TCL Technology Group Corporation Annual Report 2019
TCL 科技集团股份有限公司
TCL Technology Group Corporation
ANNUAL REPORT 2019
31 March 2020
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TCL Technology Group Corporation Annual Report 2019
Table of Contents
Part I Important Notes, Table of Contents and Definitions .................................................. 8
Part II Corporate Information and Key Financial Information ........................................... 11
Part III Business Summary .........................................................................................................17
Part IV Directors’ Report .............................................................................................................22
Part V Significant Events ............................................................................................................51
Part VI Share Changes and Shareholder Information .........................................................84
Part VII Directors, Supervisors, Senior Management and Staff .......................................93
Part VIII Corporate Governance ..............................................................................................113
Part IX Corporate Bonds .......................................................................................................... 129
Part X Financial Report............................................................................................................. 138
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TCL Technology Group Corporation Annual Report 2019
Achieve Global Leadership by Innovation and Efficiency
Chairman’s Statement
Dear shareholders, customers and partners,
In 2019, as supply surged and growth of demand slowed down, the global semi-conductor
display industry entered a cold winter with great earning pressure. To survive and also
prepare for the growth of next cycle, became the top priority for every company. Under the
severe and complicated business environment, the Company persues its global leadership
steadily, completed the significant assets spin-off, and continuously improved the efficiency
by organization reformation, so as to promote steady growth in all the businesses.
Business Review for 2019
In 2019, on the reference basis (the consolidation scope after the Restructuring), the
Company recorded revenue of RMB57.27 billion, up by 18.7% year -on-year; and a net
profit of RMB3.56 billion, up by 0.53% yearly, of which the net profit attributable to the listed
company’s shareholders was RMB2.62 billion, down by 17.0% yearly.
The Company completes the significant assets spin-off, optimizes the capital structure and
improves the operating efficiency. The net profit per capita increases to RMB74,000 from
RMB38,600. And the debt/asset ratio decreases to 61.3% from 68.4%, while the net cash
flow generated from operating activities amounted to RMB11.49 billion, both improve the
sustainable potential greatly. The Company keeps on its strategy as global industry leader,
concentrates on the long-term strategic industries which are high-tech and capital intensive.
Enhance the ecological development of the industry, improves the ability of industrial
finance and facilitates the industrial development after the restructuring. The clear
development strategy of the Company will fully release the growth potential and the positive
effect of the restructuring.
The panel price continuously drops to the historic low ebb with industry losses arising and
the market further concentrated to the leading enterprises last year. TCL CSOT keeps the
best efficiency and profitability of the industry by the business process improvement,
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TCL Technology Group Corporation Annual Report 2019
ultimate cost reduction and the better product and customer mix. For the year under review,
TCL CSOT recorded revenue of RMB33.99 billion, up by 22.9% year-on-year, and a net
profit of RMB964 million, down by 58.5% year-on-year. The t6 (G11) plant in Shenzhen
reached designed production at the end of the 2019 and the t4 (flexible AMOLED) plant
achieved mass production at the same time. The two plants will support the profit growth of
this year firmly.
TCL CSOT continuously invests in R&D and actively develops the next generation of
display technologies, from materials to manufacturing (including ink-jet printing flexible
OLED). The PCT patent applications of the Company increases 2,752 in the current period
and the acumulated patent applications reaches to 11,261.
The industrial finance business develops steadily and optimizes the capital operating
system, improves the asset efficiency and risk control capability. The supply chain finance
enables the industry development and meet the capital needs. TCL venture capital focuses
on the opportunities of cutting-edge technology; Admiralty Harbour Capital starts its
offshore operates smoothly. For the Reporting Period, the industrial finance, investment
and venture capital recorded a net profit of RMB999 million totally; Earning from the
significant assets spin-off was RMB1.15 billion. The other businesses of the Company were
stable and recorded revenue of RMB22.9 billion and a net profit of RMB320 million.
Earnings from finance and other businesses stabilize the performance of the Company
during the winter of the panel cycle.
2020 business planning
Since the end of last year, the price of the big-size panel has risen as business environment
improved. I think that the global demand-supply relationship of the industry has not
changed fundamentally, but the long-term prospect of the industry is bright with very
large market potential. The human-computer interaction technology creates the new
application scenarios and expand the new market in demand of commercial display; Global
industry reshuffling are accelerated and the industry concentrate to the leading companies.
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TCL Technology Group Corporation Annual Report 2019
The environment of the global display industry will be better comparing last year and the
enterprise with edge will have more opportunities.
TCL CSOT focuses on "improving efficiency and profitability", compares with all the
benchmarks thoroughly, finds the root reason, responses quickly, builds up the core
competencies, continues to reduce the cost, improves operation quality as well as actively
expands new markets and customers to achieve business success. The Company will
maintain the max production of the t6 plant, further expand the capacity of t3 plant, reach
mass production of the Phase I of the t4 plant, complete Phase II and Phase III construction
of t4, and start the t7 (G11) operation at the end of the year. Continuously max the existing
capacity and complete full sales. Keep on capacity expansion and support the revenue
growth this year. The Company shall dedicated to the video interaction and commercial
display technology, improve LTPS and flexible AM-OLED technology, further optimize
product and customer structure, continuously strengthen the market position and enhance
earnings. We are confident that TCL CSOT's revenue growth and profitability will exceed
last year.
The industrial finance & investment business will support the semiconductor display from
many aspects, further improve the financial status and asset turnover rate, as well as lower
financial costs. TCL Capital will focus on investment from upstream to downstream of
industrial chain and strategic technology, and support ecological perfection of the
semi-conductor display. The industrial finance & investment business will continuously
contribute to steady growth in earnings and improve the capability to counter the cycle.
The Company will continue to spin off the other business and keep an eye on the M&A
opportunity in the semiconductor. Focus on the semi-conductor display business and
shareholder return.
The Company has an active expectation this year. Although the COVID-19 epidemic
causes greater uncertainty to the global economy, we have confidence to overcome
difficulties and challenges to further expand the market share and achieve a strong revenue
growth.
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TCL Technology Group Corporation Annual Report 2019
Medium-and-long term strategic outlook
China is the world's largest exporter. And the manufacture is the root of China's economic
competitiveness, but the high-end manufacturing ability is insufficient with low value added.
China need to upgrade its manufacturer, enhance their high-end manufacturing and
technology ability. The long-term strategy of the company is centralizing the resource
and building up global leadership in strategic industries of technology-intensive and
capital-intensive. On the other hand, the Company enhances the industrial financial
capacity, develops the industrial finance business creatively, facilitates industrial
development, establishes the efficient industrial financial business system and
increases the investment income also.
The semi-conductor display technology and material is one of the most important core and
basic industries with great market prospects of which China has a global advantage.
I think there is an opportunity for China's display industry to become the global leader in
big-size products, but in medium and small size will face the challenges from Korean
companies. China and Korea will become the final leading forces of global display industry.
As the competition of the display industry will be heated, the business volatility will be lower
finally. The leading player's advantages will be significant and the return will increase
gradually. The Company will increase the scale and efficiency of the industry by interior and
exterior development, increase R&D investment, establish the technical barrier, break
through the next generation of display technology, deploy the global industrial chain layout
actively and serve global customers, establish the ecological system of the industry,
improve efficiency and become a global leader in the display industry.
With the advantages from technology, management and capital, the Company is looking for
opportunity to create a new field in the capital-intensive and technology-intensive strategic
industries to support long-term sustainable growth of the enterprise. The potential target will
be the leading enterprise of the industry, which has consistent business logic and has
synergy to increase earnings.
The Company always values shareholder returns and stabilizes the cash dividends. The
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TCL Technology Group Corporation Annual Report 2019
Board of Directors proposes the dividend of RMB0.1 per share for the year under review.
The Company has distributed cash dividends for 9 consecutive years since 2012 and
cumulative dividends will exceed RMB8.1 billion. The Group will continuously execute the
existing dividend policy and actively pay back the shareholders. In 2019, the Company
cumulatively repurchased 565 million shares with total RMB1.934 billion of repurchase to
enhance shareholder return.
I have personally increased my shares in the Company by a total of 175 million shares
since Dec. 2018 and I have confidence in the long-term value of the Company.
Finally, on behalf of the Board of Directors, I’d like to take this opportunity to express my
gratitude for the trusts of all our shareholders, for the support from all our partners and
users, as well as for the hard work of management team and staff!
Li Dongsheng
31 March 2020
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TCL Technology Group Corporation Annual Report 2019
Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the
directors, supervisors and senior management of TCL Technology Group
Corporation (hereinafter referred to as the “Company”) hereby guarantee the
factuality, accuracy and completeness of the contents of this Report and its
summary, and shall be jointly and severally liable for any misrepresentations,
misleading statements or material omissions therein.
All the Company’s directors have attended the Board meeting for the review of this
Report and its summary. And all the Company’s supervisors have attended the
meeting of the Supervisory Committee for the review of this Report and its summary.
The Board has approved a final dividend plan for the ordinary shareholders as
follows: based on the share capital of 13,000,372,307 shares on 27 March 2020 that
are eligible for profit distribution (the total share capital of 13,528,438,719 shares
minus the 528,066,412 shares in the Company’s special securities account for
repurchase that are not eligible for profit distribution), a cash dividend of RMB1 (tax
inclusive) per 10 shares is to be distributed to the shareholders, totaling
RMB1,300,037,230.70. The retained earnings of RMB6,819,795,641.3 will carry
forward for future distribution. Meanwhile, there will be no bonus issue from either
profit or capital reserves for the year under review.
Mr. Li Dongsheng, the Chairman of the Board, Ms. Du Juan, the person-in-charge of
financial affairs (Chief Financial Officer), and Mr. Xi Wenbo, the person-in-charge of
the financial department, hereby guarantee that the financial statements carried in
this Report are factual, accurate and complete.
This Report and its summary have been prepared in both Chinese and English.
Should there be any discrepancies or misunderstandings between the two versions,
the Chinese versions shall prevail.
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TCL Technology Group Corporation Annual Report 2019
Definitions
Term Definition
The “Company”, the “Group”, “TCL”, “TCL TCL Technology Group Corporation and its consolidated subsidiaries,
Tech.” or “we” except where the context otherwise requires
The “Reporting Period” The period from 1 January 2019 to 31 December 2019
The reference basis or the reference report The financial reports of the Reporting Period and last year that the
Company prepares based on the consolidation scope after the
restructuring, i.e. exclusive of the effects of the restructured businesses
TCL Industries TCL Industries Holdings Inc.
The “Major Asset Restructuring”, The major asset restructuring approved at the 13 th meeting of the 6 th
“Restructuring” or “significant assets spin-off” Board of Directors on 7 December and the First Extraordinary General
Meeting of 2019 on 7 January 2019 and settled in April 2019
TCL CSOT TCL China Star Optoelectronics Technology Co., Ltd.
Wuhan CSOT Wuhan China Star Optoelectronics Technology Co., Ltd.
Guangdong Juhua Guangdong Juhua Printed Display Technology Co., Ltd.
China Ray Guangzhou China Ray Optoelectronic Materials Co., Ltd.
Highly Highly Information Industry Co., L td., a majority-owned subsidiary of the
Company listed on the National Equities Exchange and Quotations
(stock code: 835281)
CDOT China Display Optoelectronics Technology Holdings Limited, a
majority-owned subsidiary of the Company listed on the Stock Exchange
of Hong Kong (stock code: 00334.HK)
Bank of Shanghai Bank of Shanghai Co., Ltd. (stock code: 601229.SH), with the Company
holding a 5.14% 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
Huizhou Environmental Resource Huizhou TCL Environmental Resource Co., Ltd.
TCL Industries (HK) TCL Industries Holdings (HK) Limited
TCL Household Electric Appliance Huizhou TCL Household Electric Appliance Group Co., Ltd.
Open Edutainment Beijing National Center for Open & Distance Education Co., Ltd.
Hefei Home Appliances TCL Home Appliances (HeFei) Co., Ltd.
Cool Friends Technology Huizhou Cool Friends Network Technology Co., Ltd.
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TCL Technology Group Corporation Annual Report 2019
Koyoo Online Service Koyoo Online Service Co., Ltd.
TCL Technology Park TCL Technology Park Co., Ltd.
JDH JDH Information Tech (Zhuhai) Co., Ltd.
HAWK Internet Shenzhen HAWK Internet Co., Ltd.
Getech Getech Ltd.
t1 project The generation 8.5 (or G8.5) TFT-LCD production line of TCL CSOT
t2 project The generation 8.5 (or G8.5) TFT-LCD (including oxide semiconductor)
production line of TCL CSOT
t3 project The generation 6 (or G6) LTPS-LCD panel production line of TCL CSOT
t4 project The generation 6 (or G6) flexible LTPS-AMOLED panel production line
of TCL CSOT
t6 project The generation 11 (or G11) new TFT-LCD production line of TCL CSOT
t7 project The generation 11 (or G11) new ultra-high-definition (UHD) TFT-LCD
and AMOLED production line of TCL CSOT
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TCL Technology Group Corporation Annual Report 2019
Part II Corporate Information and Key Financial Information
I Corporate Information
Stock name TCL Corp. Stock code 000100
Changed stock name1 TCL Tech.
Stock exchange for listing Shenzhen Stock Exchange
Company name in Chinese TCL 科技集团股份有限公司
Abbr. TCL 科技
Company name in English TCL Technology Group Corporation
Abbr. TCL TECH.
Legal representative Li Dongsheng
TCL Tech Building, 17 Huifeng Third Road, Zhongkai Hi-Tech Development District,
Registered address
Huizhou City, Guangdong Province, China
Zip code 516001
TCL Tech Building, 17 Huifeng Third Road, Zhongkai Hi-Tech Development District,
Office address
Huizhou City, Guangdong Province, China
Zip code 516001
Company website http://www.tcl.com
Email address ir@tcl.com
Fortune China 500
Top 60 Chinese Corporate Citizens 2019
Responsibility Value Innovation Enterprise Award
Outstanding Enterprise in Social Responsibility granted by China Corporate Social
Responsibility Annual Conference
Company honors Investors’ Favorite Award granted by Cailianpress.com
Best Board Award granted by the 15 th Gold Round Table
Sustainability Innovation Award granted by the Caijing magazine
Best A-stock Company in Investment Value Award granted by Gelonghui
Best China Listed Companies in Corporate Social Responsibility Award 2018 granted by
JRJ.com
1
In order to reflect its business scope and operations in an accurate and clear manner, as well as its strategic positioning
to become a globally leading technology company, the Company has changed, upon approval, its Chinese name from
“TCL 集团股份有限公司” to “TCL 科技集团股份有限公司”, English name from “TCL Corporation” to “TCL Technology
Group Corporation”, stock name in Chinese from “TCL 集团” to “TCL 科技”, stock name in English from “TCL” to “TCL
Tech.”, and the abbreviation of its English name from “TCL Corp.” to “TCL Tech.”. The stock code of “000100” remains
unchanged.
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TCL Technology Group Corporation Annual Report 2019
II Contact Information
Board Secretary
Name Liao Qian
19/F, Tower B, TCL Building, Gaoxin South First Road,
Address Shenzhen High-Tech Industrial Park, Shenzhen,
Guangdong Province, China
Tel. 0755-3331 1666
Fax 0755-3331 3819
Email address ir@tcl.com
III Media for Information Disclosure and Place where this Report Is Lodged
Newspapers designated by the Company for Securities Times, China Securities Journal, Shanghai Securities
information disclosure News and Securities Daily
Website designated by CSRC for publication of
http://www.cninfo.com.cn
this Report
Place where this Report is lodged Board Office of TCL Technology Group Corporation
IV Change to Company Registered Information
Unified social credit code 91441300195971850Y
Change to principal activity of the
Not applicable
Company since going public (if any)
Every change of controlling
Not applicable
shareholder since incorporation (if any)
V Other Information
The independent audit firm hired by the Company:
Name Da Hua Certified Public Accountants (Special General Partnership)
Office address Room 1101, Building 7, No. 16 Xi Si Huan Zhong Road, Haidian District, Beijing
Accountants writing signatures Qiu Junzhou and Jiang Xianmin
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting
Period:
□ Applicable ■ Not applicable
The independent financial advisor hired by the Company to e xercise constant supervision over the Company in the
Reporting Period:
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TCL Technology Group Corporation Annual Report 2019
Name Office address Representative Period of supervision
CITIC Securities Tower, No.
From 1 March 2019 to 31
CITIC Securities Co., Ltd. 8 Zhongxin 3rd Road, Futian Huang Biao and Liu Jian
December 2020
District, Shenzhen, China
VI Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes ■ No
2019-over-2018
Item 2019 2018 2017
change (%)
Revenue (RMB)Note 74,933,085,688 113,360,075,545 -33.90 111,577,362,348
EBITDA 14,224,327,742 14,096,523,261 0.91 13,395,054,317
Net profit (RMB) 3,657,735,320 4,065,194,164 -10.02 3,544,702,884
Net profit attributable to the listed
2,617,766,571 3,468,207,407 -24.52 2,664,396,006
company’s shareholders (RMB)
Net profit attributable to the listed
company’s shareholders before 235,119,321 1,587,391,372 -85.19 1,190,649,328
non-recurring gains and losses (RMB)
Basic earnings per share (RMB/share) 0.1986 0.2566 -22.60 0.2178
Diluted earnings per share (RMB/share) 0.1935 0.2562 -24.47 0.2178
Weighted average return on equity (%) 9.09 11.98 -2.89 10.86
Net cash generated from/used in
11,490,096,405 10,486,580,443 9.57 9,209,615,123
operating activities (RMB)
Net cash per share generated
from/used in operating activities 0.8493 0.7739 9.74 0.6814
(RMB/share)
Change of 31
December
31 December 31 December 31 December
2019 over 31
2019 2018 2017
December
2018 (%)
Total assets (RMB) 164,844,884,926 192,763,941,739 -14.48 160,293,985,835
Total owners’ equity (R MB) 63,883,145,340 60,871,672,647 4.95 54,142,938,886
Owners’ equity attributable to the listed
30,111,946,237 30,494,364,951 -1.25 29,747,067,178
company’s shareholders (RMB)
Share capital (share) 13,528,438,719 13,549,648,507 -0.16 13,514,972,063
Equity per share attributable to the listed
2.2258 2.2506 -1.1 2.2010
company’s shareholders (RMB/share)
Note: In April 2019, the Company completed the handover of major assets in a restructuring. Therefore, the revenue data
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TCL Technology Group Corporation Annual Report 2019
of 2019 and 2018 are not comparable as the former only includes the January-March 2019 revenue generated by the
restrcucted assets, while the latter comprises the January-December 2018 such revenue. Adopting the same reference
basis, revenue would be up by 18.72% in 2019 compared to 2018.
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
13,528,438,719
before the disclosure of this Report (share)
Fully diluted earnings per share based on the latest total
0.1935
share capital above (RMB/share)
Note: After the restructuring, the Company has shifted to a globally leading intelligent technology company concentrating
on the semi-conductor display and materials business. It is the key operational philosophy and mission of the Company to
create value for and grow with the shareholders. In order to effecti vely protect shareholders’ interests and enhance
shareholder value, the Company carried out a share repurchase programme during the Reporting Period , which has been
completed on 10 January 2020. Cumulatively, 565,333,922 shares (or 4.18% of the total share capital) have been
repurchased, of which 3,875,613 shares have been used for the 2019 Restricted Stock Incentive Plan and the Second
Global Innovation Partner Plan, 33,391,897 shares have been used for the Second Global Partner Plan, and the rest will
be kept as treasury shares and used for employee stock ownership plans, equity incentive plans or convertible bonds.
The key financial information of 2019 and 2018 exclusive of the effects of the restructuring businesses (reference data
presented based on the consolidation scope after the restructuring) is as follows:
2019-over-2018
Item 2019 2018
change (%)
Revenue (RMB) 57,270,940,685 48,240,376,808 18.72
Net profit (RMB) 3,564,025,084 3,545,237,938 0.53
Net profit attributable to the listed
2,617,778,635 3,153,044,155 -16.98
company’s shareholders (RMB)
Basic earnings per share
0.1986 0.2333 -14.87
(RMB/share)
Diluted earnings per share
0.1935 0.2329 -16.92
(RMB/share)
Weighted average return on
9.09 9.74 -0.65
equity (%)
Note: The data of 2019 and 2018 in the table above exclude the results of the restructuring businesses.
Indicate whether there are any corporate bonds.
■ Yes □ No
Indicate whether the Company has seen a deficit for the past two years.
□ Yes ■ No □ Not applicable
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TCL Technology Group Corporation Annual Report 2019
VII Accounting Data Differences under China’s Accounting Standards for Business
Enterprises (CAS) and International Financial Reporting Standards (IFRS) and
Foreign Accounting Standards
1. Net Profit and Equity under CAS and IFRS
No such differences for the Reporting Period.
2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards
No such differences for the Reporting Period.
3. Reasons for Accounting Data Differences Above
□ Applicable ■ Not applicable
VIII Key Financial Information by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 29,600,956,875 14,180,656,860 15,036,052,357 16,115,419,596
Net profit 1,006,077,530 1,730,985,146 750,351,631 170,321,013
Net profit attributable to the
779,088,389 1,313,260,303 484,981,289 40,436,590
listed company’s shareholders
Net profit attributable to the
listed company’s shareholders
560,950,806 -310,483,676 252,929,177 -268,276,986
before non-recurring gains and
losses
Net cash generated from/used
2,243,903,241 3,906,918,581 1,458,452,367 3,880,822,216
in operating activities
Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what
have been disclosed in the Company’s quarterly or interim reports.
□ Yes ■ No
IX Non-Recurring Gains and Losses
Unit: RMB
Item 2019 2018 2017 Note
Gain or loss on disposal of non-current
assets (inclusive of impairment allowance 1,419,020,969 -58,305,452 420,543,530 Not applicable
write-offs)
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TCL Technology Group Corporation Annual Report 2019
Government subsidies charged to current
profit or loss (exclusive of government
subsidies given in the Company’s ordinary
1,170,648,526 1,377,064,570 1,159,442,050 Not applicable
course of business at fixed quotas or
amounts as per the government’s uniform
standards)
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 - - 191,917,137 Not applicable
enjoyable fair value of identifiable net
assets of investees when making
investments
Gain or loss on fair-value changes in
trading financial assets and liabilities &
investment income from disposal of
trading financial assets and liabilities and
186,339,457 162,729,226 -207,276,526 Not applicable
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
77,285,628 871,846,769 504,575,138 Not applicable
than the above
Less: Corporate income tax 165,397,982 191,940,974 310,502,820 Not applicable
Non-controlling interests (net of tax) 305,249,348 280,578,104 284,951,831 Not applicable
Total 2,382,647,250 1,880,816,035 1,473,746,678 Not applicable
Explanation of why the Company reclassifies as recurrent a non -recurring gain/loss item defined or listed in the
Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public—Non-Recurring Gain/Loss Items:
□ Applicable ■ Not applicable
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TCL Technology Group Corporation Annual Report 2019
Part III Business Summary
I Principal Activity of the Company in the Reporting Period
During the Reporting Period, the Company primarily consists of the following three
business segments: the semi-conductor display and materials business, the industrial
finance & investment business and the other businesses.
Semi-conductor TCL CSOT China Ray
display & materials Wuhan CSOT Juhua
Industrial finance &
TCL Tech. TCL Financial TCL Capital
investment
Other Highly Open Edutainment
Adhere to the strategy of becoming a global leading intelligent technology company, the
Company will continue to strengthen manufacturing competitiveness, focus on developing
high-tech strategic businesses, and establish global cutting edges in related businesses.
The industrial finance business will facilitate the development of the Company’s
manufacturing business and increase returns on investments. Capitalizing on the industrial
superiority, the Company will invest in enterprises from the ecological industry chain for
better comprehensive advantage. In the future, under the principle of concentrating on the
core business and maximizing shareholder value, the Company will continue to promote
M&As in the other businesses, so as to achieve higher returns on assets.
For further information about the Company’s businesses, please refer to “Part IV Director’s
Report” herein.
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TCL Technology Group Corporation Annual Report 2019
II Significant Changes in Major Assets
1. Significant Changes in Major Assets
Major assets Significant change
Primarily driven by the transfer of the construction in progress of the t2, t3, t4 and
Fixed assets
t6 production lines to fixed assets
Intangible assets Primarily driven by spinoffs in the Restructuring
2. Major Assets Overseas
□ Applicable ■ Not applicable
III Core Competitiveness Analysis
Through the development of 39 years, TCL always adheres to the manufacturing industry,
change and innovate continuously. In the latest reform, the Company spins off the
intelligent terminal and supporting businesses, reconfirmed the technology-centric business
direction at the beginning of 2019. Furthermore, for the purpose of accurately reflecting the
strategic position-“To become a globally leading technology company”, the Company
renamed to "TCL Tech." and achieved a new round of industrial upgrading and
technological transformation with expansion and improvement on the core business.
Scale and eff iciency are prominent advantages and the compet it iveness
was intensified during the industry trough
TCL CSOT has a rapid growth of production capacity and continuously increases the
market shares, sales through the max capacity of t1 and t2, as well as t6 G11 reaches
design capacity in advance. Wuhan CSOT t3 LTPS product sales ranks second in the world,
t4 flexible AMOLED begins mass production and supply, t7 G11 project construction is in
smooth progress and TCL module and whole-widget integrated project Phase I reaches
target output. Now, the position of TCL CSOT big-size panel is stable in the market
segment: The shipment of 55-inch TV panels ranks first, the shipment of 65-inch TV panels
ranks third, the shipment of 86-inch TV panels in the white board field ranks second and the
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TCL Technology Group Corporation Annual Report 2019
shipment of 32-inch TV panels in the e-sports field ranks third. The overall advantages of
TCL CSOT stand among the forefront of the global display panel industry.
Since operation, TCL CSOT improves the efficiency of capacity expansion by efficient
production line layout, gives full play to Gemini plant layout assembly effect and industrial
chain integration advantage and drives extreme efficiency cost measures with efficiency
and benefit indicators continuing to be the global industry leader. With the industry reshuffle
intensified and concentration increased, TCL Technology can successfully cross the bottom
of the cycle based on scale and efficiency advantages and will benefit from the next
industry boom cycle with sufficient resources.
Strengthening the ability of technology research and development and
product innovation and beforehand layout of the next generat ion display
technology and materials
In 2019, the Company's R&D investment reached RMB5.46 billion. TCL Tech. submitted
2,752 PCT international patent applications with accumulative applications of 11,261
covering countries and regions such as Europe, America and Korea. The number of the
Company’s patents in the quantum dot material ranks second in the world.
After 10 years development, TCL has entered the stage of advanced technology
development from technological catch-up in the semi-conductor display field. For the large
size panel, the Company continuously optimizes the HVA technology. The Mini-LED
backlight product released for the first time in the world in 2019 and the first glass substrate
integration LED scheme have better performance in comparison to existing PCB integrated
solution. 8K and Touch technologies will be continuously used for high-end products. In the
small and medium size panel, the Company expands LTPS-LCD application scenarios with
technology, including LCD special-shaped screen, blind hole technology, small and medium
size vehicle display screen/notebook computer technology, and focuses on developing
such high-end application technologies as AMOLED foldable screen and under-panel
camera shooting. Several flexible folding products of TCL CSOT will mass produce and
sale in 2020 and the key technology of multifold and curl type is steadily developed.
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TCL Technology Group Corporation Annual Report 2019
The Company takes the lead in layout of new technologies and materials and aims to lead
the next generation display technology. In the printing OLED field, "National Printed and
Flexible Display Innovation Center" of Guangdong Juhua subordinate to the Company is
the only national innovation center in the display field in China which has built the world's
most advanced printing display public platform; The mass supply of China Ray OLED
materials has started. The QLED R&D team of the Company has solved key problems
(such as life of red and green materials), the performance of the blue -light emitting material
independently researched and developed is world-leading and related research
achievements have been published on the international scientific journal-Nature
Communication.
Taking the advantages of industrial f inance business and providing the
performance contribution with sustained and stable g rowth
After the Restructuring, the Company keeps the industrial finance and investment venture
capital, mainly by TCL Financial and TCL Capital. TCL Financial improves asset turnover
and enhances the efficiency and advantage of the main business by continuously
optimizing the asset allocation efficiency. TCL Capital focuses on investment of upstream
and downstream chain and strategic technology industry and supports ecological perfection
of the semi-conductor display. Many invested projects have synergy with the main business
with cutting-edge technology and applications jointly developed. The industrial finance &
investment and venture capital business will support industrial chain layout by the
Company in the main business and the stable profit contribution brought also makes for
offsetting the down cycle of the semi-conductor display sector.
Stable strategic customer relationship and efficient order management and
production scheduling capability
The Company is the largest big-size panel supplier among top six TV manufacturers of
China. And with a good strategic partnership with first-tier brand customers (including
Samsung, TCL Electronics and MI); For the fast growth of commercial display, the
Company works with main manufacturers (such as CVTE and Hitevision) smoothly. The G6
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TCL Technology Group Corporation Annual Report 2019
LTPS t3 plant accounts for 80% shipment of first-tier mobile phone brand customers.
Folding and hole digging screens from G6 AMOLED t4 plant mass produced and shipped
to Lenovo and MI, as well as successively cooperate with BYD and Lenovo about vehicle
display screen, notebook computer, etc. in medium size.
The long-term partnership between TCL CSOT and customers is conductive to the
Company's product market share growth and cost control, remarkably strengthens the
predictability regarding relation between supply and demand in the market and production
scheduling for orders and makes for the Company optimizing capacity utilization and
product structure which is the base of the Company management hard power.
Strengthening team building, upgrading TCL's corporate culture and
revitaliz ing the vita lity of organiz ational compet ition
Team organization ability and enterprise cultural construction are important for achieving
strategic objectives. The Company will further enhance the vitality of the organization and
team, vigorously carry forward the TCL corporate culture and comprehensively enhance
the advantages of the enterprise.
The Company will continue to improve the governance structure and establish a
"customer-centric" process-driven organization to adapt to the rapid growth of industrial
scale in the future and ensure long-term stable and healthy development of the Company,
continuously promote the upgrading of corporate culture, build consensus by systematically
sorting out corporate vision, mission, core values as well as carry out the vision of " to
become a global leading intelligent technology company", the core value of "accountability,
innovation and excellence" and the realization of "global leadership" in every aspect of daily
work.
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TCL Technology Group Corporation Annual Report 2019
Part IV Directors’ Report
I Overview
In the Reporting Period, as supply surged and growth in demand slowed down, the global
semi-conductor display industry entered a cold winter with tremendous pressure on
earnings. In face of the tough internal and external challenges, the Company completed t he
Major Asset Restructuring, deepened reform and transformation, spun off the intelligent
terminal and supporting business and shifted from diverse operations to specialized
operations. Focusing on the core business of semi-conductor display and materials
and other strategic industries which are high-tech, capital intensive and of a long
cycle, the Company aims to become a global leading intelligent technology group.
In 2019, on the reference basis (the consolidation scope after the Restructuring), the
Company recorded revenue of RMB57.27 billion, up by 18.7% year-on-year; and a profit of
RMB3.56 billion, up by 0.53% year-on year, of which the net profit attributable to the listed
company’s shareholders was RMB2.62 billion, down by 17.0% year-on-year. Under the
complicated operating environment, the Company adhered to the strategy of being globally
leading, deepened reform, and improved quality and efficiency, so as to steady growth in all
the businesses. Prices of the major products have stabilized and begin to rebound at the
end of the Reporting Period. As the supply and demand situation improves in the industry,
the Company expects a strong earning.
The Company takes management ability and efficiency as the operation foundation,
deepens organization reform, restructures business process, and improves
operation quality, with the capital structure and operation efficiency improved
constantly. By optimizing process and management, the expense ratio has decreased to
12.5% from 16.8%. Per capita net profit of the Company is improved from RMB38,600 to
RMB74,000, the debt/assets ratio has dropped from 68.4% to 61.3%, and the net cash flow
generated from operating activities is RMB11.49 billion. At the bottom of industry cycle, the
risk resistance and sustainable development ability of the Company is further enhanced.
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TCL Technology Group Corporation Annual Report 2019
The Company takes technological innovation as the main driving force, constantly
optimizes products and technologies, and actively deploys next generation display
technology and new materials. In LCD field, the Company focuses on developing 4K/8K
and Touch products. The Company launched the first Mini-LED BLU on Glass in the world,
which will establish its competition advantage in high end market of household large screen
and commercial display field. In the field of AMOLED, the Company developed the
laminated technology which allows a switch between dual fold forms of outer and inner fold,
such new technologies as multi-fold, curling, etc., have made prospective progress, and
foldable screens of t4 production line have been put into mass production for delivery. In the
field of next generation of display and materials, subordinated Guangdong Juhua of the
Company, as the only national-level printing display R&D center of the industry, has
coordinated the global industry chain resources, accelerated to promote the application of
printing display technology; OLED material which is developed independe ntly by the
Company has started its mass production, with the efficiency and life of QLED material
taking a leading position in the industry.
During the Reporting Period, there were 6,155 R&D technical staffs in the Company, with
the R&D as RMB5.46 billion; the Company submitted 2,752 PCT international application,
with cumulative applications of 11,261 and with the public patent of quantum dot ranking 2 nd
in the world; the Company held the first open conference of technological cooperati on,
employed 29 authoritative personnel of the industry as technological consultants, and
published 13 frontier technology cooperation projects world-widely, and accelerated the
breakthrough of core and basic technology and the conversion of major technological
achievements through innovation of “self-research + cooperation”.
The Company keeps on improving its industrial ability, enhances scale advantages
based on technology upgrading, and constantly enriches product portfolio. During
the reporting period, t6 G11 production line reached the designed output in advance; t7 G11
production line was constructed smoothly; t3 G6 LTPS production line expanded its
designed output and increased to 50K/month, and became the largest LTPS single plant in
the world; t4 G6 flexible OLED had Phase I mass production and the foldable screen was
delivered; Phase I of Huizhou module integration project reached the designed output; by
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TCL Technology Group Corporation Annual Report 2019
2023, five-year CAGR of shipping area of TCL CSOT will reach 10% a nd the market share
will further increase. With two G8.5 production lines, two G11 production line and two G6
production lines, TCL CSOT has formed the plant layout for large, medium and small
productions, which meet the needs of major products in the market. In 2019, market share
of TV panel was improved to the 3 rd in the world, and market share of LTPS mobile phone
panel was improved to the 2 nd in the world.
As a pioneer of international layout, the Company cooperates with upstream and
downstream enterprises to construct global industry ecology integrating localized
production, sales and service, completes the layout of global manufacturing and
supply chain of TCL CSOT, and accelerates the globalization process of domestic
semi-conductor display industry. On September 26th, 2019, the construction of the panel
and module integrated intelligent manufacturing park in India under the cooperation of TCL
CSOT and TCL Electronics officially kicked off. According to the plan, the Phase I project
will produce 8 million pieces of 26-55 inch large-sized and 30 million pieces of 3.5-8 inch
small- and medium-sized modules annually, and mass production is expected to be
delivered in the first half of 2020, to meet the growing local market needs.
The industrial finance & investment bushiness of TCL maintain a good momentum of
development, and continue to contribute strategic synergy and earnings to the
Group. Finance business of the Company optimizes capital operating system, guarantees
the liquidity of the Company, and improves asset efficiency and risk control ability. The
supply chain finance gives empowerment for industry development, and the financial
investment business conducts investment to obtain stable profits by relying on its
professional advantages. TCL venture capital business focuses on investment
opportunities in frontier technological field; Admiralty Harbour Capital operates successfully,
and bond issuing and underwriting, financial consulting, and asset management business
develops quickly. During the Reporting Period, the industrial finance, investment and
venture capital businesses recorded a profit of RMB999 million.
The other businesses develop stably, with revenue of RMB22.9 billion and a profit of
RMB320 million for the year under review. The profit of TCL industrial finance and other
24
TCL Technology Group Corporation Annual Report 2019
businesses improve the performance of the Company when the main business is low
season.
Earnings from the Asset Restructuring are RMB1.15 billion in the year under review. The
principle of the Company is to focus on the owner and maximize shareholders’ value. It will
keep on promoting M&As and improving return on assets. The growth potential of the
Company will be thoroughly released through the Restructuring, which will lay a foundation
for the long term development of the Company; the positive effect of the Restructuring will
be further reflected in the future.
39-year development of the Company is an epitome of numerous Chinese enterprises. The
Company establishes its market position, brand, channel and influence of global supply
chain of intelligent terminal products in major countries and regions of the world with its
efficiency, speed and cost advantages, starts to fight upward and focuses on strategic point
in global technological map, and strives to the peak of the industry ecology.
After 10 years of catching up, the Company has established scale and efficiency
advantages in semi-conductor, new display technology and material has created
opportunities for Chinese enterprises to catch up and surpass. Although the COVID-19
epidemic at the beginning of 2020 affected the operating performance of Q1 of the
Company and brought uncertainty for global economic growth, the Company will adhere to
the strategic goal of global leadership, make its utmost efforts, overcome difficulties and
challenges, and further expand its market share to achieve the objective of a strong growth
in full-year revenue. TCL CSOT will expand from application innovation to key technology
breakthrough on the basis of leading efficiency, then to leading original technology and
ecological layout of core industry chain, break through active Mini-LED backlight and
direct-viewing product technology, and lead the development of printing OLED/QLED. The
Group will improve scale and efficiency through internal and external extension
development; enhance R&D, and establish technological barrier; accelerate to complete
layout of global industry chain, and adapt to international competition; become the leading
enterprise of global display industry; expand display industry advantage to other relevant
industry chain, and improve competitiveness and operation efficiency.
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TCL Technology Group Corporation Annual Report 2019
The Company will take The Strategy to wards Global Leadership as enterprise development
outline, be led by strategy, be guaranteed by organization and culture, reform and break
through, improve quality and efficiency, and stride toward a technological industry
group with global leadership. The Company changed its name from “TCL Corporation” to
“TCL Technology Group Corporation” on February 7th , 2020, and entered its brand new
development stage.
II. Core Business Analysis
The Company primarily consists of the following three business segments: the
semi-conductor display and materials business, the industrial finance & investment
business and the other businesses.
Semi-conductor TCL CSOT China Ray
display & materials Wuhan CSOT Juhua
Industrial finance &
TCL Tech. TCL Financial TCL Capital
investment
Other Open Edutainment
Highly
Adhere to the strategy of becoming a global leading intelligent technology company, TCL
Tech. will gradually quit from other businesses in accordance with the principle of
maximizing shareholders’ value. It will take endogenous development power as the
foundation, powerfully promote leading progress of semiconductor products and material
business in product, technology and ecology in the world. It helps industrial development
through industrial finance, and increases investment profits; invests in ecological
enterprises by relying on industry advantages, and strengthens comprehensive
competitiveness. It utilizes technology, management, and capital advantages to deploy
Chinese enterprise assets which can establish sustainable leading advantages in capital
and technology intensive strategic industries. The selected area will be similar to
26
TCL Technology Group Corporation Annual Report 2019
management and operation logic of the existing businesses and will be top enterprises in
the respective industries with synergy, enhance income and realize sustainable
development of high quality.
(I) Semi-conductor Display and Material Business
During the Reporting Period, TCL CSOT achieved shipping area of 22.184 million square
meters, up by 23.8% compared with the same period last year, achieved revenue of
RMB33.99 billion, up by 22.9% compared with the same period last year, achieved net
profit of RMB964 million, down by 58.5% compared with the same period of last year, and
EBITDA was RMB8.68 billion. The comprehensive performance kept on taking a leading
position in the industry.
The t1 and t2 plants in Shenzhen is operating at full capacity for strong sales, the t6 plant
reached designed output in Q4 in advance, and the yield rate ramp-up was better than
expected. During the reporting period, the total shipment of large-sized panels reached
20.82 million square meters, up by 19.1% compared with the same period last year, and the
total shipment was 41.195 million pieces, up by 5% compared with the same period last
year; market share of TV panel was improved to the 3 rd in the world, the shipment of
55-inch products ranked the 1st in the world while that of 32-inch products ranked the 2nd in
the world, and market occupancy of 86-inch commercial display panel ranked the 2 nd in the
world. However, because the price of main products is lower than the same period last year,
the large size panel business achieved revenue of RMB18.93 billion, down by 12.5%
year-on-year.
T3 plant in Wuhan was operating at full capacity for strong sales, and market share of
LTPS-LCD products ranked at the 2nd in the world stably. Flexible AMOLED of t4 plant
reached Phase I mass production in Q4, curved and foldable products had mass
production successively. During the Reporting Period, the shipping area of small and
medium size products was 1.365 million square meters, up by 2.12 times compared with
the same period of last year, and the shippment was 113.978 million pieces, up by 1.25
27
TCL Technology Group Corporation Annual Report 2019
times compared with the same period last year; the revenue reached RMB15.07 billion, up
by 1.5 times compared with the same period last year.
In 2019, semi-conductor display industry ran downward, and the industry loss heavily,
restructure accelerated, Chinese panel companies improved their global competitiveness
and market share with their capital and efficiency advantages. By the end of last year, price
of large size panel rebounded, and industry operating profits improved. The demand of
global display industry has not fundamentally changed; however, long term development
prospect of the industry gets optimistic, and the market potential is still great; the demand of
video interaction technology and commercial display products increases quickly, which
brings market increment; the global industry restructure and integration accelerates, and as
a result industry concerntration is further improved. In 2020, TCL CSOT will keep on
promoting ultimate cost reduction and profit increase, improve efficiency, further optimize
product and customer structure, develop video interaction and commercial product
business, keep on operating at fully capacity for strong sales, and increase sales revenue
and operation interest; we are confident that revenue growth and profitability in 2020 will
exceed 2019.
Through high efficient production line investment strategy, synergistic advantage of
industry chain and excellent management, TCL CSOT always maintains leading
operation efficiency and profits at low season of industry cycle. Since being put into
production, TCL CSOT take advantage of aggregation effect of Gemini P lant la yo ut , and
improved production output and expanded efficiency through high efficient production line
layout; exerted integration advantages of industry chain and taken ultimate efficiency cost
measures to realize the lowest sales expense ratio and financial expense ratio, overcome
the headwind of the industry, and keep momentum for the next round of industry growth.
As the capacity is stepping into high growth phrase, product mix will be refined
continuously. T1 and t2 G8.5 production line of TCL CSOT operates at full capacity for
strong sales; G6 LTPS production line of t3 is expanded from 45k/month to 50K/month; G11
production line of t6 reached designed output in Q4 and will have production at full capacity
this year; G6 flexible OLED production line of t4 realized Phase I mass production in
December, Phase II and Phase III construction will be completed in this year; G11
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TCL Technology Group Corporation Annual Report 2019
production line construction of t7 is progressed as planned and will be put into production at
the end of this year, which lays a foundation for performance growth. While each production
line is put into production successively, by 2023, five -year CAGR of shipping area of large
size panel of TCL CSOT will be 17%, and five -year CAGR of shipping area of small and
medium panel will be 26%. Meanwhile, the proportion of high margin products of TCL
CSOT for commercial display, vehicle display, gaming monitor, etc. will improve
continuously, and strategic cooperation is established with CVTE, HiteVision, BYD, Lenovo,
etc. successively.
Take technological innovation as core drive, improve product competitiveness
continuously. In large size field, TCL CSOT consolidates the application adva ntages of
HVA technology in LCD high end products, improves the share of such products as 4K/8K,
Touch, etc., launched MLED product based on Mini-LED backlight on Glass for the first time
in the world, to meet the demand growth of high end market of large size LCD. In the small
and medium size field, the yield rate and quality of CSOT LTPS production line has reached
international top, proportion of Incell/COF/blind via product rises continuously, and the
Company actively develops under screen/within screen fingerprint technology; flexible
AMOLED focus on under screen shooting, foldable technology and other high end
technologies, with the curved punched screen and flexible foldable screen delivered
already.
Actively promote new display technology, material & core technology development
and ecology construction, and construct core advantages which lead the future.
Guangdong Juhua, as the only “national printing and flexible display innovation center” of
the industry, has launched the manufacturing of 31-inch 4K RGB QLED sample machine for
full quantum dot printing and the first 31-inch rollable flexible sample machine for ink-jet
printing based on printing technology and OLED flexible display technology in the world,
with its R&D innovation leading the industry development. China Ray mainly develops new
OLED key materials with independent IP, and has developed more than 700 new materials
currently, including more than 30 products which enter pilot scale experiment; synthesis
mass production site and sublimation plant have been put into production, and part
materials have entered into mass production stage. QLED R&D team has broken thro ugh
key problems such as the life of red and green materials, etc., and the public patent in
quantum dot electroluminescent field ranked 2nd in the world.
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TCL Technology Group Corporation Annual Report 2019
Though counter-globalization trend is severe in recent years, global supply chain
restructures, competition advantages of China manufacturing in semi-conductor are
hard to be shaken in short term. TCL CSOT will make its utmost efforts to achieve
technology leadership and ecology leadership by efficiency and product mix, break
through the next generation of new display technology and materials through
horizontal expansion and vertical extension, and lead the global display industry.
(II) Industrial Finance and Investment Business
1. TCL Financial
TCL Financial mainly includes the Group’s finance and the supply chain finance.
Finance business targets at providing capital support and management support for main
businesses and member companies, providing capital guarantee for the Group’s major
investment projects, undertaking the function of improving the Group’s asset operation
efficiency and risk control; supply chain finance business provides various financing and
support supply-chain finance for related companies, establishes ecological circle of small
and medium companies, and reduces cost of supply chain; meanwhile, financial investment
business improves capital efficiency by creating stable profits through financial services,
and reduces financial expenses of the Company.
2. TCL Capital
TCL Capital consists of TCL Venture Capital, Admiralty Harbour Capital Limited and China
Innovative Capital Management Limited (holding 49% of its equity), seek investment
opportunities in key fields of technological industries, including new display technology,
semi-conductor and their relevant industry chain, as well as high end materials and
technological equipment, etc., which promotes technology and create synergy. At the same
time, investment value was generated.
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TCL Technology Group Corporation Annual Report 2019
TCL venture capital business focuses on relevant new technologies, new materials and
new applications of main business by establishing various funds. By the end of this
reporting period, the scale of funds managed by TCL venture capital business reached
RMB8.99 billion, and it invested in 115 projects cumulatively and exited from 33 projects,
including 10 projects which it exited partialy. Currently, it holds stocks of CATL, Dynanonic,
Willsemi, and other listed companies, and the interest in Cambricon, Dkem, Transwarp, and
other companies. Several projects invested by TCL venture capital business have good
synergy with current business of TCL, and play a vital role in completing industry chain,
technology foresight and layout, and lead to technology advance of the Company.
Admiralty Harbour Capital is a licensed financial company which is established in Hong
Kong, with the license of investment bank and assets management, provides
corresponding capital and financial service support for overseas business expansion, as
well as merger and restructure. During the reporting period, Admiralty Harbour Capital
completed the 12 bonds issuing and underwriting projects and 2 bond restructure projects,
financial consultant and assets management business increase quickly, and it realized
profit in the first year.
China Innovative Capital Management Limited mainly engages in equity investment for
listed companies as well as merger and restructure, invested in more than 110 listed
companies cumulatively, with good business operation and stable growing profits. China
Innovative Capital Management Limited also provides professional support for domestic
merger and purchasing as well as business expansion of the Company in China. During the
reporting period, the Company established Guangdong Rongchuang Lingyue Intelligent
Manufacturing and IT Industry Equity Investment Fund together with China Innovative
Capital Management Limited, Utrust, etc., focusing on investment in smart manufacturing,
IT industry and relevant service upgrading field, etc.
At the end of the Reporting Period, the Company directly invests in a number of listed
companies, including a 19.07% interest in 712 Corp. (603712.SH), a 5.14% interest in Bank
of Shanghai (601229.SH) and a 20.06% interest in Fantasia Holdings (01777.HK). During
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TCL Technology Group Corporation Annual Report 2019
the Reporting Period, the Company increased its interest in Bank of Shanghai by 0.15%,
other direct interests in listed companies remained the same during the Reporting Period.
2. Revenue and Cost Analysis
(1) Breakdown of Revenue
Unit: RMB
2019 2018
Operating division As % of total As % of total Change (%)
Revenue Revenue
revenue (%) Revenue (%)
TCL CSOT 33,993,533,865 45.37% 27,666,368,029 24.41% 22.87%
Highly 20,835,617,478 27.81% 16,566,992,566 14.61% 25.77%
Other businesses
and eliminated Not
20,103,934,345 Not applicable 69,126,714,950 Not applicable
intercompany applicable
accounts
Total 74,933,085,688 100.00% 113,360,075,545 100.00% -33.90%
Note: On the reference basis, the revenue amounted to RMB57.27 billion in 2019, up by 18.72%
year-on-year.
(2) Revenue by Operating Segment
Unit: RMB
2019 2018
Operating
As % of total As % of total Change (%)
segment Revenue Revenue
Revenue (%) Revenue (%)
Domestic core
47,799,405,342 63.79% 56,473,133,329 49.82% -15.36%
businesses
Overseas core
26,256,983,394 35.04% 55,809,459,497 49.23% -52.95%
businesses
Other businesses 876,696,952 1.17% 1,077,482,719 0.95% -18.63%
Total 74,933,085,688 100.00% 113,360,075,545 100.00% -33.90%
Unit: RMB’0,000
2019 2018
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue 2,960,095.69 1,418,065.69 1,503,605.24 1,611,541.96 2,562,984.41 2,689,390.42 2,971,339.66 3,112,293.07
Net profit
attributable to the
77,908.84 131,326.03 48,498.13 4,043.66 73,083.73 85,510.10 90,372.32 97,854.59
listed company’s
shareholders
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TCL Technology Group Corporation Annual Report 2019
(3) Operating Division, Product Category or Operating Segment Contributing over 10% of
Revenue or Operating Profit
Unit: RMB
YoY
Gross YoY change in
YoY change in change in
Revenue Cost of sales profit cost of sales
revenue (%) gross profit
margin (%)
margin (%)
By operating division
Semi-conductor
33,993,533,865 30,478,907,024 10.34% 22.87% 35.61% -8.42%
display business
Distribution
20,835,617,478 20,087,790,401 3.59% 25.77% 26.26% -0.37%
business
By product category
Semi-conductor
33,993,533,865 30,478,907,024 10.34% 22.87% 35.61% -8.42%
display devices
Distribution of
20,835,617,478 20,087,790,401 3.59% 25.77% 26.26% -0.37%
electronics
By operating segment
Mainland China 47,799,405,342 42,114,423,773 11.89% -15.36% -8.84% -6.30%
Overseas
(including Hong 26,256,983,394 23,888,804,820 9.02% -52.95% -47.72% -9.11%
Kong)
(4) Whether Revenue from Physical Sales Is Higher than Service Revenue
Operating
Item Unit 2019 2018 Change (%)
division
Sales volume 0,000 ㎡ 2,218 1,792 23.83%
Semi-conductor
Output 0,000 ㎡ 2,234 1,842 21.27%
display business
Inventory 0,000 ㎡ 84 68 23.53%
(5) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable ■Not applicable
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
Compared with 2018, 17 subsidiaries (all newly incorporated) are included in and 313
subsidiaries (which 288 transferred in the Restructuring, 9 de-registered, and 16 that have
shifted from subsidiaries to associates) are excluded from the consolidation scope of 2019.
33
TCL Technology Group Corporation Annual Report 2019
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable ■Not applicable
(8) Major Customers and Suppliers
Major customers:
Total sales to top five customers (RMB) 21,701,692,572
Total sales to top five customers as % of total sales
29.30%
of the Reporting Period (%)
Total sales to related parties among top five
customers as % of total sales of the Reporting Period -
(%)
Top five customers:
Sales revenue contributed
No. Customer for the Reporting Period As % of total sales revenue (%)
(RMB)
1 Customer A 8,141,718,792 10.99%
2 Customer B 5,377,820,556 7.26%
3 Customer C 2,907,012,016 3.93%
4 Customer D 2,803,131,747 3.79%
5 Customer E 2,472,009,462 3.34%
Total 21,701,692,572 29.30%
Other information about major customers:
□ Applicable ■ Not applicable
Major suppliers:
Total purchases from top five suppliers (RMB) 14,959,258,051
Total purchases from top five suppliers as % of total
22.66%
purchases of the Reporting Period (%)
Total purchases from related parties among top five
suppliers as % of total purchases of the Reporting -
Period (%)
Top five suppliers:
Purchase in the Reporting
No. Supplier As % of total purchases (%)
Period (RMB)
1 Supplier A 5,108,937,201 7.74%
2 Supplier B 4,336,151,947 6.57%
3 Supplier C 2,031,503,382 3.08%
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TCL Technology Group Corporation Annual Report 2019
4 Supplier D 1,815,015,871 2.75%
5 Supplier E 1,667,649,650 2.53%
Total 14,959,258,051 22.66%
Other information about major suppliers:
□ Applicable ■ Not applicable
3. Expense
Unit: RMB
2019 2018 Change (%) Reason for any significant change
Selling expense 2,857,488,890 8,887,021,380 -67.85% The Restructuring
Administrative expense 1,895,087,528 4,299,610,008 -55.92% The Restructuring
Finance costs 1,248,800,752 973,260,519 28.31% Increase in financings
R&D expense 3,396,804,603 4,677,578,988 -27.38% The Restructuring
4. R&D Expense
Details about R&D expense:
2019 2018 Change (%)
Number of R&D
6,155 12,481 -50.69%
personnel Note
R&D personnel as % of total
17.40% 16.63% 0.77%
employees
R&D expense (RMB) 5,464,281,132 5,670,918,950 -3.64%
R&D expense as % of
7.29% 5.00% 2.29%
revenue
Capitalized R&D expense
2,067,476,529 1,832,275,281 12.84%
(RMB)
Capitalized R&D expense
37.84% 32.31% 5.53%
as % of total R&D expense
Note: During the Reporting Period, the Company completed the settlement of the Major Asset Restructuring and spun off
the terminal and supporting businesses. As such, it has become a globally leading intelligent technology company with its
core business being the semi-conductor display and material business. The number of R&D personnel and R&D expense
has decreased accordingly, which is why the data of 2019 and 2018 in the table above are not comparable. Based n the
reference basis, the number of R&D personnel would be up by 2.7% in 2019 compared to 2018.
