Manager of Huizhou NewMaterials Industry Park Investment and Construction Co., Ltd. Since November 2020, he has been inthe office of Vice Chairman of TCL Technology Group Corporation and its consolidated subsidiaries,except where the context otherwise requires. He became Chairman and General Manager of HuizhouInnovative Investment Co., Ltd. on 19 November 2020.)Ms. Du Juan currently serves as Executive Director, Chief Operating Officer and Chief FinancialOfficer of TCL Tech. Born in May 1970, she graduated from the Department of Investment ofZhongnan University of Economics and Law and obtained EMBA from CKGSB. From July 1991 toMay 1999, she worked in CCB Huizhou Branch. In May 1999, she joined TCL Corporation andserved as General Manager of the Settlement Center of TCL Corporation and General Manager ofTCL Financial. From October 2014 till now, she serves as President and Chairman of TCL FinancialHoldings Group (Guangzhou) Co., Ltd.. From July 2016 to February 2018, she served as VicePresident of TCL Corporation. From March 2018 till now, she serves as Chief Operating Officer(COO) of TCL Tech. From January 2019 till now, she concurrently serves as Chief Financial Officer(CFO) of TCL Tech.Mr. Jin Xuzhi currently serves as Executive Director and Senior Vice President of TCL Tech, aswell as CEO and Director of TCL CSOT, Chairman of the Board of Wuhan CSOT and Chairman ofthe Board of Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd.. Bornin September 1955, he has obtained the Master’s Degree in Material Engineering from YonseiUniversity in South Korea and MBA from McGill University. He worked in LG Semiconductor Co.,
TCL Technology Group Corporation Annual Report 2020
Ltd. and served as Deputy General Manager in LG Display (formerly known as LG Philips LCD)and Head of the IT Business Division. From April 2009 to March 2010, he served as SeniorConsultant in Fuhrmeister Electronics. He joined TCL Corporation in March 2010 and served asSenior Vice President, President and CEO of TCL CSOT and General Manager of Wuhan CSOT.Mr. Liao Qian currently serves as Executive Director, Senior Vice President, Chief of Staff andBoard Secretary of TCL Tech. He has obtained the Master’s Degree and holds the OccupationalQualification Certificate of the People’s Republic of China for Law. From August 2006 to February2014, he worked in Guotai Junan International Holdings Co., Ltd. and was engaged in the investmentbanking business in Hong Kong and Mainland China. Joining TCL Corporation in March 2014, he isin charge of strategic planning, strategic investment and matters in relation to the domestic andoverseas capital markets. He is also Independent Director of Jiawei Renewable Energy Co., Ltd.(300317.SZ), Non-Executive Director of Fantasia (1777.HK), Chairman of the Board of TonlyElectronics (1249.HK) and CDOT (0334.HK), Vice Chairman of the Board of Tianjin 712Communication & Broadcasting Co., Ltd. (603712.SH), and Director of Tianjin ZhonghuanSemiconductor Co., Ltd. (002129.SZ).Mr. Shen Haoping, Executive Director and Senior Vice President of TCL Tech. He is Chinese andwas born in 1962. He holds a bachelor's degree. He is a Senior Engineer receiving a specialallowance from the State Council. At present, he serves as Vic Chairman and General Manager ofTianjin Zhonghuan Semiconductor Co., Ltd. and Deputy Secretary of the Party Committee andGeneral Manager of Tianjin Zhonghuan Electronics and Information Group Co., Ltd. He used towork as Chairman and Deputy General Manager of Tianjin Zhonghuan Semiconductor Co., Ltd.Mr. Gan Yong, independent director of TCL Tech., Professor Senior Engineer, metallurgist andmaterials scientist, academician of the Chinese Academy of Engineering (CAE) (2001), and doctoralsupervisor. He serves as Director of the National Advisory Committee on New Materials IndustryDevelopment, Honorary President of the Association of China Rare Earth Industry (ACREI), andPresident of the Chinese Society for Metals (CSM). In June 2010, he was elected Assistant Dean ofthe CAE and became a member of the 12th National Committee of the Chinese People's PoliticalConsultative Conference (CPPCC) and Deputy Director of the Committee of Population, Resourcesand Environment of the CPPCCMr. Chen Shiyi, independent director of TCL Tech. He was born Tiantai, Zhejiang in October 1956.He is a Han people. He started to work in July 1987. His titles include Doctor of Science, doctoralsupervisor, academician of the Chinese Academy of Sciences (CAS) and the World Academy of
TCL Technology Group Corporation Annual Report 2020
Sciences (TWAS), and former principal of the Southern University of Science and Technology(SUSTech). Now he serves as Chair Professor of the SUSTech, Co-president of the SouthernUniversity of Science and Technology Education Foundation, Vice President of the 11th Council ofthe Chinese Society of Theoretical and Applied Mechanics (CSTAM), Vice President of the 2ndCouncil of the China Engineering Education Accreditation Association (CEEAA), member of theStanding Committee of the 6th Shenzhen Municipal Committee of the CPPCC, and Vice Chairmanof the 6th Committee of the Shenzhen Municipal Science and Technology Association.Mr. Wan Liangyong, independent director of TCL Tech. He was born in 1979. He is a Part memberwho joined the "National Leading Accounting Talent" of the Ministry of Finance of the People'sRepublic of China. At present, his titles include professor, doctoral supervisor, Director of theDepartment of Accounting, and Director of the Accounting Development Research Center of theSchool of Business Administration, South China University of Technology. Besides, he is a councilmember of the Accounting Society of China (ASC), Vice President of the Branch of EngineeringInstitutions of Higher Education of the ASC, and independent director of multiple companies,including Wens.Mr. Liu Xunci, independent director of TCL Tech., professor, and Top Talent in Huizhou City. Hewas born in Shaoyang, Hunan Province, in September 1959. He holds a master's degree inEconomics. In September 1976, he became an educated urban young man working in the countryside.In July 1983, he started to work upon graduation. He taught at the Hunan Agricultural University andthe Huizhou University as a lecturer, associate professor, and professor. He is an expert of theDecision-making Consultative Committee.In recent years, he led and joined multiple projects supported by national, ministerial, and provincialfunds. His works include Strategic Analysis of Business Administration, Theories and Practices ofStrategic Regional Economic Planning, and Enterprise Strategic Management. Several papers werepublished in academic journals. His main research directions include regional economic planning,enterprise strategies, and financial management. He led and completed multiple plans for economicand social development and business management for the "12th and 13th Five-Year Plan" periodsengaged by governments and enterprises, and special research reports of Guangdong Province (citiesand counties). He studied and demonstrated special projects, such as the "Guangdong-HongKong-Macao Greater Bay Area", the "Pearl River Delta", and the " Ring Daya Bay Economic Zone".Multiple research results have been adopted by governments. He is organizing and compilingprojects of the "14th Five-Year Plan" entrusted by governments at all levels.
TCL Technology Group Corporation Annual Report 2020
Born in July 1966, Mr. He Zhuohui currently serves as Chairman of the Supervisory Committee ofTCL Tech, as well as Full-time Deputy Secretary and Director in Huizhou Investment Holdings Co.,Ltd.. From August 1991 to June 1995, he served as Deputy Director of the General Office andDirector of the Office in China Construction Bank Huiyang Branch; from June 1995 to August 2008,he served as Manager in Renchengchang (Huizhou) Investment Co., Ltd.; from August 2008 toSeptember 2009, he served as General Manager of Huizhou Investment Holdings Asset ManagementCo., Ltd.; from September 2009 to December 2012, he served as Manager of the Management andDevelopment Department in Huizhou Investment Holdings Co., Ltd. and Deputy General Managerand Director of Huizhou Fairway Investment and Construction Co., Ltd.; from December 2012 tillnow, he serves as Full-time Deputy Secretary in Huizhou Investment Holdings Co., Ltd.; fromFebruary 2014 till now, he serves as Director in Huizhou Investment Holdings Co., Ltd. (from April2010 to January 2017, he concurrently served as Director of the First and Second Session of theBoard of Huizhou Fairway Investment and Construction Co., Ltd.; from August 2015, heconcurrently serves as Chairman of the Fifth and Sixth Supervisory Committees of TCLCorporation).Born in December 1975, Ms. Qiu Haiyan currently serves as Supervisor of TCL Tech. She obtainedthe Bachelor’s Degree from Central Radio & TV University in 2011. She is an accountant andmember of the Communist Party of China. From July 1995 to March 1998, she served as a financeofficer in Huizhou Zongli Real Estate Company; from March 1998 to June 2002, she served as afinance officer in Huizhou Trust Investment Company; from June 2002 till now, she serves asAccountant, Deputy Manager and Manager of the Finance Department in Huizhou InvestmentHoldings Co., Ltd.; from February 2014 till now, she serves as Workers’ Director in HuizhouInvestment Holdings Co., Ltd. (from June 2009 to February 2013, she concurrently served asSupervisor in Huizhou Fairway Investment and Construction Co., Ltd.; from June 2013 to May 2018,she concurrently served as Director in Huizhou Investment Holdings Asset Operation Co., Ltd.; fromMarch 2014, she concurrently serves as Workers’ Representative Director in Huizhou Investment andDevelopment Co., Ltd.; from April 2014, she concurrently serves as Supervisor of the Fifth, Sixthand Seventh Supervisory Committees of the Company).Mr. Mao Tianxiang currently serves as Employee Supervisor, Deputy Secretary of the PartyCommittee, Assistant President, and Head of the Audit and Supervision Department of TCL Tech. Hewas born in January 1980 and graduated from Guangxi University with a Bachelor degree. From July2003 to June 2005, he served as Secretary in China Telecom Guangxi Guilin Company; from July2005 to November 2007, he served as Supervisor of PR and Communications in the Strategic OEM
TCL Technology Group Corporation Annual Report 2020
Business Division and Officer in the President’s Office in the Company; from November 2007 toJune 2009, he served as Deputy Head of the Legal Section and Head of the General Section inHuizhou Auditing Bureau; from June 2009 to August 2014, he served as Deputy Director and DeputyDirector of the Divisional Level in the Law Enforcement Inspection Office and the EfficacyInspection Office of Huizhou Discipline Committee. He has been working in the Company sinceSeptember 2014. He served as Deputy Director of the Party-Masses Work Department in theCompany and Secretary of the Youth League Committee of the Company; from August 2015 toJanuary 2016, he concurrently served as Acting General Manager of the Electronic Device BusinessDivision in Techne Corporation; in November 2016, he was elected as Member of the PartyCommittee and Deputy Secretary of the Discipline Committee of TCL Corporation; in February2017, he served as Head of the Audit and Supervision Department; from March 2017 to December2018, he concurrently served as General Manager of TCL Resource Investment Company; from July2019 to July 2020, he concurrently served as Auditor General of TCL CSOT. Since 2019, he hassuccessively been a Supervisor of Tianjin 712 Communication & Broadcasting Co., Ltd.(603712.SH), the Chairman of the Supervisory Committee of Highly Information Industry Co., Ltd.,and the Chief Supervisor of TCL Financial Co., Ltd. Since October 2020, he has been Chairman ofthe Supervisory Committee of Tianjin Zhonghuan Semiconductor Co., Ltd. (002129.SZ); sinceOctober 2020, he has been Chairman of the Supervisory Committee of Tianjin Printronics CircuitCorporation (002134.SZ); since December 2020, he has been Assistant President, Head of the Auditand Supervision Department, Deputy Secretary of the Party Committee and Secretary of theDiscipline Inspection Committee of TCL Tech.Dr. Yan Xiaolin, Professor Senior Engineer, serves as Chief Technology Officer (CTO) and SeniorVice President of TCL Technology Group Corporation and its consolidated subsidiaries, exceptwhere the context otherwise requires, and Dean of the Wuhan TCL Industrial Technology ResearchInstitute, Ltd.; Executive Director of TCL Electronics (Huizhou) Co., Ltd., director of TCL CSOT,and Chief Scientist of TCL CSOT; Chairman of Guangdong Juhua and China Ray, director ofKateeva, an American "printed display equipment" company, Chairman of the InternationalElectrotechnical Commission (IEC)/TC110, and Vice Chairman and Asian President of the Organicand Printed Electronics Association (OE-A). Moreover, he is an expert of the National AdvisoryCommittee on New Materials Industry Development and initiator of the New Display Direction ofthe National "Key New Materials R&D and Application" Key Project (2030), the New DisplayDirection of the "Special Project of New Display and Strategic Electronic Materials" of the NationalKey R&D Plan of the 14th Five-Year Plan, the New Display Direction of the "Key Project of
TCL Technology Group Corporation Annual Report 2020
Strategic and Advanced Electronic Materials" of the National Key R&D Plan of the 13th Five-YearPlan, and the New Display Direction of "863" of the 12th Five-Year Plan of the Ministry of Scienceand Technology of the People's Republic of China. He is also Leading Talent in Scientific andTechnological Innovation of the Special Support Plan for High-level Talent of the OrganizationDepartment of the Central Committee of the CPC and Young Expert with Outstanding Contributionto China of the National "Hundred-Thousand-Ten Thousand Talent Project.
Substantial offices held concurrently in shareholding entities:
| Name | Shareholding entity | Office held in the shareholding entity | Start of tenure | End of tenure | Remuneration or allowance from the shareholding entity or not |
| Li Dongsheng | Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership) | Assigned representative of the managing partner | August 2014 | Incumbent | Not |
| Liang Weihua | Huizhou Investment Holding Co., Ltd. | Director | August 2016 | Incumbent | Yes |
| He Zhuohui | Huizhou Investment Holding Co., Ltd. | Full-Time Deputy Secretary and Director | December 2012 | Incumbent | Yes |
| Qiu Haiyan | Huizhou Investment Holding Co., Ltd. | Employee Director | February 2014 | Incumbent | Yes |
| Note | Not applicable | ||||
Substantial offices held concurrently in other entities:
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Li Dongsheng | TCL Industries Holdings Inc. | Chairman of the Board | September 2018 | Incumbent | Yes |
| Tencent Holdings Limited | Independent Non-Executive Director | April 2004 | Incumbent | Yes | |
| Liang Weihua | Huizhou New Material Industrial Park Investment and Construction Co., Ltd. | Chairman of the Board and General Manager | October 2019 | Incumbent | Not |
| Huizhou Innovation Investment Co., Ltd. | Chairman of the Board and General Manager | November 2020 | Incumbent | Not | |
| Du Juan | TCL Industries Holdings Inc. | Director | September 2018 | Incumbent | Not |
| Bank of Shanghai Co., Ltd. | Director | October 2019 | Incumbent | Not | |
| Getech Ltd. | Chairman of the Board | September 2018 | Incumbent | Not | |
| TCL Technology Park Co., Ltd. | Director | October 2017 | Incumbent | Not | |
| Liao Qian | Fantasia Holdings Group Co., Limited | Non-Executive Director | December 2020 | Incumbent | Yes |
TCL Technology Group Corporation Annual Report 2020
| Shenzhen Jiawei Photovoltaic Lighting Co., Ltd. | Independent Director | November 2016 | Incumbent | Yes | |
| Tianjin 712 Communication & Broadcasting Co., Ltd. | Vice Chairman of the Board | June 2019 | Incumbent | Not | |
| Gan Yong | The Chinese Society for Metals | President | May 2017 | Incumbent | Yes |
| Wan Liangyong | Wens Foodstuff Group Co.,Ltd. | Independent Director | April 2014 | Incumbent | Yes |
| China Railway Construction Heavy Industry Corporation Limited | Independent Director | April 2019 | Incumbent | Yes | |
| Urtrust Insurance Co., Ltd. | Independent Director | February 2020 | Incumbent | Yes | |
| Mao Tianxiang | Tianjin 712 Communication & Broadcasting Co., Ltd. | Supervisor | June 2019 | Incumbent | Not |
| Guangzhou Ketian Shichang Information Technology Co., Ltd. | Supervisor | September 2019 | Incumbent | Not | |
| Getech Ltd. | Supervisor | September 2020 | Incumbent | Not | |
| Yan Xiaolin | Guochuangke Optoelectronic Equipment Co., Ltd. | Chairman of the Board | December 2020 | Incumbent | Not |
| Note | Not applicable | ||||
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and seniormanagement as well as those who left in the Reporting Period:
□ Applicable ■ Not applicable
IV Remuneration of Directors, Supervisors and Senior ManagementDecision-making procedure, determination basis and actual payments of remuneration for directors,supervisors and senior management:
(I) Remuneration or allowance criteria for directorsThe remuneration of executive directors: As the Company pays remuneration to executive directors,it shall not pay additional allowances to them. The remuneration of them is determined as per theCompany’s remuneration management rules.The allowances of non-executive directors: RMB160,000/year (tax inclusive)The allowances of independent non-executive directors: The allowance for each independentnon-executive director is RMB160,000/year (tax inclusive), and the allowance for the convener ofthe Audit Committee is RMB200,000/year (tax inclusive).The Company shall bear the travel expense arising from the independent directors’ attending theCompany’s board and general meetings, as well as other expenses arising from non-executivedirectors and independent directors’ exercising their functions and powers as per the Company’sArticles of Association.(II) Remuneration or allowance criteria for supervisors
TCL Technology Group Corporation Annual Report 2020
The allowance for the Chairman of the Supervisory Committee is RMB160,000/year (tax inclusive);The allowance for the shareholder supervisor is RMB100,000/year (tax inclusive);And as the Company pays remuneration to the employee supervisor, it shall not pay additionalallowances to him/her.The Company shall bear the travel expense arising from the shareholder supervisor’s attending theCompany’s Supervisory Committee meetings, general meetings and board meetings (as a non-votingdelegate), as well as other expenses arising from his/her exercising his/her functions and powers asper the Company’s Articles of Association.(III) Remuneration criteria for senior managementThe remuneration of senior management is determined as per the Company’s remunerationmanagement rules.Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
| Name | Office title | Gender | Age | Incumbent/Former | Total before-tax remuneration from the Company | Remuneration from any related party or not |
| Li Dongsheng | Chairman of the Board and CEO | Male | 63 | Incumbent | 781.22 | Yes |
| Liang Weihua | Vice Chairman of the Board | Male | 39 | Incumbent | 0 | Yes |
| Du Juan | Director, COO and CFO | Female | 50 | Incumbent | 351.29 | Not |
| Liao Qian | Director, Board Secretary and Senior Vice President | Male | 40 | Incumbent | 230.34 | Not |
| Jin Xuzhi | Director and Senior Vice President | Male | 66 | Incumbent | 882.52 | Not |
| Shen Haoping | Director and Senior Vice President | Male | 58 | Incumbent | 41.44 | Not |
| Gan Yong | Independent Director | Male | 73 | Incumbent | 0 | Not |
| Chen Shiyi | Independent Director | Male | 64 | Incumbent | 0 | Not |
| Wan Liangyong | Independent Director | Male | 41 | Incumbent | 2.67 | Not |
| Liu Xunci | Independent Director | Male | 62 | Incumbent | 16.00 | Not |
| He Zhuohui | Chairman of the Supervisory Committee | Male | 55 | Incumbent | 16.00 | Yes |
| Mao Tianxiang | Employee Supervisor | Male | 40 | Incumbent | 91.91 | Not |
TCL Technology Group Corporation Annual Report 2020
| Qiu Haiyan | Supervisor | Female | 46 | Incumbent | 10.00 | Yes |
| Yan Xiaolin | Senior Vice President and CTO | Male | 54 | Incumbent | 347.93 | Not |
| Liu Bin | Vice Chairman of the Board | Male | 51 | Former | 13.91 | Yes |
| Yan Yan | Independent Director | Male | 64 | Former | 13.91 | Not |
| Lu Xin | Independent Director | Female | 58 | Former | 17.39 | Not |
| Zhou Guofu | Independent Director | Male | 57 | Former | 13.91 | Not |
| Total | -- | -- | -- | -- | 2,830.44 | -- |
Note: As of the end of the Reporting Period, Non-Executive Director Mr. Liang Weihua and Independent Directors Mr. Gan Yong andMr. Chen Shiyi hadn’t collected their allowances of RMB21,300 (before tax) respectively.Equity incentives for directors, supervisors and senior management in the Reporting Period:
□ Applicable ■ Not applicable
V Employees
1. Number, Functions and Educational Backgrounds of Employees
| Number of in-service employees of the Company as the parent | 271 |
| Number of in-service employees of major subsidiaries | 48,200 |
| Total number of in-service employees | 48,471 |
| Total number of paid employees in the Reporting Period | 48,471 |
| Number of retirees to whom the Company as the parent or its major subsidiaries need to pay retirement pensions | 1,124 |
| Functions | |
| Function | Employees |
| Production | 33,772 |
| Sales | 1,519 |
| R&D and technical | 8,156 |
| Financial | 518 |
| Administrative | 429 |
| Managerial | 1,916 |
| Other | 2,161 |
| Total | 48,471 |
| Educational backgrounds | |
| Educational background | Employees |
| Doctorate degree | 241 |
TCL Technology Group Corporation Annual Report 2020
| Master’s degree | 2,548 |
| Bachelor’s degree | 8,513 |
| Junior college | 2,688 |
| Senior high school/technical secondary school | 596 |
| Junior high school and below | 54 |
| Total | 14,640 |
| Note : The “educational backgrounds” section excludes overseas employees and operating workers. | |
2. Employee Remuneration Policy
The Company implements the remuneration management principle of “determining position byresponsibilities, determining salary by position and determining remuneration by performance”.Fixed income is determined based on position assessment, variable income is determined based onperformance appraisal and a remuneration distribution mechanism oriented by position andperformance is established inside the Company.
3. Employee Training Plans
On 10 September 2000, the Training Department of TCL Headquarters shifted to TCL TrainingInstitute. On 16 August 2005, TCL Training Institute changed its name to TCL LeadershipDevelopment Institute, which focused on cultivation of management talent and development ofleadership. In 2015, the institute has been upgraded to TCL University. As such, TCL University hasexpanded its value positioning, with changes to service recipients, services provided and the ways ofproviding services. It focuses on strategic talent for long-term development, and promotesperformance improvement by solving the existing business bottlenecks. It provides services for theGroup and the broader ecosystem, as well as offers trainings and development opportunities. Itcaptures and creates demand. And it trains and motivates.The TCL University shoulders the mission of "empower employees and development of organizationby men". It cultivates strategic talent for TCL Group through high-level reserve projects. It hasunswervingly implemented the "Hawk" Project for more than a decade, cultivated many excellentmanagement personnel at all levels for enterprises, and supported the development of TCL. It iscommitted to talent cultivation and development. The TCL University has been committed tostrategies undertaken by men, being close to business, cultural heritage, and promotion of andresponse to the organizational reform for years.
TCL Technology Group Corporation Annual Report 2020
4. Labor Outsourcing
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
Part IX Corporate GovernanceI General Information of Corporate GovernanceSince it was listed, the Company has been attaching great importance to corporate governance anddedicated to the establishment and refinement of internal control policies. So far, it has established anorganization structure that accommodates the Company’s business scale and business managementneeds. At the same time, it sets up departments and positions in a reasonable manner, plansresponsibilities and authorization scientifically and forms an internal control system withwell-defined duties and responsibilities, mutual cooperation and mutual restraints. The Company hascomprehensive audit and internal control policies, especially in terms of internal audit, in respect ofwhich the hierarchies are clear-cut and the duties and responsibilities are well-defined, which caneffectively prevent Group risks; the Company has purchased liabilities insurance for its directors,supervisors and senior management for nine consecutive years; although the shareholding proportionof its majority shareholders is less than 30%, the Company still adopts the cumulative voting systemin the election of directors and supervisors, which is higher than the standards of corporategovernance and effectively protects the voting rights of minority shareholders; in addition, theCompany’s Board of Supervisors works with diligence and the supervisors go deep into corporateresearch and proactively propose management suggestions, which effectively refine the Company’sinternal governance mechanism; by establishing new management policies, the Company continuesto improve its information disclosure management and investor relationship management; theCompany is passionate about commonweal and establishes donation funds for public benefits and allthose measures have enabled the Company to stand in the industry leading position for itsgovernance level.During the Reporting Period, in accordance with the Company Law, the Securities Law, the Code ofCorporate Governance for Listed Companies and other relevant laws and regulations, the Companycontinued to refine its governance structure and further standardized its operations to comply withthe requirements of related laws and regulations. During the Reporting Period, the Company’sdirectors, supervisors and senior management furthered their learning of regulations and documentsin respect of the corporate governance for listed companies, strengthened their self-discipline anddiligence, and faithfully safeguarded the interests of all shareholders, in particular the minorityshareholders.Currently, there is no difference between the actual status of the Company’s corporate governancestructure and the standard documents on the corporate governance for listed companies published by
TCL Technology Group Corporation Annual Report 2020
China Securities Regulatory Commission. The names of the policies are shown in the following tableand all the policies have been published on www.cninfo.com.cn.
| Category of rules | Title of rules |
| Articles of Association | The Articles of Association of TCL Technology Group Corporation |
| Dividend rules | The Dividend Rules of TCL Corporation |
| The Shareholder Return Plan for 2020-2022 of TCL Technology Group Corporation | |
| Information disclosure rules | The Rules Governing the Shareholdings of Directors, Supervisors and Senior Management in TCL Corporation and Changes therein |
| The Rules Governing the Registration of Information Insiders of TCL Corporation | |
| The Accountability Rules for Material Errors in Annual Report Disclosure of TCL Corporation | |
| The Rules Governing External Users of Information of TCL Corporation | |
| The Rules Governing Investor Relations of TCL Corporation | |
| The Work Rules for Independent Directors Concerning Annual Reports of TCL Corporation | |
| The Reception and Promotional Work Rules of TCL Corporation | |
| The Rules Governing Internal Reporting of Significant Information of TCL Corporation | |
| The Work Rules for the Board Secretary of TCL Corporation | |
| The Rules Governing Information Disclosure of TCL Corporation | |
| Governance and operation rules | The Rules of Procedure for the General Meeting of TCL Technology Group Corporation |
| The Rules of Procedure for the Supervisory Committee of TCL Technology Group Corporation | |
| The Rules of Procedure for the Board of Directors of TCL Technology Group |
TCL Technology Group Corporation Annual Report 2020
| Corporation | |
| The Work Rules for the Independent Directors of TCL Corporation | |
| The Specific Work Rules for the CEO of TCL Corporation | |
| The Rules of Procedure for the Audit Committee under the Board of Directors of TCL Corporation | |
| The Work Procedures for the Annual Audit by the Audit Committee under the Board of Directors of TCL Corporation | |
| The Rules of Procedure for the Remuneration and Appraisal Committee under the Board of Directors of TCL Corporation | |
| The Rules of Procedure for the Nomination Committee under the Board of Directors of TCL Corporation | |
| The Rules of Procedure for the Strategy Committee under the Board of Directors of TCL Corporation | |
| Internal control rules | The Rules Governing Major Investments of TCL Corporation |
| The Rules Governing the Use of Raised Funds of TCL Technology Group Corporation | |
| The Internal Control Rules for Venture Capital of TCL Corporation | |
| The Rules Governing Securities Investment of TCL Technology Group Corporation | |
| The Internal Control Rules for Investment in Derivative Financial Instruments of TCL Technology Group Corporation | |
| The Majority-Owned Subsidiary Management Measures of TCL Corporation | |
| The Rules Governing the Related-Party Transactions of TCL Corporation | |
| The Rules Governing the Guarantees Provided for External Parties of TCL Technology Group Corporation | |
| The Internal Control Rules of TCL Corporation | |
| The Internal Audit Charter of TCL Corporation | |
| The Internal Control Evaluation Rules of TCL Corporation |
There is no material incompliance with the regulatory documents issued by the CSRC governing thegovernance of listed companies.
Special corporate governance campaigns, as well as the formulation and implementation of the
TCL Technology Group Corporation Annual Report 2020
rules governing the registration of information insiders:
Upon various special checks of corporate governance by the regulatory authority and workconferences on the governance of listed companies, the Company has revised its Articles ofAssociation, Rules of Procedure for the Board of Directors, Rules of Procedure for the SupervisoryCommittee, Rules of Procedure for the General Meeting, Rules Governing the Guarantees Providedfor External Parties, Internal Control Rules for Investment in Derivative Financial Instruments, RulesGoverning Securities Investment, and Rules Governing the Use of Raised Funds. The rules strictlystandardize the Company’s behaviors and protect the interests of investors.The following rules have been revised in 2020 so as to further improve corporate governance:
| Title of rules | |
| Revised | The Articles of Association of TCL Technology Group Corporation |
| The Rules of Procedure for the Board of Directors of TCL Technology Group Corporation | |
| The Rules of Procedure for the Supervisory Committee of TCL Technology Group Corporation | |
| The Rules of Procedure for the General Meeting of TCL Technology Group Corporation | |
| The Rules Governing the Guarantees Provided for External Parties of TCL Technology Group Corporation | |
| The Internal Control Rules for Investment in Derivative Financial Instruments of TCL Technology Group Corporation |
| The Rules Governing Securities Investment of TCL Technology Group Corporation | |
| The Rules Governing the Use of Raised Funds of TCL Technology Group Corporation |
II The Company’s Independence from Its Controlling Shareholder in Business, Personnel,Asset, Organization and Financial Affairs
□ Applicable ■ Not applicable
III Horizontal Competition
□ Applicable ■ Not applicable
TCL Technology Group Corporation Annual Report 2020
IV Annual and Extraordinary General Meetings Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Date of the meeting | Disclosure date | Index to disclosed information |
| The First Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 24.98% | 3 February 2020 | 4 February 2020 | http://www.cninfo .com.cn |
| The Second Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 23.05% | 16 March 2020 | 17 March 2020 | |
| The 2019 Annual General Meeting | Combination of on-site and online voting | 22.84% | 20 April 2020 | 21 April 2020 | |
| The Third Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 25.55% | 15 June 2020 | 16 June 2020 | |
| The Fourth Extraordinary General Meeting of 2019 | Combination of on-site and online voting | 34.10% | 9 July 2020 | 10 July 2020 | |
| The Fifth Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 28.56% | 14 September 2020 | 15 September 2020 | |
| The Sixth Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 29.14% | 13 November 2020 | 14 November 2020 | |
| The Seventh Extraordinary General Meeting of 2020 | Combination of on-site and online voting | 34.28% | 28 December 2020 | 29 December 2020 |
2. Extraordinary General Meetings Convened at the Request of Preferred Shareholders with ResumedVoting Rights
□ Applicable ■Not applicable
V Performance of Duty by Independent Directors in the Reporting Period
1. Attendance of Independent Directors at Board Meetings and General Meetings
| Attendance of independent directors at board meetings and general meetings | |||||||
| Independent director | Total number of board meetings the independent director was eligible to attend | Board meetings attended on site | Board meetings attended by way of telecommunication | Board meetings attended through a proxy | Board meetings the independent director failed to attend | The independent director failed to attend two consecutive board meetings or not | General meetings attended |
TCL Technology Group Corporation Annual Report 2020
| Gan Yong | 3 | 0 | 3 | 0 | 0 | Not | 0 |
| Chen Shiyi | 3 | 0 | 3 | 0 | 0 | Not | 0 |
| Wan Liangyong | 3 | 0 | 3 | 0 | 0 | Not | 1 |
| Liu Xunci | 14 | 4 | 10 | 0 | 0 | Not | 7 |
| Lu Xin | 11 | 4 | 7 | 0 | 0 | Not | 0 |
| Zhou Guofu | 11 | 2 | 9 | 0 | 0 | Not | 0 |
| Yan Yan | 11 | 2 | 9 | 0 | 0 | Not | 0 |
2. Objections Raised by Independent Directors on Matters of the Company
No such cases in the Reporting Period.
3. Other Information about the Performance of Duty by Independent Directors
In the Reporting Period, in strict accordance with the applicable laws and regulations, as well as theCompany’s Articles of Association, the independent directors of the Company paid attention to theCompany’s operations and faithfully fulfilled their duties as independent directors. They put forwarda lot of valuable, professional advice regarding the improvement of the Company’s rules and dailyoperating decision-making. They issued their independent and fair opinion on the matters of theCompany that required their opinion. Therefore, they have played their part in improving theCompany’s supervision mechanism, as well as in protecting the legal interests of the Company andits shareholders.VI Performance of Duty by Specialized Committees under the Board in the Reporting Period
1. Performance of Duty by the Audit Committee
In the principle of being diligent, pragmatic and realistic, all the members of the Audit Committeeunder the Board proactively pushed forward the 2020 annual audit. During the annual audit, theAudit Committee convened two meetings to review the audit plan and the financial statements. Italso fully communicated with the accountants responsible for the annual audit.The Audit Committee summarized the 2020 annual audit carried out by Da Hua Certified PublicAccountants (Special General Partnership) as follows:
On 20 January 2021, we reviewed and confirmed the Audit Plan of the Internal Control of TCLTechnology Group Corporation in 2020 and the Audit Plan of the 2020 Annual Financial Statementsof TCL Technology Group Corporation submitted by Da Hua Certified Public Accountants (SpecialGeneral Partnership), the independent auditor for the year 2020.
TCL Technology Group Corporation Annual Report 2020
In October 2020, the auditor started the pre-audit of the annual report. On 2 January 2021, the auditorcame to the Company and started the official audit. Afterwards, according to the audit plan, weemailed and called a few times to learn about and urge the audit progress, as well as went to the auditsite to offer advice and urge the audit progress.On 10 March 2021, the auditor issued a preliminary “unmodified unqualified” audit opinion on theCompany’s financial statements, to which we agreed.We believed that Da Hua Certified Public Accountants (Special General Partnership), theindependent auditor for the year 2020, provided audit service for the Company in a diligent andresponsible way. It completed the audit in strict accordance with the audit plan. The audited financialstatements were a factual and complete reflection of the Company’s financial position as at 31December 2020, as well as the operating results and cash flows of the year then ended. The auditopinion they issued factually reflected the Company’s realities. On 10 March 2021, the AuditCommittee convened a meeting, where the following proposals were approved and submitted to theBoard for further review: The 2020 Annual Financial Report, the Summary Report of the AuditCommittee under the Board Regarding the 2020 Annual Audit Carried out by Da Hua CertifiedPublic Accountants (Special General Partnership), and the Proposal on the Reappointment of Da HuaCertified Public Accountants (Special General Partnership) as the Independent Auditor for 2021.
2. Performance of Duty by the Nomination Committee
During the Reporting Period, the Nomination Committee convened two meetings, where theProposal on the Appointment of Mr. Liao Qian as a Senior Vice President and the Board Secretary ofthe Company and the Proposal on the Re-election of the Board of Directors were approvedrespectively.
3. Performance of Duty by the Remuneration and Appraisal CommitteeDuring the Reporting Period, the Remuneration and Appraisal Committee did not meet.VII Performance of Duty by the Supervisory CommitteeIndicate whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period.
□ Yes ■ No
| Meeting | Date of the meeting | Supervisor present | Proposal reviewed at the meeting | Resolution | Index to the disclosed resolution | Disclosure date |
| The 15th Meeting of the Sixth Supervisory Committee | 28 February 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Revision of The Rules of Procedure for the Supervisory Committee | Resolutions of the 15th Meeting of the | http://www.cninfo.com.cn | 29 February 2020 |
TCL Technology Group Corporation Annual Report 2020
| Sixth Supervisory Committee | ||||||
| The 16th Meeting of the Sixth Supervisory Committee | 28 March 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on The 2019 Annual Work Report of the Supervisory Committee; 2. The Proposal on The 2019 Annual Financial Report; 3. The Proposal on The 2019 Annual Report and its summary; 4. The Proposal on The 2019 Annual Internal Control Evaluation Report; 5. The Proposal on the 2019 Final Dividend; 6. The Proposal on The Social Responsibility Report 2019; and 7. The Proposal on the Repurchase and Retirement of Restricted Shares That Have Been Granted under the 2018 and 2019 Restricted Stock Incentive Plans But Are Still in Lockup | Resolutions of the 16th Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 31 March 2020 |
| The 17th Meeting of the Sixth Supervisory Committee | 28 April 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on The First Quarterly Report 2020 and Its Summary; 2. The Proposal on the Compliance to the Relevant Laws and Regulations of the Company’s Asset Purchase via Share and Convertible Corporate Bonds Offering to Specified Target and Cash Payment and Raising the Matching Funds; 3. The Proposal on the Plan of Asset Purchase via Share and Convertible Corporate Bonds Offering and Cash Payment; 4. The Proposal on the Plan of Share and Convertible Corporate Bonds Offering to Raise the Matching Funds; 5. The Proposal on Reviewing the Plan of TCL Technology Group Corporation of Asset Purchase via Share and Convertible Corporate Bonds Offering to Raise the Matching Funds and Cash Payment and Its Summary; 6. The Proposal on the Transaction Not Constituting a Restructuring Listing as Defined in Item 13 of the Methods for the Administration of Significant Asset Restructurings by Listed Companies; 7. The Proposal on the Transaction’s Compliance to | Resolutions of the 17th Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 29 April 2020 |
TCL Technology Group Corporation Annual Report 2020
| Item 11 and Item 43 of the Methods for the Administration of Significant Asset Restructurings by Listed Companies; 8. The Proposal on the Transaction’s Compliance to Item 4 of the Regulations Regarding Several Matters of the Administration of Significant Asset Restructurings by Listed Companies; 9. The Proposal on Signing the Agreement on Asset Purchase via Share and Convertible Corporate Bonds Offering and Cash Payment with Entry-into-Force Conditions; 10. The Proposal on Signing the Share Subscription Agreement and the Subscription Agreement for Convertible Corporate Bonds with Entry-into-Force Conditions; 11. The Proposal on Introducing Strategic Investor and Signing the Strategic Cooperation Agreement; 12. The Proposal on the Statement on the Completeness and Compliance of the Statutory Procedures Executed and the Validity of the Legal Documents Submitted Associated with the Transaction; and 13. The Proposal on the Statement on the Volatility in the Company’s Stock Price Being Not the Case Mentioned in Item 5 of the Circular on Regulating Information Disclosure of Listed Companies and the Behaviors of Stakeholders | ||||||
| The 18th Meeting of the Sixth Supervisory Committee | 28 May 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Compliance to the Relevant Laws and Regulations of the Company’s Asset Purchase via Share and Convertible Corporate Bonds Offering to Specified Target and Cash Payment and Raising the Matching Funds; 2. The Proposal on the Plan of Asset Purchase via Share and Convertible Corporate Bonds Offering and Cash Payment; 3. The Proposal on the Plan of Share and Convertible Corporate Bonds Offering to Raise the Matching Funds; 4. The Proposal on Reviewing the Plan of TCL Technology Group Corporation of Asset | Resolutions of the 18th Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 29 May 2020 |
TCL Technology Group Corporation Annual Report 2020
TCL Technology Group Corporation Annual Report 2020
| 13. The Proposal on the Explanations Regarding the Pricing Basis for the Transaction and Its Fairness and Reasonableness; and 14. The Proposal on the Reasonableness of the Expected Dilution of Immediate Returns of the Transaction, Measures to Make up for Immediate Returns and Relevant Commitments | ||||||
| The 19th Meeting of the Sixth Supervisory Committee | 28 August 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Interim Report 2020 and Its Summary; 2. The Proposal on Adjustments to The 2019 Restricted Stock Incentive Plan and The Second Global Innovation Partner Plan (Draft) and Its Summary; 3. The Proposal on Adjustments to The Implementation and Appraisal Methods for The 2019 Restricted Stock Incentive Plan and The Second Global Innovation Partner Plan; 4. The Proposal on Reviewing the Third Global Partner Plan (Draft) and Its Summary; 5. The Proposal on Reviewing the Methods for the Administration of the Third Global Partner Plan; 6. The Proposal on Adjustments to the Matching Funds Raising Plan as Part of the Company’s Plan to Purchase Assets via Share and Convertible Corporate Bonds Offering to Raise the Matching Funds and Cash Payment; 7. The Proposal on Adjustments to the Transaction Plan Not Constituting a Significant Adjustment to the Restructuring Plan; 8. The Proposal on the Termination of the Strategic Cooperation Agreement, the Share Subscription Agreement with Entry-in-Force Conditions and Its Supplementary Agreement, and the Convertible Corporate Bonds Subscription Agreement with Entry-in-Force Conditions and Its Supplementary Agreement; 9. The Proposal on Reviewing the Report on Asset Purchase via Share and Convertible Corporate Bonds Offering to Raise the Matching Funds and via Cash Payment (Draft) (Revised) and Its Summary; 10. The Proposal on the Approval of the Audit Report | Resolutions of the 19th Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 29 August 2020 |
TCL Technology Group Corporation Annual Report 2020
| and the Reference Review Report of the Transaction; 11. The Proposal on the Reasonableness of the Expected Dilution of Immediate Returns of the Transaction, Measures to Make up for Immediate Returns and Relevant Commitments; 12. The Proposal on the Statement on the Completeness and Compliance of the Statutory Procedures Executed and the Validity of the Legal Documents Submitted Associated with the Transaction; 13. The Proposal on the Transaction’s Compliance to Item 11 and Item 43 of the Methods for the Administration of Significant Asset Restructurings by Listed Companies; and 14. The Proposal on the Transaction Not Constituting a Significant Asset Restructuring or a Restructuring Listing as Defined in Item 13 of the Methods for the Administration of Significant Asset Restructurings by Listed Companies | ||||||
| The 20th Meeting of the Sixth Supervisory Committee | 28 October 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Third Quarterly Report 2020 and Its Summary; and 2. The Proposal on the Re-election of the Supervisory Committee | Resolutions of the 20th Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 29 October 2020 |
| The 21st Meeting of the Sixth Supervisory Committee | 10 November 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on Opening a Specialized Account for Raised Funds and Authorizing the Signing of the Custody Agreement; and 2. The Proposal on Further Specifying the Plan of Private Offering of Convertible Corporate Bonds to Raise the Matching Funds | Resolutions of the 21st Meeting of the Sixth Supervisory Committee | http://www.cninfo.com.cn | 12 November 2020 |
| The First Meeting of the Seventh Supervisory Committee | 14 November 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Election of the Chairman for the Seventh Supervisory Committee | Resolutions of the First Meeting of the Seventh Supervisory Committee | http://www.cninfo.com.cn | 17 November 2020 |
| The Second Meeting of the Seventh | 26 November 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Swap of Raised Funds and Advance Investment with Self-Owned | Resolutions of the Second | http://www.cninfo.com.cn | 27 November 2020 |
TCL Technology Group Corporation Annual Report 2020
| Supervisory Committee | Funds | Meeting of the Seventh Supervisory Committee | ||||
| The Third Meeting of the Seventh Supervisory Committee | 11 December 2020 | He Zhuohui Qiu Haiyan Mao Tianxiang | 1. The Proposal on the Acquisition of the 100% Equity Interests of Moka International Limited & the Related-party Transaction | Resolutions of the Third Meeting of the Seventh Supervisory Committee | http://www.cninfo.com.cn | 12 December 2020 |
The Supervisory Committee raised no objections in the Reporting Period.
VIII Appraisal of and Incentive for Senior ManagementDuring the Reporting Period, the Company carried out performance appraisal and competenceexamination on managers. The KPI (key performance indicators) system was used for performanceappraisal. In respect of the team led by each manager, the key factors of performance appraisalincluded phased goals of strategic transformation and operating indicators of the current period (suchas profits, cash flow, products and service quality); the comprehensive results of the accomplishmentof each goal were considered as the main basis for motivating managers. In that way, corporatestrategies were converted into internal management activities through the process of goal settings,implementation and accomplishment to steer the work orientation of all systems of the Company andserve the purpose of enhancing the overall efficiency of the Company. Leader examination consistedof four dimensions of assessment, being leader’s performance, competence, experience and quality(potential, personality and aspiration/values). An annual examination report for leaders wasgenerated through annual performance assessment, virtual assessment center, 360-degree behaviorinterview or online assessment, supported by key experience, personality or management styleassessment, which served as the main basis for appraising, appointing and dismissing leaders.IX Internal Control
1. Material Internal Control Weaknesses Identified in the Reporting Period
□ Yes ■ No
| Details of material internal control weaknesses identified in the Reporting Period |
| No material internal control weaknesses were identified in the Reporting Period. |
TCL Technology Group Corporation Annual Report 2020
2. Internal Control Self-Evaluation Report
| Disclosure date of the internal control self-evaluation report | 11 March 2021 | |
| Index to the disclosed internal control self-evaluation report | http://www.cninfo.com.cn | |
| Evaluated entities’ combined assets as % of consolidated total assets | 95.9% | |
| Evaluated entities’ combined revenue as % of consolidated revenue | 98.5% | |
| Identification standards for internal control weaknesses | ||
| Type | Weaknesses in internal control over financial reporting | Weaknesses in internal control not related to financial reporting |
| Nature standard | Material weaknesses: (1) an invalid control environment; (2) fraud of directors, supervisors and senior management; (3) any material misstatement of the financial reporting of the current period which is identified by the registered accountants but the Company fails to do so; and (4) invalid internal control supervision by the Audit Committee and the internal audit organ. Serious weaknesses: A single weakness or a group of weaknesses which are less serious than a material weakness but could still cause deviation from the control objectives Common weaknesses: Other internal control weaknesses that are neither material nor serious | Material weaknesses: (1) material violations of the country’s laws or regulations in the Company’s operating activities; (2) any material decision-making error that is caused by an irrational decision-making procedure and causes material property loss to the Company; (3) a massive loss of the key managerial or technical personnel; and (4) frequent negative news coverage that causes great concern of the regulatory administration and a material long-lasting impact on the Company’s brand and reputation. Serious weaknesses: A single weakness or a group of weaknesses which are less serious than a material weakness but could still cause deviation from the control objectives Common weaknesses: Other internal control weaknesses that are neither material nor serious |
| Quantitative standard | Material weaknesses: misstatements≥ 5% of profit before tax; Serious weaknesses: 3% of profit before tax≤misstatements <5% of profit before tax; Common weaknesses: misstatements <3% of profit before tax | Not applicable |
| Number of material weaknesses in internal control over financial reporting | 0 | |
| Number of material weaknesses in internal control not related to financial reporting | 0 | |
| Number of serious weaknesses in internal control over financial reporting | 0 | |
| Number of serious weaknesses in internal control not related to financial reporting | 0 | |
X Independent Auditor’s Report on Internal Control
| Opinion paragraph in the independent auditor’s report on internal control | |
| In our opinion, TCL Technology Group Corporation maintained, in all material respects, effective internal control over financial reporting as of 31 December 2020, based on the Basic Rules on Enterprise Internal Control and other applicable rules. | |
| Independent auditor’s report on internal control disclosed or not | The Internal Control Audit Report of TCL Technology Group Corporation disclosed on http://www.cninfo.com.cn dated 11 March 2021 |
| Disclosure date | 11 March 2021 |
TCL Technology Group Corporation Annual Report 2020
| Index to such report disclosed | http://www.cninfo.com.cn |
| Type of the auditor’s opinion | Unmodified opinion |
| Material weaknesses in internal control not related to financial reporting | None |
Indicate whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control.
