TCL Technology Group Corporation Interim Report 2020
TCL科技集团股份有限公司
TCL Technology Group Corporation
INTERIM REPORT 2020
29 August 2020
TCL Technology Group Corporation Interim 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 Management Discussion and Analysis ...... 20
Part V Significant Events ...... 42
Part VI Share Changes and Shareholder Information ...... 60
Part VII Directors, Supervisors and Senior Management ...... 67
Part VIII Corporate Bonds ...... 68
Part IX Financial Statements ...... 78
Part X Other Information Submitted ...... 145
TCL Technology Group Corporation Interim Report 2020
Ramp up, Catch up
and Go all out to be A Global Leader
Chairman’s Message
Dear shareholders, customers and partners,In the first half of 2020, the global political and economic landscape constantly underwent majorchanges. Affected by the global COVID-19 epidemic, China’s economic development faced greaterchallenges and risks. Enterprises were also inevitably affected, which would accelerate industrialtransformation, upgrading and restructuring. To address the challenges, the government introducedthe policy that “domestic economic cycle plays a leading role while international economic cycleremains its extension and supplement”, and strengthened economic vitality by tax reduction andliquidity management. Meanwhile, it vigorously supported industrial development, expedited theimprovement of key technology, and enhanced the competitiveness of the manufacturing industry.All of these were conducive to the business development of the Group.Seeking opportunities from the crisis, the Company kept transforming and innovating. It achievedrevenue growth in all the sectors by maximizing cost efficiency as well as improving quality andprofitability. In the first half of 2020, TCL Tech. recorded revenue of RMB29.33 billion, up by 12.3%year-on-year on the same basis, and a net profit attributable to the listed company’s shareholders ofRMB1.21 billion, down by 42.3% year-on-year. Excluding the effect of the gain from the spin-off,the net profit attributable to the listed company’s shareholders increased by 7.6% year-on-year onthe same basis.The semi-conductor display business is still at the bottom of the cycle. Although it has stabilizedand recovered, the prices of main products in the current period are still lower than those in thesame period of last year. TCL CSOT exerted its superb management capabilities by constantlyoptimizing its products and customer structures. As a result, the large-size panel business achievedprofit, while the small- and medium-size panel business improved significantly. In the first half of2020, TCL CSOT reported a revenue of RMB19.51 billion (up by 19.9% year-on-year), a deficit ofRMB133 million, and a net profit attributable to the parent company of RMB24 million.
TCL Technology Group Corporation Interim Report 2020
Specifically, the net profit in the second quarter increased by RMB215 million from the first quarter.The supply and demand would gradually balance as the market recovers, resulting in a rebound ofsemi-conductor display industry. In the third quarter, prices of products are expected to rise at afaster pace. Profitability of TCL CSOT in the second half of the year will continue to improve.With technological innovation as the driving force, the Company has a further investment in thedisplay technology of intelligent and digital manufacturing to develop strategically integratedtechnologies and products, aiming at establishing a leading layout of next-generation displaytechnologies, materials and processes. During the Reporting Period, the Company investedRMB2.88 billion in R&D, up by 28.9% year-on-year on the same basis. It established a jointlaboratory with San’an Optoelectronics to research a process solution for the mass production ofMicro-LED displays. It also acquired a strategic stake in JOLED Inc. of Japan to jointly promotethe industrial production of large-size inkjet-printing OLED displays. The PCT applications of theCompany increased by 838 and the accumulated PCT applications reached 12,113.Given the competitive advantages of TCL CSOT, the Group will seize opportunities to furtherexpand and develop itself through mergers and acquisitions, so as to secure its global leadership inthe semi-conductor display business.The industrial finance business of TCL developed steadily. It fulfilled the funding needs of theCompany’s key projects at a low cost, actively managed the industrial liquidity and global currencyrisks, and gradually built its capacity of global asset allocation. TCL Capital proactively madearrangements regarding new materials and technologies, established an ecological chain, andfostered new industries. Meanwhile, it acted a role in the sustainable and healthy development ofthe Company by achieving a favourable investment return.To develop new driving forces for the long-term growth, the Company entered new markets in thecapital- and technology-intensive strategic industries by taking its advantages of technology,management and capital. The Company acquired 100% equity of Tianjin Zhonghuan ElectronicsGroup Co., Ltd., whose main asset was the controlling stake in “Tianjin Zhonghuan SemiconductorCo., Ltd.” (stock code: 002129.SZ). The core business of “Zhonghuan Semiconductor” wassemi-conductor silicon-wafer & photovoltaic silicon-wafer and its modules. The Company believesthat the enterprise has a promising future with great potentials to lead the globe in the
TCL Technology Group Corporation Interim Report 2020
semi-conductor and photovoltaic business. As the core and basic component of integrated circuits,the semi-conductor silicon-wafer is in line with China’s integrated circuit development strategy. Themanagement and operation of Zhonghuan Electronics is similar to that of the Company, so the twocan fully coordinate with and empower each other in terms of industrial chain, globalization as wellas management systems, thus accelerating their respective business development. The acquisitionalso included a controlling stake in “Tianjin Printronics Circuit Corp.” (stock code: 002134.SZ) andits other assets, which would inject new momentum into the Company’s growth.Looking ahead to the second half of 2020, enterprise development has reached another criticalphase along with the breakout of global epidemic, the risk of China-US. trade war and increasinguncertainties of the world economy. However, we firmly believe that enterprises with competitivestrength can always adjust quickly in every crisis, take the initiative to change, seize opportunities,and develop new capabilities.In the second half of 2020, TCL CSOT will continue to promote the expansion of Phase II andPhase III of t4 plant (G6-OLED) and the construction of t7 plant (G11-LCD), enhance thecompetitiveness of the small- and medium-size panel business such as LTPS and flexible OLED,and develop new display technologies and materials. TCL CSOT will complete the acquisition of 60%equity of Samsung Electronics Suzhou LCD Co., Ltd. from Samsung Display (TCL CSOT andSuzhou Industrial Park hold the remaining 10% and 30% equity, respectively) and 100% equity ofSamsung Display Suzhou Co., Ltd. The core business of these two plants are the production of G8.5TFT-LCD panel (with a production capacity of 120K/month) and modules (with a productioncapacity of 3.5M/month), respectively. The acquisition will promote TCL CSOT to further optimizeits industrial layout and product mix as well as the manufacturing and supply chain system, andenhance the competitiveness of the Company’s large-size display business to achievecomprehensive leadership in products, technologies, efficiency, manufacturing, and industrialecology construction.The Company will further support and coordinate the semi-conductor and new energy business,fully release the vitality of internal organizations with mechanisms, and improve its corecapabilities, so as to accomplish various tasks as planned and speed up the implementation ofZhonghuan Semiconductor’s globalization strategy.
TCL Technology Group Corporation Interim Report 2020
The industrial finance business of TCL will support the semi-conductor display from variousaspects by constantly optimizing asset allocation. It will also boost the Company’s operationalefficiency and control the global operation risks. Meanwhile, TCL Capital will focus on investmentof industrial chain and other high-tech industries to promote the competitiveness of its industrialecology.The Company has established an optimistic operational budget this year. Despite the short-termeffect brought by COVID-19 epidemic on operational results, the Company still has confidence toovercome difficulties and challenges to achieve the annual business objectives under greatuncertainty of global economy in the second half of 2020. TCL Tech., in pursuit of the substantivedevelopment, will enhance the core competitiveness of China’s manufacturing industry andconcentrate all resources and efforts to stride toward a global leadership.
Li Dongsheng29 August 2020
TCL Technology Group Corporation Interim Report 2020
Part I Important Notes, Table of Contents and DefinitionsThe 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 Reportand its summary.Mr. Li Dongsheng, the Chairman of the Board, Ms. Du Juan, the person-in-charge offinancial affairs (Chief Financial Officer), and Mr. Xi Wenbo, the person-in-charge of thefinancial department, hereby guarantee that the financial statements carried in this Reportare 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 versionsshall prevail.
TCL Technology Group Corporation Interim 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 “Reporting Period” | The period from 1 January 2020 to 30 June 2020. |
| The same basis after the spin-off | In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the revenue data of H1 2020 and H1 2019 are not comparable as the former does not include the revenue generated by the spun-off assets in January-March 2020, while the latter comprises the such revenue in January-March 2019. Therefore, the revenue data of H1 2020 and H1 2019 are only comparable on the same basis after the spin-off. |
| The significant assets spin-off or the 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. |
| TCL CSOT | TCL China Star Optoelectronics Technology Co., Ltd. |
| Zhonghuan Electronics | Tianjin Zhonghuan Electronics Group Co., Ltd. |
| Zhonghuan Semiconductor | Tianjin Zhonghuan Semiconductor Co., Ltd. (stock code: 002129.SZ) |
| Samsung Display | Samsung Display 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) |
| Guangdong Juhua | Guangdong Juhua Printed Display Technology Co., Ltd. |
| China Ray | Guangzhou China Ray Optoelectronic Materials Co., Ltd. |
| 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) |
| Educational Web | TCL Educational Web Ltd. |
| Bank of Shanghai | Bank of Shanghai Co., Ltd. (stock code: 601229.SH), with the Company holding a 5.58% interest. |
| 712 Corp. | Tianjin 712 Communication & Broadcasting Co., Ltd. (stock code: 603712.SH), with the Company holding a 19.07% interest as its second largest shareholder. |
| Fantasia | Fantasia Holdings Group Co., Limited, a listed company on the Stock Exchange of Hong Kong (stock code: 01777.HK), with the Company holding a 20.06% interest as its second largest shareholder. |
| 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 |
TCL Technology Group Corporation Interim Report 2020
| 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 |
| t7 project | The generation 11 (or G11) new ultra-high-definition (UHD) TFT-LCD and AMOLED production line of TCL CSOT |
TCL Technology Group Corporation Interim Report 2020
Part II Corporate Information and Key Financial Information
I Corporate Information
| Stock name | TCL Tech. | Stock code | 000100 |
| Changed stock name (if any) | N/A | ||
| Place of listing | Shenzhen Stock Exchange | ||
| Company name in Chinese | TCL科技集团股份有限公司 | ||
| Abbr. (if any) | TCL科技 | ||
| Company name in English (if any) | TCL Technology Group Corporation | ||
| Abbr. (if any) | TCL TECH. | ||
| Legal representative | Li Dongsheng | ||
II Contact Information
| Board Secretary | |
| Name | Liao Qian |
| Office address | 19/F, Tower B, TCL Building, Gaoxin South First Road, Shenzhen High-Tech Industrial Park, Shenzhen, Guangdong Province, China |
| Tel. | 0755-3331 1666 |
| Fax | 0755-3331 3819 |
| Email address | ir@tcl.com |
III Other Information
1. Contact Information of the Company
No change occurred to the registered address, office address and their zip codes, website address and email address of the Companyin the Reporting Period. The said information can be found in the 2019 Annual Report.
2. Media for Information Disclosure and Place where this Report is Lodged
No change occurred to the newspapers designated by the Company for information disclosure, the website designated by the CSRCfor disclosing the Company’s periodic reports and the place for lodging such reports in the Reporting Period. The said informationcan be found in the 2019 Annual Report.
TCL Technology Group Corporation Interim Report 2020
3. Other information
No change occurred to the other information in the Reporting Period.IV Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes ■ No
| Serial No. | Item | H1 2020 | H1 2019 | Change (%) |
| 1 | Revenue (RMB)Note | 29,333,210,856 | 43,781,613,735 | -33.00 |
| Revenue on the same basis after the spin-off (RMB)Note | 29,333,210,856 | 26,119,468,731 | 12.30 | |
| 2 | EBITDA (RMB) | 6,143,106,318 | 8,436,689,169 | -27.19 |
| 3 | Net profit attributable to the listed company’s shareholders (RMB)Note | 1,208,065,986 | 2,092,348,692 | -42.26 |
| Net profit attributable to the listed company’s shareholders before non-recurring gains and losses (RMB) | 181,862,847 | 250,467,130 | -27.39 | |
| 4 | Basic earnings per share (RMB/share) | 0.0932 | 0.1569 | -40.60 |
| Diluted earnings per share (RMB/share) | 0.0893 | 0.1544 | -42.16 | |
| 5 | Weighted average return on equity (%) | 4.11 | 7.17 | -3.06 |
| 6 | Net cash generated from/used in operating activities (RMB) | 7,347,810,779 | 6,150,821,822 | 19.46 |
| Net cash per share generated from/used in operating activities (RMB/share) | 0.5431 | 0.4539 | 19.65 | |
| 30 June 2020 | 31 December 2019 | Change (%) | ||
| 7 | Total assets (RMB) | 184,833,234,677 | 164,844,884,926 | 12.13 |
| 8 | Total owners’ equity (RMB) | 64,891,825,753 | 63,883,145,340 | 1.58 |
| Owners’ equity attributable to the listed company’s shareholders (RMB) | 30,027,342,791 | 30,111,946,237 | -0.28 | |
| 9 | Share capital (share) | 13,528,438,719 | 13,528,438,719 | 0.00 |
| 10 | Equity per share attributable to the listed company’s shareholders (RMB/share) | 2.2196 | 2.2258 | -0.28 |
Note: In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the H1 2019 data includedthe results of the spun-off assets for January-March 2019 and a gain of RMB1.15 billion from the spin-off. Provided that the H1 2019data were on the same basis after the spin-off, revenue would be up by 12.3% year-on-year. In 2020, the Company continued to focuson its core business and maximize shareholder’s value by spinning off the Educational Web business, which generated a gain ofRMB234 million. Provided that the spin-off gains were excluded from both of the H1 2020 and H1 2019 data, the net profitattributable to the listed company’s shareholders would be up by 7.6% year-on-year on the same basis.
TCL Technology Group Corporation Interim Report 2020
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) | 13,519,279,411 |
| Fully diluted earnings per share based on the latest total share capital above (RMB/share) | 0.0894 |
V Accounting Data Differences under China’s Accounting Standards for Business Enterprises(CAS) and International Financial Reporting Standards (IFRS) and Foreign AccountingStandards
1. Net Profit and Equity under CAS and IFRS
□ Applicable ■ Not applicable
No such differences for the Reporting Period.
2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards
□ Applicable ■ Not applicable
No such differences for the Reporting Period.
3. Reasons for Accounting Data Differences Above
□ Applicable ■ Not applicable
VI Non-Recurring Gains and Losses
Unit: RMB
| Item | H1 2020 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 289,778,280 | Not applicable |
| 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) | 355,097,992 | 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 | 280,758,994 | Not applicable |
| Spin-off costs in staff arrangement, integration, etc. | - | Not applicable |
| Gain or loss on fair-value changes in held-for-trading financial assets and liabilities & return on investment from disposal of held-for-trading financial assets and | 40,067,037 | Not applicable |
TCL Technology Group Corporation Interim Report 2020
| liabilities and available-for-sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) | ||
| Non-operating income and expense other than the above | 192,303,192 | Not applicable |
| Other gains and losses that meet the definition of non-recurring gain/loss | - | Not applicable |
| Less: Corporate income tax | 78,214,197 | Not applicable |
| Non-controlling interests (net of tax) | 53,588,159 | Not applicable |
| Total | 1,026,203,139 | Not applicable |
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
No such cases for the Reporting Period.
TCL Technology Group Corporation Interim Report 2020
Part III Business Summary
I Principal Activity of the Company in the Reporting PeriodDuring the Reporting Period, the main business structure of TCL Tech. still consisted of thefollowing three segments: the semi-conductor display and materials business, the industrial finance& investment business and the other businesses. The Company acquired 100% equity of TianjinZhonghuan Electronics Group Co., Ltd. After the Ownership Transaction, the business structure ofthe Company is planned to be adjusted as follows:
For further information about the Company’s businesses, please refer to “Part IV ManagementDiscussion and Analysis” herein.II Significant Changes in Major Assets
1. Significant Changes in Major Assets
| Major assets | Main reason for significant change |
| Held-for-trading financial assets | Increase in purchases of wealth management products |
| Prepayments | Increase in prepayments to suppliers |
| Other receivables | Increase in security deposit payments |
| Equity assets | No significant change |
| Investment property | Transfer from construction in progress |
| Fixed assets | Transfer from construction in progress |
| Intangible assets | No significant change |
TCL Technology Group Corporation Interim Report 2020
| Construction in progress | Transfer to fixed assets and investment property |
| Development costs | Transfer-out upon availability for intended use |
| Long-term prepaid expense | Increase in the current period |
| Other non-current assets | Increase in prepayments for equipment and land use rights |
2. Major Assets Overseas
□ Applicable ■ Not applicable
III Core Competitiveness AnalysisEstablished in Huizhou in 1981, TCL has been sticking to the industry for nearly 40 years bykeeping innovating, forging ahead and daring to change. Today, TCL has grown into a leadingcompany with global influence. In early 2019, the Company completed a divestment of theintelligent terminal and supporting businesses and officially renamed itself as “TCL Tech.”,positioning as a global leading technology group. At present, the Company has become a globalleader in LCD panels with a rapidly increasing market share.With a clear strategic development path and promising long-term development potential, theCompany’s leadership in LCD panels is constantly improvingIn March 2020, TCL Tech. completed the sale of its online education business, continued to focuson high-tech, capital-intensive and long-cycle strategic emerging industries, and enhanced itsindustrial finance capability. With a clear development path, the Company has witnessed greatimprovement in its core competitiveness and sustainable capability. The growth potential of theCompany has been further released. Under the heavy pressure of the epidemic in 2020, the salesarea and revenue of panels have increased with a growth rate significantly higher than that of theindustry and its major competitors.At present, the industry downturn accelerates the restructuring of competition pattern, and the scaleof production is rapidly centralizing at China's leading companies. The Company took theopportunity to liquidate inefficient production capacity and actively seek opportunities for mergersand acquisitions. With the successive release of production capacity, TCL Tech. will be able tocover all the mainstream sizes of display application, meet the specific technical and specification
TCL Technology Group Corporation Interim Report 2020
requirements of application customers in various industries, further enhance the Company’sposition in the industry, and drive the growth of its operational efficiency and profitability. With anincreasing centralization of panel market, the business cycle of the industry will be shortenedsignificantly, and the fluctuations of panel price will be greatly reduced, leading to a betterlong-term profit outlook.With emphasis on both scale and benefit, TCL CSOT maintains a global-leading efficiencyTCL CSOT has grown into a high-tech company driven by technology and management. Itcontinues to expand in the field of LCD large-screen segmentation with the largest scale growth ratein the world, while the production of overseas manufacturers keeps declining.With advantages in market segment scale, TCL CSOT maintains the world’s leading industrymanagement capability. Its efficiency and benefit indicators continue to lead the industry. Throughorganization optimization, procedure simplification, plan innovation and expense management,TCL CSOT has realized the effective reduction of material costs, manufacturing expenses andplatform expenses.With the gradual reshuffle of the industry, the industrial pattern is expected to be significantlyoptimized. Base on its comprehensive and efficient industrial layout, industry-leading managementcapacity and operational efficiency, as well as advantages in specific market segment, TCL CSOTwill steadily enter the stage of high growth, further improve its market share, profitability,competitive advantages and industry position.With strong R&D capabilities and a global layout, TCL Tech. is committed to developingitself into a world-leading technology companyTCL Tech. spared no effort in R&D investment. In the first half of 2020, the Company’s R&Dinvestment reached RMB2.88 billion, accounting for 9.81% of its revenue. The Company attachedgreat importance to the reserves and exploration of cutting-edge technologies, making efforts onmajor breakthroughs in such aspects as technological layout, product layout, and technologicalmaterial layout. In terms of the large-size panel business, TCL CSOT has an intensive processbackground, which has realized many milestone achievements in research. The Company’slarge-size HVA products are technologically advanced in high-end machines. In the future, the
TCL Technology Group Corporation Interim Report 2020
Company will consolidate such advantages in the high-end market through the promotion of 8K &Touch technologies, and will keep advancing the mass production of flexible printed QLED/OLEDdisplays. In terms of the small- and medium-size panel business, TCL CSOT will enter the marketwith high-end products. The high-color-saturation CPLP + IEST energy saving + low blue lighttechnology, which researched and developed independently by TCL CSOT, can improve imagequality and protect human eyes, and has already been supplied to major mobile phonemanufacturers. In addition, the next-generation of fully flexible AMOLED production line has beenmass-produced, leading a broad application prospect of foldable and rollable products.In the first half of 2020, TCL Tech. submitted 838 PCT applications. Its accumulated applicationsreached 12,113, covering different regions such as Europe, the United States, and South Korea.During the Reporting Period, TCL CSOT submitted 838 PCT applications and its accumulatedapplications reached 11,895. As at 30 June 2020, TCL Tech. has applied for 25,700 Chinese patentsand 10,329 U.S. patents. As at 30 June 2020, TCL CSOT has applied for 20,355 Chinese patentsand 10,175 U.S. patents. The Company owns 1,199 public patents in the field of quantum dots,ranking the 2nd in the world.The Company is committed to seizing the unprecedented opportunities for industrial adjustment andreshuffle in the semi-conductor display and materials field by vertical extension and horizontalintegration of the industrial chain. It wil also focus on the ecological layout of such fields as basicmaterials, next-generation display materials, and key equipment in new processes with a view toforming an advantage base on ecological leadership. Through continuous investment, the Companyhas been making breakthroughs in the research and development of printed display technologiesand new materials. The "National Printed and Flexible Display Innovation Center" of GuangdongJuhua, a subsidiary of the Company, is the sole national innovation center in the display field inChina, building into the world's most advanced printing display public platform. The R&D strengthand development progress of China Ray are at the forefront of the industry. The OLED materials ofChina Ray has been mass-supplied. The QLED R&D team of the company has solved key problems(such as lifetime of red and green materials). The performance of the independently developedblue-light emitting material leads an advanced position, and its relevent research achievements havebeen published on the top international scientific journal - Nature Communication.
TCL Technology Group Corporation Interim Report 2020
Industrial cluster linkage brings an effective synergy advantageAfter the spin-off, the Company held the industrial finance & investment and venture capitalbusiness, mainly comprising TCL Finance and TCL Capital. The sector supported thesemi-conductor display business from various aspects. It reduced financing costs and improvedresource efficiency for the Group. TCL Finance provided financial services for the Company’s mainbusiness and its partners of the industrial chain, ensuring the provision of resources for majorinvestment projects, and generating revenue by utilizing surplus capital.TCL Capital will expand the scale of funds and strengthen its financial investment capabilities. Itwill invest in artificial intelligence, semi-conductor display technology, new materials, intelligentmanufacturing and other fields to play an active role in building an industrial ecology. Theindustrial 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 helpsoffset the influence of the semi-conductor display industrial downturn. Focusing on the mainbusiness, TCL’s investment and venture capital business has realized the coordinated developmentof industrial technologies and investment opportunities. It accomplished many successfulinvestments in such fields as core electronic devices, basic software and high-end general-purposechips, including the investments on Cambricon and YEESTOR Microelectronics.The connotation of “Spirit of Eagle” is enriched and the cultivation of corporate culture isstrengthenedThrough the ups and downs for more than 30 years, our company developed the “spirit of eagle”,which reflects TCL’s core values and competitiveness, as well as cohesion of TCLers. Theconnotation of the “Spirit of Eagle” will be re-interpreted in the new era of development and furthermotivate all TCLers to forge ahead, embrace changes, challenge conventional ideas, endurehardship, make progress and continue to thrive. In 2019, the Company upgraded its corporateculture based on the “Spirit of Eagle”. In 2020, the Company continued to strengthen theteam-building and cultivation of corporate culture by improving the organizational structure and thecollaborative division of labor between the data headquarters and subordinate industries. It achievedcertain results as constantly enhancing the management and work quality of employees at each tier
TCL Technology Group Corporation Interim Report 2020
through multiple rounds of in-depth management training. During the epidemic in early 2020, thequick organization of 600 employees from Shenzhen and Huizhou branches to support Wuhan, thenormal operation of Wuhan CSOT, and the zero infection of 7,000 employees in Wuhan plant, areall evidences of the further deepening and consolidation of the corporate culture.
TCL Technology Group Corporation Interim Report 2020
Part IV Management Discussion and Analysis
I OverviewInternational political and economic environment has become more complex and volatile this year.The COVID-19 epidemic has further aggravated the anti-globalization sentiment, resulting inincreasing obstacles to foreign trade and technological cooperation. The cyclical recovery of thesemi-conductor display sector has been disturbed under the new phase of the global economy. In theface of such crises, the Company adheres to its solid and steady strategy, which is to build anemerging high-tech business group with global competitiveness, and concentrates on high-techindustries by maximizing efficiency.In the first half of 2020, on the same basis after the spin-off, the Company recorded revenue ofRMB29.33 billion, up by 12.3% year-on-year, and a net profit attributable to the listed company’sshareholders of RMB1.21 billion, down by 42.3% year-on year. Excluding the gain from thespin-off, the net profit attributable to the listed company’s shareholders increased by 7.6%year-on-year on the same basis. Specifically, the net profit attributable to the listed company’sshareholders was RMB0.8 billion in the second quarter, up by 96% from the first quarter.During the Reporting Period, the semi-conductor display sector remained at the bottom of theindustrial cycle. Under the negative impact on logistics and work resumption caused by theepidemic, the Company has maintained a relatively leading advantage in efficiency and benefitby promoting refined management. TCL CSOT reported a revenue of RMB19.51 billion, up by
19.9% year-on-year; a net loss of RMB133 million, down by RMB1,152 million year-on-year (inthe second quarter, there was an improvement of RMB215 million from the first quarter); and a netprofit attributable to the parent company of RMB24 million. The Company has a further investmentin R&D and intelligent manufacturing, aiming to develop strategically integrated technologies andproducts. During the Reporting Period, the Company’s R&D investment reached RMB2.88 billion,up by 28.9% year-on-year on the same basis. Meanwhile, the industrial finance, venture capital andother businesses sector recorded a net profit of RMB1.2 billion, stabilizing the Company’sprofitability during the industry downturn. The expansion of the global semi-conductor displayproduction is coming to the concluding phase, which leads to a reconstruction of the industry. Giventhe prices of display pannel in major sizes began to recover in July, the Company would imporoveits performance in the second half of the year.The Company’s semi-conductor display sector achieved a globally leading scale. During the
TCL Technology Group Corporation Interim Report 2020
Reporting Period, the t1, t2, and t6 production lines of TCL CSOT maintained at full capacity andranked second globally in terms of the TV panel market share. The market share of 55-inch TVpanel ranked the 1st in the world, while its 65-inch TV panel ranked the 2nd. Although the small-and medium-size panel plants located in Wuhan, thanks to the well management of supply chain,the LTPS panel of the t3 production line operated at full capacity, and the high-end, new-formproduct of the t4 flexible AMOLED production line was rapidly improved. Cooperation with globalleading brand customers was constantly deepened. Additionally, steady progress was made in t7project construction.In the meantime, TCL CSOT seized the opportunity of industrial restructuring to consolidate itsleading position in display panels through internal development and external M&A. With therelease of production capacity of t4 and t7 and the integration of Suzhou Samsung’s production line,by 2023, the compound annual growth rate of TCL CSOT’s capacity will reach 18.8%. Given therapid scale growth and the improvement of industry, TCL CSOT will enter a dual-drivendevelopment stage.Leading Technology is always the Company’s main driving force. As 5G technology develops,the demand for large-size, 8K, Touch and other display products grows rapidly. With the promotionof mobile Internet, requirements for the quality of electronics consumption keeps raising, and thedemand for distance education, online shopping and social entertainment increases. The Companyactively deepened cooperation with strategic suppliers and launched “smart screen”, “wisdomscreen” and other interactive products. Together with the partners of the industrial chain, theCompany promoted high-end display demand such as 8K/120Hz and built an IoT ecology ofmultiple scenarios.During the Reporting Period, the Company focused on the layout of the next-generationdisplay technologies and ecology. TCL CSOT established a joint laboratory with San’anOptoelectronics to develop Micro-LED display technology and formed a solution for commercialproduction of Micro-LED displays. The Company also invested in JOLED Inc. to accelerate theapplication of inkjet printing technology and to lead the construction of a global new displayindustrial ecology covering upstream equipment, materials and devices. TCL CSOT will promotethe development of Micro-LED and printed OLED displays and develop the independentintellectual property rights of the new display technology field from materials, processes,equipments and production line solutions, so as to lead the future display technologies.The COVID-19 epidemic not only caused a crisis with considerable difficulties for global publicsecurity, but also increased the uncertainty of the global economy. Looking ahead, we will make
TCL Technology Group Corporation Interim Report 2020
preparations for the new development pattern of "dual circulation" . As the foundation of theelectronic information industry, semi-conductor and semi-conductor display are strategic industriesrelated to the overall development of national economy and society. At present, the historicrelocation of global semi-conductor industry has already emerged, speeding up the industrialrestructuring.With an innovative and disruptive thinking, the Company will keep improving management to growinto a global leader. The Company will transform and upgrade itself from lean production toadvanced manufacturing that features intelligent and digital production. It will also introduce IPDand LTC to optimize process and improve the organizational capabilities as well as the talent pool.The Company will continue to promote the vertical extension and horizontal integration of thesemi-conductor display business. In addition, it will empower China’s semi-conductor and newenergy industries, which are rising at an accelerated pace, with industrial integration experience andglobal layout capabilities accumulated over the past 30 years. In high-tech, heavy-assset andlong-cycle fields, the Company will continuously consolidate the foundation to secure aworld-leading position, and constantly accumulate core assets in tech field.II Core Business ReviewDuring the Reporting Period, the principal business structure of TCL Tech. still consisted of thefollowing three segments: the semi-conductor display and materials business, the industrial finance& investment business and the other businesses. The Company acquired 100% equity of TianjinZhonghuan Electronics Group Co., Ltd. After the Ownership transaction, the business structure ofCompany is planned to be adjusted as follows:
TCL Technology Group Corporation Interim Report 2020
(I) Semi-conductor Display and Materials BusinessIn the first half of 2020, the sudden COVID-19 epidemic hit the semi-conductor display sectorbadly. The consumer demand was temporarily suppressed, the cyclical recovery of thesemi-conductor display sector was delayed, and the panel prices fluctuated at the historical bottom.In the face of the severe external challenges, TCL CSOT adhered to its strategic focus and strovefor survival through maximizing cost efficiency, thus maintaining its industry-leadingoperational efficiency and benefit. During the Reporting Period, TCL CSOT recorded productsales area of 14.2 million square meters, up by 47.9% year-on-year; revenue of RMB19.51 billion,up by 19.9% year-on-year; and EBITDA of RMB4.63 billion, basically unchanged compared withthe same period of last year. Affected by the historically low prices of display panels and theone-time expenditure brought about by the upgrade of epidemic prevention and control measures,TCL CSOT had a deficit of RMB133 million during the Reporting Period. Specifically, the netprofit in the second quarter increased by RMB215 million from the first quarter, and the net profitof the large-size panel business in the second quarter increased by RMB110 million from the firstquarter. TCL CSOT’s profitability maintained a leading position in the industry.