Reasons for any significant YoY change in the percentage of R&D expense in revenue:
□ Applicable ■ Not applicable
35
TCL Technology Group Corporation Annual Report 2019
5. Cash Flows
Unit: RMB
Item 2019 2018 Change (%)
Subtotal of cash generated from
86,264,894,716 130,101,601,946 -33.69%
operating activities
Subtotal of cash used in operating
74,774,798,311 119,615,021,503 -37.49%
activities
Net cash generated from/used in
11,490,096,405 10,486,580,443 9.57%
operating activities
Subtotal of cash generated from
28,039,344,036 60,058,874,214 -53.31%
investing activities
Subtotal of cash used in investing
59,771,052,922 88,289,416,141 -32.30%
activities
Net cash generated from/used in
-31,731,708,886 -28,230,541,927 12.40%
investing activities
Subtotal of cash generated from
47,909,796,502 63,323,909,094 -24.34%
financing activities
Subtotal of cash used in financing
35,958,990,471 43,284,087,005 -16.92%
activities
Net cash generated from/used in
11,950,806,031 20,039,822,089 -40.36%
financing activities
Net increase in cash and cash
-8,064,640,553 2,421,213,397 -433.08%
equivalents
Explanation of why any of the data above varies significantly on a year-on-year basis:
The significant changes to the cash flow statement items in the table above were primarily driven by spinoffs in the
Restructuring.
Explanation of why net cash generated from/used in operating activities varies significantly from net profit of the Reporting
Period
Net cash generated from operating activities was higher than net profit primarily driven by high depreciation and
amortization amounts in the semi-conductor display industry.
III Analysis of Non-Core Businesses
□ Applicable ■ Not applicable
36
TCL Technology Group Corporation Annual Report 2019
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
31 December 2019 1 January 2019 Change
As % of As % of in
Reason for any significant change
Amount total Amount total percenta
assets assets ge (%)
Monetary
18,648,184,663 11.31% 26,801,342,532 13.89% -2.58% The Restructuring
assets
Accounts
8,340,353,992 5.06% 13,647,564,194 7.07% -2.01% The Restructuring
receivable
Inventories 5,677,963,123 3.44% 19,887,971,677 10.31% -6.87% The Restructuring
Investment
82,272,964 0.05% 1,676,210,635 0.87% -0.82% The Restructuring
property
Long-term
equity 17,194,284,162 10.43% 17,117,936,085 8.87% 1.56% -
investments
The transfer of the construction in
Fixed assets 45,459,070,330 27.58% 35,983,131,306 18.64% 8.94% progress of the t2, t3, t4 and t6
production lines to fixed assets
Construction in
33,578,289,802 20.37% 38,924,586,355 20.17% 0.20% -
progress
Short-term
12,069,657,099 7.32% 13,287,723,834 6.89% 0.43% The Restructuring
borrowings
Long-term
38,512,059,200 23.36% 36,864,922,669 19.10% 4.26% -
borrowings
2. Assets and Liabilities at Fair Value
Unit: RMB
Gain/loss
Cumulative
on fair-value
fair-value Purchased in
Beginning changes in Sold in the Other Ending
Item changes the Reporting
amount the Reporting Period changes amount
charged to Period
Reporting
equity
Period
Financial
assets
1. 4,602,601,228 555,470,011 - 12,036,720,572 8,577,351,625 8,617,440,
37
TCL Technology Group Corporation Annual Report 2019
Held-for-tra 186
ding
financial
assets
(excluding
derivative
financial
assets)
2.Derivative
159,035,5
financial 391,558,256 138,118,918 -344,080,595 - 26,560,987 -
92
assets
3.
Investments
279,883,5
in other 488,457,175 - 9,800,832 - 221,004,516 2,630,024
15
equity
instruments
Subtotal of
9,056,359,
financial 5,482,616,659 693,588,929 -334,279,763 12,036,720,572 8,824,917,128 2,630,024
293
assets
Financial 272,924,6
212,097,067 219,916,229 -225,185,927 183,390,434 117,293,115 -
liabilities 88
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 Carrying amount Reason for restriction As % of total Remark
assets (RMB’0,000) assets
Deposited by the finance subsidiary in Restricted
Monetary
57,100 the central bank as the required 0.35%
assets
reserve
Monetary Other monetary assets Restricted
43,944 0.27%
assets
Held-for-tradin In pledge
g financial 174,320 Put in pledge for loan 1.06%
assets
Fixed assets 3,657,178 As collateral for loan 22.19% Collateralized
Intangible As collateral for loan Collateralized
248,370 1.51%
assets
Total 4,180,912 - 25.36% -
38
TCL Technology Group Corporation Annual Report 2019
V Investments Made
1. Total Investment Amount
Total investment amount in 2019 Total investment amount in 2018
Change (%)
(RMB) (RMB)
21,060,912,197 12,577,112,494 67.45%
2. Major Equity Investments Made in the Reporting Period
With confidence in the Company’s core business and long-term investment value, during
the Reporting Period, Mr. Li Dongsheng, Chairman of the Company’s Board, increased his
shareholdings in the Company through centralized bidding and block trading by a total of
167,974,800 shares with RMB513,869,000 on 3 January, 15 January, 30 January, 31
January, 29 April and 6 June 2019. As of 31 December 2019, Mr. Li Dongsheng and his
acting-in-concert party Jiutian Liancheng together held a total of 1,221,748,000 shares (a
9.02% stake) in the Company, and is the biggest shareholder of the Company.
3. Major Non-Equity Investments Ongoing in the Reporting Period
□ Applicable ■ Not applicable
4. Financial Investments
(1) Securities Investments
Gain/lo
Purchased
Beginnin Sold in Ending ss in
Sec Measu in Fun
g carrying Reporting carrying Reporti Acco
Security urity Security rement Reporting ding
amount Period amount ng untin
type cod name metho Period sour
(RMB’0,0 (RMB’0,0 (RMB’0,0 Period g title
e d (RMB’0,000 ce
00) 00) 00) (RMB’0,
)
000)
China Held-
Developme At fair for-tr
Entruste Not
nt Bank value ading Self-
d wealth appl
Win-Win throug - 50,000 - 50,753 753 finan fund
manage icab
RMB h profit cial ed
ment le
Wealth or loss asset
Manageme s
39
TCL Technology Group Corporation Annual Report 2019
nt Product
Tranche
2017666
CCB
Principal Held-
Shengjing At fair for-tr
Not
Tongying value ading Self-
Trust appl
Debenture throug - 40,000 - 40,907 907 finan fund
plan icab
Investment h profit cial ed
le
Collective or loss asset
Capital s
Trust Plan
Guotai Held-
Jun’an At fair for-tr
Asset Not
Asset value ading Self-
manage appl
Manageme throug - 30,000 - 30,681 681 finan fund
ment icab
nt Junxiang h profit cial ed
plan le
Yinghuo or loss asset
No. 2 s
ICBC
Held-
Wealth
At fair for-tr
Entruste Not Manageme
value ading Self-
d wealth appl ntCorporat
throug - 30,000 - 30,488 488 finan fund
manage icab e RMB
h profit cial ed
ment le Wealth
or loss asset
Manageme
s
nt
Agricultural
Bank of
Held-
China
At fair for-tr
Entruste Not “An xin
value ading Self-
d wealth appl Deli”
throug - 30,000 - 30,475 475 finan fund
manage icab Directional
h profit cial ed
ment le RMB
or loss asset
Wealth
s
Manageme
nt Product
Changjiang Held-
Securities At fair for-tr
Entruste Not
Lexiang value ading Self-
d wealth appl
1-Day throug - 20,000 - 20,426 426 finan fund
manage icab
Collective h profit cial ed
ment le
Asset or loss asset
Manageme s
40
TCL Technology Group Corporation Annual Report 2019
nt Plan
Agricultural
Bank of
Held-
China
At fair for-tr
Entruste Not “An xin
value ading Self-
d wealth appl Deli”
throug - 20,000 - 20,321 321 finan fund
manage icab Directional
h profit cial ed
ment le RMB
or loss asset
Wealth
s
Manageme
nt Product
Guotai Held-
Jun’an At fair for-tr
Entruste Not
Asset value ading Self-
d wealth appl
Manageme throug - 10,000 - 10,227 227 finan fund
manage icab
nt Junxiang h profit cial ed
ment le
Yinghuo or loss asset
No. 1 s
Guotai Held-
Jun’an At fair for-tr
Entruste Not
Asset value ading Self-
d wealth appl
Manageme throug - 10,000 - 10,227 227 finan fund
manage icab
nt Junxiang h profit cial ed
ment le
Yinghuo or loss asset
No. 3 s
Changjiang
Held-
Securities
At fair for-tr
Entruste Not Lexiang
value ading Self-
d wealth appl 1-Day
throug - 10,000 - 10,213 213 finan fund
manage icab Collective
h profit cial ed
ment le Asset
or loss asset
Manageme
s
nt Plan
Not Self-
Other securities investments
429,117 855,791 994,424 361,376 75,532 appli fund
held at period-end
cable ed
Total 429,117 1,105,791 994,424 616,094 80,250
(2) Investments in Derivative Financial Instruments
Funding source Mostly foreign-currency revenue
Legal matters involved (if
Not applicable
applicable)
41
TCL Technology Group Corporation Annual Report 2019
Disclosure date of board
announcement approving 28 April 2018
derivative investment (if any)
Disclosure date of general
meeting announcement
Not applicable
approving derivative
investment (if any)
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
Analysis of risks and control to the bank for the operations of evening up or selling the derivatives below the buying
measures associated with prices;
derivative investments held in 3. Performance risk: the Group conducts the derivative business based on rolling budgets
Reporting Period (including but for risk management, and there is a risk of performance failure due to deviation between
not limited to market risk, the actual operating results and budgets;
liquidity risk, credit risk, 4. Other risks: in the case of specific business operations, if the operator fails to finish the
operational risk, legal risk, etc.) 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
42
TCL Technology Group Corporation Annual Report 2019
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, operationa l 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 d evelopment;
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 With the rapid expansion of overseas sales, the Company keeps following the above rules
fair value of derivative in the operation of forward foreign exchange contracts, interest rate swap contracts and
investments in Reporting futures contracts to avoid and hedge foreign exchange risks arising from operation and
Period (fair value analysis financing. It saw a loss of RMB6.35 million for the Reporting Period. The fair value of
should include measurement derivatives is determined by real-time quoted price of the foreign exchange market, based
method and related on the difference between the contractual price and the forward exchange rate quoted
assumptions and parameters) immediately in the foreign exchange market on the balance sheet date.
Major changes in accounting
policies and specific
accounting principles adopted
No major changes
for derivative in vestments in
Reporting Period compared to
last reporting period
According to the Guiding Opinion of CSRC on Establishing the Independent Director
System in Listed Companies, the Stock Listing Rules of Shenzhen Stock Exchange (2018
Revision), the Company’s Articles of Association, the Rules of Procedure for Independent
Directors, etc., we, as the independent directors of the Company, express our
independent opinion on the trading of financial derivatives in 2019 as follows:
Opinion of independent
In view of the fact that certain raw materials of the core business of the Company are
directors on derivative
purchased overseas , a wide range of settlement currencies is involved. The Company
investments and risk control
reduces exchange losses and locks transaction costs by reasonabl e 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
43
TCL Technology Group Corporation Annual Report 2019
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.
We believe that the financial derivatives transactions carried out by the Company in 201 9
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
Ending contractual
amount as % of the
Beginning amount Ending amount Gain/loss in
Company’s ending net
Type of contract Reporting
assets
Period
Contractual Actual Contractual Actual Contractual Actual
amount amount amount amount amount amount
1. Forward forex 2,531,633 86,070 1,279,232 36,087 20.02 0.56
contracts
2. Interest rate 465,325 13,960 528,098 15,843 -635 8.27 0.25
swaps
3. Currency swaps 311,589 15,579 215,565 14,399 3.37 0.23
Total 3,308,547 115,609 2,022,895 66,329 -635 31.66 1.04
5. Use of Funds Raised
(1) General Information about the Use of Raised Funds
Unit: RMB’0,000
Cumulativ
Amount e amount Purpose
Cumulativ Amount
Used in with with and
Total e amount being idle
Year of Way of the Cumulativ changed changed Unused whereabo
amount with for more
raising raising Current ely used use in the use as % amount uts of the
raised changed than two
Period Reporting of total unused
use years
Period amount amount
raised
Public
offering to
2019 400,000 400,000 400,000 - - - -- -
qualified
investors
Total -- 400,000 400,000 400,000 - - - - -- -
44
TCL Technology Group Corporation Annual Report 2019
Remark
During the Reporting Period, TCL Technology Group Corporation raised a total of RMB4 billion through the Corporate
Bonds Publicly Offered in 2019 to Qualified Investors (Phase 1), (Phase 2) and (Phase 3), which was used up for
supplementing the working capital and repaying loans.
Promised Use of Raised Funds
□ Applicable ■ Not applicable
Changed Use of Raised Funds
□ Applicable ■ Not applicable
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
The Proposal on the Review of the Report of TCL Corporation on the Sale of Major
Assets & Related-Party Transaction (Draft) and Its Summary, as well as the relevant
proposals, were approved at the 13th meeting of the 6th Board of Directors on 7 December
2018 and later at the First Extraordinary General Meeting of 2019 on 7 January 2019. At
the price of RMB4.76 billion, the Company sold the following directly-held equity interests to
TCL Industries: 100% interest of TCL Industries (HK), 100% interest of Huizhou Household
Electric Appliance, 100% interest of Hefei Home Appliances, 56.50% interest in Cool
Friends Technology, 100% interest of Koyoo Online Service, 100% interest of TCL
Technology Park, 75% interest in JDH, and 36.00% interest in Getech. For details of this
restructuring, see the Report of TCL Corporation on the Sale of Major Assets &
Related-Party Transaction (Draft), its revised version and other relevant documents
disclosed on www.cninfo.com.cn dated 8 and 22 December 2018, respectively. Up to April
2019, the Company had received all the amount for this sale of major assets, marking the
completion of the restructuring. And the gain/loss on the restructuring has been recognized.
Considering the weak connection to the Company’s core business and the small
contributions to the Company’s revenue of Huizhou TCL Environmental Resource Co., Ltd.
(“Huizhou Environmental Resource ”) and Shenzhen HAWK Internet Co., Ltd. (“HAWK
Internet”), in order to further concentrate on its core business, the Company sold a 71%
45
TCL Technology Group Corporation Annual Report 2019
interest in Huizhou Environmental Resource to TCL Industries for the consideration of
RMB274,891,300; and sold the 100% interest in HAWK Internet to TCL Electronics
(Huizhou) Ltd., a subsidiary of TCL Industries, for the consideration of RMB200,109,800.
This transaction has been approved at the 21 st Meeting of the 6th Board of Directors of the
Company on 30 October 2019. For further details, see the Announcement on Sale of
Interests in Subsidiaries & the Related-Party Transactions disclosed by the Company on
www.cninfo.com.cn dated 31 October 2019.
2. Sale of Major Equity Interests
□ Applicable ■ Not applicable
VII Major Subsidiaries
Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s
net profit:
Rel
atio
nshi Prin
p cip Regist
Total assets Net assets Revenue Operating Net profit
Name with al ered
(RMB) (RMB) (RMB) profit (RMB) (RMB)
the acti capital
Co vity
mp
any
TCL Se
China mi-
Star con
Sub RMB1
Optoelec duc 964,444,37
sidi 9.823 130,582,409,307 55,231,216,844 33,993,533,865 958,502,226
tronics tor 3
ary billion
Technol dis
ogy Co., pla
Ltd. y
Dist
Highly
ribu
Informati Sub RMB1
tion 215,604,32
on sidi 33 4,520,509,132 1,002,879,862 20,835,617,478 308,374,952
of 1
Industry ary million
not
Co., Ltd.
ebo
46
TCL Technology Group Corporation Annual Report 2019
oks
Subsidiaries obtained or disposed in the Reporting Period:
See “(6) Changes to the Consolidation Scope of the Reporting Period” in Item II of Part IV.
VIII Structured Bodies Controlled by the Company
□ Applicable ■ Not applicable
IX Prospects
The external environment is complex and severe , and opportunities and challenges both
exist in 2020. Trade war between China and the United States has intensified, the
economic globalization has encountered twists and turns and China's economic
restructuring and industrial restructuring are under increasing pressure. On the other hand,
the development of 5G, AI, IoT, big data and cloud technology brings new development
opportunities for new infrastructure and application and the global display business
environment will be improved compared to last year, but the global epidemic development
increases uncertainty.
China has manufacture and consume a lot of intelligent terminals. And the market is the
biggest size and the fastest growth of semi-conductor display industry. Chinese companies
will quickly become a global leader in the display industry based on efficiency, scale, cost
and customer response advantages and the industry chain is accelerating to transfer to
China. Moreover, the continuous product technology innovation can meet the new market
requirement, especially various high performance display products in t he commercial sector.
Smart TV big screen upgrade and increase in needs for overseas market bring industrial
development opportunities. The China Industry is expected to exert an advantage in the
industry low, accelerate merging and reorganization, increase industrial concentration and
speed up development of the global industrial chain.
TCL Tech. has completed the Major Asset Restructuring and is positioned as a technology
conglomerate which proposes the "global leadership" strategic target as well as achieves
long-term effective growth and gradually achieves global leadership by continuously
improving product quality and management efficiency, breaking through the core and key
technologies and rational ecological layout. The Company will further concentrate its
47
TCL Technology Group Corporation Annual Report 2019
resources to increase scale and market competitiveness of semi-conductor display and
material business based on TCL CSOT as the core, so as to strengthen and deepen the
semi-conductor display and material industrial chain. It will also explore integration and
expansion opportunities for relevant business in the area of key, high-end and basic
information technology.
2020 is the opening year of implementing the new strategy of the Company and various key
works has been comprehensively implemented. The volume production of G6 AMOLED
production line t4 is conducted, the G11 oversize display t7 project is constructed and the
next generation of display technology proceeds orderly. The Company will actively lay out
the upstream and downstream industrial chai n, participate in development of new materials
and layout of new process and equipment as well as further improve the global
competitiveness of the semi-conductor display industry by cooperation, investment and
participation, acquisition and reorganization, etc. TCL CSOT will achieve steady growth by
efficient industrial structure layout, innovative technical capacity and stable financial capital
structure. The Company also will take advantages of technology, management and capital
and actively enter the new area of the capital-intensive and technology-intensive strategic
industries to become a global leading intelligent technology company.
X Communications with the Investment Community such as Researches, Inquiries
and Interviews
1. During the Reporting Period
Type of communication Index to main information
Date Way of communication
party communicated
18 January 2019 By visit Institutional investor www.cninfo.com.cn
12 February 2019 By visit Institutional investor www.cninfo.com.cn
18 February 2019 By visit Institutional investor www.cninfo.com.cn
19 February 2019 By visit Institutional investor www.cninfo.com.cn
20 February 2019 By visit Institutional investor www.cninfo.com.cn
20 February 2019 By visit Institutional investor www.cninfo.com.cn
25 February 2019 By visit Institutional investor www.cninfo.com.cn
27 February 2019 By visit Institutional investor www.cninfo.com.cn
48
TCL Technology Group Corporation Annual Report 2019
1 March 2019 By visit Institutional investor www.cninfo.com.cn
4 March 2019 By visit Institutional investor www.cninfo.com.cn
7 March 2019 By visit Institutional investor www.cninfo.com.cn
20 March 2019 By visit Institutional investor www.cninfo.com.cn
28 March 2019 By visit Institutional investor www.cninfo.com.cn
29 March 2019 By visit Institutional investor www.cninfo.com.cn
9 April 2019 By visit Individual investor www.cninfo.com.cn
24 April 2019 By visit Institutional investor www.cninfo.com.cn
25 April 2019 By visit Institutional investor www.cninfo.com.cn
24 May 2019 By visit Institutional investor www.cninfo.com.cn
29 May 2019 By visit Institutional investor www.cninfo.com.cn
12 June 2019 By visit Institutional investor www.cninfo.com.cn
13 June 2019 By visit Institutional investor www.cninfo.com.cn
28 June 2019 By visit Institutional investor www.cninfo.com.cn
25 July 2019 By visit Institutional investor www.cninfo.com.cn
13 August 2019 By visit Institutional investor www.cninfo.com.cn
12 September 2019 By visit Institutional investor www.cninfo.com.cn
20 September 2019 By visit Institutional investor www.cninfo.com.cn
31 October 2019 By phone Institutional investor www.cninfo.com.cn
1 November 2019 By visit Institutional investor www.cninfo.com.cn
5 November 2019 By visit Institutional investor www.cninfo.com.cn
5 November 2019 By visit Institutional investor www.cninfo.com.cn
6 November 2019 By visit Institutional investor www.cninfo.com.cn
19 November 2019 By visit Institutional investor www.cninfo.com.cn
20 November 2019 By visit Institutional investor www.cninfo.com.cn
27 November 2019 By visit Institutional investor www.cninfo.com.cn
2 December 2019 By visit Institutional investor www.cninfo.com.cn
12 December 2019 By visit Institutional investor www.cninfo.com.cn
Times of communications 36
Number of institutions communicated with 456
Number of individuals communicated with 118
Number of other communication parties 0
49
TCL Technology Group Corporation Annual Report 2019
Tip-offs or leakages of substantial
supposedly-confidential information during None
communications
50
TCL Technology Group Corporation Annual Report 2019
Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)
Special statement about the cash dividend policy
In compliance with the Company’s Articles of Association
Yes
and resolution of general meeting
Specific and clear dividend standard and ratio Yes
Complete decision-making procedure and mechanism Yes
Independent directors faithfully performed their duties and
Yes
played their due role
Non-controlling interests are able to fully express their
opinion and desire and their legal rights and interests are Yes
fully protected
In case of adjusting or changing the cash dividend policy, No changes to the dividend policy and the relevant
the conditions and procedures involved are in compliance conditions and procedures are in compliance with
with applicable regulations and transparent applicable regulations and transparent
The 2017 annual equity distribution plan: based on the share capital of 13,514,972,063
shares on 27 April 2018 plus the granted restricted shares for profit distribution of
34,676,444 shares, i.e. a total of 13,549,648,507 shares, a cash dividend of RMB1 (tax
inclusive) per 10 shares was to be distributed to the shareholders, totaling
RMB1,354,964,850.7. The retained earnings would carry forward for future distribution.
Meanwhile, there was no bonus issue from either profit or capital reserves for the year.
The 2018 annual equity distribution plan: based on the share capital of 13,402,888,507
shares on 19 March 2019 that were eligible for profit distribution (the total share capital of
13,549,648,507 shares minus the 146,760,000 shares in the Company’s special securities
account for repurchase that were not eligible for profit distribution), a cash dividend of
RMB1 (tax inclusive) per 10 shares was to be distributed to the shareholders, totaling
RMB1,340,288,851. The retained earnings would carry forward for future distribution.
Meanwhile, there was no bonus issue from either profit or capital reserves for the year.
The 2019 annual equity distribution plan: based on the share capital of 13,000,372,307
shares on 27 March 2020 that are eligible for profit distribution (the total share capital of
51
TCL Technology Group Corporation Annual Report 2019
13,528,438,719 shares minus the 528,066,412 shares in the Company’s special securities
account for repurchase that are not eligible for profit distribution), a cash dividend of RMB1
(tax inclusive) per 10 shares is to be distributed to the shareholders, totaling
RMB1,300,037,230.70. The retained earnings will carry forward for future distribution.
Meanwhile, there will be no bonus issue from either profit or capital reserves for the year.
The Company carried out a share repurchase program of up to RMB1.934 billion in 2019,
which has been completed in early January 2020. As attaching great importance to the
reasonable return of investors, the Company reviews the return plan of shareholders for the
coming three years in 2020, which not only ensures an ongoing and consistent profit
distribution policy, but also pay full attention to what the shareholders, especially the
minority shareholders, want so as to sufficiently protect their rightful interests.
Cash dividend for ordinary shareholders in the past three years (including the Reporting Period):
Unit: RMB
Net profit
attributable to
ordinary Total cash
Cash dividends in
shareholders of dividends
Cash dividends A as % other forms (like C as % A+C as %
Year the listed (including those
(tax inclusive) (A) of B (%) share repurchase) of B (%) of B (%)
company in in other forms)
(C)
consolidated (A+C)
statements for
the year (B)
2019 1,300,037,230.7 2,617,766,571 49.66% 1,933,596,514.47 73.86% 3,233,633,745.17 123.53%
2018 1,340,288,851 3,468,207,405 38.65% - - 1,340,288,851 38.65%
2017 1,355,091,606.3 2,664,396,006 50.86% - - 1,355,091,606.3 50.86%
Indicate whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts
that the Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to
the ordinary shareholders are positive.
□ Applicable ■ Not applicable
II Final Dividend Plan for the Reporting Period
Bonus issue from profit (share/10 shares) 0
Cash dividend/10 shares (RMB) (ta x inclusive) 1.00
52
TCL Technology Group Corporation Annual Report 2019
Bonus issue from capital reserves (share/10
0
shares)
Share base (share) 13,000,372,307
Cash dividends (RMB) (tax inclusive) 1,300,037,230.7
Cash dividends in other forms (like share
1,933,596,514.47
repurchase) (RMB)
Total cash dividends (including those in other
3,233,633,745.17
forms) (RMB)
Distributable profits (RMB) 8,119,832,872
Total cash dividends (including those in other
100%
forms) as % of total profits to be distributed (%)
Cash dividend plan
Based on the share capital of 13,000,372,307 shares on 27 March 2020 that are eligible for profit distribution (the total
share capital of 13,528,438,719 shares minus the 528,066,412 shares in the Company’s special securities account for
repurchase that are not eligible for profit distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be
distributed to the shareholders, totaling RMB1,300,037,230.70. The retained earnings of RMB6,819,795,641.3 will carry
forward for future distribution. Meanwhile, there will be no bonus issue from either profit or capital reserves for the year.
Cash and/or stock dividend plan in detail
Based on the share capital of 13,000,372,307 shares on 27 March 2020 that are eligible for profit distribution (the total
share capital of 13,528,438,719 shares minus the 528,066,412 shares in the Company’s special securities account for
repurchase that are not eligible for profit distribution), a cash dividend of RMB1 (ta x inclusive) per 10 shares is to be
distributed to the shareholders, totaling RMB1,300,037,230.70. The retained earnings of RMB6,819,795,641.3 will carry
forward for future distribution. Meanwhile, there will be no bonus issue from either profit or capital reserves for the year.
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and
Acquirers, as well as the Company Itself and other Entities Fulfilled in the Reporting Period or
Ongoing at the Period-end
Typ
e of Date of
Term of
com commitm Fulfillme
Commitment Promisor Details of commitment commitmen
mit ent nt
t
men making
t
Abo 1. Before and after this During the
Li Dongsheng, transaction, I/we as an
ut enterprise or our 7 period No
Commitments made in major asset Jiutian Liancheng
avoi controlled enterprises Decembe when being violation
restructuring and Donging shall have no horizontal
ding competition with the r 2018 the biggest s
Huarui
hori principal activities of TCL shareholde
53
TCL Technology Group Corporation Annual Report 2019
zont Corporation or its r of TCL
subsidiaries.
al 2. After this transaction, Corporatio
com I/we as an enterprise n
shall take active
petit measures to avoid
ion carrying out business
activities that are or may
be in competition with the
principal activities of TCL
Corporation or its
subsidiaries, and shall
urge our controlled
enterprises to do so.
3. In the event that I/we
as an enterprise or any
enterprise controlled by
me/us as an enterprise
obtains an opportunity for
a new business, which
constitutes or may
constitute horizontal
competition with the main
business of TCL
Corporation or any of its
affiliates, I/we as an
enterprise will make
maximum efforts to drive
the business opportunity
to be provided to TCL
Corporation or its affiliate
on reasonable and fair
terms and conditions in
favor of the interests of
TCL Corporation under
the permission of
conditions.
4. If due to the investment
needs of me/us as an
enterprise or the business
development of TCL
Corporation, the business
of me/us as an enterprise
or any enterprise
controlled by me/us as an
enterprise overlaps with
that of TCL Corporation,
which may constitute
horizontal competition,
I/we as an enterprise and
the enterprise controlled
by me/us as an enterprise
agree to solve the
horizontal competition
problem arising thereof
within the time limit
specified then.
5. During the period of
being the first majority
shareholder of TCL
Corporation, the
aforementioned
commitments are
unconditional and
irrevocable. I/we as an
enterprise will make
54
TCL Technology Group Corporation Annual Report 2019
comprehensive and
timely joint
compensations in full
amount to TCL
Corporation for any
losses incurred from the
violation of the
aforementioned
commitments.
1. I/we as an enterprise
will minimize related-party
transactions between
me/us as an enterprise as
well as any enterprise
controlled by me/us as an
enterprise and TCL
Corporation as well as
any of its affiliates.
2. In respect of any
unavoidable or
reasonable related-party
transaction, I/we as an
enterprise as well as the
enterprise controlled by
me/us as an enterprise
and TCL Corporation as
well as its affiliate shall
deal with it in accordance
Abo with fair market principles
ut and normal commercial
conditions, ensure the
redu fairness of related-party
During the
cing transaction prices,
perform the period
and decision-making
when being
Li Dongsheng, cont procedures for
related-party transactions 7 the biggest No
Jiutian Liancheng rolli in accordance with laws,
Decembe shareholde violation
and Donging ng undertake not to make
use of the transaction to r 2018 r of TCL s
Huarui relat transfer the funds or
Corporatio
ed-p profits of TCL Corporation
illegally, and undertake n
arty not to take advantage of
the transaction to infringe
tran
upon the legitimate rights
sact and interest of TCL
ions Corporation and its
shareholders.
3. I/we as an enterprise
and the enterprises
controlled by me/us as an
enterprise will not request
TCL Corporation or any of
its affiliates to offer more
favorable conditions than
the conditions offered to
an independent third
party in any fair market
transaction.
4. During the period of
being the first majority
shareholder of TCL
Corporation, the
aforementioned
commitments are
unconditional and
55
TCL Technology Group Corporation Annual Report 2019
irrevocable. I/we as an
enterprise will make
comprehensive and
timely joint
compensations in full
amount to TCL
Corporation for any
losses incurred from the
violation of the
aforementioned
commitments.
Upon the completion of
this transaction, I/we as
an enterprise will continue
to exercise the
shareholder’s rights in
accordance with laws,
regulations and the
Articles of Incorporation
of TCL Corporation and
maintain the
independence of TCL
Corporation in assets,
personnel, finance,
business and institution.
The specific contents are
as follows:
(I) Commitment to the
personnel independence
Abo from TCL Corporation
I/we as an enterprise
ut
undertake to maintain
kee personnel independence During the
from TCL Corporation. period
ping
General managers,
the deputy general when being
Li Dongsheng, managers, financial
liste 7 the biggest No
Jiutian Liancheng principals, board
d secretaries and other Decembe shareholde violation
and Donging senior managers of TCL
com r 2018 r of TCL s
Huarui Corporation will not serve
pan in any position other than Corporatio
Director and Supervisor in
y n
any enterprise which is a
inde wholly-owned or holding
subsidiary of me/us as an
pen enterprise or any other
dent subsidiary over which
I/we as an enterprise has
control (hereinafter
referred to as “the
subsidiaries”). They will
not be paid salaries in the
subsidiaries of me/us as
an enterprise. The
financial personnel of TCL
Corporation will not work
in the subsidiaries of
me/us as an enterprise on
a part-time basis.
(II) Commitment to the
asset independence and
completeness of TCL
Corporation
1. I/we as an enterprise
undertake that TCL
56
TCL Technology Group Corporation Annual Report 2019
Corporation has
independent and
complete assets.
2. I/we as an enterprise
undertake that TCL
Corporation has no funds
or assets misappropriated
by me/us as an enterprise
or the subsidiaries of
me/us as an enterprise.
(III) Commitment to the
financial independence of
TCL Corporation
1. I/we as an enterprise
undertake that TCL
Corporation establishes
an independent finance
department and an
independent financial
accounting system.
2. I/we as an enterprise
undertake that TCL
Corporation has standard
and independent financial
accounting policies.
3. I/we as an enterprise
undertake that TCL
Corporation opens
accounts independently
in the bank without
sharing any bank account
with me/us as an
enterprise.
4. I/we as an enterprise
undertake that the
financial personnel of TCL
Corporation not work in
the subsidiaries of me/us
as an enterprise on a
part-time basis.
5. I/we as an enterprise
undertake that TCL
Corporation is able to
make financial decisions
independently and that
I/we as an enterprise not
intervene in the fund use
of TCL Corporation.
(IV) Commitment to the
institutional
independence of TCL
Corporation
1. I/we as an enterprise
undertake that TCL
Corporation has an
independent and
complete organizational
institution and run it
independently and
autonomously.
2. I/we as an enterprise
undertake that the office
institutions and
production and operation
places of TCL
57
TCL Technology Group Corporation Annual Report 2019
Corporation are separate
from my subsidiaries/us
as an enterprise.
3. I/we as an enterprise
undertake that the Board
of Directors, Board of
Supervisors and
functional departments of
TCL Corporation are
operated independently
without any affiliation with
the functional department
of us as an enterprise.
(V) Commitment to the
business independence
from TCL Corporation
1. I/we as an enterprise
undertake to maintain
business independence
from the TCL Corporation
after this transaction.
2. I/we as an enterprise
undertake that TCL
Corporation has the
assets, personnel,
qualifications and
capabilities for
independent performance
of operating activities and
the capabilities for
autonomous operation
targeting market.
I/we as an enterprise or
the subsidiaries of me/us
as an enterprise will make
bear the corresponding
compensation liabilities in
accordance with laws for
any losses incurred to
TCL Corporation due to
the violation of the
commitments under the
commitment letter.
Star Century
Enterprises
Limited; Linzhou
Xinglan Venture Abo
Investment ut We agree not to transfer
Management shar the shares that we
Partnership e subscribe for within 36 25 25
No
Commitments made in refinancing (Limited tradi months since the end of Decembe December
violation
Partnership); ng TCL’s asset purchase via r 2017 2020
s
Linzhou Xingyong restr share offering (25
Venture ictio December 2017).
Investment ns
Management
Partnership
(Limited
58
TCL Technology Group Corporation Annual Report 2019
Partnership);
Linzhou Xingyuan
Venture
Investment
Management
Partnership
(Limited
Partnership); and
Linzhou Xinglian
Venture
Investment
Management
Partnership
(Limited
Partnership)
I will comply with
obligations specified in
the management
regulations for
short-swing trading,
Abo
insider trading and
ut
changes in the
hori
shareholding of senior
zont
management; I agree to
al
have me and the
com
partnership enterprise
petit
recognized as persons
ion,
Li Dongsheng; Bo acting in concert and
relat
Lianming; Liao have the number of 4 No
ed-p Long-stand
Qian; Huang shares I hold of TCL February violation
arty ing
Xubin; Yan Xiaolin Corporation and that the 2015 s
tran
and Shi Wanwen partnership enterprise
sact
holds of TCL Corporation
ion
calculated in
and
consolidation in
capi
accordance with the
tal
provisions of related
occ
regulations such as
upat
Article 83 of the
ion
Management Measures
on the Acquisition of
Listed Companies and
the Articles of
Incorporation when the
59
TCL Technology Group Corporation Annual Report 2019
related parties perform
their legal obligations of
information disclosure on
major equity changes and
tender offer.
1) I shall avoid horizontal
Abo
competition between the
ut
companies, enterprises or
hori
other business
zont
organizations that I own,
al
control, control with During the
com
others, have significant period
petit
influence on and TCL when being
ion,
Corporation with its TCL
relat
subsidiaries; and 30 Corporatio No
ed-p
Li Dongsheng 2) I shall reduce and August n’s director, violation
arty
control related-parties 2013 supervisor s
tran
transactions between the or senior
sact
companies, enterprises or manageme
ion
other business nt
and
organizations that I own,
capi
control, control with
tal
others, or have significant
occ
influence on and TCL
upat
Corporation with its
ion
subsidiaries.
Abo
ut
not
Li Dongsheng； redu
I/We as an enterprise
Xinjiang Jiutian cing
shall not reduce our
Liancheng Equity shar No
shareholdings in the 19 June 19 June
Investment ehol violation
Company within 12 2018 2019
Partnership ding s
months since 19 June
Other commitments (Limited s in
2018.
Partnership) the
Co
mpa
ny
Abo The Company undertakes
No
ut to TCL Multimedia that: 16 June Long-stand
The Company violation
hori The Company and its 2014 ing
s
zont subsidiaries (other than
60
TCL Technology Group Corporation Annual Report 2019
al TCL Multimedia and its
com subsidiaries) will not
petit engage in the
ion, manufacturing, assembly
relat and distribution of TV sets
ed-p (“restricted businesses”)
arty and will engage in the
tran R&D, manufacturing and
sact sales of audio and video
ion products (excluding TV
and sets) (“related
capi businesses”) which are
tal not restricted businesses,
occ provided that the party
upat making the commitment
ion or any party therein runs
or engages in related
businesses through
equity investment in Tonly
Electronics. The
distribution and
maintenance of TV sets
and the manufacturing,
assembly, distribution and
maintenance of
information technology
products related to
Internet from time to time
will no longer be included
in the scope of res tricted
businesses. The
termination condition is
that the total equity which
TCL Multimedia and its
subsidiaries hold of Cool
Friends Technology is
less than 15%.
Fulfilled on time Yes
Specific reasons for failing to fulfill
commitments on time and plans for Not applicable
next step
61
TCL Technology Group Corporation Annual Report 2019
2. Where there had been an earnings forecast for an asset or project and the Reporting Period
was still within the forecast period, explain why the forecast has been reached for the Reporting
Period.
□ Applicable ■ Not applicable
Commitments made by the Company’s shareholders and transaction counterparties regarding the operating performance
of the Reporting Period:
□ Applicable ■ Not applicable
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its
Related Parties for Non-Operating Purposes
□ Applicable ■ Not applicable
V Explanations Given by the Board of Directors, the Supervisory Committee and the
Independent Directors (if any) Regarding the Independent Auditor's “Modified
Opinion” on the Financial Statements of the Reporting Period
□ Applicable ■ Not applicable
VI YoY Changes to Accounting Policies, Estimates and Methods
For details, see “36. Changes to main accounting policies and estimates ” in “III Significant accounting policies and
estimates” in “Part X Financial Report”.
VII Retrospective Restatements due to Correction of Material Accounting Errors in
the Reporting Period
□ Applicable ■ Not applicable
VIII YoY Changes to the Scope of the Consolidated Financial Statements
Compared with 2018, 2019 saw the official exclusion of the intelligent terminal and
supporting businesses from the consolidated financial statements as the Restructuring was
completed in April 2019. The consolidated financial statements of 2019 included the Q1
data of the restructured businesses, while those of 2018 included the full-year data.
IX Engagement and Disengagement of Independent Auditor
Current independent auditor:
62
TCL Technology Group Corporation Annual Report 2019
Da Hua Certified Public Accountants (Special General
Name of the domestic independent auditor
Partnership)
The Company’s payment to the domestic independent
316
auditor (RMB’0,000)
How many consecutive years the domestic independent
12
auditor has provided audit service for the Company
Names of the certified public accountants from the domestic
independent auditor writing signatures on the auditor’s Qiu Junzhou and Jiang Xianmin
report
How many consecutive years the certified public
1 year for both
accountants have provided audit service for the Company
Indicate whether the independent auditor was changed for the Reporting Period.
□ Yes ■ No
Indicate whether the independent auditor was changed during the audit period.
□ Yes ■ No
X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable ■ Not applicable
XI Insolvency and Reorganization
□ Applicable ■ Not applicable
XII Major Legal Matters
□ Applicable ■ Not applicable
XIII Punishments and Rectifications
□ Applicable ■ Not applicable
XIV Credit Quality of the Company as well as Its Controlling Shareholder and Actual
Controller
□ Applicable ■ Not applicable
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive
Measures for Employees
(I) The First Top 400 and Key Personnel Stock Ownership Plan and the Global
63
TCL Technology Group Corporation Annual Report 2019
Partner Plan
1. On 28 March 2019, the Company disclosed the Announcement on the Quota Allocation
and Equity Vesting of the First Top 400 and Key Personnel Stock Ownership Plan and the
Global Partner Plan (the “First Stock Ownership Plan”). This plan set out a company
performance-related condition of a not-lower-than-15% growth in the net profit attributable
to shareholders of the Company as the parent in 2018 compared to 2017. According to the
2018 Annual Independent Auditor’s Report for TCL Corporation issued by Da Hua Certified
Public Accountants (Special General Partnership), the net profit attributable to
shareholders of the Company as the parent in 2018 grew by 30.17% compared to 2017,
which meant the said condition had been satisfied.
2. A total of 99,148,115 shares were purchased for the First Stock Ownership Plan. As per
the rules governing the First Stock Ownership Plan, the Management Committee of the
First Stock Ownership Plan decided to vest a total of approximately 47.49 million shares in
the holders of the First Stock Ownership Plan. To be specific, a total of about 4.26 million
shares were vested in directors, supervisors and senior management (Mr. Li Dongsheng,
Ms. Du Juan, Mr. Huang Wei, Mr. Jin Xuzhi, Mr. Liao Qian, Mr. Yan Xiaolin and Mr. Mao
Tianxiang), and the rest of 43.23 million shares were given to the other holders. The
unvested about 51.66 million shares under the First Stock Ownership Plan and the
corresponding dividends (if any) were taken back by the Management Committee of the
First Stock Ownership Plan with no compensation. These shares would be sold at a proper
timing before the expiry of the First Stock Ownership Plan, and the proceeds generated
therein would be returned to the Company.
(II) The Second Global Partner Plan
1. The Proposal on the Second Global Partner Plan (Draft) and Its Summary, and the
Measures for the Management of the Second Global Partner Plan were approved
respectively at the 16th Meeting of the 6th Board of Directors on 23 April 2019 and the Third
Extraordinary General Meeting of 2019 on 8 May 2019. Shares for the Second Global
Partner Plan would be obtained through a non-deal transfer from the special securities
account for repurchases.
64
TCL Technology Group Corporation Annual Report 2019
2. The Proposal on Adjustments to the Second Global Partner Plan (Draft) and Its
Summary was approved at the 22 nd Meeting of the 6th Board of Directors on 12 August
2019. The Company’s independent directors expressed their independent opinion on
whether the interests of the Company and its shareholders would be jeopardized by these
adjustments.
3. The shares used for the Second Global Partner Plan were part of the shares
repurchased in 2019. On 23 August 2019, the Company initiated a non-deal transfer
procedure with the Shenzhen branch of China Securities Depository and Clearing Co., Ltd.
Up to that day, the cumulative shares in the special securities account for repurchases were
repurchased at an average price of RMB3.394/share through centralized bidding. The
capital used for the Second Global Partner Plan came from the Special Fund for the 2019
Stock Ownership Plans, with a ceiling of RMB113.3321 million. Based on the aforesaid
average repurchase price, the shares to be transferred from the special securities account
for repurchases to the Second Global Partner Plan would be 33.3919 million shares in total.
4. The Announcement on the Completion of the Non-Deal Transfer to the Second Global
Partner Plan was disclosed on the designated media dated 12 October 2019. The
Company had received the Securities Transfer Confirmation issued by the Shenzhen
branch of China Securities Depository and Clearing Co., Ltd. 33.3919 million shares (or
0.25% of the Company’s total share capital) had been transferred in a non-deal manner
from the special securities account for repurchases to the securities account for employee
stock ownership plans. As required by the Second Global Partner Plan (Draft), the shares
under the Second Global Partner Plan would be locked up for a period of no less than 12
months starting from the disclosure of the announcement on the completion of the transfer
of target shares from the special securities account for repurchases, i.e. from 12 October
2019 to 11 October 2020.
(III) The 2018 Restricted Stock Incentive Plan and the Global Innovation Partner Plan
1. As authorized by the First Extraordinary General Meeting of 2018, the Company
convened the 16th Meeting of the 6th Board of Directors and the 10th Meeting of the 6th
Supervisory Committee on 23 April 2019. At the meetings, the Proposal on an Adjustment
65
TCL Technology Group Corporation Annual Report 2019
to the Repurchase Price of the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan was approved. As such, it was decided to adjust the repurchase
price of the 2018 Restricted Stock Incentive Plan and the Global Innovation Partner Plan
(the “2018 Restricted Stock Incentive Plan” for short) from RMB1.83/share to
RMB1.63/share.
2. The Proposal on the Repurchase and Retirement of Restricted Shares That Have Been
Granted to Certain Awardees under the 2018 Restricted Stock Incentive Plan and the
Global Innovation Partner Plan But Are Still in Lockup was approved respectively at the 18 th
Meeting of the 6th Board of Directors and the 12 th Meeting of the 6th Supervisory Committee
both dated 20 May 2019. As such, it was agreed to repurchase and retire the 21,209,788
restricted shares that had been granted to 755 awardees but were still in lockup due to
reasons such as job transfer to TCL Industries in the Restructuring, resignation, or failure of
fulfillment of the performance indicator.
The Proposal on the Satisfaction of the Unlocking Condition for the First Unlocking Period
of the 2018 Restricted Stock Incentive Plan and the Global Innovation Partner Plan was
also approved. A total of 712 awardees could apply to unlock their restricted shares of
6,685,704 shares in total (or 0.05% of the Company’s existing total share capital) for
trading.
3. On 29 October 2019, 21,209,788 restricted shares were repurchased and retired through
the Shenzhen branch of China Securities Depository and Clearing Co., Ltd.
(IV) The 2019 Restricted Stock Incentive Plan and the Second Global Innovation
Partner Plan
1. On 23 April 2019, the Proposal on the 2019 Restricted Stock Incentive Plan and the
Second Global Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the
Proposal on the Measures for the Implementation of the 2019 Restricted Stock Incentive
Plan and the Second Global Innovation Partner Plan of TCL Corporation, the Proposal on
Asking the General Meeting to Authorize the Board to Handle Matters Related to the 2019
Restricted Stock Incentive Plan and other proposals were approved at the 16th Meeting of
the Sixth Board of Directors. Meanwhile, the Company’s independent directors expressed
66
TCL Technology Group Corporation Annual Report 2019
their independent opinion on whether these incentive plans would be good for the
Company’s sustained development and whether the interests of the Company and its
shareholders would be jeopardized.
2. On 23 April 2019, the Proposal on the 2019 Restricted Stock Incentive Plan and the
Second Global Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the
Proposal on the Measures for the Implementation of the 2019 Restricted Stock Incentive
Plan and the Second Global Innovation Partner Plan of TCL Corporation, and the Proposal
on the Awardee List for the 2019 Restricted Stock Incentive Plan were approved at the 10th
Meeting of the Sixth Supervisory Committee.
3. Following the publication of the awardee list within the Company, the Supervisory
Committee’s Statement Regarding the Review and Publication of the Awardee List for the
Restricted Stock Incentive Plan and the Second Global Innovation Partner Plan was
disclosed to the public on 6 May 2019.
4. On 8 May 2019, the Proposal on the 2019 Restricted Stock Incentive Plan and the
Second Global Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the
Proposal on the Measures for the Implementation of the 2019 Restricted Stock Incentive
Plan and the Second Global Innovation Partner Plan of TCL Corporation, and the Proposal
on Asking the General Meeting to Authorize the Board to Handle Matters Related to the
2019 Restricted Stock Incentive Plan were approved at the Third Extraordinary General
Meeting of 2019.
5. On 10 May 2019, the Proposal on the Adjustments to the 2019 Restricted Stock
Incentive Plan and the Second Global Innovation Partner Plan were approved at the 17th
Meeting of the Sixth Board of Directors and at the 11th Meeting of the Sixth Supervisory
Committee. As such, it was approved to grant 3,875,600 restricted shares to 122 eligible
awardees on 10 May 2019. The Company’s independent directors expressed their
independent opinion that the awardee determination method and the grant date were in
compliance with the applicable requirements.
67
TCL Technology Group Corporation Annual Report 2019
6. On 27 June 2019, the Company disclosed the Announcement on the Completion of the
Grant of Restricted Stock for 2019. This grant had been completed by the Board. And the
granted shares were listed on 26 June 2019.
XVI Major Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable ■ Not applicable
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable ■Not applicable
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable ■ Not applicable
4. Credits and Liabilities with Related Parties
□ Applicable ■ Not applicable
Indicate whether there were any credits and liabilities with related parties for non-operating purposes :
□ Yes ■ No
5. Other Major Related-Party Transactions
Title of announcement Date of disclosure Website for disclosure
Announcement on Intended Continuing
Related-Party Transactions with TCL 8 December 2018
Industries Holdings (Guangdong) Inc.
Announcement on TCL Finance Co., Ltd.
and TCL Industries Holdings Inc. Signing a
13 June 2019
Financial Service Agreement and the
Related-Party Transaction http://www.cninfo.com.cn
Announcement on the Acquisition of
Interest in Subsidiary and the 13 August 2019
Related-Party Transaction
Announcement on Investment in Equity
Investment Fund and the Related-Party 13 August 2019
Transaction
68
TCL Technology Group Corporation Annual Report 2019
Announcement on Increase in the
Estimated Amount of Continuing 31 October 2019
Related-Party Transactions with TCL
Industries Holdings Inc.
Announcement on the Sale of Interest in
Subsidiary and the Related-Party 31 October 2019
Transaction
Announcement on Investment in Equity
Investment Fund and the Related-Party 19 November 2019
Transaction
XVII Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable ■ Not applicable
(2) Contracting
□ Applicable ■ Not applicable
(3) Leases
□ Applicable ■ Not applicable
2. Major guarantees
Guarantees
Unit: RMB'0,000
Guarantees provided by the Company as the parent and its subsidiaries for external par ties (exclusive of those for
subsidiaries)
Disclosure
Guarant
date of the
Actual Actual Having ee for a
guarantee Line of Type of Term of
Obligor occurrence guarantee expired related
line guarantee guarantee guarantee
date amount or not party or
announce
not
ment
69
TCL Technology Group Corporation Annual Report 2019
TCL King Electrical
Joint-liabilit 39 days--60
Appliances 2019/3/19 345,000 2019/07/23 232,163 Not Yes
y months
(Huizhou) Co., Ltd.
TCL Overseas
Joint-liabilit 19 –365
Electronics 2019/3/19 120,000 2019/07/17 83,200 Not Yes
y days
(Huizhou) Ltd.
TCL King Electrical
Joint-liabilit
Appliances 2019/3/19 60,000 2019/11/18 4,000 302 days Not Yes
y
(Chengdu) Co., Ltd.
Huizhou TCL Mobile
Joint-liabilit 1 day—15
Communication Co., 2019/3/19 450,000 2019/07/29 223,585 Not Yes
y months
Ltd.
TCL Communication
Joint-liabilit 18—60
Technology 2019/3/19 120,000 2017/11/20 106,903 Not Yes
y months
Holdings Limited
TCL Mobile
Communication Joint-liabilit 3—4
2019/3/19 248,500 2019/10/8 42,099 Not Yes
(HK) Company y months
Limited
TCT Mobile Joint-liabilit
2019/3/19 6,625 - - Not Yes
Overseas Limited -y
TCT Mobile (US) Joint-liabilit
2019/3/19 84,500 - - Not Yes
Inc. -y
TCT Mobile Joint-liabilit
2019/3/19 31,000 - - Not Yes
International Limited -y
TCT Mobile Italy Joint-liabilit
2019/3/19 1,600 - - Not Yes
S.R.L -y
TCT MOBILE - Joint-liabilit
2019/3/19 12,000 - - Not Yes
TELEFONES LTD A. -y
TCL Home
Joint-liabilit 2—365
Appliances (Hefei) 2019/3/19 140,000 2020/01/02 59,189 Not Yes
y days
Co., Ltd.