□ Yes ■ No
Explanation as to the modified opinion expressed in the independent auditor’s report on the Company’s internal control:
Indicate whether the independent auditor’s report on the Company’s internal control is consistent with the internal controlself-evaluation report issued by the Company’s Board.■ Yes □ No
TCL Technology Group Corporation Annual Report 2020
Part X Corporate Bonds
General Information of Corporate Bonds
| Bond name | Abbr. | Bond code | Value date | Maturity | Outstanding balance (RMB’0,000) | Coupon rate | Way of principal repayment and interest payment |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranche 1) (Type 2) | 16TCL02 | 112353 | 16 March 2016 | 16 March 2021 | 150,000 | 3.56% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranche 2) | 16TCL03 | 112409 | 7 July 2016 | 7 July 2021 | 200,000 | 3.50% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 1) | 17TCL01 | 112518 | 19 April 2017 | 19 April 2022 | 100,000 | 3.40% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 2) | 17TCL02 | 112542 | 7 July 2017 | 7 July 2022 | 15,700 | 3.45% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 1) | 18TCL01 | 112717 | 6 June 2018 | 6 June 2023 | 100,000 | 5.48% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly | 18TCL02 | 112747 | 20 August 2018 | 20 August 2023 | 200,000 | 5.30% | Interest payable annually and principal |
TCL Technology Group Corporation Annual Report 2020
| Offered in 2018 to Qualified Investors (Tranche 2) | repayable in full upon maturity | ||||||
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1) | 19TCL01 | 112905 | 20 May 2019 | 20 May 2024 | 100,000 | 4.33% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 2) | 19TCL02 | 112938 | 23 July 2019 | 23 July 2024 | 100,000 | 4.30% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) | 19TCL03 | 112983 | 21 October 2019 | 21 October 2024 | 200,000 | 4.20% | Interest payable annually and principal repayable in full upon maturity |
| TCL Technology Group Corporation’s Short-Term Corporate Bonds Publicly Offered in 2020 to Professional Investors (Tranche 1) | 20TCLD1 | 149140 | 8 June 2020 | 5 December 2020 | 0 | 2.50% | Principal repayable in full upon maturity with interest |
| Place for bond listing and trading | Shenzhen Stock Exchange | ||||||
| Investor eligibility | These bonds are for qualified investors only (20TCLD1 were offered after the new Securities Law and are for professional investors only). | ||||||
| Interest payment and principal repayment during the Reporting Period | 1. The interest for the period from 16 March 2019 to 15 March 2020 on “16TCL02” was paid on 16 March 2020. 2. The interest for the period from 19 April 2019 to 18 April 2020 on “17TCL01” was paid on 20 April 2020. 3. The interest for the period from 20 May 2019 to 19 April 2020 on “19TCL01” was paid on 20 May 2020. 4. The interest for the period from 6 June 2019 to 5 June 2020 on “18TCL01” was paid on 8 June 2020. 5. The interest for the period from 6 July 2019 to 6 July 2020 on “16TCL03” was paid on 7 July 2020. 6. The interest for the period from 6 July 2019 to 7 July 2020 on “17TCL02” was paid on 7 July 2020. 7. The interest for the period from 23 July 2019 to 22 July 2020 on “19TCL02” was paid on 23 July 2020. | ||||||
TCL Technology Group Corporation Annual Report 2020
| 8. The interest for the period from 20 August 2019 to 19 August 2020 on “18TCL02” was paid on 20 August 2020. 9. The interest for the period from 21 October 2019 to 20 October 2020 on “19TCL03” was paid on 21 October 2020. 10. The interest on “20TCLD1” was paid on 7 December 2020. | |
| Where the bond carries any issuer or investor option clause, interchangeable clause or other special clauses, give the execution details (if applicable) of these clauses during the Reporting Period | 1. TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 1) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. During the Reporting Period, the issuer exercised its coupon rate adjustment option to adjust the coupon rate for the period from 19 April 2020 to 18 April 2020 to 3.40% subsequent to a coupon rate of 4.80% for the period from 19 April 2017 to 18 April 2020; investors exercised their sell-back option and the Company paid the principals of RMB403,000,200 on 20 April 2020; and the sold-back bonds have all been resold, with an actual sell-back amount of RMB0 and a currently outstanding amount of RMB1 billion. 2. TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 2) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. During the Reporting Period, the issuer exercised its coupon rate adjustment option to adjust the coupon rate for the period from 7 July 2020 to 6 July 2020 to 3.45% subsequent to a coupon rate of 4.93% for the period from 7 July 2017 to 6 July 2020; investors exercised their sell-back option and the Company paid the principals of RMB2.843 billion on 7 July 2020, with a currently outstanding amount of RMB157 million. 3. TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 1) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. The interest payment day is June 6 from 2019 to 2023 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). If an investor chooses to exercise the sell-back option, the interest payment day for the sold-back bonds is June 6 from 2019 to 2021 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). 4. TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 2) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. The interest payment day is August 20 from 2019 to 2023 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). If an investor chooses to exercise the sell-back option, the interest payment day for the sold-back bonds is August 20 from 2019 to 2021 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). 5. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. The interest payment day is May 20 from 2020 to 2024 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). If an investor chooses to exercise the sell-back option, the interest payment day for the sold-back bonds is May 20 from 2020 to 2022 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). 6. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 2) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. The interest payment day is July 23 from 2020 to 2024 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). If an investor chooses to exercise the sell-back option, the interest payment day for the sold-back bonds is July 23 from 2020 to 2022 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). 7. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) is of a five-year term, with the issuer’s coupon rate adjustment option and the investors’ sell-back option at the end of the third year. The interest payment day is October 21 from 2020 to 2024 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). If an investor chooses to exercise the sell-back option, the interest payment day for the sold-back bonds is October 21 from 2020 to 2022 (the subsequent first trading day if it is a statutory holiday or rest day, with no additional interest for the postponement). |
TCL Technology Group Corporation Annual Report 2020
Bond Trustee and Credit Rating Agency
| Bond trustee: | ||||||||
| Name | Guotai Junan Securities Co., Ltd. | Office address | 33/F, Bohua Plaza, 669 Xinzha Road, Shanghai | Contact person | Wu Lei | Tel. | 021-38676503 | |
| Name | CITIC Securities Co., Ltd. | Office address | 8 Zhongxin No. 3 Road, Futian District, Shenzhen, Guangdong Province, China | Contact person | Deng Xiaoqiang | Tel. | 0755-23835888 | |
| Credit rating agency which conducted follow-up ratings for bonds during Reporting Period: | ||||||||
| Name | China Chengxin Securities Rating Co., Ltd. | Office address | Room 968, Tower 1, 599 Xinye Road, Qingpu District, Shanghai | |||||
| Where the bond trustee or credit rating agency was changed during the Reporting Period, explain the reasons, the executed procedures, the impact on investors’ interests, etc. (if applicable) | Not applicable | |||||||
Utilization of Funds Raised through Corporate Bonds
| Utilization of funds raised through corporate bonds and procedures executed | The raised funds were used to supplement the working capital and repay debt, which is in strict compliance with the prospectus. And with the authorization of the Board and the general meeting, the related internal decision-making procedure was executed according to the relevant rules approved by the Board and the general meeting. |
| Ending balance (RMB’0,000) | 0 |
| Operation of special account for raised funds | The Company has signed the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 1), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 2), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 1), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 2), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 2), and the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) with China Development Bank (Guangdong branch) and the Industrial and Commercial Bank of China (Huizhou branch) respectively to ensure that the raised funds will be used as earmarked. |
| Whether the utilization of raised funds is in line with the promised usages, utilization plan or other promises in the prospectus | Yes |
Rating Results of Corporate BondsAccording to the Follow-up Rating Report (2020) on TCL Technology Group Corporation’sCorporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranches 1 and 2) issued by China
TCL Technology Group Corporation Annual Report 2020
Chengxin Securities Rating Co., Ltd. on 27 May 2020, the AAA credit status of TCL Corporationand the said bonds was affirmed with a “Stable” outlook.According to the Follow-up Rating Report (2020) on TCL Technology Group Corporation’sCorporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranches 1 and 2) and on TCLTechnology Group Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors(Tranches 1 and 2) issued by China Chengxin Securities Rating Co., Ltd. on 27 May 2020, the AAAcredit status of TCL Corporation and the said bonds was affirmed with a “Stable” outlook.According to the Credit Rating Report on TCL Technology Group Corporation’s Corporate BondsPublicly Offered in 2019 to Qualified Investors (Tranches 1, 2 and 3) issued by China ChengxinSecurities Rating Co., Ltd. on 28 May 2020, the AAA credit status of TCL Corporation and the saidbonds was affirmed with a “Stable” outlook.During the Reporting Period, the corporate credit ratings conducted on the Company in its programsof corporate bonds and debt financing instrument issues arrived at the same results as its existingcorporate credit rating result.Credit Enhancement, Repayment Plans and Other Repayment Guarantee MeasuresNo credit enhancement measures were taken for the Company’s bonds during the Reporting Period.The capital for principal repayment and interest payment for the Company’s bonds is primarilysourced from the revenue, net profit and cash flows arising from its ordinary course of business. Therepayment guarantee measures include a specialized task group, a strict capital management plan, abond trustee, the Rules for Bondholders’ Meetings, strict information disclosure, and an undertakingto not distribute profits to shareholders, as well as suspend capital expenditures such as majorinvestments in external parties and mergers and acquisitions where the Company fails to, orexpectedly fails to, repay the principal and pay the interest on any bonds on time.The Company’s credit enhancement mechanism, repayment plans and other repayment guaranteemeasures remained unchanged during the Reporting Period.Meetings of Bondholders Convened during Reporting PeriodNo such cases in the Reporting Period.Performance of Duties by Bond Trustee during Reporting PeriodAs the trustee of the “16TCL02”, “16TCL03”, “17TCL01”, “17TCL02”, “18TCL01”, “18TCL02”,
TCL Technology Group Corporation Annual Report 2020
“19TCL01” and “20TCLD1” bonds, Guotai Junan Securities Co., Ltd., in strict accordance with theapplicable laws and regulations including the Measures for the Issue and Trading of Corporate Bondsand the Professional Code of Conduct for Corporate Bond Trustees, keeps a close eye on theCompany’s operating, financial and credit conditions to fulfill its duties as a bond trustee and protectthe legal rights and interests of the bondholders. And the bond trustee has no conflicts of interests inany kind with the Company.As the trustee of the “19TCL02” and “19TCL03” bonds, CITIC Securities Co., Ltd., in strictaccordance with the applicable laws and regulations including the Measures for the Issue andTrading of Corporate Bonds and the Professional Code of Conduct for Corporate Bond Trustees,keeps a close eye on the Company’s operating, financial and credit conditions to fulfill its duties as abond trustee and protect the legal rights and interests of the bondholders. And the bond trustee has noconflicts of interests in any kind with the Company.In the duration of the aforesaid bonds, the trustees disclosed, before 30 June every year, the trustee’sreport for the previous year on the website designated by the stock exchange.Selected Financial Information of the Company in the Past Two Years
| Item | 2020 | 2019 | Change (%) |
| EBITDA (RMB’0,000) | 1,905,982 | 1,422,433 | 33.99% |
| Current ratio | 0.92 | 1.12 | -19.34% |
| Debt/asset ratio (%) | 65.08 | 61.25 | 3.83 |
| Quick ratio | 0.66 | 0.85 | -18.82% |
| Debt/EBITDA ratio | 11.36% | 14.09% | -2.73% |
| Interest cover (times) | 2.58 | 2.16 | 19.44% |
| Cash-to-interest cover (times) | 6.45 | 5.32 | 21.24% |
| EBITDA-to-interest cover (times) | 5.98 | 5.17 | 15.67% |
| Debt repayment ratio (%) | 100 | 100 | - |
| Interest payment ratio (%) | 100 | 100 | - |
Explanation of why any financial indicator in the table above registered a year-on-year change of over 30%:
EBITDA increased 34% year-on-year, primarily driven by an increase in revenue.Principal Repayment and Interest Payment of Other Bonds and Debt Financing Instrumentsduring the Reporting Period
| No. | Bond abbreviation | Principal amount (RMB’00,000,000) | Issue date | Maturity | Coupon rate | Principal repayment and interest payment |
TCL Technology Group Corporation Annual Report 2020
| 1 | 15TCL-MTN001 | 5 | 2015-4-1 | 5 years | 5.50% | Repaid in full on time |
| 2 | 18TCL-MTN001 | 20 | 2018-12-03 | 3 years | 4.58% | The interest for the period from 3 December 2019 to 2 December 2020 was paid on 3 December 2020 |
Credit Lines Granted by Banks, as well as Their Utilization and Repayment during theReporting PeriodThe Company operates in compliance, with a fine credit reputation, strong profitability and a greatability to repay debt. Additionally, it maintains a long-term partnership with the China DevelopmentBank, The Export-Import Bank of China, the Industrial and Commercial Bank of China, etc. As at 31December 2020, the credit lines granted by the major bank partners to the Company totaledRMB218.1 billion, with RMB87.7 billion utilized and RMB130.4 billion left. During the ReportingPeriod, there were no defaults on bank loans.Fulfillment of Commitments Made in Bond Prospectuses during Reporting PeriodNot applicable.Significant Events during the Reporting PeriodNot applicable.Guarantor for Corporate Bonds
□ Yes ? No
Indicate whether the guarantor is a legal person or other organization.
□ Yes ? No
Indicate whether the financial statements of the guarantor (including the balance sheet, the income statement, the cash flow statement,the statement of changes in owners’/shareholders’ equity and the notes to the financial statements) for the reporting period aredisclosed separately within four months when every accounting year ends.
□ Yes ? No
Other Matters
On 18 July 2020, the Company disclosed the Announcement on the Cumulative New Borrowings in 2020 Exceeding 20% of the NetAssets as at the End of Last Year. On 7 November 2020, the Company disclosed the Announcement on the Cumulative NewBorrowings in 2020 Exceeding 60% of the Net Assets as at the End of Last Year. Please visit the website of the Shenzhen StockExchange (http://www.szse.cn/) for the specific announcements. The Company is in a sound financial condition and the ordinarycourse of business. The aforesaid new borrowings have no material adverse impact on the solvency of the Company.
TCL Technology Group Corporation Annual Report 2020
Da Hua Certified Public Accountants (Special General Partnership)
| TCL Technology Group Corporation |
| For the Year Ended 31 December 2020 |
| Independent Auditor’s Report |
| Da Hua Shen Zi [2021] No. 000688 |
TCL Technology Group Corporation Annual Report 2020
TCL Technology Group Corporation
Independent Auditor’s Report and Financial Statements
(For the year from 1 January 2020 to 31 December 2020)
| Contents | Page | ||
| I. | Independent Auditor’s Report | 1-7 | |
| II. | Financial Statements for Year 2020 | ||
| 1．Consolidated Balance Sheet | 1-2 | ||
| 2．Consolidated Income Statement | 3 | ||
| 3．Consolidated Cash Flow Statement | 4-5 | ||
| 4．Consolidated Statement of Changes in Shareholders’ Equity | 6-7 | ||
| 5．Balance Sheet of the Company as the Parent | 8-9 | ||
| 6．Income Statement of the Company as the Parent | 10 | ||
| 7．Cash Flow Statement of the Company as the Parent | 11-12 | ||
| 8．Statement of Changes in Shareholders’ Equity of the Company as the Parent | 13-14 | ||
| 9．Notes to Financial Statements | 15-155 |
Da Hua Shen Zi [2021] No. 000688
Independent Auditor’s Report
Da Hua Shen Zi [2021] No. 000688
To the Shareholders of TCL Technology Group CorporationI OpinionWe have audited the financial statements of TCL Technology Group Corporation (the“Company”), which comprise the consolidated and parent company (the Company asthe parent exclusive of subsidiaries) balance sheets as at 31 December 2020, theconsolidated and parent company statements of income, cash flows and changes inshareholders’ equity for the year then ended, as well as the notes to the financialstatements.In our opinion, the financial statements referred to above present fairly, in all materialrespects, the consolidated and parent company financial position of the Company at31 December 2020, and the consolidated and parent company operating results andcash flows for the year then ended, in conformity with the Chinese AccountingStandards (CAS).II Basis for OpinionWe conducted our audits in accordance with the Audit Standards for ChineseRegistered Accountants. Our responsibilities under those standards are furtherdescribed in the Auditor’s Responsibilities for Audit of Financial Statements sectionof our report. We are independent of the Company in accordance with the China Codeof Ethics for Certified Public Accountants, and we have fulfilled our other ethicalresponsibilities in accordance with the said Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.III Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most
Da Hua Shen Zi [2021] No. 000688
significance in our audit of the financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinionon these matters.And key audit matter identified in our audit is summarized as follows:
1. Revenue recognition
2. Measurement of fixed assets and construction in progress
(I) Revenue recognition
1. Matter description
Please refer to the accounting policies as stated in 30. “Revenue recognition” underNote III to the financial statements and 57. Operating revenue under Note V to thefinancial statements. The Company’s revenue for the current period wasapproximately RMB76.7 billion, representing an increase of RMB1.8 billion fromRMB74.9 billion of last year.As operating revenue is one of the Company’s key operating indicators with thehereditary risk of the management manipulating the revenue recognition time pointfor the purpose of achieving a specific objective or expectation, and the revenuerecognition for the current period has a big influence on the financial statements, weidentify revenue recognition as a key audit matter.
2. Audit response
The important audit procedures we carried out in respect of revenue recognitioninclude:
(1) We understood and assessed whether the management’s design and operation ofkey internal control in respect of revenue recognition were effective or not;
(2) We understood and assessed whether the management’s selection andimplementation of the policies related to revenue recognition complied with theaccounting standards for business enterprises;
(3) We selected samples of recorded transactions with revenue for the year andexamined relevant supporting documents involved during the transaction process,including outbound delivery orders, customers’ receipt records, sale invoices，
Da Hua Shen Zi [2021] No. 000688
customs declarations and fund receipt proofs;
(4) We selected samples of the recorded transactions with revenue around the balancesheet data and examined outbound delivery orders and other supporting documents toassess whether the revenue had been recorded into the appropriate accounting period;
(5) We obtained the Company’s sale list for the year and carried out analytic reviewprocedures on the operating revenue to determine the reasonableness of changes in therevenue and gross profit margin for the current period;
(6) We executed confirmation procedures with key accounts and inquired about thesales amount and the current account balance incurred for the current period; wecarried out substitute audit procedures on the accounts with no replies; and
(7) We checked to see whether revenue-related information was duly presented anddisclosed in the financial statements.Based on the audit work executed, we believe that the Company’s recognition ofrevenue complies with relevant requirements of the accounting standards for businessenterprises.(I) Measurement of fixed assets and construction in progress
1. Description
Please see the accounting policies specified in Items 18 and 19 of "Fixed Assets andconstruction in Progress of Note III as well as Items 21 and 22 of Note V of theFinancial Statement, 21, 22. As at 31 December 2020, the amount of fixed assets andconstruction in progress in the consolidated report of the Group stood at RMB124.3billion, accounting for 48% of the total assets. Most of the fixed assets andconstruction in progress were machinery equipment and buildings for producingLCDs, semi-conductor materials, and semiconductor devices. Whether assets arecompliant with capitalization conditions, the time point when construction in progressis included in fixed assets and the accrual of depreciation begins, and the service lifeand residual value of the corresponding fixed assets shall be subject to the judgmentof the Management. Therefore, we regard the measurement of fixed assets andconstruction in progress as a key audit matter.
2. Response to audit
Our important audit procedures for the measurement of fixed assets and construction
Da Hua Shen Zi [2021] No. 000688
in progress implement:
(1) We learn and assess the effectiveness of internal control design related to fixedassets and construction in progress and test the effectiveness of execution of keycontrols;
(2) The new asset list in the current period is obtained. A spot check is conducted overthe purchase contracts of large-value assets, payment receipts, invoices, andacceptance certificates;
(3) The new project settlement form in the current period is obtained and comparedwith the carrying amount for verification in order to check the accuracy and integrityof bookkeeping;
(4) We discuss with the Management to judge the accuracy of the time point whenconstruction in progress is included in fixed assets and the rationality of the estimatedservice life of fixed assets;
(5) We check construction in progress on-site to learn and assess the progress andverify the progress with the account records, when approaching the balance sheetdate;
(6) The certificate of ownership of fixed assets and the inventory sheet are obtained. Aspot check and an inventory are made on important assets on-site;
(7) The form for the accrual of depreciation of fixed assets is obtained. The accrual ofdepreciation is re-calculated to see if it is correct;
(8) Information related to fixed assets and construction in progress is checked to seewhether it has been listed and disclosed in the financial statement.Based on the audit work executed, we believe that the Company’s measurement offixed assets and construction in progress complies with relevant requirements of theaccounting standards for business enterprises.IV Other InformationThe Company’s management is responsible for the other information. The otherinformation comprises all of the information included in the Company’s 2020 AnnualReport other than the financial statements and our auditor’s report thereon.Our opinion on the financial statements does not cover the other information and we
Da Hua Shen Zi [2021] No. 000688
do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to readthe other information and, in doing so, consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.If, based on the work we have performed, we conclude that there is a materialmisstatement of this other information, we are required to report that fact. We havenothing to report in this regard.V Responsibilities of Management and Those Charged with Governance forFinancial StatementsThe Company’s management is responsible for the preparation of the financialstatements that give a fair view in accordance with CAS, and for designing,implementing and maintaining such internal control as the management determines isnecessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.In preparing the financial statements, the management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, mattersrelated to going concern and using the going concern basis of accounting unless themanagement either intends to liquidate the Company or to cease operations, or haveno realistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’sfinancial reporting process.VI Auditor’s Responsibilities for Audit of Financial StatementsOur objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud orerror, and to issue an auditor’s report that includes our opinion. Reasonable assuranceis a high level of assurance, but is not a guarantee that an audit conducted inaccordance with CAS will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if,individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
Da Hua Shen Zi [2021] No. 000688
As part of an audit in accordance with CAS, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to thoserisks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.
4. Conclude on the appropriateness of the management’s use of the going concernbasis of accounting and, based on the audit evidence obtained, whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists, we are required by CAS to draw users’ attention in our auditor’sreport to the related disclosures in the financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However, future events or conditionsmay cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information ofthe entities or business activities within the Company to express an opinion on thefinancial statements. We are responsible for the direction, supervision andperformance of the Company audit. We remain solely responsible for our auditopinion.We communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including anynoteworthy deficiencies in internal control that we identify during our audit.
Da Hua Shen Zi [2021] No. 000688
We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, andcommunicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.From the matters communicated with those charged with governance, we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor’s report unless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determine that a matter shouldnot be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
| Da Hua Certified Public Accountants (Special General Partnership) | Chinese CPA: | Qiu Junzhou |
| Beijing·China | ( Engagement Partner ) | |
| Chinese CPA: | Jiang Xianmin | |
| 10 March 2021 | ||
TCL Technology Group CorporationConsolidated Balance Sheet
(RMB’000)Assets:
| Assets: | Note V | 31 December 2020 | 31 December 2019 | |
| Current assets: | ||||
| Monetary assets | 1 | 21,708,905 | 18,648,185 | |
| Held-for-trading financial assets | 2 | 5,300,046 | 6,074,751 | |
| Derivative financial assets | 3 | 453,578 | 159,036 | |
| Notes receivable | 4 | 595,685 | 228,942 | |
| Accounts receivable | 5 | 12,557,614 | 8,340,354 | |
| Receivables financing | 6 | 2,176,744 | - | |
| Prepayments | 7 | 1,355,653 | 364,423 | |
| Other receivables | 8 | 2,793,640 | 2,750,042 | |
| Inventories | 9 | 8,834,958 | 5,677,963 | |
| Contract assets | 10 | 183,650 | - | |
| Assets held for sale | 11 | 360,936 | - | |
| Other current assets | 12 | 9,367,055 | 5,911,827 | |
| Total current assets | 65,688,464 | 48,155,523 | ||
| Non-current assets: | ||||
| Loans and advances to customers | 13 | 981,876 | 3,637,768 | |
| Debt investments | 14 | 119,350 | 20,373 | |
| Other debt investments | 15 | 152,063 | - | |
| Long-term receivables | 16 | 778,889 | - | |
| Long-term equity investments | 17 | 24,047,036 | 17,194,284 | |
| Investments in other equity instruments | 18 | 1,333,676 | 279,884 | |
| Other non-current financial assets | 19 | 3,055,595 | 2,542,689 | |
| Investment property | 20 | 1,664,201 | 82,273 | |
| Fixed assets | 21 | 92,829,902 | 45,459,070 | |
| Construction in progress | 22 | 31,508,311 | 33,578,290 | |
| Intangible assets | 23 | 10,054,045 | 5,684,584 | |
| Development costs | 24 | 2,103,995 | 1,548,471 | |
| Goodwill | 25 | 6,943,265 | 2,452 | |
| Long-term prepaid expense | 26 | 2,536,670 | 1,567,691 | |
| Deferred income tax assets | 27 | 1,578,088 | 840,874 | |
| Other non-current assets | 28 | 12,532,853 | 4,250,659 | |
| Total non-current assets | 192,219,815 | 116,689,362 | ||
| Total assets | 257,908,279 | 164,844,885 |
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationConsolidated Balance Sheet (Continued)
(RMB’000)Liabilities and shareholders’ equity:
| Liabilities and shareholders’ equity: | Note V | 31 December 2020 | 31 December 2019 | ||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings | 29 | 12,263,714 | 12,069,657 | ||||||||
| Borrowings from central bank | 30 | 469,834 | 573,222 | ||||||||
| Customer deposits and deposits from other banks and financial institutions | 31 | 2,850,139 | 1,355,129 | ||||||||
| Held-for-trading financial liabilities | 32 | 527,901 | 188,220 | ||||||||
| Derivative financial liabilities | 33 | 384,904 | 84,705 | ||||||||
| Notes payable | 34 | 4,725,612 | 1,720,402 | ||||||||
| Accounts payable | 35 | 16,468,932 | 11,549,133 | ||||||||
| Advances from customers | 36 | 78,597 | 141,749 | ||||||||
| Contract liabilities | 37 | 2,004,004 | - | ||||||||
| Financial assets sold under repurchase agreements | 38 | 50,080 | - | ||||||||
| Employee benefits payable | 39 | 1,856,664 | 1,094,217 | ||||||||
| Taxes and levies payable | 40 | 670,059 | 226,806 | ||||||||
| Other payables | 41 | 14,869,433 | 12,293,566 | ||||||||
| Current portion of non-current liabilities | 42 | 13,429,670 | 1,691,963 | ||||||||
| Other current liabilities | 43 | 366,971 | 69,022 | ||||||||
| Total current liabilities | 71,016,514 | 43,057,791 | |||||||||
| Non-current liabilities | |||||||||||
| Long-term borrowings | 44 | 73,589,403 | 38,512,059 | ||||||||
| Bonds payable | 45 | 18,040,773 | 16,479,085 | ||||||||
| Long-term payables | 46 | 1,280,300 | 24,206 | ||||||||
| Long-term employee benefits payable | 39 | 27,858 | 23,018 | ||||||||
| Deferred income | 47 | 1,509,867 | 1,912,421 | ||||||||
| Deferred income tax liabilities | 27 | 2,386,497 | 952,678 | ||||||||
| Other non-current liabilities | 48 | - | 483 | ||||||||
| Total non-current liabilities | 96,834,698 | 57,903,950 | |||||||||
| Total liabilities | 167,851,212 | 100,961,741 | |||||||||
| Non-current liabilities | |||||||||||
| Share capital | 49 | 14,030,788 | 13,528,439 | ||||||||
| Other equity instruments | 50 | 230,241 | - | ||||||||
| Capital reserves | 51 | 5,442,385 | 5,716,667 | ||||||||
| Less: Treasury stock | 52 | 1,913,029 | 1,952,957 | ||||||||
| Other comprehensive income | 73 | (145,573) | (534,082) | ||||||||
| Surplus reserves | 53 | 2,452,892 | 2,238,368 | ||||||||
| Specific reserve | 54 | 211 | - | ||||||||
| General reserve | 55 | 386 | 361 | ||||||||
| Retained earnings | 56 | 14,009,494 | 11,115,150 | ||||||||
| Total equity attributable to shareholders of the Company as the parent | 34,107,795 | 30,111,946 | |||||||||
| Non-controlling interests | 55,949,272 | 33,771,198 | |||||||||
| Total shareholders’ equity | 90,057,067 | 63,883,144 | |||||||||
| Total liabilities and shareholders’ equity | 257,908,279 | 164,844,885 | |||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | ||||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group Corporation
Consolidated Income Statement
(RMB’000)
| Note V | 2020 | 2019 | ||||||||
| 1. Total revenue | 76,830,401 | 75,077,806 | ||||||||
| Including: Revenue | 57 | 76,677,238 | 74,933,086 | |||||||
| Interest income | 58 | 153,163 | 144,720 | |||||||
| Less: Cost of sales | 57 | 66,242,278 | 66,337,117 | |||||||
| Interest expense | 58 | 33,034 | 17,230 | |||||||
| Taxes and levies | 59 | 300,776 | 330,588 | |||||||
| Selling expense | 60 | 886,817 | 2,857,489 | |||||||
| Administrative expense | 61 | 2,370,378 | 1,895,088 | |||||||
| R&D expense | 62 | 4,402,821 | 3,396,805 | |||||||
| Finance costs | 63 | 2,357,022 | 1,248,801 | |||||||
| Including: Interest expense | 2,594,868 | 1,958,251 | ||||||||
| Interest income | 405,409 | 401,645 | ||||||||
| Add: Other income | 64 | 1,771,035 | 1,900,636 | |||||||
| Return on investment | 65 | 3,254,404 | 3,442,554 | |||||||
| Including: Share of profit or loss of joint ventures and associates | 2,170,917 | 1,657,471 | ||||||||
| Exchange gain | 58 | (2,039) | (12,499) | |||||||
| Gain on changes in fair value | 66 | 672,793 | 473,673 | |||||||
| Less: Credit impairment loss | 67 | (64,665) | (32,258) | |||||||
| Asset impairment loss | 68 | (511,607) | (791,112) | |||||||
| Add: Asset disposal income | 69 | 2,708 | 1,157 | |||||||
| 2. Operating profit | 5,359,904 | 3,976,839 | ||||||||
| Add: Non-operating income | 70 | 492,374 | 128,609 | |||||||
| Less: Non-operating expense | 71 | 116,974 | 49,645 | |||||||
| 3. Gross profit | 5,735,304 | 4,055,803 | ||||||||
| Less: Income tax expense | 72 | 670,100 | 398,069 | |||||||
| 4. Net profit | 5,065,204 | 3,657,734 | ||||||||
| 4.1 By operating continuity | ||||||||||
| Net profit from continuing operations | 5,065,204 | 2,325,647 | ||||||||
| Net profit from discontinued operations | - | 1,332,087 | ||||||||
| 4.2 By ownership | ||||||||||
| Net profit attributable to shareholders of the Company as the parent | 4,388,159 | 2,617,765 | ||||||||
| Net profit attributable to non-controlling interests | 677,045 | 1,039,969 | ||||||||
| 5. Other comprehensive income, net of tax | 73 | 407,553 | 488,805 | |||||||
| 5.1 Other comprehensive income that will not be reclassified to profit or loss | 45,029 | 27,642 | ||||||||
| 5.2 Other comprehensive income that may subsequently be reclassified to profit or loss upon satisfaction of prescribed condition | 362,524 | 461,163 | ||||||||
| 6. Total comprehensive income | 5,472,757 | 4,146,539 | ||||||||
| Attributable to shareholders of the Company as the parent | 4,776,668 | 2,922,896 | ||||||||
| Attributable to non-controlling interests | 696,089 | 1,223,643 | ||||||||
| 7. Earnings per share | 74 | |||||||||
| 7.1 Basic earnings per share (RMB yuan/share) | 0.3366 | 0.1986 | ||||||||
| 7.2 Diluted earnings per share (RMB yuan/share) | 0.3226 | 0.1935 | ||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | |||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationConsolidated Income Statement
(RMB’000)
| Note V | 2020 | 2019 | |||||||
| 1. Cash flows from operating activities： | |||||||||
| Proceeds from sale of commodities and rendering of services | 77,471,361 | 78,966,837 | |||||||
| Net increase/(decrease) in customer deposits and deposits from other banks and financial institutions | 1,495,010 | 810,076 | |||||||
| Net increase/(decrease) in borrowings from central bank | (103,388) | 341,818 | |||||||
| Interest, fees and commissions received | 153,163 | 144,720 | |||||||
| Tax and levy rebates | 3,981,892 | 3,671,801 | |||||||
| Cash generated from other operating activities | 75 | 3,454,773 | 2,329,643 | ||||||
| Subtotal of cash generated from operating activities | 86,452,811 | 86,264,895 | |||||||
| Payments for commodities and services | (59,086,181) | (58,275,622) | |||||||
| Net (increase)/decrease in loans and advances to customers | 892,263 | (4,468,399) | |||||||
| Net (increase)/decrease in deposits in central bank and other banks and financial institutions | 361,021 | 297,896 | |||||||
| Cash paid to and for employees | (4,234,200) | (4,257,331) | |||||||
| Taxes and levies paid | (3,934,588) | (4,291,276) | |||||||
| Cash used in other operating activities | 76 | (3,752,843) | (3,780,067) | ||||||
| Subtotal of cash used in operating activities | (69,754,528) | (74,774,799) | |||||||
| Net cash generated from/used in operating activities | 79 | 16,698,283 | 11,490,096 | ||||||
| 2. Cash flows from investing activities： | |||||||||
| Proceeds from disinvestment | 30,873,459 | 26,240,545 | |||||||
| Return on investment | 1,130,055 | 814,671 | |||||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 8,119 | 92,802 | |||||||
| Net proceeds from the disposal of subsidiaries and other business units | 298,795 | 891,326 | |||||||
| Cash generated from other investing activities | 149,793 | - | |||||||
| Subtotal of cash generated from investing activities | 32,460,221 | 28,039,344 | |||||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | (33,085,563) | (20,116,210) | |||||||
| Payments for investments | (31,121,562) | (29,519,049) | |||||||
| Net payments for the acquisition of subsidiaries and other business units | (6,929,567) | (170,198) | |||||||
| Cash used in other investing activities | (97,040) | (9,965,596) | |||||||
| Subtotal of cash used in investing activities | (71,233,732) | (59,771,053) | |||||||
| Net cash generated from/used in investing activities | (38,773,511) | (31,731,709) | |||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | ||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationConsolidated Income Statement
(RMB’000)
| Note V | 2020 | 2019 | ||
| 3. Cash flows from financing activities： | ||||
| Capital contributions received | 3,822,240 | 7,531,053 | ||
| Including: Capital contributions by non-controlling interests to subsidiaries | 3,822,240 | 7,523,844 | ||
| Borrowings raised | 61,815,269 | 36,378,744 | ||
| Net proceeds from issuance of bonds | 9,039,321 | 4,000,000 | ||
| Cash generated from other financing activities | 77 | 889,562 | - | |
| Subtotal of cash generated from financing activities | 75,566,392 | 47,909,797 | ||
| Repayment of borrowings | (42,412,001) | (29,273,623) | ||
| Interest and dividends paid | (4,959,433) | (4,334,741) | ||
| Including: Dividends paid by subsidiaries to non-controlling interests | (279,922) | (99,073) | ||
| Cash used in other financing activities | 78 | (5,330,369) | (2,350,627) | |
| Subtotal of cash used in financing activities | (52,701,803) | (35,958,991) | ||
| Net cash generated from/used in financing activities | 22,864,589 | 11,950,806 | ||
| 4. Effect of foreign exchange rates changes on cash and cash equivalents | (218,687) | 226,166 | ||
| 5. Net increase in cash and cash equivalents | 570,674 | (8,064,641) | ||
| Add: Cash and cash equivalents, beginning of the period | 17,637,743 | 25,702,384 | ||
| 6. Cash and cash equivalents, end of the period | 80 | 18,208,417 | 17,637,743 |
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationConsolidated Statement of Changes in Shareholders’ Equity
(RMB’000)
| 2020 | ||||||||||||||||||||||||||||
| Equity attributable to shareholders of the Company as the parent | Non-controlling interests | Total shareholders’ equity | ||||||||||||||||||||||||||
| Share capital | Other equity instruments | Capital reserves | Treasury stock | Specific reserve | Other comprehensive income | Surplus reserves | General reserve | Retained earnings | ||||||||||||||||||||
| 1. Balance as at the end of the prior year | 13,528,439 | - | 5,716,667 | (1,952,957) | - | (534,082) | 2,238,368 | 361 | 11,115,150 | 33,771,198 | 63,883,144 | |||||||||||||||||
| Add: Adjustment for change in accounting policy | - | - | - | - | - | - | - | - | (83) | (99) | (182) | |||||||||||||||||
| 2. Balance as at the beginning of the year | 13,528,439 | - | 5,716,667 | (1,952,957) | - | (534,082) | 2,238,368 | 361 | 11,115,067 | 33,771,099 | 63,882,962 | |||||||||||||||||
| 3. Increase/decrease in the period | 502,349 | 230,241 | (274,282) | 39,928 | 211 | 388,509 | 214,524 | 25 | 2,894,427 | 22,178,173 | 26,174,105 | |||||||||||||||||
| 3.1 Total comprehensive income | - | - | - | - | 388,481 | - | - | 4,388,159 | 696,089 | 5,472,729 | ||||||||||||||||||
| 3.2 Capital increased and reduced by shareholders | 502,349 | 230,241 | (274,282) | 39,928 | - | - | - | - | - | 21,740,157 | 22,238,393 | |||||||||||||||||
| 3.2.1 Capital increased by shareholders | 511,509 | - | 1,488,791 | - | - | - | - | - | - | 3,273,095 | 5,273,395 | |||||||||||||||||
| 3.2.2 Share-based payments included in owners’ equity | (9,160) | - | (16,814) | 39,928 | - | - | - | - | - | - | 13,954 | |||||||||||||||||
| 3.2.3 Bonds included in owners’ equity | - | 230,241 | - | - | - | - | - | - | - | - | 230,241 | |||||||||||||||||
| 3.2.4 Others | - | - | (1,746,259) | - | - | - | - | - | - | 18,467,062 | 16,720,803 | |||||||||||||||||
| 3.3 Profit distribution | - | - | - | - | 211 | - | 214,524 | 25 | (1,493,704) | (258,073) | (1,537,017) | |||||||||||||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | - | - | 214,524 | - | (214,524) | 16,983 | 16,983 | |||||||||||||||||
| 3.3.2 Appropriation to general reserve | - | - | - | - | - | - | - | 25 | (25) | - | ||||||||||||||||||
| 3.3.3 Appropriation to shareholders | - | - | - | - | - | - | - | - | (1,279,155) | (275,056) | (1,554,211) | |||||||||||||||||
| 3.3.4 Others | - | - | - | - | 211 | - | - | - | - | - | 211 | |||||||||||||||||
| 3.4 Transfers within owners’ equity | - | - | - | - | - | 28 | - | - | (28) | - | - | |||||||||||||||||
| 3.4.1 Other comprehensive income transferred to retained earnings | - | - | - | - | - | 28 | - | - | (28) | - | - | |||||||||||||||||
| 4. Balance as at the end of the period | 14,030,788 | 230,241 | 5,442,385 | (1,913,029) | 211 | (145,573) | 2,452,892 | 386 | 14,009,494 | 55,949,272 | 90,057,067 | |||||||||||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs: | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | |||||||||||||||||||||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationConsolidated Statement of Changes in Shareholders’ Equity (Continued)
(RMB’000)
| 2019 | |||||||||||||||||
| Equity attributable to shareholders of the Company as the parent | Non-controlling interests | Total shareholders’ equity | |||||||||||||||
| Share capital | Capital reserves | Treasury stock | Other comprehensive income | Surplus reserves | General reserve | Retained earnings | |||||||||||
| 1. Balance as at the end of the prior year | 13,549,649 | 5,996,741 | (63,458) | (1,174,162) | 2,184,261 | 361 | 10,000,973 | 30,377,308 | 60,871,673 | ||||||||
| Add: Adjustment for change in accounting policy | - | - | - | 334,950 | - | - | (106,833) | (994) | 227,123 | ||||||||
| 2. Balance as at the beginning of the year | 13,549,649 | 5,996,741 | (63,458) | (839,212) | 2,184,261 | 361 | 9,894,140 | 30,376,314 | 61,098,796 | ||||||||
| 3. Increase/decrease in the period | (21,210) | (280,074) | (1,889,499) | 305,130 | 54,107 | - | 1,221,010 | 3,394,884 | 2,784,348 | ||||||||
| 3.1 Total comprehensive income | - | - | - | 299,561 | - | - | 2,617,765 | 1,223,644 | 4,140,970 | ||||||||
| 3.2 Capital increased and reduced by shareholders | (21,210) | (280,074) | (1,889,499) | - | - | - | - | 2,247,318 | 56,535 | ||||||||
| 3.2.1 Capital increased by shareholders | - | - | - | - | - | - | - | 7,327,174 | 7,327,174 | ||||||||
| 3.2.2 Share-based payments included in owners’ equity | (21,210) | (8,061) | (81,962) | - | - | - | - | - | (111,233) | ||||||||
| 3.2.3 Others | - | (272,013) | (1,807,537) | - | - | - | - | (5,079,856) | (7,159,406) | ||||||||
| 3.3 Profit distribution | - | - | - | - | 54,107 | - | (1,391,186) | (76,078) | (1,413,157) | ||||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | 52,832 | - | (52,832) | (16,923) | (16,923) | ||||||||
| 3.3.2 Appropriation to shareholders | - | - | - | - | - | - | (1,337,079) | (59,155) | (1,396,234) | ||||||||
| 3.3.3 Others | - | - | - | - | 1,275 | - | (1,275) | - | - | ||||||||
| 3.4 Transfers within owners’ equity | - | - | - | 5,569 | - | - | (5,569) | - | - | ||||||||
| 3.4.1 Other comprehensive income transferred to retained earnings | - | - | - | 5,569 | - | - | (5,569) | - | - | ||||||||
| 4. Balance as at the end of the period | 13,528,439 | 5,716,667 | (1,952,957) | (534,082) | 2,238,368 | 361 | 11,115,150 | 33,771,198 | 63,883,144 | ||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs: | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationBalance Sheet of the Company as the Parent
(RMB’000)Assets
| Assets | Note XV | 31 December 2020 | 31 December 2019 | |
| Current assets | ||||
| Monetary assets | 2,208,790 | 3,966,899 | ||
| Held-for-trading financial assets | 1,221,657 | 2,969,106 | ||
| Notes receivable | 6,000 | 22,514 | ||
| Accounts receivable | 1 | 175,787 | 445,090 | |
| Prepayments | 97,963 | 97,127 | ||
| Other receivables | 2 | 25,555,924 | 17,129,473 | |
| Inventories | 5,997 | 14,869 | ||
| Other current assets | 2,333 | 6,471 | ||
| Total current assets | 29,274,451 | 24,651,549 | ||
| Non-current assets | ||||
| Long-term equity investments | 3 | 65,094,459 | 39,297,272 | |
| Investments in other equity instruments | 4 | 15,000 | 15,000 | |
| Other non-current financial assets | 5 | 1,145,022 | 1,540,913 | |
| Investment property | 88,687 | 92,623 | ||
| Fixed assets | 46,012 | 54,238 | ||
| Construction in progress | 11,441 | 1,241 | ||
| Intangible assets | 42,311 | 19,145 | ||
| Long-term prepaid expense | 469,425 | 454,969 | ||
| Deferred income tax assets | 7 | - | ||
| Total non-current assets | 66,912,364 | 41,475,401 | ||
| Total assets | 96,186,815 | 66,126,950 |
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationBalance Sheet of the Company as the Parent (Continued)
(RMB’000)Liabilities and shareholders’ equity:
| Liabilities and shareholders’ equity: | Note XV | 31 December 2020 | 31 December 2019 | |||||||
| Current liabilities | ||||||||||
| Short-term borrowings | 3,670,231 | 6,484,481 | ||||||||
| Derivative financial liabilities | 16,513 | 5,981 | ||||||||
| Notes payable | - | 30,283 | ||||||||
| Accounts payable | 129,701 | 424,225 | ||||||||
| Advances from customers | - | 17,471 | ||||||||
| Contract liabilities | 1,872 | - | ||||||||
| Employee benefits payable | 220,510 | 125,095 | ||||||||
| Taxes and levies payable | 26,071 | 10,355 | ||||||||
| Other payables | 26,377,029 | 9,347,608 | ||||||||
| Current portion of non-current liabilities | 6,141,029 | 847,327 | ||||||||
| Other current liabilities | 316 | - | ||||||||
| Total current liabilities | 36,583,272 | 17,292,826 | ||||||||
| Non-current liabilities | ||||||||||
| Long-term borrowings | 12,087,500 | 2,110,000 | ||||||||
| Bonds payable | 14,092,345 | 16,479,085 | ||||||||
| Long-term employee benefits payable | 21,991 | 23,018 | ||||||||
| Deferred income | 42,652 | 51,562 | ||||||||
| Total non-current liabilities | 26,244,488 | 18,663,665 | ||||||||
| Total liabilities | 62,827,760 | 35,956,491 | ||||||||
| Share capital | 14,030,788 | 13,528,439 | ||||||||
| Other equity instruments | 230,241 | - | ||||||||
| Capital reserves | 9,846,835 | 8,382,776 | ||||||||
| Less: Treasury stock | 1,913,029 | 1,952,957 | ||||||||
| Other comprehensive income | 141,998 | 56,064 | ||||||||
| Surplus reserves | 2,250,828 | 2,036,304 | ||||||||
| Retained earnings | 8,771,394 | 8,119,833 | ||||||||
| Total shareholders’ equity | 33,359,055 | 30,170,459 | ||||||||
| Total liabilities and shareholders’ equity | 96,186,815 | 66,126,950 | ||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | |||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationIncome Statement of the Company as the Parent
(RMB’000)
| Note XV | 2020 | 2019 | ||
| 1. Revenue | 6 | 1,141,258 | 1,730,187 | |
| Less: Cost of sales | 6 | 911,211 | 1,482,346 | |
| Taxes and levies | 17,265 | 11,972 | ||
| Selling expense | 30,066 | 29,931 | ||
| Administrative expense | 427,591 | 354,036 | ||
| R&D expense | 178,751 | 160,796 | ||
| Finance costs | 1,254,686 | 917,158 | ||
| Including: Interest expense | 1,824,303 | 1,383,429 | ||
| Interest income | 595,141 | 502,967 | ||
| Add: Other income | 17,898 | 6,395 | ||
| Return on investment | 7 | 3,404,821 | 1,379,544 | |
| Including: Share of profit or loss of joint ventures and associates | 7 | 1,420,363 | 1,149,694 | |
| Gain on changes in fair value | (6,260) | 39,986 | ||
| Less: Credit impairment loss | (775) | (1,542) | ||
| Add: Asset disposal income | 63 | 256,615 | ||
| 2. Operating profit | 1,738,985 | 458,030 | ||
| Add: Non-operating income | 414,744 | 80,181 | ||
| Less: Non-operating expense | 8,496 | 9,893 | ||
| 3. Gross profit | 2,145,233 | 528,318 | ||
| Less: Income tax expense | (7) | - | ||
| 4. Net profit | 2,145,240 | 528,318 | ||
| 5. Other comprehensive income | 85,934 | 81,669 | ||
| 6. Total comprehensive income | 2,231,174 | 609,987 | ||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationCash Flow Statement of the Company as the Parent
(RMB’000)
| Note XV | 2020 | 2019 | ||
| 1. Cash flows from operating activities： | ||||
| Proceeds from sale of commodities and rendering of services | 1,145,211 | 1,489,327 | ||
| Tax and levy rebates | 1,073 | - | ||
| Cash generated from other operating activities | 4,976,960 | 8,110,950 | ||
| Subtotal of cash generated from operating activities | 6,123,244 | 9,600,277 | ||
| Payments for commodities and services | (1,022,906) | (1,440,521) | ||
| Cash paid to and for employees | (165,109) | (153,043) | ||
| Taxes and levies paid | (62,672) | (73,633) | ||
| Cash used in other operating activities | (2,229,386) | (3,089,974) | ||
| Subtotal of cash used in operating activities | (3,480,073) | (4,757,171) | ||
| Net cash generated from/used in operating activities | 8 | 2,643,171 | 4,843,106 | |
| 2. Cash flows from investing activities： | ||||
| Proceeds from disinvestment | 16,546,116 | 16,562,819 | ||
| Return on investment | 5,501,892 | 656,095 | ||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 1 | 143 | ||
| Cash generated from other investing activities | 22,048,009 | 17,219,057 | ||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | (71,954) | (5,926) | ||
| Payments for investments | (34,291,251) | (13,939,067) | ||
| Cash used in other investing activities | (26,181) | - | ||
| Subtotal of cash used in investing activities | (34,389,386) | (13,944,993) | ||
| Net cash generated from/used in investing activities | (12,341,377) | 3,274,064 |
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationCash Flow Statement of the Company as the Parent (Continued)
(RMB’000)
| Note XV | 2020 | 2019 | ||
| 1. Cash flows from financing activities： | ||||
| Capital contributions received | - | 7,209 | ||
| Borrowings raised | 30,795,000 | 11,437,982 | ||
| Net proceeds from issuance of bonds | 6,972,834 | 4,000,000 | ||
| Cash generated from other financing activities | 910,300 | - | ||
| Subtotal of cash generated from financing activities | 38,678,134 | 15,445,191 | ||
| Repayment of borrowings | (28,073,128) | (16,491,912) | ||
| Interest and dividends paid | (2,546,431) | (2,394,239) | ||
| Cash used in other financing activities | (77,630) | (2,037,236) | ||
| Subtotal of cash used in financing activities | (30,697,189) | (20,923,387) | ||
| Net cash generated from/used in financing activities | 7,980,945 | (5,478,196) | ||
| 4. Effect of foreign exchange rates changes on cash and cash equivalents | (27,546) | (26,563) | ||
| 5. Net increase in cash and cash equivalents | (1,744,807) | 2,612,411 | ||
| Add: Cash and cash equivalents, beginning of the period | 3,941,090 | 1,328,679 | ||
| 6. Cash and cash equivalents, end of the period | 9 | 2,196,283 | 3,941,090 |
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationStatement of Changes in Shareholders’ Equity of the Company as the Parent
(RMB’000)
| 2020 | ||||||||||||||||||||
| Share capital | Other equity instruments | Capital reserves | Treasury stock | Other comprehensive income | Surplus reserves | Retained earnings | Total shareholders’ equity | |||||||||||||
| 1. Balance as at the end of the prior year | 13,528,439 | - | 8,382,776 | (1,952,957) | 56,064 | 2,036,304 | 8,119,833 | 30,170,459 | ||||||||||||
| Add: Adjustment for change in accounting policy | - | - | - | - | - | - | - | - | ||||||||||||
| 2. Balance as at the beginning of the year | 13,528,439 | - | 8,382,776 | (1,952,957) | 56,064 | 2,036,304 | 8,119,833 | 30,170,459 | ||||||||||||
| 3. Increase/decrease in the period | 502,349 | 230,241 | 1,464,059 | 39,928 | 85,934 | 214,524 | 651,561 | 2,958,355 | ||||||||||||
| 3.1 Total comprehensive income | - | - | - | - | 85,934 | - | 2,145,240 | 2,231,174 | ||||||||||||
| 3.2 Capital increased and reduced by shareholders | 502,349 | 230,241 | 1,464,059 | 39,928 | - | - | - | 2,236,577 | ||||||||||||
| 3.2.1 Capital increased by owners | 511,509 | - | 1,488,791 | - | - | - | - | 2,000,300 | ||||||||||||
| 3.2.2 Share-based payments included in owners’ equity | (9,160) | - | (20,025) | 39,928 | - | - | - | 10,743 | ||||||||||||
| 3.2.3 Bonds included in owners’ equity | - | 230,241 | - | - | - | - | - | 230,241 | ||||||||||||
| 3.2.4 Others | - | - | (4,707) | - | - | - | - | (4,707) | ||||||||||||
| 3.3 Profit distribution | - | - | - | - | - | 214,524 | (1,493,679) | (1,279,155) | ||||||||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | - | 214,524 | (214,524) | - | ||||||||||||
| 3.3.2 Appropriation to shareholders | - | - | - | - | - | - | (1,279,155) | (1,279,155) | ||||||||||||
| 3.3.3 Others | - | - | - | - | - | - | - | - | ||||||||||||
| 4. Balance as at the end of the period | 14,030,788 | 230,241 | 9,846,835 | (1,913,029) | 141,998 | 2,250,828 | 8,771,394 | 33,359,055 | ||||||||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs: | Du Juan | Person-in-charge of the financial department: | Xi Wenbo | |||||||||||||||
The attached notes to the financial statements form an integral part of the financial statements.