Scale advantage was further enhanced, and supply chain control and manufacturingcapabilities were improved. The t1, t2, and t6 production lines operated at full capacity for strongsales, achieving large-size panel sales area of 13.67 million square meters, up by 52.9%year-on-year, along with revenue of RMB12.16 billion, up by 32.3% year-on-year. In the meantime,equipment was moved into the t7 production line as planned. It is expected that mass productionwill start in early 2021. In Huizhou, the high-generation module factory operated with a monthlyproduction capacity of more than 4 million pieces, and the Phase II construction of a smart factorythat mainly produces super-large panels of 8K and 80 inches or above was promoted. Massproduction can be expected by the end of 2020.As for the small- and medium-size panel business, such impact as material shortages and workresumption delay during the epidemic was overcome, which guaranteed safe productioncontinuously. The panel section of the t3 production line operated at full capacity, and theproduction capacity of the module section returned to normal in the second quarter. Moreover, thePhase I production capacity and yield rate of the t4 flexible AMOLED production line wereimproved as scheduled, products for brand manufacturers were mass produced and delivered, and
TCL Technology Group Corporation Interim Report 2020
the construction of Phase II and Phase III was accelerated. The small- and medium-size panelbusiness recognized sales area of 0.53 million square meters, down by 19% year-on-year; andrevenue of RMB7.35 billion (including CDOT), up by 3.80% year-on-year.
Product and customer structures kept improving, while super-large TV, commercial displayand high-end notebook computer businesses grew rapidly. The G11 production line t6 of TCLCSOT operated at full capacity, driving the continued rapid growth of the large-size panel business.The shipping area of 55-inch and larger-size products accounted for more than 70%. Specifically,the TV panel market share rose to 2nd in the world rankings: the market share of 55-inch panelsranked the 1st in the world, that of 65-inch panels ranked the 2nd, and that of 75-inch panels alsoranked the 2nd. Commercial display business grew rapidly in the field of high-end gaming monitorsand interactive whiteboards. The shipment of 86-inch interactive whiteboards ranked 2nd in theworld. In the small- and medium-size panel business, the shipment of LTPS smart phone panelsranked the 3rd in the world; LTPS notebook computer panels were sold to a number of internationalbrand customers, and the annual shipment was expected to become the world’s 2nd; flexibleAMOLED smart phone panels were stably supplied to brand customers for their flagship products,and the shipment surged to the 4th place in the world.
With technological innovation as the main driving force, product competitiveness wascontinuously enhanced, the layout in the field of new display technologies and materials wasimproved, and a technological and ecological leadership advantage was formed. TCL CSOTconstantly consolidated the application advantages of HVA technology in large-size LCD high-endproducts, improved the shares of such high-end products as 8K/120Hz, and accelerated the massproduction of MLED product based on Mini-LED on Glass. In the LTPS application field, itincreased the proportion of Incell/COF/blind via product, and strengthened the development ofmass production technology for under-display/in-display fingerprint sensors to products with LCDscreens. For flexible AMOLED displays, the focus was placed on under-display shooting, folding,LTPO and other special technologies. The yield rate ramp-up of foldable screens and double-curvedperforated screens was successful, and the product performance met the demand of brandcustomers.TCL CSOT attaches great importance to the technological development of the next-generation newdisplay field. It has been investing in new display technologies such as printed OLED/QLED and
TCL Technology Group Corporation Interim Report 2020
Micro-LED. During the Reporting Period, TCL CSOT and San’an Semiconductor jointly investedin the establishment of a laboratory. Focusing on the development of Micro-LED technology, thetwo aim to promote the Company’s ecological layout in the field from materials, processes,equipment and production line solutions to independent intellectual property rights.Guangdong Juhua subordinate to the Company, as the only “National Printed and Flexible DisplayInnovation Center” of the industry, focuses on the basic, key technology development and industrialapplications of printed display processes. China Ray develops new OLED key materials withindependent IP. Optical overlay (CPL) materials have been mass-produced and shipped, and theperformance of red and green light-emitting materials for printed OLED has been greatly improved.Furthermore, breakthroughs have been made in key problems such as the lifetime of red and greenmaterials for QLED materials. The number of public patents in quantum dot electroluminescentfield ranks the 2nd in the world. In order to accelerate the industrialization process of printeddisplay technologies, TCL CSOT acquired a strategic stake in JOLED Inc. Through joint R&D,patent cooperation, etc., the two will speed up the industrial mass production of printed OLEDdisplays from all aspects including materials, equipments, processes and products, and will improvethe Company’s ecology construction in the key processes of the printed display industrial chain,with a view to leading the future technological development trend.
Looking ahead to the second half of 2020, the impact of the epidemic will gradually weaken. Withthe approach of the sales season, downstream customers will actively stock up, panel prices willrebound, and industry operating profit will be improved. In the long run, the trend of steady growthin demand will remain unchanged, the exit of the industry’s inefficient production capacity willaccelerate, the restructuring and integration of the industry will speed up, and the industrialconcentration will further increase. The long-term development prospects are bright.TCL CSOT will grasp the opportunity of industry integration to expand its scale and enrichits product portfolio; continue to leverage the business synergy advantage, accelerate theprogress of localization, and make breakthroughs in cost reduction. In addition, it willexpedite the development of future-oriented capabilities, promote the IPD/LTC processsystem reform, improve digital-related capabilities and intelligent manufacturing quality, andmake its utmost efforts to achieve technology leadership and ecology leadership by improvingefficiency and product mix.
TCL Technology Group Corporation Interim Report 2020
(II) Industrial Finance and Investment BusinessTCL’s industrial finance business mainly includes the Group’s finance and the supply chain finance.In the first half of 2020, affected by the COVID-19, the finance team focused on the funding needsof the Group’s key projects, and strengthened the active management of liquidity and currency risk.The supply chain finance business took full advantage of Internet platform, and jointly withdomestic financial institutions, continuously provided high quality and convenient receivablesfinancing services for small and medium enterprise partners affected by the epidemic, realizing thesound development of the industrial ecosystem. In the second half, the industrial finance businesswill stick to the service concept of “partner finance”, focus on real industrial needs, highlight theimprovement of user experience, and constantly enrich and deepen service.TCL Capital seek investment opportunities in key fields of technological industries, including newdisplay technology, semi-conductor and their relevant industry chain, as well as high end materialsand technological equipments that promote technology and create synergy. At the same time,investment value was generated. By the end of the Reporting Period, the scale of funds managed byTCL’s venture capital business reached RMB8,989 million, and it invested in 121 projectscumulatively. Currently, it holds stocks of CATL, Dynanonic, Willsemi, Cambricon, DKEM, andother listed companies. Admiralty Harbour Capital obtained No. 6 license from HK SFCsuccessfully during the Reporting Period and became an investment bank with full licenses. In thefirst half of 2020, it completed 9 bonds issuing and underwriting projects and 4 debt managementprojects. Its investment banking and asset management business developed healthily. ChinaInnovative has invested in more than 110 listed companies cumulatively with steady growth inperformance. It invested in mature companies related to the Company’s businesses.At the end of the Reporting Period, the Company invests in some listed companies directly,including a 19.07% interest in 712 Corp. (603712.SH), a 5.58% interest in Bank of Shanghai(601229.SH) and a 20.06% interest in Fantasia Holdings (01777.HK).III Core Business AnalysisYear-on-year changes in key financial data:
Unit: RMB
| H1 2020 | H1 2019 | Change (%) | Main reason for change | |
| Revenue | 29,333,210,856 | 43,781,613,735 | -33.00% | The spin-off |
| Cost of sales | 26,740,893,081 | 37,357,128,093 | -28.42% | The spin-off |
TCL Technology Group Corporation Interim Report 2020
| Selling expense | 324,665,389 | 2,382,736,337 | -86.37% | The spin-off |
| Administrative expense | 770,003,011 | 1,266,510,300 | -39.20% | The spin-off |
| R&D expense | 1,882,501,102 | 1,880,666,523 | 0.10% | No significant change |
| Finance costs | 916,022,280 | 604,713,951 | 51.48% | Increase in financings |
| Income tax expense | 164,586,735 | 282,946,949 | -41.83% | The spin-off |
| R&D investments | 2,878,922,049 | 2,666,576,851 | 7.96% | No significant change |
| Net cash generated from/used in operating activities | 7,347,810,779 | 6,150,821,822 | 19.46% | No significant change |
| Net cash generated from/used in investing activities | -17,208,563,956 | -21,986,038,288 | 21.73% | The spin-off |
| Net cash generated from/used in financing activities | 13,235,850,184 | 5,464,945,756 | 142.20% | Increase in financings |
| Net increase in cash and cash equivalents | 3,388,412,372 | -9,901,559,172 | 134.22% | Increase in net cash generated from operating activities, increase in financings and the spin-off |
Significant changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable ■ Not applicable
No such changes in the Reporting Period.Breakdown of operating revenue:
Unit: RMB
| H1 2020 | H1 2019 | Change (%) | |||
| Revenue | As % of total revenue | Revenue | As % of total revenue | ||
| Total | 29,333,210,856 | 100% | 43,781,613,735 | 100% | -33.00% |
| By operating division | |||||
| Semi-conductor display business | 19,512,204,757 | 66.52% | 16,275,666,954 | 37.17% | 19.89% |
| Distribution business | 9,126,805,527 | 31.11% | 8,814,033,673 | 20.13% | 3.55% |
| Other businesses and internally offset accounts | 694,200,572 | 2.37% | 18,691,913,108 | 42.70% | -96.29% |
| By product category | |||||
| Semi-conductor display devices | 19,512,204,757 | 66.52% | 16,275,666,954 | 37.17% | 19.89% |
| Distribution of electronics | 9,126,805,527 | 31.11% | 8,814,033,673 | 20.13% | 3.55% |
| Other businesses and internally offset accounts | 694,200,572 | 2.37% | 18,691,913,108 | 42.70% | -96.29% |
TCL Technology Group Corporation Interim Report 2020
| By operating segment | |||||
| Mainland China | 20,814,424,616 | 70.96% | 23,804,831,122 | 54.37% | -12.56% |
| Overseas (including Hong Kong) | 8,277,832,855 | 28.22% | 19,559,977,677 | 44.68% | -57.68% |
| Others | 240,953,385 | 0.82% | 416,804,936 | 0.95% | -42.19% |
Operating division, product category or operating segment contributing over 10% of revenue or operating profit:
Unit: RMB
| 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 business | 19,512,204,757 | 17,578,748,152 | 9.91% | 19.89% | 26.99% | -5.04% |
| Distribution business | 9,126,805,527 | 8,791,575,814 | 3.67% | 3.55% | 3.47% | 0.07% |
| By product category | ||||||
| Semi-conductor display devices | 19,512,204,757 | 17,578,748,152 | 9.91% | 19.89% | 26.99% | -5.04% |
| Distribution of electronics | 9,126,805,527 | 8,791,575,814 | 3.67% | 3.55% | 3.47% | 0.07% |
| By operating segment | ||||||
| Mainland China | 20,814,424,616 | 19,272,086,968 | 7.41% | -12.56% | -4.74% | -7.61% |
| Overseas (including Hong Kong) | 8,277,832,855 | 7,426,275,636 | 10.29% | -57.68% | -56.14% | -3.15% |
Core business data restated according to the changed methods of measurement that occurred in the Reporting Period:
□ Applicable ■ Not applicable
Any over 30% YoY movements in the data above and why:
The movements were primarily driven by the spin-off.
IV Analysis of Non-Core Businesses
□ Applicable ■ Not applicable
V Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
| 30 June 2020 | 31 December 2019 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As % of total assets | Amount | As % of total assets | |||
TCL Technology Group Corporation Interim Report 2020
| Monetary assets | 21,542,628,054 | 11.66% | 18,648,184,663 | 11.31% | 0.35% | No significant change |
| Accounts receivable | 9,730,783,694 | 5.26% | 8,340,353,992 | 5.06% | 0.20% | Increase in revenue |
| Inventories | 5,541,418,058 | 3.00% | 5,677,963,123 | 3.44% | -0.44% | No significant change |
| Investment property | 1,163,696,611 | 0.63% | 82,272,964 | 0.05% | 0.58% | Transfer from construction in progress |
| Long-term equity investments | 18,606,252,622 | 10.07% | 17,194,284,162 | 10.43% | -0.36% | Return on investment in associates and joint ventures, as well as increase in the investment in Bank of Shanghai |
| Fixed assets | 59,857,478,115 | 32.38% | 45,459,070,330 | 27.58% | 4.80% | Transfer from construction in progress |
| Construction in progress | 21,017,402,164 | 11.37% | 33,578,289,802 | 20.37% | -9.00% | Transfer to fixed assets and investment property |
| Short-term borrowings | 16,491,170,954 | 8.92% | 12,069,657,099 | 7.32% | 1.60% | Increase in financings |
| Long-term borrowings | 46,145,998,074 | 24.97% | 38,512,059,200 | 23.36% | 1.61% | Increase in financings |
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 recorded in equity | Increase in the Reporting Period | Decrease in the Reporting Period | Ending amount |
| Financial assets | ||||||
| 1. Held-for-trading financial assets (excluding derivative financial assets) | 8,617,440,186 | 106,075,384 | - | 11,434,746,249 | 8,492,845,265 | 11,665,416,554 |
| 2. Derivative financial assets | 159,035,592 | 16,810,520 | 37,311,285 | 7,638,267 | 33,583,848 | 187,211,816 |
TCL Technology Group Corporation Interim Report 2020
| 3. Receivables financing | - | - | -636,831 | 107,391,838 | - | 106,755,007 |
| 4. Investments in other equity instruments | 279,883,515 | - | -7,149,123 | 6,328,611 | 8,140,429 | 270,922,574 |
| Subtotal of financial assets | 9,056,359,293 | 122,885,904 | 29,525,331 | 11,556,104,965 | 8,534,569,542 | 12,230,305,951 |
| Financial liabilities | 272,924,688 | 8,851,977 | 114,299,180 | 218,027,917 | 53,910,065 | 560,193,697 |
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’0,000) | Reason for restriction |
| Monetary assets | 25,103 | Deposited in the central bank as the required reserve |
| Monetary assets | 26,544 | Other monetary assets |
| Held-for-trading financial assets | 184,061 | Put in pledge for loan |
| Fixed assets | 3,609,419 | As collateral for loan |
| Intangible assets | 261,606 | As collateral for loan |
| Total | 4,106,734 | - |
VI Investments Made
1. Total Investment Amount
| Total investment amount in the Reporting Period (RMB) | Total investment amount in the same period of last year (RMB) | Change (%) |
| 15,240,085,210 | 3,621,221,234 | 320.85% |
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
TCL Technology Group Corporation Interim Report 2020
4. Financial Assets at Fair Value
Unit: RMB’0,000
| Type of assets | Initial investment cost | 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 | Cumulative return on investment | Ending amount | Funding source |
| Stocks | 142,513 | 4,679 | -715 | 82,627 | 80,542 | 1,444 | 55,248 | Self-funded |
| Bonds | 456,605 | -8,538 | - | 187,296 | 172,408 | 13,194 | 285,701 | Self-funded |
| Wealth management products | 1,166,225 | 6,969 | - | 868,212 | 597,148 | 4,306 | 577,362 | Self-funded |
| Derivative financial instruments | 764 | 1,681 | 3,731 | 764 | 3,358 | -4,610 | 18,721 | Self-funded |
| Others | 269,233 | 7,498 | -64 | 16,713 | - | 2,111 | 285,998 | Self-funded |
| Total | 2,035,340 | 12,289 | 2,953 | 1,155,610 | 853,457 | 16,445 | 1,223,031 | -- |
5. 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 | Agricultural Bank of China “Huilifen | 145,000 | Fair value | - | 83 | - | 145,000 | - | 83 | 145,083 | Held-for-trading | Self-funded |
TCL Technology Group Corporation Interim Report 2020
| product | g” Corporate Customized RMB Structured Deposit Product | financial assets | |||||||||||
| Bank’s wealth management product | Not applicable | Bank of China Principal-Protected Wealth Management—CNYAQKF | 100,000 | Fair value | - | 973 | - | 100,000 | - | 973 | 100,973 | Held-for-trading financial assets | Self-funded |
| Bank’s wealth management product | Not applicable | Agricultural Bank of China “Huilifeng” Corporate Customized RMB Structured Deposit Product | 40,000 | Fair value | - | 677 | - | 40,000 | - | 677 | 40,677 | Held-for-trading financial assets | Self-funded |
| Bank’s wealth management product | Not applicable | Huaxia Bank Enterprise Growing Income Conservative Customized Wealth Management Product | 40,000 | Fair value | - | 182 | - | 40,000 | - | 182 | 40,182 | Held-for-trading financial assets | Self-funded |
TCL Technology Group Corporation Interim Report 2020
| Bank’s wealth management product | Not applicable | Agricultural Bank of China “Huilifeng” Corporate Customized RMB Structured Deposit Product | 40,000 | Fair value | - | 161 | - | 40,000 | - | 161 | 40,161 | Held-for-trading financial assets | Self-funded |
| Bank’s wealth management product | Not applicable | Bank of China Steady Wealth Management Plan-Zhihui Series | 40,000 | Fair value | - | 154 | - | 40,000 | - | 154 | 40,154 | Held-for-trading financial assets | Self-funded |
| Bank’s wealth management product | Not applicable | China Everbright Bank Corporate Structured Deposits | 34,950 | Cost | - | - | - | 34,950 | - | 481 | 35,431 | Other current assets | Self-funded |
| Bank’s wealth management product | Not applicable | ICBC Wealth Management·Corporate RMB Wealth Management | 30,000 | Fair value | 30,488 | 643 | - | - | - | 643 | 31,131 | Held-for-trading financial assets | Self-funded |
| Trust plan | Not applicable | CICC Xintou Collective Capital Trust | 30,000 | Fair value | - | 488 | - | 30,000 | - | 488 | 30,488 | Held-for-trading fina | Self-funded |
TCL Technology Group Corporation Interim Report 2020
| Plan No. 2 | ncial assets | ||||||||||||
| Bank’s wealth management product | Not applicable | Huaxia Bank Enterprise Growing Income Conservative Customized Wealth Management Product | 30,000 | Fair value | - | 220 | - | 30,000 | - | 220 | 30,220 | Held-for-trading financial assets | Self-funded |
| Other securities investments held at the period-end | 1,277,765 | - | 585,606 | -1,358 | -720 | 672,936 | 847,129 | 17,738 | 422,537 | Not applicable | Self-funded | ||
| Total | 1,807,715 | - | 616,094 | 2,233 | -720 | 1,172,886 | 847,129 | 21,800 | 957,036 | - | - | ||
| Disclosure date of the board announcement approving the securities investments | 20 March 2019 | ||||||||||||
| Disclosure date of the general meeting announcement approving the securities investments (if any) | 10 April 2019 | ||||||||||||
(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 |
TCL Technology Group Corporation Interim Report 2020
| 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 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 |
TCL Technology Group Corporation Interim Report 2020
| 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 RMB38.68 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 financial derivatives business of the Company is a sound financial agent with good credit standing. The financial derivatives transactions carried out by the Company in the first half of 2020 are closely related to the daily operation needs of the Company with controllable risks. The business is in line with the interests of minority shareholders of the company and the relevant laws and regulations. |
Positions of derivative investments at the period-end:
Unit: RMB’0,000
| Type of contract | Beginning amount | Ending amount | Gain/loss in Reporting Period | Ending contractual amount as % of the Company’s ending net assets |
TCL Technology Group Corporation Interim Report 2020
| Contractual amount | Actual amount | Contractual amount | Actual amount | Contractual amount | Actual amount | ||
| 1. Forward forex contracts | 1,279,232 | 36,087 | 1,568,462 | 48,622 | 3,868 | 24.17 | 0.75 |
| 2. Interest rate swaps | 528,098 | 15,843 | 872,902 | 26,187 | 13.45 | 0.40 | |
| 3. Currency swaps | 215,565 | 14,399 | 427,531 | 21,377 | 6.59 | 0.33 | |
| Total | 2,022,895 | 66,329 | 2,868,895 | 96,186 | 3,868 | 44.21 | 1.48 |
VII Sale of Major Assets and Equity Investments
1. Sale of Major Assets
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Investments
□ Applicable ■ Not applicable
VIII Principal Subsidiaries and Joint Stock CompaniesPrincipal 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 | 148,117,510,196 | 61,298,930,297 | 19,512,204,757 | -134,963,372 | -139,251,664 |
| Highly Information Industry | Subsidiary | Distribution of electro | RMB133 million | 4,325,648,765 | 985,702,957 | 9,126,805,527 | 141,852,694 | 100,311,085 |
TCL Technology Group Corporation Interim Report 2020
| Co., Ltd. | nics |
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 |
| TCL Light Electrical Appliances (Longmen) Co., Ltd. | De-registered | No significant effect |
| TCL Educational Web Ltd. and its subsidiaries | Transferred | No significant effect |
Other information about principal subsidiaries and joint stock companies:
There were no other information about the principal subsidiaries and joint stock companies during the Reporting Period that theCompany is required to disclose.
IX Structured Bodies Controlled by the Company
□ Applicable ■ Not applicable
X Operating Performance Forecast for January-September 2020Warning of a forecast negative net profit for the January-September period of the current year or a considerable YoY change therein,as well as the reasons:
□ Applicable ■ Not applicable
XI Risks Facing the Company and Countermeasures
1. Risk of Macroeconomic Fluctuations
In the first half of 2020, affected by the COVID-19, the uncertainty of global economic growthincreased. Although the epidemic is still spreading, the global economy is gradually recoveringfrom the most severe situation. Major countries have restarted their economies one after another,and the global economy is showing signs of stabilization. However, the overall prospects foreconomic recovery are still not optimistic: emerging economies have been severely hit, andmonetary policy has been substantially loosened; in the second half of the year, the global economicoutlook remains uncertain, and the road to recovery is still fraught with difficulties. China was thefirst country to suffer the virus’s onslaught. In the first half of 2020, its economy fell first and thenrose, recovering steadily. Given that China has accumulated extensive experience in epidemicprevention and control, the possibility of a second outbreak is low. It is expected that the work and
TCL Technology Group Corporation Interim Report 2020
production resumption of the traditional service sector will speed up in the second half of the year,and thereby help the overall economy move toward normality. The return of the annual GDP topositive growth is within reach. Looking ahead to the second half of 2020, the economy and themarket as a whole are still in a process of recuperation. “Counter-globalization” behavior such asthe COVID-19 epidemic, trade protectionism and unilateralism will continue to dampen global andChinese economic growth. The display sector is a national strategic emerging industry. Thedevelopment of new display technologies has been strongly supported by the central and localgovernments, but it is still necessary for the Company to remain vigilant about the potential risksthat macroeconomic uncertainty may bring to its development.Against this backdrop, the Company will continue its in-depth studies of the macroeconomic trendsand their impact. Based on China’s idea of a new “development pattern in which domesticeconomic cycle plays a leading role while international economic cycle remains its extension andsupplement”, the Company will keep focusing on the professional operation strategies for the mainbusiness, precisely determine its business development directions, fully grasp market opportunities,and on the basis of maintaining TCL CSOT’s balanced product market distribution as well as goodcustomer quality and portfolio, strive for survival through maximizing cost efficiency, and developthrough transformation, innovation and exploration, in order to minimize the negative impact of themacro economy.
2. Risk of Industry Restructuring and Reshuffle
Although the demand for large-size panels as well as small- and medium-size panels has picked up,as shown by the latest industry supply-demand data, the semi-conductor display sector as a whole isstill in a downward cycle, and it may hover at the bottom of the cycle until 2021. Additionally, dueto the COVID-19 epidemic, the global economy remains stagnant. Overseas manufacturers haveclearly reduced production, and the concentration of production capacity has accelerated. In thepanel industry, the concentration will further increase, the industry reshuffle will be sped up, andthe weak will be eliminated.The Company will carefully identify the opportunities and challenges brought about by the industryrestructuring and reshuffle, expedite product technology iteration and business model innovation,continue to analyze in depth the trends of changes in industry supply and demand relations, predictproduction capacity allocation in advance, and increase R&D investment so as to create highbarriers to competition and broaden the business moat through the continuous improvement ofproducts’ technological content and added value as well as the constant expansion of theCompany’s scale and benefit advantages. Moreover, taking advantage of the synergy formed by
TCL Technology Group Corporation Interim Report 2020
industry-finance integration, the Company will keep improving the upstream and downstreamlayout and actively explore the second track to effectively soften the impact of the semi-conductordisplay business downturn, with the aim of seizing the earliest opportunities in the possible industryrestructuring.
3. Risks Caused by Market Competition
In terms of downstream applications, with the gradual increase in the penetration rate of 5G smartphones, as well as the rapid rise of artificial intelligence and the Internet of Things (IoT), newproducts in such fields as middle- and high-end smart devices, wearable devices, commercialdisplay devices, and in-vehicle devices have emerged one after another. The steady growth of thetraditional market and the rapid take-off of the commercial display market have driven thecontinuous increase in market demand, and at the same time led to increasingly fierce marketcompetition. Furthermore, the application scenarios of end consumers are also constantly changing.For example, short video applications such as Douyin have made for the creation of auto-rotatesmart screens, and the COVID-19 epidemic has facilitated the development of under-displayfingerprint scanning. If the Company cannot keep creating new products according to the demandof downstream applications, its business growth will also be hindered.The Company will continue to focus on the needs of the industry and end customers. It willoptimize its business structure and enhance its product competitiveness with product technologyinnovation as the main driving force. The Company will also actively listen to customer feedback,further strengthen in-depth cooperation with existing major domestic and foreign customers, andprovide customers with solutions that take into account both production profit and customization.Meanwhile, it will conduct in-depth research on mainstream customers in the industry, accuratelygrasp the pace of end market applications, constantly increase R&D investment, and based on morethorough research and analysis of market segments, explore more emerging fields, actively makearrangements regarding emerging market segments, and develop new driving forces for growth.
4. Management Risks Brought by Restructuring, Transformation and M&AAt present, the Company has completed the spin-off and transformation. Its business management isin good condition. However, the spin-off and transformation have brought about substantial changesin capital structure, business structure, management structure, operations procedures and evencorporate culture, which imposes extremely high requirements for the Company’s businessmanagement level. On the other hand, the Company is still actively looking for industry mergersopportunities and has already gained something. How to integrate the target companies from such
TCL Technology Group Corporation Interim Report 2020
aspects as business, personnel and technology to achieve the “one plus one greater than two” effectalso poses a challenge to the Company’s management level.The Company will reorganize its structures, procedures and working mechanisms through structuraladjustment and organizational re-framing to ensure that all tasks before and after the spin-off andtransformation can be seamlessly connected and effectively implemented, and that the newstructures and new mechanisms can bring a longer-term transformation impetus and a soliderorganizational guarantee to the Company. In the meantime, all employees will respond to theCompany’s call to “strive for survival through maximizing cost efficiency, and develop throughtransformation, innovation and exploration”, and actively carry out crucial tasks such as“maximizing cost efficiency”, “transformation, innovation and exploration”, and “team capabilityuplift”. All kinds of talent will be actively promoted and introduced. The employees willconsciously set higher management goals for various tasks, take up the opportunities and challengesbrought about by the spin-off, transformation and M&A with full enthusiasm, and achievelong-term, stable growth with high quality.