TCL Home
Appliances Joint-liabilit 4—185
2019/3/19 16,000 2019/07/13 12,187 Not Yes
(Zhongshan) Co., y days
Ltd.
TCL Air-Conditioner
Joint-liabilit 27—1,804
(Zhongshan) Co., 2019/3/19 158,600 2016/09/09 91,686 Not Yes
y days
Ltd.
70
TCL Technology Group Corporation Annual Report 2019
TCL Air Conditioner Joint-liabilit 33—360
2019/3/19 131,600 2019/05/07 67,124 Not Yes
(Wuhan) Co., Ltd. y days
Zhongshan TCL
Joint-liabilit 90—196
Refrigeration 2019/3/19 75,300 2019/06/21 26,211 Not Yes
y days
Equipment Co., Ltd.
Guangdong TCL
Smart Heating & Joint-liabilit 90—189
2019/3/19 7,000 2019/07/30 5,964 Not Yes
Ventilation y days
Equipment Co., Ltd.
TCL Home
Joint-liabilit
Appliances 2019/3/19 11,500 - - Not Yes
-y
(Huizhou) Co., Ltd.
TCL Intelligent
Joint-liabilit
Technology (Hefei) 2019/3/19 800 2019/01/15 2 76 days Not Yes
y
Co., Ltd.
TCL Air-Conditioner Joint-liabilit 180—365
2019/3/19 25,000 2019/07/09 12,019 Not Yes
(Jiujiang) Co., Ltd. y days
TCL Home
Joint-liabilit
Appliances (Hong 2019/3/19 20,000 - - Not Yes
-y
Kong) Limited
Shenzhen TCL
Hangxiang Supply Joint-liabilit
2019/3/19 500 - - Not Yes
Chain Service Co., -y
Ltd.
Zhongshan Hhappy
Joint-liabilit 31—31
Tree Network 2019/3/19 2,000 2019/12/16 3 Not Yes
y days
Technology Co., Ltd.
TCL Tonly
Joint-liabilit
Electronics 2019/3/19 40,000 2019/02/15 7,206 1—2 years Not Yes
y
(Huizhou) Co., Ltd.
TCL Commercial
Information Joint-liabilit 3—259
2019/3/19 14,000 2018/11/16 Not Yes
Technology -y days
(Huizhou) Co., Ltd.
TCL Very Lighting
Joint-liabilit 2—196
Technology 2019/3/19 9,500 2019/07/11 4,795 Not Yes
y days
(Huizhou) Co., Ltd.
TCL Capital (Hong Joint-liabilit
2019/3/19 100,000 - - Not Yes
Kong) Limited -y
71
TCL Technology Group Corporation Annual Report 2019
Huizhou Cool
Joint-liabilit 6—204
Friends Network 2019/3/19 13,000 2019/11/11 12,989 Not Yes
y days
Technology Co., Ltd.
SHIFENDAOJIA
Joint-liabilit 2—189
Online Service Co., 2019/3/19 3,000 2019/06/28 1,216 Not Yes
y days
Ltd.
TCL Technology Joint-liabilit
2019/3/19 27,000 - - Not Yes
Park Co., Ltd. -y
Guangzhou
Joint-liabilit 120—144
Yunsheng Tianji 2019/3/19 110,000 2017/09/28 94,900 Not Yes
y months
Technology Co., Ltd.
Guangzhou TCL
Science and
Joint-liabilit 156—156
Technology 2019/3/19 200,000 2018/12/18 38,250 Not Yes
y months
Development Co.,
Ltd.
Shenzhen Bao’an
TCL Haichuanggu
Joint-liabilit 36—36
Technology Park 2019/3/19 20,000 2018/09/25 16,144 Not Yes
y months
Development Co.,
Ltd.
TCL Industries
Joint-liabilit
Holdings (HK) 2019/3/19 800,000 2016/10/4 631,197 1—5 years Not Yes
y
Limited
Huizhou TCL
Joint-liabilit 7 days-3
Environment 2019/3/19 6,000 2019/01/24 684 Not Yes
y months
Technology Co., Ltd.
Canyon Circuit
Joint-liabilit 24—188
Technology 2019/3/19 5,000 2019/07/03 3,205 Not Yes
y days
(Huizhou) Co., Ltd.
Huizhou Shenghua Joint-liabilit 59—239
2019/3/19 9,000 2019/06/28 7,421 Not Yes
Industrial Co., Ltd. y days
Taiyang
Joint-liabilit 109—184
Electro-optic 2019/3/19 4,000 2019/07/05 3,235 Not Yes
y days
(Huizhou) Co., Ltd.
Shenzhen Qianhai
Qihang Supply Joint-liabilit
2019/3/19 110,000 2018/3/27 28,052 2-12 months Not Yes
Chain Management y
Co., Ltd.
72
TCL Technology Group Corporation Annual Report 2019
Qihang
Joint-liabilit
Import&Export 2019/3/19 30,000 - - Not Yes
-y
Limited
Huizhou
Joint-liabilit 89—245
Gaoshengda 2019/3/19 9,000 2019/06/25 390 Not Yes
y days
Technology Co., Ltd.
AGC New Electronic
Joint-liabilit
Display Glass 2019/6/12 40,000 - - Not Yes
-y
(Shenzhen) Co., Ltd.
Total approved line for such Total actual amount of
guarantees in Reporting Period 3,617,025 such guarantees in 3,893,397
(A1) Reporting Period (A2)
Total approved line for such Total actual balance of
guarantees at end of Reporting 3,617,025 such guarantees at end 1,816,017
Period (A3) of Reporting Period (A4)
Guarantees provided by the Company as the parent for its subsidiaries
Disclosure
Guarant
date of the
Actual Actual Having ee for a
guarantee Line of Type of Term of
Obligor occurrence guarantee expired related
line guarantee guarantee guarantee
date amount or not party or
announce
not
ment
Wuhan China Star 14
Joint-liabilit
Optoelectronics 2019/3/19 800,000 2016/07/05 554,546 days—96 Not Not
y
Technology Co., Ltd. months
Shenzhen China
Star Optoelectronics
Joint-liabilit 6—96
Semiconductor 2019/3/19 4,763,100 2017/03/31 1,079,113 Not Not
y months
Display Technology
Co., Ltd.
TCL China Star 18
Joint-liabilit
Optoelectronics 2019/6/12 889,535 2015/04/27 404,127 days—96 Not Not
y
Technology Co., Ltd. months
Wuhan China Star
Optoelectronics
Joint-liabilit 3—96
Semiconductor 2019/3/19 1,160,000 2017/12/22 642,500 Not Not
y months
Display Technology
Co., Ltd.
Huizhou China Star 24
Joint-liabilit
Optoelectronics 2019/3/19 500,000 2019/09/25 100,611 days—12 Not Not
y
Technology Co., Ltd. months
73
TCL Technology Group Corporation Annual Report 2019
China Star
Optoelectronics Joint-liabilit
2019/3/19 260,000 2019/08/30 48,000 24 months Not Not
International (HK) y
Limited
China Display
Optoelectronics Joint-liabilit 7 days—60
2019/3/19 150,000 2019/09/26 37,713 Not Not
Technology y months
(Huizhou) Co., Ltd.
Wuhan China
Display Joint-liabilit 22—196
2019/3/19 50,000 2019/04/10 7,790 Not Not
Optoelectronics y days
Technology Co., Ltd.
Guangdong Juhua
Joint-liabilit
Printed Display 2019/3/19 30,000 - - Not Not
-y
Technology Co., Ltd.
TCL Finance Co., Joint-liabilit
2019/3/19 150,000 - - Not Not
Ltd. -y
TCL Commercial
Joint-liabilit
Factoring 2019/3/19 50,000 - - Not Not
-y
(Shenzhen) Co., Ltd.
Huizhou Zhongkai
TCL Zhirong Joint-liabilit 12—12
2019/3/19 50,000 2019/03/10 22,989 Not Not
Technology y months
Microcredit Co., Ltd.
Guangzhou TCL
Joint-liabilit
Internet Microcredit 2019/3/19 50,000 - - Not Not
-y
Co., Ltd.
Highly Information Joint-liabilit 1—26
2019/3/19 283,000 2018/04/12 212,192 Not Not
Industry Co., Ltd. y months
Beijing Hecheng
Joint-liabilit 22—22
Nuoxin Technology 2019/3/19 20,000 2018/09/05 2,000 Not Not
y months
Co., Ltd.
Beijing Lingyun Data Joint-liabilit 1—24
2019/3/19 35,000 2018/01/01 33,340 Not Not
Technology Co., Ltd. y months
Beijing Sunpiestore Joint-liabilit 12—22
2019/3/19 67,000 2018/09/05 47,000 Not Not
Technology Co., Ltd. y months
Shaanxi Titi
Joint-liabilit 22—22
Electronic 2019/3/19 3,000 2018/09/05 1,000 Not Not
y months
Technology Co., Ltd.
74
TCL Technology Group Corporation Annual Report 2019
TCL Technology
Joint-liabilit
Park (Huizhou) Co., 2019/3/19 200,000 - - Not Not
-y
Ltd.
TCL Technology Joint-liabilit
2019/6/12 400,000 - - Not Not
Investments Limited -y
Total approved line for such Total actual amount of
guarantees in the Reporting 9,910,635 such guarantees in the 3,024,432
Period (B1) Reporting Period (B2)
Total actual balance of
Total approved line for such
such guarantees at the
guarantees at the end of the 9,910,635 3,192,920
end of the Reporting
Reporting Period (B3)
Period (B4)
Guarantees provided between subsidiaries
Disclosure
Guarant
date of the
Actual Actual Having ee for a
guarantee Line of Type of Term of
Obligor occurrence guarantee expired related
line guarantee guarantee guarantee
date amount or not party or
announce
not
ment
Total approved line for such Total actual amount of
guarantees in the Reporting - such guarantees in the -
Period (C1) Reporting Period (C2)
Total actual balance of
Total approved line for such
such guarantees at the
guarantees at the end of the - -
end of the Reporting
Reporting Period (C3)
Period (C4)
Total guarantee amount (total of the three kinds of guarantees above)
Total guarantee line approved in Total actual guarantee
the Reporting Period 13,527,660 amount in the Reporting 6,917,829
(A1+B1+C1) Period (A2+B2+C2)
Total actual guarantee
Total approved guarantee line at
balance at the end of the
the end of the Reporting Period 13,527,660 5,008,937
Reporting Period
(A3+B3+C3)
(A4+B4+C4)
Total actual guarantee amount (A4+B4+C4) as % of the 166%
Company’s net assets
Of which:
Balance of guarantees provided for shareholders, actual
1,816,016.79
controller and their related parties (D)
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TCL Technology Group Corporation Annual Report 2019
Balance of debt guarantees provided directly or indirectly for
2,284,430.79
obligors with an over 70% debt/asset ratio (E)
Amount by which the total guarantee amount exceeds 50%
3,503,339.28
of the Company’s net assets (F)
Total of the three amounts above (D+E+F) 7,603,786.86
Joint liability possibly borne or already borne in the
-
Reporting Period for outstanding guarantees (if any)
Guarantees provided in breach of prescribed procedures (if
-
any)
Irregularities in Provision of Guarantees
□ Applicable ■ Not applicable
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
Overview of wealth management entrustments in the Reporting Period:
Unit: RMB’0,000
Unrecovered overdue
Type Source of capital Amount Undue amount
amount
Bank’s wealth
Self-owned capital 770,029 145,424 0-
management product
Securities firm’s
wealth management Self-owned capital 95,000 95,000 0-
product
Trust plan Self-owned capital 150,000 40,000 0-
Other Self-owned capital 91,751 26,944 0-
Total 1,101,751 307,368 0-
High-risk wealth management transactions with a significant single amount, low liquidity and no principal protection:
□ Applicable ■ Not applicable
Situation where the principal is expectedly irrecoverable or an impairment may be incurred:
□ Applicable ■ Not applicable
(2) Entrusted Loans
Overview of entrusted loans provided in the Reporting Period:
Unit: RMB’0,000
76
TCL Technology Group Corporation Annual Report 2019
Unrecovered overdue
Total amount Source of capital Undue amount
amount
0 Self-owned capital 711.09 0
High-risk entrusted loans with a significant single amount, low liquidity and no principal protection:
□ Applicable ■ Not applicable
Situation where the principal is expectedly irrecoverable or an impairment may be incurred:
□ Applicable ■ Not applicable
4. Other Major Contracts
□ Applicable ■ Not applicable
XVIII Corporate Social Responsibility (CSR)
1. Measures Taken to Fulfill CSR Commitment
Please refer to The 2019 Corporate Social Responsibility Report of TCL Technology Group
Corporation.
2. Measures Taken for Targeted Poverty Alleviation
(1) Plans
To respond to the "Opinions of the China Securities Regulatory Commission on the Role of
Capital Markets in Serving the Country in Poverty Alleviation", the Compa ny has been
fulfilling its social responsibilities in poverty alleviation and public service, especially in the
field of education poverty alleviation. The "TCL Hope Engineering Candlelight Awards
Program" jointly established by CYDF and Shenzhen TCL Public Welfare Foundation in
2013 is one of the earliest public welfare projects for rural teachers in the country. The
investment to this project is over RMB34 million in six years. The purpose of the award is to
demonstrate the morality and professional dreams of outstanding rural teachers who have
worked hard in the grassroots education front in poverty-stricken areas for their posts, and
encourage more outstanding young teachers to take root in rural basic education and
promote rural education development.
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TCL Technology Group Corporation Annual Report 2019
(2) Summary of the Related Work Done in the Reporting Period
In the 2019 "Candlelight Awards Program", a total of 402 outstanding rural teachers were
selected. The 100 rural teacher representatives who participated in the award ceremony
were awarded the "Candlelight Award" for dedication, innovation and guidance. The
award-winning teachers will receive funding and training support. The individual award,
which is worth RMB8,000, includes a cash reward of RMB5,000 and a "candle classroom"
training of RMB3,000 in online and offline "Flipped Classroom" per person. In 2019, the
coverage of "Candlelight Micro-Loan" was expanded. Except for the outstanding teachers
who were rewarded by the "TCL Hope Engineering Candlelight Awards", all the teachers
under training who belong to the Hope Primary School Teacher Training Office of CYDF
can apply for the loan.
In order to serve the national poverty alleviation work and respond to the call for targeted
poverty alleviation, Shenzhen TCL Public Welfare Foundation initiated an "assistance
program for retired private substitute teachers" jointly with CYDF to solve the problem of
low-paid and difficult living for retired private substitute teachers in poverty-stricken areas.
This program helps and supports retired private substitute teachers who contributed to
education in poverty-stricken areas to improve their living conditions by funding services
and social advocacy, and encourage them to develop for social respect and
self-development.
(3) Results
Measurement
Indicators Quantity/Development
Unit
I. Overall summary —— ——
Of which: 1. Cash RMB’0,000 779.298
4. Poverty alleviation by education —— ——
4.3 Investment amount in
improvement of educational resources in RMB’0,000 360
poverty-stricken areas
8. Poverty alleviation by public
—— ——
programmes
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TCL Technology Group Corporation Annual Report 2019
8.2 Investment amount in targeted
RMB’0,000 10
poverty alleviation
8.3 Investment amount in public
RMB’0,000 409.298
fund for poverty alleviation
(4) Subsequent Plans
In 2020, the Company will expand the existing award scale and publicity impact of the TCL
Hope Project—Candlelight Awards Program, and strengthen interaction with netizens on
the Internet platform to maintain social attention.
Starting from 2020, the Company will also expand the coverage of the Candlelight
Micro-loan Project to solve the financial needs of more rural teachers and improve their
lives. This is to ensure the positive development of rural education.
3. Issues Related to Environmental Protection
The Company as the parent is not a major polluter. The subsidiaries in the table below were
major polluters declared by the environmental protection authorities in 2019, and
“subsidiaries” mentioned in this section refer to the following subsidiaries in particular.
Name of Approved
Distributio Discharge Governing Total
the Number of total
Major Way of n of concentrati discharge discharge Excessive
Company discharge discharge
pollutants discharge discharge on standards (metric discharge
or outlets (metric
outlets (mg/L) (mg/L) ton)
subsidiary tons/year)
Intermittent
COD 106.9mg/L 260 mg/L 777.23t 1226.05t None
ly
Northwest
discharged
ern corner
to 1
TCL China Ammonia of the plant
Guangmin 5.6 mg/L 30 mg/L 40.81t / None
Star nitrogen area
g Sewage
Optoelectr
Plant
onics
Continuou
Technolog COD Artificial 16.6 mg/L 30 mg/L 70.15t 174.89t None
sly
y Co., Ltd. wetland to
discharged
1 the north
Ammonia to
of the plant 0.65 mg/L 1.5 mg/L 2.7t 7.7t None
nitrogen Dongkeng
area
shui
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TCL Technology Group Corporation Annual Report 2019
Shenzhen COD 50mg/L 110mg/L 237.25t 494.52t None
China Star Intermittent
Optoelectr ly
Northeaste
onics discharged
rn corner
Semicondu to 1
Ammonia of the plant
ctor Guangmin 3mg/L 30mg/L 14t 79.12t None
nitrogen area
Display g Sewage
Technolog Plant
y Co., Ltd.
Wuhan Intermittent
COD 16-34mg/L 400mg/L 250.45t 353.55t None
China Star ly Northwest
Optoelectr discharged ern corner
1
onics Ammonia to Zuoling of the plant 0.306-5.59
30mg/L 25.05t 35.36t None
Technolog nitrogen Sewage area mg/L
y Co., Ltd. Plant
Construction and operation of facilities for preventing pollution:
During the Reporting Period, no major environmental pollution incidents occurred in either
the Company or any of its subsidiaries. An advanced sewage management system has
been established for each subsidiary, and regular monitoring and supervision and
inspection mechanisms have been adopted to ensure the emission and disposal of waste
water, waste gas, and solid waste and factory noises generated during the operation are in
compliance with the national and local laws and regulations.
The waste water of each subsidiary company includes domestic waste water and industrial
waste water, of which domestic waste water is discharged into the local municipal sewage
treatment pipe network after being pre-treated by oil separation and septic treatment, and
industrial waste water enters different treatment systems according to its characteristics,
and is discharged subjected to the standards after physical and chemical and biochemical
treatment. The atmospheric pollutants produced by each subsidiary are mainly process
waste gases in the production process. For different types of waste gases, each subsidiary
has constructed corresponding waste gas treatment systems, such as alkaline waste gas
treatment system, acidic waste gas treatment system, organic waste gas treatment system,
waste gas treatment system for waste water treatment station, cloth bag dedusting system,
etc. for the collection of waste gases through pipelines to the corresponding waste gas
treatment system, where waste gases are discharged at a high altitude after meeting
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TCL Technology Group Corporation Annual Report 2019
relative standards. The concentration and total amount of waste water and exhaust gas
discharged meet the relevant national and local standards. The solid wastes generated b y
each subsidiary include general waste, hazardous waste and domestic garbage, of which,
hazardous wastes are treated by an entrusted qualified hazardous waste disposal agency
according to the regulations; general wastes are disposed of by a resource recycling firm
after being classified in the plant area; while domestic garbage is disposed of by the
property management company. All the disposals meet the regulatory requirements. The
factory noise generated by each subsidiary comes from the mechanical noises of
production and power equipment, including refrigerators, cooling towers, air compressors,
fans, various types of pumps, etc.. The Company reduces the 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 insulation and sound
absorption in the factories and equipment rooms. The monitoring results show that the
factory boundary noise and emission of all subsidiaries meet the standards in a s table
manner.
Environmental Impact Assessment on Construction Projects and Other
Environmental Protection Administrative Licenses
Each subsidiary complies with the laws and regulations of environmental impact
assessment on construction projects and other e nvironmental protection administrative
licenses, and no violations occurred during the Reporting Period.
Emergency Response Plan for Environmental Incidents
Each subsidiary has set up an environmental incident emergency organization led by the
senior management of the enterprise and prepared an environmental emergency response
plan, which has been filed with the local environmental protection department in
accordance with relevant national laws and regulations. In addition, regularly emergency
drills are conducted for environmental incidents according to the plan to ensure the validity
of emergency response plan.
Environmental Self-Monitoring Program
Each subsidiary has formulated an environmental self-monitoring program in accordance
81
TCL Technology Group Corporation Annual Report 2019
with national regulations, and monitors the discharge of pollutants by manual monitoring or
manual monitoring performed by a third-party qualified agency. The monitoring plans and
annual monitoring reports can be checked on the key environmental monitoring information
platform managed by local environmental authorities or subsidiary websites.
Other environment-related information that should be disclosed:
None.
Other relevant information:
None.
XIX Other Significant Events
On 25 March 2019, the Company disclosed the Announcement on the Investment in an
Overseas Equity Investment Fund (Announcement No. 2019-039). As the electronic
information industry (where the Company competes) features a typical global vertical
specialization in terms of capital allocation as well as technological expertise. In view of that,
the Company has established R&D centers in Guangzhou, Wuhan, Hong Kong, the U.S.,
Europe, etc. based on local resources and global planning. By cooperating with
professional investing institutions across the globe through the platform of TCL Capital, the
Company strengthens insight in cutting-edge technologies and look for investment targets
with high growth potential, business synergy and financial returns. Therefore, through its
majority-owned subsidiary Li Rong Development Limited as a limited partner, the Company
intended to make an investment of US$25 million in Sierra Ventures XII, L.P., a venture
capital fund registered in Delaware, the U.S. The fund is currently in normal operation.
On 13 August 2019, the Company disclosed the Announcement on the Investment in an
Equity Investment Fund and the Related-Party Transaction (Announcement No. 2019-113).
In order to find investment projects with high growth potential, and promote the
improvement of industrial chain and technological progress through investment, the
Company intended to establish Chongqing Zhongxin Rongxin Investment Center (Limited
Partnership) jointly with Chongqing Zhongxin Rongchuang Investment Co., Ltd. and Tibet
Zhongxin Ruiyin Investment Management Co., Ltd. As a limited partnership, the fund aims
for a goal of RMB2.31 billion, of which Chongqing Zhongxin Rongchuang Investment Co.,
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TCL Technology Group Corporation Annual Report 2019
Ltd. subscribed for RMB0.06 billion, the Company subscribed for RMB1.5 billion and Tibet
Zhongxin Ruiyin Investment Management Co., Ltd. subscribed for RMB0.75 billion. The
fund is currently in normal operation.
On 19 November 2019, the Company disclosed the Announcement No. 2019-151 on
Investment in an Equity Investment Fund and the Related-Party Transaction. In order to
coordinate and leverage various resources to optimize the allocation of various elements
for faster realization of the Company’s strategies, the Company intended to make an
investment in Guangdong Rongchuang Lingyue Intelligent Manufacturing and Information
Technology Industry Equity Investment Fund Partnership (Limited Partnership) to be
established. As a limited partnership, the fund aimed to raise RMB3 billion in two tranches.
The goal of the first tranche was RMB2.03 billion, of which the Company subscribed for
RMB0.75 billion, Guangdong Utrust Industry Investment Fund Partnership (Limited
Partnership) subscribed for RMB0.4 billion, Chongqing Sokon Industry Group Stock Co.,
Ltd. subscribed for RMB0.15 billion, Win-All Hi-Tech Seed Co., Ltd. subscribed for RMB0.1
billion, Shenzhen Qianhai Zhongxin Financial Capital Management Company Limited
subscribed for RMB0.03 billion, Ningbo Meishan Bonded Port Area Chuangyi Asset
Management Partnership (Limited Partnership) subscribed for RMB0.1 billion, Chongqing
Haorong Ruigong Investment Center (Limited Partnership) subscribed for RMB0.3 billion,
and Tangying (Ningxia) Investment Management Co., Ltd. subscribed for RMB0.2 billion.
The goal of the second tranche was RMB0.97 billion. The fund is now in normal operation.
XX Significant Events of Subsidiaries
Title of current announcement Disclosure date Disclosure website
Announcement on Shenzhen Industry
Development Fund Increasing Its Capital
24 April 2019
Increase to the G11 New Display Device
Production Line Project Company http://www.cninfo.com.cn
Announcement on Name Change of
Subsidiary TCL China Star 4 November 2019
Optoelectronics Technology Co., Ltd.
83
TCL Technology Group Corporation Annual Report 2019
Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
Unit: share
Increase/decrease in the
Before After
Reporting Period (+/-)
Percenta Percenta
Shares Other Subtotal Shares
ge (%) ge (%)
1. Restricted shares 1,825,653,291 13.47% -957,888,311 -957,888,311 867,764,980 6.41%
1.1 Shares held by
state-owned legal 0 0.00% 0 0 0 0.00%
persons
1.2 Shares held by
other domestic 1,734,836,800 12.80% -957,734,601 -957,734,601 777,102,199 5.74%
investors
Among which:
Shares held by
1,210,757,974 8.94% -1,059,849,533 -1,059,849,533 150,908,441 1.12%
domestic legal
persons
Shares held
by domestic natural 524,078,826 3.86% 102,114,932 102,114,932 626,193,758 4.63%
persons
1.3 Shares held by
90,816,491 0.67% -153,710 -153,710 90,662,781 0.67%
foreign investors
Among which:
Shares held by
90,532,347 0.67% 0 0 90,532,347 0.67%
foreign legal
persons
Shares held
by foreign natural 284,144 0.00% -153,710 -153,710 130,434 0.00%
persons
2. Unrestricted
11,723,995,216 86.53% 936,678,523 936,678,523 12,660,673,739 93.59%
shares
2.1
11,723,995,216 86.53% 936,678,523 936,678,523 12,660,673,739 93.59%
RMB-denominated
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TCL Technology Group Corporation Annual Report 2019
ordinary shares
3. Total shares 13,549,648,507 100.00% -21,209,788 -21,209,788 13,528,438,719 100.00%
Reasons for share changes:
Some of the shares in a share offering made in 2017 for asset purchase, i.e. 1,059,849,533 shares, were unlocked on 4
January 2019, reducing the restricted shares and increasing the unrestricted shares accordingly; and 6,685,704 restricted
shares under the 2018 Restricted Stock Incentive Plan were unlocked, reducing the restricted shares and increasing the
unrestricted shares accordingly. 3,875,613 restricted shares were granted under the 2019 Restricted Stock Incentive Plan,
increasing the restricted shares accordingly. Mr. Li Dongsheng increased his shareholding by 167,974,800 shares,
increasing the restricted shares accordingly. 21,209,788 restricted shares under the 2018 Restricted Stock Incentive Plan
were repurchased and retired, reducing the total share capital from 13,549,648,507 shares to 13,528,438,719 shares.
Approval of share changes:
□Applicable ■Not applicable
Transfer of share ownership:
□Applicable ■Not applicable
Progress on any share repurchase:
It is the key operational philosophy and mission of the Company to create value for and grow with the shareholders. In
order to effectivel y protect shareholders’ interests and enhance shareholder value, the Company convened the 14 th
Meeting of the 6 th Board of Directors on 10 January 2019, at which the Proposal on the Repurchase of Certa in Public
Shares was approved. The Report on the Repurchase of Certain Public Shares was disclosed on 14 February 2019. In
th th
view of the trends on the secondary market of stocks, the Company convened the 15 Meeting of the 6 Board of
Directors on 19 March 2019, at which the Proposal on the Adjustment to the Upper Limit of the Share Repurchase Price.
As such, the upper limit of the share repurchase price was adjusted from RMB3.80/share to RMB5.00/share. The
Company implemented the share repurchase from 14 February 2019. Up to 10 January 2020, the Company has
cumulatively repurchased 565,333,922 shares (or 4.18% of the Company’s total share capital) in its special securities
account for repurchases by way of centralized bidding, with the highest trading price being RMB4.17/share, the lowest
trading price being RMB3.13/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 regulations including the Specific Rules of the Shenzhen Stock Exchange for Share
Repurchase by Listed Companies. The actual number of shares repurchased, repurchase price and amount used were in
compliance with the repurchase plan approved at the 14 th Meeting of the 6 th Board of Directors, with no difference with the
disclosed Report on Share Repurchase. As such, the Company has completed the share repurchase as per the
repurchase plan that it disclosed.
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TCL Technology Group Corporation Annual Report 2019
Progress on reducing the repurchased shares by means of centralized bidding:
□ Applicable ■ Not applicable
Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to the
Company’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
Beginning Unlocked in Increase in Ending
Reason for Date of
Shareholder restricted Reporting Reporting restricted
restriction unlocking
shares Period Period shares
Hubei Changjiang
Hezhi Hanyi
Equity In vestment IPO restricted
1,059,849,533 1,059,849,533 - - 2019-1-4
Fund Partnership shares
(Limited
Partnership)
Star Century
IPO restricted
Enterprises 90,532,347 - - 90,532,347 2020-12-25
shares
Limited
Duilong Xinglan
Venture
Investment
IPO restricted
Management 42,521,163 - - 42,521,163 2020-12-25
shares
Partnership
(Limited
Partnership)
Duilong Xingyong
Venture
Investment
IPO restricted
Management 38,380,684 - - 38,380,684 2020-12-25
shares
Partnership
(Limited
Partnership)
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TCL Technology Group Corporation Annual Report 2019
Duilong Xingyuan
Venture
Investment
IPO restricted
Management 37,695,315 - - 37,695,315 2020-12-25
shares
Partnership
(Limited
Partnership)
Duilong Xinglian
Venture
Investment
IPO restricted
Management 32,311,279 - - 32,311,279 2020-12-25
shares
Partnership
(Limited
Partnership)
Locked-up
shares of
Other 489,686,526 - 125,981,101 615,667,627 9999-99-99
senior
management
2018 Restricted Restricted
Stock Incentive 34,676,444 27,859,492 6,780,952 shares granted 2020-5-16
Plan as incentives
2019 Restricted Restricted
Stock Incentive - - 3,875,613 3,875,613 shares granted 2020-5-10
Plan as incentives
Total 1,825,653,291 1,087,709,025 129,856,714 867,764,980 -- --
II. Issuance and Listing of Securities
1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period
Number
Name of stock
Issue price (or approved for Termination date of
and its derivative Issue date Issued number Listing date
interest rate) public transaction
securities
trading
Type: convertible corporate bonds, convertible corporate bonds with warrants, corporate bonds
Corporate bonds 2019-5-20 4.33% 10,000,000 2019-06-06 10,000,000
Corporate bonds 2019-7-23 4.30% 10,000,000 2019-08-06 10,000,000
Corporate bonds 2019-10-21 4.20% 20,000,000 2019-10-29 20,000,000
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
Some of the shares in a share offering made in 2017 for asset purchase, i.e. 1,059,849,533
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TCL Technology Group Corporation Annual Report 2019
shares, were unlocked on 4 January 2019, reducing the restricted shares and increasing
the unrestricted shares accordingly; and 6,685,704 restricted shares under the 2018
Restricted Stock Incentive Plan were unlocked, reducing the restricted shares and
increasing the unrestricted shares accordingly. 3,875,613 restricted shares were granted
under the 2019 Restricted Stock Incentive Plan, increasing the restricted shares
accordingly. Mr. Li Dongsheng increased his shareholding by 167,974,800 shares,
increasing the restricted shares accordingly. 21,209,788 restricted shares under the 2018
Restricted Stock Incentive Plan were repurchased and retired, reducing the total share
capital from 13,549,648,507 shares to 13,528,438,719 shares.
3. Existing Staff-Held Shares
□ Applicable ■ Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
Number of
preferred
Number of Number of shareholders
Number of ordinary preferred with resumed
ordinary shareholders at shareholders with voting rights at
shareholders 433,940 the month-end 546,906 resumed voting - the month-end -
at the prior to the rights at the prior to the
period-end disclosure of period-end (if disclosure of
this Report any) (see note 8) this Report (if
any) (see note
8)
5% or greater shareholders or top 10 shareholders
Sharehol Increase/dec Shares in pledge or
Nature of Total shares
Name of ding rease in the Restricted Unrestricted frozen
sharehold held at the
shareholder percenta Reporting shares held shares held
er period-end Status Shares
ge Period
Li Dongsheng Domestic Put in
and his natural 9.03 1,221,748,009 174,574,800 609,636,366 612,111,643 pledge 541,620,000
acting-in-conc person/g by Li
88
TCL Technology Group Corporation Annual Report 2019
ert party eneral Dongsh
legal eng
person
Put in
pledge
by
408,899,521
Jiutian
Lianche
ng
Huizhou
State-ow
Investment
ned legal 6.48 878,419,747 878,419,747
Holding Co.,
person
Ltd.
Tibet Tianfeng Domestic
Enterprise general
3.89 526,095,642 526,095,642 526,095,642
Management legal
Co., Ltd. person
China
Domestic
Securities
general
Finance 2.76 373,231,553 373,231,553
legal
Corporation
person
Limited
Hong Kong
Foreign
Securities
legal 2.61 353,489,854 353,489,854
Clearing
person
Company Ltd.
Central Huijin
State-ow
Asset
ned legal 1.53 206,456,500 206,456,500
Management
person
Co., Ltd.
Domestic
Xiaomi
general
Communicatio 1.00 134,949,437 134,949,437
legal
ns Co., Ltd.
person
Xinjiang
Dongxing
Domestic
Huarui Equity
general
Investment 0.86 115,726,278 115,726,278
legal
Partnership
person
(Limited
Partnership)
TCL Domestic
0.73 99,148,115 99,148,115
Corporation－ general
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TCL Technology Group Corporation Annual Report 2019
The First legal
Employee person
Stock
Ownership
Plan
Star Century Foreign
Enterprises legal 0.67 90,532,347 90,532,347
Limited person
Hubei Changjiang Hezhi Hanyi Equity Investment Fund Partnership (Limited Partnership) has
Strategic investor or also become a top-10 shareholder in a share offering of the Company, with its shareholdings
general legal person locked up from 25 December 2017 to 25 December 2018. For further information, see the
becoming a top-10 Implementation Report on TCL Corporation’s Asset Purchase via Share Offering and the
ordinary shareholder in a Related-Party Transaction & the New Share Listing Announcement. Changjiang Hanyi was
rights issue (if any) (see de-registered as a legal person in November 2019 and the indirect equity-holding of the
note 3) original partner has become direct equity-holding. Therefore, Tibet Tianfeng Enterprise
Management Co., Ltd. has become a top-10 shareholder of the Company.
Related or Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li
acting-in-concert parties Dongsheng and Xinjiang Jiutian Liancheng Equity In vestment Partnership (Limited
among the shareholders Partnership) are the biggest shareholder of the Company with a total of 1,221,748,000
above shares.
Top 10 unrestricted shareholders
Shares by type
Name of shareholder Unrestricted shares held at the period-end
Type Shares
Huizhou Investment Holding Co., RMB-denominated
878,419,747 878,419,747
Ltd. ordinary stock
Li Dongsheng and his RMB-denominated
612,111,643 612,111,643
acting-in-concert party ordinary stock
Tibet Tianfeng Enterprise RMB-denominated
526,095,642 526,095,642
Management Co., Ltd. ordinary stock
China Securities Finance RMB-denominated
373,231,553 373,231,553
Corporation Limited ordinary stock
Hong Kong Securities Clearing RMB-denominated
353,489,854 353,489,854
Company Ltd. ordinary stock
Central Huijin Asset Management RMB-denominated
206,456,500 206,456,500
Co., Ltd. ordinary stock
RMB-denominated
Xiaomi Communications Co., Ltd. 134,949,437 134,949,437
ordinary stock
Xinjiang Dongxing Huarui Equity
RMB-denominated
Investment Partnership (Limited 115,726,278 115,726,278
ordinary stock
Partnership)
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TCL Technology Group Corporation Annual Report 2019
TCL Corporation－The First RMB-denominated
99,148,115 99,148,115
Employee Stock Ownership Plan ordinary stock
Jiaxing Junying Youchang
RMB-denominated
Investment Partnership (Limited 87,208,957 87,208,957
ordinary stock
Partnership)
Related or acting-in-concert parties
among top 10 unrestricted public Being acting-in-concert parties upon the signing of the Agreement on Acting in
shareholders, as well as between Concert, Mr. Li Dongsheng and Xinjiang Jiutian Liancheng Equity In vestment
top 10 unrestricted public Partnership (Limited Partnership) are the biggest shareholder of the Company with
shareholders and top 10 a total of 1,221,748,000 shares.
shareholders
Top 10 ordinary shareholders
involved in securities margin None
trading (if any) (see note 4)
Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company
conducted any promissory repo during the Reporting Period.
□ Yes ■ No
2. Controlling Shareholder
The Company has no controlling shareholder.
Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr.
Li Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited
Partnership) are the biggest shareholder of the Company with a total of 1,221,748,000
shares.
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
91
TCL Technology Group Corporation Annual Report 2019
controller.
3. Actual Controller and Its Acting-in-Concert Parties
The “actual controller” refers to an entity which is not a shareholder of a company but
actually controls the company behaviors through investment relationship, agreement or
other arrangements. According to the definition above, the Company has no actual
controller.
Whether there is any shareholder with a greater than 10% interest at the ultimate control level:
□ Yes ■ No
Shareholders with a greater than 5% interest at the ultimate control level:
□ Applicable ■ Not applicable
Change of the actual controller in the Reporting Period:
□ Applicable ■ Not applicable
Indicate whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable ■ Not applicable
4. Other 10% or Greater Corporate Shareholders
□ Applicable ■ Not applicable
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder , Actual
Controller, Reorganizer and Other Commitment Makers
□ Applicable ■ Not applicable
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TCL Technology Group Corporation Annual Report 2019
Part VII Directors, Supervisors, Senior Management and Staff
I Change in Shareholdings of Directors, Supervisors and Senior Management
Decrease Other
Increase in
Incumb Beginning in the increas Ending
Start of the Reporting
Name Office title ent/For Gender Age End of tenure shareholding Reporting e/decre shareholding
tenure
Period
mer (share) Period ase (share)
(share)
(share) (share)
Chairman of
Li Incumb
the Board and Male 62 2002-4-16 2020-8-31 644,873,688 167,974,800 - - 812,848,488
Dongsheng ent
CEO
Vice
Incumb
Liu Bin Chairman of Male 50 2015-8-31 2020-8-31 0 - - - 0
ent
the Board
Director,
Incumb
Du Juan COO and Female 49 2018-3-2 2020-8-31 0 - - - 0
ent
CFO
Director and
Incumb
Liao Qian Board Male 39 2014-4-23 2020-8-31 0 - - - 0
ent
Secretary
Director and
Incumb
Jin Xuzhi Senior Vice Male 65 2015-8-13 2020-8-31 0 - - - 0
ent
President
Independent Incumb
Yan Yan Male 63 2015-3-24 2020-8-31 0 - - - 0
Director ent
Independent Incumb
Lu Xin Female 57 2014-9-1 2020-8-31 0 - - - 0
Director ent
Independent Incumb
Zhou Guofu Male 56 2014-9-1 2020-8-31 0 - - - 0
Director ent
Independent Incumb
Liu Xunci Male 61 2017-9-1 2020-8-31 0 - - - 0
Director ent
Chairman of
the Incumb
He Zhuohui Male 54 2015-9-2 2020-8-31 0 - - - 0
Supervisory ent
Committee
Mao Employee Incumb
Male 39 2017-9-1 2020-8-31 0 - - - 0
Tianxiang Supervisor ent
93
TCL Technology Group Corporation Annual Report 2019
Incumb
Qiu Haiyan Supervisor Female 45 2014-9-1 2020-8-31 0 - - - 0
ent
Senior Vice
Incumb
Yan Xiaolin President and Male 53 2014-9-1 2020-8-31 599,500 - - - 599,500
ent
CTO
Wang Senior Vice
Former Male 45 2018-3-19 2019-1-10 0 - - - 0
Cheng President
Huang Director and
Former Male 54 2011-6-20 2019-1-10 3,383,380 - 845,000 - 2,538,380
Xubin CFO
Vice
He Jinlei Chairman of Former Male 46 2017-9-1 2019-5-21 0 - - - 0
the Board
Wu Xiaohui Director Former Female 48 2017-9-1 2019-8-7 0 - - - 0
Director and
Huang Wei Senior Vice Former Male 57 2015-8-13 2019-12-13 0 - - - 0
President
Total -- -- -- -- -- -- 648,856,568 167,974,800 845,000 - 815,986,368
II Change of Directors, Supervisors and Senior Management
Type of
Name Office title Date of change Reason for change
change
Transferred to TCL Industries upon the
Senior Vice
Wang Cheng Resignation 10 January 2019 Restructuring according to the principle of “people
President
follow assets”
Director and
Huang Xubin Resignation 10 January 2019 Personal and family reason
CFO
Director and
He Jinlei Vice Chairman Resignation 21 May 2019 Job change
of the Board
No longer worked in the shareholder entity due to
Wu Xiaohui Director Resignation 7 August 2019
job transfer
94
TCL Technology Group Corporation Annual Report 2019
On 30 October 2019, the plan on sale of the 71%
interest in Huizhou TCL Environmental Resource
Co., Ltd. was approved at the 21 st Meeting of the
Director and 6th Board of Directors. The relevant liabilities and
Huang Wei Senior Vice Resignation 13 December 2019 personnel would be transferred along with the
President asset. As the Chairman of the Board of Huizhou
TCL Environmental Resource Co., Ltd., Mr. Huang
Wei has been transferred to the transaction
counter-party.
III Biographical Information
Born in July 1957, Mr. Li Dongsheng is the founder of TCL Technology Group Corporation
and currently serves as the Company’s Chairman and CEO; he was elected as a delegate
to China’s 16th National Congress of the CPC and a deputy to the 10th, 11th, 12th and 13th
National People’s Congress. Mr. Li holds a number of prestigious positions: Vice Chairman
of All China Federation of Industry and Commerce (ACFIC), Honorary President of China
Video Industry Association, Vice Chairman of China Commerce of International Chamber,
President of Guangdong Provincial Enterprise Confederation, President of Guangdong
Provincial Association of Entrepreneurs, First President of China Manufacturing Innovation
Alliance, Honorary President of South China University of Technology Education
Development Foundation, Vice President of Alumni Association South China University of
Technology, Member of the Council of South China University of Technology, Visiting
Professor in Wuhan University and Honorary Professor in Beijing Institute of Technology.
From 1982 to 1985, he served as Technician, Workshop Manager and Production Director
in TTK Household Appliances Co., Ltd.; from 1985 to 1986, he served as First General
Manager of TCL Communication Devices Company; from 1986 to 1989, he served as
Director of the Introduction Department in Guangdong Huizhou Industrial Development
Corporation; from 1990 to 1993, he served as Deputy General Manager, Deputy Secretary
of the Party Committee and Secretary of the Youth League Committee of Huizhou
Electronic Communication Corporation; from 1993 to 1996, he served as General Manager
of TCL Electronics Group; from 1996 to 2002, he served as Chairman and President of the
Company and in 2002, Mr. Li Dongsheng was selected as “CCTV’s Economic Person of the
95
TCL Technology Group Corporation Annual Report 2019
Year 2002”; from April 2002 to January 2004, he served as Chairman and President of the
Company; from January 2004 till now, he serves as Chairman and CEO of the Company.
On October 24, 2018, he was selected on the “List of 100 Outstanding Private
Entrepreneurs of 40 Years of Reform and Opening Up” of the United Front Work
Department and All China Federation of Industry and Commerce. On December 18, 2018,
he was selected on the list of “100 Outstanding Contributors of Reform and Opening Up” of
the Central Committee of the Party and the State Council; he won the title of Pioneer of
Reform and awarded with the medal with the comment “A pioneer opening the international
market in electronics industry”.
As one of the founders of TCL, Mr. Li Dongsheng has led TCL in acquiring the global color
TV business of Thomson-CSF and the global mobile terminal business of Alcatel and
established a global business structure. He was honored as the “Asian Economic Person of
the Year 2004” by the Fortune magazine and won the National Medal of Honor of France. In
June 2006, Mr. Li Dongsheng wrote the famous article titled “Rebirth of the Eagle” as a call
for TCL team members to carry out reform and inno vation with the spirit of rebirth and firmly
promote the international business. In February 2014, Mr. Li Dongsheng launched TCL’s
strategic transformation of “Double+” and in the same year, TCL achieved a sales revenue
of over RMB100 billion. In 2015, the sales revenue of TCL again exceeded RMB100 billion.
Mr. Li Dongsheng always holds the firm belief that a strong country is built on the basis of
strong economy, which in turn requires a group of world-class enterprises. It is his steadfast
belief and persistent goal to firmly stick to industry and develop the Company into a
world-class enterprise as the backbone of China’s economy.
Born in February 1970, Mr. Liu Bin has obtained the Bachelor’s Degree and is an Assistant
Economist and Member of the Communist Party of China. He graduated from the
Department of Management Engineering of South China University of Technology.
Currently, he serves as Chairman and General Manager of Huizhou Investment Holdings
Co., Ltd.. From July 1992 to December 1993, he served as Deputy Director of the General
Office in Huizhou Foreign Investment Service Corporation; from December 1993 to
December 1998, he served as Secretary to the General Manager, Administrative Assistant
96
TCL Technology Group Corporation Annual Report 2019
to the General Manager and Assistant to the General Manager (the Deputy Section Head
level) of Huizhou Economy and Trade Group Co., Ltd.; from December 1998 to June 2003,
he served as Manager of Huizhou Tea Import and Export Company (the Section Head
level); from June 2003 to June 2010, he served as Deputy General Manager and General
Manager of Huizhou Economy and Trade Group Co., Ltd.; from June 2010 to May 2015, he
served as Deputy General Manager of Huizhou Investment Holdings Co., Ltd. (from May
2011 to June 2015, he concurrently served as Director and Deputy General Manager of
Huizhou Fairway Investment and Construction Co., Ltd.; from September 2013 to August
2015, he concurrently served as Supervisor and Chairman of the Board of Supervisors of
the Company); from February 2014 till now, he serves as Director of Huizhou Investment
Holdings Co., Ltd.; from May 2015 till now, he serves as Chairman and General Manager
(the Deputy Division Head level) (from June 2015 to May 2018, he concurrently served as
Chairman of Huizhou Investment Holding Asset Operation Co., Ltd., Chairman of Huizhou
Financing Guarantee Co., Ltd. and Vice Chairman of the Company; from June 2015 to
January 2017, he concurrently served as Chairman of Huizhou Fairway Investment and
Construction Co., Ltd.; from May 2016 to March 2017, he concurrently served as Director of
Uirust.
Ms. Du Juan currently serves as Chief Operating Officer, Chief Financial Officer and
Member of the Execution Commission of the Company. Born in May 1970, she graduated
from the Department of Investment of Zhongnan University of Economics and Law and
obtained EMBA from CKGSB. From July 1991 to May 1999, she worked in CCB Huizhou
Branch. In May 1999, she joined in the Company and served as General Manager of the
Settlement Center and General Manager of the Finance Company in the Company. From
October 2014 till now, she serves as President and Chairman of TCL Financial Holdings
Group (Guangzhou) Co., Ltd.. From July 2016 to February 2018, she served as Vice
President of the Company. From February 2018 till now, she serves as Chief Operating
Officer (COO) of the Company. From January 2019 till now, she concurrently serves as
Chief Financial Officer (CFO) of the Company.
Mr. Liao Qian currently serves as Executive Director, Vice President, Chief of Staff and
97
TCL Technology Group Corporation Annual Report 2019
Board Secretary of the Company. He has obtained the Master’s Degree and holds the
Occupational Qualification Certificate of the People’s Republic of China for Law. From
August 2006 to February 2014, he worked in Guotai Junan International Holdings Co., Ltd.
and was engaged in the investment banking business in Hong Kong and Mainland China.
Joining the Company in March 2014, he is in charge of Board affairs, strategic planning and
matters in relation to the domestic and overseas capital markets. He is also Independent
Director of JiaWei Renewable Energy (300317.SZ), Chairman of the Board of Tonly
Electronics (1249.HK) and CDOT (0334.HK), Non-Executive Director of Fantasia (1777.HK)
and Vice Chairman of the Board of Tianjin 712 Communication & Broadcasting Co., Ltd.
(603712.SH).
Mr. Jin Xuzhi currently serves as Senior Vice President of the Company and CEO and
Director of TCL CSOT. Born in September 1955, he has obtained the Master’s Degree in
Material Engineering from Yonsei University in South Korea and MBA from McGill
University. He worked in LG Semiconductor Co., Ltd. and served as Deputy General
Manager in LG Display (formerly known as LG Philips LCD) and Head of the IT Business
Division. From April 2009 to March 2010, he served as Senior Consultant in Fuhrmeister
Electronics. He joined in the Company in March 2010 and served as Senior Vice President,
President and CEO of CSOT and General Manager of Wuhan CSOT.
Mr. Yan Yan currently serves as Founding Managing Partner of SAIF Partners. Born in
September 1957, he holds the nationality of Hong Kong, China. Before founding SAIF, Mr.
Yan had served as Managing Director of AIG Asia Infrastructure Investment Fund and
Director of the Hong Kong Office. Between 1989 and 1994, he served as Economist in the
head office of World Bank, Researcher in Hudson Institute, a famous think tank in the U.S.,
and Director of the Strategic Planning and Business Development for Asia Pacific Region in
Sprint International Corporation. Mr. Yan obtained the Bachelor’s Degree of Engineering
from Nanjing University of Aeronautics and Astronautics. He studied in the Master’s
Program in Social Sciences in Peking University from 1984 to 1986. From 1986 to 1989, he
studied in the PhD Program in Princeton University and obtained the Master’s Degree in
International Economics in 1989. In 1995, he studied in the Program of Advanced Finance
98
TCL Technology Group Corporation Annual Report 2019
and Accounting in The Wharton School.
Mr. Yan is a member of China Private Equity Investment Association and a Co-Chairman of
the Professional Committee of the association. He is also a member of Peking University
Education Foundation and of the Investment Commission. He was selected as “Venture
Capitalist of the Year” by China Venture Capital Association in 2004 and 2007. In 2007, he
was honored as one of the “Fifty Finest Private Equity Investors in the World” by Private
Equity International. He was voted as the No. 1 Best Venture Capitalist in China for 2008
and 2009 by Forbes China. In 2009, he won the title of “Venture Capital Professional of the
Year” granted by Asia Venture Capital Journal. Under Mr. Yan’s leadership, SAIF was voted
as “VC Firm of the Year” by China Venture Capital Association in 2004 and 2007. and it was
also named as “The Best Performing Fund in Asia” by Private Equity International in 2005,
2006 and 2008, and “The Best Growth Investment Fund of 2009 in Asia”.
Ms. Lu Xin is a professor in the major of Accounting in the School of Management, Jinan
University and Deputy Director in the Management Accounting Research Center, Jinan
University. Born in October 1963, she has obtained the PhD in Management from Renmin
Business School and was elected a deputy to the 12 th and 13th National People’s Congress.
From July 1989 to December 2003, she worked in Dalian University in Liaoning; from
January 2004 till now, she serves in Jinan University. She concurrently serves as Vice
Chairperson of Taimeng Guangdong Provincial Party Committee.
Ms. Lu Xin has presided over and engaged in a number of fund projects of the national and
provincial levels. She has won the Sixth National Foreign Trade Research Outstanding
Creation Award from the Ministry of Commerce for her work titled Building Competitive
Strength - Multinational Management Strategies of Chinese Enterprises. She has published
over 50 academic papers in Accounting Research, China Industrial Economics, Journal of
Industrial Engineeri ng and Engineering Management and other journals. She has extensive
practical experience in management accounting and has presided over and engaged in a
number of management consultation projects for large and medium-sized enterprises.
Mr. Zhou Guofu currently serves as Director of South China Academy of Advanced
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TCL Technology Group Corporation Annual Report 2019
Optoelectronics. Born in October 1964, he holds the Dutch Nationality. He has obtained the
PhD in Material Sciences from IMR and the PhD in Physics from the University of
Amsterdam. From 1994 to 1995, he was engaged in postdoctoral research in the University
of Cambridge; from 1995 to 2011, he worked in Philips Research; from January 2011 till
now, he serves as Senior Consultant in Philips Research; from 2012 to 2016, he served as
Distinguished Professor in the Department of Electrical Engineering and the Department of
Industrial Design in Eindhoven University of Technology; from 2016 till now, he serves as
Science Adviser in Eindhoven University of Technology; from April 2011 till now, he serves
as Professor and Doctoral Supervisor in South China Normal University and Director of
South China Academy of Advanced Optoelectronics.
Mr. Zhou Guofu won the ISMANAM1994 Gold Award for French Young Scientists, Royal
Philips Major Invention Bronze Award and Silver Award, Guangdong Province Science and
Technology Cooperation Award at the first such awarding event, and Individual Innovation
Award for China Production, Education and Research Collaboration. He was named as
“Star of Entrepreneurship and Innovation” in Guangdong Province, Honorary Citizen of
Guangzhou City and “Hero of Innovation” of Guangzhou City. He was selected into the
Recruitment Program for Global Expert, as a distinguished expert of the country, a leading
professional of Guangdong Province and an “Outstanding Professional” under the Special
Support Program of Guangdong Province. He has published 474 scientific papers and
applied for 749 patents, including 255 international ones. 52 U.S. patents, one Japanese
patent, one European patent and 133 China Invention Patents have been authorized. Mr.