TCL Technology Group CorporationStatement of Changes in Shareholders’ Equity of the Company as the Parent (Continued)
(RMB’000)
| 2019 | |||||||||||||
| Share capital | Capital reserves | Treasury stock | Other comprehensive income | Surplus reserves | Retained earnings | Total shareholders’ equity | |||||||
| 1. Balance as at the end of the prior year | 13,549,649 | 8,565,338 | (63,458) | (24,870) | 1,982,197 | 8,969,209 | 32,978,065 | ||||||
| Add: Adjustment for change in accounting policy | - | - | - | (739) | - | 739 | - | ||||||
| 2. Balance as at the beginning of the year | 13,549,649 | 8,565,338 | (63,458) | (25,609) | 1,982,197 | 8,969,948 | 32,978,065 | ||||||
| 3. Increase/decrease in the period | (21,210) | (182,562) | (1,889,499) | 81,673 | 54,107 | (850,115) | (2,807,606) | ||||||
| 3.1 Total comprehensive income | - | - | - | 81,673 | - | 528,318 | 609,991 | ||||||
| 3.2 Capital increased and reduced by shareholders | (21,210) | (182,562) | (1,889,499) | - | - | - | (2,093,271) | ||||||
| 3.2.1 Share-based payments included in owners’ equity | (21,210) | (8,061) | (81,962) | - | - | - | (111,233) | ||||||
| 3.2.2 Others | - | (174,501) | (1,807,537) | - | - | - | (1,982,038) | ||||||
| 3.3 Profit distribution | - | - | - | - | 54,107 | (1,378,433) | (1,324,326) | ||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | 52,832 | (52,832) | - | ||||||
| 3.3.2 Appropriation to shareholders | - | - | - | - | - | (1,337,079) | (1,337,079) | ||||||
| 3.3.3 Others | - | - | - | - | 1,275 | 11,478 | 12,753 | ||||||
| 4. Balance as at the end of the period | 13,528,439 | 8,382,776 | (1,952,957) | 56,064 | 2,036,304 | 8,119,833 | 30,170,459 | ||||||
| Legal representative: | Li Dongsheng | Person-in-charge of financial affairs: | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
The attached notes to the financial statements form an integral part of the financial statements.
| I | General information |
| (I) | Place of incorporation and form of organization |
| TCL Technology Group Corporation (hereinafter referred to as the “Company”) is a limited liability company incorporated in the People's Republic of China (hereinafter referred to as "China") on 17 July 1997 under the Company Law of the People's Republic of China (hereinafter referred to as the “Company Law”). As per the approval documents of YBH [2002] No. 94 and YFH [2002] No. 134 issued by the People’s Government of Guangdong Province, and YJMH [2002] No. 112 and YJMH [2002] No. 184 issued by the Economic and Trade Commission of Guangdong Province, the Company was changed to a joint stock limited company with a registered capital of RMB1,591,935,200, which was approved by Guangdong Province Administration for Industry and Commerce on 19 April 2002. The registration number is 4400001009990. Upon the approval of ZJFXZ [2004] Document No. 1 issued by the China Securities Regulatory Commission (CSRC) on 2 January 2004, the Company was allowed to issue 590,000,000 shares to the public on 7 January 2004 and 404,395,944 ordinary shares denominated in RMB (A shares) to all public shareholders of TCL Communication Equipment Co., Ltd. (hereinafter referred to as " TCL Communication Equipment") in a stock-for-stock deal, which were listed on the Shenzhen Stock Exchange on 30 January 2004. The shares issued to the public were all priced online, with a par value of RMB1 and an issue price of RMB4.26 per share, raising a total of RMB2,513,400,000. Upon the completion of this deal, the registered capital of the Company increased to RMB2,586,331,144, and on 16 July 2004, the Company was approved by the Guangdong Province Administration for Industry and Commerce to change its business license to Business License QGYZZ No. 003362. Upon the completion of the shareholder structure reform and the expiration of the share lockup period, the foreign shareholding ratio in the Company was less than 10%. On 11 September 2007, the Company was approved by Guangdong Province Administration for Industry and Commerce to change its business license to Business License No. 440000000011990. Upon the approval of the CSRC on 7 January 2009 with the ZJXK [2009] Document No. 12, the Company privately placed 350,600,000 ordinary shares denominated in RMB (A shares) to designated investors on 23 April 2009, with a par value of RMB1 and an issue price of RMB2.58 per share, raising a total of RMB904,548,000. Upon the completion of this deal, the registered capital of the Company increased from RMB2,586,331,144 to RMB2,936,931,144, and on 2 June 2009, the Company was approved by Guangdong Province Administration for Industry and Commerce to change its business license to Business License No. 440000000011990. Upon the approval of the CSRC on 27 May 2010 with the ZJXK [2010] Document No. 719, the Company privately placed 1,301,178,273 ordinary shares denominated in RMB (A shares) to designated investors on 26 July 2010, with a par value of RMB1 and an issue price of RMB3.46 per share, raising a total of RMB4,502,076,824.58. Upon the completion of this deal, the registered capital of the Company increased from RMB2,936,931,144 to RMB4,238,109,417, and on 19 September 2010, the Company was approved by Guangdong Province Administration for Industry and Commerce to change its business license to Business License No. 440000000011990. On 19 May 2011, the Company carried out a bonus issue of 10 additional shares for every 10 shares to all the shareholders with capital reserves, representing a total of 4,238,109,417 new shares, with a par value of RMB1 per share. Upon the completion of this bonus issue, the registered capital of the Company increased from RMB4,238,109,417 to RMB8,476,218,834, and on 27 June 2011, the Company was approved by Huizhou Administration for Industry and Commerce to change its business license to Business License No. 440000000011990. During the years of 2013 and 2014, the exercise of 58,870,080 stock options increased the total share capital of the Company from 8,476,218,834 shares to 8,535,088,914 shares. |
| I | General information (continued) |
| (I) | Place of incorporation and form of organization (continued) |
| Upon the approval of the CSRC on 13 February 2014 with the ZJXK [2014] Document No. 201, the Company privately placed 917,324,357 ordinary shares denominated in RMB (A shares) to designated investors on 30 April 2014, with a par value of RMB1 and an issue price of RMB2.18 per share, raising a total of RMB1,999,767,098.26. Upon the completion of this deal, the registered capital of the Company increased from RMB8,535,088,914 to RMB9,452,413,271, and on 10 June 2014, the Company was approved by Huizhou Administration for Industry and Commerce to change its business license to Business License No. 440000000011990. In the year of 2015, 48,357,920 stock options were exercised under an incentive plan of the Company, and upon the approval of the CSRC on 28 January 2015 with the ZJXK [2015] Document No.151, the Company issued 2,727,588,511 shares in a private placement. As such, the total share capital of the Company increased from 9,452,413,271 shares to 12,228,359,702 shares. In the year of 2016, 923,340 stock options were exercised under an incentive plan of the Company, and the share capital of the Company increased from 12,228,359,702 shares to 12,229,283,042 shares. Later, 15,601,300 shares were repurchased and retired, and the share capital of the Company decreased from 12,229,283,042 shares to 12,213,681,742 shares. On 26 April 2016, the Company was approved by Huizhou Administration for Industry and Commerce to change its business license to Business License No. 91441300195971850Y (unified social credit code). In the year of 2017, the Company purchased an interest in subsidiary TCL China Star Optoelectronics Technology Co., Ltd. by means of a new issue of 1,301,290,321 shares. Upon the completion of this deal, the total share capital of the Company increased from 12,213,681,742 shares to 13,514,972,063 shares. In 2018, the Proposal on the Grant of Restricted Stock to Awardees was approved at the 7th Meeting of the 6th Board of Directors, and a total of 34,676,444 shares were subscribed for under the restricted stock incentive plan. Upon the completion of this deal, the total share capital of the Company increased from 13,514,972,063 shares to 13,549,648,507 shares. In 2019, the Company repurchased and retired 21,209,788 restricted shares that had been granted to certain awardees under the 2018 Restricted Stock Incentive Plan & Global Innovation Partner Plan but were still in lockup. As such, the total share capital of the Company decreased from 13,549,648,507 to 13,528,438,719 shares. In 2020, the Proposal on the Intended Change of the Company’s Full Name and Stock Name was approved respectively at the 23rd Meeting of the 6th Board of Directors and the First Extraordinary General Meeting of 2020. As such, the name of the Company has been changed from “TCL Corporation” to “TCL Technology Group Corporation” (abbreviation from “TCL CORP.” to “TCL TECH.”) since 7 February 2020, with the stock name changed from “TCL CORP.” to “TCL TECH.” and the stock code of “000100” unchanged. In July 2020, the Company repurchased and retired 9,159,308 restricted shares that had been granted under the 2018 and 2019 Restricted Stock Incentive Plans but were still in lockup. As such, the total share capital of the Company decreased from 13,528,438,719 to 13,519,279,411 shares. In October 2020, the Company issued 511,508,951 new shares to acquire a non-controlling interest in subsidiary Wuhan China Star Optoelectronics Technology Co., Ltd. As such, the total share capital of the Company increased from 13,519,279,411 to 14,030,788,362 shares. | |
| As at 31 December 2020, the total issued share capital of the Company were 14,030,788,362 shares. Please refer to Note V, 49 for details. | |
| The registered address of the Company is: TCL Tech Building, 17 Huifeng Third Road, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province. |
| I | General information (continued) |
| (II) | Scope of business |
| The Company and its subsidiaries (collectively referred to as the “Company") are primarily engaged in the research, development, production and sales of semi-conductor, electronic products and communication devices, new optoelectronic products, liquid crystal display devices, import and export of goods and technologies (excluding goods and technologies that are prohibited from import and export or require an administrative approval for import and export), venture capital business and venture capital consultation, entrepreneurial management services for start-up enterprises, participation in the initiation of venture capital institutions and investment management advisory institutions, immovable property leasing, IT services, conference services, computer technical services and development service of electronic products and technologies, development and sale of software, patent transfer, customs clearance services, consulting services, payment and settlement (where any approval from any relevant department is required according to law, it must be obtained before carrying out the relevant operating activities). | |
| (III) | Authorization of financial statements for issue |
| These financial statements were authorized for issue by the Company’s Board of Directors on 10 March 2021. | |
| II | Scope of the consolidated financial statements |
| As at the end of the Reporting Period, for subsidiaries included in the consolidated financial statements, please refer to Note VII, 1, (1) Breakdown of important subsidiaries. For the changes to the scope of the consolidated financial statements of the Reporting Period, see Note VI. | |
| III | Significant accounting policies and accounting estimates |
| 1 | Basis for the preparation of financial statements |
| The preparation of financial statements of the Company is based on the actual transactions and events in accordance with the "Accounting Standards for Business Enterprises - Basic Standards" published by the Ministry of Finance and specific corporate accounting standards, application guidelines for corporate accounting standards, corporate accounting standards interpretations and other relevant regulations (hereinafter collectively referred to as "corporate accounting standards") for confirmation and measurement, combining the provisions of “Regulations on the Information Disclosure and Compilation of Companies Offering Securities to the Public No. 15 - General Provisions on Financial Reports” (revised in 2014) published by CSRC. | |
| 2 | Going concern basis |
| The Company has evaluated the ability to continue as a going concern for 12 months from the end of the Reporting Period and has not identified any issues or circumstances that result in significant doubts about its ability to continue as a going concern. Therefore, the financial statements have been prepared on a going concern basis. | |
| 3 | Statement of compliance with corporate accounting standards |
| The financial statements are in compliance with the requirements of the corporate accounting standards, and truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company during the Reporting Period. |
| III | Significant accounting policies and accounting estimates (continued) |
| 4 | Accounting period |
| The Company adopts the calendar year as accounting year, and a fiscal year is from January 1 to December 31 of the Gregorian calendar. | |
| 5 | Operating cycle |
| The Company does not take the operating cycle as the criteria for liquidity classification of assets and liabilities. | |
| 6 | Base currency for bookkeeping |
| The base currency for bookkeeping and the preparation of financial statements are all in RMB, and are presented in the unit of RMB’000 unless otherwise specified. | |
| 7 | Accounting treatments for business combinations involving enterprises under and not under common control |
| (1) | When the terms, conditions and economic influence of transactions in the process of a step-by-step combination conform to one or more of the following, accounting for multiple transactions is treated as a package transaction: |
| (a) | These transactions are made simultaneously or with consideration of influence on each other; |
| (b) | These transactions can only achieve a complete business outcome when treated as a whole; |
| (c) | The occurrence of a transaction depends on the occurrence of at least one of the other transactions; |
| (d) | A transaction is uneconomical when treated alone, but is economical when considered together with other transactions. |
| (2) | Business combinations involving enterprises under common control |
| (a) | Individual financial statement |
| The assets and liabilities acquired by the Company in business combinations are measured in accordance with the book value of assets and liabilities of the combined party on the date of combination (including the goodwill of the ultimate controlling party resulting from the acquisition of the combined party). The difference between the book value of net assets acquired in the combination and the book value of the consideration paid for the combination (or the total par value of shares issued) is used to adjust the capital stock premium in the capital reserve, and when the capital stock premium in the capital reserve is insufficient for offset, it is used to adjust the retained earnings. If there is a contingent consideration and it is necessary to confirm the provisions or assets, the difference between the estimated amount of liabilities or assets and the settlement amount of subsequent contingent consideration is used to adjust the capital reserve (capital stock premium), and when the capital reserve is insufficient, it is used to adjust the retained earnings. |
| III | Significant accounting policies and accounting estimates (continued) |
| 7 | Accounting treatments for business combinations involving enterprises under and not under common control (continued) |
| (2) | Business combinations involving enterprises under common control (continued) |
| (a) | Individual financial statements (continued) |
| For a business that is ultimately realized through multiple transactions, if it is a package transaction, each transaction is treated as a transaction that acquires control; if it is not a package transaction, on the date of acquisition of control, the difference between the initial cost of long-term equity investment and the book value of long-term equity investment before the combination plus the book value of the new paid consideration on the date of combination is used to adjust the capital reserve; and when the capital reserve is insufficient for offset, it is used to adjust the retained earnings. For equity investments held prior to the date of combination, no accounting treatment is carried out for other comprehensive gains recognized by equity accounting or financial instrument confirmation and measurement standards, and up to the disposal of the investment, the accounting treatment shall be based on the same basis as the direct disposal of the assets or liabilities of the invested entity; other changes in owner's equity other than net profit or loss, other comprehensive income or profit distribution of net assets of the invested company recognized by equity method are not subject to accounting, and will be transferred to the current profit and loss until the disposal of the investment. | |
| The agency fees paid for audits, legal services, assessments and other related expenses incurred in the business combination are recognized in profit or loss in the period in which they are incurred. The transaction costs for the issuance of equity securities for the business combination that may be directly attributed to equity transactions can be deducted from equity; transaction costs directly related to the issuance of a debt instrument as a combination consideration, are treated as an initial recognized amount included in the debt instrument. | |
| If the combined party has a consolidated financial statement, the initial investment cost of the long-term equity investment is determined based on the owner's equity attributable to the Company as the parent in the consolidated financial statements of the combined party. | |
| (b) | Consolidated financial statements |
| The assets and liabilities acquired by the combining party in the business combination are measured in accordance with the book value of the owner's equity of the combined party in the consolidated financial statements of the ultimate controlling party. | |
| For the case where a business combination is finally realized through multiple transactions, if it is a package transaction, each transaction is treated as a transaction for acquiring control; if it is not a package transaction, the long-term equity investment held by the combing party before the combination, the gains and losses, other comprehensive income and other changes in owners' equity have been recognized between the date of acquisition or the date of the combining party and the combined party under the final control of the same party, whichever is later, and the date of combination, are used to offset the initial retained earnings or current profit and loss during the comparative reporting period respectively. | |
| If the accounting policies adopted by the combined parties are inconsistent with those adopted by the Company, the Company shall make adjustments in accordance with the accounting policies of the Company on the date of combination, and on this basis, confirm the consolidated financial statements in accordance with the provisions of Accounting Standards for Business Enterprises. |
| III | Significant accounting policies and accounting estimates (continued) |
| 7 | Accounting treatments for business combinations involving enterprises under and not under common control (continued) |
| (3) | Business combinations involving enterprises not under common control |
| The assets paid and liabilities incurred or assumed of the Company as a consideration for the business combination are measured at fair value on the date of purchase, and the difference between the fair value and the book value is recognized in profit or loss. Where a future event that may affect the combination costs is agreed in the combination contract, if the estimated future events are likely to occur on the date of purchase and the amount of the impact on combination costs can be reliably measured, it is also included in the combination costs. | |
| The agency fees paid for audits, legal services, assessments and other related expenses incurred in the business combination are recognized in profit or loss in the period in which they are incurred. The transaction costs for the issuance of equity securities for the business combination that may be directly attributed to equity transactions can be deducted from equity. | |
| The difference between the higher combination cost and lower fair value of identifiable net assets of the acquired party gained in the combination is recognized as goodwill by the Company. In case that the cost of combination is less than the fair value of the identifiable net assets of the acquired party gained in the combination, and the difference is still less than the fair value of identifiable net assets of the acquired party gain in the combination after review, the difference is included in the current profit and loss by the Company. | |
| For the case where a business combination involving enterprises not under common control is finally realized through multiple transactions step by step, if it is a package transaction, each transaction is treated as a transaction for acquiring control; if it is not a package transaction; if it is not a package transaction, the individual financial statements and consolidated financial statements are distinguished for related accounting treatment. | |
| (a) | In the individual financial statements, if the equity investment held before the date of combination is accounted for by equity method, the sum of the book value of equity investment of the acquired party held before the date of acquisition plus the new investment cost on the date of acquisition is recognized as the initial cost of the investment; the other comprehensive income confirmed by equity method before the date of acquisition is accounted for, when the investment is disposed, on the same basis as those the invested party adopted directly to dispose the relevant assets or liabilities. |
| If the equity investment held before the date of combination is accounted for by financial instrument recognition and measurement criteria, the sum of the fair value of equity investment on the date of combination plus the new investment cost is taken as the initial investment cost on the date of combination. The difference between the fair value and the book value of the original equity interest, and the accumulated fair value changes originally included in other comprehensive income should be transferred to return on investment in the current period of combination date. | |
| (b) | In the consolidated financial statements, the equity of the acquired party held before the date of acquisition is re-measured according to the fair value of the equity on the date of acquisition. The difference between the fair value and the book value is included in the current return on investment; if the equity of the acquired party involves other comprehensive income under the equity method, etc., other comprehensive income related to it is converted into return on investment in the current period of acquisition date. |
| III | Significant accounting policies and accounting estimates (continued) |
| 8 | Method for compiling consolidated financial statements |
| The scope of consolidation of the Company's consolidated financial statements is determined on the basis of control, and all subsidiaries (including separate entities controlled by the Company as the parent) are included in the consolidated financial statements. | |
| The accounting policies and accounting periods adopted by all subsidiaries included in the consolidated financial statements are consistent with the Company. If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with the Company, necessary adjustments will be made in accordance with the Company's accounting policies and accounting periods when preparing consolidated financial statements. The consolidated financial statements are based on the financial statements of the Company and its subsidiaries as well as other relevant information, and are prepared by the Company after adjusting the long-term equity investments in the subsidiaries in accordance with the equity method based. | |
| The impact of internal transactions between the Company and its subsidiaries, and internal transactions between subsidiaries, on the consolidated balance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in shareholders’ equity is offset in the preparation of consolidated financial statements. | |
| If the current losses shared by the minority shareholders of a subsidiary exceed the share enjoyed by the minority shareholder in the initial owner's equity of the subsidiary, the balance will still reduce the minority interests. | |
| During the Reporting Period, if a subsidiary or business is added due to the business combination involving enterprises under common control, the opening balance of the consolidated balance sheet is adjusted; the income, expenses and profits of the subsidiary or business from the beginning of the period of combination to the end of the Reporting Period are included in the consolidated income statement; the cash flows of the subsidiary or business from the beginning of the period of combination to the end of the Reporting Period are included in the consolidated cash flow statement. If a subsidiary or business is added due to a business combination involving enterprises under non-common control, the opening balance of the consolidated balance sheet is not adjusted; the income, expenses and profits of the subsidiary or business from the date of acquisition to the end of the Reporting Period are included in the consolidated income statement; the cash flows of the subsidiary or business from the date of acquisition to the end of the Reporting Period are included in the consolidated cash flow statement. | |
| During the Reporting Period, if a subsidiary or business is added due to a business combination involving enterprises not under common control, the opening balance of the consolidated balance sheet is not adjusted; the income, expenses and profits of the subsidiary and business from the date of acquisition to the end of the Reporting Period are included in the consolidated income statement; the cash flows of the subsidiary and business from the date of acquisition to the end of the Reporting Period are included in the consolidated cash flow statement. | |
| During the Reporting Period, if the Company disposes of a subsidiary or business, the income, expenses and profits of the subsidiary or business from the beginning of the period to the disposal date are included in the consolidated income statement; the cash flows of the subsidiary or business from the beginning of the Reporting Period to the disposal date are included in the consolidated cash flow statement. | |
| III 8 | Significant accounting policies and accounting estimates (continued) Method for compiling consolidated financial statements (continued) When the Company loses control over the invested party due to disposal of part of the equity investment or other reasons, the remaining equity investment after disposal will be re-measured according to its fair value by the Company on the date of loss of control. The difference of the sum of the consideration obtained from the disposal of the equity and the fair value of the remaining equity, less the sum of the share of net assets and goodwill of the original subsidiary that should be enjoyed in accordance with the original share-holding ratio since the date of acquisition or combination, is accounted for the return on investment in the current period of loss of control. Other comprehensive income or net profit and loss related to the original subsidiary's equity investment, other comprehensive income and other changes in owner's equity other than profit distribution, will be converted into current return on investment when control is lost, except for other comprehensive gains arising from the re-measurement of net liabilities of the Benefit Plan made by the invested party or changes in net assets. |
| III | Significant accounting policies and accounting estimates (continued) |
| 9 | Criteria for determining cash and cash equivalents |
| In the preparation of the cash flow statement, the Company recognizes cash holdings and deposits that can be used for payment at any time as cash. | |
| The Company recognizes cash that is easily converted into known amount with short holding period (generally due within three months from the date of purchase) and strong liquidity, and investments with low risk of changes in value (including investments in bonds within three months, while excluding equity investments), as cash equivalents. | |
| 10 | Foreign currency business and translation of foreign currency statement |
| (1) | Foreign currency transactions |
| Foreign currency transactions between the Company and its subsidiaries are translated into base currency at the spot exchange rate on the transaction date. | |
| Foreign currency monetary items are translated at the spot exchange rate on the balance sheet date, and the exchange differences resulted therefrom, except that the exchange differences arising from special foreign currency loans related to the acquisition and construction of assets eligible for capitalization should be treated in accordance with the principle of capitalization of borrowing costs, are all included in the current profit and loss. Foreign currency non-monetary items measured at historical cost are still translated at the spot exchange rate on the transaction date, and the amount of base currency for bookkeeping is not changed. | |
| Foreign currency non-monetary items measured at fair value are translated at the spot exchange rates on the date when the fair value is determined, and the exchange differences resulted therefrom are included in profit or loss in the current period as a change in fair value. In the case of foreign currency non-monetary items that are at fair value through other comprehensive income, the exchange differences incurred are included in other comprehensive income. |
| (2) | Translation of foreign currency financial statement |
| When the Company translates the financial statements of overseas operations, the assets and liabilities in the balance sheet are translated at the spot exchange rate on the balance sheet date. The owner's equity items, except for the "retained earnings" items, are translated at the spot exchange rate at the time of occurrence of items. All the incurred items in the income statement are translated at the current average exchange rate of the period in which transactions occur. | |
| The translation differences of foreign currency financial statement arising from the above translation are included in other comprehensive income. When disposing of an overseas operation, the translation differences in the foreign currency financial statements related to the foreign operation listed in other comprehensive income items in the balance sheet are transferred from the other comprehensive income item to the current profit and loss. All the incurred items in the cash flow statement are translated at the current average exchange rate of the period in which transactions occur. All the opening balance and actual amount of the previous year are listed on the basis of the amount translated in the previous year. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments |
| When the Company becomes a party to a financial instrument, it recognizes a financial asset or liability. | |
| The effective interest method refers to the method of calculating the amortized cost of financial assets or liabilities and allocating interest income or interest expenses into each accounting period. | |
| The effective interest rate refers to the interest rate used to discount the estimated future cash flow of a financial asset or financial liability during its expected duration to the book balance of the financial asset or the amortized cost of the financial liability. When determining the effective interest rate, the expected cash flow is estimated on the basis of considering all contract terms of financial assets or liabilities (such as prepayment, extension, call options or other similar options), but the expected credit loss is not considered. | |
| The amortized cost of a financial asset or financial liability is the accumulated amortization amount formed by deducting the repaid principal from the initial recognition amount of the financial asset or financial liability, adding or subtracting the difference between the initial recognition amount and the maturity amount by using the effective interest method, and then deducting the accumulated accrued loss reserve (only applicable to financial assets). | |
| (1) | Classification and measurement of financial assets |
| According to the business model of the financial assets under management and the contractual cash flow characteristics of the financial assets, the Company divides the financial assets into the following three categories: | |
| (a) | Financial assets at amortized cost. |
| (b) | Financial assets at fair value through other comprehensive income. |
| (c) | Financial assets at fair value through profit or loss. |
| Financial assets are measured at fair value when initially recognized, but if the accounts or notes receivable arising from the sale of goods or the provision of services do not contain significant financing components or do not consider financing components for no more than one year, the initial measurement shall be made at the transaction price. | |
| For financial assets at fair value through profit or loss, transaction expenses are directly recognized in the current profit and loss. For other financial assets, transaction expenses are included in the initial recognition amount. | |
| Subsequent measurement of financial assets depends on their classification. All related financial assets affected will be reclassified when and only when the Company changes its business model of managing financial assets. | |
| (a) | Financial assets classified as measured at amortized cost |
| The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest on the amount of outstanding principal, and the business model for managing the financial asset is to collect the contractual cash flow, then the Company classifies the financial asset as measured at amortized cost. Financial assets of the Company that are classified as measured at amortized cost include monetary assets, notes receivable, accounts receivable, other receivables, long-term receivables, debt investments, etc. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (1) | Classification and measurement of financial assets (continued) |
| The Company recognizes interest income from such financial assets with the effective interest method, and carries out subsequent measurement at amortized cost. Gains or losses arising from impairment or derecognition or modification are included in the current profit and loss. The Company calculates and determines the interest income based on the book balance of financial assets multiplied by the effective interest rate except for the following circumstances: | |
| ① For purchased or originated credit-impaired financial assets, the Company calculates and determines their interest income at the amortized cost of the financial asset and the credit-adjusted effective interest rate since the initial recognition. ② For financial assets not credit-impaired at the time of being purchased or originated but in the subsequent period, the Company calculates and determines their interest income at the amortized cost and the effective interest rate of the financial assets in the subsequent period. If the financial instrument is no longer credit-impaired due to the improvement of its credit risk in the subsequent period, the Company calculates and determines the interest income by multiplying the effective interest rate by the book balance of the financial asset. | |
| (b) | Financial assets classified as measured at fair value through other comprehensive income |
| The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest on the amount of outstanding principal, and the business model for managing the financial asset is both to collect contractual cash flows and for its sale, then the Company classifies the financial asset as measured at fair value through other comprehensive income. | |
| The Company recognizes interest income from such financial assets with the effective interest method. Except that the interest income, impairment loss and exchange difference are recognized as the current profit and loss, other changes in fair value are included in other comprehensive income. When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in the current profit and loss. | |
| Notes and accounts receivable at fair value through other comprehensive income are reported as receivables financing, and such other financial assets are reported as other debt investments. Among them, other debt investments maturing within one year from the balance sheet date are reported as the current portion of non-current assets, and other debt investments maturing within one year are reported as other current assets. | |
| (c) | Financial assets designated as measured at fair value through other comprehensive income |
| At the time of initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financial assets at fair value through other comprehensive income on the basis of individual financial assets. | |
| Changes in the fair value of such financial assets are included in other comprehensive income without allowance for impairment. When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in the retained earnings. During the investment period when the Company holds the equity instrument, the dividend income is recognized and included in the current profit and loss when the Company's right to receive dividends has been established, the economic benefits related to dividends are likely to flow into the Company, and the amount of dividends can be measured reliably. The Company reports such financial assets under the item of investments in other equity instruments. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (1) | Classification and measurement of financial assets (continued) |
| An investment in equity instruments is a financial asset at fair value through profit or loss when it is obtained mainly for recent sale, or is part of the identifiable portfolio of financial assets centrally managed, and objective evidence exists for a short-term profit model in the near future when initially recognized, or is a derivative (except derivatives defined as financial guarantee contracts and designated as effective hedging instruments). | |
| (d) | Financial assets classified as measured at fair value through profit or loss |
| If failing to be classified as measured at amortized cost or at fair value through other comprehensive income, or not designated as measured at fair value through other comprehensive income, financial assets are all classified as measured at fair value through profit or loss. | |
| The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. | |
| The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. | |
| (e) | Financial assets designated as measured at fair value through profit or loss |
| At the time of initial recognition, the Company may irrevocably designate financial assets as measured at fair value through profit or loss on the basis of individual financial assets in order to eliminate or significantly reduce accounting mismatches. | |
| If the mixed contract contains one or more embedded derivative instruments and its main contract is not any financial asset as above, the Company may designate the whole of the mixed contract as a financial instrument at fair value through profit or loss. Except under the following circumstances: | |
| ① Embedded derivatives do not significantly change the cash flow of mixed contracts. ② When determining for the first time whether similar mixed contracts need to be split, it is almost clear that embedded derivatives contained in them should not be split without analysis. If the prepayment right embedded in a loan allows the holder to prepay the loan at an amount close to the amortized cost, the prepayment right does not need to be split. | |
| The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. | |
| The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (2) | Classification and measurement of financial liabilities |
| The Company classifies a financial instrument or its components into financial liabilities or equity instruments upon initial recognition according to the contract terms of and the economic essence reflected by the financial instrument issued, rather than only in legal form, in combination with the definitions of financial liabilities and equity instruments. Financial liabilities are classified at initial recognition as measured at fair value through profit or loss, or other financial liabilities, or derivatives designated as effective hedging instruments. | |
| Financial liabilities are measured at fair value upon initial recognition. For financial liabilities at fair value through profit or loss, relevant transaction expenses are directly included in current profits and losses; For other categories of financial liabilities, relevant transaction expenses are included in the initial recognition amount. | |
| Subsequent measurement of financial liabilities depends on their classification: | |
| (a) | Financial liabilities at fair value through profit or loss |
| Such financial liabilities include held-for-trading financial liabilities (including derivatives falling under financial liabilities) and financial liabilities designated as measured at fair value upon initial recognition and through profit or loss. | |
| The financial liability is a held-for-trading financial liability if it is mainly undertaken for recent sale or repurchase, or is part of the identifiable portfolio of financial instruments centrally managed, and there is objective evidence that the enterprise has recently employed a short-term profit model, or is a derivative instrument, except derivatives designated as effective hedging instruments and derivatives conforming to financial guarantee contracts. Held-for-trading financial liabilities (including derivatives falling under financial liabilities) are subsequently measured at fair value. All changes in fair values except for hedging accounting are included in current profits and losses. | |
| ① Such financial liabilities can eliminate or significantly reduce accounting mismatches. ② The financial liability portfolio or the portfolio of financial assets and liabilities is managed and evaluated for performance on the basis of fair value according to the enterprise risk management or investment strategy stated in the official written documents, and is reported to key management personnel within the enterprise on this basis. | |
| The Company subsequently measures such financial liabilities at fair value. Except changes in fair value that are brought about by changes in the Company's own credit risk are included in other comprehensive income, other changes in fair value are included in current profits and losses. Unless including such changes in other comprehensive income will cause or expand accounting mismatch in profit or loss, the Company will include all changes in fair value (including the amount affected by changes in its own credit risk) in current profits and losses. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (2) | Classification and measurement of financial liabilities (continued) |
| (b) | Other financial liabilities |
| The Company classifies financial liabilities except for the following items as measured at amortized cost. Such financial liabilities are recognized by the effective interest method and subsequently measured at amortized cost. Gains or losses arising from derecognition or amortization are included in the current profits and losses: | |
| ① Financial liabilities at fair value through profit or loss. ② Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets. ③ Financial guarantee contracts that do not fall under the first two categories of this article, and loan commitments that do not fall under category (1) of this article and lend at a below-market interest rate. | |
| Financial guarantee contracts refer to contracts that require the issuer to pay a specific amount to the contract holder who has suffered losses when a specific debtor fails to pay the debt in accordance with the original or modified terms of the debt instrument. Financial guarantee contracts that are not financial liabilities designated as measured at fair value through profit or loss are measured after initial recognition according to the loss reserve amount and of the initial recognition amount, less the accumulated amortization amount during the guarantee period, whichever is higher. | |
| (3) | Derecognition of financial assets and liabilities |
| (a) | Financial asset are derecognized, i.e. written off from its account and balance sheet if: |
| ① The contractual right to receive cash flow from the financial asset is terminated; or ② The financial asset has been transferred, which meets the requirements for derecognition of financial assets. | |
| (b) | Conditions for derecognition of financial liabilities |
| If the current obligation of a financial liability (or part thereof) has been discharged, such financial liability (or part thereof) is derecognized. | |
| The existing financial liability is derecognized with a new one recognized, and the difference between the carrying amount and the consideration paid (including transferred non-cash assets or assumed liabilities) is included in the current profits and losses, if an agreement is signed between the Company and the lender to replace the existing financial liability by assuming a new one, and the contract terms of these two financial liabilities are substantially different, or the contract terms of the existing financial liability (or part thereof) are substantially modified. | |
| If the Company repurchases part of a financial liability, the carrying amount of the financial liability shall be distributed according to the proportion of the fair value of the continuing recognition portion and the derecognition portion to the overall fair value on the repurchase date. The difference between the carrying amount allocated to the derecognized portion and the consideration paid (including transferred non-cash assets or liabilities assumed) shall be included in the current profits and losses. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (4) | Recognition basis and measurement method of financial asset transfer |
| When a financial asset is transferred, the Company evaluates the risks and rewards retained of the financial asset ownership: | |
| (a) | If almost all the risks and rewards of the financial asset ownership are transferred, such financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities. |
| (b) | If almost all the risks and rewards of the financial asset ownership are retained, such financial asset shall continue to be recognized. |
| (c) | In circumstances when the Company neither transfers nor retains almost all the risks and rewards of the financial asset ownership (i.e. circumstances other than ① and ② of this article), according to whether it retains control over such financial asset, |
| ① the financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities if such control is not retained; or ② the relevant financial asset shall continue to be recognized to the extent that it continues to be involved in the transferred financial asset, and the relevant liabilities shall be recognized accordingly if such control is retained. The extent that it continues to be involved in the transferred financial asset refers to the extent the Company bears the risks or rewards on changes in the value of the transferred financial asset. | |
| When judging whether the transfer of financial assets meets the above conditions for derecognition of financial assets, the principle of substance over form shall be adopted. The Company divides the transfer of financial assets into overall transfer and partial transfer. | |
| (a) | If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall be included in the current profits and losses: |