5. Intellectual Property Risks
Competition in the semi-conductor display and materials field is becoming increasingly fierce. Asthe Company keeps expanding its business scale and technological layout, patent disputes occurfrom time to time, and intellectual property risks become increasingly obvious. Ideological trendssuch as “counter-globalization” are more likely to further amplify related risks.The Company will continue to maintain high-intensity R&D investment, continuously enhance theprofessional capabilities of the core technical team, and constantly improve the layout of keytechnology and product patents through the “independent research + cooperative R&D” model.Meanwhile, it will keep perfecting the intellectual property management and protection mechanism,and through strategic cooperation with external professional institutions on intellectual property,strengthen risk-involved patent investigation, enhance patent risk early warning, reducerisk-involved patent threats, and comprehensively improve the ability to defend against intellectualproperty risks.
TCL Technology Group Corporation Interim Report 2020
Part V Significant Events
I Annual and Extraordinary General Meetings Convened during the Reporting Period
1. General Meetings Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Date of the meeting | Date of disclosure | 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 |
2. Extraordinary General Meetings Convened at the Request of Preference Shareholders with ResumedVoting Rights
□ Applicable ■ Not applicable
II Interim Dividend Plan
□ Applicable ■ Not applicable
III Commitments of the Company’s Actual Controller, Shareholders, Related Parties andAcquirers, as well as the Company Itself and Other Entities Fulfilled in the Reporting Periodor Overdue at the Period-End
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
TCL Technology Group Corporation Interim Report 2020
IV Engagement and Disengagement of Independent AuditorAre the interim financial statements audited?
□ Yes ■ No
V Explanations Given by the Board of Directors and the Supervisory Committee Regardingthe Independent Auditor's “Modified Opinion” on the Financial Statements of the ReportingPeriod
□ Applicable ■ Not applicable
VI Explanations Given by the Board of Directors Regarding the Independent Auditor's“Modified Opinion” on the Financial Statements of Last Year
□ Applicable ■ Not applicable
VII Insolvency and Reorganization
□ Applicable ■ Not applicable
VIII Legal MattersSignificant lawsuits and arbitrations:
□ Applicable ■ Not applicable
Other legal matters:
□ Applicable ■ Not applicable
IX Doubts from Media
□ Applicable ■ Not applicable
The Company had no issues about which media generally raised doubts in the Reporting Period.X Punishments and Rectifications
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
XI Credit Quality of the Company as well as its Controlling Shareholder and ActualController
□ Applicable ■ Not applicable
TCL Technology Group Corporation Interim Report 2020
XII Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measuresfor Employees(I) The Top 400 and Key Personnel Stock Ownership Plan and the Global Partner PlanOn 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. As indicated in the Confirmation of Securities Ownership Transfer issuedby the Shenzhen branch of China Securities Depository 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 underthe Designated Asset Management Plan of the First Global Partner Plan of TCL Group weretransferred through a non-deal manner to the securities accounts of the holders under the plan. To bespecific, a total of 2,443,960 shares were transferred to the Company’s directors, supervisors andsenior management (Mr. Li Dongsheng, Ms. Du Juan, Mr. Jin Xuzhi, Mr. Liao Qian, Mr. YanXiaolin and Mr. Mao Tianxiang), and 29,578,394 shares to other holders. The unvested 67,125,761shares under the First Global Partner Plan and the corresponding dividends (if any) would be soldby the Management Committee of the First Stock Ownership Plan at a proper timing before theexpiry of the First Global Partner Plan, and the proceeds generated therein would be returned to theCompany.(II) The Second Global Partner PlanOn 14 April 2020, the Company disclosed the Announcement on the Equity Vesting of the SecondGlobal Partner Plan. This plan set out a company performance-related condition of anot-lower-than-15% growth in the net profit attributable to shareholders of the Company as theparent in 2019 compared to 2018. According to the 2019 Annual Independent Auditor’s Report forTCL Technology Group Corporation issued by Da Hua Certified Public Accountants (SpecialGeneral Partnership), the net profit attributable to shareholders of the Company as the parent in2019 failed to grow by over 15% compared to 2018, which meant the said condition had not beensatisfied. Therefore, the 33,391,897 shares under the Second Global Partner Plan and thecorresponding dividends (if any) would be taken back by the Company and would not be vested inthe holders under the plan. These shares would be sold by the Management Committee of theSecond Stock Ownership Plan at a proper timing before the expiry of the Second Global Partner
TCL Technology Group Corporation Interim Report 2020
Plan, and the proceeds generated therein would be returned to the Company.(III) The 2018 Restricted Stock Incentive Plan and the Global Innovation Partner PlanThe 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; it wasagreed to repurchase and retire the 881,067 restricted shares that had been granted to 27 awardeesunder the 2019 Restricted Stock Incentive Plan but were still in lockup because they were deemedby the Board of Directors as no longer eligible for the incentives due to reasons such as the spin-offof Huizhou TCL Environmental Resource Co., Ltd. and resignation; and it was agreed to repurchaseand retire the 1,497,289 restricted shares that had been granted to 95 in-service awardees but werestill in lockup due to the failure to satisfy the unlocking condition for the current unlocking period,i.e. an unfulfilled company performance requirement for 2019. The independent directors of theCompany issued their independent opinion on the relevant matters, and the law firm issued the legalopinion. The said matters were approved at the 2019 Annual General Meeting on 20 April 2020.(IV) The 2019 Restricted Stock Incentive Plan and the Second Global Innovation PartnerPlanThe 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; it wasagreed to repurchase and retire the 881,067 restricted shares that had been granted to 27 awardeesunder the 2019 Restricted Stock Incentive Plan but were still in lockup because they were deemed
TCL Technology Group Corporation Interim Report 2020
by the Board of Directors as no longer eligible for the incentives due to reasons such as the spin-offof Huizhou TCL Environmental Resource Co., Ltd. and resignation; and it was agreed to repurchaseand retire the 1,497,289 restricted shares that had been granted to 95 in-service awardees but werestill in lockup due to the failure to satisfy the unlocking condition for the current unlocking period,i.e. an unfulfilled company performance requirement for 2019. The independent directors of theCompany issued their independent opinion on the relevant matters, and the law firm issued the legalopinion. The said matters were approved at the 2019 Annual General Meeting on 20 April 2020.XIII Major Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable ■ Not applicable
2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments
□ Applicable ■ Not applicable
3. Related-Party Transactions Regarding Joint Investments in Third Parties
□ Applicable ■ Not applicable
4. Amounts Due to and from Related Parties
□ Applicable ■ Not applicable
Indicate whether there were any amounts due to and from related parties for non-operating purposes.
□ Yes ■ No
5. Other Major Related-Party Transactions
| Title of announcement | Date of disclosure | Website for disclosure |
| Announcement on the Expected Continuing Related-Party Transactions for 2020 | 31 March 2020 | http://www.cninfo.com.cn |
| Announcement on TCL 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 |
TCL Technology Group Corporation Interim Report 2020
XIV Occupation of the Company’s Capital by the Controlling Shareholder or any of ItsRelated Parties for Non-Operating Purposes
□ Applicable ■ Not applicable
XV Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
(3) Leases
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
2. Major 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 (agreement signing 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 | 344,310 | Joint-liability | 1 month-5 years | No | Yes |
| TCL Overseas Electronics (Huizhou) Ltd. | 2018-12-7 | 120,000 | 2020-1-15 | 47,057 | Joint-liability | 1 month-1 year | No | Yes |
TCL Technology Group Corporation Interim Report 2020
| TCL King Electrical Appliances (Chengdu) Co., Ltd. | 2018-12-7 | 60,000 | 2019-11-18 | 4,000 | Joint-liability | 1 year | No | Yes |
| Huizhou TCL Mobile Communication Co., Ltd. | 2018-12-7 | 450,000 | 2020-1-10 | 257,867 | Joint-liability | 3 months-1 year | No | Yes |
| TCL Communication Technology Holdings Limited | 2018-12-7 | 120,000 | 2017-11-20 | 12,035 | Joint-liability | 1-5 years | No | Yes |
| TCL Mobile Communication (HK) Company Limited | 2018-12-7 | 248,500 | 2020-3-5 | 84,425 | Joint-liability | 3 months-1 year | No | Yes |
| TCT Mobile Italy S.R.L | 2018-12-7 | 1,600 | 2020-3-1 | 750 | Joint-liability | 3 months-1 year | No | Yes |
| TCL Home Appliances (Hefei) Co., Ltd. | 2018-12-7 | 140,000 | 2020-1-14 | 32,966 | Joint-liability | 6 months-1 year | No | Yes |
| TCL Home Appliances (Zhongshan) Co., Ltd. | 2018-12-7 | 16,000 | 2020-4-13 | 2,647 | Joint-liability | 1-6 months | No | Yes |
| TCL Air-Conditioner (Zhongshan) Co., Ltd. | 2018-12-7 | 158,600 | 2016-9-9 | 89,244 | Joint-liability | 1 month-5 years | No | Yes |
| TCL Air Conditioner (Wuhan) Co., Ltd. | 2018-12-7 | 131,600 | 2020-1-17 | 22,490 | Joint-liability | 1 month-1 year | No | Yes |
| Zhongshan TCL Refrigeration Equipment | 2018-12-7 | 75,300 | 2020-1-21 | 9,866 | Joint-liability | 9 days-6 months | No | Yes |
TCL Technology Group Corporation Interim Report 2020
| Co., Ltd. | ||||||||
| Guangdong TCL Smart Heating & Ventilation Equipment Co., Ltd. | 2018-12-7 | 7,000 | 2020-1-15 | 2,422 | Joint-liability | 3-6 months | No | Yes |
| TCL Air-Conditioner (Jiujiang) Co., Ltd. | 2018-12-7 | 25,000 | 2020-1-13 | 11,796 | Joint-liability | 1-6 months | No | Yes |
| TCL Tonly Electronics (Huizhou) Co., Ltd. | 2018-12-7 | 40,000 | 2015-11-7 | 16,409 | Joint-liability | 2-5 years | No | Yes |
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | 2018-12-7 | 4,000 | 2020-2-14 | 354 | Joint-liability | 4-182 days | No | Yes |
| SHIFENDAOJIA Online Service Co., Ltd. | 2018-12-7 | 3,000 | 2020-1-20 | 40 | Joint-liability | 6-162 days | No | Yes |
| Guangzhou Yunsheng Tianji Technology Co., Ltd. | 2018-12-7 | 110,000 | 2017-9-28 | 89,855 | Joint-liability | 12 years | No | Yes |
| Guangzhou TCL Science and Technology Development Co., Ltd. | 2018-12-7 | 200,000 | 2018-12-18 | 115,300 | Joint-liability | 13 years | No | 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 | No | Yes |
TCL Technology Group Corporation Interim Report 2020
| TCL Industries Holdings (HK) Limited | 2018-12-7 | 800,000 | 2016-10-4 | 740,505 | Joint-liability | 1-5 years | No | Yes | |
| Canyon Circuit Technology (Huizhou) Co., Ltd. | 2018-12-7 | 5,000 | 2020-1-2 | 269 | Joint-liability | 1 month-191 days | No | Yes | |
| Huizhou Shenghua Industrial Co., Ltd. | 2018-12-7 | 9,000 | 2020-1-3 | 822 | Joint-liability | 63-189 days | No | Yes | |
| Taiyang Electro-optic (Huizhou) Co., Ltd. | 2018-12-7 | 4,000 | 2020-1-13 | 61 | Joint-liability | 135-184 days | No | Yes | |
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 2020-3-31 | 40,000 | 2020-1-10 | 25,827 | Joint-liability | 1 month-1 year | No | No | |
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 2020-3-31 | 110,000 | 2020-6-17 | 3,800 | Joint-liability | 1 year | No | No | |
| Total approved line for such guarantees in the Reporting Period (A1) | 3,621,525 | Total actual amount of such guarantees in the Reporting Period (A2) | 954,356 | ||||||
| Total approved line for such guarantees at the end of the Reporting Period (A3) | 3,621,525 | Total actual balance of such guarantees at the end of the Reporting Period (A4) | 1,931,259 | ||||||
| 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 (agreement | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or | |
TCL Technology Group Corporation Interim Report 2020
| signing date) | not | |||||||
| Wuhan China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 1,110,000 | 2016-2-24 | 614,301 | Joint-liability | 3 months-8 years | No | No |
| Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 2020-3-31 | 3,820,000 | 2018-2-11 | 1,664,681 | Joint-liability | 3 months-8 years | No | No |
| TCL China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 710,800 | 2015-4-21 | 458,407 | Joint-liability | 1 month-8 years | No | No |
| Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. | 2020-3-31 | 1,510,000 | 2017-12-22 | 1,112,062 | Joint-liability | 3 months-8 years | No | No |
| Huizhou China Star Optoelectronics Technology Co., Ltd. | 2020-3-31 | 730,000 | 2019-12-26 | 343,631 | Joint-liability | 2 months-1 year | No | No |
| China Star Optoelectronics International (HK) Limited | 2020-3-31 | 330,000 | 2019-8-30 | 48,000 | Joint-liability | 1 year | No | No |
| China Display Optoelectron | 2020-3-31 | 150,000 | 2019-5-27 | 35,151 | Joint-liability | 1 month-4 years | No | No |
TCL Technology Group Corporation Interim Report 2020
| ics Technology (Huizhou) Co., Ltd. | ||||||||
| Wuhan China Display Optoelectronics Technology Co., Ltd. | 2020-3-31 | 50,000 | 2018-10-31 | 2,623 | Joint-liability | 1 month-5 years | No | No |
| Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | 2020-3-31 | 100,000 | 2019-12-13 | 20,000 | Joint-liability | 12 months | No | No |
| Highly Information Industry Co., Ltd. | 2020-3-31 | 294,000 | 2018-7-2 | 207,122 | Joint-liability | 1 month—3 years | No | No |
| Beijing Hecheng Nuoxin Technology Co., Ltd. | 2020-3-31 | 5,000 | 2018-9-5 | 2,000 | Joint-liability | 2 years | No | No |
| Beijing Lingyun Data Technology Co., Ltd. | 2020-3-31 | 90,000 | 2020-1-1 | 33,145 | Joint-liability | 1 month-1 year | No | No |
| Beijing Sunpiestore Technology Co., Ltd. | 2020-3-31 | 70,000 | 2018-9-5 | 57,000 | Joint-liability | 1-2 years | No | No |
| Shaanxi Titi Electronic Technology Co., Ltd. | 2020-3-31 | 3,000 | 2018-9-5 | 1,000 | Joint-liability | 2 years | No | No |
| Total approved line for such guarantees in the Reporting Period (B1) | 9,862,800 | Total actual amount of such guarantees in the Reporting Period (B2) | 3,494,494 | |||||
| Total approved line for such | 9,862,800 | Total actual balance of such | 4,599,123 | |||||
TCL Technology Group Corporation Interim Report 2020
| guarantees at the end of the Reporting Period (B3) | guarantees at the end of the Reporting Period (B4) | ||
| Total guarantee amount (total of the three kinds of guarantees above) | |||
| Total guarantee line approved in the Reporting Period (A1+B1+C1) | 13,484,325 | Total actual guarantee amount in the Reporting Period (A2+B2+C2) | 4,448,850 |
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 13,484,325 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 6,530,382 |
| Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets | 217% | ||
| Of which: | |||
| Balance of guarantees provided for shareholders, the actual controller and their related parties (D) | 1,901,632.29 | ||
| Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) | 2,647,178.76 | ||
| Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) | 5,024,784.76 | ||
| Total of the three amounts above (D+E+F) | 9,573,595.82 | ||
| Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) | N/A | ||
| Guarantees provided in breach of prescribed procedures (if any) | N/A | ||
Irregularities in Provision of Guarantees
□ Applicable ■ Not applicable
No such cases in the Reporting Period.
3. Cash Entrusted for Wealth Management
Unit: RMB’0,000
| Type | Funding source | Amount | Undue amount | Unrecovered overdue amount |
| Bank’s wealth management product | Self-funded | 540,983 | 511,433 | - |
| Securities firm’s wealth management product | Self-funded | 115,000 | - | - |
| Trust plan | Self-funded | 80,000 | 70,000 | - |
| Other | Self-funded | 70,173 | 27,996 | - |
| Total | 806,156 | 609,429 | - | |
High-risk wealth management transactions with a significant single amount, low liquidity and no principal protection:
TCL Technology Group Corporation Interim Report 2020
□ Applicable ■ Not applicable
4. Other Major Contracts
□ Applicable ■ Not applicable
No such cases in the Reporting Period.XVI Corporate Social Responsibility (CSR)
1. Major Environmental Issues
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 2019, and “subsidiaries”mentioned in 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 | 122.5mg/L | 260 mg/L | 443.43t | 1226.05t | None |
| Ammonia nitrogen | 7.0 mg/L | 30 mg/L | 25.3t | / | None | ||||
| COD | Continuously discharged to Dongkengshui | 1 | Artificial wetland to the north of the plant area | 19 mg/L | 30 mg/L | 32.48t | 174.89t | None | |
| Ammonia nitrogen | 0.42 mg/L | 1.5 mg/L | 0.72t | 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 | 114.04t | 353.55t | None |
| Ammonia nitrogen | 0.56-1.72mg/L | 30mg/L | 11.41t | 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 Interim 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 relativestandards. The concentration and total amount of waste water and exhaust gas discharged meet therelevant national and local standards. The solid wastes generated by each subsidiary include generalwaste, hazardous waste and domestic garbage, of which, hazardous wastes are treated by anentrusted qualified hazardous waste disposal agency according to the regulations; general wastes aredisposed of by a resource recycling firm after being classified in the plant area; while domesticgarbage is disposed of by the property management company by sending the garbage to qualifiedlandfills. All the disposals meet the regulatory requirements. The factory noise generated by eachsubsidiary comes from the mechanical noises of production and power equipment, includingrefrigerators, cooling towers, air compressors, fans, various types of pumps, etc.. The Companyreduces the impact of noise on the surrounding environment by the use of low-noise equipment,vibration reduction, noise reduction, etc., and noise reduction measures such as sound insulationand sound absorption in the factories and equipment rooms. The monitoring results show that thefactory boundary noise and emission of all subsidiaries meet the standards in a stable manner.Environmental Impact Assessment on Construction Projects and Other EnvironmentalProtection Administrative Licenses
TCL Technology Group Corporation Interim Report 2020
Each 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.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 annualmonitoring reports can be checked on the key environmental monitoring information platformmanaged by local environmental authorities or subsidiary websites.Other environment-related information that should be disclosed:
None.Other relevant information:
None.
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. The "TCL Hope Engineering Candlelight Awards Program" jointly established byCYDF and Shenzhen TCL Public Welfare Foundation in 2013 is one of the earliest public welfareprojects for rural teachers in the country. The investment to this project is over RMB34 million insix years. The purpose of the award is to demonstrate the morality and professional dreams of
TCL Technology Group Corporation Interim Report 2020
outstanding rural teachers who have worked hard in the grassroots education front inpoverty-stricken areas for their posts, and encourage more outstanding young teachers to take rootin rural basic education and promote rural education development.In 2019, Shenzhen TCL Public Welfare Foundation officially launched the “A.I. Go Home” project.In cooperation with TCL Industrial Technology Research Institute, the Foundation employedartificial intelligence technology to develop and design a storytelling robot named “Yi Ge” whichcan simulate the voices of parents and tell stories to left-behind children and migrant children, thusstrengthening the emotional connections between parents and children. With the help of the robot,children can hear the voices of their parents more often in the process of growing up, so that mentalhealth problems and deviant behavior of left-behind children and migrant children caused by thelong-time separation from their parents can be prevented.Shenzhen TCL Public Welfare Foundation and the Education Foundation of the CentralConservatory of Music in Beijing jointly set up the “Little Music +” project in 2019 and releasedthe “Xiao Xue” music robot, with the hope of bringing famous Chinese and foreign music piecesand appreciations to students who lack music resources, inspiring optimism in every child with thepower of music, and making music literacy the wealth of a lifetime for every child.
(2) Summary of the Related Work Done in the Reporting Period
In 2020, the original launch of the 7th TCL Hope Project—Candlelight Awards Program wasdisrupted by the sudden COVID-19 outbreak. After discussion, we determined that the content ofthe project would be adjusted and upgraded. Therefore, Shenzhen TCL Public Welfare Foundationand the China Youth Development Foundation decided to cancel the 7th TCL HopeProject—Candlelight Awards Program in 2020.In the first half of 2020, an online “Yi Ge Chinese Idiom Class” was organized for pilot schools inrural areas. According to the lesson teaching methods of the pilot primary schools and combinedwith the teaching materials used by each grade, the idioms, fables and ancient poems in the “Yi Ge”storytelling robot were selected as extracurricular and extended learning materials for formalcourses, helping the students to learn knowledge while listening to stories. The project covered tenclasses from the first to sixth grades of 2 schools in 2 provinces, with a total of 586 students. The
TCL Technology Group Corporation Interim Report 2020
duration exceeded 1,500 minutes (25 hours).Meanwhile, project plan adjustments were made due to the epidemic. The originally planned offline“Little Music Class” was changed to an online activity called “A Song Between Classes”, and themusic in the “Xiao Xue” music robot was used. Without occupying the course time of the teachersand students, 1 classic song of the world was played online every day between classes, creating anew break time mode for rural primary schools. In total, applications from 35 schools were received,but in the end 18 classes of 5 schools (located in 5 counties in Heilongjiang, Henan, Hebei, Yunnan,and Sichuan, respectively) were chosen to participate in the project, covering 956 students from thefirst to sixth grades. The duration exceeded 6,400 minutes (about 107 hours).
(3) Results
| Indicators | Measurement Unit | Quantity/Development |
| I. Overall summary | —— | —— |
| Of which: Cash | RMB’0,000 | 20 |
| Poverty alleviation by public programmes | —— | —— |
| Investment amount in targeted poverty alleviation | RMB’0,000 | 10 |
| Investment amount in public fund for poverty alleviation | RMB’0,000 | 10 |
(4) Subsequent Plans
From 2020, the coverage of the “A.I. Go Home” project will keep expanding. It is expected that 5 to8 pilot schools will be established in the second half of the year, and that more than 30 classes willjoin the “Yi Ge Story Club” and drive the participation of the schools on a class basis. In themeantime, customized “Yi Ge” storytelling robots will be provided to left-behind children so thatthe left-behind children can grow up happily with the company of the robots that can simulate thevoices of their parents.In 2020, we will continue to expand the coverage of the “Little Music +” project, and establish 5 to8 partner schools and 30 partner classes. We will also continue the online “A Song Between Classes”project to provide more children who lack professional music resources with famous Chinese andforeign music pieces and master appreciations.
TCL Technology Group Corporation Interim Report 2020
The Company will expand the existing award scale and publicity impact of the TCL HopeProject—Candlelight Awards Program, and strengthen interactive communication on the Internetplatform to maintain social attention.The coverage of the Candlelight Micro-loan Project will be expanded to solve the financial needs ofmore rural teachers and improve their lives. This is to ensure the positive development of ruraleducation.XVII Other Significant Events
| Title of announcement | Date of disclosure | Website for disclosure |
| Announcement on the Completion of a Share Repurchase and the Corresponding Share Changes | 13 January 2020 | http://www.cninfo.com.cn |
| Announcement on the Change of the Company Name with the Industrial and Commercial Administration and the Change of the Stock Name | 7 February 2020 | |
| Preliminary Plan on the Acquisition of Assets through Share Offering, Convertible Corporate Bonds Offering and Cash Payment and Raising the Matching Funds | 29 April 2020 | |
| Announcement on Participating in the Public Acquisition of the 100% Equity Interests in Zhonghuan Group | 24 June 2020 |
XVIII Significant Events of Subsidiaries
| Title of announcement | Date of disclosure | Website for disclosure |
| Announcement on Intending to Increase the Capital in TCL CSOT | 31 March 2020 | http://www.cninfo.com.cn |
| Voluntary Announcement on Subsidiary TCL CSOT and San’an Semiconductor Establishing a Joint Lab | 8 June 2020 |
TCL Technology Group Corporation Interim 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 | Shares as dividend converted from profit | Shares as dividend converted from capital reserves | Other | Subtotal | Shares | Percentage (%) | |
| 1. Restricted shares | 867,764,980 | 6.41% | - | - | - | 713,455 | 713,455 | 868,478,435 | 6.42% |
| 1.1 Shares held by state-owned legal persons | 0 | 0.00% | - | - | - | 0 | 0 | 0 | 0.00% |
| 1.2 Shares held by other domestic investors | 777,102,199 | 5.74% | - | - | - | 713,455 | 713,455 | 777,815,654 | 5.75% |
| Among which: Shares held by domestic legal persons | 150,908,441 | 1.12% | - | - | - | 0 | 0 | 150,908,441 | 1.12% |
| Shares held by domestic natural persons | 626,193,758 | 4.63% | - | - | - | 713,455 | 713,455 | 626,907,213 | 4.63% |
| 1.3 Shares held by foreign investors | 90,662,781 | 0.67% | - | - | - | 0 | 0 | 90,662,781 | 0.67% |
| Among which: Shares held by foreign legal persons | 90,532,347 | 0.67% | - | - | - | 0 | 0 | 90,532,347 | 0.67% |
| Shares held by foreign natural | 130,434 | 0.00% | - | - | - | 0 | 0 | 130,434 | 0.00% |
TCL Technology Group Corporation Interim Report 2020
| persons | |||||||||
| 2. Unrestricted shares | 12,660,673,739 | 93.59% | - | - | - | -713,455 | -713,455 | 12,659,960,284 | 93.58% |
| 2.1 RMB-denominated ordinary shares | 12,660,673,739 | 93.59% | - | - | - | -713,455 | -713,455 | 12,659,960,284 | 93.58% |
| 3. Total shares | 13,528,438,719 | 100.00% | - | - | - | 0 | 0 | 13,528,438,719 | 100.00% |
Reasons for share changes:
During the Reporting Period, locked-up shares held by senior management increased by 713,455 restricted shares, as unrestrictedshares decreased by the same number. As such, the total shares of the Company remained unchanged.Approval of share changes:
□Applicable ■ Not applicable
Transfer of share ownership:
□Applicable ■ Not applicable
Progress on any share repurchase:
■ Applicable □ Not applicableIt 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
th
Board 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 Companyhas cumulatively 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 ofshares repurchased, repurchase price and amount used were in compliance with the repurchase plan approved at the 14
th
Meeting ofthe 6
thBoard of Directors, with no difference with the disclosed Report on Share Repurchase. As such, the Company has completedthe share repurchase as per the repurchase plan that it disclosed.Progress on reducing the repurchased shares by means of centralized bidding:
□ Applicable ■ Not applicable
TCL Technology Group Corporation Interim Report 2020
Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to theCompany’s ordinary 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 |
| 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 |
| 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 | - | 713,455 | 616,381,082 | Locked-up shares of senior | 9999-99-99 |
TCL Technology Group Corporation Interim Report 2020
| management | ||||||
| 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 | - | - | 3,875,613 | Restricted shares granted as incentives | 2020-6-26 |
| Total | 867,764,980 | - | 713,455 | 868,478,435 | -- | -- |
II Issuance and Listing of Securities
| 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 | Index to disclosed information | Date of disclosure |
| Type: convertible corporate bonds, convertible corporate bonds with warrants, corporate bonds | ||||||||
| Corporate bonds | 2020-6-8 | 2.5% | 10,000,000 | 2020-6-16 | 10,000,000 | 2020-12-04 | http://www.cninfo.com.cn | 2020-6-8 |
III Shareholders and Their Shareholdings at the End of the Reporting Period
Unit: share
| Number of ordinary shareholders at the period-end | 522,933 | Number of preference shareholders with resumed voting rights at the period-end (if any) (see note 8) | 0 | |||||||
| 5% or greater ordinary shareholders or top 10 ordinary shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total ordinary shares held at the period-end | Increase/decrease in the Reporting Period | Restricted ordinary shares held | Unrestricted ordinary shares held | Shares in pledge or frozen | |||
| Status | Shares | |||||||||
| Li Dongsheng and his acting-in-concert party | Domestic natural person/general legal person | 8.56 | 1,158,599,393 | -63,148,616 | 610,181,602 | 548,417,791 | Put in pledge by Li Dongsheng | 275,000,000 | ||
| Put in pledge by Jiutian Liancheng | 344,899,521 | |||||||||
| Huizhou Investment | State-owned legal person | 5.49 | 743,139,840 | -135,279,907 | - | 743,139,840 | - | - | ||
TCL Technology Group Corporation Interim Report 2020
| Holding Co., Ltd. | ||||||||
| Hong Kong Securities Clearing Company Ltd. | Foreign legal person | 3.19 | 431,613,255 | 78,123,401 | - | 431,613,255 | - | - |
| Tibet Tianfeng Enterprise Management Co., Ltd. | Domestic general legal person | 3.08 | 417,344,415 | -108,751,227 | - | 417,344,415 | - | - |
| China Securities Finance Corporation Limited | Domestic general legal person | 2.76 | 373,231,553 | - | - | 373,231,553 | - | - |
| Central Huijin Asset Management Co., Ltd. | State-owned legal person | 1.53 | 206,456,500 | - | - | 206,456,500 | - | - |
| National Social Security Fund-Portfolio 601 | Fund, wealth management product, etc. | 0.95 | 128,080,487 | 75,080,487 | - | 128,080,487 | - | - |
| Perseverance Asset Management L.L.P.－Perseverance Linshan Yuanwang Fund No. 1 | Fund, wealth management product, etc. | 0.74 | 100,000,000 | 40,000,000 | - | 100,000,000 | - | - |
| Industrial and Commercial Bank of China－E Fund Research Selected Stock Fund | Fund, wealth management product, etc. | 0.73 | 99,184,547 | 99,184,547 | - | 99,184,547 | - | - |
| Star Century Enterprises Limited | Foreign legal person | 0.67 | 90,532,347 | - | 90,532,347 | - | - | - |
| Strategic investor or general legal person becoming a | Not applicable | |||||||
TCL Technology Group Corporation Interim Report 2020
| top-10 ordinary shareholder in a rights issue (if any) (see note 3) | |||
| 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. As certain partners of Jiutian Liancheng have quit from the company and as requested by these partners, the meeting of partners of Jiutian Liancheng has resolved to reduce shareholdings in the Company corresponding to the shares of these partners in the partnership. And these partners would withdraw from the partnership. On 27 February 2020, Jiutian Liancheng reduced its holdings of 63.876 million shares, accounting for 0.5% of the Company’s total share capital, through bulk trading. This shareholding reduction is in compliance with the Several Provisions on the Reduction of Shares Held in a Listed Company by the Shareholders, Directors, Supervisors and Senior Management of the Listed Company. With confidence in the future development of the Company, Mr. Li Dongsheng and the incumbent senior management of the Company do not reduce their direct or indirect shareholdings in the Company. On 28 April 2020, They had also undertaken not to reduce their shareholdings in the Company during the period, from the date when announced the resolutions of the first Board meeting, which convened to review the plan that acquire the 39.95% interest held by Wuhan Optics Valley Industrial Investment Co., Ltd. in Wuhan China Star Optoelectronics Technology Co., Ltd. through share offering, convertible corporate bonds offering and cash payment and raise the matching funds (hereinafter referred to as the “Transaction”), to the date of the completion/termination of the Transaction. | ||
| Top 10 unrestricted ordinary shareholders | |||
| Name of shareholder | Unrestricted ordinary shares held at the period-end | Shares by class | |
| Class | Shares | ||
| Huizhou Investment Holding Co., Ltd. | 743,139,840 | RMB-denominated ordinary shares | 743,139,840 |
| Li Dongsheng and his acting-in-concert party | 548,417,791 | RMB-denominated ordinary shares | 548,417,791 |
| Hong Kong Securities Clearing Company Ltd. | 431,613,255 | RMB-denominated ordinary shares | 431,613,255 |
| Tibet Tianfeng Enterprise Management Co., Ltd. | 417,344,415 | RMB-denominated ordinary shares | 417,344,415 |
| China Securities Finance Corporation Limited | 373,231,553 | RMB-denominated ordinary shares | 373,231,553 |
| Central Huijin Asset Management Co., Ltd. | 206,456,500 | RMB-denominated ordinary shares | 206,456,500 |
| National Social Security Fund-Portfolio 601 | 128,080,487 | RMB-denominated ordinary shares | 128,080,487 |
| Perseverance Asset Management L.L.P.－ | 100,000,000 | RMB-denominated ordinary shares | 100,000,000 |
TCL Technology Group Corporation Interim Report 2020
| Perseverance Linshan Yuanwang Fund No. 1 | |||
| Industrial and Commercial Bank of China－E Fund Research Selected Stock Fund | 99,184,547 | RMB-denominated ordinary shares | 99,184,547 |
| Huizhou Investment and Development Co., Ltd. | 75,504,587 | RMB-denominated ordinary shares | 75,504,587 |
| Related or acting-in-concert parties among top 10 unrestricted ordinary shareholders, as well as between top 10 unrestricted ordinary shareholders and top 10 ordinary 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. As certain partners of Jiutian Liancheng have quit from the company and as requested by these partners, the meeting of partners of Jiutian Liancheng has resolved to reduce shareholdings in the Company corresponding to the shares of these partners in the partnership. And these partners would withdraw from the partnership. On 27 February 2020, Jiutian Liancheng reduced its holdings of 63.876 million shares, accounting for 0.5% of the Company’s total share capital, through bulk trading. This shareholding reduction is in compliance with the Several Provisions on the Reduction of Shares Held in a Listed Company by the Shareholders, Directors, Supervisors and Senior Management of the Listed Company. With confidence in the future development of the Company, Mr. Li Dongsheng and the incumbent senior management of the Company do not reduce their direct or indirect shareholdings in the Company. On 28 April 2020, They had also undertaken not to reduce their shareholdings in the Company during the period, from the date when announced the resolutions of the first Board meeting, which convened to review the plan that acquire the 39.95% interest held by Wuhan Optics Valley Industrial Investment Co., Ltd. in Wuhan China Star Optoelectronics Technology Co., Ltd. through share offering, convertible corporate bonds offering and cash payment and raise the matching funds (hereinafter referred to as the “Transaction”), to the date of the completion/termination of the Transaction. | ||
| Top 10 ordinary shareholders involved in securities margin trading (if any) (see note 4) | None | ||
Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Companyconducted any promissory repo during the Reporting Period.