Zhou Guofu holds a number of prominent positions, including Chief Scientist of National
Key R&D Program of China; Director of the “Center for International Research on Green
Optoelectronics” of the National International Science and Technology Cooperation Base;
Head of 111 Project - Optical Information Innovation and Expert Introduction Center;
Director of “International Joint Laboratory for Optical Information Technologies” under the
Ministry of Education; Chairman of the Organization Committee for the International
Conference on Display Technology (2018) hosted by the Society for Information Display
(SID); Member of the Society for Information Display (SID) Asia Branch; Member of the
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TCL Technology Group Corporation Annual Report 2019
Committee for the International Conference on Display Technology; Reviewer of Physical
Review Letters, Reviews of Modern Physics, Applied Physics Letters and Applied Physics;
Member of CSOE; Member of MNSC; Strategic Expert for the fundamental research of
Guangdong Province; Executive Director of the Council of GDMRS; Deputy
Secretary-General of Guangdong Alliance of Printed Display Technology Innovation; and
President of Shenzhen Alliance of Industrial Technology Innovation.
Born in Shaoyang City, Hunan Province, Mr. Liu Xunci is a professor with the Master’s
Degree in economics. He graduated from Central China Normal University and served as a
lecturer, associate professor, department head, member of the Organization Department
and the Publicity Department at the university. Also, he once worked in the Audit Office and
the Finance Office of Huizhou University. He is now a professor in Huizhou University, an
expert of the Decision-Making and Consultation Commission of the Huizhou Government,
and a “Top Professional” of Huizhou City. From July 2006, he stayed in the University of
Greenwich as a visiting scholar for a year.
Mr. Liu Xunci has presided over and engaged in a number of fund projects of the national
and provincial levels. His works include Analysis of Industrial and Commercial Management
Strategies, Theory and Practice on the Strategic Planning of Regional Economy, Corporate
Strategy Management, etc.. He has published quite many papers on academic journals.
His major research interests include planning of regional economy, corporate strategy
management and finance management. In recent few years, he has led and completed
“12th Five-Year” and “13th Five-Year” economic and social development plans and corporate
management consultations commissioned by governments and enterprises and special
research reports, and researched and evaluated projects such as “Pan-Pearl River Delta”,
“Ring Daya Bay Economic Zone” and “Guangdong -Hong Kong-Macao Greater Bay Area”,
with quite a few research projects going into the government’s decision-making list.
Born in July 1966, Mr. He Zhuohui currently serves as Full-time Deputy Secretary and
Director in Huizhou Investment Holdings Co., Ltd.. From August 1991 to June 1995, he
served as Deputy Director of the General Office and Director of the Office in China
Construction Bank Huiyang Branch; from June 1995 to August 2008, he served as
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TCL Technology Group Corporation Annual Report 2019
Manager in Renchengchang (Huizhou) Investment Co., Ltd.; from August 2008 to
September 2009, he served as General Manager of Huizhou Investment Holdings Asset
Management Co., Ltd.; from September 2009 to December 2012, he served as Manager of
the Management and Development Department in Huizhou Investment Holdings Co., Ltd.
and Deputy General Manager and Director of Huizhou Fairway Investment and
Construction Co., Ltd.; from December 2012 till now, he serves as Full-time Deputy
Secretary in Huizhou Investment Holdings Co., Ltd.; from February 2014 till now, he serves
as Director in Huizhou Investment Holdings Co., Ltd. (from April 2010 to January 2017, he
concurrently served as Director of the First and Second Session of the Board of Huizhou
Fairway Investment and Construction Co., Ltd.; from August 2015, he concurrently serves
as Chairman of the Fifth Session of the Board of Supervisors of the Company).
Mr. Mao Tianxiang currently serves as Member of the Party Committee, Head of the Audit
and Supervision Department and Deputy Secretary of the Discipline Committee in the
Company. He was born in January 1980 and graduated from Guangxi University with a
Bachelor degree. From July 2003 to June 2005, he served as Secretary in China Telecom
Guangxi Guilin Company; from July 2005 to November 2007, he served as Supervisor of
PR and Communications in the Strategic OEM Business Division and Officer in the
President’s Office in the Company; from November 2007 to June 2009, he served as
Deputy Head of the Legal Section and Head of the General Section in Huizhou Auditing
Bureau; from June 2009 to August 2014, he served as Deputy Director and Deputy Director
of the Divisional Level in the Law Enforcement Inspection Office and the Efficacy Inspection
Office of Huizhou Discipline Committee. He has been working in the Company since
September 2014. He served as Deputy Director of the Party-Masses Work Department in
the Company and Secretary of the Youth League Committee of the Company; from August
2015 to January 2016, he concurrently served as Acting General Manager of the Electronic
Device Business Division in Techne Corporation; in November 2016, he was elected as
Member of the Party Committee and Deputy Secretary of the Discipline Committee in the
Company; from March 2017 to December 2018, he concurrently served as General
Manager of TCL Resource Investment Company. From February 2017 till now, he serves
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TCL Technology Group Corporation Annual Report 2019
as Head of the Audit and Supervision Department. Since 2019, he has successively been a
Supervisor of Tianjin 712 Communication & Broadcasting Co., Ltd. (603712.SH) , the
Chairman of the Supervisory Committee of Highly Information Industry Co., Ltd., the Chief
Supervisor of TCL Finance Co., Ltd., etc. From July 2019, he has served concurrently as
the Chief Auditor of TCL CSOT.
Born in December 1975, Ms. Qiu Haiyan obtained the Bachelor’s Degree from Central
Radio & TV University in 2011. She is an accountant and member of the Communist Party
of China. From July 1995 to March 1998, she served as a finance officer in Huizhou Zongli
Real Estate Company; from March 1998 to June 2002, she served as a finance officer in
Huizhou Trust Investment Company; from June 2002 till now, she serves as Accountant,
Deputy Manager and Manager of the Finance Department in Huizhou Investment Holdings
Co., Ltd.; from February 2014 till now, she serves as Workers’ Director in Huizhou
Investment Holdings Co., Ltd. (from June 2009 to February 2013, she concurrent ly served
as Supervisor in Huizhou Fairway Investment and Construction Co., Ltd.; from June 2013
to May 2018, she concurrently served as Director in Huizhou Investment Holdings Asset
Operation Co., Ltd.; from March 2014, she concurrently serves as Workers’ Representative
Director in Huizhou Investment and Development Co., Ltd.; from April 2014, she
concurrently serves as Supervisor of the Fifth Supervisory Committee of the Company).
Dr. Yan Xiaolin is a professor-level senior engineer, party-time professor in Peking
University, Chairman of IEC/TC110, Vice Chairman of SID and President of the Asian
Region. He graduated from ASIPP with the Doctor’s Degree in July 1999. From July 1999
to May 2001, he was engaged in postdoctoral research in the Chinese Academy o f
Sciences. He joined in TCL in May 2001. From May 2001 to December 2004, he served as
Project Manager in TCL Multimedia Electronic R&D Center and Director and Deputy
General Manager of the Research Institute; from December 2004 to October 2005, he
served as CTO in the Component Business Division of the Company and Deputy Director
and Acting Director of TCL Industrial Technology Research Institute; from October 2005 till
now, he serves as Director of TCL Industrial Technology Research Institute; from May 2008
to November 2012, he served as Vice President of the Company; from December 2012 till
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TCL Technology Group Corporation Annual Report 2019
now, he serves as CTO and Senior Vice President of the Company. He is holding a number
of positions currently, including CTO and Senior Vice President of the Company, Director of
TCL Industrial Technology Research Institute, Executive Director of TCL Multimedia,
Director of CSOT, Chief Scientist of CSOT, Chairman of Guangdong Juhua, Chairman of
China Ray, Vice Chairman of Amlogic (Shanghai) Inc. and Director of Kateeva.
Mr. Wang Cheng, an EMBA degree holder, graduated from Harbin University of Commerce.
He joined TCL in 1997 and worked as a frontline salesman of color TVs. In 2005, after
further learning upon the Company’s appointment, he successively worked in many
important positions including Deputy Director of HR Department in TCL Multimedia Sales
Company, Director of the European Channel Account Department in the OEM Business
Center, TTE Strategy, TCL Multimedia, General Manager of TCL Multimedia Vietnam
Branch, General Manager of the Overseas Business Center and Vice President of TCL
Multimedia. Therefore, he has rich experience of working overseas. From June 2015 to July
2016, he served as HR Director in TCL Corporation (now known as “TCL Technology Group
Corporation”). After that, he returned to TCL Multimedia (now known as “TCL Electronics”)
and successively served as General Manager of the Supply Chain Center, General
Manager of the Chinese Business Division, COO, etc. Since October 2017, he has served
as CEO of TCL Electronics.
In Janaury 2019, as TCL Technology Group Corporation carried on with its strategic
business restructuring plan and TCL Industries Holdings Inc. was incorporated, Mr. Wang
Cheng resigned as a Senior Vice President of TCL Technology Group Corporation. No
longer holding any offices in TCL Technology Group Corporation, he is now the CEO of TCL
Industries Holdings Inc.
Mr. Huang Xubin used to be the Executive Director and CFO of the Company. Born in
November 1965, he graduated from Hunan University (the former Hunan Institute of
Finance and Economics). Later, he obtained the Master’s Degree in Economics from the
Department of Postgraduate of the Ministry of Finance of China and EMBA from CEIBS and
became a Senior Economist. He served as Officer in the Investment Institute, Deputy
General Manager of the Credit Card Division, Deputy Division Head and Division Head of
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TCL Technology Group Corporation Annual Report 2019
the Credit Loan Division in China Construction Bank Guangdong Branch. During the period,
he concurrently served as Manager in Guotai Junan Securities Co., Ltd. Guangzhou
Branch and Senior Manager in China Cinda Guangzhou Office. He joined in TCL in March
2001. In 2002, he served as Vice Group Leader of the Application and Preparations
Leading Group in the Finance Company of the Company; from May 2002 to December
2008, he served as Director and General Manager of the Financial Settlement Center in the
Company; from June 2004 to June 2008, he served as Chief Economist of the Company;
from October 2006 to December 2008, he served as General Manager of the Finance
Company of the Company; from April 2008 to January 2011, he served as Vice President of
the Company; from June 2008 to January 2011, he served as Director of Finance of the
Company; from January 1, 2011 to March 30, 2011, he concurrently served as Board
Secretary of the Company (in an acting capacity); from January 28, 2011 to January 10,
2019, he served as CFO of the Company. He has resigned as Director and CFO of the
Company in January 2019.
Born in December 1974, Mr. He Jinlei has obtained MBA. He served in China Construction
Bank, Southwest Securities and Institute of Software Chinese Academy of Sciences. From
June 2005 to December 2009, he served as Chief Operating Officer of Beida Jade Bird
Group; from December 2009 to December 2011, he served as Director of Peking University
Resource College; from December 2011 to April 2019, he served as Vice President of
China Development Bank Capital Co., Ltd. He has resigned as Director and Vice Chairman
of the Board of the Company in May 2019.
Born in July 1972, Ms. Wu Xiaohui has obtained the PhD in Law from Sun Yat-sen
University and is a Senior Economist. From June 1993 to April 1995, she served as a
leader in the Law Office of the Operation Department in Guangzhou Engineering
Contractor Group Co., Ltd.; from April 1995 to October 2000, she served as a leader in the
Law Office of the Operation Department and Corporate Youth League Committee Secretary
in Guangzhou Engineering Contractor Group Co., Ltd.; from October 2000 to March 2016,
she served as Deputy General Manager and Head of the Legal Affairs Department, Vice
Chairman of the Labor Union, Chief Legal Consultant, Deputy General Manager and
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TCL Technology Group Corporation Annual Report 2019
Member of the Party Committee in Guangdong Guangye Group Co., Ltd. and concurrently
as Director of South China Sea Oil Joint Service Corp. and Director of Guangdong
Petro-Trade Development Corporation. From March 2016 to July 2019, she served as
General Manager, Deputy Secretary of the Party Committee and Director of Guangdo ng
Guangxin Holdings Group Ltd. She has resigned as Director of the Company in August
2019. After that, she has become a standing committee member of the Party Committee of
Meizhou Municipality, the Deputy Secretary of the Leading Party Members’ Group of the
Huizhou Municipal Government, and the Executive Vice Mayor of Huizhou City.
Born in October 1963, Mr. Huang Wei is an MBA degree holder. He served as Deputy
Director of Wuhan Television Set Factory; Director and Deputy General Manager of Wuhan
JVC Electronic Industry Co., Ltd.; Director of Wuhan Television Set Factory and Chairman
of Wuhan JVC Electronic Industry Co., Ltd.. Mr. Huang Wei joined in TCL in May 1998. He
served as Assistant to the General Manager in TCL King Electrical Appliances (Huizhou)
Co., Ltd.; Director and Deputy General Manager in TCL-Melody; Deputy Director of the
President’s Office, Head of the Human Resource Department, Director of the President’s
Office, Secretary of the Discipline Commission, Senior Vice President, Deputy Secretary of
the Party Committee, Executive Director, and a member of the Executive Committee in the
Company. He has resigned as Director and Senior Vice President of the Company in
December 2019.
Offices held concurrently in shareholding entities:
Office held Remuneration or
in the allowance from
Name Shareholding entity shareholdin Start of tenure End of tenure the shareholding
g entity entity
Assigned
Xinjiang Jiutian Liancheng Equity representati
Li Dongsheng Investment Partnership (Limited ve of the August 2014 Ongoing None
Partnership) managing
partner
Chairman of
the Board
Liu Bin Huizhou Investment Holding Co., Ltd. Ma y 2015 Ongoing Yes
and General
Manager
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TCL Technology Group Corporation Annual Report 2019
Full-Time
Deputy December
He Zhuohui Huizhou Investment Holding Co., Ltd. Ongoing Yes
Secretary 2012
and Director
Employee February
Qiu Haiyan Huizhou Investment Holding Co., Ltd. Ongoing Yes
Director 2014
Note Not applicable
Offices held concurrently in other entities:
Remuneration
Office held
Name Other entity Start of tenure End of tenure or allowance
in the entity
from the entity
Chairman of September
TCL Industries Holdings Inc. Ongoing Yes
the Board 2018
Independent
Li Dongsheng Tencent Holdings Limited Non-Executi April 2004 Ongoing Yes
ve Director
Non-Executi
Fantasia Holdings Group Co., Limited January 2014 Ongoing Yes
ve Director
Chairman of
Liu Bin Huizhou Financing Guaranty Co., Ltd. August 2015 Ongoing No
the Board
September
TCL Industries Holdings Inc. Director Ongoing No
2018
Bank of Shanghai Co., Ltd. Director October 2019 Ongoing No
Du Juan
Chairman of September
Getech Ltd. Ongoing No
the Board 2018
TCL Technology Park Co., Ltd. Director October 2017 Ongoing No
Non-Executi
Fantasia Holdings Group Co., Limited March 2017 Ongoing Yes
ve Director
Shenzhen Jiawei Photovoltaic Lighting Independent November
Ongoing Yes
Liao Qian Co., Ltd. Director 2016
Vice
Tianjin 712 Communication &
Chairman of June 2019 Ongoing No
Broadcasting Co., Ltd.
the Board
Founding
SAIF Partners Managing October 2001 Ongoing No
Partner
Yan Yan
Independent
China Resources Land Limited Non-Executi July 2006 Ongoing Yes
ve Director
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TCL Technology Group Corporation Annual Report 2019
Guodian Technology and Environment Non-Executi
June 2012 Ongoing No
Group Corporation Limited ve Director
Bluefocus Intelligent Communications Independent
March 2014 Ongoing Yes
Group Co., Ltd. Director
ATA Creativity Global Director March 2005 Ongoing Yes
Haier Smart Home Co., Ltd. Director June 2019 Ongoing Yes
Shanghai Welltech Automation Co., Ltd. Director June 2019 Ongoing No
Independent
360 Finance, Inc July 2019 Ongoing Yes
Director
Appotronics Corporation Limited Director June 2019 Ongoing No
Jinan University Professor January 2004 Ongoing Yes
Independent Ongoing
Kingfa Sci. & Tech. Co., Ltd. Ma y 2014 Yes
Director
Independent September Ongoing
PCI-Suntek Technology Co.,Ltd. Yes
Lu Xin Director 2019
Guangdong Hengxing Feed Industry Independent Ongoing
January 2018 Yes
Co., Ltd. Director
Medprin Regenerative Medical Independent November Ongoing
Yes
Technologies Co., Ltd. Director 2018
Senior Ongoing
Philips Research in the Netherlands January 2011 No
advisor
Eindhoven University of Technology in Science Ongoing
April 2012 No
Zhou Guofu the Netherlands Consultant
South China Academy of Ad vanced Ongoing
Professor
Optoelectronics of South China Normal April 2011 Yes
and Dean
University
Liu Xunci Huizhou University Professor October 2006 Ongoing Yes
Tianjin 712 Communication &
Mao Tianxiang Supervisor June 2019 Ongoing No
Broadcasting Co., Ltd.
Note Not applicable
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and
senior management as well as those who left in the Reporting Period:
□ Applicable ■ Not applicable
IV Remuneration of Directors, Supervisors and Senior Management
Decision-making procedure and determination basis of remuneration for directors,
supervisors and senior management:
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TCL Technology Group Corporation Annual Report 2019
The allowances for directors and supervisors have been approved at the Fourth
Extraordinary General Meeting of 2011 on 14 July 2011. And the remuneration of senior
management is determined as per the Company’s remuneration management rules.
The remuneration and allowances of directors:
The remuneration and allowances of executive directors: As the Company pays
remuneration to executive directors, it shall not pay additional allowances to them. The
remuneration of five of the executive directors is determined as per the Company
headquarters’ remuneration management rules.
The allowances and other payments to independent non-executive directors: The
allowance for each independent non-executive director is RMB160,000/year (tax inclusive),
and the allowance for the convener of the Audit Committee is RMB200,000/year (tax
inclusive). And the Company shall bear the travel expense arising from the independent
directors’ attending the Company’s board and general meetings, as well as other expenses
arising from independent directors’ exercising their functions and powers as per the
Company’s Articles of Association.
The remuneration and allowances of supervisors:
The allowance for the Chairman of the Supervisory Committee is RMB160,000/year (tax
inclusive); the allowance for the shareholder supervisor is RMB100,000/year (tax inclusive);
and as the Company pays remuneration to the employee supervisor, it shall not pay
additional allowances to him/her.
Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
An y
Incumbent/ Total before-tax remuneration remuneration
Name Office title Gender Age
Former from the Company from related
party
Chairman of the
Li Dongsheng Male 62 Incumbent 678.51 Yes
Board and CEO
Vice Chairman of
Liu Bin Male 50 Incumbent 16.00 Yes
the Board
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TCL Technology Group Corporation Annual Report 2019
Director, COO and
Du Juan Female 49 Incumbent 343.59 No
CFO
Director and Board
Liao Qian Male 39 Incumbent 203.36 No
Secretary
Director and Senior
Jin Xuzhi Male 65 Incumbent 875.35 No
Vice President
Independent
Yan Yan Male 63 Incumbent 16.00 No
Director
Independent
Lu Xin Female 57 Incumbent 20.00 No
Director
Independent
Zhou Guofu Male 56 Incumbent 16.00 No
Director
Independent
Liu Xunci Male 61 Incumbent 16.00 No
Director
Chairman of the
He Zhuohui Supervisory Male 54 Incumbent 16.00 Yes
Committee
Employee
Mao Tianxiang Male 39 Incumbent 72.12 Yes
Supervisor
Qiu Haiyan Supervisor Female 45 Incumbent 10.00 Yes
Senior Vice
Yan Xiaolin Male 53 Incumbent 306.96 No
President and CTO
Senior Vice
Wang Cheng Male 45 Former 4.43 Yes
President
Huang Xubin Director and CFO Male 54 Former 5.84 No
Vice Chairman of
He Jinlei Male 46 Former 0 No
the Board
Wu Xiaohui Director Female 48 Former 0 No
Director and Senior
Huang Wei Male 57 Former 363.75 Yes
Vice President
Total -- -- -- -- 2963.91 --
Equity incentives for directors, supervisors and senior management in the Reporting Period:
□ Applicable ■ Not applicable
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TCL Technology Group Corporation Annual Report 2019
V Employees
1. Number, Functions and Educational Backgrounds of Employees
Number of in-service employees of the Company as the
226
parent
Number of in-service employees of major subsidiaries 35,153
Total number of in-service employees 35,379
Total number of paid employees in the Reporting Period 35,379
Number of retirees to whom the Company as the parent or
22
its major subsidiaries need to pay retirement pensions
Functions
Function Employees
Production 23,865
Sales 1,430
R&D and technical 6,155
Financial 340
Administrative 323
Managerial 1,141
Other 2,125
Total 35,379
Educational backgrounds
Educational background Employees
Doctorate degree 260
Master’s degree 2,234
Bachelor’s degree 7,138
Junior college 1,506
Senior high school/technical secondary school 260
Junior high school and below 6
Total 11,404
Note 1: Since the Company completed the Restructuring in April 2019, the data of employees are on an after-restructuring
basis.
Note 2: The “educational backgrounds ” section excludes operating workers and overseas employees.
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TCL Technology Group Corporation Annual Report 2019
2. Employee Remuneration Policy
The Company implements the remuneration management principle of “determining position
by responsibilities, determining salary by position and determining remuneration by
performance”. Fixed income is determined based on position assessment, variable income
is determined based on performance appraisal and a remuneration distribution mechanism
oriented by position and performance is established inside the Company.
3. Employee Training Plans
On 10 September 2000, the Training Department of TCL Headquarters shifted to TCL
Training Institute. On 16 August 2005, TCL Training Institute changed its name to TCL
Leadership Development Institute, which focused on cultivation of management talent and
development of leadership. In 2015, the institute has been upgraded to TCL University. As
such, TCL University has expanded its value positioning, with changes to service recipients,
services provided and the ways of providing services. It focuses on strategic talent for
long-term development, and promotes performance improvement by solving the existing
business bottlenecks. It provides services for the Group and the broader ecosystem, as
well as offers trainings and development opportunities. It captures and creates demand.
And it trains and motivates.
“Eagle Elites”, the top talent cultivation program, has been running for 20 years. Every
course it has offered is closely related to strategy. For instance, Eagle Elites Course 13 was
offered in 2019 to cater to the new finance requirements of the Group. Eagle Elites Course
14—Reform and Transformation Pioneer Camp cultivates talent tailored to the needs of
reform and transformation.
4. Labor Outsourcing
□ Applicable ■ Not applicable
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TCL Technology Group Corporation Annual Report 2019
Part VIII Corporate Governance
I General Information of Corporate Governance
Since it was listed, the Company has been attaching great importance to corporate
governance and dedicated to the establishment and refinement of internal control policies.
So far, it has established an organization structure that accommodates the Company’ s
business scale and business management needs. At the same time, it observes the
principle of separating incompatible duties, sets up departments and positions in a
reasonable manner, plans responsibilities and authorization scientifically and forms an
internal control system with well-defined duties and responsibilities, mutual cooperation and
mutual restraints. The Company has comprehensive audit and internal control policies,
especially in terms of internal audit, in respect of which the hierarchies are clear-cut and the
duties and responsibilities are well-defined, which can effectively prevent Group risks; the
Company has purchased liabilities insurance for its directors, supervisors and senior
management for eight consecutive years; although the shareholding proportion of its
majority shareholders is less than 30%, the Company still adopts the cumulative voting
system in the election of directors and supervisors, which is higher than the standards of
corporate governance and effectively protects the voting rights of minority shareholders; in
addition, the Company’s Board of Supervisors works with diligence and the supervisors go
deep into corporate research and proactively propose management suggestions, which
effectively refine the Company’s internal governance mechanism; by establishing new
management policies, the Company continues to improve its information disclosure
management and investor relationship management; the Company is passionate about
commonweal and establishes donation funds for public benefits and all those measures
have enabled the Company to stand in the industry leading position for its governance
level.
During the Reporting Period, in accordance with the Company Law, the Securities Law, the
Code of Corporate Governance for Listed Companies and other relevant laws and
regulations, the Company continued to refine its governance structure and further
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TCL Technology Group Corporation Annual Report 2019
standardized its operations to comply with the requirements of related laws and regulations.
During the Reporting Period, the Company’s directors, supervisors and senior
management furthered their learning of regulations and documents in respect of the
corporate governance for listed companies, strengthened their self-discipline and diligence,
and faithfully safeguarded the interests of all shareholders, in particular the minority
shareholders.
Currently, there is no difference between the actual status of the Company’s corporate
governance structure and the standard documents on the corporate governance for listed
companies published by China Securities Regulatory Commission. The names of the
policies are shown in the following table and all the policies have been published on
www.cninfo.com.cn.
Category of Title of rules
rules
Articles of The Articles of Association of TCL Corporation
Association
Dividend The Dividend Rules of TCL Corporation
rules
The Shareholder Return Plan for 2017-2020 of TCL Corporation
The Rules Governing the Shareholdings of Directors, Supervisors and
Senior Management in TCL Corporation and Changes therein
The Rules Governing the Registration of Information Insiders of TCL
Corporation
Information
The Accountability Rules for Material Errors in Annual Report Disclosure of
disclosure
TCL Corporation
rules
The Rules Governing External Users of Information of TCL Corporation
The Rules Governing Investor Relations of TCL Corporation
The Work Rules for Independent Directors Concerning Annual Reports of
TCL Corporation
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TCL Technology Group Corporation Annual Report 2019
The Reception and Promotional Work Rules of TCL Corporation
The Rules Governing Internal Reporting of Significant Information of TCL
Corporation
The Work Rules for the Board Secretary of TCL Corporation
The Rules Governing Information Disclosure of TCL Corporation
The Rules of Procedure for the General Meeting of TCL Corporation
The Rules of Procedure for the Supervisory Committee of TCL Corporation
The Rules of Procedure for the Board of Directors of TCL Corporation
The Work Rules for the Independent Directors of TCL Corporation
The Rules Governing the Use of Raised Funds of TCL Corporation
Governance The Rules of Procedure for the Audit Committee under the Board of
and Directors of TCL Corporation
operation The Rules of Procedure for the Remuneration and Appraisal Committee
rules under the Board of Directors of TCL Corporation
The Specific Work Rules for the CEO of TCL Corporation
The Rules of Procedure for the Nomination Committee under the Board of
Directors of TCL Corporation
The Rules of Procedure for the Strategy Committee under the Board of
Directors of TCL Corporation
The Rules Governing Major Investments of TCL Corporation
The Internal Control Rules for Venture Capital of TCL Corporation
The Rules Governing Securities Investment of TCL Corporation
The Internal Control Rules for Investment in Derivative Financial
Internal
Instruments of TCL Corporation
control rules
The Internal Control Rules for the Online New Share Subscription of TCL
Corporation
The Internal Control Rules for the Entrusted Wealth Management of TCL
Corporation
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TCL Technology Group Corporation Annual Report 2019
The Work Procedures for the Annual Audit by the Audit Committee under
the Board of Directors of TCL Corporation
The Internal Control Rules for the Online New Share Subscription of TCL
Corporation
The Majority-Owned Subsidiary Management Measures of TCL
Corporation
The Rules Governing the Related-Party Transactions of TCL Corporation
The Rules Governing the Guarantees Provided for External Parties of TCL
Corporation
The Internal Control Rules of TCL Corporation
The Internal Audit Charter of TCL Corporation
The Internal Control Evaluation Rules of TCL Corporation
There is no material incompliance with the regulatory documents issued by the CSRC
governing the governance of listed companies.
Special corporate governance campaigns, as well as the formulation and
implementation of the rules governing the registration of information insiders:
Upon various special checks of corporate governance by the regulatory authority and work
conferences on the governance of listed companies, the Company has revised its Articles
of Association. The rules strictly standardize the Company’s behaviors and protect the
interests of investors.
The following rules have been revised in 2019 so as to further improve corporate
governance:
Title of rules
Revised The Articles of Association of TCL Corporation
II The Company’s Independence from Its Controlling Shareholder in Business,
Personnel, Asset, Organization and Financial Affairs
□ Applicable ■ Not applicable
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TCL Technology Group Corporation Annual Report 2019
III Horizontal Competition
□ Applicable ■ Not applicable
IV Annual and Extraordinary General Meetings Convened during the Reporting
Period
1. General Meeting Convened during the Reporting Period
Investor Date of the Index to disclosed
Meeting Type Disclosure date
participation ratio meeting information
The First
Combination of
Extraordinary
on-site and online 47.17% 7 January 2019 8 January 2019
General Meeting of
voting
2019
The Second
Combination of
Extraordinary
on-site and online 33.72% 25 January 2019 26 January 2019
General Meeting of
voting
2019
Combination of
The 2018 Annual
on-site and online 33.37% 9 April 2019 10 April 2019
General Meeting
voting
The Third
Combination of
Extraordinary http://www.cninfo.c
on-site and online 33.33% 8 May 2019 9 May 2019
General Meeting of om.cn
voting
2019
The Fourth
Combination of
Extraordinary
on-site and online 33.17% 28 June 2019 29 June 2019
General Meeting of
voting
2019
The Fifth
Combination of
Extraordinary 15 November 201 16 November 201
on-site and online 26.74%
General Meeting of 9 9
voting
2019
The Sixth
Combination of
Extraordinary
on-site and online 26.35% 4 December 2019 5 December 2019
General Meeting of
voting
2019
2. Extraordinary General Meetings Convened at the Request of Preferred Shareholders with
Resumed Voting Rights
□ Applicable ■Not applicable
117
TCL Technology Group Corporation Annual Report 2019
V Performance of Duty by Independent Directors in the Reporting Period
1. Attendance of Independent Directors at Board Meetings and General Meetings
Attendance of independent directors at board meetings and general meetings
The
Total number
Board independent
of board Board Board
Board meetings director failed
meetings the meetings meetings the General
Independent meetings attended by to attend two
independent attended independent meetings
director attended on way of consecutive
director was through a director failed attended
site telecommuni board
eligible to proxy to attend
cation meetings
attend
(yes/no)
Lu Xin 9 2 7 0 0 No 2
Zhou Guofu 9 2 7 0 0 No 0
Yan Yan 9 0 9 0 0 No 0
Liu Xunci 9 3 6 0 0 No 6
2. Objections Raised by Independent Directors on Matters of the Company
No such cases in the Reporting Period.
3. Other Information about the Performance of Duty by Independent Directors
In the Reporting Period, in strict accordance with the applicable laws and regulations, as
well as the Company’s Articles of Association, the independent directors of the Company
paid attention to the Company’s operations and faithfully fulfilled their duties as
independent directors. They put forward a lot of valuable, professional advice regarding the
improvement of the Company’s rules and daily operating decision-making. They issued
their independent and fair opinion on the matters of the Company that required their opinion.
Therefore, they have played their part in improving the Company’s supervision mechanism,
as well as in protecting the legal interests of the Company and its shareholders.
Type of
Issue date of opinion Matter
opinion
The Plan for the First Phase of the Repurchase of Certain Public Shares, and
11 January 2019 the nomination of director candidates and the appointment of senior Consent
management
118
TCL Technology Group Corporation Annual Report 2019
The 2018 Annual Profit Distribution Plan, the Proposal on Reappointment of
the CPA Firm, the 2018 Annual Internal Control Evaluation Report, The
Proposal on the Guarantee Line for Subsidiaries in 2019, the Special
Statement on the Capital Occupation by the Controlling Shareholder or Other
Related Parties and the Guarantees Provided for External Parties, The
20 March 2019 Consent
Special Statement on Securities Investments in 2018, The Proposal on
Authorization Adjustments for Securities Investment and Wealth
Management, the derivative financial instrument transactions carried out by
the Company in 2018, and The Plan on the Adjustment to the Upper Limit of
the Share Repurchase Price
Changes to the Company’s accounting policies , The Proposal on the
Adjustment to the Share Repurchase Price of The 2018 Restricted Stock
Incentive Plan & Global Innovation Partner Plan, The Second Global Partner
24 April 2019 Plan of TCL Corporation (Draft) and its Summary, The 2019 Restricted Stock Consent
Incentive Plan & The Second Global Innovation Partner Plan of TCL
Corporation (Draft) and its Summary, and the derivati ve financial instrument
transactions carried out by the Company in Q1 2019
The adjustments to The 2019 Restricted Stock Incentive Plan and the Second
11 May 2019 Global Innovation Partner Plan, and the grant of restricted shares to the Consent
awardees
The Proposal on the Satisfaction of the Unlocking Condition for the First
Unlocking Period of the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan, and The Proposal on the Repurchase and
22 May 2019 Consent
Retirement of Restricted Shares That Have Been Granted to Certain
Awardees under the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan But Are Still in Lockup
Related-party transactions, The Proposal on the Adjusted Guarantee Line for
13 June 2019 Subsidiaries, and The Continuing Risk Evaluation Report of TCL Finance Co., Consent
Ltd.
The acquisition of interest in subsidiary and the related-party transaction, The
Proposal on Adjustments to the Second Global Partner Plan (Draft) and Its
Summary, investments in equity in vestment funds and the related-party
transactions, the derivative financial instrument transactions carried out by the
13 August 2019 Consent
Company in H1 2019, The Continuing Risk Evaluation Report of TCL Finance
Co., Ltd., and The Special Statement on the Capital Occupation by the
Controlling Shareholder or Other Related Parties and the Guarantees
Provided for External Parties
119
TCL Technology Group Corporation Annual Report 2019
The sale of interest in subsidiary and the related-party transaction, the
increase in the estimated amount of continuing related-party transactions with
31 October 2019 Consent
TCL Industries Holdings Inc., and the derivative financial instrument
transactions carried out by the Company in Q1~Q3 2019
19 November 2019 Investment in equity investment fund and the related-party transaction Consent
VI Performance of Duty by Specialized Committees under the Board in the Reporting
Period
1. Performance of Duty by the Audit Committee
In the principle of being diligent, pragmatic and realistic, all the members of the Audit
Committee under the Board proactively pushed forward the 2019 annual audit. During the
annual audit, the Audit Committee convened four meetings to review the audit plan and the
financial statements. It also fully communicated with the accountants responsible for the
annual audit. Two letters were issued to urge the auditor to carry out the audit in strict
compliance with the audit plan.
The Audit Committee summarized the 2019 annual audit carried out by Da Hua Certified
Public Accountants (Special General Partnership) as follows:
On 20 January 2020, we reviewed and confirmed the Audit Plan of the Internal Control of
TCL Technology Group Corporation in 2019 and the Audit Plan of the 2019 Annual
Financial Statements of TCL Technology Group Corporation submitted by Da Hua Certified
Public Accountants (Special General Partnership), the independent auditor for the year
2019.
In October 2019, the auditor started the pre-audit of the annual report. On 2 January 2020,
the auditor came to the Company and started the official audit. Afterwards, according to the
audit plan, we emailed and called a few times to learn about and urge the audit progress,
as well as went to the audit site to offer advice and urge the audit progress. We issued Urge
Letters on 28 February and 4 March 2020 respectively to ask the auditor to carry out the
audit in accordance with the audit plan, as well as to raise the following major questions: 1.
whether the Company’s accounting statements were prepared in strict compliance with the
Chinese Accounting Standards for Business Enterprises, the Company’s financial rules, as
120
TCL Technology Group Corporation Annual Report 2019
well as the applicable laws and regulations; 2. whether the Company’s accounting
treatments needed to be improved; and 3. whether the Company provided sufficient
materials as required by the auditor. The auditor replied to these questions in a timely
manner.
On 4 March 2020, we reviewed the unaudited 2019 annual financial statements of the
Company and agreed that the 2019 annual audit should be carried out based on the said
financial statements.
On 28 March 2020, the auditor issued a preliminary “unmodified unqualified” audit opinion
on the Company’s financial statements, to which we agreed.
We believed that Da Hua Certified Public Accountants (Special General Partnership), the
independent auditor for the year 2019, provided audit service for the Company in a diligent
and responsible way. It completed the audit in strict accordance with the audit plan. The
audited financial statements were a factual and complete reflection of the Company’s
financial position as at 31 December 2019, as well as the operating results and cash flows
of the year then ended. The audit opinion they issued factually reflected the Company’s
realities. On 28 March 2020, the Audit Committee convened a meeting, where the following
proposals were approved and submitted to the Board for further review: The 2019 Annual
Financial Report, the Summary Report of the Audit Committee under the Board Regarding
the 2019 Annual Audit Carried out by Da Hua Certified Public Accountants (Special General
Partnership), and the Proposal on the Reappointment of Da Hua Certified Public
Accountants (Special General Partnership) as the Independent Auditor for 2020.
2. Performance of Duty by the Nomination Committee
During the Reporting Period, the Nomination Committee convened one meeting, where the
Proposal on the Nomination of a Director Candidate for the Sixth Board was reviewed and
Mr. Jin Xuzhi was nominated as a director.
3. Performance of Duty by the Remuneration and Appraisal Committee
During the Reporting Period, the Remuneration and Appraisal Committee convened one
meeting, where The 2019 Restricted Stock Incentive Plan and the Second Global
Innovation Partner Plan (Draft) and other proposals were reviewed.
121
TCL Technology Group Corporation Annual Report 2019
VII Performance of Duty by the Supervisory Committee
Indicate whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period.
□ Yes ■ No
Proposal Index to the
Date of the Supervisor
Meeting reviewed at the Resolution disclosed Disclosure date
meeting present
meeting resolution
1. The Proposal
on The 2018
Annual Work
Report of the
Supervisory
Committee; 2.
The Proposal on
The 2018
Annual
Financial
Report; 3. The
Proposal on The
2018 Annual
Report and its
summary; 4.
Resolutions of
The Ninth The Proposal on
the Ninth
Meeting of the He Zhuohui The 2018
Meeting of the http://www.cninf
Sixth 19 March 2019 Qiu Haiyan Annual Internal 20 March 2019
Sixth o.com.cn
Supervisory Mao Tianxiang Control
Supervisory
Committee Evaluation
Committee
Report; 5. The
Proposal on The
Social
Responsibility &
Sustainable
Development
2018; 6. The
proposal on the
write-off of the
doubtful
accounts in
2017; 8. The
Proposal on the
2018 Final
Dividend
122
TCL Technology Group Corporation Annual Report 2019
1. The Proposal
on The First
Quarter Report
2019 and Its
Summary; 2.
The Proposal on
Changes to the
Accounting
Policies; 3. The
Proposal on the
Adjustment to
the Share
Repurchase
Price of The
2018 Restricted
Stock Incentive
Plan & The
Global
Innovation
Partner Plan; 4. Resolutions of
The Tenth
The Proposal on the Tenth
Meeting of the He Zhuohui
The Second Meeting of the
Sixth 23 April 2019 Qiu Haiyan 24 April 2019
Global Partner Sixth
Supervisory Mao Tianxiang
Plan (Draft) and Supervisory
Committee
Its Summary; 5. Committee
The Measures
for the
Management of
The Second
Global Partner
Plan; 6. The
Proposal on The
2019 Restricted
Stock Incentive
Plan and The
Second Global
Innovation
Partner Plan
(Draft) and Its
Summary; 7.
The
Management
Measures for
the
123
TCL Technology Group Corporation Annual Report 2019
Implementation
and Appraisal
with respect to
The 2019
Restricted Stock
Incentive Plan
and The Second
Global
Innovation
Partner Plan; 8.
The Proposal on
the Examination
of the Awardee
List for The
2019 Restricted
Stock Incentive
Plan and The
Second Global
Innovation
Partner Plan
1.The Proposal
on Adjustments
to the 2019
Restricted Stock
Resolutions of
The 11th Incentive Plan
the 11th
Meeting of the He Zhuohui and the Second
Meeting of the
Sixth 10 May 2019 Qiu Haiyan Global 11 May 2019
Sixth
Supervisory Mao Tianxiang Innovation
Supervisory
Committee Partner Plan; 2.
Committee
The Proposal on
the Grant of
Restricted Stock
to the Awardees
1. The Proposal
on the
Satisfaction of
Resolutions of
The 12th the Unlocking
the 12th
Meeting of the He Zhuohui Condition for the
Meeting of the
Sixth 20 May 2019 Qiu Haiyan First Unlocking 21 May 2019
Sixth
Supervisory Mao Tianxiang Period of the
Supervisory
Committee 2018 Restricted
Committee
Stock Incentive
Plan and the
Global
124
TCL Technology Group Corporation Annual Report 2019
Innovation
Partner Plan; 2.
The Proposal on
the Repurchase
and Retirement
of Restricted
Shares That
Have Been
Granted to
Certain
Awardees under
the 2018
Restricted Stock
Incentive Plan
and the Global
Innovation
Partner Plan But
Are Still in
Lockup
Resolutions of
The 13th 1. The Proposal
the 13th
Meeting of the He Zhuohui on The Interim
Meeting of the
Sixth 12 August 2019 Qiu Haiyan Report 2019 13 August 2019
Sixth
Supervisory Mao Tianxiang and Its
Supervisory
Committee Summary
Committee
1. Third Quarter
Report 2019
and its
summary; 2.
The Proposal on Resolutions of
The 14th
Increase in the the 14th
Meeting of the He Zhuohui
30 October Estimated Meeting of the 31 October
Sixth Qiu Haiyan
2019 Amount of Sixth 2019
Supervisory Mao Tianxiang
Continuing Supervisory
Committee
Related-Party Committee
Transactions
with TCL
Industries
Holdings Inc.
The Supervisory Committee raised no objections in the Reporting Period.
125
TCL Technology Group Corporation Annual Report 2019
VIII Appraisal of and Incentive for Senior Management
During the Reporting Period, the Company carried out performance appraisal and
competence examination on managers. The KPI (key performance indicators) system was
used for performance appraisal. In respect of the team led by each manager, the key
factors of performance appraisal included phased goals of strategic transformation and
operating indicators of the current period (such as profits, cash flow, products and service
quality); the comprehensive results of the accomplishment of each goal were considered as
the main basis for motivating managers. In that way, corporate strategies were converted
into internal management activities through the process of goal settings, implementation
and accomplishment to steer the work orientation of all systems of the Company and serve
the purpose of enhancing the overall efficiency of the Company. Leader examination
consisted of four dimensions of assessment, being leader’s performance, competence,
experience and quality (potential, personality and aspiration/values). An annual
examination report for leaders was generated through annual performance assessment,
virtual assessment center, 360-degree behavior interview or online assessment, supported
by key experience, personality or management style assessment, which served as the
main basis for appraising, appointing and dismissing leaders.
IX Internal Control
1. Material Internal Control Weaknesses Identified for the Reporting Period
□ Yes ■ No
2. Internal Control Self-Evaluation Report
Disclosure date of the internal control
31 March 2020
self-evaluation report
Index to the disclosed internal control
http://www.cninfo.com.cn
self-evaluation report
Evaluated entities’ combined assets
95%
as % of consolidated total assets
Evaluated entities’ combined revenue
94%
as % of consolidated revenue
126
TCL Technology Group Corporation Annual Report 2019
Identification standards for internal control weaknesses
Weaknesses in internal control over Weaknesses in internal control not
Type
financial reporting related to financial reporting
Material weaknesses: (1) material
violations of the country’s laws or
regulations in the Company’s
Material weaknesses: (1) an invalid
operating activities; (2) any material
control environment; (2) fraud of
decision-making error that is caused
directors, supervisors and senior
by an irrational decision-making
management; (3) any material
procedure and causes material
misstatement of the financial reporting of
property loss to the Company; (3) a
the current period which is identified by
massive loss of the key managerial or
the registered accountants but the
technical personnel; and (4) frequent
Company fails to do so; and (4) invalid
negative news coverage that causes
internal control supervision by the Audit
Nature standard great concern of the regulatory
Committee and the internal audit organ.
administration and a material
Serious weaknesses: A single weakness
long-lasting impact on the Company’s
or a group of weaknesses which are less
brand and reputation.
serious than a material weakness but
Serious weaknesses: A single
could still cause deviation from the
weakness or a group of weaknesses
control objectives
which are less serious than a material
Common weaknesses: Other internal
weakness but could still cause
control weaknesses that are neither
deviation from the control objectives
material nor serious
Common weaknesses: Other internal
control weaknesses that are neither
material nor serious
Material weaknesses: misstatements≥
5% of profit before tax;
Serious weaknesses: 3% of profit before
Quantitative standard tax≤misstatements <5% of profit before Not applicable
tax;
Common weaknesses: misstatements
<3% of profit before tax
Number of material weaknesses in
0
internal control over financial reporting
Number of material weaknesses in
internal control not related to financial 0
reporting
Number of serious weaknesses in
0
internal control over financial reporting
Number of serious weaknesses in
0
internal control not related to financial
127
TCL Technology Group Corporation Annual Report 2019
reporting
X Independent Auditor’s Report on Internal Control
Opinion paragraph in the independent auditor’s report on internal control
In our opinion, TCL Technology Group Corporation maintained, in all material respects, effective internal control over
financial reporting as of 31 December 2019, based on the Basic Rules on Enterprise Internal Control and other
applicable rules.
Independent auditor’s report on The Internal Control Audit Report of TCL Technology Group Corporation disclosed on
internal control disclosed or not http://www.cninfo.com.cn dated 31 March 2020
Disclosure date 31 March 2020
Index to such report disclosed http://www.cninfo.com.cn
Type of the auditor’s opinion Unmodified opinion
Material weaknesses in internal
control not related to financial None
reporting
Indicate whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control.
□ Yes ■ No
Indicate whether the independent auditor’s report on the Company’s internal control is consistent with the internal contr ol
self-evaluation report issued by the Company’s Board.
■ Yes □ No
128
TCL Technology Group Corporation Annual Report 2019
Part IX Corporate Bonds
I General Information of Corporate Bonds
Way of
principal
Balance
Bond name Abbr. Bond code Value date Maturity Coupon rate repayment
(RMB’0,000)
and interest
payment
TCL
Corporation’s
Corporate Interest
Bonds payable
Publicly annually and
16 March 16 March
Offered in 16TCL02 112353 150,000 3.56% principal
2016 2021
2016 to repayable in
Qualified full upon
Investors maturity
(Tranche 1)
(Type 2)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly
16TCL03 112409 7 July 2016 7 July 2021 200,000 3.50% principal
Offered in
repayable in
2016 to
full upon
Qualified
maturity
Investors
(Tranche 2)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly
17TCL01 112518 19 April 2017 19 April 2022 100,000 4.80% principal
Offered in
repayable in
2017 to
full upon
Qualified
maturity
Investors
(Tranche 1)
129
TCL Technology Group Corporation Annual Report 2019
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly
17TCL02 112542 7 July 2017 7 July 2022 300,000 4.93% principal
Offered in
repayable in
2017 to
full upon
Qualified
maturity
Investors
(Tranche 2)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly
18TCL01 112717 6 June 2018 6 June 2023 100,000 5.48% principal
Offered in
repayable in
2018 to
full upon
Qualified
maturity
Investors
(Tranche 1)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly 20 August 20 August
18TCL02 112747 200,000 5.30% principal
Offered in 2018 2023
repayable in
2018 to
full upon
Qualified
maturity
Investors
(Tranche 2)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly
19TCL01 112905 20 May 2019 20 May 2024 100,000 4.33% principal
Offered in
repayable in
2019 to
full upon
Qualified
maturity
Investors
(Tranche 1)
TCL Interest
Corporation’s 19TCL02 112938 23 July 2019 23 July 2024 100,000 4.30% payable
Corporate annually and
130
TCL Technology Group Corporation Annual Report 2019
Bonds principal
Publicly repayable in
Offered in full upon
2019 to maturity
Qualified
Investors
(Tranche 2)
TCL
Corporation’s
Interest
Corporate
payable
Bonds
annually and
Publicly 21 October 21 October
19TCL03 112983 200,000 4.20% principal
Offered in 2019 2024
repayable in
2019 to
full upon
Qualified
maturity
Investors
(Tranche 3)
Place for bond listing and
Shenzhen Stock Exchange
trading
Investor eligibility These bonds are for qualified investors only.
1. The principal of “16TCL01” was repaid with interest on 18 March 2019.
2. The interest for the period from 16 March 2018 to 15 March 2019 on “16TCL02” was
paid on 18 March 2019.
3. The interest for the period from 19 April 2018 to 18 April 2019 on “17TCL01” was paid
on 19 April 2019.
Interest payment and 4. The interest for the period from 6 June 2018 to 5 June 2019 on “18TCL01” was paid on
principal repayment during 6 June 2019.
Reporting Period 5. The interest for the period from 7 July 2018 to 5 July 2019 on “16TCL03” was paid on 8
July 2019.
6. The interest for the period from 7 July 2018 to 5 July 2019 on “17TCL02” was paid on 8
July 2019.
7. The interest for the period from 20 August 2018 to 19 August 2019 on “18TCL02” was
paid on 20 August 2019.
1. TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors
Where the bond carries any
(Tranche 1) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
issuer or investor option
adjustment option and the investors’ sell-back option at the end of the third year. The
clause, interchangeable
interest payment day is April 19 from 2018 to 2022 (the subsequent first trading day if it is
clause or other special
a statutory holiday or rest day, with no additional interest for the postponement). If an
clauses, give the execution
investor chooses to exercise the sell-back option, the interest payment day for the
details (if applicable) of these
sold-back bonds is April 19 from 2018 to 2020 (the subsequent first trading day if it is a
clauses during the Reporting
statutory holiday or rest day, with no additional interest for the postponement).
Period
2. TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors
131
TCL Technology Group Corporation Annual Report 2019
(Tranche 2) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is July 7 from 2018 to 2022 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement). If an
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is July 7 from 2018 to 2020 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
3. TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors
(Tranche 1) is of a five-year term, with the issuer’s call option, the issuer’s coupon ra te
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is June 6 from 2019 to 2023 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement). If an
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is June 6 from 2019 to 2021 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
4. TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors
(Tranche 2) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is August 20 from 2019 to 2023 (the subsequent first trading day if it
is a statutory holiday or rest day, with no additional interest for the postponement). If an
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is August 20 from 2019 to 2021 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
5. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors
(Tranche 1) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is May 20 from 2020 to 2024 (the subsequent first trading day if it is
a statutory holiday or rest day, with no additional interest for the postponement). If an
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is May 20 from 2020 to 2022 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
6. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors
(Tranche 2) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is July 23 from 2020 to 2024 (the subsequent first trading day if it is
a statutory holiday or rest day, with no additional interest for the postponement). If an
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is July 23 from 2020 to 2022 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
7. TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors
(Tranche 3) is of a five-year term, with the issuer’s call option, the issuer’s coupon rate
adjustment option and the investors’ sell-back option at the end of the third year. The
interest payment day is October 21 from 2020 to 2024 (the subsequent first trading day if
it is a statutory holiday or rest day, with no additional interest for th e postponement). If an
132
TCL Technology Group Corporation Annual Report 2019
investor chooses to exercise the sell-back option, the interest payment day for the
sold-back bonds is October 21 from 2020 to 2022 (the subsequent first trading day if it is a
statutory holiday or rest day, with no additional interest for the postponement).
II Bond Trustee and Credit Rating Agency
Bond trustee:
33/F, Bohua
Guotai Junan
Office Plaza, 669 Contact 021-3867650
Name Securities Wu Lei Tel.
address Xinzha Road, person 3
Co., Ltd.
Shanghai
8 Zhongxin
Third Road,
CITIC Futian
Office Contact Deng 0755-238358
Name Securities District, Tel.
address person Xiaoqiang 88
Co., Ltd. Shenzhen,
Guangdong
Province
Credit rating agency which conducted follow-up ratings for bonds during Reporting Period:
Office Room 968, Tower 1, 599 Xinye Road,
Name China Chengxin Securities Rating Co., Ltd.
address Qingpu District, Shanghai
Where the bond trustee or credit rating
agency was changed during the
Reporting Period, explain the reasons, Not applicable
the executed procedures, the impact on
investors’ interests, etc. (if applicable)
III Utilization of Funds Raised through Corporate Bonds
The raised funds were used to supplement the working capital and repay debt,
Utilization of funds raised through which is in strict compliance with the prospectus. And with the authorization of
corporate bonds and procedures the Board and the general meeting, the related internal decision -making
executed procedure was executed according to the relevant rules approved by the Board
and the general meeting.
Ending balance (RMB’0,000) 0
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
Operation of special account for raised
through TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to
funds
Qualified Investors (Tranche 1), the Escrow Account Agreement for the Funds
Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to
Qualified Investors (Tranche 2), the Escrow Account Agreement for the Funds
133
TCL Technology Group Corporation Annual Report 2019
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 201 9 to
Qualified Investors (Tranche 1), the Escrow Account Agreement for the Funds
Raised through TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to
Qualified Investors (Tranche 2) and the Escrow Account Agreement for the
Funds Raised through TCL Corporation’s Corporate Bonds Publicly Offered in
2019 to Qualified Investors (Tranche 3),with China Development Bank
(Guangdong branch) and the Industrial and Commercial Bank of China
(Huizhou branch) to ensure that the raised funds will be used as earmarked.