| ① The carrying amount of the transferred financial asset on the date of derecognition. ② The sum of the consideration received for the transfer of financial assets and the amount of the corresponding derecognized portion of the accumulated changes in fair value originally included in other comprehensive income directly (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). | |
| (b) | If the financial asset is partially transferred and the transferred part meets the conditions for derecognition, the carrying amount of the financial asset before transfer shall be allocated between the derecognition portion and the continuing recognition portion (in this case, the retained service asset shall be regarded as the continuing recognition part of the financial asset) according to the respective relative fair values on the transfer date, and the difference between the following two amounts shall be included in the current profits and losses: |
| ① The carrying amount of the derecognized portion on the derecognition date. ② The sum of the consideration received for the derecognized portion and the amount of the corresponding derecognized portion of the accumulated changes in fair value originally included in other comprehensive income (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (4) | Recognition basis and measurement method of financial asset transfer (continued) |
| If the transfer of a financial asset does not meet the conditions for derecognition, the financial asset shall continue to be recognized and the consideration received shall be recognized as a financial liability. | |
| (5) | Determination of fair value of financial assets and liabilities |
| The fair value of a financial asset or liability with an active market shall be determined by the quoted price in the active market, unless the financial asset has a sell-off period for the asset itself. For the financial assets restricted for the assets themselves, the compensation amount demanded by market participants due to the risk of not being able to sell the financial assets on the open market within the specified period shall be deducted from the quoted price in the active market. Quoted prices in the active market includes those for related assets or liabilities that can be easily and regularly obtained from exchanges, dealers, brokers, industry groups, pricing or regulatory agencies, and can represent actual and recurring market transactions on the basis of fair trade. | |
| The fair value of financial assets or liabilities without an active market shall be determined by valuation techniques. At the time of valuation, the Company adopts valuation techniques that are applicable under the current circumstances and are supported by sufficient available data and other information, selects input values consistent with the characteristics of relevant assets or liabilities considered by market participants in the transactions thereof, and gives priority to the use of relevant observable input values whenever possible. If the relevant observable input value cannot be obtained or be feasibly obtained, the unobservable input value shall be used. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (6) | Impairment of financial instruments |
| Based on the expected credit loss, the Company conducts impairment accounting of financial assets classified as measured at amortized cost, financial assets classified as measured at fair value through other comprehensive income and financial guarantee contracts and recognizes loss reserves. | |
| Expected credit loss refers to the weighted average of the credit losses of financial instruments weighted by the risk of default. Credit loss refers to the difference between all contractual cash flows discounted at the original effective interest rate and receivable according to the contract and all cash flows expected to be collected of the Company, i.e. the present value of all cash shortfalls. Among them, credit-impaired purchased or originated financial assets of the Company shall be discounted at the credit-adjusted effective interest rate of such financial assets. | |
| For receivables arising from transactions regulated by the income criteria, the Company uses the simplified measurement method to measure the loss reserve according to the amount equivalent to the expected credit loss during the entire duration. | |
| For credit-impaired purchased or originated financial assets, only the accumulated changes in the expected credit losses during the entire duration since the initial recognition are recognized as loss reserves on the balance sheet date. On each balance sheet date, the amount of change in the expected credit loss during the entire duration is included in the current gains and losses as impairment losses or gains. Even if the expected credit loss during the entire duration on the balance sheet date is less than that reflected in the estimated cash flow upon initial recognition, the favorable change in the expected credit loss is recognized as impairment gains. | |
| In addition to other financial assets adopting the above simplified measurement method and other than the credit-impaired purchased or originated ones, the Company evaluates whether the credit risk of relevant financial instruments has increased significantly since the initial recognition, measures its loss reserves and recognizes the expected credit loss and its changes respectively according to the following circumstances on each balance sheet date: | |
| (a) | If the credit risk of the financial instrument has not increased significantly since its initial recognition and is in the first stage, its loss reserve shall be measured according to an amount equivalent to its expected credit loss in the next 12 months, and the interest income shall be calculated at the book balance and the effective interest rate. |
| (b) | If the credit risk of the financial instrument has increased significantly since the initial recognition but no credit impairment has occurred, it is in the second stage, then its loss reserve shall be measured according to an amount equivalent to its expected credit loss throughout its life, and the interest income shall be calculated at the book balance and the effective interest rate. |
| (c) | If the financial instrument is credit-impaired since its initial recognition, it is in the third stage, and the Company shall measure its loss reserve according to an amount equivalent to its expected credit loss throughout its life, and calculate the interest income at the amortized cost and the effective interest rate. |
| The increase or reversed amount of the credit loss reserve for financial instruments shall be included in the current profits and losses as impairment losses or gains. Except for financial assets classified as measured at fair value through other comprehensive income, the credit loss reserve will offset the carrying amount of the financial assets. For financial assets classified as measured at fair value through other comprehensive income, the Company recognizes its credit loss reserve in other comprehensive income without reducing its carrying amount presented in the balance sheet. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (6) | Impairment of financial instruments (continued) |
| In the previous accounting period, the Company has measured the loss reserve, the amount of which is equivalent to the expected credit loss of the financial instrument throughout its life. However, on the balance sheet date of the current period, the financial instrument no longer conforms to the situation of significant increase in credit risk since initial confirmation; on the balance sheet date of the current period, the Company has measured the loss reserve of the financial instrument, the amount of which is equivalent to the expected credit loss in the next 12 months, and the reversed amount of the loss reserve thus formed is included in the current profit and loss as impairment profit. | |
| (a) | Significant increase of credit risk |
| In order to determine whether the credit risk of financial instruments has increased significantly since the initial recognition, the Company uses the available reasonable and based forward-looking information and compares the risk of default of financial instruments on the balance sheet date with the risk of default on the initial confirmation date. When the Company applies provisions on depreciation of financial instruments to financial guarantee contracts, the initial recognition date shall be regarded as the date when the Company becomes a party to make irrevocable commitments. | |
| For the assessment of whether the credit risk has increased significantly, the Company will consider the following factors | |
| ① According to the actual or as expected, whether the debtor's operating results have changed significantly; ② Whether the regulatory, economic or technological environment of the debtor has undergone significant adverse changes; ③ Whether the following items have changed significantly: the value of collateral as debt mortgage, or the guarantee provided by a third party, or the quality of credit enhancement; these changes will reduce the debtor's economic motivation to repay the loan within the time limit stipulated in the contract or impact the probability of default; ④ Whether the debtor's expected performance and repayment behavior have changed significantly; ⑤ Whether the Company's credit management methods for financial instruments have changed, etc. | |
| If, on the balance sheet date, the credit risk of the financial instrument is judged to be low by the Company, the Company assumes that the credit risk of the financial instrument has not increased significantly since the initial recognition. The financial instrument will be deemed to have lower credit risk under the following circumstances: the default risk of the financial instrument is lower; the borrower has a strong ability to fulfill its contractual cash flow obligations in a short time; furthermore, even if there are adverse changes in the economic situation and operating environment for a long period of time, it may not necessarily reduce the borrower's ability to fulfill its contractual cash flow obligations. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (6) | Impairment of financial instruments (continued) |
| (b) | Financial assets with depreciation of credit |
| If one or more events have adverse effects on the expected future cash flow of a financial asset, the financial asset will become a financial asset that has suffered credit impairment. The following observable information can be regarded as evidence of credit impairment of financial assets: | |
| ① The issuer or debtor is in serious financial difficulties; ② The debtor breaches the contract, such as default or overdue payment of interest or principal, etc.; ③ The creditor gives concessions to the debtor due to economic or contractual considerations related to the debtor's financial difficulties; the concessions will not be made under any other circumstances; ④ There is a great possibility of bankruptcy or other financial restructuring of the debtor; ⑤ The issuer or debtor has financial difficulties, resulting in the disappearance of the active market for the financial asset; ⑥ Purchasing or originating a financial asset with a large discount, which reflects the fact of credit loss. | |
| Credit impairment of financial assets may not be caused by separately identifiable events, but may be caused by the combined effect of multiple events. | |
| (c) | Determination of expected credit loss |
| The Company's assessment of the expected credit losses of financial instruments is based on single items and combinations. During the evaluation, the company will take into account reasonable and reliable information about past events, current situation and future economic situation forecast. | |
| The Company divides financial instruments into different combinations on the basis of common credit risk characteristics. Common credit risk characteristics adopted by the Company include: financial instrument type, credit risk rating, aging combination, overdue aging combination, contract settlement cycle, debtor's industry, etc. To understand the individual evaluation criteria and combined credit risk characteristics of relevant financial instruments, please refer to the accounting policies of relevant financial instruments for details. | |
| The Company adopts the following methods to determine the expected credit losses of relevant financial instruments: | |
| ① In terms of financial assets, credit loss is equivalent to the present value of the difference between the contract cash flow that the Company shall receive and the expected cash flow. ② In terms of the financial guarantee contract, credit loss is equal to the expected amount of payment made by the Company to the holder of the contract for credit loss incurred, less the present value of the difference between the amount expected to be collected from the holder of the contract, the debtor or any other party. ③ If, on the balance sheet date, a financial asset has suffered credit impairment, but one does not purchase or originate a financial asset that has suffered credit impairment, the credit loss is equivalent to the difference between the book balance of the financial asset and the present value of the estimated future cash flow discounted at the original actual interest rate. | |
| Factors reflected in the Company's method of predicting credit losses by quantitative finance tools include: unbiased probability weighted average amount determined by evaluating a series of possible results; time value of money; reasonable and reliable information about past events, current situation and future economic situation forecast that can be obtained on the balance sheet date without unnecessary extra costs or efforts. |
| III | Significant accounting policies and accounting estimates (continued) |
| 11 | Financial instruments (continued) |
| (6) | Impairment of financial instruments (continued) |
| (d) | Write-off of financial assets |
| If the Company cannot reasonably expect the contract cash flow of the financial asset to be fully or partially recovered, the book balance of the financial asset will be written off directly. This write-off constitutes the derecognition of relevant financial assets. | |
| (7) | Offset of financial assets and financial liabilities |
| In the balance sheet, financial assets and financial liabilities are shown separately without offsetting each other. However, if the following conditions are met at the same time, the net amount after offset will be listed in the balance sheet: | |
| (a) | The Company has the legal right, which is currently enforceable, to offset the confirmed amount; |
| (b) | The Company plans to settle on a net basis, or realize the financial assets and settle the financial liabilities at the same time. |
| 12 | Notes receivable | |
| For the determination method and accounting treatment method of the Company's expected credit loss on notes receivable, please refer to 11(6) of note III Impairment of financial instruments. | ||
| When sufficient evidence of expected credit loss cannot be evaluated at a reasonable cost at the level of single instrument, the Company will refer to the experience of historical credit loss, combines the current situation and judgment on future economic situation, divides notes receivable into several combinations according to the characteristics of credit risk, and calculates expected credit loss on the basis of combinations. | ||
| III | Significant accounting policies and accounting estimates (continued) |
| 13 | Accounts receivable |
| For the determination method and accounting treatment method of the Company's expected credit loss on accounts receivable, please refer to 11(6) of note III Impairment of financial instruments. | |
| As for the accounts receivable, if there is objective evidence that the Company will not be able to recover the money according to the original terms of the accounts receivable, the Company will separately determine its credit loss. | |
| If sufficient evidence of expected credit loss cannot be assessed at reasonable cost at the level of single instrument, the Company will divide the accounts receivable into several combinations according to the credit risk characteristics, and calculate the expected credit loss on the basis of the combinations (with reference to the experience of historical credit loss, and in combination with the current situation with the judgment of future economic situation) | |
| 14 | Other receivables |
| For the determination method and accounting treatment method of the Company's expected credit loss of other receivables, please refer to 11(6) of note III Impairment of financial instruments. | |
| For other receivables for which there is objective evidence that the Company will not be able to recover the amount according to the original terms of the receivables, the Company will separately determine its credit loss. | |
| If sufficient evidence of expected credit loss cannot be evaluated at a reasonable cost at the level of single instrument, the Company will refer to the experience of historical credit loss, combine the current situation and judgment on future economic situation, divide other receivables into several combinations according to the characteristics of credit risk, and calculate expected credit loss on the basis of combinations. | |
| 15 | Inventories |
| (1) | Classification of inventories |
| The Company classifies inventories into raw materials, in-process products, development costs, and finished products, goods shipped in transit, turnover materials and molds with an expected benefit period of less than one year, depending on the purpose of holding the inventories. Turnover materials include low-value consumables and packaging materials. | |
| (2) | Valuation method for inventories shipped in transit |
| All types of inventories are accounted for at actual cost, and actual costs include purchase costs, processing costs and other costs. Inventories are shipped in transit by weighted average method. |
| III | Significant accounting policies and accounting estimates (continued) |
| 15 | Inventories (continued) |
| (3) | Basis for determining the net realizable value of inventories and accrual method for inventory valuation allowance |
| Closing inventories are measured at cost or net realizable value, whichever is lower. In cases that difference exists due to the net realizable value is less than the cost of inventories, inventory valuation allowance is made based on individual inventory item or inventory category, and the difference is recognized in the current profit and loss. | |
| For inventories of goods directly used for sale, such as finished goods, merchandise inventories and materials for sale, in the normal production and operation process, the net realizable value is determined by the amount of the estimated selling price of the inventory less the estimated sales cost and relevant taxes and fees; for material inventories that need to be processed, in the normal production and operation process, the net realizable value is determined by the amount of the estimated selling price of finished products produced less the estimated cost to be occurred at the time of completion, the estimated selling expenses and related taxes; for inventories held for the execution of sales contracts or labor contracts, the net realizable value is calculated on the basis of the contract price, and if the quantity of inventories held is more than the quantity specified in sales contracts, the net realizable value of excess inventories is calculated based on the general sales price. | |
| At the end of the period, inventory valuation allowance is accrued according to individual inventory items; but for a large number of inventories with lower unit prices, inventory valuation allowance is accrued according to inventory category; for inventories related to the product series produced and sold in the same region with the same or similar end use or purpose, and that is difficult to be measured separately from other items, inventory valuation allowance is accrued combined with other items. | |
| If the influencing factors of the write-down of inventory value have disappeared, the amount written-down is recovered and reversed to the amount of inventory valuation allowance already accrued, and the amount reversed is included in the current profit and loss. | |
| (4) | Inventory system |
| The Company adopts a perpetual inventory system for inventory management. | |
| (5) | Amortization method of turnover materials |
| The Company amortizes turnover materials by the one-off amortization method, and the molds with a benefit period of less than one year are amortized within the period of not exceeding one year according to the expected benefit period. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 16 | Long-term equity investments |
| Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, and the Company’s long-term equity investments in its associates and joint ventures. | |
| Subsidiaries are the investees over which the Company is able to exercise control. A joint venture is a joint arrangement which is structured through a separate vehicle over which the Company has joint control together with other parties and only has rights to the net assets of the arrangement based on legal forms, contractual terms and other facts and circumstances. Associates are the investees that the Company has significant influence on their financial and operating policies. | |
| Investments in subsidiaries are presented in the Company’s financial statements using the cost method, and are adjusted to the equity method when preparing the consolidated financial statements. Investments in a joint venture and associates are accounted for using the equity method. | |
| (1) | Recognition of initial investment cost |
| (a) | Long-term equity investment formed by business combination |
| For long-term equity investment acquired by business combination involving enterprises under common control, the book value of assets and liabilities of the combined party in the consolidated financial statements of the ultimate controlling party as at the date of combination (including the goodwill formed by the ultimate controlling party's acquisition of the combined party) is recognized as investment cost. For long-term equity investment formed by combination, the share of the book value of shareholders’ equity of the combined party acquired on the date of combination is recognized as initial investment cost. The difference between the initial investment cost and assets paid as the consideration for combination, the book value of liabilities incurred or assumed and the total par value of shares issued, is used to adjust capital reserve, and when the capital reserve is insufficient, it is used to adjust retained earnings. | |
| For long-term equity investment acquired by business combinations involving enterprises not under common control, the combination cost is recognized as investment cost of the long-term equity investment. The combination cost is the fair value of assets paid, the liabilities incurred or assumed, and the equity securities issued to acquire the control of acquired party on the date of acquisition. The difference between the higher combination cost and lower fair value of identifiable net assets of the acquired party acquired in the combination is recognized as goodwill; the difference between the lower combination cost and higher fair value of identifiable net assets of the acquired party acquired in the combination is included in the current profit and loss after review. For business combination involving enterprises not under common control realized step by step through multiple transactions, the sum of the book value of equity investment held by the acquirer before the date of acquisition and the new investment cost on the date of acquisition is recognized as initial investment cost, and the combination cost includes the sum of assets paid, the liabilities incurred or assumed by the acquirer, and the fair value of equity securities issued. | |
| (b) | Long-term equity investment acquired by other means |
| For long-term equity investment acquired by cash payment, the actual acquisition price is recognized as initial investment cost. The initial investment cost includes expenses, taxes and other necessary expenses directly related to the acquisition of the long-term equity investment; the transaction costs incurred when issuing or acquiring the own equity instruments of acquirer attributed directly to equity transactions can be deducted from the equity. | |
| For long-term equity investment acquired by issuing equity securities, the fair value of equity securities issued is recognized as initial investment cost. |
| III | Significant accounting policies and accounting estimates (continued) |
| 16 | Long-term equity investments (continued) |
| Provided that the non-monetary asset exchange contains commercial substance and the fair value of the assets received or assets surrendered can be reliably measured, the initial investment cost of the long-term equity investment received with non-monetary assets is determined based on the fair value of the assets surrendered, except that there is conclusive evidence indicates that the fair value of assets received is more reliable. For non-monetary assets that do not satisfy the above condition, the book value of assets surrendered and related taxes and fees payable are recognized as the initial investment cost of the long-term equity investment. | |
| The initial investment cost of a long-term equity investment acquired by debt restructuring is determined on the basis of fair value. | |
| (2) | Subsequent measurement and recognition of related profit and loss |
| (a) | Subsequent measurement |
| The Company adopts the cost method to account for the long-term equity investments under the control of investee, and the consolidated financial statements are adjusted in accordance with the equity method in preparation. | |
| The Company adopts the equity method to account for the long-term equity investments in associates and joint ventures. The difference between the higher initial investment cost and the fair value share of identifiable net assets of the investee enjoyed in the investment is not used to adjust the initial investment cost of the long-term investment; the difference between the lower initial investment cost and the fair value share of identifiable net assets of the investee enjoyed at the time of conducting the investment is included in the current profit and loss. | |
| (b) | Recognition of profit and loss |
| Under the cost method, in addition to the actual payment or the cash dividends or profits included in the consideration that have been declared but not yet paid, the Company recognizes the investment income according to the cash dividends or profits that the investee declared to pay. | |
| Under the equity method, when the investment enterprise confirms that it should enjoy the net profit or net loss of the investee, it should adjust the net profit of the investee based on the fair value of identifiable assets of the investee at the time of conducting the investment before the confirmation, and the part of profit and loss of internal transaction between the investor and associates and joint venture that should be attributed to the investor according to the shareholding ratio, should be offset, and the investment profit and loss should be confirmed on this basis. When the Company confirms that it should assume the loss occurred by the investee, the process hereunder is followed: first, the book value of the long-term equity investment is offset. Secondly, if the book value of the long-term equity investment is insufficient for the offset, the investment loss is continued to be recognized, and the book value of long-term receivable items is offset, subject to other book value of the long-term equity that substantially constitutes the net investment of the investee. Finally, after the above-mentioned treatment, if the Company still bears additional obligations in accordance with the investment contract or agreement, the provisions are recognized according to the estimated obligations and included in the current investment losses. | |
| If the investee realizes profit in the future period, the Company shall, after deducting the unconfirmed loss share, conduct the process in the reverse order of the above to write down the book balance of the confirmed liabilities and recover other long-term equity that substantially constitute net investment of the investee and the book value of the long-term equity, and recognize the profit as return on investment. | |
| Other changes in the owner's equity other than net profit or loss, other comprehensive income and profit distribution of the investee, are used to adjust the book value of the long-term equity investment and included in capital reserve. The unrealized profit and loss from internal transactions between the Company and the investee attributed to the Company according to the shareholding ratio, is offset, and the investment profit and loss is recognized on this basis. In respect of the internal transaction losses incurred by the Company and the investee, for the part recognized asset impairment losses, the corresponding unrealized losses are not offset. |
| III | Significant accounting policies and accounting estimates (continued) |
| 16 | Long-term equity investments (continued) |
| (3) | Step-by-step disposal of investment in subsidiaries |
| When the terms, conditions and economic influence of transactions of the equity investment of the subsidiary conform to one or more of the following, accounting for multiple transactions is treated as a package transaction: | |
| (a) | These transactions are made simultaneously or with consideration of influence on each other; |
| (b) | These transactions can only achieve a complete business outcome as a whole; |
| (c) | The occurrence of a transaction depends on the occurrence of at least one of the other transaction; |
| (d) | A transaction alone is uneconomical, but is economical when considered together with other transactions. |
| When an enterprise loses control over the original subsidiary due to disposal of part of the equity investment or other reasons, if the transactions do not belong to a package transaction, the accounting treatment of individual financial statements and consolidated financial statements should be distinguished as follows: | |
| (a) | In the individual financial statements, the disposed equity should be accounted for in accordance with the “Accounting Standards for Business Enterprises No. 2 – Long-term Equity Investment”; meanwhile, the remaining equity should be recognized as long-term equity or other related financial assets based on its book value. If the remaining equity after disposal can be used to exercise common control or significant influence on the original subsidiary, it shall be accounted for in accordance with the relevant provisions on the conversion of the cost method into the equity method. |
| (b) | In the consolidated financial statements, the remaining equity should be re-measured in accordance with its fair value on the date of loss of control. The difference between the sum of the consideration acquired from the disposal of the equity and the fair value of the remaining equity, less the share of net assets of the original subsidiary that should be enjoyed in accordance with the original share-holding ratio from the date of acquisition, is included in the current profit and loss of the period in which loss of control occurred. Other comprehensive income related to the original subsidiary's equity investment should be converted into current investment income when control is lost. The Company shall disclose in the notes the fair value of the remaining equity after disposal on the date of loss of control and the amount of relevant gains or losses arising from the disposal remeasured based on the fair value. |
| If the transactions of disposal of equity investment in a subsidiary until the loss of control is a package transaction, the accounting treatment of individual financial statements and consolidated financial statements should be distinguished as follows: : | |
| (a) | In the individual financial statements, the difference between each disposal price and the book value of the long-term equity investment corresponding to the disposed equity before the loss of control is recognized as other comprehensive income, and transferred to the current profit and loss of the period in which the loss of control occurred; |
| (b) | In the consolidated financial statements, the difference between each disposal price and the disposal of investment corresponding to the share of the net assets of the subsidiary before the loss of control is recognized as other comprehensive income, and transferred to the current profit and loss of the period in which the loss of control occurred. |
| III | Significant accounting policies and accounting estimates (continued) |
| 16 | Long-term equity investments (continued) |
| (4) | Basis for determining control, common control and significant influence on the investee |
| Control means having the power of control over the investee, enjoying variable returns by participating in the relevant activities of the investee, and having the ability to use the power over the investee to influence the amount of returns. | |
| Common control means the control that is common to an arrangement in accordance with the relevant agreement, and the decisions of relevant activities of the arrangement must be made upon agreement of the Company and other parties sharing the control rights. | |
| Significant influence means the power to participate in the decision-making of the financial and operating policies of the investee, but by which cannot control or commonly control together with other parties the formulation of the policies. | |
| (5) | Impairment test and allowance for impairment |
| On the balance sheet date, if there is any indication that the long-term equity investment is impaired due to continuous decline in the market price or deterioration of operating conditions of the investee, the recoverable amount of long-term equity investment is determined according to the net value of a single long-term equity investment less the disposal expenses or the present value of expected future cash flows of the long-term equity investment, whichever is higher. When the recoverable amount of the long-term equity investment is lower than the book value, the book value of assets is written-off to the recoverable amount, and the amount written-down is recognized as asset impairment losses, which is included in the current profit and loss, and the corresponding allowance for asset impairment is made. | |
| For long-term equity investments without significant influence or quotation in an active market and whose fair value cannot be measured in a reliable way, the impairment loss is determined by the difference between the book value and the present value determined by discounting the future cash flows of similar financial assets at the current market rate of return. | |
| Other long-term equity investments with signs of impairment other than goodwill arising from business combination, if the measurement of recoverable amount indicates that the recoverable amount of the long-term equity investment is lower than its book value, the difference is recognized as impairment losses. | |
| Goodwill arising from a business combination is tested for impairment annually, regardless of whether there is any indication of impairment. | |
| Once the impairment loss of long-term equity investment is confirmed, it will not be reversed. | |
| 17 | Investment property |
| The Company's investment property means the property held for the purpose of earning rent or capital appreciation, or both, including the land use rights that have been leased, the land use rights that are held for transfer upon appreciation, and the leased buildings. In addition, for the vacant buildings held by the Company for the purpose of leases, if the Board of Directors makes a written resolution that expressly indicates that the buildings will be used for leases and the intention of holding will not change in a short-term, the building will also be reported as investment property. | |
| The Company adopts the cost model for subsequent measurement of investment property. For the purpose of depreciation or amortization method, the same amortization policy adopted for buildings as fixed assets and land use rights as intangible assets are used. |
| III | Significant accounting policies and accounting estimates (continued) |
| 18 | Fixed assets |
| (1) | Recognition criteria for fixed assets |
| Fixed assets mean tangible assets held for the purpose of producing goods, rendering of services, leases or operation management, whose service life is more than one fiscal year. Fixed assets satisfying the following conditions are recognized: | |
| (a) | The economic benefits associated with the fixed assets are likely to flow into the enterprise; |
| (b) | The cost of the fixed asset can be measured in a reliable way. |
| The Company's fixed assets are classified into buildings, machinery and equipment, office and electronic equipment, transportation vehicles and fixed assets renovation in line with capitalization conditions. Where each component of a fixed asset with a different service life provides economic benefits to the Company in different ways and applies different depreciation rates, it is recognized as a single fixed asset. | |
| Fixed assets are initially measured at cost. The cost of purchasing fixed assets includes the purchase price, related taxes, and other expenses attributable to the fixed asset before it is ready for the intended use, such as the expenses on transportation, handling, installation and professional services, etc. When determining the cost of fixed assets, discard expenses should be considered. Subsequent expenditures related to fixed assets that satisfy the recognition criteria of fixed assets are included in the cost of fixed assets; otherwise, they are recognized in profit and loss in the period in which they arise. | |
| (2) | Recognition and initial measurement of fixed assets under a financing lease |
| If one of the following conditions specified in the terms of the lease agreement of an asset singed between the Company and the leasing party, it is recognized as an asset under financing lease: | |
| (a) | The ownership of the leased asset is attributable to the Company upon the expiry of lease; |
| (b) | The Company has the option to purchase the asset, and the purchase price is much lower than the fair value of the asset when the option is exercised; |
| (c) | The lease term represents the majority of the service life of the leased asset; |
| (d) | The present value of the minimum lease payments on the lease start date is not significantly different from the fair value of the asset. |
| On the date of the lease starts, the Company recognizes the fair value of the leased asset or the present value of the minimum lease payment as the book value of the leased asset, whichever is lower, and recognizes the minimum lease payment amount as the book value of the long-term payable, the difference is recognized as unconfirmed financing costs. Unrecognized financing expenses are apportioned over the lease term by the effective interest method. | |
| III | Significant accounting policies and accounting estimates (continued) | |||
| 18 | Fixed assets (continued) | |||
| (3) | Depreciation method for fixed assets | |||
| Fixed assets are depreciated by the straight-line method. The depreciation rate of various fixed assets is determined according to the estimated service life and estimated residual value (the estimated residual value is 0-10% of the original value). The depreciation rate of classified fixed assets is as follows: | ||||
| Asset Category | Estimated Service Life | Annual Depreciation Rate | ||
| Houses and buildings | 20-50 years | 2-5% | ||
| Machinery and equipment (exclude mold) | 5-18 years | 5-20% | ||
| Mold (with benefit period more than one year) | 1-3 years | 33-100% | ||
| Office and electronic equipment | 3-22 years | 4-33% | ||
| Transportation equipment | 4-8 years | 12-25% | ||
| Other devices | 4-5 years | 20-25% | ||
| Power stations | 25 years | 4% | ||
| Fixed assets renovation is amortized evenly over the benefit period. | ||||
| All fixed assets are subject to depreciation, except for fixed assets that have been fully depreciated and continue to be used, and the land that is priced and recorded separately. Fixed assets are depreciated on a monthly basis. Fixed assets added are not depreciated in the current month when being added but from the following month; fixed assets reduced are still depreciated in the current month when being reduced, and no depreciation is made from the following month. Fixed assets that are not profitable for the Company or not used temporarily (other than seasonally deactivated) are recognized as idle fixed assets. The estimated life expectancy and depreciation rate of idle fixed assets should be re estimated, and depreciation is directly included in the current profit and loss. | ||||
| 19 | Construction in progress |
| Construction in progress refers to the necessary expenses incurred by the Company for the purchase and construction of fixed assets or investment property before being ready for the expected usable status, including engineering materials costs, labor costs, related taxes and fees, borrowing costs that should be capitalized and indirect costs that should be apportioned. Construction in progress is accounted for separately according to individual projects. | |
| After the construction in progress is ready for its intended use, it must be transferred to fixed assets or investment property, whether the final accounting procedures are completed or not. |
| III | Significant accounting policies and accounting estimates (continued) |
| 20 | Borrowing costs |
| Borrowing costs refer to interest and other related costs incurred by the Company as a result of borrowings, including interest on borrowings, amortization of discounts or premiums, ancillary expenses, and exchange differences arising from foreign currency borrowings. | |
| Borrowing costs that can be directly attributable to the acquisition, construction or production of assets eligible for capitalization are capitalized and included in the relevant asset cost. Other borrowing costs are recognized as expenses in the period in which they are incurred, and are included in the current profit and loss. Assets eligible for capitalization refer to fixed assets, investment property and inventories (only refers to inventories with an acquisition, construction and production process for more than one year) that require a substantial period of acquisition, construction or production activities to get ready for the intended use or sale status. | |
| Borrowing costs refer to the interest of borrowings, the amortization of discounts or premiums, auxiliary expenses and exchange differences arising from foreign currency borrowings incurred by the Company. Borrowing costs begin to be capitalized when the following three conditions are all satisfied: | |
| (1) | Asset expenditure has occurred; |
| (2) | Borrowing costs have occurred; |
| (3) | The acquisition, construction or production activities necessary to enable the assets to be ready for the intended usable or saleable state have commenced. |
| When an asset satisfied the capitalization conditions is abnormally interrupted during the process of acquisition, construction or production and the interruption period lasts for more than three months, the capitalization of the borrowing costs is suspended and recognized as the current expenses until the acquisition, construction or production of the assets starts again. When an asset satisfied the capitalization conditions is ready for its intended use or sale, the capitalization is stopped and the borrowing costs incurred in the future are included in the current profit and loss. The period of capitalization refers to the period from the time when the borrowing costs start to be capitalized to the point when the capitalization is stopped, and the period in which the borrowing costs are suspended for capitalization is not included. | |
| During the period of capitalization, if special borrowings are made for the acquisition, construction or production of assets eligible for capitalization, the amount of the interest expenses actually incurred during the current period of the special borrowings, less the amount of interest income earned by depositing unused borrowing funds in a bank or investment income earned by temporary investment, is recognized as the amount of capitalization. When a general loan is occupied for the purpose of purchasing, constructing or producing assets satisfied the capitalization conditions, the amount of capitalization is determined according to the weighted average of the accumulated asset expenditure exceeding the special loan portion multiplied by the capitalization rate of the general loan occupied; the capitalization rate is determined based on the weighted average interest rate of general borrowings. |
| III | Significant accounting policies and accounting estimates (continued) | |
| 21 | Intangible assets | |
| Intangible assets are recorded at the actual cost at the time of acquisition. The service life of intangible assets is analyzed and judged at the time of acquisition. Intangible assets with a finite service life are amortized on the shortest of the estimated service lives, the beneficial period of the contract and the effective period specified by law from the time when the intangible assets are available for use. The amortization period is as follows: | ||
| Category | Amortization years | |
| Land use rights | The shorter of the years of the land use rights and the operating years of the Company | |
| Patents and non-patent technologies | 10 years or the shorter of service life, beneficiary years and legally valid years | |
| Other | Beneficiary period | |
| The Company reviews the service life and amortization method of intangible assets with limited service life at least at the end of each year, and made adjustment if necessary. | ||
| If an intangible asset is unforeseen to bring economic benefits to the Company, it is regarded as an intangible asset with an indefinite service life, which will be reviewed in each accounting period. If there is evidence indicates that the service life of the intangible asset is limited, then it is converted to an intangible asset with limited service life. Intangible assets with indefinite service lives are not amortized. | ||
| The expenditures of the Company's internal research and development projects are classified into expenditures in the research phase and expenditures in the development phase. Research means an original, planned survey of acquiring and understanding new scientific or technical knowledge. Development means the application of research results or other knowledge to a plan or design to produce new or substantially improved materials, devices, products, etc. prior to commercial production or use. | ||
| The expenditures in the research phase of the Company's internal research and development projects are included in the current profit and loss when incurred; expenditures in the development phase are recognized as intangible assets only when the following conditions are all satisfied: | ||
| (1) | It is technically feasible to complete the intangible asset to enable it to be used or sold; | |
| (2) | There is intent to complete the intangible asset and use or sell it; | |
| (3) | The intangible assets can bring economic benefits; | |
| (4) | There are sufficient technical, financial and other resources to support the development of the intangible assets as well as ability to use or sell the intangible assets; | |
| (5) | Expenditures attributable to the development stage of the intangible asset can be measured in a reliable way. | |
| If the above conditions cannot be all satisfied, the expenditures are included in the current profit and loss when incurred. | ||
| III | Significant accounting policies and accounting estimates (continued) |
| 22 | Long-term prepaid expense |
| Long-term prepaid expenses refer to various expenses that the Company has paid and whose period of amortization is more than one year, such as the improvement expenses incurred in renting fixed assets by operating leases. Long-term prepaid expenses are amortized on a straight-line basis within the beneficial period of the expense items. |
| 23 | Impairment of long-lived assets |
