TCL科技：2023年半年度报告（英文版）

Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 1 TCL科技集团股份有限公司TCLTechnology Group Corporation INTERIMREPORT 2023 August 29,2023 Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 2 Part IImportant 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 TCLTechnology 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. Mr. Li Dongsheng, the Chairman of the Board, Ms. Li Jian, the person-in-charge of financial affairs (Chief Financial Officer), and Mr. Peng Pan, the person-in-charge of the financial department, hereby guarantee that the financial statements carried in this Interim Report are factual, accurate, and complete. All the Company’s directors attended the Board meeting for the review of this Interim Report and its summary. The future plans, development strategies or other forward-looking statements mentioned in this Report and its summary shall NOT be considered as promises of the Company to investors. Therefore, investors are kindly reminded to pay attention to possible investment risks. The Company has no interim dividend plan, either in the form of cash or stock, nor for the conversion of capital reserve into share capital. 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 version shall prevail. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 3 Table of Contents Part IImportant Notes, Table of Contents and Definitions ...........................................................2Part IICorporate Information and Key Financial Information ...................................................6Part IIIManagement Discussion and Analysis ...............................................................................9Part IVCorporate Governance ......................................................................................................32Part VEnvironmental and Social Responsibility .........................................................................35 Part VISignificant Events ...............................................................................................................43Part VIIChanges in Shares and Information about Shareholders .............................................53Part VIIIPreferred Shares .............................................................................................................60Part IXBonds ...................................................................................................................................61Part XFinancial Report ..................................................................................................................65Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 4 Documents Available for Reference (I) The financial statements signed and stamped by the person-in-charge of the Company, the Chief Financial Officer and person-in-charge of the financial department. (II) The originals of all company documents and announcements that were disclosed to the public during the Reporting Period. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 5 Definitions Term Refers to Definition The “Company”, the “Group”，“TCL”，“TCLTech.” or “we” Refers toTCLTechnology Group Corporation The “Reporting Period”, “current period” Refers to The period from January 1,2023 to June 30,2023. TCLCSOTRefers to TCLChina Star Optoelectronics Technology Co., Ltd. Zhonghuan Electronics Refers to TCLTechnology Group (Tianjin) Co., Ltd. TCLIndustrial Refers to TCLIndustrial Holdings Co., Ltd. TCLZhonghuan Refers toTCLZhonghuan Renewable Energy Technology Co., Ltd., a majority-owned subsidiary of the Company listed on the Shenzhen Stock Exchange (stock code: 002129.SZ) TPCRefers toTianjin Printronics Circuit Corporation, a majority-owned subsidiary of the Company listed on the Shenzhen Stock Exchange (stock code: 002134.SZ) Highly Refers toHighly Information Industry Co., Ltd., a majority-owned subsidiary of the Company listed on the National Equities Exchange and Quotations (stock code: 835281) Shenzhen CSOTRefers to Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Wuhan CSOTRefers to Wuhan China Star Optoelectronics Technology Co., Ltd. Wuhan China Star Optoelectronics Semiconductor Refers toWuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Guangzhou CSOTRefers to Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Suzhou CSOTRefers to Suzhou China Star Optoelectronics Technology Co., Ltd. Moka Technology Refers to Moka International Limited t1 Refers to The generation 8.5 (or G8.5) TFT-LCD production line of TCLCSOT t2 Refers to The generation 8.5 (or G8.5) TFT-LCD (including oxide semiconductor) production line of TCLCSOT t3 Refers to The generation 6 (or G6) LTPS-LCD panel production line at Wuhan CSOT t4 Refers to The generation 6 (or G6) flexible LTPS-AMOLED panel production line at Wuhan CSOT Wuhan t3 production expansion project Refers to The generation 6 (or G6) of new semiconductor production line of Wuhan CSOT t6 Refers to The generation 11 (or G11) new TFT-LCD display production line at Shenzhen CSOT t7 Refers to The generation 11 (or G11) new ultra high definition display production line at Shenzhen CSOT t9 Refers to The generation 8.6 (or G8.6) new oxide semiconductor production line at Guangzhou CSOT t10 Refers to The generation 8.5 (or G8.5) TFT-LCD production line at Suzhou CSOTGWRefers to Gigawatt, power unit for solar cells,1GW = 1,000 megawatts G12 Refers to12-inch ultra-large DW-cut solar monocrystalline silicon square wafer, size: 44,096mm2, diagonal line: 295mm, side length: 210mm, with its size 80.5% larger than the conventional M2 RMBRefers to Renminbi Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 6 Part IICorporate Information and Key Financial Information I. Corporate Information Stock name TCLTECH. Stock code 000100 Place of listing Shenzhen Stock Exchange Company name in Chinese TCL科技集团股份有限公司Abbr. in Chinese (if any) TCL科技Company name in English (if any) TCLTechnology Group Corporation Abbr. in English (if any) TCLTECH. Legal representative Li Dongsheng II. Contact Information Board Secretary Name Liao Qian Office address 10/F, Tower G1, International ETown, TCLScience Park,1001 Nanshan District, Shenzhen, Guangdong Province, China Tel.0755-33311666 Email address ir@tcl.com III. Other Information 1. Contact Information of the Company Whether the registered address, office address and their zip codes, website address and email address of the Company changed during the Reporting Period. □ Applicable √ Not applicable No changes occurred to the registered address, office address and their zip codes, website address, email address and other contact information of the Company during the Reporting Period. Please refer to the Annual Report 2022 for details. 2. Media for Information Disclosure and Place Where This Report is Lodged Whether the media for information disclosure and place where this report is lodged changed during the Reporting Period. □ Applicable √ Not applicable No changes occurred to the name and website of the stock exchange website and media on which the Company discloses its Interim Report and the place for lodging such reports during the Reporting Period. Please refer to the Annual Report 2022 for details. 3. Other Information Whether other information changed during the Reporting Period. □ Applicable √ Not applicable IV. Key Accounting Data and Financial Indicators Indicate whether there is any retrospectively adjusted or restated datum in the table below Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 7 √ Yes □ No Earnings per share in the first half of 2022 were adjusted due to the conversion of capital reserves into share capital during the Reporting Period H12023 H12022 Change Before adjustment After adjustment After adjustmentRevenue (RMB) 85,148,725,60684,522,181,12884,522,181,1280.74%Net profit attributable to the company’s shareholders (RMB) 340,493,589663,522,871663,522,871 -48.68%Net profits attributable to the company’s shareholders before non-recurring gains and losses (RMB) -600,066,840 -626,869,385 -626,869,3854.28%Net cash generated from operating activities (RMB) 10,416,168,1479,016,635,7439,016,635,74315.52%Basic earnings per share (RMB/share) 0.01840.04890.0445 -58.65%Diluted earnings per share (RMB/share) 0.01810.04850.0441 -58.96%Weighted average return on equity (%) 0.67 1.71 1.71 Decreased by 1.04 percentage points year on year End of the Reporting PeriodDecember 31,2022 Change Before adjustment After adjustment After adjustmentTotal assets (RMB) 381,324,490,388359,996,232,668 359,996,232,668 5.92%Owners’ equity attributable to the company’s shareholders (RMB) 50,464,207,95850,678,520,477 50,678,520,477 -0.42%Note: The Company converted its capital reserve into share capital in May 2023, at a rate of 1 share for every 10 shares to all shareholders. The Company recalculated the basic earnings per share and diluted earnings per share for the first half of 2022 in accordance with accounting standards and other regulations. The total share capital of the Company at the end of the last trading session before the disclosure of this Report: The Total share capital of the Company at the end of the last trading session before the disclosure of this Report (share) 18,779,080,767Fully diluted earnings per share based on the latest total share capital above: Fully diluted earnings per share based on the latest total share capital above (RMB/share) 0.0181V. Accounting Data Differences under China Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Differences in Net Profit and Equity under CAS and IFRS □ Applicable √ Not applicable 2. Differences in Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 8 3. Reasons for Accounting Data Differences Above □ Applicable √ Not applicable VI. Non-Recurring Gains and Losses √ Applicable □ Not applicable Unit: RMB Item Amount Gains and losses on disposal of non-current assets (inclusive of impairment allowance write-offs) 321,753,442Government subsidies charged to current profits and loss (except for government subsidies closely related to the Company’s normal business which comply with national policies and regulations and are enjoyed on an ongoing basis according to certain standard quotas or quantities) 1,267,258,979The profits or losses generated from changes in fair value arising from holding marketable financial assets and marketable financial liabilities, as well as the investment-related income from the disposal of marketable financial assets, marketable financial liabilities and available-for-sale financial assets, except for the effective hedging business related to the Company’s normal business operation. -42,740,098Reversal of provision for impairment of receivables that have been individually tested for impairment 2,500,000Non-operating income and expenses other than the above 707,420,655Less: Corporate income tax 364,521,716Non-controlling interests (net of tax) 951,110,833Total 940,560,429Details of other profit and loss items that meet the definition of non-recurring profits and losses: □ Applicable √ Not applicable The Company has no other profit and loss items that meet the definition of non-recurring profits and losses. Notes on non-recurring profit and loss items that which is listed in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gain/Loss shall be used to define Recurring Gain/Loss items □ Applicable √ Not applicable The Company does not have any non-recurring profit and loss items listed in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gain/Loss that are defined as recurring profit and loss items. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 9 Part IIIManagement Discussion and Analysis I. Company-related industry outlook in the Reporting Period In the first half of the year, the global economy slowed down significantly with continued geopolitical conflicts and a high rate of inflation. The complex and severe external environment has increased the uncertainty of domestic economic development. In response to these challenges, the Company continuously laid out its business in the pan-semiconductor industry on a basis of semiconductor displays, new energy photovoltaics, and semiconductor materials, enhanced the resilience of its business and optimized its business strategies to pursue sustainable high-quality development. During the Reporting Period, the Company achieved an operating revenue of RMB85.15 billion, with a year-on-year increase of 0.7%; net profit of RMB2.39 billion, with a year-on-year increase of 24.1%; net profit attributable to shareholders of the listed company of RMB0.34 billion; and a net operating cash flow of RMB10.42 billion. Benefiting from an improving industry landscape, the supply and demand relationship in the semiconductor display industry was optimized, inventories along the industry chain remained at a healthy level and mainstream product prices steadily increased, the operating revenue and profit in the Company's semiconductor display business significantly improved. The Company continued to consolidate its advantages in terms of product and technology leadership in new energy photovoltaics and semiconductor materials businesses, enhanced its industrial chain synergy, and achieved rapid growth in terms of operating revenue and profit. Maintaining strategic focus, optimizing the business strategy, enhancing differentiated competitiveness, and improving operational benefits. With the improved industrial concentration, the leading manufacturers illustrated their advantages in terms of economies of scale, and the semiconductor display industry entered a new stage of development. During the Reporting Period, the demand area steadily increased, product prices stabilized and rebounded, and the operating income of the semiconductor display business increased by 34.9% quarter-on-quarter in the second quarter, the profitability has steadily improved. TCLZhonghuan implemented a differentiation strategy, which focused on the high-growth market such as N-type and G12 products in the field of photovoltaic materials. In doing so, it occupied leading global market share and achieved significant Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 10 growth in revenue and profit. In the field of cells and modules, the Company further consolidated the technological advantages of the "G12+Shingled" dual-platform, and strengthened the competitiveness of the photovoltaic industry chain by adopting a differentiated layout. Building business barriers based on technological innovation, deepening intelligent and digital manufacturing capabilities, and accelerating high-quality industrial transformations and upgrades. During the Reporting Period, the Company invested RMB5.47 billion in R&D, a year-on-year increase of 4.1%. The Company also filed a total of 177 new international patent applications under the PCT, increasing the total number of applications filed to 14,927. The Company continued to lead product technology upgrades and built a leading technological advantage in the semiconductor display business in the fields of ultra-high definition, high refresh rates, large screen sizes and flexible displays, top global customers achieved a leap in industrial value through high-end product line of the company. In the new energy photovoltaic business, the Company continued to lead the industry upgrading in the field of large-size, thin slicing, thin line, shingled and other technical processes. The Company advanced the manufacturing transformation and upgrade through digitalization and intelligentization, and applied AI intelligent detection systems in the semiconductor display business to identify defects in LCD panel production, further improving production efficiency. In addition, the Company deepened the application of the industry 4.0 system in the new energy photovoltaic business, with industry-leading flexible manufacturing capabilities, thus promoting high-quality development within the industry. Pushing localized operations of the global industrial chain, strengthening the construction of overseas business platforms, and exploring a new globalization model. The Company actively promoted the localized operations of its industrial chain. The TCLCSOTIndia Display Module Factory continued to expand both its production and sales capacity. TCLZhonghuan planned to establish production capacity of crystals and chips in the Middle East through establishing a joint venture with Saudi Vision Industries, and strengthened collaboration with partners in some target markets. The Company continued to strengthen its overseas business development and explored a new globalization model to enhance its competitiveness. The Company will respond to any challenges with its own operational capabilities and strategic management, continue to improve the profitability of semiconductor display business, and steadily grow its new energy photovoltaic business. The Company will firmly grasp the opportunities brought Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 11 by the transformations and upgrades in the technology manufacturing industry and the global energy structure, and shall continue to implement the business strategies of "improving operational quality and efficiency, enhancing strengths to shore up weaknesses, innovation-driven development as well as accelerating global expansion" in order to achieve sustainable, high-quality development and take a lead in the global market. II. Main businesses of the Company during the Reporting Period The Company focused on the development of the core business of semiconductor display, new energy photovoltaic and semiconductor materials, and committed to achieving the strategic goal of global leadership. (I) Semiconductor display business In the first half of the year, the downstream demand for displays remained sluggish, but it has increased quarter on quarter. The trend toward large-sized products has driven a steady increase in demand area. On the supply side, the large-size panel industry has become increasingly concentrated, industrial competition has shifted from rapid scale expansion and market share growth driven by investment to a focus on technology and profitability as key guiding factors, the industry achieved healthy development. The prices of large-sized panels have continued to rise since March this year, while the prices of small and medium-sized panels have gradually stabilized at a low level. During the Reporting Period, the Company achieved an operating revenue of RMB35.53 billion in its semiconductor display business, with a year-on-year decrease of 4.7%. Among this, the display business achieved an operating revenue of RMB20.41 billion in the second quarter, with a year-on-year increase of 18.5%, and a quarter-on-quarter increase of 34.9%. The net loss of display business TCLTECH Semi-conductor display New energy photovoltaic & Semi-conductor materialsIndustrial finance & investment Other TCLCSOTMoka Technology Zhonghuan PhotovoltaicZhonghuan AdvancedTCL Financial TCLCapital Highly TPC Juhua China Ray TCLMicrochip Xinhuan/XinhuaFull Text of the 2023 Interim Report of TCLTechnology Group Corporation 12 in the second quarter reduced by RMB 2.15 billion compared to the first quarter. In its large-sized product business, TCLCSOT made the best use of its own strengths and industry chain advantages, and firmly adopted the strategies of large-sized and high-end TV panels while actively developing commercial displays, such as interactive whiteboards, digital signage, and splicing screens. The layout of TCLCSOT's high-generation production lines covered the factories of the G8 production lines of t1, t2, t9, and t10, and the factories of the G11 production lines (the highest generation in the world) of t6 and t7. The market share of TV panels steadily ranked among the top two in the world. By giving play to the production efficiency and cutting cost efficiency of high-generation production lines, the Company led the development of large-sized and high-end products in collaboration with strategic customers, and in doing so, improved the value of the whole industry chain. The Company's 55-inch TV panels and above increased to 78% in terms of sales area proportion, while the market share of 55-inch and 75-inch products ranked first in the world, the market share of 65-inch products ranked second in the world, and the market share of high-end TV panels such as shadowless screens and 120HZ screens steadily ranked first in the world. In commercial markets such as interactive whiteboards, digital signages, and splicing screens, TCL CSOT ranked among the top level in terms of global market share. In its medium-sized product business, TCLCSOT accelerated the layout of its new businesses, including IT and vehicle-mounted screen products, while enhancing product competitiveness and optimizing customer structure to create new driving forces for business growth. The G6 LTPS production line was expanded as planned, and the t9 production line, positioned at medium-size IT and vehicle-mounted screen products, successfully achieved a capacity increase in SoP, with brand customer introduced for commercial displays, monitor and laptops. TCL CSOT's medium-sized panel business developed rapidly, reaching a revenue share of 21%. The Company's shipments of monitors jumped to the top third in the world, with e-sports monitor having the largest market share globally. The market share of LTPS laptops and LTPS tablets ranked second globally. With the rapid penetration of LTPS panels in the field of new energy vehicles, the Company's shipment of LTPS vehicle-mounted screens also significantly increased. The Company's Mini-led backlight products for monitor, laptop, vehicle-mounted screen and other products achieved SoP to continuously satisfy the various needs of customers. In its small-sized product business, TCLCSOT consolidated its position in the market of Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 13 LTPS mobile phone panels, drove the growth of the flexible OLED business with product innovations, and expanded the VR/AR and professional display markets. TCLCSOT ranked third in the world in terms of LTPS mobile panel shipments from the t3 production line. The independently developed 1512 PPIMini-led LCD-VR screens achieved SoP. The Company actively expanded into professional display fields such as healthcare, smart homes, and learning machines. TCLCSOT ranked fifth in the world in terms of the shipments of flexible OLED mobile phone panels from the t4 production line. During the Reporting Period, TCLCSOT began cooperating with several new brands, which further improved its customer structure. Flexible OLED folding, LTPO, Pol-Less, and other new technologies have now reached an industry-leading level, and TCLCSOT has achieved SoP and supplied high-end flagship models to brand customers, with high-end products achieving remarkable progress and laying the foundation for business improvement. Looking ahead to the second half of the year, consumer demand is expected to rebound due to the seasonal effect. Currently, the prices of large-sized display products continue to rise, while the prices of some medium-sized products have begun to bottom out. Meanwhile, the prices of small-sized products have stabilized. Thanks to favorable industry trends and the optimization of the Company's business structure, the Company is confident that its semiconductor display business will achieve significant improvement in the second half of the year. In the long term, as major information carriers and interactive interfaces in the digital economy era, semiconductor displays will further increase in industrial value, the trend toward large-sized TVs will drive steady growth in the display demand area. Maintaining a reasonable level of profitability is the foundation for the sustainable development of the industry, the industry will move toward more rational competition. TCLCSOT will continue to promote the healthy and sustainable development of the industry. Efficiency and profitability will remain the cornerstone of its operations, allowing for the continuous improvement of its relative competitiveness. It will also improve the layout of small and medium-sized products, improve its customer structure and business performance, and accelerate its transformation and upgrade from the leading manufacturer of large-sized displays to a leading manufacturer of full-sized displays. (II) New energy photovoltaics and semiconductor materials business In the first half of the year, as the capacity of upstream raw materials and various links in the Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 14 photovoltaic industry chain were released, product prices decreased. However, the economic viability of photovoltaic power generation improved, driving a steady increase in terminal demand. TCL Zhonghuan grasped the opportunity of the growing market, gave full play to its advanced production capacity and flexible manufacturing, and achieved rapid growth in production and sales scale. During the Reporting Period, TCLZhonghuan achieved an operating revenue of RMB34.9 billion, with a year-on-year increase of 10.1%, and a net profit of RMB4.84 billion, with a year-on-year increase of 50%. Relying on its technical advantages of G12 and N-type photovoltaic materials, TCL Zhonghuan consolidated its leading position in the market, enhanced the layout of TOPCON batteries and shingled modules, and strengthened its differentiated competitiveness. The Company continued to expand its advanced production capacity, and gave full play to the scale advantages, cost advantages, and market advantages of G12 products to expand its leading position in the field of photovoltaic materials. At the end of the Reporting Period, the Company's total monocrystalline silicon capacity reached 165GW, with its market share of photovoltaic silicon wafers ranked top in the world. The Company led the upgrade of large-size, thin slicing, thin line process technologies for crystals and wafers. Metrics such as the consumption rate of silicone materials per crystalline unit, monthly crystal output per furnace, number of wafer output per kg, and other indicators, the Company managed to maintain a leading position in the industry. With the increasing demand for energy efficiency and upgrading photovoltaic products to N-type technology, the Company has built a deep technical barrier. The Company also built a smart factory for 25GWN-type TOPCON batteries and continuously improved the production capacity of shingled modules, leading to the development of a differentiated industrial chain based on next-generation technology, enhancing its competitiveness. TCLZhonghuan increasingly applied Industry 4.0 technology in flexible manufacturing and accelerated the layout of its international business to seize a high-value market share. As global trade barriers increase, it is becoming much more important to build a global manufacturing layout. Having relied on long-term investment and development in smart manufacturing over the years, the Company has achieved industry-leading capabilities in applying Industry 4.0 in flexible manufacturing and has satisfied its customers' demands for customization and differentiation. Furthermore, the Company has collaborated with the supply chain and manufacturing sector to Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 15 enhance its end-to-end traceability capabilities, securing a significant share in high-premium markets. The Company has fully introduced the Industry 4.0 system in all links of the industrial chain, creating autonomously coordinated and highly efficient dark factories. This has allowed it to achieve industry-leading productivity and automated production, establishing a competitive advantage in localized manufacturing on a global scale. During the Reporting Period, the Company signed cooperation terms and lists with Vision Industries Company, with a view to jointly establish a joint venture and invest in a photovoltaic crystal and wafer factory in Saudi Arabia. This initiative marks the start of an overseas localized manufacturing strategy for crystals and wafers. The Company and Maxeon have achieved mutually promoted and coordinated development in terms of production and channels around the world. These efforts will further facilitate the accelerated growth of the Company's overseas business in the future. III. Analysis of core competitiveness Over the past 42 years, TCLTECH has developed an industrial layout that focuses on semiconductor displays, new energy photovoltaics, and semiconductor materials by maintaining innovation, change, and transformation, and has achieved leapfrog development in the pan-semiconductor segment from zero to one and one to N. In this process, TCLTECH has continued to enhance its own core competitiveness and sustainability. By upholding its mission of "leading technology and mutually beneficial cooperation", the Company has continued to increase its investment in leading technology to create a better life for people, and build an open and mutually beneficial industry ecosystem with partners characterized by a people-oriented approach and mutual cooperation. Leading in scale: rapid growth of production capacity and improvement of value chain layout As a global semiconductor display leader, the Company has two 11th-generation, four 8th-generation, and two 6th-generation semiconductor panel production lines, and is ranked second in the world in terms of capacity. The Company has continuously expanded its capacity through an endogenous growth and M&A strategy. By establishing two 8.5th-generation OEM lines, CSOT has secured its foothold in TV panels, further boosted its capacity in large-sized panels, and maintained a leading position globally with two 11th-generation OEM lines and a merger with the Samsung t10 Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 16 production line. CSOT ranks among top 2 globally by market share of TV panels. In 2021, the Company established a mid-sized t9 production line with high added value to expedite its strategic layout across all product sizes. At present, products from the t9 production line have been delivered to IT brand customers. The Company has successfully increased its competitiveness in its mid-sized business, which is evidenced by securing first place by market share of e-sport MNT products and second place by market share of LTPS tablets and LTPS notebooks globally. In addition, the Company has also maintained high-speed development in vehicle-mounted devices. In the small-sized segment, the Company has focused on mid and high-end products in LTPS and flexible OLED technologies through its two 6th-generation production lines, i.e. t3 and t4. In the first half of the year, the Company ranked third by market share of LTPS mobile panels, and fifth by flexible OLED mobile panels. The Company has also actively extended its value chain, increased module capacity, acquired Moka Technology, and further scaled up its position along the value chain and in terms of profitability. Based on its upgraded scale, management, and synergy with the industrial chain, the Company will further shore up its industry status and overall competitiveness in the future. Leading in technology and ecology: Actively laying the groundwork for next-generation display technologies and materials, building a first-mover advantage through ecological leadership Relying on TCLCSOT, the Company has accelerated its vertical layout of the industrial chain and continuously improved its upstream capacity for technological innovation. The Company has strategically focused on building an ecosystem in areas such as basic materials, next-generation display materials, and critical equipment for new manufacturing processes. This is aimed at creating a TCL ecosystem within the display market to establish a leading advantage based on next-generation display technology. The Company has actively invested in quantum dot display technologies, and increased its research and industrial cooperation efforts in areas such as quantum dot display materials, new device structures, and ink-jet printing. In doing so, it aims to tap into the key technologies of the next generation of displays. The subsidiary of the Company, Guangdong Juhua, has the only national innovation center "National Printing and Flexible Display Innovation Center" in the display industry within China, which has provided a globally-leading public platform for G4.5 printed display R&D. This has helped integrate industrial chain resources from all links, including materials, techniques, processes, and application verification to enable the integration of cutting-edge technology Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 17 development into industrial applications. In addition, the Company has continued to invest in Micro-LED display technologies to help promote the Company's ecological layout in this field from materials, techniques, equipment, and production line solutions to independent intellectual property. New Strategic Growth Engines: Seizing Development Opportunities and Promoting the Rapid Development of the New Energy Photovoltaic Industry The Company has boosted the rapid development of TCLZhonghuan based on its excellent management experience that it has accumulated from the high-tech, asset-heavy, and long-cycle industry for years. By invigorating the organization through systematic and institutional reform, the Company has optimized its assets structure to enhance its operation efficiency, and has unleashed the growth potential of new energy photovoltaics business through industrial synergy. TCLZhonghuan has further consolidated its leading position in the industry, with high-quality and growth performance, and has become one of the key engines driving the Company's core businesses. In 2022, TCLZhonghuan was awarded the title of "National Championship Enterprises with Leading Products in the Manufacturing Industry", and was ranked top in the world in terms of its capacity and shipment of photovoltaic monocrystalline silicon wafers. Furthermore, it secured the leading market share worldwide for G12 large-size photovoltaic monocrystalline silicon wafers. Driven by its efforts in semiconductor displays and new energy photovoltaics, the Company aims to become a world-leading tech conglomerate. Upgrading Corporate Culture: Taking the Company to a New Development Stage by upholding the Mission and Vision of "Leading Technology and Mutually Beneficial Cooperation" The Company put forward its mission of "leading technology and mutually beneficial cooperation" in the new period. Guided by this mission, the Company is committed to creating an organizational culture of "reform, innovation, responsibility, and excellence", and continues to deepen its team building and improve its corporate culture. TCLTechnology will continue to invest in fields closely related to human life (such as intelligence, health, carbon reduction, and energy saving), and build its leading advantages in technology and products to deliver a wonderful experience and better life to people. Bearing the sustainable development and people-oriented approach in mind, the Company is dedicated to environmental friendliness, employee engagement, and social trust, as well as the harmonious development between humanity, nature, and society. The Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 18 Company has also joined hands with stakeholders to develop an open and win-win industrial eco-system that emphasizes healthy competition and synergistic development. IV. Analysis of Core Businesses Overview Is it the same as the disclosure of the Company's main business during the reporting period √ Yes □ No See the relevant contents in "I. Main businesses of the Company during the reporting period". Year-on-year changes in key financial data Unit: RMB H12023 H12022 Change (%) Reason for change Revenue 85,148,725,606 84,522,181,1280.74% No significant change Operating cost 74,267,599,102 76,522,943,519 -2.95% No significant change Sales expenses 1,206,697,982 1,053,369,27714.56% No significant change Administrative expenses 2,015,923,674 1,716,379,37517.45% No significant change R&D expenses 4,892,353,793 4,451,763,6119.90% No significant change Financial expenses 1,613,162,624 1,720,157,252 -6.22% No significant change Income tax expenses -99,798,639 -88,397,544 -12.90% No significant change R&D investments 5,465,280,784 5,252,157,3874.06% No significant change Net cash generated from operating activities 10,416,168,147 9,016,635,74315.52% No significant change Net cash generated from investing activities -19,540,957,320 -17,613,551,791 -10.94% No significant change Net cash generated from financing activities 3,101,455,669 9,930,162,074 -68.77% Mainly caused by a decrease in financing activities Net increase in cash and cash equivalents -5,931,375,972 1,594,616,564 -471.96%Mainly caused by a year-on-year decrease in cash flow from investing activities and financing activities Significant changes to the profit structure or sources of the Company during the Reporting Period: □ Applicable √ Not applicable No significant changes to the profit structure or sources of the Company during the Reporting Period. Breakdown of revenue: Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 19 Unit: RMB H12023 H12022 Change (%) Amount As % of total revenue (%) Amount As % of total revenue (%) Total 85,148,725,606100% 84,522,181,128100% 0.74%By operating division Semi-conductor display 35,528,426,910 41.73% 37,262,161,64644.09% -4.65%New energy photovoltaics 34,897,789,200 40.98% 31,698,336,74137.50% 10.09%Distribution business 13,812,824,911 16.22% 14,728,215,43217.43% -6.22%Other businesses and internally offset accounts 909,684,585 1.07% 833,467,3090.98% 9.14%By product category Semi-conductor display devices 35,528,426,910 41.73% 37,262,161,64644.09% -4.65%New energy photovoltaics & semi-conductor materials 34,897,789,200 40.98% 31,698,336,74137.50% 10.09%Distribution of electronics 13,812,824,911 16.22% 14,728,215,43217.43% -6.22%Other businesses and internally offset accounts 909,684,585 1.07% 833,467,3090.98% 9.14%By operating segment Mainland China 58,816,018,766 69.07% 57,379,449,51867.89% 2.50%Overseas (Including Hong Kong) 26,332,706,840 30.93% 27,142,731,61032.11% -2.98%Operating division, product category, or region contributing over 10% of revenue or operating profit √ Applicable □ Not applicable Unit: RMB Revenue Operating cost Gross profit marginChange in revenue year-on-year (%) Change in cost of sales year-on-year (%) Change in gross profit margin year-on-year (%) By operating division Semi-conductor display 35,528,426,910 33,690,861,7475.17% -4.65% -5.93% 1.28%New energy photovoltaics 34,897,789,200 26,797,901,79923.21% 10.09% 2.71% 5.52%Distribution business 13,812,824,911 13,293,638,1243.76% -6.22% -5.90% -0.32%By product category Semi-conductor display devices 35,528,426,910 33,690,861,7475.17% -4.65% -5.93% 1.28%New energy photovoltaics & 34,897,789,200 26,797,901,79923.21% 10.09% 2.71% 5.52%Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 20 semi-conductor materials Distribution of electronics 13,812,824,911 13,293,638,1243.76% -6.22% -5.90% -0.32%By operating segment Mainland China 58,816,018,766 53,121,546,5229.68% 2.50% 3.61% -0.96%Offshore (Including Hong Kong) 26,332,706,840 21,146,052,58019.70% -2.98% -16.26% 12.73%Core business data in the recent term restated according to the changed methods of measurement that occurred in the Reporting Period □ Applicable √ Not applicable V. Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB Amount As % of gross profit Source Sustainability Asset impairment -2,358,955,686 -102.98%Falling price of inventory write-off in line with the market No Non-operating income 26,029,7721.14% - No Non-operating expenses 49,159,7782.15% - No VI. Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB End of the Reporting Period December 31,2022 Change in percentage (%) Main reason for change Amount As % of total assets Amount As % of total assets Monetary assets 29,286,644,8927.68% 35,378,501,2619.83% -2.15% No significant change Accounts receivable 21,286,401,4585.58% 14,051,661,4623.90% 1.68% No significant change Contract assets 298,866,5990.08% 315,167,0850.09% -0.01% No significant change Inventories 18,113,675,4174.75% 18,001,121,8555.00% -0.25% No significant change Investment property 889,134,6560.23% 946,449,1250.26% -0.03% No significant change Long-term equity investments 30,354,398,2237.96% 29,256,215,8048.13% -0.17% No significant change Fixed assets 149,680,214,98839.25% 132,477,671,84436.80% 2.45% No significant change Construction in progress 42,114,759,17611.04% 52,053,833,62914.46% -3.42% No significant change Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 21 Right-of-use assets 5,744,716,6591.51% 5,110,123,9041.42% 0.09% No significant change Short-term borrowings 9,613,991,2112.52% 10,215,910,9632.84% -0.32% No significant change Contract liabilities 2,245,240,1660.59% 2,336,008,1640.65% -0.06% No significant change Long-term borrowings 127,571,442,18233.45% 118,603,164,83932.95% 0.51% No significant change Lease liabilities 5,058,333,6441.33% 4,461,382,9021.24% 0.09% No significant change 2. Major Assets Overseas □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 22 3. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Item Beginning amount Gain/loss of fair-value changes in the Reporting Period Cumulative fair-value changes recorded in equity Impairment allowances established in the Reporting PeriodAmount purchased in the Reporting Period Amount sold in the Reporting Period Other changes Ending amount Financial assets 1. Held-for-trading financial assets (excluding derivative financial assets) 15,632,334,714 421,433,335 17,692,666,35715,012,782,463 18,733,651,943 2. Derivative financial assets 361,034,230 37,767,673 -47,188,601 -226,409,725125,203,577 3. Accounts receivables financing 1,103,127,764 2,204,805,7023,307,933,466 4. Investments in other equity instruments 439,996,263 -20,061,981 1,720,000 -550,603421,103,679 Subtotal of financial assets 17,536,492,971 459,201,008 -67,250,582 17,694,386,35715,012,782,4631,977,845,37422,587,892,665 Total of the above 17,536,492,971 459,201,008 -67,250,582 17,694,386,35715,012,782,4631,977,845,37422,587,892,665 Financial liabilities 932,646,673 6,800,298293,602,807 804,379,9341,034,731,40933,986,7091,036,685,012 Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 23 4. Restricted Asset Rights as of the Period-End Restricted assets Carrying amount (RMB’0,000) Reason for restriction Monetary assets 26,697 Central bank statutory deposit reserve Monetary assets 127,543 Other monetary funds and restricted bank deposits Notes receivable 17,523 Pledge Fixed assets 10,073,210 As collateral for loan Intangible assets 410,416 As collateral for loan Held-for-trading financial assets 45,254 Pledge Construction in progress 509,929 As collateral for loan Right-of-use assets 1,813 As collateral for lease Accounts receivable 135,830 Pledge Contract assets 29,804 Pledge Total 11,378,019 VII. Investments Made 1. Total Investment Amount √ Applicable □ Not applicable Total investment amount in the Reporting Period (RMB) Total investment amount in the same period last year (RMB) Change (%) 19,514,629,660 21,824,233,385 -10.58%2. Major Equity Investments Made in the Reporting Period √ Applicable □ Not applicable Unit: RMB100 million Name of investee Principal activity Investment method Investment amount Shareholding percentage (%) Funding source Partner Term of investmentType of products Progress as of the balance sheet dateEstimated income Investment income/loss in the Reporting Period Involvement in lawsuit(s) Date (if any) of disclosureIndex (if any) to disclosed informationHuizhou Dongshen Jia'an Equity Investment Partnership (Limited Partnership) Industrial investments Equity investments 15.699.94% Self-raised funds Ningbo Jia'an Venture Capital Partnership (Limited Partnership)Not applicable Not applicable EstablishedNot applicable Not applicable Not applicable March 31, 2023 .com.cn Total -- -- 15.6 -- -- -- -- -- -- Not applicable Not applicable -- -- -- 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 24 4. Financial Investments (1) Stock Investments √ Applicable □ Not applicable Unit: RMB'0,000 Stock type Stock code Stock abbreviation Initial investment costAccounting measurement method Beginning carrying amountGain/loss of fair-value changes in the Reporting Period Cumulative fair-value changes recorded in equityAmount purchased in the Reporting Period Amount sold in the Reporting Period Gain/loss in the Reporting Period Ending carrying amount Accounting title Funding source Stocks 300842.SZDKElectronic Materials, Inc.2,430 Fair value 25,25817,69700017,69742,955 Other non-current financial assetsSelf-funded Stocks 688469.SHChip integration 26,745 Fair value - -94026,7450 -9426,651 Other non-current financial assetsSelf-funded Government bonds 220016IB 22 Interest-bearing government bonds 1620,000Measurement at amortized cost 20,327000023620,563Debt investmentsSelf-funded Government bonds 220016IB 22 Interest-bearing government bonds 1620,000Measurement at amortized cost 20,327000023620,563Debt investmentsSelf-funded ETFs US4642885135 ISHARESIBOXXHIGHYLDCORP 13,734 Fair value 11,02590015,04911,56327515,018Held-for-trading financial assetsSelf-funded Government bonds 220016IB 22 Interest-bearing government bonds 1610,000Measurement at amortized cost 10,158000011910,276Debt investmentsSelf-funded Government bonds 220016.IB 22 Interest-bearing government bonds 1610,000Measurement at amortized cost 10,152000011910,271Debt investmentsSelf-funded Stocks 688728 Galaxycore Inc.4,284 Fair value 18,404 -629001,884 -1689,494Other non-current financial assetsSelf-funded Financial bonds XS2587421681 NANYAN 7.35 PERP Corp 7,226Measurement at amortized cost - 007,22601657,397Debt investmentsSelf-funded Bonds XS2560662541 LINKCBLTD 4,622 Fair value 4,791 -40601,5830 -2766,134Held-for-trading financial assetsSelf-funded Other securities investments held at the period-end 402,509 - 177,432350 -2,461215,886229,3703,179161,851 Total 521,552 - 297,87417,007 -2,461266,490242,81721,487331,174 Disclosure date of the board announcement approving securities investments March 31,2023 Date for disclosure and announcement on approving securities investment by the general meeting April 22,2023 Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 25 (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB'0,000 Type of contract Beginning amount Ending amount Gain/loss in the Reporting Period Ending contractual amount as % of the Company’s ending net assets Contractual amount Transaction limit Contractual amount Transaction limit Contractual amount Transaction limit 1. Forward forex contracts 2,062,17273,4412,959,775112,97721,148 21.210.812. Interest rate swaps 384,44611,533247,1227,4131.770.05Total 2,446,61884,9743,206,897120,39021,14822.970.86Accounting policies and specific accounting principles for hedging business during the Reporting Period and a description of whether there have been significant changes from those of the previous reporting period No significant change. Description of actual profits and losses during the Reporting Period During the Reporting Period, profit from changes in the fair value of hedged items amounted to RMB360.35 million; losses from the delivery of due forward exchange contracts amounted to negative RMB189.00 million; and profit from the valuation of outstanding forward exchange contracts amounted to RMB40.13 million. Description of the hedging effect During the Reporting Period, the Company's main foreign exchange risk exposures include exposures of assets and liabilities denominated in foreign currencies arising from business such as outbound sales, raw material procurement, and financing. The uncertain risks arising from the exchange rate fluctuations were effectively hedged by using derivative contracts with the same purchase amounts and maturities in opposite directions. Funding source for derivative investment Self-funded. Analysis of risks and control measures associated with derivative investments held in the Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) In order to effectively manage the exchange and interest rate risks of foreign currency assets, liabilities, and cash flows, the Company, after fully analyzing the market trends and predicting operations (including orders and capital plans), adopted forward foreign exchange contracts, options, and interest rate swaps to avoid future exchange rate and interest rate risks. As its business scale changes, the Company will adjust its 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 is related to hedging and trading activities associated with the main business operations. There is a market risk associated with potential losses due to fluctuations in market prices, such as underlying interest rates and exchange rates, which affects the 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 incurring losses due to paying fees to the bank for liquidating or selling the derivatives below the buying prices; 3. Performance risk: the Group conducts its derivative business based on rolling budgets for risk management, and there is a risk of performance failure due to deviation arising between the actual operating results and budgets; 4. Other risks: in the case of specific business operations, the failure of operational personnel to report and obtain approvals in accordance with established procedures or to accurately, promptly, and comprehensively record information related to financial derivative transactions may result in potential losses or missed trading opportunities in the derivative business. Moreover, if the trading operator fails to fully understand the terms of transaction contracts or product information, the Group may face legal risks and transaction losses. Risk control measures: 1. Basic management principles: the Group strictly follows the hedging principle mainly to fix costs and avoid risks. It is necessary for the financial derivatives business to align with the variety, size, direction, and duration of spot goods, and this should not involve any speculative trading. When selecting hedging instruments, only simple financial derivatives that are closely related to the main business operations and comply with the requirements of hedge accounting should be selected. Avoid engaging in complex business activities that go beyond the established scope of operations and involve risks and pricing that are difficult to understand; 2. The Group has formulated a special risk management system tailored to the risk characteristics of the financial Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 26 derivatives business, covering all key aspects such as preemptive prevention, in-process monitoring, and post-processing. It reasonably allocates professionals for investment decision-making, business operations, and risk control as required. Personnel involved in investment are required to fully understand the risks of financial derivatives investment and strictly implement the business operations and risk management system of derivatives. Before the holding company engages in derivative business activities, the holding company must submit detailed business reports to the competent department of the Group, including information about its internal approval, main product terms, operational necessity, preparations, risk analysis, risk management strategy, fair value analysis, and accounting methods. Additionally, a special summary report of previously conducted operations should be submitted. Only after obtaining the opinion of the relevant professional departments within the Group may the holding company proceed with the operations. 3. Relevant departments should track the changes in the open market price or fair value of financial derivatives, promptly assess the risk exposure changes of invested financial derivatives, and compile reports to the board of directors on business development; 4. The financial company should actively manage and disclose in a timely manner any confirmed gains and losses as well as unrealized losses from futures and derivative transactions of listed companies. When such losses account for 10% of the audited net profit attributable to the shareholders of the listed company in the last year and exceed RMB10 million, the financial company should make timely disclosure thereof. Changes in market prices or fair value of derivative investments in the Reporting Period (fair value analysis should include the measurement method and related assumptions and parameters). With the rapid expansion of overseas sales, the Company continued to follow the above rules in the operation of forward foreign exchange contracts, interest rate swap contracts, and futures contracts to avoid and hedge against foreign exchange risks arising from operations and financing. During the Reporting Period, there were profits and losses of RMB360.35 million from changes in the fair value of hedged items and negative RMB148.87 million from derivatives. The fair value of derivatives is determined by the real-time quoted price of the foreign exchange market, and is based on the difference between the contractual price and the forward exchange rate quoted immediately on the foreign exchange market on the balance sheet date. Legal matters involved (if applicable) Not applicable Disclosure date of the board announcement approving the derivative investments (if any) March 31,2023 Disclosure date of the general meeting announcement approving the derivative investments (if any) April 22,2023 Opinion of independent directors on derivative investments and risk control From January to June 2023, the financial derivatives transactions entered into by the Company were closely connected to the daily operational needs of the Company, and the risks therefrom were controllable. Such transactions conformed to the development needs of the Company, and the requirements of related laws and regulations. 