□ Yes ■ No
No such cases in the Reporting Period.IV Change of the Controlling Shareholder or the Actual Controller
□ Applicable ■ Not applicable
TCL Technology Group Corporation Interim Report 2020
Part VII Directors, Supervisors and Senior ManagementI Change in Shareholdings of Directors, Supervisors and Senior Management
□ Applicable ■ Not applicable
No changes occurred to the shareholdings of the directors, supervisors and senior management in the Reporting Period. See the 2019Annual Report for more details.II Change of Directors, Supervisors and Senior Management
□ Applicable ■ Not applicable
No changes occurred to the directors, supervisors and senior management in the Reporting Period. See the 2019 Annual Report formore details.
TCL Technology Group Corporation Interim Report 2020
Part VIII Corporate BondsGeneral 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 | 17TCL02 | 112542 | 7 July 2017 | 7 July 2022 | 300,000 | 4.93% | Interest payable annually and |
TCL Technology Group Corporation Interim Report 2020
| Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 2) | 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 Offered in 2018 to Qualified Investors (Tranche 2) | 18TCL02 | 112747 | 20 August 2018 | 20 August 2023 | 200,000 | 5.30% | Interest payable annually and principal 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 | 19TCL03 | 112983 | 21 October | 21 October | 200,000 | 4.20% | Interest |
TCL Technology Group Corporation Interim Report 2020
| Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) | 2019 | 2024 | 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 | 100,000 | 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. | ||||||
| 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 | ||||||
TCL Technology Group Corporation Interim Report 2020
TCL Technology Group Corporation Interim Report 2020
Bond Trustee and Credit Rating Agency
sell-back option at the end of the third year. The interest payment day is October 21 from 2020 to2024 (the subsequent first trading day if it is a statutory holiday or rest day, with no additionalinterest for the postponement). If an investor chooses to exercise the sell-back option, the interestpayment day for the sold-back bonds is October 21 from 2020 to 2022 (the subsequent firsttrading day if it is a statutory holiday or rest day, with no additional interest for the postponement).Bond trustee:
| 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 | 22/F, CITIC Securities Plaza, 48 Liangmaqiao Road, Chaoyang District, Beijing | Contact person | Deng Xiaoqiang | Tel. | 010-60838888 | |
| 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 2015 to Qualified Investors, 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 |
TCL Technology Group Corporation Interim Report 2020
| 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), the Escrow Account Agreement for the Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3), and the Escrow Account Agreement for the Funds Raised through TCL Technology Group Corporation’s Short-Term Corporate Bonds Publicly Offered in 2020 to Professional Investors (Tranche 1) with China Development Bank (Guangdong branch) 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 byChina Chengxin Securities Rating Co., Ltd. on 27 May 2020, the AAA credit status of TCLCorporation and 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.
TCL Technology Group Corporation Interim Report 2020
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.The repayment guarantee measures include a specialized task group, a strict capital managementplan, a bond trustee, the Rules for Bondholders’ Meetings, strict information disclosure, and anundertaking to not distribute profits to shareholders, as well as suspend capital expenditures such asmajor investments 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”,“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 CorporateBonds and 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 andprotect the legal rights and interests of the bondholders. And the bond trustee has no conflicts ofinterests in any 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 asa bond trustee and protect the legal rights and interests of the bondholders. And the bond trustee hasno conflicts of interests in any kind with the Company.
TCL Technology Group Corporation Interim Report 2020
Relevant Financial Information of the Company as at the End of the Reporting Period or theEnd of Last year (or the Reporting Period or the Same Period of Last Year)
| Item | 30 June 2020 | 31 December 2019 | Change (%) |
| Current ratio | 1.13 | 1.12 | 0.94% |
| Debt/asset ratio (%) | 64.89 | 61.25 | 3.64 |
| Quick ratio | 0.87 | 0.85 | 2.25% |
| H1 2020 | H1 2019 | Change (%) | |
| EBITDA-to-interest cover (times) | 3.93 | 5.66 | -30.57% |
| Debt repayment ratio (%) | 100 | 100 | 0.00 |
| Interest payment ratio (%) | 100 | 100 | 0.00 |
Explanation of why any financial indicator in the table above registered a year-on-year change of over 30%:
It’s primarily driven by the year-on-year decrease in profit.Overdue Amounts
□ Applicable ■ Not applicable
No such cases.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 |
| 1 | 15TCL-MTN001 | 5 | 2015-4-1 | 5 years | 5.50% | Repaid in full on time |
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 at30 June 2020, the credit lines granted by the major bank partners to the Company totaledRMB216.6 billion, with RMB77.2 billion utilized and RMB139.4 billion left. During the ReportingPeriod, there were no defaults on bank loans.
TCL Technology Group Corporation Interim Report 2020
Fulfillment of Commitments Made in Bond Prospectuses during Reporting PeriodUp to the date of the approval of this Report for issue, the Company has been executing all thecommitments given in its bond prospectuses, without any negative impact on the investors causedby the Company’s weak execution of such commitments.Significant Events during the Reporting Period
□ Applicable ■ Not 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,and the statement of changes in owners’/shareholders’ equity) for the reporting period are disclosed separately within two monthswhen every accounting year ends.
□ Yes ■ No
TCL Technology Group Corporation Interim Report 2020
TCL Technology Group CorporationUnaudited Financial Statements
(For the period from 1 January 2020 to 30 June 2020)
| Contents | Page | ||
| I | Unaudited Financial Statements | ||
| 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 | 15-144 |
TCL Technology Group CorporationConsolidated Balance Sheet
(RMB’000)Assets:
| Assets: | Note V | 30 June 2020 | 31 December 2019 | |
| Current assets: | ||||
| Monetary assets | 1 | 21,542,628 | 18,648,185 | |
| Held-for-trading financial assets | 2 | 8,989,331 | 6,074,751 | |
| Derivative financial assets | 3 | 187,212 | 159,036 | |
| Notes receivable | 4 | 26,133 | 228,942 | |
| Accounts receivable | 5 | 9,730,784 | 8,340,354 | |
| Receivables financing | 6 | 106,755 | - | |
| Prepayments | 7 | 694,616 | 364,423 | |
| Other receivables | 8 | 5,084,046 | 2,750,042 | |
| Inventories | 9 | 5,541,418 | 5,677,963 | |
| Other current assets | 10 | 8,080,115 | 5,911,827 | |
| Total current assets | 59,983,038 | 48,155,523 | ||
| Non-current assets: | ||||
| Loans and advances to customers | 11 | 1,941,271 | 3,637,768 | |
| Debt investments | 12 | 20,116 | 20,373 | |
| Long-term equity investments | 13 | 18,606,252 | 17,194,284 | |
| Investments in other equity instruments | 14 | 270,923 | 279,884 | |
| Other non-current financial assets | 15 | 2,676,086 | 2,542,689 | |
| Investment property | 16 | 1,163,697 | 82,273 | |
| Fixed assets | 17 | 59,857,478 | 45,459,070 | |
| Construction in progress | 18 | 21,017,402 | 33,578,290 | |
| Intangible assets | 19 | 6,378,500 | 5,684,584 | |
| Development costs | 20 | 895,325 | 1,548,471 | |
| Goodwill | 21 | 2,452 | 2,452 | |
| Long-term prepaid expense | 22 | 2,073,741 | 1,567,691 | |
| Deferred income tax assets | 23 | 860,601 | 840,874 | |
| Other non-current assets | 24 | 9,086,352 | 4,250,659 | |
| Total non-current assets | 124,850,196 | 116,689,362 | ||
| Total assets | 184,833,234 | 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 | 30 June 2020 | 31 December 2019 | ||||
| Current liabilities: | |||||||
| Short-term borrowings | 25 | 16,491,171 | 12,069,657 | ||||
| Borrowings from central bank | 26 | 1,404,722 | 573,222 | ||||
| Customer deposits and deposits from other banks and financial institutions | 27 | 3,617,529 | 1,355,129 | ||||
| Loans from other banks and financial institutions | 28 | 500,000 | - | ||||
| Held-for-trading financial liabilities | 29 | 403,530 | 188,220 | ||||
| Derivative financial liabilities | 30 | 156,664 | 84,705 | ||||
| Notes payable | 31 | 2,293,907 | 1,720,402 | ||||
| Accounts payable | 32 | 11,436,883 | 11,549,133 | ||||
| Advances from customers | 33 | 2,155 | 141,749 | ||||
| Contract liabilities | 34 | 231,497 | - | ||||
| Financial assets sold under repurchase agreements | 35 | 50,073 | - | ||||
| Employee benefits payable | 36 | 821,672 | 1,094,217 | ||||
| Taxes and levies payable | 37 | 260,209 | 226,806 | ||||
| Other payables | 38 | 12,315,818 | 12,293,566 | ||||
| Current portion of non-current liabilities | 39 | 3,092,394 | 1,691,963 | ||||
| Other current liabilities | 40 | 108,656 | 69,022 | ||||
| Total current liabilities | 53,186,880 | 43,057,791 | |||||
| Non-current liabilities | |||||||
| Long-term borrowings | 41 | 46,145,998 | 38,512,059 | ||||
| Bonds payable | 42 | 17,977,601 | 16,479,085 | ||||
| Long-term payables | 43 | 24,210 | 24,206 | ||||
| Long-term employee benefits payable | 36 | 22,408 | 23,018 | ||||
| Deferred income | 44 | 1,589,175 | 1,912,421 | ||||
| Deferred income tax liabilities | 23 | 995,139 | 952,678 | ||||
| Other non-current liabilities | - | 483 | |||||
| Total non-current liabilities | 66,754,531 | 57,903,950 | |||||
| Total liabilities | 119,941,411 | 100,961,741 | |||||
| Share capital | 45 | 13,528,439 | 13,528,439 | ||||
| Capital reserves | 46 | 5,764,408 | 5,716,667 | ||||
| Less: Treasury stock | 47 | 1,945,748 | 1,952,957 | ||||
| Other comprehensive income | 68 | (602,550) | (534,082) | ||||
| Surplus reserves | 48 | 2,238,368 | 2,238,368 | ||||
| General reserve | 49 | 361 | 361 | ||||
| Retained earnings | 50 | 11,044,065 | 11,115,150 | ||||
| Total equity attributable to shareholders of the Company as the parent | 30,027,343 | 30,111,946 | |||||
| Non-controlling interests | 34,864,480 | 33,771,198 | |||||
| Total shareholders’ equity | 64,891,823 | 63,883,144 | |||||
| Total liabilities and shareholders’ equity | 184,833,234 | 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 Income Statement
(RMB’000)
| Note V | H1 2020 | H1 2019 | |||||
| 1. Total revenue | 29,418,903 | 43,860,558 | |||||
| Including: Revenue | 51 | 29,333,211 | 43,781,614 | ||||
| Interest income | 52 | 85,692 | 78,944 | ||||
| Less: Cost of sales | 51 | 26,740,893 | 37,357,128 | ||||
| Interest expense | 52 | 16,278 | 8,312 | ||||
| Taxes and levies | 53 | 87,284 | 241,189 | ||||
| Selling expense | 54 | 324,665 | 2,382,736 | ||||
| Administrative expense | 55 | 770,003 | 1,266,510 | ||||
| R&D expense | 56 | 1,882,501 | 1,880,667 | ||||
| Finance costs | 57 | 916,022 | 604,714 | ||||
| Including: Interest expense | 1,132,442 | 1,096,991 | |||||
| Interest income | 250,867 | 239,908 | |||||
| Add: Other income | 58 | 952,416 | 921,527 | ||||
| Return on investment | 59 | 1,340,665 | 2,005,739 | ||||
| Including: Share of profit or loss of joint ventures and associates | 881,503 | 654,004 | |||||
| Exchange gain | 52 | 689 | (11,065) | ||||
| Gain on changes in fair value | 60 | 114,034 | 295,530 | ||||
| Less: Credit impairment loss | 63 | 1,124 | 20,547 | ||||
| Asset impairment loss | 62 | 328,682 | 314,341 | ||||
| Add: Asset disposal income | 61 | 1,320 | (3,428) | ||||
| 2. Operating profit | 760,573 | 2,992,717 | |||||
| Add: Non-operating income | 64 | 491,939 | 46,113 | ||||
| Less: Non-operating expense | 65 | 18,801 | 18,820 | ||||
| 3. Gross profit | 1,233,711 | 3,020,010 | |||||
| Less: Income tax expense | 66 | 164,587 | 282,947 | ||||
| 4. Net profit | 1,069,124 | 2,737,063 | |||||
| 4.1 By operating continuity | |||||||
| Net profit from continuing operations | 1,069,124 | 1,404,976 | |||||
| Net profit from discontinued operations | - | 1,332,087 | |||||
| 4.2 By ownership | |||||||
| Net profit attributable to shareholders of the Company as the parent | 1,208,066 | 2,092,349 | |||||
| Net profit attributable to non-controlling interests | (138,942) | 644,714 | |||||
| 5. Other comprehensive income, net of tax | 67 | (88,940) | 512,530 | ||||
| 5.1 Other comprehensive income that will not be reclassified to profit or loss | (13,382) | (17,564) | |||||
| 5.2 Other comprehensive income that may subsequently be reclassified to profit or loss upon satisfaction of prescribed condition | (75,558) | 530,094 | |||||
| 6. Total comprehensive income | 980,184 | 3,249,593 | |||||
| Attributable to shareholders of the Company as the parent | 1,139,598 | 2,441,842 | |||||
| Attributable to non-controlling interests | (159,414) | 807,751 | |||||
| 7. Earnings per share | 68 | ||||||
| 7.1 Basic earnings per share (RMB yuan/share) | 0.0932 | 0.1569 | |||||
| 7.2 Diluted earnings per share (RMB yuan/share) | 0.0893 | 0.1544 | |||||
| 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 Cash Flow Statement
(RMB’000)
| Note V | H1 2020 | H1 2019 | |||||||
| 1. Cash flows from operating activities： | |||||||||
| Proceeds from sale of commodities and rendering of services | 30,776,853 | 46,131,645 | |||||||
| Net increase/(decrease) in customer deposits and deposits from other banks and financial institutions | 2,262,400 | 2,657,645 | |||||||
| Net increase/(decrease) in borrowings from central bank | 831,500 | (33,465) | |||||||
| Net increase in loans from other financial institutions | 500,000 | - | |||||||
| Interest, fees and commissions received | 85,692 | 78,944 | |||||||
| Tax and levy rebates | 1,409,112 | 2,051,141 | |||||||
| Cash generated from other operating activities | 69 | 1,133,384 | 911,336 | ||||||
| Subtotal of cash generated from operating activities | 36,998,941 | 51,797,246 | |||||||
| Payments for commodities and services | (23,358,384) | (34,287,313) | |||||||
| Net (increase)/decrease in loans and advances to customers | (106,115) | (3,013,412) | |||||||
| Net (increase)/decrease in deposits in central bank and other banks and financial institutions | 319,970 | 368,644 | |||||||
| Cash paid to and for employees | (2,545,709) | (2,909,441) | |||||||
| Taxes and levies paid | (2,253,748) | (2,402,718) | |||||||
| Cash used in other operating activities | 70 | (1,707,145) | (3,402,183) | ||||||
| Subtotal of cash used in operating activities | (29,651,131) | (45,646,423) | |||||||
| Net cash generated from/used in operating activities | 73 | 7,347,810 | 6,150,823 | ||||||
| 2. Cash flows from investing activities： | |||||||||
| Proceeds from disinvestment | 10,040,824 | 9,423,467 | |||||||
| Return on investment | 245,980 | 199,930 | |||||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 146 | 20,067 | |||||||
| Net proceeds from the disposal of subsidiaries and other business units | 199,303 | 863,817 | |||||||
| Cash generated from other investing activities | 10,486,253 | 10,507,281 | |||||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | (12,491,013) | (11,374,990) | |||||||
| Payments for investments | (15,202,884) | (13,828,141) | |||||||
| Net payments for the acquisition of subsidiaries and other business units | - | (171,293) | |||||||
| Cash used in other investing activities | 71 | (920) | (7,118,896) | ||||||
| Subtotal of cash used in investing activities | (27,694,817) | (32,493,320) | |||||||
| Net cash generated from/used in investing activities | (17,208,564) | (21,986,039) | |||||||
| 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 Cash Flow Statement (Continued)
(RMB’000)
| Note V | H1 2020 | H1 2019 | ||
| 3. Cash flows from financing activities： | ||||
| Capital contributions received | 2,262,240 | 4,829,829 | ||
| Including: Capital contributions by non-controlling interests to subsidiaries | 2,262,240 | 4,822,620 | ||
| Borrowings raised | 28,360,521 | 19,249,337 | ||
| Net proceeds from issuance of bonds | 4,403,000 | 1,000,000 | ||
| Cash generated from other financing activities | 71,503 | - | ||
| Subtotal of cash generated from financing activities | 35,097,264 | 25,079,166 | ||
| Repayment of borrowings | (18,182,122) | (14,866,027) | ||
| Interest and dividends paid | (3,066,421) | (2,898,038) | ||
| Including: Dividends paid by subsidiaries to non-controlling interests | (275,264) | (25,953) | ||
| Cash used in other financing activities | 72 | (612,872) | (1,850,155) | |
| Subtotal of cash used in financing activities | (21,861,415) | (19,614,220) | ||
| Net cash generated from/used in financing activities | 13,235,849 | 5,464,946 | ||
| 4. Effect of foreign exchange rates changes on cash and cash equivalents | 13,317 | 468,710 | ||
| 5. Net increase in cash and cash equivalents | 3,388,412 | (9,901,560) | ||
| Add: Cash and cash equivalents, beginning of the period | 17,637,743 | 25,702,384 | ||
| 6. Cash and cash equivalents, end of the period | 74 | 21,026,155 | 15,800,824 |
| 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)
| H1 2020 | |||||||||||||||||
| 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 | 13,528,439 | 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 | - | - | - | - | - | - | - | - | - | ||||||||
| 2. Balance as at the beginning of the year | 13,528,439 | 5,716,667 | (1,952,957) | (534,082) | 2,238,368 | 361 | 11,115,150 | 33,771,198 | 63,883,144 | ||||||||
| 3. Increase/decrease in the period | - | 47,741 | 7,209 | (68,468) | - | - | (71,085) | 1,093,282 | 1,008,679 | ||||||||
| 3.1 Total comprehensive income | - | - | - | (68,464) | - | - | 1,208,066 | (159,414) | 980,188 | ||||||||
| 3.2 Capital increased and reduced by shareholders | - | 47,741 | 7,209 | - | - | - | - | 1,659,202 | 1,714,152 | ||||||||
| 3.2.1 Capital increased by shareholders | - | - | - | - | - | - | - | 2,262,240 | 2,262,240 | ||||||||
| 3.2.2 Share-based payments included in owners’ equity | - | 5,526 | 7,209 | - | - | - | - | - | 12,735 | ||||||||
| 3.2.3 Others | - | 42,215 | - | - | - | - | - | (603,038) | (560,823) | ||||||||
| 3.3 Profit distribution | - | - | - | - | - | - | (1,279,155) | (406,506) | (1,685,661) | ||||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | - | - | - | - | - | ||||||||
| 3.3.2 Appropriation to shareholders | - | - | - | - | - | - | (1,279,155) | (406,506) | (1,685,661) | ||||||||
| 3.4 Transfers within owners’ equity | - | - | - | (4) | - | - | 4 | - | - | ||||||||
| 3.4.1 Other comprehensive income transferred to retained earnings | - | - | - | (4) | - | - | 4 | - | - | ||||||||
| 4. Balance as at the end of the period | 13,528,439 | 5,764,408 | (1,945,748) | (602,550) | 2,238,368 | 361 | 11,044,065 | 34,864,480 | 64,891,823 | ||||||||
| 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 | 30 June 2020 | 31 December 2019 | |
| Current assets | ||||
| Monetary assets | 11,913,572 | 3,966,899 | ||
| Held-for-trading financial assets | 2,906,115 | 2,969,106 | ||
| Derivative financial assets | 854 | - | ||
| Notes receivable | 21,361 | 22,514 | ||
| Accounts receivable | 1 | 144,774 | 445,090 | |
| Prepayments | 200,601 | 97,127 | ||
| Other receivables | 2 | 15,001,251 | 17,129,473 | |
| Inventories | 6,776 | 14,869 | ||
| Other current assets | 9,801 | 6,471 | ||
| Total current assets | 30,205,105 | 24,651,549 | ||
| Non-current assets | ||||
| Long-term equity investments | 3 | 45,722,688 | 39,297,272 | |
| Investments in other equity instruments | 4 | 15,000 | 15,000 | |
| Other non-current financial assets | 5 | 1,583,060 | 1,540,913 | |
| Investment property | 90,654 | 92,623 | ||
| Fixed assets | 49,292 | 54,238 | ||
| Construction in progress | 19,280 | 1,241 | ||
| Intangible assets | 19,746 | 19,145 | ||
| Long-term prepaid expense | 449,084 | 454,969 | ||
| Total non-current assets | 47,948,804 | 41,475,401 | ||
| Total assets | 78,153,909 | 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 | 30 June 2020 | 31 December 2019 | |
| Current liabilities | ||||
| Short-term borrowings | 7,213,043 | 6,484,481 | ||
| Derivative financial liabilities | - | 5,981 | ||
| Notes payable | 137,543 | 30,283 | ||
| Accounts payable | 106,095 | 424,225 | ||
| Advances from customers | 28 | 17,471 | ||
| Contract liabilities | 56,508 | - | ||
| Employee benefits payable | 123,795 | 125,095 | ||
| Taxes and levies payable | 9,669 | 10,355 | ||
| Other payables | 13,437,563 | 9,347,608 | ||
| Current portion of non-current liabilities | 3,024,296 | 847,327 | ||
| Total current liabilities | 24,108,540 | 17,292,826 | ||
| Non-current liabilities | ||||
| Long-term borrowings | 5,703,000 | 2,110,000 | ||
| Bonds payable | 17,977,601 | 16,479,085 | ||
| Long-term employee benefits payable | 22,408 | 23,018 | ||
| Deferred income | 39,335 | 51,562 | ||
| Total non-current liabilities | 23,742,344 | 18,663,665 | ||
| Total liabilities | 47,850,884 | 35,956,491 | ||
| Share capital | 13,528,439 | 13,528,439 | ||
| Capital reserves | 8,388,302 | 8,382,776 | ||
| Less: Treasury stock | 1,945,748 | 1,952,957 | ||
| Other comprehensive income | 120,782 | 56,064 | ||
| Surplus reserves | 2,036,304 | 2,036,304 | ||
| Retained earnings | 8,174,946 | 8,119,833 | ||
| Total shareholders’ equity | 30,303,025 | 30,170,459 | ||
| Total liabilities and shareholders’ equity | 78,153,909 | 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 | H1 2020 | H1 2019 | ||
| 1. Revenue | 6 | 486,384 | 763,599 | |
| Less: Cost of sales | 6 | 384,058 | 650,918 | |
| Taxes and levies | 4,022 | 8,920 | ||
| Selling expense | 11,918 | 14,396 | ||
| Administrative expense | 141,988 | 160,762 | ||
| R&D expense | 51,618 | 45,261 | ||
| Finance costs | 543,831 | 413,526 | ||
| Including: Interest expense | 844,394 | 676,058 | ||
| Interest income | 303,902 | 301,489 | ||
| Add: Other income | 15,329 | 4,959 | ||
| Return on investment | 7 | 1,391,855 | 742,856 | |
| Including: Share of profit or loss of joint ventures and associates | 7 | 617,216 | 583,230 | |
| Gain on changes in fair value | 98,825 | (71,490) | ||
| Less: Credit impairment loss | (601) | (2,745) | ||
| Add: Asset disposal income | - | (10) | ||
| 2. Operating profit | 855,559 | 148,876 | ||
| Add: Non-operating income | 486,288 | 10,008 | ||
| Less: Non-operating expense | 7,579 | 7,304 | ||
| 3. Gross profit | 1,334,268 | 151,580 | ||
| Less: Income tax expense | - | - | ||
| 4. Net profit | 1,334,268 | 151,580 | ||
| 5. Other comprehensive income | 64,718 | 32,130 | ||
| 6. Total comprehensive income | 1,398,986 | 183,710 |
| 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 | H1 2020 | H1 2019 | ||
| 1. Cash flows from operating activities： | ||||
| Proceeds from sale of commodities and rendering of services | 832,527 | 746,180 | ||
| Tax and levy rebates | 1,073 | 341 | ||
| Cash generated from other operating activities | 112,440 | 5,063,425 | ||
| Subtotal of cash generated from operating activities | 946,040 | 5,809,946 | ||
| Payments for commodities and services | (717,268) | (909,086) | ||
| Cash paid to and for employees | (108,049) | (77,954) | ||
| Taxes and levies paid | (19,721) | (45,844) | ||
| Cash used in other operating activities | (964,363) | (800,356) | ||
| Subtotal of cash used in operating activities | (1,809,401) | (1,833,240) | ||
| Net cash generated from/used in operating activities | 8 | (863,361) | 3,976,706 | |
| 2. Cash flows from investing activities： | ||||
| Proceeds from disinvestment | 3,069,748 | 9,941,886 | ||
| Return on investment | 4,989,820 | 280,280 | ||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 1 | 135 | ||
| Cash generated from other investing activities | 8,059,569 | 10,222,301 | ||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | (12,165) | (2,576) | ||
| Payments for investments | (10,584,137) | (4,220,774) | ||
| Cash used in other investing activities | (920) | - | ||
| Subtotal of cash used in investing activities | (10,597,222) | (4,223,350) | ||
| Net cash generated from/used in investing activities | (2,537,653) | 5,998,951 |
| 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 | H1 2020 | H1 2019 | ||
| 1. Cash flows from financing activities： | ||||
| Capital contributions received | - | 7,209 | ||
| Borrowings raised | 19,360,252 | 6,460,956 | ||
| Net proceeds from issuance of bonds | 4,403,000 | 1,000,000 | ||
| Cash generated from other financing activities | 60,000 | - | ||
| Subtotal of cash generated from financing activities | 23,823,252 | 7,468,165 | ||
| Repayment of borrowings | (10,824,628) | (9,480,956) | ||
| Interest and dividends paid | (1,707,229) | (1,782,161) | ||
| Cash used in other financing activities | (16,524) | (1,536,764) | ||
| Subtotal of cash used in financing activities | (12,548,381) | (12,799,881) | ||
| Net cash generated from/used in financing activities | 11,274,871 | (5,331,716) | ||
| 4. Effect of foreign exchange rates changes on cash and cash equivalents | (3,269) | (30,892) | ||
| 5. Net increase in cash and cash equivalents | 7,870,588 | 4,613,049 | ||
| 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 | 11,811,678 | 5,941,728 |
| 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)
| H1 2020 | |||||||||||||||
| 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 | 13,528,439 | 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 | - | 5,526 | 7,209 | 64,718 | - | 55,113 | 132,566 | ||||||||
| 3.1 Total comprehensive income | - | - | - | 64,718 | - | 1,334,268 | 1,398,986 | ||||||||
| 3.2 Capital increased and reduced by shareholders | - | 5,526 | 7,209 | - | - | - | 12,735 | ||||||||
| 3.2.1 Share-based payments included in owners’ equity | - | 5,526 | 7,209 | - | - | - | 12,735 | ||||||||
| 3.3 Profit distribution | - | - | - | - | - | (1,279,155) | (1,279,155) | ||||||||
| 3.3.1 Appropriation to surplus reserves | - | - | - | - | - | - | - | ||||||||
| 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 | 13,528,439 | 8,388,302 | (1,945,748) | 120,782 | 2,036,304 | 8,174,946 | 30,303,025 | ||||||||
| 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 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 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 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 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 shares of the Company have 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. | |||
| As at 30 June 2020, the total issued share capital of the Company were 13,528,438,719 shares. Please refer to Note V, 45 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 27 August 2020. | |
| 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 investment income 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 investment income; 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 investment income 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 profit 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 shareholders' equity. | |
| 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 under non-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 investment income 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 investment income 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 "undistributed profit" 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 measured at fair value and whose changes are included in the current profit and 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 funds, notes receivable, accounts receivable, other receivables, long-term receivables, creditors' 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 and whose changes are included in 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 and whose changes are included in 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 measured at fair value with changes included in other comprehensive income are reported as receivables financing, and such other financial assets are reported as other creditors' investments. Among them, other creditors' investments maturing within one year from the balance sheet date are reported as non-current assets maturing within one year, and other creditors' investments maturing within one year are reported as other current assets. | |