| The impairment of assets other than inventories, financial assets and deferred income tax assets is determined by the Company as follows: | |
| On the balance sheet date, if there is evidence indicates that the asset is idle, there is a use termination plan or the market price drops sharply, or the external environment changes significantly, impairment test should be conducted. The difference between the recoverable amount of the asset and its book value is recognized as impairment loss and included in the current profit and loss, and corresponding allowance for asset impairment is made. For the goodwill formed by business combination and the intangible assets with indefinite service life, impairment test is carried out every year regardless of whether there is any indication of impairment. The recoverable amount is determined based on the net amount of fair value of assets less the disposal expenses, or the present value of estimated future cash flows of the assets, whichever is lower. The Company estimates the recoverable amount based on the individual assets. If it is difficult to estimate the recoverable amount of the individual assets, the recoverable amount of the asset is determined based on the asset group to which the asset belongs. After the asset impairment loss is recognized, the depreciation or amortization expense of the impaired assets will be adjusted accordingly in the future period. | |
| Once the asset impairment loss is confirmed, it cannot be reversed in the future accounting period. | |
| Treatment of goodwill impairment: in the impairment test of goodwill, the book value of goodwill is apportioned to the asset group or asset group portfolio expected to benefit from the synergy of business combination, and the book value of goodwill is apportioned to the relevant asset group or asset group combination in a reasonable way. In the case of impairment test, the asset group or asset group portfolio that does not contain goodwill is tested for impairment first to confirm the corresponding asset impairment loss, and then the asset group or asset group containing goodwill is tested for impairment to confirm the corresponding goodwill impairment loss. | |
| 24 | Asset transfer with repurchase conditions |
| When the Company sells products or transfers other assets, it signs a product or a transfer asset repurchase agreement with the purchaser, and determines whether the sales commodity satisfies the revenue recognition conditions according to the terms of the agreement. If the after-sales repurchase is a financing transaction, the Company does not recognize the sales revenue when the product or asset is delivered. If the repurchase price is greater than the difference between the sales prices, interest of the difference is accrued on time during the repurchase period, and included in finance costs. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 25 | Provisions |
| When the Company is involved in any litigation, debt guarantee, contract loss or reorganization, which is likely in need of future delivery of assets or rendering of services, and the amount of which can be measured in a reliable way, it is recognized as provisions. | |
| (1) | Recognition criteria of provisions |
| When an obligation related to the contingent events satisfies all the following conditions, it is recognized by the Company as provisions: | |
| (a) | The obligation is the current obligation of the Company; |
| (b) | The fulfillment of the obligation is likely to cause economic benefits to flow out of the Company; |
| (c) | The amount of the obligation can be measured in a reliable way. |
| (2) | Measurement of provisions |
| The provisions of the Company are initially measured on the basis of the best estimate of the expenditure required to perform the relevant current obligations. | |
| When determining the best estimate, the Company considers factors such as risks, uncertainties and time value of money related to contingent events. Where the time value of money has a significant impact, the best estimate is determined by discounting the relevant future cash outflows. | |
| The best estimates are handled as follows: | |
| In case that there is a continuous range (or interval) of required expenditures, within which the possibility of occurrence of various results is the same, the best estimate is determined by the average of the middle value of the range, that is, the average of the upper and lower limits. | |
| In case that there is no continuous range (or interval) of required expenditures, or there is a continuous range but the possibility of various results in the range is different, if the contingency involves a single item, the best estimate is determined based on the most probable amount; if a contingency involves multiple items, the best estimate is determined based on various possible outcomes and associated probabilities. | |
| If all or part of the expenses required by the Company to settle the provisions are expected to be compensated by a third party, the compensation amount is separately recognized as an asset when it is basically confirmed to be received, and the recognized compensation amount should not exceed the book value of provisions. | |
| 26 | Contract liabilities |
| The Company recognizes as contract liabilities the part of the obligation to transfer the goods to the customer due to received or receivable consideration from the customer. |
| III | Significant accounting policies and accounting estimates (continued) |
| 27 | Employee benefits |
| Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits provided in various forms of consideration in exchange for service rendered by employees or compensations for the termination of employment relationship. | |
| (a) | Short-term employee benefits |
| Short-term employee benefits include employee wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs, and short-term paid absences. The employee benefit liabilities are recognized in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. Non-monetary benefits are measured at their fair value. | |
| (b) | Post-employment benefits |
| The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. Defined contribution plans are post-employment benefit plans under which the Company pays fixed contributions into a separate fund and will have no obligation to pay further contributions; and defined benefit plans are post-employment benefit plans other than defined contribution plans. During the Reporting Period, the Company’s defined contribution plans mainly include basic pensions and unemployment insurance. | |
| (c) | Termination benefits |
| If the Company terminates the labor relationship with an employee before the labor contract expires, or offers compensation for encouraging the employee to accept the redundancies voluntarily, the liabilities arising from the termination of labor relations with the employee is determined, and also included in the current profit and loss, at the time when the group cannot unilaterally withdraw the termination of the labor relationship plan or redundancies proposal, or the time when the cost associated with reorganization involving payment of termination benefits is confirmed, whichever is earlier. | |
| (d) | Other long-term employee benefits |
| Other long-term employee benefits refer to all employee benefits except short-term employment benefits, post-employment benefits and termination benefits. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 28 | Share-based payments |
| The share-based payments of the Company are mainly equity-settled share-based payments, and only allow to be exercised by employees after the completion of their services in the waiting period. On each balance sheet date in the waiting period, based on the best estimate of the number of vesting equity instruments, the services obtained in the current period are included in the relevant costs or expenses and capital reserve based on the fair value at the grant date of the equity instruments. | |
| The fair value of equity instruments is determined by the external appraiser or management based on the binomial distribution method. The best estimate of the vesting equity instrument is determined by the management based on historical statistics on the vesting weights and turnover rates on the balance sheet date. | |
| Equity-settled share-based payments are measured based on the fair value of the equity instruments granted to employees. In case that the vesting right is available immediately after the grant, it is included in relevant cost or expense based on the fair value of the equity instrument on the grant date, and the capital reserve is increased accordingly. In case that the vesting right is available after the completion of services in the waiting period or satisfaction of stipulated performance conditions, on each balance sheet day during the waiting period, the services acquired in the current period are included into the relevant costs or expenses and capital reserve on the basis of the best estimate of the number of feasible equity instruments and at the fair value of the date on which the equity instruments are granted. No adjustments are made to the identified related costs or expenses or total owner's equity after the vesting date. | |
| 29 | Revenue recognition (applicable before 31 December 2019) |
| Revenue is recognized only when economic benefits are likely to flow in and the amount of income and associated costs can be measured in a reliable way, and the following conditions are all satisfied: | |
| (1) | Sales of goods |
| The Company has transferred the main risks and rewards of ownership of the goods to the purchaser, and no longer retains any continuing management right or effective control of the goods, which are usually linked to the ownership, and recognizes the realization of sales revenue of the goods. | |
| (2) | Sales of property development products |
| The realization of sales revenue is recognized when the sales of property is completed and acceptance of the property is qualified, the terms of delivery stipulated in the sales contract are satisfied, and the buyer has obtained the certificate of payment for the delivery of the property stipulated in the sales contract (usually the first payment of the sales contract is received and the payment arrangement of the remaining payment is confirmed). | |
| (3) | Rendering of services |
| In the case that the transaction results of service rendering can be estimated in a reliable way, the Company confirms the relevant labor revenue according to the percentage of completion method on the balance sheet date; otherwise, the revenue is recognized based on the amount of labor costs that have occurred and are expected to be compensated. | |
| (4) | Interest income |
| Accounted for according to the time and effective interest rate of the Company's monetary assets used by others. |
| III | Significant accounting policies and accounting estimates (continued) |
| 29 | Revenue recognition (continued) |
| (5) | Royalties income |
| Accounted for according to the time and method of charging as stipulated in the relevant contract or agreement. | |
| 30 | Revenue recognition (applicable from 1 January 2020) |
| The Company shall recognize the revenue according to the transaction price assigned to the performance obligation when any due performance obligation is fulfilled (namely when the client obtains the control over relevant commodities or services). | |
| (1) | General principles applied to revenue recognition |
| The Company shall recognize the revenue according to the transaction price assigned to the performance obligation when any due performance obligation is fulfilled (namely when the client obtains the control over relevant commodities or services). Performance Obligation means that, under the contract, the Company promises to transfer commodities or services that can be clearly distinguished to the client. “Obtain the control over relevant commodities or services” refers to the ability to completely dominate the use of commodities and obtain almost all economic benefits. From the contract’s effectiveness date, the Company shall evaluate the contract, recognize each single performance obligation included and determine whether each performance obligation is fulfilled within a certain period or at a time point. | |
| When any of the following conditions is met, for performance obligation to be fulfilled within a certain period, the Company shall recognize corresponding revenue within the period as scheduled: | |
| (a) | While fulfilling the due obligation in the Company, the client obtains and consumes the resulting economic benefit; |
| (b) | The client is able to control the commodities under construction during the Company’s fulfillment; |
| (c) | Commodities generated from the Company’s fulfillment possess irreplaceable purpose and the Company has the right to charge all fulfilled performance obligations within the whole contract period; otherwise, the Company shall recognize corresponding revenue when the client obtains the control over relevant commodities or services. |
| For any performance obligation with a certain period, the Company shall apply the output method/input method to determine the appropriate fulfillment schedule based on the specific nature of commodities and services. The output method is to determine the fulfillment schedule according to the value of commodities transferred to the client (while the input method is to determine the fulfillment schedule according to the Company’s input to fulfill the performance obligation). If the fulfillment schedule cannot be reasonably determined and the Company’s cost is predicted to be compensated, corresponding revenue shall be recognized based on the specific cost amount till the fulfillment schedule could be reasonably determined. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 30 | Revenue recognition (continued) |
| (2) | Principles of handling revenues from specific transactions |
| (a) | For the contract containing the sales return article: When the client obtains the control over relevant commodities, corresponding revenue shall be recognized according to the consideration amount (excluding the amount predicted to be returned due to sales return) predicted to be duly charged from transferring commodities to the client, and corresponding liabilities shall be recognized based on the amount predicted to be returned due to sales return. Meanwhile, when commodities are sold, the balance through deducting the predicted cost from taking back commodities from the book value of commodities predicted to be returned (including the impairment of value of returned commodities) shall be checked and calculated under “Returned Commodities Cost Receivable”. |
| (b) | For the contract containing the quality assurance article: it’s required to evaluate whether the quality assurance involves any separable service except for the promise (to the client) that commodities conform to established standards. If the Company provides additional service, it shall be deemed as a single performance obligation and subject to the accounting treatment according to relevant revenue criteria provisions; otherwise, the quality assurance liability shall be subject to the accounting treatment according to the accounting criteria provisions on Contingency. |
| (c) | For the sales contract containing the client’s additional purchase option: the Company shall evaluate whether the option provides the client with any significant right. If any, it shall be deemed as a single performance obligation and the transaction price shall be apportioned to the performance obligation, and corresponding revenues shall be recognized when the client executes the purchase option right and obtains the control over relevant commodities in the future or when the option becomes invalid. If the separable selling price applied to the client’s additional purchase option right cannot be directly observed, it’s required to comprehensively consider the difference in discounts between the client’s execution of option right and the client’s non-execution of option right and analyze the possibility for the client to execute the option right and other relevant information. Then, corresponding reasonable estimate shall be made. |
| (d) | The contract licensing the IP right to the client: It’s required to evaluate whether the IP right license constitutes any single performance obligation; if any, it is necessary to determine whether the performance obligation fulfillment is fulfilled within a certain period or at a time point. If any IP right license is granted to the client and royalties are charged based on the client’s actual sales or usage, corresponding revenues shall be recognized at a later time between the following dates: the day when the client’s subsequent selling or usage occurs; the day when the Company fulfills relevant performance obligation. |
| (3) | Specific revenue recognition method |
| (a) | Product sales contract |
| According to the contract terms, for the selling of products subject to performance obligation fulfillment conditions at a time point and other products, the Company shall recognize the realization of sales revenues when the client obtains the control over relevant commodities or services according to the delivery condition agreed in the sales contract upon signed by the client after commodities are received. | |
| (b) | Technical service contract |
| The Company shall recognize corresponding revenues by using the straight line method within the lease term agreed in the lease contract. | |
| (c) | Royalties income |
| If revenues are recognized within a certain period based on the technical service contract, corresponding revenues shall be recognized according to the performance schedule. |
| III | Significant accounting policies and accounting estimates (continued) |
| 30 | Revenue recognition (continued) |
| (3) | Specific revenue recognition method (continued) |
| (d) | Revenue from photovoltaic power stations |
| a. Centralized power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on power supply provided by the business departments of the Company, after the duration of continuous and trouble-free operation specified by the electric power company is met. b. Distributed power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on settlement provided by the business departments of the Company. | |
| 31 | Contract cost |
| (1) | Contract performance cost |
| For the cost resulting from performing the contract which is not included in other ASBE except the revenue standards and meets the following conditions, the Company shall recognize it as an asset： | |
| (a) | The cost is directly related to a current or predicted contract, including the direct labor, direct material and manufacturing expenses (or similar expenses), the cost borne by the client and other costs resulting from the contract; |
| (b) | The cost adds various resources that can be applied by the Company to fulfill due performance obligations. |
| (c) | The cost is predicted to be recovered. |
| The asset shall be presented and reported in inventory or other non-current assets, which depends on whether the amortization period exceeds a normal operating cycle during the initial recognition. | |
| (2) | Contract acquisition cost |
| If the increment cost resulting from the Company’s acquisition of contract is predicted to be recovered, it shall be recognized as an asset as the contract acquisition cost. Increment Cost refers to the cost which only results from the contract acquisition, like the sales commission. If the amortization period is less than one year, it shall be included in current profit and loss. | |
| (3) | Contract cost amortization |
| The asset related to the contract cost shall adopt the same basis for the recognition of commodities or services revenues related to the asset, be amortized during the period of fulfilling the performance obligation or according to the fulfillment schedule and be included into current profit and loss. | |
| III | Significant accounting policies and accounting estimates (continued) | |
| 31 | Contract cost (continued) | |
| (4) | Impairment of contract cost | |
| For the asset related to the contract cost as mentioned above, if the book value is higher than the difference between the residual consideration predicted to be obtained from the Company’s transfer of commodities related to the asset and the cost to be incurred due to such transfer, depreciation reserves shall be calculated and withdrawn for the surplus which shall also be recognized as the asset impairment loss. | ||
| After the impairment allowances are established, if changes in depreciation factors during previous periods have made the above different higher than the asset’s book value, it shall be restituted to previously established asset impairment allowances and included in current profit and loss. However, the book value of restituted asset shall not exceed the book value of the asset on the date of restitution without establishing impairment allowances. | ||
| 32 | Government grants | |
| (1) | Category | |
| Government grants are transfers of monetary or non-monetary assets from the government to the Group at nil consideration. According to the grants targets stipulated in the relevant government documents, government grants are classified into government grants related to assets and government grants related to income. | ||
| (2) | Recognition of government grants | |
| If a government grant is a monetary asset, it is measured at the amount received or receivable. If a government grant is a non-monetary asset, it is measured at fair value. If the fair value cannot be obtained in a reliable way, it is measured at the nominal amount (RMB1). Government grants measured at nominal amounts are recognized directly in the current profit and loss. | ||
| (3) | Accounting treatment | |
| Government grants related to assets offset the book value of the underlying assets. | ||
| If the government grants related to income are used to compensate related costs or losses in the subsequent period, it is recognized as deferred income and included in the current profit and loss or offset costs in the period in which the related costs or losses are recognized; government grants used to compensate costs or losses incurred by the enterprise are directly included in the current profit or loss or offset related costs. For government grants related to the daily activities of the enterprise, the R&D and VAT-related subsidies are included in other income; other government grants offset related costs according to the nature of economic activities. Government grants not related to daily activities of the Company are included in the non-operating income and expenditure. For preferential loans for policy discount, if the government finance department appropriates the discounted funds to the lending bank, the borrowing cost is accounted for according to the principal of the loan and the policy preferential interest rate, with the amount actually received as the entry value of the loan. If the government finance department directly appropriates the interest grant funds to the Company, the grants offset the related borrowing costs. | ||
| In case that a confirmed government grant is required to be returned, the book value of the asset is adjusted if the book value of relevant assets is offset at the initial recognition; if there is related deferred income, the book balance of deferred income is offset, and the excess is included in the current profit and loss; in case of other circumstances, it is directly included in the current profit and loss. | ||
| III | Significant accounting policies and accounting estimates (continued) |
| 33 | Deferred income tax assets and deferred income tax liabilities |
| The income taxes of the Company include current income tax and deferred income tax. Both current income tax and deferred income tax are recognized in the current profit and loss as income tax expense or gain, except for the following: | |
| (1) | Adjusting goodwill due to income tax arising from business combination; |
| (2) | Income tax related to transactions or events directly included in shareholders' equity is included in shareholders’ equity. |
| On the balance sheet date, the Company recognizes the deferred income tax assets or deferred income tax liabilities in accordance with the balance sheet liability method on temporary differences between the book value of assets or liabilities and their tax base. | |
| The Company recognizes all taxable temporary differences as deferred tax liabilities except the taxable temporary differences incurred in the following transactions: | |
| (1) | Initial recognition of goodwill; or initial recognition of assets or liabilities arising from transactions with the following characteristics: the transaction is not a business combination, and does not affect the accounting profits or the amount of taxable income when occurs; |
| (2) | For taxable temporary differences related to investments in subsidiaries, associates and joint ventures, the timing of the reversal of the temporary differences can be controlled and the temporary differences are unlikely to be reversed in the foreseeable future. |
| The Company recognizes deferred income tax assets arising from deductible temporary differences, subject to the amount of taxable income likely to be obtained to offset the deductible temporary differences, except the deductible temporary differences incurred in the following transactions: | |
| (1) | The transaction is not a business combination, and does not affect the accounting profits or the amount of taxable income when occurs; |
| (2) | The deductible temporary differences related to investment in subsidiaries, associates and joint ventures cannot satisfy all the following: the temporary differences are likely to be reversed in the foreseeable future and are likely to be used for deduction of deductible taxable income for temporary differences in the future. |
| On the balance sheet date, the Company measures the deferred income tax assets and deferred income tax liabilities according to the tax law based on the applicable tax rate during the period of expectation of recovering the assets or paying off the liabilities, and reflects the income tax impact of the expected recovery of assets or liquidation of liabilities on the balance sheet date. | |
| On the balance sheet date, the Company reviews the book value of deferred income tax assets. If it is probable that no sufficient taxable income will be available in the future to offset the benefits of deferred tax assets, the book value of deferred tax assets is written down. When it is probable that sufficient taxable income will be available, the amount written-down will be reversed. |
| III | Significant accounting policies and accounting estimates (continued) |
| 34 | Leases |
| (1) | Accounting treatment of operating leases |
| (a) | The rental fees paid by the Company for the lease of assets are apportioned on a straight-line basis over the entire lease term without deduction of the rent-free period and included in the current expenses. The initial direct costs associated with the lease transactions paid by the Company are included in the current expenses. |
| When the lessor of an asset bears the expenses related to the lease that should be borne by the Company, the Company deducts the part of the expenses from the total rent. The deducted rental expenses are apportioned during the lease term and included in the current expenses. | |
| (b) | The rental fees charged by the Company for renting out assets are apportioned on a straight-line basis over the entire lease term without deduction of the rent-free period and is recognized as rental income. The initial direct expenses related to lease transactions paid by the Company are included in the current expenses; if the amount is a significant one, it is capitalized and included in the current income in the same period as the lease income is recognized throughout the lease period. |
| When the Company bears the lease-related expenses that should be borne by the lessee, the Company deducts the part of the expenses from the total rental income, and distributes the deducted rental expenses within the lease term. | |
| (2) | Financial leased assets |
| On the date when lease starts, the Company recognizes the fair value of the leased asset or the present value of the minimum lease payment as the book value of the leased asset, whichever is lower, and recognizes the minimum lease payment amount as the book value of the long-term payable, and the difference between the two is recognized as unconfirmed financing expenses. The Company adopts the effective interest rate method to amortize the unrecognized financing expenses during the asset lease period and includes them in financial expenses. | |
| (3) | Financial leasing assets |
| On the date when lease starts, the Company recognizes the receivable of the financial lease, the difference between the sum of unsecured residual value and its present value as unrealized financing income, and recognizes the lease income in the future period of the lease. The initial direct costs incurred by the Company in connection with lease transactions are included in the initial measurement of financial lease receivable, and the amount of income recognized during the lease term is reduced. | |
| 35 | Related parties |
| If one party controls, commonly controls or exerts a significant influence on the other party, and two or more parties are under the control, common control or significant influence of the other party, they constitute related parties. | |
| 36 | Discontinued operations |
| The Company recognizes a component disposed of or classified as a component that can be separately distinguished from the category held for sale and satisfied any of the following as a component of discontinued operations: (1) The component represents an independent major business or a separate major business area; (2) This component is part of a related plan to dispose of an independent major business or a separate major operating area; (3) This component is a subsidiary that is acquired for resale. Operating profit and loss, such as impairment losses for discontinued operations and the amount reversed, and disposal profit and loss are presented in the income statement as profit and loss of discontinued operations. |
| III | Significant accounting policies and accounting estimates (continued) | ||||
| 37 | Changes to major accounting policies and estimates | ||||
| (1) | Changes to accounting policies | ||||
| The Company has adopted since 1 January 2020 the Accounting Standard No. 14 for Business Enterprises-Revenue revised by the Ministry of Finance in 2017. For details of the changed accounting policies, please refer to Item 30 in Note III to the financial statements in this report. | |||||
| As required by the new revenue standard, retained earnings and other relevant financial statement items at the beginning of the period when the new revenue standard was first adopted (1 January 2020) should be adjusted according to the cumulative effects arising from the first adoption of the new revenue standard, and data of the comparable periods should not be adjusted. | |||||
| When executing the new revenue standard, the Company considered adjustments only for the cumulative effects in respect of the outstanding contracts on the date of the standard’s first adoption; and did not make retrospective adjustments in respect of the changes that had occurred to contracts before the beginning of the earliest comparable period or before the beginning of 2020, but according to the final arrangements of the contract changes, identified the fulfilled and unfulfilled performance obligations, determined the transaction price and distributed the transaction price to the fulfilled and unfulfilled performance obligations. | |||||
| The effects of the adoption of the new revenue standard on the presentation of the balance sheet items as at the beginning of the current period are as follows: | |||||
| Item | Carrying amount as per the former revenue standard | Effect of reclassification | Effect of remeasurement | Carrying amount as per the revised revenue standard | |
| Accounts receivable | 8,340,354 | - | (22,728) | 8,317,626 | |
| Inventories | 5,677,963 | - | 45,303 | 5,723,266 | |
| Other non-current assets | 4,250,659 | - | 5,951 | 4,256,610 | |
| Deferred income tax assets | 840,874 | - | (57) | 840,817 | |
| Advances from customers | 141,749 | (138,076) | - | 3,673 | |
| Contract liabilities | - | 124,737 | 25,459 | 150,196 | |
| Taxes and levies payable | 226,806 | - | (118) | 226,688 | |
| Other current liabilities | 69,022 | 13,339 | 3,310 | 85,671 | |
| Retained earnings | 11,115,150 | - | (83) | 11,115,067 | |
| Non-controlling interests | 33,771,198 | - | (99) | 33,771,099 | |
| (2) | Changes to accounting estimates | ||||
| No change occurred to the major accounting estimates in the Reporting Period. | |||||
| 38 | Correction of previous accounting errors | ||||
| No previous accounting errors were identified and corrected in the Reporting Period. | |||||
| IV | Taxes |
| 1 | Value-added tax |
| Starting from 1 April 2019, output tax was calculated at 3%, 5%, 6%, 9% or 13% of the taxable income of general taxpayers and the value added-tax was paid based on the difference after deducting the allowance deduction of input tax in the current period. The value added-tax payment for the Company’s directly exported goods is executed in accordance with the regulations of “Exemption, Offset and Refund”. Starting from 1 April 2019, the tax refund rate is 0%-13%. | |
| 2 | Urban maintenance and construction tax |
| Subject to the relevant tax laws and regulations of the state and local regulations, urban maintenance and construction tax is paid based on the proportion stipulated by the state according to the individual circumstances of each member of the Company. | |
| 3 | Education surcharges |
| Education surcharges are paid according to the individual circumstances of each member of the Company based on the proportion stipulated by the state in accordance with the relevant national tax regulations and local regulations. | |
| 4 | Dike protection fee |
| Dike protection fee is paid according to relevant national tax regulations and local regulations. | |
| 5 | Property tax |
| Property tax is paid on the houses with property rights according to the proportion stipulated by the state in accordance with the relevant national tax regulations and local regulations. | |
| 6 | Corporate income tax |
| The corporate income tax rate for the Company was 25% in the Current Period (2019: 25%). | |
| According to Article 28 of the Enterprise Income Tax Law of the People's Republic of China, a reduced corporate income tax rate of 15% is applied to important high-tech enterprises that the government supports. The following subsidiaries are entitled to tax preferences, overseas subsidiaries adopt the local tax rates, and the other subsidiaries of the Company are all taxed at a rate of 25%. |
| IV | Taxes (continued) | |||
| 6 | Corporate income tax (continued) | |||
| Subsidiaries entitled to tax preferences: | ||||
| Company name | Preferential tax rate | Reason | ||
| TCL China Star Optoelectronics Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Qingdao Blue Business Consulting Co., Ltd. | 15% | High-tech enterprise | ||
| Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Tianjin Huanxin Technology&Development Co., Ltd. | 15% | High-tech enterprise | ||
| Tianjin Huan’Ou Semiconductor Material&Technology Co., Ltd. | 15% | High-tech enterprise | ||
| TianJin Zhonghuan Advanced Material&Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Inner Mongolia Zhonghuan Solar Material Co., Ltd. | 15% | High-tech enterprise | ||
| Huansheng Solar (Jiangsu) Co., Ltd. | 15% | High-tech enterprise | ||
| Zhangjiakou Huan’Ou International New Energy Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. | 15% | High-tech enterprise | ||
| Wuxi Zhonghuan Applied Materials Co., Ltd. | 15% | High-tech enterprise | ||
| Tianjin Huan’Ou International New Energy Technology Co., Ltd. | 15% | High-tech enterprise | ||
| Inner Mongolia Zhonghuan Xiexin Solar Material Co., Ltd. | 15% | Encouraged business in West China | ||
| Shangqiu Yaowei Photovoltaic Power Generation Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Tianjin Huanyu Yangguang New Energy Technology Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Huludao Zhongrun Energy Technology Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Kangbao Huanju New Energy Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Qinhuangdao Tianhui Solar Energy Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Zhonghuan Energy (Inner Mongolia) Co., Ltd. | 12.5% | State-supported public infrastructure project | ||
| Dushan Anju Photovoltaic Technology Co., Ltd. | 7.5% | State-supported public infrastructure project, Encouraged business in West China | ||
| Huhehaote Huanju New Energy Development Co., Ltd. | 7.5% | State-supported public infrastructure project, Encouraged business in West China | ||
| Sonid Left Banner Huanxin New Energy Co., Ltd. | 7.5% | State-supported public infrastructure project, Encouraged business in West China | ||
| Otog Banner Huanju New Energy Co., Ltd. | 7.5% | State-supported public infrastructure project, Encouraged business in West China | ||
| Yixing Huanxing New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Tianjin Binhai Huanneng New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Gaoqing Huanyuan Energy Technology Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Gaoqing Chengguang Energy Technology Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Guyuan Shengju New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| IV | Taxes (continued) | |||
| 6 | Corporate income tax (continued) | |||
| Zhangjiakou Shengyuan New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Ningjin Jinchen New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project | ||
| Ongniud Banner Guangrun New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project, Encouraged business in West China | ||
| Tuquan Guanghuan New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project, Encouraged business in West China | ||
| Inner Mongolia New Huanyu Yangguang New Energy Technology Co., Ltd. | Tax-free | State-supported public infrastructure project, Encouraged business in West China | ||
| Gengma Huanxing New Energy Co., Ltd. | Tax-free | State-supported public infrastructure project, Encouraged business in West China | ||
| Dangxiong Youhao New Energy Development Co., Ltd. | Tax-free | State-supported public infrastructure project, Encouraged business in West China | ||
| Shangqiu Suoguang Energy Technology Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Shangqiu Suoneng Energy Technology Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Shangqiu Suoyuan Energy Technology Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Ulanqab Dishengsheng Energy Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Tongliao Guangdong New Energy Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Alxa League Huanju New Energy Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Jinxiang Haotian New Energy Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Shaanxi Runhuan Tianyu Technology Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| Inner Mongolia Zhonghuan Asset Management Co., Ltd. | 5% | Small meagre-profit enterprise | ||
| 7 | Individual income tax | |||
| Individual income tax of income paid to employees by the Company is withheld by the Company on behalf of employees in accordance with to the relevant national tax regulations. | ||||
| V | Notes to Consolidated Financial Statements | |||
| 1 | Monetary assets | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Cash on hand | 1,189 | 966 | ||
| Ban k deposits | 17,744,850 | 17,636,777 | ||
| Deposits with the central bank | 209,978 | 570,999 | ||
| Interest receivable on deposits | 84,459 | 64,970 | ||
| Other monetary assets | 3,668,429 | 374,473 | ||
| 21,708,905 | 18,648,185 | |||
| Note | Monetary assets with restricted use rights | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| TCL Tech Finance’s statutory reserve deposits with the central bank | 209,978 | 570,999 | ||
| Restricted amount of other monetary assets | 3,206,051 | 374,473 | ||
| Interest receivable on deposits | 84,459 | 64,970 | ||
| 3,500,488 | 1,010,442 | |||
| As at 31 Dec. 2020, the Company's bank deposits of RMB209,978 thousand (31 Dec. 2019: 570,999 thousand) are statutory reserve deposits placed in the central bank by TCL Tech Finance Co., Ltd., a subsidiary of the Company. | ||||
| As at 31 Dec. 2020, the Company's monetary assets abroad amounted to RMB1,131,911 thousand (31 Dec. 2019: RMB523,583 thousand), all of which were owned by the overseas subsidiaries of the Company. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 2 | Held-for-trading financial assets | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Debt instrument investments | 4,628,306 | 5,772,747 | |||
| Equity instrument investments | 671,740 | 302,004 | |||
| 5,300,046 | 6,074,751 | ||||
| 3 | Derivative financial assets | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Foreign exchange forwards | 445,690 | 121,255 | |||
| Interest rate swaps | - | 7,727 | |||
| Others | 7,888 | 30,054 | |||
| 453,578 | 159,036 | ||||
| 4 | Notes receivable | ||||
| (1) | Notes receivable by category | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Bank acceptance notes | 576,468 | 207,713 | |||
| Trade acceptance notes | 19,217 | 21,229 | |||
| 595,685 | 228,942 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||
| 4 | Notes receivable (continued) | |||||||||||
| (1) | Notes receivable by category (continued) | |||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||||
| Gross amount | Allowance for doubtful accounts | Carrying amount | Gross amount | Allowance for doubtful accounts | Carrying amount | |||||||
| Amount | Percentage | Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||
| Notes receivable for which the allowance for doubtful accounts were established on the individual basis | - | - | - | - | - | - | - | - | - | - | ||
| Notes receivable for which the allowance for doubtful accounts were established on the grouping basis | ||||||||||||
| Of which: group with no recovery risk | 576,468 | 97% | - | - | 576,468 | 207,713 | 91% | - | - | 207,713 | ||
| By aging analysis | 19,217 | 3% | - | - | 19,217 | 21,229 | 9% | - | - | 21,229 | ||
| 595,686 | 100% | - | - | 595,686 | 228,942 | 100% | - | - | 228,942 | |||
| (2) | As at 31 Dec. 2020, notes receivable in pledge were RMB24,000 thousand. | |||||||||||
| (3) | As at 31 Dec. 2020, endorsed or discounted notes receivable that were undue on the balance sheet date and were derecognized were RMB30,916 thousand. | |||||||||||
| 5 | Accounts receivable | |||||
| 31 Dec. 2020 | 1 Jan. 2020 | 31 Dec. 2019 | ||||
| Accounts receivable | 12,838,895 | 8,362,646 | 8,385,374 | |||
| Less: allowance for doubtful accounts | 281,281 | 45,020 | 45,020 | |||
| 12,557,614 | 8,317,626 | 8,340,354 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 5 | Accounts receivable (continued) | ||||||||||
| (1) | Accounts receivable in the period from 1 Jan. 2020 to 31 Dec. 2020 are classified as follows by how the allowances for doubtful accounts were established: | ||||||||||
| 31 Dec. 2020 | |||||||||||
| Gross amount | Allowance for doubtful accounts | ||||||||||
| Lifetime ECL rate | Gross amount | ||||||||||
| Accounts receivable for which the related allowances for doubtful accounts were established on the individual basis | 100,972 | 93.13% | 94,033 | ||||||||
| Of which: | |||||||||||
| Accounts receivable1 | 100,972 | 93.13% | 94,033 | ||||||||
| Accounts receivable for which the related allowances for doubtful accounts were established on the grouping basis | 12,737,923 | 2.14% | 187,248 | ||||||||
| Of which: | |||||||||||
| Group 1：by aging analysis | 8,765,135 | 2.13% | 186,919 | ||||||||
| Group 2：by related party grouping | 3,171,513 | 0.01% | 329 | ||||||||
| Group 3: Group with no recovery risk | 801,275 | - | - | ||||||||
| 12,838,895 | 281,281 | ||||||||||
| (2) | The aging of accounts receivable is analysed as follows: | ||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| Within 1 year | 11,810,255 | 91.99% | 8,258,361 | 98.49% | |||||||
| 1-2 years | 392,397 | 3.06% | 96,100 | 1.15% | |||||||
| 2-3 years | 400,671 | 3.12% | 10,451 | 0.12% | |||||||
| Over 3 years | 235,572 | 1.83% | 20,462 | 0.24% | |||||||
| 12,838,895 | 100% | 8,385,374 | 100% | ||||||||
| Note: Accounts receivable within 1 year increased as a percentage of the total accounts receivable, primarily driven by the business combinations involving entities under common control. | |||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 5 | Accounts receivable (continued) | |||
| (3) | Allowances for doubtful accounts receivable are analysed as follows: | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| End of the prior year | 45,020 | 434,893 | ||
| Changes in accounting policies | - | 3,879 | ||
| Adjusted beginning | 45,020 | 438,772 | ||
| New subsidiaries | 199,462 | - | ||
| Current accrual | 76,552 | 46,633 | ||
| Reversal of current period | (26,300) | (11,940) | ||
| Write-off of current period | (12,439) | (8,604) | ||
| Reduced subsidiaries | - | (419,974) | ||
| Exchange adjustment | (1,014) | 133 | ||
| Ending amount | 281,281 | 45,020 | ||
| (4) | There is no debt owed by shareholders holding 5% or more voting shares in this account balance. | |||
| (5) | As at 31 Dec. 2020, the accounts receivable of the top five balances are as follows: | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Total amount owed by the top five | 6,443,402 | 3,991,332 | ||
| Proportion of total accounts receivable | 50.19% | 47.60% | ||
| 6 | Receivables financing | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Notes receivable financing | 1,206,289 | - | ||
| Accounts receivable financing | 970,455 | - | ||
| 2,176,744 | - | |||
| Note | Endorsed or discounted notes receivable and accounts receivable that were outstanding on the balance sheet date and were derecognized as at 31 Dec. 2020 amounted to RMB8,283,446 thousand. | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 7 | Prepayments | |||
| (1) | Prepayments are analyzed as follows: | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Within 1 year | 1,352,128 | 364,423 | ||
| 1-2 years | 399 | - | ||
| 2-3 years | 414 | - | ||
| Over 3 years | 2,712 | - | ||
| 1,355,653 | 364,423 | |||
| Note | Prepayments over 1 year were primarily incurred by the business combinations not involving entities under common control. | |||||
| (2) | As at 31 Dec. 2020, the prepayments of the top five balances are as follows: | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Total amount owed by the top five | 816,964 | 169,266 | ||||
| As % of total prepayments | 60.26% | 46.45% | ||||
| 8 | Other receivables | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Dividends receivable | - | 5,771 | ||||
| Other receivables | 2,793,640 | 2,744,271 | ||||
| 2,793,640 | 2,750,042 | |||||
| (1) | Dividends receivable | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | - | 5,771 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 8 | Other receivables (continued) | ||||||
| (2) | Other receivables | ||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||
| Other receivables | 3,046,810 | 2,844,737 | |||||
| Less: allowance for doubtful accounts | 253,170 | 100,466 | |||||
| 2,793,640 | 2,744,271 | ||||||
| (a) | Nature of other receivables is analyzed as follows: | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Subsidy receivable | 1,612,041 | 1,354,557 | ||||
| External unit current account | 678,933 | 993,962 | ||||
| Deposit and security deposit | 343,367 | 162,934 | ||||
| Others | 159,299 | 232,818 | ||||
| 2,793,640 | 2,744,271 | |||||
| (b) | Allowance for doubtful other receivables is analyzed as follows: | |||||||
| 12-month ECL | Lifetime ECL (credit not impaired) | Lifetime ECL (credit impaired) | Total | |||||
| Beginning amount | 45,157 | - | 55,309 | 100,466 | ||||
| Current accrual | 10,268 | 86,944 | - | 97,212 | ||||
| Increase due to new subsidiaries | 10,638 | 105,064 | 49,399 | 165,101 | ||||
| Reversal of current period | (248) | (78,172) | (6,916) | (85,336) | ||||
| Write-off in current period | - | - | (23,258) | (23,258) | ||||
| Exchange adjustment | (1,015) | - | - | (1,015) | ||||
| 64,800 | 113,836 | 74,534 | 253,170 | |||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||
| 8 | Other receivables (continued) | |||||
| (c) | The aging of other receivables is analyzed as follows: | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Carrying amount | Percentage | Carrying amount | Percentage | |||