Whether the utilization of raised funds
is in line with the promised usages,
Yes
utilization plan or other promises in the
prospectus
IV Rating Results of Corporate Bonds
According to the Follow-up Rating Report (2019) on TCL Corporation’s Corporate Bonds
Publicly Offered in 2016 to Qualified Investors (Tranches 1 and 2) issued by China
Chengxin Securities Rating Co., Ltd. on 9 May 2019, the AAA credit status of TCL
Corporation and the said bonds was affirmed with a “Stable” outlook.
According to the Follow-up Rating Report (2019) on TCL Corporation’s Corporate Bonds
Publicly Offered in 2017 to Qualified Investors (Tranches 1 and 2) and on TCL
Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranches 1
and 2) issued by China Chengxin Securities Rating Co., Ltd. on 9 May 2019, the AAA credit
status of TCL Corporation and the said bonds was affirmed with a “Stable” outlook.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 1) issued by China Chengxin Securities
Rating Co., Ltd. on 9 May 2019, TCL Corporation was rated AAA with a “Stable” outlook,
and the said bonds were also rated AAA.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 2) issued by China Chengxin Securities
Rating Co., Ltd. on 9 September 2019, TCL Corporation was rated AAA with a “Stable”
134
TCL Technology Group Corporation Annual Report 2019
outlook, and the said bonds were also rated AAA.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 3) issued by China Chengxin Securities
Rating Co., Ltd. on 9 October 2019, TCL Corporation was rated AAA with a “Stable” outlook,
and the said bonds were also rated AAA.
V Credit Enhancement, Repayment Plans and Other Repayment Guarantee Measures
No 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
primarily sourced 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 management plan, a bond trustee, the Rules for Bondholders’ Meetings,
strict information disclosure, and an undertaking to not distribute profits to shareholders, as
well as suspend capital expenditures such as major investments in external parties and
mergers and acquisitions where the Company fails to, or expectedly 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
guarantee measures remained unchanged during the Reporting Period.
VI Meetings of Bondholders Convened during Reporting Period
No such cases in the Reporting Period.
VII Performance of Duties by Bond Trustee during Reporting Period
As the trustee of the “16TCL02”, “16TCL03”, “17TCL01”, “17TCL02”, “18TCL01”, “18TCL02”
and “19TCL01” bonds, Guotai Junan Securities Co., Ltd., in strict accordance with the
applicable laws and regulations including the Measures for the Issue and Trading of
Corporate Bonds and the Professional Code of Conduct for Corporate Bond Trustees,
keeps a close eye on the Company’s operating, financial and credit conditions to fulfill its
duties as a bond trustee and protect the legal rights and interests of the bondholders. And
135
TCL Technology Group Corporation Annual Report 2019
the bond trustee has no conflicts of interests in any kind with the Company.
As the trustee of the “19TCL02” and “19TCL03” bonds, CITIC Securities Co., Ltd., in strict
accordance with the applicable laws and regulations including the Measures for the Issue
and Trading of Corporate Bonds and the Professional Code of Conduct for Corporate Bond
Trustees, keeps a close eye on the Company’s operating, financial and credit conditions to
fulfill its duties as a bond trustee and protect the legal rights and interests of the
bondholders. And the bond trustee has no conflicts of interests in any kind with the
Company.
VIII Selected Financial Information of the Company in the Past Two Years
Item 2019 2018 Change (%)
EBITD A (R MB’0,000) 1,422,433 1,409,652 0.91%
Current ratio 1.12 1.02 9.97%
Debt/asset ratio (%) 61.25 68.42 -7.17
Quick ratio 0.85 0.67 17.97%
Debt/EBITDA ratio 14.09% 10.69% 3.40%
Interest cover (times) 2.16 2.40 -10.00%
Cash-to-interest cover (times) 5.32 5.46 -2.56%
EBITDA-to-interest cover (times) 5.17 5.53 -6.51%
Debt repayment ratio (%) 100 100.00 0.00
Interest payment ratio (%) 100 100.00 0.00
Explanation of why any financial indicator in the table above registered a year-on-year change of over 30%:
□ Applicable ■ Not applicable
IX Principal Repayment and Interest Payment of Other Bonds and Debt Financing
Instruments during the Reporting Period
Principal amount Coupon Principal repayment
No. Bond abbreviation Issue date Maturity
(RMB’00,000,000) rate and interest payment
1 18TCL-SCP001 20 2018-4-23 0.74 year 4.80% Repaid in full on time
The interest for the
period from 2 April
2 15TCL-MTN001 5 2015-4-1 5 years 5.50% 2018 to 1 April 2019
was paid on 2 April
2019
136
TCL Technology Group Corporation Annual Report 2019
The interest for the
period from 3
December 2018 to 2
3 18TCL-MTN001 20 2018-12-3 3 years 4.58%
December 2019 was
paid on 3 December
2019
Credit Lines Granted by Banks, as well as Their Utilization and Repayment during
the Reporting Period
The Company operates in compliance, with a fine credit reputation, strong profitability and
a great ability to repay debt. Additionally, it maintains a long-term partnership with the China
Development Bank, The Export-Import Bank of China, the Industrial and Commercial Bank
of China, etc. As at 31 December 2019, the credit lines granted by the major bank partners
to the Company totaled RMB199.6 billion, with RMB59.3 billion utilized and RMB140.3
billion left. During the Reporting Period, there were no defaults on bank loans.
Fulfillment of Commitments Made in Bond Prospectuses during Reporting Period
Up to the date of the approval of this Report for issue, the Company has been executing all
the commitments given in its bond prospectuses, without any negative impact on the
investors caused by 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, the statement of changes in owners ’/shareholders’ equity and the notes to the financial statements) for
the reporting period are disclosed separately within four months when every accounting year ends.
□ Yes No
The Company is required to separately provide the financial statements of the guarantor for the reporting period within
four months when every accounting year ends, and indicate whether the financial statements are audited or not.
137
TCL Technology Group Corporation
For the Year Ended 31 December 2019
Independent Auditor’s Report
Da Hua Shen Zi [2020] No. 000688
Da Hua Certified Public Accountants（Special General Partnership）
TCL Technology Group Corporation
Annual Report 2019
TCL Technology Group Corporation
Independent Auditor’s Report and Financial Statements
(For the year from 1 January 2019 to 31 December 2019)
Contents Page
I Independent Auditor’s Report 1-7
II Financial Statements for Year 2019
1． Co nso lida ted Ba la nce S hee t 1-2
2． Co nso lida ted Inc om e S ta te me nt 3
3． Co nso lida ted Ca s h F lo w Statem e nt 4-5
4． Co nso lida ted S ta te me nt o f C ha nges i n
6-7
Sha re ho lde rs’ Eq ui ty
5． Ba la nce S he et o f the Co mpa ny as the
8-9
Pare nt
6． Inc ome S ta te me nt o f the Co mpa ny as the
10
Pare nt
7． Cas h Flo w S ta te me nt o f the Co mpa ny as
11-12
the Pa re nt
8． S ta te me nt o f C ha ng es i n S ha re ho lder s’
13-14
Equi ty of the Co mpa ny as the Pa re nt
9． No tes to Fi na ncia l S ta te me nts 15-197
Da Hua Shen Zi [2020] No. 000688
Independent Auditor’s Report
Da Hua Shen Zi [2020] No. 000688
To the Shareholders of TCL Technology Group Corporation
I Opinion
We have audited the financial statements of TCL Technology Group
Corporation (the “Company”), which comprise the consolidated and parent
company (the Company as the parent exclusive of subsidiaries) balance
sheets as at 31 December 2019, the consolidated a nd parent company
statements of income, cash flows and changes in shareholders’ equity for the
year then ended, as well as the notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated and parent company financial position of
the Company at 31 December 2019, and the consolidated and parent
company operating results and cash flows for the year then ended, in
conformity with the Chinese Accounting Standards (CAS).
II Basis for Opinion
We conducted our audits in accordance with the Audit Standards for Chinese
Registered Accountants. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for Audit of Financial Statements
section of our report. We are independent of the Company in accordance with
the China Code of Ethics for Certified Public Accountants, and we have fulfilled
our other ethical responsibilities in accordance with the said Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
III Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the financial statements of the current period.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
And key audit matter identified in our audit is summarized as follows:
1
Da Hua Shen Zi [2020] No. 000688
1. Related-party transactions and outstanding amounts
2. Revenue recognition
(I) Balances and Transactions of Related Parties
1. Matter description
Please refer to the Note " IX. Related Parties and Related-party Transactions"
to the financial statements. Related-party transactions in 2019 are about RMB
17.1 billion, up 98% over the previous period.
As the fair reflection of financial statements will be significantly impacted by
whether related parties and related-party transactions are disclosed completely,
whether related-party transactions are authentic, and whether the transaction
prices are fair, we identify balances and transactions of related parties as key
audit matters.
2. Audit response
The important audit procedures we carried out in respect of related-party
transactions include:
(1) Understand and evaluate the management's internal control of recognizing
and disclosing related party relations and transactions, and review the
effectiveness of internal control design and implementation;
(2) Obtain management's statement on related party relations and their
transaction integrity, and obtain the list of related party relations provided by
management, and check against information obtained from other public
channels;
(3) Check customers, suppliers and other related parties that have business
with the company to recognize any missing of related parties. At the same time,
obtain the resolutions of the board of directors and the shareholders' meeting
relevant to the related party transactions, check the decision-making authority
and procedures of the related party transactions, and evaluate the legality and
compliance of the related party transactions and whether they have been
properly authorized and approved.
(4) Compared the sales prices of related parties with those of non-related
parties for similar products to judge the fairness of related transaction prices;
2
Da Hua Shen Zi [2020] No. 000688
(5) Obtain details of the amount and balance of related party transactions, and
check the financial vouchers corresponding to the transactions and the
attached contracts or orders, transfer orders, statements, invoices and bank
receipts of the selected samples; In addition, send notice for the amount and
balance of related transactions of important related parties.
(6) We checked TCL Technology Group Corporation's presentation and
disclosure of related parties and related-party transactions in the financial
statements;
Based on the audit work executed, we believe that the integrity of
management's disclosure of related party relationships, the authenticity of
related-party transactions and the fairness of transaction prices are
reasonable.
(II) Revenue recognition
1. Matter description
Please refer to the accounting policies as stated in 30. “Revenue recognition”
under Note III to the financial statements and 52. Operating revenue under
Note V to the financial statements. The Company’s operating revenue for the
current period was approximately RMB74.9 billion, which was a decrease of
around 34% from the previous period.
As operating revenue is one of the Company’s key operating indicators with
the hereditary risk of the management manipulating the revenue recognition
time point for the purpose of achieving a specific objective or expectation, and
the revenue recognition for the current period has a big influence on the
financial statements, we identify revenue recognition as a key audit matter.
2. Audit response
The important audit procedures we carried out in respect of revenue
recognition include:
(1) We understood and assessed whether the management’s design and
operation of key internal control in respect of revenue recognition were
effective or not;
(2) We understood and assessed whether the management’s selection and
implementation of the policies related to revenue recognition complied with the
3
Da Hua Shen Zi [2020] No. 000688
accounting standards for business enterprises;
(3) We selected samples of recorded transactions with revenue for the year
and examined relevant supporting documents involved during the transaction
process, including outbound delivery orders, customers’ receipt records, sale
invoices， customs declarations and fund receipt proofs;
(4) We selected samples of the recorded transactions with revenue around the
balance sheet data and examined outbound delivery orders and other
supporting documents to assess whether the revenue had been recorded into
the appropriate accounting period;
(5) We obtained the Company’s sale list for the year and carried out analytic
review procedures on the operating revenue to determine the reasonableness
of changes in the revenue and gross profit margin for the current period;
(6) We executed confirmation procedures with key accounts and inquired
about the sales amount and the current account balance incurred for the
current period; we carried out substitute audit procedures on the accounts with
no replies;
Based on the audit work executed, we believe that the Company’s recognition
of revenue complies with relevant requirements of the accounting standa rds
for business enterprises.
IV Other Information
The Company’s management is responsible for the other information. The
other information comprises all of the information included in the Company’s
2019 Annual Report other than the financial statements a nd our auditor’s
report thereon.
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material
4
Da Hua Shen Zi [2020] No. 000688
misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
V Responsibilities of Management and Those Charged with Governance
for Financial Statements
The Company’s management is responsible for the preparation of the financial
statements that give a fair view in accordance with CAS, and for designing,
implementing and maintaining such internal control as the management
determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for
assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the management either intends to liquidate the Company
or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company’s financial reporting process.
VI Auditor’s Responsibilities for Audit of Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with CAS will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with CAS, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
5
Da Hua Shen Zi [2020] No. 000688
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
management.
4. Conclude on the appropriateness of the management’s use of the going
concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required by CAS to
draw users’ attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves
fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Company to express
an opinion on the financial statements. We are responsible for the direction,
supervision and performance of the Company audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any noteworthy deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and
6
Da Hua Shen Zi [2020] No. 000688
communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we
determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Da Hua Certified Public Accountants Chinese CPA:
(Special General Partnership)
（ Engagement Partner）
BeijingChina
Chinese CPA:
28 March 2020
7
TCL Technology Group Corporation
Consolidated Balance Sheet
(RMB’000)
Assets: Note V 31 December 2019 31 December 2018
Current assets:
Monetary assets 1 18,648,185 26,801,343
Held-for-trading financial assets 2 6,074, 751 -
Financial assets at fair value
through profit or loss 3 - 1,137, 580
Derivative financial assets 4 159,036 -
Notes receivable 5 228,942 4,272, 222
Accounts receivable 6 8,340, 354 13,604,358
Factored accounts receivable 7 - 47,087
Prepayments 8 364,423 1,194, 972
Other receivables 9 2,750, 042 5,719, 379
Inventories 10 5,677, 963 19,887,972
Assets classified as held for
sale - 18,791
Other current assets 11 5,911, 827 7,624, 097
Total current assets 48,155,523 80,307,801
Non-current assets:
Loans and advances to
customers 12 3,637, 768 1,123, 800
Investments in debt obligations 13 20,373 -
Available-for-sale financial
assets 14 - 4,270, 845
Long-t erm equity investments 15 17,194,284 16,957,109
Investments in other debt
obligations 16 279,884 -
Other non-current financial
assets 17 2,542, 689 -
Investment property 18 82,273 1,676, 211
Fixed assets 19 45,459,070 35,983,131
Construction in progress 20 33,578,290 38,924,586
Intangible assets 21 5,684, 584 5,954, 873
R&D expense 22 1,548, 471 1,011, 504
Goodwill 23 2,452 357,112
Long-t erm prepaid ex pense 24 1,567, 691 1,861, 333
Deferred income tax assets 25 840,874 797,882
Other non-current assets 26 4,250, 659 3,537, 756
Total non-current assets 116,689,362 112,456,142
Total assets 164,844,885 192,763,943
Person-in-c
Person-in-charg harge of the
Legal e of financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
1
TCL Technology Group Corporation
Consolidated Balance Sheet (Continued)
(RMB’000)
Liabilities and shareholders’ equity: Note V 31 December 2019 31 December 2018
Current liabilities:
Short-term borrowings 27 12,069,657 13,240,637
Factorage financings 7 - 47,087
Borrowings from central bank 28 573,222 231,404
Customer deposits and interbank deposits 29 1,355,129 545,053
Held-for-trading financial liabilities at fair value
30 188,220 -
through profit or loss
Financial liabilities at fair value through profit or
31 - 212,097
loss
Derivative financial liabilities 32 84,705 -
Notes payable 33 1,720,402 3,092,574
Accounts payable 34 11,549,133 23,922,712
Ad vances from customers 35 141,749 1,460,773
Payroll payable 36 1,094,217 2,891,393
Taxes payable 37 226,806 716,534
Other payables 38 12,293,566 23,120,774
Short-term commercial papers payable 39 - 2,000,000
Current portion of non-current liabilities 40 1,691,963 6,009,915
Other current liabilities 41 69,022 1,344,451
Total current liabilities 43,057,791 78,835,404
Non-current liabilities:
Long-term borrowings 42 38,512,059 36,864,923
Bonds payable 43 16,479,085 12,985,628
Long-term payables 44 24,206 73,902
Long-term payroll payable 36 23,018 24,246
Deferred income 45 1,912,421 2,637,229
Deferred income tax liabilities 25 952,678 440,352
Other non-current liabilities 483 30,586
Total non-current liabilities 57,903,950 53,056,866
Total liabilities 100,961,741 131,892,270
Share capital 46 13,528,439 13,549,649
Capital reserves 47 5,716,667 5,996,741
Less: Treasury stock 48 1,952,957 63,458
Other comprehensive income 68 (534,082) (1,174,162)
Surplus reserves 49 2,238,368 2,184,261
General reserve 50 361 361
Retained earnings 51 11,115,150 10,000,973
Total equity attributable to shareholders of the
Company as the parent 30,111,946 30,494,365
Non-controlling interests 33,771,198 30,377,308
Total shareholders’ equity 63,883,144 60,871,673
Total liabilities and shareholders’ equity 164,844,885 192,763,943
Person-in
-charge Person-in-ch
of arge of the
Legal financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
2
TCL Technology Group Corporation
Consolidated Income Statement
(RMB’000)
Note V 2019 2018
1. Revenue 75,077,806 113,447,438
Including: Operating revenue 52 74,933,086 113,360,076
Interest income 53 144,720 87,362
Less: Cost of sales 52 66,337,117 92,605,589
Interest expense 53 17,230 72,248
Taxes and surcharges 54 330,588 661,262
Selling expense 55 2,857,489 8,887,021
Administrative expense 56 1,895,088 4,299,607
R&D expense 57 3,396,805 4,677,579
Finance costs 58 1,248,801 973,261
Including: Interest expense 1,958,251 1,782,408
Interest income 401,645 621,949
Add: Other income 59 1,900,636 2,218,718
Return on investment 60 3,442,554 2,167,254
Including: Share of profit or loss of joint ventures and associates 1,657,471 1,360,268
Foreign exchange gain 53 (12,499) (47,714)
Gain on changes in fair value 61 473,673 (3,879)
Less: Credit impairment loss 62 32,258 -
Asset impairment loss 63 791,112 1,523,119
Add: Asset disposal income 64 1,157 10,071
2. Operating profit 3,976,839 4,092,202
Add: Non-operating income 65 128,609 956,809
Less: Non-operating expense 66 49,645 104,631
3. Profit before tax 4,055,803 4,944,380
Less: Income tax expense 67 398,069 879,182
4. Net profit 3,657,734 4,065,198
4.1 By operational continuity
Net profit from continuing operations 2,325,647 3,553,189
Net profit from discontinued operations 1,332,087 512,009
4.2 By ownership
Net profit attributable to owners of the Company as the parent 2,617,765 3,468,211
Net profit attributable to non-controlling interests 1,039,969 596,987
5. Other comprehensive income, net of tax 68 488,805 (1,663,194)
5.1 Other comprehensive income that will not be reclassified to profit
27,642 -
or loss
5.2 Other comprehensive income that may subsequently be
461,163 (1,663,194)
reclassified to profit or loss
6. Total comprehensive income 4,146,539 2,402,004
Attributable to shareholders of the Company as the parent 2,922,896 2,074,777
Attributable to non-controlling interests 1,223,643 327,227
7. Earnings per share 69
7.1 Basic earnings per share (RMB yuan/share) 0.1986 0.2566
7.2 Diluted earnings per share (RMB yuan/share) 0.1935 0.2562
Person-in-charg
Person-in-charge of e of the financial
Legal representative: Li Dongsheng financial affairs： Du Juan department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
3
TCL Technology Group Corporation
Consolidated Cash Flow Statement
(RMB’000)
Note V 2019 2018
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services 78,966,837 123,443,026
Net increase/(decrease) in customer deposits and interbank deposits 810,076 234,178
Net increase/(decrease) in borrowings from central bank 341,818 191,407
Interest, handling charges and commissions received 144,720 88,208
Tax rebates 3,671,801 4,003,111
Cash generated from other operating activities 70 2,329,643 2,141,672
Subtotal of cash generated from operating activities 86,264,895 130,101,602
Payments for commodities and services (58,275,622) (90,509,473)
Net increase/(decrease) in loans and advances to customers (4,468,399) (1,068,789)
Net increase/(decrease) in deposits in central bank and in interbank loans
297,896 3,076,532
granted
Cash paid to and for employees (4,257,331) (10,174,024)
Taxes paid (4,291,276) (5,000,449)
Cash used in other operating activities 71 (3,780,067) (15,938,820)
Subtotal of cash used in operating activities (74,774,799) (119,615,023)
Net cash generated from/used in operating activities 73 11,490,096 10,486,579
2. Cash flows from investing activities:
Proceeds from disinvestment 26,240,545 58,385,497
Return on investment 814,671 1,309,354
Net proceeds from disposal of fixed asset s, intangible asset s and other
92,802 81,287
long-lived asset s
891,326 281,174
Net proceeds from disposal of subsidiaries or other business units
Cash generated from other investing activities - 1,562
Subtotal of cash generated from investing activities 28,039,344 60,058,874
Payments for acquisition of fixed asset s, intangible asset s and other
(20,116,210) (32,798,364)
long-lived asset s
Payments for investments (29,519,049) (55,491,053)
Net payments for acquisition of subsidiaries and other business units (170,198) -
Cash used in other investing activities (9,965,596) -
Subtotal of cash used in investing activities (59,771,053) (88,289,417)
Net cash generated from/used in investing activities (31,731,709) (28,230,543)
Person-in-ch
arge of the
Person-in-charge of financial
Legal representative: Li Dongsheng financial affairs ： Du Juan department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
4
TCL Technology Group Corporation
Consolidated Cash Flow Statement
(RMB’000)
Note V 2019 2018
3. Cash flows from financing activities:
Capital contributions received 7,531,053 7,759,258
Including: Capital contributions by non-controlling
7,523,844 7,695,800
interests to subsidiaries
Borrowings obtained 36,378,744 50,564,652
Net proceeds from issuance of bonds 4,000,000 5,000,000
Subtotal of cash generated from financing activities 47,909,797 63,323,910
Repayment of borrowings (29,273,623) (38,554,966)
Payments for interest and dividends (4,334,741) (4,144,148)
Including: Dividends paid by subsidiaries to
(99,073) (411,272)
non-controlling interests
Cash used in other financing activities 72 (2,350,627) (584,974)
Subtotal of cash used in financing activities (35,958,991) (43,284,088)
Net cash generated from/used in financing activities 11,950,806 20,039,822
4. Effect of foreign exchange rate changes on cash and
226,166 125,357
cash equivalents
5. Net increase in cash and cash equivalents (8,064,641) 2,421,215
Add: Cash and cash equivalents, beginning of the period 25,702,384 23,281,169
6. Cash and cash equivalents, end of the period 74 17,637,743 25,702,384
Person-in-c
Person-in-charge harge of the
Legal of financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
5
TCL Technology Group Corporation
Consolidated Statement of Changes in Shareholders’ Equity
(RMB’000)
2019
Equity attributable to shareholders of the Company as the parent
Total
Non-controllin
Share Capital Treasury
Other
Surplus General Retained shareholders’
comprehensi g interests
capital reserves stock reserves reserve earnings equity
ve income
1. Balances as at end of 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: Adjustments for changed
accounting policies - - - 334,950 - - (106,833) (994) 227,123
2. Balances as at 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
(21,210) (280,074) (1,889,499) 305,130 54,107 - 1,221,010 3,394,884 2,784,348
3. Increase/decrease in the period
- - - 299,561 - - 2,617,765 1,223,644 4,140,970
3.1 Total comprehensive income
3.2 Capital increased and reduced by 56,535
shareholders (21,210) (280,074) (1,889,499) - - - - 2,247,318
3.2.1 Capital increased by shareholders - - - - - - - 7,327,174 7,327,174
3.2.2 Share-based payments included in
shareholders’ equity (21,210) (8,061) (81,962) - - - - - (111,233)
- (272,013) (1,807,537) - - - - (5,079,856) (7,159,406)
3.2.3 Other
- - - - 54,107 - (1,391,186) (76,078) (1,413,157)
3.3 Profit distribution
3.3.1 Appropriation to surplus reserves - - - - 52,832 - (52,832) (16,923) (16,923)
- - - - - - (1,337,079) (59,155) (1,396,234)
3.3.2 Appropriation to shareholders
- - - - 1,275 - (1,275) - -
3.3.3 Other
3.4 Transfers within owners’ equity - - - 5,569 - - (5,569) - -
3.4.1 Other comprehensive income 5,569 - (5,569) -
transferred to retained earnings - - - - -
- - - - - - - - -
3.4.2 Other
4. Balances as at 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
Person-in-charge of financial Person-in-charge of the fina
Legal representative: Li Dongsheng affairs: Du Juan ncial department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
6
TCL Technology Group Corporation
Consolidated Statement of Changes in Shareholders’ Equity (Continued)
(RMB’000)
2018
Equity attributable to shareholders of the Company as the parent Total
Non-controllin shareholders
Share Capital Treasury Other Surplus General Retained g interests ’ equity
capital reserves stock comprehensiv reserves reserve earnings
e income
1. Balances as at end of prior year 13,514,972 5,940,471 - 219,272 1,494,300 361 8,577,688 24,395,872 54,142,936
2. Balances as of beginning of the year 13,514,972 5,940,471 - 219,272 1,494,300 361 8,577,688 24,395,872 54,142,936
3. Increase/decrease in the period 34,677 56,270 (63,458) (1,393,434) 689,961 - 1,423,285 5,981,436 6,728,737
3.1 Total comprehensive income - - - (1,393,434) - - 3,468,211 327,227 2,402,004
3.2 Capital increased and reduced by
shareholders 34,677 56,270 (63,458) - - - - 7,127,793 7,155,282
3.2.1 Capital increased by shareholders - - - - - - - 7,127,793 7,127,793
3.2.2 Share-based payments included in
shareholders’ equity 34,677 28,781 (63,458) - - - - - -
3.2.3 Other - 27,489 - - - - - - 27,489
3.3 Profit distribution - - - - 689,961 - (2,044,926) (1,473,584) (2,828,549)
3.3.1 Appropriation to surplus reserves - - - - 689,961 - (689,961) - -
3.3.2 Appropriation to shareholders - - - - - - (1,354,965) (1,109,311) (2,464,276)
3.3.3 Other - - - - - - - (364,273) (364,273)
4. Balances as at end of the period 13,549,649 5,996,741 (63,458) (1,174,162) 2,184,261 361 10,000,973 30,377,308 60,871,673
Person-in-charge of financial Person-in-charge of the
Legal representative: Li Dongsheng affairs: Du Juan financial department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
7
TCL Technology Group Corporation
Balance Sheet of the Company as the Parent
(RMB’000)
Assets: Note XIV 31 December 2019 31 December 2018
Current assets:
Monetary assets 3,966, 899 1,328, 707
Held-for-trading financial
2,969, 106 -
assets
Financial assets at fair value
- 711,741
through profit or loss
Notes rec eivable 22,514 20,497
Accounts receivable 1 445,090 194,959
Prepayments 97,127 187,895
Other receivables 2 17,129,473 18,773,353
Inventories 14,869 826
Other current assets 6,471 1,873, 962
Total current assets 24,651,549 23,091,940
Non-current assets:
A vailable-for-sale financial
3 - 1,185, 430
assets
Long-term equity investments 4 39,297,272 41,803,450
Investments in other equity
5 15,000 -
instruments
Other non-current financial
1,540, 913 -
assets
Investment property 92,623 5,158
Fixed assets 54,238 40,058
Construction in progress 1,241 552
Intangible assets 19,145 18,776
Long-term prepaid expense 454,969 461,056
Total non-current assets 41,475,401 43,514,480
Total assets 66,126,950 66,606,420
Person-in-
charge of
the
Person-in-charg financial
Legal e of financial departmen
representative: Li Dongsheng affairs ： Du Juan t: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
8
TCL Technology Group Corporation
Balance Sheet of the Company as the Parent (Continued)
(RMB’000)
Note XIV 31 December 2019 31 December 2018
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings 6,484, 481 3,300, 260
Derivative financial liabilities 5,981 -
Notes payable 30,283 123,708
Accounts payable 424,225 252,801
Ad vances from customers 17,471 38,615
Payroll payable 125,095 98,753
Taxes payable 10,355 3,437
Other payables 9,347, 608 6,407, 742
Short-term commercial papers payable - 2,000, 000
Current portion of non-current liabilities 847,327 3,000, 003
Total current liabilities 17,292,826 15,225,319
Non-current liabilities:
Long-term borrowings 2,110, 000 5,340, 956
Bonds payable 16,479,085 12,985,628
Long-term payables - 700
Long-term payroll payable 23,018 24,246
Deferred income 51,562 51,506
Total non-current liabilities 18,663,665 18,403,036
Total liabilities 35,956,491 33,628,355
Share capital 13,528,439 13,549,649
Capital reserves 8,382, 776 8,565, 338
Less: Treasury stock 1,952, 957 63,458
Other comprehensive income 56,064 (24,870)
Surplus reserves 2,036, 304 1,982, 197
Retained earnings 8,119, 833 8,969, 209
Total shareholders’ equity 30,170,459 32,978,065
Total liabilities and shareholders’ equity 66,126,950 66,606,420
Person-in-c
Person-in-charge harge of the
Legal of financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
9
TCL Technology Group Corporation
Income Statement of the Company as the Parent
(RMB’000)
Note XIV 2019 2018
1. Operating revenue 6 1,730, 187 2,055, 950
Less: Cost of sales 6 1,482, 346 1,854, 623
Taxes and surcharges 11,972 6,951
Selling expense 29,931 29,160
Administrative expense 354,036 368,820
R&D expense 160,796 123,609
Finance costs 917,158 634,124
Including: Interest expense 1,383, 429 1,330, 315
Interest income 502,967 652,821
Add: Other income 6,395 8,000
Return on investment 7 1,379, 544 7,126, 393
Including: Share of profit or loss of joint
7 1,149, 694 931,721
ventures and associates
Gain on changes in fair value 39,986 (54,003)
Less: Credit impairment loss (1,542) -
Asset impairment loss - 41,872
Add: Asset disposal income 256,615 22,238
2. Operating profit 458,030 6,099, 419
Add: Non-operating income 80,181 809,277
Less: Non-operating expense 9,893 9,092
3. Profit before tax 528,318 6,899, 604
Less: Income tax expense - -
4. Net profit 528,318 6,899, 604
5. Other comprehensive inc ome 81,669 (11,225)
6. Total comprehensive income 609,987 6,888, 379
Person-in-
charge of
the
Person-in-char financial
Legal ge of financial departmen
representative: Li Dongsheng affairs ： Du Juan t: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
10
TCL Technology Group Corporation
Cash Flow Statement of the Company as the Parent
(RMB’000)
Note
XIV 2019 2018
1. Cash flows from operating activities:
Proceeds from sale of commodities and
rendering of services 1,489,327 2,346,705
Cash generated from other operating
activities 8,110,950 2,001,412
Subtotal of cash generated from operating
activities 9,600,277 4,348,117
Payments for commodities and services (1,440,521) (2,442,452)
Cash paid to and for employees (153,043) (179,932)
Taxes paid (73,633) (35,117)
Cash used in other operating activities (3,089,974) (6,590,572)
Subtotal of cash used in operating activities (4,757,171) (9,248,073)
Net cash generated from/used in operating
8
activities 4,843,106 (4,899,956)
2. Cash flows from investing activities:
Proceeds from disinvestment 16,562,819 48,308,442
Return on investment 656,095 5,314,308
Net proceeds from disposal of fixed assets,
intangible assets and other long-lived 143 242,768
assets
Subtotal of cash generated from investing
activities 17,219,057 53,865,518
Payments for acquisition of fixed assets,
intangible assets and other long-lived
assets (5,926) (11,466)
Payments for investments (13,939,067) (50,693,136)
Subtotal of cash used in investing activities (13,944,993) (50,704,602)
Net cash generated from/used in investing
activities 3,274,064 3,160,916
Person-in-c
Person-in-charg harge of the
Legal e of financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
11
TCL Technology Group Corporation
Cash Flow Statement of the Company as the Parent (Continued)
(RMB’000)
Note XIV 2019 2018
3. Cash flows from financing activities:
Capital contributions received 7,209 63,458
Borrowings obtained 11,437,982 9,771, 712
Net proceeds from issuance of bonds 4,000, 000 5,000, 000
Subtotal of cash generated from financing
activities 15,445,191 14,835,170
Repayment of borrowings (16,491,912) (10,569,652)
Payments for interest and dividends (2,394,239) (2,364,333)
Cash used in other financing activities (2,037,236) (2,937)
Subtotal of cash used in financing activities (20,923,387) (12,936,922)
Net cash generated from/used in financing
activities (5,478,196) 1,898, 248
4. Effect of foreign exchange rate changes on cash
and cash equivalents (26,563) 62,974
5. Net increase in cash and cash equivalents 2,612, 411 222,182
Add: Cash and cash equivalents, beginning of the
period 1,328, 679 1,106, 497
6. Cash and cash equivalents, end of the period 9 3,941, 090 1,328, 679
Person-in-c
Person-in-charg harge of the
Legal e of financial financial
representative: Li Dongsheng affairs ： Du Juan department: Xi Wenbo
The attached notes to the financial statements form an integral part of the financial statements.
12
TCL Technology Group Corporation
Statement of Changes in Shareholders’ Equity of the Company as the Parent
(RMB’000)
2019
Other
Total
Share Capital Treasury compreh Surplus Retained
shareholders’
capital reserves stock ensive reserves earnings
equity
income
1. Balances as of end of prior year 13,549,649 8,565,338 (63,458) (24,870) 1,982,197 8,969,209 32,978,065
Add: Adjustments for changed accounting policies - - - (739) - 739 -
2. Balances as of 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
(21,210) (8,061) (81,962) - - - (111,233)
shareholders’ equity
3.2.2 Other - (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 Other - - - - 1,275 11,478 12,753
4. Balances as at end of the period 13,528,439 8,382,776 (1,952,957) 56,064 2,036,304 8,119,833 30,170,459
Person-in-charge of t
Legal Person-in-charge of he financial departm
representative: Li Dongsheng financial affairs: Du Juan ent: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements.
13
TCL Technology Group Corporation
Statement of Changes in Shareholders’ Equity of the Company as the Parent (Continued)
(RMB’000)
2018
Other Total
Share Capital Treasury Surplus Retained
comprehensi shareholders’
capital reserves stock reserves earnings
ve income equity
1. Balances as of end of prior year 13,514,972 8,476,523 - (13,645) 1,292,236 4,114,531 27,384,617
2. Balances as of beginning of the year 13,514,972 8,476,523 - (13,645) 1,292,236 4,114,531 27,384,617
3. Increase/decrease in the period 34,677 88,815 (63,458) (11,225) 689,961 4,854,678 5,593,448
3.1 Total comprehensive income - - - (11,225) - 6,899,604 6,888,379
3.2 Capital increased and reduced by shareholders 34,677 88,815 (63,458) - - - 60,034
3.2.1 Capital increased by shareholders - - - - - - -
3.2.2 Share-based payments included in
34,677 28,781 (63,458) - - - -
shareholders’ equity
3.2.3 Other - 60,034 - - - - 60,034
3.3 Profit distribution - - - - 689,961 (2,044,926) (1,354,965)
3.3.1 Appropriation to surplus reserves - - - - 689,961 (689,961) -
3.3.2 Appropriation to shareholders - - - - - (1,354,965) (1,354,965)
4. Balances as at end of the period 13,549,649 8,565,338 (63,458) (24,870) 1,982,197 8,969,209 32,978,065
Person-in-charge of
Legal Person-in-charge of the financial depart
representative: Li Dongsheng financial affairs: Du Juan ment: Xi Wenbo
The attached not es to the financial statements form an integral part of the financial statements
14
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
I General information
(I) Place of incorporation and 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
15
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
16
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
I General information (continued)
(I) Place of incorporation and 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 7 th
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.
The Proposal on the Intended Change of the Company’s Full Name and Stock Name was
approved respectively at the 23 rd Meeting of the 6th Board of Directors and the First
Extraordinary General Meeting of 2020 held in January and February 2020. As such, the
name of the Company has been changed from “TCL Corporation” to “TCL Technology
Group Corporation”.
As at 31 December 2019, the total issued share capital of the Company were
13,528,438,719 shares. Please refer to Note V, 46 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.
17
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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 crys tal 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 28 March 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.
18
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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 o f 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.
19
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
Accounting treatments for business combinations involving enterprises under and not under
7
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 f ollowing, accounting for multiple
transactions is treated as a package transaction:
These transactions are made simultaneously or with consideration of influence on each
(a)
other;
These transactions can only achieve a complete business outcome when treated as a
(b)
whole;
The occurrence of a transaction depends on the occurrence of at least one of the other
(c)
transactions;
A transaction is uneconomical when treated alone, but is economical when considered
(d)
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.
20
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
Accounting treatments for business combinations involving enterprises under and not under
7
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.
21
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
22
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
Accounting treatments for business combinations involving enterprises under and not under
7
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 valu e 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
23
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
24
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
25
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
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.
26
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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 available for sale, 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.
27
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
11 Financial instruments (applicable only for 2018)
Financial instruments include financial assets, financial liabilities and equity instruments.
(1) Classification of financial instrument
The Company classifies financial assets and liabilities at initial recognition based on the
contractual terms of the financial instruments issued and the economic substance they
reflect but not only the legal form, in combination with the purpose of the acquisition of
financial assets and liabilities, to the following categories: financial assets (or financial
liabilities) that are measured at fair value and whose changes are included in current profit
and loss; held-to-maturity investments; receivables; available-for-sale financial assets.
(2) Recognition basis and measurement method of financial instruments
Financial assets and financial liabilities are measured at fair value on initial recognition. For
financial assets or liabilities that are measured at fair value and whose changes are
included in the current profits or losses, transaction expenses are directly recognized in the
current profit and loss. For other financial assets or liabilities, transaction expenses are
included in the initial recognition amount.
The Company conducts subsequent measurement of financial assets at fair value, and
does not deduct the transaction costs that may occur in the future disposal of the financial
assets, except for the following cases: held-to-maturity investments and loans and
receivables are measured at amortized cost by the effective interest method; and derivative
financial assets that are linked to, and required to be settled by the delivery of, equity
instruments not quoted in an active market with a fair value that cannot be measured in a
reliable way, are measured at costs.
The Company conducts subsequent measurement of financial liabilities at amortized costs
by the effective interest method, except for the following cases: financial liabilities that are
measured at fair value and whose changes are included in the current profit and loss are
measured at fair value; and derivative financial liabilities that are linked to, and required to
be settled by the delivery of, equity instruments not quoted in an active market with a fair
value that cannot be measured in a reliable way, are measured at costs.
(3) Recognition basis and measurement method of financial asset transfer
The transfer of financial assets means that the Company transfers or delivers the financial
assets to the other party (the transferred party) other than the issuer of the financial assets.
If the Company has transferred almost all the risks and rewards of the financial asset
ownership to the transferred party, the recognition of the financial assets will be terminated,
while if the Company retains almost all the risks and rewards of the financial asset
ownership, the recognition of the financial assets will not be terminated.
Where the transfer of financial assets meets the conditions for termination of recognition,
based on the consideration received for the transfer, the difference between the sum of
accumulated changes in the fair value originally recorded in the owner's equity (in the case
where the transferred financial assets are available for sale) and the book value of
transferred financial assets is included in the current profit and loss. If the transfer of
28
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
financial assets does not meet the conditions for termination of recognition, the Company
will keep the recognition of the transferred financial assets and recognize the consideration
received as a financial liability.
29
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
11 Financial instruments (continued)
(4) Conditions for the derecognition of financial liabilities
If all or part of the current obligations of a financial liability has been discharged, recognition
of the financial liability or part of it is terminated; if the Company signs an agreement with
the creditor to replace the existing financial liabilities with new ones, and the terms of the
contract of new financial liabilities are substantially different from the existing ones, the
recognition of existing financial liabilities is terminated and the new financial liabilities are
recognized.
If substantial changes are made to all or part of the contractual terms of existing financial
liabilities, the recognition of existing financial liabilities or the part thereof will be terminated,
and the financial liabilities with modified new terms will be recognized as a new financial
liability. When the recognition of a financial liability is terminated in whole or in part, the
difference between the book value of the financial liability with recognition terminated and
the consideration paid (including the transferred non-cash assets or new financial liabilities
assumed) will be included in the current profit and loss.
If the Company repurchases part of the financial liabilities, the book value of the financial
liabilities as a whole is allocated on the repurchase date based on the relative fair value of
the portion continue to be recognized and the portion terminated to be recognized. The
difference between the book value assigned to the portion terminated to be recognized and
the consideration paid (including the transferred non-cash assets or new financial liabilities
assumed) is included in the current profit and loss.
(5) Methods for determining the fair value of financial assets and financial liabilities
The Company determines the fair value of financial instruments with active markets by the
quoted prices in active markets. For financial instruments without active market, the
Company determines the fair value by valuation techniques. In the valuation, the Company
adopts valuation techniques that are applicable under current circumstances and that are
with sufficient available data and other information, and selects input values that are
consistent with the asset or liability characteristics considered by market participants in the
transactions of related assets or liabilities, and tries the best to give priority to relevant
observable input values. Non-observable input values are used in the cases that the
relevant observable input values are not available or are not practicable.
(6) Impairment of financial assets
On the balance sheet date, the Company checks the book value of financial assets other
than the ones measured at fair value and whose changes are included in the current profit
and loss. In case that objective evidence of impairment of the financial assets is found, the
impairment loss is recognized and allowance for impairment is made.
(a) Measurement of impairment losses on held-to-maturity investments, loans and receivables
If impairment of a financial assets measured at amortized cost, such as held-to-maturity
investments and loans, occurs, the Company recognizes the difference between the
present value of the future cash flows of the financial asset and the book value as th e
impairment loss, which is included in the current profit and loss. The expected present value
30
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
of future cash flows is determined by discounting the original real interest rate of the
financial asset, taking into account the value of the relevant collateral.
The Company conducts separate impairment tests on financial assets with significant single
amount. In case that objective evidence of impairment of a financial asset is found, the
impairment loss is recognized and included in the current profit and loss. Financial assets
with insignificant single amount may be tested individually for impairment or tested in a
combination of financial assets with similar credit risk characteristics together with financial
assets without impairment after being separately tested.
31
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
11 Financial instruments (continued)
(6) Impairment of financial assets (continued)
For the impairment loss recognized on the financial assets measured at amortized cost, if
there is objective evidence that the value of the financial assets has recovered and is
objectively related to the events occurring after the recognition of the loss, the previously
recognized impairment loss is reversed and included in the current profit and loss.
The measurement of impairment losses on receivables is described in the allowance
policies for doubtful accounts.
(b) Measurement of impairment losses on available-for-sale financial assets
The Company conducts a separate inspection of each available-for-sale equity instrument
investment on the balance sheet date. If the fair value of the equity instrument invested on
the balance sheet date is less than 50% of its initial investment cost (including 50%) or less
than its initial investment cost over one year (including one year), it indicates that the
investment is impaired; if the fair value of the equity instrument invested on the balance
sheet date is less than its initial investment cost by more than 20% (including 20%) but has
not yet reached 50%, the Company will consider other relevant factors, such as price
volatility, to determine whether the equity instrument investment is impaired.
In the event that the financial assets available for sale are impaired, even if the recognition
of financial assets is not terminated, the Company transfers the accumulated loss resulting
from the decline of fair value, which was directly included in other comprehensive income
originally, from other comprehensive income to the current profit and loss. The accumulated
loss transferred is equal to the balance of the initial acquisition cost of the financial assets
available for sale after deducting the recovered principal and the amortized amount, the
current fair value and the impairment losses already recorded in the profit and loss.
For equity instrument investments that are not quoted in active markets and whose fair
value cannot be reliably measured, or derivative financial assets that are linked to the equity
instruments and required to be settled by delivery of the equity instruments, the Company
recognizes their impairment as impairment losses based on the difference between the
present value of future cash flow of the financial asset and its book value, and include the
impairment losses in the current profit and loss. The impairment losses incurred on these
assets are not reversed in subsequent accounting periods.
For available-for-sale debt instruments that have been recognized for impairment loss, if the
fair value increases in the subsequent accounting period and is objectively related to events
that occur after the original impairment losses have been recognized, the previously
recognized impairment losses are transferred back to the current profit and loss; the
impairment losses on available-for-sale equity instruments are reversed through equity
when the value of the equity instruments recovers; but for impairment losses on equity
instruments that are not quoted in active markets and whose fair value cannot be measured
in a reliably way, or derivative financial assets that are linked to, and required to be settled
by delivery of the equity instruments, are not reversed.
32
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 Financial instruments (applicable from January 1, 2019)
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 measured at amortized cost.
Financial assets measured at fair value and whose changes are included in other
(b)
comprehensive income.
Financial assets measured at fair value and whose changes are included in the current
(c)
profit and 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.
33
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
(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.
34
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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.
Financial assets classified as measured at fair value and whose changes are included in
(b)
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 ass et 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.
Financial assets designated as measured at fair value and whose changes are included in
(c)
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.
35
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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 investm ent 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.
36
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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).
Financial assets classified as measured at fair value and whose changes are included in the
(d)
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.
Financial assets designated as measured at fair value and whose changes are included in
(e)
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.
37
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
The Company reports such financial assets as trading financial assets and other
non-current financial assets according to their liquidity.
38
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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:
Financial liabilities measured at fair value and whose changes are included in the current
(a)
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
39
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
changes in fair value (including the amount affected by changes in its own credit risk) in
current profits and losses.
40
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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
41
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
42
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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:
If almost all the risks and rewards of the financial asset ownership are transferred, such
(a) 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 almost all the risks and rewards of the financial asset ownership are retained, such
(b)
financial asset shall continue to be recognized.
In circumstances when the Company neither transfers nor retains almost all the risks and
(c) 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.
If the overall transfer of financial assets meets the conditions for derecognition, the
(a) 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).
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
(b) 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:
43
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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).
44
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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.
Financial assets initially acquired or derived or financial liabilities assumed shall be
determined on the basis of market transaction price.
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.
45
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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 d ate, 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 los s and
its changes respectively according to the following circumstances on each balance sheet
date:
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
(a)
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.
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
(b) 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.
If the financial instrument is credit-impaired since its initial recognition, it is in the third stage,
(c) 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
46
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
47
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
Important Accounting Policies and Accounting Estimates (Continued)
III
12 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.
48
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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
49
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
50
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
12 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:
The Company has the legal right, which is currently enforceable, to offset the confirmed
(a)
amount;
The Company plans to settle on a net basis, or realize the financial assets and settle the
(b)
financial liabilities at the same time.
51
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Important Accounting Policies and Accounting Estimates (Continued)
Recognition standard and accrual method of provision for bad debt for receivables
13
(applicable before December 31, 2018)
Receivables refer to non-derivative financial assets that are not quoted in an active market,
but have fixed or fixable recovery amount.
The recognition standard and accrual method of the company's provision for bad debt for
receivables in 2018 are shown as follows: the Company adopts the allowance method to
account for bad debt losses for receivables.
(1) Recognition standard of provision for bad debt for receivables
On the balance sheet date, the Company checks the book value of receivables. In case that
objective evidence shows that receivables are impaired, impairment losses shall be
confirmed and impairment reserves shall be accrued. It indicates that the receivables show
signs of impairment when one of the following circumstances occurs:
(a) The debtor is stuck in serious financial difficulties;
The debtor's violation of the contract terms, breach of the contract or overdue performance
(b)
of its duty of debt repayment;
Considering economic or legal factors, the creditor makes concessions to the debtor who is
(c)
in financial difficulties;
(d) There is a great possibility of bankruptcy or other financial restructuring of the debtor;
(e) There is other objective evidence that shows impairment of receivables.
(2) Recognition criteria of bad debts
The debtor goes bankrupt or dies, but still cannot recover the receivables after his bankrupt
(a)
property or estate is paid off;
(b) The debtor fails to fulfill its debt-paying obligations within the time limit, which obviously
indicates that the receivable cannot be recovered or the possibility of recovery is extremely
small.
If it is determined that the receivables cannot be recovered, the receivables shall be written
off as bad debts after being reported to and approved by the board of directors.
(3) Method of provision for bad debts
For receivables with significant single amount, the Company will conduct impairment test
separately. If objective evidence shows that the receivables have been impaired, the
Company will recognize impairment losses and accrue bad debt reserves according to the
difference between the present value of its future cash flow and its book value. For
receivables with insignificant single amount, impairment test can be carried out separately,
or they can be divided into several combinations according to similar credit risk
characteristics together with receivables that have not suffered impairment through
separate test, and then impairment losses can be calculated and determined according to a
52
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
certain proportion of the balance of receivables combination on the balance sheet date, and
bad debt reserves can be accrued. The calculation and determination of bad debt reserves
shall be based on a certain proportion of the balance of the receivables portfolio, and shall
fully reflect the actual impairment losses incurred by each item. The determination of the
accrual proportion shall be based on the actual loss rate of such portfolio and reasonably
determined in combination with the current situation. The Company and its subsidiaries
shall determine similar credit risk characteristic combinations according to actual conditions,
including but not limited to industry distribution, regional distribution, overdue status and
aging, etc. If the Company cannot reasonably determine the combination of similar credit
risk characteristics, impairment test shall be conducted separately.
53
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
Important Accounting Policies and Accounting Estimates (Continued)
III
14 Notes receivable (applicable since January 1, 2019)
For the determination method and accounting treatment method of the Company's
expected credit loss on bills receivable, please refer to 12(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
bills receivable into several combinations according to the characteristics of credit risk, and
calculates expected credit loss on the basis of combinations.
15 Accounts receivable (applicable since January 1, 2019)
For the determination method and accounting treatment method of the Company's
expected credit loss on accounts receivable, please refer to 12(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)
16 Other receivables (applicable since January 1, 2019)
For the determination method and accounting treatment method of the Company's
expected credit loss of other receivables, please refer to 12(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.
17 Inventories
(1) Classification of inventories
The Company classifies inventories into raw materials, in-process products, development
54
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
55
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
17 Inventories (continued)
Basis for determining the net realizable value of inventories and accrual method for
(3)
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.
56
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
18 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
57
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
58
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
18 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.
59
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
60
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
18 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: :
61
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
(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.
62
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
18 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.
19 Investment property
63
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
64
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
20 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;
The Company has the option to purchase the asset, and the purchase price is much lower
(b)
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;
The present value of the minimum lease payments on the lease start date is not significantly
(d)
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.
65
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
20 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:
Annual
Estimated Service
Asset Category Depreciation
Life
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.
21 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.
66
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
22 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;
The acquisition, construction or production activities necessary to enable the assets to be
(3)
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.
67
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
68
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
23 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
The shorter of the years of the land use rights and the
Land use rights
operating years of the Company
Patents and non-patent 10 years or the shorter of service life, beneficiary years and
technologies legally valid years
Software usage fee Beneficiary period
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;
Expenditures attributable to the development stage of the intangible asset can be measured
(5)
in a reliable way.
If the above conditions cannot be all satisfied, the expenditures are included in the current
profit and loss when incurred.
69
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
24 Long-term prepaid expenses
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.
25 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.
26 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.
70
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
27 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;
The fulfillment of the obligation is likely to cause economic benefits to flow out of the
(b)
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.
71
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
28 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.
72
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
29 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.
30 Revenue recognition
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
73
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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 actual interest rate of the Company's monetary
funds used by others.
74
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
30 Revenue recognition (continued)
(5) User fee income
Accounted for according to the time and method of charging as stipulated in the relevant
contract or agreement.
31 Government subsidies
(1) Category
Government subsidies are transfers of monetary or non-monetary assets from the
government to the Group at nil consideration. According to the subsidy targets stipulated in
the relevant government documents, government subsidies are classified into government
subsidies related to assets and government subsidies related to income.
(2) Recognition of government subsidies
If a government subsidy is a monetary asset, it is measured at the amount received or
receivable. If a government subsidy 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 subsidies measured at nominal amounts are recognized directly in
the current profit and loss.
(3) Accounting treatment
Government subsidies related to assets offset the book value of the underlying assets.
If the government subsidies 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 subsidies 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 subsidies related to the daily activities of the enterprise, the R&D and
VAT-related subsidies are included in other income; other government subsidies offset
related costs according to the nature of economic activities. Government subsidies 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 subsidy funds to the Company, the subsidies
offset the related borrowing costs.
In case that a confirmed government subsidy 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.
75
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
32 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;
Income tax related to transactions or events directly included in shareholders' equity is
(2)
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:
The transaction is not a business combination, and does not affect the accounting profits or
(1)
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.
76
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
33 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.
34 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.
35 Discontinued operations
77
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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.