5. Use of the Capital Raised √Applicable Not applicable (1) General Information about the Use of Raised Funds √Applicable Not applicable Unit: RMB'0,000 Year of raising Method of Total amount raised Used in the current period Total amount used Total amount of Total amount of Total amount of Total proceePurpose and Amount left idle Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 27 raising changed-purpose funds during the Reporting Period changed-purpose funds changed-purpose funds as a % of total amount raised ds that have not been used location of the unused amountfor over two years 2022 Non-public offering of shares 947,469.47244.99947,714.46Not applicableNot applicableNot applicable 0 Not applicable0Total -- 947,469.47244.99947,714.46 Not applicableNot applicableNot applicable 0 -- 0Use of the Capital Raised According to the Approval for the Non-Public Issue of Shares by TCLTechnology Group Co., Ltd. (Zheng Jian Xu Ke [2022] No.1658) issued by the China Securities Regulatory Commission, the Company issued no more than 2,806,128,484 shares in a non-public manner.2,806,128,484 shares were issued in the offering. As of December 6,2022, the Company raised RMB9,596,959,415.28, or RMB122,264,729.12 after deducting the cost in connection with issuing shares (not including VAT). The proceeds that can be utilized amounted to RMB9,474,694,686.16. On December 6,2022, the Company received the proceeds from the aforementioned share issue, which was confirmed by Da Hua CPAs (Special General Partnership) in its capital verification report of "Da Hua Yan Zi [2022] No.000709". As of June 30,2023, the Company utilized the proceeds of RMB9,477,144,603.75 (including net interest income of RMB2,449,917.59), in which RMB9,000,000,000.00 was used to repay the funds raised for the investment in previous projects, while the remaining amount was used to make up the working capital. As of the date of this report issuance, the Company has successfully completed the closure procedures for the special account designated for the funds raised through this private placement. (2) Promised Use of Raised Funds √Applicable Not applicable Unit: RMB'0,000 Promised project funded with raised funds and investment with over-raised funds Whether the project changed or not (including partial changes) Total promised investment amount with raised funds Adjusted total investment amount (1) Investment in the Reporting Period Cumulative investment amount at the period-end (2) Investment progress as at the period-end (3)=(2)/(1)Time when the project is ready for its intended use Benefits derived in the Reporting Period Whether it met the expected benefits or not Whether there were significant changes to the project feasibility or not Promised projects 1.8.6th generation oxide semiconductor new display device production line project No 900,000.00900,000.000900,000.00100.00%24 months from the commencement date of the project Not applicable Not applicableNo 2. Additional working capital No 47,469.4747,469.47244.9947,714.46100.52% Not applicableNot applicable Not applicableNo Subtotal of promised projects -- 947,469.47947,469.47244.99947,714.46 -- -- -- -- Over-raised funds None Description of delayed Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 28 progress and reasons for failure to achieve the planned progress and expected income Description of major changes in project feasibility Not applicable Over-raised funds amount, purpose, and use progress Not applicable Change in location of the project with raised funds Not applicable Change in the project implementation method Not applicable Advance investments in promised projects funded with raised funds and subsequent swaps On December 12,2022, the Proposal on Using Raised Funds to Swap Self-raised Funds Previously Invested in Projects that should be Funded with Raised Funds was approved at the 26th Meeting of the Company's 7th Board of Directors. As such, the raised funds were agreed to be swapped with the advance investments of self-raised funds in projects that should be funded with raised funds. The total swap amount was RMB9 billion. Temporary addition of idle raised funds to supplement working capital Not applicable Amount and reason for surplus raised funds during project implementation Not applicable Unused raised fund purpose and allocation Not applicable Issues or other situations regarding the use and Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 29 disclosure of raised funds (3) Change of the raised fund projects □ Applicable √ Not applicable No such cases in the Reporting Period. VIII. Sale of Major Assets and Equity Investments 1. Sale of Major Assets □ Applicable √ Not applicable 2. Sale of Major Equity Investments □ Applicable √ Not applicable IX. Principal Subsidiaries and Joint Stock Companies √ Applicable □ Not applicable Principal subsidiaries and joint stock companies with an over 10% effect on the Company's net profit: Unit: RMB'0,000 Company name Company type Principal activity Registered capital Total assets Net assets Revenue Operating profit Net profitTCLChina Star Optoelectronics Technology Co., Ltd. SubsidiarySemi-conductor display RMB33.08 billion 19,479,8257,084,5283,060,062 -447,534 -361,917 TCLZhonghuan New Energy Technology Co., Ltd. SubsidiarySemiconductor photovoltaics and semiconductor materials RMB4.04 billion 12,232,7495,840,7313,489,779 539,836 483,888 Highly Information Industry Co., Ltd. SubsidiaryDistribution business RMB0.42 billion 883,358146,9541,381,28210,6287,871Acquisition and disposal of subsidiaries in the Reporting Period √ Applicable □ Not applicable Company name How subsidiaries were obtained or disposed of in the Reporting Period Effects on overall operations and operating performance Lumetech North America Corporation Newly incorporated No significant effect Suzhou Zhonghuan Photovoltaic Materials Co., Ltd. Newly incorporated No significant effect Ningxia Huanou New Energy Technology Co., Ltd. Newly incorporated No significant effect Xinxin Semiconductor Technology Co., Ltd. Acquisition No significant effect Jiangsu Mingjing Semiconductor Technology Co., Ltd. Acquisition No significant effect Jiangsu Lixin Semiconductor Technology Co., Ltd. Acquisition No significant effect Xuzhou Xinjing Semiconductor Technology Co., Ltd. Acquisition No significant effect Jiangsu Huasheng Semiconductor Materials Co., Ltd. Acquisition No significant effect Hong Kong NExcel Electronic Technology Co., Ltd. Acquisition No significant effect Singapore NExcel Electronic Technology Pte. Acquisition No significant effect Xuzhou Jingrui Semiconductor Equipment Technology Co., Ltd. Acquisition No significant effect Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 30 Meixin (Xuzhou) Silicon Material Technology Co., Ltd. Acquisition No significant effect Ningxia Zhonghuan Industrial Park Management Co., Ltd. Newly incorporated No significant effect Shanghai Zhonghuan Photovoltaic Materials Co., Ltd. Newly incorporated No significant effect Guangzhou TCLIndustrial Research Institute Co., Ltd. Newly incorporated No significant effect Xiaoyuzaixian (Beijing) Technology Co., Ltd. Newly incorporated No significant effect Suzhou Huaxin Environmental Technology Co., Ltd. Acquisition No significant effect Huizhou Dongshen Jia'an Equity Investment Partnership (Limited Partnership) Newly incorporated No significant effect Inner Mongolia TCLPhotoelectric Technology Co., Ltd. Acquisition No significant effect Ningbo Dongshen Zhixuan Equity Investment Partnership (Limited Partnership) Newly incorporated No significant effect Huansheng Photovoltaic (Guangdong) Co., Ltd. Newly incorporated No significant effect TCLFinancial Technology (Shenzhen) Co., Ltd. Acquisition No significant effect Yixing Huanxing New Energy Co., Ltd. Disposal No significant effect Tianjin Binhai Huanneng New Energy Co., Ltd. Disposal No significant effect Dushan Anju Photovoltaic Technology Co., Ltd. Disposal No significant effect Shangyi Shengxin New Energy Development Co., Ltd. Disposal No significant effect Gengma Huanxing New Energy Co., Ltd. Disposal No significant effect Guyuan Shengju New Energy Co., Ltd. Disposal No significant effect Zhangjiakou Shengyuan New Energy Co., Ltd. Disposal No significant effect Qinhuangdao Tianhui Solar Energy Co., Ltd. Disposal No significant effect X. Structured Bodies Controlled by the Company □ Applicable √ Not applicable XI. Risks and Responses 1. Risk of Macroeconomic Fluctuations In recent years, a series of factors have brought about potential financial risks, including trade barriers, the Russia-Ukraine geopolitical conflict, and increasing uncertainty of global economic development, as well as measures adopted by countries to address stubbornly high inflation. In this context, the Company has committed to driving innovation and implementing a strategy of technological self-reliance, while also following the national roadmap of "fostering a new development paradigm with domestic circulation as the mainstay and the mutual promotion of domestic-international dual circulation". To achieve this, the Company has focused on a specialized operation strategy for its core businesses, playing to its advantages in industrial chains, consolidating its leading position in the country, and implementing the "going global" strategy. This approach aims to establish a more resilient global supply chain layout, enabling the Company to engage in the international economy and effectively respond to economic uncertainties. 2. Risk of Industry Climate Fluctuations Due to a slowdown in global consumer demand, there has been a significant impact on panel demand and shipments. Although the panel industry has shown some signs of recovery in recent times, it is still in the overall phase of climbing out of a cyclical trough. The Company will dynamically Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 31 analyze the development trend between supply and demand, and will proactively anticipate shifts in production capacity allocation to ensure profitability. Meanwhile, the Company will strengthen its investment in R&D, and expand its advantages in terms of size and effectiveness by creating high barriers to competition and broadening its business moat. 3. Risk of Changing Technologies and Application Scenarios The application scenarios of end consumers are constantly evolving. For instance, semiconductor displays serve as gateways to connect the real world with the virtual one, and in the future, they will give rise to various products driven by innovative technologies and products. In addition, under the consensus of carbon neutrality, paperless and recyclable electronic products, and other low-carbon footprint concepts will also become a new trend on the demand side. The Company's products therefore need to continuously innovate to adapt to evolving application requirements. The Company will continue to focus on the demands of the industry and end customers, strengthen R&D investment, optimize business structure driven by technology innovation, and enhance product competitiveness. Based on more thorough research and analysis of market segments, the Company will explore more emerging fields, actively make arrangements regarding emerging market segments, and develop new driving forces for growth. 4. Intellectual Property and Legal Risks As the Company's business scale expands and its technology footprint continues to grow, the risks associated with intellectual property will become more significant. The Company will continue to maintain high-intensity R&D investment, continuously enhance the professional capabilities of its core technical team, and continuously improve the patent layout of key technologies and products through the model of "independent research + cooperative R&D". The Company will also improve its intellectual property management and protection mechanisms, and comprehensively mitigate intellectual property risks by engaging in strategic partnerships with external professional organizations in the field of intellectual property. Furthermore, international trade barriers and market access complexities are continuously increasing, as well as rising compliance risks in overseas markets. The Company will therefore intensify its research into international laws, regulations, and standards, and further improve its compliance management system to ensure its operations remain compliant. It will also maintain close communication with local partners to mitigate potential legal risks. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 32 Part IVCorporate Governance I. Annual and Extraordinary General Meetings Convened during the Reporting Period 1. General Meetings Convened during the Reporting Period Meeting Type Investor participation ratio Date of the meeting Date of disclosure Resolutions of the meeting The First Extraordinary General Meeting of 2023 Extraordinary general meeting 15.03% January 9,2023 January 10,2023 All proposals were adopted. Please refer to the Notice on the 1st Extraordinary General Meeting of 2023 disclosed on on January 10, 2023 (Notice No.: 2023-001) The 2022 Annual General Meeting Annual general meeting 16.42% April 21,2023 April 22,2023 All proposals were adopted. Please refer to the Notice on Resolutions of General Meeting of 2022 disclosed on on April 22,2023 (Notice No.: 2023-029) The Second Extraordinary General Meeting of 2023 Extraordinary general meeting 15.57% June 16,2023 June 17,2023 All proposals were adopted. Please refer to the Notice on the 2nd Extraordinary General Meeting of 2023 disclosed on on June 17, 2023 (Notice No.: 2023--046) 2. Extraordinary General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II. Change of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Office title Type of change Date of change Reason for change Wang Cheng Director Elected January 9,2023 Election at a shareholders’ meeting Zhao Jun Director Elected January 9,2023 Election at a shareholders’ meeting III. Interim Dividend Plan □ Applicable √ Not applicable The Company has no interim dividend plan, either in the form of cash or stock. IV. Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees √ Applicable □ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 33 1. Equity Incentives □ Applicable √ Not applicable 2. Implementation of Employee Stock Ownership Plan √ Applicable □ Not applicable All the valid employee stock ownership plans during the Reporting Period Name Scope of employees Number of employees Total number of shares held （share） Changes Proportion to total share capital of listed companies Funding source for implementing the plan 2021-2023 Employee Stock Ownership Plan (Phase I) The Company's middle and senior management and outstanding key staff Less than 3,60048,332,573Not applicable 0.26% Special incentive funds provisioned by the Company 2021--2023 Employee Stock Ownership Plan (Phase II) The Company's middle and senior management and outstanding key staff Less than 3,600117,132,801Not applicable 0.62% Special incentive funds provisioned by the Company Note: 1.Based on the agreements under the Tranche IIIGlobal Partner Program (Draft), the shares attributable to employees have been fully vested, sold and transferred to employees at the end of the reporting period. 2. At the end of the reporting period,2021-2023 ESOP (Tranche III) (Draft) and other related matters have been deliberated and approved by the general meeting. The underlying shares under the ESOP have not been transferred. Shareholdings of Directors, Supervisors and Senior Management under the Employee Stock Ownership Plan during the Reporting Period Name Position Opening shareholding (shares) Closing shareholding (shares) Proportion to total share capital of listed companies Li Dongsheng Chairman, CEO About 27.07 million shares About 20 million shares 0.11%Wang Cheng Director, COO Zhao Jun Director, Senior Vice President Liao Qian Director, Board Secretary and Senior Vice President Yan Xiaolin Senior Vice President, CTO Li Jian CFO Mao Tianxiang Employee Supervisor Changes of asset management institutions during the Reporting Period □ Applicable √ Not applicable Changes of equity caused by the holder’s disposal share during the Reporting Period □ Applicable √ Not applicable For details on change in shareholdings from non-trading transfer by directors, supervisors and senior managers under the ESOP, please Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 34 see the “Change of Shareholdings of Directors, Supervisors and Senior Managers” in the report. Exercise of shareholder rights during the Reporting Period □ Applicable √ Not applicable Other relevant information and explanations of the Employee Stock Ownership Plan during the Reporting Period. □ Applicable √ Not applicable Changes of the members of Employee Stock Ownership Plan Management Committee □ Applicable √ Not applicable Financial impact of Employee Stock Ownership Plan on the Company during the Reporting Period and related accounting treatment √ Applicable □ Not applicable The financial, accounting treatment and taxation involved in the Company’s shareholding plan shall be implemented according to laws and regulations and normative documents on financial systems, accounting standards, taxation systems, etc. The holder of the shareholding plan shall pay the personal income tax generated due to the shareholding plan according to law, and can choose to sell the corresponding amount of shares to the shareholding plan to cover personal income tax. The remaining shares will be attributed to individuals. Termination of Employee Stock Ownership Plan during the Reporting Period √Applicable Not applicable Based on the agreements under the Tranche IIIGlobal Partner Program (Draft), the shares attributable to employees have been fully vested, sold and transferred to employees at the end of the reporting period. 3. Other Employee Incentives □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 35 Part VEnvironmental and Social Responsibility IMajor Environmental Issues Whether the listed company and its subsidiaries are major polluters announced by the environmental protection department √ Yes □ No Policies and Industrial Standards in connection with Environmental Protection The Company complies with a number of environmental protection policies, including: Law of the People’s Republic of China on Environmental Protection, Law of the People’s Republic of China on the Prevention and Control of Atmospheric Pollution, Law of the People’s Republic of China on the Prevention and Control of Water Pollution, Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste, Law of the People’s Republic of China on Soil Pollution Prevention, Law of the People’s Republic of China on Noise Pollution Prevention, Law of the People’s Republic of China on the Prevention and Control of Radioactive Pollution. Industrial standards referred by the Company in environmental protection include: the Electronic Industry Water Pollutant Discharge Standards, Battery Industry Pollutant Discharge Standards, Pollutant Discharge Standards for Urban Sewage Treatment Plants, Environmental Noise Discharge Standards for Industrial Enterprise and Factories, Pollutant Discharge Standards for Urban Sewage Treatment Plants, Hazardous Waste Storage Pollution Control Standards and Malodorous Pollutant Discharge Standards. Administrative License for Environmental Protection The Company complies with the laws and regulations related to environmental protection license during its construction, carries out environmental impact evaluation, obtains sewage discharge permits, and files with the provincial and municipal regulators for its operation on a timely basis. Industrial Discharge Standards, and Details on Pollutant Discharge from Production and Operation Name of the Company or subsidiary Key pollutants and types of specific pollutants Major pollutants Way of dischargeNumber of discharge outletsDistribution of discharge outletsDischarge intensity Governing discharge standards Total discharge Approved total dischargeExcessive dischargeTianJin Zhonghuan Advanced Material&Technology Co., Ltd. Waste water pollutants COD, ammonia nitrogen, other specific pollutants (total nitrogen, total phosphorus, pH, suspended solids, BOD5, flow, fluoride, petroleum) Organized 1 General discharge outlet As per emission standard DB12/356-2018 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicableFull Text of the 2023 Interim Report of TCLTechnology Group Corporation 36 Name of the Company or subsidiary Key pollutants and types of specific pollutants Major pollutants Way of dischargeNumber of discharge outletsDistribution of discharge outletsDischarge intensity Governing discharge standards Total discharge Approved total dischargeExcessive dischargeTianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. Waste water pollutants COD, ammonia nitrogen, other specific pollutants (total nitrogen, total phosphorus, pH, suspended solids, BOD5, flow, fluoride, petroleum) Organized 1 General discharge outlet As per emission standard DB12/356-2018 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicableTianjin Huanzhi New Energy Technology Co., Ltd. Waste water pollutants Chemical oxygen demand, total phosphorus (measured by P), ammonia nitrogen (NH3-N), total nitrogen (measured by N), pH, suspended solids, petroleum, anionic surfactants, 5-day BOD Organized 1 General discharge outlet As per emission standard DB12/599--2015 Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant Not exceeding Standard Not applicableTianjin Huanou New Energy Technology Co., Ltd Waste water pollutants Chemical oxygen demand, ammonia nitrogen (NH3-N), total nitrogen (measured by N), total phosphorus (measured by P), pH, flotage,5-day BOD, total organic carbon, anionic surfactants, petroleum, animal and vegetable oils, suspended solids Organized 1 General discharge outlet As per emission standard Discharge Standard of Water Pollutants for Electronic Industry GB39731-2020, Integrated Wastewater Discharge Standard DB12/356-2018 Not exceeding Standard Not applicableInner Mongolia Zhonghuan Solar Material Co., Ltd. Waste gas pollutants Particulate matter, nitrogen oxides, VOCs, fluoride Not organizing MultipleRooftops of plants and production workshops As per emission standard Integrated Emission Standard of Air Pollutants GB16297- 1996 Not exceeding Standard Not applicableWaste water pollutants COD, ammonia nitrogen, other specific pollutants (total phosphorus, pH, suspended solids, BOD5, fluoride) Organized 1 General discharge outlet As per emission standard GB8978-1996 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicableZhonghuan Advanced Semiconductor Materials Co., Ltd. Waste water pollutants COD, ammonia nitrogen, other specific pollutants (fluoride, total nitrogen, total phosphorus, suspended solids, pH, BOD5) Organized 1 General discharge outlet As per emission standard Wastewater Quality Standards for Discharge to Municipal Sewers GB/T31962 GB8978-1996 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicableHuansheng Solar (Jiangsu) Co., Ltd. Waste water pollutants COD, ammonia nitrogen, other specific pollutants (fluoride, total nitrogen, total phosphorus, suspended solids, pH) Organized 1 General discharge outlet Discharged according to the standard Emission Standard of Pollutants for Battery Industry GB30484- 2013 Not exceeding Standard Not applicableWuxi Zhonghuan Applied Materials Co., Ltd. Waste water pollutants COD, ammonia nitrogen, other specific pollutants (total nitrogen, total phosphorus, suspended solids, pH) Organized 1 General discharge outlet Discharged according to the standard Emission Standard of Pollutants for Battery Industry GB30484- 2013 Not exceeding Standard Not applicableTCLChina Star Optoelectronics Technology Co., Waste water pollutants COD Discharged to Guangming Sewage Plant 1 North of the plant area 145.3mg/L 260mg/L 538.47t 2071.12t Not applicableFull Text of the 2023 Interim Report of TCLTechnology Group Corporation 37 Name of the Company or subsidiary Key pollutants and types of specific pollutants Major pollutants Way of dischargeNumber of discharge outletsDistribution of discharge outletsDischarge intensity Governing discharge standards Total discharge Approved total dischargeExcessive dischargeLtd. COD Discharged to the artificial wetland 1 Artificial wetland 14.09mg/L 30mg/L 23.3t 174.89t Not applicableWaste gas pollutants Nitrogen oxides Discharged to the atmosphere in an organized manner50 Plant roof 28.3mg/Nm3120mg/Nm314.73t Not applicableNot applicableShenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Waste water pollutants COD Discharged to Guangming Sewage Plant 2 Southeast corner of the plant 39.85mg/L 110mg/L 149.778t 1077.8t Not applicableWaste gas pollutants Nitrogen oxides Discharged to the atmosphere in an organized manner10 Plant roof 2.375mg/Nm3120mg/Nm33.7194t 38.86t Not applicableSuzhou China Star Optoelectronics Technology Co., Ltd. Waste water pollutants COD Continuously discharged to CSSD Environmental Technology Wastewater Treatment Plant 2 In CSSD Environmental Technology Wastewater Treatment Plant 60mg/L 500mg/L 66.39t 129.6t Not applicable14mg/L 100mg/L 12.52t 449.82t Not applicableAmmonia nitrogen 11.84mg/L 6mg/L 1.43t 22.68t Not applicableSuzhou China Star Optoelectronics Display Co., Ltd. Waste water pollutants CODContinuously discharged to Suzhou Industrial Park First Sewage Treatment Plant 1 South gate of the plant area 16mg/L 500mg/L 1.73t 96.335t Not applicableAmmonia nitrogen 10.308mg/L 45mg/L 0.0201t 5.65t Not applicableWuhan China Star Optoelectronics Technology Co., Ltd. Waste water pollutants COD Intermittently discharged 1 Southwestern corner of the plant 23.93mg/L 400mg/L 54.59t 353.55t Not applicableAmmonia nitrogen 119.42mg/L 30mg/L 12.74t 35.36t Not applicableWuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Waste water pollutants COD Intermittently discharged 1 Northeastern corner of the plant 69.83mg/L 400mg/L 224.36t 570.8t Not applicableAmmonia nitrogen 112.01mg/L 30mg/L 17.39t 57.1t Not applicableDisposing of pollutants During the Reporting Period, the pollutants generated by the Company and its subsidiaries were discharged in accordance with the requirements of the pollutant discharge permit after treated by corresponding pollutant treatment facilities. All kinds of pollutant treatment facilities were in normal operation, and there were no incidents of environmental pollution or complaints from surrounding residents, nor any incidents of notification or Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 38 punishment received from government environmental supervision agencies. The discharge and disposal of waste water, waste gas, solid waste, and plant boundary noise generated in the operating process complied with the laws and regulations of the country and the place where the operation was located. The Company’s waste water 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 with oil separation and septic treatment; industrial waste water enters different treatment systems according to its characteristics, and is discharged after physical, chemical and biochemical treatment. The air pollutants produced by the Company are mainly process waste gas in the production process. For different types of waste gases, the Company has constructed corresponding waste gas treatment systems, such as a waste gas stripping system, acidic waste gas treatment system, alkaline waste gas treatment system, organic waste gas treatment system, waste gas treatment system for waste water treatment station, 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 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 by the Company 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 recycled and disposed of by a resource recycling manufacturer after being classified in the plant area; domestic garbage is handed over by the property company to a domestic garbage landfill for sanitary landfill. All of the above disposals have been carried out according to laws and regulations. The factory noises generated by the Company come from the mechanical noises of production and power equipment, including refrigerators, cooling towers, air compressors, fans, various 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 Company's factory noise emissions can stably reach the standards. Emergency Response Plan for Environmental Incidents The Company regularly carries out environmental risk assessment and emergency material survey, prepares an Emergency Response Plan for Environmental Incidents and submits it to the local environmental protection department for recordation after being reviewed by experts. The Company regularly delivers employee training on emergency plans and carries out emergency drills for environmental emergencies to ensure timely and accurate Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 39 response to environmental pollution emergencies. The Plan shall be subject to changes in line with the actual situation and changes of various companies under the Group in a timely manner, and shall be prepared again in case of major changes or after every 3 years. Name of subsidiary Filing No. of the Emergency Response Plan TCLChina Star Optoelectronics Technology Co., Ltd.440311-2023-0005-M Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. 440311-2020-0030-M Suzhou China Star Optoelectronics Technology Co., Ltd. (t10) 320509-2022-464-M Suzhou China Star Optoelectronics Display Co., Ltd. (M10) 320509-2022-423-L Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (t4) 420111-GX-2020-014-H Wuhan China Star Optoelectronics Technology Co., Ltd. (t3) 420111-GX-2020-013-H Relevant information on investments in environmental governance and protection and payments of environmental protection taxes The Company pays the environmental protection taxes every quarter by the Financial Department, and the investments in environmental protection are calculated on an annual basis. Environmental Self-Monitoring Program The Company implements on-line monitoring of various pollutants based on the environmental impact assessment approval and pollution discharge permit, clarifies monitoring indicators, execution standards and their limits, conducts quarterly testing of various pollution factors such as waste water/waste gas/ground water/soil/plant boundary noise, and develops a self-monitoring plan based on the Company's own situation, as well as regularly employing qualified third party to test various pollution factors with the reports kept on file. In addition to self-monitoring, the local environmental protection department also infrequently supervises the environmental testing to ensure that emissions meet standards. Administrative punishments received with respect to environmental issues in the Reporting Period No such matters to be disclosed Measures taken to reduce its carbon emissions and their effects during the Reporting Period √ Applicable □ Not applicable To address the challenge of global climate change and actively respond to the national strategic requirements of “emission peak” and "carbon neutrality", the Company officially issued a Carbon Neutrality White Paper on July 6,2023, making a "3050" pledge to achieve emission peak by 2030 and carbon neutrality by 2050. In response to these targets, TCLTechnology Group has established a management framework, set up a working group to deal with climate change, and effectively managed greenhouse gas emissions based on the Company's actual situation, market environment, and policy trends, and implemented tasks, supervision, and execution responsibilities from Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 40 senior management to shop-floor employees. TCLTechnology Group manages its overall greenhouse gas emissions from five aspects: supervision of carbon accounting, carbon reduction management, carbon asset pooling, carbon trading services and carbon finance support. In addition, the Company also carries out the ISO 14064 Greenhouse Gas Accounting and Verification through third-party agencies, scientifically sets carbon emission targets and develops relevant improvement measures. The Group's dual carbon targets are further specified with annual self-evaluation conducted to ensure the targets achieved. The Company actively responds to the national strategic requirements of carbon reduction, always upholds the business philosophy of green and sustainable development, and implements a series of measures such as selection of energy-efficient equipment (100% major equipment equipped with frequency conversion and automation equipment), smart energy system management and optimization of power supply to effectively reduce equipment energy consumption, and recovers waste heat and ice water energy and uses solar energy for power generation, thereby reducing carbon emissions. In order to achieve energy saving and emission reduction, TianJin ZhongHuan Advanced Material&Technology Co., Ltd. renovated Fab3 Compressed Air Supply Station and Fab2 Litian Water Station, saving about 1.16 million KWH of electricity annually, and the renovation was completed on June 25,2023. At Huangsheng Photovoltaic (Jiangsu) Co., Ltd., the PV panels are installed in the plant-wide open space (such as car sheds and roofs), saving approximately 780,000 KWH of electricity annually, and the renovation was completed on June 30,2023. In the future, all companies of TCLTechnology will forge ahead in sustainable development, and constantly explore and implement the carbon reduction strategy, leading the industry and the whole value chain towards green and low carbon. II. Social Responsibility Plan for consolidating and extending the achievements of poverty alleviation and pushing forward rural revitalization TCLTech actively responds to national calls and focuses on four major areas (i.e. science and technology, education, culture and sports, and targeted relief), continuously strengthens investment in public charitable undertakings, integrates public charitable resources, and contributes to promoting social equity, consolidating and expanding achievements of poverty alleviation and, and achieving rural revitalization and common prosperity. The Company has combined its advantageous industrial resources to implement projects such as “TCLPhotovoltaic Low-carbon School”, “TCLSmart Classroom”, “A.I. Home”, “Little Music+”, and “TCLHope Project Candlelight Award Plan”, in assistance with the revitalization of rural education from such aspect as rural school educational Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 41 resources and infrastructure. Annual summary of consolidating and extending the achievements of poverty alleviation and pushing forward rural revitalization To address the sustainable development issues for rural schools, TCLCharity Foundation cooperated with TCL Zhonghuan to implement the TCLPhotovoltaic Low-carbon School Project, building solar photovoltaic power generation systems free of charge on the roofs of the rural schools and donating the income from such power generation to the schools. The electricity so generated is fully integrated into the power grid, and the power generation income is used for improving the instructional environment and funding for students from poor families, creating a sustainable educational aid model. In June 2023, the Foundation donated roof-based photovoltaic power generation systems and income from 25 years of power generation by such equipment, to a total of 9 rural schools in Horinger County, Hohhot City, Inner Mongolia respectively. The installed power generation capacity of the roof-based photovoltaic power generation system for each of the school is 55 KW, and it is expected that the photovoltaic power generation systems in the 9 schools will generate 17.19 million KWH of electricity throughout their life cycles. Up to now, the Foundation has donated 19 Photovoltaic Low-carbon Schools in Shaanxi, Ningxia, and Inner Mongolia, benefiting over 5,000 students. To address the inequity of educational resources between urban and rural areas, TCLCharity Foundation establishes TCLSmart Classrooms in urban and rural schools, including smart instructional equipment and software, to build multimedia smart classrooms, tailored and simultaneous classrooms between “urban and rural areas”. In June 2023, the Foundation started the donation for Smart Classrooms in Shenzhen Chiwan School. Up to now, the Foundation has donated 3 Smart Classrooms in Shenzhen, Guangdong and Guilin, Guangxi, benefiting more than 3,000 students. In 2019, TCLCharity Foundation cooperated with the TCLIndustrial Research Institute to launch the “A.I. Home” project, developed and designed the “Eagle Storytelling Machine”, and delivered the “Eagle Story Club” campaign in rural schools, bringing together children from rural schools, to improve their wellbeing and help them with growing up. In 2023, the Foundation distributed over 200 customized “Eagle Storytelling Machines” to left-behind children and migrant children; The sixth batches of pilot schools were selected for the “Eagle Story Club” project. A total of 34 schools from 16 provinces including Xinjiang, Tibet, Guizhou, were selected as the “Eagle Story Club” pilot schools, and a total of 145 story boxes were distributed, benefiting 11,000 students. To address the shortage of high-quality music education resources for children, TCLCharity Foundation and the Education Foundation of the Beijing Central Conservatory of Music launched the “Little Music++” project, Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 42 developed and designed the “Little Snow Music Machine”, and carried out “Little Snow Music Class” in the rural schools to introduce both Chinese and international famous music works and appreciation to children who lack music resources and motivate kids to develop positive and optimistic characters. In 2023, the sixth batches of pilot schools were selected for the “Little Snow Music Class” project. A total of 35 schools from 15 provinces including Ningxia, Guangxi, Henan, were selected as the “Little Snow Music Class” pilot schools, and a total of 150 music boxes and 720 music picture books were distributed, benefiting more than 9,000 students. To promote the development of rural education, TCLCharity Foundation continues to implement the “TCL Hope Project Candlelight Award Plan” to recruit and encourage rural teachers to stay in their jobs and contribute to rural education. The project solicited excellent teachers from 194 counties and districts in 14 provinces that serve as the key counties in the National Rural Revitalization and the pairing support areas of Shenzhen. Each of the winners received a personal award worth RMB9,500, including a cash reward and 7-day offline “Candlelight Class” training. In the first half of 2023, the 9th "TCLHope Project Candlelight Award Plan" started its candidate selection, and finally 400 outstanding rural teachers won the awards. Till now, the project applicants cover 523 counties in 23 provinces across the country. More than 3,400 outstanding rural teachers from 2,000 schools have won the awards. A total investment of over RMB46 million has been made in this project. In addition, TCLCharity Foundation continues to launch projects such as targeted assistance and community charity. Through actions such as helping the needy, and pairing assistance, it supports, consolidates and expands the poverty alleviation achievements, builds harmonious urban and rural communities, and contributes to social equity and harmonious development. The Company focused on rural groups to promote rural revitalization through cultural co-creation, and developed the “TCL Chen Xiangbo Aesthetic Education Space” in No.325 village, Xunwu County, Jiangxi Province, to carry out various cultural and artistic activities in the immersive space so as to improve the cultural and artistic literacy of local residents. Also, rural public charitable projects were implemented, such as “Rural Elderly Photography Activities” and “TCLVolunteer Public Education Trip to Tibetan Areas of Qinghai Keba”, to push the progress of cultural and ethical development in rural areas from multiple dimensions. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 43 Part VISignificant Events I. 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 Overdue at the Period-End √ Applicable □ Not applicable Commitment Promisor Type of commitmentDetails of commitment Date of commitment making Term of commitment FulfillmentCommitments made in refinancing Citic Securities Company Limited, Nuode Asset Management Co., Ltd., Guotai Junan Securities Co., Ltd., Everbright Securities Company Limited, UBSAG, Caitong Fund Management Co., Ltd., GFSecurities Co., Ltd., Haitong Securities Co., Ltd., Perseverance Asset Management Partnership (Limited Partnership) - Gaoyi Xiaofeng No.2 Zhixin Fund, China Life Asset Management Co., Ltd. - China Life Asset Management - Bank of China - China Life Asset - PIPE2020 Insurance Asset Management Product, China Southern Asset Management Co., Ltd., Shen Ruijin, Dacheng Fund Management Co., Ltd., Golden Eagle Asset Management Co., Ltd., Huaxia Life Insurance Co., Ltd., Taikang Asset Management Co., Ltd. - Taikang Life Insurance Co., Ltd. - Unit Link - Industry Configuration, Guang Dong Zheng Yuan Private Fund Investment Management Co., Ltd. - Zhengyuan Saturday Private Equity Investment Fund, Bank of Communications Schroder Fund Management Co., Ltd., Foresight Fund Co., Ltd. About restriction on sales of shares The shares of TCL Tech subscribed shall not be transferred within 6 months from the date of listing. December 5, 2022 6 months from the date of listing of the new shares FulfilledFulfilled on time Yes Specific reasons for failing to fulfill commitments on time and plans for next steps Not applicable II. Occupation of the Company, Capital by the Controlling Shareholder or any of Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. III. Irregularities in the Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 44 IV. Engagement and Disengagement of Independent Auditor Whether the semi-annual financial report has been audited □ Yes √ No The interim financial statements are unaudited. V. Explanation of the Board of Directors and Board of Supervisors on the “Non-Standard Auditor’s Report” □ Applicable √ Not applicable VI. Explanation of the Board of Directors on the “Non-Standard Auditor’s Report” for the Previous Year □ Applicable √ Not applicable VII. Insolvency and Reorganization □ Applicable √ Not applicable No such cases in the Reporting Period. VIII. Lawsuits No such cases in the Reporting Period. IX. Punishments and Rectifications □ Applicable √ Not applicable No significant punishments or rectifications in the Reporting Period. X. Credit Quality of the Company as well as its Controlling Shareholder and Actual Controller □ Applicable √ Not applicable XI. Major Related-Party Transactions 1. Continuing Related-Party Transactions □ Applicable √ Not applicable Please refer to the relevant announcements disclosed by the Company on the designated media. 2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments □ Applicable √ Not applicable Please refer to the relevant announcements disclosed by the Company on the designated media. 3. Related-Party Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable The Company did not engage in any related-party transactions regarding joint investments in third parties that should be disclosed Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 45 during the reporting period. 4. Amounts Due to and from Related Parties √ Applicable □ Not applicable Indicate whether there were any amounts due to and from related parties for non-operating purposes. √ Yes □ No Amounts receivable due to related parties Related parties Relationship with the Company Source Capital occupation for non-operating purposes or not Beginning balance (RMB’0,000)Amount of new grants in current period (RMB’0,000)Amount of recovered grants in current period (RMB’0,000)Coupon rate Interest in current period (RMB’0,000)Ending balance (RMB’0,000)TCL Industrial Holdings Co., Ltd. Related corporation Sale of equity investments No 47,040047,040 - - 0The Influence of Amounts Due to Related Parties on the Company’s Operating Results and Financial Status The Company sold 100% held equity of Chongqing Zhongxin Rongxin to TCLIndustries Holdings Inc. in order to further optimize its business structure and focus resources on the development of its primary high-tech business in line with the government policy guidance and in accordance with the needs of the Company’s announced financing projects. According to the agreement signed by both parties, TCLIndustries Holdings Inc. shall pay 51% of the equity transfer price to the Company before June 30,2022. The remaining equity transfer price will be paid before June 30, 2023. Refer to the Announcement on the Disposal of Equity Interests in Partnership Enterprise and the Related-Party Transactions disclosed by the Company on dated June 27,2022. 5. Transactions with Related Finance Companies □ Applicable √ Not applicable 6. Transactions Between the Financial Company Controlled by the Company and Related Companies √ Applicable □ Not applicable Deposit business Related parties Relationship with the Company Daily deposit ceiling (RMB’0,000) Range of interest Beginning balance (RMB’0,000)Amount incurred in the current period Ending balance (RMB’0,000)Total deposit amount in current period (RMB’0,000) Total withdrawal amount in current period (RMB’0,000) Subsidiary of TCLIndustries Holdings Co., Ltd. Related corporation 250,0000.8%-1.15% 34,186.2465,729.22464,846.5635,068.86Loans: Related parties Relationship with the Company Loan limit Range of interest Beginning balance (RMB’0,000)Amount incurred in the current period Ending balance (RMB’0,000)Total loan amount in current period (RMB’0,000) Total repayment amount in current period (RMB’0,000) Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 46 Subsidiary of TCL Industries Holdings Co., Ltd. Related corporation The balance of comprehensive credit on any day shall not exceed RMB2.5 billion (including loans, notes discounting, and notes acceptance) - - - - - Credit or other financial business: Related parties Relationship with the Company Business type Total Ending balance (RMB’0,000) Subsidiary of TCL Industries Holdings Co., Ltd. Related corporation Credit granting (bill discount) The balance of comprehensive credit on any day shall not exceed RMB2.5 billion (including loans, notes discounting, and notes acceptance) 60,998.79Subsidiary of TCL Industries Holdings Co., Ltd. Related corporation Credit granting (bill acceptance) 44,338.167. Other Major Related-Party Transactions √ Applicable □ Not applicable of announcement Date of interim disclosure Website for disclosure Report on the Execution of Daily Related-Party Transactions in 2022 March 31,2023 Announcement on Daily Related-party Leases in 2023 March 31,2023 Announcement on the Launch of Accounts Receivable Factoring and the Related-party Transaction March 31,2023 Announcement on Reducing the Limit of Financial Services Provided by TCLTechnology Group Finance Co., Ltd. to Related Parties and Renewing the Financial Services Agreement for Related-party Transactions March 31,2023 Announcement on the Expected Continuing Related-Party Transactions for 2023 March 31,2023 Announcement on the Related-party Transactions with Shenzhen Jucai Supply Chain Technology Co., Ltd. in 2023 March 31,2023 Announcement on External Investments and Related-party Transactions of the Subsidiary - TCLZhonghuan May 17,2023 XII. 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 Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 47 2. Major Guarantees √ Applicable □ Not applicable Unit: RMB'0,000 Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) Obligor Disclosure date of the guarantee line announcement Line of guarantee Actual occurrence dateActual guarantee amount Type of guarantee Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or notGuarantee for related parties or notTCLKing Electrical Appliances (Huizhou) Co., Ltd. April 28,2022327,138 August 29,20199,531 Joint liability guarantee / Counter guarantee provided by TCL Industrial Holding Co., Ltd. 1.2 years No Yes TCLKing Electrical Appliances (Chengdu) Co., Ltd. April 28,202251,653 - - Joint liability guarantee / - Yes Yes Huizhou TCLMobile Communication Co., Ltd. April 28,2022212,507 - - Joint liability guarantee / - Yes Yes TCLMobile Communication (HK) Company Limited April 28,202229,225 - - Joint liability guarantee / - Yes Yes TCLHome Appliances (Hefei) Co., Ltd. April 28,202268,280 - - Joint liability guarantee / - Yes Yes TCLHome Appliances (Zhongshan) Co., Ltd. April 28,20224,929 - - Joint liability guarantee / - Yes Yes TCLAir-Conditioner (Zhongshan) Co., Ltd. April 28,202280,991 March 31,20212,867 Joint liability guarantee / 10 days-7.8 years No Yes TCLAir Conditioner (Wuhan) Co., Ltd. April 28,202213,480 - - Joint liability guarantee / - Yes Yes Zhongshan TCLRefrigeration Equipment Co., Ltd. April 28,202231,749 - - Joint liability guarantee / - Yes Yes Guangdong TCLSmart Heating & Ventilation Equipment Co., Ltd. April 28,20222,522 - - Joint liability guarantee / - Yes Yes TCLHome Appliances (Huizhou) Co., Ltd. April 28,202210,000 - - Joint liability guarantee / - Yes Yes TCLAir-Conditioner (Jiujiang) Co., Ltd. April 28,20225,488 - - Joint liability guarantee / - Yes Yes Tonly Technology Co., Ltd. April 28,202239,496 November 4,2021322Joint liability guarantee / 1.4 years No Yes TCLVery Lighting Technology (Huizhou) Co., Ltd. April 28,20221,034 - - Joint liability guarantee / - Yes Yes SHIFENDAOJIAOnline Service Co., Ltd. April 28,202277 - - Joint liability guarantee / - Yes Yes Guangzhou TCLScience and Technology Development Co., Ltd. April 28,202284,700 - - Joint liability guarantee / - Yes Yes TCLIndustries Holdings (HK) Limited April 28,2022514,629 December 21,2021144,516Joint liability guarantee / 1.5 years No Yes Techigh Circuit Technology (Huizhou) Co., Ltd. April 28,2022499 - - Joint liability guarantee / - Yes Yes Huizhou Zhongkai TCL Zhirong Technology Microcredit Co., Ltd. May 22,202145,500 - - Joint liability guarantee / With counter- guarantee - Yes Yes Huizhou Yunxin Technology Co., Ltd. April 22,202315,000 - - Joint liability guarantee / With counter- guarantee - Yes No Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 48 Qihang Import&Export Limited April 22,20236,000 - - Joint liability guarantee / With counter- guarantee - Yes No Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. April 22,202340,000 - - Joint liability guarantee / With counter- guarantee - Yes No Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. April 22,2023110,000 August 24,202250,123 Joint liability guarantee / With counter- guarantee 49-296 days No No Qihang International Import and Export Co., Ltd. April 22,202350,000 - - Joint liability guarantee / With counter- guarantee - Yes No Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. April 22,202335,000 April 28,202025,274.91 Joint liability guarantee / Guarantee in proportion to shareholding percentage 8.5 years No No Inner Mongolia Xinhuan Silicon Energy Technology Co., Ltd. April 22,2023180,000 - - Joint liability guarantee / Guarantee in proportion to shareholding percentage - Yes No Inner Mongolia Xinhua Semiconductor Technology Co., Ltd. April 22,202340,000 - - Joint liability guarantee / Guarantee in proportion to shareholding percentage - Yes No Total approved line for such guarantees in Reporting Period (A1) 476,000Total actual amount of such guarantees in Reporting Period (A2) 56,311Total approved line for such guarantees at the end of the Reporting Period (A3) 1,999,897Total actual balance of such guarantees at end of Reporting Period (A4) 232,634Guarantees provided by the Company as the parent for its subsidiaries Obligor Disclosure date of the guarantee line announcement Line of guarantee Actual occurrence dateActual guarantee amount Type of guarantee Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or notGuarantee for related parties or notTCLMOKAINTERNATIONALLIMITEDApril 22,2023176,000 May 31,202317,040 Joint liability guarantee / / 336 days No No TCLTechnologyInvestmentsLimited April 22,2023400,000 July 14,2020216,774 Joint liability guarantee / / 2 years No No TCLChina Star Optoelectronics Technology Co., Ltd. April 22,20231,580,000 December 22,20221,233,058Joint liability guarantee / / 296 days-9.5 years No No TCLTechnology Park (Huizhou) Co., Ltd. April 22,202397,000 June 21,202148,000 Joint liability guarantee / / 7.5-7.5 years No No TCLTechnology Group (Tianjin) Co., Ltd. April 22,202390,000 August 31,202280,000 Joint liability guarantee / / 4.2 years No No TCLTechnology Group Finance Co., Ltd. April 22,2023200,000 April 15,202211,556 Joint liability guarantee / / 3-33 days No No Beijing Hecheng Nuoxin Technology Co., Ltd. April 22,202310,000 September 2,202210,000Joint liability guarantee / / 66 days No No Beijing Lingyun Data Technology Co., Ltd. April 22,2023128,000 July 14,202233,843 Joint liability guarantee / / 13-296 days No No Beijing Sunpiestore Technology Co., Ltd. April 22,2023145,000 July 19,2022115,000 Joint liability guarantee / / 18-139 days No No Guangdong Juhua Printed Display Technology Co., Ltd. April 22,20235,000 - - Joint liability guarantee / / - Yes No Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 22,20231,750,000 March 7,2022865,918 Joint liability guarantee / / 6 days-6.7 years No No Highly (Tianjin) E-Commerce Co., Ltd. April 22,20235,000 - - Joint liability guarantee / / - Yes No Highly (Tianjin) Technology Co., Ltd. April 22,2023115,000 April 21,202332,708 Joint liability guarantee / / 296 days No No Highly Information Industry Co., Ltd. April 22,2023554,000 May 18,2022432,174 Joint liability guarantee / / 25 days-2.0 years No No China Display Optoelectronics Technology (Huizhou) Co., Ltd. April 22,2023150,000 October 18,202231,247 Joint liability guarantee / / 3-296 days No No Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 49 Huizhou China Star Optoelectronics Technology Co., Ltd. April 22,20231,150,000 January 1,2021530,007 Joint liability guarantee / / 21 days-5.7 years No No Huizhou Moka Technology Development Co., Ltd. April 22,202355,000 - - Joint liability guarantee / / - Yes No Moka Technology (Guangdong) Co., Ltd. April 22,2023700,000 April 21,202378,206 Joint liability guarantee / / 296 days No No Qingdao Blue Business Consulting Co., Ltd. April 22,20235,000 June 19,2023125 Joint liability guarantee / / 233-238 days No No Shaanxi Titi Electronic Technology Co., Ltd. April 22,202310,000 September 2,202210,000Joint liability guarantee / / 66 days No No Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 22,20231,300,000 April 28,20181,107,059 Joint liability guarantee / / 34 days-6.0 years No No Suzhou China Star Optoelectronics Technology Co., Ltd. April 22,2023100,000 April 21,202313 Joint liability guarantee / / 3-296 days No No Suzhou China Star Optoelectronics Display Co., Ltd. April 22,2023265,000 August 30,202242,655 Joint liability guarantee / / 8.9 years No No Tianjin Printronics Circuit Corporation April 22,2023100,000 September 9,20224,358Joint liability guarantee / / 7.2 years No No Tianjin TiTi Yunchuang Technology Co., Ltd. April 22,20235,000 September 2,20225,000Joint liability guarantee / / 66 days No No Tianjin WanfangNuoxin Technology Co., Ltd. April 22,20235,000 September 2,20225,000Joint liability guarantee / / 66 days No No Tianjin Xincheng Pilot Technology Co., Ltd. April 22,20235,000 September 2,20225,000Joint liability guarantee / / 66 days No No Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 22,20231,600,000 December 22,20171,010,437Joint liability guarantee / / 7 days-4.7 years No No Wuhan China Star Optoelectronics Technology Co., Ltd. April 22,20231,600,000 June 29,2021913,885 Joint liability guarantee / / 4 days-7.2 years No No Chongqing Blue Business Consulting Co., Ltd. April 22,20231,000 - - Joint liability guarantee / / - Yes No China Star Optoelectronics International (HK) Limited April 22,2023100,000 - - Joint liability guarantee / / - Yes No Total approved line for such guarantees in Reporting Period (B1) 12,406,000Total actual amount of such guarantees in Reporting Period (B2) 1,612,058Total approved line for such guarantees at the end of the Reporting Period (B3) 12,406,000Total actual balance of such guarantees at end of Reporting Period (B4) 6,839,064Guarantees provided between subsidiaries Obligor Disclosure date of the guarantee line announcement Line of guarantee Actual occurrence dateActual guarantee amount Type of guarantee Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or notGuarantee for related parties or notHuhehaote Huanju New Energy Development Co., Ltd.