| Within 1 year | 2,713,832 | 89.07% | 2,635,597 | 92.65% | ||
| 1 to 2 years | 80,991 | 2.66% | 77,938 | 2.74% | ||
| 2 to 3 years | 131,394 | 4.31% | 48,704 | 1.71% | ||
| Over 3 years | 120,593 | 3.96% | 82,498 | 2.90% | ||
| 3,046,810 | 100% | 2,844,737 | 100% | |||
| Note | Other receivables over 2 years increased as a percentage of the total other receivables primarily driven by the business combinations not involving entities under common control. | |||||
| (d) | There is no debt owed by shareholders holding 5% or more voting shares in this account balance. | |||||
| (e) | As at 31 Dec. 2020, the other receivables of the top five balances are as follows: | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Total amount owed by the top five | 2,004,109 | 1,830,213 | |||
| As % of total other receivables | 65.78% | 64.34% | |||
| (f) | As at 31 Dec. 2020, there is no transfer of other receivables that do not conform to the conditions for derecognition in the balance of this account; no transaction arrangement for asset securitization with other receivables as the subject asset; and no financial instrument that is the subject of securitization and does not conform to the conditions for derecognition. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||
| 9 | Inventories | |||||||||||||||
| (1) | Inventory is classified as follows: | |||||||||||||||
| 31 Dec. 2020 | ||||||||||||||||
| Gross amount | Inventory valuation allowance | Carrying amount | ||||||||||||||
| Raw materials | 2,698,477 | 196,354 | 2,502,123 | |||||||||||||
| Work in progress | 1,900,684 | 213,991 | 1,686,693 | |||||||||||||
| Finished goods | 4,606,092 | 273,232 | 4,332,860 | |||||||||||||
| Turnover materials | 317,162 | 3,880 | 313,282 | |||||||||||||
| 9,522,415 | 687,457 | 8,834,958 | ||||||||||||||
| 1 Jan. 2020 | 31 Dec. 2019 | |||||||||||||||
| Gross amount | Inventory valuation allowance | Carrying amount | Gross amount | Inventory valuation allowance | Carrying amount | |||||||||||
| Raw materials | 1,033,927 | 129,254 | 904,673 | 1,033,927 | 129,254 | 904,673 | ||||||||||
| Work in progress | 760,881 | 149,624 | 611,257 | 760,881 | 149,624 | 611,257 | ||||||||||
| Finished goods | 4,112,112 | 172,044 | 3,940,068 | 4,066,809 | 172,044 | 3,894,765 | ||||||||||
| Turnover materials | 268,086 | 818 | 267,268 | 268,086 | 818 | 267,268 | ||||||||||
| 6,175,006 | 451,740 | 5,723,266 | 6,129,703 | 451,740 | 5,677,963 | |||||||||||
| As at 31 Dec. 2020, the Company has no inventory for liabilities guarantee. |
| (2) | Inventory valuation allowances are analyzed as follows: | |||||||||||||
| 1 Jan. 2020 | Current accrual | New subsidiaries | Reversal in current period | Write-off in current period | Exchange adjustment | 31 Dec. 2020 | ||||||||
| Raw materials | 129,254 | 62,512 | 24,341 | (542) | (19,211) | - | 196,354 | |||||||
| Work in progress | 149,624 | 181,458 | 2,038 | (1,098) | (118,031) | - | 213,991 | |||||||
| Finished goods | 172,044 | 249,840 | 64,131 | (2,932) | (207,946) | (1,905) | 273,232 | |||||||
| Turnover materials | 818 | 3,062 | - | - | - | - | 3,880 | |||||||
| 451,740 | 496,872 | 90,510 | (4,572) | (345,188) | (1,905) | 687,457 | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) |
| 10 | Contract assets |
| (1) | Contract assets are classified as follows: |
| 31 Dec. 2020 | 1 Jan. 2020 | |||||||||||
| Gross amount | Valuation allowance | Carrying amount | Gross amount | Valuation allowance | Carrying amount | |||||||
| Electricity charges receivable | 186,516 | 2,866 | 183,650 | - | - | - | ||||||
| (2) | Valuation allowances for contract assets are analyzed as follows: | |||||||||||||
| 1 Jan. 2020 | Increase in current period | Increase due to newly acquired subsidiaries | Reversal in current period | Write-off in current period | Exchange adjustment | 31 Dec. 2020 | ||||||||
| Electr icity charg ges | - | 797 | 2,069 | - | - | - | 2,866 | |||||||
| 11 | Assets held for sale | ||||||||
| Ending carrying amount | Fair value | Expected disposal expense | Expected time of disposal | ||||||
| Assets held for sale | 360,936 | 364,582 | 3,646 | Within 1 year | |||||
| As at 31 Dec. 2020, non-current assets expected to be disposed of within 1 year were presented as assets held for sale. | |||||||||
| 12 | Other current assets | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Short-term debt investments | 1,418,900 | 1,596,741 | ||||
| VAT to be deducted, to be certified, etc. | 3,697,455 | 2,299,416 | ||||
| Current portion of loans and advances to customers (note) | 4,104,903 | 1,968,056 | ||||
| Others | 145,797 | 47,614 | ||||
| 9,367,055 | 5,911,827 | |||||
| Note | The current portion of loans and advances is loans due within the next year issued by subsidiaries TCL Tech Finance Co., Ltd., Guangzhou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd., of which interest receivable is RMB21,691 thousand. | |||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||
| 13 | Loans and advances to customers | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Loans and advances to customers (note) | 981,876 | 3,637,768 | ||||
| Note | Loans and advances to customers are loans granted by subsidiaries TCL Tech Finance Co., Ltd., Guangzhou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | |||||
| 14 | Debt investments | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||
| National debt and secondary market debt (note) | 119,350 | 20,373 | ||||
| Note | As at 31 Dec. 2020, there were no significant debt investments. | |||||
| 15 | Other debt investments | |||||||||||||||
| Beginning amount | Interest accrual | Fair value change in current period | Ending amount | Cost | Cumulative fair value change | Loss allowances cumulatively recognized in other comprehensive income | ||||||||||
| Trust plans | - | 1,492 | (619) | 152,063 | 150,050 | 521 | - | |||||||||
| Note | As at 31 Dec. 2020, there were no significant other debt investments. | |||||||||||||||
| 16 | Long-term receivables | |||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | Range of discount rate | ||||||||
| Gross amount | Allowance for doubtful account | Carrying amount | Gross amount | Allowance for doubtful account | Carrying amount | |||||
| Finance leases | 778,889 | - | 778,889 | - | - | - | 7.125% | |||
| 17 | Long-term equity investments | |||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | |||
| Associates (1) | 23,941,424 | 13,622 | 23,927,802 | 17,042,572 | 22,846 | 17,019,726 | ||
| Joint ventures (2) | 168,737 | 49,503 | 119,234 | 174,558 | - | 174,558 | ||
| 24,110,161 | 63,125 | 24,047,036 | 17,217,130 | 22,846 | 17,194,284 | |||
| As at 31 Dec. 2020, the Company has established impairment allowances for long-term equity investments in investees with poor management and insolvent assets. Other than that, there are no major restrictions on the realization of investment and the remittance of return on investment for long-term equity investments. |
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||
| 17 | Long-term equity investments (continued) | |||||||||||||||||||||
| (1) | Associates | |||||||||||||||||||||
| Increase or decrease in current period | ||||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | ||||||||||||
| Bank of Shanghai Co., Ltd. | 9,314,611 | - | 1,004,403 | 1,144,145 | 85,934 | - | (316,955) | - | - | 11,232,138 | ||||||||||||
| China Innovative Capital Management Limited | 877,920 | - | - | 159,707 | - | - | - | - | - | 1,037,627 | ||||||||||||
| LG Electronics (Huizhou) Co., Ltd. | 92,583 | - | - | 9,998 | - | (12,200) | - | - | 90,381 | |||||||||||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 40,837 | - | - | (1,276) | - | - | - | - | - | 39,561 | ||||||||||||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 5,342 | - | 300 | 1,026 | - | - | - | - | - | 6,668 | ||||||||||||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | 2,078 | - | - | 387 | - | - | - | - | - | 2,465 | ||||||||||||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | 1,815 | - | (7,680) | (87) | - | - | - | - | 5,952 | - | ||||||||||||
| TCL Air Conditioner (Wuhan) Co., Ltd. | 37,666 | - | - | 168 | - | - | - | - | 37,834 | |||||||||||||
| TCL Finance (Hong Kong) Co., Limited | 972 | - | - | 22,152 | - | - | - | - | 23,124 | |||||||||||||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 8,688 | - | - | 4,017 | - | - | (595) | - | - | 12,110 | ||||||||||||
| Shenzhen Tianyi Hemeng Education Co., Ltd. | 6,325 | - | - | (1,606) | - | - | - | - | - | 4,719 | ||||||||||||
| Yizheng Zeyu Electric Light Co., Ltd. | 2,507 | - | - | - | - | - | - | - | (2,507) | - | ||||||||||||
| Urumqi TCL Equity Investment Management Co., Ltd. | 870 | - | - | 474 | - | - | (1,118) | - | - | 226 | ||||||||||||
| Hubei Changjiang Hezhi Equity Investment Fund Partnership (Limited Partnership) | 1,137,499 | - | (86,506) | 316,299 | - | - | - | - | - | 1,367,292 | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||
| 17 | Long-term equity investments (continued) | |||||||||||||||||||||
| (1) | Associates (continued) | |||||||||||||||||||||
| Increase or decrease in current period | ||||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | ||||||||||||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 585,223 | - | (16,291) | 330,160 | (23) | - | (48,608) | - | 28 | 850,489 | ||||||||||||
| Deqing Puhua Equity Investment Fund Partnership (Limited Partnership) | 205,476 | - | (15,149) | 7,959 | - | - | - | - | (3,615) | 194,671 | ||||||||||||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 199,603 | - | 262,899 | 58,314 | - | - | (8,957) | - | - | 511,859 | ||||||||||||
| Wuxi TCL Aisikai Semiconductor Industry Investment Fund Partnership (Limited Partnership) | 114,768 | - | 106,507 | 23,411 | - | - | (22,988) | - | - | 221,698 | ||||||||||||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | 34,546 | - | - | 1,090 | 2 | - | - | - | - | 35,638 | ||||||||||||
| Ningbo Meishan Bonded Port Qiyu Investment Management Partnership (Limited Partnership) | 67,768 | - | - | (1,395) | - | - | - | - | - | 66,373 | ||||||||||||
| Shanghai Gen Auspicious Venture Capital Partnership (Limited Partnership) | 29,667 | - | - | 25,874 | (64) | - | (11,991) | - | 598 | 44,084 | ||||||||||||
| Nanjing Zijin A Dynamic Investment Partnership (Limited Partnership) | 25,982 | - | - | 129 | (11) | - | - | - | (4,884) | 21,216 | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||
| 17 | Long-term equity investments (continued) | |||||||||||||||||||||
| (1) | Associates (continued) | |||||||||||||||||||||
| Increase or decrease in current period | ||||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | ||||||||||||
| Huizhou Kaichuang Venture Investment Partnership (Limited Partnership) | 8,754 | - | - | (108) | 63 | - | - | - | - | 8,709 | ||||||||||||
| Beijing A Dynamic Venture Capital Center (Limited Partnership) | 21,008 | - | (2,600) | (1,112) | - | - | - | - | (9,931) | 7,365 | ||||||||||||
| Yixing Jiangnan Tianyuan Venture Capital Company (Limited Partnership) | 17,931 | - | (13,657) | 3,538 | (12) | - | - | - | - | 7,800 | ||||||||||||
| Shenzhen Chuangdong New Industry Investment Fund Enterprise (Limited Partnership) | 11,437 | - | - | (1) | - | - | - | - | - | 11,436 | ||||||||||||
| Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. | 4,301 | - | - | 1,806 | - | - | - | - | - | 6,107 | ||||||||||||
| Huizhou Kaimeng Angel Investment Partnership (Limited Partnership) | 2,869 | - | - | (209) | - | - | - | - | - | 2,660 | ||||||||||||
| Ningbo Jiutian Matrix Investment Management Co., Ltd. (note) | 1,953 | - | - | 707 | - | - | - | - | - | 2,660 | ||||||||||||
| Urumqi Qixinda Equity Investment Management Co., Ltd. | 1,396 | - | - | 215 | - | - | - | - | - | 1,611 | ||||||||||||
| Urumqi TCL Create Dynamic Equity Investment Management Co., Ltd. | 760 | - | - | (1) | - | - | - | - | - | 759 | ||||||||||||
| Beijing A Dynamic Investment Consulting Co., Ltd. | 555 | - | - | (82) | - | - | - | - | - | 473 | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||
| 17 | Long-term equity investments (continued) | |||||||||||||||||||||
| (1) | Associates (continued) | |||||||||||||||||||||
| Increase or decrease in current period | ||||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | ||||||||||||
| Shanghai Gen Auspicious Investment Management Co., Ltd. | 518 | - | - | (9) | - | - | - | - | - | 509 | ||||||||||||
| Changzhou A Dynamic Fund Management Co., Ltd. | 536 | - | (600) | - | - | - | - | - | 64 | - | ||||||||||||
| Nanjing A Dynamic Equity Investment Fund Management Co., Ltd. | 287 | - | - | (5) | - | - | - | - | - | 282 | ||||||||||||
| Wuxi TCL Medical Imaging Technology Co., Ltd. | 50,264 | - | - | (9,297) | - | - | - | - | (78) | 40,889 | ||||||||||||
| Beijing WeMed Medical Equipment Co., Ltd. | 11,972 | - | (177) | (287) | - | - | - | 9,224 | (16,392) | 4,340 | ||||||||||||
| Shanghai Huiying Medical Technology Co., Ltd. | 442 | - | - | (442) | - | - | - | - | - | - | ||||||||||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 279,442 | - | 225,733 | 37,595 | - | - | - | - | - | 542,770 | ||||||||||||
| TCL Ventures Fund L.P. | 39,609 | - | 20,163 | (2,706) | - | - | - | - | (2,846) | 54,220 | ||||||||||||
| Getech Ltd. | 7,576 | - | 4,450 | (1,789) | - | - | - | - | 15,910 | 26,147 | ||||||||||||
| Huizhou TCL Environmental Resource Co., Ltd. | 79,990 | - | - | 18,020 | - | - | - | - | - | 98,010 | ||||||||||||
| Guangdong Innovative Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) | 375,020 | - | - | 2,533 | - | - | - | - | - | 377,553 | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||||||
| 17 | Long-term equity investments (continued) | ||||||||||||||||||||||
| (1) | Associates (continued) | ||||||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | |||||||||||||
| Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) | 149,493 | - | - | 1,184 | - | - | - | - | - | 150,677 | |||||||||||||
| TCL Intelligent Technology (Ningbo) Co., Ltd. | - | - | 12,500 | (12,500) | - | - | - | - | - | - | |||||||||||||
| Pride Telecom Limited | - | - | - | - | - | - | - | - | - | - | |||||||||||||
| Shenzhen Xinhuoyicheng Recreational and Sports Industry Co., Ltd. | - | - | 1,540 | (26) | - | - | - | - | - | 1,514 | |||||||||||||
| JOLED Incorporation | - | - | 1,340,000 | (74,851) | - | - | - | - | (72,155) | 1,192,994 | |||||||||||||
| Sichuan Shengtian New Energy Development Co., Ltd. | - | 471,788 | - | (1,397) | - | - | (13,201) | - | - | 457,190 | |||||||||||||
| Yanyuan Fengguang New Energy Co., Ltd. | - | 57,669 | - | 749 | - | - | - | - | - | 58,418 | |||||||||||||
| SunPower Systems International Limited | - | 31,607 | - | (5,240) | - | - | - | - | - | 26,367 | |||||||||||||
| Zhonghuan Aineng (Beijing) Technology Co., Ltd. | - | 5,079 | - | 988 | - | - | - | - | - | 6,067 | |||||||||||||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | - | 34,783 | - | (934) | - | - | - | - | - | 33,849 | |||||||||||||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | - | 78,691 | - | 7,619 | - | (35) | - | - | - | 86,275 | |||||||||||||
| Hunan Guoxin Semiconductor Technology Co., Ltd. | - | 9,969 | - | - | - | - | - | - | - | 9,969 | |||||||||||||
| Maxeon Solar Technologies，Ltd. | - | 2,063,484 | - | (179,855) | - | - | - | - | - | 1,883,629 | |||||||||||||
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | - | 424,387 | - | 39,392 | - | - | - | - | - | 463,779 | |||||||||||||
| Ruihuan (Inner Mongolia) Solar Power Co., Ltd. | - | 15,196 | - | (3,428) | - | - | - | - | - | 11,768 | |||||||||||||
| Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) | - | 284,992 | 179,715 | (93) | - | - | - | - | - | 464,614 | |||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||||
| 17 | Long-term equity investments (continued) | ||||||||||||||||||||
| (1) | Associates (continued) | ||||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | |||||||||||
| Tianjin Hope Equity Investment Fund Management Co., Ltd. | - | 659 | - | (246) | - | - | - | - | - | 413 | |||||||||||
| Zhonghuan Feilang (Tianjin) Technology Co., Ltd. | - | 5,292 | - | (166) | - | - | - | - | - | 5,126 | |||||||||||
| Tianjin Zhonghuan Tengliang Technology Co., Ltd. | - | 6,383 | - | (10) | - | 536 | - | - | - | 6,909 | |||||||||||
| Others | 3,160,867 | - | (1,300,440) | 255,537 | (2,444) | - | (72,397) | - | 32,648 | 2,073,771 | |||||||||||
| 17,019,726 | 3,489,979 | 1,715,110 | 2,176,035 | 83,445 | 501 | (509,010) | 9,224 | (57,208) | 23,927,802 | ||||||||||||
| Note | Associate Shenzhen Jiutian Matrix Investment Management Co., Ltd. changed its name to Ningbo Jiutian Matrix Investment Management Co., Ltd. in November 2020. | ||||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||||
| 17 | Long-term equity investments (continued) | ||||||||||||||||||||
| (2) | Joint ventures | ||||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||||
| Name of investee | Beginning amount | Increase due to newly acquired subsidiaries | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equity changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | |||||||||||
| TV University Online Distance Education Technology Co., Ltd. | 137,903 | - | - | (10,537) | - | - | - | - | (127,366) | - | |||||||||||
| Huizhou TCL Taidong Shihua Investment Co., Ltd. | 12,779 | - | - | (9,432) | - | - | - | - | (3,347) | - | |||||||||||
| Shanxi TCL Huirong Venture Investment Co., Ltd. | 22,633 | - | (20,000) | 18,248 | - | (20,845) | - | - | (36) | - | |||||||||||
| TCL Huizhou City, Kai Enterprise Management Limited | 1,243 | - | - | 65 | - | - | - | - | - | 1,308 | |||||||||||
| Huizhou TCL Human Resources Service Co., Ltd. | - | - | 2,500 | (379) | - | - | - | - | - | 2,121 | |||||||||||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | - | - | - | - | - | - | - | - | - | - | |||||||||||
| Zhangjiakou Qixin Equity Investment Fund Partnership | - | 136,747 | (19,198) | (1,744) | - | - | - | - | - | 115,805 | |||||||||||
| Wuxi Zhonghuan Applied Materials Co., Ltd. | - | 500,109 | - | (1,339) | - | (1,653) | (35,000) | - | (462,117) | - | |||||||||||
| 174,558 | 636,856 | (36,698) | (5,118) | - | (22,498) | (35,000) | - | (592,866) | 119,234 | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 17 | Long-term equity investments (continued) | ||||||||||
| (3) | Impairment allowances for long-term equity investments | ||||||||||
| 1 Jan. 2020 | Increase in current period | Write-off in current period | 31 Dec. 2020 | Note | |||||||
| Pride Telecom Limited | 1,624 | - | - | 1,624 | Note 1 | ||||||
| Beijing WeMed Medical Equipment Co., Ltd. | 21,222 | - | (9,224) | 11,998 | Note 1 | ||||||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | - | 49,503 | - | 49,503 | Note 1 | ||||||
| 22,846 | 49,503 | (9,224) | 63,125 | ||||||||
| Note1 | Impairment allowances were established for the long-term investments in these investees at the recoverable amounts because continuous operating loss occurred to these investees with poor management. | ||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||
| 18 | Investments in other equity instruments | |||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||
| Equity instruments not held-for-trading | 1,333,676 | 279,884 | ||||||||
| Item name | Dividend income recognized | Accumulated gains | Accumulated losses | Amount of other comprehensive income transferred to retained earnings | Reasons designated as measured at fair value and whose changes are included in other comprehensive income | Reasons for other comprehensive income transferred to retained earnings | ||||
| Equity instruments not held-for-trading | 1,113 | 223,375 | (84,280) | (626) | Financial assets not held-for-trading | Sold in current period | ||||
| 19 | Other non-current financial assets | |||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||
| Equity investments | 2,422,328 | 2,531,111 | ||||||||
| Debt investments | 633,267 | 11,578 | ||||||||
| 3,055,595 | 2,542,689 | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 20 | Investment property | ||||||
| Housing and buildings | Land use right | Total | |||||
| Gross amount: | |||||||
| 1 Jan. 2020 | 134,644 | 477 | 135,121 | ||||
| Increases | |||||||
| Increase in current period | 9,362 | - | 9,362 | ||||
| Increase due to newly acquired subsidiaries | 824,304 | 101,570 | 925,874 | ||||
| Reclassified from fixed assets and intangible assets | 30,265 | 133,501 | 163,766 | ||||
| Reclassified from construction in progress | 1,136,385 | - | 1,136,385 | ||||
| Decreases | |||||||
| Reclassified to fixed assets and intangible assets | (488,218) | (40,541) | (528,759) | ||||
| 31 Dec. 2020 | 1,646,742 | 195,007 | 1,841,749 | ||||
| Accumulated depreciation and amortization: | |||||||
| 1 Jan. 2020 | 52,742 | 106 | 52,848 | ||||
| Increases | |||||||
| Increase in current period | 63,720 | 2,894 | 66,614 | ||||
| Increase due to newly acquired subsidiaries | 51,579 | 7,844 | 59,423 | ||||
| Reclassified from fixed assets and intangible assets | 539 | 3,904 | 4,443 | ||||
| Decreases | |||||||
| Reclassified to fixed assets and intangible assets | (53,368) | (4,485) | (57,853) | ||||
| 31 Dec. 2020 | 115,212 | 10,263 | 125,475 | ||||
| Investment property, net: | |||||||
| 31 Dec. 2020 | 1,531,530 | 184,744 | 1,716,274 | ||||
| 1 Jan. 2020 | 81,902 | 371 | 82,273 | ||||
| Impairment allowances: | |||||||
| 1 Jan. 2020 | - | - | - | ||||
| Increases | |||||||
| Increase due to newly acquired subsidiaries | 122,732 | - | 122,732 | ||||
| Decreases | |||||||
| Reclassified to fixed assets and intangible assets | (70,659) | - | (70,659) | ||||
| 31 Dec. 2020 | 52,073 | - | 52,073 | ||||
| Investment property, carrying amount: | |||||||
| 31 Dec. 2020 | 1,479,457 | 184,744 | 1,664,201 | ||||
| 1 Jan. 2020 | 81,902 | 371 | 82,273 | ||||
| As at 31 Dec. 2020, investment property with pending ownership certificates was RMB172,947 thousand, which was mainly buildings of subsidiary GD Solar Co., Ltd., with the ownership certificates expected to be completed in 2021. | |||||||
| V | Notes to Consolidated Financial Statements (Continued) |
| 21 | Fixed assets |
| Housing and buildings | Machinery equipment | Office and electronic equipment | Means of transport | Power stations | Others | Total | ||||||||
| Gross amount: | ||||||||||||||
| 1 Jan. 2020 | 16,407,245 | 56,430,796 | 1,758,555 | 84,587 | - | 6,571 | 74,687,754 | |||||||
| Increases | ||||||||||||||
| Increase due to newly acquired subsidiaries | 5,613,724 | 19,111,471 | 2,570,157 | 51,230 | 2,368,903 | 2,603 | 29,718,088 | |||||||
| Purchase | 9,109 | 1,501,088 | 122,311 | 6,324 | - | 163 | 1,638,995 | |||||||
| Reclassified from investment property | 488,218 | - | - | - | - | - | 488,218 | |||||||
| Reclassified from construction in progress | 2,336,930 | 31,243,755 | 364,086 | 5,539 | 1,307 | - | 33,951,617 | |||||||
| Decrease | ||||||||||||||
| Written down with government grants | (6,136) | (694,893) | (290) | - | - | - | (701,319) | |||||||
| Decrease due to newly reduced subsidiaries | - | - | (2,655) | (1,037) | - | - | (3,692) | |||||||
| Reclassified to investment property | (30,265) | - | - | - | - | - | (30,265) | |||||||
| Other decreases | (474,707) | (546,596) | (575,661) | (5,798) | (394) | (110) | (1,603,266) | |||||||
| Exchange adjustment | - | - | (390) | (187) | - | - | (577) | |||||||
| 31 Dec. 2020 | 24,344,118 | 107,045,621 | 4,236,113 | 140,658 | 2,369,816 | 9,227 | 138,145,553 | |||||||
| Accumulated depreciation: | ||||||||||||||
| 1 Jan. 2020 | 1,875,286 | 26,629,564 | 652,321 | 50,663 | - | 4,293 | 29,212,127 | |||||||
| Increases | ||||||||||||||
| Increase due to newly acquired subsidiaries | 807,902 | 4,489,001 | 1,000,606 | 29,978 | 313,681 | 472 | 6,641,640 | |||||||
| Accrual | 631,492 | 7,916,773 | 208,551 | 14,014 | 22,588 | 921 | 8,794,339 | |||||||
| Reclassified from investment property | 53,368 | - | - | - | - | - | 53,368 | |||||||
| Decreases | ||||||||||||||
| Written down with government grants | (174,339) | (280,305) | - | - | - | - | (454,644) | |||||||
| Decrease due to newly reduced subsidiaries | - | - | (2,477) | (855) | - | - | (3,332) | |||||||
| Reclassified to investment property | (539) | - | - | - | - | - | (539) | |||||||
| Other decreases | (55,546) | (140,030) | (77,103) | (4,202) | - | (94) | (276,975) | |||||||
| Exchange adjustment | - | - | (275) | (126) | - | - | (401) | |||||||
| 31 Dec. 2020 | 3,137,624 | 38,615,003 | 1,781,623 | 89,472 | 336,269 | 5,592 | 43,965,583 | |||||||
| Fixed assets, net: | ||||||||||||||
| 31 Dec. 2020 | 21,206,494 | 68,430,618 | 2,454,490 | 51,186 | 2,033,547 | 3,635 | 94,179,970 | |||||||
| 1 Jan. 2020 | 14,531,959 | 29,801,232 | 1,106,234 | 33,924 | - | 2,278 | 45,475,627 |
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||
| 21 | Fixed assets (continued) | |||||||||||||
| Housing and buildings | Machinery equipment | Office and electronic equipment | Means of transport | Power stations | Others | Total | ||||||||
| Impairment allowances: | ||||||||||||||
| 1 Jan. 2020 | - | 6,666 | 9,891 | - | - | - | 16,557 | |||||||
| Increase due to newly acquired subsidiaries | 700,882 | 128,774 | 394,441 | 3,977 | - | - | 1,228,074 | |||||||
| Current accrual | - | 40,695 | 263 | 186 | - | - | 41,144 | |||||||
| Reclassified from investment property | 70,659 | - | - | - | - | - | 70,659 | |||||||
| Write-off in current period | - | (5,726) | (42) | (598) | - | - | (6,366) | |||||||
| Exchange adjustment | - | - | - | - | - | - | - | |||||||
| 31 Dec. 2020 | 771,541 | 170,409 | 404,553 | 3,565 | - | - | 1,350,068 | |||||||
| Fixed assets, carrying amount | ||||||||||||||
| 31 Dec. 2020 | 20,434,953 | 68,260,209 | 2,049,937 | 47,621 | 2,033,547 | 3,635 | 92,829,902 | |||||||
| 1 Jan. 2020 | 14,531,959 | 29,794,566 | 1,096,343 | 33,924 | - | 2,278 | 45,459,070 | |||||||
| Please refer to Item 81 of Note V for information on fixed asset mortgage. As at 31 Dec. 2020, temporarily idle fixed assets were RMB4,232 thousand; and the gross amount of the fixed assets that were sufficiently depreciated and still in use was RMB10,946,496 thousand. | ||||
| Fixed assets with pending ownership certificates at the end of the current period: | ||||
| Carrying amount | Expected time of obtaining ownership certificate | |||
| Housing and buildings (Note) | 9,642,523 | Within 2021 | ||
| Note | As at 31 Dec. 2020, the fixed assets with pending ownership certificates of the Company are mainly the housing and buildings of CSOT’s t3, t4 and t6 manufacturing bases and Huizhou module factory, as well as the housing and buildings of Inner Mongolia Zhonghuan Xiexin Solar Material Co., Ltd., Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. and Tianjin Zhongke Huanhai Industrial Park Co., Ltd. | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||||||
| 22 | Construction in progress | |||||||||||||||||||||||||
| Project name | Budget | Beginning amount | Increase due to newly acquired subsidiaries | Increase in current period | Reclassified to fixed assets in current period | Other decreases | 31 Dec. 2020 | Investment as % of budget | Progress | Cumulative capitalized interest | Of which: capitalized interest in current period | Interest capitalization rate for current period | Funding source | |||||||||||||
| t6 production line of LCD panel | 33,149,000 | 17,267,442 | - | 1,299,548 | (18,187,381) | (74,372) | 305,237 | 84% | 98% | 796,952 | 220,984 | 4.69% | Self-funded + external-loan-funded | |||||||||||||
| t7 production line of LCD panel | 35,337,000 | 3,350,136 | - | 6,017,721 | (23,465) | (5,749) | 9,338,643 | 54% | 60% | 124,705 | 124,705 | 4.21% | Self-funded + external-loan-funded | |||||||||||||
| t4 production line of LCD panel | 27,081,000 | 10,024,509 | - | 11,503,185 | (10,155,826) | (479,113) | 10,892,755 | 100% | 80% | 840,028 | 321,231 | 4.21% | Self-funded + external-loan-funded | |||||||||||||
| Huizhou modular integration project | 5,930,000 | 1,441,460 | - | 1,591,122 | (960,720) | (433,031) | 1,638,831 | 90% | 81% | 19,818 | 19,206 | 4.45% | Self-funded + external-loan-funded | |||||||||||||
| Production line of 8-12-inch semi-conductor silicon wafers for integrated circuit | 5,707,172 | - | 2,208,940 | 28,121 | (205,416) | (4,062) | 2,027,583 | 42% | 42% | - | - | - | Self-funded | |||||||||||||
| Industrialization phase V of monocrystalline silicon materials for renewable solar power batteries and monocrystalline silicon wafers for ultra-thin high-efficient solar power batteries | 9,125,010 | - | 2,678,696 | 345,625 | (1,607,037) | - | 1,417,284 | 51% | 51% | - | - | - | Self-funded | |||||||||||||
| Others | N/A | 1,494,743 | 4,862,104 | 3,459,630 | (2,811,772) | (1,116,727) | 5,887,978 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||
| 33,578,290 | 9,749,740 | 24,244,952 | (33,951,617) | (2,113,054) | 31,508,311 | |||||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||
| 23 | Intangible assets | ||||||||
| Land use right | Non-patented technologies /patents | Others | Total | ||||||
| Gross amount: | |||||||||
| 1 Jan. 2020 | 3,477,919 | 3,301,461 | 778,796 | 7,558,176 | |||||
| Increases | |||||||||
| Increase due to newly acquired subsidiaries | 2,341,673 | 1,544,010 | 47,027 | 3,932,710 | |||||
| Purchase | 62,090 | 418,054 | 116,183 | 596,327 | |||||
| Reclassified from investment property | 40,541 | - | - | 40,541 | |||||
| Reclassified from construction in progress | - | - | 174,976 | 174,976 | |||||
| Reclassified from development costs | - | 1,073,297 | - | 1,073,297 | |||||
| Decreases | |||||||||
| Sale and disposal | - | (115,020) | (755) | (115,775) | |||||
| Reclassified to investment property | (133,501) | - | - | (133,501) | |||||
| Decrease due to newly reduced subsidiaries | - | - | (8,155) | (8,155) | |||||
| Written down with government grants | - | - | (1,960) | (1,960) | |||||
| Exchange adjustment | - | (15,336) | (8) | (15,344) | |||||
| 31 Dec. 2020 | 5,788,722 | 6,206,466 | 1,106,104 | 13,101,292 | |||||
| Accumulated amortization: | |||||||||
| 1 Jan. 2020 | 334,894 | 1,080,538 | 401,055 | 1,816,487 | |||||
| Increases | |||||||||
| Increase due to newly acquired subsidiaries | 119,418 | 329,680 | 20,796 | 469,894 | |||||
| Accrual | 121,293 | 467,332 | 121,277 | 709,902 | |||||
| Reclassified from investment property | 4,485 | - | - | 4,485 | |||||
| Decreases | |||||||||
| Sale and disposal | - | (11,032) | (753) | (11,785) | |||||
| Reclassified to investment property | (3,904) | - | - | (3,904) | |||||
| Decrease due to newly reduced subsidiaries | - | - | (6,479) | (6,479) | |||||
| Written down with government grants | (6,835) | - | (575) | (7,410) | |||||
| Exchange adjustment | - | (2,348) | (6) | (2,354) | |||||
| 31 Dec. 2020 | 569,351 | 1,864,170 | 535,315 | 2,968,836 | |||||
| Intangible assets, net： | |||||||||
| 31 Dec. 2020 | 5,219,371 | 4,342,296 | 570,789 | 10,132,456 | |||||
| 1 Jan. 2020 | 3,143,025 | 2,220,923 | 377,741 | 5,741,689 | |||||
| Impairment allowances： | |||||||||
| 1 Jan. 2020 | - | 34,881 | 22,224 | 57,105 | |||||
| Increase due to newly acquired subsidiaries | 23,562 | - | - | 23,562 | |||||
| Accrual | - | - | - | - | |||||
| Write-off in current period | - | - | - | - | |||||
| Exchange adjustment | - | (2,256) | - | (2,256) | |||||
| 31 Dec. 2020 | 23,562 | 32,625 | 22,224 | 78,411 | |||||
| Intangible assets, carrying amount： | |||||||||
| 31 Dec. 2020 | 5,195,809 | 4,309,671 | 548,565 | 10,054,045 | |||||
| 1 Jan. 2020 | 3,143,025 | 2,186,042 | 355,517 | 5,684,584 | |||||
| Please refer to Item 81 of Note V for information on collateralized intangible assets. As at 31 Dec. 2020, the carrying amount of land use rights with pending ownership certificates was RMB2,122 thousand. | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 24 | Development costs | ||||||||||
| Development costs are as follows： | |||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||
| Semi-conductor display | 1,383,727 | 1,548,471 | |||||||||
| Semi-conductor photovoltaic and semi-conductor materials | 720,268 | - | |||||||||
| 2,103,995 | 1,548,471 | ||||||||||
| 25 | Goodwill | ||||||||||
| (1) | Gross amount of goodwill | ||||||||||
| Name of investee or item incurring goodwill | Beginning amount | Increase in current period | Decrease in current period | Ending amount | |||||||
| Incurred in business combination | Increase due to newly acquired subsidiaries | Disposal and others | |||||||||
| TCL Medical Radiological Technology (Beijing) Co., Ltd. | Note 1 | 28,967 | - | - | - | 28,967 | |||||
| Qingdao Blue Business Consulting Co., Ltd. | Note 2 | 2,452 | - | - | - | 2,452 | |||||
| Tianjin Zhonghuan Electronics Group Co., Ltd. | Note 3 | - | 6,726,130 | - | - | 6,726,130 | |||||
| Tianjin Huan’Ou Semiconductor Material&Technology Co., Ltd. | Note 4 | - | - | 214,683 | - | 214,683 | |||||
| 31,419 | 6,726,130 | 214,683 | - | 6,972,232 | |||||||
| (2) | Goodwill impairment allowance | ||||||||
| Name of investee | Beginning amount | Increase in current period | Decrease in current period | Ending amount | |||||
| TCL Medical Radiological Technology (Beijing) Co., Ltd. | 28,967 | - | - | 28,967 | |||||
| Note 1 | The Company acquired in 2010 a 51.82% interest in TCL Medical Radiological Technology (Beijing) Co., Ltd. (hereinafter referred to as “TCL Medical Radiological Technology”) with a capital of RMB 52,319 thousand. As such, the difference between the accumulated investment of the Company in TCL Medical Radiological Technology (corresponding to a 51.82% interest) and the fair value of the identifiable net assets of TCL Medical Radiological Technology attributable to the Company on the settlement date (equal to RMB 28,967 thousand) was recorded in the Company’s goodwill. An impairment allowance of RMB 28,967 thousand had been established on this goodwill item for 2019. |
| V | Notes to Consolidated Financial Statements (Continued) | ||
| 25 | Goodwill (continued) | ||
| Note 2 | Highly Information Industry Co., Ltd., a subsidiary of the Company, acquired in October 2016 a 60% interest in Qingdao Blue Business Consulting Co., Ltd. (hereinafter referred to as “Blue Business Consulting”) with a capital of RMB 10,000 thousand. As such, the difference between the accumulated investment of Highly Information Industry Co., Ltd. in Blue Business Consulting (corresponding to a 60% interest) and the fair value of the identifiable net assets of Blue Business Consulting attributable to Highly Information Industry Co., Ltd. on the settlement date (equivalent to RMB 2,452 thousand) was recorded in the Company’s goodwill. | ||
| Note 3 | The Company acquired on 1 October 2020 the 100% interest in Tianjin Zhonghuan Electronics Group Co., Ltd. (hereinafter referred to as “Zhonghuan Electronics”) with a cash payment of RMB12,500,000 thousand. As from the date of acquisition, the Group has obtained the control of Zhonghuan Electronics and has thus included it into the consolidated financial statements. As such, the difference between the accumulated investment of the Company in Zhonghuan Electronics (corresponding to the 100% interest) and the fair value of the identifiable net assets of Zhonghuan Electronics attributable to the Company on the settlement date (equal to RMB6,726,130 thousand) was recorded in the Company’s goodwill. | ||
| Note 4 | Tianjin Huan’Ou Semiconductor Material&Technology Co., Ltd. is a subsidiary of Zhonghuan Electronics, which the Company has acquired in a business combination not involving entities under common control. | ||
| (3) | Goodwill impairment test | ||
| The Company tested the impairment of its goodwill on 31 December 2020. The recoverable amount of the asset portfolio with goodwill was calculated with the discounted future cash flow approach, based on the budget approved by the Management (the budget period is five years). The estimated perpetual annual growth rate was adopted to calculate the future cash flow exceeding the budget period. The perpetual annual growth rate (primarily 0% - 0.37%) adopted by the Management was consistent with predicted data on the industry. The Management confirmed the revenue growth rate (mainly -2.83% - 24.57%) and the EBITDA (primarily 5.9% - 19.6%) in accordance with historical experience and the prediction of market development and the consistency with strategic planning for future enterprise development. The special risk discount rate (mainly 8% - 13.5%) that could reflect relevant asset portfolios was adopted. There was no need for the Company to set aside allowances for asset impairment for the asset portfolio of Qingdao Blue Business Consulting Co., Ltd., Tianjin Zhonghuan Advanced Materials & Technology Co., Ltd., and Tianjin Printronics Circuit Corp., and the goodwill of the asset portfolio of semi-conductor photovoltaic and semi-conductor materials on 31 December 2020, after the Management analyzed the recoverable amount of each asset portfolio according to the assumption. | |||
| The key assumptions used in the future cash flow discounting method adopted for the TPC asset group and the semi-conductor photovoltaic and semi-conductor materials asset group are as follows: | |||
| 31 Dec. 2020 | |||
| Perpetual annual growth rate | 0% | ||
| Discount rate | 13.50% | ||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||||
| 26 | Long-term prepaid expense | |||||||||||||||||||||
| 1 Jan. 2020 | Increase in current period | Increase due to newly acquired subsidiaries | Amortization in current period | Others | 31 Dec. 2020 | |||||||||||||||||
| Improvement expense on leased fixed assets | 1,528,158 | 464,143 | - | (154,891) | (310) | 1,837,100 | ||||||||||||||||
| Others | 39,533 | 1,311,982 | 265,536 | (819,267) | (98,214) | 699,570 | ||||||||||||||||
| 1,567,691 | 1,776,125 | 265,536 | (974,158) | (98,524) | 2,536,670 | |||||||||||||||||
| 27 | Deferred income tax assets and deferred income tax liabilities | |||||||||||||||||||||
| (1) | Un-offset deferred income tax assets | |||||||||||||||||||||
| 31 Dec. 2020 | 1 Jan. 2020 | |||||||||||||||||||||
| Deductible temporary difference | Deferred income tax assets | Deductible temporary difference | Deferred income tax assets | |||||||||||||||||||
| Deductible losses | 6,894,358 | 1,123,164 | 4,202,964 | 671,868 | ||||||||||||||||||
| Asset impairment allowances | 863,644 | 157,705 | 444,397 | 74,151 | ||||||||||||||||||
| Provisions | 348,755 | 63,881 | 177,421 | 28,473 | ||||||||||||||||||
| Changes in fair value | 55,115 | 9,708 | 2,862 | 429 | ||||||||||||||||||
| Others | 1,236,231 | 223,630 | 353,392 | 65,896 | ||||||||||||||||||
| 9,398,103 | 1,578,088 | 5,181,036 | 840,817 | |||||||||||||||||||
| 31 Dec. 2019 | ||||||||||||||||||||||
| Deductible temporary difference | Deferred income tax assets | |||||||||||||||||||||
| Deductible losses | 4,202,964 | 671,868 | ||||||||||||||||||||
| Asset impairment allowances | 444,625 | 74,208 | ||||||||||||||||||||
| Provisions | 177,421 | 28,473 | ||||||||||||||||||||
| Changes in fair value | 2,862 | 429 | ||||||||||||||||||||
| Others | 353,392 | 65,896 | ||||||||||||||||||||
| 5,181,264 | 840,874 | |||||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||
| 27 | Deferred income tax assets and deferred income tax liabilities (continued) | ||||||||
| (2) | Un-offset deferred income tax liabilities | ||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||
| Taxable temporary differences | Deferred income tax liabilities | Taxable temporary differences | Deferred income tax liabilities | ||||||
| Accelerated depreciation of fixed assets | 9,964,402 | 1,632,989 | 4,924,463 | 782,644 | |||||
| Increase in value of assets as assessed in business combination not involving entities under common control | 1,677,938 | 330,039 | - | - | |||||
| Changes in fair value | 1,387,815 | 339,098 | 242,663 | 54,491 | |||||
| Government grants | 120,200 | 18,030 | 314,595 | 52,290 | |||||
| Other | 333,004 | 66,341 | 307,929 | 63,253 | |||||
| 13,483,359 | 2,386,497 | 5,789,650 | 952,678 | ||||||
| (3) | Unrecognized deferred income tax assets | ||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||
| Deductible temporary differences | 450,345 | 314,937 | |||||||
| Deductible losses | 2,805,343 | 914,950 | |||||||
| 3,255,688 | 1,229,887 | ||||||||
| (4) | There were no deferred income tax assets or liabilities presented at the net amount after offsetting. | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 27 | Deferred income tax assets and deferred income tax liabilities (continued) | |||||||
| (5) | Deductible losses in respect of unrecognized deferred income tax assets will expire in the following years: | |||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||
| 2020 | 85,905 | 12,682 | ||||||
| 2021 | 186,872 | 22,419 | ||||||
| 2022 | 278,304 | 10,848 | ||||||
| 2023 | 497,214 | 27,193 | ||||||
| 2024 | 487,234 | 34,909 | ||||||
| 2025 | 460,523 | 4,937 | ||||||
| 2026 onwards | 809,291 | 801,962 | ||||||
| 2,805,343 | 914,950 | |||||||
| 28 | Other non-current assets | |||||||
| 31 Dec. 2020 | 1 Jan. 2020 | 31 Dec. 2019 | ||||||
| Advance payment for equipment and land use rights (Note) | 11,725,289 | 3,336,619 | 3,336,619 | |||||
| Advance payment for patents | 244,462 | 225,576 | 225,576 | |||||
| Others | 563,102 | 694,415 | 688,464 | |||||
| 12,532,853 | 4,256,610 | 4,250,659 | ||||||
| Note | The Company reclassifies long-lived assets such as advance payment for equipment and land use rights reflected in prepaid accounts to other non-current assets. | |||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 29 | Short-term borrowings | ||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||
| Unsecured borrowings | 10,983,337 | 11,291,664 | |||||
| Borrowings secured by pledge | 1,059,306 | 754,794 | |||||
| Borrowings secured by collateral | 192,000 | - | |||||
| Interest payable | 29,071 | 23,199 | |||||
| 12,263,714 | 12,069,657 | ||||||
| As at 31 Dec. 2020, short-term borrowings secured by pledge were RMB1,059,306 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB754,794 thousand), which were secured by the pledge of held-for-trading financial assets of RMB2,111,342 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB1,743,204 thousand). Short-term borrowings secured by collateral were RMB192,000 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB0), which were secured by the collateral of machinery equipment of RMB207,407 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB0). | |||||||
| As at 31 Dec. 2020, the Company does not have any short-term borrowings that have expired and have not been repaid. | |||||||
| 30 | Borrowings from central bank | ||||||
| As at 31 Dec. 2020, the balance of the borrowings of TCL Tech Finance Co., Ltd., a subsidiary of the Company, from the central bank was RMB469,834 thousand (31 Dec. 2019: RMB573,222 thousand). | |||||||
| 31 | Customer deposits and deposits from banks and other financial institutions | ||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||
| Customer deposits and deposits from banks and other financial institutions | 2,850,139 | 1,355,129 | |||||
| Customer deposits and deposits from banks and other financial institutions are the deposits of related and non-related enterprises absorbed by TCL Tech Finance Co., Ltd., a subsidiary of the Company, within the business scope approved by the regulatory authority. | |||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 32 | Held-for-trading financial liabilities | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Financial liabilities at fair value through profit or loss | 527,901 | 188,220 | ||
| 33 | Derivative financial liabilities | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Derivative financial liabilities | 384,904 | 84,705 | ||
| 34 | Notes payable | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Bank acceptance notes | 4,324,150 | 1,595,901 | ||
| Trade acceptance notes | 401,462 | 124,501 | ||
| 4,725,612 | 1,720,402 | |||
| There is no amount payable to shareholders holding 5% or more voting shares in the Company in the account balance. | ||||
| 35 | Accounts payable | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Amounts due to suppliers | 16,468,932 | 11,549,133 | ||
| As at 31 Dec. 2020, there were no significant accounts payable with an age of over one year. There is no amount payable to shareholders holding 5% or more voting shares in this account. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||
| 36 | Advances from customers | |||||
| 31 Dec. 2020 | 1 Jan. 2020 | 31 Dec. 2019 | ||||
| Advances from customers | 78,597 | 3,673 | 141,749 | |||
| The Company had no advances from customers of a large amount with an age of over one year. | ||||
| There is no advance from shareholders holding 5% or more voting shares in this account balance. | ||||
| 37 | Contract liabilities | |||
| 31 Dec. 2020 | 1 Jan. 2020 | |||
| Advances from customers | 2,004,004 | 150,196 | ||
| 38 | Financial assets sold under repurchase agreements | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Financial assets sold under repurchase agreements | 50,080 | - | ||
| 39 | Employee benefits payable and long-term employee benefits payable | |||
| (1) | Employee benefits payable | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Short-term employee benefits payable | 1,828,681 | 1,089,163 | ||
| Defined contribution plans payable | 25,394 | 1,371 | ||
| Dismissal benefits payable | 2,589 | 3,683 | ||
| 1,856,664 | 1,094,217 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||
| 39 | Employee benefits payable and long-term employee benefits payable (continued) | |||||||||||||
| (1) | Employee benefits payable (continued) | |||||||||||||
| (a) | Short-term employee benefits payable | |||||||||||||
| 1 Jan. 2020 | Acquired subsidiaries | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||||
| Wages, bonuses, allowances and subsidies | 910,703 | 17,982 | 4,765,060 | (4,199,793) | 1,493,952 | |||||||||
| Employee services and benefits | 9,623 | 2,117 | 221,615 | (213,327) | 20,028 | |||||||||
| Social insurance benefits | 42,174 | 2,888 | 129,083 | (137,018) | 37,127 | |||||||||
| Of which: medical insurance | 40,453 | 2,682 | 118,836 | (127,405) | 34,566 | |||||||||
| Employment injury insurance | 556 | 199 | 2,041 | (1,780) | 1,016 | |||||||||
| Maternity insurance | 1,165 | 7 | 8,206 | (7,833) | 1,545 | |||||||||
| Housing fund | 20,008 | 3 | 176,872 | (160,223) | 36,660 | |||||||||
| Trade union funds and staff education funds | 2,050 | 8,613 | 14,456 | (13,621) | 11,498 | |||||||||
| Others | 104,605 | 859 | 219,064 | (95,112) | 229,416 | |||||||||
| 1,089,163 | 32,462 | 5,526,150 | (4,819,094) | 1,828,681 | ||||||||||
| (b) | Defined contribution plans | |||||||||||||
| 1 Jan. 2020 | Acquired subsidiaries | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||||
| Basic pension insurance | 1,312 | 6,562 | 145,061 | (128,930) | 24,005 | |||||||||
| Unemployment insurance | 59 | 184 | 5,137 | (3,991) | 1,389 | |||||||||
| 1,371 | 6,746 | 150,198 | (132,921) | 25,394 | ||||||||||
| (2) | Long-term employee benefits payable | |||||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||||||
| Supplementary pension insurance (note) | 27,858 | 23,018 | ||||||||||||
| Note | This item is the supplementary pension insurance benefits payable to retired employees. | |||||||||||||
| (1) | Dividends payable | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Other non-controlling interests | 1,293 | 11,058 | ||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 40 | Taxes and levies payable | |||||||
| 31 Dec. 2020 | 1 Jan. 2020 | 31 Dec. 2019 | ||||||
| VAT | 75,769 | 26,879 | 26,997 | |||||
| Corporate income tax | 471,670 | 154,027 | 154,027 | |||||
| Individual income tax | 33,518 | 22,666 | 22,666 | |||||
| City construction tax | 23,919 | 1,965 | 1,965 | |||||
| Educational surcharge | 17,105 | 1,450 | 1,450 | |||||
| Others | 48,078 | 19,701 | 19,701 | |||||
| 670,059 | 226,688 | 226,806 | ||||||
| Please refer to Note IV for the standards for provisions for taxes and the applicable tax rates. | ||||||||
| 41 | Other payables | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Dividends payable | 1,293 | 11,058 | ||
| Other payables | 14,868,140 | 12,282,508 | ||
| 14,869,433 | 12,293,566 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 41 | Other payables (continued) | |||
| (2) | Other payables | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Payables for engineering equipment | 9,586,852 | 8,515,216 | ||
| Amounts due to external entities | 4,192,022 | 2,711,596 | ||
| Unpaid expenses | 879,629 | 856,377 | ||
| Deposit and security deposit | 209,637 | 199,319 | ||
| 14,868,140 | 12,282,508 | |||
| There is no amount payable to shareholders holding 5% or more voting shares in this account. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 42 | Current portion of non-current liabilities | ||||||
| Note V | 31 Dec. 2020 | 31 Dec. 2019 | |||||
| Current portion of long-term borrowings (note 1) | 44 | 4,360,381 | 800,000 | ||||