78
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
36 Changes to major accounting policies and estimates
(1) Changes to accounting policies
The Company has adopted since 1 January 2019 the revised versions of certain
accounting standards (revised by the Ministry of Finance in 2017), namely, the
Accounting Standard No. 22 for Business Enterprises—Recognition and Measurement of
Financial Instruments, the Accounting Standard No. 23 for Business
Enterprises—Transfer of Financial Assets, the Accounting Standard No. 24 for Business
(a)
Enterprises—Hedge Accounting, and the Accounting Standard No. 37 for Business
Enterprises—Presentation of Financial Instruments (together, the “New Accounting
Standards for Financial Instruments”). For details of the changed accounting policies,
please refer to Item 12 in Note III to the financial statements in the full version of this
report.
For the financial instruments recognized and measured before 1 January 2019 in a way
that is inconsistent with the New Accounting Standards for Financial Instruments, the
Company makes transitional adjustments according to the new standards. And the
Company does not restate the comparable financial data of the previous period that is
inconsistent with the New Accounting Standards for Financial Instruments. The difference
between the original carrying amount of a financial instrument and the new carrying
amount on the date of the adoption of the New Accounting Standards for Financial
Instruments is recorded in the retained earnings or other comprehensive income as at 1
January 2019.
The effects of the adoption of the New Accounting Standards for Financial Instruments on
the presentation of the balance sheet items as at 1 January 2019 are as follows:
Carrying amount as per Carrying amount as per
the old accounting the New Accounting
Item Change
standards for financial Standards for Financial
instruments Instruments
Held-for-trading financial assets - 2,438,866 2,438,866
Financial assets at fair value through 1,137,580 (1,137,580) -
profit or loss
Derivative financial assets - 391,558 391,558
Notes and accounts receivable 17,876,580 (17,876,580) -
Notes receiv able - 4,272,222 4,272,222
Accounts receiv able - 13,600,479 13,600,479
Other receivables 5,719,379 (3,196) 5,716,183
Other current assets 7,624,097 627,123 8,251,220
Loans and advances to customers 1,123,800 (627,123) 496,677
Available-for-sale financial assets 4,270,845 (4,270,845) -
Long-term equity investments 16,957,109 160,827 17,117,936
Investments in other equity instruments - 488,457 488,457
Other non-current financial assets - 2,163,735 2,163,735
Financial liabilities at fair value through
profit or loss 212,097 (212,097) -
Derivative financial liabilities - 212,097 212,097
Deferred income tax liabilities 440,352 820 441,172
Other comprehensive income (1,174,162) 334,950 (839,212)
Retained earnings 10,000,973 (106,833) 9,894,140
Total equity attributable to owners of the
Company as the parent 30,494,365 228,117 30,722,482
Non-controlling interests 30,377,308 (994) 30,376,314
79
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
36 Changes to major accounting policies and estimates (continued)
(1) Changes to accounting policies (continued)
Carrying amount adjustments of financial assets classified and measured as per the New
Accounting Standards for Financial Instruments:
Carrying amount as Reclassification Carrying amount as per
Change
per the old accounting (exclusive of the New Accounting
incurred by
standards for financial change incurred Standards for Financial
measureme
instruments (31 by Instruments (1 January
nt
December 2018) measurement) 2019)
Held-for-trading financial assets - 2,378,390 60,476 2,438,866
Financial assets at fair value through profit
or loss reclassified to held-for-trading
financial assets - 37,084 -
Available-for-sale financial assets
reclassified to held-for-trading financial
assets - 2,341,306 60,476
Financial assets at fair value through
profit or loss 1,137,580 (1,137,580) - -
Financial assets at fair value through profit
or loss reclassified to held-for-trading
financial assets - (37,084) -
Financial assets at fair value through profit
or loss reclassified to derivative financial
assets - (391,558) -
Financial assets at fair value through profit
or loss reclassified to other non-current
financial assets - (708,938) -
Deriv ative financial assets - 391,558 - 391,558
Financial assets at fair value through profit
or loss reclassified to derivative financial
assets - 391,558 -
Notes receivable - 4,272,222 - 4,272,222
Accounts receivable - 13,604,358 (3,879) 13,600,479
Other receivables 5,719,379 - (3,196) 5,716,183
Available-for-sale financial assets 4,270,845 (4,270,845) - -
Available-for-sale financial assets
reclassified to held-for-trading financial
assets - (2,341,306) -
Available-for-sale financial assets
reclassified to investments in other equity
instruments - (474,742) -
Available-for-sale financial assets
reclassified to other non-current financial
assets - (1,454,797) -
Long-term equity inv estments 16,957,109 - 160,827 17,117,936
Inv estments in other equity instruments - 474,742 13,715 488,457
Available-for-sale financial assets
reclassified to investments in other equity
instruments - 474,742 13,715 -
80
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
36 Changes to major accounting policies and estimates (continued)
(1) Changes to accounting policies (continued)
Carrying amount adjustments of financial assets classified and measured as per the New
Accounting Standards for Financial Instruments (continued):
Carrying amount as
Carrying amount as per per the New
Reclassif ication Change
the old accounting Accounting
(exclusive of incurred by
standards for financial Standards for
change incurred measureme
instruments (31 Financial
by measurement) nt
December 2018) Instruments (1
January 2019)
Other non-current financial assets - 2,163,735 - 2,163,735
Financial assets at fair value through profit
or loss reclassified to other non-current
financial assets - 708,938 -
Available-for-sale financial assets
reclassif ied to other non-current financial
assets - 1,454,797 -
Financial liabilities at fair value through
profit or loss 212,097 (212,097) - -
Financial liabilities at fair value through
profit or loss reclassif ied to deriv ative
financial liabilities - (212,097) -
Derivative financial liabilities - 212,097 - 212,097
Financial liabilities at fair value through
profit or loss reclassif ied to deriv ative
financial liabilities - 212,097 -
The effects of the reclassification or measurement of financial assets as per the New
Accounting Standards for Financial Instruments on the beginning retained earnings, other
comprehensive income, deferred income tax liabilities, equity attributable to owners of the
Company as the parent and non-controlling interests:
Carrying amount as per
Carrying amount as per the
Effect of the the New Accounting
old accounting standards for
Item accounting standard Standards for Financial
financial instruments (31
revisions Instruments (1 January
December 2018)
2019)
Deferred income tax liabilities 440,352 820 441,172
Other comprehensive income (1,174,162) 334,950 (839,212)
Retained earnings 10,000,973 (106,833) 9,894,140
Total equity attributable to owners of the
Company as the parent 30,494,365 228,117 30,722,482
Non-controlling interests 30,377,308 (994) 30,376,314
The Company has adopted the revised version of the Accounting Standard No. 7 for Business
Enterprises—Exchange of Non-Monetary Assets since 10 June 2019, and the revised version of
the Accounting Standard No. 12 for Business Enterprises—Debt Restructuring since 17 June
(b) 2019. These accounting policy changes are dealt with using the prospective application method.
Exchanges of non-monetary assets and debt restructuring from 1 January 2019 to the date of the
adoption of the said revised standards are adjusted according to the revised standards. The first
adoption of the said standards by the Company has no impact on the financial statements.
81
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
III Significant accounting policies and accounting estimates (continued)
37 Correction of previous accounting errors
During the Reporting Period, there are no corrections in the previous accounting errors
made by the Company.
38 Changes to financial statement line items
The Ministry of Finance issued on 30 April 2019 the Notice on Revising and Issuing the
Format of the 2019 Annual Financial Statements of General Enterprises (CK〔2019〕No. 6),
splitting certain balance sheet items.
The Company has prepared the financial statements according to the new requirements for
the format of financial statements, and adjusted the comparative data as per the Accounting
Standards No. 30 for Business Enterprises—Presentation of Financial Statements. The
effects of the said changes on the financial statement items and amounts of the
comparative period are as follows:
Item 31 December 2018 Effect 1 January 2019
Notes and accounts
receivable 17,876,580 (17,876,580) -
Notes rec eivable - 4,272, 222 4,272, 222
Accounts receivable - 13,600,479 13,600,479
Notes and accounts
payable 27,015,286 (27,015,286) -
Notes payable - 3,092, 574 3,092, 574
Accounts payable - 23,922,712 23,922,712
82
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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
(2018: 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.
83
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
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:
Preferent
Company
ial tax Reason
name
rate
TCL China Star Optoelectronics High-tech
15%
Technology Co., Ltd. enterprise
Shenzhen China Star Optoelectronics
High-tech
Semiconductor Display Technology Co., 15%
enterprise
Ltd.
Wuhan China Star Optoelectronics High-tech
15%
Technology Co., Ltd. enterprise
Qingdao Blue Business Consulting Co., High-tech
15%
Ltd. enterprise
Wuhan China Star Optoelectronics
High-tech
Semiconductor Display Technology Co., 15%
enterprise
Ltd.
7 Personal income tax
Personal 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.
84
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements
1 Monetary assets
December 31, 2019 December 31, 2018
RMB
Amount in Exchange Amount in original Exchang RMB equivalent
equivalent
original currency rate currency e rate Amount
Amount
Cash 966 5,065
Bank deposits -
17,636,777 25,702,447
RMB 14,917,520 1.0000 14,917,520 19,687,152 1.0000 19,687,152
USD
377,494 6.9762 2,633,477 733,139 6.8632 5,031,682
HKD 36,165 0.8959 32,400 572,877 0.8763 502,012
EUR - 7.8252 - 24,717 7.8549 194,150
RUB - 0.1125 - 300,870 0.0987 29,696
Other currencies 53,380 257,755
Deposit w ith central
bank
570,999 868,895
Other monetary
assets - 374,473 224,936
RMB 132,132 1.0000 132,132 224,936 1.0000 224,936
HKD 270,500 0.8959 242,341
Interest receivable on
deposits 64,970 -
Total 18,648,185 26,801,343
(1) Sub-nature of other monetary assets
December 31, 2019 December 31, 2018
Margin deposit 54,150 204,417
Others 320,323 20,519
374,473 224,936
85
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
1 Monetary assets (Continued)
(2) Monetary assets with restricted use rights:
December 31, 2019 December 31, 2018
TCL Finance’s deposit reserve funds with the central bank 570,999 868,895
Other monetary assets 374,473 224,936
Deposit interest receivable 64,970 -
Factoring mor tgage deposit of accounts receivable - 5,128
1,010,442 1,098,959
As of December 31, 2019, the Company's bank deposits of RMB 570,999,000 (at the end of 2018:
868,895,000) are the legal deposit res erves deposited in the central bank by TCL Finance Co.,
Ltd., a subsidiary of the Company.
As of December 31, 2019, the Company's monetary funds deposited abroad amounted to RMB
523,583,000 (at the end of 2018: RMB 4,884,301,000), all of which were the monetary funds
owned by the overseas subsidiaries of the Company.
2 Trading financial assets (applicable in 2019 only)
December 31, 2019 January 1, 2019
Credit instrument investment 5,772,747 867,439
Equity instrument investment 302,004 1,571,427
6,074,751 2,438,866
Financial assets measured at fair value and whose changes are included in current profits
3
and losses (applicable in 2018 only)
December 31, 2018
Fund management plan 708,938
Derivative financial assets 418,635
Monetary funds 10,007
1,137,580
The fair value of the Company's derivative financial assets is determined based on the real-time
quotation in the foreign exchange market. The fair value change of the derivative financial assets is
determined based on the differenc e between the contract price and the forward exchange rate
quoted in the foreign exchange market on the balance sheet date.
There is no significant restriction on the realization of the Company's financial asset investments
measured at fair value and whose changes are included in the current profits and losses.
86
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
4 Derivative financial assets (applicable in 2019 only)
December 31, 2019 January 1, 2019
Foreign exchange forwards 121,255 65,873
Interest rate swap 7,727 67,247
Others 30,054 258,438
159,036 391,558
5 Notes receivable
December 31, 2019 December 31, 2018
Bank acceptance 207,713 2,372,024
Commercial acceptance 21,229 1,900,198
228,942 4,272,222
6 Accounts receivable
December 31, 2019 January 1, 2019 December 31, 2018
Accounts receivable 8,385,374 14,039,251 14,039,251
Less: provision for bad debts 45,020 438,772 434,893
8,340,354 13,600,479 13,604,358
87
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
6 Accounts receivable (continued)
(1) Accounts receivable in 2019 are classified by bad debt accrual method as follows:
December 31, 2019
Provision for bad debts
The entire duration
Book balance Expected credit loss Book balance
rate
Accounts receivable with provision for bad
debts on a single basis
Including:
Accounts receivable 1 19,250 69.87% 13,450
Accounts receivable with provision for bad
debts according to combination
Including:
Combination 1: Aging analysis 5,998,078 0.52% 31,132
Combination 2: Combination of related
parties 2,368,046 0.02% 438
8,366,124 31,570
8,385,374 45,020
(2) The aging of accounts receivable is analyzed as follows:
December 31, 2019 December 31, 2018
Amount Proportion Amount Proportion
Within 1 year 8,258,361 98.49% 13,486,519 96.06%
1 to 2 years 96,100 1.15% 387,369 2.76%
2 to 3 years 10,451 0.12% 58,823 0.42%
More than 3 years 20,462 0.24% 106,540 0.76%
8,385,374 100% 14,039,251 100%
88
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
6 Accounts receivable (continued)
(3) The provision for bad debts for accounts receivable is analyzed as follows:
December 31, 2019 December 31, 2018
Late last year 434,893 384,267
Changes in accounting policies 3,879 -
Adjusted beginning 438,772 384,267
Increased subsidiaries - 3,863
Current accrual 46,633 302,172
Reversal of current period (11,940) (102,542)
Write-off of current period (8,604) (143,763)
Reduced subsidiaries (419,974) (11,418)
Exchange adjustment 133 2,314
Amount at the end of period 45,020 434,893
(4) There is no debt owed by shareholders holding 5% or more voting shares in this
account balance.
As of December 31, 2019, the accounts receivable of the top five balances are as
(5)
follows:
December 31, 2019 December 31, 2018
Total amount owed by the top five 3,991,332 2,694,561
Proportion of total accounts receivable 47.60% 19.19%
7 Accounts receivable factoring/factoring loans
As of December 31, 2019, there is no factoring of accounts receivable (at the end of 2018: RMB
47,087,000). According to the provisions of various factoring agreements, as the subsidiaries of
the Company retain some risks related to accounts receivable (risks of customers' non-payment
or delayed payment ), the Company reflects bank loans obtained from factoring and factoring
accounts receivable on the balance sheet.
89
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
8 Prepayment
(1) Prepayments is analyzed as follows:
December 31, 2019 December 31, 2018
Within 1 year 364,423 1,194,972
(2) As of December 31, 2019, the prepayments of the top five balances are as follows:
December 31, 2019 December 31, 2018
Total amount owed by the top five 169,266 578,751
Percentage of total prepayments 46.45% 48.43%
9 Other receivables
December 31, 2019 January 1, 2019 December 31, 2018
Interest receivable - 70,777 70,778
Dividend receivable 5,771 47,748 47,748
Other receivables 2,744,271 5,597,658 5,600,853
2,750,042 5,716,183 5,719,379
Other receivables mainly include account current.
(1) Interest receivable
December 31, 2019 January 1, 2019 December 31, 2018
Interest on deposits and financial 70,777 70,778
management -
- 70,777 70,778
Note: The Company has no balance of interest receivable at the end of the period, which is in
accordance wit h the requirements of the Notice on Revising and Issuing the Format of General
Enterprise Financial Statements for 2019 (CK [2019] No.6) issued by t he Ministry of Finance on
April 30, 2019. For an enterprise that has implemented the new financial instrument accounting
standard, the interest receivable is included in the book balance of the corresponding financial
instruments based on the interest accrued by the effective interest rate method.
90
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
9 Other receivables (continued)
(2) Dividend receivable
December 31, 2019 December 31, 2018
Wuxi TCL Venture Capital Partnership (Limited
5,771 -
Partnership)
TV University Online Distance Education Technology
- 47,656
Co., Ltd.
SEMP TCL INDUSTRIA E COMERCIO DE
- 92
ELETROELETRONICOS S.A.
5,771 47,748
(3) Other receivables
December 31, 2019 January 1, 2019 December 31, 2018
Other accounts receivable 2,844,737 6,026,004 6,026,004
Less: provision for bad debts 100,466 428,346 425,151
2,744,271 5,597,658 5,600,853
(a) Nature of other receivables is analyzed as follows:
December 31, 2019 January 1, 2019 December 31, 2018
Subsidy receivable 1,354,557 933,187 933,187
External unit current account 993,962 892,391 892,391
Deposit and security deposit 162,934 253,144 253,144
Others 232,818 3,518,936 3,522,131
2,744,271 5,597,658 5,600,853
91
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
9 Other receivables (continued)
(3) Other receivables (continued)
(b) Bad debt accrual for other receivables is analyzed as follows:
Expected credit loss
for the entire
In the next 12 months duration (incurred
Expected credit loss credit impair ment) Total
Late last year 42,200 382,951 425,151
Change and adjustment of accounting
3,195 - 3,195
policy
Adjusted beginning 45,395 382,951 428,346
Current accrual 4,737 - 4,737
Reversal of current period (7,172) - (7,172)
Write-off in current period - (25,627) (25,627)
Decrease in disposal subsidiaries - (302,015) (302,015)
Exchange adjustment 2,197 - 2,197
December 31, 2019 45,157 55,309 100,466
(c) The aging of other receivables is analyzed as follows:
December 31, 2019 December 31, 2018
Book amount Proportion Book amount Proportion
Within 1 year 2,635,597 92.65% 5,134,601 85.21%
1 to 2 years 77,938 2.74% 343,730 5.70%
2 to 3 years 48,704 1.71% 300,090 4.98%
More than 3 years 82,498 2.90% 247,583 4.11%
Amount at the end of period 2,844,737 100% 6,026,004 100%
There is no debt owed by shareholders holding 5% or more voting shares in this account
(d)
balance.
92
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
9 Other receivables (continued)
(3) Other receivables (continued)
(e) As of December 31, 2019, the other receivables of the top five balances are as follows:
December 31, 2019 December 31, 2018
Total amount owed by the top
five 1,830,213 2,015,077
Proportion of total other
receivables 64.34% 33.44%
(f) As of Dec ember 31, 2019, 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.
10 Inventory
(1) Inventory is classified as follows:
December 31, 2019 December 31, 2018
Reserve for Reserve for
Book inventory Book Book inventory Book
balance depreciation value balance depreciation value
Raw material 1,033,927 129, 254 904, 673 3,362,179 361, 962 3,000,217
Goods in process 760, 881 149, 624 611,257 1,157,557 165, 335 992, 222
Finished goods 4,066,809 172, 044 3,894,765 11,925, 676 251, 218 11,674, 458
Turnover material 268, 086 818 267, 268 575, 885 849 575, 036
The real estate
development cost - - - 3,646,039 - 3,646,039
6,129,703 451, 740 5,677,963 20,667,336 779, 364 19,887,972
As of December 31, 2019, the Company has no invent ory for liabilities guarantee.
93
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
10 Inventory (continued)
(2) The inventory depreciation reserves is analyzed as follows:
Current Current
January period period Current period Decreased Remittance December
1, 2019 Provision Reversal Write-off subsidiaries adjustment 31, 2019
Raw
361,962 122,168 (24,735) (127,458) (202,648) (35) 129,254
material
Goods in 165,335 242,331 (38,157) (181,012) (38,873) - 149,624
process
Finished 251,218 280,748 (13,909) (168,275) (177,608) (130) 172,044
goods
Turnover 849 28 (31) - (28) - 818
material
779,364 645,275 (76,832) (476,745) (419,157) (165) 451,740
11 Other current asset
December 31, 2019 January 1, 2019 December 31, 2018
Creditors' investment 1,596,741 3,495,330 3,495,330
VAT to be deducted, to be cer tified, etc. 2,299,416 4,056,515 4,056,515
Loans and advances due within one year
1,968,056 627,123 -
(note)
Other 47,614 72,252 72,252
5,911,827 8,251,220 7,624,097
Note Loans and advances due within one year are loans due within the next year issued by TCL Finance Co., Ltd.
s (a subsidiary of the Company), Guangz hou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongkai TCL
Zhirong Technology Microcredit Co., Ltd., of which interest receivable is RMB 13,626,000.
12 Loans and advances paid
December 31, 2019 January 1, 2019 December 31, 2018
Loans and advances paid (note) 3,637,768 496,677 1,123,800
Note Loans and advances granted are loans granted by TCL Finance Co., Ltd. (a subsidiary of the Company),
s Guangzhou TCL Internet Microcredit Co., Ltd. and Huizhou Zhongk ai TCL Zhirong Technology Microcredit Co.,
Ltd., of which interest receivable is RMB 73,407,000.
13 Creditors' investment (applicable in 2019 only)
December 31, 2019 January 1, 2019
National debt 20,373 -
94
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
14 Available-for-sale financial assets (applicable in 2018 only)
December 31, 2018
Available- for-sale equity instruments - measured at fair value (note) 1,917,168
Available- for-sale equity instruments - measured at costs 2,353,677
4,270,845
Note
Available-for-sale equity instruments - measured at fair value
s
December 31, 2018
Costs 2,452,730
Changes in fair value (438,844)
Less: provision for impair ment 96,718
1,917,168
15 Long-term equity investments
December 31, 2019 January 1, 2019
Book Prov i ion for Book Book Prov i ion for Book
balance impairment value balance impairment value
Unconsolidated subsidiaries - - - 20,373 20,373 -
(1)
Long-term equity investm ent 17,217,130 22,846 17,194,284 17,268,423 150,487 17,117,936
calculated by equity method
Including: Associates (2) 17,042,572 22,846 17,019,726 16,630,772 133,725 16,497,047
Joint Ventures (3) 174,558 - 174,558 637,651 16,762 620,889
17,217,130 22,846 17,194,284 17,288,796 170,860 17,117,936
95
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
December 31, 2018
Book Prov i ion for Book
balance impairment value
Unconsolidated subsidiaries
20,373 20,373 -
(1)
Long-term equity investm ent
17,107,596 150,487 16,957,109
calculated by equity method
Including: Associates (2) 16,469,945 133,725 16,336,220
Joint Ventures (3) 637,651 16,762 620,889
17,127,969 170,860 16,957,109
As of December 31, 2019, the Company has set aside long -term investment impairment reserve for the
amount of invested units with poor management and insolvent assets. In addition, there are no major
restrictions on t he realization of investment and the remittance of investment income for long -term
equity investment.
96
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(1) Unconsolidated subsidiaries
Profit and loss adjustment
Percentage of Changes in Provision for impair ment
Name of invested company its registered current profits and Cumulative change Decrease in Cumulative December 31, 2
capital Initial investment losses in profit or loss current period amount 019
Jinke Holding Group Co., Ltd. 75.50% 20,373 - - (20,373) (20,373) -
97
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates
Increase or decrease in current period
Openin Increase or Change Other
Investment gains Other
Amount at g decrease s in Accrued increases
and losses comprehens Declared cash
Name of invested company beginning adjustm investment in other Provision for and December 3
recognized by ive income dividends or profits
of year ent the current interest impairment decrease 1, 2019
equity method adjustments
period s s
- - -
Bank of Shanghai Co., Ltd. 8,363,564 188, 813 1,018,493 81,483 (245,339) (92,403) 9,314,611
Zhongxin Financial Capital Management
- - 838, 800 39,120 - - - - - 877, 920
Company Limited
Huan Tech Co., Ltd. 180, 364 - - (684) - - - - (179,680) -
Tianjin 712 Communication & Broadcasting
704, 224 65,853 (7,362) (245) 762, 470
Co., Ltd.
LG Electronics(Hui Zhou) INC. 83,902 - - 16,881 - - (8,200) - - 92,583
Shenzhen Qianhai Qihang Supply Chain
45,034 - - (4,197) - - - - - 40,837
Management Co., Ltd.
Shenzhen Jucai Supply Chain Technology
5,158 - - 184 - - - - - 5,342
Co., Ltd.
Shenzhen Tixiang Management Technology
2,013 - - 65 - - - - - 2,078
Co., Ltd.
TCL Nanyang Electric Appliance
4,706 - - (577) - - - - (2,314) 1,815
(Guangzhou) Co., Ltd.
TCL Air Conditioner (Wuhan) Co., Ltd. - - 27,720 9,946 - - - - - 37,666
TCL Finance (Hong Kong) Co., Limited - - 12,031 (11,059) - - - - - 972
Zhihui Xinyuan Commercial (Huizhou) Co.,
- - 7,500 1,188 - - - - - 8,688
Ltd.
Huizhou TCL Environmental Resource Co.,
- - 77,434 2,556 - - - - - 79,990
Ltd.
Guangdong Rongchuang Lingyue Intelligent
Manufacturing and Information Technology
- - 375, 000 20 - - - - - 375, 020
Industry Equity Investment Fund Partnership
(Limited Partnership)
98
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates (continued)
Guangdong Yuecai Emerging Industry
Equity Investment Fund Partnership (Limited - - 150, 000 (507) - - - - - 149, 493
Partnership)
Shenzhen Tianyi Hemeng Education Co.,
- - 8,000 (1,675) - - - - - 6,325
Ltd.
Yizheng Zeyu Electric Light Co., Ltd. 2,507 - - - - - - - - 2,507
99
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates
Increase or decrease in current period
Increase or Investment Other December
Amount decrease gains and Other DeclaredAccrued
Changes Provision increases 31,
at Opening investment losses comprehensive cash
Name of invested company in other for and
beginning adjustment in the recognized income dividends 2019
interests impair decrease
of year current by equity adjustments or profits
ment s
period method
Urumqi TCL Equity In vestment Management Co.,
1,048 - - (178) - - - - - 870
Ltd.
Hubei Changjiang Hezhi Equity In vestment Fund
1,047,882 19,646 - 58,642 - - - - 11,329 1,137,499
Partnership (Limited Partnership)
Xinjiang Dongpeng Weichuang Equity Investment
956,754 - (469,015) 257,210 5 - (117,898) - (41,833) 585,223
Partnership (Limited Partnership)
Deqing Puhua Equity In vestment Fund
207,047 - - (1,571) - - - - - 205,476
Partnership (Limited Partnership)
Xinjiang Dongpeng Heli Equity In vestment
116,550 - 86,816 (3,763) - - - - - 199,603
Partnership (Limited Partnership)
Wuxi TCL Aisikai Semiconductor Industry
Investment Fund Partnership (Limited 86,121 - 25,508 3,291 - - (152) - - 114,768
Partnership)
Wuxi TCL Venture Capital Partnership (Limited
92,382 - (24,477) 31,130 (4,789) - (32,836) - (26,864) 34,546
Partnership)
Ningbo Meishan Bonded Port Qiyu Investment
69,178 - - (1,410) - - - - - 67,768
Management Partnership (Limited Partnership)
Changzhou A Dynamic Venture Capital
58,578 - (60,000) 1,422 - - - - - -
Partnership (Limited Partnership)
100
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates (continued)
Shanghai Chuangxiang Venture Capital 25,828 4,903 (6,498) (33) 16 - - - 5,451 29,667
Partnership (Limited Partnership)
Nanjing Zijin Chuangdong Investment
25,997 - - (22) 7 - - - - 25,982
Partnership (Limited Partnership)
Huizhou Kaichuang Venture Investment
23,839 - - (3,940) (6,188) - (7,188) - 2,231 8,754
Partnership (Limited Partnership)
101
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates
Increase or decrease in current period
Increase
Investment
Amount or Other
gains and Other Declared Accrued December
at decrease Changes increases
Opening investme losses comprehensive cash Provision 31,
Name of invested company beginni in other and
adjustment recognized income dividends for 2019
ng of nt in the interests decrease
by equity adjustments or profits impairment
year current s
method
period
Beijing A D ynamic Venture
Capital Center (Limited 20,366 - - (19) (1,029) - - - 1,690 21,008
Partnership)
Yixing Jiangnan Tianyuan
Venture Capital Company 22,173 - (1,517) (1,675) (1,013) - - - (37) 17,931
(Limited Partnership)
Shenzhen Chuangdong New
Industry In vestment Fund 12,408 - (1,183) 212 - - - - - 11,437
Enterprise (Limited Partnership)
Hubei Changjiang Hezhi Equity
Investment Fund Management 4,391 - - (90) - - - - - 4,301
Co., Ltd.
Huizhou Kaimeng Angel
Investment Partnership (Limited 2,869 - - - - - - - - 2,869
Partnership)
Shenzhen Jiutian Matrix
Investment Management Co., 1,445 - - 508 - - - - - 1,953
Ltd.
Urumqi Qixinda Equity
Investment Management Co., 945 - - 451 - - - - - 1,396
Ltd.
Urumqi TCL Create Dynamic
Equity In vestment Management 763 - - (3) - - - - - 760
Co., Ltd.
102
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates (continued)
Beijing A D ynamic Investment
635 - - (80) - - - - - 555
Consulting Co., Ltd.
Shanghai Gen Auspicious
Investment Management Co., 516 - - 2 - - - - - 518
Ltd.
Changzhou Chuangdong Fund
506 - - 30 - - - - - 536
Management Co., Ltd.
Nanjing A D ynamic Equity
Investment Fund Management 386 - - (99) - - - - - 287
Co., Ltd.
Ningbo Meishan Bonded Port
Renxing Culture Investment 3,767 - (3,854) 1,208 - - - - (1,121) -
Center (Limited Partnership)
103
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates (continued)
Increase or decrease in current period
Increase
Investment
or
Amount gains and Other Declared Accrued Other December
Opening decrease Changes
Name of invested at losses comprehensive cash Provision increases 31,
adjustment investme in other
company beginning recognized income dividends for and 2019
nt in the interests
of year by equity adjustments or profits impairment decreases
current
method
period
Wuxi TCL Medical Imaging
- - 30,730 19,488 - - - - 46 50,264
Technology Co., Ltd.
Beijing WeMed Medical
5,104 - (193) (5,830) - - - - 12,891 11,972
Equipment Co., Ltd.
Shanghai Huiying Medical
- - 1,000 (891) - - - - 333 442
Technology Co., Ltd.
AGC New Electronic
Display Glass (Shenzhen) 220,468 - 96,138 (37,164) - - - - - 279,442
Co., Ltd.
TCL Ventures Fund L.P. - - 44,706 (6,653) - - - - 1,556 39,609
Getech Ltd. - - 20,000 (12,424) - - - - - 7,576
Qingteng Intellectual
Property Holding 3,921 - - (3,921) - - - - - -
(Shenzhen) Co., Ltd.
Canyon Circuit Technology
22,085 - - 884 - - - - (22,969) -
(Huizhou) Co., Ltd.
TCL Rechi (Huizhou)
Refrigeration Equipment 177,112 - - 2,773 - - - - (179,885) -
Co., Ltd.
104
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates (continued)
Wuhan Shangde Plastics
5,968 - - 25 - - - - (5,993) -
Technology Co., Ltd.
Gaoshengda Holdings
60,960 - - 6,710 - - - - (67,670) -
(Huizhou) Co., Ltd.
Shenzhen
Shenchangcheng
2,844 - - 417 - - - - (3,261) -
Commercial Property
Service Co., Ltd.
Amlogic (Shanghai)
144,589 - - (876) - - - - (143,713) -
Limited
SEMP TCL INDUSTRIA E
COMERCIO DE 327,631 - - - - - - - (327,631) -
ELETROELETRONICOS
S.A.
Naturedao Information
Science and Technology, 3,063 - - - - - - - (3,063) -
Ltd.
T2Mobile Limited 21,612 - - (1,184) - - - - (20,428) -
Harvey Holdings Limited 22,261 - - (1,847) - - - - (20,414) -
Shenzhen Thunderbird
Network Technology Co., 289,752 - - 11,332 - - - - (301,084) -
Ltd.
Jiangxi Broadcasting TV
Network E-Commerce Co., 1,480 - - (39) - - - - (1,441) -
Ltd.
105
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(2) Associates
Increase or decrease in current period
Increase
Investment
or
Opening gains and Declared Accrued Other December
Amount at decrease Changes
adjustmen losses Other comprehensive cash Provision increases 31,
Name of invested company beginning of investment in other
t recognized income adjustments dividends for and 2019
year in the interests
by equity or profits impairment decreases
current
method
period
Tibet Dongwei Investment Management
232 - (250) (1) - - - - 19 -
Center (Limited Partnership)
Active Industries International Limited 15,417 - - - - - - - (15,417) -
China Merchants Real Estate (Pingshan,
377, 122 - - - - - - - (377,122) -
Shenzhen) Co., Ltd.
Taiyang Electro-optic (Huizhou) Co., Ltd. 13,707 - - 282 - - - - (13,989) -
Palm Venture Group 87,869 - - (3,582) - - - - (84,287) -
Huarui (Huizhou) Co., Ltd. 19,753 - - (33) - - - - (19,720) -
TCL Very Lighting Technology (Huizhou)
16,736 - - (158) - - - - (16,578) -
Co., Ltd.
Sontec TCL Argentina S.A. 512 - - - - - - - (512) -
Radio Victoria TCL Argentina S.A. 8,667 - - - - - - - (8,667) -
Huizhou Gaoshengda Metals Co., Ltd. 29,539 - - 26 - - - - (29,565) -
Beijing Shangdao Yuetu Technology Co.,
7,278 - - (1,351) - - - - (5,927) -
Ltd.
Other 2,276,692 136, 278 - 192, 178 - - (45,810) - (160,941) 2,398,397
16,336,220 160, 827 1,423,209 1,634,991 68,492 - (464,785) - (2,139,228) 17,019,726
Note: Associates with zero closing balance of long-term equity investment are due to the transfer of assets reorganization in the current period.
106
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(3) Joint Ventures
Increase or decrease in current period
Increase
Investment
or
gains and Other Other Declared Accrued Other
Amount at decrease
losses comprehensive change cash Provision increases December
Name of invested company beginning of investment recognized income in dividends for and 31, 2019
year in the
by equity adjustments equity or profits impairment decreases
current
method
period
TV University Online Distance Education Technology
Co., Ltd. 111,062 - 25,754 - - - - 1,087 137,903
Huizhou TCL Taidong Shihua Investment Co., Ltd. 19,143 - (6,364) - - - - - 12,779
Shanxi TCL Huirong Venture In vestment Co., Ltd. 6,098 - 16,535 - - - - - 22,633
TCL Huizhou City, Kai Enterprise Management
Limited 514 - 729 - - - - - 1,243
TCL Sun, Inc. 13,899 - 1,437 - - - - (15,336) -
CJ Speedex Logistics Co., Ltd. 467,888 - (1,489) - - - - (466,399) -
TCL Zhiyi Technology (Huizhou) Co., Ltd. 2,285 - (5) - - - - (2,280) -
620,889 - 36,597 - - - - (482,928) 174,558
Note: Joint ventures with zero closing balance of long-term equity investment are due to the transfer of assets reorganization in the current period.
107
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
15 Long-term equity investment (continued)
(4) Impairment Provision for Long-Term Equity Investments
Increase Decrease
December 31, Notes
January 1, 2019 in current in current
2019
period period
Pride Telecom Limited Note
1,624 - - 1,624
1
Naturedao Information Note
Science and Technology, 2,221 - (2,221) - 2
Ltd.
Jinke Holding Group Co., Note
20,373 - (20,373) -
Ltd. 2
China United Magnesium Note
97,387 - (97,387) -
Co.,Ltd. 2
Wealthy Way Group Limited
Note
1,215 - (1,215) -
2
Beijing WeMed Medical Note
31,278 - (10,056) 21,222
Equipment Co., Ltd. 1
TCL - I MAX Entertainment
Co., Note
16,762 - (16,762) -
Limited 2
170,860 - (148,014) 22,846
Note Impairment provisions were established for t he long -term investments in t hese investees at the rec overable
1 amounts because continuous operating loss occurred to these investees wit h poor management.
Note The decreas e in the current period is the trans fer -out caused by asset reorganization.
2
108
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
16 Other equity instruments (applicable in 2019 only)
December 31, 2019 January 1, 2019
Non-trading equity instruments 279,884 488,457
Reasons
designated as Reasons for
Amount of other measured at fair other
Dividend comprehensive value and comprehensive
Accumulated Accumulated
Item name income income whose changes income
gains losses
recognized transferred to are included in transferred to
retained earnings other retained
comprehensive earnings
income
Non-trading Non-transaction
Sale in current
equity - - (144,193) (5,569) al financial
period
instruments assets
17 Other non-current financial assets (applicable in 2019 only)
December 31, 2019 January 1, 2019
Equity investment 2,531,111 1,454,797
Creditors' investment 11,578 708,938
2,542,689 2,163,735
109
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
18 Investment property
Housing and
Land use right Total
buildings
Gross amount:
January 1, 2019 2,702, 083 247,463 2,949, 546
Increase
Increase in current period 70,788 75,486 146,274
Reclassified from fixed
26,920 595 27,515
assets and intangible assets
Reclassified from
552 - 552
construction in progress
Decreased
Decrease in current
(69,134) (75,486) (144,620)
period
Reduced subsidiaries (2,543,912) (247,463) (2,791,375)
Reclassified to fixed
(52,653) (118) (52,771)
assets and intangible assets
December 31, 2019 134,644 477 135,121
Accumulated depreciation
and amortization:
January 1, 2019 1,260, 111 13,224 1,273, 335
Increase
Increase in current period 98,214 1,278 99,492
Reclassified from fixed
3,021 126 3,147
assets and intangible assets
Decreased
Decrease in current
(63,976) (630) (64,606)
period
Reduced subsidiaries (1,210,610) (13,866) (1,224,476)
Reclassified to fixed
(34,018) (26) (34,044)
assets and intangible assets
December 31, 2019 52,742 106 52,848
Net value of investment
property:
December 31, 2019 81,902 371 82,273
January 1, 2019 1,441, 972 234,239 1,676, 211
110
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
19 Fixed assets
Fixed Office and
Housing and assets Machinery electronic Means of
buildings renovation equipment equipment transport Total
Gross amount:
January 1, 2019 13,062,161 382,091 47,752,417 1,831,728 112,496 63,140,893
Increase
Purchase 27,460 2,293 487,844 189,086 23,448 730,131
Reclassif ied from
52,653 - - - - 52,653
investment property
Reclassif ied from
6,556,484 527 12,358,589 643,873 2,199 19,561,672
construction in progress
Decreased
Written down with
- - (694,587) (5,945) (503) (701,035)
government subsidies
Reduced subsidiaries (3,255,850) (376,732) (3,348,480) (844,702) (48,207) (7,873,971)
Reclassif ied to
(26,920) - - - - (26,920)
investment property
Other decreases (3,964) (2,269) (122,140) (54,371) (4,733) (187,477)
Exchange adjustment (4,779) 661 (2,847) (1,114) (113) (8,192)
December 31, 2019 16,407,245 6,571 56,430,796 1,758,555 84,587 74,687,754
Accumulated
depreciation:
January 1, 2019 2,410,859 283,254 23,235,237 1,077,885 67,708 27,074,943
Increase
Provision 497,160 7,973 6,294,411 238,368 15,916 7,053,828
Reclassif ied from
34,018 - - - - 34,018
investment property
Decreased
Written down with
(34,215) - (901,358) (6,048) (503) (942,124)
government subsidies
Reduced subsidiaries (1,029,450) (280,961) (1,930,748) (608,368) (28,766) (3,878,293)
Reclassif ied to
(3,021) - - - - (3,021)
investment property
Other decreases (1,888) (1,537) (65,028) (47,983) (3,598) (120,034)
Exchange adjustment 1,823 (4,436) (2,950) (1,533) (94) (7,190)
December 31, 2019 1,875,286 4,293 26,629,564 652,321 50,663 29,212,127
Net value of fixed assets:
December 31, 2019 14,531,959 2,278 29,801,232 1,106,234 33,924 45,475,627
January 1, 2019 10,651,302 98,837 24,517,180 753,843 44,788 36,065,950
111
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
19 Fixed Assets (Continued)
Office and
Housing and Fix ed assets Machinery Means of
electronic Total
buildings renov ation equipment transport
equipment
Provision for
impair ment:
January 1, 2019 1,141 990 69,329 11,276 83 82,819
Current accrual - - 2,957 43 - 3,000
Reduced subsidiaries (1,141) (990) (63,160) (1,130) (83) (66,504)
Write-off in current
period - - (2,760) (298) - (3,058)
Exchange adjustment - - 300 - - 300
December 31, 2019 - - 6,666 9,891 - 16,557
Net amount of fixed
assets:
December 31, 2019 14,531,959 2,278 29,794,566 1,096,343 33,924 45,459,070
January 1, 2019 10,650,161 97,847 24,447,851 742,567 44,705 35,983,131
Please refer to Item 42 of Not e V for information on fixed asset mortgage. As at December 31, 2019, the
Company has no temporarily idle fixed assets; the gross amount of the fixed assets that were sufficiently
depreciated and still in use was RMB 12,064,591,000.
Fixed assets with pending ownership certificates at the end of the current period:
Expected time of
Provision
Gross Accumulated Carrying obtaining
for
amount depreciation amount ownership
impairment
certificate
Housing and buildings
8,678, 263 345,457 - 8,332, 806 Within 2020
(Not e)
N As at December 31, 2019, the fixed assets with pending ownership certificates of the Company are mainly
ot the housing and buildings of CS OT’s T4 and T6 manufacturing bases and Huizhou module factory.
es
112
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
20 Construction in progress
Reclassified Investme
to nt in cur
rent year
Reclassified to investment
fixed assets in property in as
Amount at Increase in current period current Other December % of Source of
Project name Budget beginning of year current period Fixed assets period decreases 31, 2019 budget fund
Self-owned
t6 production line of LCD panel 46,500,000 19,030,563 6,381,846 (8,143,075) - (1,892) 17,267,442 capital and
55%
borrowings
Self-owned
t7 production line of LCD panel 42,683,000 346, 143 3,003,993 - - - 3,350,136 capital and
8%
borrowings
Self-owned
t4 production line of LCD panel 35,000,000 13,003,038 3,228,943 (6,207,472) - - 10,024,509 capital and
46%
borrowings
Self-owned
Huizhou modular integration project 9,600,000 1,305,373 1,061,628 (914,432) - (11,109) 1,441,460 capital and
25%
borrowings
Self-owned
Huizhou whole-widget integration project 3,099,400 566, 876 498, 730 - - - 1,065,606 capital and
34% borrowings
Self-owned
t3 production line of LCD panel 16,000,000 2,339,781 419, 827 (2,686,299) - - 73,309 17% capital and
borrowings
Self-owned
Upgrade of the t2 production line of LCD panel 121, 285 (1,159,707) 31,784 capital and
1,471,000 1,070,206 - - 81% borrowings
Not Self-owned
Yunsheng Technology Park in Guangzhou Science City 1,200,000 611,184 19,805 - - (630,989) - capital and
applicable
borrowings
113
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
20 Construction in progress (continued)
651, 422 829, 217 (450,687) (552) (705,356) 324, 044 Not Not
Other Not applicable
applicable applicable
38,924,586 15,565,274 (19,561, 672) (552) (1,349,346) 33,578,290
114
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
21 Intangible assets
Non-patented
Land use Trademark use
technologies Other Total
right rights
/patents
Gross amount:
January 1, 2019 4,188,127 2,620,190 346, 160 1,042,630 8,197,107
Increase
Purchase 207, 579 224, 721 - 103, 530 535, 830
Reclassified from
118 - - - 118
investment property
Reclassified from
- 219 - 14,921 15,140
construction in progress
Reclassified from R&D
- 633, 163 - 6,233 639, 396
expense
Decreased
Sale and disposal (109) (918) - (29,954) (30,981)
Reclassified to investment
(595) - - - (595)
property
Reduced subsidiaries (915,883) (175,012) (338,777) (357,972) (1,787,644)
Exchange adjustment (1,318) (902) (6,822) (1,153) (10,195)
December 31, 2019 3,477,919 3,301,461 561 778, 235 7,558,176
Accumulated amortization:
January 1, 2019 463, 334 883, 515 159, 085 666, 305 2,172,239
Increase
Provision 110,275 309, 537 5,179 120, 506 545, 497
Reclassified from
26 - - - 26
investment property
Decreased
Sale and disposal (109) (918) - (28,374) (29,401)
Reclassified to investment
(126) - - - (126)
property
Reduced subsidiaries (231,178) (110,208) (160,831) (357,352) (859,569)
Written down with
(6,835) - - - (6,835)
government subsidies
Exchange adjustment (493) (1,388) (3,243) (220) (5,344)
December 31, 2019 334, 894 1,080,538 190 400, 865 1,816,487
Net value of intangible assets:
December 31, 2019 3,143,025 2,220,923 371 377, 370 5,741,689
January 1, 2019 3,724,793 1,736,675 187, 075 376, 325 6,024,868
Provision for impairment:
January 1, 2019 - 34,316 - 35,679 69,995
Provision - - - 11,845 11,845
Write-off in current period - - - (25,300) (25,300)
Exchange adjustment - 565 - - 565
December 31, 2019 - 34,881 - 22,224 57,105
Net amount of intangible
assets:
December 31, 2019 3,143,025 2,186,042 371 355, 146 5,684,584
January 1, 2019 3,724,793 1,702,359 187, 075 340, 646 5,954,873
Please refer to Item 42 of Note V for infor mation on collateralized intangible assets.
115
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
22 R&D Expense
The Company's R& D expense is listed as follows:
December 31, 2019 December 31, 2018
LCD panels 1,548,471 846,925
Mobile phones - 150,186
Other - 14,393
1,548,471 1,011,504
23 Goodwill
(1) Name of invested company Reason Initial amount December 31, 2019 December 31, 2018
TCL (Vietnam) Corporation Ltd. Note 1 1,947 - 778
TCL Mobile Communication (HK)
Company Limited 310 - 124
TCL Electronics Holdings Limited Note 2 11,419 - 4,567
TCL Electronics Holdings Limited Note 3 (5,409) - (2,705)
TCL Electronics Holdings Limited Note 4 39,130 - 19,565
TCL Electronics Holdings Limited Note 5 28,017 - 15,409
TCL Electronics Holdings Limited Note 6 8,952 - 5,372
TCL Electronics Holdings Limited Note 7 36,259 - 25,381
TCL Communication Technology
Holdings Limited Note 8 316,893 - 194,551
JRD Communication Inc. Note 9 134,968 - 134,968
TCL Medical Radiological Technology
Note
(Beijing) Co., Ltd. 10 28,967 28,967 28,967
Huizhou TCL Environment Technology
Note
Co., Ltd. 11 92,952 - 92,952
Note
TCL Communication (Ningbo) Co., Ltd. 12 89,196 - 89,196
Toshiba Visual Products (China) Co.,
Note
Ltd. 13 12,065 - 12,065
Note
Pusheng Group Co., Ltd. 14 3,506 - 3,506
Note
East Fair Investments Limited 15 50,729 - 50,729
Qingdao Blue Business Consulting Co.,
Note
Ltd. 16 2,452 2,452 2,452
Gross amount 31,419 677,877
Note
Less: provision for impair ment 17 28,967 320,765
Net carrying amount 2,452 357,112
116
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
Note TCL Overseas Holdings Limited, a wholly-owned subsidiary of TCL Electronics Holdings Limit ed
1. (hereinafter referred to as “TCL Electronics”) (a subsidiary of the Company’s wholly-owned subsidiary
TCL Industries Holdings (HK ) Limited), increased in November 2000 its interest in TCL (Vietnam)
Corporation Ltd. (hereinafter referred to as “TCL Vietnam”) to 100% with a capital of HK$ 10,690,000. As
such, the difference bet ween the accumulated investment of TCL Overseas Holdings Limited in TCL
Vietnam (corresponding to a 100% interest) and the owner’s equity of TCL Vietnam attribut able to TCL
Overseas Holdings Limited on the settlement date (equal to RMB 1,947,000) was recorded in the
Company’s goodwill, and was trans ferred out in 2019 due to disposal of subsidiaries.
Note TCL Industries Holdings (HK ) Limited, a wholly-owned s ubsidiary of the Company, purchased in 2000
2. another 19,220,000 shares in TCL Electronics with a capit al of HK$ 29,872,000. As such, the difference
between the accumulated investment of TCL Industries Holdings (HK) Limited in TCL Electronics
(corresponding to a 51.82% interest) and the owner’s equity of TCL Electronics attributable to TCL
Industries Holdings (HK) Limited on the settlement date (equal to RMB 11,419,000) was rec orded in the
Company’s goodwill, and was trans ferred out in 2019 due to disposal of subsidiaries.
Note TCL Industries Holdings (HK) Limited, a wholly-owned s ubsidiary of the Company, purchased in 2001
3. another 32,556,000 shares in TCL Electronics with a capit al of HK $ 30,608,000. As such, the difference
between the accumulated investment of TCL Industries Holdings (HK ) Limited in TCL Electronics
(corresponding to a 55.15% interest) and the shareholders’ equity of TCL Electronics attributable to TCL
Industries Holdings (HK) Limited on the settlement date (equal to RMB -5,409, 000) was recorded in the
Company’s goodwill, and was trans ferred out in 2019 due to disposal of subsidiaries.
Note According to a conditional agreement on the acquisition of Huizhou TCL Computer Technology Co., Ltd.
4. signed in late 2000 between TCL Industries Holdings (HK) Limited and TCL Holdings (BVI) Limited, a
wholly -owned subsidiary of TCL Electronics (a subsidiary of the Company’s wholly -owned subsidiary
TCL Industries Holdings (HK) Limited), TCL Electronics offered, at the price of HK$ 1.78/share,
105,619,289 shares as the consideration for the acquisition, to TCL Industries Holdings (HK) Limited. As
such, the difference between the accumulated investment of TCL Industries Holdings (HK ) Limited in
TCL Electronics (corresponding to a 53.86% interest) and the shareholders’ equity of TCL Electronics
attributable to TCL Industries Holdings (HK) Limited on the settlement date (equal to RMB39, 130, 000)
was recorded in the Company’s goodwill, and was transferred out in 2019 due to disposal of subsidiaries.
117
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
Note TCL Industries Holdings (HK) Limited, a wholly-owned s ubsidiary of the Company, purchased in 2002
5. another 39,610,000 shares in TCL Electronics with a capit al of HK $ 76,719,000. As such, the difference
between the accumulated investment of TCL Industries Holdings (HK ) Limited in TCL Electronics
(corresponding to a 54.15% interest) and the shareholders’ equity of TCL Electronics attributable to TCL
Industries Holdings (HK) Limited on the settlement date (equal to RMB 28,017,000) was recorded in the
Company’s goodwill, and was trans ferred out in 2019 due to disposal of subsidiaries.
Note TCL Industries Holdings (HK) Limited, a wholly-owned s ubsidiary of the Company, purchased in 2003
6. another 37, 080, 000 shares in TCL Electronics with a capital of HK$62, 304, 820. As such, the difference
between the accumulated investment of TCL Industries Holdings (HK ) Limited in TCL Electronics
(corresponding to a 54.51% interest) and the shareholders’ equity of TCL Electronics attributable to TCL
Industries Holdings (HK) Limited on the settlement date (equal to RMB 8,952,000) was recorded in the
Company’s goodwill, and was trans ferred out in 2019 due to disposal of subsidiaries.
Note TCL Industries Holdings (HK) Limited, a wholly-owned s ubsidiary of the Company, purchased in 2004
7. another 50,436,000 shares in TCL Electronics with a capital of HK$ 126,814,000. As such, the difference
between the accumulated investment of TCL Industries Holdings (HK ) Limited in TCL E lectronics
(corresponding to a 54.83% interest) and the shareholders’ equity of TCL Electronics attributable to TCL
Industries Holdings (HK) Limited on the settlement date (equal to RMB 36,259,000) was recorded in the
Company’s goodwill, and was trans ferre d out in 2019 due to disposal of subsidiaries.
118
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
Note TCL Industries Holdings (HK ) Limited, a wholly-owned subsidiary of the Company, acquired in 2004 a
8. 57.4% interest in TCL Communication with a consideration of RMB 1,510,016,000. As such, the
difference bet ween the accumulat ed investment of TCL Industries Holdings (HK ) Limited in TCL
Communication (corresponding to a 57.4% interest) and the shareholders’ equity of TCL Communication
attributable to TCL Industries Holdings (HK ) Limited on the settlement dat e (equal to RMB 316, 893, 000)
was recorded in the Company’s goodwill. An impairment allowance of RMB 194,551,000 had been
established on this goodwill item for 2017. And this item was transferred out in 2019 due to disposal of
subsidiaries.
Note TCL Communication, a subsidiary of the Company’s subsidiary TCL Industries Holdings (HK) Limited,
9. acquired in July 2007 a combined 61.46% interest in JRD Communication Inc. (hereinafter referred to as
“JRDC”) from the other shareholders, with a total consideration of US$ 39,313,000 (equivalent to
approximately RMB 296,584,000). As such, the difference between the accumulated investment of TCL
Communication in JRDC (corresponding to a 100% interest) and the fair value of the identifiable net
assets of JRDC attributable to TCL Communication on the settlement date (equal to approximately RMB
134,968,000) was recorded in the Company’s goodwill. An impairment allowance of RMB 34,453,000
had been established on this goodwill item for 2018. And this item was transferred out in 2019 due to
disposal of subsidiaries.