| (c) | Financial assets designated as measured at fair value and whose changes are included in other comprehensive income |
| At the time of initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financial assets measured at fair value and whose changes are included in 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 provision 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 reported such financial assets under other equity instrument investment items. |
| 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 measured at fair value and whose changes are included in the current profit and 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 and whose changes are included in the current profit and loss |
| If failing to be classified as measured at amortized cost or at fair value and whose changes are included in other comprehensive income, or not designated as measured at fair value and whose changes are included in other comprehensive income, financial assets are all classified as measured at fair value and whose changes are included in the current profit and 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 trading financial assets and other non-current financial assets according to their liquidity. | |
| (e) | Financial assets designated as measured at fair value and whose changes are included in the current profit and loss |
| At the time of initial recognition, the Company may irrevocably designate financial assets as measured at fair value and whose changes are included in the current profit and 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 measured at fair value and whose changes are included in the current profits and losses. 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 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 and whose changes are included in current profits and losses, or other financial liabilities, or derivatives designated as effective hedging instruments. | |
| Financial liabilities are measured at fair value upon initial recognition. For financial liabilities measured at fair value and whose changes are included in current profits and losses, 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 measured at fair value and whose changes are included in the current profit and loss |
| Such financial liabilities include trading financial liabilities (including derivatives falling under financial liabilities) and financial liabilities designated as measured at fair value upon initial recognition and whose changes are included in current profits and losses. | |
| The financial liability is a 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. 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. | |
| The Company irrevocably designates financial liabilities as measured at fair value and whose changes are included in current profits and losses at the time of initial recognition in order to provide more relevant accounting information if: | |
| 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 measured at fair value and whose changes are included in the current profit and 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 and whose changes are included in current profits and losses 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 measured at fair value and whose changes are included in 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 measured at fair value and whose changes are included in 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 and whose changes are included in 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 and whose changes are included in 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 and whose changes are included in 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. |
| III | Significant accounting policies and accounting estimates (continued) |
| 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. | |
| 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 bill, 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 accounts receivable for which there is objective evidence that the Company will not be able to recover the amount 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 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 |
| Ending 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 under non-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 under non-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 investment income. | |
| 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 enterprise 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) | 5-11 years | 9-20% | ||
| Mold (with benefit period more than one year) | 1-3 years | 33-100% | ||
| Office and electronic equipment | 3-5 years | 20-33% | ||
| Transportation equipment | 4-5 years | 20-25% | ||
| Other devices | 4-5 years | 20-25% | ||
| 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 enterprise 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 financial expenses. | |
| 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) |
| 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. | |
| (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. | |
| III | Significant accounting policies and accounting estimates (continued) |
| 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 | |
| Advances from customers | 141,749 | (136,249) | - | 5,500 | |
| Contract liabilities | - | 133,818 | - | 133,818 | |
| Other current liabilities | 69,022 | 2,431 | - | 71,453 | |
| (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 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. |
| IV | Taxes (continued) | |||||
| 6 | Corporate income tax (continued) | |||||
| 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%. | ||||||
| Subsidiaries entitled to tax preferences: | ||||||
| 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 | |||
| 30 June 2020 | 31 December 2019 | |||
| Cash on hand | 686 | 966 | ||
| Ban k deposits | 20,681,078 | 17,636,777 | ||
| Deposits with the central bank | 251,029 | 570,999 | ||
| Interest receivable on deposits | 133,107 | 64,970 | ||
| Other monetary assets | 476,728 | 374,473 | ||
| 21,542,628 | 18,648,185 | |||
| Note | Monetary assets with restricted use rights | |||
| 30 June 2020 | 31 December 2019 | |||
| TCL Finance’s statutory reserve deposits with the central bank | 251,029 | 570,999 | ||
| Other monetary assets | 132,337 | 374,473 | ||
| Interest receivable on deposits | 133,107 | 64,970 | ||
| 516,473 | 1,010,442 | |||
| As at 30 June 2020, the Company's bank deposits of RMB251,029 thousand (31 December 2019: 570,999 thousand) are statutory reserve deposits placed in the central bank by TCL Finance Co., Ltd., a subsidiary of the Company. | ||||
| As at 30 June 2020, the Company's monetary assets abroad amounted to RMB697,796 thousand (31 December 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 | |||
| 30 June 2020 | 31 December 2019 | |||
| Debt instrument investments | 8,619,290 | 5,772,747 | ||
| Equity instrument investments | 370,041 | 302,004 | ||
| 8,989,331 | 6,074,751 | |||
| 3 | Derivative financial assets | |||
| 30 June 2020 | 31 December 2019 | |||
| Foreign exchange forwards | 144,216 | 121,255 | ||
| Interest rate swaps | - | 7,727 | ||
| Others | 42,996 | 30,054 | ||
| 187,212 | 159,036 | |||
| 4 | Notes receivable | |||
| (1) | Notes receivable by category | |||
| 30 June 2020 | 31 December 2019 | |||
| Bank acceptance notes | 26,133 | 207,713 | ||
| Trade acceptance notes | - | 21,229 | ||
| 26,133 | 228,942 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||
| 4 | Notes receivable (continued) | |||||||||||
| (1) | Notes receivable by category (continued) | |||||||||||
| 30 June 2020 | 31 December 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 grouping basis | 26,133 | 100% | - | - | 26,133 | 228,942 | 100% | - | - | 228,942 | ||
| By aging analysis | 26,133 | 100% | - | - | 26,133 | 228,942 | 100% | - | - | 228,942 | ||
| (2) | As at 30 June 2020, there were no notes receivable in pledge or endorsed or discounted notes receivable that were undue on the balance sheet date. | |||||||||||
| 5 | Accounts receivable | |||||
| 30 June 2020 | 31 December 2019 | |||||
| Accounts receivable | 9,769,829 | 8,385,374 | ||||
| Less: allowance for doubtful accounts | 39,045 | 45,020 | ||||
| 9,730,784 | 8,340,354 | |||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 5 | Accounts receivable (continued) | ||||||||||
| (1) | Accounts receivable in the period from 1 January 2020 to 30 June 2020 are classified as follows by how the allowances for doubtful accounts were established: | ||||||||||
| 30 June 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 | |||||||||||
| Of which: | |||||||||||
| Accounts receivable1 | 7,453 | 22.18% | 1,653 | ||||||||
| Accounts receivable for which the related allowances for doubtful accounts were established on the grouping basis | |||||||||||
| Of which: | |||||||||||
| Group 1：by aging analysis | 7,560,428 | 0.49% | 36,970 | ||||||||
| Group 2：by related party grouping | 2,201,948 | 0.02% | 422 | ||||||||
| 9,762,376 | 37,392 | ||||||||||
| 9,769,829 | 39,045 | ||||||||||
| (2) | The aging of accounts receivable is analysed as follows: | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| Within 1 year | 9,715,829 | 99.44% | 8,258,361 | 98.49% | |||||||
| 1-2 years | 35,873 | 0.37% | 96,100 | 1.15% | |||||||
| 2-3 years | 5,737 | 0.06% | 10,451 | 0.12% | |||||||
| Over 3 years | 12,390 | 0.13% | 20,462 | 0.24% | |||||||
| 9,769,829 | 100% | 8,385,374 | 100% | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 5 | Accounts receivable (continued) | |||
| (3) | Allowances for doubtful accounts receivable are analysed as follows: | |||
| 30 June 2020 | 31 December 2019 | |||
| End of the prior year | 45,020 | 434,893 | ||
| Changes in accounting policies | - | 3,879 | ||
| Adjusted beginning | 45,020 | 438,772 | ||
| Current accrual | 5,712 | 46,633 | ||
| Reversal of current period | (1,532) | (11,940) | ||
| Write-off of current period | (10,237) | (8,604) | ||
| Reduced subsidiaries | - | (419,974) | ||
| Exchange adjustment | 82 | 133 | ||
| Ending amount | 39,045 | 45,020 | ||
| (4) | There is no debt owed by shareholders holding 5% or more voting shares in this account balance. | |||
| (5) | As at 30 June 2020, the accounts receivable of the top five balances are as follows: | |||
| 30 June 2020 | 31 December 2019 | |||
| Total amount owed by the top five | 5,892,013 | 3,991,332 | ||
| Proportion of total accounts receivable | 60.31% | 47.60% | ||
| 6 | Receivables financing | |||
| 30 June 2020 | 31 December 2019 | |||
| Receivables financing | 106,755 | - | ||
| Note | Endorsed or discounted notes receivable and accounts receivable that were outstanding on the balance sheet date as at the period-end are as follows: | |||
| Derecognized amount at period-end | Un-derecognized amount at period-end | |||
| Receivables financing | 136,455 | - | ||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 7 | Prepayments | ||||||
| (1) | Prepayments are analyzed as follows: | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Within 1 year | 694,616 | 364,423 | |||||
| (2) | As at 30 June 2020, the prepayments of the top five balances are as follows: | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Total amount owed by the top five | 373,439 | 169,266 | |||||
| As % of total prepayments | 53.76% | 46.45% | |||||
| 8 | Other receivables | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Dividends receivable | 374,627 | 5,771 | |||||
| Other receivables | 4,709,419 | 2,744,271 | |||||
| 5,084,046 | 2,750,042 | ||||||
| Other receivables mainly included current accounts. | |||||||
| (1) | Dividends receivable | |||
| 30 June 2020 | 31 December 2019 | |||
| Bank of Shanghai Co., Ltd. | 316,955 | |||
| Fantasia Holdings Group Co., Limited | 57,672 | - | ||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | - | 5,771 | ||
| 374,627 | 5,771 | |||
| (2) | Other receivables | |||||
| 30 June 2020 | 31 December 2019 | |||||
| Other receivables | 4,787,398 | 2,844,737 | ||||
| Less: allowance for doubtful accounts | 77,979 | 100,466 | ||||
| 4,709,419 | 2,744,271 | |||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||
| 8 | Other receivables (continued) | ||||||||||||
| (2) | Other receivables (continued) 9() | ||||||||||||
| (a) | Nature of other receivables is analyzed as follows: | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| Subsidy receivable | 1,460,824 | 1,354,557 | |||||||||||
| External unit current account | 749,122 | 993,962 | |||||||||||
| Deposit and security deposit | 2,196,172 | 162,934 | |||||||||||
| Others | 303,301 | 232,818 | |||||||||||
| 4,709,419 | 2,744,271 | ||||||||||||
| (b) | Allowance for doubtful other receivables is analyzed as follows: | ||||||||||||
| In the next 12 months Expected credit loss | Expected credit loss for the entire duration (incurred credit impairment) | Total | |||||||||||
| Beginning amount | 45,157 | 55,309 | 100,466 | ||||||||||
| Current accrual | 500 | - | 500 | ||||||||||
| Reversal of current period | (74) | (601) | (675) | ||||||||||
| Write-off in current period | - | (22,459) | (22,459) | ||||||||||
| Exchange adjustment | 147 | - | 147 | ||||||||||
| 30 June 2020 | 45,730 | 32,249 | 77,979 | ||||||||||
| (c) | The aging of other receivables is analyzed as follows: | |||||
| 30 June 2020 | 31 December 2019 | |||||
| Carrying amount | Percentage | Carrying amount | Percentage | |||
| Within 1 year | 4,521,311 | 94.44% | 2,635,597 | 92.65% | ||
| 1 to 2 years | 157,548 | 3.29% | 77,938 | 2.74% | ||
| 2 to 3 years | 55,809 | 1.17% | 48,704 | 1.71% | ||
| More than 3 years | 52,730 | 1.10% | 82,498 | 2.90% | ||
| 4,787,398 | 100% | 2,844,737 | 100% | |||
| (d) | There is no debt owed by shareholders holding 5% or more voting shares in this account balance. | |||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||||||||
| 8 | Other receivables (continued) | ||||||||||||||||||||||||
| (2) | Other receivables (continued) | ||||||||||||||||||||||||
| (e) | As at 30 June 2020, the other receivables of the top five balances are as follows: | ||||||||||||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||||||||||||
| Total amount owed by the top five | 3,380,220 | 1,830,213 | |||||||||||||||||||||||
| As % of total other receivables | 70.61% | 64.34% | |||||||||||||||||||||||
| (f) | As at 30 June 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. | ||||||||||||||||||||||||
| 9 | Inventories | ||||||||||||||||||||||||
| (1) | Inventory is classified as follows: | ||||||||||||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||||||||||||
| Gross amount | Inventory valuation allowance | Carrying amount | Gross amount | Inventory valuation allowance | Carrying amount | ||||||||||||||||||||
| Raw materials | 1,229,001 | 151,092 | 153,745 | 1,224,175 | 1,075,256 | 1,033,927 | 129,254 | 904,673 | |||||||||||||||||
| Goods in process | 894,195 | 121,765 | 772,430 | 760,881 | 149,624 | 611,257 | |||||||||||||||||||
| Finished goods | 3,724,193 | 294,882 | 3,429,311 3,429,311 | 4,066,809 | 172,044 | 3,894,765 | |||||||||||||||||||
| Turnover materials | 265,239 | 818 | 264,421 | 268,086 | 818 | 267,268 | |||||||||||||||||||
| 6,112,628 6,112,628 | 567,013 | 571,210 | 6,107,802 | 5,541,418 5,541,418 | 6,129,703 | 451,740 | 5,677,963 | ||||||||||||||||||
| As at 30 June 2020, the Company has no inventory for liabilities guarantee. | |||||||||||||||||||||||||
| (2) | Inventory valuation allowances are analyzed as follows: | ||||||||||||||||||||||||
| 1 January 2020 | Current accrual | Resersal in current period | Write-off in current period | Exchange adjustment | 30 June 2020 | ||||||||||||||||||||
| Raw materials | 129,254 | 26,518 | (1,899) | (128) | - | 153,745 | |||||||||||||||||||
| Goods in process | 149,624 | 43,275 | (71,134) | - | - | 121,765 | |||||||||||||||||||
| Finished goods | 172,044 | 339,870 | (8,027) | (209,620) | 615 | 294,882 | |||||||||||||||||||
| Turnover materials | 818 | - | - | - | - | 818 | |||||||||||||||||||
| 451,740 | 409,663 | (81,060) | (209,748) | 615 | 571,210 | ||||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||
| 10 | Other current assets | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| Debt investments | 1,348,462 | 1,596,741 | |||||||||||
| VAT to be deducted, to be certified, etc. | 2,788,833 | 2,299,416 | |||||||||||
| Current portion of loans and advances to customers (note) | 3,867,422 | 1,968,056 | |||||||||||
| Others | 75,398 | 47,614 | |||||||||||
| 8,080,115 | 5,911,827 | ||||||||||||
| Note | The current portion of loans and advances is loans due within the next year issued by subsidiaries TCL Finance Co., Ltd., Guangzhou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd., of which interest receivable is RMB110,380 thousand. | ||||||||||||
| 11 | Loans and advances to customers | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| Loans and advances to customers (note) | 1,941,271 | 3,637,768 | |||||||||||
| Note | Loans and advances to customers are loans granted by subsidiaries TCL Finance Co., Ltd., Guangzhou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | ||||||||||||
| 12 | Debt investments | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| National debt (note) | 20,116 | 20,373 | |||||||||||
| Note | As at 30 June 2020, there were no significant debt investments. | ||||||||||||
| 13 | Long-term equity investments | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | ||||||||
| Associates (1) | 18,568,017 | 15,773 | 18,552,244 | 17,042,572 | 22,846 | 17,019,726 | |||||||
| Joint ventures (2) | 54,008 | - | 54,008 | 174,558 | - | 174,558 | |||||||
| 18,622,025 | 15,773 | 18,606,252 | 17,217,130 | 22,846 | 17,194,284 | ||||||||
| As at 30 June 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) | ||||||||||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||||||||||
| (1) | Associates | ||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 2020 | ||||||||||
| Bank of Shanghai Co., Ltd. | 9,314,611 | 792,028 | 591,599 | 64,718 | - | (316,955) | - | - | 10,446,001 | ||||||||||
| China Innovative Capital Management Limited | 877,920 | - | 6,044 | - | - | - | - | - | 883,964 | ||||||||||
| Tianjin 712 Communication & Broadcasting Co., Ltd. | 762,470 | - | 19,511 | - | (14,725) | - | - | 767,256 | |||||||||||
| LG Electronics(Hui Zhou) INC. | 92,583 | - | 4,164 | - | - | - | - | 96,747 | |||||||||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 40,837 | - | (136) | - | - | - | - | - | 40,701 | ||||||||||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 5,342 | 300 | 207 | - | - | - | - | - | 5,849 | ||||||||||
| Shenzhen Tixiang Management Technology Co., Ltd. | 2,078 | - | 160 | - | - | - | - | - | 2,238 | ||||||||||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | 1,815 | - | (86) | - | - | - | - | - | 1,729 | ||||||||||
| TCL Air Conditioner (Wuhan) Co., Ltd. | 37,666 | - | 582 | - | - | - | - | 38,248 | |||||||||||
| TCL Finance (Hong Kong) Co., Limited | 972 | - | (972) | - | - | - | - | - | |||||||||||
| Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. | 8,688 | - | 4,135 | - | - | (595) | - | - | 12,228 | ||||||||||
| Shenzhen Tianyi Hemeng Education Co., Ltd. | 6,325 | - | (1,889) | - | - | - | - | - | 4,436 | ||||||||||
| Yizheng Zeyu Electric Light Co., Ltd. | 2,507 | - | - | - | - | - | - | - | 2,507 | ||||||||||
| Urumqi TCL Equity Investment Management Co., Ltd. | 870 | - | 348 | - | - | (1,118) | - | - | 100 | ||||||||||
| Hubei Changjiang Hezhi Equity Investment Fund Partnership (Limited Partnership) | 1,137,499 | (49,367) | 96,771 | - | - | - | - | - | 1,184,903 | ||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||||
| 13 | Long-term equity investments (continued) | |||||||||||||||||||
| (1) | Associates (continued) | |||||||||||||||||||
| Increase or decrease in current period | ||||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 2020 | |||||||||||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 585,223 | (16,291) | 82,441 | 5 | - | (48,608) | - | - | 602,770 | |||||||||||
| Deqing Puhua Equity Investment Fund Partnership (Limited Partnership) | 205,476 | - | (756) | - | - | - | - | - | 204,720 | |||||||||||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 199,603 | (13,484) | 22,818 | - | - | (8,957) | - | - | 199,980 | |||||||||||
| Wuxi TCL Aisikai Semiconductor Industry Investment Fund Partnership (Limited Partnership) | 114,768 | 55,167 | 2,846 | - | - | - | - | - | 172,781 | |||||||||||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | 34,546 | - | 657 | (8) | - | - | - | - | 35,195 | |||||||||||
| Ningbo Meishan Bonded Port Qiyu Investment Management Partnership (Limited Partnership) | 67,768 | - | (583) | - | - | - | - | - | 67,185 | |||||||||||
| Shanghai Chuangxiang Venture Capital Partnership (Limited Partnership) | 29,667 | - | 9,552 | 15 | - | (9,094) | - | - | 30,140 | |||||||||||
| Nanjing Zijin A Dynamic Investment Partnership (Limited Partnership) | 25,982 | - | (5) | 4 | - | - | - | - | 25,981 | |||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||||||||||
| (1) | Associates (continued) | ||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 2020 | ||||||||||
| Huizhou Kaichuang Venture Investment Partnership (Limited Partnership) | 8,754 | - | (95) | - | - | - | - | - | 8,659 | ||||||||||
| Beijing A Dynamic Venture Capital Center (Limited Partnership) | 21,008 | (2,600) | (43) | - | - | - | - | - | 18,365 | ||||||||||
| Yixing Jiangnan Tianyuan Venture Capital Company (Limited Partnership) | 17,931 | (4,552) | 617 | 2 | - | - | - | 1 | 13,999 | ||||||||||
| Shenzhen A Dynamic New Industry Investment Fund Enterprise (Limited Partnership) | 11,437 | - | - | - | - | - | - | - | 11,437 | ||||||||||
| Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. | 4,301 | - | (264) | - | - | - | - | - | 4,037 | ||||||||||
| Huizhou Kaimeng Angel Investment Partnership (Limited Partnership) | 2,869 | - | (209) | - | - | - | - | - | 2,660 | ||||||||||
| Shenzhen Jiutian Matrix Investment Management Co., Ltd. | 1,953 | - | 17 | - | - | - | - | - | 1,970 | ||||||||||
| Urumqi Qixinda Equity Investment Management Co., Ltd. | 1,396 | - | (29) | - | - | - | - | - | 1,367 | ||||||||||
| Urumqi TCL Create Dynamic Equity Investment Management Co., Ltd. | 760 | - | (1) | - | - | - | - | - | 759 | ||||||||||
| Beijing A Dynamic Investment Consulting Co., Ltd. | 555 | - | (78) | - | - | - | - | - | 477 | ||||||||||
| Shanghai Gen Auspicious Investment Management Co., Ltd. | 518 | - | (3) | - | - | - | - | - | 515 | ||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||||||||||
| (1) | Associates (continued) | ||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 2020 | ||||||||||
| Changzhou A Dynamic Fund Management Co., Ltd. | 536 | - | 1 | - | - | - | - | - | 537 | ||||||||||
| Nanjing A Dynamic Equity Investment Fund Management Co., Ltd. | 287 | - | (8) | - | - | - | - | - | 279 | ||||||||||
| Wuxi TCL Medical Imaging Technology Co., Ltd. | 50,264 | - | (2,544) | - | - | - | - | 10 | 47,730 | ||||||||||
| Beijing WeMed Medical Equipment Co., Ltd. | 11,972 | (136) | (1,279) | - | - | - | (7,073) | 3,591 | 7,075 | ||||||||||
| Shanghai Huiying Medical Technology Co., Ltd. | 442 | - | (264) | - | - | - | - | - | 178 | ||||||||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 279,442 | 225,733 | 11,100 | - | - | - | - | - | 516,275 | ||||||||||
| TCL Ventures Fund L.P. | 39,609 | - | (1,283) | - | - | - | - | (1,527) | 36,799 | ||||||||||
| Getech Ltd. | 7,576 | 4,451 | (2,038) | - | - | - | - | 15,910 | 25,899 | ||||||||||
| Huizhou TCL Environmental Resource Co., Ltd. | 79,990 | - | 8,158 | - | - | - | - | - | 88,148 | ||||||||||
| Guangdong Rongchuang Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) | 375,020 | - | (4,832) | - | - | - | - | - | 370,188 | ||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||||||||||
| (1) | Associates (continued) | ||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 2020 | ||||||||||
| Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) | 149,493 | - | (1,180) | - | - | - | - | - | 148,313 | ||||||||||
| TCL Intelligent Technology (Ningbo) Co., Ltd. | - | 12,500 | 594 | - | - | - | - | - | 13,094 | ||||||||||
| Others | 2,398,397 | - | 27,595 | (5,842) | - | (57,672) | - | 45,347 | 2,407,825 | ||||||||||
| 17,019,726 | 1,003,749 | 871,340 | 58,894 | - | (457,724) | (7,073) | 63,332 | 18,552,244 | |||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||||||||||
| (2) | Joint ventures | ||||||||||||||||||
| Increase or decrease in current period | |||||||||||||||||||
| Name of investee | Amount at beginning of year | Increase or decrease in investment in current period | Investment gains and losses recognized by equity method | Other comprehensive income adjustment | Other equty changes | Declared cash dividends or profits | Impairment allowance | Other increases and decreases | 30 June 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 | - | 30,097 | - | - | - | - | - | 52,730 | ||||||||||
| TCL Huizhou City, Kai Enterprise Management Limited | 1,243 | - | 35 | - | - | - | - | - | 1,278 | ||||||||||
| 174,558 | - | 10,163 | - | - | - | - | (130,713) | 54,008 | |||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 13 | Long-term equity investments (continued) | ||||||||||
| (3) | Impairment allowances for long-term equity investments | ||||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | Notes | |||||||
| Pride Telecom Limited | 1,624 | - | - | 1,624 | Note 1 | ||||||
| Beijing WeMed Medical Equipment Co., Ltd. | 21,222 | - | (7,073) | 14,149 | Note 1 | ||||||
| 22,846 | - | (7,073) | 15,773 | ||||||||
| Note 1 | 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) | |||||||||
| 14 | Investments in other equity instruments | |||||||||
| 30 June 2020 | 31 December 2019 | |||||||||
| Non-trading equity instruments | 270,923 | 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 | ||||
| Non-trading equity instruments | 1,136 | - | (154,111) | 4 | Non-trading equity instruments | Sale in current period | ||||
| 15 | Other non-current financial assets | |||||||||
| 30 June 2020 | 31 December 2019 | |||||||||
| Equity investments | 2,664,744 | 2,531,111 | ||||||||
| Debt investments | 11,342 | 11,578 | ||||||||
| 2,676,086 | 2,542,689 | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 16 | Investment property | ||||||
| Housing and buildings | Land use right | Total | |||||
| Gross amount: | |||||||
| 1 January 2020 | 134,644 | 477 | 135,121 | ||||
| Increase | |||||||
| Increase in current period | 9,362 | - | 9,362 | ||||
| Reclassified from fixed assets and intangible assets | - | 103,007 | 103,007 | ||||
| Reclassified from construction in progress | 985,667 | - | 985,667 | ||||
| Decrease | |||||||
| Reclassified to fixed assets and intangible assets | (8,045) | - | (8,045) | ||||
| 30 June 2020 | 1,121,628 | 103,484 | 1,225,112 | ||||
| Accumulated depreciation and amortization: | |||||||
| 1 January 2020 | 52,742 | 106 | 52,848 | ||||
| Increase | |||||||
| Increase in current period | 8,827 | 1,088 | 9,915 | ||||
| Reclassified from fixed assets and intangible assets | - | 2,137 | 2,137 | ||||
| Decrease | |||||||
| Reclassified to fixed assets and intangible assets | (3,485) | - | (3,485) | ||||
| 30 June 2020 | 58,084 | 3,331 | 61,415 | ||||
| Investment property, net: | |||||||
| 30 June 2020 | 1,063,544 | 100,153 | 1,163,697 | ||||
| 1 January 2020 | 81,902 | 371 | 82,273 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||
| 17 | Fixed assets | |||||||||||
| Housing and buildings | Fixed assets renovation | Machinery equipment | Office and electronic equipment | Means of transport | Total | |||||||
| Gross amount: | ||||||||||||
| 1 January 2020 | 16,407,245 | 6,571 | 56,430,796 | 1,758,555 | 84,587 | 74,687,754 | ||||||
| Increase | ||||||||||||
| Purchase | 1,659 | - | 688,608 | 33,213 | 2,243 | 725,723 | ||||||