* November 26, 201414,529 December 11, 201514,529Joint liability guarantee / / 1.3 years No No Zhonghuan Energy (Inner Mongolia) Co., Ltd. June 24,201710,680 July 21,201710,680Joint liability guarantee / / 9 years No No Otog Banner Huanju New Energy Co., Ltd. June 24,201716,807 August 30,201716,808Joint liability guarantee / / 4.13 years No No Tianjin Huanzhi New Energy Technology Co., Ltd. January 21,202162,493 July 20,202142,460Joint liability guarantee / / 4.5 years No No Zhonghuan Hong Kong Holding Limited March 22,2021100,000 March 26,202150,000Joint liability guarantee / / 1 year No No Inner Mongolia Zhonghuan Crystal Materials Co., Ltd. March 22,2021 May 26,2022562,495 April 30,2021443,440Joint liability guarantee / / 6 years No No Tianjin Huanou New Energy Technology Co., Ltd May 26,2022402,000 September 28, 202244,728Joint liability guarantee / / 6.16 years No No Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 50 Note: (1) The guarantee period in the above table is the occurrence period of the principal debt. The actual guarantee is valid for two or three years from the expiration date of the principal debt, which is subject to the single contract. (2) During the Reporting Period, the Company adjusts the guarantee limit to its controlling subsidiaries based on their demands. The details are outlined as follows: The guarantee limit amounting to RMB 900 million offered to TCLChina Star Optoelectronics Technology Co., Ltd. was transferred to TCLTechnology Group (Tianjin) Co., Limited, another controlling subsidiary. The Company has performed internal review procedures for the above-mentioned guarantee transfers. It's found that they did not violate the legal provisions on listed Wuxi Zhonghuan Applied Materials Co., Ltd. May 26,2022190,000 June 30,2022101,589Joint liability guarantee / / 6 years No No Huansheng New Energy (Jiangsu) Co., Ltd. May 26,2022155,000 September 30, 202289,834Joint liability guarantee / / 6 years No No Huansheng Solar (Jiangsu) Co., Ltd. March 22,202147,000 April 1,202147,000Joint liability guarantee / / 2.5 years No No Ningxia Zhonghuan Solar Material Co., Ltd. March 22,2021748,000 May 30,2022575,000Joint liability guarantee / / 6 years No No TCLMokaInternationalLimited April 22,2023214,500 April 27,20235,436Joint liability guarantee / / 26-87 days No No China Star Optoelectronics International (HK) Limited April 22,202390,000 November 24, 202087,058Joint liability guarantee / / 69 days No No Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 22,20233,022,500 November 5,20212,197,925Joint liability guarantee / / 2.87-5 years No No Subsidiaries within the consolidated scope (retained) April 22,2023100,000 - Total approved line for such guarantees in Reporting Period (C1) 3,427,000Total actual amount of such guarantees in Reporting Period (C2) 128,930Total approved line for such guarantees at the end of the Reporting Period (C3) 5,736,004Total actual balance of such guarantees at end of Reporting Period (C4) 3,726,486Total guarantee amount (total of the three kinds of guarantees above) Total guarantee line approved in the Reporting Period (A1+B1+C1) 16,309,000Total actual guarantee amount in the Reporting Period (A2+B2+C2) 1,797,299Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) 20,141,901Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) 10,798,185Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets 81.72%Of which: Balance of guarantees provided for shareholders, the actual controller and their related parties (D) 157,236Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) 1,908,647Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) 4,191,247Total of the three above amounts (D+E+F) 4,191,247Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) - Guarantees provided in breach of prescribed procedures (if any) - Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 51 companies, and complied with the relevant requirements of the Proposal on Providing Guarantees for Subsidiaries in 2023 reviewed and approved at the 2023 annual shareholders’ meeting held on April 21,2023. (3) In the table above, Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd., a subsidiary controlled by the Company, was jointly guaranteed by the Company and its subsidiary TCLChina Star Optoelectronics Technology Co., Ltd. in an external syndicated loan, in which the Company provided certain percentage of guarantee, while TCLChina Star Optoelectronics Technology Co., Ltd. provided full guarantee. (4) As at the end of the Reporting Period, the debt portion under joint guarantee amounted to RMB21.97925 billion. The joint guarantee has been filled in the “Company’s Guarantee for Subsidiaries” and “Guarantee Among Subsidiaries”, respectively. The “total guarantee accrued at the end of the reporting period” and “total balance of guarantee accrued at the end of the Reporting Period” including the debt portion under the joint guarantee amounted to RMB21.97925 billion. In the “guarantee among subsidiaries”, the guaranteed entity and Huhehaote Huanju New Energy Development Co., Ltd. were provided with the guarantee under joint and several liability by TCLTechnology Group (Tianjin) Co., Ltd. and TCLZhonghuan New Energy Technology Co., Ltd., both of which were subsidiaries. As at the end of the Reporting Period, the debt portion under joint guarantee amounted to RMB145.29 million. 3. Cash Entrusted for Wealth Management √ Applicable □ Not applicable Unit: RMB'0,000 Type Funding source Amount Undue amount Unrecovered overdue amount Impairment allowance for unrecovered overdue amount of wealth management products Bank’s wealth management product Self-funded1,035,315.41913,900.21 - - Securities firm’s wealth management product Self-funded386,962.99283,286.43 - - Trust plan Self-funded 212,100.00212,100.00 - - Other Self-funded 130,685.4947,040.05 - - Total 1,765,063.891,456,326.69 - - High-risk wealth management transactions with a significant single amount liquidity: □ Applicable √ Not applicable 4. Other Major Contracts □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 52 XIII. Other Significant Events □ Applicable √ Not applicable There are no other significant events that need to be explained for the Reporting Period. XIV. Significant Events of Subsidiaries √ Applicable □ Not applicable 1. During the Reporting Period, the subsidiary - TCLZhonghuan issued relevant proposals such as the "Plan for Issuing Convertible Corporate Bonds to Non-specific Investors". Currently, relevant works are implemented in an orderly manner, as detailed in the relevant information disclosed by TCLZhonghuan on designated media. 2. During the Reporting Period, the subsidiary - Tianjin Printronics issued relevant proposals such as the "Report on Major Asset Purchase and Capital Increase and Related Party Transactions (Draft)". Currently, relevant works are carried out in an orderly manner, as detailed in the relevant information disclosed by Tianjin Printronics on designated media. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 53 Part VIIChanges in Shares and Information about Shareholders I. Changes in Shares 1. Changes in shares Unit: share Before change Increase/decrease in the Reporting Period (+/-) After change Shares Percentage New issues Bonus sharesShares converted from capital reserveOthers Subtotal Shares PercentageI. Restricted Shares 3,420,220,96720.03% 00342,022,097 -3,081,703,851 -2,739,681,754680,539,2133.62%1. Shares held by state-owned legal entities 877,192,9815.14% 0087,719,297 -964,912,278 -877,192,98100.00%2. Shares held by other domestic investors 908,951,9565.33% 0090,895,196 -320,533,070 -229,637,874679,314,0823.62%Among which: Shares held by domestic legal entities 187,134,5021.10% 0018,713,450 -205,847,952 -187,134,50200.00%Shares held by domestic individuals 721,817,4544.23% 0072,181,746 -114,685,118 -42,503,372679,314,0823.62%3. Shares held by foreign investors 197,538,1861.15% 0019,753,819 -216,066,874 -196,313,0551,225,1310.007%Among which: Shares held by foreign legal entities 196,783,6251.15% 0019,678,363 -216,461,988 -196,783,62500.00%Shares held by foreign natural persons 754,5610.004% 0075,456395,114470,5701,225,1310.007%4. Fund, wealth management product, etc. 1,436,537,8448.41% 00143,653,785 -1,580,191,629 -1,436,537,84400.00%II. Non-restricted shares 13,651,670,64079.97% 001,365,167,0633,081,703,8514,446,870,91418,098,541,55496.38%1. RMB-denominated ordinary shares 13,651,670,64079.97% 001,365,167,0633,081,703,8514,446,870,91418,098,541,55496.38%III. Total shares 17,071,891,607100.00% 001,707,189,16001,707,189,16018,779,080,767100.00%Reasons for changes in shares √ Applicable □ Not applicable 1. On April 26,2023, the Company disclosed the Implementation Announcement on the 2022 Annual Equity Distribution, and after the completion of the capital reserve conversion, the total share capital of the Company increased from 17,071,891,607 shares to 18,779,080,767 shares. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 54 2. On June 19,2023, the Company disclosed the “Suggestive Announcement on Releasing from the Restriction on Non-publicly Offered Shares and Listing for Circulation”. The non-publicly offered restricted shares were released from restriction and listed for circulation on June 26,2023. 3. During the Reporting Period, locked-up shares held by senior management increased by 66,446,730 shares, as non-restricted shares decreased by the same amount. Approval of changes in shares □ Applicable √ Not applicable Transfer of share ownership □ Applicable √ Not applicable Progress on any share repurchase √ Applicable □ Not applicable The 32nd meeting of the 7th Board of Directors of the Company reviewed and approved the Proposal on the Repurchase of Part Shares Held by the Public in 2023. On June 28,2023, the Company repurchased shares of the Company for the first time through centralized bidding from the special securities account for repurchase and completed the transaction, with 64,992,964 shares repurchased, accounting for 0.35% of the total share capital of the Company. The highest and lowest trading price were RMB3.86 per share and RMB3.73 per share, respectively, and the total payment approximated to RMB247 million (excluding transaction fees). For details, please refer to the "Announcement on the First Repurchase of Shares Held by the Public in 2023 and the Transaction Completion" released by the Company on designated media. Progress on reducing the repurchased shares by means of centralized bidding □ Applicable √ Not applicable Effects of changes in shares on the basic earnings per share, diluted earnings per share, net asset value per share attributable to the Company’s ordinary shareholders and other financial indicators for the most recent period √ Applicable □ Not applicable Item H12023 Basic earnings per share (RMB/share) 0.0184 Diluted earnings per share (RMB/share) 0.0181Item June 30,2023 Net assets per share attributable to ordinary shareholders of the Company (RMB) 2.69Other information that the Company considers necessary or is required by the securities regulatory authorities to be disclosed □ Applicable √ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 55 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Name of shareholder Number of restricted shares at period-begin Number of increased restricted shares of the period (note) Number of released restricted shares of the period Number of restricted shares at period-end Reason for restriction Date of restriction release CITIC Securities Co., Ltd. 280,701,75428,070,175308,771,9290The shares were within the lockup period of non-public offering (shares of the Company subscribed by investors in non-public offering shall not be transferred within 6 months from the date of listing) June 26,2023 Guotai Junan Securities Co., Ltd. 228,070,17522,807,017250,877,1920Everbright Securities Company Limited 204,678,36220,467,836225,146,1980UBSAG 196,783,62519,678,363216,461,9880GFSecurities Co., Ltd.187,134,50218,713,450205,847,9520Haitong Securities Co., Ltd. 163,742,69016,374,269180,116,9590Perseverance Asset Management Partnership (Limited Partnership) - Gaoyi Xiaofeng No.2 Zhixin Fund 131,578,94713,157,895144,736,8420China Life Asset Management - Bank of China - China Life Asset - PIPE2020 Insurance Asset Management Product 116,959,06411,695,906128,654,9700Shen Ruijin 108,479,53210,847,953119,327,4850Huaxia Life Insurance Co., Ltd. - Self-owned funds 87,719,2988,771,93096,491,2280Other shareholders participating in the non-public offering of the Company 1,100,280,535110,028,0541,210,308,5890Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 56 Others 614,092,48366,446,7300680,539,213Locked-up shares of senior management Not applicable Total 3,420,220,967347,059,5783,086,741,332680,539,213 -- -- Note: During the reporting period, the Company increased one share for every 10 shares to all shareholders with capital reserves, resulting in a corresponding increase in restricted shares during the reporting period. II. Issuance and Listing of Securities □ Applicable √ Not applicable III. Total Number of Shareholders and Their Shareholdings Unit: share Total number of ordinary shareholders by the end of the reporting period 667,265Total number of preferred shareholders with resumed voting rights by the end of the reporting period (if any) 0Shareholdings of ordinary shareholders with more than 5% or the top 10 shareholders of ordinary shares Name of shareholder Nature of shareholder Shareholding percentage (%) Number of shares held at the period-endIncrease/decrease during the reporting periodNumber of restricted ordinary shares heldNumber of non-restricted ordinary shares held Shares in pledge, marked or frozen Status Shares Li Dongsheng and his acting-in-concert party Domestic individual/ Domestic general legal entity 6.80% 1,276,684,768117,599,749672,868,839603,815,929 Put in pledge by Li Dongsheng 158,032,380Put in pledge by Jiutian Liancheng 308,057,743Hong Kong Securities Clearing Company Ltd. Foreign legal entity 4.39% 823,982,122435,483,645 Huizhou Investment Holding Co., Ltd. State-owned legal entity 3.88% 728,193,7246,053,884 Wuhan Optics Valley Industrial Investment Co., Ltd. State-owned legal entity 2.88% 540,632,616412,320,220 China Securities Finance Corporation Limited Domestic general legal entity 2.19% 410,554,71037,323,157 CITIC Securities Co., Ltd. State-owned legal entity 2.12% 397,627,664109,943,310 GFSecurities Co., Ltd. Domestic general legal entity 1.16% 218,691,15528,125,553 Perseverance Asset Fund, wealth management 1.05% 197,236,70165,657,754 Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 57 Management Partnership (Limited Partnership) - Gaoyi Xiaofeng No. 2 Zhixin Fund product, etc. Bank of China Limited - Huatai-Pinebridge CSI Photovoltaic Industry Trading Open Index Securities Investment Fund Fund, wealth management product, etc. 0.93% 175,414,610175,414,610 China Life Asset Management - Bank of China - China Life Asset - PIPE2020 Insurance Asset Management Product Fund, wealth management product, etc. 0.69% 128,654,97011,695,906 Strategic investor or general legal entity becoming top-10 ordinary shareholders due to private placement of new shares (if any) Not applicable Note on the above shareholders’ associations or concerted actions Mr. Li Dongsheng, one of the top 10 shareholders, and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,276,684,768 shares in total and becoming the largest shareholder of the Company. Explain if any of the shareholders above was involved in entrusting/being entrusted with voting rights or waiving voting rights Not applicable Explanation on repurchase accounts among top 10 shareholders (if any) Not applicable Top 10 non-restricted ordinary shareholders Name of shareholder Number of non-restricted ordinary shares held at the end of the reporting period Type of shares Type Shares Hong Kong Securities Clearing Company Ltd. 823,982,122 RMB-denominated ordinary shares 823,982,122Huizhou Investment Holding Co., Ltd. 728,193,724 RMB-denominated 728,193,724Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 58 ordinary shares Li Dongsheng and his acting-in-concert party 603,815,929 RMB-denominated ordinary shares 603,815,929Wuhan Optics Valley Industrial Investment Co., Ltd. 540,632,616 RMB-denominated ordinary shares 540,632,616China Securities Finance Corporation Limited 410,554,710 RMB-denominated ordinary shares 410,554,710CITICSecurities Co., Ltd.397,627,664 RMB-denominated ordinary shares 397,627,664GFSecurities Co., Ltd.218,691,155 RMB-denominated ordinary shares 218,691,155Perseverance Asset Management Partnership (Limited Partnership) - Gaoyi Xiaofeng No.2 Zhixin Fund 197,236,701 RMB-denominated ordinary shares 197,236,701Bank of China Limited - Huatai-Pinebridge CSI Photovoltaic Industry Trading Open Index Securities Investment Fund 175,414,610 RMB-denominated ordinary shares 175,414,610China Life Asset Management - Bank of China - China Life Asset - PIPE2020 Insurance Asset Management Product 128,654,970 RMB-denominated ordinary shares 128,654,970Related or acting-in-concert parties among top 10 non-restricted ordinary shareholders, as well as between top 10 non-restricted ordinary shareholders and top 10 ordinary shareholders Mr. Li Dongsheng, one of the top 10 shareholders, and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,276,684,768 shares in total and becoming the largest shareholder of the Company. Explanation for the top 10 ordinary shareholders participating in securities margin trading (if any) As at the end of the Reporting Period, Huizhou Investment Holding Co., Ltd., one of the top 10 shareholders of the Company, decreased the number of registered shares by 89,260,000 shares due to their participation in the refinancing business; the shareholder Wuhan Optical Valley Industrial Investment Co., Ltd. decreased the number of registered shares by 61,000,000 shares due to its participation in the refinancing business. Indicate whether any of the top 10 ordinary shareholders or the top 10 non-restricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yes √ No No such cases in the Reporting Period. IV. Change in Shareholdings of Directors, Supervisors, and Senior Management √ Applicable □ Not applicable Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 59 Name Position Position Status Number of shares held at the beginning of the reporting period Increase of shares during the reporting period Decrease of shares during the reporting period Number of shares held at the end of the reporting period Number of restricted shares granted at the beginning of the reporting period Number of restricted shares granted during the reporting period Number of restricted shares granted at the end of the reporting period Li Dongsheng Chairman, CEO Incumbent 814,061,09683,097,357 - 897,158,453 - - -Wang Cheng Director, COO Incumbent 157,661175,522 - 333,183 - - -Zhao Jun Director, Senior Vice President Incumbent 200,482742,372 - 942,854 - - -Liao Qian Director, Senior Vice President, Board Secretary Incumbent 481,306807,769 - 1,289,075 - - -Mao Tianxiang Employee Supervisor Incumbent 229,583336,992 - 566,575 - - -Yan Xiaolin Senior Vice President, CTO Incumbent 1,303,3021,038,963 - 2,342,265 - - -Li Jian CFOIncumbent 294,513674,108 - 968,621 - - -Total -- -- 816,727,94386,873,083 - 903,601,026 - - -Note: The increase in the number of shares held by the Company's directors, supervisors, and executives during the Reporting Period was due to the Company's conversion of capital reserves into share capital, as well as the non-transactional transfer of shares (which are attributable to the participants of the Tranche IIIGlobal Partnership Plan and the 2021-2023 Employee Shareholding Plan (first tranche)) to their securities accounts. V. Change of the Controlling Shareholder or the Actual Controller Mr. Li Dongsheng and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,276,684,768 shares in total and becoming the largest shareholder of the Company.Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 60 Part VIIIPreferred Shares □ Applicable √ Not applicable During the reporting period, the Company did not have preferred shares. Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 61 Part IXBonds √ Applicable □ Not applicable I. Enterprise Bonds □ Applicable √ Not applicable No enterprise bonds in the Reporting Period. II. Corporate Bonds √ Applicable □ Not applicable 1. General Information on Corporate Bonds Unit: RMB'0,000 Bond name Abbr. Bond code Date of issuance Value date MaturityOutstanding balance Coupon rate Way of principal repayment and interest payment Place of trading TCL Corporation Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) 19TCL03112983 October 17,2019 October 21,2019October 21,2024 44,0002.95% Interest payable annually and principal repayable in full upon maturity Shenzhen Stock Exchange TCL Corporation Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 2) 19TCL02112938 July 19, 2019 July 23, 2019 July 23, 2024 100,0003.05% Interest payable annually and principal repayable in full upon maturity Shenzhen Stock Exchange TCL Corporation Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1) 19TCL01112905 May 17, 2019 May 20, 2019 May 20, 2024 100,0003.15% Interest payable annually and principal repayable in full upon maturity Shenzhen Stock Exchange TCL Corporation 18TCL02112747 August 17, 2018 August 20,2018August 20,2023 200,0003.55% Interest payable Shenzhen Stock Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 62 Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 2) annually and principal repayable in full upon maturity Exchange Investor eligibility (if any) For qualified investors / For professional investors Applicable trading mechanism Match to trade, click to trade, inquire to trade, bid to trade, negotiate to trade Risk of termination of listing and trading (if any) and countermeasures No Overdue bonds □ Applicable √ Not applicable 2. Triggering and implementation of issuer or investor option clauses and investor protection clauses □ Applicable √ Not applicable 3. Adjustments of credit rating results during the Reporting Period □ Applicable √ Not applicable 4. The implementation and changes of guarantees, debt repayment plans and other safeguard measures regarding debt repayment during the Reporting Period, and their impact on bond investor equity □ Applicable √ Not applicable III. Debt Financing Instruments of Non-Financial Enterprises √Applicable Not applicable 1. General information of debt financing instruments of non-financial enterprises: Unit: RMB'0,000 Bond name Abbr. Bond code Date of issuance Value date Maturity Outstanding balance Coupon rate Way of principal repayment and interest payment Place of trading2023 Mid-Term Notes of TCL Technology Group Corporation (Tranche 1) (Scientific Innovation Notes) 23TCL Group MTN001 (Scientific Innovation Notes) 102380151 February 3, 2023 February 7, 2023 February 7, 2026 150,0004.10% Interest payable annually and principal repayable in full upon maturity Inter-bank market 2022 Mid-Term Notes of TCL Technology Group Corporation 22TCL Group MTN003 (Scientific Innovation 102281474 July 4,2022 July 6,2022 July 6,2025200,0003.45% Interest payable annually and principal repayable in Inter-bank market Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 63 Overdue bonds □ Applicable √ Not applicable 2. Triggering and implementation of issuer or investor option clauses and investor protection clauses □ Applicable √ Not applicable 3. Adjustments to credit ratings in the Reporting Period □ Applicable √ Not applicable 4. Execution and changes of guarantees, repayment plans and other repayment guarantee measures in the Reporting Period, as well as the impact on the equity of bond investor □ Applicable √ Not applicable IV. Convertible Corporate Bonds □ Applicable √ Not applicable During the reporting period, the Company did not have convertible corporate bonds. V. Consolidated loss of the Reporting Period Exceeding 10% of Net Assets of the last year-end □ Applicable √ Not applicable (Tranche 3) (Scientific Innovation Notes) Notes) full upon maturity 2022 Mid-Term Green Notes of TCLTechnology Group Corporation (Tranche 2) 22TCL Group GN002 132280040 April 25, 2022 April 27, 2022 April 27, 2025 150,0003.30% Interest payable annually and principal repayable in full upon maturity Inter-bank market 2022 Mid-Term Notes of TCL Technology Group Corporation (Tranche 1) 22TCL Group MTN001 102280089 January 12, 2022 January 14, 2022 January 14, 2025 200,0003.45% Interest payable annually and principal repayable in full upon maturity Inter-bank market 2021 Mid-Term Notes of TCL Technology Group Corporation (Tranche 1) (High-Growth Bonds) 21TCL Group MTN001 (High-Growth Bonds) 102100966 May 10, 2021 May 12, 2021 May 12, 2024 200,0004.15% Interest payable annually and principal repayable in full upon maturity Inter-bank market Investor eligibility (if any) Not applicable Applicable trading mechanism Not applicable Risk of termination of listing and trading (if any) and countermeasures No Full Text of the 2023 Interim Report of TCLTechnology Group Corporation 64 VI. Key accounting data and financial indicators of the Company for the past two years as at the end of the Reporting Period Unit: RMB'0,000 Item End of the Reporting Period December 31,2022 Change Current ratio 1.091.090.00%Debt/asset ratio 63.4% 63.3% 0.09%Quick ratio 0.80.82.6%H12023 H12022 Change Net profit before non-recurring gains and losses 49,891 54,269 -8.07%Debt to EBITDA ratio 6.82% 6.99% -0.17%Interest coverage ratio 1.70 1.4616.44%Cash coverage ratio 4.76 4.90 -2.80%EBITDA coverage ratio 6.01 6.45 -6.82%Debt repayment ratio 100% 100% 0.00Interest payment ratio 100% 100% 0.001 Section XUnaudited Financial Report (For the period from January 1,2023 to June 30,2023) I. Auditor’s Report Whether the 2023 interim report has been audited or not □ Yes √ No The Company’s 2023 interim financial report has not yet been audited. II. Financial Statements The unit of the notes to the financial report is: RMB’000. Content Page Consolidated Balance Sheet 1-2 Consolidated Income Statement 3 Consolidated Cash Flow Statement 4-5 Consolidated Statement of Changes in Shareholders’ Equity 6-7 Balance Sheet of the Parent Company 8-9 Income Statement of the Parent Company 10 Cash Flow Statement of the Parent Company 11-12 Statement of Changes in Shareholder Equity of the Parent Company 13-14 Notes to Financial Statements 15-170 TCLTechnology Group Corporation Consolidated Balance Sheet (RMB’000) 1 Note VJune 30,2023 January 1,2023 Current assets Monetary assets 129,286,645 35,378,501Held-for-trading financial assets 214,371,775 12,703,507Derivative financial assets 3125,204 361,034Notes receivable 4353,633 512,849Accounts receivable 521,286,401 14,051,661Receivables financing 63,307,933 1,103,128Prepayments 73,523,684 3,593,857Other receivables 83,590,396 4,033,248Inventories 918,113,675 18,001,122Contract assets 10298,867 315,167Other current assets 115,258,026 5,438,936Total current assets 99,516,239 95,493,010Non-current assets Debt investments 12859,062 741,703Long-term receivables 13624,341 631,373Long-term equity investments 1430,354,398 29,256,216Investments in other equity instruments 15421,104 439,996Other non-current financial assets 164,361,877 2,928,827Investment property 17889,135 946,449Fixed assets 18149,680,215 132,477,672Construction in progress 1942,114,759 52,053,834Right-of-use assets 205,744,717 5,110,124Intangible assets 2118,149,218 16,783,931Development costs 222,487,554 3,179,207Goodwill 2310,385,265 9,161,852Long-term deferred expenses 243,112,378 2,744,208Deferred income tax assets 252,762,750 1,753,887Other non-current assets 269,861,480 6,293,943Total non-current assets 281,808,253 264,503,222Total assets 381,324,492 359,996,232Legal representative: Li Dongsheng Person in chargeof financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Consolidated Balance Sheet (Continued) (RMB’000) 2 Liabilities and shareholders' equity: Note VJune 30,2023 January 1,2023Current liabilities Short-term borrowings 279,613,991 10,215,911Borrowings from the Central Bank 28727,203 777,676Customer deposits and deposits from other banks and financial institutions 29563,135 603,423Held-for-trading financial liabilities 30726,942 861,912Derivative financial liabilities 31309,743 70,735Notes payable 325,386,999 6,365,660Accounts payable 3330,475,619 26,381,912Advances from customers 34569 1,402Contract liabilities 352,245,240 2,336,008Employee compensation payable 362,333,712 2,376,933Taxes and levies payable 371,133,659 1,215,591Other payables 3823,333,685 24,190,352Non-current liabilities due within one year 3912,645,566 10,957,321Other current liabilities 401,416,235 1,185,848Total current liabilities 90,912,298 87,540,684Non-current liabilities Long-term borrowings 41127,571,442 118,603,165Bonds payable 4210,588,471 12,006,851Lease liabilities 435,058,334 4,461,383Long-term payables 442,431,551 887,763Long-term employee compensation payable 36191,800 472,538Deferred income 453,012,860 2,468,145Deferred income tax liabilities 251,816,071 1,319,428Estimated liabilities 46108,359 97,522Total non-current liabilities 150,778,888 140,316,795Total liabilities 241,691,186 227,857,479Share capital 4718,779,081 17,071,892Capital reserves 4810,425,008 12,522,793Less: Treasury share 491,119,036 1,314,581Other comprehensive income 50 (1,176,068) (811,822)Surplus reserves 513,712,273 3,712,273Specific reserves 526,791 2,301General risk reserve 538,934 8,934Retained earnings 5419,827,223 19,486,730Total equity attributable to shareholders of the parent company 50,464,206 50,678,520Non-controlling interests 89,169,100 81,460,233Total shareholders’ equity 139,633,306 132,138,753Total liabilities and shareholders' equity 381,324,492 359,996,232Legal representative: Li Dongsheng Person in chargeof financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Consolidated Income Statement (RMB’000) 3 Note VJanuary - June 2023 January - June 2022I. Total revenue 85,190,18984,560,760Including: Operating revenue 5585,148,72684,522,181Interest income 5641,46338,579Less: Operating cost 5574,267,59976,522,944Interest expenditures 569,97614,292Taxes and levies 57391,897289,081Sales expenses 581,206,698 1,053,369Administrative expenses 592,015,924 1,716,379R&D expenses 60 4,892,3544,451,764Financial expenses 611,613,163 1,720,157Including: Interest expenses 2,325,7852,031,269Interest income 415,285325,439Plus: Other income 62 1,199,9251,643,110Return on investment 63 2,313,7751,780,515Including: Return on investment in joint ventures and associates 1,220,326 1,757,650Exchange gain 56 (295) 24,351Gain on changes in fair value 64452,401114,495Credit impairment loss 65 (45,502) (27,157)Asset impairment loss 66 (2,358,956) (1,010,287)Asset disposal income 67 (40,012) (23,631)II. Operating profit 2,313,9141,294,170Plus: Non-operating income 6826,030596,540Less: Non-operating expenses 6949,16052,392III. Gross profit 2,290,7841,838,318Less: Income tax expenses 70 (99,799) (88,398)IV. Net profit 2,390,5831,926,716(I) Classification by business continuity 1. Net profit from continuing operations 2,390,583 1,926,7162. Net profit from discontinued operations - -(II) Classification by ownership 1. Net profits attributable to the shareholders of the parent company 340,493 663,5212. Net profit attributable to non-controlling interests 2,050,090 1,263,195V. Other comprehensive income, net of tax 50 (451,010) (372,997)(I) Other comprehensive income that cannot be reclassified into profit or loss (19,415) (13,285)(II) Other comprehensive income that may subsequently be reclassified into profit or loss upon satisfaction of prescribed condition (431,595) (359,712)VI. Total comprehensive income 1,939,573 1,553,719Total comprehensive income attributable to the shareholders of the parent company (23,753) 308,506Total comprehensive income attributable to non-controlling interests 1,963,3261,245,213VII. Earnings per share 71 (I) Basic earnings per share (RMB yuan) 0.01840.0445(II) Diluted earnings per share (RMB yuan) 0.0181 0.0441Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the accounting department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Consolidated Cash Flow Statement (RMB’000) 4 Note VJanuary - June 2023 January - June 2022I. Cash flow from operating activities: Proceeds from sale of commodities and rendering of services 61,503,988 65,932,012Net increase/(decrease) in customer deposits and deposits from other banks and financial institutions (40,289) (400,311)Net increase/(decrease) in borrowings from central bank (50,474) (708,318)Cash received from interest, handling charge and commission 41,463 38,579Tax and levy rebates 4,842,869 7,032,417Cash generated from other operating activities 725,588,8175,538,379 Sub-total of cash generated from operating activities 71,886,374 77,432,758 Payments for commodities and services (48,233,115) (54,309,690)Net (increase)/decrease in loans and advances to customers 27,311 (40,873)Net (increase)/decrease in deposits in central bank and other banks and financial institutions 54,883 (73,909)Cash paid to and for employees (6,043,453) (6,631,511)Taxes and levies paid (2,226,234) (1,689,737)Cash used in other operating activities 73 (5,049,598) (5,670,402) Sub-total of cash used in operating activities (61,470,206) (68,416,122) Net cash generated from operating activities 7810,416,168 9,016,636II. Cash flow generated from investing activities: Proceeds from disinvestments 26,691,189 22,017,628Proceeds from return on investments 1,202,097 254,501Net proceeds from disposal of fixed assets, intangible assets and other long-term assets 39,062 10,504Net proceeds from disposal of subsidiaries and other business units 78 - -Cash generated from other investing activities 741,640,76673,748 Sub-total of cash generated from investment activities 29,573,11422,356,381 Payments for the acquisition and construction of fixed assets, intangible assets and other long-term assets (16,465,349) (18,251,636)Cash paid for investments (31,830,252) (21,384,892)Net payments for acquiring subsidiaries and other business units 78 (342,527) -Cash used in other investing activities 75 (475,943) (333,406) Subtotal of cash used in investing activities (49,114,071) (39,969,934)Net cash used in investing activities (19,540,957) (17,613,553) Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements.TCLTechnology Group Corporation Consolidated Cash Flow Statement (Continued) (RMB’000) 5 Note VJanuary - June 2023 January - June 2022III. Cash flow generated from financing activities: Capital contributions received 1,047,506 5,365,010Including: Capital contributions by non-controlling interests to subsidiaries 1,047,506 5,365,010Borrowings raised 41,697,801 37,672,460Net cash received from bonds issue 1,500,000 4,500,000Cash generated from other financing activities 76 1,895,912 6,000Sub-total of cash generated from financing activities 46,141,219 47,543,470 Cash paid for debt repayment (33,255,720) (28,355,640)Cash paid for dividend and profit distribution or repayment of interests (3,471,466) (4,802,831)Including: Dividends and profit paid by subsidiaries to minority shareholders (325,152) (289,774)Cash used in other financing activities 77 (6,312,578) (4,454,836)Subtotal of cash used in financing activities (43,039,764) (37,613,307) Net cash generated from financing activities 3,101,455 9,930,163IV. Effect of exchange rate changes on cash and cash equivalents 91,958 261,370V. Net increase in cash and cash equivalents (5,931,376) 1,594,616 Add: Opening balance of cash and cash equivalents 33,675,624 30,081,705 VI. Ending balance of cash and cash equivalents 7827,744,248 31,676,321Legal representative: Li Dongsheng Person in chargeof financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Consolidated Statement of Changes in Shareholders’ Equity (RMB’000) 6 January - June 2023 Equity attributable to shareholders of the parent company Share capital Other equity instrumentsCapital reservesTreasury shareSpecialReservesOther comprehensiveincomeSurplus reservesGeneralrisk reserveUndistributedprofitNon-controllinginterestsShareholder equity Total I. Balance at the end of the prior year 17,071,892 - 12,522,792 (1,314,581) 2,301 (811,822) 3,712,2738,93419,486,73081,460,234 132,138,753 Add: Change in accounting policies - - - - - - - - - - - II. Balance at the beginning of the period 17,071,892 - 12,522,792 (1,314,581) 2,301 (811,822) 3,712,2738,93419,486,73081,460,234132,138,753 III. Movement of the period 1,707,189 - (2,097,784) 195,545 4,490 (364,246) - - 340,493 7,708,866 7,494,553 (I) Total comprehensive income - - - - - (364,246) - - 340,4931,963,326 1,939,573 (II) Capital contributed and reduced by shareholders - - (426,700) 219,638 - - - - - 6,011,113 5,804,051 1. Capital increased by shareholders - - - - - - - - - 6,657,075 6,657,075 2. Share-based payments included in owners' equity - - 20,868466,809 - - - - - - 487,677 3. Amount of bond issuance included in owners' equity - - - - - - - - - - - 4. Others - - (447,568) (247,171) - - - - - (645,962) (1,340,701) (III) Profit distribution - - - - 4,490 - - - - (315,559) (311,069) 1. Appropriation of surplus reserves - - - - - - - - - - - 2. Appropriation of general risk reserve - - - - 16,191 - - - - 34,58850,779 3. Appropriation to shareholders - - - - - - - - - (325,152) (325,152) 4. Others - - - - (11,701) - - - - (24,995) (36,696) (IV) Transfers within owners’ equity 1,707,189 - (1,683,096) (24,093) - - - - - - - 1. Capitalization of capital reserves into capital (or share capital) 1,707,189 - (1,683,096) (24,093) - - - - - - - (V) Others - - 12,012 - - - - - - 49,986 61,998 IV. Balance as at the end of the period 18,779,081 - 10,425,008 (1,119,036) 6,791 (1,176,068) 3,712,2738,93419,827,223 89,169,100 139,633,306 Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Consolidated Statement of Changes in Shareholders’ Equity (Continued) (RMB’000) 7 January - June 2022 Equity attributable to shareholders of the parent company Share capital Other equity instrumentsCapital reservesTreasury shareSpecialReservesOther comprehensiveincomeSurplus reservesGeneralrisk reserveUndistributedprofitNon-controllinginterestsShareholder equity Total I. Balance at the end of the prior year 14,030,642 200,3346,079,267 (1,885,557) 1,549 (409,447) 2,550,173 8,934 22,458,34076,611,057119,645,292 Add: Change in accounting policies - - - - - - - - 69,346185,491254,837 II. Balance at the beginning of the period 14,030,642 200,3346,079,267 (1,885,557) 1,549 (409,447) 2,550,1738,93422,527,68676,796,548119,900,129 III. Movement of the period - (5,933) (1,893,692) (426,107) 1,919 (355,015) - - (1,400,656) 3,317,639 (761,845) (I) Total comprehensive income - - - - - (355,015) - - 663,5211,245,2131,553,719 (II) Capital contributed and reduced by shareholders - (5,933) (1,893,692) (426,107) - - - - - 4,249,5091,923,777 1. Capital increased by shareholders - - - - - - - - - 4,735,6954,735,695 2. Capital contributed by holders of other equity instruments - (5,933) 3,902 - - - - - - - (2,031) 3. Share-based payments included in owners' equity - - 49276,664 - - - - - - 77,156 4. Others - - (1,898,086) (502,771) - - - - - (486,186) (2,887,043) (III) Profit distribution - - - - 1,919 - - - (2,050,003) (2,177,083) (4,225,167) 1. Appropriation of surplus reserves - - - - - - - - - - - 2. Appropriation of general risk reserve - - - - 1,919 - - - - - 1,919 3. Appropriation to shareholders - - - - - - - - (2,050,003) (2,177,083) (4,227,086) 4. Others - - - - - - - - - - - (IV) Others - - - - - - - - (14,174) - (14,174) IV. Balance as at the end of the period 14,030,642 194,4014,185,575 (2,311,664) 3,468 (764,462) 2,550,1738,93421,127,03080,114,187119,138,284 Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements.TCLTechnology Group Corporation Balance Sheet of the Company (RMB’000) 8 Assets Note XVIJune 30,2023 January 1,2023Current assets Monetary assets 12,917,668 17,821,922Held-for-trading financial assets 9,647,246 5,936,208Derivative financial assets 4,918 15,578Accounts receivable 1365,860 353,812Prepayments 18,451 3,693Other receivables 25,504,163 4,961,948Inventories - 5,380Other current assets 36,275 34,838Total current assets 28,494,581 29,133,379 Non-current assets Long-term receivables 1,988,096 1,935,365Long-term equity investments 377,496,501 76,360,371Investments in other equity instruments 45,000 5,000Other non-current financial assets 51,218,353 431,023Investment property 79,196 81,034Fixed assets 33,055 32,223Construction in progress - -Right-of-use assets 445,650 428,575Intangible assets 103,923 109,605Long-term deferred expenses 37,446 24,069Deferred income tax assets 7 7Total non-current assets 81,407,227 79,407,272 Total assets 109,901,808 108,540,651Legal representative: Li Dongsheng Person in chargeof financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Balance Sheet of the Parent Company (Continued) (RMB’000) 9 Liabilities and shareholders' equity: Note XVIJune 30,2023 January 1,2023 Current liabilities Short-term borrowings 1,961,839 1,900,169Accounts payable 169,446 140,563Contract liabilities 822 308Employee compensation payable 100,677 178,097Taxes and levies payable 59,944 63,908Other payables 17,679,838 22,036,683Non-current liabilities due within one year 5,372,565 5,605,919Other current liabilities 11,465 2,430Total current liabilities 25,356,596 29,928,077 Non-current liabilities Long-term borrowings 20,965,355 15,280,955Bonds payable 8,424,693 9,922,133Lease liabilities 24,455 748Long-term employee compensation payable 22,660 84,188Deferred income 54,343 53,638Total non-current liabilities 29,491,506 25,341,662 Total liabilities 54,848,102 55,269,739Share capital 18,779,081 17,071,892Other equity instruments - -Capital reserves 16,029,964 17,715,533Less: Treasury share 1,119,036 1,314,581Other comprehensive income (95,863) (128,195)Surplus reserves 3,510,209 3,510,209Retained earnings 17,949,351 16,416,054Total shareholders’ equity 55,053,706 53,270,912 Total liabilities and shareholders' equity 109,901,808 108,540,651Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Income Statement of the Company (RMB’000) 10 Note XVIJanuary - June 2023 January - June 2022 I. Operating revenue 6736,414 589,571Less: Operating cost 6504,204 412,401Taxes and levies 8,793 1,961Sales expenses 17,908 31,939Administrative expenses 165,184 136,116R&D expenses 22,282 78,136Financial expenses 390,668 876,773Including: Interest expenses 807,654 1,271,057Interest income 321,244 391,725Plus: Other income 4,995 2,901Return on investment 71,788,747 10,607,557Of which: Share of profit or loss of joint ventures and associates 7682,026 690,201Gain on changes in fair value 117,382 24,470Credit impairment loss 10 26Asset disposal income 1,093 987II. Operating profit 1,539,602 9,688,186Plus: Non-operating income 15 574,945Less: Non-operating expenses 6,321 7,360 III. Gross profit 1,533,296 10,255,771Less: Income tax expenses - 12 IV. Net profit 1,533,296 10,255,759 V. Other comprehensive income 32,333 4,068 VI. Total comprehensive income 1,565,629 10,259,827Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Cash Flow Statement of the Company (RMB’000) 11 NoteXVIJanuary - June 2023 January - June 2022I. Cash flow from operating activities: Proceeds from sale of commodities and rendering of services 687,718 421,044Tax and levy rebates 1 1,714Cash generated from other operating activities 420,249 1,592,522Sub-total of cash generated from operating activities 1,107,968 2,015,280Payments for commodities and services (397,613) (453,962)Cash paid to and for employees (114,193) (141,860)Taxes and levies paid (77,503) (36,637)Cash used in other operating activities (5,065,900) (407,266)Sub-total of cash used in operating activities (5,655,209) (1,039,725)Net cash generated from operating activities 8 (4,547,241) 975,555II. Cash flow from investing activities: Proceeds from disinvestments 8,180,269 6,242,022Proceeds from return on investments 1,131,472 70,898Net proceeds from disposal of fixed assets, intangible assets and other long-term assets - 24Sub-total of cash generated from investment activities 9,311,741 6,312,944 Payments for the acquisition and construction of fixed assets, intangible assets and other long-term assets (6,631) (5,860)Payments for investments (12,791,025) (6,974,584)Cash used in other investing activities - - Subtotal of cash used in investing activities (12,797,656) (6,980,444) Net cash used in investing activities (3,485,915) (667,500)Legal representative: Li Dongsheng Person in chargeof financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Cash Flow Statement of the Company (Continued) (RMB’000) 12 Note XVIJanuary - June 2023 January - June 2022III. Cash flow generated from financing activities: Capital contributions received - -Borrowings raised 11,780,000 14,931,000Net cash received from bonds issue 1,500,000 4,500,000Cash generated from other financing activities 54,267 106,878 Sub-total of cash generated from financing activities 13,334,267 19,537,878 Cash paid for debt repayment (9,203,619) (12,364,006)Cash paid for distribution of dividends and profits or repayment of interests (715,827) (2,625,194)Cash used in other financing activities (269,708) (535,295)Subtotal of cash used in financing activities (10,189,154) (15,524,495)Net cash generated from financing activities 3,145,113 4,013,383IV. Effect of exchange rate changes on cash and cash equivalents (53,755) 15,223V. Net increase in cash and cash equivalents (4,941,798) 4,336,661Add: Opening balance of cash and cash equivalents 17,570,270 10,401,379VI. Ending balance of cash and cash equivalents 912,628,472 14,738,040Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Statement of Changes in Shareholders’ Equity of the Company (RMB’000) 13 January - June 2023Share capitalOther equity instrumentsCapital reservesTreasury share Other comprehensive incomeSurplus reservesRetained earningsTotal shareholders’ equity I. Balance at the end of the prior year 17,071,892 - 17,715,533 (1,314,581) (128,195) 3,510,20916,416,054 53,270,912 Add: Change in accounting policies - - - - - - - - II. Balance at the beginning of the period 17,071,892 - 17,715,533 (1,314,581) (128,195) 3,510,20916,416,054 53,270,912 III. Movement of the period 1,707,189 - (1,685,569) 195,54532,332 - 1,533,2971,782,794 (I) Total comprehensive income - - - - 32,332 - 1,533,2971,565,629 (II) Capital contributed and reduced by shareholders - - 17,836219,638 - - - 237,474 1. Capital contributed by owners - - - - - - - - 2. Capital contributed by holders of other equity instruments - - - - - - - - 3. Share-based payments included in owners' equity - - 17,836466,809 - - - 484,645 4. Amount of bond issuance included in owners' equity - - - - - - - - 5. Others - - - (247,171) - - - (247,171) (III) Profit distribution - - - - - - - - 1. Appropriation of surplus reserves - - - - - - - - 2. Appropriation to shareholders - - - - - - - - 3. Others - - - - - - - - (IV) Transfers within owners’ equity 1,707,189 - (1,683,096) (24,093) - - - - 1. Capitalization of capital reserves into capital (or share capital) 1,707,189 - (1,683,096) (24,093) - - - - (V) Others - - (20,308) - - - - (20,308) IV. Balance as at the end of the period 18,779,081 - 16,029,964 (1,119,036) (95,863) 3,510,20917,949,351 55,053,706 Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements.TCLTechnology Group Corporation Statement of Changes in Shareholder Equity of the Company (Continued) (RMB’000) 14 January - June 2022 Share capital Other equity instrumentsCapital reservesTreasury share Other comprehensive incomeSurplus reserves Retained earningsTotal shareholders’ equity I. Balance at the end of the prior year 14,030,642200,3349,900,679 (1,885,557) (112,194) 2,348,1098,021,32932,503,342 Add: Change in accounting policies - - - - - - - - II. Balance at the beginning of the period 14,030,642200,3349,900,679 (1,885,557) (112,194) 2,348,1098,021,32932,503,342 III. Movement of the period - (5,933) (313) (426,107) 4,067 - 8,191,5827,763,296 (I) Total comprehensive income - - - - 4,067 - 10,255,75910,259,826 (II) Capital contributed and reduced by shareholders - (5,933) (313) (426,107) - - - (432,353) 1. Capital contributed by owners - - - - - - - - 2. Capital contributed by holders of other equity instruments - (5,933) 3,902 - - - - (2,031) 3. Share-based payments included in owners' equity - - 49276,664 - - - 77,156 4. Others - - (4,707) (502,771) - - - (507,478) (III) Profit distribution - - - - - - (2,050,003) (2,050,003) 1. Appropriation of surplus reserves - - - - - - - - 2. Appropriation to shareholders - - - - - - (2,050,003) (2,050,003) 3. Others - - - - - - - - (IV) Others - - - - - - (14,174) (14,174) IV. Balance as at the end of the period 14,030,642194,4019,900,366 (2,311,664) (108,127) 2,348,10916,212,91140,266,638 Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Person in charge of the financial department: Peng Pan The attached notes to the financial statements form an integral part of the financial statements.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 15 IGeneral information (I) Place of incorporation and organizational structure TCLTechnology 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 July 17,1997 under the Corporate Law of the People's Republic of China (hereinafter referred to as “Corporate 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 April 19,2002. The registration number is 4400001009990. Upon approval of ZJFXZ [2004] Document No.1 issued by the China Securities Regulatory Commission (CSRC) on January 2,2004, the Company was permitted to issue 590,000,000 shares to the public on January 7,2004 and 404,395,944 ordinary shares denominated in RMB (A shares) to all public shareholders of TCLCommunication Equipment Co., Ltd. (hereinafter referred to as " TCLCommunication Equipment") in a stock-for-stock deal, which were listed on the Shenzhen Stock Exchange on January 30,2004. 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 July 16,2004, the Company was approved by the Guangdong Province Administration for Industry and Commerce to change its business license to Business License QGYZZNo.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 September 11,2007, 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 January 7,2009 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 April 23,2009, 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 the issue, the registered capital of the Company increased from RMB2,586,331,144 to RMB2,936,931,144, and on June 2,2009, 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 May 27,2010 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 July 26,2010, 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 September 19,2010, the Company was approved by Guangdong Province Administration for Industry and Commerce to change its business license to Business License No.440000000011990. On May 19,2011, the Company carried out a bonus issue of 10 additional shares for every 10 shares to all the shareholders with capital reserves, representing a total of 4,238,109,417 new shares, with a par value of RMB1 per share. Upon the completion of this bonus issue, the registered capital of the Company increased from RMB4,238,109,417 to RMB8,476,218,834, and on June 27,2011, the Company was approved by Huizhou Administration for Industry and Commerce to change its business license to Business License No.440000000011990. During the years of 2013 and 2014, the exercise of 58,870,080 stock options increased the total share capital of the Company from 8,476,218,834 shares to 8,535,088,914 shares. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 16 IGeneral information (continued) (I) Place of incorporation and organizational structure (continued) Upon the approval of the CSRC on February 13,2014 with the ZJXK [2014] Document No.201, the Company privately placed 917,324,357 ordinary shares denominated in RMB (A-share) to designated investors on April 30,2014, 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 June 10, 2014, the Company was approved by Huizhou Administration for Industry and Commerce to change its business license to Business License No.440000000011990. In 2015,48,357,920 stock options were exercised under an incentive plan of the Company, and upon approval by the CSRC on January 28,2015 with the ZJXK [2015] Document No.151, the Company issued 2,727,588,511 shares in a private placement. As such, the total share capital of the Company increased from 9,452,413,271 shares to 12,228,359,702 shares. In 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 April 26,2016, 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 2017, the Company purchased an interest in subsidiary TCLChina Star Optoelectronics Technology Co., Ltd. by means of a new issue of 1,301,290,321 shares. Upon the completion of this deal, the total share capital of the Company increased from 12,213,681,742 shares to 13,514,972,063 shares. In 2018, the Proposal on the Grant of Restricted Stock to Awardees was approved at the 7th Meeting of the 6th Board of Directors, and a total of 34,676,444 shares were subscribed for under the restricted stock incentive plan. Upon the completion of this deal, the total share capital of the Company increased from 13,514,972,063 shares to 13,549,648,507 shares. In 2019, the Company repurchased and retired 21,209,788 restricted shares that had been granted to certain awardees under the 2018 Restricted Stock Incentive Plan & Global Innovation Partner Plan but were still in lockup. As such, the total share capital of the Company decreased from 13,549,648,507 to 13,528,438,719 shares. In 2020, the Proposal on the Intended Change of the Company’s Full Name and Stock Name were approved respectively at the 23rd Meeting of the 6th Board of Directors and the First Extraordinary General Meeting of 2020. The name of the Company was then changed from “TCLCorporation” to “TCLTechnology Group Corporation” (abbreviation from “TCLCORP.” to “TCLTECH.”) since February 7,2020, with the stock name changed from “TCLCORP.” to “TCLTECH.”, while the stock code “000100” remained unchanged. In July 2020, the Company repurchased and retired 9,159,308 restricted shares that had been granted under the 2018 and 2019 Restricted Stock Incentive Plans but were still in lockup. As such, the total share capital of the Company decreased from 13,528,438,719 to 13,519,279,411 shares. In October 2020, the Company issued 511,508,951 new shares to acquire the non-controlling interest in subsidiary Wuhan China Star Optoelectronics Technology Co., Ltd. Upon the completion of this deal, the total share capital of the Company increased from 13,519,279,411 shares to 14,030,788,362 shares. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 17 I. General information (continued) (I) IPlace of incorporation and organizational structure (continued) In September 2021, the Company repurchased and retired 145,941 restricted shares that had been granted under the 2019 Restricted Stock Incentive Plans but were still locked up. As such, the total share capital of the Company decreased from 14,030,788,362 to 14,030,642,421 shares. During 2022, investors of TCLDirectional IIConvertible bonds exercised their rights of conversion resulting in additional issue of 235,120,702 shares, and the total share capital of the Company increased from 14,030,642,421 shares to 14,265,763,123 shares. In December 2022, the Company issued 2,806,128,484 ordinary shares denominated in RMB to specific investors in a non-public offering with the approval of the ZJXK [2022] No.1658 issued by the China Securities Regulatory Commission, resulting in an increase of 2,806,128,484 shares in total share capital of the Company to 17,071,891,607 shares from 14,265,763,123 shares. On May 8,2023, the Company issued shares to all shareholders with one share for every 10 shares through capital reserves, representing a total of 1,707,189,160 new shares, with a par value of RMB1 per share. Upon the completion of this bonus issue, the registered capital of the Company was increased from RMB17,071,891,607 to RMB18,779,080,767. As of June 30,2023, the total issued share capital of the Company was 18,779,080,767 shares. See note V.47 for details. The registered address of the Company is: TCLTech Building,17 Huifeng Third Road, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province. (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-conductors, electronic products and communication devices, new optoelectronic products, liquid crystal display devices, import and export of goods and technologies (excluding goods and technologies that are prohibited from import and export or require an administrative approval for import and export), venture capital business and venture capital consultation, entrepreneurial management services for start-up enterprises, participation in the initiation of venture capital institutions and investment management advisory institutions, immovable property leasing, IT services, conference services, computer technical services and development service of electronic products and technologies, development and sale of software, patent transfer, customs clearance services, consulting services, payments and settlements (where any approval from any relevant department is required according to law, it must be obtained before carrying out the relevant operations activities). (III) Authorization of financial statements for issue These financial statements were authorized for issue by the Company’s Board of Directors on August 29,2023. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 18 IIScope of 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. IIISignificant 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 Information Disclosure and Compilation of Companies Offering Securities to the Public No.15 - General Provisions on Financial Reports” (revised in 2014) published by CSRC. 2 Going concern basis The Company has evaluated the ability to continue as a going concern for 12 months from the end of the Reporting Period and has not identified any issues or circumstances that result in significant doubts about its ability to continue as a going concern. Therefore, the financial statements have been prepared on a going concern basis. 3 Accounting Basis and Measurement Basis The Company’s accounting treatment is based on the accrual basis. Except certain financial instruments measured at fair value, the financial statements are measured at historical cost. If an asset is impaired, provision for impairment will be made accordingly based onrelevant rules.4 Statement of compliance with corporate accounting standards The financial statements are in compliance with the requirements of the Accounting Standards for Business Enterprises, and truly and completely reflect the financial position, operating results, cash flow and other relevant information of the Company during the Reporting Period.5 Accounting period The Company adopts the calendar year as an accounting period, and its fiscal year is from January 1 to December 31 of the Gregorian calendar. 6 Operations cycle The Company does not take the operating cycle as the criteria for liquidity classification of assets and liabilities. 7 Functional currency for bookkeeping The functional currency for bookkeeping and the preparation of financial statements are all denominated in RMB, and are presented in the unit of RMB’000 in all the tables herein unless otherwise specified. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 19 IIISignificant accounting policies and accounting estimates (continued) 8 Accounting treatments for business combinations involving enterprises under and not under common control (1) When the terms, conditions and economic influence of transactions in the process of a step-by-step combination conform to one or more of the following, accounting for multiple transactions is treated as a package transaction: (a) These transactions are made simultaneously or with consideration of influence on each other; (b) These transactions can only achieve a complete business outcome when they are accounted for collectively; (c) The occurrence of a transaction depends on the occurrence of at least one of the other transactions; (d) A transaction is uneconomical individually, but is economical when considered collectively with other transactions. (2) Business combinations involving enterprises under common control (a) Individual financial statement Assets and liabilities acquired by the Company in business combinations are measured at the carrying amount of assets and liabilities of the acquiree on the date of combination (including the goodwill of the ultimate controlling party resulting from the acquiree). The difference between the carrying amount of net assets acquired in the combination and that 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 provision 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. For a business combination 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 investments and the carrying amount of long-term equity investments before the combination plus the carrying amount of the newly paid considerations 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 the owner’s equity other than net profit or loss, other comprehensive income or profit distribution of net assets of the invested company recognized as equity are not subject to accounting, and will be transferred to the current profit and loss until disposal of the investment. The agency fees paid for audits, legal services, assessments and consultations and other direct related expenses incurred in the business combination are recognized in profit or loss in the period in which they were 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 owners' equity attributable to the parent company in the consolidated financial statements of the combined party. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 20 IIISignificant accounting policies and accounting estimates (continued) 8 Accounting treatments for business combinations involving enterprises under and not under common control (continued) (2) Business combinations involving enterprises under common control (continued) (b) Consolidated financial statements Assets and liabilities acquired by the acquirer in the business combination are measured based on the carrying amount of the owner's equity of the acquiree in the consolidated financial statements of the ultimate controlling party. In 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 investments held by the combined 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. These are used to offset the initial retained earnings or current profit and loss during the comparative reporting periods respectively. If the accounting policies adopted by the acquiree 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. (3) Business combination not under common control Assets paid and liabilities incurred or assumed by 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 their carrying amount 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 consultations and other directly related expenses incurred in the business combination are recognized in profit or loss during 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 net identifiable 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 net identifiable assets of the acquired party gained in the combination, and the difference is still less than the fair value of net identifiable assets of the acquired party gain in the combination after review, the difference is included in the current profit and loss by the Company. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 21 IIISignificant accounting policies and accounting estimates (continued) 8 Accounting treatments for business combinations involving enterprises under and not under common control (continued) (3) Business combination not under common control (continued) In the case where a business combination not under common control is realized through multiple exchanges and transactions, if it is a package transaction, each transaction will be accounted for as a transaction for acquiring control; in the case it is not a package transaction, if the equity investment held before the date of combination is accounted for using equity method, the sum of the carrying amount of equity investments of the acquiree held before the date of acquisition, plus the new investment cost on the date of acquisition will be recognized as the initial cost of the investment; the remaining comprehensive income recognized in equity investments using equity method before the date of acquisition will be recorded, when the investment is disposed of on the same basis as those the investee adopted directly to dispose of the relevant assets or liabilities. If the equity investment held before the date of combination is accounted for by financial instrument recognition and measurement criteria, the sum of the fair value of equity investment on the date of combination plus the new investment cost is taken as the initial investment cost on the date of combination. The difference between the fair value and the carrying amount of the original equity, and the accumulated fair value changes originally included in other comprehensive income should be transferred to return on investment in the current period of combination date. (4) Expenses incurred from combination The agency fees paid for audits, legal services, assessments and consultations and other directly related expenses incurred in the business combination are recognized in profit or loss during 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; 9 Method for preparing consolidated financial statements (1) Consolidation scope 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) are included into the consolidated financial statements. (2) Consolidation procedure The Company prepares the consolidated financial statements based on the financial statements of itself and its subsidiaries and other relevant information. The Company prepares the consolidated financial statements in a manner that the whole group will be treated as an accounting entity to reflect the financial position, operating results, and cash flow of the group as a whole under unified accounting policies, in accordance with the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises. The accounting policies and accounting periods adopted by all subsidiaries included in the consolidated financial statements are consistent with those of the Company. If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with those of the Company, necessary adjustments will be made in accordance with the Company's accounting policies and accounting periods when preparing consolidated financial statements. The impact of intracompany transactions between the Company and its subsidiaries, and intracompany transactions between subsidiaries, on the consolidated balance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in shareholders' equity is offset in the preparation of consolidated financial statements. Where a transaction is recognized by the Company or its subsidiaries as the transaction subject, which is different from that under the consolidated financial statement of the group, the transaction should be adjusted at the group level. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 22 IIISignificant accounting policies and accounting estimates (continued) 9 Method for preparing consolidated financial statements (continued) (2) Consolidation procedure (continued) If the current losses shared by the minority shareholders of a subsidiary exceed the share enjoyed by the minority shareholder in the initial owners' equity of the subsidiary, the balance will still reduce the minority interests. During the Reporting Period, if a subsidiary or business is added due to the business combination involving enterprises under common control, the opening balance of the consolidated balance sheet is adjusted; the income, expenses and profits of the subsidiary or business from the beginning of the period of combination to the end of the Reporting Period are included in the consolidated income statement; the cash flows of the subsidiary or business from the beginning of the period of combination to the end of the Reporting Period are included in the consolidated cash flow statement. If a subsidiary or business is added due to a business combination involving enterprises under non-common control, the opening balance of the consolidated balance sheet is not adjusted; the income, expenses and profits of the subsidiary or business from the date of acquisition to the end of the Reporting Period are included in the consolidated income statement; the cash flow of the subsidiary or business from the date of acquisition to the end of the Reporting Period is 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 or business from the date of acquisition to the end of the Reporting Period are included in the consolidated income statement; the cash flow of the subsidiary or business from the date of acquisition to the end of the Reporting Period is included in the consolidated cash flow statement. During the reporting period, if the Company disposes of a subsidiary or business, the income, expenses and profits of the subsidiary or business from the beginning of the period to the disposal date are included in the consolidated income statement; the cash flow of the subsidiary or business from the beginning of the reporting period to the disposal date is 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 based on its fair value by the Company on the date of loss of control. The difference of the sum of the consideration obtained from the disposal of the equity and the fair value of the remaining equity, less the sum of the share of net assets and goodwill of the original subsidiary that should be enjoyed in accordance with the original share-holding ratio since the date of acquisition or combination, is accounted for the return on investment in the current period of loss of control. Other comprehensive income or net profit and loss related to the original subsidiary's equity investment, other comprehensive income and other changes in owners' equity other than profit distribution, will be converted into current return on investment when control is lost, except for other comprehensive gains arising from the re-measurement of net liabilities of the Benefit Plan made by the invested party or changes in net assets. 10 Classification of joint arrangements and accounting treatment method for joint operations (1) Classification of joint arrangements The Company classifies a joint arrangement as a joint operation or a joint venture according to factors such as the structure and legal form of the joint arrangement, the terms agreed in the joint arrangement, other relevant facts and circumstances. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 23 IIISignificant accounting policies and accounting estimates (continued) 10 Classification of joint arrangements and accounting treatment method for joint operations (continued) (1) Classification of joint arrangements (continued) Joint arrangements not reached through independent entities are classified as joint operations; joint arrangements reached through independent entities are usually classified as joint ventures; however, a joint arrangement that is indicated by conclusive evidence of meeting any of the following conditions and meeting the provisions of relevant laws and regulations is classified as a joint operation: ① The legal form of the joint arrangement shows that the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. ② The contractual terms of the joint arrangement stipulates that the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. ③ Other relevant facts and circumstances show that the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. For example, the parties enjoy all the output substantially related to the joint arrangement, and the repayment of the liabilities relating to the arrangement continues relying on the support of the parties. (2) Accounting treatment for joint operation The Company shall recognize the following items in relation to interest in the joint operation, and carry out accounting treatment in accordance with the provisions of relevant accounting standards for business enterprises: ① its assets, including its share of any assets held jointly; ② its liabilities, including its share of any liabilities incurred jointly; ③ its revenue from the sale of its share of the output arising from the joint operations; ④ its share of the revenue from the sale of the output by the joint operations; and ⑤ its expenses, including its share of any expenses incurred jointly. If investing or selling assets (except those that constitute a business), etc., into or to the joint operation, the Company shall only recognize the part of the profit and loss arising from the transaction attributable to other participants in the joint operation, before the assets, etc., are sold to a third party by the joint operation. The Company will recognize in full the asset impairment loss arising if the assets invested or sold are impaired in compliance with the Accounting Standards for Business Enterprises No.8 - Asset Impairment, etc. If purchasing assets (except those that constitute a business), etc., from the joint operation, the Company shall only recognize the part of the profit and loss arising from the transaction attributable to other participants in the joint operation, before the assets, etc., are sold to a third party by the Company. The Company will recognize its share of the asset impairment loss arising if the assets purchased are impaired in compliance with the Accounting Standards for Business Enterprises No.8 - Asset Impairment, etc. The Company does not enjoy joint control over the joint operations. If the Company has rights to the assets, and obligations for the liabilities, relating to the joint operation, it shall still be accounted for by the above principles; otherwise, it shall be accounted for by the relevant accounting standards for business enterprises. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 24 IIISignificant accounting policies and accounting estimates (continued) 11 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. 12 Foreign currency business and translation of foreign currency statements (1) Foreign currency transactions Foreign currency transactions between the Company and its subsidiaries are translated into base currency at the spot exchange rate on the transaction date. Foreign currency monetary items are translated at the spot exchange rate on the balance sheet date, and the exchange differences resulted therefrom, except that the exchange differences arising from special foreign currency loans related to the acquisition and construction of assets eligible for capitalization should be treated in accordance with the principle of capitalization of borrowing costs, are all included in the current profit and loss. Foreign currency non-monetary items measured at historical cost are still translated at the spot exchange rate on the transaction date, and the amount of base currency for bookkeeping is not changed. Foreign currency non-monetary items measured at fair value are translated at the spot exchange rates on the date when the fair value is determined, and the exchange differences resulted therefrom are included in profit or loss in the current period as a change in fair value. In the case of foreign currency non-monetary items that are at fair value through other comprehensive income, the exchange differences incurred are included in other comprehensive income. (2) Translation of foreign currency financial statement When the Company translates the financial statements of overseas operations, the assets and liabilities in the balance sheet are translated at the spot exchange rate on the balance sheet date. The owner’s equity items, except for the “Retained earnings” item, are translated at the spot exchange rate at the time of occurrence of the 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 overseas operation listed in other comprehensive income in the balance sheet are transferred from the other comprehensive income to the profit and loss. When the disposal of a portion of the equity investment or otherwise causes a decrease in the proportion of equity held in the overseas operation without losing of control over the overseas operation, the translation differences in the foreign currency statements related to the part of the overseas operation disposed of will be attributed to minority interests, rather than to the profit and loss. When the overseas operation disposed of is a portion of the equity of an associate or joint venture, the translation difference of the foreign statements related to the overseas operation should be transferred to the profit or loss for the period in proportion to the disposal of the overseas operation. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 25 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments When the Company becomes a party to a financial instrument, it recognizes a financial asset or liability. The effective interest method refers to the method of calculating the amortized cost of financial assets or liabilities and allocating interest income or interest expenses into each accounting period. The effective interest rate refers to the interest rate used to discount the estimated future cash flow of a financial asset or financial liability during its expected duration to the book balance of the financial asset or the amortized cost of the financial liability. When determining the effective interest rate, the expected cash flow is estimated on the basis of considering all contract terms of financial assets or liabilities (such as prepayment, extension, call options or other similar options), but the expected credit loss is not considered. The amortized cost of a financial asset or financial liability is the accumulated amortization amount formed by deducting the repaid principal from the initial recognition amount of the financial asset or financial liability, adding or subtracting the difference between the initial recognition amount and the maturity amount by using the effective interest method, and then deducting the accumulated accrued loss reserve (only applicable to financial assets). (1) Classification and measurement of financial assets According to the business model of the financial assets under management and the contractual cash flow characteristics of the financial assets, the Company divides the financial assets into the following three categories: (a) Financial assets at amortized cost. (b) Financial assets at fair value through other comprehensive income. (c) Financial assets at fair value through profit or loss. Financial assets are measured at fair value when initially recognized, but if the accounts or notes receivable arising from the sale of goods or the provision of services do not contain significant financing components or do not consider financing components for no more than one year, the initial measurement shall be made at the transaction price. For financial assets at fair value through profit or loss, transaction expenses are directly recognized in the current profit and loss. For other financial assets, transaction expenses are included in the initial recognition amount. Subsequent measurement of financial assets depends on their classification. All related financial assets affected will be reclassified when and only when the Company changes its business model of managing financial assets. (a) Financial assets classified as those 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 those measured at amortized cost include monetary assets, notes receivable, accounts receivable, other receivables, long-term receivables, debt investments, etc. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 26 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (1) Classification and measurement of financial assets (continued) (a) Financial assets classified as those measured at amortized cost (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 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 assets and the credit-adjusted effective interest rate since the initial recognition. ② For financial assets not credit-impaired at the time of being purchased or originated but in the subsequent period, the Company calculates and determines their interest income at the amortized cost and the effective interest rate of the financial assets in the subsequent period. If the financial instrument is no longer credit-impaired due to the improvement of its credit risk in the subsequent period, the Company calculates and determines the interest income by multiplying the effective interest rate by the book balance of the financial asset.(b) Financial assets classified as those measured at fair value through other comprehensive income The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest on the amount of outstanding principal, and the business model for managing the financial assets is both to collect contractual cash flow and for its sale, then the Company classifies the financial assets as measured at fair value through other comprehensive income. The Company recognizes interest income from such financial assets with the effective interest method. Except that the interest income, impairment loss and exchange difference are recognized as the current profit and loss, other changes in fair value are included in other comprehensive income. When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in the current profit and loss. Notes and accounts receivable at fair value through other comprehensive income are reported as receivables financing, and such other financial assets are reported as other debt investments. Among them, other debt investments maturing within one year from the balance sheet date are reported as the current portion of non-current assets, and other debt investments maturing within one year are reported as other current assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 27 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (1) Classification and measurement of financial assets (continued) (c) Financial assets designated as measured at fair value through other comprehensive incomeAt the time of initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financial assets at fair value through other comprehensive income on the basis of individual financial assets. Changes in the fair value of such financial assets are included in other comprehensive income without allowance for impairment. When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in the retained earnings. During the investment period when the Company holds the equity instrument, the dividend income is recognized and included in the current profit and loss when the Company's right to receive dividends has been established, the economic benefits related to dividends are likely to flow into the Company, and the amount of dividends can be measured reliably. The Company reports such financial assets under the item of investments in other equity instruments. An investment in equity instruments is a financial asset at fair value through profit or loss when it is obtained mainly for recent sale, or is part of the identifiable portfolio of financial assets centrally managed when initially recognized and objective evidence exists for a short-term profit model in the near future, or is a derivative (except for derivatives defined as financial guarantee contracts and designated as effective hedging instruments). (d) Financial assets classified as those measured at fair value through profit or loss If failing to be classified as those measured at amortized cost or at fair value through other comprehensive income, or not designated as measured at fair value through other comprehensive income, financial assets are all classified as those measured at fair value through profit or loss. The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 28 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (1) Classification and measurement of financial assets (continued) (e) Financial assets designated as measured at fair value through profit or loss At the time of initial recognition, the Company may irrevocably designate financial assets as measured at fair value through profit or loss on the basis of individual financial assets in order to eliminate or significantly reduce accounting mismatches. If the mixed contract contains one or more embedded derivative instruments and its main contract is not any financial asset as above, the Company may designate the whole of the mixed contract as a financial instrument at fair value through profit or loss. Except under the following circumstances: ① Embedded derivatives do not significantly change the cash flow of mixed contracts. ② When determining initially whether similar mixed contracts need to be split, it is substantially clear that embedded derivatives contained in them should not be split without analysis. If the prepayment right embedded in a loan allows the holder to prepay the loan at an amount close to the amortized cost, the prepayment right does not need to be split. The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 29 IIISignificant accounting policies and accounting estimates (continued) 13 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 substance reflected by the financial instrument issued, rather than only in legal form, in combination with the definitions of financial liabilities and equity instruments. Financial liabilities are classified at initial recognition as measured at fair value through profit or loss, or other financial liabilities, or derivatives designated as effective hedging instruments. Financial liabilities are measured at fair value upon initial recognition. For financial liabilities at fair value through profit or loss, relevant transaction expenses are directly included in current profits and losses; for other categories of financial liabilities, relevant transaction expenses are included in the initial recognition amount. Subsequent measurement of financial liabilities depends on their classification: (a) Financial liabilities at fair value through profit or loss Such financial liabilities include held-for-trading financial liabilities (including derivatives falling under financial liabilities) and financial liabilities designated as measured at fair value upon initial recognition and through profit or loss. A financial liability is a held-for-trading financial liability if it is mainly undertaken for recent sale or repurchase, or is part of the identifiable portfolio of financial instruments centrally managed, and there is objective evidence that the enterprise has recently employed a short-term profit model, or is a derivative instrument, except derivatives designated as effective hedging instruments and derivatives conforming to financial guarantee contracts. Held-for-trading financial liabilities (including derivatives falling under financial liabilities) are subsequently measured at fair value. All changes in fair values except for hedging accounting are included in current profits and losses. The Company irrevocably designates financial liabilities as measured at fair value through profit or loss at the time of initial recognition in order to provide more relevant accounting information, provided: 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. Apart from changes in fair value that are brought about by changes in the Company’s own credit risk and included in other comprehensive income, other changes in fair value are included in current profits and losses. Unless including such changes in other comprehensive income will cause or expand accounting mismatch in profit or loss, the Company will include all changes in fair value (including the amount affected by changes in its own credit risk) in current profits and losses. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 30 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (2) Classification and measurement of financial liabilities (continued) (b) Other financial liabilities The Company classifies financial liabilities except for the following items as measured at amortized cost. Such financial liabilities are recognized by the effective interest method and subsequently measured at amortized cost. Gains or losses arising from derecognition or amortization are included in the current profits and losses: ① Financial liabilities at fair value through profit or loss. ② Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets. ③ Financial guarantee contracts that do not fall under the first two categories hereof, and loan commitments that do not fall under category (1) hereof and lend at a below-market interest rate. Financial guarantee contracts refer to contracts that require the issuer to pay a specific amount to the contract holder who has suffered losses when a specific debtor fails to pay the debt in accordance with the original or modified terms of the debt instrument. Financial guarantee contracts that are not financial liabilities designated as measured at fair value through profit or loss are measured after initial recognition according to the loss reserve amount and of the initial recognition amount, less the accumulated amortization amount during the guarantee period, whichever is higher. (3) Derecognition of financial assets and liabilities (a) Financial asset are derecognized, i.e. written off from its account and balance sheet if any of the following conditions is met: ① The contractual right to receive cash flow from the financial asset is terminated; or ② The financial asset has been transferred, which meets the requirements for derecognition of financial assets. (b) Conditions for derecognition of financial liabilities If the current obligation of a financial liability (or part thereof) has been discharged, such financial liability (or part thereof) is derecognized. The existing financial liability is derecognized with a new one recognized, and the difference between the carrying amount and the consideration paid (including transferred non-cash assets or assumed liabilities) is included in the current profits and losses, if an agreement is signed between the Company and the lender to replace the existing financial liability by assuming a new one, and the contract terms of these two financial liabilities are substantially different, or the contract terms of the existing financial liability (or part thereof) are substantially modified. If the Company repurchases part of a financial liability, the carrying amount of the financial liability shall be distributed according to the proportion of the fair value of the continuing recognition portion and the derecognition portion to the overall fair value on the repurchase date. The difference between the carrying amount allocated to the derecognized portion and the consideration paid (including transferred non-cash assets or liabilities assumed) shall be included in the current profits and losses.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 31 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (4) Recognition basis and measurement method of financial asset transfer When a financial asset is transferred, the Company evaluates the risks and rewards retained of the financial asset ownership: (a) If almost all the risks and rewards of the financial asset ownership are transferred, such financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities. (b) If risks and rewards of the financial asset ownership are substantially retained, such financial asset shall continue to be recognized. (c) In circumstances where the Company neither transfers nor retains risks and rewards of the financial asset ownership substantially (i.e. circumstances other than ① and ② of this article), based on whether it retains control over such financial asset, ① the financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities if such control is not retained; or ② the relevant financial asset shall continue to be recognized to the extent that it continues to be involved in the transferred financial asset, and the relevant liabilities shall be recognized accordingly if such control is retained. The extent that it continues to be involved in the transferred financial asset refers to the extent the Company bears the risks or rewards on changes in the value of the transferred financial asset. When judging whether the transfer of financial assets meets the above conditions for derecognition of financial assets, the principle of substance over form shall be adopted. The Company divides the transfer of financial assets into overall transfer and partial transfer. (a) If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall be included in the current profits and losses: ① The carrying amount of the transferred financial asset on the date of derecognition. ② The sum of the consideration received for the transfer of financial assets and the amount of the respective derecognized portion of the accumulated changes in fair value originally included in other comprehensive income directly (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). (b) If the financial asset is partially transferred and the transferred part meets the conditions for derecognition, the carrying amount of the financial asset before transfer shall be allocated between the derecognition portion and the continuing recognition portion (in this case, the retained service asset shall be regarded as the continuing recognition part of the financial asset) according to the respective relative fair values on the transfer date, and the difference between the following two amounts shall be included in the current profits and losses: ① The carrying amount of the derecognized portion on the derecognition date. ② The sum of the consideration received for the derecognized portion and the amount of the corresponding derecognized portion of the accumulated changes in fair value originally included in other comprehensive income (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 32 IIISignificant accounting policies and accounting estimates (continued) 13 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 33 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (6) Impairment of financial instruments Based on the expected credit loss, the Company conducts impairment accounting of financial assets classified as those measured at amortized cost, financial assets classified as those measured at fair value through other comprehensive income and financial guarantee contracts and recognizes loss reserves. Expected credit loss refers to the weighted average of the credit losses of financial instruments weighted by the risk of default. Credit loss refers to the difference between all contractual cash flows discounted at the original effective interest rate and receivable according to the contract and all cash flows expected to be collected of the Company, i.e. the present value of all cash shortfalls. Among them, credit-impaired purchased or originated financial assets of the Company shall be discounted at the credit-adjusted effective interest rate of such financial assets. For receivables arising from transactions regulated by the income criteria, the Company uses the simplified measurement method to measure the loss reserve according to the amount equivalent to the expected credit loss during the entire duration. For credit-impaired purchased or originated financial assets, only the accumulated changes in the expected credit losses during the entire duration since the initial recognition are recognized as loss reserves on the balance sheet date. On each balance sheet date, the amount of change in the expected credit loss during the entire duration is included in the current gains and losses as impairment losses or gains. Even if the expected credit loss during the entire duration on the balance sheet date is less than that reflected in the estimated cash flow upon initial recognition, the favorable change in the expected credit loss is recognized as impairment gains. In addition to other financial assets adopting the above simplified measurement method and other than the credit-impaired purchased or originated ones, the Company evaluates whether the credit risk of relevant financial instruments has increased significantly since the initial recognition, measures its loss reserves and recognizes the expected credit loss and its changes respectively according to the following circumstances on each balance sheet date: (a) If the credit risk of the financial instrument has not increased significantly since its initial recognition, it is in the first stage, and its loss reserve shall be measured according to an amount equivalent to its expected credit loss over the next 12 months, and the interest income shall be calculated according to the book balance and the effective interest rate. (b) If the credit risk of the financial instrument has increased significantly since initial recognition but no credit impairment has occurred, it is in the second stage, and its loss reserve shall be measured according to an amount equivalent to its expected credit loss throughout its life, and the interest income shall be calculated according to the book balance and the effective interest rate. (c) If the financial instrument is credit-impaired since its initial recognition, it is in the third stage, and the Company shall measure its loss reserve according to an amount equivalent to its expected credit loss throughout its life, and calculate the interest income at the amortized cost and the effective interest rate. The increase or reversed amount of the credit loss reserve for financial instruments shall be included in the current profits and losses as impairment losses or gains. Except for financial assets classified as those measured at fair value through other comprehensive income, the credit loss reserve will offset the carrying amount of the financial assets. For financial assets classified as those measured at fair value through other comprehensive income, the Company recognizes its credit loss reserve in other comprehensive income without reducing its carrying amount presented in the balance sheet. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 34 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (6) Impairment of financial instruments (continued) In the previous accounting period, the Company has measured the loss reserve, the amount equivalent to the expected credit loss of the financial instruments 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 instruments, the amount 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 in 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 whether the actual or expected debtor's operations 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 debtmortgage, 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 and could 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 capacity 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 35 IIISignificant accounting policies and accounting estimates (continued) 13 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 difficulty; 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 assets; ⑥ Purchasing or generation of 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 expected credit losses of financial instruments is assessed individually and collectively. During the assessment of the expected credit losses, the Company will take into account reasonable and reliable information about past events, the current situation and future economic situation forecast. The Company divides financial instruments into different combinations on the basis of common credit risk characteristics. Common credit risk characteristics adopted by the Company include: financial instrument type, credit risk rating, aging combination, overdue aging combination, contract settlement cycle, debtor's industry, etc. To understand the individual evaluation criteria and combined credit risk characteristics of relevant financial instruments, please refer to the accounting policies of relevant financial instruments for details. The Company adopts the following methods to determine the expected credit losses of relevant financial instruments: ① In terms of financial assets, credit loss is equivalent to the present value of the difference between the contract cash flow that the Company shall receive and the expected cash flow. ② In terms of the financial guarantee contract, credit loss is equal to the expected amount of payment made by the Company to the holder of the contract for credit loss incurred, less the present value of the difference between the amount expected to be collected from the holder of the contract, the debtor or any other party. ③ If, on the balance sheet date, a financial asset has suffered credit impairment, but one does not purchase or generate 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 36 IIISignificant accounting policies and accounting estimates (continued) 13 Financial instruments (continued) (6) Impairment of financial instruments (continued) (d) Write-off of financial assets If the Company cannot reasonably expect the contract cash flow of the financial asset to be fully or partially recovered, the book balance of the financial asset will be written off directly. This write-off constitutes the derecognition of relevant financial assets. (7) Offset of financial assets and financial liabilities In the balance sheet, financial assets and financial liabilities are shown separately without offsetting each other. However, if the following conditions are met at the same time, the net amount after offset will be listed in the balance sheet: (a) The Company has the legal right, which is currently enforceable, to offset the confirmed amount; (b) The Company plans to settle on a net basis, or realize the financial assets and settle the financial liabilities at the same time. 14 Notes receivable For the determination method and accounting treatment method of the Company's expected credit loss on notes receivable, please refer to 13(6) of note IIIImpairment of financial instruments. If sufficient evidence of expected credit loss cannot be evaluated at a reasonable cost at the level of a single instrument, the Company will refer to the experience of historical credit loss, combine the current situation and judgment on future economic situation, divide notes receivable into several combinations according to the characteristics of credit risk, and calculate expected credit loss on the basis of combinations. 15 Accounts receivable For the determination method and accounting treatment method of the Company's expected credit loss on accounts receivable, please refer to 13(6) of note IIIImpairment of financial instruments. As for the accounts receivable, if there is objective evidence that the Company will not be able to recover the money according to the original terms of the accounts receivable, the Company will separately determine its credit loss. If sufficient evidence of expected credit loss cannot be assessed at reasonable cost at the level of single instrument, the Company will divide the accounts receivable into several combinations according to the credit risk characteristics, and calculate the expected credit loss on the basis of the combinations (with reference to the experience of historical credit loss, and in combination with the current situation with the judgment of future economic situation) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 37 IIISignificant accounting policies and accounting estimates (continued) 16 Receivables financing Accounts receivable classified as those measured at fair value through other comprehensive income, with a maturity of i) less than one year (including one year) from the initial recognition date, are listed as receivables financing; or ii) more than one year from the initial recognition date, are listed as other debt investments. For the relevant accounting policies, please refer to 13(6) of note IIIImpairment of financial instruments. 17 Other receivables For the determination method and accounting treatment method of the Company's expected credit loss of other receivables, please refer to 13(6) of note IIIImpairment of financial instruments. For other receivables for which there is objective evidence that the Company will not be able to recover the amount according to the original terms of the receivables, the Company will separately determine its credit loss. If sufficient evidence of expected credit loss cannot be evaluated at a reasonable cost at the level of single instrument, the Company will refer to the experience of historical credit loss, combine the current situation and judgment on future economic situation, divide other receivables into several combinations according to the characteristics of credit risk, and calculate expected credit loss on the basis of combinations. 18 Inventories (1) Classification of inventories Inventories refer to, among other things, finished products or goods held by the Company for sale in its daily activities, work in progress in production, materials and supplies consumed in the production or provision of labor services. Inventories mainly include but are not limited to raw materials, work in progress, finished products, and turnover materials.(2) Valuation method for inventories shipped in transit When acquired, inventory is initially measured at cost, including purchase costs, processing costs, and other costs. Inventories are shipped in transit by weighted average method. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 38 IIISignificant accounting policies and accounting estimates (continued) 18 Inventories (continued) (3) Basis for determining the net realizable value of inventories and accrual method for inventory valuation allowance After conducting a comprehensive counting at the end of the period, inventory valuation allowance shall be accrued or adjusted based on whichever lower of the cost and net realizable value of the inventory. For inventories of goods directly used for sale, such as finished goods, merchandise inventories and materials for sale, in the normal production and operations process, the net realizable value is determined by the amount of the estimated Sales expenses 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 operations process, the net realizable value is determined by the amount of the estimated selling expenses of finished products produced less the estimated cost 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, which is difficult to measure separately from other items, thus inventory valuation allowance is accrued and 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's turnover materials are amortized by the one-time amortization method. 19 Contract assets A contract asset shall be recognized if the Company has transferred the goods to the customer and has the right to receive a consideration depending on other factors than the passage of time. The right of the Company to unconditionally receive the considerations from customers (i.e., only depending on the passage of time) is listed independently as receivables. For the determination method and accounting treatment method of the Company’s expected credit loss on contract assets, please refer to 13(6) of note IIIImpairment of financial instruments. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 39 IIISignificant accounting policies and accounting estimates (continued) 20 Held-for-sale assets (1) Criteria for classification as being held for sale The Company recognizes non-current assets or disposal groups that meet both of the following conditions as components held for sale: ① they can be sold immediately under the current status according to the practice of selling such assets or disposal groups in similar transactions; ② The sale is likely to occur, that is, the Company has made a resolution on the sale plan, obtained the approval from the regulatory authorities (if applicable), and obtained a confirmed purchase commitment that the sale is expected to be completed in one year. The confirmed purchase commitment refers to a legally binding purchase agreement concluded by and between the Company and another party, which contains important terms such as transaction price, time and sufficiently severe penalty for breach of contract, so that there will be little possibility of major adjustments to or cancellation of the agreement. (2) Accounting treatment for held-for-sale assets The Company shall not depreciate or amortize non-current assets or disposal groups held for sale. If the carrying amount is higher than the amount of fair value net of selling expenses, the former shall be written down to the latter. The amount written down shall be recognized as asset impairment loss and included in the current profit and loss, and the impairment allowance for assets held for sale shall be accrued at the same time. The non-current asset or disposal group classified as being held for sale on the date of acquisition shall be initially measured at whichever initially measured amount is lower under the assumption that it is not classified as being held for sale and the amount of fair value net of selling expenses. The above principles are applicable to all non-current assets, except investment real estate subsequently measured by the fair value model, biological assets measured by the amount of fair value net of selling expenses, assets formed by employee compensation, deferred income tax assets, financial assets regulated by the relevant accounting standards of financial instruments, and rights arising from insurance contracts regulated by the relevant accounting standards of insurance contracts. 21 Other debt investments For the determination method and accounting treatment methods of the Company’s expected credit loss of other debt investments, please refer to 13(6) of note IIIImpairment of financial instruments.22 Long-term receivables For the determination method and accounting treatment method of the Company's expected credit loss on long-term receivables, please refer to 13(6) of note IIIImpairment of financial instruments. As for the accounts receivable, if there is objective evidence that the Company will not be able to recover the money according to the original terms of the accounts receivable, the Company will separately determine its credit loss. If sufficient evidence of expected credit loss cannot be 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 situations, divide long receivables into several combinations according to the characteristics of credit risk, and calculate expected credit loss on the basis of combinations. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 40 IIISignificant accounting policies and accounting estimates (continued) 23 Long-term equity investments (1) Recognition of initial investment cost (a) Long-term equity investment formed by business combination For details on accounting policies, please refer to Note (VII) accounting treatments for business combinations involving enterprises under and not under common control. (b) Long-term equity investment acquired by other means For long-term equity investment acquired by cash payment, the actual acquisition price is recognized as initial investment cost. The initial investment cost includes expenses, taxes and other necessary expenses directly related to the acquisition of the long-term equity investment. For long-term equity investment acquired by issuing equity securities, the fair value of equity securities issued is recognized as initial investment cost; the transaction costs arising from issuing or acquiring the own equity instruments of the acquirer will be offset from the equity in directly attributable transactions. 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 that indicates that the fair value of assets received is more reliable. For non-monetary assets that do not satisfy the above condition, the carrying amount 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 41 IIISignificant accounting policies and accounting estimates (continued) 23 Long-term equity investments (continued) (2) Subsequent measurement and recognition of profit and loss (a) Cost method The long-term equity investment by which the Company exercises control over the investee is accounted for by the cost method and measured at the initial investment cost. When the long-term equity investment is added or recovered, its cost should be adjusted thereby. In addition to the actual payment or the cash dividends or profits included in the consideration that have been declared but not yet paid when acquiring the investment, the Company recognizes the investment income for the period the investee's cash dividends or profits attributable to the Company will be recorded in gains from investment for the period. (b) Equity method The long-term equity investments made by the Company in affiliates and joint ventures are accounted for using the equity method. Among them, the portion of equity investments in affiliates, held indirectly through venture capital, mutual funds, trusts, or similar entities, including investment-linked insurance funds, are measured at fair value through profit or loss. The difference between the higher initial cost of the long-term equity investment 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 higher fair value share of identifiable net assets of the investee enjoyed at the time of conducting the investment is included in the current profits and losses. After the Company acquires a long-term equity investment, the investment income and other comprehensive income should be recognized respectively based on the Company's share in the net profit and loss and other comprehensive income realized by the investee, and the carrying amount of the long-term equity investment should be adjusted accordingly; the Company's share in the profits or cash dividends declared by the investee should be calculated, and the carrying amount of the long-term equity investment should be reduced accordingly; the carrying amount of the long-term equity investment should be adjusted based on changes in owners' equity of the investee other than net profit and loss, other comprehensive income, and profit distribution, and included in owners' equity. Before the Company recognizes its share in the net profit and loss of the investee, the net profit of the investee is adjusted based on the fair value of the identifiable assets of the investee as at the acquisition of the investment. Any unrealized profit and loss from internal transactions between the Company and its affiliates or joint ventures attributed to the Company based on the Company's, will be offset, and the investment profit and loss is recognized thereon. When the Company recognizes its share in the losses incurred by the investee, the Company should, firstly, offset the carrying amount of the long-term equity investment. Then, if the carrying amount of the long-term equity investment is insufficient for the offset, the investment loss is continued to be recognized, and the carrying amount of long-term receivable items is offset, subject to other carrying amount of the long-term equity constitutes the net investment in the investee. Finally, after the above-mentioned treatment, if the Company still bears additional obligations in accordance with the investment contract or agreement, the provision 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 recognized liabilities and recover other long-term equity that substantially constitutes net investment of the investee and the carrying amount of the long-term equity, and then recover the recognition of the profit as return on investment. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 42 IIISignificant accounting policies and accounting estimates (continued) 23 Long-term equity investments (continued) (3) Conversion accounting treatment of long-term equity investments (a) Accounting treatment for the transfer from fair value measurement to equity method For an equity investment, originally held by the Company without control, joint control or significant impact on the investee that is accounted for based on the financial instrument recognition and measurement standards, if as a result of additional investment or otherwise, the equity investment enables the Company to exercise significant impact on or joint control (rather than control) over the investee, the sum of the fair value of the originally held equity investment determined under the Accounting Standards for Business Enterprises No.22 - Recognition and Measurement of Financial Instruments and the new investment cost should be deemed as the initial cost of the investment accounted for using equity method.The difference between the lower initial investment cost accounted for using equity method and the higher share of the fair value of the identifiable net assets of the investee as at the date of the additional investment calculated based on the new shareholding percentage after the additional investment is made, shall be used to adjust the carrying amount of the long-term equity investment and included in the non-operating income for the period. (b) Transfer from fair value measurement or equity method to cost method For an equity investment, originally held by the Company without control, joint control or significant impact on the investee that is accounted for based on the financial instrument recognition and measurement standards, or a long-term equity investment originally held by the Company in an affiliate or joint venture, if as a result additional investment or for other reasons, the investment enables the Company to exercise control over an investee that is not under the common control with Company, the sum of the carrying amount of the originally held equity investment and the new investment cost should be should be the initial cost of the investment accounted for using cost method in preparation of the individual financial statements of the Company. The remaining comprehensive income recognized in the equity investments using equity method before the date of acquisition is accounted for, when the investment is disposed of, on the same basis as those the investee adopted directly to dispose of the underlying assets or liabilities. If the equity investment held before the acquisition date is subject to the accounting treatment under the relevant provisions of the Accounting Standards for Business Enterprises No.22 - Recognition and Measurement of Financial Instruments, the cumulative changes in fair value originally included in other comprehensive income should be transferred to the profit or loss for the period when the investment is accounted for using cost method. (c) Transfer from equity method to fair value measurement If the Company loses joint control or significant impact on the investee due to the disposal of part of the equity investment or otherwise, the equity remaining after the disposal should be accounted for under the Accounting Standards for Business Enterprises No.22 - Recognition and Measurement of Financial Instruments, and the difference between the fair value and carrying amount as at the date of losing the joint control or significant impact should be included in the profit or loss for the period. Other comprehensive income recognized for the original equity investment accounted for using equity method should be accounted for on the same basis as the direct disposal of the underlying assets or liabilities by the investee when the equity method is terminated. (d) Transfer from cost method to equity method Where the Company loses control over the investee due to the disposal of part of the equity investment or otherwise, if the equity remaining after the disposal by which the Company can exercise joint control or significant impact on the investee in preparation of the individual financial statements of the Company, the investment will be accounted for using equity method, and such remaining equity will be adjusted as if it were accounted for using equity method from the time when it is acquired. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 43 IIISignificant accounting policies and accounting estimates (continued) 23 Long-term equity investments (continued) (3) Conversion accounting treatment of long-term equity investments (continued) (e) Transfer from cost method to fair value measurement If the Company loses control over the investee due to the disposal of part of the equity investment or otherwise, the equity remaining after the disposal by which the Company cannot exercise joint control or significant impact on the investee should be accounted for based on the Accounting Standards for Business Enterprises No.22 - Recognition and Measurement of Financial Instruments, in preparation of the individual financial statements of the Company, and the difference between the fair value and carrying amount as at the date of losing the control should be included in profit or loss. (4) Disposal of long-term equity investments When a long-term equity investment is disposed of, the difference between the carrying amount of the long-term equity investment and the actual acquisition price shall be included in the profit or loss for the period. For a long-term equity investment accounted for using equity method, when the investment is disposed of, the part originally included in other comprehensive income should be accounted for in the corresponding proportion and on the same basis as the direct disposal of the underlying assets or liabilities by the investee. 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 when they are accounted for collectively; (c) The occurrence of a transaction depends on the occurrence of at least one of the other transactions; (d) A transaction is uneconomical individually, but is economical when considered collectively 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 carrying amount. 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 44 IIISignificant accounting policies and accounting estimates (continued) 23 Long-term equity investments (continued) (4) Disposal of long-term equity investments (continued) (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 shareholding ratio from the date of acquisition, is included in the current profit and loss of the period in which loss of control occurred. Other comprehensive income related to the original subsidiary's equity investment should be converted into current investment income when control is lost. The Company shall disclose in the notes the fair value of the remaining equity after disposal on the date of loss of control and the amount of relevant gains or losses arising from the disposal remeasured based on the fair value. If the transactions of disposal of equity investment in a subsidiary until the loss of control is a package transaction, the accounting treatment of individual financial statements and consolidated financial statements should be distinguished as follows: : (a) In the individual financial statements, the difference between each disposal price and the carrying amount 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. (5) Criteria for judgment of joint control and significant impact If the Company exerts joint control over an arrangement with other participants in accordance with the relevant agreement, and decision on activities that has significant impact on the return of the arrangement requires the unanimous consent of the participants sharing the control, the Company and other participants will be deemed to have joint control over the arrangement - a joint venture arrangement. If a joint venture arrangement is entered into through an independent entity, and the Company has right over the net assets of the independent entity based on the relevant agreements, the independent entity shall be deemed as a joint venture and accounted for using equity method. If based on the relevant agreement, the Company does not have rights to the net assets of the individual entity, the individual entity shall be deemed as a joint operation, and the items related to the share of interests in the joint operation should be recognized and accounted for in accordance with the provisions of relevant Accounting Standards for Business Enterprises. Significant impact means the investor’s power to participate in the decision-making of the financial and operating policies of the investee, but by which the investor cannot control or commonly control together with other parties the formulation of the policies. Significant impact on the investee will be determined based on one or more of the cases with reference to all facts and conditions: 1) Assigning a representative to the board of directors or similar authority of the investee; 2) Participating in formulation of the financial and operational policies of the investee; 3) Entering into a significant transaction with the investee; 4) Assigning an officer to the investee; or 5) Providing key technical information to the investee. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 45 IIISignificant accounting policies and accounting estimates (continued) 24 Investment property The Company's investment property means the property held for the purpose of earning rent or capital appreciation, or both, including the land use rights that have been leased, the land use rights that are held for transfer upon appreciation, and the leased buildings. In addition, for the vacant buildings held by the Company for the purpose of leases, if the Board of Directors makes a written resolution that expressly indicates that the buildings will be used for leases and the intention of holding will not change in a short-term, the building will also be reported as investment property. The Company adopts the cost model for subsequent measurement of investment property. For the purpose of depreciation or amortization method, the same amortization policy adopted for buildings as fixed assets and land use rights as intangible assets are used. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 46 IIISignificant accounting policies and accounting estimates (continued) 25 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. Fixed assets are depreciated by the straight-line method. The depreciation rate of various fixed assets is determined according to the estimated service life and estimated residual value (the estimated residual value is 0-10% of the original value). The depreciation rate of classified fixed assets is as follows: Asset Category Estimated Service Life Annual Depreciation RateHouses and buildings 20-50 years 1.90%-5%Machinery equipment 5-10 years 9.5%-20%Office and electronic equipment 2-5 years 22.22%-50%Transportation equipment 3-5 years 19.00%-33.33%Photovoltaic power stations 20-25 years 3.80%-4.75%Others 4-5 years 19.00%-31.67%Fixed assets renovation is amortized evenly over the benefit period. All fixed assets are subject to depreciation, except for fixed assets that have been fully depreciated and continue to be used, and the land that is priced and recorded separately. Fixed assets are depreciated on a monthly basis. Fixed assets added are not depreciated in the current month when being added but from the following month; fixed assets reduced are still depreciated in the current month when being reduced, and no depreciation is made from the following month. Fixed assets that are not profitable for the Company or not used temporarily (other than seasonally deactivated) are recognized as idle fixed assets. The estimated life expectancy and depreciation rate of idle fixed assets should be re estimated, and depreciation is directly included in the current profit and loss. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 47 IIISignificant accounting policies and accounting estimates (continued) 26 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. 27 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 and other assets that require a substantial period of acquisition, construction or production activities to get ready for the intended use or sale status. Borrowing costs become capitalized when: (1) The asset expenditure has occurred, including expenditure incurred in the form of cash payments, transfer of non-cash assets, or assuming interest-bearing debts for the purpose of acquisition, construction, or production of assets that are eligible for capitalization; (2) Borrowing costs have occurred; (3) The acquisition, construction or production activities necessary to enable the assets to be ready for the intended usable or saleable state have commenced. When an asset satisfied the capitalization conditions is abnormally interrupted during the process of acquisition, construction or production and the interruption period lasts for more than three months, the capitalization of the borrowing costs is suspended and recognized as the current expenses until the acquisition, construction or production of the assets starts again. When an asset satisfied the capitalization conditions is ready for its intended use or sale, the capitalization is stopped and the borrowing costs incurred in the future are included in the current profit and loss. The period of capitalization refers to the period from the time when the borrowing costs start to be capitalized to the point when the capitalization is stopped, and the period in which the borrowing costs are suspended for capitalization is not included. During the period of capitalization, if special borrowings are made for the acquisition, construction or production of assets eligible for capitalization, the amount of the interest expenses actually incurred during the current period of the special borrowings, less the amount of interest income earned by depositing unused borrowing funds in a bank or investment income earned by temporary investment, is recognized as the amount of capitalization. When a general loan is occupied for the purpose of purchasing, constructing or producing assets satisfied the capitalization conditions, the amount of capitalization is determined according to the weighted average of the accumulated asset expenditure exceeding the special loan portion multiplied by the capitalization rate of the general loan occupied; the capitalization rate is determined based on the weighted average interest rate of general borrowings. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 48 IIISignificant accounting policies and accounting estimates (continued) 28 Right-of-use assets The Company initially measures right-of-use assets at cost. Such cost includes: (1) The initial measurement amount of lease liabilities; (2) Lease payments made on or before the commencement date of the lease term (if a lease incentive exists, net of the amount related to the lease incentive already taken); (3) Initial direct costs incurred by the Company; (4) Costs expected to be incurred by the Company to disassemble and remove the leased asset(s), restore the premises where the leased asset(s) is/are located, or restore the leased asset(s) to the condition agreed upon under the terms of the lease (excluding costs incurred to produce inventory). After the commencement date of the lease term, the Company uses the cost model for subsequent measurement of right-of-use assets. If it is reasonably certain that ownership of the leased asset(s) will be obtained at the end of the lease term, the Company depreciates the leased asset(s) over its/their remaining service life. If it is not reasonably certain that ownership of the leased asset(s) will be obtained at the end of the lease term, the Company depreciates the leased asset(s) over the lease term or the remaining service life of the leased asset(s), whichever is shorter. Right-of-use assets for which depreciation reserves have been accrued are depreciated in future periods at their carrying amount net of depreciation reserves, with reference to the above principles. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 49 IIISignificant accounting policies and accounting estimates (continued) 29 Intangible assets Intangible assets are recorded at the actual cost at the time of acquisition. The service life of intangible assets is analyzed and judged at the time of acquisition. Intangible assets with a finite service life are amortized on the shortest of the estimated service lives, the beneficial period of the contract and the effective period specified by law from the time when the intangible assets are available for use. The amortization period is as follows: Category Amortization years Land use rights The shorter of the years of the land use rights and the operating years of the Company Patents and non-patent technologies 10 years or the shorter of service life, beneficiary years and legally valid years Others 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 foreseen as unable 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 evidence indicates that the service life of the intangible asset is limited, then it is converted to an intangible asset with limited service life. Intangible assets with indefinite service lives are not amortized. The expenditures of the Company's internal research and development projects are classified into expenditures in the research phase and expenditures in the development phase. Research means an original, planned survey of acquiring and understanding new scientific or technical knowledge. Development means the application of research results or other knowledge to a plan or design to produce new or substantially improved materials, devices, products, etc. prior to commercial production or use. The expenditures in the research phase of the Company's internal research and development projects are included in the current profit and loss when incurred; expenditures in the development phase are recognized as intangible assets only when the following conditions are all satisfied: (1) It is technically feasible to complete the intangible asset to enable it to be used or sold; (2) There is intent to complete the intangible asset and use or sell it; (3) The intangible assets can bring economic benefits; (4) There are sufficient technical, financial and other resources to support the development of the intangible assets as well as ability to use or sell the intangible assets; (5) Expenditures attributable to the development stage of the intangible asset can be measured in a reliable way. If the above conditions cannot be all satisfied, the expenditures are included in the current profit and loss when incurred. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 50 IIISignificant accounting policies and accounting estimates (continued) 30 Impairment of long-lived assets The Company determines whether there is any sign of possible impairment of the long-term assets on the balance sheet date. If there is any sign of impairment in a long-term asset, the Company estimates the recoverable amount thereof based on the individual asset. If it is difficult to estimate the recoverable amount of the individual asset, the recoverable amount of the asset is determined based on the asset group to which the asset belongs. The recoverable amount of an asset is determined based on the net amount of fair value of the asset less the disposal expenses, or the present value of estimated future cash flows of the asset, whichever is higher. If the measurement results of the recoverable amount indicate that the recoverable amount of the long-term investment is lower than its carrying amount, the carrying amount of the long-term investment is written off to the recoverable amount, and the amount written by is recognized as asset impairment losses, which is included in the profit and loss, while provision for asset impairment is made. Once the asset impairment loss is confirmed, it cannot be reversed in the future accounting period. After the asset impairment loss is recognized, the depreciation or amortization expense of the impaired assets will be adjusted accordingly in the future periods, so that the adjusted carrying amount of the asset (deducting the expected net residual value) will be systematically amortized over the remaining service life of the asset. 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. In the impairment test of goodwill, the carrying amount of goodwill is apportioned to the asset group or asset group portfolio expected to benefit from the synergy of the business combination. When impairment tests are conducted on underlying asset groups or asset group portfolios that contain goodwill, impairment tests will be first conducted on the asset groups or asset group portfolios that do not contain goodwill, provided there is any sign of impairment in the asset groups or asset group portfolios related to the goodwill, and the recoverable amount will be calculated, and compared with the relevant carrying amount to recognize the corresponding impairment loss. Further impairment tests will be conducted on asset groups or asset group portfolios that contain goodwill, by comparing the carrying amount of such underlying asset groups or asset group portfolios (including the part of the carrying amount of the allocated goodwill) with their recoverable amount. If the recoverable amount of the underlying asset group or asset group portfolio is lower than its carrying amount, the impairment loss shall be recognized for goodwill. 31 Long-term deferred expenses Long-term deferred expenses refer to various expenses that the Company has paid, should be amortized over the current and future periods, 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. 32 Contract liabilities The Company recognizes as contract liabilities the part of the obligation to transfer the goods to the customer due to received or receivable consideration from the customer. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 51 IIISignificant accounting policies and accounting estimates (continued) 33 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 compensation for the termination of labor relations with the employee is determined, and also included in the current profit and loss, at the time when the Company 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. For other long-term employee benefits that meet the conditions of a defined contribution plan, the amount to be contributed shall be recognized as a liability during the accounting period when the employee provides services to the Company, and shall be included in profit or loss for the period or the underlying asset costs. For long-term employee benefits other than those mentioned above, on the balance sheet date, the benefit obligations arising from the defined benefit plan shall be attributed to the periods during which the employee provides services, and shall be included in profit or loss for the period or the underlying asset costs. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 52 IIISignificant accounting policies and accounting estimates (continued) 34 Estimated liabilities (1) Recognition standards for estimated liabilities An obligation related to product quality assurance, loss contracts, restructuring and other contingencies shall be recognized as provision, if i) it is a current obligation of the Company, ii) the fulfillment of this obligation is likely to result in an outflow of economic benefits, and iii) the amount of this obligation can be reliably measured. (2) Measurement methods for estimated liabilities The estimated liabilities 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 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 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 provision 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 carrying amount of provision. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 53 IIISignificant accounting policies and accounting estimates (continued) 35 Lease liabilities The Company initially measures lease liabilities at the present value of the lease payments outstanding on the commencement date of the lease term. When calculating the present value of lease payments, the Company uses the interest rate implicit in lease as the rate of discount. If the implicit interest rate of the lease cannot be determined, the incremental loan interest rate of the Company shall be used as the discount rate. Lease payments include: (a) The amount of fixed payments, net of amounts related to lease incentives, and the amount of substantive fixed payments; (b) Variable lease payments that depend on indexation or ratio; (c) The exercise price of the purchase option, when applicable, if the Company is reasonably certain that the option will be exercised; (d) The amount required to be paid to exercise the option to terminate the lease if the lease term reflects that the Company will exercise the option to terminate the lease; (e) The estimated amount payable based on the secured residual value provided by the Company. The Company calculates the interest expenses of lease liabilities for each period within the lease term at a fixed rate of discount and includes them in profit or loss for the current period or cost of the related assets. Variable lease payments that are not included in the measurement of lease liabilities should be included in profit or loss for the current period or cost of the related assets when they are actually incurred. 36 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 owners' equity after the vesting date. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 54 IIISignificant accounting policies and accounting estimates (continued) 37 Revenue recognition (1) General principles applied to revenue recognition The Company shall recognize the revenue according to the transaction price assigned to the performance obligation when any due performance obligation is fulfilled (namely when the client obtains the control over relevant commodities or services). Performance Obligation means that, under the contract, the Company promises to transfer commodities or services that can be clearly distinguished to the client. “Obtain the control over relevant commodities or services” refers to the ability to completely dominate the use of commodities and obtain almost all economic benefits. From the contract’s effectiveness date, the Company shall evaluate the contract, recognize each single performance obligation included and determine whether each performance obligation is fulfilled within a certain period or at a time point. When any of the following conditions is met, for performance obligation to be fulfilled within a certain period, the Company shall recognize corresponding revenue within the period as scheduled: (a) While fulfilling the due obligation in the Company, the client obtains and consumes the resulting economic benefit; (b) The client is able to control the commodities under construction during the Company’s fulfillment; (c) Commodities generated from the Company’s fulfillment possess irreplaceable purpose and the Company has the right to charge all fulfilled performance obligations within the whole contract period; otherwise, the Company shall recognize corresponding revenue when the client obtains the control over relevant commodities or services. For any performance obligation with a certain period, the Company shall apply the output method/input method to determine the appropriate fulfillment schedule based on the specific nature of commodities and services. The output method is to determine the fulfillment schedule according to the value of commodities transferred to the client (while the input method is to determine the fulfillment schedule according to the Company’s input to fulfill the performance obligation). If the fulfillment schedule cannot be reasonably determined and the Company’s costs are predicted to be compensated, corresponding revenue shall be recognized based on the specific cost amount until the fulfillment schedule could be reasonably determined. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 55 IIISignificant accounting policies and accounting estimates (continued) 37 Revenue recognition (continued) (2) Specific revenue recognition method (a) Product sales contract According to the contract terms, for the selling of products subject to performance obligation fulfillment conditions at a time point and other products, the Company shall recognize the realization of sales revenues when the client obtains the control over relevant commodities or services according to the delivery condition agreed in the sales contract upon signed by the client after commodities are received. (b) Technical service contract If revenues are recognized within a certain period based on the technical service contract, corresponding revenues shall be recognized according to the performance schedule. (c) Royalties income Accounted for according to the time and method of charging as stipulated in the relevant contract or agreement. (d) Revenue from photovoltaic power stations a. Centralized power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on power supply provided by the business departments of the Company, after the duration of continuous and trouble-free operation specified by the electric power company is met. b. Distributed power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on settlement provided by the business departments of the Company. (3) Principles of handling revenues from specific transactions (a) For the contract containing the sales return article: When the client obtains the control over relevant commodities, corresponding revenue shall be recognized according to the consideration amount (excluding the amount predicted to be returned due to sales return) predicted to be duly charged from transferring commodities to the client, and corresponding liabilities shall be recognized based on the amount predicted to be returned due to sales return. Meanwhile, when commodities are sold, the balance through deducting the predicted cost from taking back commodities from the carrying amount of commodities predicted to be returned (including the impairment of value of returned commodities) shall be checked and calculated under “Returned Commodities Cost Receivable”. (b) For the contract containing the quality assurance article: it’s required to evaluate whether the quality assurance involves any separable service except for the promise (to the client) that commodities conform to established standards. If the Company provides additional service, it shall be deemed as a single performance obligation and subject to the accounting treatment according to relevant revenue criteria provisions; otherwise, the quality assurance liability shall be subject to the accounting treatment according to the accounting criteria provisions on Contingency. (c) For the sales contract containing the client’s additional purchase option: the Company shall evaluate whether the option provides the client with any significant right. If any, it shall be deemed as a single performance obligation and the transaction price shall be apportioned to the performance obligation, and corresponding revenues shall be recognized when the client executes the purchase option right and obtains the control over relevant commodities in the future or when the option becomes invalid. If the separable selling price applied to the client’s additional purchase option right cannot be directly observed, it’s required to comprehensively consider the difference in discounts between the client’s execution of option right and the client’s non-execution of option right and analyze the possibility for the client to execute the option right and other relevant information. Then, corresponding reasonable estimate shall be made. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 56 IIISignificant accounting policies and accounting estimates (continued) 37 Revenue recognition (continued) (3) Principles of handling revenues from specific transactions (continued) (d) The contract licensing the IP right to the client: It’s required to evaluate whether the IP right license constitutes any single performance obligation; if any, it is necessary to determine whether the performance obligation fulfillment is fulfilled within a certain period or at a time point. If any IP right license is granted to the client and royalties are charged based on the client’s actual sales or usage, corresponding revenues shall be recognized at a later time between the following dates: the day when the client’s subsequent selling or usage occurs; the day when the Company fulfills relevant performance obligations. 38 Contract costs (1) Contract performance cost For the cost resulting from performing the contract which is not included in other ASBE except the revenue standards and meets the following conditions, the Company shall recognize it as an asset：(a) The cost is directly related to a current or predicted contract, including the direct labor, direct material and manufacturing expenses (or similar expenses), the cost borne by the client and other costs resulting from the contract; (b) The cost adds various resources that can be applied by the Company to fulfill due performance obligations. (c) The cost is predicted to be recovered. The asset shall be presented and reported in inventory or other non-current assets, which depends on whether the amortization period exceeds a normal operating cycle during the initial recognition. (2) Contract acquisition cost If the increment cost resulting from the Company’s acquisition of contract is predicted to be recovered, it shall be recognized as an asset as the contract acquisition cost. Increment Cost refers to the cost which only results from the contract acquisition, like the sales commission. If the amortization period is less than one year, it shall be included in current profit and loss. (3) Contract cost amortization The asset related to the contract cost shall adopt the same basis for the recognition of commodities or services revenues related to the asset, be amortized during the period of fulfilling the performance obligation or according to the fulfillment schedule and be included into current profit and loss. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 57 IIISignificant accounting policies and accounting estimates (continued) 38 Contract costs (continued) (4) Impairment of contract costs For the asset related to the contract cost as mentioned above, if the carrying amount is higher than the difference between the residual consideration predicted to be obtained from the Company’s transfer of commodities related to the asset and the cost to be incurred due to such transfer, depreciation reserves shall be calculated and withdrawn for the surplus which shall also be recognized as the asset impairment loss. After the impairment allowances is established, if changes in depreciation factors during previous periods have made the above difference higher than the asset’s carrying amount, it shall be restituted to previously established asset impairment allowances and included in current profit and loss. However, the carrying amount of restituted assets shall not exceed the carrying amount of the asset on the date of restitution without establishing impairment allowances. 39 Government grants (1) Type of change Government grants are transfers of monetary or non-monetary assets from the government to the Group at nil consideration. According to the grants targets stipulated in the relevant government documents, government grants are classified into government grants related to assets and government grants related to income. (2) Recognition of government grants If a government grant is a monetary asset, it is measured at the amount received or receivable. If a government grant is a non-monetary asset, it is measured at fair value. If the fair value cannot be obtained in a reliable way, it is measured at the nominal amount (RMB1). Government grants measured at nominal amounts are recognized directly in the current profits and losses. (3) Accounting treatment Government grants related to assets offset the carrying amount of the underlying assets. If the government grants related to income are used to compensate related costs or losses in the subsequent period, it is recognized as deferred income and included in the current profit and loss or offset costs in the period in which the related costs or losses are recognized; government grants used to compensate costs or losses incurred by the enterprise are directly included in the current profits or losses or offset related costs. For government grants related to the day-to-day activities of the enterprise, the R&D and VAT-related subsidies and the taxation, or operation-based incentive government subsidies are included in other income; other government grants are written off against related costs based on the substance of economic activities. Government grants not related to daily activities of the Company are included in the non-operating income and expenditure. For preferential loans for policy discount, if the government finance department appropriates the discounted funds to the lending bank, the borrowing cost is accounted for according to the principal of the loan and the policy preferential interest rate, with the amount actually received as the entry value of the loan. If the government finance department directly appropriates the interest grant funds to the Company, the grants offset the related borrowing costs. In case that a confirmed government grant is required to be returned, the carrying amount of the asset is adjusted if the carrying amount 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 58 IIISignificant accounting policies and accounting estimates (continued) 40 Deferred income tax assets and deferred income tax liabilities Deferred income tax assets and deferred income tax liabilities shall be recognized based on the difference (temporary difference) between the tax basis and carrying amount of the underlying assets or liabilities. On the balance sheet date, the deferred income tax assets and deferred income tax liabilities are measured based on the tax rate applicable during the period when it is expected to recover the assets or pay off the liabilities. (1) Basis for recognition of deferred income tax assets The Company recognizes deferred income tax assets arising from deductible temporary differences to the extent that it is likely to acquire taxable income that can be used to offset the deductible temporary differences, deductible losses that can be carried forward to future years and tax credits. However, deferred income tax assets arising from the initial recognition of assets or liabilities in a transaction with all the following characteristics shall not be recognized: (1) the transaction is not a business combination; and (2) the occurrence of the transaction does not affect accounting profits or taxable income or deductible losses. For a deductible temporary difference related to investments in affiliates, the corresponding deferred income tax asset will be recognized if the following criteria are met simultaneously: the temporary difference is likely to be reversed in the foreseeable future and it is likely to obtain taxable income that can be used to offset the deductible temporary difference in the future. (2) Basis for recognition of deferred income tax liabilities The Company recognizes the taxable temporary differences that should be paid but not paid for the current and previous periods as deferred income tax liabilities. But deferred tax liabilities do not include: (a) Temporary differences arising from the initial recognition of goodwill; (b) Temporary differences arising from transactions or events that are not formed by a business combination and do not affect accounting profits or taxable income (or deductible losses) upon their occurrence; (c) For taxable temporary differences related to investments in subsidiaries and associates, 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. (3) Deferred income tax assets and liabilities are presented on a net basis after, provided the following conditions are met: (a) An enterprise has the legal right to settle current income tax assets and liabilities on a net basis;(b) Deferred income tax assets and liabilities relate to income taxes levied by the same taxing authority on either the same taxable entity or different taxable entities which intend to either settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are reversed. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 59 IIISignificant accounting policies and accounting estimates (continued) 41 Leases From the effectiveness date of a contract, the Company assesses whether the contract is a lease or includes any lease. If a party to the contract transfers the right allowing the control over the use of one or more assets that have been identified within a certain period, in exchange for a consideration, such contract is a lease or includes a lease. (1) Lease contract split If a contract contains multiple single leases at the same time, the Company will split the contract, and conduct accounting treatment of each single lease respectively. If a contract contains both lease and non-lease parts at the same time, the Company will split the lease and non-lease parts, conduct accounting treatment of the lease part in accordance with the accounting standards governing leases, and conduct accounting treatment of the non-lease part in accordance with other applicable corporate accounting standards. (2) Lease contract combination With regard to two or multiple contracts containing leases concluded by the Company with the same counterparty or its related parties at the same or a similar time, when any of the following conditions is met, the contracts are combined into one contract for accounting treatment: (a) Two or multiple contracts are concluded based on an overall business purpose and constitute a package deal, and if they are not considered as a whole, the overall business purpose cannot be understood. (b) The consideration amount of one contract among the two or multiple contracts depends on the pricing or performance of other contracts. (c) The rights to use assets transferred by the two or multiple contracts constitute one single lease. (3) Accounting treatment with the Company as lessee On the commencement date of the lease term, the Company recognizes the right-of-use assets and lease liabilities for the lease, unless it is a simplified short-term lease or low-value asset lease. (a) Short-term leases and low-value asset leases A short-term lease refers to a lease that does not include a purchase option and whose lease term does not exceed 12 months. A low-value asset lease refers to a lease where the value will be low when a single leased asset is a new asset. The Company does not recognize the right-of-use assets or lease liabilities for the following short-term leases and low-value asset leases. In each period within the lease term, the relevant lease payments are included in cost of the related assets or profit or loss for the current period on a straightline basis or according to other systemic and reasonable methods. Item Simplified leased asset type Short-term lease A lease whose lease term does not exceed 12 months from the commencement date of the lease term Low-value asset lease An asset lease with a value of less than RMB40,000 or its foreign currency equivalents TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 60 IIISignificant accounting policies and accounting estimates (continued) 41 Leases (continued) (3) Accounting treatment with the Company as lessee (continued) The Company recognizes the right-of-use assets and lease liabilities for short-term leases and low-value asset leases other than those mentioned above. (b) The accounting policies for right-of-use assets and lease liabilities are detailed in Note III,26 and Note III,34. (4) Accounting treatment with the Company as lessor (a) Lease classification: The Company classifies leases into finance leases and operating leases at the inception of leases. A finance lease refers to a lease where almost all the risks and rewards, related to the ownership of the leased asset(s), are substantially transferred, regardless of whether the ownership is transferred eventually. An operating lease refers to all leases other than finance leases. Usually, the Company classifies a lease that meets any one or more of the following conditions as a finance lease: 1) Upon expiry of the lease term, the ownership of the leased asset(s) is transferred to the lessee. 2) The lessee has the option to purchase the leased assets. As the agreed purchase price is low enough compared with the fair value of the leased asset(s) at the time the option is expected to be exercised, it can be reasonably determined at the inception of the lease that the lessee will exercise the option.3) Although the ownership of the asset(s) is not transferred, the lease term accounts for the majority of the service life of the leased asset(s). 4) At the inception of the lease, the present value of the lease payments receivable is almost equal to the fair value of the leased asset(s). 5) The leased asset(s) is/are special in nature and can be only used by the lessee, unless there is a large alteration. The Company may also classify a lease that falls under any one or more of the following circumstances as a finance lease: 1) If the lessee cancels the lease, losses to the lessor caused by the cancellation will be borne by the lessee. 2) Gains or losses arising from fluctuations in the fair value of the residual value of the leased asset(s) are borne by the lessee. 3) The lessee is able to renew the lease with a rental far lower than the market level to the next term.(b) Accounting treatment of finance leases On the commencement date of the lease term, the Company recognizes the finance lease receivables for the finance lease and derecognises the leased asset(s) of the finance lease. In the initial measurement of finance lease receivables, the sum of the unsecured residual value and the present value of the lease payments receivable not yet received on the commencement date of the lease term discounted at the interest rate implicit in lease is the entry value of the finance lease receivables. Lease payments receivable include: 1) The amount of fixed payments, net of amounts related to lease incentives, and the amount of substantive fixed payments; 2) Variable lease payments that depend on indexation or ratios; 3) The exercise price of the purchase option, when applicable, if it is reasonably certain that the lessee will exercise the purchase option; 4) The amount required to be paid by the lessee to exercise the option to terminate the lease if the lease term reflects that the lessee will exercise the option to terminate the lease; 5) Secured residual value provided to the lessor by the lessee, a party related to the lessee, or an independent third party that has the financial ability to perform the security provision obligation. The received variable lease payments that are not included in the measurement of the net investment in the lease are included in profit or loss for the current period when they are actually incurred. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 61 IIISignificant accounting policies and accounting estimates (continued) 41 Leases (continued) (4) Accounting treatment with the Company as lessor (continued) (c) Accounting treatment of operating leases For each period of the lease term, the Company adopts the straight-line method or other systematic and reasonable methods to recognize the lease receipts of the operating lease as rental income; the Company capitalizes the initial direct expenses incurred in connection with the operating lease, amortizes them over the lease term on the same basis as that for the recognition of the rental income, and includes them in the current profit and loss by stage; the Company includes the variable lease payments, obtained in connection with the operating lease that are not included in the lease receipts, in the current profit and loss when actually incurred. (5) Sale and leaseback (a) The Company as seller and lessee If the asset transfer in a sale and leaseback transaction is a sale, the Company will measure the right-of-use assets formed by the sale and leaseback based on the portion of the original asset’s carrying amount that is related to the use right acquired by the leaseback, and recognize related gains or losses only for the right transferred to the lessor. If the fair value of the sales consideration is different from the fair value of the asset, or if the lessor does not charge the rent at the market price, the Company will conduct accounting treatment with the sales consideration amount below the market price as the prepaid rent, or the amount above the market price as the additional financing provided by the lessor to the lessee; at the same time, the relevant sales gains or losses will be adjusted based on the fair value. If the asset transfer in a sale and leaseback transaction is not a sale, the Company will continue to recognize the transferred asset and at the same time recognize a financial liability equivalent to the transfer income. (b) The Company as buyer and lessor If the asset transfer in a sale and leaseback transaction is a sale, the Company will conduct corresponding accounting treatment for asset purchase and apply the accounting standards governing leases to the accounting treatment of the asset lease. If the fair value of the sales consideration is different from the fair value of the asset, or if the Company does not charge the rent at the market price, the Company will conduct accounting treatment with the sales consideration amount below the market price as the pre-collected rent, or the amount above the market price as the additional financing provided by the Company to the lessee; at the same time, the rental receipt will be adjusted based on the market price. If the asset transfer in a sale and leaseback transaction is not a sale, the Company will recognize a financial asset equivalent to the transfer income. 42 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. Enterprises that are solely controlled by the state and do not have any other related party relationship shall not be deemed as related parties. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 62 IIISignificant accounting policies and accounting estimates (continued) 43 Discontinued operations The Company will recognize a component that meets one of the following conditions, has been disposed of or classified as being held for sale, and can be separately identified, as a component of discontinued operation: (1) This component represents an independent main business or a separate main operation region. (2) This component is part of a related plan to dispose of an independent main business or a separate main operation region. (3) This component is a subsidiary acquired for the sole purpose of 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. 44 Hedge Accounting Hedge is classified as fair value hedge, cash flow hedge or net foreign investment hedge based on the hedging relationship. (1) A hedging relationship qualifies for hedge accounting only if all of the following criteria are met: (a) The hedging relationship consists only of eligible hedging instruments and eligible hedged items. (b) At the inception of the hedging relationship, there is formal designation of hedging instruments and hedged items, and documentation of the hedging relationship and the Company’s risk management strategies and objectives for undertaking the hedge have been prepared. (c) The hedging relationship meets the hedge effectiveness requirements. The hedging relationship meets the hedge effectiveness requirements only if all of the following criteria are met: 1) There is an economic relationship between the hedged item and the hedging instrument. This economic relationship causes opposite changes in the value of the hedging instrument and the hedged item in face of the identical hedged risk. 2) The effect of credit risk does not dominate the value changes that result from that economic relationship. 3) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item. However, that designation shall not reflect an imbalance between the weightings of the hedged item and the hedging instrument that would create hedge ineffectiveness that could result in an accounting outcome that would be inconsistent with the purpose of hedge accounting. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 63 IIISignificant accounting policies and accounting estimates (continued) 44 Hedge Accounting (continued) (2) Fair value hedge accounting (a) Gain or loss on the hedging instrument shall be recognized in profit or loss. If the hedging instrument hedges a non-trading equity instrument (or a component thereof) that the Company has elected to be measured at fair value through other comprehensive income, the hedging gain or loss generated by the hedging instrument shall be recognized in other comprehensive income. (b) Gain or loss generated by the hedged item due to the hedged risk exposure shall be recognized in profit or loss, and shall adjust the carrying amount of the recognized hedged item that is not measured at fair value. If the hedged item is a financial asset (or a component thereof) measured at fair value through other comprehensive income, the hedging gain or loss on the hedged item shall be recognized in profit or loss, and will not be required for adjustment since the carrying amount has been measured at fair value. However, if the hedged item is a non-trading equity instrument (or a component thereof) that the Company has elected to be measured at fair value through other comprehensive income, the hedging gain or loss on the hedged item shall be recognized in other comprehensive income, and will not be required for adjustment, since the carrying amount has been measured at fair value. When a hedged item represents a defined commitment that has not been unrecognized (or a component thereof), the cumulative change in the fair value of the hedged item subsequent to its designation caused by the hedge relationship is recognized as an asset or a liability with a corresponding gain or loss recognized in profit or loss. When a defined commitment is made to acquire an asset or assume a liability, the initial carrying amount of the asset or the liability is adjusted to include the cumulative change in the fair value of the hedged item that has been recognized. (c) If the hedged item is a financial instrument (or a component thereof) measured at amortized cost, the adjustment made to the carrying amount of the hedged item shall be amortized based on the effective interest rate recalculated on the amortization commencement date, and recognized in the profit or loss. This amortization can commence from the adjustment date, but not later than the time when the hedging gain or loss adjustment is made for the termination of the hedged item. If the hedged item is a financial asset (or a component thereof) measured at fair value through other comprehensive income, the cumulative recognized hedging gain or loss shall be amortized in the same manner and recognized in the profit or loss, but the carrying amount of the financial asset (or a component thereof) shall not be adjusted. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 64 IIISignificant accounting policies and accounting estimates (continued) 44 Hedge Accounting (continued) (3) Accounting treatment of cash flow hedges (a) The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e., the portion that is offset by the change in the cash flow hedge reserve) shall be recognized in other comprehensive income. The amount of cash flow hedging reserves shall be determined based on the lower of the absolute amount of the following two items: 1) The cumulative gain or loss on the hedging instrument since the commencement of the hedge;2) The cumulative change in the present value of expected future cash flows of the hedged item since the commencement of the hedge. The amount of cash flow hedging reserves recognized in other comprehensive income for each period is the change in cash flow hedging reserves for the period. (b) The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge (i.e., other gain or loss after deducting that recognized in other comprehensive income) shall be recognized in profit or loss. (c) The amount that has been accumulated in the cash flow hedge reserve shall be accounted for as follows: 1) if any hedged item as an expected transaction, and the expected transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a defined commitment for which fair value hedge accounting treatment is applied, the Company shall remove that amount from the cash flow hedge reserve previously recognized in other comprehensive income and include it in the initial cost of the asset or the liability. 2) for cash flow hedges other than those covered by 1), that amount from the cash flow hedge reserve previously recognized in other comprehensive income shall be reclassified from the cash flow hedge reserve to profit or loss in the same period or the period during which the hedged expected future cash flows affect profit or loss. 3) however, if that amount from the cash flow hedge reserve previously recognized in other comprehensive income is a loss and the Company expects that all or a portion of that loss will not be recovered in one or more future periods, it shall immediately reclassify the amount that is not expected to be recovered from other comprehensive income to profit or loss. (4) Hedges of a net investment in a foreign operation Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment shall be accounted for similarly to cash flow hedges: (a) The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognized in other comprehensive income. When disposing of all or part of the foreign operation, the gain or loss on the hedging instrument recognized in other comprehensive income shall be correspondingly transferred out and recognized in the profit or loss. (b) The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge shall be recognized in the profit or loss. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 65 IIISignificant accounting policies and accounting estimates (continued) 44 Hedge Accounting (continued) (5) Termination of hedge accounting Hedge accounting will be terminated if one of the following situations occurs: (a) The hedging relationship no longer meets the risk management objectives due to changes in risk management objectives. (b) The hedging instrument has expired or been sold, or the contract has been terminated or has been exercised. (c) The economic relationship no longer exists between the hedged item and the hedging instrument, or the effect of credit risk start to dominate the value changes that result from that economic relationship. (d) The hedging relationship no longer meets other conditions for applying hedging accounting stipulated in this standard. In case that the rebalancing of the hedging relationship is applied, the Company shall first consider the rebalancing of the hedging relationship, and then evaluate whether the hedging relationship meets the conditions for applying hedging accounting stipulated in this standard. Termination of hedge accounting may affect the whole or a portion of the hedging relationship, and when only a portion thereof is affected, hedge accounting remain applicable to the remaining unaffected portion. (6) Fair value selection of credit risk exposure When credit derivative instruments measured at fair value through profit or loss are used to manage the credit risk exposure of a financial instrument (or a component thereof), the financial instrument (or a component thereof) can be designated as a financial instrument measured at fair value through profit or loss during its initial recognition, subsequent measurement, or when not yet recognized, with written records made simultaneously, provided that the following criteria are met: (a) The subject (such as the borrower or the loan commitment holder) of the credit risk exposure of the financial instrument is consistent with the subject involved in the credit derivative; (b) The reimbursement level of the financial instrument is consistent with that of the instrument required to be delivered under the terms of the credit derivative. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 66 IIISignificant accounting policies and accounting estimates (continued) 45 Changes to major accounting policies and estimates (1) Change of accounting policies Impact of the adoption of the Interpretation to Accounting Standards for Business Enterprises No.16 on the Company On December 13,2022, the Ministry of Finance (“MOF”) issued the Interpretation No.16 of the Accounting Standards for Business Enterprises (CK [2022] No.31, hereinafter referred to as the “Interpretation No.16”), clarifying “Accounting treatment that the deferred income taxes associated with assets and liabilities arising from a single transaction is not subject to the initial recognition exemption”. The Interpretation No.16 is effective from January 1,2023, which allows voluntarily early adoption. The Company implemented accounting treatment related to such matter this year, and the implementation of the Interpretation No.16 had no significant impact on the consolidation and the Company’s financial statements. (2) Changes to accounting estimates No significant change occurred to the major accounting estimates in the Reporting Period. 46 Correction of previous accounting errors No previous accounting errors were identified and corrected in the Reporting Period. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 67 IVTaxes 1 Value-added tax In the Reporting Period, output tax was calculated at 3%,5%,6%,9% or 13% of the taxable income of general taxpayers and the value added-tax was paid based on the difference after deducting the allowance deduction of input tax in the current period. The value added-tax payment for the Company’s directly exported goods is executed in accordance with the regulations of “Exemption, Offset and Refund”. 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 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 68 IVTaxes (continued) 5 Corporate income tax The corporate income tax rate for the Company was 15% in the current period. 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. According to the Announcement on Further Implementing Preferential Income Tax Policies for Small and Micro Enterprises issued by the Ministry of Finance and the State Administration of Taxation on March,2022 (Announcement No.13 [2022] of the Ministry of Finance and the State Administration of Taxation), from January 1,2022 to December 31,2024, the annual taxable income of small and low-profit enterprises exceeding RMB1 million but at no more than RMB3 million will be included in the taxable income at a reduced rate of 25%, and the enterprise income tax will be paid at the rate of 20%. According to the relevant provisions of the Announcement on the Preferential Income Tax Policies for Small and Micro Enterprises and Self-employed Businesses (Announcement No.6 [2023] of the Ministry of Finance and the State Taxation Administration) and the Announcement of the Ministry of Finance and the State Taxation Administration on Tax Policies for Further Supporting the Development of Small and Micro Enterprises and Self-employed Businesses (Announcement No.12 [2023] of the Ministry of Finance and the State Taxation Administration), issued by the Ministry of Finance and the State Taxation Administration in 2023, from January 1,2023 to December 31,2027, the annual taxable income of small and low-profit enterprises not exceeding RMB1 million will be included in the taxable income at a reduced rate of 25%, and the enterprise income tax will be paid at the rate of 20%. Except for the following subsidiaries entitling to preferential tax treatment and the overseas subsidies that adopt local applicable tax rate, other entities under the Company are subject to the applicable tax rate of 25%, or the preferential tax rate for small and micro enterprises. Subsidiaries entitled to tax preferences: Company Name Preferential tax rate Reason TCLChina Star Optoelectronics Technology Co., Ltd.15% High-tech enterprise Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd.15% High-tech enterprise Wuhan China Star Optoelectronics Technology Co., Ltd.15% High-tech enterprise Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd.15% High-tech enterprise Suzhou China Star Optoelectronics Technology Co., Ltd.15% High-tech enterprise Shenzhen TCLHigh-Tech Development Co., Ltd.15% High-tech enterprise Qingdao Blue Business Consulting Co., Ltd.15% High-tech enterprise Shenzhen Qianhai Maojia Software Technology Co., Ltd.15% High-tech enterprise Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd.15% High-tech enterprise Tianjin Zhonghuan Advanced Material&Technology Co., Ltd.15% High-tech enterprise Inner Mongolia Zhonghuan Solar Material Co., Ltd.15% High-tech enterprise Zhangjiakou Huan Ou International New Energy Technology Co., Ltd.15% High-tech enterprise Wuxi Zhonghuan Applied Materials Co., Ltd.15% High-tech enterprise Tianjin Huanzhi New Energy Technology Co., Ltd.15% High-tech enterprise Zhonghuan Advanced Semiconductor Materials Co., Ltd.15% High-tech enterprise Huansheng New Energy (Jiangsu) Co., Ltd.15% High-tech enterprise Xuzhou Jingrui Semiconductor Equipment Technology Co., Ltd.15% High-tech enterprise Tianjin Printronics Circuit Corporation 15% High-tech enterprise Tianjin Huanbo Science and Technology Co., Ltd.15% High-tech enterprise Tianjin Zhonghuan Electronics Computer Co., Ltd.15% High-tech enterprise TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 69 IVTaxes (continued) 5 Corporate income tax (continued) Company Name Preferential tax rate Reason Guangdong TCLNew Technology Co., Ltd.15.00% High-tech enterprise Inner Mongolia Zhonghuan Crystal Materials Co., Ltd.15.00%High-tech enterprise, encouraged business in West China Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd.15.00%High-tech enterprise, encouraged business in West China Ningxia Zhonghuan Solar Material Co., Ltd.15.00%Encouraged business in West China Dushan Anju Photovoltaic Technology Co., Ltd.15.00%Encouraged business in West China Sonid Left Banner Huanxin New Energy Co., Ltd.15.00%Encouraged business in West China Otog Banner Huanju New Energy Co., Ltd.15.00%Encouraged business in West China Zhonghuan Advanced Semiconductor (Tianjin) Co., Ltd.15.00%Encouraged business in West China Ningxia Huanneng New Energy Co., Ltd.15.00%Encouraged business in West China Shaanxi Huanyu Green New Energy Co., Ltd.15.00%Encouraged business in West China Shaanxi Huanshuo Green New Energy Co., Ltd.15.00%Encouraged business in West China Shaanxi Huanbo Xinneng Power Engineering Construction Co., Ltd.15.00%Encouraged business in West China Ningxia Zhonghuan Industrial Park Management Co., Ltd.15.00%Encouraged business in West China Ningxia Huanou New Energy Technology Co., Ltd.15.00%Encouraged business in West China Inner Mongolia TCLPhotoelectric Technology Co., Ltd.15.00%Encouraged business in West China Qinhuangdao Tianhui Solar Energy Co., Ltd.12.50%State-supported public infrastructure project Yixing Huanxing New Energy Co., Ltd.12.50%State-supported public infrastructure project Tianjin Binhai Huanneng New Energy Co., Ltd.12.50%State-supported public infrastructure project Zhangjiakou Shengyuan New Energy Co., Ltd.12.50%State-supported public infrastructure project Phase III project of Hohhot Huanju New Energy Development Co., Ltd.7.50%State-supported public infrastructure project, encouraged business in West China TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 70 IVTaxes (continued) 5 Corporate income tax (continued) Company Name Preferential tax rate Reason Guyuan Shengju New Energy Co., Ltd.7.50%State-supported public infrastructure project Ongniud Banner Guangrun New Energy Co., Ltd.7.50%State-supported public infrastructure project, encouraged business in West China Tuquan Guanghuan New Energy Co., Ltd.7.50%State-supported public infrastructure project, encouraged business in West China Inner Mongolia New Huanyu Yangguang New Energy Technology Co., Ltd. 7.50%State-supported public infrastructure project, encouraged business in West China Gengma Huanxing New Energy Co., Ltd.7.50%State-supported public infrastructure project, encouraged business in West China Dangxiong Youhao New Energy Development Co., Ltd.7.50%State-supported public infrastructure project, encouraged business in West China Shaanxi Runhuan Tianyu Technology Co., Ltd. Tax-freeState-supported public infrastructure project, encouraged business in West China Shangyi Shengyao New Energy Development Co., Ltd. Tax-freeState-supported public infrastructure project Hohhot Shuguang New Energy Co., Ltd. Tax-freeState-supported public infrastructure project, encouraged business in West China 6 Individual income tax Individual income tax of income paid to employees by the Company is withheld by the Company on behalf of employees in accordance with to the relevant national tax regulations.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 71 VNotes to Consolidated Financial Statements 1 Monetary assets June 30,2023 January 1,2023 Cash on hand 456 480 Bank deposits 27,307,262 33,161,505 Deposits with the central bank 268,149 381,137 Other monetary assets 1,710,778 1,835,379 29,286,645 35,378,501Note Monetary assets with restricted use rights June 30,2023 January 1,2023TCLTech Finance's statutory reserve deposits with the central bank 266,969 321,852Other restricted monetary assets 1,275,428 1,381,025 1,542,397 1,702,877 On June 30,2023, the Company’s bank deposits of RMB266,969,000 (December 31,2022: RMB321,852,000) were statutory deposit reserves deposited with the Central Bank by TCL Technology Group Finance Co., Ltd., a subsidiary of the Company. On June 30,2023, the Company’s monetary assets offshore amounted to RMB1,517,330,000 (December 31,2022: RMB2,230,135,000), all of which were owned by the overseas subsidiaries of the Company. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 72 VNotes to Consolidated Financial Statements (Continued) 2 Held-for-trading financial assets June 30,2023 January 1,2023 Financial assets classified as those measured at fair value through profit or loss 14,371,775 12,703,507Including: Debt instrument investments 14,159,396 12,483,274Equity instrument investments 212,379 220,233 14,371,775 12,703,5073 Derivative financial assets June 30,2023 January 1,2023 Foreign exchange forwards and foreign exchange swaps 27,216 206,398 Interest rate swaps 97,192 154,636 Others 796 - 125,204 361,0344 Notes receivable (1) Notes receivable by category June 30,2023 January 1,2023 Bank acceptance notes 353,621 512,767Trade acceptance notes 12 82 353,633 512,849TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 73 VNotes to Consolidated Financial Statements (Continued) 4 Notes receivable (continued) (2) Presentation of provision for bad debts on notes receivable by category (continued) June 30,2023 January 1,2023 Gross amount Allowance CarryingamountGross amount Allowance Carryingamount Amount Ratio (%) Amount Percentage AmountRatio (%) Amount Percentage Notes receivable for which the allowance for doubtful accounts were established on the grouping basis 353,633 100% - - 353,633512,849100% - - 512,849Including:low-risk portfolio 353,621 100% - - 353,621512,76799.98% - - 512,767By aging analysis 12 0% - - 12 820.02% - - 82 353,633 100% - - 353,633 512,849100% - - 512,849 (3) As at June 30,2023, notes receivable in pledge were RMB175,227,000. (4) Endorsed or discounted notes receivable that were outstanding on the balance sheet date and were derecognized as at June 30,2023 amounted to RMB86,344,000. Endorsed or discounted notes receivable that were not outstanding on the balance sheet date and were not derecognized as at June 30,2023 amounted to RMB73,763,000. 5 Accounts receivable June 30,2023 January 1,2023 Accounts receivable 21,783,813 14,505,731 Less: allowance for doubtful accounts 497,412 454,070 21,286,401 14,051,661 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 74 VNotes to Consolidated Financial Statements (Continued) 5 Accounts receivable (continued) (1) Accounts receivable as at June 30,2023 are classified as follows by how the doubtful debts were provisioned: June 30,2023 Gross amount Allowance Lifetime ECL rate Gross amount Accounts receivable for which the related allowances for doubtful accounts were established on the individual basis 339,94992.89% 315,791 Of which: Accounts receivable 339,94992.89% 315,791 Accounts receivable for which the elated allowances for doubtful accounts were established on the grouping basis 21,443,8640.85% 181,621 Of which: Group 1: by aging analysis 11,977,8900.14% 16,437 Group 2: by related parties 3,965,9010.00% -Group 3: by tariff 892,3880.01% 62 Group 4: by photovoltaics 3,944,9633.84% 151,554 Group 5: other silicon materials 662,7222.05% 13,568 21,783,813 497,412 (2) The aging of accounts receivable is analysed as follows: June 30,2023 January 1,2023 Amount Ratio (%) Amount Ratio (%) Within 1 year 20,424,80693.77% 13,254,66091.37%1 to 2 years 451,3712.07% 350,7022.42%2 to 3 years 320,6841.47% 339,0782.34%Over 3 years 586,9522.69% 561,2913.87% 21,783,813100% 14,505,731100%TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 75 VNotes to Consolidated Financial Statements (Continued) 5 Accounts receivable (continued) (3) Allowances for doubtful accounts receivable are analyzed as follows: June 30,2023 Beginning amount 454,070Accrued in current period 59114 Reversal of current period (16,689)Write-off of current period -Exchange adjustment 917 Ending amount 497,412 (4) On June 30,2023, the accounts receivable of the top five balances are as follows: June 30,2023 January 1,2023 Total amount owed by the top five 7,505,291 5,422,959 Proportion of total accounts receivable 34.45% 37.38%(5) Accounts receivable derecognized due to transfer of financial assets Item Methods of transfer of financial assetsAmount derecognized for the period Gain or loss on derecognitionAccounts receivable Factoring 1,786,496 (17,689)6 Receivables financing June 30,2023 January 1,2023 Notes receivable financing 3,136,525 1,103,128Receivable financing 171,408 - 3,307,933 1,103,128Note Endorsed or discounted notes receivable that were outstanding on the balance sheet date and were derecognized on June 30,2023 amounted to RMB26,295,768,000. As of June 30,2023, the Company believes that financing for the receivables it held did not have significant credit risk and will not cause significant losses due to default. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 76 VNotes to Consolidated Financial Statements (Continued) 7 Prepayments (1) Prepayments are analyzed as follows: June 30,2023 January 1,2023 Within 1 year 3,389,564 3,586,208 1-2 years 124,786 5,556 2-3 years 8,405 1,530 Over 3 years 929 563 3,523,684 3,593,857(2) As of June 30,2023, the prepayments of the top five balances are as follows: June 30,2023 January 1,2023 Total amount owed by the top five 2,103,785 2,655,698 As % of total prepayments 59.70% 73.90%8 Other receivables June 30,2023 January 1,2023 Dividends receivable - 1,226Other receivables 3,590,396 4,032,022 3,590,396 4,033,248(1) Dividends receivable June 30,2023 January 1,2023 Others - 1,226 - 1,226TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 77 VNotes to Consolidated Financial Statements (Continued) 8 Other receivables (continued) (2) Other receivables June 30,2023 January 1,2023 Other receivables 3,821,4514,259,495Less: allowance for doubtful accounts 231,055227,473 3,590,3964,032,022 (a) Nature of other receivables is analyzed as follows: June 30,2023 January 1,2023 Subsidy receivable 1,582,2631,868,634Equity transfer receivables 526,1781,073,246Security and deposits 536,848479,269Others 945,107610,873 3,590,3964,032,022(b) Allowance for doubtful other receivables is analyzed as follows: 12-monthECLLifetime ECL (credit not impaired)Lifetime ECL (credit impaired) Total January 1,202368,114134,78624,573 227,473Current accrual 3,529 508 - 4,037Increase of new subsidiaries - 790 - 790 Reversal of current period (226) - (51) (277) Write-off of current period - - (960) (960) Exchange adjustment (8) - - (8) June 30,202371,409136,08423,562 231,055 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 78 VNotes to Consolidated Financial Statements (Continued) 8 Other receivables (continued) (c) The aging of other receivables is analyzed as follows: June 30,2023 January 1,2023 Carrying amount Ratio (%) Carrying amount Ratio (%)Within 1 year 2,587,39067.70% 3,209,877 75.35%1 to 2 years 708,93718.55% 417,448 9.80%2 to 3 years 212,7275.58% 258,284 6.07%Over 3 years 312,3978.17% 373,886 8.78% 3,821,451100.00% 4,259,495 100%(d) As of June 30,2023, the other receivables of the top five balances are as follows: June 30,2023 January 1,2023Total amount owed by the top five 1,925,635 2,324,850As % of total other receivables 50.39% 54.58%(e) On June 30,2023, there was no transfer of other receivables that did 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 was the subject of securitization and did not conform to the conditions for derecognition.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 79 VNotes to Consolidated Financial Statements (Continued) 9 Inventories (1) Inventories are classified as follows: June 30,2023 January 1,2023 Carrying balance Provision for depreciation of inventories / provision for impairment of contract performance costsCarryingamountCarryingbalanceProvision for depreciation of inventories / provision for impairment of contract performance costs Carrying amountRaw materials 4,703,654 815,985 3,887,6695,604,506979,845 4,624,661 Work in progress 2,898,920 403,663 2,495,2573,674,059421,558 3,252,501Finished Goods 13,345,469 1,961,524 11,383,94511,512,5971,705,750 9,806,847Turnover materials 347,982 1,178 346,804318,2911,178 317,11321,296,025 3,182,35018,113,67521,109,4533,108,331 18,001,122As of June 30,2023, the Company had no inventory for liabilities guarantee. (2) Provision for depreciation of inventories / provision for impairment of contract performance costs: January 1,2023 Current Accrual IncreaseSubsidiaryCurrentReversal CurrentWrite-off Exchange Adjustment June 30,2023Raw materials 979,845 288,958 80,509 (36,748) (496,921) 342 815,985Work in progress 421,558 336,539 50,003 (43,558) (360,932) 53 403,663 Finished Goods 1,705,750 1,681,956 29,941 (9,236) (1,448,031) 1,144 1,961,524Turnover materials 1,178 - - - - - 1,178 3,108,331 2,307,453160,453 (89,542) (2,305,884) 1,539 3,182,350 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 80 VNotes to Consolidated Financial Statements (Continued) 10 Contract assets (1) Contract assets are classified as follows: June 30,2023 January 1,2023 Carrying balance Allowance for doubtful accountsCarrying amountCarrying balanceAllowance for doubtful accounts Carrying amountElectricity charges receivable 312,131 13,264298,867327,54312,376 315,167(2) Valuation allowances for contract assets are analyzed as follows: January 1, 2023 Current Accrual Current Reversal or write-offOther increases and decreases June 30, 2023Electricity charges 12,376 3,671 (2,783) - 13,26411 Other current assets June 30,2023 January 1,2023 Short-term debt investments 926,970 939,864VAT to be deducted, to be certified, etc. 3,480,160 3,775,842Current portion of loans and advances to customers (note) 614,704 640,917Others 236,192 82,313 5,258,026 5,438,936Note: The loans and advances due within one year are loans due within the next year issued by subsidiary TCLTech Finance Co., Ltd., of which interest receivable is RMB416,000. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 81 VNotes to Consolidated Financial Statements (Continued) 12 Debt Investments June 30,2023 January 1,2023 National debt and secondary market debt 859,062 741,70313 Long-term receivables June 30,2023 January 1,2023 Discount rate Interval Gross amount AllowanceCarrying amount Gross amount Allowance Carrying amount Finance lease 624,341 - 624,341631,373 - 631,373 7.125%- 8.115%Including: Unrealized financing income (751,763) - (751,763) (781,934) - (781,934) 624,341 - 624,341631,373 - 631,373 14 Long-term equity investments June 30,2023 January 1,2023 Gross amount Impairment allowanceCarrying amountGross amountImpairment allowance Carrying amountAssociates (1) 30,347,995 459,72229,888,273 29,065,027329,479 28,735,548Joint ventures (2) 515,628 49,503466,125570,17149,503 520,66830,863,623 509,22530,354,39829,635,198378,982 29,256,216As of June 30,2023, the Company made impairment allowances for long-term equity investments in investees with poor management and insolvent assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 82 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates Increase or decrease in current period Name of investee January 1,2023Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equity changesDeclaredCash dividends or profitAccruedImpairment allowanceOther increases and decreasesJune 30, 2023 China Innovative Capital Management Limited 944,392 - (3,099) - - - - - 941,293 LGElectronics (Huizhou) Co., Ltd.89,772 - 9,143 - - (13,400) - - 85,515 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd.27,358 - (1,144) 274 - - - (26,488) - Shenzhen Jucai Supply Chain Technology Co., Ltd.15,273 - 1,7125 - - - - 16,990 Shenzhen Tixiang Business Management Technology Co., Ltd.1,147 - - - 51,342 TCLAir Conditioner (Wuhan) Co., Ltd.40,610 - 1,035 - - - - - 41,645 TCLFinance (Hong Kong) Co., Limited 109,943 - - - - 110,742 Urumqi TCLEquity Investment Management Co., Ltd.1,090 - (1) - - - - - 1,089 Hubei Changjiang Hezhi Equity Investment Fund Partnership (Limited Partnership) 1,413,073 (106,205) 137,873 - - - - - 1,444,741 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 365,51148,4036,9545 - (5,902) - - 414,971 Deqing Puhua Equity Investment Fund Partnership (Limited Partnership) 126,213 (8,668) 77263 - - - - - 194,808 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 83 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee January 1,2023Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equity changesDeclaredCash dividends or profit distribution declaredProvision for impairmentOther increases and decreasesJune 30, 2023 Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 372,687 (17,656) (22,416) - - (32,747) - - 299,868 Wuxi TCLAisikai Semi-conductor Industry Investment Fund Partnership (Limited Partnership) 310,930 (2,644) (10,402) - - - - - 297,884 Wuxi TCLVenture Capital Partnership (Limited Partnership) 36,850 - (14) 289 - - - - 37,125 Ningbo Meishan Bonded Port Qiyu Investment Management Partnership (Limited Partnership) 23,342 - 25,755 - - - - - 49,097 Shanghai Gen Auspicious Venture Capital Partnership (Limited Partnership) 15,057 - 2411,531 - - - - 16,829 Nanjing Zijin ADynamic Investment Partnership (Limited Partnership) 19,726 - (3) 5 - - - - 19,728 Huizhou Kaichuang Venture Investment Partnership (Limited Partnership) 8,695 - (9) 220 - - - - 8,906 Beijing ADynamic Venture Capital Center (Limited Partnership) 7,636 - - - - 7,642 Yixing Jiangnan Tianyuan Venture Capital Company (Limited Partnership) 4,820 - (95) 7 - - - - 4,732 Shenzhen Chuangdong New Industry Investment Fund Enterprise (Limited Partnership) 2,338 - - - - - - - 2,338 Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd.11,553 - (3,000) - - 9,340 Huizhou Kaimeng Angel Investment Partnership (Limited Partnership) 2,543 - (13) - - - - - 2,530 Ningbo Jiutian Matrix Investment Management Co., Ltd. 2,597 - (11) - - - - - 2,586 Urumqi Qixinda Equity Investment Management Co., Ltd.4,502 - (97) - - - - - 4,405 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 84 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee January 1,2023Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equity changesDeclaredCash dividends or profit distribution declaredAccruedImpairment allowanceOther increases and decreasesJune 30, 2023 Urumqi TCLCreate Dynamic Equity Investment Management Co., Ltd.759 - - - - - - - 759 Beijing ADynamic Investment Consulting Co., Ltd.467 - (1) - - - - - 466 Shanghai Gen Auspicious Investment Management Co., Ltd.2,511 - (259) - - (1,753) - - 499 Nanjing ADynamic Equity Investment Fund Management Co., Ltd.279 - (1) - - -- - 278 Wuxi TCLMedical Imaging Technology Co., Ltd.25,837 - (3,387) - - -- (351) 22,099 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd.880,249 - 163 - - - - - 880,412 TCLVentures Fund L.P.29,018 (15,877) (400) - - (403) - (174) 12,164 Getech Ltd.83,660 - (1,355) (7) - - - (4) 82,294 Guangdong Innovative Lingyue Intelligent Manufacturing andInformation Technology Industry Equity Investment Fund Partnership (Limited Partnership) 502,444 338,054 8,975 - - (19,937) - - 829,536 Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) 167,809 - 9,051 - - - - - 176,860 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 85 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee January 1,2023Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equity changesDeclaredCash dividends or profit distribution declaredAccruedImpairment allowanceOther increases and decreasesJune 30, 2023 Shenzhen Xinhuoyicheng Recreational and Sports Industry Co., Ltd.1,388 - (148) - - - - - 1,240 JOLEDIncorporation 159,302 - (17,384) - - - (137,375) (4,543) - Sichuan Shengtian New Energy Development Co., Ltd.508,492 - 17,203 - - (9,128) - - 516,567 SunPower Systems International Limited 28,345 - 1,735 - - - - - 30,080 Zhonghuan Aineng (Beijing) Technology Co., Ltd.4,118 - (1,385) - - - - - 2,733 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd.136,682 - 1,121 - - - - - 137,803 Hunan Guoxin Semiconductor Technology Co., Ltd.9,825 - (88) - - - - - 9,737 Maxeon Solar Technologies, Ltd.1,620,417 290,027 (177,080) - - - - 64,3901,797,754 Xinjiang Goens Energy Technology Co., Ltd. (Note) 3,919,465 - 546,333 - - (216,000) - - 4,249,798 Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 657,615 18,550 (9,875) - - (4,986) - - 661,304 Zhonghuan Feilang (Tianjin) Technology Co., Ltd.5,125 - - - (2,000) 3,585 Ningbo Zhongxin Venture Capital Partnership Tianjin Huanxin 144,968 - - - - 145,483 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 86 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee January 1,2023Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equity changesDeclaredCash dividends or profit distribution declaredAccruedImpairment allowanceOther increases and decreasesJune 30,2023 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd.393,946 - (15,840) - - - - - 378,106 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd.1,012 - - - - - - - 1,012 Inner Mongolia Huanye Material Co., Ltd.6,163 - - - - - - - 6,163 Shenzhen Shutuo Technology Co., Ltd.38,202 - (687) - - - - (1,364) 36,151 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd.69,540 - (5,584) 650 - - - (261) 64,345 Wuhan Guochuangke Optoelectronic Equipment Co., Ltd.25,910 - (1,651) - - - - (6,743) 17,516 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd.3,936 - 5,058 - - - - - 8,994 Purplevine Holdings Limited 1,629 - (1,621) - - - - (8) - Xinxin Semiconductor Technology Co., Ltd.1,798,784 - (34,120) - - - - (1,764,664) - Inner Mongolia Xinhua Semiconductor Technology Co., Ltd.117,886 240,000 (5,751) - - - - - 352,135 Inner Mongolia Xinhuan Silicon Energy Technology Co., Ltd.127,847 1,668,000 (11,885) - - - - - 1,783,962 Shanghai Feilihua Shichuang Technology Co., Ltd.41,054 - 392 - - - - 37341,819 Bank of Shanghai Co., Ltd.12,809,374 - 718,10632,788 - (327,157) - - 13,233,111 Hubei Consumer Finance Co., Ltd.166,077 - 6,967 - - - - - 173,044 Tianjin 712 Communication & Broadcasting Co., Ltd.287,755 - 6,662 - - (2,548) - (115,598) 176,271 Jiangsu Jixin Semiconductor Silicon Material Research Institute Co., Ltd. - 8,900 (740) - - - - (113) 8,047 Xi’an Simovi New Material Co., Ltd. - 30,000 - - - - - - 30,000 28,735,5482,490,8841,257,95335,767 - (636,961) (137,375) (1,857,543) 29,888,273 Note: Xinjiang Xiexin New Energy Materials Technology Co., Ltd. was renamed as Xinjiang Goens Energy Technology Co., Ltd. in May 2023. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 87 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (2) Joint ventures Increase or decrease in current period Name of investee January 1,2023 Increase/decrease in investment in current periodInvestment gains and losses recognized by equity methodOther comprehensive income adjustmentOther equitychangesDeclaredCash dividends or profit distribution declaredAccruedImpairment allowanceOther increases and decreasesJune 30,2023 TCLHuizhou City, Kai Enterprise Management Limited 1,347 -(2)- - - - -1,345 Huizhou TCLHuman Resources Service Co., Ltd.6,274 - 367 - - - - -6,641 Zhangjiakou Qixin Equity Investment Fund Partnership 86,975 - - - - - - -86,975 Tianjin Huanyan Technology Co., Ltd.140,793 - (2,792) - - - - - 138,001 TCLMicrochip Technology (Guangdong) Co., Ltd.285,279 -(35,200) -(16,916)- - -233,163 520,668 - (37,627) - (16,916) - - - 466,125 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 88 (3) Impairment allowances for long-term equity investments 15 Investments in other equity instruments 16 Other non-current financial assets VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) January 1,2023 Increase in the periodDecrease in the periodOther changesJune 30, 2023 Note Pride Telecom Limited 1,624 - - - 1,624 Note 1 Huaxia CPV (Inner Mongolia) Power Co., Ltd.49,503 - - - 49,503 Note 1 JOLEDIncorporation 318,604137,375 - (7,132) 448,847 Note 1 Ruihuan (Inner Mongolia) Solar Power Co., Ltd.9,251 - - - 9,251 Note 1 378,982137,375 - (7,132) 509,225 Note 1 Impairment allowances were established for the long-term investments in these investees at recoverable amounts because continuous operations loss occurred to these investees with poor management. June 30,2023 January 1,2023 Stocks 46,668 66,706Equity of unlisted companies 374,436 373,290 421,104 439,996Item name Confirmed Dividend income recognized AccumulatedProfitsAccumulatedlossesAmount of other comprehensive income transferred to retained earningsReasons designated as measured at fair value and whose changes are included in other comprehensive incomeStocks - 3,166 (166,341) -Being held long term for strategic purposesEquity of unlisted companies - 132,19 (21,665) - Being held long term for strategic purposesTotal - 163,85 (188,006) - June 30,2023 January 1,2023 Equity investments 4,252,7132,928,827Debt investments 109,164 - 4,361,8772,928,827TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 89 VNotes to Consolidated Financial Statements (Continued) 17 Investment property Houses and buildings Land use rights TotalGross amount: January 1,2023 1,067,479 205,633 1,273,112 Increase Reclassified from fixed assets and intangible assets 1,932 - 1,932 Decreases Reclassified to fixed assets and intangible assets (44,787) - (44,787)Other decreases - (1,828) (1,828)June 30,2023 1,024,624203,805 1,228,429 Accumulated depreciation and amortization: January 1,2023 235,474 38,402 273,876 Increase Accrued in current period 17,0592,196 19,255 Reclassified from fixed assets and intangible assets 201 - 201 Decreases Reclassified to fixed assets and intangible assets (6,788) - (6,788) Other decreases - (37) (37)June 30,2023 245,94640,561 286,507 Investment property, net: - - -June 30,2023 778,678163,244 941,922 January 1,2023 832,005 167,231 999,236 Impairment allowance: January 1,2023 52,787 - 52,787 Increase Increase in the period - - -Decreases Decrease in the period - - -June 30,2023 52,787 - 52,787 Investment property, net: June 30,2023 725,891163,244 889,135 January 1,2023 779,218 167,231 946,449 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 90 VNotes to Consolidated Financial Statements (Continued) 18 Fixed assets Houses and buildings Machinery equipmentOffice andelectronic equipmentTransportationequipmentPower stationsOthers TotalGross amount: January 1, 2023 44,979,606 174,755,648 2,737,234 261,094 2,361,429 27,226 225,122,237 Increase Acquisition and other 687,724 826,098 65,66522,8231,000 3,149 1,606,459New subsidiary 1,888,332 2,968,135 11,2252,083 - 14,164 4,883,939Reclassified from investment property 44,787 - - - - - 44,787 Reclassified from construction in progress 5,536,951 20,095,440190,4275,065177 3,113 25,831,173 Decreases Written down with government grants (3,846) (1,132,196) - - - - (1,136,042)Reclassified to investment property (1,932) - - - - - (1,932) Other decreases (134,039) (3,811,277) (37,138) (3,655) (134,800) (3,929) (4,124,838) Exchange adjustment 24,584 9,3542,408648 - 1,022 38,016 June 30, 202353,022,167 193,711,2022,969,821288,0582,227,806 44,745 252,263,799 Accumulated depreciation: January 1, 2023 7,827,013 80,699,683 1,726,432 165,109 514,036 15,930 90,948,203 Increase Accrual 874,982 8,605,889136,12519,504 41,277 2,155 9,679,932 New subsidiary 241,475 357,935 9,1301,478 - 14,164 624,182 Reclassified from investment property 6,788 - - - - - 6,788 Other increases - 679,050 - - 7 - 679,057 Decreases Reclassified to investment property (201) - - - - - (201)Other decreases (15,595) (941,540) (30,701) (1,906) (19,244) (3,929) (1,012,915) Exchange adjustment 1,441 2,254934316 - 347 5,292 June 30, 20238,935,903 89,403,2711,841,920184,501536,076 28,667 100,930,338 Fixed assets, net: June 30, 202344,086,264 104,307,9311,127,901103,5571,691,730 16,078 151,333,461 January 1, 2023 37,152,593 94,055,965 1,010,802 95,985 1,847,393 11,296 134,174,034 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 91 VNotes to Consolidated Financial Statements (Continued) 18 Fixed assets (continued) Houses and buildings Machinery equipmentOffice and electronic equipmentTransportation equipmentPower stations Others TotalImpairment allowance: January 1, 2023 766,317 832,173 35,290 111 62,059 412 1,696,362Accrued in current period Write-off of current period - (43,071) (45) - - - (43,116) June 30, 2023766,317 789,10235,24511162,059 412 1,653,246 Fixed assets, carrying amount: June 30, 202343,319,947 103,518,8291,092,656103,4461,629,671 15,666 149,680,215 January 1, 2023 36,386,276 93,223,792 975,512 95,874 1,785,334 10,884 132,477,672 Please refer to Item 81 of Note V for information on fixed asset pledge. As of June 30,2023, the gross amount of the fixed assets that were fully depreciated and still in use was RMB41,764,110,000. Fixed assets with pending ownership certificates at the end of the current period: Carrying amount Expected time of obtaining ownership certificateHouses and buildings (Note) 21,899,635Expected to be completed in 2024Note As of June 30,2023, the fixed assets with pending ownership certificates of the Company were mainly the buildings and constructions of CSOT’s t3, t4 and t9 manufacturing bases, as well as the buildings and constructions of Inner Mongolia Zhonghuan Crystal Material Co., Ltd., Inner Mongolia Zhonghuan Advanced Semi-conductor Material Co., Ltd. and Tianjin Huanhai Industrial Park Co., Ltd. 19 Construction in progress (1) Schedule of construction in progress June 30,2023 January 1,2023 Construction in progress 42,124,367 52,063,442 Less: Impairment allowance 9,608 9,608 42,114,75952,053,834TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 92 VNotes to Consolidated Financial Statements (Continued) 19 Construction in progress (continued) (2) Changes to construction in progress Project name Budget January 1, 2023 Increase in the period Transfer-in in current period Fixed assets Other movementsJune 30, 2023 Project input vestment as % of budget ProjectprogressCumulative capitalized interest Including: capitalized interest in current period Interest capitalizat ion rate for current period Funding source t5 production line of LCD panel 11,321,000 5,039,401 2,043,760 (3,759,096) - 3,324,06590% 90% 77,36546,1161.5% Proprietary fund and loans t4 production line of LCD panel 35,000,000 16,239,091 374,674 (29,825) (10,577) 16,573,36396% 96% 1,485,024134,4392.4% Proprietary fund and loans t9 production line of LCD panel 31,500,000 10,383,892 1,574,055 (6,770,575) (88,079) 5,099,29363% 63% 224,67380,2871.5%Proprietary funds, proceeds from share offering and loans Large-diameter semiconductor silicon wafers for integrated circuit 5,410,520 1,630,505 982,920 (121,014) - 2,492,41159% 59% - - - Self-financing 50GW (G12) solar-grade monocrystalline silicon material smart factory project 10,979,744 3,667,153 2,612,733 (4,050,814) (42,379) 2,186,69392% 92% 115,797115,7973.4% Proprietary fund and loans Semiconductor silicon wafers for integrated circuit 9,450,000 - 1,445,805 (41,805) (5,565) 1,398,43535% 35% 71,1116413.0% Proprietary fund and loans Production line of 8-12-inch semiconductor silicon wafers for integrated circuit 5,707,172 1,130,031 204,212 (60,522) (3,864) 1,269,85780% 80% 11,757 11,7570.6% Proprietary fund and loans Semiconductor Monocrystalline Silicon Wafters for Energy-Saving Power Devices 1,998,710 878,904 185,527 (289,272) (377) 774,78248% 48% - - - Self-financing Others Not applicable 13,084,857 6,773,542 (10,708,250) (154,289) 8,995,860 52,053,834 16,197,228 (25,831,173) (305,130) 42,114,759 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 93 VNotes to Consolidated Financial Statements (Continued) 20 Right-of-use assets Houses and buildingsTransportation equipmentMachinery equipmentLand use rights Total Gross amount: January 1,2023 4,293,124 1,430 1,110,462 134,541 5,539,557 Increase New subsidiary - - 212,139 - 212,139 Leased in 677,761 - - 3,428 681,189 Other increases 5,209 - 52,715 257 58,181 Decreases Reduced subsidiary - - - (55,039) (55,039) Reduction due to contract revision (2,697) - - - (2,697) Other decreases (30,239) (302) - - (30,541) Exchange adjustment 1,858 - - - 1,858 June 30,20234,945,0161,1281,375,31683,187 6,404,647 Accumulated depreciation: January 1,2023 227,403 912 189,886 11,232 429,433 Increase Accrual 154,967 (60) 65,6194,321 224,847 Decreases Other decreases (24,639) - - (2,648) (27,287) Exchange adjustment 855 - - - 855 June 30,2023358,586852287,58712,905 659,930 Right-of-use assets, carrying amount: June 30,20234,586,4302761,087,72970,282 5,744,717 January 1,2023 4,065,721 518 920,576 123,309 5,110,124 Impairment allowance: January 1,2023 - - - - - June 30,2023 - - - - - Right-of-use assets, carrying amount June 30,20234,586,4302761,087,72970,282 5,744,717 January 1,2023 4,065,721 518 920,576 123,309 5,110,124 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 94 VNotes to Consolidated Financial Statements (Continued) 21 Intangible assets Land use rightsNon-patent technologies/patentsOthers Total Gross amount: January 1,2023 9,216,257 11,350,4771,995,65022,562,384 Increase New subsidiary 279,287392,385 142,037813,709 Purchase 26,21468,13119,388113,733 Reclassified from construction in progress - - 254,583254,583 Reclassified from development costs - 1,386,093 - 1,386,093 Decreases Sale and disposal (31,436) - (31,218) (62,654) Reclassified to investment property Reduced subsidiary (3,144) - - (3,144) Other decreases (76,918) (165,570) - (242,488) Exchange adjustment - (3,514) 501 (3,013) June 30,20239,410,26013,028,002 2,380,94124,819,203 Accumulated amortization: January 1,2023 1,018,407 3,685,498926,4325,630,337 Increase Accrual 130,913582,251 114,683827,847 New subsidiary 17,38818,260 58,92094,568 Decreases Sale and disposal (643) - (5,935) (6,578) Reclassified to investment property - - - - Reduced subsidiary (157) - - (157) Other decreases (7,934) (15,150) (2,668) (25,752) Exchange adjustment - 11287298 June 30,20231,157,9744,270,8701,091,7196,520,563 Intangible assets, net： June 30,20238,252,2868,757,132 1,289,22218,298,640 January 1,2023 8197850 7,664,9791,069,21816,932,047 Impairment allowance: January 1,2023 23,562 113,406 11,148 148,116 Accrual Exchange adjustment - 1,306 - 1,306 June 30,2023 23,562114,712 11,148149,422 Intangible assets, carrying amount: June 30,20238,228,7248,642,420 1,278,07418,149,218 January 1,2023 8,174,288 7,551,5731,058,07016,783,931 As of June 30,2023, the total carrying amount of land use rights for which the title certificate has not been registered properly was RMB11,653,000. Please refer to Item 81 of Note V for information on collateralized intangible assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 95 VNotes to Consolidated Financial Statements (Continued) 22 Development costs Development expenditures are presented as follows: June 30,2023 January 1,2023 Semi-conductor display 1,598,5112,172,507 New energy photovoltaic & semi-conductor materials 889,0431,006,700 2,487,5543,179,207 23 Goodwill (1) Gross amount of goodwill Name of investee or item incurring goodwill January 1, 2023 Increase in the periodDecrease in the period June 30, 2023 TCLMedical Radiological Technology (Beijing) Co., Ltd. Note 128,967 - - 28,967 Qingdao Blue Business Consulting Co., Ltd. Note 22,452 - - 2,452 Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. Note 3214,683 - - 214,683 TCLTechnology Group (Tianjin) Co., Ltd. Note 46,726,130 - - 6,726,130 Moka International Limited Note 51,728,973 - - 1,728,973 Suzhou China Star Optoelectronics Technology Co., Ltd. Note 6486,603 - - 486,603 Huizhou Kedate Smart Display Technology Co., Ltd. Note 73,011 - - 3,011 Suzhou China Star Environmental Protection Technology Co., Ltd. Note 8 - 43,408 - 43,408 Xinxin Semiconductor Technology Co., Ltd. Note 9 - 1,180,005 - 1,180,005 9,190,8191,223,413 - 10,414,232 (2) Goodwill impairment allowance Name of investee January 1,2023Increase in the periodDecrease in the period June 30,2023 TCLMedical Radiological Technology (Beijing) Co., Ltd.28,967 - - 28,967 Note 1 In 2010, the Company acquired a 51.82% interest in TCLMedical Radiological Technology (Beijing) Co., Ltd. (hereinafter referred to as “TCLMedical Radiological Technology”) with capital of RMB 52,319,000. Thus, the difference between the accumulated investment of the Company in TCLMedical Radiological Technology (corresponding to 51.82% interest) and the fair value of the net identifiable assets of TCLMedical 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 allowance of RMB 28,967,000 had been made on such goodwill in 2018. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 96 VNotes to Consolidated Financial Statements (Continued) 23 Goodwill (continued) (2) Goodwill impairment allowance Note 2 In October 2016, Highly Information Industry Co., Ltd., a subsidiary of the Company, acquired 60% interest in Qingdao Blue Business Consulting Co., Ltd. (hereinafter referred to as “Blue Business Consulting”) with consideration of RMB 10,000,000. Thus, the difference between the accumulated investment of Highly Information Industry Co., Ltd. in Blue Business Consulting (corresponding to a 60% interest) and the fair value of the net identifiable assets of Blue Business Consulting attributable to Highly Information Industry Co., Ltd. on the settlement date (equivalent to RMB2,452,000) was recorded in the Company’s goodwill. Note 3 Tianjin Huan’Ou Semiconductor Material&Technology Co., Ltd. is a subsidiary of Zhonghuan Electronics, which the Company has acquired in a business combination not involving entities under common control. Note 4 The Company completed its acquisition of 100% stake in TCLTechnology Group (Tianjin) Co., Ltd. (former name: Tianjin Zhonghuan Electronic Information Group Co., Ltd.) on October 1,2020 with a cash consideration of RMB12,500,000,000. At the date of acquisition, the Group obtained the effective control of TCLTechnology Group (Tianjin) Co., Ltd., and included such company into the consolidated financial statements. On the date of transaction, the difference between the accumulated investment of the Company in TCLTechnology Group (Tianjin) Co., Ltd. (corresponding to the 100% interest) and the fair value of the net identifiable assets of Zhonghuan Electronics attributable to the Company on the settlement date (equal to RMB6,726,130,000) was recorded in the Company’s goodwill. The goodwill mainly consists of 2 asset groups: the new energy photovoltaic and semiconductor materials and the Tianjin Printronics Circuit Corp. Note 5 In April 2021, the Company acquired 100% interest in Moka International Limited with a cash consideration of RMB2,800,000,000. Thus, the difference between the accumulated investment of the Company in Moka International Limited (corresponding to the 100% interest) and the fair value of the net identifiable assets of Moka International Limited attributable to the Company on the settlement date (equal to RMB1,728,973,000) was recorded in the Company’s goodwill. Note 6 In April 2021, the Company acquired 60% interest in Suzhou China Star Optoelectronics Technology Co., Ltd. (formerly known as “Samsung Suzhou LCDCo. Ltd.”) with a cash consideration of RMB4,757,727,000. The difference between the accumulated investment of the Company in Suzhou China Star Optoelectronics Technology Co., Ltd. (corresponding to the total 70% interest) and the fair value of the identifiable net assets of Suzhou China Star Optoelectronics Technology Co., Ltd. attributable to the Company on the settlement date (equivalent to RMB486,603,000) was recorded in the Company’s goodwill. Note 7 In August 2022, the Company acquired in 100% interest in Huizhou Kedate Smart Display Technology Co., Ltd. with a cash consideration of RMB51,000,000. As such, the difference between the investment of the Company in Huizhou Kedate Smart Display Technology Co., Ltd. (corresponding to the 100% interest) and the fair value of the net identifiable assets of Zhonghuan Electronics attributable to the Company on the settlement date (equal to RMB3,011,000) was recorded in the Company’s goodwill. Note 8 Suzhou China Star Optoelectronics Technology Co., Ltd., a subsidiary of the Company, completed the acquisition of 100% equity of Suzhou China Star Environmental Protection Technology Co., Ltd. in May 2023 at a cash consideration of RMB344,942,000. As at the date of this transaction, the difference (RMB43,407,000) between the investment amount i.e. the 100% equity of Suzhou China Star Environmental Protection Technology Co., Ltd. held by Suzhou China Star Optoelectronics Technology Co., Ltd. and the fair value of the identifiable net assets of the equity are recognized in this item. Note 9 Zhonghuan Advanced Semi-conductor Material Co., Ltd., a subsidiary of the Company, completed the acquisition of 100% equity of Xinxin Semiconductor Technology Co., Ltd. in February,2023 at a consideration of RMB7,399,683,000 by issuing equity securities. As at the date of this transaction, the difference (RMB1,180,005,000) between the investment amount i.e. the 100% equity of Xinxin Semiconductor Technology Co., Ltd. held by Zhonghuan Advanced Semi-conductor Material Co., Ltd. and the fair value of the identifiable net assets of the equity are recognized in this item. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 97 VNotes to Consolidated Financial Statements (Continued) 23 Goodwill (continued) (III) Goodwill impairment test As of June 30,2023, there were no signs of impairment in the asset group of Qingdao Blue Business Consulting Co., Ltd., the asset group of Tianjin Zhonghuan Advanced Materials & Technology Co., Ltd., the asset group of new energy photovoltaic and semiconductor materials, the asset group of Moka International Limited, the asset group of Suzhou China Star Optoelectronics Technology Co., Ltd. and the asset group of Suzhou China Star Environmental Protection Technology Co., Ltd. No impairment provision was required for the goodwill of the above asset groups. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 98 VNotes to Consolidated Financial Statements (Continued) 24 Long-term deferred expenses January 1, 2023Increase in the periodAmortization in the period Others June 30, 2023 Improvement expense on leased fixed assets 1,441,265218,898 (86,840) 19 1,573,342 Others 1,302,9431,173,161 (938,947) 1,879 1,539,036 2,744,2081,392,059 (1,025,787) 1,898 3,112,378 25 Deferred income tax assets and deferred income tax liabilities (1) Un-offset deferred income tax assets June 30,2023 January 1,2023 Deductible temporary differenceDeferred income tax assetsDeductible temporary difference Deferred income tax assets Deductible losses 23,189,142 3,658,74819,383,9333,055,974 Asset impairment allowances 3,315,646 632,526 4,132,996785,212 Provisions 651,954109,859559,58491,408 Changes in fair value 12,7132,12315,3982,792 Lease liabilities 3,661,586467,532195,72229,358 Others 3,514,662602,2371,924,357200,865 34,345,703 5,473,025 26,211,9904,165,609 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 99 VNotes to Consolidated Financial Statements (Continued) 25 Deferred income tax assets and deferred income tax liabilities (continued) (2) Un-offset deferred income tax liabilities June 30,2023 January 1,2023 Taxable temporary differencesDeferred taxliabilitiesTaxable temporary differences Deferred income tax liabilities Accelerated depreciation of fixed assets 12,775,0951,982,38913,198,2612,046,374 One-off tax deduction for fixed assets 6,776,6801,047,8876,818,6471,021,284 Increase in value of assets as assessed in business combination not involving entities under common control 3,657,410 688,3931,627,106378,993 Changes in fair value 777,623183,329331,29271,725 Right-of-use assets 3,567,816465,6981,139 171 Others 701,405158,650951,687212,603 28,256,0294,526,346 22,928,1323,731,150 (3) There were no deferred income tax assets or liabilities presented on a net basis after offsetting Item Amount subject to mutual offset of deferred income tax assets against liabilities at the end of the periodClosing balance of deferred income tax assets or liabilities after offset Deferred income tax assets 2,710,2752,762,750 Deferred income tax liabilities 2,710,275 1,816,071 Item Amount subject to mutual offset of deferred income tax assets against liabilities at the beginning of the periodOpening balance of deferred income tax assets or liabilities after offset Deferred income tax assets 2,411,7221,753,887 Deferred income tax liabilities 2,411,7221,319,428 (4) Unrecognized deferred income tax assets June 30,2023 January 1,2023 Deductible temporary difference 791,998 306,669 Deductible losses 12,531,63710,302,065 13,323,635 10,608,734 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 100 VNotes to Consolidated Financial Statements (Continued) 25 Deferred income tax assets and deferred income tax liabilities (continued) (5) Deductible losses in respect of unrecognized deferred income tax assets will expire in the following years: June 30,2023 January 1,2023 2022 - 268,388 2023 471,740472,917 2024 472,157472,157 2025 440,443440,443 2026 1,079,1771,242,203 2027 onwards 10,068,1207,405,957 12,531,637 10,302,065 26 Other non-current assets June 30,2023 January 1,2023 Gross amount Impairment allowanceCarrying amountGross amountImpairment allowance Carrying amount Advance payment for equipment and land use rights (Note) 5,503,724 - 5,503,724 5,426,643 - 5,426,643 Advance payment for patents 262,799 - 262,799 273,348 - 273,348 Others 4,094,957 - 4,094,957593,952 - 593,952 9,861,480 - 9,861,480 6,293,943 - 6,293,943 Note The Company reclassifies long-lived assets such as advance payment for equipment and land use rights reflected in prepaid accounts to other non-current assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 101 VNotes to Consolidated Financial Statements (Continued) 27 Short-term borrowings June 30,2023 January 1,2023 Unsecured borrowings 9,588,27610,214,632 Borrowings secured by pledge 19,461 - Interest payable 6,2541,279 9,613,99110,215,911 On June 30,2023, the Company’s short-term pledged loans were equivalent to RMB19,461,000, pledged with held-for-trading financial assets equivalent to RMB21,441,000. As of June 30,2023, 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 June 30,2023, the balance of the borrowings of TCLTech Finance Co., Ltd. (a subsidiary of the Company) from the central bank was RMB727,203,000 (December 31, 2022: RMB777,676,000). 29 Customer deposits and deposits from banks and other financial institutions June 30,2023 January 1,2023 Customer deposits and deposits from other banks and financial institutions 563,135603,423 Customer deposits and deposits from banks and other financial institutions are the deposits of related and nonrelated enterprises absorbed by TCLTech Finance Co., Ltd., a subsidiary of the Company, within the business scope approved by the regulatory authority. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 102 VNotes to Consolidated Financial Statements (Continued) 30 Held-for-trading financial liabilities June 30,2023 January 1,2023 Financial liabilities at fair value through profit or loss.726,942861,912 31 Derivative financial liabilities June 30,2023 January 1,2023 Derivative financial liabilities 309,74370,735 32 Notes payable June 30,2023 January 1,2023 Bank acceptance notes 4,222,7725,731,632 Trade acceptance notes 1,164,227634,028 5,386,9996,365,660 As of June 30,2023, the Company had no notes payable that were due but not paid. 33 Accounts payable June 30,2023 January 1,2023 Amounts due to suppliers 30,475,61926,381,912 As of June 30,2023, there were no significant accounts payable aged over one year. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 103 34 Advances from customers 35 Contract liabilities 36 Employee benefits payable and long-term employee benefits payable VNotes to Consolidated Financial Statements (Continued) June 30,2023 January 1,2023 Advances from customers 569 1,402 As of June 30,2023, the Company had no significant accounts receivable aged over one year. June 30,2023 January 1,2023 Advances from customers 2,245,2402,336,008(1) Employee compensation payable June 30,2023 January 1,2023Short-term employee benefits payable 2,313,534 2,341,429Defined contribution plans payable 16,437 26,353Dismissal benefits payable 3,741 9,151 2,333,712 2,376,933TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 104 VNotes to Consolidated Financial Statements (Continued) 36 Employee benefits payable and long-term employee benefits payable (continued) (1) Employee benefits payable (continued) (a) Short-term employee benefits presented January 1,2023Increase in the periodDecrease in the period June 30,2023 Wages, bonuses, allowances and subsidies 2,034,238 5,672,377 (5,652,103) 2,054,512 Employee services and benefits - 225,408 (225,408) -Social insurance benefits 38,105 186,201 (191,841) 32,465 Including: medical insurance premium 36,751 170,631 (175,697) 31,685 Employment injury insurance premiums 695 9,232 (9,331) 596 Maternity insurance 659 6,338 (6,813) 184 Housing fund 27,917 171,658 (181,587) 17,988 Trade union funds and staff education funds 49,41896,695 (109,222) 36,891Others 191,75126,433 (46,506) 171,678 2,341,4296,378,772 (6,406,667) 2,313,534 (b) Defined contribution plans January 1,2023Increase in the periodDecrease in the period June 30,2023 Basic pension insurance 25,381384,295 (393,832) 15,844 Unemployment insurance 97211,507 (11,886) 593 26,353395,802 (405,718) 16,437 (2) Long-term employee compensation payable June 30,2023 January 1,2023 Supplementary pension insurance 24,59125,101Other long-term benefits 167,209447,437 191,800472,538TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 105 37 Taxes and levies payable 38 Other payables (1) Dividends payable June 30,2023 January 1,2023Other non-controlling interests 55,083 40,010 55,083 40,010VNotes to Consolidated Financial Statements (Continued) June 30,2023 January 1,2023 Corporate income tax 559,142 731,839Value-added tax 105,307 211,873Individual income tax 128,847 42,611Urban maintenance and construction tax 75,362 60,858Education surcharges 53,858 43,495Others 211,143 124,915 1,133,659 1,215,591Please refer to Note IV for the standards for provisions for taxes and the applicable tax rates. June 30,2023 January 1,2023 Dividends payable 55,083 40,010Other payables 23,278,603 24,150,342 23,333,686 24,190,352TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 106 VNotes to Consolidated Financial Statements (Continued) 38 Other payables (continued) (2) Other payables June 30,2023 January 1,2023 Payables for engineering equipment 19,022,322 19,130,372Unpaid expenses 2,182,555 2,195,904Security and deposits 347,180 353,207Others 1,726,546 2,470,85923,278,603 24,150,342TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 107 VNotes to Consolidated Financial Statements (Continued) 39 Non-current liabilities due within one year June 30,2023 January 1,2023 Long-term borrowings due within one year (Note 1) 416,389,135 4,341,300Bonds payable due within one year (Note 2) 424,998,972 5,170,383Lease liabilities due within one year 43430,363 295,010Long-term payables due within one year 123,510 179,127Interest payable due within one year 393,984 552,181Long-term employee compensation payable due within one year 309,602 419,320 12,645,566 10,957,321Note 1 The interest rates of the Company’s long-term borrowing due within one year ranged from 2.3% to 6.61% in the current period (2022: from 2.7% to 5.91%). Note 2 The Company's bonds payable due within one year are mainly as follows: ① Corporate bond 18TCL 02: Issued in August 2018, with a term of 5 years, the closing balance as of June 30 was RMB2,000,260,000. ② Corporate bond 19TCL 01: Issued in May 2019, with a term of 5 years, the closing balance as of June 30 was RMB1,000,099,000. ③ Medium-term note 21TCLTechnology MTN001 (high-growth bond): Issued in May 2021, with a term of 3 years, the closing balance as of June 30 was RMB1,998,613,000. 40 Other current liabilities June 30,2023 January 1,2023 After-sales service expense (note) 1,100,958 844,293Output tax to be transferred 235,431 175,626Others 79,846 165,929 1,416,235 1,185,848Note After-sales service expense expected to occur within 1 year is presented in other current liabilities.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 108 VNotes to Consolidated Financial Statements (Continued) 41 Long-term borrowings June 30,2023 January 1,2023Borrowings secured by collateral 42,107,358 42,317,366Borrowings secured by pledge 6,216,682 6,675,371Unsecured borrowings 85,636,537 73,951,728 133,960,577 122,944,465 Including: long-term loans due within one year (6,389,135) (4,341,300) 127,571,442 118,603,165The maturities of the Company's long-term borrowings vary from 2023 to 2038. As of June 30,2023, the long-term borrowings secured by collateral were equivalent to RMB42,107,358,000 (December 31,2022: RMB42,317,366,000), which were secured by the collaterals of the land use right, houses and buildings, machinery and equipment of about RMB109,429,235,000 (December 31,2022: RMB110,182,749,000); the long-term pledged borrowings were equivalent to RMB6,216,682,000 (December 31,2022: RMB6,675,371,000), which were pledged by the collaterals of the 60% equity in Suzhou China Star Optoelectronics Technology Co., Ltd.,100% equity in Suzhou China Star Optoelectronics Display Co., Ltd. and 40% equity in Huansheng Solar (Jiangsu) Co., Ltd. and accounts receivable and contract assets of about RMB971,785,000 (December 31,2022: RMB757,751,000).The interest rates of the Company’s long-term borrowing ranged from 2.30% to 7.79% in the current period (2022: from 2.4% to 7.75%). 42 Bonds payable June 30,2023 January 1,2023 Corporate bonds 3,599,179 4,518,438MTN 6,989,292 7,488,413 10,588,471 12,006,851TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 109 VNotes to Consolidated Financial Statements (Continued) 42 Bonds payable (continued) (1) Movements in bonds payable Bond name Par value Issue date Maturity Issued amountJanuary 1, 2023 Issued in current period Accrued interest as per par value Amortization of premium or discountRepaid in current period Others (note 1) June 30,2023 19TCL011,000,000 May 20,201951,000,0001,000,264 - 17,246 (109) - (1,000,155) - 19TCL021,000,000 July 23,201951,000,000996,522 - 15,125 1,104 - 997,626 19TCL032,000,000 October 21,201952,000,000436,934 - 6,437 841 - 437,775 TCLTEC11,957,483 July 14,202051,957,4832,084,718 - 20,097 11,872 - 67,188 2,163,778 21TCLGroup MTN001 (High- Growth Debt) 2,000,000 May 10,202132,000,0001,997,821 - 40,900 525 - (1,998,346) - 22TCLGroup MTN0012,000,000 January 14,202232,000,0001,997,392 - 34,342 441 - - 1,997,833 22TCLGroup GN0021,500,000 April 27,202231,500,0001,497,217 - 24,522 594 - - 1,497,811 22TCLGroup MTN003 (Science and Technology Notes) 2,000,000 July 06,202232,000,0001,995,983 - 34,153 792 - - 1,996,775 23TCLGroup MTN001 (Science and Technology Notes) 1,500,000February 03, 202331,500,0001,500,000 24,206 (3,127) - - 1,496,873 - Total 14,957,48314,957,48312,006,8511,500,000217,02812,933 - (2,931,313) 10,588,471 Note Others are bonds payable within one year which are reclassified to non-current liabilities due within one year and exchange adjustment. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 110 VNotes to Consolidated Financial Statements (Continued) 43 Lease liabilities June 30,2023 January 1,2023 Total lease liabilities 5,488,6974,756,393 Less: Current portion of lease liabilities 430,363295,010 Total 5,058,3344,461,38344 Long-term payables June 30,2023 January 1,2023 Finance lease 2,431,551887,76345 Deferred income January 1,2023 Increase in the periodDecrease in the period Others June 30,2023Government grants 2,468,1454,067,217 (3,538,632) 16,130 3,012,860 2,468,1454,067,217 (3,538,632) 16,130 3,012,860 Items involving governmentgrants January 1,2023 New grants in current period Amount recorded in non-operating income in current periodAmount recorded in other income in current periodAmount used to offset costs and expenses in current periodOther changes June 30,2023Government grants related to assets 953,042 262,499 - (6,653) (37,455) (1,019,853) 151,580 Government grants related to income 1,515,103 3,820,848 - (1,128,701) (1,022,487) (323,483) 2,861,2802,468,145 4,083,347 - (1,135,354) (1,059,942) (1,343,336) 3,012,860Note "Other changes" were deferred income offset by the carrying amounts of relevant assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 111 VNotes to Consolidated Financial Statements (Continued) 46 Estimated liabilities June 30,2023 January 1,2023 After-sales service fee of products 39,35227,105Pending litigation 68,96970,379Onerous contract 3838 108,35997,522TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 112 VNotes to Consolidated Financial Statements (Continued) 47 Share capital January 1,2023 Increase or decrease in current period June 30,2023 Amount Ratio (%) New issuesShares converted from capital reserveOthers Subtotal Amount Ratio (%) I. Restricted Shares 3,420,221 20.03% - 342,022 (3,081,704) (2,739,682) 680,5393.62% II. Non-restricted shares 13,651,671 79.97% - 1,365,167 3,081,7044,446,87118,098,54296.38% III. Total shares 17,071,892 100% - 1,707,189 1,707,18918,779,081100% As of June 30,2023, the Company's total share capital was 18,779,080,767 shares.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 113 VNotes to Consolidated Financial Statements (Continued) 48 Capital reserves January 1,2023Increase in the periodDecrease in the period June 30,2023Share premium 12,437,990274,244 (2,401,878) 10,310,356 Other capital reserves 84,80353,253 (23,404) 114,652 12,522,793327,497 (2,425,282) 10,425,00849 Treasury share January 1,2023Increase in the periodDecrease in the period June 30,2023Treasury share 1,314,581271,264 (466,809) 1,119,036 Increase in the period is mainly stock repurchases for the employee stock ownership plan or the equity incentives of the Company. On May 31,2023, the 32nd meeting of the Seven-term Board of Directors was held to deliberate and approve the “Proposal on the Repurchase of Certain Shares from the Social Public in 2023”. The Company will repurchase its own shares via centralized bidding, and the Company’s shares repurchased will be used for the employee stock ownership plans or equity incentives. As of June 30,2023, the total number of shares repurchased was 64,993,000 shares at the total consideration of RMB247,171,000. Decrease in the year is mainly caused by the non-trading transfer and sale of the employee portion of the employee stock ownership plan. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 114 VNotes to Consolidated Financial Statements (Continued) 50 Other comprehensive income (1) Other comprehensive income items, income tax effects and reclassifications to profit or loss January - June 2023 January - June 2022 I. Items that cannot be reclassified to profit or loss subsequently 1. Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 4,483 388Share of the period 4,483 388Previous other comprehensive income reclassified to retained earnings for current period 2. Changes in fair value of other equity instruments (23,898) (13,674)Current gain/(loss) (20,062) (9,968)Previous other comprehensive income reclassified to retained earnings for current period - -Income tax effects recorded in other comprehensive income (3,836) (3,706) II. Items that will be reclassified to profit or loss subsequently 1. Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 29,896 4,046Share of the period 29,896 4,046Income tax effects recorded in other comprehensive income - -2. Changes in fair value of financial assets recorded in other comprehensive income - -Current gain/(loss) - - 3. Cash flow hedges (360,611) (209,875)Current gain/(loss) (340,791) (158,364)Previous other comprehensive income reclassified to profit for current period (23,262) (48,626)Income tax effects recorded in other comprehensive income 3,442 (2,885) 4. Differences arising from translation of foreign currency financial statements of overseas operations (100,880) (153,882) 5. Net income arising from disposal of overseas operations through profit or loss - - (451,010) (372,997) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 115 (2) Changes in other comprehensive income items VNotes to Consolidated Financial Statements (Continued) 50 Other comprehensive income (continued) Equity attributable to shareholders of the parent company Change of accounting policies Share of other comprehensive income of investees that will be reclassified to profit or loss under equity methodGain/loss on changes in fair value of financial assetsGain/(Loss) on changes in cash flow hedgesDifferences arising from translation of foreign currency-denominated financial statementsFair value changes of other equity instrumentsFair value changes of other debt instrumentsOther comprehensive income transferred to retained earnings SubtotalNon-controlling interestsTotal other comprehensive income January 1,2022334,95046,888 (350,569) 62,546 (239,179) (141,290) - (122,793) (409,447) 899 (408,548) Movement of 2022 - (17,501) - 15,615 (397,531) (16,420) - 13,462 (402,375) 75,341 (327,034) January 1,2023334,95029,387 (350,569) 78,161 (636,710) (157,710) - (109,331) (811,822) 76,240 (735,582) Movement from January to June 2023 - 34,381 - (271,320) (107,245) (20,062) - - (364,246) (86,764) (451,010) June 30,2023334,95063,768 (350,569) (193,159) (743,955) (177,772) - (109,331) (1,176,068) (10,524) (1,186,592) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 116 VNotes to Consolidated Financial Statements (Continued) 51 Surplus reserves January 1,2023Increase in the periodDecrease in the period June 30,2023Statutory surplus reserves 3,529,403 -- 3,529,403Discretionary surplus reserves 182,870 -- 182,8703,712,273 - - 3,712,273As per China's Company Law, Articles of Association for Companies, accounting standards, the Company and several of its subsidiaries shall appropriate 10% of net profits as statutory surplus reserves until the reserve amount reaches 50% of the registered capital. According to the aforesaid laws and regulations, part of the statutory surplus reserves can be converted into share capital of the Company, and the remaining amount shall not be lower than 25% of the registered capital. After the appropriation to the statutory surplus reserves, the Company may appropriate the discretionary surplus reserves. Upon approval, the discretionary surplus reserves can be used to make up the previous loss or increase the share capital. 52 Specific reserves January 1,2023Appropriation in the periodDecrease in the period June 30,2023 Production safety reserve 2,30116,191 (11,701) 6,791 53 General risk reserve January 1,2023Appropriation in the periodDecrease in the period June 30,2023 General risk reserve 8,934 - - 8,934 As per the General Rules on Financial Affairs of Financial Enterprises and the Guide to the Implementation of the General Rules on Financial Affairs of Financial Enterprises promulgated by the Ministry of Finance, as well as the Articles of Association of TCLTechnology Group Corporation, the Company's subsidiary - TCLTechnology Group Corporation - appropriated 1% of its net profit as general risk reserve in the previous years. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 117 VNotes to Consolidated Financial Statements (Continued) 54 Retained earnings January - June 2023 January - June 2022Retained earnings at the beginning of the year 19,486,730 22,458,340Change of accounting policies (Note) - 69,346Net profit for current period 340,493 663,521Decrease in the period - (2,064,177)Including: Appropriation of surplus reserves Distributed to ordinary shareholders as dividends - (2,050,003)Others - (14,174) Retained earnings at the end of the period 19,827,223 21,127,03055 Operating income and operating costs January - June 2023 January - June 2022 RevenueOperating costRevenue OperatingcostCore business 82,810,84672,687,77682,566,755 75,173,515Non-core business 2,337,8801,579,8231,955,426 1,349,429 85,148,72674,267,59984,522,181 76,522,944 (1) Business by operating segment Revenue Operating cost Gross profit January - June 2023 January -June 2022January -June 2023January -June 2022January - June 2023 January - June 2022 Domestic sales 58,816,019 57,379,45053,158,64651,272,0925,657,373 6,107,358 Foreign sales 26,332,707 27,142,73121,108,95325,250,8525,223,754 1,891,879 85,148,726 84,522,18174,267,59976,522,94410,881,127 7,999,237 (2) The sales revenue from the top five customers combined was RMB22,802,968,000 and RMB27,189,512,000 respectively for January-June,2023 and January-June,2022, accounting for 27.5% and 32.9% of the core business revenue. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 118 VNotes to Consolidated Financial Statements (Continued) 55 Operating income and operating costs (continued) (3) Revenue and costs generated from the Company's trial sales are as follows: January - June 2023 January - June 2022 Revenue 457,949427,118Operating cost 417,719403,77756 Interest income/expense and exchange gain January - June 2023 January - June 2022 Interest income 41,46338,579Interest expenditures 9,97614,292Exchange gain/(loss) (295) 24,351 The interest income, interest expense and exchange gain/(loss) above occurred with the Company's subsidiary TCLTech Finance Co., Ltd., which are presented separately herein as required for a financial enterprise. 57 Taxes and levies January - June 2023 January - June 2022 Property tax 190,060 131,638Stamp tax 119,421 100,211Urban maintenance and construction tax 35,287 21,608Education surcharges 18,924 15,407Land use tax 18,063 13,634Others 10,142 6,583 391,897 289,081 The applicable tax and levy standards are detailed in Note IV. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 119 VNotes to Consolidated Financial Statements (Continued) 58 Sales expenses January - June 2023 January - June 2022 Employee salaries and benefits 340,417 322,046After-sales service expense 408,042 281,872Promotional and marketing expenses 121,280 139,964Others 336,959 309,487 1,206,698 1,053,36959 General and administrative expense January - June 2023 January - June 2022 Employee salaries and benefits 755,363759,634Depreciation and amortization expenses 391,849370,222 Digital development expenses 64,244128,251 Others 804,468458,272 2,015,924 1,716,37960 R&D expenses January - June 2023 January - June 2022 Depreciation and amortization expenses 1,815,4221,483,845 Material expenses 1,469,9341,859,860 Employee salaries and benefits 1,053,804779,375 Others 553,194328,684 4,892,3544,451,76461 Financial expenses January - June 2023 January - June 2022 Interest expenditures 2,325,7852,031,269Interest income (415,285) (325,439)Exchange loss / (gain) (360,345) (55,264)Others 63,00869,591 1,613,163 1,720,157TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 120 VNotes to Consolidated Financial Statements (Continued) 62 Other income January - June 2023 January - June 2022 R&D subsidies 896,8011,554,890VAT rebates on software 20,87317,127Over-deduction in taxable amount for VAT 1,585589Others 280,66670,504 1,199,9251,643,11063 Return on investment January - June 2023 January - June 2022Gain on disposal of debt instruments at fair value through profit or loss 23,310 141,285Gain on disposal of debt instruments at fair value through profit or loss Gain on disposal of equity instruments at fair value through profit or loss 703,905 (75,115)Gain on disposal of debt instruments at fair value through profit or loss Gain on holding of equity instruments at fair value through profit or loss 8,8407,365 Gain on disposal of debt instruments at fair value through profit or loss Gain on holding of debt instruments at fair value through profit or loss 137,07635,619Share of net income of associates 1,257,9531,769,993Share of net income of joint ventures (37,627) (12,343)Net income from disposal of long-term equity investments 360,377491,319Others (140,059) (577,608) 2,313,7751,780,51564 Gain on changes in fair value January - June 2023 January - June 2022 Held-for-trading financial assets 483,079 (139,785)Derivative financial assets 37,768 (1,176)Held-for-trading financial liabilities (68,190) 46,194Derivative financial liabilities (256) 209,262 452,401114,495TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 121 VNotes to Consolidated Financial Statements (Continued) 65 Credit impairment loss January - June 2023 January - June 2022 Loss on uncollectible accounts receivable (42,425) (21,227)Loss on uncollectible other receivables (3,760) (4,351)Other financial assets 683 (1,579) (45,502) (27,157)66 Asset impairment loss January - June 2023 January - June 2022 Inventory valuation loss (2,217,911) (1,006,908)Impairment loss on long-term equity investments (137,375) -Impairment loss on fixed assets - -Impairment loss on contract assets (3,670) -Impairment loss on intangible assets - -Impairment loss on construction in progress - -Others - (3,379) (2,358,956) (1,010,287) 67 Asset disposal income January - June 2023 January - June 2022 Income/(loss) from disposal of fixed assets (18,624) (17,103)Income/(loss) from disposal of intangible assets (22,271) (8,498)Others 883 1,970 (40,012) (23,631)68 Non-operating income January - June 2023January - June 2022 Amount through current non-recurring gains and lossesGains on retired or damaged non-current assets 176116 176 Government grants and others 25,854596,424 25,854 26,030596,540 26,030 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 122 VNotes to Consolidated Financial Statements (Continued) 69 Non-operating expense January - June 2023January - June 2022 Amount through current non-recurring gains and lossesLosses on retired or damaged non-current assets 2,3922,020 2,392Others 46,76850,372 46,76849,16052,392 49,16070 Income tax expenses (1) Table of income tax expenses January - June 2023 January - June 2022 Current income tax expense 577,065 338,743Deferred income tax expense (676,864) (427,141) (99,799) (88,398)(2) Accounting profit and income tax adjustment process January - June 2023 January - June 2022 Gross profit 2,290,784 1,838,318Income tax expense calculated at statutory/applicable tax rate 572,696 275,748Impact of different tax rates applied to subsidiaries 20,717 365,664Impact of adjusting income tax in previous periods (182,054) (51,310)Impact of non-taxable income (344,175) (488,118)Impact of non-deductible costs, expenses and losses 31,332 44,556Impact of the use of deductible losses carry forward without recognize deferred income tax assets in the previous periods (118,357) (329,838)Impact of unrecognized deferred income tax assets of deductible temporary differences or deductible losses in the current period 384,393 324,802Others (464,351) (229,902) Income tax expense (99,799) (88,398)TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 123 VNotes to Consolidated Financial Statements (Continued) 71 Earnings per share (1) Basic earnings per share January - June 2023 January - June 2022 Net profit attributable to shareholders of the parent company 340,493 663,523Weighted average outstanding ordinary shares (in thousand shares) 18,519,475 14,925,203 Basic earnings per share (RMB yuan) 0.0184 0.0445(2) Diluted earnings per share January - June 2023 January - June 2022 Net profit attributable to shareholders of the parent company 340,493 663,523Diluted weighted average outstanding ordinary shares (in thousand shares) 18,779,081 15,042,602 Diluted earnings per share (RMB yuan) 0.0181 0.044172 Cash generated from other operating activities Cash received from other related operating activities in the consolidated cash flow statement was RMB5,588,817,000 (the same period of the previous year: RMB5,538,379,000), which primarily consisted of current payments received, government grants and special appropriation, etc. 73 Cash used in other operating activities Cash paid in other operating activities in the consolidated cash flow statement was RMB5,049,598,000 (the same period of the previous year: RMB5,670,402,000), which primarily consisted of various expenses and current payments. 74 Cash generated from other investing activities Cash received from other related investing activities in the Company’s consolidated cash flow statement amounted to RMB1,640,766,000 (the same period of the previous year: RMB73,748,000), mainly due to the receipt of project bid bonds and net cash received from subsidiaries, etc. 75 Cash used in other investing activities Cash paid for other related investing activities in the Company’s consolidated cash flow statement amounted to RMB475,943,000 (the same period of the previous year: RMB333,406,000), mainly due to the refund of project bid bonds, payments for foreign exchange forward delivery and net cash paid for selling subsidiaries, etc. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 124 VNotes to Consolidated Financial Statements (Continued) 76 Cash generated from other financing activities Cash received from other related financing activities in the consolidated cash flow statement of the Company amounted to RMB1,895,912,000 (the same period of the previous year: RMB6,000,000), mainly including finance lease payments and deposits received. 77 Cash used in other financing activities Cash paid for other related financing activities in the Company’s consolidated cash flow statement amounted to RMB6,312,578,000 (the same period of the previous year: RMB4,454,836,000), mainly for the repurchase of minority interests in subsidiaries, repurchase of company shares, and payment of financial lease payments, etc. 78 Supplementary information for the cash flow statement (1) Reconciliation of net profit to net cash generated from/used in operating activities January - June 2023 January - June 2022 Net profit 2,390,583 1,926,716Add: Asset impairment allowance 2,404,458 1,037,444Depreciation of fixed assets 9,763,566 9,659,290Depreciation of right-of-use assets 224,847 152,525Amortization of intangible assets 808,784 753,154Amortization of long-term prepaid expense 1,025,787 857,830Loss/(Gain) on disposal of fixed assets, intangible assets and other long-lived assets 40,012 23,631Loss on retired or damaged fixed assets 2,216 1,904Loss/(Gain) on changes in fair value (452,401) (114,495)Financial expenses 1,975,711 1,965,946Return on investment (2,313,775) (1,780,515)Decrease/(Increase) in deferred income tax assets (1,008,863) (663,627)Increase/(Decrease) in deferred income tax liabilities 496,643 565,235Decrease/(Increase) in inventory (324,976) (119,965)Decrease/(Increase) in operating receivables (8,800,043) (2,029,270)Increase/(Decrease) in operating payables 3,073,357 (2,332,939)Others 1,110,262 (886,228) Net cash generated from operating activities 10,416,168 9,016,636TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 125 VNotes to Consolidated Financial Statements (Continued) 78 Supplementary information for the cash flow statement (continued) (2) Net cash payments for acquisition of subsidiaries in the current period January - June 2023 January - June 2022Payments of cash and cash equivalents made in current period due to business combinations incurred in current period 350,155 -Less: cash and cash equivalents held by subsidiary on acquisition date 7,628 -Add: Payments of cash and cash equivalents made in current period due to business combinations incurred in previous periods - -Net cash payments for acquisition of subsidiaries 342,527 - (3) Net cash proceeds from disposal of subsidiaries in the current period Cash or cash equivalents received in current period due to disposal of subsidiary in current period - -Less: cash and cash equivalents held by subsidiary on the date when the Company’s control over the subsidiary ceased - -Add: Cash or cash equivalents received in current period due to disposal of subsidiaries in prior periods - - Net proceeds from the disposal of subsidiaries - - (4) Breakdown of cash and cash equivalents June 30,2023 January 1,2023I. Cash 27,744,248 33,675,624Including: Cash on hand 456 480Bank deposits available for payment on demand 27,307,262 32,696,213Other monetary assets available for payment on demand 435,350 919,646Deposits with the central bank available for payment 1,180 59,285II. Cash equivalents - - III. Ending balance of cash and cash equivalents 27,744,248 33,675,624TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 126 VNotes to Consolidated Financial Statements (Continued) 79 Net changes in cash and cash equivalents January - June 2023 January - June 2022 Cash and cash equivalents at the end of the period 27,744,248 31,676,321Less: Cash at the beginning of the year 33,675,624 30,081,705 Net increase in cash and cash equivalents (5,931,376) 1,594,616 Analysis of ending cash and cash equivalents: Monetary assets at the end of the period 29,286,645 33,795,517Less: Non-cash equivalents at the end of the period (note) 1,542,397 2,119,196 Cash and cash equivalents at the end of the period 27,744,248 31,676,321 Note: The closing non-cash equivalents primarily included interest receivable on bank deposits, the statutory reserve deposits placed by TCLTech Finance Co., Ltd. in the central bank and other monetary assets, detailed in Annex V,1. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 127 VNotes to Consolidated Financial Statements (Continued) 80 Assets with restricted ownership or use rights June 30,2023 Reason for restriction Monetary assets 266,969 Deposited in the central bank as the required reserveMonetary assets 1,275,428 Other restricted monetary assetsNotes receivable 175,227 PledgeFixed assets 100,732,098 As collateral for loanIntangible assets 4,104,162 As collateral for loanHeld-for-trading financial assets 452,544 PledgeConstruction in progress 5,099,292 As collateral for loanRight-of-use assets 18,131 Lease collateralAccounts receivable 1,358,298 PledgeContract assets 298,041 Pledge 113,780,190 81 Foreign currency monetary items June 30,2023 Foreign currency balance Conversion rate RMB balanceMonetary assets Including: USD 601,167 7.22584,343,913 HKD 116,889 0.9219107,760 EUR 3,314 7.848726,011 JPY 1,829,193 0.049991,277 SGD 2485.32801,321INR 2,540,279 0.0881223,799 Accounts receivable Including: USD 1,292,625 7.22589,340,250 HKD 100 0.921992 INR 4,687,2160.0881412,944 Accounts payable Including: USD 580,092 7.2258 4,191,629 HKD 624,481 0.9219575,709JPY 11,554,876 0.0499576,588 EUR 3,8437.848730,163INR 368,134 0.088132,433 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 128 VNotes to Consolidated Financial Statements (Continued) 81 Foreign currency monetary items (continued) June 30,2023 Foreign currency balance Conversion rate RMB balanceOther receivables Including: USD 28,373 7.2258205,018HKD 29,957 0.921927,617 JPY 71,970 0.04993,591 PLN 1,520 1.76452,682 INR 56,801 0.08815,004 KRW 102,5900.0055565 MXN 20,8880.42208,815 SGD 755.3280400 Other payables Including: USD 784,534 7.22585,668,886 HKD 81,348 0.921974,995 JPY 20,199,269 0.0499 1,007,944 INR 31,931 0.08812,813 PLN 421 1.7645743 KRW 176,9700.0055974 AUD 34 4.7806163 MXN 26,139 0.4220 11,031 EUR 179 7.8487 1,405 SGD 32 5.3280 170 Notes payable Including: USD 2,6027.225818,802 Short-term borrowings Including: USD 2,6937.225819,459 Long-term borrowings Including: USD 555,4487.22584,013,556TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 129 VI Changes to Consolidation Scope 1 Newly consolidated entities for current period Name of investee Consolidated period Reason for change Registered capital (RMB) Contribution ratio Lumetech North America Corporation February-June, 2023 Newly incorporated USD10,000,000100.00%Suzhou Zhonghuan Photovoltaic Materials Co., Ltd. March-June, 2023 Newly incorporated RMB50,000,000100.00%Ningxia Huanou New Energy Technology Co., Ltd. March-June, 2023 Newly incorporated RMB1,250,000,000 100.00%Xinxin Semiconductor Technology Co., Ltd. March-June, 2023 Acquisition RMB6,513,000,000100.00%Jiangsu Mingjing Semiconductor Technology Co., Ltd. March-June, 2023 Acquisition RMB120,000,000100.00%Jiangsu Lixin Semiconductor Technology Co., Ltd. March-June, 2023 Acquisition RMB4,300,000,000100.00%Zhonghuan Advanced (Xuzhou) Semiconductor Technology Co., Ltd. March-June, 2023 Acquisition RMB4,210,000,000100.00%Jiangsu Huasheng Semiconductor Materials Co., Ltd. March-June, 2023 Acquisition RMB200,000,000100.00%Hong Kong NExcel Electronic Technology Co., Ltd. March-June, 2023 Acquisition USD5,000,000100.00%Singapore NExcel Electronic Technology Co., Ltd. March-June, 2023 Acquisition SGD100,000100.00%Xuzhou Jingrui Semiconductor Equipment Technology Co., Ltd. March-June, 2023 Acquisition RMB150,000,000100.00%Meixin (Xuzhou) Silicon Material Technology Co., Ltd. March-June, 2023 Acquisition RMB22,000,000100.00%Ningxia Zhonghuan Industrial Park Management Co., Ltd. March-June, 2023 Newly incorporated RMB10,000,000100.00%Shanghai Zhonghuan Photovoltaic Materials Co., Ltd. March-June, 2023 Newly incorporated RMB10,000,000100.00%Guangzhou TCLIndustrial Research Institute Co., Ltd. March-June, 2023 Newly incorporated RMB200,000,000100.00%Xiaoyu Online (Beijing) Technology Co., Ltd. March-June, 2023 Newly incorporated RMB10,000,000100.00%Suzhou China Star Environmental Protection Technology Co., Ltd. May-June, 2023 Acquisition RMB100,000,000100.00%Huizhou Dongshen Jia'an Equity Investment Partnership (Limited Partnership) May-June,2023Newly incorporated RMB1,561,000,00099.94%Inner Mongolia TCLPhotoelectric Technology Co., Ltd. May-June,2023 Acquisition RMB100,000,000100.00%TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 130 Note: Business combinations not under the common control occurred in the current period (1) Acquisition of shares of Suzhou China Star Environmental Protection Technology Co., Ltd. ① The cost of acquisition and goodwill were recognized as follows: On May 31,2023 (the “Acquisition Date”), the Group acquired 100% equity of Suzhou China Star Environmental Protection Technology Co., Ltd. at a cash consideration of RMB344,942,000, and included such company into the scope of consolidation. Cash consideration 344,942Less: Share of fair value of identifiable net assets acquired 301,534 Goodwill amount 43,408 ② Assets and liabilities of the acquiree as at the acquisition date are presented as follows: Fair value at acquisition date Carrying amount at acquisition date Current assets 25,50225,502 Non-current assets 332,703150,272 Net assets 301,534146,468Less: non-controlling interests - -Net assets acquired 301,534146,468③ Jiangsu Tiandi Heng’an Real Estate Land Asset Appraisal Co., Ltd. has appraised the information above using the income method, and issued an asset appraisal report (TDHA [2022] ZPZNo.1065), with an appraised value of RMB344,942,000. Ningbo Dongshen Zhixuan Equity Investment Partnership (Limited Partnership) May-June,2023Newly incorporatedRMB551,000,00090.74%VIChanges to Consolidation Scope (continued) 1 Newly consolidated entities for current period (continued) Name of investee Consolidated period Reason for change Registered capital (RMB) Contribution ratioTCLFinancial Technology (Shenzhen) Co., Ltd. Late June 2023 Acquisition RMB5,000,000100.00%Huansheng Photovoltaic (Guangdong) Co., Ltd. Late June 2023 Newly incorporated RMB10,000,000100.00%TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 131 (2)Acquisition of shares in TCLInternet Technology (Shenzhen) Co., Ltd. ① On June 30,2023 (the “Acquisition Date”), the Group acquired 100% equity of TCLInternet Technology (Shenzhen) Co., Ltd. with a cash consideration of RMB15,036,000, and included such company into the scope of consolidation. Cash consideration 15,036Less: Share of fair value of identifiable net assets acquired 15,036Difference of lower goodwill / merger cost and higher share of fair value of identifiable net assets acquired -② Assets and liabilities of the acquiree as at the acquisition date are presented as follows: Item Fair value at acquisition date Carrying amount at acquisition date Current assets 38,15138,151Non-current assets 11,6006,098 Net assets 15,03610,360 Less: non-controlling interests - -Net assets acquired 15,03610,360(3)Acquisition of shares in Xinxin Semiconductor Technology Co., Ltd. ① The cost of acquisition and goodwill were recognized as follows: On February 28,2023 (the “Acquisition Date”), the Group acquired 100% equity of Xinxin Semiconductor Technology Co., Ltd. by issuing equity securities, and included such company into the scope of consolidation. Fair value of equity securities issued 7,399,683 Less: Share of fair value of identifiable net assets acquired 6,219,678 Goodwill amount 1,180,005 ② Assets and liabilities of the acquiree as at the acquisition date are presented as follows: Item Fair value at acquisition date Carrying amount at acquisition date Total assets 8,320,6727,752,700 Total liabilities 2,100,9942,313,890 Net assets 6,219,6785,438,810 Less: non-controlling interests - -Net assets acquired 6,219,6785,438,810 VIChanges to Consolidation Scope (continued) 1 Newly consolidated entities for current period (continued) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 132 (4)Acquisition of shares in Inner Mongolia TCLPhotoelectric Technology Co., Ltd. ①The cost of acquisition and goodwill were recognized as follows: On May 1,2023 (the “Acquisition Date”), the Group acquired 100% equity of Inner Mongolia TCLPhotoelectric Technology Co., Ltd. at a cash consideration of RMB119,039,000, and included such company into the scope of consolidation. Cash consideration 119,039 Less: Share of fair value of identifiable net assets acquired 119,039Difference of lower goodwill / merger cost and higher share of fair value of identifiable net assets acquired -② Assets and liabilities of the acquiree as at the acquisition date are presented as follows: Item Fair value at acquisition date Carrying amount at acquisition date Total assets 213,871194,735 Total liabilities 94,832 94,832 Net assets 119,039 99,903 Less: non-controlling interests - -Net assets acquired 119,03999,903 2 Deconsolidated entities for current period Name of investee Time of deconsolidation Reason for change Yixing Huanxing New Energy Co., Ltd. April 2023 Transferred Tianjin Binhai Huanneng New Energy Co., Ltd. April 2023 Transferred Dushan Anju Photovoltaic Technology Co., Ltd. April 2023 Transferred Shangyi Shengxin New Energy Development Co., Ltd. April 2023 Transferred Gengma Huanxing New Energy Co., Ltd. April 2023 Transferred Guyuan Shengju New Energy Co., Ltd. April 2023 Transferred Zhangjiakou Shengyuan New Energy Co., Ltd. April 2023 Transferred Qinhuangdao Tianhui Solar Energy Co., Ltd. April 2023 TransferredVIChanges to Consolidation Scope (continued) 1 Newly consolidated entities for current period (continued) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 133 3 Subsidiaries disposed in current period Name of subsidiary Yixing Huanxing New Energy Co., Ltd.Tianjin Binhai Huanneng New Energy Co., Ltd.Dushan Anju Photovoltaic Technology Co., Ltd. Shangyi Shengxin NewEnergy Development Co., Ltd.Price for equity interest disposal 32,213 30,249 52,460 79,060 % equity interest disposed 100% 100% 99% 100%Way of equity disposal Sale Sale Sale SaleTime of loss of control April 2023 April 2023 April 2023 April 2023Determination basis for time of loss of control The operating risk has been transferredThe operating risk has been transferredThe operating risk has been transferred The operating risk has been transferredDifference between the disposal price and the Company’s share of the subsidiary’s net assets in the consolidated financial statements relevant to the disposed equity interest 6,038 26,308 (22,207) 84,046 Name of subsidiary Gengma Huanxing New Energy Co., Ltd.Guyuan Shengju New Energy Co., Ltd.Zhangjiakou Shengyuan New Energy Co., Ltd. Qinhuangdao TianhuiSolar Energy Co., Ltd.Price for equity interest disposal 31,830 57,490 58,290 84,060 % equity interest disposed 99% 99% 99% 99%Way of equity disposal Sale Sale Sale SaleTime of loss of control April 2023 April 2023 April 2023 April 2023Determination basis for time of loss of control The operating risk has been transferredThe operating risk has been transferredThe operating risk has been transferred The operating risk has been transferredDifference between the disposal price and the Company’s share of the subsidiary’s net assets in the consolidated financial statements relevant to the disposed equity interest (13,906) (9,728) (9,413) (38,259)VIChanges to Consolidation Scope (continued) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 134 VII Interests in Other Entities 1 Interests in subsidiaries (1) Principal subsidiaries Name of investee Place of registrationNature of business Principal place of businessShareholding ratio (%) How subsidiary was obtained Direct Indirect TCLChina Star Optoelectronics Technology Co., Ltd. ShenzhenManufacturing and sales Shenzhen 79.17% - IncorporatedShenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. ShenzhenManufacturing and sales Shenzhen - 54.31% IncorporatedGuangzhou China Ray Optoelectronic Materials Co., Ltd. GuangzhouResearch and development Guangzhou - 100% IncorporatedWuhan China Star Optoelectronics Technology Co., Ltd. Wuhan Manufacturing and sales Wuhan - 95.35% IncorporatedWuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Wuhan Manufacturing and sales Wuhan - 57.14% IncorporatedChina Star Optoelectronics International (HK) Limited Hong Kong Sales Hong Kong - 100% IncorporatedChina Display Optoelectronics Technology Holdings Limited BermudaInvestment holding Bermuda - 64.20% Business combination not under common control China Display Optoelectronics Technology (Huizhou) Co., Ltd. HuizhouManufacturing and sales Huizhou - 100% IncorporatedWuhan China Display Optoelectronics Technology Co., Ltd. Wuhan Manufacturing and sales Wuhan - 100% IncorporatedSuzhou China Star Optoelectronics Technology Co., Ltd. SuzhouManufacturing and sales Suzhou - 100% Business combination not under common control TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 135 VIIInterests in Other Entities (Continued) 1 Interests in subsidiaries (Continued) (1) Composition of key subsidiaries (Continued) Name of investee Place of registration Nature of businessPrincipal place of businessShareholding ratio (%) How subsidiary was obtained Direct Indirect Suzhou China Star Optoelectronics Display Co., Ltd. Suzhou Manufacturing and sales Suzhou - 100% Business combination not under common control Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Guangzhou Manufacturing and sales Guangzhou - 55% Incorporated TCLCulture Media (Shenzhen) Co., Ltd. Shenzhen Ad planning Shenzhen 100% - Incorporated Highly Information Industry Co., Ltd. Beijing Product distribution Beijing 66.46% - Incorporated Beijing Sunpiestore Technology Co., Ltd. Beijing Sales Beijing - 53.45% Incorporated Beijing Lingyun Data Technology Co., Ltd. Beijing Sales Beijing - 60.00% Incorporated TCLTechnology Group Finance Co., Ltd. Huizhou Financial Huizhou 82.00% 18.00% Incorporated Xinjiang TCLEquity Investment Ltd. Xinjiang Investment business Shenzhen 100% - Incorporated Ningbo TCLEquity Investment Ltd. Ningbo Investment business Shenzhen 100% - Incorporated TCLTechnology Park (Huizhou) Co., Ltd. Huizhou Property management Huizhou - 100% Incorporated TCLResearch America Inc. U.S. Research and development U.S. - 100% Incorporated TCLIndustrial Technology Research Institute (Hong Kong) Limited Hong KongResearch and development Hong Kong - 100% Incorporated TCLTechnology Investments Limited Hong KongInvestment business Hong Kong 100% - Incorporated TCLZhonghuan New Energy Technology Co., Ltd. Tianjin Manufacturing and sales Tianjin 2.55% 27.37% Business combination not under common control Tianjin Printronics Circuit Corporation Tianjin Manufacturing and sales Tianjin - 26.86% Business combination not under common control Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. Tianjin Manufacturing and sales Tianjin - 100% Business combination not under common control Wuxi Zhonghuan Applied Materials Co., Ltd. Wuxi Manufacturing and sales Wuxi - 98.08% Business combination not under common control Tianjin Huanzhi New Energy Technology Co., Ltd. Tianjin Manufacturing and sales Tianjin - 62.00% Business combination not under common control TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 136 VIIInterests in Other Entities (Continued) 1 Interests in subsidiaries (Continued) (1) Composition of key subsidiaries (Continued) Inner Mongolia Zhonghuan Solar Material Co., Ltd. Inner MongoliaManufacturing and sales Inner Mongolia - 100.00% Business combination not under common control Tianjin Zhonghuan Advanced Material&Technology Co., Ltd. TianjinManufacturing and sales Tianjin - 100.00% Business combination not under common control Huansheng Solar (Jiangsu) Co., Ltd. Wuxi Manufacturing and sales Wuxi - 83.73% Business combination not under common control Tianjin Huanou International Silicon Material Co., Ltd. TianjinProcurement & sales Tianjin - 100.00% Business combination not under common control Zhonghuan Hong Kong Holding Limited Hong Kong Sales Hong Kong - 100.00% Business combination not under common control Tianjin Huanrui Electronic Technology Co., Ltd. TianjinProcurement & sales Tianjin - 100.00% Business combination not under common control Inner Mongolia Zhonghuan Xiexin Solar Material Co., Ltd. Inner MongoliaManufacturing and sales Inner Mongolia - 59.32% Business combination not under common control Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. Inner MongoliaManufacturing and sales Inner Mongolia - 100.00% Business combination not under common control Zhonghuan Advanced Semiconductor Materials Co., Ltd. Wuxi Manufacturing and sales Wuxi 7.50% 36.00% Business combination not under common control Moka International Limited BVI Investment holding BVI - 100.00% Business combination not under common control Moka Technology (Guangdong) Co., Ltd. HuizhouManufacturing and sales Huizhou - 100.00% Business combination not under common control (2) Subsidiaries with substantial non-controlling interests Name of subsidiary Non-controllingshareholding ratio (%)Current periodprofit or loss attributable to non-controlling interestsCurrent period dividends distributed to non-controlling interests Closing non-controlling interestsShareholder equityTCLChina Star Optoelectronics Technology Co., Ltd.20.83% (1,546,652) - 42,840,468 TCLZhonghuan New Energy Technology Co., Ltd.70.09% 3,484,892 227,08944,090,640 Highly Information Industry Co., Ltd.33.54% 29,568 33,963 552,148 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 137 VIIInterests in Other Entities (Continued) 1 Interests in subsidiaries (Continued) (2) Subsidiaries with substantial non-controlling interests (continued) The key financial information of the above subsidiaries is as follows: June 30,2023 January 1,2023 Current assets Non-current assets TotalassetsCurrentliabilitiesNon-currentliabilitiesTotalliabilitiesCurrentassetsNon-currentassetsTotalassetsCurrentliabilitiesNon-currentliabilitiesTotal liabilities TCLChina Star Optoelectronics Technology Co., Ltd. 38,461,841 156,336,412 194,798,254 46,726,932 77,226,042 123,952,974 40,115,151152,441,917192,557,06845,523,24273,184,255118,707,497 TCLZhonghuan New Energy Technology Co., Ltd. 34,331,503 87,995,990 122,327,493 21,375,853 42,544,326 63,920,179 31,829,52377,304,246109,133,76923,020,08239,053,84462,073,926 Highly Information Industry Co., Ltd. 8,692,301 141,278 8,833,578 7,330,519 33,518 7,364,038 8,563,285149,3908,712,6757,191,61039,9617,231,571 January - June 2023 January - June 2022 Revenue Net profitTotal comprehensive incomeNet cash generate from/used in operating activities Revenue Net profitTotal comprehensive incomeNet cash generate from/used in operating activities TCLChina Star Optoelectronics Technology Co., Ltd. 30,600,624 (3,619,167) (3,976,323) 6,612,328 32,429,876 (2,631,952) (2,880,645) 10,250,591 TCLZhonghuan New Energy Technology Co., Ltd. 34,897,789 4,838,8804,839,827 2,860,116 31,698,3373,224,900 3,224,900 2,809,898 Highly Information Industry Co., Ltd. 13,812,825 78,707 78,707 (605,431) 14,728,215 118,259 118,259 (574,296) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 138 VIIInterests in Other Entities (Continued) 2 Interests in joint ventures and associates (1) Basic information about principal joint ventures and associates Name of investee Principal place of business/place of registrationNature of businessStrategic to the Group’s activities or not Shareholding ratio (%) Direct IndirectAssociate Xinjiang Goens Energy Technology Co., Ltd. XinjiangR&D, production & sale of polycrystalline silicon & monocrystalline silicon;Yes - 27%Bank of Shanghai Co., Ltd. Shanghai Financial Yes 5.76% (2) Key financial information of major associates June 30,2023 January 1,2023 June 30,2023 January 1, 2023Xinjiang Goens Energy Technology Co., Ltd.Xinjiang Goens Energy Technology Co., Ltd.Bank of Shanghai Co., Ltd. Bank of Shanghai Co., Ltd. Total assets 18,456,40018,957,948 3,033,046,069 2,878,524,759 Total liabilities 2,747,0944,436,5462,804,061,231 2,656,876,235 Non-controlling interests Not applicable Not applicable 607,016 594,465Equity attributable to shareholders of the parent company 15,709,30614,521,402228,377,822 221,054,059Share of equity in proportion to the Company’s interest 4,241,5133,920,77913,154,563 12,732,714Carrying amount of investment in associate 4,249,7983,919,46413,233,111 12,809,374January - June 2023January - June 2022January - June 2023 January - June 2022Xinjiang Goens Energy Technology Co., Ltd.Xinjiang Goens Energy Technology Co., Ltd.Bank of Shanghai Co., Ltd. Bank of Shanghai Co., Ltd.Revenue 4,079,1626,649,11926,360,045 27,941,662 Net profit attributable to the parent company 2,023,4573,835,37712,834,970 12,674,306 Dividends from associate to the Group in current period - - 327,157 327,157TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 139 VIIInterests in Other Entities (Continued) 2 Interests in joint ventures and associates (continued) (3) Financial information of other joint ventures and associates combined respectively End of June 2023 / January-June 2023End of June 2022 / January-June 2022Joint ventures: Total carrying amount of investments 466,125542,914Aggregate of following items calculated in proportion to the Company’s interest Net profit (note) (37,627) (12,343)Other comprehensive income (note) Total comprehensive income (37,627) (12,343) Associate: Total carrying amount of investments 12,405,36411,064,477Aggregate of following items calculated in proportion to the Company’s interest Net profit (note) (6,486) (13,791)Other comprehensive income (note) 2,979366Total comprehensive income (3,507) (13,425) Note: The net profit and other comprehensive income have taken into account the impacts of both the fair value of the identifiable assets and liabilities upon the acquisition of investment and accounting policies unifying. (4) The Company did not have any significant joint venture during the reporting period. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 140 VIIIRisks related to financial instruments The purpose of the Company’s risk management is to achieve a right balance between the risk and the benefit and maximally reduce the adverse impact of financial risks on the Company’s financial performance. Based on such purpose, the Company has established various risk management policies to recognize and analyze possible risks to be encountered by the Company, set an appropriate risk acceptable level and designed corresponding internal control procedures so as to control the Company’s risk level. In addition, the Company will regularly review these risk management policies and relevant internal control system in order to adapt to the market or handle various changes in the Company’s operating activities. Meanwhile, the Company’s internal audit department will also regularly or randomly check whether the implementation of internal control system conforms to relevant risk management policies. In fact, the Company has applied proper diversified investment and business portfolio to disperse various financial instrument risks and worked out corresponding risk management policies to reduce the risk of concentrating on one single industry, specific region or specific counterpart. The main risks arising from the Company's financial instruments are credit risk, liquidity risk, and market risk (mainly foreign exchange risk and interest rate risk). (1) Credit risk Credit risk refers to the risk of financial loss caused by any party of financial instruments to another party due to the failure in fulfilling performance obligations. The Group controls the credit risk based on the specific group classification, and credit risk mainly results from bank deposit, due from central bank, notes receivable, accounts receivable, loans and advances to customers and other receivables. The Group’s bank deposits and due from central bank are mainly deposited in stated-owned banks and other large and medium-sized listed banks. The Group considers no significant credit risk existed and no significant loss will be caused by the counterpart’s breach of contract. For notes receivable, accounts receivable, loans and advances to customers and other receivables, the Group has established relevant policies to control the credit risk exposure, and will evaluate the client’s credit qualification and determine corresponding credit period based on the client’s financial status, the possibility of obtaining guarantees from the third party, relevant credit records and other factors (like the current market situation). In the meantime, the Group will regularly monitor the client's credit records. For any client with unfavorable credit records, the Group will issue written reminders, shorten the credit period or cancel the credit period so as to keep the Group's overall credit risk controllable. As of June 30,2023, no significant guarantee or other credit enhancements held due to the debtor mortgage was found in the Group. (2) Liquidity risk Liquidity risk refers to the risk of capital shortage the Company encounters when the Company is fulfilling the obligation of settlement in the form of cash or other financial assets. Various subsidiaries under the Group shall be responsible for predicting their own cash flow. The financial department of the headquarter shall firstly summarize predictions on the cash flow of various subsidiaries and then continuously monitor the short-term and long-term fund demand at the Group's level so as to maintain sufficient cash reserves and negotiable securities that can be realized at any time; meanwhile, special efforts shall also be made to continuously monitor whether provisions stated in the loan agreement are observed and to make major financial institutions promise to provide sufficient reserve funds so as to satisfy short-term and long-term capital demand. As of June 30,2023, the Group had no liquidity risk events. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 141 VIIIRisks Related to Financial Instruments (continued) (3) Market risk (a) Foreign exchange risk The Group has carried out various economic activities around the world including manufacturing, selling, investment and financing etc., and corresponding interest rate fluctuation risks exist in the Group’s foreign currency assets and liabilities and future foreign currency transactions. The Group always regards "Locking the Cost and Avoiding Possible Risks" as the foreign currency risk management goal. Through the natural hedging of settlement currency, matching with the foreign currency liabilities, signing simple derivative products closely related to the owner's operation and meeting corresponding hedge accounting treatment requirements and applying other management methods, the foreign currency risk exposure can be controlled within a reasonable scope and the impact of interest rate fluctuations on the Group's overall profit and loss will be reduced. (a) On June 30,2023, foreign-currency asset and liability items with significant exposure to exchange risk were mainly denominated in US dollars. After management, the total risk exposure of the US dollar-denominated items had a net asset exposure of USD685,752,000, equivalent to RMB4,955,104,000 based on the spot exchange rate on the balance sheet date. The differences arising from the translation of foreign currency financial statements were not included. The Group applies the following exchange rate of USD against RMB: Average exchange rate Exchange rate at period-end January - June 2023 June 30,2023 USD/RMB 6.9693 7.2258 Provided that other risk variables remained unchanged except for the exchange rate, a 5% depreciation/appreciation in RMB as a result of the changes in the exchange rate of RMB against USD would cause an increase/decrease of RMB247,755,000 in shareholders’ equity and net profit respectively of the Group on June 30,2023. The above-mentioned sensitivity analysis is made based on the assumption that the exchange rate changes on the balance sheet date, and financial instruments held by the Group on the balance sheet date exposed to the exchange risk are re-calculated based on the changed exchange rate. The above analysis does not include differences arising from the translation of foreign currency financial statements. (b) Interest risk The Group’s interest rate risk mainly results from interest-bearing bank borrowings adopting floating interest rates, and the Group determined the proportion of fixed interest rates and floating interest rates based on the market environment and its risk tolerance. Up until June 30,2023, the Group’s liabilities with floating interest rates accounted for 59.93% of its total interest-bearing liabilities. And, the Group will continuously monitor the interest rates and make corresponding adjustments according to the specific market changes so as to avoid interest rate risk. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 142 IXClassification of Financial Instruments and Fair Value Fair value of financial instruments and levels 1 Fair value is divided into the following levels in measurement and disclosure: Level 1 refers to the (unadjusted) quotation of the same type of assets or liabilities on the active market; and the Company mainly adopts the closing price as the value of a financial asset. Financial instruments of level 1 mainly include exchange listed stocks and bonds. Level 2 refers to the directly or indirectly observable input of a financial asset or liability that does not belong to level 1. Level 3 refers to the input of a financial asset or liability determined based on variables other than the observable market data (non-observable input). 2 Basis for determining the market value of items measured at continuous level 1 fair value The Company adopts the active market quotation as the fair value of a level 1 financial asset.3 Items measured at continuous level 2 fair value adopt the following valuation techniques and parameters: The Company’s receivables financing was bank acceptance notes and trade acceptance notes, of which the market prices were determined based on the transfer or discounted amounts. Derivative financial assets and liabilities are multiple IRS and CCS signed between the Group and financial institutions. The Company adopts the quotations 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.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 143 IXClassification of Financial Instruments and Fair Value (Continued) 5 Financial instruments measured in three levels of fair value Financial assets Item Level 1 Level 2 Level 3 TotalHeld-for-trading financial assets (see Note V.2) 319,92510,646,4263,405,424 14,371,775 Derivative financial assets (see Note V.3) - 125,204 125,204Receivables financing (see Note V.6) - - 3,307,933 3,307,933Investments in other equity instruments (see Note V.15) 46,668 - 374,436 421,104Other non-current financial assets (see Note V.16) 722,328 - 3,639,549 4,361,877Total assets continuously measured at fair value 1,088,92110,771,63010,727,342 22,587,893 Financial liabilities Item Level 1 Level 2 Level 3 TotalHeld-for-trading financial liabilities (see Note V,30) - 163,872563,070 726,942 Derivative financial liabilities (see Note V,31) - 309,743 - 309,743 Total liabilities continuously measured at fair value - 473,615563,070 1,036,685 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 144 XRelated Parties and Related-Party Transactions 1 Actual controller and its acting-in-concert parties Explanation of The Company’s Absence of Controlling Shareholders Mr. Li Dongsheng and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,276,684,768 shares in total and becoming the largest shareholder of the Company. As per Article 216 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 their interest in the limited liability company’s total capital or the joint stock company’s total number of shares. According to the definition above, the Company has no controlling shareholder or actual controller. 2 Related parties that do not control or are not controlled by the Company Information about such related parties： Company Name Relationship with the CompanyZhonghuan Feilang (Tianjin) Technology Co., Ltd. Joint ventureHuizhou TCLHuman Resources Service Co., Ltd. Joint ventureHuaxia CPV (Inner Mongolia) Power Co., Ltd. Joint ventureTianjin Huanyan Technology Co., Ltd. Joint ventureTianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) Joint ventureTCLHuanxin Semi-conductor (Tianjin) Co., Ltd. Joint venture’s subsidiaryMoxing Semi-conductor (Guangdong) Co., Ltd. Joint venture’s subsidiaryJiangsu Huanxin Semiconductor Co., Ltd. Joint venture’s subsidiaryAnhui TCLHuman Resources Service Co., Ltd. Joint venture’s subsidiaryPeer College Education Technology (Huizhou) Co., Ltd. Joint venture’s subsidiaryShanxi Shengwei Enterprise Management Co., Ltd. Joint venture’s subsidiaryAnhui Dangzhuo Enterprise Management Co., Ltd. Joint venture’s subsidiaryHubei Shifen Sharing Technology Co., Ltd. Joint venture’s subsidiaryMoxun Semiconductor Technology (Shanghai) Co., Ltd. Joint venture’s subsidiaryShenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. AssociateSunPower Systems International Limited AssociateShenzhen Jucai Supply Chain Technology Co., Ltd. AssociateMAXEONSOLARTECHNOLOGIES , PTE. LTDAssociateTianjin 712 Communication & Broadcasting Co., Ltd. AssociateInner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. AssociateShenzhen Tixiang Business Management Technology Co., Ltd. AssociateXinjiang Goens Energy Technology Co., Ltd. AssociateInner Mongolia Shengou Electromechanical Engineering Co., Ltd. AssociateTCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 145 XRelated parties and related-party transactions (continued) 2 The nature of related parties without control relationship (continued) TCLIntelligent Technology (Ningbo) Co., Ltd. AssociateAijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. AssociateZhihui Xinyuan Commercial (Huizhou) Co., Ltd. AssociateNingbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) AssociateNingbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) AssociateInner Mongolia Huanye Material Co., Ltd. AssociateRuihuan (Inner Mongolia) Solar Power Co., Ltd. AssociateZhonghuan Aineng (Beijing) Technology Co., Ltd. AssociateLGElectronics (Huizhou) Co., Ltd. AssociateWuxi TCLMedical Imaging Technology Co., Ltd. AssociateChina Innovative Capital Management Limited AssociateGetech Ltd. and its subsidiaries Associate and its subsidiariesTCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries Associate and its subsidiariesShenzhen Qianhai Qihang Supply Chain Management Co., Ltd. Associate’s subsidiarySunPower Systems Sarl Associate’s subsidiaryQihang International Import & Export Limited Associate’s subsidiaryQihang Import&Export Limited Associate’s subsidiaryJucai Supply Chain International (Hong Kong) Co., Ltd. Associate’s subsidiaryShenzhen Xirang International Network Information Technology Co., Ltd. Associate’s subsidiaryShanghai Tixiang Enterprise Management Consulting Co., Ltd. Associate’s subsidiaryElite Excellent Investments Limited Associate’s subsidiaryEsteem Venture Investment Limited Associate’s subsidiaryShenzhen Juchuang Zhilian Information Technology Co., Ltd. Associate’s subsidiaryHuixing Holdings Limited Associate’s subsidiaryMarvel Paradise Limited Associate’s subsidiaryUnion Dynamic Investment Limited Associate’s subsidiaryDalian Tixiang Enterprise Management Consulting Co., Ltd. Associate’s subsidiaryZiteng Intellectual Property Operation (Shenzhen) Co., Ltd. Associate’s subsidiarySunPower Malaysia Manufacturing Sdn.Bhd. Associate's subsidiaryHuizhou Yunxin Technology Co., Ltd. Associate’s subsidiaryShenzhen Junhe Supply Chain Co., Ltd. Associate’s subsidiaryShenzhen Wisteria Intellectual Property Agency Co., Ltd. Associate’s subsidiaryTCLIndustries Holdings Co., Ltd. and its subsidiaries Other relationshipsThunderbird Innovation Technology (Ningbo) Co., Ltd. Other relationshipsThunderbird Innovation Technology (Shenzhen) Co., Ltd. Other relationshipsCJSpeedex Logistics Co., Ltd. Significantly influenced by the Company’s senior managementTCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 146 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (1) Selling raw materials and finished goods to related parties Note 1 January - June 2023 January - June 2022 TCLIndustries Holdings Co., Ltd. and its subsidiaries 7,423,420 5,216,624SunPower Systems Sarl 880,716 1,031,484 SunPower Malaysia Manufacturing Sdn.Bhd. 643,867 171,070Qihang International Import & Export Limited 524,009 497,015 SunPower Systems International Limited 79,537 106,752 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 74,657 1,176,332 Qihang Import&Export Limited 54,082 - TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 51,496 16,015 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 25,237 4,680 Shenzhen Jucai Supply Chain Technology Co., Ltd. 4,647 688 Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 3,840 2,940 Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. 75 - Tianjin 712 Communication & Broadcasting Co., Ltd. 16 - Jiangsu Huanxin Semiconductor Co., Ltd. - 19,542 Getech Ltd. and its subsidiaries - 4,704 Moxing Semi-conductor (Guangdong) Co., Ltd. - 44 9,765,599 8,247,890 (2) Purchasing raw materials and finished products from related parties Note 2 January - June 2023 January - June 2022Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 2,329,164 2,230,372 Xinjiang Goens Energy Technology Co., Ltd. 1,890,773 2,464,489 TCLIndustries Holdings Co., Ltd. and its subsidiaries 701,382 440,420 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 661,064 154,854 Shenzhen Jucai Supply Chain Technology Co., Ltd. 626,214 607,566 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 172,513 89,991 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 119,831 70,157 Qihang Import&Export Limited 60,781 15,776 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 25,461 32,406 Getech Ltd. and its subsidiaries 11,666 12,062 Jucai Supply Chain International (Hong Kong) Co., Ltd. 2,776 1,126 TCLIntelligent Technology (Ningbo) Co., Ltd. 2,596 861 Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 401 - 6,604,622 6,120,080 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 147 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (3) Receiving funding from related parties Note 3 January - June 2023 January - June 2022Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 350,000 93 Shenzhen Jucai Supply Chain Technology Co., Ltd. 156,551 149,714 Qihang Import&Export Limited 23,016 36,860 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 22,025 52,452 Qihang International Import & Export Limited 16,823 19,047 Anhui TCLHuman Resources Service Co., Ltd. 13,667 6,148 Huizhou Yunxin Technology Co., Ltd. 11,448 - Shenzhen Juchuang Zhilian Information Technology Co., Ltd. 10,406 - Elite Excellent Investments Limited 9,082 5,412 Esteem Venture Investment Limited 5,619 40 Anhui Dangzhuo Enterprise Management Co., Ltd. 5,572 - Shenzhen Xirang International Network Information Technology Co., Ltd. 5,371 6,516 Peer College Education Technology (Huizhou) Co., Ltd. 4,063 3,744 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 3,058 27,985 Shanxi Shengwei Enterprise Management Co., Ltd. 2,948 3,808 Hubei Shifen Sharing Technology Co., Ltd. 2,246 85 Huizhou TCLHuman Resources Service Co., Ltd. 1,509 158 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 816 56,146 Huixing Holdings Limited 667 670 Marvel Paradise Limited 633 600 TCLIntelligent Technology (Ningbo) Co., Ltd. 564 - Union Dynamic Investment Limited 411 397 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 125 205 Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 33 33 Shanghai Tixiang Enterprise Management Consulting Co., Ltd. - 10,904 Shenzhen Tixiang Business Management Technology Co., Ltd. - 1,494 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. - 8 646,653 382,519 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 148 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (4) Leases January - June 2023 January - June 2022Rental income TCLIndustries Holdings Co., Ltd. and its subsidiaries 31,029 39,217 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 30,171 34,756 Inner Mongolia Huanye Material Co., Ltd. 9,668 - TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 2,752 - Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 439 439 Shenzhen Jucai Supply Chain Technology Co., Ltd. 427 414 Getech Ltd. and its subsidiaries 376 683 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 189 182 75,051 75,691 Rental expense TCLIndustries Holdings Co., Ltd. and its subsidiaries 33,563 28,999 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 4,926 2,581 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 703 1,120 Shenzhen Jucai Supply Chain Technology Co., Ltd. 70 137 39,262 32,837(5) Rendering or receipt of services January - June 2023 January - June 2022 Rendering of services 127,756 120,933Receipt of services 888,553 567,820TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 149 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (6) Receiving interest from or paying interest to related parties Note 3 January - June 2023 January - June 2022 Interest received 7,058 11,457Interest paid 2,319 8,387(7) Remuneration of key management personnel Note 4 January - June 2023 January - June 2022Remuneration of key management personnel 6,996 7,460 (8) Other related transactions 1. In May 2023, the Group signed an equity transfer agreement with TCLAce (Huizhou) Co., Ltd., a subsidiary of TCLIndustries Holdings Co., Ltd., to acquire 100% equity of Inner Mongolia TCL Optoelectronic Technology Co., Ltd. held by TCLAce (Huizhou) Co., Ltd. at a transaction price of RMB1,190.39 million. 2. In June 2023, the Group signed an equity transfer agreement with TCLFinancial Holding Group (Guangzhou) Co., Ltd., a subsidiary of TCLIndustries Holdings Co., Ltd., to acquire 100% equity of TCLFinancial Technology (Shenzhen) Co., Ltd. held by TCLFinancial Holding Group (Guangzhou) Co., Ltd. at a transaction price of RMB15,036,000. 3. In June 2023, the Group signed an equity transfer agreement with Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. to transfer 40% equity of Shenzhen Qianhai Sailing Supply Chain Management Co., Ltd. to Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. at a transaction price of RMB21,940,000. Note 1 Selling raw materials and finished products to related parties The Company sells raw materials, spare parts, auxiliary materials and finished goods to its joint ventures and associates at market prices, which are settled in the same way as non-related-party transactions. These related-party transactions have no material impact on the Company’s net profit^ but play an important role as to the Company’s continued operations. Note 2 Purchasing raw materials and finished products from related parties The Company purchases raw materials and finished goods from its joint ventures and associates at prices similar to those paid to third-party suppliers, which are settled in the same way as non-related-party transactions. These related-party transactions have no material impact on the Company’s net profit^ but play an important role as to the Company’s continued operations. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 150 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) Note 3 Providing funding for or receiving funding from related parties and corresponding interest received or paid The Company set up a settlement center in 1997 and TCLTech Finance Co., Ltd. in 2006 (together, the “Financial Settlement Center”). The Financial Settlement Center is responsible for the financial affairs of the Company, including capital operation and allocation. The Center settles accounts with the Company’s subsidiaries, joint ventures and associates and pays the interest. It also allocates the money deposited by the subsidiaries, joint ventures and associates in it to these enterprises and charges interest. The interest income and expense between the Company and the Center are calculated according to the interest rates declared by the People’s Bank of China. The funding amount provided refers to the outstanding borrowings due from the Center to related parties, while the funding amount received means the balances of related parties’ deposits in the Center. Note 4 Remuneration of key management personnel does not include share-based payment. Note 5 Transactions taken by TCLFinancial Technology (Shenzhen) Co., Ltd. with the Group between January and June 2023 are recorded into TCLIndustries Holdings Co., Ltd. and its subsidiaries.TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 151 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (1) Notes receivable June 30,2023 January 1,2023 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd.158 - 158 -(2) Accounts receivable June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 3,312,435 2,149,032 SunPower Systems Sarl 310,833 258,443 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 157,228 249,860 Qihang International Import & Export Limited 57,546 6,163 Qihang Import&Export Limited 42,410 36,224 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 22,235 12,651 Inner Mongolia Huanye Material Co., Ltd. 13,567 6,398 SunPower Systems International Limited 12,589 76,749 Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 6,690 - Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 5,286 -Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 2,055 1,522 Thunderbird Innovation Technology (Ningbo) Co., Ltd. 658 Shenzhen Jucai Supply Chain Technology Co., Ltd. 482 1,163 Getech Ltd. and its subsidiaries 344 281 Tianjin 712 Communication & Broadcasting Co., Ltd. 71 44 Huizhou Yunxin Technology Co., Ltd. 30 -Huaxia CPV (Inner Mongolia) Power Co., Ltd. 25 183 Shenzhen Junhe Supply Chain Co., Ltd. 15 -SunPower Malaysia Manufacturing Sdn.Bhd. 2 2 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 2 969 Tianjin Huanyan Technology Co., Ltd. - 289 MAXEONSOLARTECHNOLOGIES , PTE. LTD - 104 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. - 28 3,944,503 2,800,105TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 152 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (3) Accounts payable June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 1,694,814 1,311,176 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 1,169,450 699,954 Shenzhen Jucai Supply Chain Technology Co., Ltd. 191,890 268,519 Getech Ltd. and its subsidiaries 134,830 112,831 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 108,723 9,534 Qihang Import&Export Limited 92,731 73,130 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 89,886 63,818 Inner Mongolia Huanye Material Co., Ltd. 61,129 25,090 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 60,779 57,847 Qihang International Import & Export Limited 20,354 20,058 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 6,530 7,981 Jucai Supply Chain International (Hong Kong) Co., Ltd. 672 3,769 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 443 968 Shenzhen Xirang International Network Information Technology Co., Ltd. 324 - TCLIntelligent Technology (Ningbo) Co., Ltd. 173 - Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 109 10 Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. 45 - 3,632,882 2,654,685TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 153 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (4) Other receivables June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 129,006 576,402 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 21,940 218 Inner Mongolia Huanye Material Co., Ltd. 9,819 4,061 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 7,791 7,987 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 6,813 2,058 Getech Ltd. and its subsidiaries 5,211 3,994 Shenzhen Xirang International Network Information Technology Co., Ltd. 3,553 3,825 Zhonghuan Aineng (Beijing) Technology Co., Ltd. 3,101 3,101 Shenzhen Jucai Supply Chain Technology Co., Ltd. 2,786 1,725 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 856 15 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 743 - LGElectronics (Huizhou) Co., Ltd. 278 212 Anhui TCLHuman Resources Service Co., Ltd. 70 - TCLIntelligent Technology (Ningbo) Co., Ltd. 24 - Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 15 - Ruihuan (Inner Mongolia) Solar Power Co., Ltd. - 20,181 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. - 559 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries - 9 Wuxi TCLMedical Imaging Technology Co., Ltd. - 6 192,006 624,353TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 154 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (5) Other payables June 30,2023 January 1,2023Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 428,100 428,100 Shenzhen Jucai Supply Chain Technology Co., Ltd. 143,999 115,220 Getech Ltd. and its subsidiaries 123,209 166,525 TCLIndustries Holdings Co., Ltd. and its subsidiaries 107,247 81,858 Qihang Import&Export Limited 26,296 9,089 Anhui TCLHuman Resources Service Co., Ltd. 20,541 11,009 Qihang International Import & Export Limited 16,823 25,812 Shenzhen Xirang International Network Information Technology Co., Ltd. 11,103 3,124 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 9,317 9,317 Elite Excellent Investments Limited 9,082 8,762 Esteem Venture Investment Limited 5,619 5,416 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 5,574 5,564 Anhui Dangzhuo Enterprise Management Co., Ltd. 5,520 2,751 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 4,378 1,444 Peer College Education Technology (Huizhou) Co., Ltd. 4,166 3,881 Hubei Shifen Sharing Technology Co., Ltd. 2,247 85 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 2,091 1,924 Tianjin Huanyan Technology Co., Ltd. 1,982 - Shanxi Shengwei Enterprise Management Co., Ltd. 1,909 2,221 Huizhou TCLHuman Resources Service Co., Ltd. 1,519 2,515 Moxun Semiconductor Technology (Shanghai) Co., Ltd. 830 4,057 Huixing Holdings Limited 667 673 Marvel Paradise Limited 633 612 Union Dynamic Investment Limited 411 401 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 272 18,762 TCLIntelligent Technology (Ningbo) Co., Ltd. 164 75 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 151 449 Thunderbird Innovation Technology (Shenzhen) Co., Ltd. 144 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 114 - CJSpeedex Logistics Co., Ltd. 92 102 Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 66 66 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 55 55 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 45 45 Jucai Supply Chain International (Hong Kong) Co., Ltd. - 2,333 China Innovative Capital Management Limited - 29934,366 912,276 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 155 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (6) Non-current liabilities due within one year June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 19,058 19,555 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 7,646 4,972 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 1,210 957 27,914 25,484(7) Prepayments June 30,2023 January 1,2023Tianjin Huanyan Technology Co., Ltd.30,438 30,438Getech Ltd. and its subsidiaries 14,027 16,890Shenzhen Jucai Supply Chain Technology Co., Ltd.8,985 1,446Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd.7,525 - Huaxia CPV (Inner Mongolia) Power Co., Ltd.1,043 - Shenzhen Xirang International Network Information Technology Co., Ltd.1,014 1,416TCLIntelligent Technology (Ningbo) Co., Ltd.800 -TCLIndustries Holdings Co., Ltd. and its subsidiaries 670 75Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd.120 2,633Jucai Supply Chain International (Hong Kong) Co., Ltd.88 - Anhui Dangzhuo Enterprise Management Co., Ltd.5 - Xinjiang Goens Energy Technology Co., Ltd. - 8,386 64,715 61,284TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 156 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (8) Advances from customers June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 304 214 304 214 (9) Contract liabilities June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 6,734 56,969 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 67 - Huizhou Yunxin Technology Co., Ltd. 2 - Shenzhen Junhe Supply Chain Co., Ltd. 1 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. - 148,237 6,804 205,206(10) Lease liabilities June 30,2023 January 1,2023TCLIndustries Holdings Co., Ltd. and its subsidiaries 25,451 1,345 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 5,987 1,260 31,438 2,605TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 157 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (11) Deposits from related parties (note) June 30,2023 January 1,2023Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 350,022 300,086 Shenzhen Jucai Supply Chain Technology Co., Ltd. 156,794 132,615 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 22,034 15,382 Huizhou Yunxin Technology Co., Ltd. 11,449 - Shenzhen Juchuang Zhilian Information Technology Co., Ltd. 10,421 4,136 Shenzhen Xirang International Network Information Technology Co., Ltd. 5,374 11,956 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd. 3,064 20,735 Anhui TCLHuman Resources Service Co., Ltd. 1,675 1,637 Shanxi Shengwei Enterprise Management Co., Ltd. 1,058 978 TCLIntelligent Technology (Ningbo) Co., Ltd. 564 - Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 544 15,722 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 125 41,867 Jiangsu Huanxin Semiconductor Co., Ltd. - 42,553 Shanghai Tixiang Enterprise Management Consulting Co., Ltd. - 9,923 Shenzhen Tixiang Business Management Technology Co., Ltd. - 5,766 Dalian Tixiang Enterprise Management Consulting Co., Ltd. - 46 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. - 8 563,124 603,410These deposits are made by related parties in the Company’s subsidiary TCLTech Finance Co., Ltd. (12) Other non-current assets June 30,2023 January 1,2023Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. 168,448 216,468.00 Getech Ltd. and its subsidiaries 17,602 3,176.00 Shenzhen Wisteria Intellectual Property Agency Co., Ltd. 7,741 -Qihang International Import & Export Limited 4,052 -TCLIntelligent Technology (Ningbo) Co., Ltd. 1,085 - 198,928 219,644TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 158 XI Share-based payments 1 General conditions of share-based payment Total amount of each equity instrument granted by the Company in the current period 247,100Total amount of each equity instrument exercised by the Company in the current period -Total amount of the Company’s equity instruments that expired in the current period 3,520Range of exercise prices of the Company’s stock options outstanding and remaining contract term at the end of the period -Range of exercise prices of the Company’s other equity instruments outstanding and remaining contract term at the end of the period -(1) Employee Stock Ownership Plan (Phase II) 2021-2023 According to the Proposal on the Management Measures of the Company’s Employee Stock Ownership Plan (Phase II) 2021-2023 deliberated and adopted at the Second Extraordinary Meeting 2022, and the Proposal on the Company’s Employee Stock Purchase Plan (Phase II) 2021-2023 (Draft) adopted by the resolution of the of the 19th Meeting of the Seventh-term Board of Directors and the 14th Meeting of the Seventh-term Board of Supervisors; 32.6211 million shares were granted to no more than 3,600 awardees at the price of RMB4.35 on July 22,2022. In 2023, a total of 3,520,000 restricted shares granted by the Company became void due to the awardees’ resignation. (2) Employee Stock Ownership Plan (Phase III) 2021-2023 According to the Proposal on the Management Measures of the Company’s Employee Stock Ownership Plan (Phase III) 2021-2023 deliberated and adopted at the Second Extraordinary Meeting 2023, and the Proposal on the Company’s Employee Stock Purchase Plan (Phase III) 2021-2023 (Draft) adopted by the resolution of the 32nd Meeting of the Seventh-term Board of Directors and the 21st Meeting of the Seventh-term Board of Supervisors; 247.10 million shares were granted to no more than 3,600 awardees at the price of RMB3.94 on June 16,2023. The vesting arrangement of the restricted stock granted under the above incentive plan is shown in the following table: Number of times Vesting period and ratio First non-trade transfer or sale After 12 months from the date of vesting of the holder's respective quota of the underlying shares, the Shareholding Plan may decide whether to sell 50% of the shares or to transfer 50% of the holder's respective shares to the account of the holder of the Shareholding Plan, provided that such transfer and sales are then supported by the systems of SZSE and the Registration and Settlement Corporation; Second non-trade transfer or sale After 24 months from the date of vesting of the holder's corresponding quota of the underlying shares, the Shareholding Plan may decide whether to sell 50% of the shares or to transfer 50% of the holder's corresponding shares to the account of the holder of the Shareholding Plan provided that such transfer and sales are then supported by the systems of SZSE and the Registration and Settlement Corporation 2 Equity-settled share-based payments Method of determining the fair value of equity instruments on the date of grant The Group determined the fair value of equity instruments on the grant date based on the fair value of the shares. Basis for determining the number of exercisable equity instruments On each balance sheet date within the vesting period, the Group determines the best estimate based on the latest number of employees eligible to exercise their options, and revise the estimated number of exercisable equity instruments. Reasons for significant differences between current and previous estimates Not applicableAccumulated amount of equity-settled share-based payment included in capital reserve RMB52,466,000Total expense recognized for equity-settled share-based payments in the current period RMB25,907,0003 The Company has no cash-settled share-based payments. 4 The Company has no share-based payment modification or termination. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 159 XIICommitments 1 Capital commitments June 30,2023 January 1,2023 Contracted but not provisioned Note 119,260,93012,563,851Approved by Board but not Note 21,196,2603,248,000 20,457,19015,811,851 Note 1 The capital commitments under contractual obligations but not provided for in the current period primarily consisted of such commitments for construction of investment projects and external investments. Note 2 The capital commitments were approved by the Board but are not under contractual obligations in the current period primarily consisting of such commitments for CSOT’s LCD panel project. As of June 30,2023, apart from the disclosures above, there were no other major commitments that are required to be disclosed. XIIIContingencies Guarantees Provided for External Parties The guaranteed amount for related party bank loan, commercial drafts, letters of credit, etc. is RMB2,326,335,000. XIVEvents after Balance Sheet Date There are no significant non-adjusting events after the balance sheet date. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 160 XV Other Important Matters (I) 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 four reporting segments: the semi-conductor display business, the new energy photovoltaic and semi-conductor materials business, the distribution business and the other businesses. The Company's management regularly evaluates the operating results of these reporting segments to determine the allocation of resources and evaluate their performance. The Company’s four reporting segments are: (1) Semiconductor display business: mainly includes the research and development, manufacturing and sales of semiconductor display panels and semiconductor display modules, as well as complete display processing. (2) New energy photovoltaic and semiconductor materials business: mainly includes the manufacture and sales of semiconductor materials, semiconductor devices, new energy materials, and new energy; development, and operation of high-efficiency photovoltaic power station projects. (3) Distribution business: mainly includes the sales of computers, software, tablet computers, mobile phones and other electronic products. (4) Other businesses: other businesses besides the above, including industrial finance and investment business, technology development services and patent maintenance services provided by the company, etc. Segment assets include all current assets such as tangible assets, intangible assets, other long-term assets and receivables attributable to each segment. Segment liabilities include payables, bank loans and other long-term liabilities attributable to each segment. Segment operating results refer to the income generated by each segment (including external transactions income and inter-segment transaction income), net of expenses incurred by each segment, depreciation, amortization and impairment losses of assets attributable to each segment, gains or losses from changes in fair value, return on investment, non-operating income and income tax expenses. Transfer pricing of inter-segment income is calculated on terms similar to other foreign transactions. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 161 XIVOther Important Matters (Continued) (I) Segment reporting (continued) 2 Financial information of reporting segments For the six-month period ending June 30,2023 Semi-conductor display New energy photovoltaics and semi-conductor materials businessDistribution businessOther and offsets TotalRevenue 35,528,427 34,897,78913,812,825909,685 85,148,726 Gross profit (4,227,369) 5,377,407104,8511,035,895 2,290,784Income tax expense (778,497) 538,52726,144114,027 (99,799)Net profit (3,448,872) 4,838,880 78,707921,8682,390,583 Total assets 217,251,615 122,327,493 8,833,57932,911,805 381,324,492Total liabilities 144,644,005 63,920,179 7,364,03725,762,965 241,691,186 Other items - - - - -Depreciation and amortization 8,892,304 2,764,766 30,524 135,394 11,822,988 Capital expenditure 8,709,8007,696,786 - 58,76416,465,349 Net interest expense 454,816 551,20756,617816,373 1,879,013 For the six-month period ending June 30,2022 Semi-conductor display and materials business New energy photovoltaics and semi-conductor materials businessDistribution businessOther and offsets TotalRevenue 37,262,16231,698,33714,728,215833,46784,522,181Gross profit (2,750,561) 3,480,014165,175943,690 1,838,318 Income tax expense (477,736) 255,11446,91687,308 (88,398) Net profit (2,272,825) 3,224,900118,259856,382 1,926,716 Total assets 222,752,118 88,714,8348,228,82610,660,749 330,356,527 Total liabilities 145,828,388 43,905,7646,891,65414,592,438 211,218,244 Other items - - - - -Depreciation and amortization 7,868,6571,982,21315,9911,555,938 11,422,798 Capital expenditure 13,126,0314,963,363 - 162,24218,251,636Net interest expense 424,130384,45633,041839,9161,681,543TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 162 XVINotes to the key items presented in the financial statements of the Company 1 Accounts receivable June 30,2023 January 1,2023 Amount Ratio (%) AllowanceAccrua Ratio (%) Amount Ratio (%) Allowance PercentageWithin 1 year 365,925 100% 650.02% 353,877100% 65 0.02%2 Other receivables June 30,2023 January 1,2023 Dividends receivable 58,994 -Other receivables 5,445,169 4,961,948 5,504,163 4,961,948 (a) Nature of other receivables is analyzed as follows: June 30,2023 January 1,2023 Equity transfer receivables 22,550 470,628Current account with external entities - -Security and deposits 2,524 1,795Others 5,420,095 4,489,525 5,445,169 4,961,948(b) Allowance for doubtful other receivables is analyzed as follows: 12-month ECL Lifetime ECL (credit not impaired) Lifetime ECL (credit impaired) Total January 1,20231,075 - 31,718 32,793Accrued in current period - - - Reversal of current period (4) - (6) (10) Write-off of current period - - - - June 30,20231,071 - 31,712 32,783 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 163 XVINotes to Financial Statements of the Parent Company (Continued) 2 Other receivables (continued) (c) The aging of other receivables is analyzed as follows: June 30,2023 January 1,2023 Amount Ratio (%) Amount Ratio (%)Within 1 year 2,777,14250.70% 3,944,909 78.98%1 to 2 years 1,738,96431.74% 23,902 0.48%2 to 3 years 9,8450.18% 225,690 4.52%Over 3 years 952,00117.38% 800,240 16.02% 5,477,952100.00% 4,994,741 100% The outstanding other receivables were mostly current accounts with related parties. The top five other receivables of the Company amounted to approximately RMB4,559,160,000 (December 31,2022: RMB4,008,688,000), accounting for 83.23% of the total other receivables of the Company (December 31,2022: 80.26%). 3 Long-term equity investments June 30,2023 January 1,2023 Gross amount Allowance fordoubtful accountsCarrying amountGross amountImpairment allowance Carrying amountAssociates and joint ventures (1) 15,938,111 15,938,111 17,171,275 - 17,171,275Subsidiaries (2) 61,558,390 61,558,390 59,189,096 - 59,189,096 77,496,501 77,496,501 76,360,371 - 76,360,371 As of June 30,2023, there are no major restrictions on the realization of investment and the remittance of return on long-term equity investments. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 164 XVINotes to Financial Statements of the Parent Company (Continued) 3 Long-term equity investments (continued) (1) Associates and joint ventures Increase or decrease in current period June 30,2023 Opening balance Increase/decrease in investment in current periodInvestment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared cash dividends or profits Provision for impairment Other increases and decreases China Innovative Capital Management Limited 944,392 - (3,099) - - - - - 941,293 LGElectronics (Huizhou) Co., Ltd.89,772 - 9,143 - - (13,400) - - 85,515 Shenzhen Qianhai Qihang Supply Chain Management Co., Ltd.27,358 - (1,144) 274 - - - (26,488) 0 Shenzhen Tixiang Business Management Technology Co., Ltd.1,147 - 190 - - - 51,342 Shenzhen Jucai Supply Chain Technology Co., Ltd.15,273 - 1,7125 - - - - 16,990 Guangdong Innovative Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) 502,444338,0548,975 - - (19,937) - - 829,536 Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) 167,809 - 9,051 - - - - - 176,860 Xinxin Semiconductor Technology Co., Ltd.1,798,784 - (34,120) - - - - (1,764,664) 0 Huizhou TCLHuman Resources Service Co., Ltd.6,274 - - - - 6,641 TCLMicrochip Technology (Guangdong) Co., Ltd.285,281 - (35,200) - (16,915) - - - 233,166 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd.69,540 - (5,584) 650 - - - (261) 64,345 Bank of Shanghai Co., Ltd.12,809,374 - 718,10632,788 - (327,157) - - 13,233,111 Hubei Consumer Finance Co., Ltd. 166,077 - 6,967 - - - - - 173,044 Tianjin 712 Communication & Broadcasting Co., Ltd. 287,755 - 6,662 - - (2,548) - (115,598) 176,271 17,171,280338,054682,02633,717 (16,915) (363,042) - (1,907,006) 15,938,111 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 165 XVINotes to Financial Statements of the Parent Company (Continued) 3 Long-term equity investments (continued) (2) Subsidiaries Direct shareholdingratio (%) Opening balanceIncrease in the periodDecrease in the period June 30, 2023TCLChina Star Optoelectronics Technology Co., Ltd.79.17% 33,780,853268,400 - 34,049,253TCLTechnology Group Finance Co., Ltd.82% 1,256,003 - - 1,256,003TCLTechnology Group (Tianjin) Co., Ltd.100% 15,000,000 - - 15,000,000TCLZhonghuan New Energy Technology Co., Ltd.2.55% 1,752,635177,098 - 1,929,733TCLCulture Media (Shenzhen) Co., Ltd.100% 361,414 - - 361,414Xinjiang TCLEquity Investment Ltd.100% 200,000 - - 200,000Huizhou Sailuote Communication Co., Ltd.100% 110,000 - - 110,000Highly Information Industry Co., Ltd.66.46% 107,296 - - 107,296TCLCommunication Equipment (Huizhou) Co., Ltd.75% 79,500 - - 79,500TCLMedical Radiological Technology (Beijing) Co., Ltd.100% 58,497 - - 58,497Shenzhen TCLStrategic Equity Investment Fund Partnership (Limited Partnership) 100% 71,009 - - 71,009TCLIndustrial Technology Research Institute, Ltd. (Europe) 100% 20,000 - - 20,000Wuhan TCLIndustrial Technology Research Institute, Ltd.100% 20,000 - - 20,000Shenzhen TCLHigh-Tech Development Co., Ltd.100% 20,000 - - 20,000Beijing HAWKCloud Information Technology Co., Ltd.100% 20,000 - - 20,000Huizhou Hongsheng Science and Technology Development Co., Ltd.100% 1,000 - - 1,000Tianjin Silica Material Technology Co., Ltd.100% 2,800,000 - - 2,800,000Xiamen TCLTechnology Industrial Investment Co., Ltd.100% 211,000108,448 - 319,448TCLInternet Technology (Shenzhen) Co., Ltd.100% 15,000 - - 15,000Ningbo TCLEquity Investment Ltd.100% 300,000 - 300,000TCLTechnology Investments Limited 100% 2,988,293 - - 2,988,293Huizhou Dongshen Jia’an Equity Investment Partnership (Limited Partnership) 99.94% 10,000 - 10,000 TCLFinancial Technology (Shenzhen) Co., Ltd.100% 15,036 - 15,036 Zhonghuan Advanced Semiconductor Materials Co., Ltd.7.5%1,790,312 - 1,790,312 Equity incentives of subsidiaries —— 16,596 - - 16,596 59,189,0962,369,294 - 61,558,390For the registered capital of subsidiaries and the Company's equity interests in the subsidiaries, see Note VII. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 166 XVINotes to Financial Statements of the Parent Company (Continued) 4 Investments in other equity instruments June 30,2023 January 1,2023Equity of unlisted companies 5,0005,0005 Other non-current financial assets June 30,2023 January 1,2023Equity investments 454,654431,023Debt investments 763,699 -6 Operating income and operating costs January - June 2023 January - June 2022 Revenue Operating costRevenue Operating cost Core business 433,463 431,097339,768 333,523Non-core business 302,951 73,107249,803 78,878 736,414504,204589,571 412,4017 Return on investment January - June 2023 January - June 2022Profit from holding and disposal of debt instruments at fair value through profit or loss 104,795 140,452Gain on disposal of derivative financial assets/liabilities 4,637 -Dividends from subsidiaries 713,047 9,292,231Share of profit of associates for current period 716,859 701,530Share of profit of joint ventures for current period (34,833) (11,328)Net income from disposal of long-term investments 284,242 484,6721,788,747 10,607,557As of June 30,2023, there were no significant restrictions on the collection of return on investment. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 167 XVINotes to Financial Statements of the Parent Company (Continued) 8 Net cash generated from operating activities Net cash used in operating activities of the Company was (RMB4,547,241,000). 9 Ending balance of cash and cash equivalents Cash and cash equivalents at end of the period of the Company was RMB12,628,472,000. 10 Contingent liabilities As of June 30,2023, the contingent liabilities not provided for in the financial report were as follows: June 30,2023 January 1,2023 Guarantees for bank loans of subsidiaries 46,798,594 42,748,105 Guarantees such as trade notes, letters of credit and letters of guarantee for subsidiaries 21,592,043 17,329,299 Guarantees for bank loans, trade notes, letters of credit, etc. of related parties 2,326,335 3,137,934TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 168 XVIIComparative Figures Certain comparative data have been reclassified to comply with the presentation of the current period. XVIIINon-recurring profit and loss items and amount January - June 2023 January - June 2022 Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) 321,753 464,268 Government grants through profit or loss (exclusive of government grants given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) 1,267,259 429,923The profits or losses generated from changes in fair value arising from holding marketable financial assets and marketable financial liabilities, as well as the investment-related income from the disposal of marketable financial assets, marketable financial liabilities and available-for-sale financial assets, except for the effective hedging business related to the Company’s normal business operation. (42,740) (11,164)Reversal of provision for impairment of receivables that have been individually tested for impairment 2,500 10,180 Non-operating income and expenses other than the above 707,421 538,585Income tax effects (364,522) (47,766)Non-controlling interests effects (951,111) (93,634) Non-recurring gains and losses attributable to ordinary shareholders of the parent company 940,560 1,290,392 The Company recognizes non-recurring gain and loss items in accordance with the provisions of (2008) No.43 Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gain/Loss (2008) issued by the China Securities Regulatory Commission. XIXWeighted Average Return on Equity (ROE) and Earnings per Share (EPS) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1 to June 30,2023 (RMB’000) 169 The Company calculates the ROE and EPS as follows in accordance with "the Compilation Rules No.9 for Information Disclosure of Companies Offering Securities to the Public-Calculation and Disclosure of Return on Equity and Earnings per Share (Revised in 2010)" issued by the China Securities Regulatory Commission and relevant provisions of accounting standards: Item Reporting period Net profit attributable to the parent company for the reporting period Weighted average return on equity (%) Earnings per share (RMB yuan)Basic earnings per share Diluted earnings per share Net profit attributable to ordinary shareholders of the Company 340,4930.67% 0.0184 0.0181Net profit attributable to ordinary shareholders of the Company before non-recurring gains and losses (600,067) -1.19% -0.0324 -0.0320Company Name: TCLTechnology Group Corporation Date: August 29,2023 The financial statements and the notes thereto from to are signed by: Legal representative: Li Dongsheng Person in charge of financial affairs: Li Jian Accounting Person in charge of the accounting department: Peng Pan