Note The Company acquired in 2010 a 51.82% interest in TCL Medical Radiological Technology (Beijing) Co.,
10 Ltd. (hereinafter referred to as “TCL Medical Radiological Technology”) with a capital of RMB 52,319,000.
As such, the differenc e 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, 000) was recorded in the Company’s goodwill. An impairment allowanc e of RMB
28,967,000 had been established on this goodwill item for 2018.
Note Huizhou TCL Environmental Resource Co., Ltd. (hereinafter referred to as “TCL Environmental
11 Resource”), a subsidiary of the Company, acquired in 2010 the 100% interest in Huizhou TCL
Environment Technology Co., Ltd. (hereinaft er referred to as “TCL Environment Technology”) with a
capital of RMB 98,024,000. As such, the difference between the accumulated investment of TCL
Environmental Resource in TCL Environment Technology (correspondin g to a 100% interest) and the fair
value of the identifiable net assets of TCL Environment Technology attributable t o TCL Environmental
Resource on the settlement date (equal to RMB 92,952,000) was recorded in the Company’s goodwill.
And this item was trans ferred out in 2019 due to disposal of subsidiaries.
119
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
Note TCL Communication, a s ubsidiary of the Company’s wholly -owned subsidiary TCL Industries Holdings
12 (HK) Limited, acquired in May 2011 the 100% interest in TCL Communication (Ningbo) Co., Ltd.
(hereinafter referred to as “TCL Communication Ningbo”) with a capit al of 11 million euros (equivalent to
RMB 102,690,000). As such, the difference bet ween the accumulat ed investment of TCL Communication
in TCL Communication Ningbo (corresponding to a 100% interest) and the fair value of the identifiable
net assets of TCL Communication Ningbo attributable to TCL Communication on the settlement date
(equivalent to RMB 89,196,000) was recorded in the Company’s goodwill, and was transferred out in
2019 due to disposal of subsidiaries.
Note Huizhou TCL Household A ppliance Marketing Co., Ltd. (hereinafter referred to as “Huizhou TCL
13 Hous ehold Appliance Mark eting”), a subsidiary of TCL Electronics (a s ubsidiary of the Company’s
wholly -owned subsidiary TCL Industries Holdings (HK ) Limited), ac quired in May 2014 a 21% interest in
Toshiba Visual Products (China) Co., Ltd. (hereinafter referred to as “Toshiba Visual Products”) with a
capital of RMB 0. As such, the difference bet ween the accumulated investment of Huizhou TCL
Hous ehold Appliance Marketing in Toshiba Visual Products (corresponding to a 70% interest) and the fair
value of the identifiable net assets of Toshiba Visual Products attributable to Huizhou TCL Household
Appliance Marketing on the settlement date (equivalent to RMB 12,065,000) was recorded in the
Company’s goodwill. An impairment allowance of RMB 12,065,000 had been established on this goo dwill
item for 2017. And this item was transferred out in 2019 due to disposal of subsidiaries.
Note Tonly Electronics, a subsidiary of the Company’s wholly -owned subsidiary TCL Industries Holdings (HK )
14 Limited, acquired in Sept ember 2015 the 100% interest in Pusheng Group Co., Ltd. (hereinafter referred
to as “Pusheng Group”) with a capital of RMB 95,546,000. As such, the difference bet ween the
accumulated investment of Tonly Electronics in Pusheng Group (corres ponding to a 100% interest) and
the fair value of the identifiable net assets of Pusheng Group attributable to Tonly Electronics on the
settlement date (equivalent to RMB 3,506,000) was recorded in the Company’s goodwill, and was
transferred out in 2019 due to disposal of subsidiaries.
120
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
Note Prosper Wide Limited and TCL Communication Technology Holdings Limited, subsidiaries of the
15 Company’s wholly-owned subsidiary TCL Industries Holdings (HK) Limited, acquired in September 2015
a 40% interest and a 19.99% interest in East Fair Investments Limited (hereinafter referred to as “East
Fair Investments”), respectively, with a capital of RMB 9, 600, 000 and a c apital of RMB 4,798, 000. As
such, the differenc e bet ween the accumulated investment of P rosper Wide Limited and TCL
Communication Tec hnology Holdings Limited in East Fair Investments (corresponding to a combined
interest of 59.99%) and the fair value of the identifiable net assets of East Fair Investments attributable to
Prosper Wide Limited and TCL Communication Technology Holdings Limited on the settlement date
(equivalent to RMB 50,729,000) was recorded in the Company’s goodwill. An impairment allowance of
RMB 50,729, 000 had been established on this goodwill item for 2017. And this item was transferred out
in 2019 due to disposal of subsidiaries.
Note Highly Information Industry Co., Ltd., a subsidiary of the Company, acquired in October 2016 a 60%
16 interest in Qingdao Blue Business Consulting Co., Ltd. (hereinafter referred to as “Blue Business
Cons ulting”) with a capital of RMB 10,000,000. As such, the difference between t he 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 2,452,000) was recorded in the
Company’s goodwill.
Note On December 31, 2019, the Company tested asset groups inclusive of goodwill for impairment. Upon the
17 test, goodwill is not impaired.
(1) Provision for impairment of goodwill
Opening Increase in Decrease in
Name of invested company balance current period current period Closing balance
TCL Communication Technology Holdings
194,551 - (194,551) -
Limited
Toshiba Vis ual Products (China) Co., Ltd. 12,065 - (12,065) -
JRD Communication Inc. 34,453 - (34,453) -
East Fair Investments Limited 50,729 - (50,729) -
TCL Medical Radiological Technology (Beijing)
28,967 - - 28,967
Co., Ltd.
Huizhou TCL Environment Technology Co.,
- 92,952 (92,952) -
Ltd.
320,765 92,952 (384,750) 28,967
121
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
(2) 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 distribut es 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.
122
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
23 Goodwill (Continued)
The carrying amount of each asset group including goodwill and the amount of allocated
(a)
goodwill are as follows:
December 31, 2019
Carrying amount of asset group Allocated goodwill amount
Business asset group of
2,780 2,452
Qingdao Blue
2,780 2,452
(b) The recoverable amount of the asset group and the asset group combination is calculated based on
the five-y ear 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
8%
forecast period
Income growth rate in stable
0%
period
Net profit rate in forecast
5%
period
Net profit rate in stable
4%
period
Discount rat e 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.
123
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
24 Long-term deferred expenses
Increase Amortizati December
Reduced
2019 in Increased on in 31,
subsidiarie Other
January 1 current subsidiaries current 2019
s
period period
Improvement
expense on
1,460,293 165,252 - (2,027) (95,392) 32 1,528,158
leased fixed
assets
Other 401,040 390,523 1,874 (276,068) (477,773) (63) 39,533
1,861,333 555,775 1,874 (278,095) (573,165) (31) 1,567,691
25 Deferred income tax assets and deferred income tax liabilities
(1) Deferred income tax assets
December 31, 2019 December 31, 2018
Deductible Deferred Deductible Deferred
temporary income tax temporary income tax
difference assets difference assets
Estimated liabilities 177,421 28,473 1,475, 703 226,083
Unrealized profit
- - 1,590, 469 261,126
within the Group
Provision for
444,625 74,208 629,031 100,264
impairment of assets
Changes in fair value 2,862 429 95,609 18,252
Deductible losses 4,202,964 671,868 364,596 89,707
Other 353,392 65,896 525,125 102,450
5,181, 264 840,874 4,680, 533 797,882
124
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
25 Deferred Income Tax Assets and Deferred Income Tax Liabilities (Continued)
(2) Deferred Income Tax Liabilities
December 31, 2019 January 1, 2019
Taxable Deferred Taxable Deferred
temporary Income Tax temporary Income Tax
Accelerated depreciation differences
4,924,463 Liabilities
782,644 differences
2,292,445 Liabilities
347,327
Changes in fair value 242,663 54,491 204,717 38,171
Government subsidies 314,595 52,290 81,854 15,098
Other 307,929 63,253 215,910 40,576
5,789,650 952,678 2,794,926 441,172
December 31, 2018
Taxable Deferred
temporary Income Tax
Accelerated depreciation differences Liabilities
2,292,445 347,327
of fixed assets
Changes in fair value 201,438 37,351
Government subsidies 81,854 15,098
Other 215,910 40,576
2,791,647 440,352
26 Other non-current assets
December 31, 2019 December 31, 2018
Advance payment for equipment and
3,336,619 2,649,080
land use rights (Note)
Advance payment for patents 225,576 362,608
Other 688,464 526,068
4,250,659 3,537,756
Notes The Company reclassifies long-term assets such as advance payment for equipment and land use
rights reflected in prepaid accounts to other non-current assets.
125
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
27 Short-term borrowings
Classification of short-term borrowings
December 31, 2019 December 31, 2018
Unsecured borrowings 11,291,664 13,240,637
Pledge borrowings 754,794 -
Interest payable 23,199 -
12,069,657 13,240,637
As at December 31, 2019, the short-t erm pledged borrowings of the Company amounted to RMB
754,794,000, which was pledged by trading financial assets of about RMB 1,743,204,000 (the
Company had no pledged short -term borrowings balance as at the end of 2018).
As at December 31, 2019, the Company does not have any short -term borrowings that have expired
and have not been repaid.
28 Borrowings from the Central Bank
As of December 31, 2019, the balance of the borrowings of TCL Finance Co., Ltd., a subsidiary of the
Company, from the central bank was RMB 573,222,000 (as at the end of 2018: RMB 231,404,000).
29 Deposits and placements from other financial institutions
December 31, 2019 December 31, 2018
Deposits and placements from other
1,355, 129 545,053
financial institutions
Deposits and placements from other financial institutions are the deposits of affiliated and
non-affiliated enterprises absorbed by TCL Finance Co., Ltd., a subsidiary of the Company, within the
business scope approved by the regulatory authority.
30 Trading financial liabilities (applicable in 2019 only)
December 31, 2019 January 1, 2019
Financial liabilities measured at fair
value and whose changes are 188,220 -
included in the current profit and loss
126
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
Financial liabilities measured at fair value and whose changes are included in the
31
current profit and loss (applicable in 2018 only)
December 31, 2018
Derivative financial liabilities -forward
106,901
foreign exchange contracts
Derivative financial liabilities -interest
105,196
rate swap contracts
212,097
The fair value of the Company's trading financial liabilities is determined based on the real -time
quoted price in the foreign exchange and interest rate open market. The fair value change of
the trading financial liabilities is determined based on the difference between the forward
exchange rate and interest rate of the contract price and quoted price in the foreign exchange
and interest rate open mark et on the balance sheet date.
32 Derivative financial liabilities (applicable in 2019 only)
December 31, 2019 January 1, 2019
Derivative financial liabilities 84,705 212,097
33 Notes payable
December 31, 2019 December 31, 2018
Bank acceptance 1,595, 901 2,234, 882
Commercial accept ance 124,501 857,692
1,720, 402 3,092, 574
There is no amount payable to shareholders holding 5% or more voting shares in the Company in the
account balance.
34 Accounts payable
Accounts payable mainly include the Company's accounts payable for raw materials and purchased
components. As of December 31, 2019, the balance of accounts payable was RMB 11, 549, 133, 000
(as at the end of 2018: RMB 23, 922,712,000), of which the accounts payable for more than one year
was RMB 31,013,000 (As of the end of 2018: RMB 262,062,000), accounting for about 0.27% of all
accounts payable (as at the end of 2018: 1.10%).
There is no amount pay able to shareholders holding 5% or more voting shares in this account.
127
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
35 Advances from customers
The end-of-term advance payment is mainly the sales of goods received in advance by the Company.
As at December 31, 2019, the balance of advance payment was RMB 141,749,000 (as at the end of
2018: RMB 1,460, 773, 000), and the Company had no large amount of advance payment older than
one year.
There is no advance payment from s hareholders holding 5% or more voting shares in this account
balance.
128
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
36 Payroll Payable and Long-Term Payroll Payable
(1) Payroll Payable
December 31, 2019 December 31, 2018
Short-term payroll payable (not e) 1,089, 163 2,802, 947
Defined contribution plans payable 1,371 16,124
Dismissal benefits payable 3,683 72,322
1,094, 217 2,891, 393
Notes Short-term payroll payable
Increase in Decrease in
January 1, 2019 current period current period December 31, 2019
Wages, bonuses, allowances
2,178,857 5,717,529 (6,976,060) 920,326
and subsidies
Social insurance premium 25,762 224,077 (207,665) 42,174
Housing fund 8,846 177,014 (165,852) 20,008
Trade union funds and staff
90,355 14,977 (103,282) 2,050
education funds
Others 499,127 99,615 (494,137) 104,605
2,802,947 6,233,212 (7,946,996) 1,089,163
(2) Long-Term Payroll Payable
December 31, 2019 December 31, 2018
Supplementary old age security pensions
(note) 23,018 24,246
Note This item is the supplementary old age security pensions payable to retired employees.
s
129
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
37 Taxes payable
December 31, 2019 December 31, 2018
VAT 26,997 238,049
Corporate income tax 154,027 214,140
Individual inc ome tax 22,666 34,204
City construction tax 1,965 18,504
Educational surcharge 1,450 13,328
Embankment charges 27 51,785
Waste electric appliance and electronic
- 60,870
product treatment fund
Other 19,674 85,654
226,806 716,534
Please refer to Note IV for the standards for provisions for taxes and the applicable tax rates.
38 Other payables
December 31, 2019 December 31, 2018
Interest payable - 586,819
Dividends payable 11,058 22,553
Other payables 12,282,508 22,511,402
12,293,566 23,120,774
130
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
38 Other payables (continued)
(1) Interest payable
December 31, 2019 December 31, 2018
Interest payable on MTN - 27,922
Interest payable on
corporate bonds - 314,321
Interest payable on
short-term commercial
papers - 67,467
Interest payable on bank
borrowings - 177,109
- 586,819
Note: The Company has no balance of interest payable at the end of the period, which is in accordance
with the requirements of the Notice on Revising and Issuing the Format of General Ent erprise Financial
Statements for 2019 (CK [2019] No. 6) issued by the Ministry of Finance on April 30, 2019. For an
enterprise that has implemented the new financial instrument accounting standard, the interest payable
is included in the book balance of the corresponding financial instruments based on the interest accrued
by the effective int erest rate method. For a long-term financial instrument with periodic interest
payments, during the holding period, the undue interest accrued using the effective int erest method is
classified as “current assets” or “current liabilities”.
(2) Dividends payable
December 31, 2019 December 31, 2018
Other minority shareholders 11,058 22,553
(3) Other payables
December 31, 2019 December 31, 2018
Engineering and equipment expense 8,515, 216 10,236,446
Ordinary current payables to external entities 2,711, 596 6,705, 566
Unpaid expenses 856,377 4,709, 423
Deposit and security deposit 199,319 407,967
Payables for land acquisition - 452,000
Total 12,282,508 22,511,402
There is no amount payable to shareholders holding 5% or more voting shares in this account.
39 Short-Term Commercial Papers Payable
December 31, 2019 December 31, 2018
Short-term commercial papers - 2,000, 000
131
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
40 Current Portion of Non-Current Liabilities
Note V December 31, 2019 December 31, 2018
Long-term borrowings (note 1) 42 800,000 3,509, 915
MTN (note 2) 499,748 -
Corporate bonds - 2,500, 000
Current portion of interest payable 392,215 -
1,691, 963 6,009, 915
Note 1 The current portion of long-term borrowings was RMB 800,000,000 of unsecured borrowings.
The interest rate of the Company 's current portion of long-term borrowing in the current period ranges
from 2.33% to 6.00% (in 2018: 2.33% to 5.57% ).
Note 2 The current portion of medium-term notes payable of RMB 499,748,000 at the end of the period was
reclassified to the item of “current portion of non-current liabilities”.
41 Other current liabilities
December 31, 2019 December 31, 2018
After-sales service expense (note) 35,435 1,108, 360
Financial assets sold under
- 185,364
repurchase agreements
Other 33,587 50,727
69,022 1,344, 451
Note After-sales service expense expected to occur within 1 year is reflected in current liabilities.
s
132
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
42 Long-term borrowings
December 31, 2019 December 31, 2018
Mortgage 33,589,761 29,516,297
borrowings
Unsecured 5,722, 298 10,858,541
borrowings
39,312,059 40,374,838
Of which: Current portion of long-t erm borrowings (800,000) (3,509,915)
38,512,059 36,864,923
The maturities of the Company’s long-term borrowings vary from 2020 to 2029.
As at December 31, 2019, the carrying amount of long-t erm mortgage borrowings was RMB
33,589,761,000, with land use rights, buildings, machinery and equipment and construction in progress
equivalent to RMB 39,055,477, 000 as the collateral.
The interest rate of the Company's current portion of long-term borrowing ranges from 2.33% to 6.00%
(in 2018: 2.33% to 5.57%).
43 Bonds payable
December 31, 2019 December 31, 2018
Corporate bonds (note 1) 14,483,130 10,492,914
MTN (note 2) 1,995, 955 2,492, 714
16,479,085 12,985,628
133
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
43 Bonds Payable (Continued)
Note On March 16, 2016, the Company issued RMB 1.5 billion of five-year corporate bonds. On July 7,
1 2016, the Company issued RMB 2 billion of 2016 (P hase II) five-year corporate bonds.
On April 19, 2017, the Company issued RMB 1 billion of 2017 (Phase I) five-year corporate bonds.
On July 7, 2017, the Company issued RMB 3 billion of 2017 (Phase II) five-year corporate bonds.
On June 6, 2018, the Company issued RMB 1 billion of 2018 (Phase I) five -year corporat e bonds. On
August 20, 2018, the company issued RMB 2 billion of 2018 (Phase II) five-year corporate bonds.
On May 20, 2019, the Company issued RMB 1 billion of 2019 (Phase I) five -year corporate bonds.
On July 23, 2019, the Company issued RMB 1 billion of 2019 (P hase II) five-year corporate bonds.
On October 21, 2019, the Company issued RMB 2 billion of 2019 (Phas e III) five-y ear corporate
bonds.
Note On April 2, 2015, the Company issued RMB 500 million of 5-year medium-t erm notes.
2
On December 3, 2018, the Company issued RMB 2 billion of 3-year medium -term notes.
The current portion of medium -term notes payable of RMB 499,748,000 at the end of this period was
reclassified to the item of “current portion of non-current liabilities”.
44 Long-term payables
December 31, 2019 December 31, 2018
Technological development fund 24,000 73,000
Other 206 902
24,206 73,902
45 Deferred income
December 31, 2019 December 31, 2018
Government subsidies (note) 1,912, 421 2,637, 229
Note: Mainly income-related
134
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
46 Share Capital
January 1, 2019 Increase or decrease in current period December 31, 2019
(Unit: Thousand yuan) Amount Proportion New issues Other Subtotal Amount Proportion
I. Restricted shares 1,825,654 13.47% - (957,888) (957,888) 867,766 6.41%
II. Unrestricted shares 11,723,995 86.53% - 936,678 936,678 12,660,673 93.59%
III. Total shares 13,549,649 100.00% - (21,210) (21,210) 13,528,439 100.00%
135
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
46 Share Capital (Continued)
As at 31 December 2019, 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.
47 Capital Reserves
Increase in Decrease in
January 1, 2019 current period current period December 31, 2019
Share premium 4,930,142 - (5,930) 4,924,212
Other capital reserves 1,066,599 - (274,144) 792,455
5,996,741 - (280,074) 5,716,667
48 Treasury stock
January 1, 2019 Increase in Decrease in December 31, 2019
current period current period
Incentive shares 63,458 126,726 (44,764) 145,420
Repurchased shares 1,934,263 (126,726) 1,807,537
63,458 2,060,989 (171,490) 1,952,957
The increase in incentive shares in the current period was RMB126,726,000 trans ferred through a
non-deal manner from repurchased t reas ury stock to incentive shares, while t he decrease in the
current period was prim arily driven by the grant, unlocking and retirement of shares.
The increase in repurchas ed shares in t he current period was repurchases in the current period,
while the decrease in the current period was primarily driven by the non -deal transfer from
repurchased treasury stock to incentive shares.
49 Surplus Reserves
Increase in Decrease in
January 1, 2019 current period current period December 31, 2019
Statutory surplus reserves 2,001,391 54,107 - 2,055,498
Discretionary surplus
reserves 182,870 - - 182,870
2,184,261 54,107 - 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 regist ered 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 us ed to
make up the previous loss or increase the share capital.
136
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
50 General Reserve
Decrease in
Increase in current current
January 1, 2019 period period December 31, 2019
General Reserve 361 - - 361
As per the General Rules on Financial Affairs of Financial E nterprises and the Guide t o 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.
51 Retained Earnings
2019 2018
Beginning retained earnings 10,000,973 8,577, 688
Changes in accounting policies (106,833) -
Net profit for current period 2,617, 765 3,468, 211
Decrease in current period (1,396,755) (2,044,926)
Including: Appropriated as surplus reserves (52,832) (689,961)
Distributed to ordinary shareholders as
(1,337,079)
dividends (1,354,965)
Others (6,844) -
Ending retained earnings 11,115,150 10,000,973
137
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
52 Operating Revenue and Cost of Sales
2019 2018
Operating Operating
revenue Cost of sales revenue Cost of sales
Core business 74,056,389 66,003,229 112,282,593 91,888,990
Non-core business 876,697 333,888 1,077, 483 716,599
74,933,086 66,337,117 113,360,076 92,605,589
(1) Core Business by Operating Area
Revenue Cost of sales Gross profit
2019 2018 2019 2018 2019 2018
Dome
stic
sales 47,799,405 56,473,133 42,114,424 46,197,816 5,684, 981 10,275,317
Export
sales 26,256,984 55,809,460 23,888,805 45,691,174 2,368, 179 10,118,286
74,056,389 112,282,593 66,003,229 91,888,990 8,053, 160 20,393,603
(2) The sales revenue from the top five customers combined was RMB 21,701,693,000 and RMB
17,833,273,000 respectively for 2019 and 2018, accounting for 29. 3% and 15.88% of the core business
revenue.
53 Interest Income/Expense and Exchange Gain
2019 2018
Interest income 144,720 87,362
Interest expense 17,230 72,248
Exchange gain/(loss) (12,499) (47,714)
The interest income, int erest 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.
138
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
54 Taxes and Surcharges
2019 2018
City maintenance and construction tax 64,586 132,326
Property tax 93,039 109,329
Stamp tax 67,689 103,995
Educational surcharge 47,761 96,329
Land use tax 12,370 15,064
Others 45,143 204,219
330,588 661,262
The applicable tax and surcharge standards
are detailed in Note IV.
55 Sales Expenses
2019 2018
Employee salaries and benefits 647,645 1,890, 522
Traffic expense 481,379 1,707, 790
Advertising and sales promotional expense 434,422 1,520, 470
After-sales service expense 424,439 1,448, 773
Brand promotion expense 225,349 808,948
Others 644,255 1,510, 518
2,857, 489 8,887, 021
56 General and Administrative Expenses
2019 2018
Employee salaries and benefits 855,810 2,142, 861
Depreciation and amortization expense 378,404 568,048
Expense for hiring intermediary organizations 333,300 422,194
Insuranc e expense 101,074 192,146
Others 226,500 974,358
1,895, 088 4,299, 607
139
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
57 Research and Development Expenses
2019 2018
Depreciation and amortization expense 1,185, 695 798,740
Employee salaries and benefits 905,908 1,678, 164
Material expens e 872,466 1,252, 141
Outsourcing development expense 124,889 101,496
Insuranc e expense 68,894 135,169
Others 238,953 711,869
3,396, 805 4,677, 579
58 Financial Expenses
2019 2018
Interest expense 1,958, 251 1,782, 408
Interest income (401,645) (621,949)
Exchange loss/(income) (355,134) (321,412)
Others 47,329 134,214
1,248, 801 973,261
59 Other Incomes
2019 2018
R&D subsidies 1,811, 757 1,851, 643
VAT rebates on software 62,208 367,075
VAT accrual and deduction 7,323 -
Others 19,348 -
1,900, 636 2,218, 718
140
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
60 Return on Investment
2019 2018
Proceeds from disposal of credit instruments
346,391 -
at fair value through profit or loss
Proceeds from disposal of equity
instruments at fair value through profit or (113,316) -
loss
Proceeds from holding of equity instruments
28,747
at fair value through profit or loss
Proceeds from holding of credit instruments
99,859 -
at fair value through profit or loss
Credit instruments measured at amortized
7,217 -
cost through profit or loss
Income from disposal of wealth
management instruments - 691,917
Income from disposal of derivative financial
assets/liabilities - (64,779)
Share of net income of associates 1,620, 874 1,334, 263
Share of net income of joint ventures 36,597 26,005
Net income from dispos al of long-term
equity investments 1,416, 185 (48,708)
Income from disposal of available-for-s ale
financial assets - 109,175
Income during period of holding
available-for-sale financial assets - 119,381
3,442, 554 2,167, 254
61 Gains on Changes in Fair Value
2019 2018
Tradable financial asset 555,470 -
Derivative financial assets 138,119 -
Tradable financial liabilities (4,771) -
Derivative financial liabilities (215,145) -
Financial assets/liabilities at fair value
through profit or loss – forward forex - 5,834
contracts
Financial liabilities at fair value through profit
- (9,380)
or loss - wealth management instruments
Financial assets at fair value through profit
- (333)
or loss - interest rate swap contracts
473,673 (3,879)
141
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
62 Credit impairment loss (for 2019 only)
2019
Loss on uncollectible accounts of accounts
receivable 34,693
Loss on uncollectible accounts of other
receivables (2,435)
32,258
63 Asset Impairment Loss
2019 2018
Loss on uncollectible accounts - 217,800
Inventory valuation loss 568,443 999,690
Loss on impairments of available-for-sale
financial assets (for 2018 only) - 22,548
Loss on impairment of long-term equity
investments - 31,277
Loan impairment loss 123,761 7,522
Loss on impairments of fixed assets 3,000 61,572
Loss on impairment of intangible assets 11,845 43,548
Loss on impairment of goodwill 92,952 62,823
Loss on impairment of other assets (8,889) 76,339
791,112 1,523, 119
64 Asset Disposal Income
2019 2018
Income/(loss) from disposal of fixed assets 1,042 129,282
Income/(loss) from disposal of intangible
(116,206)
assets 26
Income from disposal of other non-current
(3,005)
assets 89
1,157 10,071
142
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
65 Non-Operating Income
2019 2018
Gains on retired or damaged non-current
84 742
assets
Including: Gains on retired or damaged
84 714
fixed assets
Others 128,525 956,067
128,609 956,809
66 Non-Operating Expense
2019 2018
Losses on retired or damaged non-current
1,763 8,398
assets
Including: Losses on retired or damaged
946 7,926
fixed assets
Losses on retired or damaged
- 232
intangible assets
Others 47,882 96,233
49,645 104,631
67 Income Tax Expense
(1) Income tax expense statement
2019 2018
Current income tax expense 198,993 641,006
Deferred income tax expense 199,076 238,176
398,069 879,182
143
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
67 Income Tax Expense (Continued)
(2) Accounting profits and income tax adjustment process
2019 2018
Total profit 4,055, 803 4,944, 380
Income tax expense calculated at statutory/applicable tax
1,013, 951 1,236, 095
rate
Impact of different tax rates applied to subsidiaries (699,553) (300,160)
Impact of adjusting income tax in previous periods 12,009 21,235
Impact of non-taxable income (113,147) (535,444)
Impact of non-deductible costs, expenses and losses 13,977 287,277
Impact of deductible losses on the use of previously
(19,689) (119,824)
unrecognized deferred income tax assets
Impact of deductible temporary differences or deductible
losses of unrecognized deferred income tax assets in the 45,798 -
current period
Others 144,723 290,003
Income Tax Expense 398,069 879,182
144
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
68 Other Comprehensive Income
(1) Other comprehensive income items, income tax effects and reclassifications to profit or loss
2019 2018
I. Items that cannot be reclassified to profit or loss subsequently 27,642 -
1. Share of other comprehensive income of investees that will be
8,980 -
reclassif ied to profit or loss under equity method
Amount attributable to the Company in the current period 15,065 -
Previous other comprehensive income reclassif ied to retained
(6,085) -
earnings for current period
18,662 -
2. Changes in fair value of other equity instruments
Current gain/(loss) 9,798 -
Previous other comprehensiv e income reclassified to retained
13,251 -
earnings for current period
Income tax effects recorded in other comprehensiv e income (4,387) -
II. Items that w ill be reclassif ied to profit or loss subsequently 461,163 (1,663,194)
1. Share of other comprehensive income of investees that will be
32,200 132,924
reclassif ied to profit or loss under equity method
Amount attributable to the Company in the current period 59,512 132,924
Income tax effects recorded in other comprehensiv e income (27,312) -
2. Available-for-sale financial assets - (803,456)
Current gain/(loss) - (576,616)
Previous other comprehensiv e income reclassified to profit for current
- (226,840)
period
Income tax effects recorded in other comprehensiv e income -
3. Cash flow hedges (86,576) (96,064)
Current gain/(loss) (118,895) (45,368)
Previous other comprehensiv e income reclassified to profit for current
31,056 (40,471)
period
Income tax effects recorded in other comprehensiv e income 1,263 (10,225)
4. Differences arising from translation of foreign currency financial
250,005 (896,598)
statements of overseas operations
5. Net amount transferred to profit or loss in the current period for
265,534 -
disposal of overseas operations
Total 488,805 (1,663,194)
145
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
68 Other comprehensive income (continued)
(2) Changes in Other Comprehensive Income Items
Equity attributable to shareholders of the Company as the parent
Differenc es
Share of other arising from
comprehensive Gain/Loss on translation
income of changes in of foreign
investees that will fair value of Gain/(Loss) currency-d Fair value Total other
Accounting be reclassified to available-for- on changes enominated changes of Non-cont r comprehen
policy profit or loss under sale financial in cash flow financial other equity olling sive
Change equity method assets hedges statements instruments Subtotal interests income
January 1, 2018 - 56,074 400,380 121,329 (358,511) - 219,272 48,069 267,341
Change in 2018 - 132,924 (750,787) (89,078) (686,493) - (1,393,434) (269,760) (1,663,194)
December 31, 2018 - 188,998 (350,407) 32,251 (1,045,004) - (1,174,162) (221,691) (1,395,853)
Changes in 2019 334,950 41,181 - (66,723) 311,357 19,315 640,080 183,675 823,755
December 31, 2019 334,950 230,179 (350,407) (34,472) (733,647) 19,315 (534,082) (38,016) (572,098)
146
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
69 Earnings per Share (EPS)
(1) Basic EPS
2019 2018
Net profit attributable to owners of the Company as the
2,617, 765 3,468, 211
parent
Weighted average outstanding ordinary shares (in
13,178,283 13,514,972
thousand shares)
Basic EPS (RMB yuan/share) 0.1986 0.2566
(2) Diluted EPS
2019 2018
Net profit attributable to owners of the Company as the
2,617, 765 3,468, 211
parent
Diluted weighted average outstanding ordinary shares
13,528,439 13,538,282
(in thous and shares )
Diluted EPS (RMB yuan/share) 0.1935 0.2562
70 Cash Generated from Other Operating Activities
Cash generated from other operating activities in the consolidated cas h flow statement was
RMB2,329,643,000, which primarily consisted of other current payments received and government
subsidies.
71 Cash Used in Other Operating Activities
Cash used in other operating activities in the consolidated cash flow statement was
RMB3,780,067,000, which primarily consisted of various expenses.
72 Cash Used in Other Financing Activities
Cash used in other operating activities in the consolidated cash flow statement was
RMB2,350,627,000, which was mainly cash paid to repurchase treasury stock.
147
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
73 Net Cash Generated from/Used in Operating Activities
Reconciliation of Net Profit to Net Cash Generated from/ Used in Operating Activities
2019 2018
Net profit 3,657, 734 4,065, 198
Add：Asset impairment allowance 823,370 1,523, 119
Depreciation of fixed assets 7,153, 320 6,941, 175
Amortization of intangible assets 545,523 548,421
Amortization of long-term prepaid expense 573,165 481,053
Loss/(Inc ome) from disposal of fixed assets,
intangible assets and ot her long-lived assets (1,157) (10,071)
Loss on retired or damaged fixed assets 1,679 7,656
Loss/(Gain) on changes in fair value (473,673) 3,879
Financial Expenses 1,632, 846 1,580, 958
Return on Investment (3,442,554) (2,167,254)
Decrease/(Increase) in deferred inc ome tax assets (42,992) 73,961
Increase/(Decrease) in deferred income tax
liabilities 512,326 169,195
Decrease/(Increase) in inventory 13,641,565 (7,941,359)
Decrease/(Increase) in operating receivables 10,891,929 1,228, 167
Increase/(Decrease) in operating receivables (24,131,345) 898,032
Other 148,360 3,084, 449
Net cash generated from/used in operating activities 11,490,096 10,486,579
74 Changes in Cash and Cash Equivalents, Net
Ending cash and cash equivalents 17,637,743 25,702,384
Less: Beginning cash 25,702,384 23,281,169
Net increase in cash and cash equivalents (8,064,641) 2,421, 215
Analysis of ending cash and cash equivalents：
Ending monetary assets 18,648,185 26,801,343
Less: Ending non-cash equivalents (note) 1,010, 442 1,098, 959
Ending cash and cash equivalents 17,637,743 25,702,384
Not The ending non-cash equivalents primarily included bank deposits, the required reserve
e: deposited by TCL Finance Co., Ltd. in the central bank and other monetary assets. For further
information, see Note V, item 1.
148
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
V Notes to Items in Consolidated Financial Statements (Continued)
75 Foreign currency monetary items
December 31, 2019
Foreign currency balanc e Conversion rate RMB balance
Monetary assets
Including: US D 377,494 6.9762 2,633, 477
HKD 306,665 0.8959 274,741
Accounts receivable
Including: US D 295,367 6.9762 2,060,539
HKD 5,403 0.8959 4,841
Accounts payable
Including: US D 150,246 6.9762 1,048,146
HKD 1,105,500 0.8959 990,417
JPY 1,682,029 0.0642 107,986
Other receivables
Including: US D 11,875 6.9762 82,842
HKD 271,690 0.8959 243,407
JPY 11,970 0.0642 768
PLN 118 1.8387 217
INR 624,138 0.0978 61,041
Other payables
Including: US D 21,373 6.9762 149,102
HKD 65,523 0.8959 58,702
JPY 13,306 0.0642 854
INR 45,356 0.0978 4,436
Short-term borrowings
Including: US D 199,198 6.9762 1,389,645
Long-term borrowings
Including: US D 2,626,000 6.9762 18,319, 501
149
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VI Changes in Consolidation Scope
1 Newly Consolidated Entities for Current Period
The
Consolidated
Investee Reason for change Registered capital Company’s
period
interest
Huizhou Hongsheng Technology
Jan.-Dec. 2019 Newly incorporated RMB 1,000,000 100%
Development Co., Ltd.
Kunshan Ruiying Medical Imaging
Feb.-June 2019 Newly incorporated RMB 50,000,000 100%
Diagnosis Center Co., Ltd.
Zhongshan Hongyuan Technology
Feb.-March 2019 Newly incorporated RMB 100,000 100%
Development Co., Ltd.
Wuxi TCL Medical Imaging Technology
Feb.-June 2019 Newly incorporated RMB 43,900,000 70%
Co., Ltd.
Tongxinggongxue Education Technology
Feb.-Dec. 2019 Newly incorporated RMB 5,000,000 100%
(Huizhou) Co., Ltd.
AHFG ESOP Limited Feb.-Dec. 2019 Newly incorporated HKD 50,000 100%
TCL Entertainment Solutions Limited March-March 2019 Newly incorporated RMB 20,000,000 100%
Guangzhou Tianshi Cloud Intelligence
March-March 2019 Newly incorporated RMB 50,000,000 80%
Technology Co., Ltd.
Zhihui Xinyuan Commercial (Huizhou) Co.,
Ltd. March-March 2019 Newly incorporated RMB 30,000,000 100%
Jiaozuo Kangying Clinic Co., Ltd. March-June 2019 Newly incorporated RMB 10,000,000 99%
Shenzhen Huaying Clinic April-June 2019 Newly incorporated RMB 12,000,000 70%
Shenzhen Huaying Medical Imaging
April-June 2019 Newly incorporated RMB 20,000,000 100%
Diagnosis Center
TCL Industrial Technology Research
May - Dec. 2019 Newly incorporated PLN 10,000,000 100%
Institute (Europe) Co., Ltd.
TCL Technology Investments Limited July - Dec. 2019 Newly incorporated HKD 214,115, 600 100%
Admiralty Harbour Global Credit
Aug. - Dec. 2019 Newly incorporated USD 0.01 100%
Opportunities Fund
GARFORD LIMITED Sept. - Dec. 2019 Newly incorporated USD1 100%
Chongqing Blue Business Consulting Co.,
Oct.- Dec. 2019 Newly incorporated RMB 10,000,000 100%
Ltd.
150
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VI Changes in Consolidation Scope (Continued)
2 Subjects that are no longer included in the consolidation scope in the current period (continued)
Time of no longer
included in
Investee consolidation scope Reas on for change
TCL Technology Park (Wuhan) Co., Ltd. Jan. 2019 Transfer
Shanghai Xinying Medical Technology Co.,
ltd. Jan. 2019 Cancellation
Taiwan Dabis Mobile Communication Co.,
ltd. March 2019 Cancellation
Xingyun Enterprise Co., Ltd. March 2019 Cancellation
Beijing Xunying Renren Medical
Technologies Co., Ltd. March 2019 Cancellation
Shaanxi Shangxinfeng Environmental
Technology Co., Ltd. April 2019 Transfer
Shanghai Huiying Medical Technology Co., Capital Increase by
Ltd. April 2019 Minority Shareholders
TCL Industries Holdings (HK) Limited and its
subsidiaries April 2019 Transfer
Huizhou TCL Household Electric Appliance
Group Co., Ltd. and its subsidiaries April 2019 Transfer
TCL Home Appliances (Hefei) Co., Ltd. and
its subsidiaries April 2019 Transfer
Huizhou Cool Friends Network Technology
Co., Ltd. and its subsidiaries April 2019 Transfer
Koyoo Online Service Co., Ltd. April 2019 Transfer
TCL Technology Park Co., Ltd. and its
subsidiaries April 2019 Transfer
Getech Ltd. and its subsidiaries April 2019 Transfer
JDH Information Tech (Zhuhai) Co., Ltd. April 2019 Transfer
Shenzhen HYT E-Commerce Limited June 2019 Cancellation
Techne Corporation June 2019 Cancellation
Wuxi TCL Medical Imaging Technology Co., Capital Increase by
Ltd. and its subsidiaries June 2019 Minority Shareholders
Shenzhen Haixing Education Technology
Co., Ltd. July 2019 Cancellation
Caixingqiu (Shenzhen) Technology Co., Ltd. July 2019 Cancellation
Shenzhen Thunderbird Digital Entertainment
Technology Co., Ltd. Aug. 2019 Transfer
Shenzhen HAWK Internet Co., Ltd. and its
subsidiaries Nov. 2019 Transfer
Huizhou TCL Environmental Resource Co.,
Ltd. and its subsidiaries Nov. 2019 Transfer
Guangzhou Zhilang Credit Investigation Co.,
Ltd. Nov. 2019 Transfer
Xi' an Huaxian Software Development
Service Co., Ltd. Dec. 2019 Cancellation
Huizhou TCL Light Electrical Appliances Co.,
Ltd. Dec. 2019 Transfer
151
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VI Changes in Consolidation Scope (Continued)
3 Subsidiaries Disposed in Current Period
TCL Industries
Holdings (HK) Limited
and its subsidiaries
Huizhou TCL
Hous ehold Electric
Appliance Group Co.,
Ltd. and its subsidiaries
TCL Home Applianc es
(Hefei) Co., Ltd. and its
subsidiaries
Huizhou Cool Friends Shaanxi Shangxinfeng Shanghai Huiying Wuxi TCL Medical
TCL Technology Park Network Tec hnology
Name of subsidiaries Environmental Medical Technology Co., Imaging Technology Co.,
(Wuhan) Co., Ltd. Co., Ltd. and its Technology Co., Ltd. Ltd. Ltd. and its subsidiaries
subsidiaries
Koyoo Online Service
Co., Ltd.
TCL Technology Park
Co., Ltd. and its
subsidiaries
Getech Ltd. and its
subsidiaries
JDH Information Tech
(Zhuhai) Co., Ltd.
435 - -
Price for equity interest disposal 255,000 4,760, 000
152
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VI Changes in Consolidation Scope (Continued)
3 Subsidiaries Disposed in Current Period (Continued)
51.00% 90.00% 35.00%
% equity interest disposed 51.00% Not applicable
Transfer Capit al Increase by Capit al Increase by
Way of disposal Transfer Transfer Minority Shareholders Minority Shareholders
Time of loss of cont rol Jan. 2019 April 2019 April 2019 May 2019 June 2019
When the rights and When the rights and When the rights and When the rights and
obligations in relation When the rights and obligations in relation to obligations in relation to obligations in relation to
to the target equity obligations in relation to the target equity interest the target equity interest the target equity interest
Determination basis for time of loss interest have all been the target equity interest have all been transferred have all been transferred have all been transferred
of control transferred have all been trans ferred
Differenc e between the disposal
price and the Company’s share of
the subsidiary’s net assets in the
1,265 1,238, 377 (43) 1,494 28,728
consolidated financial statements
relevant to the disposed equity
interest
153
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VI Changes in Consolidation Scope (Continued)
Subsidiaries Disposed in Current Period (Continued)
3
Shenzhen Thund Huizhou TCL Huizhou TCL
Shenzhen HAWK Guangzhou Zhilang
erbird Digital Ent Environmental Light Electrical
Name of subsidiaries Internet Co., Ltd. Credit Investigation
ertainment Tech Resource Co., Ltd. Appliances Co.,
and its subsidiaries Co., Ltd.
nology Co., Ltd. and its subsidiaries Ltd.
Price for equity interest disposal 0.002 200,110 - 274,891 31,240
% equity interest disposed 100% 100% 100% 71% 100%
Way of disposal Transfer Transfer Transfer Transfer Transfer
Time of loss of cont rol Aug. 2019 Nov. 2019 Nov. 2019 Nov. 2019 Dec. 2019
When the rights
When the rights When the rights and
When the rights and When the rights and and obligations
and obligations in obligations in
obligations in obligations in in relation to the
relation to the relation to the
target equity relation to the target relation to the target target equity
target equity
interest have all
equity interest have equity interest have interest have all
interest have all
Determination basis for time of been transferred all been trans ferred all been trans ferred been
been transferred
loss of control transferred
Differenc e between the disposal
price and the Company’s share of
the subsidiary’s net assets in the
200 20,552 - 37,287 22,305
consolidated financial statements
relevant to the disposed equity
interest
154
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities
1 Interests in Subsidiaries
(1) Major Subsidiaries
Place of Nature of The Company’s interest How subsidiary
Investee
registration business Direct Indirect was obtained
TCL China Star Optoelectronics Technology Manufacturing
Shenzhen 88.82% - Incorporated
Co., Ltd. (note 1) and sales
Shenzhen China Star Optoelectronics Manufacturing
Shenzhen - 53.87% Incorporated
Semiconductor Display Technology Co., Ltd. and sales
Guangzhou China Ray Optoelectronic Research and
Guangzhou - 100. 00% Incorporated
Materials Co., Ltd. development
Wuhan China S tar Optoelectronics Manufacturing
Wuhan - 45.55% Incorporated
Technology Co., Ltd. (Note 2) and sales
Wuhan China S tar Optoelectronics
Manufacturing
Semiconductor Display Technology Co., Ltd. Wuhan - 33.88% Incorporated
and sales
(Note 2)
Obtained in a
business
Manufacturing combination
Shenzhen CPT Display Technology Co., Ltd. Shenzhen - 100. 00%
and sales not under
common
control
China Star Optoelectronics International Hong Kong Sales - 100. 00% Incorporated
(HK) Limited
Obtained in a
business
China Display Optoelectronics Technology Investment combination
Bermuda - 64.21%
Holdings Limited holding not under
common
control
China Display Optoelectronics Technology Manufacturing
Huizhou - 100. 00% Incorporated
(Huizhou) Co., Ltd. and sales
Wuhan China Display Optoelectronics Manufacturing
Wuhan - 100. 00% Incorporated
Technology Co., Ltd. and sales
The Virgin Investment
TCL Educational Web Ltd. - 100. 00% Incorporated
Islands holding
Shenzhen TCL Educational Technology Co., Educational
Shenzhen - 100. 00% Incorporated
Ltd. services
Silk Road (Beijing) International Education Educational
Beijing - 80.00% Incorporated
and Technology Center Co., Ltd. services
Beijing HAWK Cloud Information Technology
Beijing Internet service 100. 00% - Incorporated
Co., Ltd.
TCL Culture Media (Shenzhen) Co., Ltd. Shenzhen Ad planning 100. 00% - Incorporated
Product
Highly Information Industry Co., Ltd. Beijing 73.69% - Incorporated
distribution
Beijing Sunpiestore Technology Co., Ltd. Beijing Sales - 60.00% Incorporated
Beijing Lingyun Data Technology Co., Ltd. Beijing Sales - 60.00% Incorporated
155
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
1 Interests in Subsidiaries (Continued)
(1) Major Subsidiaries (Continued)
The Company’s interest How
Place of
Nature of subsidiary
Investee registratio
business Direct Indirect was
n
obtained
TCL Finance Holdings Group Guangzho Incorporate
Financial 100% -
(Guangzhou) Co., Ltd. u d
Incorporate
TCL Finance Co., Ltd. Huizhou Financial 82% -
d
TCL Finance Technology (Shenzhen) Incorporate
Shenzhen Financial - 100%
Co., Ltd. d
Shenzhen Baisi Asset Management Co., Asset Incorporate
Shenzhen management - 100%
Ltd. d
TCL Financial Service (Guangzhou) Co., Guangzho Financial Incorporate
- 100%
Ltd. u services d
TCL Commercial Factoring (Shenzhen) Commercial Incorporate
Shenzhen - 100%
Co., Ltd. factoring d
Huizhou Zhongkai TCL Zhirong
Huizhou Financial 89.84% - Acquired
Technology Microcredit Co., Ltd.
Investment Incorporate
Xinjiang TCL Equity In vestment Co., Ltd Xinjiang 100% -
business d
Property Incorporate
TCL Technology Park (Huizhou) Co., Ltd. Huizhou 100% -
management d
The Virgin Investment Incorporate
Winshero Investment Limited 100% -
Islands business d
Research
Incorporate
TCL Research America Inc. U.S. and - 100%
d
development
Research
TCL Industrial Technology Research Hong and - 100% Incorporate
Institute (Hong Kong) Limited Kong d
development
Hong Investment Incorporate
TCL Technology Investments Limited 100% -
Kong business d
156
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
1 Interests in Subsidiaries (Continued)
(1) Major Subsidiaries (Continued)
Note
1 Shenzhen China Star Optoelectronics Technology Co., Ltd. was renamed “TCL China Star Optoelectronics
Technology Co., Ltd.” in October 2019.
Note TCL China Star Optoelectronics Technology Co., Ltd. (hereinafter referred to as “TCL CSOT”), a subsidiary
2 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
Current period Current period
Ending equity
Profit or loss Dividends
Non-controlling attributable to
Name of subsidiaries attributable to distributed to
interests non-controlling
non-controlling non-controlling interests
interests interests
TCL China Star Optoelectronics
11.18% 576,102 - 32,986,429
Technology Co., Ltd.
Highly Information Industry Co., L td. 26.31% 64,251 27,910 297,835
157
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
1 Interests in Subsidiaries (Continued)
(2) Subsidiaries with Significant Minority Shareholders'' Interests (Continued)
The main financial information of the above subsidiary is listed as follows:
December 31, 2019 December 31, 2018
Current Non-current Assets Current Non-current Liabilities Current Non-current Assets Current Non-current Liabilities
Assets Assets Total Liabilities Liabilities Total Assets Assets Total Liabilities Liabilities Total
TCL China Star
Optoelectronics
39,784,300 90,798,110 130,582,410 36,200,599 39,150,594 75,351,193 37,654,261 78,694,317 116,348,578 35,014,430 33,644,993 68,659,423
Technology Co.,
Ltd.
Highly Information
4,482,847 37,662 4,520,509 3,484,042 33,587 3,517,629 3,937,368 20,555 3,957,923 3,050,859 20,000 3,070,859
Industry Co., Ltd.
2019 2018
Net Cash
Generated
from/Used
Total Net Cash Generated Total in
comprehensive from/Used in Operating Operating Net comprehensive Operating
Operating revenue Net profit income Acti vities revenue profit income Acti vities
TCL China Star
Optoelectronics 33,993,534 964,444 846,436 8,253,015 27,666,368 2,321,582 2,225,619 9,025,339
Technology Co., Ltd.
Highly Information
20,835,617 215,604 215,604 194,578 16,566,993 195,939 195,939 (80,265)
Industry Co., Ltd.
158
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
2 Interests in Joint Ventures and Associates
(1) Basic Information about Major Joint Ventures and Associates
The Company’s
interest
Principal
Investee place of Nature of business
business/pla Strategic to the Direct Indirect
ce of Group’s activities or
registration not
Joint ventures–
TV University Online Distance Education Educational
Technology Co., Ltd. Beijing services Yes - 50.00%
Huizhou TCL Taidong Shihua Investment
Co., Ltd. Huizhou Shihua Yes - 50.00%
Associates–
Tianjin 712 Communication & Broadcasting
Co., Ltd. Tianjin Communication Yes - 19.07%
Bank of Shanghai Co., Ltd. Shanghai Financial Yes - 5.14%
Not For the Reporting Period, the Company had a 5.14% interest in Bank of Shanghai Co., Ltd. and appointed
e: 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 Joint Ventures
December 31, 2019 December 31, 2018
TV University TV University
Online Distance Online Distance
Education Huizhou TCL Taidong Education Huizhou TCL Taidong
Technology Co., Shihua Investment Co., Technology Co., Shihua Investment Co.,
Ltd. Ltd. Ltd. Ltd.
Current assets 1,280,911 2,488 1,237,435 8,504
Non-current assets 73,852 45,741 76,396 32,517
Total assets 1,354,763 48,229 1,313,831 41,021
Current liabilities 1,033,623 22,671 1,049,238 2,734
Non-current liabilities 29,140 - 27,385 -
Total liabilities 1,062,763 22,671 1,076,623 2,734
Non-controlling interests 8,489 - 7,236 -
Equity attributable to shareholders of 283,511 25,558 229,972 38,287
the Company as the parent
Share of equity in proportion to the 141,756 12,779 114,986 19,143
Company’s interest
Carrying amount of investment in joint 137,902 12,779 111,062 19,143
venture
159
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
2 Interests in Joint Ventures and Associates (Continued)
(2) Key Financial Information of Major Joint Ventures (Continued)
2019 2018
TV University TV University
Online Distance Online Distance Huizhou TCL
Education Huizhou TCL Taidong Education Taidong
Technology Co., Shihua Investment Technology Co., Shihua Investment
Ltd. Co., Ltd. Ltd. Co., Ltd.
Operating revenue 1,795,624 12,849 1,685,044 42,253
Net profit 54,791 (12,728) 55,116 (6,894)
Other Comprehensive
- - - -
Income
Total comprehensive
54,791 (12,728) 55,116 (6,894)
income
Group from joint venture
- - 52,954 -
for current period
(3) Key Financial Information of Major Associates
December 31, 2019 December 31, 2018
Tianjin 712 Tianjin 712
Communication Communication
& Broadcasting Bank of Shanghai & Broadcasting Bank of Shanghai
Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd.
Current assets 4,747, 834 N/A 4,044, 512 340,781,435
Non-current assets 716,851 N/A 686,246 1,686, 990,964
Total assets 5,464, 685 2,237, 082,000 4,730, 758 2,027, 772,399
Current liabilities 2,844, 593 N/A 2,360, 757 1,670, 100,906
Non-current liabilities 61,820 N/A 117,493 195,902,885
Total liabilities 2,906, 413 N/A 2,478, 250 1,866, 003,791
Non-cont rolling interests - - - 492,059
Equity attributable to
shareholders of the 2,558, 272 176,709,000 2,252, 508 161,276,549
Company as the parent
Share of equity in
proportion to the 487,862 9,077, 785 429,553 8,045, 973
Company’s interest
Carrying amount of
762,470 9,314, 611 704,224 8,363, 564
investment in associate
160
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Interests in Other Entities (Continued)
2 Interests in Joint Ventures and Associates (Continued)
(3) Key Financial Information of Major Associates (Continued)
2019 2018
Tianjin 712 Tianjin 712
Communication Communication &
& Broadcasting Bank of Shanghai Broadcasting Co., Bank of Shanghai
Co., Ltd. Co., Ltd. Ltd. Co., Ltd.