| Reclassified from investment property | 8,045 | - | - | - | - | 8,045 | ||||||
| Reclassified from construction in progress | 435,967 | - | 16,974,544 | 34,795 | 868 | 17,446,174 | ||||||
| Decrease | ||||||||||||
| Written down with government grants | - | - | (13,756) | - | - | (13,756) | ||||||
| Reduced subsidiaries | - | - | - | (2,655) | (1,037) | (3,692) | ||||||
| Other decreases | (14,645) | - | (217,059) | (344,965) | (515) | (577,184) | ||||||
| Exchange adjustment | (460) | - | - | 114 | 60 | (286) | ||||||
| 30 June 2020 | 16,837,811 | 6,571 | 73,863,133 | 1,479,057 | 86,206 | 92,272,778 | ||||||
| Accumulated depreciation: | ||||||||||||
| 1 January 2020 | 1,875,286 | 4,293 | 26,629,564 | 652,321 | 50,663 | 29,212,127 | ||||||
| Increase | ||||||||||||
| Accrual | 286,940 | 431 | 3,093,378 | 95,141 | 5,742 | 3,481,632 | ||||||
| Reclassified from investment property | 3,485 | - | - | - | - | 3,485 | ||||||
| Decrease | ||||||||||||
| Written down with government grants | (17,108) | - | (234,207) | - | - | (251,315) | ||||||
| Reduced subsidiaries | - | - | - | (2,477) | (855) | (3,332) | ||||||
| Other decreases | (6,486) | - | (30,886) | (3,155) | (162) | (40,689) | ||||||
| Exchange adjustment | - | - | - | 70 | 33 | 103 | ||||||
| 30 June 2020 | 2,142,117 | 4,724 | 29,457,849 | 741,900 | 55,421 | 32,402,011 | ||||||
| Fixed assets, net: | ||||||||||||
| 30 June 2020 | 14,695,694 | 1,847 | 44,405,284 | 737,157 | 30,785 | 59,870,767 | ||||||
| 1 January 2020 | 14,531,959 | 2,278 | 29,801,232 | 1,106,234 | 33,924 | 45,475,627 | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||
| 17 | Fixed assets (continued) | |||||||||||
| Housing and buildings | Fixed assets renovation | Machinery equipment | Office and electronic equipment | Means of transport | Total | |||||||
| Impairment allowance: | ||||||||||||
| 1 January 2020 | - | - | 6,666 | 9,891 | - | 16,557 | ||||||
| Current accrual | - | - | - | - | - | - | ||||||
| Write-off in current period | - | - | (3,268) | - | - | (3,268) | ||||||
| Exchange adjustment | - | - | - | - | - | - | ||||||
| 30 June 2020 | 3,398 | 9,891 | 13,289 | |||||||||
| Fixed assets, net: | ||||||||||||
| 30 June 2020 | 14,695,695 | 1,847 | 44,401,886 | 727,266 | 30,785 | 59,857,478 | ||||||
| 1 January 2020 | 14,531,959 | 2,278 | 29,794,566 | 1,096,343 | 33,924 | 45,459,070 | ||||||||||
| Please refer to Item 75 of Note V for information on fixed asset mortgage. As at 30 June 2020, the Company has no temporarily idle fixed assets; the gross amount of the fixed assets that were sufficiently depreciated and still in use was RMB11,634,643 thousand. | ||||||||||||||||
| Fixed assets with pending ownership certificates at the end of the current period: | ||||||||||||||||
| Gross amount | Accumulated depreciation | Provision for impairment | Carrying amount | Expected time of obtaining ownership certificate | ||||||||||||
| Housing and buildings (Note) | 7,482,134 | 366,007 | - | 7,116,127 | Within 2021 | |||||||||||
| Note | As at 30 June 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. | |||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||||||||||||
| 18 | Construction in progress | ||||||||||||||||||||||||
| Project name | Budget | Amount at beginning of year | Increase in current period | Reclassified to fixed assets in current period | Other decreases | 30 June 2020 | Investment as % of budget | Progress | Cumulative capitalized interest | Of whch: 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 | 374,490 | (16,099,035) | - | 1,542,897 | 82% | 98% | 796,952 | 220,984 | 4.69% | Self-funded + external-loan-funded | |||||||||||||
| t7 production line of LCD panel | 35,337,000 | 3,350,136 | 2,727,744 | - | - | 6,077,880 | 19% | 19% | 8,505 | 8,505 | 4.00% | Self-funded + external-loan-funded | |||||||||||||
| t4 production line of LCD panel | 27,081,000 | 10,024,509 | 1,193,941 | (218,097) | (1,290) | 10,999,063 | 58% | 58% | 625,646 | 151,710 | 3.40% | Self-funded + external-loan-funded | |||||||||||||
| Huizhou modular integration project | 5,930,000 | 1,441,460 | 802,081 | (792,704) | - | 1,450,837 | 79% | 75% | 14,486 | - | - | Self-funded + external-loan-funded | |||||||||||||
| Others | N/A | 1,494,743 | 778,500 | (336,338) | (990,180) | 946,725 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||
| 33,578,290 | 5,876,756 | (17,446,174) | (991,470) | 21,017,402 | |||||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 19 | Intangible assets | |||||||
| Land use right | Non-patented technologies /patents | Trademark use rights | Other | |||||
| Gross amount: | ||||||||
| 1 January 2020 | 3,477,919 | 3,301,461 | 778,796 | 7,558,176 | ||||
| Increase | ||||||||
| Purchase | 154,657 | 46,546 | 25,004 | 226,207 | ||||
| Reclassified from investment property | - | - | - | - | ||||
| Reclassified from construction in progress | - | - | 1,290 | 1,290 | ||||
| Reclassified from development costs | - | 866,080 | - | 866,080 | ||||
| Decrease | ||||||||
| Sale and disposal | - | - | (1,927) | (1,927) | ||||
| Reclassified to investment property | (103,007) | - | - | (103,007) | ||||
| Reduced subsidiaries | - | - | (8,155) | (8,155) | ||||
| Exchange adjustment | - | 2,156 | 2 | 2,158 | ||||
| 30 June 2020 | 3,529,569 | 4,216,243 | 795,010 | 8,540,822 | ||||
| Accumulated amortization: | ||||||||
| 1 January 2020 | 334,894 | 1,080,538 | 401,055 | 1,816,487 | ||||
| Increase | ||||||||
| Accrual | 52,746 | 193,780 | 55,128 | 301,654 | ||||
| Reclassified from investment property | ||||||||
| Decrease | ||||||||
| Sale and disposal | - | - | (1,889) | (1,889) | ||||
| Reclassified to investment property | (2,137) | - | - | (2,137) | ||||
| Reduced subsidiaries | - | - | (6,479) | (6,479) | ||||
| Written down with government grants | (3,418) | - | - | (3,418) | ||||
| Exchange adjustment | - | 481 | 1 | 482 | ||||
| 30 June 2020 | 382,085 | 1,274,799 | 447,816 | 2,104,700 | ||||
| Intangible assets, net： | ||||||||
| 30 June 2020 | 3,147,484 | 2,941,444 | 347,194 | 6,436,122 | ||||
| 1 January 2020 | 3,143,025 | 2,220,923 | 377,741 | 5,741,689 | ||||
| Impairment allowance： | ||||||||
| 1 January 2020 | - | 34,881 | 22,224 | 57,105 | ||||
| Accrual | - | - | - | - | ||||
| Write-off in current period | - | - | - | - | ||||
| Exchange adjustment | - | 517 | - | 517 | ||||
| 30 June 2020 | - | 35,398 | 22,224 | 57,622 | ||||
| Intangible assets, net： | ||||||||
| 30 June 2020 | 3,147,484 | 2,906,046 | 324,970 | 6,378,500 | ||||
| 1 January 2020 | 3,143,025 | 2,186,042 | 355,517 | 5,684,584 | ||||
| Please refer to Item 75 of Note V for information on collateralized intangible assets. | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||
| 20 | Development costs | |||||||||||||
| Development costs are as follows： | ||||||||||||||
| 30 June 2020 | 31 December 2019 | |||||||||||||
| LCD panels | 895,325 | 1,548,471 | ||||||||||||
| 21 | Goodwill | |||||||||||||
| (1) | Gross amount of goodwill | |||||||||||||
| Name of investee or item incuuring goodwill | Beginning amount | Increase in current period | Decrease in current period | Ending amount | ||||||||||
| Incurred in business combination | Others | Disposal | 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 | |||||||
| 31,419 | - | - | - | - | 31,419 | |||||||||
| (2) | Goodwill impairment allowance | |||||||||||||
| Name of investee or item incuuring goodwill | Beginning amount | Increase in current period | Decrease in current period | Ending amount | ||||||||||
| Accrual | Others | Disposal | Others | |||||||||||
| TCL Medical Radiological Technology (Beijing) Co., Ltd. | 28,967 | - | - | - | - | 28,967 | ||||||||
| V 21 (2) Note 1 | Notes to Consolidated Financial Statements (Continued) Goodwill (continued) Goodwill impairment allowance (continued) 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 2018. |
| 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 | On 30 June 2020, the Company tested asset groups inclusive of goodwill for impairment. Upon the test, goodwill is not impaired. |
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 21 | Goodwill (continued) | |||
| (3) | The Company tested goodwill acquired from business combination that has been allocated to the following asset groups or asset group combinations for impairment: | |||
| The Company distributes goodwill to the following independent asset groups: | ||||
| Business asset group of Qingdao Blue: fixed assets and goodwill of Qingdao Blue Business Consulting Co., Ltd. are the asset group where goodwill is located. | ||||
| (a) | The carrying amount of each asset group including goodwill and the amount of allocated goodwill are as follows: | |||
| 30 June 2020 | ||||
| Carrying amount of asset group | Allocated goodwill amount | |||
| Business asset group of Qingdao Blue | 3,028 | 2,452 | ||
| (b) | The recoverable amount of the asset group and the asset group combination is calculated based on the five-year budget approved by the management and the cash flow after the detailed annual forecast period at a specific long-term average growth rate, and is calculated using the present value model of future cash flow. Key assumptions used include: | |||
| Business asset group of Qingdao Blue | ||||
| Income growth rate in forecast period | 10% | |||
| Income growth rate in stable period | 3% | |||
| Net profit rate in forecast period | 5% | |||
| Net profit rate in stable period | 4% | |||
| Discount rate | 8% | |||
| (c) | Goodwill impairment test results | |||
| At the end of the Reporting Period, the Company tested the above goodwill for impairment. During the impairment test, the Company compared the carrying amount of the relevant asset group including goodwill with its recoverable amount. If the recoverable amount is lower than the carrying amount, the relevant difference is included in the current profits and losses. According to the goodwill impairment test, the goodwill of Business asset group of Qingdao Blue is not impaired. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||
| 22 | Long-term prepaid expense | |||||||||||
| 1 January 2020 | Increase in current period | Amortization in current period | Others | 30 June 2020 | ||||||||
| Improvement expense on leased fixed assets | 1,528,158 | 134,323 | (62,539) | (1,533) | 1,598,409 | |||||||
| Others | 39,533 | 825,831 | (378,072) | (11,960) | 475,332 | |||||||
| 1,567,691 | 960,154 | (440,611) | (13,493) | 2,073,741 | ||||||||
| 23 | Deferred income tax assets and deferred income tax liabilities | ||||||||||||||||||
| (1) | Unoffset deferred income tax assets | ||||||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||||||
| Deductible temporary difference | Deferred income tax assets | Deductible temporary difference | Deferred income tax assets | ||||||||||||||||
| Provisions | 228,516 | 37,125 | 177,421 | 28,473 | |||||||||||||||
| Asset impairment allowances | 474,459 | 77,776 | 444,625 | 74,208 | |||||||||||||||
| Changes in fair value | 2,862 | 429 | 2,862 | 429 | |||||||||||||||
| Deductible losses | 3,905,283 | 625,818 | 4,202,964 | 671,868 | |||||||||||||||
| Others | 679,575 | 119,453 | 353,392 | 65,896 | |||||||||||||||
| 5,290,695 | 860,601 | 5,181,264 | 840,874 | ||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 23 | Deferred income tax assets and deferred income tax liabilities (continued) | ||||||
| (2) | Unoffset deferred income tax liabilities | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Taxable temporary differences | Deferred Income Tax Liabilities | Taxable temporary differences | Deferred Income Tax Liabilities | ||||
| Accelerated depreciation of fixed assets | 4,941,869 | 786,502 | 4,924,463 | 782,644 | |||
| Changes in fair value | 396,405 | 93,004 | 242,663 | 54,491 | |||
| Government grants | 124,429 | 29,159 | 314,595 | 52,290 | |||
| Other | 400,726 | 86,474 | 307,929 | 63,253 | |||
| 5,863,429 | 995,139 | 5,789,650 | 952,678 | ||||
| (3) | Unrecognized deferred income tax assets | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Deductible temporary differences | 464,094 | 314,937 | |||||
| Deductible losses | 582,051 | 340,140 | |||||
| 1,046,145 | 655,077 | ||||||
| (4) | There were no deferred income tax assets or liabilities presented at the net amount after offsetting. | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 23 | 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: | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| 2020 | - | 9 | |||||||||
| 2021 | - | 805 | |||||||||
| 2022 | - | 672 | |||||||||
| 2023 | 6,575 | 6,575 | |||||||||
| 2027 | 19,202 | 19,202 | |||||||||
| 2028 | 128,689 | 139,065 | |||||||||
| 2029 | 173,812 | 173,812 | |||||||||
| 2030 | 253,773 | - | |||||||||
| 582,051 | 340,140 | ||||||||||
| 24 | Other non-current assets | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Advance payment for equipment and land use rights (Note) | 8,150,900 | 3,336,619 | |||||||||
| Advance payment for patents | 251,429 | 225,576 | |||||||||
| Others | 684,023 | 688,464 | |||||||||
| 9,086,352 | 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) | ||||||
| 25 | Short-term borrowings | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Unsecured borrowings | 15,718,031 | 11,291,664 | |||||
| Pledge borrowings | 739,084 | 754,794 | |||||
| Interest payable | 34,056 | 23,199 | |||||
| 16,491,171 | 12,069,657 | ||||||
| As at 30 June 2020, the short-term pledged borrowings of the Company amounted to RMB739,084 thousand (31 December 2019: RMB754,794 thousand), which was pledged by held-for-trading financial assets of about RMB1,840,612 thousand (31 December 2019: RMB1,743,204 thousand). | |||||||
| As at 30 June 2020, the Company does not have any short-term borrowings that have expired and have not been repaid. | |||||||
| 26 | Borrowings from central bank | ||||||
| As at 30 June 2020, the balance of the borrowings of TCL Finance Co., Ltd., a subsidiary of the Company, from the central bank was RMB1,404,722 thousand (31 December 2019: RMB573,222 thousand). | |||||||
| 27 | Customer deposits and deposits from banks and other financial institutions | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Customer deposits and deposits from banks and other financial institutions | 3,617,529 | 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 Finance Co., Ltd., a subsidiary of the Company, within the business scope approved by the regulatory authority. |
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 28 | Loans from other banks and financial institutions | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Loans from other banks and financial institutions | 500,000 | - | |||
| 29 | Held-for-trading financial liabilities | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Financial liabilities at fair value through profit or loss | 403,530 | 188,220 | |||
| 30 | Derivative financial liabilities | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Derivative financial liabilities | 156,664 | 84,705 | |||
| 31 | Notes payable | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Bank acceptance notes | 1,838,732 | 1,595,901 | |||
| Trade acceptance notes | 455,175 | 124,501 | |||
| 2,293,907 | 1,720,402 | ||||
| There is no amount payable to shareholders holding 5% or more voting shares in the Company in the account balance. | |||||
| 32 | Accounts payable | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Amounts due to suppliers | 11,436,883 | 11,549,133 | |||
| As at 30 June 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) | |||||
| 33 | Advances from customers | |||||
| 30 June 2020 | 1 January 2020 | 31 December 2019 | ||||
| Advances from customers | 2,155 | 5,500 | 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. | ||||
| 34 | Contract liabilities | |||
| 30 June 2020 | 1 January 2020 | |||
| Advances from customers | 231,497 | 133,818 | ||
| 35 | Financial assets sold under repurchase agreements | |||
| 30 June 2020 | 31 December 2019 | |||
| Financial assets sold under repurchase agreements | 50,073 | - | ||
| 36 | Employee benefits payable and long-term employee benefits payable | |||
| (1) | Employee benefits payable | |||
| 30 June 2020 | 31 December 2019 | |||
| Short-term employee benefits payable | 799,293 | 1,089,163 | ||
| Defined contribution plans payable | 22,379 | 1,371 | ||
| Dismissal benefits payable | - | 3,683 | ||
| 821,672 | 1,094,217 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 36 | Employee benefits payable and long-term employee benefits payable (continued) | ||||||||||
| (1) | Employee benefits payable (continued) | ||||||||||
| (a) | Short-term employee benefits payable | ||||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | ||||||||
| Wages, bonuses, allowances and subsidies | 910,703 | 1,975,959 | (2,210,245) | 676,417 | |||||||
| Employee services and benefits | 9,623 | 90,788 | (90,196) | 10,215 | |||||||
| Social insurance benefits | 42,174 | 38,688 | (57,368) | 23,494 | |||||||
| Of which: medical insurance | 40,454 | 34,764 | (53,448) | 21,770 | |||||||
| Employment injury insurance | 555 | 461 | (467) | 549 | |||||||
| Maternity insurance | 1,165 | 3,463 | (3,453) | 1,175 | |||||||
| Housing fund | 20,008 | 73,717 | (66,369) | 27,356 | |||||||
| Trade union funds and staff education funds | 2,050 | 2,521 | (2,369) | 2,202 | |||||||
| Others | 104,605 | 28,168 | (73,164) | 59,609 | |||||||
| 1,089,163 | 2,209,841 | (2,499,711) | 799,293 | ||||||||
| (b) | Defined contribution plans | ||||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | ||||||||
| Basic pension insurance | 1,312 | 58,751 | (38,516) | 21,547 | |||||||
| Unemployment insurance | 59 | 1,698 | (925) | 832 | |||||||
| 1,371 | 60,449 | (39,441) | 22,379 | ||||||||
| (2) | Long-term employee benefits payable | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Supplementary pension insurance (note) | 22,408 | 23,018 | |||||||||
| Note | This item is the supplementary pension insurance benefits payable to retired employees. | ||||||||||
| (1) | Dividends payable | |||
| 30 June 2020 | 31 December 2019 | |||
| Other minority interests | 5,594 | 11,058 | ||
| (2) | Other payables | |||
| 30 June 2020 | 31 December 2019 | |||
| Payables for engineering equipment | 8,268,944 | 8,515,216 | ||
| Amounts due to external entities | 2,734,748 | 2,711,596 | ||
| Unpaid expenses | 1,102,011 | 856,377 | ||
| Deposit and security deposit | 204,521 | 199,319 | ||
| 12,310,224 | 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) | |||
| 37 | Taxes and levies payable | |||
| 30 June 2020 | 31 December 2019 | |||
| VAT | 54,729 | 26,997 | ||
| Corporate income tax | 127,504 | 154,027 | ||
| Individual income tax | 24,594 | 22,666 | ||
| City construction tax | 1,898 | 1,965 | ||
| Educational surcharge | 1,386 | 1,450 | ||
| Others | 50,098 | 19,701 | ||
| 260,209 | 226,806 | |||
| Please refer to Note IV for the standards for provisions for taxes and the applicable tax rates. | ||||
| 38 | Other payables | |||
| 30 June 2020 | 31 December 2019 | |||
| Dividends payable | 5,594 | 11,058 | ||
| Other payables | 12,310,224 | 12,282,508 | ||
| 12,315,818 | 12,293,566 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||
| 39 | Current portion of non-current liabilities | ||||||
| Note V | 30 June 2020 | 31 December 2019 | |||||
| Current portion of long-term borrowings (note 1) | 41 | - | 800,000 | ||||
| Current portion of MTN (note 2) | 2,498,942 | 499,748 | |||||
| Current portion of interest payable | 593,452 | 392,215 | |||||
| 3,092,394 | 1,691,963 | ||||||
| Note 1 | As at 30 June 2020, there were no current portion of long-term borrowings. And as at 31 December 2019, the interest rate of the current portion of long-term borrowings ranged from 2.33% to 6.00%. | ||||||
| Note 2 | The current portion of medium-term notes payable of RMB2,498,942 thousand at the end of the period was reclassified to the item of “current portion of non-current liabilities”. | ||||||
| 40 | Other current liabilities | ||||||
| 30 June 2020 | 1 January 2020 | 31 December 2019 | |||||
| After-sales service expense (note) | 56,944 | 35,435 | 35,435 | ||||
| Others | 51,712 | 36,018 | 33,587 | ||||
| 108,656 | 71,453 | 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) | |||||
| 41 | Long-term borrowings | |||||
| 30 June 2020 | 31 December 2019 | |||||
| Mortgage borrowings | 36,087,824 | 33,589,761 | ||||
| Unsecured borrowings | 10,058,174 | 5,722,298 | ||||
| 46,145,998 | 39,312,059 | |||||
| Of which: Current portion of long-term borrowings | - | (800,000) | ||||
| 46,145,998 | 38,512,059 | |||||
| The maturities of the Company’s long-term borrowings vary from 2021 to 2030. | ||||
| As at 30 June 2020, the carrying amount of long-term mortgage borrowings was RMB36,087,824 thousand, with land use rights, buildings, machinery and equipment equivalent to RMB38,710,256 thousand as the collateral. | ||||
| The interest rate of the Company's long-term borrowing ranges from 2.70% to 4.90% in the current period (in 2019: 2.33% to 6.00%). | ||||
| 42 | Bonds payable | |||
| 30 June 2020 | 31 December 2019 | |||
| Corporate bonds | 12,987,168 | 14,483,130 | ||
| MTN | 4,990,433 | 1,995,955 | ||
| 17,977,601 | 16,479,085 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||
| 42 | Bonds payable (continued) | ||||||||||||
| (1) | Movements in bonds payable | ||||||||||||
| Bond name | Par value | Issue date | Maturity | Issued amount | Beginning amount | Issued in current period | Accrued interest as per par value | Amortization of premium or discount | Repaid in current period | Others (note) | Ending amount | ||
| 16TCL02 | 1,500,000 | 2016-03-16 | 2021-03-16 | 1,500,000 | 1,500,000 | - | - | - | (1,500,000) | - | |||
| 16TCL03 | 2,000,000 | 2016-07-07 | 2021-07-07 | 2,000,000 | 2,000,000 | - | - | - | - | 2,000,000 | |||
| 17TCL01 | 1,000,000 | 2017-04-19 | 2022-04-19 | 1,000,000 | 1,000,000 | 403,000 | - | 1,314 | (403,000) | 1,001,314 | |||
| 17TCL02 | 3,000,000 | 2017-07-07 | 2022-07-07 | 3,000,000 | 3,000,000 | - | - | - | - | 3,000,000 | |||
| 18TCL01 | 1,000,000 | 2018-06-06 | 2023-06-06 | 1,000,000 | 998,786 | - | - | 159 | - | 998,945 | |||
| 18TCL02 | 2,000,000 | 20180-8-20 | 2023-08-20 | 2,000,000 | 1,995,639 | - | - | 597 | - | 1,996,236 | |||
| 18TCL-MTN001 | 2,000,000 | 2018-12-03 | 2021-12-03 | 2,000,000 | 1,995,955 | - | - | 1,047 | - | 1,997,002 | |||
| 19TCL01 | 1,000,000 | 2019-05-20 | 2024-05-20 | 1,000,000 | 997,480 | - | - | 287 | - | 997,767 | |||
| 19TCL02 | 1,000,000 | 2019-07-23 | 2024-07-23 | 1,000,000 | 997,448 | - | - | 279 | 997,727 | ||||
| 19TCL03 | 2,000,000 | 2019-10-21 | 2024-10-21 | 2,000,000 | 1,993,777 | - | - | 1,401 | 1,995,179 | ||||
| 20TCL-MTN001 | 3,000,000 | 2020-03-27 | 2023-03-26 | 3,000,000 | - | 3,000,000 | - | (6,569) | 2,993,431 | ||||
| 20TCLD1 | 1,000,000 | 2020-06-08 | 2020-12-05 | 1,000,000 | - | 1,000,000 | - | (1,058) | (998,942) | - | |||
| 20,500,000 | 20,500,000 | 16,479,085 | 4,403,000 | - | (2,543) | (403,000) | (2,498,942) | 17,977,601 | |||||
| Note: Others are the current portion of bonds payable reclassified to the current portion of non-current liabilities. | |||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||
| 43 | Long-term payables | ||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||
| Technological development fund | 24,000 | 24,000 | |||||||||||||
| Others | 210 | 206 | |||||||||||||
| 24,210 | 24,206 | ||||||||||||||
| 44 | Deferred income | ||||||||||||||
| 1 January 2020 | 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 | 30 June 2020 | |||||||||
| Government grants related to assets | 220,063 | 181,870 | (1,466) | - | (29,114) | (14,726) | 356,627 | ||||||||
| Government grants related to income | 1,692,358 | 573,120 | - | (933,324) | (77,582) | (22,024) | 1,232,548 | ||||||||
| 1,912,421 | 754,990 | (1,466) | (933,324) | (106,696) | (36,750) | 1,589,175 | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||||||
| 45 | Share capital | ||||||||||||||
| 1 January 2020 | Increase/decrease in current period | 30 June 2020 | |||||||||||||
| (Unit: RMB’000) | Amount | Percentage | New issues | Others | Subtotal | Amount | Percentage | ||||||||
| 1. Restricted shares | 867,766 | 6.41% | - | 713 | 713 | 868,479 | 6.42% | ||||||||
| 2. Unrestricted shares | 12,660,673 | 93.59% | - | (713) | (713) | 12,659,960 | 93.58% | ||||||||
| 3. Total shares | 13,528,439 | 100% | - | - | - | 13,528,439 | 100% | ||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||
| 45 | Share capital (continued) | ||||||||
| As at 30 June 2020, the Company’s total share capital was 13,528,439,000 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. | ||||||||
| 46 | Capital reserves | ||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | ||||||
| Share premium | 4,924,212 | - | - | 4,924,212 | |||||
| Other capital reserves | 792,455 | 47,741 | - | 840,196 | |||||
| 5,716,667 | 47,741 | - | 5,764,408 | ||||||
| 47 | Treasury stock | ||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | ||||||
| Incentive shares | 145,420 | - | (7,209) | 138,211 | |||||
| Repurchased shares | 1,807,537 | - | - | 1,807,537 | |||||
| 1,952,957 | - | (7,209) | 1,945,748 | ||||||
| The decrease in incentive shares in the current period was primarily attributed to the repurchase of restricted shares. | |||||||||
| 48 | Surplus reserves | ||||||||
| 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | ||||||
| Statutory surplus reserves | 2,055,498 | - | - | 2,055,498 | |||||
| Discretionary surplus reserves | 182,870 | - | - | 182,870 | |||||
| 2,238,368 | - | - | 2,238,368 | ||||||
| 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. | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 49 | General reserve | ||||||||||
| 1 January 2020 | Accrued in current period | Decrease in current period | 30 June 2020 | ||||||||
| General reserve | 361 | - | - | 361 | |||||||
| 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 Finance Co., Ltd., this subsidiary appropriated 1% of its net profit as general reserve in the previous years. | |||||||||||
| 50 | Retained earnings | ||||||||||
| H1 2020 | H1 2019 | ||||||||||
| Beginning retained earnings | 11,115,150 | 10,000,973 | |||||||||
| Changes in accounting policies | - | (106,833) | |||||||||
| Net profit for current period | 1,208,066 | 2,092,349 | |||||||||
| Decrease in current period | (1,279,151) | (1,354,663) | |||||||||
| Including: Appropriated as surplus reserves | - | - | |||||||||
| Distributed to ordinary shareholders as dividends | (1,279,155) | (1,337,079) | |||||||||
| Others | 4 | (17,584) | |||||||||
| Ending retained earnings | 11,044,065 | 10,631,826 | |||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||||||||||||
| 51 | Revenue and cost of sales | |||||||||||||||||
| H1 2020 | H1 2019 | |||||||||||||||||
| Revenue | Cost of sales | Revenue | Cost of sales | |||||||||||||||
| Core business | 29,092,257 | 26,698,363 | 43,364,809 | 37,162,229 | ||||||||||||||
| Non-core business | 240,954 | 42,530 | 416,805 | 194,899 | ||||||||||||||
| 29,333,211 | 26,740,893 | 43,781,614 | 37,357,128 | |||||||||||||||
| (1) | Core business by operating segment | |||||||||||||||||
| Revenue | Cost of sales | Gross profit | ||||||||||||||||
| H1 2020 | H1 2019 | H1 2020 | H1 2019 | H1 2020 | H1 2019 | |||||||||||||
| Domestic | 20,814,425 | 23,804,831 | 19,272,087 | 20,230,464 | 1,542,338 | 3,574,367 | ||||||||||||
| Overseas | 8,277,832 | 19,559,978 | 7,426,276 | 16,931,765 | 851,556 | 2,628,213 | ||||||||||||
| 29,092,257 | 43,364,809 | 26,698,363 | 37,162,229 | 2,393,894 | 6,202,580 | |||||||||||||
| (2) | The sales revenue from the top five customers combined was RMB11,621,499 thousand and RMB11,698,539 thousand respectively for H1 2020 and H1 2019, accounting for 39.95% and 26.98% of the core business revenue. | |||||||||||||||||
| 52 | Interest income/expense and exchange gain | |||||||||||||||||
| H1 2020 | H1 2019 | |||||||||||||||||
| Interest income | 85,692 | 78,944 | ||||||||||||||||
| Interest expense | 16,278 | 8,312 | ||||||||||||||||
| Exchange gain/(loss) | 689 | (11,065) | ||||||||||||||||
| The interest income, interest expense and exchange gain/(loss) above occurred with the Company’s subsidiary TCL Finance Co., Ltd., which are presented separately herein as required for a financial enterprise. | ||||||||||||||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 53 | Taxes and levies | |||
| H1 2020 | H1 2019 | |||
| City maintenance and construction tax | 6,053 | 57,345 | ||
| Property tax | 43,614 | 49,221 | ||
| Stamp tax | 29,668 | 41,419 | ||
| Educational surcharge | 4,312 | 42,561 | ||
| Land use tax | 3,280 | 6,757 | ||
| Others | 357 | 43,886 | ||
| 87,284 | 241,189 | |||
| The applicable tax and levy standards are detailed in Note IV. | ||||
| 54 | Selling expense | |||
| H1 2020 | H1 2019 | |||
| Employee salaries and benefits | 118,172 | 441,208 | ||
| After-sales service expense | 70,833 | 344,590 | ||
| Transport expense | 62,420 | 428,212 | ||
| Others | 73,240 | 1,168,726 | ||
| 324,665 | 2,382,736 | |||
| 55 | Administrative expense | |||
| H1 2020 | H1 2019 | |||
| Employee salaries and benefits | 239,141 | 499,992 | ||
| Depreciation and amortization expense | 159,465 | 277,386 | ||
| Expense for hiring intermediary organizations | 93,429 | 115,099 | ||
| Others | 277,968 | 374,033 | ||
| 770,003 | 1,266,510 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 56 | R&D expense | |||
| H1 2020 | H1 2019 | |||
| Depreciation and amortization expense | 828,746 | 550,111 | ||
| Employee salaries and benefits | 275,167 | 523,775 | ||
| Material expense | 549,480 | 442,272 | ||
| Others | 229,108 | 364,509 | ||
| 1,882,501 | 1,880,667 | |||
| 57 | Finance costs | |||
| H1 2020 | H1 2019 | |||
| Interest expense | 1,132,442 | 1,096,991 | ||
| Interest income | (250,867) | (239,908) | ||
| Exchange loss/(gain) | 27,234 | (288,121) | ||
| Others | 7,213 | 35,752 | ||
| 916,022 | 604,714 | |||
| 58 | Other income | |||
| H1 2020 | H1 2019 | |||
| R&D subsidies | 939,165 | 848,918 | ||
| VAT rebates on software | 1,307 | 61,525 | ||
| Over-dedcution in taxable amount for VAT | 8,120 | 434 | ||
| Others | 3,824 | 10,650 | ||
| 952,416 | 921,527 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 59 | Return on investment | |||
| H1 2020 | H1 2019 | |||
| Proceeds from disposal of debt instruments at fair value through profit or loss | 53,588 | 132,451 | ||
| Proceeds from disposal of equity instruments at fair value through profit or loss | 21,704 | (220,027) | ||
| Proceeds from holding of equity instruments at fair value through profit or loss | 22,482 | 8,416 | ||
| Proceeds from holding of debt instruments at fair value through profit or loss | 111,645 | 65,033 | ||
| Proceeds from holding of equity instruments at fair value through other comprehensive income | 1,136 | 9,632 | ||
| Share of net income of associates | 871,340 | 643,353 | ||
| Share of net income of joint ventures | 10,163 | 10,651 | ||
| Net income from disposal of long-term equity investments | 288,383 | 1,302,625 | ||
| Others | (39,776) | 53,605 | ||
| 1,340,665 | 2,005,739 | |||
| 60 | Gain on changes in fair value | |||
| H1 2020 | H1 2019 | |||
| Held-for-trading financial assets | 106,075 | 404,132 | ||
| Derivative financial assets | 16,811 | 99,603 | ||
| Held-for-trading financial liabilities | (8,860) | (1,747) | ||
| Derivative financial liabilities | 8 | (206,458) | ||
| 114,034 | 295,530 | |||
| 61 | Credit impairment loss | |||
| H1 2020 | H1 2019 | |||
| Loss on uncollectible accounts receivable | 4,180 | 23,812 | ||
| Loss on uncollectible other receivables | (175) | (3,265) | ||
| Other financial assets | (2,881) | - | ||
| 1,124 | 20,547 | |||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 62 | Asset impairment loss | |||||||
| H1 2020 | H1 2019 | |||||||
| Inventory valuation loss | 328,603 | 201,644 | ||||||
| Loss on impairments of fixed assets | - | 2,660 | ||||||
| Loss on impairment of intangible assets | - | 11,845 | ||||||
| Loss on impairment of goodwill | - | 92,952 | ||||||
| Loss on impairment of other assets | 79 | 5,240 | ||||||
| 328,682 | 314,341 | |||||||
| 63 | Asset disposal income | |||||||
| H1 2020 | H1 2019 | |||||||
| Income/(loss) from disposal of fixed assets | 1,320 | (3,184) | ||||||
| Income/(loss) from disposal of intangible assets | - | (253) | ||||||
| Income from disposal of other non-current assets | - | 9 | ||||||
| 1,320 | (3,428) | |||||||
| 64 | Non-operating income | |||||||
| H1 2020 | H1 2019 | Amount through current non-recurring gains and losses | ||||||
| Gains on retired or damaged non-current assets | 63 | 84 | 63 | |||||
| Others | 491,876 | 46,029 | 491,876 | |||||
| 491,939 | 46,113 | 491,939 | ||||||
| 65 | Non-operating expense | |||||||
| H1 2020 | H1 2019 | Amount through current non-recurring gains and losses | ||||||
| Losses on retired or damaged non-current assets | 139 | 624 | 139 | |||||
| Others | 18,662 | 18,196 | 18,662 | |||||
| 18,801 | 18,820 | 18,801 | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||||
| 66 | Income tax expense | |||||||
| (1) | Income tax expense | |||||||
| H1 2020 | H1 2019 | |||||||
| Current income tax expense | 141,710 | 235,888 | ||||||
| Deferred income tax expense | 22,877 | 47,059 | ||||||
| 164,587 | 282,947 | |||||||
| (2) | Accounting profit and income tax adjustment process | |||||||
| H1 2020 | H1 2019 | |||||||
| Gross profit | 1,233,711 | 3,020,010 | ||||||
| Income tax expense calculated at statutory/applicable tax rate | 308,428 | 755,002 | ||||||
| Impact of different tax rates applied to subsidiaries | (123,181) | (562,758) | ||||||
| Impact of adjusting income tax in previous periods | 5,403 | 16,018 | ||||||
| Impact of non-taxable income | (83,807) | (44,442) | ||||||
| Impact of non-deductible costs, expenses and losses | 3,814 | 10,554 | ||||||
| Impact of deductible losses on the use of previously unrecognized deferred income tax assets | (2,742) | (18,518) | ||||||
| Impact of deductible temporary differences or deductible losses of unrecognized deferred income tax assets in the current period | 95,350 | 63,827 | ||||||
| Others | (38,678) | 63,264 | ||||||
| Income tax expense | 164,587 | 282,947 | ||||||
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 67 | Other comprehensive income | |||
| (1) | Other comprehensive income items, income tax effects and reclassifications to profit or loss | |||
| H1 2020 | H1 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 | (6,233) | - | ||
| Amount attributable to the Company in the current period | (6,233) | - | ||
| 2. Changes in fair value of other equity instruments | (7,149) | 17,564 | ||
| Current gain/(loss) | (7,145) | (30,761) | ||
| Previous other comprehensive income reclassified to retained earnings for current period | (4) | 17,584 | ||
| 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 | 65,127 | 30,931 | ||
| Amount attributable to the Company in the current period | 65,127 | 30,931 | ||
| 2. Changes in fair value of financial assets recorded in other comprehensive income | (637) | - | ||
| Current gain/(loss) | (637) | - | ||
| 3. Cash flow hedges | (76,988) | (86,037) | ||
| Current gain/(loss) | (76,988) | (119,842) | ||
| Previous other comprehensive income reclassified to profit for current period | - | 31,056 | ||
| Income tax effects recorded in other comprehensive income | - | 2,749 | ||
| 4. Differences arising from translation of foreign currency financial statements of overseas operations | (63,060) | 585,200 | ||
| (88,940) | 512,530 | |||
| V | Notes to Consolidated Financial Statements (Continued) | ||||||||||
| 67 | 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 January 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 December 2019 | 334,950 | 230,179 | (350,407) | (34,472) | (733,647) | 19,315 | - | (534,082) | (38,016) | (572,098) | |
| Change in 2020 | - | 58,518 | (637) | (35,430) | (83,770) | (7,145) | (4) | (68,468) | (20,472) | (88,940) | |
| 30 June 2020 | - | 288,697 | (351,044) | (69,902) | (817,417) | 12,170 | (4) | (602,550) | (58,488) | (661,038) | |
| V | Notes to Consolidated Financial Statements (Continued) | |||
| 68 | Earnings per share | |||
| (1) | Basic earnings per share | |||
| H1 2020 | H1 2019 | |||
| Net profit attributable to shareholders of the Company as the parent | 1,208,066 | 2,092,349 | ||
| Weighted average outstanding ordinary shares (in thousand shares) | 12,956,324 | 13,338,143 | ||
| Basic earnings per share (RMB yuan/share) | 0.0932 | 0.1569 | ||
| (2) | Diluted earnings per share | |||
| H1 2020 | H1 2019 | |||
| Net profit attributable to shareholders of the Company as the parent | 1,208,066 | 2,092,349 | ||
| Diluted weighted average outstanding ordinary shares (in thousand shares) | 13,528,439 | 13,549,649 | ||
| Diluted earnings per share (RMB yuan/share) | 0.0893 | 0.1544 | ||
| 69 | Cash generated from other operating activities | |||
| Cash generated from other operating activities in the consolidated cash flow statement was RMB1,133,384 thousand (H1 2019: RMB911,336 thousand), which primarily consisted of other current payments received and government grants. | ||||
| 70 | Cash used in other operating activities | |||
| Cash used in other operating activities in the consolidated cash flow statement was RMB1,707,145 thousand (H1 2019: RMB3,402,183 thousand), which primarily consisted of various expenses. | ||||
| 71 | Cash used in other investing activities | |||
| Cash used in other investing activities in the consolidated cash flow statement was RMB920 thousand (H1 2019: RMB7,118,896 thousand), which primarily consisted of cash used in other investing activities. | ||||
| 72 | Cash used in other financing activities | |||
| Cash used in other financing activities in the consolidated cash flow statement was RMB612,872 thousand (H1 2019: RMB1,850,155 thousand), which was mainly cash paid to acquire non-controlling interests. | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 73 | Supplementary information for the cash flow statement | ||||
| (1) | Reconciliation of net profit to net cash generated from/used in operating activities | ||||
| H1 2020 | H1 2019 | ||||
| Net profit | 1,069,124 | 2,737,063 | |||
| Add：Asset impairment allowance | 329,806 | 334,888 | |||
| Depreciation of fixed assets | 3,491,547 | 3,776,389 | |||
| Amortization of intangible assets | 301,654 | 264,149 | |||
| Amortization of long-term prepaid expense | 440,611 | 298,132 | |||
| Loss/(Income) from disposal of fixed assets, intangible assets and other long-lived assets | (1,320) | 3,428 | |||
| Loss on retired or damaged fixed assets | 76 | 540 | |||
| Loss/(Gain) on changes in fair value | (114,034) | (295,530) | |||
| Financial Expenses | 1,175,265 | 828,247 | |||
| Return on Investment | (1,340,665) | (2,005,739) | |||
| Decrease/(Increase) in deferred income tax assets | (19,727) | 462,246 | |||
| Increase/(Decrease) in deferred income tax liabilities | 42,461 | (49,255) | |||
| Decrease/(Increase) in inventory | 136,545 | 15,454,388 | |||
| Decrease/(Increase) in operating receivables | (3,060,866) | 10,111,819 | |||
| Increase/(Decrease) in operating receivables | 4,335,225 | (26,222,512) | |||
| Others | 562,108 | 452,570 | |||
| Net cash generated from/used in operating activities | 7,347,810 | 6,150,823 | |||
| (2) | There were no net cash payments for acquisition of subsidiaries in the current period. | ||||
| (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 | 219,596 | ||||
| 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 | 199,303 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | ||||
| 73 | Supplementary information for the cash flow statement | ||||
| (4) | Breakdown of cash and cash equivalents | ||||
| 30 June 2020 | 31 December 2019 | ||||
| 1. Cash | 21,026,155 | 17,637,743 | |||
| Of which: Cash on hand | 686 | 966 | |||
| Bank deposits available for payment on demand | 20,681,078 | 17,636,777 | |||
| Other monetary assets available for payment on demand | 344,391 | - | |||
| 2. Cash equivalents | - | - | |||
| 3. Cash and cash equivalents, end of the period | 21,026,155 | 17,637,743 | |||
| 74 | Changes in cash and cash equivalents, net | ||||
| H1 2020 | H1 2019 | ||||
| Ending cash and cash equivalents | 21,026,155 | 15,800,824 | |||
| Less: Beginning cash | 17,637,743 | 25,702,384 | |||
| Net increase in cash and cash equivalents | 3,388,412 | (9,901,560) | |||
| Analysis of ending cash and cash equivalents： | |||||
| Ending monetary assets | 21,542,628 | 16,442,086 | |||
| Less: Ending non-cash equivalents (note) | 516,473 | 641,262 | |||
| Ending cash and cash equivalents | 21,026,155 | 15,800,824 | |||
| Note： | The ending non-cash equivalents primarily included interest receivable on bank deposits, the statutory reserve deposits placed by TCL 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) | ||||||
| 75 | Assets with restricted ownership or use rights | ||||||
| 30 June 2020 | Reason for restriction | ||||||
| Monetary assets | 251,029 | Statutory reserve deposits in the central bank | |||||
| Monetary assets | 265,444 | Other monetary assets | |||||
| Held-for-trading financial assets | 1,840,612 | In pedge for loan | |||||
| Fixed assets | 36,094,192 | As collateral for loan | |||||
| Intangible assets | 2,616,064 | As collateral for loan | |||||
| 41,067,341 | |||||||
| 76 | Foreign currency monetary items | ||||||
| 30 June 2020 | |||||||
| Foreign currency balance | Conversion rate | RMB balance | |||||
| Monetary assets | |||||||
| Including: USD | 307,134 | 7.0795 | 2,174,352 | ||||
| HKD | 207,347 | 0.9134 | 189,391 | ||||
| Accounts receivable | |||||||
| Including: USD | 404,683 | 7.0795 | 2,864,953 | ||||
| HKD | 99,127 | 0.9134 | 90,543 | ||||
| Accounts payable | |||||||
| Including: USD | 104,069 | 7.0795 | 736,756 | ||||
| HKD | 1,171,248 | 0.9134 | 1,069,818 | ||||
| JPY | 2,649,347 | 0.0657 | 174,062 | ||||
| INR | 1,955,588 | 0.0937 | 183,239 | ||||
| Other receivables | |||||||
| Including: USD | 32,344 | 7.0795 | 228,979 | ||||
| HKD | 60,976 | 0.9134 | 55,695 | ||||
| JPY | 11,970 | 0.0657 | 786 | ||||
| PLN | 149 | 1.7877 | 266 | ||||
| INR | 786,528 | 0.0937 | 73,698 | ||||
| KRW | 95,000 | 0.0059 | 563 | ||||
| V | Notes to Consolidated Financial Statements (Continued) | |||||
| 76 | Foreign currency monetary items (continued) | |||||
| 30 June 2020 | ||||||
| Foreign currency balance | Conversion rate | RMB balance | ||||
| Other payables | ||||||
| Including: USD | 21,408 | 7.0795 | 151,558 | |||
| HKD | 76,967 | 0.9134 | 70,302 | |||
| JPY | 135,536 | 0.0657 | 8,905 | |||
| INR | 37,610 | 0.0937 | 3,524 | |||
| PLN | 4,920 | 1.7877 | 8,795 | |||
| KRW | 21,149 | 0.0059 | 125 | |||
| Short-term borrowings | ||||||
| Including: USD | 174,401 | 7.0795 | 1,234,672 | |||
| Long-term borrowings | ||||||
| Including: USD | 2,006,000 | 7.0795 | 14,201,477 | |||
| VI | Changes in 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.-Jun. 2020 | Newly incorporated | KRW100,000,000 | 100% | ||||||
| TCL Technology Investments Limited(BVI) | Apr.-Jun. 2020 | Newly incorporated | USD1 | 100% | ||||||
| Admiralty Harbour Strategic Investment Limited | Jun. 2020 | Newly incorporated | USD10,000 | 100% | ||||||
| 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 | ||||||||
| 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 | Indidrect | |||||||
| 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. (note 1) | Wuhan | Manufacturing and sales | Wuhan | - | 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% | Obtained in a 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% | Obtained in a 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% | Incorporated | ||
| Beijing Lingyun Data Technology Co., Ltd. | Beijing | Sales | Beijing | - | 60% | Incorporated | ||
| TCL Finance Holdings Group (Guangzhou) Co., Ltd. | Guangzhou | Financial | Guangzhou | 100% | - | Incorporated | ||
| TCL Finance Co., Ltd. | Huizhou | Financial | Huizhou | 82% | 18% | Incorporated | ||
| TCL Finance 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 | Indidrect | ||||||||||
| Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. | Huizhou | Financial | Huizhou | 89.94% | - | Purchased | |||||
| Xinjiang TCL Equity Investment Co., Ltd | Xinjiang | Investment business | Xinjiang | 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 | |||||
| Note 1 | TCL China Star Optoelectronics Technology Co., Ltd. (hereinafter referred to as “TCL CSOT”), a subsidiary of the Company, has a 45.55% interest in Wuhan China Star Optoelectronics Technology Co., Ltd. (hereinafter referred to as “Wuhan CSOT”) and a 33.88% interest in Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (hereinafter referred to as “Wuhan CSOT Optoelectronics Semiconductor”). TCL CSOT appoints key management personnel of Wuhan CSOT and Wuhan CSOT Optoelectronics Semiconductor and decides its business and financial policies, so TCL CSOT is considered to have substantial control over Wuhan CSOT. Therefore, Wuhan CSOT is included in the Company’s consolidated financial statements. | ||||||||||
| (2) | Subsidiaries with significant 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% | (156,898) | 349,027 | 34,412,835 | |||||||
| Highly Information Industry Co., Ltd. | 26.31% | 1,328 | 32,731 | 247,688 | |||||||
| VII | Interests in Other Entities (Continued) | |||||||||||||
| 1 | Interests in subsidiaries (continued) | |||||||||||||
| (2) | Subsidiaries with significant non-controlling interests (continued) | |||||||||||||
| The main financial information of the above subsidiary is listed as follows: | ||||||||||||||
| 30 June 2020 | 31 December 2019 | |||||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabiliites | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabiliites | |||
| TCL China Star Optoelectronics Technology Co., Ltd. | 45,915,354 | 102,202,156 | 148,117,510 | 44,137,998 | 42,680,582 | 86,818,580 | 39,784,300 | 90,798,110 | 130,582,410 | 36,200,599 | 39,150,594 | 75,351,193 | ||
| Highly Information Industry Co., Ltd. | 4,290,290 | 35,359 | 4,325,649 | 3,026,359 | 313,587 | 3,339,946 | 4,482,847 | 37,662 | 4,520,509 | 3,484,042 | 33,587 | 3,517,629 | ||
| H1 2020 | H1 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. | 19,512,205 | (139,252) | (210,542) | 6,728,060 | 16,275,667 | 1,018,706 | 942,406 | 3,596,443 | ||
| Highly Information Industry Co., Ltd. | 9,126,806 | 100,311 | 100,311 | (529,200) | 8,814,034 | 87,682 | 87,682 | (336,484) | ||
| 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 | |||||
| Associates– | ||||||
| Tianjin 712 Communication & Broadcasting Co., Ltd. | Tianjin | Communication | Yes | 19.07% | - | |
| Bank of Shanghai Co., Ltd. (note 1) | Shanghai | Financial | Yes | 5.58% | - | |
| Note1： | For the Reporting Period, the Company had a 5.58% 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 | |||||
| 30 June 2020 | 31 December 2019 | |||||
| Tianjin 712 Communication & Broadcasting Co., Ltd. | Bank of Shanghai Co., Ltd. | Tianjin 712 Communication & Broadcasting Co., Ltd. | Bank of Shanghai Co., Ltd. | |||
| Current assets | 4,669,040 | N/A | 4,747,834 | N/A | ||
| Non-current assets | 716,945 | N/A | 716,851 | N/A | ||
| Total assets | 5,385,985 | 2,388,229,360 | 5,464,685 | 2,237,081,943 | ||
| Current liabilities | 2,685,900 | N/A | 2,844,594 | N/A | ||
| Non-current liabilities | 115,750 | N/A | 61,820 | N/A | ||
| Total liabilities | 2,801,650 | 2,205,052,909 | 2,906,414 | 2,059,855,312 | ||
| Non-controlling interests | - | 528,204 | - | 518,019 | ||
| Equity attributable to shareholders of the Company as the parent | 2,584,336 | 182,648,247 | 2,558,272 | 176,708,612 | ||
| Share of equity in proportion to the Company’s interest | 492,833 | 10,187,422 | 487,862 | 9,077,778 | ||
| Carrying amount of investment in associate | 767,256 | 10,446,001 | 762,470 | 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) | |||||||
| H1 2020 | H1 2019 | |||||||
| Tianjin 712 Communication & Broadcasting Co., Ltd. | Bank of Shanghai Co., Ltd. | Tianjin 712 Communication & Broadcasting Co., Ltd. | Bank of Shanghai Co., Ltd. | |||||
| Revenue | 839,937 | 25,411,782 | 723,326 | 25,150,585 | ||||
| Net profit | 103,264 | 11,148,126 | 53,860 | 10,739,685 | ||||
| Other comprehensive income | - | 491,004 | - | 496,321 | ||||
| Total comprehensive income | 103,264 | 11,639,130 | 53,860 | 11,236,006 | ||||
| Dividends from associate to the Group in current period | 14,725 | 316,955 | 7,362 | 245,337 | ||||
| (3) | Financial information of insignificant joint ventures and associates combined respectively | |||||||
| H1 2020 | H1 2019 | |||||||
| Joint ventures: | ||||||||
| Aggregated carrying amount of investments | 54,008 | 148,373 | ||||||
| Aggregate of following items calculated in proportion to the Company’s interest | ||||||||
| Net profit (note) | 10,163 | 10,651 | ||||||
| Other comprehensive income (note) | - | - | ||||||
| Total comprehensive income | 10,163 | 10,651 | ||||||
| Associates: | ||||||||
| Aggregated carrying amount of investments | 7,338,987 | 6,723,710 | ||||||
| Aggregate of following items calculated in proportion to the Company’s interest | ||||||||
| Net profit (note) | 260,230 | 112,683 | ||||||
| Other comprehensive income (note) | (5,824) | (1,012) | ||||||
| Total comprehensive income | 254,406 | 111,671 | ||||||
| (4) | The Company had no significant joint ventures in the Reporting Period. | |||||||
| 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. | |||||||
| 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 30 June 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 (Continued) | ||||
| (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 June 30, the Group priced the foreign currency liabilities having significant interest rate risk exposure in USD; after corresponding management measures were taken, the total risk exposure of the item in USD was the net asset exposure USD130,454,222.10 which could be converted into RMB923,550,665.37 based on the spot rate on the balance sheet day. The translation reserve was not included. | |||||
| The Group applies the following exchange rate of RMB against USD: | |||||
| Average exchange rate | Exchange rate at period-end | ||||
| H1 2020 | 30 June 2020 | ||||
| USD/RMB | 7.0413 | 7.0795 | |||
| It shall be assumed that other risk variables remained unchanged except the interest rate, on which basis, changes in the Group’s exchange rate of RMB against USD made RMB increased/decreased 5% and the shareholder’s equity/net profit increased/decreased RMB46,177,533. | |||||
| The above-mentioned sensitivity analysis is made based on the assumption that the interest rate changes on the balance sheet day and financial instruments held by the Group on the balance sheet day based on the changed interest rate having the foreign exchange risk are re-calculated. The above analysis shall not include the translation reserve difference. | |||||
| (b) | Interest risk | ||||
| The Group’s interest rate risk mainly results from the bank liability with interest adopting the floating interest rate, and the Group has determined the proportion of fixed interest rate and floating interest rate based on the market environment and the risk tolerance. Up to 30 June 2020, the Group’s liabilities with interest based on the floating interest rate occupied 39%. However, the Group will continuously monitor the specific interest rate level and make corresponding adjustment according to the specific market changes so as to avoid any possible 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) | 2,879,210 | 388,178 | 5,721,943 | 8,989,331 | ||||
| Derivative financial assets (see Note V, 3) | - | 187,212 | - | 187,212 | ||||
| Receivables financing (see Note V, 6) | - | 106,755 | - | 106,755 | ||||
| Investments in other equity instruments (see Note V, 14) | 182,443 | - | 88,480 | 270,923 | ||||
| Other non-current financial assets (see Note V, 15) | - | - | 2,676,086 | 2,676,086 | ||||
| Total assets continuously measured at fair value | 3,061,653 | 682,145 | 8,486,509 | 12,230,307 | ||||
| Financial liabilities | ||||||||
| Item | Level 1 | Level 2 | Level 3 | Total | ||||
| Held-for-trading financial liabilities (see Note V, 29) | 240,427 | 163,103 | - | 403,530 | ||||
| Derivative financial liabilities (see Note V, 30) | - | 156,664 | - | 156,664 | ||||
| Total liabilities continuously measured at fair value | 240,427 | 319,767 | - | 560,194 |
| 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. |
| X | Related Parties and Related-Party Transactions (Continued) | |
| 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 (Hui Zhou) INC. | 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 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 Chuangdong Equity Investment Management Partnership (Limited Partnership) | Associate | |
| Shenzhen Tianyi Hemeng Education Co., Ltd. | Associate | |
| Bank of Shanghai Co., Ltd. | Associate | |
| Shanghai Huiying Medical Technology Co., Ltd. | Associate | |
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | Associate | |
| Fantasia Holdings Group Co., Limited | Associate | |
| TCL Finance (HK) Limited | 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 | |
| Getech Ltd. and its subsidiaries | Associate | |
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | Associate | |
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | Associate | |
| 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 | |
| Purplevine IP Operating (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 Inc. and its subsidiaries | Under control of the same director | |
| CJ Speedex Logistics Co., Ltd. | Significantly influenced by the Company’s director | |
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions | ||||
| H1 2020 | H1 2019 | ||||
| (1) | Selling raw materials and finished products to related parties | Note1 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 5,240,451 | 2,311,111 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 234,209 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 137,086 | 430,845 | |||
| Qihang International Import & Export Limited | 107,240 | - | |||
| Qihang Import&Export Limited | 96,347 | 661,114 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 2,389 | - | |||
| Purplevine IP Operating (Shenzhen) Co. Ltd | 508 | 329 | |||
| Saipu TCL Electronic Industrial Technology Co., Ltd. | - | 252,078 | |||
| TCL Sun,Inc. | - | 79,594 | |||
| TCT Mobile - Telefones LTDA | - | 44,889 | |||
| CJ Speedex Logistics Co., Ltd. | - | 84,809 | |||
| 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 | |||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | - | 40 | |||
| Huizhou Gaoshengda Technology Co., Ltd. | - | 15 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 12 | |||
| 5,818,230 | 3,889,112 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| H1 2020 | H1 2019 | ||||
| (2) | Purchasing raw materials and finished products from related parties | Note 2 | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 1,142,086 | 242,826 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 266,602 | 250,290 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 63,237 | 13,277 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 10,190 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 141 | 95,648 | |||
| TCL Intelligent Technology (Ningbo) Co., Ltd. | 7 | - | |||
| 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 | |||
| 1,482,263 | 1,003,234 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| H1 2020 | H1 2019 | ||||
| (3) | Receiving fundings from related parties | Note 3 | |||
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | 1,839,450 | 1,000,000 | |||
| TCL Finance (HK) Limited | 1,510,089 | 1,832,048 | |||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 77,054 | 82,009 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 42,653 | 12,684 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 36,224 | 20,428 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 17,844 | - | |||
| Qihang Import&Export Limited | 3,415 | 26,880 | |||
| Qihang International Import & Export Limited | 2,626 | - | |||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | 2,574 | 4,891 | |||
| Elite Excellent Investments Limited | 2,187 | 2,167 | |||
| Huixing Holdings Limited | 661 | 663 | |||
| Marvel Paradise Limited | 650 | 642 | |||