| Current portion of bonds payable | 8,146,771 | 499,748 | |||||
| Current portion of long-term payables | 361,110 | - | |||||
| Current portion of interest payable | 561,408 | 392,215 | |||||
| 13,429,670 | 1,691,963 | ||||||
| Note 1 | As at 31 Dec. 2020, the current portion of long-term borrowings included unsecured borrowings of RMB4,360,381 thousand (including amounts translated from other currencies). The interest rates of the current portion of long-term borrowings ranged from 1.35% to 5.70% (2019: 2.33%-6.00%). | ||||||
| 43 | Other current liabilities | ||||||
| 31 Dec. 2020 | 1 Jan. 2020 | 31 Dec. 2019 | |||||
| After-sales service expense (note) | 197,515 | 35,435 | 35,435 | ||||
| Others | 169,456 | 50,236 | 33,587 | ||||
| 366,971 | 85,671 | 69,022 | |||||
| Note | After-sales service expense expected to occur within 1 year is reflected in current liabilities. | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 44 | Long-term borrowings | ||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||
| Borrowings secured by collateral | 39,413,026 | 33,589,761 | |||||
| Borrowings secured by pledge | 445,100 | - | |||||
| Unsecured borrowings | 38,091,658 | 5,722,298 | |||||
| 77,949,784 | 39,312,059 | ||||||
| Of which: Current portion of long-term borrowings | (4,360,381) | (800,000) | |||||
| 73,589,403 | 38,512,059 | ||||||
| The maturities of the Company’s long-term borrowings vary from 2021 to 2030. | |||||||
| As at 31 Dec. 2020, long-term borrowings secured by collateral were RMB39,413,026 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB33,589,761 thousand), which were secured by the collaterals of land use rights, housing and buildings and machinery equipment of RMB83,524,779 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB39,055,477 thousand). Long-term borrowings secured by pledge were RMB445,100 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB0), which were secured by the pledges such as rights of charge of RMB302,447 thousand (including amounts translated from other currencies) (31 Dec. 2019: RMB0 thousand). | |||||||
| The interest rates of the Company's long-term borrowing ranged from 1.35% to 5.70% in the current period (2019: 2.33%-6.00%). | |||||||
| 45 | Bonds payable | ||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||
| Corporate bonds | 13,047,234 | 14,483,130 | |||||
| MTN | 4,993,539 | 1,995,955 | |||||
| 18,040,773 | 16,479,085 | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||
| 45 | Bonds payable (continued) | |||||||||||||
| (1) | Movements in bonds payable | |||||||||||||
| Bond name | Par value | Issue date | Maturity | Issued amount | Increase due to newly acquired subsidiaries | Beginning amount | Issued in current period | Accrued interest as per par value | Amortization of premium or discount | Repaid in current period | Others (note 1) | Ending amount | ||
| 16TCL02 | 1,500,000 | 2016-03-16 | 5 | 1,500,000 | - | 1,500,000 | - | - | - | - | (1,500,000) | - | ||
| 16TCL03 | 2,000,000 | 2016-07-07 | 5 | 2,000,000 | - | 2,000,000 | - | - | - | - | (2,000,000) | - | ||
| 17TCL01 | 1,000,000 | 2017-04-19 | 5 | 1,000,000 | - | 1,000,000 | - | - | 947 | - | - | 1,000,947 | ||
| 17TCL02 | 3,000,000 | 2017-07-07 | 5 | 3,000,000 | - | 3,000,000 | - | - | - | (2,843,000) | - | 157,000 | ||
| 18TCL01 | 1,000,000 | 2018-06-06 | 5 | 1,000,000 | - | 998,786 | - | - | (242) | - | - | 998,544 | ||
| 18TCL02 | 2,000,000 | 2018-08-20 | 5 | 2,000,000 | - | 1,995,639 | - | - | 1,202 | - | - | 1,996,841 | ||
| 18TCL-MTN001 | 2,000,000 | 2018-12-03 | 3 | 2,000,000 | - | 1,995,955 | - | - | 2,106 | - | (1,998,061) | - | ||
| 19TCL01 | 1,000,000 | 2019-05-20 | 5 | 1,000,000 | - | 997,480 | - | - | 576 | - | - | 998,056 | ||
| 19TCL02 | 1,000,000 | 2019-07-23 | 5 | 1,000,000 | - | 997,448 | - | - | 561 | - | - | 998,009 | ||
| 19TCL03 | 2,000,000 | 2019-10-21 | 5 | 2,000,000 | - | 1,993,777 | - | - | 1,965 | - | - | 1,995,742 | ||
| 20TCL Tech MTN001 | 3,000,000 | 2020-03-27 | 3 | 3,000,000 | - | - | 3,000,000 | - | (5,359) | - | - | 2,994,641 | ||
| TCL Private Convertible 1 (Note 2) | 600,000 | 2020-11-11 | 2 | 600,000 | - | - | 600,000 | 1,000 | (28,810) | - | - | 572,190 | ||
| TCL Private Convertible 2 (Note3) | 2,600,000 | 2020-11-30 | 2 | 2,600,000 | - | - | 2,600,000 | 1,083 | (220,708) | - | - | 2,380,375 | ||
| TCL TEC 1 | 1,957,483 | 2020-07-14 | 5 | 1,957,483 | - | 1,957,483 | - | (7,953) | - | - | 1,949,530 | |||
| 18 Zhonghuan Semiconductor MTN002 | 800,000 | 2018-12-5 | 3 | 800,000 | 800,292 | - | - | 608 | (948) | (608) | (799,344) | - | ||
| V | Notes to Consolidated Financial Statements (Continued) |
| 45 | Bonds payable (continued) |
| (1) | Movements in bonds payable (continued) | ||||||||||||
| Bond name | Par value | Issue date | Maturity | Issued amount | Increase due to newly acquired subsidiaries | Beginning amount | Issued in current period | Accrued interest as per par value | Amortization of premium or discount | Repaid in current period | Others (note 1) | Ending amount | |
| 18 Zhonghuan Semiconductor MTN001 | 600,000 | 2019-3-15 | 3 | 600,000 | 600,614 | - | - | 449 | (351) | (449) | - | 600,263 | |
| 19 Zhonghuan Semiconductor MTN002 | 600,000 | 2019-8-23 | 3 | 600,000 | 599,863 | - | - | 433 | 8 | (433) | - | 599,871 | |
| 20Zhonghuan01 | 800,000 | 2020-6-22 | 3 | 800,000 | 798,565 | - | - | 197 | 199 | (197) | - | 798,764 | |
| 19TCL-MTN001 (Note 4) | 800,000 | 2019-6-14 | 3 | 800,000 | 800,000 | - | - | - | - | - | (800,000) | - | |
| 19Zhonghuan01 | 450,000 | 2019-3-6 | 2 | 450,000 | 449,557 | - | - | - | 344 | - | (449,901) | - | |
| 19Zhonghuan02 | 600,000 | 2019-8-9 | 2 | 600,000 | 599,204 | - | - | - | 261 | - | (599,465) | - | |
| 29,307,483 | 29,307,483 | 4,648,095 | 16,479,085 | 8,157,483 | 3,770 | (256,202) | (2,844,687) | (8,146,771) | 18,040,773 | ||||
| Note 1 | Others are the current portion of bonds payable reclassified to the current portion of non-current liabilities. | ||||||||||||
| Note 2 | TCL Private Convertible 1 is convertible corporate bonds with a maturity of two years. The stock convertible period starts from the first trading day 12 months after the completion of the offering and ends upon the maturity of the bonds. The interest rates for the first and second years are 2% and 1.5% respectively. | ||||||||||||
| Note 3 | TCL Private Convertible 2 is convertible corporate bonds with a maturity of two years. The stock convertible period starts from the first trading day six months after the completion of the offering and ends upon the maturity of the bonds. The interest rates for the first and second years are 0.5% and 0.1% respectively. | ||||||||||||
| Note 4 | The notes carry advanced redemption provisions, which will be redeemed in 2021. Therefore, they were reclassified as current portion of non-current liabilities. | ||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 46 | Long-term payables | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Finance leases | 1,256,300 | - | |||
| Technological development fund | 24,000 | 24,000 | |||
| Others | - | 206 | |||
| 1,280,300 | 24,206 | ||||
| 47 | Deferred income | |||||||||||||||
| 1 Jan. 2020 | Increase due to newly acquired subsidiaries | New grants in current period | Amount recorded in non-operating income in current period | Amount recorded in other income in current period | Amount used to offset costs and expenses in current period | Other changes | 31 Dec. 2020 | |||||||||
| Government grants related to assets | 220,063 | 128,303 | 762,311 | (1,296) | (76,595) | (184,454) | (364,691) | 483,641 | ||||||||
| Government grants related to income | 1,692,358 | - | 1,833,318 | (5) | (1,618,199) | (321,412) | (562,924) | 1,023,136 | ||||||||
| Rental | - | 3,663 | - | - | - | - | (573) | 3,090 | ||||||||
| 1,912,421 | 131,966 | 2,595,629 | (1,301) | (1,694,794) | (505,866) | (928,188) | 1,509,867 | |||||||||
| Note | “Other changes” were deferred income offset by the carrying amounts of relevant assets. | |||||||||||||||
| 48 | Other non-current liabilities | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Others | - | 483 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||
| 49 | Share capital | ||||||||||||||
| 1 Jan. 2020 | Increase/decrease in current period | 31 Dec. 2020 | |||||||||||||
| (Unit: RMB’000) | Amount | Percentage | New issues | Others | Subtotal | Amount | Percentage | ||||||||
| 1. Restricted shares | 867,766 | 6.41% | 511,509 | (8,447) | 503,062 | 1,370,828 | 9.77% | ||||||||
| 2. Unrestricted shares | 12,660,673 | 93.59% | - | (713) | (713) | 12,659,960 | 90.23% | ||||||||
| 3. Total shares | 13,528,439 | 100% | 511,509 | (9,160) | 502,349 | 14,030,788 | 100% | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 49 | Share capital (continued) | ||||||||||
| As at 31 Dec. 2020, the Company’s total share capital was 14,030,788 thousand shares. | |||||||||||
| Note | Except for Chairman of the Board Mr. Li Dongsheng who holds restricted shares subscribed for in a private placement, none of the other incumbent directors, supervisors or senior management hold any restricted shares from a split-share structure reform or a private placement. The shares held by these personnel will stay partially frozen as per the Rules on the Management of Shares Held by the Directors, Supervisors and Senior Management Officers of Listed Companies and the Changes thereof. The trading and information disclosure in relation to these shares shall be in strict compliance with the applicable laws, regulations and rules. | ||||||||||
| 50 | Other equity instruments | ||||||||||
| 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||
| Convertible bonds | - | 230,241 | - | 230,241 | |||||||
| 51 | Capital reserves | ||||||||||
| 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||
| Share premium | 4,924,212 | 1,487,230 | (969,057) | 5,442,385 | |||||||
| Other capital reserves | 792,455 | - | (792,455) | - | |||||||
| 5,716,667 | 1,487,230 | (1,761,512) | 5,442,385 | ||||||||
| 52 | Treasury stock | ||||||||||
| 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||
| Incentive shares | 145,420 | - | (39,928) | 105,492 | |||||||
| Repurchased shares | 1,807,537 | - | - | 1,807,537 | |||||||
| 1,952,957 | - | (39,928) | 1,913,029 | ||||||||
| The decrease in incentive shares in the current period was primarily attributed to the repurchase and retirement of restricted shares. | |||||||||||
| 53 | Surplus reserves | ||||||||||
| 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | ||||||||
| Statutory surplus reserves | 2,055,498 | 214,524 | - | 2,270,022 | |||||||
| Discretionary surplus reserves | 182,870 | - | - | 182,870 | |||||||
| 2,238,368 | 214,524 | - | 2,452,892 | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) |
| 53 | Surplus reserves (continued) |
| As per China’s Company Law, Articles of Association for Companies, accounting standards, the Company and several of its subsidiaries shall appropriate 10% of net profits as statutory surplus reserves until the reserve amount reaches 50% of the registered capital. According to the aforesaid laws and regulations, part of the statutory surplus reserves can be converted into share capital of the Company, and the remaining amount shall not be lower than 25% of the registered capital. | |
| After the appropriation to the statutory surplus reserves, the Company may appropriate the discretionary surplus reserves. Upon approval, the discretionary surplus reserves can be used to make up the previous loss or increase the share capital. | |
| 54 | Specific reserve | |||||||
| 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | |||||
| Production safety reserve | - | 211 | - | 211 | ||||
| 55 | General reserve | ||||||||||
| 1 Jan. 2020 | Accrued in current period | Decrease in current period | 31 Dec. 2020 | ||||||||
| General reserve | 361 | 25 | - | 386 | |||||||
| As per the General Rules on Financial Affairs of Financial Enterprises and the Guide to the Implementation of the General Rules on Financial Affairs of Financial Enterprises promulgated by the Ministry of Finance, as well as the Articles of Association of TCL Technology Group Corporation, this subsidiary appropriated 1% of its net profit as general reserve in the previous years. | |||||||||||
| 56 | Retained earnings | ||||||||||
| 2020 | 2019 | ||||||||||
| Beginning retained earnings | 11,115,150 | 10,000,973 | |||||||||
| Changes in accounting policies | (83) | (106,833) | |||||||||
| Net profit for current period | 4,388,159 | 2,617,765 | |||||||||
| Decrease in current period | (1,493,732) | (1,396,755) | |||||||||
| Including: Appropriated as surplus reserves | (214,524) | (52,832) | |||||||||
| Distributed to ordinary shareholders as dividends | (1,279,155) | (1,337,079) | |||||||||
| Others | (53) | (6,844) | |||||||||
| Ending retained earnings | 14,009,494 | 11,115,150 | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||
| 57 | Revenue and cost of sales | ||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Revenue | Cost of sales | Revenue | Cost of sales | ||||||||||||||
| Core business | 75,938,207 | 66,049,377 | 74,056,389 | 66,003,229 | |||||||||||||
| Non-core business | 739,031 | 192,901 | 876,697 | 333,888 | |||||||||||||
| 76,677,238 | 66,242,278 | 74,933,086 | 66,337,117 | ||||||||||||||
| (1) | Core business by operating segment | ||||||||||||||||
| Revenue | Cost of sales | Gross profit | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Domestic | 53,611,557 | 47,799,405 | 48,136,161 | 42,114,424 | 5,475,396 | 5,684,981 | |||||||||||
| Overseas | 22,326,650 | 26,256,984 | 17,913,216 | 23,888,805 | 4,413,434 | 2,368,179 | |||||||||||
| 75,938,207 | 74,056,389 | 66,049,377 | 66,003,229 | 9,888,830 | 8,053,160 | ||||||||||||
| (2) | The sales revenue from the top five customers combined was RMB29,538,238 thousand and RMB21,701,693 thousand respectively for 2020 and 2019, accounting for 38.90% and 29.30% of the core business revenue. | ||||||||||||||||
| 58 | Interest income/expense and exchange gain | ||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Interest income | 153,163 | 144,720 | |||||||||||||||
| Interest expense | 33,034 | 17,230 | |||||||||||||||
| Exchange gain/(loss) | (2,039) | (12,499) | |||||||||||||||
| The interest income, interest expense and exchange gain/(loss) above occurred with the Company’s subsidiary TCL Tech Finance Co., Ltd., which are presented separately herein as required for a financial enterprise. | |||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 59 | Taxes and levies | |||
| 2020 | 2019 | |||
| Property tax | 117,164 | 93,039 | ||
| Stamp tax | 83,661 | 67,689 | ||
| City maintenance and construction tax | 42,124 | 64,586 | ||
| Educational surcharge | 29,948 | 47,761 | ||
| Land use tax | 12,336 | 12,370 | ||
| Others | 15,543 | 45,143 | ||
| 300,776 | 330,588 | |||
| The applicable tax and levy standards are detailed in Note IV. | ||||
| 60 | Selling expense | |||
| 2020 | 2019 | |||
| Employee salaries and benefits | 304,706 | 647,645 | ||
| After-sales service expense | 239,256 | 424,439 | ||
| Branding expense | 52,022 | 225,349 | ||
| Transport expense | 49,713 | 481,379 | ||
| Ad and sales promotion expense | 34,538 | 434,422 | ||
| Others | 206,582 | 644,255 | ||
| 886,817 | 2,857,489 | |||
| 61 | Administrative expense | |||
| 2020 | 2019 | |||
| Employee salaries and benefits | 934,400 | 855,810 | ||
| Depreciation and amortization expense | 469,747 | 378,404 | ||
| Expense for hiring intermediary organizations | 382,596 | 333,300 | ||
| Office expense | 137,893 | 123,423 | ||
| Insurance expense | 56,317 | 101,074 | ||
| Others | 389,425 | 103,077 | ||
| 2,370,378 | 1,895,088 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 62 | R&D expense | |||
| 2020 | 2019 | |||
| Depreciation and amortization expense | 1,746,405 | 1,185,695 | ||
| Material and lab expense | 1,602,260 | 885,607 | ||
| Employee salaries and benefits | 701,448 | 905,908 | ||
| Outsourced development cost | 138,884 | 124,889 | ||
| Others | 213,824 | 294,706 | ||
| 4,402,821 | 3,396,805 | |||
| 63 | Finance costs | |||
| 2020 | 2019 | |||
| Interest expense | 2,594,868 | 1,958,251 | ||
| Interest income | (405,409) | (401,645) | ||
| Exchange loss/(gain) | 144,797 | (355,134) | ||
| Others | 22,766 | 47,329 | ||
| 2,357,022 | 1,248,801 | |||
| 64 | Other income | |||
| 2020 | 2019 | |||
| R&D subsidies | 1,703,282 | 1,811,757 | ||
| VAT rebates on software | 9,603 | 7,323 | ||
| Over-deduction in taxable amount for VAT | 1,328 | 62,208 | ||
| Others | 56,822 | 19,348 | ||
| 1,771,035 | 1,900,636 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 65 | Return on investment | |||
| 2020 | 2019 | |||
| Proceeds from disposal of debt instruments at fair value through profit or loss | 237,721 | 346,391 | ||
| Proceeds from disposal of equity instruments at fair value through profit or loss | 388,726 | (113,316) | ||
| Proceeds from holding of equity instruments at fair value through profit or loss | 86,866 | 28,747 | ||
| Proceeds from holding of debt instruments at fair value through profit or loss | 184,200 | 99,859 | ||
| Share of net income of associates | 2,176,035 | 1,620,874 | ||
| Share of net income of joint ventures | (5,118) | 36,597 | ||
| Net income from disposal of long-term equity investments | 211,578 | 1,416,185 | ||
| Others | (25,604) | 7,217 | ||
| 3,254,404 | 3,442,554 | |||
| 66 | Gain on changes in fair value | |||
| 2020 | 2019 | |||
| Held-for-trading financial assets | 404,920 | 555,470 | ||
| Derivative financial assets | 273,916 | 138,119 | ||
| Held-for-trading financial liabilities | (13,522) | (4,771) | ||
| Derivative financial liabilities | 7,479 | (215,145) | ||
| 672,793 | 473,673 | |||
| 67 | Credit impairment loss | |||
| 2020 | 2019 | |||
| Loss on uncollectible accounts receivable | 50,252 | 34,693 | ||
| Loss on uncollectible other receivables | 11,876 | (2,435) | ||
| Other financial assets | 2,537 | - | ||
| 64,665 | 32,258 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 68 | Asset impairment loss | |||||||
| 2020 | 2019 | |||||||
| Inventory valuation loss | 492,300 | 568,443 | ||||||
| Loss on impairments of fixed assets | 41,144 | 3,000 | ||||||
| Loss on impairment of intangible assets | - | 11,845 | ||||||
| Loss on impairment of goodwill | - | 92,952 | ||||||
| Loss on impairment of other assets | (21,837) | 114,872 | ||||||
| 511,607 | 791,112 | |||||||
| 69 | Asset disposal income | |||||||
| 2020 | 2019 | |||||||
| Income/(loss) from disposal of fixed assets | 2,708 | 1,042 | ||||||
| Income/(loss) from disposal of intangible assets | - | 26 | ||||||
| Income from disposal of other non-current assets | - | 89 | ||||||
| 2,708 | 1,157 | |||||||
| 70 | Non-operating income | |||||||
| 2020 | 2019 | Amount through current non-recurring gains and losses | ||||||
| Gains on retired or damaged non-current assets | 89 | 84 | 89 | |||||
| Negative goodwill | 292,440 | 68,022 | 292,440 | |||||
| Government grants and others | 199,845 | 60,503 | 199,845 | |||||
| 492,374 | 128,609 | 492,374 | ||||||
| 71 | Non-operating expense | |||||
| 2020 | 2019 | Amount through current non-recurring gains and losses | ||||
| Losses on retired or damaged non-current assets | 12,631 | 1,763 | 12,631 | |||
| Others | 104,343 | 47,882 | 104,343 | |||
| 116,974 | 49,645 | 116,974 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 72 | Income tax expense | |||||||
| (1) | Income tax expense | |||||||
| 2020 | 2019 | |||||||
| Current income tax expense | 383,063 | 198,993 | ||||||
| Deferred income tax expense | 287,037 | 199,076 | ||||||
| 670,100 | 398,069 | |||||||
| (2) | Accounting profit and income tax adjustment process | |||||||
| 2020 | 2019 | |||||||
| Gross profit | 5,735,304 | 4,055,803 | ||||||
| Income tax expense calculated at statutory/applicable tax rate | 1,433,826 | 1,013,951 | ||||||
| Impact of different tax rates applied to subsidiaries | (695,654) | (699,553) | ||||||
| Impact of adjusting income tax in previous periods | 14,308 | 12,009 | ||||||
| Impact of non-taxable income | (247,750) | (113,147) | ||||||
| Impact of non-deductible costs, expenses and losses | 4,669 | 13,977 | ||||||
| Impact of deductible losses on the use of previously unrecognized deferred income tax assets | (111,372) | (19,689) | ||||||
| Impact of deductible temporary differences or deductible losses of unrecognized deferred income tax assets in the current period | 30,736 | 45,798 | ||||||
| Others | 241,337 | 144,723 | ||||||
| Income tax expense | 670,100 | 398,069 | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 73 | Other comprehensive income | |||
| (1) | Other comprehensive income items, income tax effects and reclassifications to profit or loss | |||
| 2020 | 2019 | |||
| I. Items that cannot be reclassified to profit or loss subsequently | ||||
| 1. Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method | (7,313) | 8,980 | ||
| Amount attributable to the Company in the current period | (6,715) | 15,065 | ||
| Previous other comprehensive income reclassified to retained earnings for current period | (598) | (6,085) | ||
| 2. Changes in fair value of other equity instruments | 52,342 | 18,662 | ||
| Current gain/(loss) | 51,716 | 9,798 | ||
| Previous other comprehensive income reclassified to retained earnings for current period | 626 | 13,251 | ||
| Income tax effects recorded in other comprehensive income | - | (4,387) | ||
| II. Items that will be reclassified to profit or loss subsequently | ||||
| 1. Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method | 90,758 | 32,200 | ||
| Amount attributable to the Company in the current period | 90,758 | 59,512 | ||
| Income tax effects recorded in other comprehensive income | - | (27,312) | ||
| 2. Changes in fair value of financial assets recorded in other comprehensive income | (162) | - | ||
| Current gain/(loss) | (162) | - | ||
| 3. Cash flow hedges | 8,175 | (86,576) | ||
| Current gain/(loss) | (6,896) | (118,895) | ||
| Previous other comprehensive income reclassified to profit for current period | - | 31,056 | ||
| Income tax effects recorded in other comprehensive income | 15,071 | 1,263 | ||
| 4. Differences arising from translation of foreign currency financial statements of overseas operations | 263,753 | 250,005 | ||
| 5. Net income arising from disposal of overseas operations through profit or loss | - | 265,534 | ||
| 407,553 | 488,805 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 73 | Other comprehensive income (continued) | ||||||||||
| (2) | Changes in other comprehensive income items | ||||||||||
| Equity attributable to shareholders of the Company as the parent | |||||||||||
| Accounting policy Change | Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method | Gain/loss on changes in fair value of financial assets | Gain/(Loss) on changes in cash flow hedges | Differences arising from translation of foreign currency-denominated financial statements | Fair value changes of other equity instruments | Other comprehensive income transferred to retained earnings | Subtotal | Non-controlling interests | Total other comprehensive income | ||
| 1 Jan. 2019 | - | 188,998 | (350,407) | 32,251 | (1,045,004) | - | - | (1,174,162) | (221,691) | (1,395,853) | |
| Change in 2019 | 334,950 | 41,181 | - | (66,723) | 311,357 | 19,315 | - | 640,080 | 183,675 | 823,755 | |
| 31 Dec. 2019 | 334,950 | 230,179 | (350,407) | (34,472) | (733,647) | 19,315 | - | (534,082) | (38,016) | (572,098) | |
| Change in 2020 | - | 83,771 | (162) | 28,784 | 224,208 | 51,880 | 28 | 388,509 | 19,044 | 407,553 | |
| 31 Dec. 2020 | 334,950 | 313,950 | (350,569) | (5,688) | (509,439) | 71,195 | 28 | (145,573) | (18,972) | (164,545) | |
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 74 | Earnings per share | |||
| (1) | Basic earnings per share | |||
| 2020 | 2019 | |||
| Net profit attributable to shareholders of the Company as the parent | 4,388,159 | 2,617,765 | ||
| Weighted average outstanding ordinary shares (in thousand shares) | 13,035,985 | 13,178,283 | ||
| Basic earnings per share (RMB yuan/share) | 0.3366 | 0.1986 | ||
| (2) | Diluted earnings per share | |||
| 2020 | 2019 | |||
| Net profit attributable to shareholders of the Company as the parent | 4,388,159 | 2,617,765 | ||
| Diluted weighted average outstanding ordinary shares (in thousand shares) | 13,604,246 | 13,528,439 | ||
| Diluted earnings per share (RMB yuan/share) | 0.3226 | 0.1935 | ||
| 75 | Cash generated from other operating activities | |||
| Cash generated from other operating activities in the consolidated cash flow statement was RMB3,454,773 thousand (2019: RMB2,329,643 thousand), which primarily consisted of other current payments received and government grants. | ||||
| 76 | Cash used in other operating activities | |||
| Cash used in other operating activities in the consolidated cash flow statement was RMB3,752,843 thousand (2019: RMB3,780,067 thousand), which primarily consisted of various expenses. | ||||
| 77 | Cash generated from other financing activities | |||
| Cash generated from other financing activities in the consolidated cash flow statement was RMB889,562 thousand (2019: RMB0), which primarily consisted of factored financings received. | ||||
| 78 | Cash used in other financing activities | |||
| Cash used in other financing activities in the consolidated cash flow statement was RMB5,330,369 thousand (2019: RMB2,350,627 thousand), which was mainly cash paid to acquire non-controlling interests. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 79 | Supplementary information for the cash flow statement | ||||
| (1) | Reconciliation of net profit to net cash generated from/used in operating activities | ||||
| 2020 | 2019 | ||||
| Net profit | 5,065,204 | 3,657,734 | |||
| Add：Asset impairment allowance | 576,272 | 823,370 | |||
| Depreciation of fixed assets | 8,860,953 | 7,153,320 | |||
| Amortization of intangible assets | 709,902 | 545,523 | |||
| Amortization of long-term prepaid expense | 974,158 | 573,165 | |||
| Loss/(Income) from disposal of fixed assets, intangible assets and other long-lived assets | (2,708) | (1,157) | |||
| Loss on retired or damaged fixed assets | 12,542 | 1,679 | |||
| Loss/(Gain) on changes in fair value | (672,793) | (473,673) | |||
| Financial Expenses | 2,774,738 | 1,632,846 | |||
| Return on Investment | (3,254,404) | (3,442,554) | |||
| Decrease/(Increase) in deferred income tax assets | (466,876) | (42,992) | |||
| Increase/(Decrease) in deferred income tax liabilities | 983,284 | 512,326 | |||
| Decrease/(Increase) in inventory | (1,421,831) | 13,641,565 | |||
| Decrease/(Increase) in operating receivables | (1,678,659) | 10,891,929 | |||
| Increase/(Decrease) in operating receivables | 3,790,917 | (24,131,345) | |||
| Others | 447,584 | 148,360 | |||
| Net cash generated from/used in operating activities | 16,698,283 | 11,490,096 | |||
| (2) | Net cash payments for acquisition of subsidiaries in the current period | ||
| Amount | |||
| Payments of cash and cash equivalents made in current period due to business combinations incurred in current period | 13,177,909 | ||
| Less: cash and cash equivalents held by subsidiary on acquisition date | 6,248,342 | ||
| Add: Payments of cash and cash equivalents made in current period due to business combinations incurred in previous periods | - | ||
| Net cash payments for acquisition of subsidiaries | 6,929,567 | ||
| (3) | Net cash proceeds from disposal of subsidiaries in the current period | ||
| Amount | |||
| Cash or cash equivalents received in current period due to disposal of subsidiary in current period | 319,088 | ||
| Less: cash and cash equivalents held by subsidiary on the date when the Company’s control over the subsidiary ceased | 20,293 | ||
| Add: cash or cash equivalents received in current period due to disposal of subsidiary in prior periods | - | ||
| Net cash proceeds from disposal of subsidiaries | 298,795 |
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 79 | Supplementary information for the cash flow statement | ||||
| (4) | Breakdown of cash and cash equivalents | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| 1. Cash | 18,208,417 | 17,637,743 | |||
| Of which: Cash on hand | 1,189 | 966 | |||
| Bank deposits available for payment on demand | 17,744,850 | 17,636,777 | |||
| Other monetary assets available for payment on demand | 462,378 | - | |||
| 2. Cash equivalents | - | - | |||
| 3. Cash and cash equivalents, end of the period | 18,208,417 | 17,637,743 | |||
| 80 | Changes in cash and cash equivalents, net | ||||
| 2020 | 2019 | ||||
| Ending cash and cash equivalents | 18,208,417 | 17,637,743 | |||
| Less: Beginning cash | 17,637,743 | 25,702,384 | |||
| Net increase in cash and cash equivalents | 570,674 | (8,064,641) | |||
| Analysis of ending cash and cash equivalents： | |||||
| Ending monetary assets | 21,708,905 | 18,648,185 | |||
| Less: Ending non-cash equivalents (note) | 3,500,488 | 1,010,442 | |||
| Ending cash and cash equivalents | 18,208,417 | 17,637,743 | |||
| Note | The ending non-cash equivalents primarily included interest receivable on bank deposits, the statutory reserve deposits placed by TCL Tech Finance Co., Ltd. in the central bank and other monetary assets. For further information, see Note V, item 1. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 81 | Assets with restricted ownership or use rights | |||
| 31 Dec. 2020 | Reason for restriction | |||
| Monetary assets | 209,978 | Statutory reserve deposits in the central bank | ||
| Monetary assets | 3,290,510 | Security deposits | ||
| Notes receivable | 24,000 | Pledge | ||
| Fixed assets | 71,991,618 | As collateral for loan | ||
| Intangible assets | 2,488,094 | As collateral for loan | ||
| Held-for-trading financial assets | 2,111,342 | As pledge for loan | ||
| Construction in progress | 9,721,671 | As collateral for loan | ||
| Accounts receivable | 398,495 | Pledge | ||
| Contract assets | 102,794 | Pledge | ||
| 90,338,502 | ||||
| 82 | Foreign currency monetary items | ||||
| 31 Dec. 2020 | |||||
| Foreign currency balance | Conversion rate | RMB balance | |||
| Monetary assets | |||||
| Including: USD | 724,605 | 6.5249 | 4,727,973 | ||
| HKD | 378,628 | 0.8417 | 318,691 | ||
| EUR | 4,638 | 8.0302 | 37,244 | ||
| JPY | 36,288 | 0.0633 | 2,297 | ||
| Accounts receivable | |||||
| Including: USD | 522,041 | 6.5249 | 3,406,265 | ||
| HKD | 164,047 | 0.8417 | 138,078 | ||
| Accounts payable | |||||
| Including: USD | 119,375 | 6.5249 | 778,910 | ||
| HKD | 1,128,736 | 0.8417 | 950,057 | ||
| JPY | 2,868,010 | 0.0633 | 181,545 | ||
| AUD | 108 | 5.0281 | 543 | ||
| Other receivables | |||||
| Including: USD | 51,903 | 6.5249 | 338,662 | ||
| HKD | 103,174 | 0.8417 | 86,842 | ||
| JPY | 11,970 | 0.0633 | 758 | ||
| PLN | 111 | 1.7554 | 195 | ||
| INR | 553,867 | 0.0890 | 49,294 | ||
| KRW | 102,390 | 0.0060 | 616 | ||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 82 | Foreign currency monetary items (continued) | ||||
| 31 Dec. 2020 | |||||
| Foreign currency balance | Conversion rate | RMB balance | |||
| Other payables | |||||
| Including: USD | 55,386 | 6.5249 | 361,388 | ||
| HKD | 118,613 | 0.8417 | 99,837 | ||
| JPY | 1,660,192 | 0.0633 | 105,090 | ||
| INR | 1,083,449 | 0.0890 | 96,427 | ||
| PLN | 4,667 | 1.7554 | 8,192 | ||
| KRW | 1,088 | 0.0060 | 7 | ||
| EUR | 3 | 8.0302 | 24 | ||
| Notes receivable | |||||
| Including: USD | 16,819 | 6.5249 | 109,742 | ||
| Notes payable: | |||||
| Including: USD | 17,614 | 6.5249 | 114,930 | ||
| EUR | 1,852 | 8.0302 | 14,872 | ||
| JPY | 1,045,141 | 0.0633 | 66,157 | ||
| Short-term borrowings | |||||
| Including: USD | 185,722 | 6.5249 | 1,211,817 | ||
| Long-term borrowings | |||||
| Including: USD | 2,286,000 | 6.5249 | 14,915,921 | ||
| EUR | 146,000 | 8.0302 | 1,172,409 | ||
| VI | Changes to Consolidation Scope | ||||
| 1 | Newly consolidated entities for current period | ||||
| Name of investee | Consolidated period | Reason for change | Registered capital | The Company’s interest | |
| TCL Optoelectronics Korea Co., Ltd | Apr.-Dec. 2020 | Newly incorporated | KRW100,000,000 | 100% | |
| TCL Technology Investments Limited(BVI) | Apr.-Dec. 2020 | Newly incorporated | USD1 | 100% | |
| Admiralty Harbour Strategic Investment Limited | Jun.-Dec. 2020 | Newly incorporated | USD10,000 | 100% | |
| Highly (Tianjin) E-commerce Co., Ltd. | Jul.-Dec. 2020 | Newly incorporated | RMB30,000,000 | 100% | |
| Sichuan Sunpiestore Technology Co., Ltd. | Sept.-Dec. 2020 | Newly incorporated | RMB2,000,000 | 100% | |
| Guangzhou Zhike Inclusive Financing Guarantee Co., Ltd. | Oct.-Dec. 2020 | Newly incorporated | RMB100,000,000 | 100% | |
| Tianjin Zhonghuan Electronics Group Co., Ltd. and its subsidiaries (note) | Oct.-Dec. 2020 | Business combination not involving entities under common control | RMB1,000,000,000 | 100% | |
| Huludao Zhongrun Energy Technology Co., Ltd. | Nov.-Dec. 2020 | Business combination not involving entities under common control | RMB58,800,000 | 100% | |
| Tianjin Huanhai Property Development Co., Ltd. | Nov.-Dec. 2020 | Newly incorporated | RMB1,000,000 | 100% | |
| Wuxi Zhonghuan Applied Materials Co., Ltd. | Nov.-Dec. 2020 | Business combination not involving entities under common control | RMB1,350,000,000 | 81.48% | |
| Shangyi Shengyao New Energy Development Co., Ltd. | Nov.-Dec. 2020 | Business combination not involving entities under common control | RMB1,000,000 | 99.44% | |
| Guangzhou Ruixin Business Co., Ltd. | Dec. 2020 | Newly incorporated | RMB10,000,000 | 100% | |
| Ningjin Jinchen New Energy Co., Ltd. | Dec. 2020 | Newly incorporated | RMB10,000,000 | 100% | |
| Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | Dec. 2020 | Newly incorporated | RMB500,000,000 | 100% | |
| Huansheng New Energy (Tianjin) Co., Ltd. | Dec. 2020 | Newly incorporated | RMB630,000,000 | 84.13% | |
| VI | Changes to Consolidation Scope | ||
| 1 | Newly consolidated entities for current period (continued) | ||
| Note | Business combination not involving entities under common control incurred in the current period | ||
| (1) | On 1 October 2020 (the acquisition date), the Group completed the acquisition of the 100% interest of Zhonghuan Electronics for a cash consideration of RMB12,500,000 thousand. On the acquisition date, the Group obtained actual control of Zhonghuan Electronics and therefore has included it into the consolidated financial statements from that day on. Zhonghuan Electronics is primarily engaged in semi-conductor and semi-conductor photovoltaic. | ||
| (2) | The cost of acquisition and goodwill were recognized as follows: | ||
| Cash consideration | 12,500,000 | ||
| Less: Share of fair value of identifiable net assets acquired | 5,773,870 | ||
| Goodwill | 6,726,130 | ||
| (3) | The assets and liabilities of the substantial acquiree Zhonghuan Electronics as at the acquisition date are as follows： | ||
| Fair value as at acquisition date | |||
| Current assets | 19,411,744 | ||
| Non-current assets | 42,379,474 | ||
| Current liabilities | 18,355,837 | ||
| Less: non-controlling interests | 22,801,988 | ||
| Net assets acquired | 5,773,870 | ||
| Assets evaluated as appreciated assets were mainly investment property, buildings, and intangible assets (including the right to use land as well as technological assets like patents, know-how, software copyrights). The assessment methods for the above assets are as follows: | |||
| a | The main assessment method for investment property is the income capitalization approach. First, the future normal net earnings of the subject property are estimated, when the price of the subject property is calculated. Then, a suitable capitalization rate is selected and discounted to the valuation date for summation to estimate the value of the subject property. | ||
| b | The primary assessment methods for buildings are the market comparison approach, the income capitalization approach and the replacement cost approach. In terms of the market comparison approach, the subject property is compared with similar real estate transaction cases that have happened recently or will happen soon, transaction conditions, time price formation, regional factors (external conditions of the real estate), and individual factors (own conditions of the real estate). The reasonable market price most possible for the subject property is calculated after necessary correction of the known prices of real estate transaction cases that have happened recently or will happen soon. With respect to the income capitalization approach, first, the future normal net earnings of the subject property are estimated, when the value of the subject property is calculated. Then, a suitable capitalization rate is selected and discounted to the valuation date for summation to estimate the value of the subject property. In regard to the replacement cost approach, the basic formula is: Full replacement value of the building x newness rate = value of the subject property. | ||
| c | The main assessment methods for the right to use land are the market comparison approach and the integrated evaluation of the housing and land of the main building. For the market comparison approach, the land to be evaluated and similar cases of land transactions that have occurred recently are compared in line with the substitution principle, when the price of the land to be evaluated is calculated. Then, the price of the land to be evaluated on the valuation date is calculated, after the known price of the latter is corrected by reference with the transaction situation, time, region, and individual factors of the land. | ||
| VI | Changes to Consolidation Scope (Continued) | |||||
| 1 | Newly consolidated entities for current period (continued) | |||||
| d | The primary assessment method for technological assets like patents, know-how, software copyrights is the income approach. For this method, the expected future earnings of such technological assets are calculated and discounted to the present value at a suitable discount rate. Then, the value of such technological assets is calculated by summation. | |||||
| 2 | Deconsolidated entities for current period | |||||
| Name of investee | Time of deconsolidation | Reason | ||||
| TCL Light Electrical Appliances (Longmen) Co., Ltd. | Jan. 2020 | De-registered | ||||
| TCL Educational Web Ltd. and its subsidiaries | Mar. 2020 | Transferred | ||||
| Shanghai Bairen Information Technology Co., Ltd. | Sept. 2020 | De-registered | ||||
| Xinjiang Sunpiestore Electronic Technology Co., Ltd. | Dec. 2020 | De-registered | ||||
| 3 | Subsidiaries disposed in current period | |||||
| Name of subsidiary | TCL Educational Web Ltd. and its subsidiaries | |||||
| Price for equity interest disposal | 420,000 | |||||
| % equity interest disposed | 100% | |||||
| Way of disposal | Transferred | |||||
| Time of loss of control | Mar. 2020 | |||||
| Determination basis for time of loss of control | When the rights and obligations in relation to the target equity interest have all been transferred | |||||
| Difference between the disposal price and the Company’s share of the subsidiary’s net assets in the consolidated financial statements relevant to the disposed equity interest | 270,788 | |||||
| VII | Interests in Other Entities | |||||||
| 1 | Interests in subsidiaries | |||||||
| (1) | Principal subsidiaries | |||||||
| Name of investee | Place of registration | Nature of business | Principal place of business | Company’s interest | How subsidiary was obtained | |||
| Direct | Indirect | |||||||
| TCL China Star Optoelectronics Technology Co., Ltd. | Shenzhen | Manufacturing and sales | Shenzhen | 91.56% | - | Incorporated | ||
| Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | Shenzhen | Manufacturing and sales | Shenzhen | - | 54.12% | Incorporated | ||
| Guangzhou China Ray Optoelectronic Materials Co., Ltd. | Guangzhou | Research and development | Guangzhou | - | 100% | Incorporated | ||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | Wuhan | Manufacturing and sales | Wuhan | 39.95% | 45.55% | Incorporated | ||
| Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (note 1) | Wuhan | Manufacturing and sales | Wuhan | - | 33.88% | Incorporated | ||
| Shenzhen CPT Display Technology Co., Ltd. | Shenzhen | Manufacturing and sales | Shenzhen | - | 100% | Business combination not under common control | ||
| China Star Optoelectronics International (HK) Limited | Hong Kong | Sales | Hong Kong | - | 100% | Incorporated | ||
| China Display Optoelectronics Technology Holdings Limited | Bermuda | Investment holding | Bermuda | - | 64.21% | Business combination not under common control | ||
| China Display Optoelectronics Technology (Huizhou) Co., Ltd. | Huizhou | Manufacturing and sales | Huizhou | - | 100% | Incorporated | ||
| Wuhan China Display Optoelectronics Technology Co., Ltd. | Wuhan | Manufacturing and sales | Wuhan | - | 100% | Incorporated | ||
| Beijing HAWK Cloud Information Technology Co., Ltd. | Beijing | Internet service | Beijing | 100% | - | Incorporated | ||
| TCL Culture Media (Shenzhen) Co., Ltd. | Shenzhen | Ad planning | Shenzhen | 100% | - | Incorporated | ||
| Highly Information Industry Co., Ltd. | Beijing | Product distribution | Beijing | 73.69% | - | Incorporated | ||
| Beijing Sunpiestore Technology Co., Ltd. | Beijing | Sales | Beijing | - | 60.00% | Incorporated | ||
| Beijing Lingyun Data Technology Co., Ltd. | Beijing | Sales | Beijing | - | 60.00% | Incorporated | ||
| TCL Financial Holdings Group (Guangzhou) Co., Ltd. | Guangzhou | Financial | Guangzhou | 100% | - | Incorporated | ||
| TCL Tech Finance Co., Ltd. (note 2) | Huizhou | Financial | Huizhou | 82.00% | 18.00% | Incorporated | ||
| TCL Financial Technology (Shenzhen) Co., Ltd. | Shenzhen | Financial | Shenzhen | - | 100% | Incorporated | ||
| Shenzhen Baisi Asset Management Co., Ltd. | Shenzhen | Asset management | Shenzhen | - | 100% | Incorporated | ||
| TCL Financial Service (Guangzhou) Co., Ltd. | Guangzhou | Financial services | Guangzhou | - | 100% | Incorporated | ||
| TCL Commercial Factoring (Shenzhen) Co., Ltd. | Shenzhen | Commercial factoring | Shenzhen | - | 100% | Incorporated | ||
| VII | Interests in Other Entities (Continued) | ||||||||
| 1 | Interests in subsidiaries (continued) | ||||||||
| (1) | Principal subsidiaries (continued) | ||||||||
| Name of investee | Place of registration | Nature of business | Principal place of business | Company’s interest | How subsidiary was obtained | ||||
| Direct | Indirect | ||||||||
| Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | Huizhou | Financial | Huizhou | 89.94% | - | Acquired | |||
| Xinjiang TCL Equity Investment Ltd. | Xinjiang | Investment business | Shenzhen | 100% | - | Incorporated | |||
| Ningbo TCL Equity Investment Ltd. | Ningbo | Investment business | Shenzhen | 100% | - | Incorporated | |||
| TCL Technology Park (Huizhou) Co., Ltd. | Huizhou | Property management | Huizhou | - | 100% | Incorporated | |||
| Winshero Investment Limited | The Virgin Islands | Investment business | The Virgin Islands | - | 100% | Incorporated | |||
| TCL Research America Inc. | U.S. | Research and development | U.S. | - | 100% | Incorporated | |||
| TCL Industrial Technology Research Institute (Hong Kong) Limited | Hong Kong | Research and development | Hong Kong | - | 100% | Incorporated | |||
| TCL Technology Investments Limited | Hong Kong | Investment business | Hong Kong | 100% | - | Incorporated | |||
| Tianjin Zhonghuan Semiconductor Co., Ltd. | Tianjin | Manufacturing & sales | Tianjin | 2.57% | 25.30% | Business combination not under common control | |||
| Tianjin Printronics Circuit Corporation | Tianjin | Manufacturing & sales | Tianjin | - | 25.35% | Business combination not under common control | |||
| Tianjin Huan’Ou Semiconductor Material&Technology Co., Ltd. | Tianjin | Manufacturing & sales | Tianjin | - | 100% | Business combination not under common control | |||
| Wuxi Zhonghuan Applied Materials Co., Ltd. | Wuxi | Manufacturing & sales | Wuxi | - | 81.48% | Business combination not under common control | |||
| Tianjin Huanzhi New Energy Technology Co., Ltd. | Tianjin | Manufacturing & sales | Tianjin | - | 62.00% | Business combination not under common control | |||
| Inner Mongolia Zhonghuan Solar Material Co., Ltd. | Inner Mongolia | Manufacturing & sales | Inner Mongolia | - | 100% | Business combination not under common control | |||
| TianJin Zhonghuan Advanced Material&Technology Co., Ltd. | Tianjin | Manufacturing & sales | Tianjin | - | 60.00% | Business combination not under common control | |||
| Huansheng Solar (Jiangsu) Co., Ltd. | Wuxi | Manufacturing & sales | Wuxi | - | 77.00% | Business combination not under common control | |||
| Tianjin Huanou International Silicon Material Co., Ltd. | Tianjin | Procurement & sales | Tianjin | - | 100% | Business combination not under common control | |||
| VII | Interests in Other Entities (Continued) | |||||||
| 1 | Interests in subsidiaries (continued) | |||||||
| (1) | Principal subsidiaries (continued) | |||||||
| Name of investee | Place of registration | Nature of business | Principal place of business | Company’s interest | How subsidiary was obtained | |||
| Direct | Indirect | |||||||
| Zhonghuan Hong Kong Holding Limited | Hong Kong | Sales | Hong Kong | - | 100% | Business combination not under common control | ||
| Tianjin Huanrui Electronic Technology Co., Ltd. | Tianjin | Procurement & sales | Tianjin | - | 100% | Business combination not under common control | ||
| Inner Mongolia Zhonghuan Xiexin Solar Material Co., Ltd. | Inner Mongolia | Manufacturing & sales | Inner Mongolia | - | 59.32% | Business combination not under common control | ||
| Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. | Inner Mongolia | Manufacturing & sales | Inner Mongolia | - | 60.00% | Business combination not under common control | ||
| Zhonghuan Advanced Semiconductor Materials Co., Ltd. | Wuxi | Manufacturing & sales | Wuxi | - | 60.00% | Business combination not under common control | ||
| Note 1 | TCL China Star Optoelectronics Technology Co., Ltd. (hereinafter referred to as “TCL CSOT”), a subsidiary of the Company, has a 33.88% interest in Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (hereinafter referred to as “Wuhan CSOSDT”). TCL CSOT appoints key management personnel of Wuhan CSOSDT and decides its business and financial policies, so TCL CSOT is considered to have substantial control over Wuhan CSOSDT. Therefore, Wuhan CSOSDT is included in the Company’s consolidated financial statements. | ||||
| Note 2 | Subsidiary TCL Finance Co., Ltd. changed its name to “TCL Tech Finance Co., Ltd.” in August 2020. | ||||
| (2) | Subsidiaries with substantial non-controlling interests | ||||
| Name of subsidiary | Non-controlling interests | Current period Profit or loss attributable to non-controlling interests | Current period Dividends distributed to non-controlling interests | Ending equity attributable to non-controlling interests | |
| TCL China Star Optoelectronics Technology Co., Ltd. | 8.44% | 314,392 | 349,027 | 35,782,845 | |
| Tianjin Zhonghuan Semiconductor Co., Ltd. (Note) | 72.13% | 145,414 | - | 8,380,767 | |
| Highly Information Industry Co., Ltd. | 26.31% | 73,533 | 33,211 | 336,389 | |
| VII | Interests in Other Entities (Continued) | |||||||||||||
| 1 | Interests in subsidiaries (continued) | |||||||||||||
| (2) | Subsidiaries with substantial non-controlling interests (continued) | |||||||||||||
| The key financial information of the above subsidiaries is as follows: | ||||||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | |||
| TCL China Star Optoelectronics Technology Co., Ltd. | 57,189,005 | 117,985,042 | 175,174,047 | 55,328,869 | 55,005,109 | 110,333,978 | 39,784,300 | 90,798,110 | 130,582,410 | 36,200,599 | 39,150,594 | 75,351,193 | ||
| Tianjin Zhonghuan Semiconductor Co., Ltd. | 16,085,100 | 42,634,584 | 58,719,684 | 17,329,888 | 13,308,403 | 30,638,291 | - | - | - | - | - | - | ||
| Highly Information Industry Co., Ltd. | 4,771,001 | 67,485 | 4,838,486 | 3,653,818 | 113,762 | 3,767,580 | 4,482,847 | 37,662 | 4,520,509 | 3,484,042 | 33,587 | 3,517,629 | ||
| 2020 | 2019 | |||||||||
| Revenue | Net profit | Total comprehensive income | Net cash generate from/used in operating activities | Revenue | Net profit | Total comprehensive income | Net cash generate from/used in operating activities | |||
| TCL China Star Optoelectronics Technology Co., Ltd. | 46,765,152 | 2,427,604 | 2,517,639 | 16,482,499 | 33,993,534 | 964,444 | 846,436 | 8,253,015 | ||
| Tianjin Zhonghuan Semiconductor Co., Ltd. | 5,682,962 | 427,175 | 426,746 | 665,007 | - | - | - | - | ||
| Highly Information Industry Co., Ltd. | 22,518,401 | 186,177 | 186,177 | 111,130 | 20,835,617 | 215,604 | 215,604 | 194,578 | ||
Note: Tianjin Zhonghuan Semiconductor Co., Ltd. has been included in the consolidated financial statements since 1 Oct. 2020. Therefore, it was included in the consolidated income statement for the period from Oct. to Dec. 2020.