Operating revenue 2,140, 653 49,800,000 1,625, 550 43,887,822
Net profit 345,317 N/A 224,927 18,067,835
Other Comprehensive - - -
Income 1,180, 474
Total comprehensive 345,317 22,400, 000 224,927
income 19,248,309
Group from joint venture
for current period 7,362 245,339 4,417 194,713
(4) Financial Information of Insignificant Joint Ventures and Associates Combined Respectively
2019 2018
Joint vent ures:
Aggregat ed carrying amount of
23,876 490,684
investments
Aggregat e of following items calculated in
proportion to the Company’s interest
Net profit (note) 17,207 1,926
Other comprehensive income (note) - -
Total comprehensive inc ome 17,207 1,926
Associates:
Aggregat ed carrying amount of
6,942, 645 7,268, 434
investments
Aggregat e of following items calculated in
proportion to the Company’s interest
Net profit (note) 550,645 393,086
Other comprehensive income (note) (12,991) 105,061
Total comprehensive inc ome 537,654 498,147
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.
161
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VIII 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:
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.
162
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
VII Classification of Financial Instruments and Fair Value (Continued)
I
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 2,675, 15 3,043, 44
(see Note V, 2) 4 356,155 2 6,074, 751
Derivative financial assets (see
Note V, 4) - 159,036 - 159,036
Investments in other equity
instruments (see Note V, 16) 192,489 - 87,395 279,884
Other non-current financial 2,542, 68
assets(see Note V, 17) - - 9 2,542, 689
Total assets continuously 2,867, 64 5,673, 52
measured at fair value 3 515,191 6 9,056, 360
Financial liabilities
Item Level 1 Level 2 Level 3 Total
Held-for-trading financial
liabilities(see Note V, 30) 43,000 145,220 - 188,220
Derivative financial liabilities (see
note V, 32) - 84,705 - 84,705
Total liabilities continuously
measured at fair value 43,000 229,925 - 272,925
163
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX 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 Joint Equity Investment Partnership (Limit ed Partnership)
became t he concerted parties due to the signing of the Concerted Action A greement, holding a total
of 1.221 million shares, making 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 c apital; 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 vot ing
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.
164
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Relat ed Parties and Related-P arty Transactions (Continued)
2 Relat ed Parties that Do Not Control or Are Not Controlled by the Company
Information about such related parties：
Relat ed party Relationship with the
Company
Petro AP (Hong Kong) Company Limited Associate
Huizhou TCL Taidong Shihua Investment Co., Ltd. Joint Venture
TV University Online Distance Education Technology Co., Ltd. Joint Venture
Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. Associate
Yizheng Zeyu Electric Light Co., Ltd. Associate
AGC New Electronic Display Glass (Shenzhen) Co., Ltd. Associate
Xinjiang Dongpeng Weichuang Equity Investment Partnership
Associate
(Limited Partnership)
Xinjiang Dongpeng Heli Equity Investment Partnership (Limited
Associate
Partnership)
Tibet Dongwei Investment Management Cent er (Limited
Associate
Partnership)
Urumqi Dongpeng Chuangdong Equity Investment Management
Associate
Partnership (Limited Partnership)
Urumqi TCL Create Dynamic Equity Investment Management Co.,
Associate
Ltd.
Shenzhen Tianyi Hemeng Education Co., Ltd. Associate
Shenzhen Tixiang Management Technology Co., Ltd. Associate
Shenzhen Qianhai Qihang S upply Chain Management Co., Ltd. Associate
Shenzhen Jucai Supply Chain Technology Co., Ltd. Associate
Shanghai Huiying Medical Technology Co., Ltd. Associate
Shanghai Gen A uspicious Investment Management Co., Ltd. Associate
Nanjing A Dynamic Equity Investment Fund Management Co., Ltd. Associate
Huizhou Kaichuang Vent ure Investment Partnership (Limited
Associate
Partnership)
Huizhou TCL Environmental Resource Co., Ltd. and its
Associate
subsidiaries
Huizhou TCL Real Estate Development Co., Ltd. Associate
Hubei Changjiang Hezhi Equity Investment Fund Management
Co., Ltd. Associate
Beijing A Dynamic Investment Consulting Co., Ltd. Associate
165
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Relat ed Parties and Related-P arty Transactions (Continued)
2 Relat ed Parties that Do Not Control or Are Not Controlled by the Company (Continued)
TCL Air Conditioner (Wuhan) Co., Ltd. and Its Subsidiary Associate
Getech Ltd. and its subsidiaries Associate
TCL Finance (HK) Limited Associate
Bank of Shanghai Co., Ltd. Associate
Purplevine IP Operating (Shenzhen) Co. Ltd Associate’s subsidiary
Zijins han Investment Co., Ltd. Associate’s subsidiary
Elite Excellent Investments Limited Associate’s subsidiary
Qihang Import&Export Limited Associate’s subsidiary
Huixing Holdings Limited Associate’s subsidiary
UNION DY NAMIC INVES TME NT LIMITE D Associate’s subsidiary
MARVEL PARADISE LIMITE D Associate’s subsidiary
ESTEEM VENTURE INVES TME NT LIMITE D Associate’s subsidiary
PETRO AP S.A. Associate’s subsidiary
Shenzhen Xirang International Commercial Travel Co., Ltd. Associate’s subsidiary
Beijing National Center for Open & Distance Education Co., Ltd. Joint vent ure’s subsidiary
Enterprises Greatly Affected
CJ Speedex Logistics Co., Ltd.
by the same director
Enterprises under the control
TCL Industries Holdings Inc.and its Subsidiaries
of the same director
166
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major related-party transactions
2019 2018
(1) Sale of raw materials and finished products note1
6,963,427 -
TCL Industries Holdings Inc. and its subsidiaries
Shenzhen Qianhai Qihang Supply Chain 652,343 550,794
Management Co., Ltd.
511,551 474,640
Qihang Import and Export Limited
252,078 901,905
Saipu TCL Electronic Industrial Technology Co., Ltd.
85,540 179,939
Subida Xijie Logistics Co., Ltd.
79,594 273,062
TCL Sun Inc.
44,889 103,045
TCT Mobile - Telefones LTDA
23,346 84,163
T2Mobile International Limited
Huizhou TCL Environmental Resource Co., Ltd. and 5,177 -
its subsidiaries
Ziteng Intellectual Property Operation (Shenzhen) 713 61
Co., Ltd.
336 144
Taiyang Electro-optic (Huizhou) Co., Ltd.
240 -
Beijing Shangdao Yuetu Technology Co., Ltd.
238 63,947
Palm Venture Group
116 21,130
Shenzhen Thunderbir d Smart Products Co.,Ltd.
Shenzhen Tixiang Enterprise Management 40 18
Technology Co., Ltd.
19 136
Shenzhen Jucai Supply Chain Technology Co., Ltd.
15 41
Huizhou Gaoshengda Technology Co., Ltd.
Beijing National Center for Open & Distance 12 92
Education Co., Ltd.
- 8,653
TCL Zhiyi Technology Huizhou Co., Ltd.
- 41,217
TCL Very Lighting Technology (Huizhou) Co., Ltd.
- 2,665
T2Mobile (Shanghai) Limited
- 185
Honpe Technology (Shenzhen) Co., Ltd.
Shenzhen Thunderbir d Netw ork Technology Co., - 37
Ltd.
- 3,031
Huizhou Shenghua Industrial Co., Ltd.
- 6
Huizhou TCL Real Estate Development Co.,Ltd.
Shenzhen Thunderbir d Information Technology Co., - 7
Ltd.
- 1,229
Shenzhen Thunderbir d Netw ork Media Co.,Ltd.
8,619,674 2,710,147
167
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions
2019 2018
Finished Goods from Related Note
(2)
Parties 2
AGC New Electronic Display Glass
1,147, 113 13,651
(Shenzhen) Co., Ltd.
TCL Industries Holdings Inc.and its
813,551 -
Subsidiaries
Huizhou Gaoshengda Technology
154,843 1,257, 707
Co., Ltd.
Shenzhen Qianhai Qihang Supply 95,669 405,848
Chain Management Co., Ltd.
CJ Speedex Logistics Co., Ltd. 78,847 340,253
Shenzhen Jucai Supply Chain
68,832 44,272
Technology Co., Ltd.
Taiyang Electro-optic (Huizhou)
50,882 236,562
Co., Ltd.
TCL Very Lighting Technology 41,946 257,248
(Huizhou) Co., Ltd.
Wuhan Shangde Plastics 33,866 132,862
Technology Co., Ltd.
Huizhou Shenghua Industrial Co.,
20,659 329,165
Ltd.
Amlogic Co., Limited 13,947 99,940
Qihang Import&Export Limited 3,529 242,316
Huizhou TCL Taidong Shihua
1,551 -
Investment Co., Ltd.
Shenzhen Thunderbird Network
695 2,457
Media Co., Ltd.
Shenzhen Thunderbird Smart
370 21,841
Products Co., Ltd.
Canyon Circuit Technology 58 3,166
(Huizhou) Co., Ltd.
Guangdong Regency - 56,909
Optics-Electron Corp.
Yizheng Zeyu Electric Light Co., - 7,371
Ltd.
Tairui (Hong Kong) Limited - 7,337
TCL Rechi (Huizhou) Refrigeration - 3,156
Equipment Co., Ltd.
Rechi Precision Mechanism - 513
(Huizhou) Co., Ltd.
2,526, 358 3,462, 574
168
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions (Continued)
2019 2018
(3) Getting Funding from Related Parties Note 3
TCL Air Conditioner (Wuhan) Co., Ltd. and Its
652,105 -
Subsidiary
Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 350,004 -
Xinjiang Dongpeng Weichuang Equity
169,288 -
Investment Partnership (Limited Partnership)
Huizhou TCL Environmental Resource Co., Ltd.
82,659 -
and its subsidiaries
Shenzhen Qianhai Qihang Supply Chain 30,475 29,876
Management Co., Ltd.
Qihang Import&Export Limited 28,267 64,677
Shenzhen Jucai Supply Chain Technology Co.,
22,535 17,346
Ltd.
Beijing National Center for Open & Distance
5,081 13,177
Education Co., Ltd.
Elite Excellent Investments Limited 2,164 2,162
Shenzhen Tixiang Management Technology Co., 1,599 845
Ltd.
Huixing Holdings Limited 665 668
MARVEL PARADISE LIMITED 640 641
TV University Online Distance Education 554 1,534
Technology Co., Ltd.
UNION DYNAMIC INVESTMENT LIMITED 471 775
Xinjiang Dongpeng Heli Equity Investment
297 -
Partnership (Limited Partnership)
Petro AP (Hong Kong) Company Limited 140 -
ESTEEM VENT URE INVEST MENT LIMITED 97 -
Zijinshan Investment Co., Ltd. 1 6
Huan Tech Co., Ltd. - 467
Shenzhen Thunderbird Network Technology Co., - 436,565
Ltd.
CJ Speedex Logistics Co., Ltd. - 25,138
Huizhou Gaoshengda Technology Co., Ltd. - 28,907
Shenzhen Thunderbird Network Media Co., Ltd. - 84,760
Canyon Circuit Technology (Huizhou) Co., Ltd. - 60,085
Huizhou Shenghua Industrial Co., Ltd. - 5,863
Taiyang Electro-optic (Huizhou) Co., Ltd. - 4,658
Shenzhen Thunderbird Smart Products Co., Ltd. - 1,620
Shenzhen Thunderbird Information Technology - 4,663
Co., Ltd.
1,347, 042 784,433
169
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions (Continued)
Note
(4) Providing Funding for Related Parties 3 2019 2018
TCL Industries Holdings Inc.and its Subsidiaries 2,692,921 -
Huizhou TCL Environmental Resource Co., Ltd. and its
427,593 -
subsidiaries
TCL Air Conditioner ( Wuhan) Co., Ltd. and Its Subsidiary 146,439 -
Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 112,318 43,000
Qihang Import&Export Limited - 5,230
Huizhou Gaoshengda Technology Co., Ltd. - 45,819
Canyon Circuit Technology (Huizhou) Co., Ltd. - 10,000
3,379,271 104,049
(5) Lease 2019 2018
Rental income
AGC New Electronic Display Glass (Shenzhen) Co., Ltd. 40,629 24,082
TCL Industries Holdings Inc.and its Subsidiaries 22,572 -
Beijing National Center for Open & Distance Education Co., Ltd. 3,361 13,625
Huizhou TCL Real Estate Development Co., Ltd. 866 70
Shenzhen Thunderbird Network Media Co., Ltd. 787 1,575
Shenzhen Thunderbird Infor mation Technology Co., Ltd. 608 1,041
Shenzhen Jucai Supply Chain Technology Co., Ltd. 449 -
Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 445 1,703
CJ Speedex Logistics Co., Ltd. 431 1,109
Purplevine IP Operating (Shenzhen) Co. Ltd 366 211
Hubei Changjiang Hezhi Equity Investment Fund Management 253 871
Co., Ltd.
Shanghai Huiying Medical Technology Co., Ltd. 213 -
Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. 169 -
Urumqi Dongpeng Chuangdong Equity Investment Management 60 215
Partnership (Limited Par tnership)
Shenzhen Tianyi Hemeng Education Co., Ltd. 34 -
Shenzhen Yisheng Kangyun Technology Development Co., Ltd. 31 122
Huan Tech Co., Ltd. 10 68
Huizhou Shenghua Industrial Co., Ltd. 1 1
Taiyang Electro-optic (Huizhou) Co., Ltd. 1 2
TCL Very Lighting Technology (Huizhou) Co., Ltd. - 1
Beijing A Dynamic Investment Consulting Co., Ltd. - 4
Huizhou Kaichuang Venture Investment Partner ship (Limited
Partnership) - 4
Nanjing A Dynamic Equity Investment Fund Management Co., Ltd. - 4
Qingteng Intellectual Proper ty Holding (Shenzhen) Co., Ltd.
- 396
Shanghai Gen Auspicious Investment Management Co., Ltd. - 4
Urumqi TCL Create Dynamic Equity Investment Management Co., - 215
Ltd.
170
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions (Continued)
(5) Lease (continued)
Shenzhen Thunderbird Network Technology Co., Ltd. - 1
Tibet Dongwei Fund Management Center (Limited
Partnership) - 12
Guangdong Regency Optics-Electron Corp. - 46
71,286 45,382
Rental expense
TCL Industries Holdings Inc.and its Subsidiaries 38,110 -
Wuhan Lesheng Times Trading Co., Ltd. 9,544 42,565
CJ Speedex Logistics Co., Ltd. 4,558 -
TCL Very Lighting Technology (Huizhou) Co., Ltd. 603 -
Shenzhen Jucai Supply Chain Technology Co., Ltd. - 272
Shenzhen Yisheng Kangyun Technology Development Co.,
- 52
Ltd.
52,815 42,889
(6) Providing Labour Service for or Accepting
Labour Service from Related Parties
Providing labour service for related parties 306,009 74,722
Accepting labour service from related parties 639,429 1,329, 540
171
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions (Continued)
2019 2018
(7) Receiving Interest from or Paying Interest to
Related Parties
Interest received 104,297 16,421
Interest paid 14,226 15,854
2019 2018
(8) Remuneration of key management personnel 29,639 25,864
Note Sale of Raw Materials and Finished Goods to Related Parties
1
The Company sells raw materials, spare parts, auxiliary materials and finished goods to its joint
ventures and associates at market prices, which are settled in the same way as non-related-party
transactions. These related-party transactions have no material impact on the Company’s net profit,
but play an important role as to the Company’s continued operations.
Note Finished Goods from Related Parties
2
The Company purchas es 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 imp act on t he
Company’s net profit, but play an important role as to the Company’s continued operations.
Note Providing Funding for or Getting Funding from Related Parties and Corresponding Interest Received
3 or Paid
The Company set up a settlement centre in 1997 and TCL Finance Co., Ltd. in 2006 (together, the
“Financial Settlement Centre”). The Financial Settlement Centre is responsible for the financial affairs
of the Company, including capital operation and allocation. The Centre settles accounts with t he
Company’s subsidiaries, joint vent ures 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 t he Company and the Centre 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 Centre to related parties, while
the funding amount received means the balances of related parties’ deposits in the Centre.
Note The following trans actions between the Company and the Company in January and March of this
4 period are related transactions
Relat ed party Relationship with the Company
Active Industries International Limited Associate
Harvey Holdings Limited Associate
KAI OS TE CHNOLOGIES INC Associate
Opta Corporation Associate
Palm Venture Group Associate
TCL Very Lighting Technology (Huizhou) Co.,
Associate
Ltd.
TCL Mingchuang (Xi’an) Co., Ltd. Associate
172
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
3 Major Related-Party Transactions (Continued)
Not The following transactions between the Company and the Company in January -March of this
e4 period are related transactions (continued)
Relat ed party Relationship with the Company
TCL Rec hi (Huizhou) Refrigeration Equipment Associate
Co., Ltd.
Beijing Shangdao Yuetu Technology Co., Ltd. Associate
Wealthy Way Group Limited Associate
Amlogic (Shanghai) Inc. Associate
Saipwell TCL Electronics Industrial
Associate
Technology Co., Ltd.
China Merchants Real Estate (Pingshan,
Associat
Shenzhen) Co., Ltd.
Cany on Circuit Technology (Huizhou) Co., Associate
Ltd.
Taiyang Electro-optic (Huizhou) Co., Ltd. Associate
Wuhan Shangde Plastics Technology Co., Ltd. Associate
Shenzhen Shenchangcheng Commercial
Associate
Property Service Co., Ltd.
TCL Sun, Inc. Joint vent ure
TCL Zhiyi Technology (Huizhou) Co., Ltd. Joint vent ure
T2Mobile Limited Joint vent ure
Amlogic Co., Limited Associate’s subsidiary
Good Vision Limited Associate’s subsidiary
TCT Mobile - Telefones LTDA Associate’s subsidiary
Gaoweida Digital Technology (Huizhou) Co., Associate’s subsidiary
Ltd.
Honpe Technology (Shenzhen) Co., Ltd. Associate’s subsidiary
Huizhou Gaoshengda Technology Co., Ltd. Associate’s subsidiary
Huizhou Shenghua Industrial Co., Ltd. Associate’s subsidiary
Jinpe Tec hnology (HK) Co., Limited Associate’s subsidiary
Shenzhen Yisheng Kangyun Technology
Associate’s subsidiary
Development Co., Ltd.
Tairui (Hong Kong) Limit ed Associate’s subsidiary
Wuhan Lesheng Times Trading Co., Ltd. Associate’s subsidiary
Xiong Hua Investment Co., Ltd. Associate’s subsidiary
T2Mobile International Limited Joint vent ure’s subsidiary
T2Mobile (Shanghai) Limited Joint vent ure’s subsidiary
Le Shi Zhi Xin Electronics & Technology Major subsidiary’s non-cont rolling shareholder
(Tianjin) Co., Ltd.
173
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties
(1) Accounts receivable
December 31, 2019 December 31, 2018
TCL Industries Holdings Inc.and its Subsidiaries 2,169,426 -
Shenzhen Qianhai Qihang Supply Chain Management Co.,
32,242 136,049
Ltd.
Qihang Import&Export Limited 24,892 50,223
Shanghai Huiying Medical Technology Co., Ltd. 1,000 -
Bank of Shanghai Co., Ltd. 68 -
Purplevine IP Operating (Shenzhen) Co. Ltd 39 -
CJ Speedex Logistics Co., Ltd. 33 -
Huizhou TCL Real Estate Development Co., Ltd. - 6
Saipwell TCL Electronics Industrial Technology Co., Ltd. - 173,651
TCL Sun,Inc. - 79,672
Shenzhen Thunderbird Smart Products Co., Ltd. - 12,513
T2Mobile International Limited - 46,362
T2Mobile (Shanghai) Limited - 2,774
TCL Zhiyi Technology (Huizhou) Co., Ltd. - 1,479
Beijing National Center for Open & Distance Education Co.,
- 102
Ltd.
Palm Venture Group - 18,582
Le Shi Zhi Xin Electronics & Technology (Tianjin) Co., Ltd. - 3,442
Huan Tech Co., Ltd. - 430
2,227,700 525,285
174
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties
(2) Accounts payable
December 31, 2019 December 31, 2018
AGC New Electronic Display Glass (Shenzhen) Co., Ltd. 410,872 14,839
TCL Industries Holdings Inc.and its Subsidiaries 294,817
Huizhou TCL Environmental Resource Co., Ltd. and its 54,112 -
subsidiaries
Getech Ltd. and its subsidiaries 23,617 -
Shenzhen Jucai Supply Chain Technology Co., Ltd. 19,746 24,711
TCL Nanyang Electr ic Appliance (Guangzhou) Co., Ltd. - 136
Huizhou Gaoshengda Technology Co., Ltd. - 359,391
Taiyang Electro-optic (Huizhou) Co., Ltd. - 91,306
Wuhan Shangde Plastics Technology Co., Ltd. - 8,576
Huizhou Shenghua Industrial Co., Ltd. - 91,947
Shenzhen Thunderbird Network Media Co., Ltd. - 2,879
Amlogic Co., Limited - 14,057
CJ Speedex Logistics Co., Ltd. - 81,585
Harvey Holdings Limited - 12
Shenzhen Shenchangcheng Commercial Proper ty Service Co.,
- 5
Ltd.
803,164 689,444
175
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties (Continued)
(3) Other receivables
December 31, 2019 December 31, 2018
TCL Industries Holdings Inc.and its Subsidiaries 59,769 -
Huizhou TCL Environmental Resource Co., Ltd. and its
22,253 -
subsidiaries
PETRO AP S.A. 1,296 -
Nanjing Zijin Chuangdong Investment Partnership (Limited
296 296
Partnership)
Shenzhen Jucai Supply Chain Technology Co., Ltd. 144 3,358
Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 75 22,092
LG Electronics(Hui Zhou) INC. 46 10
Wuxi TCL Medical Imaging Technology Co., Ltd. 5 -
Beijing WeMed Medical Equipment Co., Ltd. 2 -
TCL Air Conditioner (Wuhan) Co., Ltd. and Its Subsidiary 2 -
Huan Tech Co., Ltd. - 22
Saipw ell TCL Electronics Industrial Technology Co., Ltd. - 236,839
China Merchants Real Estate (Pingshan, Shenzhen) Co., Ltd. - 147,037
Active Industries International Limited - 88,882
Harvey Holdings Limited - 33,372
KAI OS TECHNOLOGIES INC - 12,816
Palm Venture Group - 12,266
Wuhan Lesheng Times Trading Co., Ltd. - 8,000
Hubei Changjiang Hezhi Equity Investment Fund Partnership
- 7,845
(Limited Partnership)
Good Vision Limited - 5,722
Shenzhen Thunderbir d Smart Products Co., Ltd. - 1,849
Le Shi Zhi Xin Electronics & Technology (Tianjin) Co., Ltd. - 800
Shenzhen Tixiang Management Technology Co., Ltd. - 341
Shenzhen Thunderbir d Netw ork Media Co., Ltd. - 251
Wealthy Way Group Limited - 78
Shenzhen Changcheng Commercial Technology Property Service
- 21
Co., Ltd.
Xiong Hua Investment Co., Ltd. - 17
T2Mobile International Limited - 6
Changzhou Chuangdong Fund Management Co., Ltd. - 2
Shenzhen Jiutian Matrix Investment Management Co., Ltd. - 2
83,888 581,924
176
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties (Continued)
(4) Other payables
December 31, 2019 December 31, 2018
TCL Industries Holdings Inc.and its Subsidiaries 49,029 -
Qihang Import&Export Limited 28,268 59,446
TCL Air Conditioner ( Wuhan) Co., Ltd. and Its Subsidiary 27,654 -
Getech Ltd. and its subsidiaries 23,137 -
Petro AP (Hong Kong) Company Limited 23,100 -
TCL Finance (HK) Limited 12,208
Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 5,541 -
AGC New Electronic Display Glass (Shenzhen) Co., Ltd. 4,701 4,659
Shenzhen Tixiang Management Technology Co., Ltd. 3,591 -
Purplevine IP Operating (Shenzhen) Co. Ltd 3,238 -
Shenzhen Xirang International Business Travel Co., Ltd. 2,769 -
Elite Excellent Investments Limited 2,164 2,162
TCL Nanyang Electr ic Appliance (Guangzhou) Co., Ltd. 2,035 2,035
Xinjiang Dongpeng Weichuang Equity Investment Par tnership
1,102 -
(Limited Par tnership)
CJ Speedex Logistics Co., Ltd. 1,040 87,330
Huixing Holdings Limited 665 668
MARVEL PARADISE LIMITED 640 641
UNION DYNAMIC INVESTMENT LIMITED 471 775
Huizhou TCL Environmental Resource Co., Ltd. and its
384 -
subsidiaries
Beijing National Center for Open & Distance Education Co.,
168 3,282
Ltd.
Huizhou TCL Real Estate Development Co., Ltd. 165 2
TV University Online Distance Education Technology Co., Ltd. 138 139
ESTEEM VENTURE INVESTMENT LIMITED 97 -
Xinjiang Dongpeng Heli Equity Investment Partnership (Limited
Partnership) 37 -
Zijinshan Investment Co., Ltd. 1 6
Shenzhen Thunderbird Network Technology Co., Ltd. - 409,752
Opta Corporation - 34,190
Good Vision Limited - 5,708
Jinpe Technology (HK) Co., Limited - 1,976
Wuhan Shangde Plastics Technology Co., Ltd. - 784
Shenzhen Yisheng Kangyun Technology Development Co., Ltd. - 777
Huizhou Shenghua Industrial Co., Ltd. - 718
Shenzhen Thunderbird Infor mation Technology Co., Ltd. - 241
T2Mobile Limited - 176
Hubei Changjiang Hezhi Equity Investment Fund Management - 172
Co., Ltd.
Taiyang Electro-optic (Huizhou) Co., Ltd. - 93
Urumqi Dongpeng Chuangdong Equity Investment
- 42
Management Par tnership (Limited Par tnership)
Honpe Technology (Shenzhen) Co., Ltd. - 27
T2Mobile (Shanghai) Limited - 14
177
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties (Continued)
(4) Other payables (continued)
December 31, 2019 December 31, 2018
Gaoweida D igital Technology (Huizhou) Co., Ltd. - 2
Canyon Circuit Technology (Huizhou) Co., Ltd. - 1
192,343 615,818
(5) Advance payment
December 31, 2019 December 31, 2018
Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 31,592 -
Shenzhen Xirang International Business Travel Co., Ltd. 1,446 -
TCL Industries Holdings Inc.and its Subsidiaries 565 -
Shenzhen Tixiang Management Technology Co., Ltd. 200 -
TCL Air Conditioner ( Wuhan) Co., Ltd. and Its Subsidiary 35 -
Shenzhen Jucai Supply Chain Technology Co., Ltd. - 29
CJ Speedex Logistics Co., Ltd. - 1,758
T2Mobile (Shanghai) Limited - 1,130
Le Shi Zhi Xin Electronics & Technology (Tianjin) Co., Ltd. - 18
33,838 2,935
(6) Advances from customers
December 31, 2019 December 31, 2018
TCL Industries Holdings Inc.and its Subsidiaries 1,994 -
Huizhou TCL Environmental Resource Co., Ltd. and its
328 -
subsidiaries
Huizhou TCL Real Estate Development Co., Ltd. 76 -
Qihang Import&Export Limited - 7,526
Palm Venture Group - 25
Huizhou Gaoshengda Technology Co., Ltd. - 10
2,398 7,561
178
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties (Continued)
(7) Dividend receivable
December 31, 2019 December 31, 2018
Wuxi TCL Venture Capital Partnership (Limited Par tnership) 5,771 -
TV University Online Distance Education Technology Co., Ltd. - 47,656
Saipwell TCL Electronics Industrial Technology Co., Ltd. - 92
5,771 47,748
(8) Deposits from Related Parties (Note)
December 31, 2019 December 31, 2018
TCL Air Conditioner ( Wuhan) Co., Ltd. and Its Subsidiary 652,130 -
TCL Industries Holdings Inc.and its Subsidiaries 350,004 -
Xinjiang Dongpeng Weichuang Equity Investment Par tnership
169,316 -
(Limited Par tnership)
Huizhou TCL Environmental Resource Co., Ltd. and its
83,149 -
subsidiaries
Shenzhen Qianhai Qihang Supply Chain Management Co.,
30,489 29,876
Ltd.
Qihang Import&Export Limited 28,267 -
Shenzhen Jucai Supply Chain Technology Co., Ltd. 22,544 17,346
Beijing National Center for Open & Distance Education Co.,
5,087 13,032
Ltd.
Elite Excellent Investments Limited 2,164 -
Shenzhen Tixiang Management Technology Co., Ltd. 1,601 845
Huixing Holdings Limited 665 -
MARVEL PARADISE LIMITED 640 -
TV University Online Distance Education Technology Co.,
554 1,394
Ltd.
UNION DYNAMIC INVESTMENT LIMITED 471 -
Xinjiang Dongpeng Heli Equity Investment Partnership
297 -
(Limited Par tnership)
Zhihui Xinyuan Commerce (Huizhou) Co., Ltd. 243
Petro AP (Hong Kong) Company Limited 140 -
ESTEEM VENTURE INVESTMENT LIMITED 97 -
Zijinshan Investment Co., Ltd. 1 -
Huan Tech Co., Ltd. - 467
Shenzhen Thunderbird Network Media Co., Ltd. - 84,760
Canyon Circuit Technology (Huizhou) Co., Ltd. - 60,085
Huizhou Gaoshengda Technology Co., Ltd. - 28,907
Shenzhen Thunderbird Network Technology Co., Ltd. - 26,565
CJ Speedex Logistics Co., Ltd. - 14,465
Huizhou Shenghua Industrial Co., Ltd. - 5,144
Shenzhen Thunderbird Infor mation Technology Co., Ltd. - 4,663
Taiyang Electro-optic (Huizhou) Co., Ltd. - 4,565
Shenzhen Thunderbird Smart Products Co., Ltd. - 1,620
Shenzhen Yisheng Kangyun Technology Development Co.,
- -
Ltd.
1,347,859 293,734
These deposits are made by related parties in the Company’s subsidiary TCL Finance Co., Ltd.
179
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
IX Related Parties and Related-Party Transactions (Continued)
4 Amounts Due from and to Related Parties (Continued)
(9) Interest receivable
December 31, 2019 December 31, 2018
Shenzhen Qianhai Qihang Supply Chain Management - 71
Co., Ltd.
- 4,953
Harvey Holdings Limited
- 78
Qihang Import&Export Limited
- 34
Huizhou Gaoshengda Technology Co., Ltd.
- 18
Canyon Circuit Technology (Huizhou) Co., Ltd.
- 5,154
(10) Other non-current assets
December 31, 2019 December 31, 2018
Purplevine IP Operating (Shenzhen) Co. Ltd 129,965 -
129,965 -
(11) Other current asset
December 31, 2019 December 31, 2018
TCL Industries Holdings Inc.and its Subsidiaries 5,208 -
Huizhou TCL Environmental Resource Co., Ltd. and its
738 -
subsidiaries
Shenzhen Qianhai Qihang Supply Chain Management
193 -
Co., Ltd.
TCL Air Conditioner ( Wuhan) Co., Ltd. and Its Subsidiary 189
6,328 -
180
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
X 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 ：
December 31, 2019 December 31, 2018
Year 1 26,347 101,775
Year 2 16,748 87,092
Year 3 6,705 42,858
Thereafter 5,416 67,742
55,216 299,467
2 Capital commitments
December 31, 2019 December 31, 2018
Under contractual
obligations but not Note 6,733, 484 8,609, 241
provided for 1
Approved by Board but
not under contractual Note 77,087 8,627
obligations 2
6,810, 571 8,617, 868
Note The capital commitments under contractual obligations but not provided for in the current period
1 primarily consisted of such commitments for construction of investment projects and external
investments.
Note The capital commitments approved by the Board but not under contractual obligations in the current
2 period primarily consisted of such commitments for CSOT’s LCD panel project.
As at 31 Dec ember 2019, except for the disclosures above, there were no other major commitments
that are required to be disclosed.
181
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XI Contingencies
Guarant ees Provided for External Parties
The guarantee amount for related party bank loan, commercial drafts, letters of credit, etc. is RMB
18,160,168,000.
As at 31 December 2019, the Company estimated that it was not likely for the afores aid 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 require d to be disclosed as at 31
December 2019.
XII Events after Balance Sheet Date
th th
The 2019 Final Dividend Plan was approved at the 25 Meeting of the 6 Board of Directors on 28 March
2020. Based on the share capital of 13,000,372,307 shares on 27 Marc h 2020 that are eligible for profit
1 distribution (the total share capital of 13,528,438,719 shares minus the 528,066,412 shares in the
Company’s special securities account for repurchase that are not eligible for profit distribution), a cash
dividend of RMB1 (tax inclusive) per 10 shares is to be distributed to the shareholders, totaling
RMB1,300,037,230.70. There will be no bonus issue from capital reserves or profit.
On 27 March 2020, according to the Zhong S hi Xie Zhu 【2020】MTN223 Document—Acceptance of
2 Registration issued by the National Association of Financial Market Institutional Investors and the Offering
Plan and Commitment Letter of the First Tranche of MTN of 2020 of TCL Technology Group Corporation,
the Company completed the offering of the three -year MTN of RMB 3 billion, with interest carrying from 27
March 2020 and a coupon rate of 3.60%.
Since the COV ID-19 outbreak, the Company has taken active meas ures to fulfil its social responsibilities as
a listed company. It protects the life security and health of all employees and fight against the impact of the
epidemic on the operating activities. As the manufacturing process of semi-conductor display devices is
special, TCL CSOT was carrying out production and operation as scheduled during the Spring Festival.
There is no direct impact on the production or construction of the t1, t2, t6 and t7 factories of TCL CS OT in
Shenzhen, and the module factory in Huizhou City. Since the t3 and t4 factories are locat ed in Wuhan City,
there was once short-t erm pressure in terms of work resumption of employees and the supply of certain raw
3 materials. The Company arranged for the return to work of employees in strict compliance with the
requirements for prevention and control of the COV ID -19, and ensured the normal supply of raw materials
through coordination of logistics channels, communication with strategic suppliers, etc.
The Company will continue to keep an eye on the developments of the COV ID-19 epidemic, seize
integration opportunities in the industry, and solidify the leadership of TCL CSOT in efficiency and earnings.
It will increase the market share through efficient production capacity arrangements, and increase the
proportions of commercial display, AMOLE D and foldable screens with high -added value through improving
product and technology capabilities, so as to achieve global leadership in the semi -conductor display
industry. As of 28 March 2020, the Company has seen no material advers e impact of the COV ID-19
epidemic.
Except for the aforesaid event, there were no other signific ant post -balance-sheet-date events that are
required to be disclosed as at the date of the authorization of the financial statements for issue.
182
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIII Description of other important matters
(I) Discontinued operations
On January 7, 2019, the major asset restructuring approved at the First Extraordinary General Meeting of
2019:
The Company will directly hold 100% equity in TCL Industries Holdings (HK) Limited, 100% equity in
Huizhou TCL Household Electric Appliance Group Co., Ltd., 100% equity in TCL Home A ppliances (Hefei)
Co., Ltd., 55% equity in Huizhou Cool Friends Network Technology Co., Ltd., 100% equity in Koyoo Online
Service Co., Ltd., 100% equity in TCL Technology Park Co., Ltd., Getech Ltd. owns 36% of the shares,
and through its wholly-owned subsidiary TCL Finance Holdings Group (Guangzhou) Co., Ltd., indirectly
holds 75% of the shares of JDH Information Tech (Zhuhai) Co., Ltd., and Huizhou TCL Light Electrical
Appliances Co., Ltd., indirectly holds 1.50% of the shares of Huizhou Cool Friends Net work Technology Co.,
Ltd., all sold to TCL Industries Holdings Inc. at a price of RMB 4.76 billion. The Major Asset Restructuring
has been completed in A pril 2019.
Amount in 2019 Amount in 2018
Income from discontinued operations 20,167,401 77,791,560
Total profit from discontinued operations 171,147 933,252
Income tax expense from discontinued operations 77,436 421,243
Net profit from discontinued operations 93,710 512,009
Add: Net profit and loss on disposal of discontinued
operations 1,238, 377 -
Total net profit from discontinued operations 1,332, 087 512,009
(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: semiconductor display
and mat erials business, distribution business and other business. 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:
Semiconductor display and mat erials business: mainly includes researc h and development, manufacturing
(1)
and sales of semiconductor display panels and semiconductor display modules.
(2) Distribution businesses: mainly includes the sales of computers, soft ware, tablet computers, mobile phones
and ot her electronic products.
(3) Other business: other businesses besides the above, including industrial finance and investment business,
technology development servic es and patent maintenance services provided by the company, etc.
183
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIII Description of other important matters (continued)
(II) Segment Reporting (continued)
Segment assets include all current assets such as tangible assets, intangible assets, other long-term assets
and receivables attributable t o 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 eac h segment (including external trans actions
income and inter-s egment 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. Trans fer pricing of
inter-segment income is calculated on terms similar to other foreign transactions.
184
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIII Notes on other important matters (continued)
(II) Segment reporting (continued)
2 Report the financial information of the segment
For the 12-month period ending December 31, 2019
Others and
Semiconductor eliminated
Distribution
display intercompa Total
business
and mat erials ny
business accounts
Operating revenue 33,993,534 20,835,617 20,103,935 74,933,086
Total profit 963,401 285,511 2,806,891 4,055,803
Income Tax Expense (1,043) 69,907 329,205 398,069
Net profit 964,444 215,604 2,477,686 3,657,734
Total assets 130,582,410 4,520,509 29,741,966 164,844,885
Total liabilities 75,351,193 3,517,629 22,092,919 100,961,741
Other items
Depreciation and
amortization 6,863,247 6,626 1,402,134 8,272,007
expenses
Capit al expenditure 19,737,178 - 379,032 20,116,210
Net interest expense 232,301 56,871 1,139,943 1,429,115
185
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIII Notes on other important matters (continued)
(II) Segment reporting (continued)
2 Report the financial information of the segment (continued)
For the 12-month period ending December 31, 2018
Semiconductor
display Distribution Non-core
Total
and mat erials business business
business
Operating revenue 27,666,368 16,566,993 69,126,715 113,360,076
Total profit 2,600,818 272,614 2,070,948 4,944,380
Income Tax Expense 279,236 76,675 523,271 879,182
Net profit 2,321,582 195,939 1,547,677 4,065,198
Total assets 116,348,578 3,957,923 72,457,442 192,763,943
Total liabilities 68,659,423 3,070,859 60,161,988 131,892,270
Other items
Depreciation and
amortization 5,896,622 5,382 2,068,645 7,970,649
expenses
Capit al expenditure 30,664,197 - 2,134,167 32,798,364
Net interest expense 161,647 37,312 946,386 1,145,345
186
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent
1 Accounts receivable
December 31, 2019 December 31, 2018
Bad
Bad
de
de
bt
Amount Proportion Proportion Amount Proportion bt p Proportion
pro
rovi
visi
sion
on
Within
445,539 100% 449 0.10% 194,959 100% - 0%
1 year
As of December 31, 2019, there was not such accounts receivable from any shareholder with a 5% or greater
voting stock.
2 Other receivables
December 31, 2019 December 31, 2018
Interest receivable - 212,200
Dividend receivable 4,211,824 4,211,824
Other receivables 12,917,649 14,349,329
17,129,473 18,773,353
(a) Nature of other receivables is analyzed as follows:
December 31, 2019 December 31, 2018
External unit current account 440,600 617,647
Deposit and security deposit 792 2,304
Other 12,476,257 13,729,378
12,917,649 14,349,329
(b) Bad debt accrual for other receivables is analyzed as follows:
Expected credit loss for
Expected credit loss in the entire duration (credit
Total
next 12 months impairment has
occurred)
December 31, 2018 - 65,873 65,873
Change and adjustment
of accounting policy - - -
January 1, 2019 65,873 65,873
Current accrual 753 32 785
Reversal of current
period - (2,777) (2,777)
Write-off in current period (35) (21,828) (21,863)
December 31, 2019 718 41,300 42,018
187
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
2 Other receivables (continued)
(c) The aging of other receivables is analyzed as follows:
December 31, 2019 December 31, 2018
Amount Proportion Amount Proportion
Within 1 9,708,317 74.91% 11,333, 489 78.62%
year
1 to 2 2,080,024 2,506,592 17.39%
years 16.05%
2 to 3 940, 910 316, 189 2.19%
years 7.26%
More than
230, 416 258, 932 1.80%
3 years
1.78%
12,959,667 100. 00% 14,415,202 100. 00%
The outstanding other receivables were mostly current accounts with related parties. As of
December 31, 2019, there were no such other rec eivables from any shareholder with a 5% or greater
voting stock.
The top five other receivables of the Company are about RMB 9,544,224, 000 (end of 2018: RMB
6,598, 913,000), accounting for 73.65% (end of 2018: 45.78%) of the total other receivables of the
Company.
188
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
3 Available-for-sale financial assets (applicable in 2018 only)
December 31, 2018
Available- for-sale equity instruments - measured at fair
40,736
value (note)
Available- for-sale equity instruments - measured at costs 1,144,694
1,185,430
Note Available-for-sale equity instruments - measured at fair value
s
December 31, 2018
Costs 40,000
Changes in fair value 736
40,736
4 Long-term equity investments
December 31, 2019 December 31, 2018
Provision Provision
for for
Book impairm Carrying Book impairmen Carrying
balance ent amount balance t amount
Long-term equity investment
11,863,148 - 11,863,148 9,545,711 - 9,545,711
calculated by equity method
Among them: Associates (1) 11,850,369 - 11,850,369 9,526,568 - 9,526,568
Joint Ventures (1) 12,779 - 12,779 19,143 - 19,143
Subsidiaries (2) 27,434,124 - 27,434,124 32,257,739 - 32,257,739
39,297,272 - 39,297,272 41,803,450 - 41,803,450
As of December 31, 2019, there are no major restrictions on the realiz ation of investment and the
remittance of investment income for long -term equity investment.
189
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
4 Long-term equity investment (continued)
(1) Joint Ventures and Associates
Increase or decrease in current period
Increase or
decrease Investment Other Cash Other
Amount at Changes
investment gains and comprehensiv dividends or Impair ment increases December
beginning of in other
in the losses e income profits allowance and 31, 2019
year interests
current recognized by adjustments declared decreases
period equity method
Bank of Shanghai Co., Ltd. 8,363,564 188,813 1,018,493 81,483 - (245,339) - (92,403) 9,314,611
Zhongxin Financial Capital Management
- 838,800 39,120 - - - - - 877,920
Company Limited
LG Electronics(Hui Zhou) INC. 83,902 - 16,881 - - (8,200) - - 92,583
Shenzhen Qianhai Qihang Supply Chain
45,034 - (4,197) - - - - - 40,837
Management Co., Ltd.
TCL Nanyang Electr ic Appliance
2,023 - (207) - - - - - 1,816
(Guangzhou) Co., Ltd.
Huan Tech Co., Ltd. 180,364 - (2,261) - - - - (178,103) -
Tianjin 712 Communication & Broadcasting
704,224 - 65,853 (7,362) (245) 762,470
Co., Ltd.
Huizhou TCL Taidong Shihua Investment
19,143 - (6,364) - - - - - 12,779
Co., Ltd.
Shenzhen Jucai Supply Chain Technology
5,158 - 184 - - - - - 5,342
Co., Ltd.
Shenzhen Tixiang Management Technology
2,013 - 65 - - - - - 2,078
Co., Ltd.
Huizhou TCL Environmental Resource Co.,
- 71,300 438 - - - - - 71,738
Ltd.
190
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent (Continued)
4 Long-term equity investment (continued)
(1) Joint Ventures and Associates
Increase or decrease in current period
Increase
or Investment Other
Other Change Cash
Amount at decrease gains and increase
comprehen s in dividends Impairment December
beginning of investmen losses s and
sive income other or profits allowance 31, 2019
year t in the recognized decreas
adjustments interests declared
current by equity es
period method
Guangdong Rongchuang Lingyue
Intelligent Manufacturing and
Information Technology Industry - 375,000 20 - - - - - 375,020
Equity Investment Fund
Partnership (Limited Partnership)
Guangdong Yuecai Emerging
Industry Equity Investment Fund - 150,000 (507) - - - - - 149,493
Partnership (Limited Partnership)
Other 140,286 - 22,176 - - (6,001) - - 156,461
9,545,711 1,623,913 1,149,694 81,483 - (266,902) - (270,751) 11,863,148
191
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent (Continued)
4 Long-term equity investment (continued)
(2) subsidiaries
Increase in
Vote January 1, Decrease in
current December 31,2019
Proportion 2019 current period
period
TCL Industries Holdings (HK) Limited - 1,327,882 - (1,327,882) -
TCL China Star Optoelectronics
88.82% 21,895,698 268, 400 - 22,164,098
Technology Co., Ltd.
Huizhou TCL Household Electric
- 448, 000 - (448,000) -
Appliance Group Co., Ltd.
Huizhou Cool Friends Network
- 273, 144 - (273,144) -
Technology Co., Ltd.
Koyoo Online Service Co., Ltd. - 25,469 - (25,469) -
Techne Corporation - 37,954 - (37,954) -
Xinjiang TCL Equity Investment Co., Ltd 100% 200, 000 - - 200, 000
Wuhan TCL Industrial Technology
100% 20,000 - - 20,000
Research Institute, Ltd.
Huizhou TCL Environmental Resource
100% 273, 000 - (273,000) -
Co., Ltd.
Highly Information Industry Co., Ltd. 73.69% 107, 296 - - 107, 296
TCL Communication Equipment
75.00% 79,500 - - 79,500
(Huizhou) Co., Ltd.
TCL Finance Co., Ltd. 82.00% 1,256,003 - - 1,256,003
Shenzhen TCL High-Tech Development
100% 20,000 - - 20,000
Co., Ltd.
TCL Home Appliances (Hefei) Co., Ltd. - 300, 000 - (300,000) -
Huizhou TCL Light Electrical Appliances
100% 70,037 (70,037) -
Co., Ltd.
TCL Culture Media (Shenzhen) Co., Ltd. 100% 353, 414 8,000 - 361, 414
TCL Finance Holdings Group
100% 772, 000 - - 772, 000
(Guangzhou) Co., Ltd.
Guangzhou TCL Internet Microcredit
100% 500, 000 - - 500, 000
Co., Ltd.
Shenzhen HAWK Internet Co., Ltd. 100% 350, 000 (350,000) -
Shenzhen Thunderbird Digital
100% 50,000 - (50,000) -
Entertainment Technology Co., Ltd.
TCL Intelligent Industry (Huizhou) Co.,
- 59,000 - (59,000) -
Ltd.
Huizhou Zhongkai TCL Zhirong
89.84% 405, 624 52,370 - 457, 994
Technology Microcredit Co., Ltd.
192
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
4 Long-term equity investment (continued)
(2) Subsidiaries (continued)
Current
Vote January 1, Current period December
period
Proportion 2019 Decreased 31, 2019
Increase
Beijing HAWK Cloud Information
100% 20,000 - - 20,000
Technology Co., Ltd.
TCL Technology Park (Huizhou) Co., Ltd. 100% 625,324 (120,374) 504,950
TCL Technology Park Co., Ltd. - 2,563,631 - (2,563,631) -
Huizhou Sailuote Communication Co., Ltd. 100% 82,500 27,500 - 110,000
TCL Medical Radiological Technology
100% 58,497 - - 58,497
(Beijing) Co., Ltd.
Shenzhen TCL Strategic Equity Investment
100% 20,000 - - 20,000
Fund Partnership (Limited Partnership)
Getech Ltd. - 36,000 - (36,000) -
TCL Industrial Technology Research
100% - 20,000 - 20,000
Institute, Ltd. (Europe)
Peer College Education Technology
100% - 5,000 - 5,000
(Huizhou)
Huizhou Hongsheng Technology
100% - 1,000 - 1,000
Development Co., Ltd.
Ningbo TCL Equity Investment Co., Ltd. 100 % - 300,000 300,000
TCL Technology Investments Limited 100% - 188,293 188,293
Beijing Zhiqujia Technology Co., Ltd. 100% - 257,627 - 257,627
Equity incentives of subsidiaries - 27,766 322 (17,636) 10,452
32,257,739 1,128,512 (5,952,127) 27,434,124
For the registered capit al of subsidiaries and the Company’s equity interests in the subsidiaries, see Note V.
193
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
5 Other equity instrument investment (2019 only)
December 31, 2019 January 1, 2019
Non-trading equity instruments 15,000 15,076
Reasons for other
Amount of other Reasons designated as
Div i end Accumu comprehensiv e
Accumulat comprehensiv e measured at fair value and
Item name income lated income transferred
ed losses income transferred whose changes are included in
recogniz ed gains to retained
to retained earnings other comprehensiv e income
earnings
Non-trading equity
instruments - - (76) - - -
6 Operating Revenue and Cost of Sales
2019 2018
Operating Cost of sales Operating revenue Cost of sales
revenue
Core business 1,216,047 1,200,847 1,255,708 1,247,345
Non-core business 514,140 281,499 800,242 607,278
1,730,187 1,482,346 2,055,950 1,854,623
7 Return on Investment
2019 2018
Income from disposal of credit instruments measured at fair value and whose
177,073 -
changes are included in current profit and loss
Income from disposal of equity instruments measured at fair value and whose
210,848 -
changes are included in current profit and loss
Income held by credit instruments measured at fair value and whose changes
46,726 -
are included in current profit and loss
Credit instruments measured at amor tized cost through profit or loss 7,217
Income held by equity instruments measured at fair value and whose changes
17,361 -
are included in current profit and loss
Income from disposal of wealth management instruments - 412,800
Dividends from subsidiaries 257,126 5,384,073
Share of profit of associates for current period 1,156,058 935,168
Share of profit of joint ventures for current period (6,364) (3,447)
Income during period of holding available- for-sale financial assets - 31,282
Net income from disposal of long- ter m investments (486,501) 366,517
1,379,544 7,126,393
As of December 31, 2019, there were no significant restrictions on the collection of the investment
income.
194
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XIV Notes to Financial Statements of the Company as Parent(Continued)
8 Cash flows generated from operating activities
The net cash inflow from operating activities in the company's cash flow statement was RMB
4,843, 106,000.
9 Balance of cash and cash equivalents at the end of period
The Company's balance of cash and cash equivalents at the end of the period was RMB 3,941,090,000.
10 Contingent Liabilities
As at December 31, 2019, the contingent liabilities not provided for in the financial report are as follows:
December 31, 2019 December 31, 2018
Guarantees for commercial drafts and letters of guarantee of
9,809,585 25,162,875
subsidiaries
Guarantees for bank loans of subsidiaries 22,119,613 23,408,535
Guarantee bank loans, commercial bills, letters of credit, etc. of related
18,160,168 1,112,147
parties
195
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XV Comparative Data
Cert ain comparative data have been reclassified to comply with the present ation of the current period.
XVI Non-recurring profit and loss items and amounts
2019 2018
Gain or loss on disposal of non-current assets (inclusive of
1,419, 021 (58,305)
impairment allowance write-offs)
Government subsidies charged to current profit or loss (exclusive of
government subsidies given in the Company’s ordinary cours e of 1,170, 649 1,377, 065
business at fixed quotas or amounts as per the government’s
uniform standards)
In addition to the effective hedging business related to the normal -
operation of the company, gains and losses on fair value changes 186,339 162,729
arising from the holding of trading financial assets and trading
financial liabilities, as well as investment gains from the disposal of
trading financial assets, trading financial liabilities and
available-for-sale financial assets.
Non-operating income and expense ot her than the above 77,286 871,847
Income tax impact (165,398) (191,942)
Number of Minority Shares Affected (305,250) (280,578)
Non-recurring gains and losses attributable to ordinary shareholders
2,382, 647 1,880, 816
of the Company as parent
The confirmation of non-recurring profit and loss items by the company shall be carried out in accordance
with the provisions of (2008) No.43 "Explanat ory Announcement No.1-Non-recurring Profit and Loss
(2008)" issued by the China Securities Regulat ory Commission.
196
TCL Technology Group Corporation
Notes to Financial Statements
(For the period from 1 January 2019 to 31 December 2019)
(The amounts in tables are expressed in thousands of RMB)
XVII 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 (Revis ed in 2010)" issued by China Securities Regulatory
Commission and relevant provisions of accounting standards:
Item Reporting Weighted EPS (RMB yuan)
period average
Basic EPS Diluted EPS
Net profit ROE
Net profit attributable to ordinary
2,617, 765 9.09% 0.1986 0.1935
shareholders of the Company
Net profit attributable to ordinary
shareholders of the Company before 235,119 0.76% 0.0178 0.0174
non-recurring gains and losses
Company Name: TCL Technology Group Corporation
Date: March 28, 2020
The financial statements and the notes thereto from page 1 to page 197 are signed
by:
Person-in-char Person-in-ch
Legal ge of arge of the
Representative Li financial financial
: Dongsheng affairs： Du Juan department: Xi Wenbo
197