| Union Dynamic Investment Limited | 478 | 482 | |||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 241 | - | |||
| Petro AP (Hong Kong) Company Limited | 122 | 3,391 | |||
| Esteem Venture Investment Limited | 99 | - | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 14 | - | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 5 | - | |||
| Zijinshan Investment Co., Ltd. | 1 | 6 | |||
| TCL Industries Holdings Inc. and its subsidiaries | - | 14,186 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 3,813 | |||
| Huan Tech Co., Ltd. | - | 469 | |||
| TV University Online Distance Education Technology Co., Ltd. | - | 262 | |||
| 3,536,387 | 3,005,021 | ||||
| H1 2020 | H1 2019 | ||||
| (4) | Providing fundings for related parties | Note 3 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 2,733,731 | 2,882,797 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 244,714 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 22,428 | 83,819 | |||
| 3,000,873 | 2,966,616 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 3 | Major related-party transactions (continued) | ||||
| H1 2020 | H1 2019 | ||||
| (5) | Leases | ||||
| Rental income | |||||
| TCL Industries Holdings Inc. and its subsidiaries | 51,496 | 6,081 | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 19,986 | 20,421 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | 454 | 422 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 390 | 145 | |||
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | 161 | 71 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 29 | - | |||
| Purplevine IP Operating (Shenzhen) Co. Ltd | 25 | 341 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 3,364 | |||
| Shenzhen Thunderbird Network Media Co., Ltd. | - | 787 | |||
| Shenzhen Thunderbird Information Technology Co., Ltd. | - | 608 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | - | 445 | |||
| Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. | - | 253 | |||
| CJ Speedex Logistics Co., Ltd. | - | 250 | |||
| Urumqi Dongpeng Chuangdong 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 | |||
| 72,541 | 33,325 | ||||
| H1 2020 | H1 2019 | ||||
| Rental expense | |||||
| TCL Industries Holdings Inc. and its subsidiaries | 31,525 | 10,660 | |||
| Wuhan Lesheng Times Trading Co., Ltd. | - | 9,544 | |||
| CJ Speedex Logistics Co., Ltd. | - | 4,558 | |||
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | - | 603 | |||
| 31,525 | 25,365 | ||||
| H1 2020 | H1 2019 | ||||
| (6) | Providing labour service for or accepting labour service from related parties | ||||
| Providing labour service for related parties | 51,194 | 80,366 | |||
| Accepting labour service from related parties | 170,430 | 378,577 | |||
| X | Related Parties and Related-Party Transactions (Continued) | |||||
| 3 | Major related-party transactions (continued) | |||||
| H1 2020 | H1 2019 | |||||
| (7) | Receiving interest from or paying interest to related parties | Note 3 | ||||
| Interest received | 59,029 | 80,802 | ||||
| Interest paid | 4,789 | 7,218 | ||||
| H1 2020 | H1 2019 | |||||
| (8) | Remuneration of key management personnel | 5,209 | 7,270 | |||
| Note1 | 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. | ||||||
| Note2 | 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. | ||||||
| Note3 | Providing fundings for or receiving fundings from related parties and corresponding interest received or paid | |||||
| The Company set up a settlement center in 1997 and TCL 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. in the period from January to May in the current period are related-party transactions. | |||||
| X | Related Parties and Related-Party Transactions (Continued) | |||||
| 3 | Major related-party transactions (continued) | |||||
| Note6 | The transactions between the Company and the following companies in the period from January to March 2019 are related-party transactions. | |||||
| Related party | Relationship with the Company | |||||
| Saipu TCL Electronic Industrial Technology Co., Ltd. | Associate | |||||
| Taiyang Electro-optic (Huizhou) Co., Ltd. | Associate | |||||
| Palm Venture Group | Associate | |||||
| Beijing Shangdao Yuetu Technology Co., Ltd. | Associate | |||||
| Wuhan Shangde Plastics Technology Co., Ltd. | Associate | |||||
| TCL Very Lighting Technology (Huizhou) Co., Ltd. | Associate | |||||
| Huan Tech Co., Ltd. | Associate | |||||
| Canyon Circuit Technology (Huizhou) Co., Ltd. | Associate | |||||
| TCL Sun,Inc. | Joint venture | |||||
| TCT Mobile - Telefones LTDA | Associate’s subsidiary | |||||
| Huizhou Gaoshengda Technology Co., Ltd. | Associate’s subsidiary | |||||
| Huizhou Shenghua Industrial Co., Ltd. | Associate’s subsidiary | |||||
| Amlogic Co., Limited | Associate’s subsidiary | |||||
| Wuhan Lesheng Times Trading Co., Ltd. | Associate’s subsidiary | |||||
| Shenzhen Yisheng Kangyun Technology Development Co., Ltd. | Associate’s subsidiary | |||||
| T2Mobile International Limited | Joint venture’s subsidiary | |||||
| 4 | Balances due from and to related parties | |||||
| (1) | Accounts receivable | |||||
| 30 June 2020 | 31 December 2019 | |||||
| TCL Industries Holdings Inc. and its subsidiaries | 1,712,830 | 2,169,426 | ||||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 177,862 | - | ||||
| Qihang International Import & Export Limited | 105,630 | - | ||||
| Qihang Import&Export Limited | 41,083 | 24,892 | ||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 29,986 | 32,242 | ||||
| Purplevine IP Operating (Shenzhen) Co. Ltd | 438 | 39 | ||||
| Huizhou TCL Real Estate Development Co., Ltd. | 76 | - | ||||
| Bank of Shanghai Co., Ltd. | 75 | 68 | ||||
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | 13 | - | ||||
| Shanghai Huiying Medical Technology Co., Ltd. | - | 1,000 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (1) | Accounts receivable (continued) | ||||
| CJ Speedex Logistics Co., Ltd. | - | 33 | |||
| 2,067,993 | 2,227,700 | ||||
| (2) | Accounts payable | ||||
| 30 June 2020 | 31 December 2019 | ||||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 410,454 | 410,872 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 48,385 | 19,746 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 41,732 | 294,817 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 20,920 | 54,112 | |||
| Getech Ltd. and its subsidiaries | - | 23,617 | |||
| 521,491 | 803,164 | ||||
| (3) | Other receivables | ||||
| 30 June 2020 | 31 December 2019 | ||||
| TCL Industries Holdings Inc. and its subsidiaries | 36,878 | 59,769 | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 2,009 | - | |||
| PETRO AP S.A. | 1,322 | 1,296 | |||
| Nanjing Zijin A Dynamic Investment Partnership (Limited Partnership) | 296 | 296 | |||
| LG Electronics (Hui Zhou) INC. | 21 | 46 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 18 | 22,253 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 8 | 2 | |||
| 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 | |||
| 40,552 | 83,888 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (4) | Other payables | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 76,939 | 1,102 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 54,349 | 49,029 | |||
| Getech Ltd. and its subsidiaries | 28,696 | 23,137 | |||
| Petro AP (Hong Kong) Company Limited | 23,547 | 23,100 | |||
| TCL Finance (HK) Limited | 12,389 | 12,208 | |||
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | 5,546 | 5,541 | |||
| AGC New Electronic Display Glass (Shenzhen) Co., Ltd. | 4,685 | 4,701 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 4,108 | - | |||
| Purplevine IP Operating (Shenzhen) Co. Ltd | 3,591 | 3,238 | |||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | 3,548 | 2,035 | |||
| Qihang Import&Export Limited | 3,415 | 28,268 | |||
| Qihang International Import & Export Limited | 2,626 | - | |||
| Elite Excellent Investments Limited | 2,187 | 2,164 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 871 | 384 | |||
| Huixing Holdings Limited | 661 | 665 | |||
| Marvel Paradise Limited | 650 | 640 | |||
| CJ Speedex Logistics Co., Ltd. | 500 | 1,040 | |||
| Union Dynamic Investment Limited | 478 | 471 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | 165 | 165 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 131 | - | |||
| Esteem Venture Investment Limited | 99 | 97 | |||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 37 | 37 | |||
| Zijinshan Investment Co., Ltd. | 1 | 1 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | - | 27,654 | |||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | - | 3,591 | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | - | 2,769 | |||
| Beijing National Center for Open & Distance Education Co., Ltd. | - | 168 | |||
| TV University Online Distance Education Technology Co., Ltd. | - | 138 | |||
| 229,219 | 192,343 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (5) | Prepayments | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 63,621 | 31,592 | |||
| Getech Ltd. and its subsidiaries | 16,957 | - | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 7,018 | - | |||
| Shenzhen Xirang International Business Travel Co., Ltd. | 2,119 | 1,446 | |||
| TCL Industries Holdings Inc. and its subsidiaries | 733 | 565 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 35 | 35 | |||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | - | 200 | |||
| 90,483 | 33,838 | ||||
| (6) | Advances from customers | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 3 | 328 | |||
| TCL Industries Holdings Inc. and its subsidiaries | - | 1,994 | |||
| Huizhou TCL Real Estate Development Co., Ltd. | - | 76 | |||
| 3 | 2,398 | ||||
| (7) | Dividends receivable | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Bank of Shanghai Co., Ltd. | 316,955 | ||||
| Fantasia Holdings Group Co., Limited | 57,672 | - | |||
| Wuxi TCL Venture Capital Partnership (Limited Partnership) | - | 5,771 | |||
| 374,627 | 5,771 | ||||
| X | Related Parties and Related-Party Transactions (Continued) | ||||
| 4 | Balances due from and to related parties (continued) | ||||
| (8) | Deposits from related parties (note) | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. | 1,839,616 | 350,247 | |||
| TCL Finance (HK) Limited | 1,510,658 | - | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 42,686 | 30,489 | |||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 36,253 | 22,544 | |||
| Shenzhen Qianhai Qihang International Supply Chain Management Co., Ltd. | 17,856 | - | |||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | 2,575 | 1,601 | |||
| Xinjiang Dongpeng Heli Equity Investment Partnership (Limited Partnership) | 204 | 297 | |||
| Xinjiang Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) | 157 | 169,316 | |||
| Petro AP (Hong Kong) Company Limited | 122 | 140 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 14 | 83,149 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | 5 | 652,130 | |||
| 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 | |||
| 3,450,146 | 1,347,859 | ||||
| Note | These deposits are made by related parties in the Company’s subsidiary TCL Finance Co., Ltd. | ||||
| (9) | Other non-current assets | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Purplevine IP Operating (Shenzhen) Co. Ltd | 200,632 | 129,965 | |||
| (10) | Other current assets | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Tcl Industries Holdings Inc. and its subsidiaries | 100,313 | 5,208 | |||
| Huizhou TCL Environmental Resource Co., Ltd. and its subsidiaries | 379 | 738 | |||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 3 | 193 | |||
| TCL Air Conditioner (Wuhan) Co., Ltd. and its subsidiaries | - | 189 | |||
| 100,695 | 6,328 | ||||
| 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： | |||||
| 30 June 2020 | 31 December 2019 | ||||
| Within 1 year | 58,159 | 26,347 | |||
| 1-2 years | 41,471 | 16,748 | |||
| 2-3 years | 33,376 | 6,705 | |||
| Over 3 years | 126,164 | 5,416 | |||
| 259,170 | 55,216 | ||||
| 2 | Capital commitments | ||||
| 30 June 2020 | 31 December 2019 | ||||
| Under contractual obligations but not provided for | Note 1 | 8,041,420 | 6,733,484 | ||
| Approved by Board but not under contractual obligations | Note2 | - | 77,087 | ||
| 8,041,420 | 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 30 June 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 RMB19,312,590 thousand. | |
| As at 30 June 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 30 June 2020. | |
| XIII | Events after Balance Sheet Date |
| 1 | On 14 July 2020, as per the Filing Certificate FGBWZB [2020] No. 294 issued by the Natioanl Development and Reform Commission, TCL Tech. completed the overseas issue of its five-year 300 million US dollar bonds in 2020, with the value date on 14 July 2020 and the coupon rate being 1.875%. |
| 2 | The proposals in relation to the Company’s acquisition of the 100% equity interests in Tianjin Zhonghuan Electronics Group Co., Ltd. (hereinafter referred to as “Zhonghuan Electronics”) were approved at the Second Extraordianry Meeting and the 28th Meeting of the Sixth Board of Directors, as well as at the Fourth Extraordianry General Meeting of 2020. On 15 July 2020, the Company acquired the 100% equity interests in Zhonghuan Electronics. On 17 July 2020, the transaction parties signed the Equity Transaction Contract. Zhonghuan Electronics’s total assets as at the end of August 2019 were RMB46,423,005,400, and its revenue and net profit for January-August 2019 were RMB11,106,370,200 and RMB677,340,700 respectively, with its major assets being Tianjin Zhonghuan Semiconductor Co., Ltd. (stock code: 002129.SZ). |
| 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) | Discontinued operations | ||
| On 7 January 2019, the significant assets spin-off was approved at the First Extraordinary General Meeting of 2019. As such, the Company sold its direct holdings of the 100% equity interests in TCL Industries Holdings (HK) Limited, the 100% equity interests in Huizhou TCL Household Electric Appliance Group Co., Ltd., the 100% equity interests in TCL Home Appliances (Hefei) Co., Ltd., the 55% equity interests in Huizhou Cool Friends Network Technology Co., Ltd., the 100% equity interests in Koyoo Online Service Co., Ltd., the 100% equity interests in TCL Technology Park Co., Ltd., and the 36% equity interests in Getech Ltd., as well as its indirect holdings of the 75% equity interests in JDH Information Tech (Zhuhai) Co., Ltd. and the 1.50% equity interests in Huizhou Cool Friends Network Technology Co., Ltd. respectively through its wholly-owned subsidiaries TCL Finance Holdings Group (Guangzhou) Co., Ltd. and Huizhou TCL Light Electrical Appliances Co., Ltd., to TCL Industries Holdings Inc. for a total consideration of RMB4.76 billion. The significant assets spin-off has been completed in April 2019. | |||
| H1 2020 | H1 2019 | ||
| Revenue from discontinued operations | - | 20,167,401 | |
| Gross profit from discontinued operations | - | 171,147 | |
| Income tax expense on discontinued operations | - | 77,436 | |
| Net profit from discontinued operations | - | 93,710 | |
| Add: Net gain/loss on disposal of discontinued operations | - | 1,238,377 | |
| Total net profit from discontinued operations | - | 1,332,087 | |
| (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) | |||
| 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 six months ended 30 June 2020 | |||||||||
| Semi-conductor display and materials business | Distribution business | Others and internally offset accounts | Total | ||||||
| Revenue | 19,512,205 | 9,126,806 | 694,200 | 29,333,211 | |||||
| Gross profit | (134,775) | 141,187 | 1,227,299 | 1,233,711 | |||||
| Income tax expense | (1,604) | 40,876 | 125,315 | 164,587 | |||||
| Net profit | (133,171) | 100,311 | 1,101,984 | 1,069,124 | |||||
| Total assets | 140,989,292 | 4,325,649 | 39,518,293 | 184,833,234 | |||||
| Total liabilities | 79,705,967 | 3,339,946 | 36,895,498 | 119,941,411 | |||||
| Other items | |||||||||
| Depreciation and amortization expense | 4,414,769 | 3,608 | (184,563) | 4,233,814 | |||||
| Capital expenditure | 12,226,139 | - | 264,874 | 12,491,013 | |||||
| Net interest expense | 242,341 | 17,893 | 551,927 | 812,161 | |||||
| For the six months ended 30 June 2019 | |||||||||
| Semi-conductor display and materials business | Distribution business | Others and internally offset accounts | Total | ||||||
| Revenue | 16,275,667 | 8,814,034 | 18,691,913 | 43,781,614 | |||||
| Gross profit | 1,062,378 | 123,793 | 1,833,839 | 3,020,010 | |||||
| Income tax expense | 43,672 | 36,111 | 203,164 | 282,947 | |||||
| Net profit | 1,018,706 | 87,682 | 1,630,675 | 2,737,063 | |||||
| Total assets | 120,921,077 | 3,502,447 | 30,228,371 | 154,651,895 | |||||
| Total liabilities | 68,052,589 | 2,635,239 | 22,760,868 | 93,448,696 | |||||
| Other items | |||||||||
| Depreciation and amortization expense | 3,229,755 | 2,878 | 1,106,037 | 4,338,670 | |||||
| Capital expenditure | 10,586,329 | - | 788,661 | 11,374,990 | |||||
| Net interest expense | 431,309 | 31,084 | 324,058 | 786,451 | |||||
| XV | Notes to Financial Statements of the Company as Parent | ||||||||||||||||||||||
| 1 | Accounts receivable | ||||||||||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||||||||||
| Amount | Percentage | Allowance | Allowance ratio | Amount | Percentage | Allowance | Allowance ratio | ||||||||||||||||
| Within 1 year | 145,224 | 100% | 450 | 0.31% | 445,539 | 100% | 449 | 0.10% | |||||||||||||||
| As at 30 June 2020, there was not such accounts receivable from any shareholder with a 5% or greater voting stock. | |||||||||||||||||||||||
| 2 | Other receivables | ||||||||||||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||||||||||||
| Dividends receivable | 316,955 | 4,211,824 | |||||||||||||||||||||
| Other receivables | 14,684,296 | 12,917,649 | |||||||||||||||||||||
| 15,001,251 | 17,129,473 | ||||||||||||||||||||||
| (a) | Other receivables by nature are analyzed as follows: | ||||||
| 30 June 2020 | 31 December 2019 | ||||||
| Receivables from external entities | 650,086 | 440,600 | |||||
| Security deposits | 1,802,102 | 792 | |||||
| Others | 12,232,108 | 12,476,257 | |||||
| 14,684,296 | 12,917,649 | ||||||
| (b) | Allowance for doubtful other receivables is analyzed as follows: | ||||||
| Expected credit loss in next 12 months | Expected credit loss for the entire duration (credit impairment has occurred) | Total | |||||
| 31 December 2019 | 718 | 41,300 | 42,018 | ||||
| Adjustment for change in accounting policy | - | - | - | ||||
| 1 January 2020 | 718 | 41,300 | 42,018 | ||||
| Accrued in current period | - | - | - | ||||
| Reversal in current period | - | 601 | 601 | ||||
| Write-off in current period | - | - | - | ||||
| 30 June 2020 | 718 | 40,699 | 41,417 | ||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||||
| 2 | Other receivables (continued) | ||||||||||
| (c) | The aging of ther receivables is analyzed as follows： | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| Within 1 year | 11,112,350 | 75.46% | 9,708,317 | 74.91% | |||||||
| 1-2 years | 2,625,045 | 17.83% | 2,080,024 | 16.05% | |||||||
| 2-3 years | 736,098 | 5.00% | 940,910 | 7.26% | |||||||
| Over 3 years | 252,220 | 1.71% | 230,416 | 1.78% | |||||||
| 14,725,713 | 100% | 12,959,667 | 100% | ||||||||
| The outstanding other receivables were mostly current accounts with related parties. As at 30 June 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 RMB10,477,097 thousand (31 December 2019: RMB9,544,224 thousand), accounting for 71.15% (31 December 2019：73.65%) of the total other receivables of the Company. | |||||||||||||
| 3 | Long-term equity investments | ||||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||||
| Gross amount | Impair ment allowance | Carrying amount | Gross amount | Impair ment allowance | Carrying amount | ||||||||
| Associates and joint ventures (1) | 13,001,064 | - | 13,001,064 | 11,863,148 | - | 11,863,148 | |||||||
| Subsidiaries (2) | 32,721,624 | - | 32,721,624 | 27,434,124 | - | 27,434,124 | |||||||
| 45,722,688 | - | 45,722,688 | 39,297,272 | - | 39,297,272 | ||||||||
| As at 30 June 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 | ||||||||||||||||||
| Amount at beginning of year | 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 | 30 June 2020 | ||||||||||
| Bank of Shanghai Co., Ltd. | 9,314,611 | 792,028 | 591,599 | 64,718 | - | (316,955) | - | - | 10,446,001 | |||||||||
| China Innovative Capital Management Limited | 877,920 | - | 6,044 | - | - | - | - | - | 883,964 | |||||||||
| Tianjin 712 Communication & Broadcasting Co., Ltd. | 762,470 | - | 19,511 | - | - | (14,725) | - | - | 767,256 | |||||||||
| LG Electronics (Hui Zhou) INC. | 92,583 | - | 4,164 | - | - | - | - | - | 96,747 | |||||||||
| Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. | 40,837 | - | (136) | - | - | - | - | - | 40,701 | |||||||||
| Huizhou TCL Taidong Shihua Investment Co., Ltd. | 12,779 | - | (9,432) | - | - | (3,347) | - | |||||||||||
| Shenzhen Tixiang Enterprise Management Technology Co., Ltd. | 2,078 | - | 160 | - | - | - | - | - | 2,238 | |||||||||
| Shenzhen Jucai Supply Chain Technology Co., Ltd. | 5,342 | 300 | 207 | - | - | - | - | - | 5,849 | |||||||||
| TCL Nanyang Electric Appliance (Guangzhou) Co., Ltd. | 1,816 | - | (86) | - | - | - | - | - | 1,730 | |||||||||
| Huizhou TCL Environmental Resource Co., Ltd. | 71,738 | - | 8,158 | - | - | - | - | - | 79,896 | |||||||||
| Guangdong Rongchuang Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) | 375,020 | - | (4,832) | - | - | - | - | - | 370,188 | |||||||||
| Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) | 149,493 | - | (1,180) | - | - | - | - | - | 148,313 | |||||||||
| Others | 156,461 | - | 3,039 | - | - | - | - | (1,319) | 158,181 | |||||||||
| 11,863,148 | 792,328 | 617,216 | 64,718 | - | (331,680) | - | (4,666) | 13,001,064 | ||||||||||
| XV | Notes to Financial Statements of the Company as Parent (Continued) | ||||||||
| 3 | Long-term equity investments (continued) | ||||||||
| (2) | Subsidiaries | ||||||||
| Company’s voting right | 1 January 2020 | Increase in current period | Decrease in current period | 30 June 2020 | |||||
| TCL China Star Optoelectronics Technology Co., Ltd. | 91.56% | 22,164,098 | 5,268,400 | - | 27,432,498 | ||||
| TCL Finance Co., Ltd. | 82.00% | 1,256,003 | - | - | 1,256,003 | ||||
| TCL Finance 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 Co., 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 Technology Development Co., Ltd. | 100% | 1,000 | - | - | 1,000 | ||||
| Beijing Zhiqujia Technology Co., Ltd. | 100% | 257,627 | - | - | 257,627 | ||||
| Ningbo TCL Equity Investment Co., Ltd. | 100% | 300,000 | - | - | 300,000 | ||||
| TCL Technology Investments Limited | 100% | 188,293 | - | - | 188,293 | ||||
| Winshero Investment Limited | 100% | - | - | - | - | ||||
| Equity incentives of subsidiaries | 10,452 | 170 | - | 10,622 | |||||
| 27,434,124 | 5,792,450 | (504,950) | 32,721,624 | ||||||
| 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 | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Non-trading equity instruments | 15,000 | 15,000 | |||||||||
| 5 | Other non-current financial assets | ||||||||||
| 30 June 2020 | 31 December 2019 | ||||||||||
| Equity investments | 1,573,718 | 1,531,335 | |||||||||
| Debt investments | 9,342 | 9,578 | |||||||||
| 1,583,060 | 1,540,913 | ||||||||||
| 6 | Revenue and cost of sales | ||||||||||
| H1 2020 | H1 2019 | ||||||||||
| Revenue | Cost of sales | Revenue | Cost of sales | ||||||||
| Core business | 382,812 | 377,010 | 491,348 | 483,925 | |||||||
| Non-core business | 103,572 | 7,048 | 272,251 | 166,993 | |||||||
| 486,384 | 384,058 | 763,599 | 650,918 | ||||||||
| 7 | Return on investment | ||||||||||
| H1 2020 | H1 2019 | ||||||||||
| Income from disposal of debt instruments at fair value through profit or loss | 10,177 | 86,292 | |||||||||
| Income from disposal of equity instruments at fair value through profit or loss | - | 12,050 | |||||||||
| Income from holding debt instruments at fair value through profit or loss | 2,729 | 20,310 | |||||||||
| Debt instruments at amortized cost through profit or loss | - | 53,606 | |||||||||
| Income from holding equity instruments at fair value through profit or loss | 12,265 | 9,676 | |||||||||
| Dividends from subsidiaries | 736,919 | 177,885 | |||||||||
| Share of profit of associates for current period | 626,648 | 584,429 | |||||||||
| Share of profit of joint ventures for current period | (9,432) | (1,199) | |||||||||
| Net income from disposal of long-term investments | 12,549 | (200,193) | |||||||||
| 1,391,855 | 742,856 | ||||||||||
| As at 30 June 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 RMB863,361 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 RMB11,811,678 thousand. | ||||
| 10 | Contingent liabilities | |||
| As at 30 June 2020, the contingent liabilities not provided for in the financial report are as follows: | ||||
| 30 June 2020 | 31 December 2019 | |||
| Guarantees for trade notes and letters of guarantee of subsidiaries | 19,005,682 | 9,809,585 | ||
| Guarantees for bank loans of subsidiaries | 26,985,549 | 22,119,613 | ||
| Guarantees for bank loans, trade notes, letters of credit, etc. of related parties | 19,312,590 | 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 | |||
| H1 2020 | H1 2019 | |||
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 289,779 | 1,299,737 | ||
| 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) | ||||
| 355,098 | 592,690 | |||
| 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 | 280,759 | - | ||
| 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) | ||||
| 40,067 | 72,879 | |||
| Non-operating income and expense other than the above | 192,303 | 26,753 | ||
| Income tax effects | (78,214) | (91,321) | ||
| Non-controlling interests effects | (53,589) | (58,856) | ||
| Non-recurring gains and losses attributable to ordinary shareholders of the Company as the parent | 1,026,203 | 1,841,882 | ||
| 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 | 1,208,066 | 4.11% | 0.0932 | 0.0893 | ||||
| Net profit attributable to ordinary shareholders of the Company before non-recurring gains and losses | 181,863 | 0.62% | 0.0140 | 0.0134 | ||||
Company Name: TCL Technology Group Corporation
Date: 27 Agust 2020
The financial statements and the notes thereto from page 1 to page 144 are signed by:
| Legal Representative: | Li Dongsheng | Person-in-charge of financial affairs： | Du Juan | Person-in-charge of the financial department: | Xi Wenbo |
Part X Other Information Submitted
I Other Material Social Security Issues
Indicate whether the listed company or any of its subsidiaries is involved in any other material social securityissues.
□ Yes ■ No □ Not applicable
Indicate whether the Company received any administrative punishments in the Reporting Period.
□ Yes ■ No □ Not applicable
II Communications with the Investment Community such as Researches,Inquiries and Interviews during the Reporting Period
Date
| Date | Place | Way of communication | Type of communication party | Communication party | Main discussions and materials provided |
| 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 |
| 16 January 2020 | Company Conference Room in Shenzhen | By visit | Institutional investor | TF Securities, China Asset Management, TruValue Asset Management, Dingsa Fund, Essence Fund, Essence Securities, Sense Fund, Boyuan Fund, JTJ Investment, China Orient Asset Management, etc. | Inquired about the Company’s business development |
| 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 |
| 29 April 2020 | - | By phone | Institutional investor | Harvest Fund, China Asset Management, Penghua Fund, Perseverance Asset Management, asptex, Daiwa, Morgan Stanley, Q Fund Managemet, UG, Essence International, Essence Securities, Aeon Insurance Asset Management, etc. | Inquired about the Q1 2020 performance and development planning of TCL Tech. |
III Financial Relationships between the Listed Company and the ControllingShareholder and Its Related Parties
□ Applicable ■ Not applicable