| VII | Interests in Other Entities (Continued) | |||||
| 2 | Interests in joint ventures and associates | |||||
| (1) | Basic information about principal joint ventures and associates | |||||
| Name of investee | Principal place of business /place of registration | Nature of business | Strategic to the Group’s activities or not | The Company’s interest | ||
| Direct | Indirect | |||||
| Associate | ||||||
| Bank of Shanghai Co., Ltd. (note) | Shanghai | Financial | Yes | 5.76% | - | |
| Note: | For the Reporting Period, the Company had a 5.76% interest in Bank of Shanghai Co., Ltd. and appointed one of its directors to be a member of the Risk Management Committee under the Board of the Bank of Shanghai. Therefore, the Company is deemed to have significant influence on the Bank of Shanghai, and this long-term equity investment is thus measured using the equity method. | |||||
| (2) | Key financial information of major associates | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Bank of Shanghai Co., Ltd. | Bank of Shanghai Co., Ltd. | |||
| Total assets | 2,462,144,000 | 2,237,081,943 | ||
| Total liabilities | N/A | 2,059,855,312 | ||
| Non-controlling interests | N/A | 518,019 | ||
| Equity attributable to shareholders of the Company as the parent | 190,398,000 | 176,708,612 | ||
| Share of equity in proportion to the Company’s interest | 10,966,925 | 9,077,778 | ||
| Carrying amount of investment in associate | 11,232,138 | 9,314,611 | ||
| VII | Interests in Other Entities (Continued) | |||
| 2 | Interests in joint ventures and associates (continued) | |||
| (2) | Key financial information of major associates (continued) | |||
| 2020 | 2019 | |||
| Bank of Shanghai Co., Ltd. | Bank of Shanghai Co., Ltd. | |||
| Revenue | 50,746,000 | 49,800,292 | ||
| Net profit | 20,885,000 | 20,297,588 | ||
| Dividends from associate to the Group in current period | 316,955 | 245,337 | ||
| (3) | Financial information of insignificant joint ventures and associates combined respectively | |||
| 2020 | 2019 | |||
| Joint ventures: | ||||
| Aggregated carrying amount of investments | 119,234 | 174,558 | ||
| Aggregate of following items calculated in proportion to the Company’s interest | ||||
| Net profit (note) | (5,118) | 36,597 | ||
| Other comprehensive income (note) | - | - | ||
| Total comprehensive income | (5,118) | 36,597 | ||
| Associates: | ||||
| Aggregated carrying amount of investments | 12,695,664 | 7,705,115 | ||
| Aggregate of following items calculated in proportion to the Company’s interest | ||||
| Net profit (note) | 1,031,890 | 616,498 | ||
| Other comprehensive income (note) | (2,489) | (12,991) | ||
| Total comprehensive income | 1,029,401 | 603,507 | ||
| Note： | The net profit and other comprehensive income have taken into account the impacts of both the fair value of the identifiable assets and liabilities upon the acquisition of investment and accounting policies unifying. | |||
| (4) | The Company had no significant joint ventures in the Reporting Period. | |||
| VIII | Risks Related to Financial Instruments |
| The purpose of the Company’s risk management is to achieve a right balance between the risk and the benefit and maximally reduce the adverse impact of financial risks on the Company’s financial performance. Based on such purpose, the Company has established various risk management policies to recognize and analyze possible risks to be encountered by the Company, set an appropriate risk acceptable level and designed corresponding internal control procedures so as to control the Company’s risk level. In addition, the Company will regularly review these risk management policies and relevant internal control system in order to adapt to the market or handle various changes in the Company’s operating activities. Meanwhile, the Company’s internal audit department will also regularly or randomly check whether the implementation of internal control system conforms to relevant risk management policies. In fact, the Company has applied proper diversified investment and business portfolio to disperse various financial instrument risks and worked out corresponding risk management policies to reduce the risk of concentrating on one single industry, specific region or specific counterpart. | |
| Main risks caused by the Company’s financial instruments include the credit risk, the liquidity risk and the market risk (including the foreign exchange risk and the interest rate risk). | |
| (1) | Credit risk |
| Credit risk refers to the risk of financial loss caused by any party of financial instruments to another party due to the failure in fulfilling performance obligations. The Group controls the credit risk based on the specific group classification, and credit risk mainly results from bank deposit, due from central bank, bills receivable, account receivable, issued loan and monies advanced and other receivables. | |
| The Group’s bank deposits and due from central bank are mainly deposited in stated-owned banks and other large and medium-sized listed banks. The Group considers no significant credit risk existed and no significant loss will be caused by the counterpart’s breach of contract. | |
| For notes receivable, accounts receivable, loans and advances to customers and other receivables, the Group has established relevant policies to control the credit risk exposure, and will evaluate the client’s credit qualification and determine corresponding credit period based on the client’s financial status, the possibility of obtaining guarantees from the third party, relevant credit records and other factors (like the current market situation). In the meantime, the Group will regularly monitor the client’s credit records. For any client with unfavorable credit records, the Group will issue written reminders, shorten the credit period or cancel the credit period so as to keep the Group’s overall credit risk controllable. | |
| As at 31 Dec. 2020, no significant guarantee or other credit enhancements held due to the debtor’s mortgage was found in the Group. | |
| (2) | Liquidity risk |
| Liquidity risk refers to the risk of capital shortage the Company encounters when the Company is fulfilling the obligation of settlement in the form of cash or other financial assets. Various subsidiaries under the Group shall be responsible for predicting their own cash flow. The financial department of the headquarters shall firstly summarize predictions on the cash flow of various subsidiaries and then continuously monitor the short-term and long-term fund demand at the Group’s level so as to maintain sufficient cash reserves and negotiable securities that can be realized at any time; meanwhile, special effort shall also be made to continuously monitor whether provisions stated in the loan agreement are observed and to make major financial institutions promise to provide sufficient reserve fund so as to satisfy the short-term and long-term capital demand. |
| VIII | Risks Related to Financial Instruments | ||||
| (3) | Market risk | ||||
| (a) | Foreign exchange risk | ||||
| The Group has carried out various economic activities around the world including manufacturing, selling, investment and financing etc., and corresponding interest rate fluctuation risks exist in the Group’s foreign currency assets and liabilities and future foreign currency transactions. | |||||
| The Group always regards “Locking the Cost and Avoiding Possible Risks” as the foreign currency risk management goal. Through the natural hedging of settlement currency, matching with the foreign currency liabilities, signing simple derivative products closely related to the owner’s operation and meeting corresponding hedge accounting treatment requirements and applying other management methods, the foreign currency risk exposure can be controlled within a reasonable scope and the impact of interest rate fluctuations on the Group’s overall profit and loss will be reduced. | |||||
| On 31 Dec., foreign-currency asset and liability items with significant exposure to exchange risk were mainly denominated in the US dollar. After management, the total risk exposure of the US dollar-denominated items was net asset exposure of USD126,602 thousand, equivalent to RMB826,066 thousand based on the spot exchange rate on the balance sheet date. The differences arising from the translation of foreign currency financial statements were not included. | |||||
| The Group applies the following exchange rate of USD against RMB: | |||||
| Average exchange rate | Exchange rate at period-end | ||||
| 2020 | 31 Dec. 2020 | ||||
| USD/RMB | 6.8941 | 6.5249 | |||
| Provided that other risk variables remained unchanged except the exchange rate, a 5% depreciation/appreciation in RMB as a result of the changes in the exchange rate of RMB against USD would cause an increase/decrease of RMB41,303 thousand in the shareholders’ equity and net profit respectively of the Group on 31 Dec. | |||||
| The above-mentioned sensitivity analysis is made based on the assumption that the exchange rate changes on the balance sheet date, and financial instruments held by the Group on the balance sheet date exposed to the exchange risk are re-calculated based on the changed exchange rate. The above analysis does not include differences arising from the translation of foreign currency financial statements. | |||||
| (b) | Interest risk | ||||
| The Group’s interest rate risk mainly results from interest-bearing bank borrowings adopting floating interest rates, and the Group determines the proportion of fixed interest rates and floating interest rates based on the market environment and its risk tolerance. Up to 31 Dec. 2020, the Group’s liabilities with floating interest rates accounted for 66% of its total interest-bearing liabilities. And, the Group will continuously monitor the interest rates and make corresponding adjustments according to the specific market changes so as to avoid interest rate risk. | |||||
| IX | Classification of Financial Instruments and Fair Value |
| Fair value of financial instruments and levels | |
| 1. | Fair value is divided into the following levels in measurement and disclosure: |
| Level 1 refers to the (unadjusted) quotation of the same type of assets or liabilities on the active market; and the Company mainly adopts the closing price as the value of a financial asset. Financial instruments of level 1 mainly include exchange listed stocks and bonds. | |
| Level 2 refers to the directly or indirectly observable input of a financial asset or liability that does not belong to level 1. | |
| Level 3 refers to the input of a financial asset or liability determined based on variables other than the observable market data (non-observable input). | |
| 2. | Basis for determining the market value of items measured at continuous level 1 fair value |
| The Company adopts the active market quotation as the fair value of a level 1 financial asset. | |
| 3. | Items measured at continuous level 2 fair value adopt the following valuation techniques and parameters: |
| The Company’s receivables financing was bank acceptance notes and trade acceptance notes, of which the market prices were determined based on the transfer or discounted amounts. | |
| Derivative financial assets and liabilities are multiple IRS and CCS signed between the Group and financial institutions. The Company adopts the quotation provided by the financial institution in valuation. | |
| 4. | Items measured at continuous level 3 fair value adopt the following valuation techniques and parameters (nature and quantity): |
| Other non-current financial assets measured at continuous level 3 fair value are mainly unlisted equity investments held by the Company. In measuring the fair value, the Company mainly adopts the valuation technique of comparison with listed companies, taking into account the price of similar securities and liquidity discount. | |
| Held-for-trading financial assets measured at continuous level 3 fair value are mainly wealth management products held by the Company. In valuation of the fair value, the Company adopts the method of discounting future cash flows based on the agreed expected yield rate. | |
| IX | Classification of Financial Instruments and Fair Value (Continued) | |||||||
| 5 | Financial instruments measured at three levels of fair value | |||||||
| Financial assets | ||||||||
| Item | Level 1 | Level 2 | Level 3 | Total | ||||
| Held-for-trading financial assets (see Note V, 2) | 3,170,115 | 1,617,694 | 512,237 | 5,300,046 | ||||
| Derivative financial assets (see Note V, 3) | - | 453,578 | - | 453,578 | ||||
| Receivables financing (see Note V, 6) | - | 2,164,350 | 12,394 | 2,176,744 | ||||
| Investments in other equity instruments (see Note V, 18) | 315,269 | - | 1,018,407 | 1,333,676 | ||||
| Other debt investments (see Note V, 15) | - | 152,063 | - | 152,063 | ||||
| Other non-current financial assets (see Note V, 19) | 10,000 | 1,553,387 | 1,492,208 | 3,055,595 | ||||
| Total assets continuously measured at fair value | 3,495,384 | 5,941,072 | 3,035,246 | 12,471,702 | ||||
| Financial liabilities | ||||||||
| Item | Level 1 | Level 2 | Level 3 | Total | ||||
| Held-for-trading financial liabilities (see Note V, 32) | 304,701 | 223,200 | - | 527,901 | ||||
| Derivative financial liabilities (see Note V, 33) | - | 384,904 | - | 384,904 | ||||
| Total liabilities continuously measured at fair value | 304,701 | 608,104 | - | 912,805 |
| X | Related Parties and Related-Party Transactions | |
| 1 | Actual controller and its acting-in-concert parties | |
| The Company has no controlling shareholder. | ||
| Mr. Li Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership) have become acting-in-concert parties due to the signing of the Concerted Action Agreement. They hold a total of 1,158.5994 million shares in the Company, which makes them the largest shareholder of the Company. | ||
| As per Article 217 of the Company Law, a controlling shareholder refers to a shareholder who owns over 50% of a limited liability company’s total capital or over 50% of a joint stock company’s total share capital; or, despite the ownership of less than 50% of a limited liability company’s total capital or less than 50% of a joint stock company’s total number of shares, who can still prevail in the resolution of a meeting of shareholders or a general meeting of shareholders according to the voting rights corresponding to his interest in the limited liability company’s total capital or the joint stock company’s total number of shares. According to the definition above, the Company has no controlling shareholder or actual controller. | ||
| 2 | Related parties that do not control or are not controlled by the Company | |
| Information about such related parties： | ||
| Related party | Relationship with the Company | |
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | Associate | |
| TCL Intelligent Technology (Ningbo) Co., Ltd. | Associate | |
| LG Electronics (Huizhou) Co., Ltd. | Associate | |
| Wuxi TCL Medical Imaging Technology Co., Ltd. | Associate | |
| Beijing WeMed Medical Equipment Co., Ltd. | Associate | |
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | Associate | |
| Shenzhen Tixiang Business Management Technology Co., Ltd. | Associate | |
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | Associate | |
| Petro AP (Hong Kong) Company Limited | Associate | |
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | Associate | |
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | Associate | |
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | Associate | |
| Nanjing Zijin A Dynamic Investment Partnership (Limited Partnership) | Associate | |
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | Associate | |
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | Associate | |
| Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. | Associate | |
| Urumqi Dongpeng A Dynamic Equity Investment Management Partnership (Limited Partnership) | Associate | |
| X | Related Parties and Related-Party Transactions (Continued) | |
| 2 | Related parties that do not control or are not controlled by the Company (continued) | |
| Related party | Relationship with the Company | |
| Shenzhen Tianyi Hemeng Education Co., Ltd. | Associate | |
| Bank of Shanghai Co., Ltd. | Associate | |
| JOLED Incorporation | Associate | |
| Shanghai Huiying Medical Technology Co., Ltd. | Associate | |
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | Associate | |
| TCL Finance (Hong Kong) Co., Limited | Associate | |
| Getech Ltd. and its subsidiaries | Associate and its subsidiaries | |
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | Associate and its subsidiaries | |
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | Associate and its subsidiaries | |
| Huizhou TCL Human Resources Service Co., Ltd. | Joint venture | |
| Anhui TCL Human Resources Service Co., Ltd. | Joint venture’s subsidiary | |
| Huizhou TCL Real Estate Development Co., Ltd. | Associate’s subsidiary | |
| Qihang Import & Export Limited | Associate’s subsidiary | |
| Elite Excellent Investments Limited | Associate’s subsidiary | |
| Huixing Holdings Limited | Associate’s subsidiary | |
| Marvel Paradise Limited | Associate’s subsidiary | |
| Union Dynamic Investment Limited | Associate’s subsidiary | |
| Esteem Venture Investment Limited | Associate’s subsidiary | |
| Zijinshan Investment Co., Ltd. | Associate’s subsidiary | |
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | Associate’s subsidiary | |
| Shenzhen Xirang International Business Travel Co., Ltd. | Associate’s subsidiary | |
| Petro AP S.A. | Associate’s subsidiary | |
| Qihang International Import & Export Limited | Associate’s subsidiary | |
| TCL Industries Holdings Co., Ltd. and its subsidiaries | Under control of the same director | |
| CJ Speedex Logistics Co., Ltd. | Significantly influenced by the Company’s director | |
| SunPower Systems International Limited | Associate | |
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | Joint venture | |
| Inner Mongolia Jinghuan Electronic Material Co., Ltd. | Associate | |
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | Associate | |
| Sichuan Shengtian New Energy Development Co., Ltd. | Associate | |
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | Associate | |
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | Associate | |
| Yanyuan Fengguang New Energy Co., Ltd. | Associate | |
| Zhonghuan Aineng (Beijing) Technology Co., Ltd. | Associate | |
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions | ||||
| 2020 | 2019 | ||||
| (1) | Selling raw materials and finished products to related parties | Note1 | |||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 11,907,330 | 6,963,427 | |||
| Wuxi Zhonghuan Applied Materials Co., Ltd. | 826,569 | - | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 720,035 | - | |||
| Qihang International Import & Export Limited | 436,002 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 227,848 | 652,343 | |||
| SunPower Systems International Limited | 223,755 | - | |||
| Qihang Import & Export Limited | 177,473 | 511,551 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 31,156 | 5,177 | |||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | 4,756 | - | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 766 | 19 | |||
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | 522 | 713 | |||
| Sichuan Shengtian New Energy Development Co., Ltd. | 140 | - | |||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | 17 | 40 | |||
| CJ Speedex Logistics Co., Ltd. | 12 | 85,540 | |||
| Saipu TCL Electronic Industrial Technology Co., Ltd. | - | 252,078 | |||
| TCL Sun,Inc. | - | 79,594 | |||
| TCT Mobile - Telefones LTDA | - | 44,889 | |||
| T2Mobile International Limited | - | 23,346 | |||
| Taiyang Electro-optic (Huizhou) Co., Ltd. | - | 336 | |||
| Palm Venture Group | - | 238 | |||
| Beijing Shangdao Yuetu Technology Co., Ltd. | - | 240 | |||
| Shenzhen Thunderbird Smart Products Co., Ltd. | - | 116 | |||
| Huizhou Gaoshengda Technology Co., Ltd. | - | 15 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 12 | |||
| 14,556,381 | 8,619,674 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| 2020 | 2019 | ||||
| (2) | Purchasing raw materials and finished products from related parties | Note2 | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 2,353,119 | 1,147,113 | |||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 607,405 | 813,551 | |||
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | 364,982 | - | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 263,053 | 68,832 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 53,648 | - | |||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | 45,826 | - | |||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | 5,711 | - | |||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | 1,079 | - | |||
| TCL Intelligent Technology (Ningbo) Co., Ltd. | 795 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 141 | 95,669 | |||
| Huizhou Gaoshengda Technology Co., Ltd. | - | 154,843 | |||
| CJ Speedex Logistics Co., Ltd. | - | 78,847 | |||
| Taiyang Electro-optic (Huizhou) Co., Ltd. | - | 50,882 | |||
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | - | 41,946 | |||
| Wuhan Shangde Plastics Technology Co., Ltd. | - | 33,866 | |||
| Huizhou Shenghua Industrial Co., Ltd. | - | 20,659 | |||
| Amlogic Co., Limited | - | 13,947 | |||
| Qihang Import & Export Limited | - | 3,529 | |||
| Huizhou TCL Taidong Shihua Investment Co., Ltd. | - | 1,551 | |||
| Shenzhen Thunderbird Network Media Co., Ltd. | - | 695 | |||
| Shenzhen Thunderbird Smart Products Co., Ltd. | - | 370 | |||
| Canyon Circuit Technology (Huizhou) Co., Ltd. | - | 58 | |||
| 3,695,759 | 2,526,358 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| 2020 | 2019 | ||||
| (3) | Receiving funding from related parties | Note 3 | |||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 2,000,623 | 350,004 | |||
| TCL Finance (Hong Kong) Co., Limited | 528,391 | - | |||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 266,839 | 297 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 103,136 | 30,475 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 98,476 | - | |||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 58,845 | 169,288 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 52,757 | 22,535 | |||
| Qihang International Import & Export Limited | 34,717 | - | |||
| Qihang Import & Export Limited | 31,363 | 28,267 | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 5,826 | - | |||
| Huizhou TCL Human Resources Service Co., Ltd. | 3,926 | - | |||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | 3,328 | 1,599 | |||
| Anhui TCL Human Resources Service Co., Ltd. | 2,548 | - | |||
| Elite Excellent Investments Limited | 2,008 | 2,164 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 1,236 | 652,105 | |||
| Huixing Holdings Limited | 667 | 665 | |||
| Marvel Paradise Limited | 592 | 640 | |||
| Union Dynamic Investment Limited | 417 | 471 | |||
| Petro AP (Hong Kong) Company Limited | 112 | 140 | |||
| Esteem Venture Investment Limited | 90 | 97 | |||
| Zijinshan Investment Co., Ltd. | - | 1 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | - | 82,659 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 5,081 | |||
| TV University Online Distance Education Technology Co., Ltd. | - | 554 | |||
| 3,195,897 | 1,347,042 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| 2020 | 2019 | ||||
| (4) | Providing funding for related parties | Note 3 | |||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 1,063,580 | 2,692,921 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 47,945 | 427,593 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 195,550 | 146,439 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 112,318 | |||
| 1,307,075 | 3,379,271 | ||||
| 2020 | 2019 | ||||
| (5) | Leases | ||||
| Rental income | |||||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 96,973 | 22,572 | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 50,856 | 40,629 | |||
| Wuxi Zhonghuan Applied Materials Co., Ltd. | 2,239 | - | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 2,187 | - | |||
| Getech Ltd. and its subsidiaries | 2,074 | - | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 789 | 449 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | 657 | 866 | |||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 322 | 169 | |||
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | 29 | 366 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 3,361 | |||
| Shenzhen Thunderbird Network Media Co., Ltd. | - | 787 | |||
| Shenzhen Thunderbird Information Technology Co., Ltd. | - | 608 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 445 | |||
| CJ Speedex Logistics Co., Ltd. | - | 431 | |||
| Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. | - | 253 | |||
| Shanghai Huiying Medical Technology Co., Ltd. | - | 213 | |||
| Urumqi Dongpeng A Dynamic Equity Investment Management Partnership (Limited Partnership) | - | 60 | |||
| Shenzhen Tianyi Hemeng Education Co., Ltd. | - | 34 | |||
| Shenzhen Yisheng Kangyun Technology Development Co., Ltd. | - | 31 | |||
| Huan Tech Co., Ltd. | - | 10 | |||
| Huizhou Shenghua Industrial Co., Ltd. | - | 1 | |||
| Taiyang Electro-optic (Huizhou) Co., Ltd. | - | 1 | |||
| 156,126 | 71,286 |
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| 2020 | 2019 | ||||
| (5) | Leases (continued) | ||||
| Rental expense | |||||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 41,379 | 38,110 | |||
| Wuhan Lesheng Times Trading Co., Ltd. | - | 9,544 | |||
| CJ Speedex Logistics Co., Ltd. | - | 4,558 | |||
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | - | 603 | |||
| 41,379 | 52,815 | ||||
| 2020 | 2019 | ||||
| (6) | Providing labour service for or accepting labour service from related parties | ||||
| Providing labour service for related parties | 126,819 | 306,009 | |||
| Accepting labour service from related parties | 441,668 | 639,429 | |||
| 2020 | 2019 | ||||
| (7) | Receiving interest from or paying interest to related parties | Note 3 | |||
| Interest received | 86,235 | 104,297 | |||
| Interest paid | 9,611 | 14,226 | |||
| 2020 | 2019 | ||||
| (8) | Remuneration of key management personnel | 28,304 | 29,639 | ||
| Note 1 | Selling raw materials and finished goods to related parties | ||||
| The Company sells raw materials, spare parts, auxiliary materials and finished goods to its joint ventures and associates at market prices, which are settled in the same way as non-related-party transactions. These related-party transactions have no material impact on the Company’s net profit, but play an important role as to the Company’s continued operations. | |||||
| Note 2 | Purchasing raw materials and finished goods from related parties | ||||
| The Company purchases raw materials and finished goods from its joint ventures and associates at prices similar to those paid to third-party suppliers, which are settled in the same way as non-related-party transactions. These related-party transactions have no material impact on the Company’s net profit, but play an important role as to the Company’s continued operations. | |||||
| X | Related Parties and Related-Party Transactions (Continued) | |
| 3 | Major related-party transactions (continued) | |
| Note3 | Providing funding for or receiving funding from related parties and corresponding interest received or paid | |
| The Company set up a settlement center in 1997 and TCL Tech Finance Co., Ltd. in 2006 (together, the “Financial Settlement Center”). The Financial Settlement Center is responsible for the financial affairs of the Company, including capital operation and allocation. The Center settles accounts with the Company’s subsidiaries, joint ventures and associates and pays the interest. It also allocates the money deposited by the subsidiaries, joint ventures and associates in it to these enterprises and charges interest. The interest income and expense between the Company and the Center are calculated according to the interest rates declared by the People’s Bank of China. The funding amount provided refers to the outstanding borrowings due from the Center to related parties, while the funding amount received means the balances of related parties’ deposits in the Center. | ||
| Note4 | The transactions between the Company and the following companies in the period from January to March in the current period are related-party transactions. | |
| Related party | Relationship with the Company | |
| TV University Online Distance Education Technology Co., Ltd. | Joint venture | |
| Beijing National Center for Open & Distance Education Co., Ltd. | Joint venture’s subsidiary | |
| Note5 | The transactions between the Company and Huizhou TCL Taidong Shihua Investment Co., Ltd. before the date of the latter’s disposal were related-party transactions. | |
| Note6 | The transactions between the Company and the following companies in the period from January to March 2019 were related-party transactions. | |
| Harvey Holdings Limited | Associate | |
| Palm Venture Group | Associate | |
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | Associate | |
| Beijing Shangdao Yuetu Technology Co., Ltd. | Associate | |
| Saipu TCL Electronic Industrial Technology Co., Ltd. | Associate | |
| Canyon Circuit Technology (Huizhou) Co., Ltd. | Associate | |
| Taiyang Electro-optic (Huizhou) Co., Ltd. | Associate | |
| Wuhan Shangde Plastics Technology Co., Ltd. | Associate | |
| Huan Tech Co., Ltd. | Associate | |
| TCL Sun,Inc. | Joint venture | |
| Amlogic Co., Limited | Associate’s subsidiary | |
| TCT Mobile - Telefones LTDA | Associate’s subsidiary | |
| Huizhou Gaoshengda Technology Co., Ltd. | Associate’s subsidiary | |
| Huizhou Shenghua Industrial Co., Ltd. | Associate’s subsidiary | |
| Shenzhen Yisheng Kangyun Technology Development Co., Ltd. | Associate’s subsidiary | |
| Wuhan Lesheng Times Trading Co., Ltd. | Associate’s subsidiary | |
| T2Mobile International Limited | Joint venture’s subsidiary | |
| Le Shi Zhi Xin Electronics & Technology (Tianjin) Co., Ltd. | Non-controlling shareholder of a substantial subsidiary | |
| X | Related Parties and Related-Party Transactions (Continued) |
| 3 | Major related-party transactions (continued) |
| Note 7 |
| SunPower Systems International Limited | Associate | |
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | Joint venture | |
| Inner Mongolia Jinghuan Electronic Material Co., Ltd. | Associate | |
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | Associate | |
| Sichuan Shengtian New Energy Development Co., Ltd. | Associate | |
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | Associate | |
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | Associate | |
| Yanyuan Fengguang New Energy Co., Ltd. | Associate | |
| Zhonghuan Aineng (Beijing) Technology Co., Ltd. | Associate | |
| Note8 | The transactions between the Company and Wuxi Zhonghuan Applied Materials Co., Ltd. in the period from October to November 2020 were related-party transactions. | |
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| 4 | Balances due from and to related parties | ||||
| (1) | Accounts receivable | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 2,580,564 | 2,169,426 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 381,327 | - | |||
| Qihang Import & Export Limited | 112,535 | 24,892 | |||
| SunPower Systems International Limited | 99,791 | - | |||
| Qihang International Import & Export Limited | 17,265 | - | |||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | 13,825 | - | |||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | 6,983 | ||||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | 2,149 | - | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 1,148 | - | |||
| Bank of Shanghai Co., Ltd. | 45 | 68 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | 4 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 32,242 | |||
| Shanghai Huiying Medical Technology Co., Ltd. | - | 1,000 | |||
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | - | 39 | |||
| CJ Speedex Logistics Co., Ltd. | - | 33 | |||
| 3,215,636 | 2,227,700 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (2) | Accounts payable | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 385,787 | 410,872 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 122,863 | 19,746 | |||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 32,336 | 294,817 | |||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | 31,115 | - | |||
| Getech Ltd. and its subsidiaries | 21,594 | 23,617 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 11,435 | 54,112 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 8,562 | - | |||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | 1,365 | - | |||
| 615,057 | 803,164 | ||||
| (3) | Other receivables | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 41,645 | 59,769 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 25,486 | 22,253 | |||
| Zhonghuan Aineng (Beijing) Technology Co., Ltd. | 3,099 | - | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 2,755 | - | |||
| Petro AP S.A. | 1,218 | 1,296 | |||
| Ulanqab Xinyuan New Energy Co., Ltd. | 425 | ||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 218 | - | |||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | 66 | - | |||
| LG Electronics (Huizhou) Co., Ltd. | 26 | 46 | |||
| Wuxi Zhonghuan Yangjie Semiconductor Co., Ltd. | 2 | - | |||
| Nanjing Zijin A Dynamic Investment Partnership (Limited Partnership) | - | 296 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | - | 144 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 75 | |||
| Wuxi TCL Medical Imaging Technology Co., Ltd. | - | 5 | |||
| Beijing WeMed Medical Equipment Co., Ltd. | - | 2 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | - | 2 | |||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | - | - | |||
| 74,940 | 83,888 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (4) | Other payables | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 266,838 | 37 | |||
| JOLED Incorporation | 63,300 | - | |||
| TCL Industries Holdings Co., Ltd. and its subsidiaries | 53,036 | 49,029 | |||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 47,782 | 1,102 | |||
| Qihang International Import & Export Limited | 34,717 | - | |||
| Getech Ltd.and its subsidiaries | 34,003 | 23,137 | |||
| Qihang Import & Export Limited | 31,363 | 28,268 | |||
| Petro AP (Hong Kong) Company Limited | 21,698 | 23,100 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 14,556 | - | |||
| Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. | 11,836 | - | |||
| TCL Finance (Hong Kong) Co., Limited | 11,419 | 12,208 | |||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 5,500 | 5,541 | |||
| Huizhou TCL Human Resources Service Co., Ltd. | 3,926 | - | |||
| Anhui TCL Human Resources Service Co., Ltd. | 2,548 | - | |||
| Elite Excellent Investments Limited | 2,008 | 2,164 | |||
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | 1,281 | 3,238 | |||
| CJ Speedex Logistics Co., Ltd. | 1,050 | 1,040 | |||
| Huixing Holdings Limited | 667 | 665 | |||
| Marvel Paradise Limited | 592 | 640 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 500 | - | |||
| Union Dynamic Investment Limited | 417 | 471 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 372 | - | |||
| Huizhou TCL Environmental Resource Co., Ltd.and its subsidiaries | 243 | 384 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | 91 | 165 | |||
| Esteem Venture Investment Limited | 90 | 97 | |||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | 45 | - | |||
| Yanyuan Fengguang New Energy Co., Ltd. | 28 | - | |||
| TCL Air Conditioner (Wuhan) Co., Ltd.and its subsidiaries | 4 | 27,654 | |||
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | 4 | - | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | - | 4,701 | |||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | - | 3,591 | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | - | 2,769 | |||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | - | 2,035 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 168 | |||
| TV University Online Distance Education Technology Co., Ltd. | - | 138 | |||
| Zijinshan Investment Co., Ltd. | - | 1 | |||
| 609,914 | 192,343 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (5) | Prepayments | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Xinjiang Xiexin New Energy Material Technology Co., Ltd. | 28,520 | - | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 4,162 | 1,446 | |||
| Getech Ltd.and its subsidiaries | 3,130 | - | |||
| JOLED Incorporation | 1,962 | - | |||
| TCL Industries Holdings Co., Ltd.and its subsidiaries | 92 | 565 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd.and its subsidiaries | 35 | 35 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 31,592 | |||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | - | 200 | |||
| 37,901 | 33,838 | ||||
| (6) | Advances from customers | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| TCL Industries Holdings Co., Ltd.and its subsidiaries | 341 | 1,994 | |||
| Huizhou TCL Environmental Resource Co., Ltd.and its subsidiaries | 34 | 328 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | - | 76 | |||
| 375 | 2,398 | ||||
| (7) | Contract liabilities | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| TCL Industries Holdings Co., Ltd.and its subsidiaries | 42,533 | - | |||
| (8) | Dividends receivable | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | - | 5,771 | |||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (9) | Deposits from related parties (note) | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 2,000,623 | 350,247 | |||
| TCL Finance (Hong Kong) Co., Limited | 528,391 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 103,136 | 30,489 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 98,476 | - | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 52,677 | 22,544 | |||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 11,062 | 169,316 | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 5,826 | ||||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | 3,328 | 1,601 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd.and its subsidiaries | 1,232 | 652,130 | |||
| Petro AP (Hong Kong) Company Limited | 112 | 140 | |||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 1 | 297 | |||
| Huizhou TCL Environmental Resource Co., Ltd.and its subsidiaries | - | 83,149 | |||
| Qihang Import & Export Limited | - | 28,267 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 5,087 | |||
| Elite Excellent Investments Limited | - | 2,164 | |||
| Huixing Holdings Limited | - | 665 | |||
| Marvel Paradise Limited | - | 640 | |||
| TV University Online Distance Education Technology Co., Ltd. | - | 554 | |||
| Union Dynamic Investment Limited | - | 471 | |||
| Esteem Venture Investment Limited | - | 97 | |||
| Zijinshan Investment Co., Ltd. | - | 1 | |||
| 2,804,864 | 1,347,859 | ||||
| These deposits are made by related parties in the Company’s subsidiary TCL Tech Finance Co., Ltd. | |||||
| (10) | Other current assets | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| TCL Industries Holdings Co., Ltd.and its subsidiaries | 1,055 | 5,208 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd.and its subsidiaries | 275 | 189 | |||
| Huizhou TCL Environmental Resource Co., Ltd.and its subsidiaries | 85 | 738 | |||
| Huaxia CPV (Inner Mongolia) Power Co., Ltd. | 42 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 193 | |||
| 1,457 | 6,328 | ||||
| (11) | Other non-current assets | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. | 232,613 | 129,965 | |||
| XI | Commitments | ||||
| 1 | Lease commitments | ||||
| The following table presents the minimum lease payables after the balance sheet date according to the irrevocable operating lease contracts signed by the Company： | |||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Within 1 year | 57,350 | 26,347 | |||
| 1-2 years | 36,849 | 16,748 | |||
| 2-3 years | 35,625 | 6,705 | |||
| Over 3 years | 60,509 | 5,416 | |||
| 190,333 | 55,216 | ||||
| 2 | Capital commitments | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||
| Under contractual obligations but not provided for | Note1 | 8,522,634 | 6,733,484 | ||
| Approved by Board but not under contractual obligations | Note2 | 189,019 | 77,087 | ||
| 8,711,653 | 6,810,571 | ||||
| Note1 | The capital commitments under contractual obligations but not provided for in the current period primarily consisted of such commitments for construction of investment projects and external investments. | ||||
| Note2 | The capital commitments approved by the Board but not under contractual obligations in the current period primarily consisted of such commitments for CSOT’s LCD panel project. | ||||
| As at 31 Dec. 2020, except for the disclosures above, there were no other major commitments that are required to be disclosed. | |||||
| XII | Contingencies |
| Guarantees Provided for External Parties | |
| The guarantee amount for related party bank loan, commercial drafts, letters of credit, etc. is RMB16,144,884 thousand. | |
| As at 31 Dec. 2020, the Company estimated that it was not likely for the aforesaid guarantees to cause a material loss, so it did not record a provision in the financial statements for it. Except for the said contingencies, there were no other major contingencies that are required to be disclosed as at 31 Dec. 2020. | |
| XIII | Events after Balance Sheet Date |
| Pursuant to the 2010 Final Dividend Plan approved at the 25th Meeting of the 6th Board of Directors on 10 Mar. 2021, the 2010 final dividend plan is as follows: based on the share capital of 13,546,581,599 shares on 10 March 2021 that are eligible for profit distribution (the total share capital of 14,030,788,362 shares minus the 484,206,763 shares in the Company’s special securities account for repurchase that are not eligible for profit distribution), a cash dividend of RMB1.2 (tax inclusive) per 10 shares is to be distributed to the shareholders, totaling RMB1,625,589,791.88. Meanwhile, there will be no bonus issue from either profit or capital reserves for the year under review. | |
| Except for the aforesaid events, there were no other significant post-balance-sheet-date events that are required to be disclosed as at the date of the authorization of the financial statements for issue. | |
| XIV | Other Important Matters |
| (I) | Business combination involving entities not under common control |
| During the Reporting Period, the Group successfully acquired Tianjin Zhonghuan Electronics Group Co., Ltd. (Zhonghuan Electronics), which holds a controlling interest in Tianjin Zhonghuan Semiconductor Co., Ltd. (002129.sz) and Tianjin Printronics Circuit Corporation (002134.sz) respectively, as well as assets including Zhonghuan Computer. Following the completion of the acquisition in late September, Zhonghuan Electronics has been included in the consolidated financial statements since October 2020. Through these acquisitions, the Group has entered the industries of semi-conductor photovoltaic and semi-conductor materials. | |
| (II) | Segment reporting |
| 1 | Basis for determining reporting segment and accounting policies |
| According to the Company's internal organizational structure, management requirements and internal reporting system, the Company's business is divided into three reporting segments: the semi-conductor display and materials business, the distribution business and the other businesses. The Company's management regularly evaluates the operating results of these reporting segments to determine the allocation of resources and evaluate their performance. The Company's three reporting segments are: | |
| (1) | Semi-conductor display and materials business: mainly includes research and development, manufacturing and sales of semiconductor display panels and semiconductor display modules. |
| (2) | Distribution business: mainly includes the sales of computers, software, tablet computers, mobile phones and other electronic products. |
| (3) | Semi-conductor photovoltaic and semi-conductor materials business: mainly includes the manufacturing and sales of semi-conductor materials, semi-conductor devices, new energy materials and new energy; and the development and operation of high-efficient photovoltaic power station projects. |
| (4) |
| Segment assets include all current assets such as tangible assets, intangible assets, other long-term assets and receivables attributable to each segment. Segment liabilities include payables, bank loans and other long-term liabilities attributable to each segment. | |
| Segment operating results refer to the income generated by each segment (including external transactions income and inter-segment transaction income), net of expenses incurred by each segment, depreciation, amortization and impairment losses of assets attributable to each segment, gains or losses from changes in fair value, investment income, non-operating income and income tax expenses. Transfer pricing of inter-segment income is calculated on terms similar to other foreign transactions. |
| XIV | Other Important Matters (Continued) | ||||||||||
| (II) | Segment reporting (continued) | ||||||||||
| 2 | Financial information of reporting segments | ||||||||||
| For the 12 months ended 31 Dec. 2020 | |||||||||||
| Semi-conductor display and materials business | Semi-conductor photovoltaic and materials business | Distribution business | Others and internally offset accounts | Total | |||||||
| Revenue | 46,765,152 | 5,682,962 | 22,518,401 | 1,710,723 | 76,677,238 | ||||||
| Gross profit | 2,681,812 | 464,004 | 251,352 | 2,338,136 | 5,735,304 | ||||||
| Income tax expense | 259,681 | 36,829 | 65,175 | 308,415 | 670,100 | ||||||
| Net profit | 2,422,131 | 427,175 | 186,177 | 2,029,721 | 5,065,204 | ||||||
| Total assets | 167,530,948 | 58,719,684 | 4,838,486 | 26,819,161 | 257,908,279 | ||||||
| Total liabilities | 102,716,040 | 30,638,290 | 3,767,580 | 30,729,302 | 167,851,212 | ||||||
| Other items | |||||||||||
| Depreciation and amortization expense | 9,770,114 | 634,433 | 6,252 | 134,213 | 10,545,012 | ||||||
| Capital expenditure | 31,326,649 | 931,541 | - | 827,373 | 33,085,563 | ||||||
| Net interest expense | 549,748 | 231,729 | 49,291 | 1,238,562 | 2,069,330 | ||||||
| For the 12 months ended 31 Dec. 2019 | |||||||||||
| Semi-conductor display and materials business | Semi-conductor photovoltaic and materials business | Distribution business | Others and internally offset accounts | Total | |||||||
| Revenue | 33,993,534 | - | 20,835,617 | 20,103,935 | 74,933,086 | ||||||
| Gross profit | 963,401 | - | 285,511 | 2,806,891 | 4,055,803 | ||||||
| Income tax expense | (1,043) | - | 69,907 | 329,205 | 398,069 | ||||||
| Net profit | 964,444 | - | 215,604 | 2,477,686 | 3,657,734 | ||||||
| Total assets | 130,582,410 | - | 4,520,509 | 29,741,966 | 164,844,885 | ||||||
| Total liabilities | 75,351,193 | - | 3,517,629 | 22,092,919 | 100,961,741 | ||||||
| Other items | - | ||||||||||
| Depreciation and amortization expense | 6,863,247 | - | 6,626 | 1,402,134 | 8,272,007 | ||||||
| Capital expenditure | 19,737,178 | - | - | 379,032 | 20,116,210 | ||||||
| Net interest expense | 232,301 | - | 56,871 | 1,139,943 | 1,429,115 | ||||||
| XV | Notes to Financial Statements of the Company as Parent | |||||||||||||||||||||||
| 1 | Accounts receivable | |||||||||||||||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||||||||||||||||
| Amount | Percentage | Allowance | Allowance ratio | Amount | Percentage | Allowance | Allowance ratio | |||||||||||||||||
| Within 1 year | 175,944 | 100% | 157 | 0.09% | 445,539 | 100% | 449 | 0.10% | ||||||||||||||||
| As at 31 Dec. 2020, there was not such accounts receivable from any shareholder with a 5% or greater voting stock. | ||||||||||||||||||||||||
| 2 | Other receivables | |||||||||||||||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||||||||||||||||||||||
| Dividends receivable | - | 4,211,824 | ||||||||||||||||||||||
| Other receivables | 25,555,924 | 12,917,649 | ||||||||||||||||||||||
| 25,555,924 | 17,129,473 | |||||||||||||||||||||||
| (a) | Other receivables by nature are analyzed as follows: | |||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Receivables from external entities | 216,836 | 440,600 | ||
| Security deposits | 2,354 | 792 | ||
| Others | 25,336,734 | 12,476,257 | ||
| 25,555,924 | 12,917,649 | |||
| (b) | Allowance for doubtful other receivables is analyzed as follows: | |||||||
| 12-month ECL | Lifetime ECL (credit not impaired) | Lifetime ECL (credit impaired) | Total | |||||
| 31 Dec. 2019 | 718 | - | 41,300 | 42,018 | ||||
| Adjustment for change in accounting policy | - | - | - | - | ||||
| 1 Jan. 2020 | 718 | - | 41,300 | 42,018 | ||||
| Accrued in current period | 244 | - | - | 244 | ||||
| Reversal in current period | - | - | (727) | (727) | ||||
| Write-off in current period | - | - | - | - | ||||
| 31 Dec. 2020 | 962. | - | 40,573 | 41,535 | ||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||||
| 2 | Other receivables (continued) | ||||||||||
| (c) | The aging of other receivables is analyzed as follows： | ||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| Within 1 year | 22,903,192 | 89.48% | 9,708,317 | 74.91% | |||||||
| 1-2 years | 1,554,740 | 6.07% | 2,080,024 | 16.05% | |||||||
| 2-3 years | 750,517 | 2.93% | 940,910 | 7.26% | |||||||
| Over 3 years | 389,010 | 1.52% | 230,416 | 1.78% | |||||||
| 25,597,459 | 100% | 12,959,667 | 100% | ||||||||
| The outstanding other receivables were mostly current accounts with related parties. As at 31 Dec. 2020, there were no such other receivables from any shareholder with a 5% or greater voting stock. | |||||||||||||
| The top five other receivables of the Company are about RMB21,175,647 thousand (31 Dec. 2019: RMB9,544,224 thousand), accounting for 82.73% (31 Dec. 2019：73.65%) of the total other receivables of the Company. | |||||||||||||
| 3 | Long-term equity investments | ||||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||||
| Gross amount | Impair ment allowance | Carrying amount | Gross amount | Impair ment allowance | Carrying amount | ||||||||
| Associates and joint ventures (1) | 13,903,039 | - | 13,903,039 | 11,863,148 | - | 11,863,148 | |||||||
| Subsidiaries (2) | 51,191,420 | - | 51,191,420 | 27,434,124 | - | 27,434,124 | |||||||
| 65,094,459 | - | 65,094,459 | 39,297,272 | - | 39,297,272 | ||||||||
| As at 31 Dec. 2020, there are no major restrictions on the realization of investment and the remittance of return on long-term equity investments. | |
| XV | Notes to Financial Statements of the Company as Parent (Continued) | |||||||||||||||||
| 3 | Long-term equity investments (continued) | |||||||||||||||||
| (1) | Associates and joint ventures | |||||||||||||||||
| Increase/decrease in current period | ||||||||||||||||||
| Beginning amount | Increase/decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustments | Other equity changes | Cash dividends or profit distribution declared | Impairment allowance | Other increases and decreases | 31 Dec. 2020 | ||||||||||
| Bank of Shanghai Co., Ltd. | 9,314,611 | 1,004,403 | 1,144,145 | 85,934 | - | (316,955) | - | - | 11,232,138 | |||||||||
| China Innovative Capital Management Limited | 877,920 | - | 159,707 | - | - | - | - | - | 1,037,627 | |||||||||
| LG Electronics (Huizhou) Co., Ltd. | 92,583 | - | 9,998 | - | - | (12,200) | - | - | 90,381 | |||||||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 40,837 | - | (1,276) | - | - | - | - | - | 39,561 | |||||||||
| Huizhou TCL Taidong Shihua Investment Co., Ltd. | 12,779 | - | (9,432) | - | - | (3,347) | - | |||||||||||
| Shenzhen Tixiang Business Management Technology Co., Ltd. | 2,078 | - | 387 | - | - | - | - | - | 2,465 | |||||||||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 5,342 | 300 | 1,026 | - | - | - | - | - | 6,668 | |||||||||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | 1,816 | (7,680) | (87) | - | - | - | - | 5,951 | - | |||||||||
| Huizhou TCL Environmental Resource Co., Ltd. | 71,738 | - | 18,020 | - | - | - | - | - | 89,758 | |||||||||
| Guangdong Innovative Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) | 375,020 | - | 2,533 | - | - | - | - | - | 377,553 | |||||||||
| Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) | 149,493 | - | 1,184 | - | - | - | - | - | 150,677 | |||||||||
| Huizhou TCL Human Resources Service Co., Ltd. | - | 2,500 | (379) | - | - | - | - | - | 2,121 | |||||||||
| Others | 918,931 | (88,084) | 94,537 | - | - | (14,725) | - | (36,569) | 874,090 | |||||||||
| 11,863,148 | 911,439 | 1,420,363 | 85,934 | - | (343,880) | - | (33,965) | 13,903,039 | ||||||||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||
| 3 | Long-term equity investments (continued) | ||||||||
| (2) | Subsidiaries | ||||||||
| Company’s direct interest | 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | |||||
| TCL China Star Optoelectronics Technology Co., Ltd. | 91.56% | 22,164,098 | 5,268,400 | - | 27,432,498 | ||||
| TCL Tech Finance Co., Ltd. | 82.00% | 1,256,003 | - | - | 1,256,003 | ||||
| Tianjin Zhonghuan Electronics Group Co., Ltd. | 100.00% | - | 12,500,000 | - | 12,500,000 | ||||
| Tianjin Zhonghuan Semiconductor Co., Ltd. | 2.57% | - | 1,752,635 | - | 1,752,635 | ||||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | 39.95% | - | 4,217,000 | - | 4,217,000 | ||||
| TCL Financial Holdings Group (Guangzhou) Co., Ltd. | 100% | 772,000 | - | - | 772,000 | ||||
| TCL Technology Park (Huizhou) Co., Ltd. | 100% | 504,950 | - | (504,950) | - | ||||
| Guangzhou TCL Internet Microcredit Co., Ltd. | 100% | 500,000 | 500,000 | - | 1,000,000 | ||||
| Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | 89.84% | 457,994 | - | - | 457,994 | ||||
| TCL Culture Media (Shenzhen) Co., Ltd. | 100% | 361,414 | - | - | 361,414 | ||||
| Xinjiang TCL Equity Investment Ltd. | 100% | 200,000 | - | - | 200,000 | ||||
| Huizhou Sailuote Communication Co., Ltd. | 100% | 110,000 | - | - | 110,000 | ||||
| Highly Information Industry Co., Ltd. | 73.69% | 107,296 | - | - | 107,296 | ||||
| TCL Communication Equipment (Huizhou) Co., Ltd. | 75.00% | 79,500 | - | - | 79,500 | ||||
| TCL Medical Radiological Technology (Beijing) Co., Ltd. | 100% | 58,497 | - | - | 58,497 | ||||
| Shenzhen TCL Strategic Equity Investment Fund Partnership (Limited Partnership) | 100% | 20,000 | 23,880 | - | 43,880 | ||||
| TCL Industrial Technology Research Institute, Ltd. (Europe) | 100% | 20,000 | - | - | 20,000 | ||||
| Wuhan TCL Industrial Technology Research Institute, Ltd. | 100% | 20,000 | - | - | 20,000 | ||||
| Shenzhen TCL High-Tech Development Co., Ltd. | 100% | 20,000 | - | - | 20,000 | ||||
| Beijing HAWK Cloud Information Technology Co., Ltd. | 100% | 20,000 | - | - | 20,000 | ||||
| Peer College Education Technology (Huizhou) Co., Ltd. | 100% | 5,000 | - | - | 5,000 | ||||
| Huizhou Hongsheng Science and Technology Development Co., Ltd. | 100% | 1,000 | - | - | 1,000 | ||||
| Beijing Zhiqujia Technology Co., Ltd. | 100% | 257,627 | - | - | 257,627 | ||||
| Ningbo TCL Equity Investment Ltd. | 100% | 300,000 | - | - | 300,000 | ||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||
| 3 | Long-term equity investments (continued) | ||||||||
| (2) | Subsidiaries (continued) | ||||||||
| Company’s direct interest | 1 Jan. 2020 | Increase in current period | Decrease in current period | 31 Dec. 2020 | |||||
| TCL Technology Investments Limited | 100% | 188,293 | - | - | 188,293 | ||||
| Equity incentives of subsidiaries | 10,452 | 331 | - | 10,783 | |||||
| 27,434,124 | 24,262,246 | (504,950) | 51,191,420 | ||||||
| For the registered capital of subsidiaries and the Company’s equity interests in the subsidiaries, see Note V. | |||||||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||||
| 4 | Investments in other equity instruments | ||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||
| Equity instruments not held for trading | 15,000 | 15,000 | |||||||||
| 5 | Other non-current financial assets | ||||||||||
| 31 Dec. 2020 | 31 Dec. 2019 | ||||||||||
| Equity investments | 1,145,022 | 1,531,335 | |||||||||
| Debt investments | - | 9,578 | |||||||||
| 1,145,022 | 1,540,913 | ||||||||||
| 6 | Revenue and cost of sales | ||||||||||
| 2020 | 2019 | ||||||||||
| Revenue | Cost of sales | Revenue | Cost of sales | ||||||||
| Core business | 886,980 | 897,447 | 1,216,047 | 1,200,847 | |||||||
| Non-core business | 254,278 | 13,764 | 514,140 | 281,499 | |||||||
| 1,141,258 | 911,211 | 1,730,187 | 1,482,346 | ||||||||
| 7 | Return on investment | ||||||||||
| 2020 | 2019 | ||||||||||
| Income from disposal of debt instruments at fair value through profit or loss | 176,098 | 177,073 | |||||||||
| Income from disposal of equity instruments at fair value through profit or loss | 289,959 | 210,848 | |||||||||
| Income from holding debt instruments at fair value through profit or loss | 20,323 | 46,726 | |||||||||
| Debt instruments at amortized cost through profit or loss | - | 7,217 | |||||||||
| Income from holding equity instruments at fair value through profit or loss | 12,265 | 17,361 | |||||||||
| Dividends from subsidiaries | 736,919 | 257,126 | |||||||||
| Share of profit of associates for current period | 1,430,174 | 1,156,058 | |||||||||
| Share of profit of joint ventures for current period | (9,811) | (6,364) | |||||||||
| Net income from disposal of long-term investments | 748,894 | (486,501) | |||||||||
| 3,404,821 | 1,379,544 | ||||||||||
| As at 31 Dec. 2020, there were no significant restrictions on the collection of return on investment. | |||||||||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | |||
| 8 | Net cash generated from/used in operating activities | |||
| Net cash used in operating activities of the Company as the parent was RMB2,643,171 thousand. | ||||
| 9 | Cash and cash equivalents, end of the period | |||
| Cash and cash equivalents, end of the period of the Company as the parent was RMB2,196,283 thousand. | ||||
| 10 | Contingent liabilities | |||
| As at 31 Dec. 2020, the contingent liabilities not provided for in the financial report are as follows: | ||||
| 31 Dec. 2020 | 31 Dec. 2019 | |||
| Guarantees for trade notes and letters of guarantee of subsidiaries | 10,903,205 | 9,809,585 | ||
| Guarantees for bank loans of subsidiaries | 33,054,210 | 22,119,613 | ||
| Guarantees for bank loans, trade notes, letters of credit, etc. of related parties | 16,144,884 | 18,160,168 | ||
| XVI | Comparative Data | |||
| Certain comparative data have been reclassified to comply with the presentation of the current period. | ||||
| XVII | Non-Recurring Gains and Losses | |||
| 2020 | 2019 | |||
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 226,828 | 1,419,021 | ||
| Government grants through profit or loss (exclusive of government grants given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) | ||||
| 736,747 | 1,170,649 | |||
| Gain equal to the amount by which investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the Company’s enjoyable fair value of identifiable net assets of investees when making investments | 292,440 | 68,022 | ||
| Gain or loss on fair-value changes on held-for-trading financial assets and liabilities & income from disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) | ||||
| 350,757 | 186,339 | |||
| Non-operating income and expense other than the above | 80,764 | 9,264 | ||
| Income tax effects | (135,131) | (165,398) | ||
| Non-controlling interests effects | (97,494) | (305,250) | ||
| Non-recurring gains and losses attributable to ordinary shareholders of the Company as the parent | 1,454,911 | 2,382,647 | ||
| The Company recognizes non-recurring gain and loss items in accordance with the provisions of (2008) No.43 "Explanatory Announcement No.1-Non-recurring Gains and Losses (2008)" issued by the China Securities Regulatory Commission. | ||||
| XVIII | Weighted Average Return on Equity (ROE) and Earnings per Share (EPS) | |||||||
| The Company calculates the ROE and EPS as follows in accordance with "the Compilation Rules No. 9 for Information Disclosure of Companies Offering Securities to the Public-Calculation and Disclosure of Return on Equity and Earnings per Share (Revised in 2010)" issued by China Securities Regulatory Commission and relevant provisions of accounting standards: | ||||||||
| Item | Net profit for Reporting Period | Weighted average ROE | EPS (RMB yuan) | |||||
| Basic EPS | Diluted EPS | |||||||
| Net profit attributable to ordinary shareholders of the Company | 4,388,159 | 13.75% | 0.3366 | 0.3226 | ||||
| Net profit attributable to ordinary shareholders of the Company before non-recurring gains and losses | 2,933,248 | 9.19% | 0.2250 | 0.2156 | ||||
Company Name: TCL Technology Group Corporation
Date: 10 March 2021
The financial statements and the notes thereto from page 1 to page 155 are signed by:
| Legal Representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |