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  • TCL科技:2022年半年度报告(英文版)

    日期:2022-09-10 20:27:26
    股票名称:TCL科技 股票代码:000100
    研报栏目:定期财报  (PDF) 5570K
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    TCLTechnology Group Corporation Interim Report 2022 1 TCL科技集团股份有限公司TCLTechnology Group Corporation INTERIMREPORT 2022 August 26,2022 TCLTechnology Group Corporation Interim Report 2022 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 person-in-charge of the Company, Ms. Li Jian, the person-in-charge of financial affairs (Chief Financial Officer), and Mr. Xi Wenbo, the person-in-charge of the financial department (Chief Accountant), 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 report. 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 has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. TCLTechnology Group Corporation Interim Report 2022 3 Table of Contents Part IImportant Notes, Table of Contents and Definitions ....................................2 Part IICorporate Information and Key Financial Information ............................6 Part IIIManagement Discussion and Analysis ........................................................9 Part IVCorporate Governance ................................................................................31 Part VEnvironmental and Social Responsibility ...................................................33 Part VISignificant Events ........................................................................................41 Part VIIChanges in Shares and Information about Shareholders ......................56 Part VIIIBonds .........................................................................................................62 Part IXFinancial Report ..........................................................................................67 TCLTechnology Group Corporation Interim Report 2022 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 the Company’s announcements and documents that were disclosed to the public during the Reporting Period. TCLTechnology Group Corporation Interim Report 2022 5 Definitions Term Refers to Definition The “Company”, the “Group”,“TCL”,“TCLTech.” or “we” Refers to TCLTechnology Group Corporation The “Reporting Period”, “current period” Refers to The period from January 1,2022 to June 30,2022. TCLCSOTRefers to TCLChina Star Optoelectronics Technology Co., Ltd. TCLZhonghuan Refers to TCLZhonghuan Renewable Energy Technology Co., Ltd., a majority-owned subsidiary of the Company listed on the Shenzhen Stock Exchange (stock code: 002129.SZ) TPCRefers to Tianjin Printronics Circuit Corporation, a majority-owned subsidiary of the Company listed on the Shenzhen Stock Exchange (stock code: 002134.SZ) Wuhan CSOTRefers to Wuhan China Star Optoelectronics Technology Co., Ltd. Guangdong Juhua Refers to Guangdong Juhua Printed Display Technology Co., Ltd. Jiutian Liancheng Refers to Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) Highly Refers to Highly Information Industry Co., Ltd., a majority-owned subsidiary of the Company listed on the National Equities Exchange and Quotations (stock code: 835281) Moka Technology Refers to Moka International Limited Semiconductor materials Refers to Materials with electrical conductivity between conductors and insulators. Monocrystalline silicon Refers to Single-crystal silicon in which the silicon atoms are structured periodically and made of high-purity polycrystalline silicon by the Czochralski (CZ) and float zone (FZ) method. Polycrystalline silicon Refers to Polycrystal of silicon composed of silicon grains at a certain size, in which each silicon grain has a different crystalline orientation. High-purity polysilicon used to prepare monocrystalline silicon is primarily purified from metallurgical-grade polysilicon by the improved Siemens method. P-type Refers to P-type monocrystalline silicon created by adding trivalent elements (such as boron) to replace silicon atoms in the production process of monocrystalline silicon. N-type Refers to P-type monocrystalline silicon created by adding pentavalent elements (such as phosphorus) to replace silicon atoms in the production process of monocrystalline silicon. Polished wafer Refers to Silicon wafer obtained through cutting, grinding, and polishing. Epitaxial wafer Refers to Semiconductor silicon wafer formed through the epitaxial process on the polished wafer. 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 of TCLCSOT t4 Refers to The generation 6 (or G6) flexible LTPS-AMOLED panel production line of TCLCSOT t5 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 of TCL CSOT t7 Refers to The generation 11 (or G11) new ultra-high-definition (UHD) TFT-LCD and AMOLED production line of TCLCSOT t9 Refers to The generation 8.6 (or G8.6) new oxide semiconductor production line of Guangzhou CSOT t10 Refers to The generation 8.5 (or G8.5) TFT-LCD production line of Suzhou China Star Optoelectronics Technology Co., Ltd. GWRefers to Gigawatt, power unit for solar cells,1GW = 1,000 megawatts G12 Refers to 12-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 TCLTechnology Group Corporation Interim Report 2022 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. (if any) TCL科技 Company name in English (if any) TCLTechnology Group Corporation Abbr. (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 change occurred to the registered address, office address and their zip codes, website address and email address of the Company during the Reporting Period. Please refer to the Annual Report 2021 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 change occurred to the newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for lodging such reports during the Reporting Period. Please refer to the Annual Report 2021 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 restated datum in the table below. √ Yes □ No Reasons for retroactive adjustment or restatement TCLTechnology Group Corporation Interim Report 2022 7 Change of accounting policy H12022 H12021 Change Before adjustment After adjustment After adjustment Revenue (RMB) 84,522,181,12874,298,646,75874,405,849,03913.60% Net profit attributable to the company’s shareholders (RMB) 663,522,8716,783,884,8076,802,218,487 -90.2% Net profits attributable to the company’s shareholders before non-recurring gains and losses (RMB) -626,869,3855,497,817,947 5,516,151,627 -111.36% Net cash generated from operating activities (RMB) 9,016,635,74313,895,714,157 13,895,714,157 -35.11% Basic earnings per share (RMB/share) 0.04890.5026 0.5040 -90.30% Diluted earnings per share (RMB/share) 0.04850.4835 0.4848 -90.00% Weighted average return on equity (%) 1.71% 18.96% 19.01% Decrease by 17.3 percentage points year on year End of the Reporting Period December 31,2021 Change Before adjustment After adjustment After adjustment Total assets (RMB) 330,356,529,181308,733,133,305308,987,970,9156.92% Owners’ equity attributable to the company’s shareholders (RMB) 39,024,099,35843,034,234,61143,103,580,799 -9.46% Reasons for change in accounting policies and correction of accounting errors In accordance with the Interpretation No.15 of the Accounting Standards for Business Enterprises issued by the Ministry of Finance, the Company implemented related requirements and retroactively adjusted relevant items of the financial statements at the beginning of the year and the same period of the previous year. Such change in accounting policy has no material impact on the Company’s financial position and operating results. Total share capital at the end of the last trading session before the disclosure of this Report: Total share capital at the end of the last trading session before the disclosure of this Report (share) 14,030,642,421 Fully 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) 0.0473 V. 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 There were no differences in the net profit and equity reported by the Company under CAS and IFRS during the Reporting Period. 2. Differences in Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable √ Not applicable There were no differences in the net profit and equity reported by the Company under CAS and Foreign Accounting Standards during the Reporting Period. 3. Reasons for Accounting Data Differences Above □ Applicable √ Not applicable TCLTechnology Group Corporation Interim Report 2022 8 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) 464,268,004 Government 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) 429,923,376 The 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. -11,163,893 Reversal of provision for impairment of receivables that have been individually tested for impairment 10,179,957 Non-operating income and expenses other than the above 538,584,560 Less: Corporate income tax 47,765,551 Non-controlling interests (net of tax) 93,634,197 Total 1,290,392,256 Details 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. Note 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. TCLTechnology Group Corporation Interim Report 2022 9 Part IIIManagement Discussion and Analysis I. Main businesses of the Company during the reporting period 1. Overview In the first half of the year affected by factors such as intensifying geopolitical conflicts, rising inflationary pressures, and multiple waves of COVID-19 outbreaks across the world, the demand in end market remained sluggish and the global economy slowed down significantly. The complex and changing political and economic situation has further impacted the high-tech industry and driven the transformation of energy structures. In response to these changes, the Company laid out its business in the pan-semiconductor industry on a basis of semiconductor display, new energy photovoltaics, and semiconductor materials, strengthened its risk management and control, and secured the bottom line of operation with ultimate cost efficiency to improve comparative competitiveness and pursue sustainable high-quality development. During the reporting period, the Company achieved an operating revenue of RMB84.52 billion, a year-on-year increase of 13.6%; a net profit of RMB1.93 billion, a year-on-year decrease of 79.3%; and a net profit of RMB660 million attributable to the shareholders of listed companies, a year-on-year decrease of 90.2%. The Company saw decreased profits primarily due to overall sluggish demand for display terminals, sharp decline in orders from key regional markets and customers caused by geopolitical conflicts, and significantly lower prices of major products than that at the same period of last year. The net profit of the Company's semiconductor display business decreased by RMB8.9 billion year on year. In terms of its new energy photovoltaic business, the Company seized the promising opportunities of the industry, fully utilized its leading advantages in products and process technology, and accelerated the construction of advanced capacity. In terms of its semiconductor material business, the Company continued to diversify its product and customer structure, with both production and sales increasing significantly. TCLZhonghuan achieved an operating income of RMB31.7 billion, a year-on-year increase of 79.7%, and a net profit of RMB3.225 billion, a year-on-year increase of 68.4%, with rapidly increased proportion of contribution to the Company's performance. The Company has recently begun working with its partners to launch a project of 100,000 tons of granular silicon and silicon-based materials and a project of 10,000 tons of electronic grade polycrystalline silicon, enabling the Company to coordinate industrial chain resources and secure the supply of major materials on the upstream. Building long-term competitive advantages based on the technological innovation-driven TCLTechnology Group Corporation Interim Report 2022 10 business development. During the reporting period, the Company invested RMB5.25 billion in R&D, a year-on-year increase of 3.65%. The Company filed a total of 475 new international patent applications under the PCT, for a total of 14,526 applications filed. The Company has increased R&D investment in the semiconductor display business by focusing on new display technologies such as printed OLED, QLED, and Micro-LED, and made breakthroughs in key technologies and materials such as flexible displays, near-to-eye displays, and basic chemicals. The Company's patent applications for quantum dot electroluminescence technology and materials reached 2,033, ranking second in the world. The Company has developed a series of proprietary technologies and expertise with independent intellectual property rights in the field of new energy photovoltaics and semiconductor materials. The Company's market share of G12 large silicon wafers and high-efficiency N-type silicon wafers ranked first in the world, leading the upgrade of thin-wafer and thin-line process technology in the photovoltaic industry. Optimizing product and customer structures, growing market shares, and balanced development of overall business structure. In the semiconductor display sector, the first product of the high-end t9 production line has been launched and the expansion project for G6 LTPS has been constructed as planned, improving the balance of the Company's capacity layout. In the first half of this year, the Company's shipments of e-sports MNTs and LTPS tablets ranked first in the world, its shipment of LTPS laptops ranked second in the world, and its shipment of LTPS vehicle screen ranked top five in the world. Its product portfolio has been continuously optimized. The Company's total capacity of photovoltaic materials reached 109GW, and its market share of silicon wafers external sales ranked first in the world. It is expected that the Company's crystal capacity will exceed 140GW by the end of 2022, becoming the largest manufacturer of photovoltaic monocrystalline silicon in the world. The capacity scale and market share of the Company's imbricated modules have been steadily improved. The Company has further enhanced its global competitiveness by strengthening its synergistic advantage with MAXEON. The Company continued to optimize its total solution for semiconductor materials, doubling its year-on-year growth in the shipment of 8-12 inch polished wafers and epitaxial wafers. Building a digital and industry 4.0 platform while pioneering cutting-edge intelligent manufacturing technology. Through the deep integration of intelligence, digitization, and advanced manufacturing in the semiconductor display business, the Company has driven the continuous improvement of processes, greatly improved manufacturing efficiency, and realized the dynamic management of the whole production process and the product lifecycle. The Company has adopted a lean management model combined with industry 4.0 manufacturing in its new energy photovoltaics business, significantly increasing the flexible manufacturing capability and quality assurance. The TCLTechnology Group Corporation Interim Report 2022 11 Company's monthly output of single furnaces, number of wafers per kilogram, man-machine ratio, and other indicators have been continuously optimized. TCLZhonghuan Yinchuan's phase 6 single-crystal plant has increased its man-machine ratio to 384 units per person in the crystal drawing process, realizing personnel efficiency far above the industry average. Driving the entire value chain towards green and low-carbon development through a people-oriented approach, and constantly exploring harmonious coexistence and sustainable development. Upholding a green development model, the Company has promoted the low-carbon process in both the production and consumption process. TCLCSOT and other major businesses improve the utilization of clean energy by building photovoltaic power generation systems on plant roofs. New display technologies such as HVA,1G1D, and LTPO can effectively reduce the power consumption of consumer products while improving image quality. TCLZhonghuan has accelerated the production and manufacturing of new energy photovoltaic materials, strengthened the national industrial layout with Inner Mongolia, Tianjin, and Jiangsu as manufacturing bases, and reduced the integrated cost of global energy transformation through R&D and innovation. Looking forward, the increasing restructuring of the global economy will pose both opportunities and challenges to the high-tech industry. The increasing competition in the semiconductor display industry will optimize the industry layout in the long run and recover earnings. We will comprehensively consider the industrial chain layout and resource investment in new energy photovoltaics to achieve more sustainable and stable development while choosing the opportunity to expand related field layout based on our experience in semiconductor materials. We will continue to implement the business strategy of “improving operating quality and profitability, consolidating advantages and improving disadvantages, accelerating global layout, and promoting innovation-driven development”, stick to the bottom line of extreme cost efficiency, and strengthen risk control capabilities and adaptability to drive high-quality development. 2. Operation of main businesses Based on the semi-conductor display business, new energy photovoltaic and semi-conductor materials as the main business, the Company continue to optimize its business structure, and further focus on its main businesses, to achieve the strategic goal of global leadership in its two core industries. TCLTechnology Group Corporation Interim Report 2022 12 (I) Semiconductor display business Under the influence of international political conflicts and the COVID-19 pandemic, the recovery of the global economy has been slow, downstream consumer demand has remained sluggish, the semiconductor display industry fell at the bottom of the industry cycle, and the prices of major products have significantly lowered compared to the same period of last year. During the reporting period, TCLCSOT achieved a total of sales area of 22.496 million square meters, a year-on-year increase of 26.4%, and achieved a revenue of RMB37.26 billion from the semiconductor display business, a year-on-year decrease of 8.81%, with a loss of RMB2.27 billion. In order to meet these challenges, the Company took adopted extreme cost-effectiveness as the bottom line of operations and improved its business structure to enhance risk control and resilience capacity in this economic cycle. In its large-size product business, TCLCSOT has consolidated its leading position in TV panels with a high-end product strategy, and gradually increased its proportion of commercial displays such as interactive whiteboards, digital signs, and video walls. The t1, t2, t6, and t10 plants maintained efficient operations, and the t7 plant has ramped up as scheduled. The Company's TV panel market share ranked second in the world,55-inch and 75-inch product market share ranked first in the world,65-inch product market share ranked second in the world, and 8K and 120Hz high-end TV panel market share ranked first in the world by a firm margin. The Company has accelerated the adjustment of its product structure, with revenue from non-TV businesses rising to 25%, becoming the core supplier for leading customers in terms of commercial display markets such as interactive whiteboards, digital signs, and TV walls. The Company's market share of interactive whiteboards has risen to first in the world. In its medium-size product business, TCLCSOT has accelerated the expansion of new business such as IT and vehicle screen products while improving the distribution of production capacity to create a new growth engine. In order to meet market and customer needs, the Company improved the ordering of its medium-sized product and customer structure based on the optimization TCLTECH. Semi-conductor display New energy photovoltaic & Semi-conductor materials Industrial finance & investment Other TCLCSOTChina Ray Zhonghuan Photovoltaic Zhonghuan Advanced TCL Financial TCL Capital Highly TPC Juhua Moka Technology TCLMicrochip Xinhuan / Xinhua TCLTechnology Group Corporation Interim Report 2022 13 of existing capacity, and achieved a rapid growth in high-end IT segments. The company's e-sports display market share ranked first in the world, LTPS laptop shipments ranked second in the world, and shipment of LTPS tablets ranked first in the world. The Company achieved breakthroughs in multiple key vehicle screen customers, with both shipment volume and revenue scale increasing significantly. Revenue from t3 non-mobile products also increased by 56%. The t9 production line, which is positioned in the new business layout of medium-sized IT and vehicle-mounted products has launched its first product. The G6 LTPS production line constructed as planned. After commissioning, the overall capacity and competitiveness of LTPS will rank first in the world, making further breakthroughs in the medium-sized business strategy of the Company. In its small-size product business, TCLCSOT focused on foldable and other technologies while expanding VR/AR new displays to optimize its product and customer structure. The shipment volume of LTPS mobile panels from the t3 production line remained the fourth highest in the world. The independently developed industry-leading 1512 PPILCD-VR screens are expected to achieve SoP and shipment to brand customers in September. The t4 production line was still under pressure due higher R&D costs and fixed expenses for the scaling of capacity during the early stage. However, the development of new technologies and products such as foldable OLEDs, under-screen cameras, LTPOs, and narrow bezels has progressed smoothly. This has acquired many brand customers, diversified the product portfolio and customer resources, and laid a foundation for subsequent business enhancement. In the long run, the growth of large-size display production capacity will decrease and further optimization of the competitive landscape will continue. The industry will accelerate its restructuring, old capacity will continue to be eliminated, and leading manufacturers will take the initiative in cutting down on production. With gradually reducing capacity at the supply side and the recovery of demand, the industry is expected to rebound. TCLCSOT will further optimize its business portfolio, increase the proportion of high-end large-size products, improve the product layout for medium-size products, improve the business situation for small-size products, and accelerate its transformation from a leader in large-sized displays to a cutting-edge enterprise covering all display sizes. The Company will pursue efficiency in its operations and continue to improve its comparative competitive advantages in the industry. (II) New energy photovoltaic and semiconductor materials business Driven by the accelerated transformation of the global energy structure, demand in the photovoltaics industry has experienced explosive growth. The demand for semiconductor materials has also maintained rapid development as China has continued the independent development of its domestic semiconductor manufacturing industry. The new energy photovoltaics and TCLTechnology Group Corporation Interim Report 2022 14 semiconductor material industries have fully utilized their leading technological advantages, accelerated the construction of advanced production capacity, and are continuing to improve operating efficiency, results in sharp growths in both revenue and performance. During the reporting period, TCLZhonghuan achieved an operating revenue of RMB31.70 billion, a year-on-year increase of 79.7%, and earned a net profit of RMB3.225 billion, a year-on-year increase of 68.4%. 1. New energy photovoltaics business Accelerating advanced capacity building, strengthening industrial collaboration, and realizing rapid and high-quality business growth. During the reporting period, the capacity scale and market share of TCLZhonghuan in new energy photovoltaic materials grew rapidly, with capacity increasing to 109GW and the advanced capacity maintaining a leading global position. Sales scale increased by 24% year-on-year, market share of G12 silicon wafers ranked first in the world, and the market share of high-efficiency N-type monocrystalline silicon wafers ranked first in the world. Shingled PV modules with patent advantages have also achieved a rapid growth in production capacity. The production capacity of the G12 high-efficiency shingled PV module project in Jiangsu has reached 8GW, while the production capacity of the G12 high-efficiency shingled PV module project (Phase I) in Tianjin has reached 3GW. Based on the future design for the next generation of differentiated battery technology, the Company has completed the construction of an automated and intelligently industry-leading G12 battery engineering demonstration line with an annual capacity of 2GW. The Company has also strengthened its strategic cooperation with ecosystem partners and acquired the upstream core resources in advance to further consolidate its competitive advantages in non-silicon materials and manufacturing costs while enhancing its control in key links and value nodes alongside the industrial chain. Increasing the monthly production capacity per furnace, leading thin-wafer and thin-line trends, and continuously improving the efficiency of the photovoltaics industry based on long-term technology accumulation and process optimization. During the reporting period, the Company's monthly output of silicon rods per furnace increased by 19%, while the consumption rate of silicon materials per unit product decreased by 6% year on year. The Company continued to lead the industry in the thin-line standards and achieved SoP of 150um p-type and 130um n-type products with manufacturing efficiency significantly ahead of the industry. Relying on an industry 4.0 intelligent manufacturing platform, the Company has established a flexible cooperation model with the upstream and downstream to effectively meet the differentiated needs of customers for p-type and n-type batteries, and further improved the production and sales scale and product quality of the Company's products. 2. Semiconductor materials business TCLTechnology Group Corporation Interim Report 2022 15 Semiconductor material business adopts the Total Solution, to significantly increasing production and sales by following a dual development route (characteristic technology and advanced processes control), continuously improving product and customer structure. Driven by the zone melting and direct-pulling process, the Company has engaged in intensive power + IC development. During the reporting period, the Company achieved full coverage of 8-inch and below mainstream products, completed SoP of 12-inch products below 28nm, ensuring the provision of a full series solutions for global customers. The shipped area of polished wafer and epitaxial wafer products increased by 76.2% year-on-year, of which the shipment of 8-inch and 12-inch products increased by 107% year-on-year. Operating revenue increased by 79.9% year-on-year, achieving a leading position in the Chinese market. The Company will seize the opportunities of the development of the semiconductor industry and continue to diversity its product and customer structure to improve the scale of production capacity. By the end of this year, the Company expects to reach a production capacity of 900,000,1,000,000, and 300,000 pieces per month for 6-inch,8-inch, and 12-inch products respectively. The Company will also continue to improve its layout in the new energy photovoltaics and semiconductor industries, and constantly enhance industrial chain synergy and supply chain stability. The Company and its partners have recently jointly invested in the construction of a project with an annual output of around 100,000 tons of granular silicon and silicon-based materials, along with a project with an annual output of 10,000 tons of electronic grade polycrystalline silicon. This will realize the vertical expansion of the industrial chain and enhance the Company's leading position in the new energy photovoltaics and semiconductor materials business. The Company also invested in Xinxin Semiconductor, and jointly promoted resources in overseas markets to horizontally expand its business layout in semiconductor materials. The company will continue to focus on the overall semiconductor strategy of semiconductor display, new energy photovoltaic and semiconductor materials,adopting the principle of “improving operating quality and profitability, consolidating advantages and improving disadvantages, accelerating global layout, and promoting innovation-driven development” to constantly improve its core competitiveness, achieve high-quality development, and become a leading global high-tech industry group. II. Analysis of core competitiveness In 2022, TCL upgraded its corporate culture and put forward a new mission of “leading technology and mutually beneficial cooperation”. In the future, TCL will continue to strengthen 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 TCLTechnology Group Corporation Interim Report 2022 16 cooperation. Now, the Company has developed a business structure based on semi-conductor display devices, new energy photovoltaic and semi-conductor materials. The Company, with a clear development path, efficient operation and distinct culture, and professional operation, is constantly improving its core competitiveness and abilities in sustainable development. Leading in scale: rapid growth of production capacity and improvement of value chain layout As a global leading enterprise in semiconductor display and a pioneer in independent line construction in the domestic display field, the Company has brought the aggregation effect into full play through the centralized production line layout and continues to expand production capacity through endogenous growth and external acquisition; through the construction of two 8.5-gen lines, TCLCSOT has gained a firm foothold in the field of TV panels; subsequently, two 6-gen lines successfully introduce small-size panels, and the shipment has exceeded 10%; in recent years, through the investment and construction of two 11-gen lines and the acquisition of Suzhou Samsung Factory t10 production line, we have further expanded our large-sized production capacity and kept a leading position for large-sized panels in the world; Last year, the Company invested in the construction of t9 production lines for high value-added IT, commercial display and other medium-sized products to speed up full-size strategic layout. TCLHuaxing has actively extended the value chain and further enhanced its position and profitability by expanding the production capacity of internally developed modules and acquiring the Moka Technology and Samsung module plants. The Company's core competitive advantage based on scale and supply chain synergy will be further strengthened, while its industry position and comprehensive competitiveness will be further enhanced. The t9 production line has launched its first product and is ready to be put into production, while the production expansion (t5) project of the 6-gen LTPS production line has progressed as planned. This will ensure that the TCLCSOT's production line layout will be more balanced and the business structure will be further optimized. 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 accelerated the vertical layout of the industrial chain and continuously improved its upstream capacity for technological innovation. The Company, focusing on basic materials, next-generation display materials, key equipment in new techniques and other fields for its ecological layout, has constructed a TCL ecosystem within the display field, so as to establish its leading advantage based on next generation display technology, and its high-tech value continues to be enhanced. TCLTechnology Group Corporation Interim Report 2022 17 The "National Printing and Flexible Display Innovation Center" of Guangdong Juhua under the Company, is the only national innovation center in the display field within China, and has built a global leading public platform for G4.5 printed display R&D, integrating industrial chain resources from all links including materials, techniques, processes and application verification. In addition, the Company will continue to invest in Micro-LED display technology, so as to promote the Company's ecological layout in this field from materials, techniques, equipment, and production line solutions to independent intellectual property, and develop a process flow solution for Micro-LED commercial SoP. Leading in management: adopting extreme cost efficiency across the cycle with relative competitiveness While establishing market scale, technology, and ecosystems advantages, the Company has also taken the lead in efficiency and benefit indicators. Since beginning operations in 2011, TCLCSOT has weathered several rounds of sharp fluctuation cycles in the display industry with extreme cost efficiency and lean management. Through the synergistic effect of centralized factories, the Company gives full play to the efficiency of its production line layout and capacity increase, further improving the activation and product scheduling efficiency with advantages in industrial chain integration and locking in strategic customers, promoting end-to-end cost and expense control through refined management and extreme efficiency cost measures, so as to build its relative competitiveness in the industry. Despite the severe industry situation in 2022, TCLCSOT will continue to improve efficiency and effectiveness indicators across the cycle of industry development. New strategic growth engine: seizing development opportunities in conjunction with the rapid development of semiconductors and photovoltaics Relying on the Company's long-term management expertise in technology- intensive, capital-intensive, and long-term industries, TCLZhonghuan developed its business rapidly through institutional reform, optimizing capital structure, stimulating organizational vitality, and releasing growth potential. Both operating revenue and profits have grown significantly In the first half of 2022, the Company implemented a series of strategic operation measures such as industry coordination, operation efficiency optimization, and management experience empowerment. TCLZhonghuan gradually enhanced its abilities in strategy, operation, and resource allocation. Driven by the factors of high industry prosperity and rapid expansion of production capacity, TCLZhonghuan has further consolidated its leading position in the industry, realized high-quality and rapid growth performance, and gradually grown into one of the main engines for performance growth of TCLTechnology. With an inexhaustible source of development power, the TCLTechnology Group Corporation Interim Report 2022 18 two tracks converge to make the Company a leader in the development of the global science and technology industry. Upgrading of organizational culture: The mission of “leading technology and mutually beneficial cooperation” drives the Company into a new development stage At the beginning of 2022, the Company put forward the 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 the construction of a 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. We will uphold the concept of sustainable development based on a people-oriented approach, while promoting mutually beneficial development. We are dedicated to the environmental friendliness, employee engagement, social trust, as well as the harmonious development between humanity, nature, and society. We will also work with stakeholders to build an open and mutually beneficial industry ecosystem and value healthy competition and integrated development on a basis of open cooperation and mutually beneficial development with partners. III. Core Business Analysis Overview Whether it is the same as the disclosure of the main business of the Company during the reporting period √ Yes □ No See relevant contents in “I. Main businesses of the Company during the reporting period”. Year-on-year changes in key financial data: Unit: RMB H12022 H12021 Change (%) Reason for change Revenue 84,522,181,128 74,405,849,039 13.60% Cost of sales 76,522,943,51958,068,971,004 31.78% Primarily due to the increase in the scale of TCLZhonghuan's operating revenue Selling expenses 1,053,369,277 901,175,67616.89% Administrative expenses 1,716,379,375 2,023,367,685 -15.17% Financial expenses 1,720,157,252 1,818,982,875 -5.43% Income tax expense -88,397,5441,416,496,913 -106.24% Primarily due to the decrease in tax payments as the semiconductor display business affected by the industry cycle R&D investments 5,252,157,387 5,067,168,130 3.65% TCLTechnology Group Corporation Interim Report 2022 19 Net cash generated from operating activities 9,016,635,743 13,895,714,157 -35.11% Primarily due to the decrease in operating cash flows as the semiconductor display business affected by the industry cycle Net cash used in investing activities -17,613,551,791 -20,963,137,286 15.98% Net cash generated from financing activities 9,930,162,074 13,396,966,630 -25.88% Net increase in cash and cash equivalents 1,594,616,564 6,285,295,538 -74.63% Primarily due to the year-on-year decrease in operating cash flows and financing cash flows 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: Unit: RMB H12022 H12021 Change (%) Amount As % of total revenue (%) Amount As % of total revenue (%) Total 84,522,181,128100% 74,405,849,039100% 13.60% By operating division Semi-conductor display 37,262,161,64644.09% 40,863,496,89754.92% -8.81% New energy photovoltaic 31,698,336,74137.50% 17,644,418,98623.71% 79.65% Distribution business 14,728,215,43217.43% 14,450,787,00119.42% 1.92% Other businesses and internally offset accounts 833,467,3090.98% 1,447,146,1551.95% -42.41% By product category Semi-conductor display devices 37,262,161,64644.09% 40,863,496,89754.92% -8.81% New energy photovoltaic & semi-conductor materials 31,698,336,74137.50% 17,644,418,98623.71% 79.65% Distribution of electronics 14,728,215,43217.43% 14,450,787,00119.42% 1.92% Other businesses and 833,467,3090.98% 1,447,146,1551.95% -42.41% TCLTechnology Group Corporation Interim Report 2022 20 internally offset accounts By operating segment Mainland China 57,379,449,518 67.89% 48,121,871,530 64.67% 19.24% Overseas (including Hong Kong) 27,142,731,610 32.11% 26,283,977,509 35.33% 3.27% Operating division, product category or region contributing over 10% of revenue or operating profit √ Applicable □ Not applicable Unit: RMB Revenue Cost of sales Gross profit margin Change in revenue (%) Change in cost of sales (%) Change in gross profit margin (%) By operating division Semi-conductor display 37,262,161,64635,813,110,134 3.89% -8.81% 23.66% -25.24% New energy photovoltaic 31,698,336,74126,089,723,84517.69% 79.65% 86.33% -2.95% Distribution business 14,728,215,43214,126,968,9654.08% 1.92% 0.98% 0.89% By product category Semi-conductor display devices 37,262,161,64635,813,110,134 3.89% -8.81% 23.66% -25.24% New energy photovoltaic & semi-conductor materials 31,698,336,74126,089,723,84517.69% 79.65% 86.33% -2.95% Distribution of electronics 14,728,215,43214,126,968,9654.08% 1.92% 0.98% 0.89% By operating segment Mainland China 57,379,449,518 51,272,091,91910.64% 19.24% 27.65% -5.89% Overseas (including Hong Kong) 27,142,731,610 25,250,851,6006.97% 3.27% 41.04% -24.92% Core business data in the recent term restated according to the changed methods of measurement that occurred in the Reporting Period □ Applicable √ Not applicable IV. Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB Amount As % of gross profit Source Sustainability Asset impairment 1,010,286,54754.96% Primarily due to falling price of inventory write-offs in line with market No TCLTechnology Group Corporation Interim Report 2022 21 Non-operating income 596,539,61832.45% Primarily government grants and others No Non-operating expense 52,391,5462.85% Not applicable No V. Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB End of the Reporting Period December 31,2021 Change in percentage (%) Notes on significant changes Amount Proportion of total assets Ratio Amount As % of total assets Monetary assets 33,795,516,751 10.23% 31,393,692,48510.16% 0.07% No significant change Accounts receivable 19,085,232,9245.78% 18,238,782,2475.90% -0.12% No significant change Contract assets 275,287,800 0.08% 233,528,7860.08% 0.00% No significant change Inventories 14,025,004,1314.25% 14,083,356,9184.56% -0.31% No significant change Investment property 793,033,485 0.24% 761,902,2360.25% -0.01% No significant change Long-term equity investments 26,665,070,350 8.07% 25,640,578,2458.30% -0.23% No significant change Fixed assets 116,788,925,376 35.35% 113,723,758,876 36.81% -1.46% No significant change Construction in progress 43,418,950,154 13.14% 37,029,504,222 11.98% 1.16% No significant change Right-of-use assets 2,094,665,349 0.63% 2,426,911,2080.79% -0.16% No significant change Short-term borrowings 14,811,740,4954.48% 9,341,426,5433.02% 1.46% Optimization of the debt structure Contract liabilities 4,367,690,585 1.32% 2,593,882,0040.84% 0.48% No significant change Long-term borrowings 96,482,487,828 29.21% 87,279,081,95528.25% 0.96% Increase in financings Lease liabilities 1,156,827,073 0.35% 1,102,071,8130.36% -0.01% No significant change 2. Major Assets Overseas □ Applicable √ Not applicableTCLTechnology Group Corporation Interim Report 2022 22 3. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Item Beginning amount Gain/loss on fair-value changes in the Reporting Period Cumulative fair-value changes recorded in equity Impairment allowances established in the Reporting Period Amount purchased in the Reporting Period Amount Amount sold in the Reporting Period Other changes Ending amount Financial assets 1. Held-for-trading financial assets (excluding derivative financial assets) 10,305,293,789 -139,785,390 0 6,366,157,772 6,428,042,157 10,103,624,014 2. Derivative financial assets 70,928,566 -1,176,11657,779,395 360,895,990488,427,835 3. Receivables financing 2,217,638,736 6,210,1412,223,848,877 4. Investments in other equity instruments 927,319,447 -9,967,351 5,640,000 1,356,500 5,899,966 927,535,562 Subtotal of financial assets 13,521,180,538 -140,961,506 47,812,044 6,371,797,772 6,429,398,657 373,006,097 13,743,436,288 Financial liabilities 947,240,307 -255,456,349 216,143,583 1,456,380,469 1,385,671,352 442,164,057 1,420,800,715 Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No TCLTechnology Group Corporation Interim Report 2022 23 4. Restricted Asset Rights as at the Period-End Restricted assets Carrying amount (RMB’0,000) Reason for restriction Monetary assets 43,209 Deposited in the central bank as the required reserve Monetary assets 168,711 Other restricted monetary assets Notes receivable 27,856 Pledge Fixed assets 8,603,286 As collateral for loan Intangible assets 318,405 As collateral for loan Held-for-trading financial assets 3,473 Put in pledge for loan Right-of-use assets 2,826 As collateral for lease Accounts receivable 101,812 Pledge Contract assets 15,038 Pledge Total 9,284,615 -- VI. Investments Made 1. Total Investment Amount √ Applicable □ Not applicable Total investment amount in the Reporting Period (RMB) Total investment amount in the same period of last year (RMB) Change (%) 21,824,233,38518,214,544,74319.82% 2. Major Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable TCLTechnology Group Corporation Interim Report 2022 24 4. Financial Investments (1) Securities Investments √ Applicable □ Not applicable Unit: RMB'0,000 Security type Securities code Securities Abbreviation Initial investment cost Measurement method Beginning carrying amount Gain/loss on fair-value changes in the Reporting Period Cumulative fair-value changes recorded in equity Purchased in the Reporting Period Amount sold in the Reporting Period The “Reporting Period”, “current period” Profit and loss Ending carrying amount Accounting title Funding source Stocks 300842.SZ DKElectronic Materials, Inc. 2,430 Fair value 48,644 -5,972000 -5,97242,672 Other non-current financial assets Self-funded Stocks 688728.SHGalaxycore Inc.4,284 Fair value 19,692 -615000 -61519,077 Other non-current financial assets Self-funded Stocks 0860.HKWesolutions Inc.18,926 Fair value 10,1310 -2,1240008,008 Investments in other equity instruments Self-funded Bonds USG9328DAM2 3 VEDANTA RESOURCES LTD 7,757 Fair value 9,341 -13301,1982,8812587,960 Held-for-trading financial assets Self-funded Bonds USY39690AA30 INDIKAENERGY CAPITALIV 2,788 Fair value - -20407,3432,342 -164,949 Held-for-trading financial assets Self-funded Bonds USG61759AA70 MN MINING/ENERGYRESOURC 3,391 Fair value 4,321 -95601,0940 -6554,691 Held-for-trading financial assets Self-funded Bonds XS2082380515 ANTON OILFIELDSERV GRP/ 6,645 Fair value 4,794 -2960498631 -1014,605 Held-for-trading financial assets Self-funded Bonds XS0240295575 REPUBLICOF IRAQ 3,254 Fair value 4,221 -488000 -263,939 Held-for-trading Self-funded TCLTechnology Group Corporation Interim Report 2022 25 financial assets Bonds XS2335327388 EHICAR SERVICESLTD 5,396 Fair value 7,742 -1,718002,622 -2,1163,673 Held-for-trading financial assets Self-funded Bonds XS2205566206 VLL INTERNATIONALINC 3,691 Fair value 3,434 -137000 -193,473 Held-for-trading financial assets Self-funded Other securities investments held at the period-end 406,113 -- 155,576 -7,04132 193,520264,643 -11,48472,478 -- -- Total 464,676 -- 267,895 -17,559 -2,092 203,653273,118 -20,746175,524 -- -- Disclosure date of the board announcement approving the securities investments April 28,2022 Disclosure date of the general meeting announcement approving the securities investments (if any) May 20,2022 TCLTechnology Group Corporation Interim Report 2022 26 (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB'0,000 Funding source Mostly foreign-currency revenue Legal matters involved (if applicable) Not applicable Disclosure date of the board announcement approving the derivative investments (if any) April 28,2018 Disclosure date of the general meeting announcement approving the derivative investments (if any) Not applicable Analysis of risks and control measures associated with derivative investments held in Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) In order to effectively manage the exchange and interest rate risks of foreign currency assets, liabilities and cash flows, the Company, after fully analyzing the market trend and predicting the operation (including orders and capital plans), adopts forward foreign exchange contracts, options and interest rate swaps to avoid future exchange rate and interest rate risks. As its business scale changes subsequently, the Company will adjust the exchange rate risk management strategy according to the actual market conditions and business plans. Risk analysis: 1. Market risk: the financial derivatives business carried out by the Group belongs to hedging and trading business related to main business operations, and there is a market risk of loss due to the fluctuation of underlying interest and exchange rates, which lead to the fluctuation of prices of financial derivatives; 2. Liquidity risk: the derivatives business carried out by the Group is an over-the-counter transaction operated by a financial institution, and there is a risk of loss due to paying fees to the bank for liquidating or selling the derivatives below the buying prices; 3. Performance risk: the Group conducts the derivative business based on rolling budgets for risk management, and there is a risk of performance failure due to deviation between the actual operating results and budgets; 4. Other risks: in the case of specific business operations, if the operator fails to finish the prescribed procedures for report or approval, or fails to record the financial derivative business information accurately, promptly and completely, it may result in loss of derivative business or trading opportunities. Moreover, if the trading operator fails to fully understand the terms of transaction contracts or product information, the Group will face the legal risks and transaction losses therefrom. Measures taken for risk control: 1. Basic management principles: the Group strictly follows the hedging principle mainly for the purposes of fixing costs and avoiding risks. It is required that the financial derivatives business to be carried out align with the variety, size, direction and duration of spot goods, and no speculative trading should be involved. In the selection of hedging instruments, only simple financial derivatives that are closely related to the main business operation and meet the requirements of hedge accounting treatment should be selected, and complex business beyond the prescribed business scope or difficult to recognize in terms of risk and pricing shall be avoided; 2. The Group has formulated a special risk management system tailored to the risk characteristics of the financial derivatives business, covering all key aspects such as preemptive prevention, in-process monitoring and post-processing. It reasonably allocates professionals for investment decision-making, business operation 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 operation and risk management system of derivatives. Before starting the derivatives business, the holding company must submit to the competent department of the Group detailed business reports including its internal approval, main product terms, operational necessity, preparations, risk analysis, risk management strategy, fair value analysis and accounting methods, and special summary reports on business operated. Operation is only allowed upon the approval of the functions under the Group; 3. Relevant departments should track the changes in the open market price or fair value of financial derivatives, timely assess the risk exposure changes of invested financial derivatives, and make reports to the board of directors on business development; 4. When the combined fair value impairment of the Company's traded derivatives and the changes in the value of assets (if any) used for risk hedging results in a total loss or floating loss amount to reach 10% of the Company's audited net profit attributable to the shareholders of the listed company in the latest year and the absolute amount exceeds RMB10 million, the Company shall disclose it in a timely manner. Changes in market prices or fair value of derivative investments in With the rapid expansion of overseas sales, the Company keeps following the above rules in the operation of forward foreign exchange contracts, interest rate swap contracts and futures TCLTechnology Group Corporation Interim Report 2022 27 Reporting Period (fair value analysis should include measurement method and related assumptions and parameters) contracts to avoid and hedge foreign exchange risks arising from operation and financing. The profit and loss during the reporting period was RMB69.09 million. The fair value of derivatives is determined by real-time quoted price of the foreign exchange market, based on the difference between the contractual price and the forward exchange rate quoted immediately in the foreign exchange market on the balance sheet date. Major changes in accounting policies and specific accounting principles adopted for derivative investments in Reporting Period compared to last reporting period No significant change Opinion of independent directors on derivative investments and risk control In view of the fact that certain raw materials of the core business of the Company are purchased overseas, a wide range of settlement currencies is involved. The Company reduces exchange losses and locks transaction costs by reasonable financial derivatives, which helps to reduce risk control costs and improve company competitiveness. Risks are effectively controlled as the Company has taken series of measures such as conducting a rigorous internal evaluation for the operation of financial derivatives business, establishing a corresponding regulatory mechanism, formulating reasonable accounting policies and specific accounting principles, setting limits for risk exposure management, and operating simple financial derivatives. The contracting agent for financial derivatives business of the Company is a sound financial agent with good credit standing. We are of the opinion that the financial derivatives transactions carried out by the Company in the first half of 2022 were closely related to the daily operation needs of the Company with controllable risks in line with the interests of the Company and minority shareholders and the relevant provisions of relevant laws and regulations. Unit: RMB'0,000 Type of contract Beginning amount Ending amount Gain/loss in Reporting Period Ending contractual amount as % of the Company’s ending net assets Contractual amount Actual amount Contractual amount Actual amount Contractual amount Actual amount 1. Forward forex contracts 1,736,17561,4062,242,21182,261 6,909 18.820.69 2. Interest rate swaps 415,69612,471353,69113,1272.970.11 Total 2,151,87173,8772,595,90195,3886,90921.790.8 5. Use of Funds Raised □ Applicable √ Not applicable The Company did not use the funds raised during the Reporting Period. VII. Sale of Major Assets and Equity Investments 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Investments □ Applicable √ Not applicable VIII. Principal Subsidiaries and Joint Stock 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 Type of change Principal activity Registered capital Total assets Net assets Revenue Operating profit Net profit TCLChina Star Optoelectronics Technology Subsidiary Semi-conductor display RMB30.468 billion 21,866,7687,551,717 3,242,988 -317,069 -263,195 TCLTechnology Group Corporation Interim Report 2022 28 Co., Ltd. TCL Zhonghuan New Energy Technology Co., Ltd. Subsidiary New energy photovoltaic & semi-conductor materials RMB3.232 billion 8,871,483 4,480,907 3,169,834 349,581 322,490 Highly Information Industry Co., Ltd. Subsidiary Distribution business RMB0.412 billion 822,883 133,7171,472,822 16,680 11,826 Acquisition and disposal of subsidiaries in the reporting period √ Applicable □ Not applicable Company Name How subsidiary was obtained or disposed of in the Reporting Period Effects on overall operations and operating performance Zhonghuan Advanced Semiconductor (Tianjin) Co., Ltd. Newly incorporated No significant effect Huanou (Wuxi) New Energy Materials Co., Ltd. Newly incorporated No significant effect Huaian Municipal Huanxin New Energy Co., Ltd. Newly incorporated No significant effect Lingwu Huanju New Energy Co., Ltd. Newly incorporated No significant effect Inner Mongolia Zhonghuan Electronic Materials Co., Ltd. Newly incorporated No significant effect Tianjin Zhonghuan Industrial Park Co., Ltd. Newly incorporated No significant effect Tianjin Huanrui Technology Co., Ltd. Newly incorporated No significant effect Shaanxi Huanyu Green New Energy Co., Ltd. Newly incorporated No significant effect Shaanxi Huanshuo Green New Energy Co., Ltd. Newly incorporated No significant effect Xi'an Shangpai Technology Co., Ltd. Newly incorporated No significant effect Tongliao Guangdong New Energy Co., Ltd. De-registered No significant effect Description of Principal Subsidiaries and Joint Stock Companies Affected by the panel industry cycle, TCLCSOT, a subsidiary of the Company, experienced a significant year-on-year decline in its performance. For details, please refer to "Section IIIManagement Discussion and Analysis". IX. Structured Bodies Controlled by the Company □ Applicable √ Not applicable TCLTechnology Group Corporation Interim Report 2022 29 X. Risks Facing the Company and Countermeasures 1. Risk of Macroeconomic Fluctuations In recent years, changes to the global trade, technology, and financial environment have impacted the development of China's economy and enterprises, as well as the global economy. The Russia-Ukraine war has raised the risk of a split in the global economy, which may lead to multiple geopolitical groups with different technical standards, cross-border payment systems, and reserve currencies. The macroeconomic situation of both China and the world has grown increasingly uncertain as a result of a series of unfavorable factors, such as the Russia-Ukraine war, the COVID-19 pandemic, the slowdown of global economy, and intensified inflation. In this context, the Company will continue to carry out conduct in-depth research on macroeconomic trends and their impact. Based on China’s idea of a new “development pattern in which domestic economic cycle plays a leading role while international economic cycle remains its extension and supplement”, the Company will keep focusing on the professional operation strategies for the main business, endeavor to consolidate advantages and improve disadvantages, improve abilities, and catch up. The Company will drive the rapid development of its new energy and semiconductor business to minimize the negative impact of macroeconomic factors on the basis of maintaining the global leading advantages of TCLCSOT's balanced market development, optimized product portfolio, and rich customer structure. 2. Risk of Industry Climate Fluctuations Due to the impact of the COVID-19 pandemic and the Russia-Ukraine war, the recovery of global consumption demand has remained sluggish. The impact has been further transmitted to the upstream, which has had a significant impact on panel demand and shipments. The panel industry is in a downward cycle, and the development of the panel industry will remain stagnant. The Company will analyse in depth the trends of changes in industry supply and demand relations, predict production capacity allocation in advance, and increase R&D investment so as to create high barriers to competition and broaden the business moat through the continuous improvement of products’ technological content and added value as well as the constant expansion of the Company’s scale and benefit advantages. The Company will also increase its investments in new energy photovoltaics and semiconductors to effectively reduce the impact of economic fluctuations in the panel industry and further consolidate its leading position. 3. Risks Caused by Changes in Consumer Demand The application scenarios of end consumers are also changing. For example, the aging population continues to grow worldwide, and the needs of the elderly for the differentiated scenarios of smart products are getting more attention. Under the consensus of "carbon neutrality", a new TCLTechnology Group Corporation Interim Report 2022 30 demand trend for low-carbon concepts such as paperless and recyclable electronic products has been shaped. If the Company cannot keep creating new products in line with the demand of downstream applications, its business growth may also be hindered. The Company will continue to focus on the needs of the industry and end customers, conduct in-depth research on mainstream customers in the industry, continuously increase R&D investment, and use product technology innovation as the core driving force to optimize business structures 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 Risks Competition has become increasingly fierce in the semiconductor display and materials industry. As the Company keeps expanding its business scale and technological layout, patent disputes may arise from time to time, and intellectual property risks become increasingly obvious. The Company will continue to maintain high-intensity R&D investment, continuously enhance the professional capabilities of the 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 also will keep perfecting the intellectual property management and protection mechanism, and strengthen risk-involved patent investigation, enhance patent risk early warning, reduce risk-involved patent threats, and comprehensively mitigate intellectual property risks through strategic cooperation with external professional institutions on intellectual property. TCLTechnology Group Corporation Interim Report 2022 31 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 2022 Extraordinary general meeting 22.26% April 29,2022 April 30,2022 All proposals were adopted. Please refer to the Notice on the 1st Extraordinary General Meeting of Shareholders in 2022 disclosed on on April 30,2022 (Notice No.: 2022-045) The 2021 Annual General Meeting Annual general meeting 22.12% May 19,2022 May 20,2022 All proposals were adopted. Please refer to the Notice on Resolutions of General Meeting of Shareholders in 2021 disclosed on on May 20, 2022 (Notice No.: 2022-051) Note: The above investor participation ratio is the share proportions of investors who attended the meeting to the Company’s total shares (excluding the treasury shares that have been repurchased). 2. Extraordinary General Meetings Convened at the Request of Preference 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 Liu Kun Non-executive Director Former April 12,2022 Resigned as a non-executive director of the Company due to job adjustment Lin Feng Non-executive Director Elected April 29,2022 Nominated by Wuhan Optics Valley Industrial Investment Co., Ltd., a shareholder with an >3% stake in the Company 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 1. Equity Incentives □ Applicable √ Not applicable 2. Implementation of Employee Stock Ownership Plan √ Applicable □ Not applicable TCLTechnology Group Corporation Interim Report 2022 32 All the valid employee stock ownership plans during the Reporting Period Name Scope of employees Number of employees Total amount of shares held Changes Proportion to total share capital of listed companies Funding source for implementing the plan The Third Global Partner Plan The Company's middle and senior management and outstanding key staff 1,800 43,859,649 shares Not applicable 0.31% The Company's special incentive fund for 2020 2021-2023 Employee Stock Ownership Plan (Phase I) The Company's middle and senior management and outstanding key staff 3,600 113,143,154 shares Not applicable 0.81% The Company's special incentive fund for 2021 Shareholdings of Directors, Supervisors and Senior Management under the Employee Stock Ownership Plan during the Reporting Period Name Office title Beginning amount in the Reporting Period Ending amount in the Reporting Period Proportion to total share capital of listed companies Li Dongsheng Chairman of the Board and CEO 24,656,600 shares 22,729,900 shares 0.16% Du Juan Director Jin Xuzhi Director, Senior Vice President Liao Qian Director, Board Secretary and Senior Vice President Wang Cheng COO Li Jian CFO Yan Xiaolin Senior Vice President, CTO 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 3. Other Employee Incentives □ Applicable √ Not applicable TCLTechnology Group Corporation Interim Report 2022 33 Part VEnvironmental and Social Responsibility I. Major Environmental Issues Whether the listed company and its subsidiaries are major polluters announced by the environmental protection department √ Yes □ No Name of the Company or subsidiary Major pollutants Way of discharge Number of discharge outlets Distribution of discharge outlets Discharge concentration (mg/L) Governing discharge standards (mg/L) Total discharge (metric ton) Approved total discharge (metric tons/year) Excessive discharge Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. COD Intermittently discharged to Guangming Sewage Plant 1 Southeast corner of the plant 70mg/L 110mg/L 306.6t / Not applicable Ammonia nitrogen 4mg/L 30mg/L 17.52t / Not applicable COD 1 Beside the East No.2 gate of the plant 70/L 110mg/L 255.5t / Not applicable Ammonia nitrogen 5mg/L 30mg/L 18.25t / Not applicable Wuhan China Star Optoelectronics Technology Co., Ltd. COD Intermittently discharged 1 Southwestern corner of the plant 40 mg/L 400 mg/L 128.83t 353.55t Not applicable Ammonia nitrogen Intermittently discharged 1 Southwestern corner of the plant 2.4 mg/L 30 mg/L 12.88t 35.36t Not applicable Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. COD Intermittently discharged 1 Northeastern corner of the plant 33 mg/L 400 mg/L 121.74t 570.8t Not applicable Ammonia nitrogen Intermittently discharged 1 Northeastern corner of the plant 2.8 mg/L 30 mg/L 12.17t 57.1t Not applicable TianJin Zhonghuan Advanced Material&Technology Co., Ltd. Wastewater: COD, ammonia nitrogen, other characteristic pollutants (total nitrogen, total phosphorus, pH value, suspended matter, BOD5, flow, fluoride, petroleum) Organized 1 General discharge outlet As per emission standard DB12/356- 2018 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicable Tianjin Huan'Ou Semiconductor Material&Technology Co., Wastewater: COD, ammonia nitrogen, other characteristic Organized 1 General discharge outlet As per emission standard DB12/356- 2018 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicable TCLTechnology Group Corporation Interim Report 2022 34 Ltd. pollutants (total nitrogen, total phosphorus, pH value, suspended matter, BOD5, flow, fluoride, petroleum) Inner Mongolia Zhonghuan Solar Material Co., Ltd. Waste gas: Particulate matter, nitrogen oxides, VOCs, fluoride Wastewater: COD, ammonia nitrogen, other characteristic pollutants (total phosphorus, pH, suspended matter, BOD5, fluoride) Organized, unorganized Multiple General discharge outlet, plant area, and roof of production workshop As per emission standard GB16297- 1996 Comprehensive Air Pollutant Emission Standard, GB8978- 1996 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicable Zhonghuan Advanced Semiconductor Materials Co., Ltd. Wastewater: COD, ammonia nitrogen, other characteristic pollutants (fluoride, total nitrogen, total phosphorus, suspended matter, pH, BOD5) Organized 1 General discharge outlet As per emission standard GB/T 31962 Water Quality Standard for Sewage Discharged into Urban Sewers GB8978- 1996 Comprehensive Sewage Discharge Standard Not exceeding Standard Not applicable Huansheng Solar (Jiangsu) Co., Ltd. Wastewater: COD, ammonia nitrogen, other characteristic pollutants (fluoride, total nitrogen, total phosphorus, suspended matter, pH) Organized 1 General discharge outlet Discharged according to the standard GB 30484- 2013 Discharge Standard for Battery Industry Pollutants Not exceeding Standard Not applicable Wuxi Wastewater: Organized 1 General Discharged GB 30484- Not Standard Not TCLTechnology Group Corporation Interim Report 2022 35 Zhonghuan Applied Materials Co., Ltd. COD, ammonia nitrogen, other characteristic pollutants (total nitrogen, total phosphorus, suspended matter, pH) discharge outlet according to the standard 2013 Discharge Standard for Battery Industry Pollutants exceeding applicable Construction and operation of facilities for preventing pollution: During the Reporting Period, an advanced sewage management system was established by the Company and its subsidiaries, and regular monitoring and supervision and inspection mechanisms were adopted to ensure the waste water, waste gas, solid waste and factory noises generated during the operation were emitted and treated according to national and local laws and regulations. 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. Environmental Impact Assessment on Construction Projects and Other Environmental Protection Administrative Licenses The Company complies with the laws and regulations of environmental impact assessment on construction projects and other environmental protection administrative licenses, and promptly reports the operation situation to the provincial and municipal environmental protection regulatory authorities. Emergency Response Plan for Environmental Incidents The Company has prepared an environmental emergency response plan, which has been filed with the local environmental protection administration in accordance with relevant government laws and regulations, and has set up an environmental incident emergency organization led by the senior management. In addition, regularly staff training and emergency drills are delivered for accurately and promptly responding to environmental incidents according to the plan. Environmental Self-Monitoring Program The Company has formulated an environmental self-monitoring program in accordance with government regulations, and monitors the discharge of pollutants by automatic monitoring or manual monitoring performed by a qualified third-party agency. The monitoring plans and annual monitoring reports can be checked on the key environmental monitoring information platform managed TCLTechnology Group Corporation Interim Report 2022 36 by local environmental authorities or subsidiary websites. Administrative punishments received with respect to environmental issues in the Reporting Period: Name of the Company or subsidiary Reasons for punishment Violations Punishment results Effects on the production and operation of listed companies Rectification measures of the Company Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Other environment-related information that should be disclosed TCLTechnology discloses the content of environmental information through its annual ESG report. Measures taken to reduce its carbon emissions and their effects during the Reporting Period √ Applicable □ Not applicable To meet the challenges of global climate change and actively respond to the national requirements of “peak carbon” and “carbon neutrality” (the “dual carbon” goals), TCLTechnology firmly adopts to the green development path and is committed to achieving green operation, energy saving and, emission reduction in all aspects of the Company's operation. TCLTechnology has effectively reduced the carbon emissions for its business by continuously improving the energy management system, increasing the utilization of renewable energies, building a green supply chain, and enhancing employees' low carbon awareness. TCLTechnology actively expands its green industry, and has been developing its photovoltaic new energy industry through TCLZhonghuan in response to climate change. In the first half of 2022, Wuhan CSOT conducted carbon calculations by employing a professional third-party agency, identified its carbon emissions, pushed the ISO 14064 certification of greenhouse gases, formulated the Company's carbon neutrality strategic plan, and further clarified its dual carbon goals and action path in the future. In addition, the Company has the completed commissioning and grid connection of its photovoltaic project. It is estimated that the power generation in 2022 will reach at least 8 million KWH. The Company has purchased 70 million KWH of clean energy (electricity) in 2022 to continuously implement carbon emission reduction. In order to achieve energy saving and emission reduction, TCLZhonghuan has been focusing on the improvement, optimization, and upgrade of production equipment and technology, along with the R&D and replacement of new materials. The Company’s production bases use technical, management, and structural means to achieve energy conservation, and reduce power consumption and related carbon emissions through improvement in waste heat recovery, air conditioning and refrigeration, natural resource utilization, and improvement of equipment energy efficiency. The Company also actively invests in the construction of photovoltaic projects for its plants and the introduction of clean energy. 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. Other relevant information: Not applicable II. Social Responsibility 1. Consolidating and Extending the Achievements of Poverty Alleviation and Pushing Forward Rural Revitalization Plan for consolidating and extending the achievements of poverty alleviation and pushing forward rural revitalization In response to government initiatives, the Company has adopted an innovative model that integrates public welfare with high technology, maximizing the value of public welfare through technology. TCL always shoulders social responsibilities, focuses on public welfare education and promotes rural revitalization. Exploring an innovative model of science and technology + pubic welfare, TCL adopts A.I. technology to accompany left-behind children. The Company fulfills its social responsibilities with practical actions and empowers its public welfare activities to develop science and technology for good and contribute its strength to common prosperity. The “TCLProject Hope Candlelight Award”, jointly established by the Shenzhen TCLFoundation and the China Youth Development Foundation, rewards outstanding rural teachers and organizes offline training. The Shenzhen TCLFoundation works with TCLIndustrial Technology Research Institute to initiate the “A.I. Go Home” project. An “Eagle” storytelling robot is developed and designed with professional technology and AI technology. The robot is designed to imitate parents’ voices and tell stories for children TCLTechnology Group Corporation Interim Report 2022 37 when they are away from their parents, so as to strengthen the parent-child relationship. In 2022, the “A.I. Go Home” project is upgraded again, and the “Eagle Audiobook” WeChat Mini Program V2.0 is launched. The Shenzhen TCLFoundation and the Education Foundation of the Central Conservatory of Music jointly launch the “Little Music +” project and develop the “Xiao Xue” music robot. These efforts provide musical resources to children, bring them famous Chinese and foreign musical masterpieces , which diversify music teaching resources for rural primary schools, and encourage every child to stay positive and optimistic with the power of music. The Candlelight Micro-Loan Project, a targeted micro-loan project jointly provided by the Shenzhen TCLFoundation and TCLFinance Group for rural teachers, aims to support those rural teachers and their families in need of help in such aspects as healthcare for major diseases, daily consumption, and skill training. The Company continues to invest in education aids and sponsor projects such as the “TCLYoung Scholars Program” and the “TCLScience and Technology Innovation Fund”. The TCLPhotovoltaic Sunshine Campus contributes to the development of rural education by building photovoltaic power generation systems for rural schools to improve the school teaching environment and providing financial assistance for underprivileged students. The TCLSmart Classroom Project and Photoelectric Laboratory Project are aimed at bringing more educational resources to children and promoting education equity. Annual summary of consolidating and extending the achievements of poverty alleviation and pushing forward rural revitalisation In the first half of 2022, the eighth "TCLProject Hope Candlelight Award" was recommended by the China Youth Development Foundation to solicit 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. An online final evaluation meeting was held to select 400 excellent teachers. Each of the winners received a personal award worth RMB9,500, including a cash reward and 7-day offline "candlelight class" training. In 2022, the "Eagle Storytelling Robot” under "A.I. Go Home" project was upgraded and optimized in functionality, packaging, and quality control. The “Eagle Story Club” gathered children together through the “Eagle Storytelling Robot” to popularize famous classical literature from both at home and abroad. In March 2022, the Shenzhen TCLFoundation began the recruitment of the fourth batch of pilot schools for the "Eagle Story Club", receiving submissions from a total of 74 rural schools across the country. Five schools were selected, and a total of 19 story boxes and 38 "Eagle Storytelling Robots" were distributed, benefiting a total of 324 students. The “Eagle Audiobook” WeChat Mini Program has added a new poetry section with Poems for Children wrote by Bei Dao. As of present, the mini program has more than 1,400 active users, and more than 230 people have completed recordings. The “Little Music +” project under the "Xiao Xue Music Class” is dedicated to enhancing music teaching instruments and professional resources in rural schools through the “Xiao Xue Music Robot". In 2022, the Company completed the upgrade of its "Xiao Xue Music Robot, optimizing for functionality, packaging, and quality control. In the first half of 2022, the Shenzhen TCLFoundation recruited the fourth batch of pilot schools for the "Xiao Xue Music Class”, receiving submissions from a total of 53 rural schools across the country. Five schools were selected, and a total of 16 music boxes and 32 "Xiao Xue Music Robots" were distributed, benefiting a total of 3,373 students. Adopting an innovative charity + finance mode, the Candlelight Micro-Loan Project improves the quality of life for rural educators to ensure the development of rural education. In the first half of 2022, the “Candlelight Micro-Loan Project” continued, further expanding in influence. In response to the “dual carbon” strategy, TCLPhotovoltaic Sunshine Campus Project donated a photovoltaic roof power generation system and 25 years of power generation income to 4 rural schools, with a system value of RMB1.19 million and donated the photovoltaic power generation income of about RMB1.68 million. In January 2022, TCL launched the TCLSmart Classroom Project to narrow the gap of educational resources between urban and rural areas. In March 2022, TCL launched the Optoelectronic Laboratory Project to address the shortage of high-quality scientific and technological innovations and interactive education resources for primary and secondary school students. In 2022, TCLFoundation launched the "TCLYoung Scholars Program" and "TCLScience and Technology Innovation Fund" for young people and scientific education programs. These programs will serve an important model for education sponsorships in the future to further promote educational equity. The Shenzhen TCLFoundation helps the Company consolidate its achievements in rural revitalization through targeted assistance projects. In 2022, in the targeted assistance and donation project in Taimei Town, Boluo County, Huizhou, TCLFoundation invested a TCLTechnology Group Corporation Interim Report 2022 38 total of RMB650,000, donated learning devices with a value of RMB600,000 to the local government, and invested RMB50,000 in supporting poverty alleviation. In June 2022, when the Bei River was hit by a once-in-a-century flood, the TCLFoundation immediately donated RMB100,000 to Huizhou Charity Federation for the Huizhou Jiaolong Emergency Rescue Center to purchase materials required for frontline rescue and disaster relief. Effects of consolidating and extending the achievements of poverty alleviation and pushing forward rural revitalization Index Unit Quantity/Development IOverall Situation 1. Fund RMB 5,063,985 IISpecific investments 1. Education 1.1 Amount of investment to improve the educational resources in poverty-stricken areas RMB 4,313,985 2. Society 2.1 Amount of public welfare fund investment RMB 750,000 Subsequent plans for extending the achievements of poverty alleviation and pushing forward rural revitalization In the second half of 2022, the Company will continue to drive rural education development through the "TCLProject Hope Candlelight Award" program. The project will expand the influence of award evaluation and promotion to strengthen media communication and Internet publicity to retain public attention. In the future, the Company will continue to promote the "A.I. Go Home" project, strengthen the promotion and use of the "Eagle Audiobook" Wechat Mini Program, further optimize the functions of the mini program, and plan to update the 2.0 version of the mini program in the second half of the year to further strengthen the relationship between parents and children and provide emotional support. The Company will also complete the identification of a fourth batch of pilot schools for the project. The "Eagle Storytelling Robot" will accompany children in story lessons every month, and is expected to serve more than 3,800 students. In the second half of 2022, "Little Music +" will continue to focus on the music education for rural children, and identify a fourth batch of pilot schools under the "Xiao Xue Music Class” program to expand its coverage of rural school students. The Company will select sites for TCLPhotovoltaic Sunshine Campus Project in Hohhot, Inner Mongolia; Huizhou, Guangdong; Zhangjiakou, Hebei; and other locations. In the future, the project will cover more schools in need to further implement the "dual carbon" development concept and drive the development of rural education. The TCLSmart Classroom project is expected to be completed and commissioned in the second half of 2022, contributing to the sharing of educational resources and promoting education equity. The Optoelectronic Laboratory Project is expected to officially confirmed in the second half of 2022, and will serve to stimulate the scientific interest and innovation of young people. In the future, it is expected that the Company will invest RMB1.8 million each year to support young outstanding talents through the TCLYoung Scholars Program. The Company expects to make donations for 10 consecutive years from 2022 through the TCL Science and Technology Innovation Fund to promote science and technology innovation from the source and train more young scientific research talents for society. The total donation amount is expected to be RMB40 million. 2.Production safety Production safety supervision system TCLTechnology upholds "people-oriented, safety first" principles, continuously improves the management of employee health and production safety, ensures a safe production environment through various occupational health management mechanisms and measures, and carries out a series of training programs to ensure the health and safety of employees. In accordance with safety laws and regulations, the Company has improved its production safety responsibility system from the aspects of management, equipment and facilities, and employee safety awareness. In order to ensure the effective implementation of production safety management, TCLTechnology has formulated regulations such as the Production Safety Management Practices, Management Practices for Production Safety Performance Evaluation, Emergency Response Plan for Production Safety Accidents, and others. In terms of management, TCLTechnology has established a Work Safety Administration Committee and the Office of the Work Safety Administration Committee to preside over the its production safety management and guarantee system. TCLTechnology has established a management system for regularly screening hidden TCLTechnology Group Corporation Interim Report 2022 39 hazards in various industries. In each plant, safety management personnel at all levels carry out safety inspection in each area on a daily, weekly, monthly, and quarterly basis (including holidays), along with follow-up rectification measures. In response to the Group's action, TCLCSOT promulgated various security management regulations, and has pegged security management with performance review for middle management. Security accountability is implemented and security awareness is strengthened based on a dual communication mechanism (i.e. key contact personnel and contact points), in which contact points are responsible for auditing the performance of the mechanism. TCLCSOT has developed the CSOTSecurity Management Improvement Scheme to enhance security management from the perspectives of personnel, machines, materials, processing, and environmental protection. TCLZhonghuan has formulated a safety management manual and corporate management regulations with target safety production goals, adopted the process method, ensured effective system operations, and continued improvement through monitoring and measuring of the system. Development of production safety standards TCLTechnology continuously improves measures for production safety in various segments, optimizes safety equipment and facilities in workspaces, and carries out lean management and control over production safety. Subsidiaries under TCLCSOT have domestically and internationally leading safety equipment and facilities in place (such as automatic fire alarm systems CO2 automatic fire extinguishing systems, VESDA systems, and TGMS systems), and provide employees with safe and reliable personal protective equipment. TCLCSOT adopts the HAZOP, SFMEA, and other risk identification instruments to analyze the risks arising from manufacturing, and develops lean management and control measures accordingly, along with proactive engagement in risk visualization management. TCLZhonghuan has launched an information-based management platform for production safety featuring interfaces classified by group, geographic location, segment, and company, for a total of 10 management modules,38 sub-modules, and 80 specific tasks, enabling visualization of the fundamental management information about production safety standards. The platform can plan and push tasks in real time with simultaneous trajectory throughout the process, a risk database is established with risk identification and control specialization, hidden hazards are screened and special operations are managed dynamically, the system collects dynamic safety information in real time and establishes a large database, and the expert team regularly identifies production safety laws, regulations, and standards. A safety database has been created with these six functions, which solve key and difficult problems such as real-time safety supervision and data analysis for hidden hazards across different plants. Production safety process Product safety is not only a basic requirement of customers for TCLTechnology brand, technology, and services, but also one of social responsibilities borne by the Company. TCLTechnology and its various segments strictly conform to related laws and regulations, with 100% product inspection and testing coverage, to ensure products are in compliance with safety requirements. TCLTechnology has also passed the CB, UL, and other international safety certifications, and formulated a response plan for product safety incidents to strictly control product safety compliance. TCLCSOT adopts an intelligent energy system to realize real-time monitoring over the status of equipment, energy consumption, and products. TCLCSOT introduces deep learning algorithms, realizes fault prediction through equipment and process parameters, effectively improves processing efficiency, introduces ADC image recognition technology, realizes panel AI intelligent detection, and independently develops a visual detection algorithm to meet the needs of plants. The Company continuously optimizes and improves FDC, yield efficiency, multi-factor analysis, and other analysis-based modeling systems, realizing real-time monitoring and alert on equipment and quality status. As a result, concentrated abnormalities can be located in a rapid manner. TCLCSOT also introduces a comprehensive AI-based automatic diagnosis system for AI identification, learning, decision-making, and implementation to reduce costs while ensuring safety and scaling of production efficiency. TCLZhonghuan continuously improves the "formulation" chip manufacturing process and the "Deep Blue" AI learning model by using digital, automatic, and intelligent solutions. Through the “Deep Blue” intelligent manufacturing model and the new generation of intelligent plants, TCLZhonghuan works to develop 4.0 intelligent plants to improve intelligent manufacturing. Production safety education and training TCLTechnology focuses on the fundamentals of work safety education to consolidate its work safety management and improve the safety awareness of employees through all kinds of activities. During the reporting period, the Company actively facilitated various segments to carry out safety education activities and monthly events for safety and fire protection to improve the corporate safety TCLTechnology Group Corporation Interim Report 2022 40 culture. The Company has organized a variety of safety training measures to increase the production safety awareness and skills of employees with an aim to establish a culture of safety. Safety inspections carried out by competent authorities during the Reporting Period TCLTechnology always complies with related laws and regulations, takes the initiative to support and accept safety inspections by competent authorities, and fulfills its production safety commitment to the society. TCLTechnology Group Corporation Interim Report 2022 41 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 Commitment Type of change Details of commitment Commitment Time Commitment Term Fulfillment Commitments made in asset restructuring The largest shareholder of the listed company and person acting in concert (Mr. Li Dongsheng and Jiutian Liancheng) About avoiding horizontal competition 1. Before and after this transaction, there was no horizontal competition between me/this partnership and the enterprises controlled by me/this partnership and TCLGroup and the main businesses of its affiliated enterprises. 2. After this transaction, I/this partnership will take active measures to avoid any business or activity that competes or may constitute competition with the main business of TCLGroup and its affiliated enterprises, and will urge the enterprises controlled by me/this partnership to avoid any business or activity that competes or may constitute competition with the main business of TCLGroup and its affiliated enterprises. 3. If I/this partnership and the enterprises controlled by me/this partnership obtain the opportunity to engage in new business, which constitutes or may constitute horizontal competition with the main business of TCLGroup and its affiliated enterprises. I/this partnership will, when it is possible, try my/our best to make this business opportunity available to TCLGroup or its affiliated enterprises in the first place based on reasonable and fair terms and conditions. 4. If the business of mine/this partnership and the enterprises controlled by me/this partnership coincides or may constitute horizontal competition with TCL Group’s business due to my/this partnership’s investment demand or TCLGroup’s business development, I/this partnership and the enterprises controlled by me/this partnership agree to solve the resulting horizontal competition within a specific time limit since as it is December 7, 2018 During the period of being the largest shareholder of TCL Group There is no violation of commitment TCLTechnology Group Corporation Interim Report 2022 42 determined. 5. During the period of being the largest shareholder of TCL Group, the aforementioned commitment is unconditional and irrevocable. If I/this partnership violate the aforementioned commitments, I/this partnership will make comprehensive, timely and full joint and several compensation for the losses to TCLGroup caused thereby. The largest shareholder of the listed company and person acting in concert (Mr. Li Dongsheng and Jiutian Liancheng) Commitments on reducing and regulating related party transactions 1. I/this partnership will minimize the related party transactions between me/this partnership and the enterprises controlled by me/this partnership and TCLGroup and its affiliated enterprises. 2. For inevitable or reasonable related party transactions, I/this partnership and the enterprises controlled by me/this partnership and TCLGroup and its affiliated enterprises will conduct them according to fair market principles and normal commercial conditions, so as to ensure the fairness of the related party transaction price, and will perform the decision-making procedures for related party transactions according to the law, to ensure that the related party transactions will not be used to illegally transfer TCLGroup’s funds or to damage the legitimate rights and interests of TCL Group and its shareholders. 3. I/this partnership and the enterprises controlled by me/this partnership will not ask TCL Group and its affiliated enterprises to give more favorable conditions than those that can be offered to an independent third party in any fair market transaction. 4. During the period of being the largest shareholder of TCL Group, the aforementioned commitment is unconditional and irrevocable. If I/this partnership violate the aforementioned commitments, I/this partnership will make comprehensive, timely and full joint and several compensation for the losses to TCLGroup caused thereby. December 7, 2018 During the period of being the largest shareholder of TCL Group There is no violation of commitment The largest shareholder of the listed company and person acting in concert (Mr. Li Commitments on maintaining the independence of listed companies After this transaction, I/this partnership will continue to exercise shareholder’s rights according to laws, regulations and the Articles of Association of TCLGroup, and maintain the independence of TCLGroup in terms of assets, personnel, finance, business and December 7, 2018 During the period of being the largest shareholder of TCL Group There is no violation of commitment TCLTechnology Group Corporation Interim Report 2022 43 Dongsheng and Jiutian Liancheng) institutions. I/this partnership will ensure: (I) The independence of TCL Group personnel. I/this partnership promise(s) to maintain personnel independence with TCLGroup. TCLGroup’s senior management, including the general manager, deputy general manager, chief financial officer, and secretary of the board of directors, shall not hold positions other than directors and supervisors in my/this partnership’s subordinate wholly-owned, controlled or other enterprises with actual control (hereinafter referred to as “subordinate enterprises”), and shall not be paid in my/this partnership’s subordinate enterprises. The financial personnel of TCLGroup shall not work part-time in my/this partnership’s subordinate enterprises. (II) The independence and integrity of TCLGroup’s assets. 1. The independence and integrity of TCLGroup’s assets. 2. TCLGroup does not have any funds or assets occupied by me/this partnership and my/this partnership’s subordinate enterprises. (III) The financial independence of TCLGroup. 1. TCLGroup establishes an independent financial department and an independent financial accounting system. 2. TCLGroup has a standardized and independent financial accounting system. 3. TCLGroup opens an independent bank account and does not share a bank account with me/this partnership. 4. The financial personnel of TCLGroup shall not work part-time in my/this partnership’s subordinate enterprises. 5. TCLGroup can make independent financial decisions, and I/this partnership shall not interfere with the use of TCL Group’s funds. (IV) The institutional independence of TCL Corporation. 1. TCLGroup has an independent and complete organization which can operate independently. 2. TCLGroup’s office and premises for production and operations are separated from my subordinate enterprises/this TCLTechnology Group Corporation Interim Report 2022 44 partnership. 3. The Board of Directors, Board of Supervisors and various functional departments of TCL Group operate independently, and have no subordinate relationship with this partnership’s functional departments. (V) The business independence of TCLGroup. 1. I/this partnership promise(s) to maintain the business independence of TCLGroup after this transaction. 2. TCLGroup has the assets, personnel, qualifications and ability to independently carry out business activities, and has the ability to operate independently in the market. If TCLGroup suffers losses due to the violation of commitments under the letter of commitment by me/this partnership or my/this partnership’s subordinate enterprises, I/this partnership will bear the corresponding compensation liability according to the law. Commitments made upon IPO or refinancing Mr. Li Dongsheng About horizontal competition, related-party transaction and capital occupation 1) I shall avoid horizontal competition between the companies, enterprises or other business organizations that I own, control, control with others, have significant influence on and the Company with its subsidiaries; and 2) I shall reduce and control transactions of related parties between the companies, enterprises or other business organizations that I own, control, control with others, or have significant influence on and the Company with its subsidiaries. August 30, 2013 During the tenure of the Company’s director, supervisor or senior management There is no violation of commitment Fulfilled 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. TCLTechnology Group Corporation Interim Report 2022 45 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 Significant lawsuits and arbitrations: □ Applicable √ Not applicable No such cases in the Reporting Period. Other lawsuit matters □ Applicable √ Not applicable IX. Punishments and Rectifications □ Applicable √ Not applicable Description of 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 During the Reporting Period, the Company’s daily related-party transactions is found in the related announcements disclosed on . 2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments □ Applicable √ Not applicable 3. Related-Party Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No related-party transactions regarding joint investments in third parties which occurred during the Company’s 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 TCLTechnology Group Corporation Interim Report 2022 46 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 Industries Holdings Co., Ltd. Related corporation Sale of equity investments No 096,00048,9600.00% 047,040 The 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, TCL Industries Holdings Inc. shall pay 51% of the equity transfer price (i.e. RMB489.6 million) 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 Deposits: 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 600,000.000.01-1.15% 2,127.79226,780.06228,878.0529.80 Loans: 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) Subsidiary of TCLIndustries Holdings Co., Ltd. Related corporation The balance of comprehensive credit on any one day (including loans) shall not exceed RMB6 billion - - - - - Credit or other financial business: Related parties Relationship with the Company Business type Total Ending balance (RMB’0,000) Subsidiary of TCLIndustries Holdings Co., Ltd. Related corporation Credit granting (bill discount) The balance of comprehensive credit on 93,652.04 TCLTechnology Group Corporation Interim Report 2022 47 Subsidiary of TCLIndustries Holdings Co., Ltd. Related corporation Credit granting (bill acceptance) any one day shall not exceed RMB6 billion 65,645.09 7. Other Major Related-Party Transactions √ Applicable □ Not applicable of announcement Date of disclosure Website for disclosure Announcement on the Disposal of Equity Interests in Partnership Enterprises and the Related-Party Transaction June 27,2022 Announcement on the Expected Continuing Related-Party Transactions for 2022 April 28,2022 Announcement on the Launch of Accounts Receivable Factoring and the Related-party Transaction April 28,2022 Announcement on the Related-party Transactions with Shenzhen Jucai Supply Chain Technology Co., Ltd. in 2022 April 28,2022 Announcement of TCLTechnology Group Finance Co., Ltd. on Continuing to Provide Financial Services to Related Parties and Renewing the Financial Service Agreement April 28,2022 Announcement on Progress of Additional Placement and Share Issue in Subsidiaries and the Related-Party Transaction March 22,2022 Announcement on Additional Placement and Share Issue in Subsidiaries and the Related-Party Transaction January 24,2022 XII. Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable There were no entrustment projects that brought profits and losses to the Company reaching more than 10% of the Company’s total profits in the Reporting Period. (2) Contracting □ Applicable √ Not applicable Notes to Contracting There were no contracting projects that brought profits and losses to the Company reaching more than 10% of the Company’s total profits in the Reporting Period. (3) Leases □ Applicable √ Not applicable Notes to leases: There were no lease projects that brought profits and losses to the Company reaching more than 10% of the Company’s total profits in the Reporting Period. 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 Guarantee Limit Actual occurrence date Actual guarantee amount Guarantee Type of change Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or not Guarantee for related parties or not TCLKing Electrical Appliances (Huizhou) Co., Ltd. April 28, 2022 327,138 August 29,2019 12,464 Joint liability guarantee / Counter guarantee provided by TCL Industrial Holding 3.6-5 years No Yes TCLKing Electrical Appliances (Chengdu) Co., Ltd. April 28, 2022 51,653 - - Joint liability guarantee / - Yes Yes TCLTechnology Group Corporation Interim Report 2022 48 Huizhou TCL Mobile Communication Co., Ltd. April 28, 2022 212,507 - - Joint liability guarantee / Co., Ltd. - Yes Yes TCLMobile Communication (HK) Company Limited April 28, 2022 29,225 - - Joint liability guarantee / - Yes Yes TCLHome Appliances (Hefei) Co., Ltd. April 28, 2022 68,280 March 2,2021 4,968 Joint liability guarantee / 1-2 years No Yes TCLHome Appliances (Zhongshan) Co., Ltd. April 28, 2022 4,929 - - Joint liability guarantee / - Yes Yes TCLAir-Conditioner (Zhongshan) Co., Ltd. April 28, 2022 80,991 March 13,2020 33,771 Joint liability guarantee / 0.37-3 years No Yes TCLAir Conditioner (Wuhan) Co., Ltd. April 28, 2022 13,480 - - Joint liability guarantee / - Yes Yes Zhongshan TCL Refrigeration Equipment Co., Ltd. April 28, 2022 31,749 - - Joint liability guarantee / - Yes Yes Guangdong TCL Smart Heating & Ventilation Equipment Co., Ltd. April 28, 2022 2,522 - - Joint liability guarantee / - Yes Yes TCLHome Appliances (Huizhou) Co., Ltd. April 28, 2022 10,000 - - Joint liability guarantee / - Yes Yes TCLAir-Conditioner (Jiujiang) Co., Ltd. April 28, 2022 5,488 - - Joint liability guarantee / - Yes Yes Tonly Technology Co., Ltd. April 28, 2022 39,496 April 23,2021 37,519 Joint liability guarantee / 3 years No Yes TCLVery Lighting Technology (Huizhou) Co., Ltd. April 28, 2022 1,034 - - Joint liability guarantee / - Yes Yes SHIFENDAOJIA Online Service Co., Ltd. April 28, 2022 77 - - Joint liability guarantee / - Yes Yes Guangzhou TCL Science and Technology April 28, 2022 84,700 December 27, 2018 80,465 Joint liability / 13 years No Yes TCLTechnology Group Corporation Interim Report 2022 49 Development Co., Ltd. guarantee TCLIndustries Holdings (HK) Limited April 28, 2022 514,629 April 14,2020 376,323 Joint liability guarantee / 1-3 years No Yes Techigh Circuit Technology (Huizhou) Co., Ltd. April 28, 2022 499 - - Joint liability guarantee / - Yes No Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. April 28, 2022 40,000 December 27, 2021 2,360 Joint liability guarantee / With counter- guarantee 189 days No Yes Qihang Import&Export Limited April 28, 2022 6,000 - - Joint liability guarantee / With counter- guarantee - No No Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. April 28, 2022 110,000 September 1, 2021 28,153 Joint liability guarantee / With counter- guarantee 50 days-1 years No No Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. April 28, 2022 80,000 April 28,2020 25,889 Joint liability guarantee / Guarantee in proportion to shareholding percentage 8 years No No Qihang International Import & Export Limited April 28, 2022 50,000 - 1,678 Joint liability guarantee / With counter- guarantee 1 year No No Huizhou Zhongkai TCLZhirong Technology Microcredit Co., Ltd. May 22, 2021 45,500 September 29, 2021 15,000 Joint liability guarantee / With counter- guarantee 1 year No Yes Total approved line for such guarantees in Reporting Period (A1) 1,764,397 Total actual amount of such guarantees in Reporting Period (A2) 57,880 Total approved line for such guarantees at the end of the Reporting Period (A3) 1,809,897 Total actual balance of such guarantees at end of Reporting Period (A4) 618,588 Guarantees provided by the Company as the parent for its subsidiaries Obligor Disclosure date of the guarantee line announcement Guarantee Limit Actual occurrence date Actual guarantee amount Guarantee Type of change Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or not Guarantee for related parties or not Wuhan China Star Optoelectronics Technology Co., Ltd. April 28, 2022 1,600,000 July 26, 2019 413,940 Joint liability guarantee / / 22 days-3 years No No Shenzhen China Star Optoelectronics April 28, 2022 1,550,000 April 28,2018 1,183,090 Joint liabilit/ / 1 month - 8 years No No TCLTechnology Group Corporation Interim Report 2022 50 Semiconductor Display Technology Co., Ltd. y guarantee TCLChina Star Optoelectronics Technology Co., Ltd. April 28, 2022 679,500 September 29, 2019 35,190 Joint liability guarantee / / 13 days-3 years No No Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 28, 2022 2,000,000 December 22, 2017 989,901 Joint liability guarantee / / 3 month - 8 years No No Huizhou China Star Optoelectronics Technology Co., Ltd. April 28, 2022 1,150,000 January 1,2021 637,589 Joint liability guarantee / / 3 month - 8 years No No China Star Optoelectronics International (HK) Limited April 28, 2022 500,000 - - Joint liability guarantee / / - No No China Display Optoelectronics Technology (Huizhou) Co., Ltd. April 28, 2022 150,000 July 28, 2021 47,037 Joint liability guarantee / / 43 days-7.39 years No No Wuhan China Display Optoelectronics Technology Co., Ltd. April 28, 2022 50,000 February 14, 2020 197 Joint liability guarantee / / 2-3 years No No Guangdong Juhua Printed Display Technology Co., Ltd. April 28, 2022 40,000 May 31, 2022 4,324 Joint liability guarantee / / 15 months No No TCLTechnology Group Finance Co., Ltd. April 28, 2022 300,000 January 25,2022 59,863 Joint liability guarantee / / 95-409 days No No Highly Information Industry Co., Ltd. April 28, 2022 480,000 April 1, 2020 358,000 Joint liability guarantee / / 1 days-2.5 years No No Beijing Hecheng Nuoxin Technology Co., Ltd. April 28, 2022 10,000 July 23, 2021 5,000 Joint liability guarantee / / 1 year No No Beijing Lingyun Data Technology Co., Ltd. April 28, 2022 131,500 July 29, 2021 38,390 Joint liability guarantee / / 86-364 days No No Beijing Sunpiestore Technology Co., Ltd. April 28, 2022 140,000 July 23, 2021 83,000 Joint liability guarantee / / 1 year No No Shaanxi Titi Electronic Technology Co., Ltd. April 28, 2022 10,000 July 23, 2021 3,000 Joint liability guarantee / / 1 year No No TCLTechnology Group Corporation Interim Report 2022 51 TCLTechnology Park (Huizhou) Co., Ltd. April 28, 2022 172,600 April 24,2020 99,500 Joint liability guarantee / / 1-10 years No No TCLTechnology Investments Limited April 28, 2022 400,000 July 14, 2020 201,342 Joint liability guarantee / / 5 years No No Ningbo TCLEquity Investment Ltd. April 28, 2022 50,000 - - Joint liability guarantee / / - No No TCLMoka International Limited April 28, 2022 176,000 May 20, 2022 40,268 Joint liability guarantee / / 1 year No No Huizhou Moka Technology Development Co., Ltd. April 28, 2022 55,000 - - Joint liability guarantee / / - No No Moka Technology (Guangdong) Co., Ltd. April 28, 2022 700,000 December 31, 2021 121,182 Joint liability guarantee / / 1-8 months No No Guangzhou China Star Optoelectronics Semiconductor Display Technology Co., Ltd. April 28, 2022 1,750,000 March 4,2022 730,703 Joint liability guarantee / / 1-8 years No No Suzhou China Star Optoelectronics Display Co., Ltd. April 28, 2022 265,000 - - Joint liability guarantee / / - No No Suzhou China Star Optoelectronics Technology Co., Ltd. April 28, 2022 57,000 - - Joint liability guarantee / / - No No Highly (Tianjin) Technology Co., Ltd. April 28, 2022 50,000 May 9, 2021 21,737 Joint liability guarantee / / 40-61 days No No Highly (Tianjin) E-Commerce Co., Ltd. April 28, 2022 5,000 - - Joint liability guarantee / / - No No Qingdao Blue Business Consulting Co., Ltd. April 28, 2022 5,000 - - Joint liability guarantee / / - No No Tianjin Printronics Circuit Corporation April 28, 2022 100,000 - - Joint liability guarantee / / - No No TCLTechnology Group (Tianjin) Co., Ltd.* April 28, 2022 200,000 - - Joint liability / / - No No TCLTechnology Group Corporation Interim Report 2022 52 guarantee Tianjin WanfangNuoxin Technology Co., Ltd. * April 28, 2022 5,000 - - Joint liability guarantee / / - No No Total approved line for such guarantees in the Reporting Period (B1) 12,781,600 Total actual amount of such guarantees in the Reporting Period (B2) 1,476,775 Total approved line for such guarantees at the end of the Reporting Period (B3) 12,781,600 Total actual balance of such guarantees at the end of the Reporting Period (B4) 5,073,254 Guarantees provided between subsidiaries Obligor Disclosure date of the guarantee line announcement Guarantee Limit Actual occurrence date Actual guarantee amount Guarantee Type of change Collateral (if any) Counterguarantee (if any) Term of guarantee Expired or not Guarantee for related parties or not Huhehaote Huanju New Energy Development Co., Ltd.* November 26,2014 24,529 December 11,2015 24,529 Joint liability guarantee / / 9.5 years No No Zhonghuan Energy (Inner Mongolia) Co., Ltd. June 24, 2017 11,800 July 21, 2017 11,800 Joint liability guarantee / / 15 years No No Otog Banner Huanju New Energy Co., Ltd. June 24, 2017 19,816 August 30,2017 19,816 Joint liability guarantee / / 10 years No No Qinhuangdao Tianhui Solar Energy Co., Ltd. November 11,2017 September 6,2018 22,829 January 19,2018 22,829 Joint liability guarantee / / 10-12 years No No Guyuan Shengju New Energy Co., Ltd. September 6,2018 10,119 October 8, 2018 10,119 Joint liability guarantee / / 11 years No No Zhangjiakou Shengyuan New Energy Co., Ltd. September 6,2018 13,790 October 8, 2018 13,790 Joint liability guarantee / / 11 years No No Zhonghuan Hong Kong Holding Limited March 22, 2021 65,000 March 26, 2021 52,994 Joint liability guarantee / / 3 years No No Inner Mongolia Zhonghuan Crystal Materials Co., Ltd. March 22, 2021 May 26, 2022 602,500 April 30, 2021 432,500 Joint liability guarantee / / 7 years No No Huansheng Solar (Jiangsu) Co., Ltd. March 22, 2021 53,900 April 1, 2021 53,900 Joint liability / / 5 years No No TCLTechnology Group Corporation Interim Report 2022 53 guarantee Tianjin Huanzhi New Energy Technology Co., Ltd. January 21, 2021 131,500 July 20, 2021 56,011 Joint liability guarantee / / 7 years No No Ningxia Zhonghuan Solar Material Co., Ltd. January 23, 2022 748,000 May 30, 2022 133,000 Joint liability guarantee / / 7 years No No Wuxi Zhonghuan Applied Materials Co., Ltd. May 26, 2022 190,000 June 30, 2022 10,000 Joint liability guarantee / / 7 years No No TCLZhonghuan’s guarantee for subsidiaries within the consolidated scope (retained) May 26, 2022 620,000 - - Joint liability guarantee / / - No No Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd.* April 28, 2022 2,612,50 0 April 28, 2018 2,394,858 Joint liability guarantee / / 5-8 years No No PANEL OPTODISPLAY TECHNOLOGY PRIVATE LIMITED April 28, 2022 8,200 April 22, 2022 825 Joint liability guarantee / / 2 years No No TCLMoka International Limited April 28, 2022 214,500 April 29, 2022 41,557 Joint liability guarantee / / 26-87 days No No China Star Optoelectronics International (HK) Limited April 28, 2022 500,000 November 24,2020 167,785 Joint liability guarantee / / 3 years No No Total approved line for such guarantees in the Reporting Period (C1) 5,083,200 Total actual amount of such guarantees in the Reporting Period (C2) 386,398 Total approved line for such guarantees at the end of the Reporting Period (C3) 5,848,984 Total actual balance of such guarantees at the end of the Reporting Period (C4) 3,446,314 Total guarantee amount (total of the three kinds of guarantees above) Total guarantee line approved in the Reporting Period (A1+B1+C1) 19,629,197 Total actual guarantee amount in the Reporting Period (A2+B2+C2) 1,921,053 Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) 20,440,481 Total actual guarantee balance at the end of the Reporting Period (A4+ B4+ C4) 9,138,156 Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets 234.17% Of which: Balance of guarantees provided for shareholders, the actual controller and their related parties (D) 562,869 TCLTechnology Group Corporation Interim Report 2022 54 Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) 2,663,958 Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) 7,186,951 Total of the three above amounts (D+E+F) 7,186,951 Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) - Guarantees provided in breach of prescribed procedures (if any) - Note: ①The 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: (1) The guarantee limit amounting to RMB2 billion offered to Suzhou China Star Optoelectronics Technology Co., Ltd. was transferred to TCLTechnology Group (Tianjin) Co., Limited, another controlling subsidiary. (2) The guarantee limit amounting to RMB50 million offered to Beijing Sunpiestore Technology Co., Ltd. was transferred to Tianjin Wanfang Nuoxin Technology Co., Ltd., a wholly-owned subsidiary of the Company. In respect of the guarantee adjustment above, the Company has completed internal deliberation procedures and the debt/asset ratio of subsidiaries subject to guarantee limit increment does not exceed 70%, which complied with the related requirements in the Rules Governing the Guarantees Provided for External Parties, and the 2022 Proposals on Guarantee Provided to Subsidiaries passed on the 2021 general meeting held on May 19,2022. 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. As at the end of the Reporting Period, the debt portion under joint guarantee amounted to RMB10.7457534 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 RMB10.7457534 billion. ④ The Company provided guarantee to the syndicated loan of Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. for its “Project For Expanding the G6 Semiconductor Display Component Production Line” under joint and several liability of no more than RMB7.5 billion. The guarantee is within the limit of 2022 Proposal on Providing Guarantee to Subsidiaries passed on the 18th of the Seventh Session Board of Directors and 2021 general meeting. As at the end of the Reporting Period, the Company had not executed any specific guarantee contract. The actual guarantee limit will be subject to the specific contract. ⑤ 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. TCLTechnology Group Corporation Interim Report 2022 55 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-funded 629,001.00625,900.00 - - Securities firm’s wealth management product Self-funded 100,962.99 100,962.99 - - Trust plan Self-funded 100,000.00 60,000.00 - - Other Self-funded 19,219.11 19,219.11 - - Total 849,183.10 806,082.10 - - High-risk wealth management transactions with a significant single amount, low liquidity and no principal guarantee: □ Applicable √ Not applicable Wealth management transactions where the principal is expectedly irrecoverable or an impairment may be incurred: □ Applicable √ Not applicable 4. Other Major Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XIII. Other Significant Events √ Applicable □ Not applicable of announcement Date of disclosure Website for disclosure Announcement on Resignation and Appointment of Non-executive Directors 4/14/2022 Report on the Repurchase of Certain Public Shares in 2022 3/21/2022 XIV. Significant Events of Subsidiaries √ Applicable □ Not applicable of announcement Date of disclosure Website for disclosure Announcement on Additional Placement and Share Issue in Subsidiaries and the Related-Party Transaction 1/24/2022 TCLTechnology Group Corporation Interim Report 2022 56 Part VIIChanges in Shares and Information about Shareholders I. Changes in Shares 1. Changes in shares Unit: share Prior to changes Increase/decrease in the Reporting Period (+/-) After changes Shares Percentage Others Subtotal Shares Percentage I. Restricted Shares 612,110,4884.36% 1,445,0021,445,002613,555,4904.37% Shares held by other domestic investors 611,718,9904.36% 1,270,5791,270,579612,989,5694.37% Of which: Shares held by domestic individuals 611,718,9904.36% 1,270,5791,270,579612,989,5694.37% Shares held by foreign entities 391,4980.0028% 174,423174,423565,9210.0040% Of which: Shares held by foreign individuals 391,4980.0028% 174,423174,423565,9210.0040% II. Non-restricted shares 13,418,531,93395.64% -1,445,002 -1,445,00213,417,086,93195.63% Ordinary shares in RMB 13,418,531,93395.64% -1,445,002 -1,445,00213,417,086,93195.63% III. Total shares 14,030,642,421100% 0014,030,642,421100% Statement on the changes in shares During the Reporting Period, locked-up shares held by senior management increased by 1,445,002 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 On June 1,2021, the Company issued the Announcement on Planned Allocation and Equity Ownership Under the Global Partnership Phase IIIScheme, which specifies that, in accordance with Global Partnership Phase IIIScheme (Draft), the share holders under the scheme may sell 50% of corresponding shares held based on current market conditions at their discretion, or transfer 50% of corresponding shares held to the scheme holder’s account through non-trading transfer subject to the support of Shenzhen Stock Exchange and the Depository and Clearing Corporation, after 12 months upon the vesting date of the underlying shares; the share holders under the scheme may sell the remained 50% of corresponding shares or transfer the remained 50% of corresponding shares to the scheme holder’s account through non-trading transfer subject to Shenzhen Stock Exchange and the Depository and Clearing TCLTechnology Group Corporation Interim Report 2022 57 Corporation after 24 months upon the vesting date of the underlying shares. During the Reporting Period, parts of shares under the Scheme had been transferred to the securities account of scheme holders through non-trading transfer in June. A total of 21,054,347 shares were transferred, including 1,926,671 shares transferred to directors, supervisors and senior management through non-trading transfer and 19,127,676 shares transferred to other holders through non-trading transfer. Progress on any share repurchase √ Applicable □ Not applicable During the Reporting Period, the Company repurchased 106,484,364 shares through centralized bidding from the special securities account for repurchase from March 23,2022 to June 24,2022, accounting for 0.76% of the total share capital of the Company. The highest and lowest trading price was RMB5.01 per share and RMB4.34 per share, respectively, and the total payment approximated to RMB502.62 million (excluding transaction fees). 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, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed □ Applicable √ Not applicable 2. Changes in restricted shares √ Applicable □ Not applicable Unit: share Name of shareholder Beginning restricted shares Unlocked in Reporting Period Increase in Reporting Period Ending restricted shares Reason for restriction Date of unlocking Directors, supervisors, and executives of the Company 612,110,48801,445,002613,555,490 Locked-up shares of senior management Removal of lock-up restriction based on related laws and regulations Total 612,110,48801,445,002613,555,490 -- -- 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 761,967 Total number of preference shareholders with resumed voting rights by the end of the reporting period (if any) 0 Shareholdings 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-end Increase/decrease during the Reporting Period Number of restricted ordinary shares held Number 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 8.26% 1,159,085,019485,626610,545,821548,539,198 Put in pledge by Li Dongsheng 179,338,800 Put in pledge by 238,620,000 TCLTechnology Group Corporation Interim Report 2022 58 Jiutian Liancheng Huizhou Investment Holding Co., Ltd. State-owned legal entity 5.30% 743,139,84000743,139,840 Wuhan Optics Valley Industrial Investment Co., Ltd. State-owned legal entity 3.95% 554,770,496 -3,781,9000554,770,496 Pledge 255,754,475 Hong Kong Securities Clearing Company Limited Foreign legal entity 2.68% 376,447,862 -71,400,1490376,447,862 China Securities Finance Corporation Limited Domestic general legal entity 2.66% 373,231,55300373,231,553 Tibet Tianfeng Enterprise Management Co., Ltd. Domestic general legal entity 1.54% 215,582,406 -30,986,4320215,582,406 TCL Technology Group Corporation - 2021 to 2023 Employee Stock Ownership Plan (Phase I) Fund, wealth management product, etc. 0.81% 113,143,15400113,143,154 Sinatay Life Insurance Co., Ltd. - Conventional Product Fund, wealth management product, etc. 0.74% 104,190,17200104,190,172 ICBCCredit Suisse Fund - Agricultural Bank of China - ICBCCredit Suisse China Securities Financial Asset Management Plan Fund, wealth management product, etc. 0.53% 74,761,5000074,761,500 Southern Asset Management Fund, wealth management product, etc. 0.53% 74,761,5000074,761,500 TCLTechnology Group Corporation Interim Report 2022 59 - Agricultural Bank of China - Southern China Securities Financial Asset Management Plan 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 and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,159,085,019 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 account among top 10 shareholders There is a special repurchase account “TCLTechnology Group Corporation’s special securities account for repurchase” among the top 10 Shareholders, which are not outlined in the top 10 shareholders above. As of the end of the Reporting Period, this repurchase account held 399,900,216 shares. 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 Huizhou Investment Holding Co., Ltd. 743,139,840 RMB-denominated ordinary shares 743,139,840 Wuhan Optics Valley Industrial Investment Co., Ltd. 554,770,496 RMB-denominated ordinary shares 554,770,496 Li Dongsheng and his acting-in-concert party 548,539,198 RMB-denominated ordinary shares 548,539,198 Hong Kong Securities Clearing Company Limited 376,447,862 RMB-denominated ordinary shares 376,447,862 China Securities Finance Corporation Limited 373,231,553 RMB-denominated ordinary shares 373,231,553 Tibet Tianfeng Enterprise Management Co., Ltd. 215,582,406 RMB-denominated ordinary shares 215,582,406 TCLTechnology Group Corporation - 2021 to 2023 Employee Stock Ownership Plan (Phase I) 113,143,154 RMB-denominated ordinary shares 113,143,154 Sinatay Life Insurance Co., Ltd. - 104,190,172 RMB- 104,190,172 TCLTechnology Group Corporation Interim Report 2022 60 Conventional Product denominated ordinary shares ICBCCredit Suisse Fund - Agricultural Bank of China - ICBC Credit Suisse China Securities Financial Asset Management Plan 74,761,500 RMB-denominated ordinary shares 74,761,500 Southern Asset Management - Agricultural Bank of China - Southern China Securities Financial Asset Management Plan 74,761,500 RMB-denominated ordinary shares 74,761,500 Related 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 and Ningbo Jiutian Liancheng Equity Investment Partnership (Limited Partnership) became persons acting in concert by signing the Agreement on Concerted Action, holding 1,159,085,019 shares in total and becoming the largest shareholder of the Company. Explanation on the top 10 ordinary shareholders participating in securities margin trading 1. Wuhan Optics Valley Industrial Investment Co., Ltd., a shareholder of the Company, conducted share-based securities lending business for “TCLTechnology”. At the end of the Reporting Period,3,781,900 shares of securities were lent out. 2, Tibet Tianfeng Enterprise Management Co., Ltd., a shareholder of the Company, holds 117,343,814 shares through the general securities account, and holds 98,238,592 shares through the credit securities account, with a total of 215,582,406 shares actually held. 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 Name Position Postion Status Number of shares held at the beginning of the year Increase of shares during the Reporting Period Decrease of shares during the Reporting Period Number of shares held at the end of the year Number of restricted shares granted at the beginning of the period Number of restricted shares granted during the period Number of restricted shares granted at the end of the period Li Dongsheng Chairman of the Board and CEO Incumbent 813,575,470485,6260814,061,096000 Liang Weihua Vice Charmian of the Board Incumbent 0000000 Du Juan Director Incumbent 417,730374,2370791,967000 Jin Xuzhi Director, Senior Vice President Incumbent 521,997232,5640754,561000 Shen Haoping Director, Senior Vice President Incumbent 0000000 Liao Qian Director, Board Secretary and Senior Vice President Incumbent 229,596251,7100481,306000 Lin Feng Director Incumbent 0000000 Gan Yong Independent director Incumbent 0000000 Chen Shiyi Independent director Incumbent 0000000 Wan Liangyong Independent director Incumbent 0000000 Liu Xunci Independent director Incumbent 0000000 TCLTechnology Group Corporation Interim Report 2022 61 He Zhuohui Chairman of the Supervisory Committee Incumbent 0000000 Qiu Haiyan Supervisor Incumbent 0000000 Mao Tianxiang Employee Supervisor Incumbent 128,979100,6040229,583000 Wang Cheng COOIncumbent 157,66100157,661000 Li Jian CFOIncumbent 97,709196,8040294,513000 Yan Xiaolin Senior Vice President, CTO Incumbent 1,018,176285,12601,303,302000 Liu Kun Previous director Former 0000000 Total -- -- 816,147,3181,926,6710818,073,989000 V. Change of the Controlling Shareholder or the Actual Controller Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Change of the actual controller in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. TCLTechnology Group Corporation Interim Report 2022 62 Part VIIIBonds 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 Maturity Outstanding 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 21,2019 October 21,2024 200,0004.20% 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 100,0004.30% 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 Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 2) 18TCL02112747 August 17, 2018 August 20,2018 August 20,2023 200,0003.55% Interest payable annually and principal repayable in full upon maturity Shenzhen Stock Exchange TCL Corporation Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 1) 18TCL01112717 June 5, 2018 June 6, 2018 June 6, 2023 17,001.904.00% Interest payable annually and principal repayable in full upon maturity Shenzhen Stock Exchange TCL Corporation Corporate Bonds Publicly Offered in 2017 17TCL02112542 July 6,2017 July 7, 2017 July 7, 2022 15,7003.45% Interest payable annually and principal repayable in full upon Shenzhen Stock Exchange TCLTechnology Group Corporation Interim Report 2022 63 to Qualified Investors (Tranche 2) maturity Investor eligibility (if any) For qualified investors / For professional investors Applicable trading mechanism Not applicable Risk of termination of listing and trading (if any) and countermeasures None Overdue bonds: □ Applicable √ Not applicable 2. Triggering and implementation of issuer or investor option clauses and investor protection clauses √ Applicable □ Not applicable In accordance with the provisions of the Prospectus for TCLTechnology Group Corporation Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1), the bondholders of 19TCL01 elected to sell back all or part of their 19TCL01 to TCL Technology Group Corporation during the sell-back registration period (April 19,2022 to April 25,2022) at the sell-back price of RMB100/bond (excluding interest). The coupon rate decreased from 4.33% to 3.15% two years after the existence period, and the sell-back fund was released on May 20,2022. According to the data provided by the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, the number of 19TCL01 sold back during the sell-back registration period was 10,000,000, and the sell-back amount was RMB1,000,000,000 (excluding interest). As indicated in the Announcement on Sell-back Declaration Results, the Company would resell the sold-back bonds from May 23,2022 to June 20,2022, and the number of bonds proposed to be resold would be no more than 10,000,000. The number of bonds resold in this tranche was 10,000,000, and the average resale price was RMB100.2534/bond, and all of which had been resold through manual transfer. Upon the completion of the resales, no bonds pending for resales remain, and there are 10,000,000 bonds of 19TCL01 outstanding in depositary. 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 III. Debt Financing Instruments of a Non-Financial Enterprise √ Applicable □ Not applicable 1. General information of debt financing instruments of a non-financial enterprise: Unit: RMB100 million Name of debt instrument Abbr. Code of debt instrument Date of issuance Value date Maturity Outstanding balance Interest rate Way of principal repayment and interest payment Place of trading 2022 Mid-Term Green Notes of TCL Technology Group Corporation (Tranche 2) 22TCL- GN002 132280040 April 25, 2022 April 27, 2022 April 27, 2025 15.003.30% 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- MTN001 102280089 January 12, 2022 January 14, 2022 January 14, 2025 20.003.45% Interest payable annually and principal repayable in full upon maturity Inter-bank market 2021 Mid-Term Notes of TCL Technology 21TCL- MTN001 (High-Growth 102100966 May 10, 2021 May 12, 2021 May 12, 2024 20.004.15% Interest payable annually and Inter-bank market TCLTechnology Group Corporation Interim Report 2022 64 Group Corporation (Tranche 1)(High-Growth Bonds) Bonds) principal repayable in full upon maturity 2020 Mid-Term Notes of TCL Technology Group Corporation (Tranche 1) 20TCL- MTN001 102000509 March 25, 2020 March 27, 2020 March 27, 2023 30.003.60% 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 None 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 1. Adjustments and Rectification of Transfer Prices Name Price before adjustment (RMB/share) Adjusted price (RMB/share) Start date for the adjustment TCLDirectional Transfer 2 (CBNo.: 124017) 7.887.73 June 2,2022 TCLDirectional Transfer 2 (CBNo.: 124017) 7.734.10 July 25,2022 2. Cumulative bond-to-stock conversions □ Applicable √ Not applicable 3. Top 10 holders of convertible corporate bonds No. Name of holder Nature of holder Number of convertible corporate bonds held at the period-end Amount of convertible corporate bonds held at the period-end (RMB) Proportion of convertible bonds held at the end of the period 1 GFSecurities Co., Ltd. Domestic general legal entity 3,900,000 390,000,000 15.46% 2 Guosen Securities Co., Ltd. State-owned legal entity 3,000,000 300,000,000 11.89% 3 Western Securities Co., Ltd. State-owned legal entity 1,700,000170,000,0006.74% 4 China Life Pension Hongxin Fixed Income Pension Product - Industrial and Commercial Bank of China Limited Fund, wealth management product, etc. 1,300,000130,000,0005.15% TCLTechnology Group Corporation Interim Report 2022 65 5 China Life Pension Sustaining Fixed Income Pension Product No.9 - China Merchants Bank Co., Ltd. Fund, wealth management product, etc. 1,300,000130,000,0005.15% 6 Shenwan Hongyuan Group Co., Ltd. Domestic general legal entity 1,000,000 100,000,000 3.96% 7 Zheshang Securities Co., Ltd. State-owned legal entity 1,000,000100,000,0003.96% 8 China Life Insurance (Group) Company Enterprise Annuity Plan- Agricultural Bank Of China Limited Fund, wealth management product, etc. 1,000,000 100,000,000 3.96% 9 China Life Yongfeng Enterprise Annuity Collective Plan- Agricultural Bank Of China Limited Fund, wealth management product, etc. 1,000,000 100,000,000 3.96% 10 Taipingyang Investment Strategy Co., Ltd. – Security Investment Fund of China Foreign legal entity 800,00080,000,0003.17% Note: The table above was filled in based on the data of holders delivered by the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. 4. Significant changes to the profitability, assets and credit standing of the guarantor □ Applicable √ Not applicable 5. Liabilities and change in credit of the Company at the end of the Reporting Period, as well as future cash arrangements for repayment For details on financial indicators, including asset/liability ratio, interest coverage ratio, and loan repayment rate, refer to the “Key accounting data and financial indicators of the Company for the past two years as at the end of the Reporting Period” in this section. The company issued targeted convertible bonds without debt rating. V. Consolidated loss of the Reporting Period Exceeding 10% of Net Assets of the last year-end □ Applicable √ Not applicable VI. Key Accounting Data and Financial Indicators of the Company for the past two years as at the end of the Reporting Period Item End of the Reporting Period December 31,2021 Change Current ratio 1.03 1.08 -4.63% Debt/asset ratio 63.9% 61.2% 2.74% Quick ratio 0.8 0.8 -3% H12022 H12021 Change Net profit after non-recurring profit or loss (in RMB10,000) 54,269 778,670 -93.03% Debt to EBITDA ratio 6.99% 10.70% -3.71% Interest coverage ratio 1.46 5.12 -71.48% Cash coverage ratio 4.90 7.23 -32.23% EBITDA coverage ratio 6.45 8.57 -24.74% Debt repayment ratio 100% 100% 0.00 TCLTechnology Group Corporation Interim Report 2022 66 Interest payment ratio 100% 100% 0.00 TCLTechnology Group Corporation Interim Report 2022 Part IXFinancial Report (For the period from January 1,2022 to June 30,2022) I. Auditor’s Report Whether the 2022 semi-annual report has been audited or not □ Yes √ No The Company’s 2022 semi-annual financial report has not yet been audited. II. Financial Statements The unit of the notes to the financial report is: RMB1,000. TCLTechnology Group Corporation Consolidated Balance Sheet ___________(RMB’000)_____________ 1 Note VJune 30,2022 January 1,2022 Current assets Monetary assets 133,795,517 31,393,692 Held-for-trading financial assets 28,975,013 7,601,256 Derivative financial assets 3488,428 70,929 Notes receivable 4772,065 776,202 Accounts receivable 519,085,233 18,238,782 Receivables financing 62,223,849 2,217,639 Prepayments 74,038,913 2,306,325 Other receivables 84,172,848 4,458,621 Inventories 914,025,004 14,083,357 Contract assets 10275,288 233,529 Other current assets 114,160,806 5,802,960 Total current assets 92,012,964 87,183,292 Non-current assets Debt investments 1220,136 - Long-term receivables 13639,690 651,118 Long-term equity investments 1426,665,070 25,640,578 Investments in other equity instruments 15927,536 927,319 Other non-current financial assets 161,128,611 2,704,038 Investment property 17793,033 761,902 Fixed assets 18116,788,925 113,723,759 Construction in progress 1943,418,950 37,029,504 Right-of-use assets 202,094,665 2,426,911 Intangible assets 2116,169,914 14,000,546 Development costs 222,643,417 2,540,199 Goodwill 239,158,841 9,158,841 Long-term deferred expenses 242,469,122 2,640,530 Deferred income tax assets 252,816,973 2,150,423 Other non-current assets 2612,608,680 7,449,009 Total non-current assets 238,343,563 221,804,677 Total assets 330,356,527 308,987,969 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 shareholder equity: Note VJune 30,2022 January 1,2022 Current liabilities Short-term borrowings 2714,811,740 9,341,427 Borrowings from the Central Bank 28728,744 1,437,062 Customer deposits and deposits from other banks and financial institutions 29 265,745 666,056 Held-for-trading financial liabilities 30989,803 925,035 Derivative financial liabilities 31430,997 22,205 Notes payable 325,426,352 3,275,296 Accounts payable 3324,185,474 24,297,860 Advances from customers 346,067 5,794 Contract liabilities 354,367,691 2,593,882 Employee compensation payable 362,575,269 3,311,933 Taxes and levies payable 37744,597 1,238,849 Other payables 3821,623,916 19,386,888 Current portion of non-current liabilities due within a one-year period 39 11,957,256 13,006,765 Other current liabilities 401,530,424 1,269,887 Total current liabilities 89,644,075 80,778,939 Non-current liabilities Long-term borrowings 4196,482,488 87,279,082 Bonds payable 4213,499,159 13,066,281 Lease liabilities 431,156,827 1,102,072 Long-term payables 44723,672 671,344 Long-term employee compensation payable 36 872,205 669,931 Deferred income 455,115,596 2,361,205 Deferred income tax liabilities 253,724,221 3,158,986 Total non-current liabilities 121,574,168 108,308,901 Total liabilities 211,218,243 189,087,840 Share capital 4614,030,642 14,030,642 Other equity instruments 47194,401 200,334 Capital reserves 484,185,575 6,079,267 Less: Treasury stock 492,311,664 1,885,557 Other comprehensive income 70 (764,462) (409,447) Surplus reserves 502,550,173 2,550,173 Specific reserves 513,468 1,549 General risk reserve 528,934 8,934 Retained earnings 5321,127,030 22,527,686 Total equity attributable to shareholders of the parent company 39,024,097 43,103,581 Non-controlling interests 80,114,187 76,796,548 Total shareholders’ equity 119,138,284 119,900,129 Total liabilities and shareholder equity 330,356,527 308,987,969 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 2022 January - June 2021 1. Total revenue 84,560,760 74,479,982 Including: Revenue 5484,522,181 74,405,849 Interest income 5538,579 74,133 Less: Cost of sales 5476,522,944 58,068,971 Interest expenditures 5514,292 12,564 Taxes and levies 56289,081 294,310 Selling expenses 571,053,369 901,176 Administrative expenses 581,716,379 2,023,368 R&D expenses 594,451,764 3,402,959 Financial expenses 601,720,157 1,818,983 Including: Interest expenses 2,031,269 2,160,434 Interest income 325,439 187,547 Plus: Other income 611,643,110 810,034 Return on investments 621,780,515 2,788,205 Including: Return on investment in joint ventures and associates 1,757,650 1,315,184 Exchange gain 5524,351 964 Gain on changes in fair value 63114,495 (314,196) Credit impairment loss 64 (27,157) (11,445) Asset impairment loss 65 (1,010,287) (797,519) Asset disposal income 66 (23,631) 24,327 2. Operating profit 1,294,170 10,458,021 Plus: Non-operating income 67596,540 267,948 Less: Non-operating expenses 6852,392 11,987 3. Gross profit 1,838,318 10,713,982 Less: Income tax expenses 69 (88,398) 1,416,497 4. Net profit 1,926,716 9,297,485 (1) Classification by business continuity 1. Net profit from continuing operations 1,926,716 9,239,189 2. Net profit from discontinued operations - 58,296 (2) Classification by ownership 1. Net profits attributable to the owners of the parent company 663,521 6,802,218 2. Net profit attributable to non-controlling interests 1,263,195 2,495,267 5. Other comprehensive income, net of tax 70 (372,997) (217,489) 5.1 Other comprehensive income that cannot be reclassified into profit or loss (13,285) (184,359) 5.2 Other comprehensive income that may subsequently be reclassified into profit or loss upon satisfaction of prescribed condition (359,712) (33,130) 6. Total comprehensive income 1,553,719 9,079,996 Total comprehensive income attributable to the shareholders of the parent company 308,506 6,566,398 Total comprehensive income attributable to non-controlling interests 1,245,213 2,513,598 7. Earnings per share 71 7.1 Basic earnings per share (RMB yuan) 0.0489 0.5040 7.2 Diluted earnings per share (RMB yuan) 0.0485 0.4848 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the accounting department: Xi Wenbo 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 V January - June 2022 January - June 2021 I. Cash flow from operations activities: Proceeds from sale of commodities and rendering of services 65,932,012 60,061,126 Net increase/(decrease) in customer deposits and deposits from other banks and financial institutions (400,311) (602,777) Net increase/(decrease) in borrowings from central bank (708,318) 634,916 Cash received from interest, handling charge and commission 38,579 74,133 Tax and levy rebates 7,032,417 2,530,415 Cash generated from other operating activities 725,538,379 5,032,866 Sub-total of cash generated from operating activities 77,432,758 67,730,679 Payments for commodities and services (54,309,690) (42,679,165) Net (increase)/decrease in loans and advances to customers (40,873) (720,348) Net (increase)/decrease in deposits in central bank and other banks and financial institutions (73,909) (309,934) Cash paid to and for employees (6,631,511) (4,424,050) Taxes and levies paid (1,689,737) (2,179,393) Cash used in other operating activities 73 (5,670,402) (3,522,074) Sub-total of cash used in operating activities (68,416,122) (53,834,964) Net cash generated from operating activities 789,016,636 13,895,715 II. Cash flow from investing activities: Proceeds from disinvestments 22,017,628 13,223,437 Proceeds from return on investments 254,501 945,622 Net proceeds from disposal of fixed assets, intangible assets and other long-term assets 10,504 127,405 Net cash received from disposal of subsidiaries and other business units - 511,576 Cash received from other related investing activities 7473,748 7,079 Sub-total of cash generated from investment activities 22,356,381 14,815,119 Payments for the acquisition and construction of fixed assets, intangible assets and other long-term assets (18,251,636) (13,684,031) Cash paid for investments (21,384,892) (17,853,045) Net cash paid for acquiring subsidiaries and other business units - (4,139,505) Cash used in other investing activities 75 (333,406) (101,676) Subtotal of cash used in investing activities (39,969,934) (35,778,257) Net cash used in investing activities (17,613,553) (20,963,138) Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 2022 January - June 2021 III. Cash flow generated from financing activities: Capital contributions received 5,365,010 8,413,591 Including: Cash received from minority shareholders of subsidiaries 5,365,010 8,413,591 Borrowings raised 37,672,460 34,898,543 Net proceeds from issuance of bonds 4,500,000 2,499,800 Cash generated from other financing activities 766,000 249,287 Sub-total of cash generated from financing activities 47,543,470 46,061,221 Cash paid for debt repayment (28,355,640) (25,245,482) Cash paid for dividend and profit distribution or repayment of interests (4,802,831) (4,358,673) Including: Dividends and profit paid by subsidiaries to minority shareholders (289,774) (219,635) Cash used in other financing activities 77 (4,454,836) (3,060,099) Subtotal of cash used in financing activities (37,613,307) (32,664,254) Net cash generated from financing activities 9,930,163 13,396,967 IV. Effect of exchange rate changes on cash and cash equivalents 261,370 (44,249) V. Net increase in cash and cash equivalents 1,594,616 6,285,295 Add: Balance of cash and cash equivalents at the beginning of the year 30,081,705 18,208,417 VI. Closing balance of cash and cash equivalents 7931,676,321 24,493,712 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 2022 Equity attributable to shareholders of the Company as the parent Share capital Other equity instruments Capital reserves Treasury stock Specific Reserves Other comprehensive income Surplus reserves Appropriation to general reserve Undistributed profit Non-controlling interests Shareholder equity Total 1. Balance as at the end of the prior year 14,030,642 200,334 6,079,267 (1,885,557) 1,549 (409,447) 2,550,173 8,934 22,458,340 76,611,057 119,645,292 Add: Adjustment for change in accounting policy - - - - - - - - 69,346 185,491 254,837 2. Balance as at the beginning of the period 14,030,642 200,334 6,079,267 (1,885,557) 1,549 (409,447) 2,550,173 8,934 22,527,686 76,796,548 119,900,129 3. Increase/decrease in the period - (5,933) (1,893,692) (426,107) 1,919 (355,015) - - (1,400,656) 3,317,639 (761,845) 3.1 Total comprehensive income - - - - - (355,015) - - 663,521 1,245,213 1,553,719 3.2 Capital increased and reduced by shareholders - (5,933) (1,893,692) (426,107) - - - - - 4,249,509 1,923,777 1. Capital increased by shareholders - - - - - - - - - 4,735,695 4,735,695 2. Capital increased by holders of other equity instruments - (5,933) 3,902 - - - - - - - (2,031) 3. Share-based payments included in owner equity - - 492 76,664 - - - - - - 77,156 4. Others - - (1,898,086) (502,771) - - - - - (486,186) (2,887,043) 3.3 Profit distribution - - - - 1,919 - - - (2,050,003) (2,177,083) (4,225,167) 1. Appropriation of surplus reserves - - - - - - - - - - - 2. Appropriation of general risk reserves - - - - 1,919 - - - - - 1,919 3. Appropriation to shareholders - - - - - - - - (2,050,003) (2,177,083) (4,227,086) 4. Others - - - - - - - - - - - (4) Others - - - - - - - - (14,174) - (14,174) 4. Balance as at the end of the period 14,030,642 194,401 4,185,575 (2,311,664) 3,468 (764,462) 2,550,173 8,934 21,127,030 80,114,187 119,138,284 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 2021 Equity attributable to shareholders of the Company as the parent Non-controlling interests Shareholder equity Total Share capital Other equity instruments Capital reserves Treasury stock Specific Reserves Other comprehensive income Surplus reserves Appropriation to general reserve Undistributed profit 1. Balance as at the end of the prior year 14,030,788 - 230,241 - 5,442,385 - (1,913,029) 211 (145,573) - 2,452,892 - 386 14,009,494 55,949,272 - 90,057,067 Add: Adjustment for change in accounting policy - - - - - - - - - - - - - - - - - 2. Balance as at the beginning of the period 14,030,788 - 230,241 - 5,442,385 - (1,913,029) 211 (145,573) - 2,452,892 - 386 14,009,494 55,949,272 - 90,057,067 3. Increase/decrease in the period (146) - (29,907) - 636,882 - 27,472 1,338 (263,874) - 97,281 - 8,548 8,518,192 20,847,276 - 29,843,062 3.1 Total comprehensive income - - - - - - - - (141,053) - - - - 10,126,790 5,106,886 - 15,092,623 3.2 Capital increased and reduced by shareholders (146) - (29,907) - 636,882 - 27,472 - - - - - - - 16,271,882 - 16,906,183 1. Capital increased by shareholders - - - - - - - - - - - - - - 18,150,004 - 18,150,004 2. Capital increased by holders of other equity instruments - - (29,907) - 75,461 - 537,972 - - - - - - - - - 583,526 3. Share-based payments included in owner equity (146) - - - 2,823 - 118,559 - - - - - - - - - 121,236 4. Others - - 558,598 (629,059) - - - - - (1,878,122) (1,948,583) 3.3 Profit distribution - - - - - - - 1,338 - - 97,831 - 8,548 (1,731,969) (531,492) - (2,155,744) 1. Appropriation of surplus reserves - - - - - - - - - - 97,831 - - (97,831) - - - 2. Appropriation of general risk reserves - - - - - - - 1,338 - - - - 8,548 (8,548) - - 1,338 3. Appropriation to shareholders - - - - - - - - - - - - - (1,625,590) (287,220) - (1,912,810) 4. Others - - - - - - - - - - - - - - (244,272) - (244,272) 3.4 Transfers within owners’ equity - - - - - - - - (122,821) - (550) - - 123,371 - - - 1. Other comprehensive income transferred to retained earnings - - - - - - - - (122,821) - (550) - - 123,371 - - - 4. Balance as at the end of the period 14,030,642 - 200,334 - 6,079,267 - (1,885,557) 1,549 (409,447) - 2,550,173 - 8,934 22,527,686 76,796,548 - 119,900,129 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 XVJune 30,2022 January 1,2022 Current assets Monetary assets 14,893,969 10,467,962 Held-for-trading financial assets 5,516,389 4,372,557 Derivative financial assets 3,792 - Accounts receivable 1136,918 93,566 Prepayments 121,790 47,333 Other receivables 229,868,004 13,819,512 Inventories 23,395 41,029 Other current assets 24,343 15,011 Total current assets 50,588,600 28,856,970 Non-current assets Long-term equity investments 373,567,164 71,303,126 Investments in other equity instruments 4 5,000 5,000 Other non-current financial assets 5126,644 1,051,536 Investment property 82,906 84,795 Fixed assets 33,569 37,402 Construction in progress 1,360 1,360 Right-of-use assets 440,425 452,398 Intangible assets 88,136 93,324 Long-term deferred expenses 25,163 26,079 Deferred income tax assets - 12 Total non-current assets 74,370,367 73,055,032 Total assets 124,958,967 101,912,002 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 shareholder equity: Note XVJune 30,2022 December 31,2021 Current liabilities Short-term borrowings 3,500,281 1,250,989 Accounts payable 128,836 141,877 Contract liabilities 78,650 23,823 Employee compensation payable 170,041 294,653 Taxes and levies payable 68,075 13,076 Other payables 47,315,655 38,597,139 Current portion of non-current liabilities due within a one-year period 7,176,374 4,843,348 Other current liabilities 713 4,284 Total current liabilities 58,438,625 45,169,189 Non-current liabilities Long-term borrowings 14,490,000 12,898,000 Bonds payable 11,491,205 11,159,524 Lease liabilities 6,648 13,365 Long-term employee compensation payable 207,213 108,384 Deferred income 58,638 60,198 Total non-current liabilities 26,253,704 24,239,471 Total liabilities 84,692,329 69,408,660 Share capital 14,030,642 14,030,642 Other equity instruments 194,401 200,334 Capital reserves 9,900,366 9,900,679 Less: Treasury stock 2,311,664 1,885,557 Other comprehensive income (108,127) (112,194) Surplus reserves 2,348,109 2,348,109 Retained earnings 16,212,911 8,021,329 Total shareholders’ equity 40,266,638 32,503,342 Total liabilities and shareholder equity 124,958,967 101,912,002 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Income Statement of the parent company ___________(RMB’000)_____________ 10 Note XVJanuary - June 2022 January - June 2021 1. Revenue 6589,571 773,672 Less: Cost of sales 6412,401 635,555 Taxes and levies 1,961 9,370 Selling expenses 31,939 14,403 Administrative expenses 136,116 228,082 R&D expenses 78,136 64,151 Financial expenses 876,773 840,141 Including: Interest expenses 1,271,057 1,232,115 Interest income 391,725 411,290 Plus: Other income 2,901 1,757 Return on investments 710,607,557 1,851,151 Including: Gains on investment in joint ventures and associates 7690,201 627,705 Gain on changes in fair value 24,470 41,889 Credit impairment loss 26 19 Asset disposal income 987 - 2. Operating profit 9,688,186 876,786 Plus: Non-operating income 574,945 206,554 Less: Non-operating expenses 7,360 1,965 3. Gross profit 10,255,771 1,081,375 Less: Income tax expenses 12 - 4. Net profit 10,255,759 1,081,375 5. Other comprehensive income 4,068 (152,039) 6. Total comprehensive income 10,259,827 929,336 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Cash Flow Statement of the Company as the Parent ___________(RMB’000)_____________ 11 Note XVJanuary - June 2022 January - June 2021 I. Cash flow from operations activities: Proceeds from sale of commodities and rendering of services 421,044 618,146 Tax and levy rebates 1,714 - Cash generated from other operating activities 1,592,522 21,091,888 Sub-total of cash generated from operating activities 2,015,280 21,710,034 Payments for commodities and services (453,962) (487,959) Cash paid to and for employees (141,860) (97,433) Taxes and levies paid (36,637) (133,486) Cash used in other operating activities (407,266) (1,102,683) Sub-total of cash used in operating activities (1,039,725) (1,821,561) Net cash generated from operating activities 8975,555 19,888,473 II. Cash flow from investment activities: Proceeds from disinvestments 6,242,022 7,176,816 Proceeds from return on investments 70,898 1,855,032 Net proceeds from disposal of fixed assets, intangible assets and other long-term assets 24 - Sub-total of cash generated from investment activities 6,312,944 9,031,848 Payments for the acquisition and construction of fixed assets, intangible assets and other long-term assets (5,860) (15,930) Cash paid for investment (6,974,584) (20,669,875) Cash used in other investing activities - - Subtotal of cash used in investing activities (6,980,444) (20,685,805) Net cash used in investing activities (667,500) (11,653,957) Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo The attached notes to the financial statements form an integral part of the financial statements. TCLTechnology Group Corporation Cash Flow Statement of the Parent Company (Continued) ___________(RMB’000)_____________ 12 Note XVJanuary - June 2022 January - June 2021 III. Cash flow generated from financing activities: Capital contributions received - - Borrowings raised 14,931,000 8,200,000 Net proceeds from issuance of bonds 4,500,000 2,499,800 Cash generated from other financing activities 106,878 - Sub-total of cash generated from financing activities 19,537,878 10,699,800 Cash paid for debt repayment (12,364,006) (10,571,804) Cash paid for distribution of dividends and profits or repayment of interests (2,625,194) (2,236,916) Cash used in other financing activities (535,295) (409,734) Subtotal of cash used in financing activities (15,524,495) (13,218,454) Net cash generated from financing activities 4,013,383 (2,518,654) IV. Effect of exchange rate changes on cash and cash equivalents 15,223 (18,448) V. Net increase in cash and cash equivalents 4,336,661 5,697,414 Add: Balance of cash and cash equivalents at the beginning of the year 10,401,379 2,196,283 VI. Closing balance of cash and cash equivalents 914,738,040 7,893,697 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 2022 Share capital Other equity instruments Capital reserves Treasury stock Other comprehensive income Surplus reserves Retained earnings Total shareholders’ equity 1. Balance as at the end of the prior year 14,030,642 200,334 9,900,679 (1,885,557) (112,194) 2,348,109 8,021,329 32,503,342 Add: Adjustment for change in accounting policy - - - - - - - - 2. Balance as at the beginning of the period 14,030,642 200,334 9,900,679 (1,885,557) (112,194) 2,348,109 8,021,329 32,503,342 3. Increase/decrease in the period - (5,933) (313) (426,107) 4,067 - 8,191,582 7,763,296 3.1 Total comprehensive income - - - - 4,067 - 10,255,759 10,259,826 3.2 Capital increased and reduced by shareholders - (5,933) (313) (426,107) - - - (432,353) 1. Capital increased by owners - - - - - - - - 2. Capital increased by holders of other equity instruments - (5,933) 3,902 - - - - (2,031) 3. Share-based payments included in owner equity - - 492 76,664 - - - 77,156 4. Others - - (4,707) (502,771) - - - (507,478) 3.3 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 - - - - - - - - (4) Others - - - - - - (14,174) (14,174) 4. Balance as at the end of the period 14,030,642 194,401 9,900,366 (2,311,664) (108,127) 2,348,109 16,212,911 40,266,638 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 (Continued) ___________(RMB’000)_____________ 14 2021 Share capital Other equity instruments Capital reserves Treasury stock Other comprehensive income Surplus reserves Retained earnings Total shareholders’ equity 1. Balance as at the end of the prior year 14,030,788 230,241 9,846,835 (1,913,029) 141,998 2,250,828 8,771,394 33,359,055 Add: Adjustment for change in accounting policy - - - - - - - - 2. Balance as at the beginning of the period 14,030,788 230,241 9,846,835 (1,913,029) 141,998 2,250,828 8,771,394 33,359,055 3. Increase/decrease in the period (146) (29,907) 53,844 27,472 (254,192) 97,281 (750,065) (855,713) 3.1 Total comprehensive income - - - - (259,690) - 978,304 718,614 3.2 Capital increased and reduced by shareholders (146) (29,907) 53,844 27,472 - - - 51,263 1. Capital increased by owners - - - - - - - - 2. Capital increased by holders of other equity instruments - (29,907) 75,461 537,972 - - - 583,526 3. Share-based payments included in owner equity (146) - (3,278) 118,560 - - 115,136 4. Others - - (18,339) (629,060) - - (647,399) 3.3 Profit distribution - - - - - 97,831 (1,723,421) (1,625,590) 1. Appropriation of surplus reserves - - - - - 97,831 (97,831) - 2. Appropriation to shareholders - - - - - - (1,625,590) (1,625,590) 3. Others - - - - - - - - 3.4 Transfers within owners’ equity - - - - 5,498 (550) (4,948) - 1. Other comprehensive income transferred into retained earnings - - - - 5,498 (550) (4,948) - 4. Balance as at the end of the period 14,030,642 200,334 9,900,679 (1,885,557) (112,194) 2,348,109 8,021,329 32,503,342 Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the financial department: Xi Wenbo 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 15 IGeneral information (1) 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 Company Law of the People's Republic of China (hereinafter referred to as the “Company Law”). As per the approval documents of YBH [2002] No.94 and YFH [2002] No.134 issued by the People’s Government of Guangdong Province, and YJMH [2002] No.112 and YJMH [2002] No.184 issued by the Economic and Trade Commission of Guangdong Province, the Company was changed to a joint stock limited company with a registered capital of RMB1,591,935,200, which was approved by Guangdong Province Administration for Industry and Commerce on 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 common 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 the issue, 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 common 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 common 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 16 IGeneral information (continued) (1) Place of incorporation and organizational structure (continued) Upon the approval of the CSRC on February 13,2014 with the[2014] Document No.201, the Company privately placed 917,324,357 ordinary shares denominated in RMB (A shares) to designated investors on April 30,2009, 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 the issue, 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. During 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. During 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). During 2017, the Company acquired stake 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 issue, the total share capital of the Company increased from 12,213,681,742 shares to 13,514,972,063 shares. During 2018, the Proposal on the Grant of Restricted Stock to Awardees was approved at the 7th Meeting of the Sixth Session of the 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 subject to lockup restriction. As such, the total share capital of the Company decreased from 13,549,648,507 to 13,528,438,719 shares. During 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 Sixth Session of the Board of Directors and the First Extraordinary General Meeting of 2020. The name of the Company was then changed from “TCL Corporation” 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 subject to lockup restriction. As such, the total share capital of the Company decreased from 13,528,438,719 to 13,519,279,411 shares. In October 2020, the Company issued 511,508,951 new shares to acquire a non-controlling interest in a 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. I General information (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. As of June 30,2022, the total issued share capital of the Company was 14,030,642,421 shares. See note V. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 17 46 for details. The registered address of the Company is: TCLTech Building,17 Huifeng Third Road, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province. (2) 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). (3) Authorization of publishing the financial report These financial statements were authorized for publishing by the Company’s Board of Directors on August 26,2022. 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 Corporate Accounting Standards - 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 18 IIISignificant accounting policies and accounting estimates (continued) 3 Statement of compliance with corporate accounting standards The financial statements are in compliance with the requirements of the corporate accounting standards, and truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company during the reporting period. 4 Accounting period The Company adopts the calendar year as accounting year, and an accounting year is from January 1 to December 31. 5 Operations cycle The Company does not take the operating cycle as the criteria for liquidity classification of assets and liabilities. 6 Functional currency for bookkeeping Renminbi ("RMB") is both the functional currency and the presentation currency for preparation of the financial statements. Unless otherwise specified, these financial statements shall be presented in the unit of RMB'000. 7 Accounting treatments for business combinations involving enterprises under and not under common control (1) When the terms, conditions and economic influence of transactions in the process of a step-by-step combination conform to one or more of the following, accounting for multiple transactions is treated as a package transaction: (a) these transactions are made simultaneously or with consideration of influence on each other; (b) these transactions can only achieve a complete business outcome when treated as a whole; (c) the occurrence of a transaction depends on the occurrence of at least one of the other transactions; (d) A transaction alone is uneconomical, but is economical when considered together with other transactions. (2) Business combinations involving enterprises under common control (a) Individual financial statement The assets and liabilities acquired by the Company in business combinations are measured at the carrying value of assets and liabilities of the combined party on the date of combination (including the goodwill of the ultimate controlling party resulting from the acquisition of the combined party). The difference between the carrying value 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 estimated liabilities or assets, the difference between the estimated liabilities or assets and the settlement 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 19 IIISignificant accounting policies and accounting estimates (continued) 7 Accounting treatments for business combinations involving enterprises under and not under common control (continued) (2) Business combinations involving enterprises under common control (continued) (a) Individual financial statements (continued) For a business 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 book value of long-term equity investments before the combination plus the book value 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. (b) Consolidated financial statements The assets and liabilities acquired by the combining party in the business combination are measured at the carrying value of the owners' equity of the combined party in the consolidated financial statements of the ultimate controlling party. For the case where a business combination is finally realized through multiple transactions, if it is a package transaction, each transaction is treated as a transaction for acquiring control; if it is not a package transaction, the long-term equity 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 combined parties are inconsistent with those adopted by the Company, the Company shall make adjustments in accordance with the accounting policies of the Company on the date of combination, and on this basis, confirm the consolidated financial statements in accordance with the provisions of Accounting Standards for Business Enterprises. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 20 IIISignificant accounting policies and accounting estimates (continued) 7 Accounting treatments for business combinations involving enterprises under and not under common control (continued) (3) Combination not under common control The 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 the carrying value is recognized in profit or loss. Where a future event that may affect the combination costs is agreed in the combination contract, if the estimated future events are likely to occur on the date of purchase and the amount of the impact on combination costs can be reliably measured, it is also included in the combination costs. The agency fees paid for audits, legal services, assessments and 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 identifiable net assets of the acquiree gained in the combination is recognized as goodwill by the Company. In case that the cost of combination is less than the fair value of the identifiable net assets of the acquiree gained in the combination, and the difference is still less than the fair value of identifiable net assets of the acquiree gain in the combination after review, the difference is included in the current profit and loss by the Company. For the case where a business combination involving enterprises not under common control is finally realized through multiple transactions step by step, if it is a package transaction, each transaction is treated as a transaction for acquiring control; if it is not a package transaction, the individual financial statements and consolidated financial statements are treated separately for accounting purposes. (a) In the individual financial statements, if the equity investment held before the date of combination is accounted for in the equity method, the sum of the book value of equity investments of the acquiree held before the date of acquisition plus the new investment cost on the date of acquisition is recognized as the initial cost of the investment; the remaining comprehensive income confirmed in equity investments by the equity method before the date of acquisition is accounted for, when the investment is disposed, 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 value of the original equity interest, and the accumulated fair value changes originally included in other comprehensive income should be transferred to return on investment in the current period of combination date. (b) In the consolidated financial statements, the equity of the acquiree held before the date of acquisition is re-measured according to the fair value of the equity on the date of acquisition. The difference between the fair value and the book value is included in the current return on investment; if the equity of the acquiree held before the date of acquisition involves other comprehensive income, etc. under the equity method, other comprehensive income, etc. related to it is converted into return on investment in the current period of the acquisition date. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 21 IIISignificant accounting policies and accounting estimates (continued) 8 Method for preparing consolidated financial statements The scope of consolidation of the Company's consolidated financial statements is determined on the basis of control, and all subsidiaries (including separate entities controlled by the parent Company) are included in the consolidated financial statements. The accounting policies and accounting periods adopted by all subsidiaries included in the consolidated financial statements are consistent with the Company. If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with the Company, necessary adjustments will be made in accordance with the Company's accounting policies and accounting periods when preparing consolidated financial statements. The consolidated financial statements are based on the financial statements of the Company and its subsidiaries as well as other relevant information, and are prepared by the Company after adjusting the long-term equity investments for the subsidiaries in accordance with the equity method. The impact of internal transactions between the Company and its subsidiaries, and internal transactions between subsidiaries, on the consolidated balance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in shareholder equity is offset in the preparation of consolidated financial statements. If the current losses shared by the minority shareholders of a subsidiary exceed the share enjoyed by the minority shareholder in the initial 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 investee due to disposal of part of the equity investment or other reasons, the remaining equity investment after disposal will be re-measured according to its fair value by the Company on the date of loss of control. The difference of the sum of the consideration obtained from the disposal of the equity and the fair value of the remaining equity, less the sum of the share of net assets and goodwill of the original subsidiary that should be enjoyed in accordance with the original share-holding ratio since the date of acquisition or combination, is accounted for the return on investment in the current period of loss of control. Other comprehensive income or net profit and loss related to the original subsidiary's equity investment, other comprehensive income and other changes in owners' equity other than profit distribution, will be transferred 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 investee or changes in net assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 22 IIISignificant accounting policies and accounting estimates (continued) 9 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. 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 indicates that the joint venturers 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 joint venturers have rights to the assets, and obligations for the liabilities, relating to the arrangement. ③ Other relevant facts and circumstances show that the joint venturers have rights to the assets, and obligations for the liabilities, relating to the arrangement. For example, the joint venturers are eligible to almost all the output 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 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 23 IIISignificant accounting policies and accounting estimates (continued) 10 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. 11 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 “undistributed profits” 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 foreign operation listed in other comprehensive income items in the balance sheet are transferred from the other comprehensive income item to the current profit and loss. All the incurred items in the cash flow statement are translated at the current average exchange rate of the period in which transactions occur. All the opening balance and actual amount of the previous year are listed on the basis of the amount translated in the previous year. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 24 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments When the Company becomes a party to a financial instrument, it recognizes a financial asset or liability. The effective interest method refers to the method of calculating the amortized cost of financial assets or liabilities and allocating interest income or interest expenses into each accounting period. The effective interest rate refers to the interest rate used to discount the estimated future cash flow of a financial asset or financial liability during its expected duration to the book balance of the financial asset or the amortized cost of the financial liability. When determining the effective interest rate, the expected cash flow is estimated on the basis of considering all contract terms of financial assets or liabilities (such as prepayment, extension, call options or other similar options), but the expected credit loss is not considered. The amortized cost of a financial asset or financial liability is the accumulated amortization amount formed by deducting the repaid principal from the initial recognition amount of the financial asset or financial liability, adding or subtracting the difference between the initial recognition amount and the maturity amount by using the effective interest method, and then deducting the accumulated accrued loss reserve (only applicable to financial assets). (1) Classification and measurement of financial assets According to the business model of the financial assets under management and the contractual cash flow characteristics of the financial assets, the Company divides the financial assets into the following three categories: (a) Financial assets at amortized cost. (b) Financial assets at fair value through other comprehensive income. (c) Financial assets at fair value through profit or loss. Financial assets are measured at fair value when initially recognized, but if the accounts or notes receivable arising from the sale of goods or the provision of services do not contain significant financing components or do not consider financing components for no more than one year, the initial measurement shall be made at the transaction price. For financial assets at fair value through profit or loss, transaction expenses are directly recognized in the current profit and loss. For other financial assets, transaction expenses are included in the initial recognition amount. Subsequent measurement of financial assets depends on their classification. All related financial assets affected will be reclassified when and only when the Company changes its business model of managing financial assets. (a) Financial assets classified as measured at amortized cost The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest on the amount of outstanding principal, and the business model for managing the financial asset is to collect the contractual cash flow, then the Company classifies the financial asset as measured at amortized cost. Financial assets of the Company that are classified as measured at amortized cost include monetary assets, notes receivable, accounts receivable, other receivables, long-term receivables, debt investments, etc. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 25 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (1) Classification and measurement of financial assets (continued) The Company recognizes interest income from such financial assets with the effective interest method, and carries out subsequent measurement at amortized cost. Gains or losses arising from impairment or derecognition or modification are included in 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 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. (c) Financial assets designated as measured at fair value through other comprehensive income At the time of initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financial assets at fair value through other comprehensive income on the basis of individual financial assets. Changes in the fair value of such financial assets are included in other comprehensive income without allowance for impairment. When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in the retained earnings. During the investment period when the Company holds the equity instrument, the dividend income is recognized and included in the current profit and loss when the Company's right to receive dividends has been established, the economic benefits related to dividends are likely to flow into the Company, and the amount of dividends can be measured reliably. The Company reports such financial assets under the item of investments in other equity instruments. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 26 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (1) Classification and measurement of financial assets (continued) An investment in equity instruments is a financial asset 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 measured at fair value through profit or loss If failing to be classified as measured at amortized cost or at fair value through other comprehensive income, or not designated as measured at fair value through other comprehensive income, financial assets are all classified as measured at fair value through profit or loss. The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. (e) Financial assets designated as measured at fair value through profit or loss At the time of initial recognition, the Company may irrevocably designate financial assets as measured at fair value through profit or loss on the basis of individual financial assets in order to eliminate or significantly reduce accounting mismatches. If the mixed contract contains one or more embedded derivative instruments and its main contract is not any financial asset as above, the Company may designate the whole of the mixed contract as a financial instrument at fair value through profit or loss. Except under the following circumstances: ① Embedded derivatives do not significantly change the cash flow of mixed contracts. ② When determining for the first time whether similar mixed contracts need to be split, it is almost clear that embedded derivatives contained in them should not be split without analysis. If the prepayment right embedded in a loan allows the holder to prepay the loan at an amount close to the amortized cost, the prepayment right does not need to be split. The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fair value as well as dividends and interest income associated with such financial assets into current profits and losses. The Company reports such financial assets as held-for-trading financial assets and other non-current financial assets according to their liquidity. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 27 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (2) Classification and measurement of financial liabilities The Company classifies a financial instrument or its components into financial liabilities or equity instruments upon initial recognition according to the contract terms of and the economic essence reflected by the financial instrument issued, rather than only in legal form, in combination with the definitions of financial liabilities and equity instruments. Financial liabilities are classified at initial recognition as measured at fair value 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 if: ① Such financial liabilities can eliminate or significantly reduce accounting mismatches. ② The financial liability portfolio or the portfolio of financial assets and liabilities is managed and evaluated for performance on the basis of fair value according to the enterprise risk management or investment strategy stated in the official written documents, and is reported to key management personnel within the enterprise on this basis. The Company subsequently measures such financial liabilities at fair value. 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 28 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (2) Classification and measurement of financial liabilities (continued) (b) Other financial liabilities The Company classifies financial liabilities except for the following items as measured at amortized cost. Such financial liabilities are recognized by the effective interest method and subsequently measured at amortized cost. Gains or losses arising from derecognition or amortization are included in the current profits and losses: ① Financial liabilities at fair value through profit or loss. ② Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets. ③ Financial guarantee contracts that do not fall under the first two categories of this article, and loan commitments that do not fall under category (1) of this article and lend at a below-market interest rate. Financial guarantee contracts refer to contracts that require the issuer to pay a specific amount to the contract holder who has suffered losses when a specific debtor fails to pay the debt in accordance with the original or modified terms of the debt instrument. Financial guarantee contracts that are not financial liabilities designated as measured at fair value through profit or loss are measured after initial recognition according to the loss reserve amount and of the initial recognition amount, less the accumulated amortization amount during the guarantee period, whichever is higher. (3) Derecognition of financial assets and liabilities (a) Financial asset are derecognized, i.e. written off from its account and balance sheet if: ① The contractual right to receive cash flow from the financial asset is terminated; or ② The financial asset has been transferred, which meets the requirements for derecognition of financial assets. (b) Conditions for derecognition of financial liabilities If the current obligation of a financial liability (or part thereof) has been discharged, such financial liability (or part thereof) is derecognized. The existing financial liability is derecognized with a new one recognized, and the difference between the carrying amount and the consideration paid (including transferred non-cash assets or assumed liabilities) is included in the current profits and losses, if an agreement is signed between the Company and the lender to replace the existing financial liability by assuming a new one, and the contract terms of these two financial liabilities are substantially different, or the contract terms of the existing financial liability (or part thereof) are substantially modified. If the Company repurchases part of a financial liability, the carrying amount of the financial liability shall be distributed according to the proportion of the fair value of the continuing recognition portion and the derecognition portion to the overall fair value on the repurchase date. The difference between the carrying amount allocated to the derecognized portion and the consideration paid (including transferred non-cash assets or liabilities assumed) shall be included in the current profits and losses. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 29 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (4) Recognition basis and measurement method of financial asset transfer When a financial asset is transferred, the Company evaluates the risks and rewards retained of the financial asset ownership: (a) If almost all the risks and rewards of the financial asset ownership are transferred, such financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities. (b) If almost all the risks and rewards of the financial asset ownership are retained, such financial asset shall continue to be recognized. (c) In circumstances where the Company neither transfers nor retains almost all the risks and rewards of the financial asset ownership (i.e. circumstances other than ① and ② of this article), according to whether it retains control over such financial asset, ① the financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities if such control is not retained; or ② the relevant financial asset shall continue to be recognized to the extent that it continues to be involved in the transferred financial asset, and the relevant liabilities shall be recognized accordingly if such control is retained. The extent that it continues to be involved in the transferred financial asset refers to the extent the Company bears the risks or rewards on changes in the value of the transferred financial asset. When judging whether the transfer of financial assets meets the above conditions for derecognition of financial assets, the principle of substance over form shall be adopted. The Company divides the transfer of financial assets into overall transfer and partial transfer. (a) If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall be included in the current profits and losses: ① The carrying amount of the transferred financial asset on the date of derecognition. ② The sum of the consideration received for the transfer of financial assets and the amount of the corresponding derecognized portion of the accumulated changes in fair value originally included in other comprehensive income directly (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). (b) If the financial asset is partially transferred and the transferred part meets the conditions for derecognition, the carrying amount of the financial asset before transfer shall be allocated between the derecognition portion and the continuing recognition portion (in this case, the retained service asset shall be regarded as the continuing recognition part of the financial asset) according to the respective relative fair values on the transfer date, and the difference between the following two amounts shall be included in the current profits and losses: ① The carrying amount of the derecognized portion on the derecognition date. ② The sum of the consideration received for the derecognized portion and the amount of the corresponding derecognized portion of the accumulated changes in fair value originally included in other comprehensive income (the financial assets involved in the transfer are financial assets at fair value through other comprehensive income). TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 30 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (4) Recognition basis and measurement method of financial asset transfer (continued) If the transfer of a financial asset does not meet the conditions for derecognition, the financial asset shall continue to be recognized and the consideration received shall be recognized as a financial liability. (5) Determination of fair value of financial assets and liabilities The fair value of a financial asset or liability with an active market shall be determined by the quoted price in the active market, unless the financial asset has a sell-off period for the asset itself. For the financial assets restricted for the assets themselves, the compensation amount demanded by market participants due to the risk of not being able to sell the financial assets on the open market within the specified period shall be deducted from the quoted price in the active market. Quoted prices in the active market includes those for related assets or liabilities that can be easily and regularly obtained from exchanges, dealers, brokers, industry groups, pricing or regulatory agencies, and can represent actual and recurring market transactions on the basis of fair trade. Financial assets initially acquired or derived or financial liabilities assumed shall be determined on the basis of market transaction price. The fair value of financial assets or liabilities without an active market shall be determined by valuation techniques. At the time of valuation, the Company adopts valuation techniques that are applicable under the current circumstances and are supported by sufficient available data and other information, selects input values consistent with the characteristics of relevant assets or liabilities considered by market participants in the transactions thereof, and gives priority to the use of relevant observable input values whenever possible. If the relevant observable input value cannot be obtained or be feasibly obtained, the unobservable input value shall be used. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 31 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (6) Impairment of financial instruments Based on the expected credit loss, the Company conducts impairment accounting of financial assets classified as measured at amortized cost, financial assets classified as measured at fair value 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 measured at fair value through other comprehensive income, the credit loss reserve will offset the carrying amount of the financial assets. For financial assets classified as measured at fair value through other comprehensive income, the Company recognizes its credit loss reserve in other comprehensive income without reducing its carrying amount presented in the balance sheet. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 32 IIISignificant accounting policies and accounting estimates (continued) 12 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 debt mortgage, or the guarantee provided by a third party, or the quality of credit enhancement; these changes will reduce the debtor’s economic motivation to repay the loan within the time limit stipulated in the contract 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 33 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (6) Impairment of financial instruments (continued) (b) Financial assets with depreciation of credit If one or more events have adverse effects on the expected future cash flow of a financial asset, the financial asset will become a financial asset that has suffered credit impairment. The following observable information can be regarded as evidence of credit impairment of financial assets: ① The issuer or debtor is in serious financial 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 Company’s assessment of expected credit losses of financial instruments is based on single items and combinations. 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 34 IIISignificant accounting policies and accounting estimates (continued) 12 Financial instruments (continued) (6) Impairment of financial instruments (continued) (d) Write-off of financial assets If the Company cannot reasonably expect the contract cash flow of the financial asset to be fully or partially recovered, the book balance of the financial asset will be written off directly. This write-off constitutes the derecognition of relevant financial assets. (7) Offset of financial assets and financial liabilities In the balance sheet, financial assets and financial liabilities are shown separately without offsetting each other. However, if the following conditions are met at the same time, the net amount after offset will be listed in the balance sheet: (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. 13 Notes receivable For the determination method and accounting treatment method of the Company's expected credit loss on notes receivable, please refer to 12(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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 35 IIISignificant accounting policies and accounting estimates (continued) 14 Accounts receivable For the determination method and accounting treatment method of the Company's expected credit loss on accounts receivable, please refer to 12(6) of note 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) 15 Other receivables For the determination method and accounting treatment method of the Company's expected credit loss of other receivables, please refer to 12(6) of note 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. 16 Inventories (1) Classification of inventories The Company classifies inventories into raw materials, in-process products, finished products, goods shipped in transit, turnover materials and molds with an expected benefit period of less than one year, depending on the purpose of holding the inventories. Turnover materials include low-value consumables and packaging materials. (2) Valuation method for inventories shipped in transit All types of inventories are accounted for at actual cost, and actual costs include purchase costs, processing costs and other costs. Inventories are shipped in transit by weighted average method. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 36 IIISignificant accounting policies and accounting estimates (continued) 16 Inventories (continued) (3) Basis for determining the net realizable value of inventories and accrual method for inventory valuation allowance Closing inventories are measured at cost or net realizable value, whichever is lower. In cases where differences exists due to the net realizable value being less than the cost of inventory, inventory valuation allowance is made based on individual inventory items or the inventory category, and the difference is recognized in the current profit and loss. For inventories of goods directly used for sale, such as finished goods, merchandise inventories and materials for sale, in the normal production and operations process, the net realizable value is determined by the amount of the estimated selling price of the inventory less the estimated sales cost and relevant taxes and fees; for material inventories that need to be processed, in the normal production and operations process, the net realizable value is determined by the amount of the estimated selling price 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 amortizes turnover materials by the one-off amortization method, and the molds with a benefit period of less than one year are amortized within the period of not exceeding one year according to the expected benefit period. 17 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 12(6) of note IIIImpairment of financial instruments. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 37 IIISignificant accounting policies and accounting estimates (continued) 18. Held-for-sale (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 for non-current assets or disposal groups held for sale The Company shall not depreciate or amortize non-current assets or disposal groups held for sale. If the book value 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 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. 19 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 12(6) of note IIIImpairment of financial instruments. 20 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 12(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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 38 IIISignificant accounting policies and accounting estimates (continued) 21 Long-term equity investments Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, and the Company’s long-term equity investments in its associates and joint ventures. Subsidiaries are the investees over which the Company is able to exercise control. A joint venture is a joint arrangement which is structured through a separate vehicle over which the Company has joint control together with other parties and only has rights to the net assets of the arrangement based on legal forms, contractual terms and other facts and circumstances. Associates are the investees that the Company has significant influence on their financial and operating policies. Investments in subsidiaries are presented in the Company’s financial statements using the cost method, and are adjusted to the equity method when preparing the consolidated financial statements. Investments in a joint venture and associates are accounted for using the equity method. (1) Recognition of initial investment cost (a) Long-term equity investment formed by business combination For long-term equity investment acquired by business combination involving enterprises under common control, the book value of assets and liabilities of the combined party in the consolidated financial statements of the ultimate controlling party as at the date of combination (including the goodwill formed by the ultimate controlling party's acquisition of the combined party) is recognized as investment cost. For long-term equity investment formed by combination, the share of the book value of shareholder equity of the combined party acquired on the date of combination is recognized as initial investment cost. The difference between the initial investment cost and assets paid as per consideration for combination, the book value of liabilities incurred or assumed and the total par value of shares issued, is used to adjust capital reserve, and when the capital reserve is insufficient, it is used to adjust retained earnings. For long-term equity investment acquired by business combinations involving enterprises not under common control, the combination cost is recognized as investment cost of the long-term equity investment. The combination cost is the fair value of assets paid, the liabilities incurred or assumed, and the equity securities issued to acquire the control of acquired party on the date of acquisition. The difference between the higher combination cost and lower fair value of identifiable net assets of the acquiree acquired in the combination is recognized as goodwill; the difference between the lower combination cost and higher fair value of identifiable net assets of the acquiree acquired in the combination is included in current profits and losses after review. For business combination involving enterprises not under common control realized step by step through multiple transactions, the sum of the book value of equity investment held by the acquirer before the date of acquisition and the new investment cost on the date of acquisition is recognized as initial investment cost, and the combination cost includes the sum of assets paid, the liabilities incurred or assumed by the acquirer, and the fair value of equity securities issued. (b) Long-term equity investment acquired by other means For long-term equity investment acquired by cash payment, the actual acquisition price is recognized as initial investment cost. The initial investment cost includes expenses, taxes and other necessary expenses directly related to the acquisition of the long-term equity investment; the transaction costs incurred when issuing or acquiring the own equity instruments of acquirer attributed directly to equity transactions which can be deducted from the equity. For long-term equity investment acquired by issuing equity securities, the fair value of equity securities issued is recognized as initial investment cost. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 39 IIISignificant accounting policies and accounting estimates (continued) 21 Long-term equity investments (continued) Provided that the non-monetary asset exchange contains commercial substance and the fair value of the assets received or assets surrendered can be reliably measured, the initial investment cost of the long-term equity investment received with non-monetary assets is determined based on the fair value of the assets surrendered, except that there is conclusive evidence that indicates that the fair value of assets received is more reliable. For non-monetary assets that do not satisfy the above condition, the book value of assets surrendered and related taxes and fees payable are recognized as the initial investment cost of the long-term equity investment. The initial investment cost of a long-term equity investment acquired by debt restructuring is determined on the basis of fair value. (2) Subsequent measurement and recognition of related profit and loss (a) Subsequent measurement The Company adopts the cost method to account for the long-term equity investments under the control of investee, and the consolidated financial statements are adjusted in accordance with the equity method in preparation. The Company adopts the equity method to account for the long-term equity investments in associates and joint ventures. The difference between the higher initial investment cost and the fair value share of identifiable net assets of the investee enjoyed in the investment is not used to adjust the initial investment cost of the long-term investment; the difference between the lower initial investment cost and the fair value share of identifiable net assets of the investee enjoyed at the time of conducting the investment is included in the current profits and losses. (b) Recognition of profit and loss Under the cost method, in addition to the actual payment or the cash dividends or profits included in the consideration that have been declared but not yet paid, the Company recognizes the investment income according to the cash dividends or profits that the investee declared to pay. Under the equity method, when the investment enterprise confirms that it should enjoy the net profit or net loss of the investee, it should adjust the net profit of the investee based on the fair value of identifiable assets of the investee at the time of conducting the investment before the confirmation, and the part of profit and loss of internal transaction between the investor and associates and joint venture that should be attributed to the investor according to the shareholding ratio, should be offset, and the investment profits and losses should be confirmed on this basis. When the Company confirms that it should assume the loss occurred by the investee, the process hereunder is followed: first, the book value of the long-term equity investment is offset. Secondly, if the book value of the long-term equity investment is insufficient for the offset, the investment loss is continued to be recognized, and the book value of long-term receivable items is offset, subject to other book value of the longterm equity that substantially constitutes the net investment of the investee. Finally, after the above-mentioned treatment, if the Company still bears additional obligations in accordance with the investment contract or agreement, the estimated liabilities are recognized according to the estimated obligations and included in the current investment losses. If the investee realizes profit in the future period, the Company shall, after deducting the unconfirmed loss share, conduct the process in the reverse order of the above to write down the book balance of the confirmed liabilities and recover other long-term equity that substantially constitutes net investment of the investee and the book value of the long-term equity, and recognize the profit as return on investment. Other changes in the owners' equity other than net profit or loss, other comprehensive income and profit distribution of the investee, are used to adjust the book value of the long-term equity investment and included in capital reserve. The unrealized profit and loss from internal transactions between the Company and the investee attributed to the Company according to the shareholding ratio, is offset, and the investment profit and loss is recognized on this basis. In respect of the internal transaction losses incurred by the Company and the investee, for the part recognized asset impairment losses, the corresponding unrealized losses are not offset. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 40 IIISignificant accounting policies and accounting estimates (continued) 21 Long-term equity investments (continued) (3) Step-by-step disposal of investment in subsidiaries When the terms, conditions and economic influence of transactions of the equity investment of the subsidiary conform to one or more of the following, accounting for multiple transactions is treated as a package transaction: (a) These transactions are made simultaneously or with consideration of influence on each other; (b) These transactions can only achieve a complete business outcome when treated as a whole; (c) The occurrence of a transaction depends on the occurrence of at least one of the other transactions; (d) A transaction alone is uneconomical, but is economical when considered together with other transactions. When an enterprise loses control over the original subsidiary due to disposal of part of the equity investment or other reasons, if the transactions do not belong to a package transaction, the accounting treatment of individual financial statements and consolidated financial statements should be distinguished as follows: (a) In the individual financial statements, the disposed equity should be accounted for in accordance with the Corporate Accounting Standards No.2 - Long-term Equity Investment; meanwhile, the remaining equity should be recognized as long-term equity or other related financial assets based on its book value. If the remaining equity after disposal can be used to exercise common control or significant influence on the original subsidiary, it shall be accounted for in accordance with the relevant provisions on the conversion of the cost method into the equity method. (b) In the consolidated financial statements, the remaining equity should be re-measured in accordance with its fair value on the date of loss of control. The difference between the sum of the consideration acquired from the disposal of the equity and the fair value of the remaining equity, less the share of net assets of the original subsidiary that should be enjoyed in accordance with the original 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 book value of the long-term equity investment corresponding to the disposed equity before the loss of control is recognized as other comprehensive income, and transferred to the current profit and loss of the period in which the loss of control occurred; (b) In the consolidated financial statements, the difference between each disposal price and the disposal of investment corresponding to the share of the net assets of the subsidiary before the loss of control is recognized as other comprehensive income, and transferred to the current profit and loss of the period in which the loss of control occurred. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 41 IIISignificant accounting policies and accounting estimates (continued) 21 Long-term equity investments (continued) (4) Basis for determining control, common control and significant influence on the investee Control means having the power of control over the investee, enjoying variable returns by participating in the relevant activities of the investee, and having the ability to use the power over the investee to influence the amount of returns. Common control means the control that is common to an arrangement in accordance with the relevant agreement, and the decisions of relevant activities of the arrangement must be made upon agreement of the Company and other parties sharing the control rights. Significant influence means the power to participate in the decision-making of the financial and operating policies of the investee, but by which cannot control or commonly control together with other parties the formulation of the policies. (5) Impairment test and allowance for impairment On the balance sheet date, if there is any indication that the long-term equity investment is impaired due to continuous decline in the market price or deterioration of operating conditions of the investee, the recoverable amount of long-term equity investment is determined according to the net value of a single long-term equity investment less the disposal expenses or the present value of expected future cash flows of the long-term equity investment, whichever is higher. When the recoverable amount of the long-term equity investment is lower than the book value, the book value of assets is written-off to the recoverable amount, and the amount written-down is recognized as asset impairment losses, which is included in the current profit and loss, and the corresponding allowance for asset impairment is made. For long-term equity investments without significant influence or quotation in an active market and whose fair value cannot be measured in a reliable way, the impairment loss is determined by the difference between the book value and the present value determined by discounting the future cash flows of similar financial assets at the current market rate of return. Other long-term equity investments with signs of impairment other than goodwill arising from business combination, if the measurement of recoverable amount indicates that the recoverable amount of the long-term equity investment is lower than its book value, the difference is recognized as impairment losses. Goodwill arising from a business combination is tested for impairment annually, regardless of whether there is any indication of impairment. Once the impairment loss of long-term equity investment is confirmed, it will not be reversed. 22 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 42 IIISignificant accounting policies and accounting estimates (continued) 23 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 Rate Houses and buildings 20-50 years 2.22%-5% Machinery equipment 5-10 years 11.11%-20% Office and electronic equipment 2-5 years 22.22%-50% Transportation equipment 3-5 years 22.22%-33.33% Power stations 20-25 years 4.44%-5% Others 4-5 years 22.22%-25% Fixed assets renovation is amortized evenly over the benefit period. All fixed assets are subject to depreciation, except for fixed assets that have been fully depreciated and continue to be used, and the land that is priced and recorded separately. Fixed assets are depreciated on a monthly basis. Fixed assets added are not depreciated in the current month when being added but from the following month; fixed assets reduced are still depreciated in the current month when being reduced, and no depreciation is made from the following month. Fixed assets that are not profitable for the 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 43 IIISignificant accounting policies and accounting estimates (continued) 24 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. 25 Borrowing costs Borrowing costs refer to interest and other related costs incurred by the Company as a result of borrowings, including interest on borrowings, amortization of discounts or premiums, ancillary expenses, and exchange differences arising from foreign currency borrowings. Borrowing costs that can be directly attributable to the acquisition, construction or production of assets eligible for capitalization are capitalized and included in the relevant asset cost. Other borrowing costs are recognized as expenses in the period in which they are incurred, and are included in the current profit and loss. Assets eligible for capitalization refer to fixed assets, investment property and inventories (only refers to inventories with an acquisition, construction and production process for more than one year) that require a substantial period of acquisition, construction or production activities to get ready for the intended use or sale status. Borrowing costs refer to the interest of borrowings, the amortization of discounts or premiums, auxiliary expenses and exchange differences arising from foreign currency borrowings incurred by the Company. Borrowing costs begin to be capitalized when the following three conditions are all satisfied: (1) Asset expenditure has occurred; (2) Borrowing costs have occurred; (3) The acquisition, construction or production activities necessary to enable the assets to be ready for the intended usable or saleable state have commenced. When an asset satisfied the capitalization conditions is abnormally interrupted during the process of acquisition, construction or production and the interruption period lasts for more than three months, the capitalization of the borrowing costs is suspended and recognized as the current expenses until the acquisition, construction or production of the assets starts again. When an asset satisfied the capitalization conditions is ready for its intended use or sale, the capitalization is stopped and the borrowing costs incurred in the future are included in the current profit and loss. The period of capitalization refers to the period from the time when the borrowing costs start to be capitalized to the point when the capitalization is stopped, and the period in which the borrowing costs are suspended for capitalization is not included. During the period of capitalization, if special borrowings are made for the acquisition, construction or production of assets eligible for capitalization, the amount of the interest expenses actually incurred during the current period of the special borrowings, less the amount of interest income earned by depositing unused borrowing funds in a bank or investment income earned by temporary investment, is recognized as the amount of capitalization. When a general loan is occupied for the purpose of purchasing, constructing or producing assets satisfied the capitalization conditions, the amount of capitalization is determined according to the weighted average of the accumulated asset expenditure exceeding the special loan portion multiplied by the capitalization rate of the general loan occupied; the capitalization rate is determined based on the weighted average interest rate of general borrowings. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 44 IIISignificant accounting policies and accounting estimates (continued) 26 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 value net of depreciation reserves, with reference to the above principles. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 45 IIISignificant accounting policies and accounting estimates (continued) 27 Intangible assets Intangible assets are recorded at the actual cost at the time of acquisition. The service life of intangible assets is analyzed and judged at the time of acquisition. Intangible assets with a finite service life are amortized on the shortest of the estimated service lives, the beneficial period of the contract and the effective period specified by law from the time when the intangible assets are available for use. The amortization period is as follows: Category Amortization years Land use rights The shorter of the years of the land use rights and the operating years of the Company Patents and non-patent technologies 10 years or the shorter of service life, beneficiary years and legally valid years Other Beneficiary period The Company reviews the service life and amortization method of intangible assets with limited service life at least at the end of each year, and made adjustment if necessary. If an intangible asset is 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 46 IIISignificant accounting policies and accounting estimates (continued) 28 Long-term prepaid expense Long-term prepaid expenses refer to various expenses that the Company has paid and whose period of amortization is more than one year, such as the improvement expenses incurred in renting fixed assets by operating leases. Long-term prepaid expenses are amortized on a straight-line basis within the beneficial period of the expense items. 29 Impairment of long-lived assets The impairment of assets other than inventories, financial assets and deferred income tax assets is determined by the Company as follows: On the balance sheet date, if there is evidence indicating that the asset is idle, there is a use termination plan or the market price drops sharply, or the external environment changes significantly, impairment tests should be conducted. The difference between the recoverable amount of the asset and its book value is recognized as impairment loss and included in the current profit and loss, and corresponding allowance for asset impairment is made. For the goodwill formed by business combination and the intangible assets with indefinite service life, impairment test is carried out every year regardless of whether there is any indication of impairment. The recoverable amount is determined based on the net amount of fair value of assets less the disposal expenses, or the present value of estimated future cash flows of the assets, whichever is lower. The Company estimates the recoverable amount based on the individual assets. If it is difficult to estimate the recoverable amount of the individual assets, the recoverable amount of the asset is determined based on the asset group to which the asset belongs. After the asset impairment loss is recognized, the depreciation or amortization expense of the impaired assets will be adjusted accordingly in the future period. Once the asset impairment loss is confirmed, it cannot be reversed in the future accounting period. Treatment of goodwill impairment: in the impairment test of goodwill, the book value of goodwill is apportioned to the asset group or asset group portfolio expected to benefit from the synergy of business combination, and the book value of goodwill is apportioned to the relevant asset group or asset group combination in a reasonable way. In the case of impairment test, the asset group or asset group portfolio that does not contain goodwill is tested for impairment first to confirm the corresponding asset impairment loss, and then the asset group or asset group containing goodwill is tested for impairment to confirm the corresponding goodwill impairment loss. 30 Asset transfer with repurchase conditions When the Company sells products or transfers other assets, it signs a product or a transfer asset repurchase agreement with the purchaser, and determines whether the sales commodity satisfies the revenue recognition conditions according to the terms of the agreement. If the after-sales repurchase is a financing transaction, the Company does not recognize the sales revenue when the product or asset is delivered. If the repurchase price is greater than the difference between the sales prices, interest of the difference is accrued on time during the repurchase period, and included in finance costs. 31 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 47 IIISignificant accounting policies and accounting estimates (continued) 32 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 48 IIISignificant accounting policies and accounting estimates (continued) 33 Estimated liabilities When the Company is involved in any litigation, debt guarantee, contract loss or reorganization, which is likely in need of future delivery of assets or rendering of services, and the amount of which can be measured in a reliable way, it is recognized as estimated liabilities. (1) Recognition standards for estimated liabilities When an obligation related to the contingent events satisfies all the following conditions, it is recognized by the Company as estimated liabilities: (a) The obligation is the current obligation of the Company; (b) The fulfillment of the obligation is likely to cause economic benefits to flow out of the Company; (c) The amount of the obligation can be measured in a reliable way. (2) Measurement 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 estimated liabilities are expected to be compensated by a third party, the compensation amount is separately recognized as an asset when it is basically confirmed to be received, and the recognized compensation amount should not exceed the book value of estimated liabilities. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 49 IIISignificant accounting policies and accounting estimates (continued) 34 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. 35 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 50 IIISignificant accounting policies and accounting estimates (continued) 36 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). (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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 51 IIISignificant accounting policies and accounting estimates (continued) 36 Revenue recognition (continued) (2) Principles of handling revenues from specific transactions (a) For the contract containing the sales return article: When the client obtains the control over relevant commodities, corresponding revenue shall be recognized according to the consideration amount (excluding the amount predicted to be returned due to sales return) predicted to be duly charged from transferring commodities to the client, and corresponding liabilities shall be recognized based on the amount predicted to be returned due to sales return. Meanwhile, when commodities are sold, the balance through deducting the predicted cost from taking back commodities from the book value of commodities predicted to be returned (including the impairment of value of returned commodities) shall be checked and calculated under “Returned Commodities Cost Receivable”. (b) For the contract containing the quality assurance article: it’s required to evaluate whether the quality assurance involves any separable service except for the promise (to the client) that commodities conform to established standards. If the Company provides additional service, it shall be deemed as a single performance obligation and subject to the accounting treatment according to relevant revenue criteria provisions; otherwise, the quality assurance liability shall be subject to the accounting treatment according to the accounting criteria provisions on Contingency. (c) For the sales contract containing the client’s additional purchase option: the Company shall evaluate whether the option provides the client with any significant right. If any, it shall be deemed as a single performance obligation and the transaction price shall be apportioned to the performance obligation, and corresponding revenues shall be recognized when the client executes the purchase option right and obtains the control over relevant commodities in the future or when the option becomes invalid. If the separable selling price applied to the client’s additional purchase option right cannot be directly observed, it’s required to comprehensively consider the difference in discounts between the client’s execution of option right and the client’s non-execution of option right and analyze the possibility for the client to execute the option right and other relevant information. Then, corresponding reasonable estimate shall be made. (d) The contract licensing the IP right to the client: It’s required to evaluate whether the IP right license constitutes any single performance obligation; if any, it is necessary to determine whether the performance obligation fulfillment is fulfilled within a certain period or at a time point. If any IP right license is granted to the client and royalties are charged based on the client’s actual sales or usage, corresponding revenues shall be recognized at a later time between the following dates: the day when the client’s subsequent selling or usage occurs; the day when the Company fulfills relevant performance obligations. (3) Specific revenue recognition method (a) Product sales contract According to the contract terms, for the selling of products subject to performance obligation fulfillment conditions at a time point and other products, the Company shall recognize the realization of sales revenues when the client obtains the control over relevant commodities or services according to the delivery condition agreed in the sales contract upon signed by the client after commodities are received. (b) Technical service contract 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 52 IIISignificant accounting policies and accounting estimates (continued) 36 Revenue recognition (continued) (3) Specific revenue recognition method (continued) (d) Revenue from photovoltaic power stations a. Centralized power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on power supply provided by the business departments of the Company, after the duration of continuous and trouble-free operation specified by the electric power company is met. b. Distributed power stations: Power stations are combined to the grid. The income will be confirmed based on the documents on settlement provided by the business departments of the Company. 37 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 53 IIISignificant accounting policies and accounting estimates (continued) 37 Contract costs (continued) (4) Impairment of contract costs For the asset related to the contract cost as mentioned above, if the book value is higher than the difference between the residual consideration predicted to be obtained from the Company’s transfer of commodities related to the asset and the cost to be incurred due to such transfer, depreciation reserves shall be calculated and withdrawn for the surplus which shall also be recognized as the asset impairment loss. After the impairment allowances is established, if changes in depreciation factors during previous periods have made the above difference higher than the asset’s book value, it shall be restituted to previously established asset impairment allowances and included in current profit and loss. However, the book value of restituted assets shall not exceed the book value of the asset on the date of restitution without establishing impairment allowances. 38 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 book value of the underlying assets. If the government grants related to income are used to compensate related costs or losses in the subsequent period, it is recognized as deferred income and included in the current profit and loss or offset costs in the period in which the related costs or losses are recognized; government grants used to compensate costs or losses incurred by the enterprise are directly included in the current profits or losses or offset related costs. For government grants related to the daily activities of the enterprise, the R&D and VAT-related subsidies are included in other income; other government grants offset related costs according to the nature of economic activities. Government grants not related to daily activities of the Company are included in the non-operating income and expenditure. For preferential loans for policy discount, if the government finance department appropriates the discounted funds to the lending bank, the borrowing cost is accounted for according to the principal of the loan and the policy preferential interest rate, with the amount actually received as the entry value of the loan. If the government finance department directly appropriates the interest grant funds to the Company, the grants offset the related borrowing costs. In case that a confirmed government grant is required to be returned, the book value of the asset is adjusted if the book value of relevant assets is offset at the initial recognition; if there is related deferred income, the book balance of deferred income is offset, and the excess is included in the current profit and loss; in case of other circumstances, it is directly included in the current profit and loss. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 54 IIISignificant accounting policies and accounting estimates (continued) 39 Deferred income tax assets and deferred income tax liabilities The income taxes of the Company include current income tax and deferred income tax. Both current income tax and deferred income tax are recognized in the current profit and loss as income tax expense or gain, except for the following: (1) Adjusting goodwill due to income tax arising from business combination; (2) Income tax related to transactions or events directly included in shareholders' equity is included in shareholders’ equity. On the balance sheet date, the Company recognizes the deferred income tax assets or deferred income tax liabilities in accordance with the balance sheet liability method on temporary differences between the book value of assets or liabilities and their tax base. The Company recognizes all taxable temporary differences as deferred tax liabilities except the taxable temporary differences incurred in the following transactions: (1) Initial recognition of goodwill; or initial recognition of assets or liabilities arising from transactions with the following characteristics: the transaction is not a business combination, and does not affect the accounting profits or the amount of taxable income which occurs; (2) For taxable temporary differences related to investments in subsidiaries, associates and joint ventures, the timing of the reversal of the temporary differences can be controlled and the temporary differences are unlikely to be reversed in the foreseeable future. The Company recognizes deferred income tax assets arising from deductible temporary differences, subject to the amount of taxable income likely to be obtained to offset the deductible temporary differences, except the deductible temporary differences incurred in the following transactions: (1) The transaction is not a business combination, and does not affect the accounting profits or the amount of taxable income when occurs; (2) The deductible temporary differences related to investment in subsidiaries, associates and joint ventures cannot satisfy all the following: the temporary differences are likely to be reversed in the foreseeable future and are likely to be used for deduction of deductible taxable income for temporary differences in the future. On the balance sheet date, the Company measures the deferred income tax assets and deferred income tax liabilities according to the tax law based on the applicable tax rate during the period of expectation of recovering the assets or paying off the liabilities, and reflects the income tax impact of the expected recovery of assets or liquidation of liabilities on the balance sheet date. On the balance sheet date, the Company reviews the book value of deferred income tax assets. If it is probable that no sufficient taxable income will be available in the future to offset the benefits of deferred tax assets, the book value of deferred tax assets is written down. When it is probable that sufficient taxable income will be available, the amount written-down will be reversed. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 55 IIISignificant accounting policies and accounting estimates (continued) 40 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 recognises 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 56 IIISignificant accounting policies and accounting estimates (continued) 40 Leases (continued) (3) Accounting treatment with the Company as lessee (continued) The Company recognises 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 recognises 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 57 IIISignificant accounting policies and accounting estimates (continued) 40 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 value that is related to the use right acquired by the leaseback, and recognise 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 recognise the transferred asset and at the same time recognise 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 recognise a financial asset equivalent to the transfer income. 41 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. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 58 IIISignificant accounting policies and accounting estimates (continued) 42 Discontinued operations The Company recognizes a component disposed of or classified as a component that can be separately distinguished from the category held for sale and satisfies any of the following as a component of discontinued operations: (1) The component represents an independent major business or a separate major business area; (2) This component is part of a related plan to dispose of an independent major business or a separate major operating area; (3) This component is a subsidiary that is acquired for resale. Operating profit and loss, such as impairment losses for discontinued operations and the amount reversed, and disposal profit and loss are presented in the income statement as profit and loss of discontinued operations. 43 Changes to major accounting policies and estimates (1) Change of accounting policy (a) Impact of the adoption of the Interpretation to Accounting Standards for Business Enterprises No.15 on the Company On December 31,2021, the Ministry of Finance issued the Interpretation to Accounting Standards for Business Enterprises No.15(Cai Kuai [2021] No.35, hereinafter referred to as the "Interpretation No.15"). Interpretation No.15 outlined that "the accounting treatment of the external sales of products or by-products produced before the fixed assets reach the intended serviceable state or during the R&D process" (hereinafter referred to as "trial sales") and "the judgment on loss-making contracts", effective from January 1,2022. ①Accounting treatment of the external sales of products or by-products produced before the fixed assets reach the intended serviceable state or during the R&D process For trial sales that occurred between the beginning of the period (i.e. January 1,2021) and the implementation date of the Interpretation (January 1,2022), the Company has made retroactive adjustments in accordance with Interpretation No.15. According to the provisions of Interpretation No.15, the Company adjusted the relevant items of the balance sheet as follows: Balance Sheet items December 31,2021 Before the Change Accumulated amount impacted before change After the Change Fixed assets 113,579,297 144,462113,723,759 Construction in progress 36,965,885 63,61937,029,504 Intangible assets 13,982,647 17,89914,000,546 Development costs 2,508,419 31,7802,540,199 Deferred income tax assets 2,153,346 -2,9232,150,423 Retained earnings 22,458,340 69,34622,527,686 Non-controlling interests 76,611,057 185,49176,796,548 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 59 IIISignificant accounting policies and accounting estimates (continued) 43 Changes to Major Accounting Policies and Estimates (continued) (1) Changes to Accounting Policies (continued) The Company adjusted the relevant items presented in the income statement and the cash flow statement as follows: Items presented in the income statement and cash flow statement January - June 2021 Before the Change Accumulated amount impacted before change After the Change Revenue 74,298,647 107,202 74,405,849 Cost of sales 57,984,972 83,999 58,068,971 R&D expenses 3,428,197 (25,238) 3,402,959 Income tax expense 1,413,574 2,923 1,416,497 ② Judgment on onerous contracts The Company has not fulfilled all obligations when it first implemented Interpretation No.15 (January 1, 2022), and the implementation of this provision has no significant impact on the Company's financial statements for comparable periods. (2) Changes to accounting estimates No change occurred to the major accounting estimates in the reporting period. 44 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 60 IV Taxes 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 Dike protection fee Dike protection fee is paid according to relevant national tax regulations and local regulations. 5 Property tax Property tax is paid on the houses with property rights according to the proportion stipulated by the state in accordance with the relevant national tax regulations and local regulations. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 61 IVTaxes (continued) 6 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. The following subsidiaries are entitled to tax preferences, overseas subsidiaries adopt the local tax rates, and the other subsidiaries of the Company are all taxed at a rate of 25%. Subsidiaries entitled to tax preferences: 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 Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. 15% High-tech enterprise TianJin Zhonghuan Advanced Material&Technology Co., Ltd. 15% High-tech enterprise Inner Mongolia Zhonghuan Solar Material Co., Ltd.15% High-tech enterprise Huansheng Solar (Jiangsu) Co., Ltd.15% High-tech enterprise Zhangjiakou Huan Ou International New Energy Technology Co., Ltd. 15% High-tech enterprise Wuxi Zhonghuan Applied Materials Co., Ltd.15% High-tech enterprise Inner Mongolia Zhonghuan Crystal Materials Co., Ltd. 15% High-tech enterprise Tianjin Huanzhi New Energy 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 Guangdong TCLNew Technology Co., Ltd.15% High-tech enterprise Shenzhen Qianhai Maojia Software Technology Co., Ltd. 15% High-tech enterprise Inner Mongolia Zhonghuan Crystal Materials Co., Ltd. 15% High-tech enterprise, encouraged business in West China Ningxia Zhonghuan Solar Material Co., Ltd.15% Encouraged business in West China Phase I and Phase II projects of Hohhot Huanju New Energy Development Co., Ltd. 15% 7.5% State-supported public infrastructure project, encouraged business in West China Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. 12.5% Encouraged business in West China Yixing Huanxing New Energy Co., Ltd.12.5% State-supported public infrastructure project Guyuan Shengju New Energy Co., Ltd.12.5% State-supported public infrastructure project Shangqiu Yaowei Photovoltaic Power Generation Co., Ltd. 12.5% State-supported public infrastructure project Tianjin Huanyu Yangguang New Energy Technology Co., Ltd. 12.5% State-supported public infrastructure project TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 62 IV Taxes (continued) 6 Corporate income tax (continued) Company Name Preferential tax rate Reason Huludao Zhongrun Energy Technology Co., Ltd. 12.5% State-supported public infrastructure project Qinhuangdao Tianhui Solar Energy Co., Ltd.12.5% State-supported public infrastructure project Huludao Xincheng New Energy Technology Co., Ltd. 12.5% State-supported public infrastructure project Zhangjiakou Shengyuan New Energy Co., Ltd.12.5% State-supported public infrastructure project Dushan Anju Photovoltaic Technology Co., Ltd. 7.5% State-supported public infrastructure project, encouraged business in West China Sonid Left Banner Huanxin New Energy Co., Ltd. 7.5% State-supported public infrastructure project, encouraged business in West China Otog Banner Huanju New Energy Co., Ltd.7.5% State-supported public infrastructure project, encouraged business in West China Inner Mongolia New Huanyu Yangguang New Energy Technology Co., Ltd. 7.5% State-supported public infrastructure project, encouraged business in West China Gengma Huanxing New Energy Co., Ltd.7.5% State-supported public infrastructure project, encouraged business in West China Shaanxi Runhuan Tianyu Technology Co., Ltd. Tax-free State-supported public infrastructure project, encouraged business in West China Tianjin Binhai Huanneng New Energy Co., Ltd. Tax-free State-supported public infrastructure project Gaoqing Huanyuan Energy Technology Co., Ltd. Tax-free State-supported public infrastructure project Gaoqing Chengguang Energy Technology Co., Ltd. Tax-free State-supported public infrastructure project Ningjin Jinchen New Energy Co., Ltd. Tax-free State-supported public infrastructure project Ongniud Banner Guangrun New Energy Co., Ltd. 7.5% State-supported public infrastructure project, encouraged business in West China Tuquan Guanghuan New Energy Co., Ltd.7.5% State-supported public infrastructure project, encouraged business in West China Dangxiong Youhao New Energy Development Co., Ltd. 7.5% State-supported public infrastructure project, encouraged business in West China TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 63 IV Taxes (continued) 6 Corporate income tax (continued) Company Name Preferential tax rate Reason Shangqiu Suoguang Energy Technology Co., Ltd. 2.5% ~ 10% Small low-profit business Shangqiu Suoyuan Energy Technology Co., Ltd. 2.5% ~ 10% Small low-profit business Inner Mongolia Zhonghuan Construction Management Co., Ltd. 2.5% ~ 10% Small low-profit business Inner Mongolia Environmental Energy Resources Development Co., Ltd. 2.5% ~ 10% Small low-profit business Ulanqab Dishengsheng Energy Co., Ltd.5.0% Small low-profit business Tongliao Guangdong New Energy Co., Ltd.5.0% Small low-profit business Alxa League Huanju New Energy Co., Ltd.5.0% Small low-profit business Jinxiang Haotian New Energy Co., Ltd.5.0% Small low-profit business Inner Mongolia Zhonghuan Asset Management Co., Ltd. 5.0% Small low-profit business Inner Mongolia Huanya Hotel Management Co., Ltd. 5.0% Small low-profit business Shangqiu Suoneng Energy Technology Co., Ltd. 2.5% Small low-profit business Tianjin Zhonghuan Zhongda Technology Co., Ltd. 2.5% Small low-profit business Sichuan Sunpiestore Technology Co., Ltd.5% Small low-profit business Guizhou Sunpiestore Technology Co., Ltd.5% Small low-profit business Tianjin Zhonghuan Hengda Technology Co., Ltd. 2.5% Small low-profit business Tianjin Yingtuo Computer Control Technology Co., Ltd. 2.5% Small low-profit business Tianjin Zhongdian High Tech Co., Ltd.2.5% Small low-profit business Tianjin Zhonghuan Electronic Instrument Co., Ltd. 2.5% Small low-profit business According to the Notice on Implementing Inclusive Tax Reduction and Exemption Policies for Small and Micro Enterprises (Cai Shui [2019] No.13) issued by the Ministry of Finance and the State Administration of Taxation on January 17,2019 and the Announcement on Implementing Preferential Income Tax Policies for Small and Micro Enterprises and Individual Industrial and Commercial Households(Announcement No.12 [2021] of the Ministry of Finance and State Administration of Taxation) issued by the Ministry of Finance and the State Administration of Taxation on April 2,2021, the annual taxable income of a small low-profit enterprise that is not less than RMB1 million shall be included in its taxable income at the reduced rate of 25%, and shall be eligible to halve its corporate income tax after it pays corporate income tax with tax rate of 20% thereafter for the period from January 1,2021 to December 31,2022. 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 14, 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 3 million yuan 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%.. 7 Individual income tax Individual income tax of income paid to employees by the Company is withheld by the Company on behalf of employees in accordance with to the relevant national tax regulations. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 64 V Notes to Consolidated Financial Statements 1 Monetary assets June 30,2022 December 31,2021 Cash on hand 601 789 Bank deposits 30,617,093 29,049,850 Deposits with the central bank 433,812 481,162 Interest receivable on deposits 196,410 64,825 Other monetary assets 2,547,601 1,797,066 33,795,517 31,393,692 Note Monetary assets with restricted use rights June 30,2022 December 31,2021 TCLTech Finance's statutory reserve deposits with the central bank 432,087 358,178 Interest receivable on deposits 196,410 64,825 Other restricted monetary assets 1,490,699 888,984 2,119,196 1,311,987 On June 30,2022, the Company's bank deposits of RMB432,087 thousand (At the end of 2021: RMB358,178 thousand) were statutory deposit reserves deposited with the Central Bank by TCLTechnology Group Finance Co., Ltd., a subsidiary of the Company. On June 30,2022, the Company’s monetary assets offshore amounted to RMB3,059,740 thousand (At the end of 2021: RMB2,817,430 thousand), all of which were owned by the overseas subsidiaries of the Company. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 65 VNotes to Consolidated Financial Statements (Continued) 2 Held-for-trading financial assets June 30,2022 December 31,2021 Financial assets at fair value through profit or loss 8,975,013 7,601,256 Including: Debt instrument investments 8,715,145 7,288,741 Equity instrument investments 259,868 312,515 8,975,013 7,601,256 3 Derivative financial assets June 30,2022 December 31,2021 Foreign exchange forwards 377,658 59,063 Interest rate swaps 110,407 11,866 Others 363 - 488,428 70,929 4 Notes receivable (1) Notes receivable by category June 30,2022 December 31,2021 Bank acceptance notes 502,406 775,423 Letter of credit 268,962 - Trade acceptance notes 697 779 772,065 776,202 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 66 VNotes to Consolidated Financial Statements (Continued) 4 Notes receivable (continued) (1) Notes receivable by category (continued) June 30,2022 December 31,2021 Gross amount Allowance Carrying amount Gross amount Allowance Carrying amount Amount Ratio (%) Amount Percentage Amount Ratio (%) Amount Percentage Notes receivable for which the allowance for doubtful accounts were established on the grouping basis 772,065100% - - 772,065 776,202100% - - 776,202 Including: group with no recovery risk 771,36899.91% - - 771,368 775,42399.90% - - 775,423 By aging analysis 6970.09% - - 697 7790.10% - - 779 772,065100% - - 772,065 776,202100% - - 776,202 (2) On June 30,2022, notes receivable in pledge were RMB278,564 thousand. (3) Endorsed or discounted notes receivable that were outstanding on the balance sheet date and were derecognized as on June 30,2022 amounted to RMB395,695 thousand. Endorsed or discounted notes receivable that were not outstanding on the balance sheet date and were not derecognized as amounted to RMB103,639 thousand. 5 Accounts receivable June 30,2022 December 31,2021 Accounts receivable 19,525,099 18,657,744 Less: allowance for doubtful accounts 439,866 418,962 19,085,233 18,238,782 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 67 VNotes to Consolidated Financial Statements (Continued) 5 Accounts receivable (continued) (1) Accounts receivable in the period from January 1,2022 to June 30,2022 are classified as follows by how the allowances for doubtful accounts were provisioned : June 30,2022 Gross amount Allowance Lifetime ECL rate Gross amount Accounts receivable for which the related allowances for doubtful accounts were established on the individual basis 209,909 100% 209,903 Of which: Accounts receivable 209,909 100% 209,903 Accounts receivable for which the related allowances for doubtful accounts were established on the grouping basis 19,315,190 1.19% 229,963 Of which: Group 1: By aging analysis 13,841,352 1.53% 211,226 Group 2:by related party grouping 4,378,861 0.43% 18,737 Group 3: Group with no recovery risk 1,094,978 - - 19,525,099 439,866 (2) The aging of accounts receivable is analysed as follows: June 30,2022 December 31,2021 Amount Ratio (%) Amount Ratio (%) Within 1 year 18,102,94692.72% 17,493,94193.76% 1 to 2 years 535,3722.74% 465,3912.49% 2 to 3 years 325,7061.67% 309,1501.66% Over 3 years 561,0752.87% 389,2622.09% 19,525,099 100% 18,657,744 100% TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 68 VNotes to Consolidated Financial Statements (Continued) 5 Accounts receivable (continued) (3) Allowances for doubtful accounts receivable are analysed as follows: June 30,2022 December 31,2021 Beginning amount 418,962 281,281 New subsidiary - 33,745 Accrued in current period 39,854 209,480 Reversal of current period (18,627) (86,588) Write-off of current period (1,200) (12,759) Reduced subsidiary - (5,381) Exchange adjustment 877 (816) Ending amount 439,866 418,962 (4) On June 30,2022, the accounts receivable of the top five balances are as follows: June 30,2022 December 31,2021 Total amount owed by the top five 8,856,242 8,922,641 Proportion of total accounts receivable 45.36% 47.82% 6 Receivables financing June 30,2022 December 31,2021 Notes receivable financing 2,223,849 2,217,639 2,223,849 2,217,639 Note Endorsed or discounted notes receivable that were outstanding on the balance sheet date and were derecognized on June 30,2022 amounted to RMB25,046,597 thousand. On June 30,2022, the Company was of the opinion that the held receivables financing did not have significant credit risk and would not cause significant losses due to default. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 69 VNotes to Consolidated Financial Statements (Continued) 7 Prepayments (1) Prepayments are analyzed as follows: June 30,2022 December 31,2021 Within 1 year 3,995,436 2,297,910 1-2 years 38,958 6,560 2-3 years 4,277 1,376 Over 3 years 242 479 4,038,913 2,306,325 (2) As of June 30,2022, the prepayments of the top five balances are as follows: June 30,2022 December 31,2021 Total amount owed by the top five 2,191,727 1,681,650 As % of total prepayments 54.27% 72.91% 8 Other receivables June 30,2022 December 31,2021 Dividends receivable 335,077 - Other receivables 3,837,771 4,458,621 4,172,848 4,458,621 (1) Dividends receivable June 30,2022 December 31,2021 Bank of Shanghai Co., Ltd. 327,157 - Tianjin 712 Communication & Broadcasting Co., Ltd. 7,777 - Others 143 - 335,077 - TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 70 VNotes to Consolidated Financial Statements (Continued) 8 Other receivables (continued) (2) Other receivables June 30,2022 December 31,2021 Other receivables 4,063,658 4,681,100 Less: allowance for doubtful accounts 225,887 222,479 3,837,771 4,458,621 (a) Nature of other receivables is analyzed as follows: June 30,2022 December 31,2021 Subsidy receivable 1,985,491 1,696,203 Equity transfer receivables 708,265 1,480,960 Receivables from external entities 535,127 832,197 Security deposits 513,792 421,430 Others 95,096 27,831 3,837,771 4,458,621 (b) Allowance for doubtful other receivables is analyzed as follows: 12-month ECL Lifetime ECL (credit not impaired) Lifetime ECL (credit impaired) Total Beginning amount 76,254 120,291 25,934 222,479 Current accrual 5,498 23 - 5,521 Reversal of current period (3) (912) (255) (1,170) Write-off of current period - (652) (254) (906) Exchange adjustment (37) - - (37) June 30,202281,712 118,750 25,425 225,887 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 71 VNotes to Consolidated Financial Statements (Continued) 8 Other receivables (continued) (c) The aging of other receivables is analyzed as follows: June 30,2022 December 31,2021 Carrying amount Ratio (%) Carrying amount Ratio (%) Within 1 year 3,291,864 81.00% 3,991,248 85.26% 1 to 2 years 347,626 8.55% 292,805 6.26% 2 to 3 years 258,533 6.37% 228,974 4.89% Over 3 years 165,635 4.08% 168,073 3.59% 4,063,658 100% 4,681,100 100% (d) As of June 30,2022, the other receivables of the top five balances are as follows: June 30,2022 December 31,2021 Total amount owed by the top five 2,754,201 3,381,203 As % of total other receivables 67.78% 72.23% (e) On June 30,2022, 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 72 VNotes to Consolidated Financial Statements (Continued) 9 Inventories (1) Inventories are classified as follows: June 30,2022 December 31,2021 Gross amount Provision for depreciation of inventories / provision for impairment of contract performance costs Carrying amount Gross amount Provision for depreciation of inventories / provision for impairment of contract performance costs Carrying amount Raw materials 4,220,419 698,908 3,521,511 4,247,095 652,265 3,594,830 Work in progress 2,778,138 334,073 2,444,065 2,705,288 321,606 2,383,682 Finished Goods 8,816,198 1,089,257 7,726,941 8,541,513 823,701 7,717,812 Turnover materials 333,643 1,156 332,487 388,135 1,102 387,033 16,148,398 2,123,394 14,025,004 15,882,031 1,798,674 14,083,357 On June 30,2022, the Company had no inventory for liabilities guarantee. (2) Provision for depreciation of inventories / provision for impairment of contract performance costs: January 1, 2022 Current Accrual Current Reversal Current Write-off Exchange Adjustment June 30, 2022 Raw materials 652,265 202,134 (16,463) (139,028) - 698,908 Work in progress 321,606 163,357 (45,359) (105,531) - 334,073 Finished Goods 823,701 708,657 (5,472) (438,211) 582 1,089,257 Turnover materials 1,102 54 - - - 1,156 1,798,674 1,074,202 (67,294) (682,770) 582 2,123,394 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 73 VNotes to Consolidated Financial Statements (Continued) 10 Contract assets (1) Contract assets are classified as follows: June 30,2022 December 31,2021 Gross amount Allowance for doubtful accounts Carrying amount Gross amount Allowance for doubtful accounts Carrying amount Electricity charges receivable 284,450 9,162 275,288 239,753 6,224 233,529 (2) Valuation allowances for contract assets are analyzed as follows: January 1,2022 Current Accrual Current Reversal or write-off Other increases and decreases June 30,2022 Electricity charges 6,224 2,938 - - 9,162 11 Other current assets June 30,2022 December 31,2021 Short-term debt investments 279,000 571,140 VAT to be deducted, to be certified, etc. 2,455,846 3,931,095 Current portion of loans and advances to customers (note) 1,228,727 1,169,487 Others 197,233 131,238 4,160,806 5,802,960 Note: Loans and advances due within one year are loans due within one year from TCLTechnology Group Finance Co., Ltd., a subsidiary of the Company, of which interest receivable is RMB3,387 thousand. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 74 VNotes to Consolidated Financial Statements (Continued) 12 Debt Investments June 30,2022 December 31,2021 National debt and secondary market debt (note) 20,136 - 13 Long-term receivables June 30,2022 December 31,2021 Discount rate Interval Gross amount Allowance Carrying amount Gross amount Allowance Carrying amount Finance lease 639,690 - 639,690 651,118 - 651,118 7.125%- 8.115% Including: unrealized financing income (814,080) - (814,080) (848,837) - (848,837) 639,690 - 639,690 651,118 - 651,118 14 Long-term equity investments June 30,2022 December 31,2021 Gross amount Impairment allowance Carrying amount Gross amount Impairment allowance Carrying amount Associates (1) 26,123,780 1,624 26,122,156 25,086,945 1,624 25,085,321 Joint ventures (2) 592,417 49,503 542,914 604,760 49,503 555,257 26,716,197 51,127 26,665,070 25,691,705 51,127 25,640,578 As of June 30,2022, the Company established 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 75 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Accrued Impairment allowance Other increases and decreases June 30,2022 Bank of Shanghai Co., Ltd. 11,919,796 - 729,672 4,068 - (327,157) - - 12,326,379 China Innovative Capital Management Limited 1,063,219 - (74,814) - - - - - 988,405 LGElectronics (Huizhou) Co., Ltd. 92,079 - 5,763 - - (13,000) - - 84,842 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 36,160 - (1,405) - - - - - 34,755 Shenzhen Jucai Supply Chain Technology Co., Ltd. 10,706 - 2,311 - - - - - 13,017 Shenzhen Tixiang Business Management Technology Co., Ltd. 3,620 - (1,823) - - - - 1,797 TCLAir Conditioner (Wuhan) Co., Ltd. 38,605 - 315 - - - - 38,920 TCLFinance (Hong Kong) Co., Limited 109,317 - (9,014) - - - - 100,303 Urumqi TCLEquity Investment Management Co., Ltd. 71 - 675 - - - - 746 Hubei Changjiang Hezhi Equity Investment Fund Partnership (Limited Partnership) 1,555,876 (4,304) 129,552 - - - - 1,681,124 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 396,773 (4,993) 9,707 - - (44,257) - - 357,230 Deqing Puhua Equity Investment Fund Partnership (Limited Partnership) 192,956 (41,572) (788) - - - - 150,596 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 76 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Impairment allowance Other increases and decreases June 30,2022 Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 463,294 (15,690) (10,793) - - (42,218) - - 394,593 Wuxi TCLAisikai Semi-conductor Industry Investment Fund Partnership (Limited Partnership) 232,764 (3,767) 63,977 6 - - - (6) 292,974 Wuxi TCLVenture Capital Partnership (Limited Partnership) 35,580 - (6) - - - - 6 35,580 Ningbo Meishan Bonded Port Qiyu Investment Management Partnership (Limited Partnership) 64,975 - (583) - - - - - 64,392 Shanghai Gen Auspicious Venture Capital Partnership (Limited Partnership) 29,945 - (1,333) 145 - (571) - - 28,186 Nanjing Zijin ADynamic Investment Partnership (Limited Partnership) 19,725 - (2) 6 - - - - 19,729 Huizhou Kaichuang Venture Investment Partnership (Limited Partnership) 8,700 - - - - - - 8,700 Beijing ADynamic Venture Capital Center (Limited Partnership) 6,415 - 3,510 - - - - - 9,925 Yixing Jiangnan Tianyuan Venture Capital Company (Limited Partnership) 3,750 - (3) 9 - - - - 3,756 Shenzhen Chuangdong New Industry Investment Fund Enterprise (Limited Partnership) 2,341 - - - - - - - 2,341 Hubei Changjiang Hezhi Equity Investment Fund Management Co., Ltd. 6,006 - 919 - - - - - 6,925 Huizhou Kaimeng Angel Investment Partnership (Limited Partnership) 2,595 - (14) - - - - - 2,581 Ningbo Jiutian Matrix Investment Management Co., Ltd. (note) 2,851 - (106) - - - - - 2,745 Urumqi Qixinda Equity Investment Management Co., Ltd. 1,137 - 837 - - - - - 1,974 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 77 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Accrued Impairment allowance Other increases and decreases June 30,2022 Urumqi TCLCreate Dynamic Equity Investment Management Co., Ltd. 761 - (1) - - - - - 760 Beijing ADynamic Investment Consulting Co., Ltd. 469 - - - - - - - 469 Shanghai Gen Auspicious Investment Management Co., Ltd. 918 - (1,501) - - (362) - - (945) Nanjing ADynamic Equity Investment Fund Management Co., Ltd. 283 - (2) - - - - - 281 Wuxi TCLMedical Imaging Technology Co., Ltd. 29,235 - (4,583) - - - - 72 24,724 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 635,360 - 63,000 - - - - - 698,360 TCLVentures Fund L.P. 53,019 - 12,113 - - - - 2,799 67,931 Getech Ltd. 21,032 - (4,211) 199 - - - 8,401 25,421 TCLEnvironmental Technology Co., Ltd. 130,643 - 3,539 - - - - - 134,182 Guangdong Innovative Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) 372,976 - (5,792) - - - - - 367,184 Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) 151,026 (279) 13,636 - - - - - 164,383 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 78 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Accrued Impairment allowance Other increases and decreases June 30,2022 Shenzhen Xinhuoyicheng Recreational and Sports Industry Co., Ltd. 1,417 - (45) - - - - - 1,372 Pride Telecom Limited - - - - - - - - - JOLEDIncorporation 869,073 80,960 (92,657) - - - - (95,560) 761,816 Sichuan Shengtian New Energy Development Co., Ltd. 478,264 - 15,162 - - - - - 493,426 Yanyuan Fengguang New Energy Co., Ltd. 62,528 (41,822) (4,454) - - (16,252) - - - SunPower Systems International Limited 27,792 - 554 - - - - - 28,346 Zhonghuan Aineng (Beijing) Technology Co., Ltd. 6,843 - (1,371) - - - - - 5,472 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 122,960 - 10,002 - - - - - 132,962 Hunan Guoxin Semiconductor Technology Co., Ltd. 9,758 - (330) - - - - - 9,428 Maxeon Solar Technologies, Ltd. 2,020,194 - (158,018) - - - - - 1,862,176 Xinjiang Xiexin New Energy Material Technology Co., Ltd. 1,691,361 - 1,039,939 - - - - - 2,731,300 Ruihuan (Inner Mongolia) Solar Power Co., Ltd. 5,896 - - - - - - - 5,896 Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 659,630 - 2 - - - - - 659,632 Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 4,722 - 145 - - - - - 4,867 Ningbo Zhongxin Venture Capital Partnership Tianjin Huanxin 58,278 - (289) - - - - - 57,989 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 79 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (1) Associates (continued) Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Accrued Impairment allowance Other increases and decreases June 30,2022 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 421,762 - (74) - - - - - 421,688 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 2,914 - - - - (2,289) - - 625 Inner Mongolia Huanye Material Co., Ltd. 4,109 - - - - - - - 4,109 Shenzhen Shutuo Technology Co., Ltd. 38,038 - (428) - - - - - 37,610 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 49,964 - 3,020 - - - - - 52,984 Wuhan Guochuangke Optoelectronic Equipment Co., Ltd. 24,744 - (539) - - - - - 24,205 TCLIntelligent Technology (Ningbo) Co., Ltd. - - - - - - - - - Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. - - - - - - - - - Purplevine Holdings Limited - 3,789 9,200 - - - - (5,142) 7,849 Hubei Consumer Finance Co., Ltd. 168,654 - 6,091 - - - - (14,174) 160,572 Tianjin 712 Communication & Broadcasting Co., Ltd. 661,442 (88,084) 21,332 - - (7,777) - (64,342) 522,569 25,085,321 (115,762) 1,769,994 4,434 - (453,883) - (167,948) 26,122,156 Note: Tianjin Huanxin Technology & Development Co., Ltd. Was renamed as TCLHuanxin Semi-conductor (Tianjin) Co., Ltd in April 2022. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 80 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (2) Joint ventures Increase or decrease in current period Name of investee Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared Cash dividends or profit distribution declared Accrued Impairment allowance Other increases and decreases June 30,2022 TCLHuizhou City, Kai Enterprise Management Limited 1,329 - 11 - - - - - 1,340 Huizhou TCLHuman Resources Service Co., Ltd. 3,296 - 3,030 - - - - - 6,326 Zhangjiakou Qixin Equity Investment Fund Partnership 92,681 - (757) - - - - - 91,924 Huaxia CPV (Inner Mongolia) Power Co., Ltd. (Note 1) - - - - - - - - - Tianjin Huanyan Technology Co., Ltd. 144,517 - (269) - - - - - 144,248 TCLMicrochip Technology (Guangdong) Co., Ltd. 313,434 - (14,358) - - - - - 299,076 555,257 - (12,343) - - - - - 542,914 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 81 VNotes to Consolidated Financial Statements (Continued) 14 Long-term equity investments (continued) (3) Impairment allowances for long-term equity investments January 1, 2022 Increase in current period Decrease in current period June 30, 2022 Note Pride Telecom Limited 1,624 - - 1,624 Note 1 Huaxia CPV (Inner Mongolia) Power Co., Ltd.49,503 - - 49,503 Note 1 51,127 - - 51,127 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. 15 Investments in other equity instruments June 30,2022 December 31,2021 Stocks 88,092 109,011 Equity of unlisted companies 839,444 818,308 927,536 927,319 Item name Confirmed Dividend income recognized Accumulated Profits Accumulated losses Amount of other comprehensive income transferred to retained earnings Reasons designated as measured at fair value and whose changes are included in other comprehensive income Reasons for other comprehensive income transferred to retained earnings Stocks - 4,115 (109,186) - Being held long term for strategic purposes Sold in current period Equity of unlisted companies - 9,033 (40,751) - Being held long term for strategic purposes Sold in current period Total - 13,148 (149,937) - 16 Other non-current financial assets June 30,2022 December 31,2021 Equity investments 829,914 2,149,781 Debt investments 298,697 554,257 1,128,611 2,704,038 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 82 VNotes to Consolidated Financial Statements (Continued) 17 Investment property Houses and buildings Land use rights Total Gross amount: January 1,2022 896,416 92,817 989,233 Increase Reclassified from fixed assets and intangible assets 124,908 - 124,908 Decreases Reclassified to fixed assets and intangible assets (43,013) (175) (43,188) June 30,2022 978,311 92,642 1,070,953 Accumulated depreciation and amortization: January 1,2022 165,990 8,376 174,366 Increase Accrued in current period 16,577 1,072 17,649 Reclassified from fixed assets and intangible assets 38,266 - 38,266 Decreases Reclassified to fixed assets and intangible assets (5,326) - (5,326) June 30,2022 215,507 9,448 224,955 Investment property, net: June 30,2022 762,804 83,194 845,998 January 1,2022 730,426 84,441 814,867 Impairment allowance: January 1,2022 52,965 - 52,965 Increase Increase in current period - - - Decreases Decrease in current period - - - June 30,2022 52,965 - 52,965 Investment property, carrying amount: June 30,2022 709,839 83,194 793,033 January 1,2022 677,461 84,441 761,902 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 83 VNotes to Consolidated Financial Statements (Continued) 18 Fixed assets Houses and buildings Machinery equipment Office and electronic equipment Transportation equipment Power stations Other Total Gross amount: December 31,202136,809,487 144,268,573 6,141,205 228,961 2,361,036 21,576 189,830,838 Change of accounting policy - 144,462 - - - - 144,462 January 1,202236,809,487 144,413,035 6,141,205 228,961 2,361,036 21,576 189,975,300 Increase Reclassified from investment property 43,013 - - - - - 43,013 Reclassified from construction in progress 1,845,051 10,576,943 72,518 10,093 391 - 12,504,996 Acquisition and other 7,097 4,892,816 37,137 12,817 - 1,040 4,950,907 Decreases Written down with government grants - (77,220) - - - - (77,220) Reclassified to investment property (124,908) - - - - - (124,908) Other decreases (23,670) (3,362,523) (3,686,523) (21,600) - (80) (7,094,396) Exchange adjustment 4,412 1,184 379 193 - 412 6,580 June 30,202238,560,482 156,444,235 2,564,716 230,464 2,361,427 22,948 200,184,272 Accumulated depreciation: December 31,20216,424,323 64,912,283 2,500,253 145,498 426,922 13,504 74,422,783 Change of accounting policy - - - - - - - January 1,20226,424,323 64,912,283 2,500,253 145,498 426,922 13,504 74,422,783 Increase Accrual 687,481 7,531,330 114,985 17,077 43,294 999 8,395,166 Reclassified from investment property 5,326 - - - - - 5,326 Other increases 1,246,475 1,246,475 Decreases Reclassified to investment property (38,266) - - - - (38,266) Other decreases (7,116) (1,290,448) (993,165) (14,062) - - (2,304,791) Exchange adjustment 317 1,295 209 105 - 115 2,041 June 30,2022 7,072,065 72,400,935 1,622,282 148,618 470,216 14,618 81,728,734 Fixed assets, net: June 30,2022 31,488,417 84,043,300 942,434 81,846 1,891,211 8,330 118,455,538 January 1,2022 30,385,164 79,500,752 3,640,952 83,463 1,934,114 8,072 115,552,517 December 31,202130,385,164 79,356,290 3,640,952 83,463 1,934,114 8,072 115,408,055 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 84 VNotes to Consolidated Financial Statements (Continued) 18 Fixed assets (continued) Houses and buildings Machinery equipment Office and electronic equipment Transportation equipment Power stations Other Total Impairment allowance: January 1,2022771,541 653,840 338,477 2,429 62,059 412 1,828,758 Accrued in current period Other transfers in - 305,506 - - - - 305,506 Write-off of current period (5,224) (153,488) (1,302) (2,131) - - (162,145) Other transfers out - - (305,387) (119) - - (305,506) June 30,2022 766,317 805,858 31,788 179 62,059 412 1,666,613 Fixed assets, carrying amount: June 30,2022 30,722,100 83,237,442 910,646 81,667 1,829,152 7,918 116,788,925 January 1,2022 29,613,623 78,846,912 3,302,475 81,034 1,872,055 7,660 113,723,759 December 31,2021 29,613,623 78,702,450 3,302,475 81,034 1,872,055 7,660 113,579,297 Please refer to Item 80 of Note V for information on fixed asset mortgage. As of June 30,2022, the cost of the fixed assets that the Company had fully depreciated and still continued to use amounted to RMB34,922,674 thousand. Fixed assets with pending ownership certificates at the end of the current period: Carrying amount Expected time of obtaining ownership certificate Houses and buildings (Note) 14,105,697 Within 2023 Note As of June 30,2022, the fixed assets with pending ownership certificates of the Company were mainly the buildings and constructions of CSOT's t3, t4, t6, and t7 manufacturing bases, as well as the buildings and constructions of Inner Mongolia Zhonghuan Solar Material Co., Ltd., Inner Mongolia Zhonghuan Crystal Material Co., Ltd., Inner Mongolia Zhonghuan Advanced Semi-conductor Material Co., Ltd., Jiangsu Zhonghuan Enterprise Management Co., Ltd. and Tianjin Huanhai Industrial Park Co., Ltd. 19 Construction in progress (1) Schedule of construction in progress June 30,2022 January 1,2022 December 31,2021 Construction in progress 43,564,862 37,175,664 37,112,045 Less: Impairment allowance 145,912 146,160 146,160 43,418,950 37,029,504 36,965,885 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 85 VNotes to Consolidated Financial Statements (Continued) 19 Construction in progress (continued) (2) Changes to construction in progress Project name Budget Beginning amount Change in Accounting Policy changes Increase in current period Transfer-in in current period Fixed assets Other decreases June 30,2022 Project input Investment as % of budget Project progress Cumulative capitalized interest Including: capitalized interest in current period Interest capitalizat ion rate for current period Funding source t7 production line of LCD panel 35,337,000 3,362,350 - 1,616,903 (1,297,514) (5,024) 3,676,715 69% 69% 450,374 57,942 1.03% Self-funded + external-loan-funded t5 production line of LCD panel 12,500,000 739,416 - 1,482,131 (1,394) - 2,220,153 22% 22% - - - Self-funded t4 production line of LCD panel 35,000,000 17,226,269 - 775,811 (556,415) (14,648) 17,431,017 96% 96% 1,228,973 137,949 2.13% Self-funded + external-loan-funded t9 production line of LCD panel 31,500,000 3,916,693 - 3,068,318 (5,126) 6,979,885 22% 22% 29,852 29,852 4.37% Self-funded Production line of 8-12-inch semiconductor silicon wafers for integrated circuit 5,707,172 1,307,446 - 708,150 (742,577) (14,092) 1,258,927 71% 71% - - - Self-funded Industrialization phase V of monocrystalline silicon materials for renewable solar power batteries and monocrystalline silicon wafers for ultra-thin high-efficient solar power batteries 9,125,010 955,959 - 674,972 (709,681) (311,175) 610,075 97% 97% 54,018 - - Self-funded + external-loan-funded 50GW (G12) solar-grade monocrystalline silicon material smart factory project 10,979,740 543,611 - 2,768,844 (1,462,903) - 1,849,552 30% 30% - - - Self-funded Others Not applicable 8,914,141 63,619 8,450,250 (7,729,386) (305,998) 9,392,626 Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable 36,965,885 63,619 19,545,379 (12,504,996) (650,937) 43,418,950 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 86 VNotes to Consolidated Financial Statements (Continued) 20 Right-of-use assets Houses and buildings Transportation equipment Machinery equipment Land use rights Total Gross amount: December 31,2021867,511 1,164 1,982,380 13,335 2,864,390 Increase Leased in 289,890 139 - - 290,029 Other increases - 462 - - 462 Decreases Other decreases (13,169) (339) (585,917) - (599,425) Exchange adjustment 1,913 (5) - - 1,908 June 30,20221,146,145 1,421 1,396,463 13,335 2,557,364 Accumulated depreciation: December 31,2021101,348 522 335,526 83 437,479 Increase New subsidiary - - - - - Accrual 61,010 256 91,092 167 152,525 Decreases Reduced subsidiary - - - - - Other decreases (5,113) (110) (123,140) - (128,363) Exchange adjustment 1,060 (2) - - 1,058 June 30,2022158,305 666 303,478 250 462,699 Right-of-use assets, carrying amount: June 30,2022987,840 755 1,092,985 13,085 2,094,665 December 31,2021766,163 642 1,646,854 13,252 2,426,911 Impairment allowance: December 31,2021 - - - - - June 30,2022 - - - - - Right-of-use assets, carrying amount June 30,2022987,840 755 1,092,985 13,085 2,094,665 December 31,2021766,163 642 1,646,854 13,252 2,426,911 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 87 VNotes to Consolidated Financial Statements (Continued) 21 Intangible assets Land use rights Non-patent technologies /patents Other Total Gross amount: December 31,20218,649,646 8,083,664 1,590,550 18,323,860 Change of accounting policy - 17,899 - 17,899 January 1,20228,649,646 8,101,563 1,590,550 18,341,759 Increase Purchase 777,484 765,937 98,023 1,641,444 Reclassified from construction in progress - - 60,279 60,279 Reclassified from development costs - 1,239,973 3,208 1,243,181 Reclassified from investment property 175 - - 175 Decreases Sale and disposal - - (2,664) (2,664) Exchange adjustment (26,287) 155 (26,132) June 30,20229,427,305 10,081,186 1,749,551 21,258,042 Accumulated amortization: December 31,2021802,839 2,654,155 739,490 4,196,484 Increase Accrual 130,451 529,871 92,832 753,154 Decreases Sale and disposal - - (520) (520) Other decreases (4,118) - (280) (4,398) Exchange adjustment (3,531) 89 (3,442) June 30,2022929,172 3,180,495 831,611 4,941,278 Intangible assets, net: June 30,20228,498,133 6,900,691 917,940 16,316,764 December 31,20217,846,807 5,429,509 851,060 14,127,376 Impairment allowance: December 31,202123,562 110,019 11,148 144,729 Accrual - 442 - 442 Exchange adjustment - 1,679 - 1,679 June 30,202223,562 112,140 11,148 146,850 Intangible assets, carrying amount: June 30,20228,474,571 6,788,551 906,792 16,169,914 January 1,20227,823,245 5,337,389 839,912 14,000,546 December 31,20217,823,245 5,319,490 839,912 13,982,647 As of June 30,2022, the total book value of land use rights for which the title certificate has not been registered properly was RMB2,076 thousand. Please refer to Item 80 of Note V for information on collateralized intangible assets. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 88 VNotes to Consolidated Financial Statements (Continued) 22 Development expenditures Development expenditures are as follows: June 30,2022 January 1,2022 December 31,2021 Semi-conductor display 1,532,364 1,266,973 1,266,973 New energy photovoltaic & semi-conductor materials 1,111,053 1,273,226 1,241,446 2,643,417 2,540,199 2,508,419 23 Goodwill (1) Gross amount of goodwill Name of investee or item incurring goodwill Beginning amount Increase in current period Decrease in current period Ending balance TCLMedical Radiological Technology (Beijing) Co., Ltd. Note 1 28,967 - - 28,967 Qingdao Blue Business Consulting Co., Ltd. Note 2 2,452 - - 2,452 Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. Note 3 214,683 - - 214,683 Tianjin Zhonghuan Electronics Group Co., Ltd. Note 4 6,726,130 - - 6,726,130 Moka International Limited Note 5 1,728,973 - - 1,728,973 Suzhou China Star Optoelectronics Technology Co., Ltd. Note 6 486,603 - - 486,603 9,187,808 - - 9,187,808 (2) Goodwill impairment allowance Name of investee Beginning amount Increase in current period Decrease in current period Ending balance 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 thousand. 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 identifiable net assets of TCLMedical Radiological Technology attributable to the Company on the settlement date (equal to RMB 28,967 thousand) was recorded in the Company's goodwill. An impairment allowance of RMB 28,967 thousand had been established on this goodwill item for 2018. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 89 VNotes to Consolidated Financial Statements (Continued) 23 Goodwill (continued) Note 2 Highly Information Industry Co., Ltd., a subsidiary of the Company, acquired in October 2016 a 60% interest in Qingdao Blue Business Consulting Co., Ltd. (hereinafter referred to as “Blue Business Consulting”) with a capital of RMB10,000 thousand. 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 identifiable net assets of Blue Business Consulting attributable to Highly Information Industry Co., Ltd. on the settlement date (equivalent to RMB 2,452 thousand) was recorded in the Company’s goodwill. Note 3 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 acquired on October 1,2020100% interest in Tianjin Zhonghuan Electronics Group Co., Ltd. (hereinafter referred to as “Zhonghuan Electronics”) with a cash payment of RMB 12,500,000 thousand. As from the date of acquisition, the Group has obtained the control of Zhonghuan Electronics and has thus included it into the consolidated financial statements. As such, the difference between the accumulated investment of the Company in Zhonghuan Electronics (corresponding to the 100% interest) and the fair value of the identifiable net assets of Zhonghuan Electronics attributable to the Company on the settlement date (equal to RMB6,726,130 thousand) was recorded in the Company’s goodwill. Note 5 The Company acquired in April 2021100% interest in Moka International Limited with a cash payment of RMB2,800,000 thousand. 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 identifiable net assets of Moka International Limited attributable to the Company on the settlement date (equal to RMB1,728,973 thousand) was recorded in the Company’s goodwill. Note 6 The Company acquired in April 202160% interest in Suzhou China Star Optoelectronics Technology Co., Ltd. (formerly known as “Samsung Suzhou LCDCo. Ltd.” with a cash payment of RMB4,757,727 thousand. 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 thousand) was recorded in the Company’s goodwill. (III) Goodwill impairment test The Company carried out an impairment test of its goodwill on June 30,2022. The recoverable amount of the asset portfolio with goodwill was calculated with the discounted future cash flow approach, based on the budget approved by the Management (the budget period is five years). The estimated perpetual annual growth rate was adopted to calculate the future cash flow exceeding the budget period. The perpetual annual growth rate (primarily 0% - 0.37%) adopted by the Management was consistent with predicted data on the industry. The management determines the revenue growth rate (mainly -2.83%-24.57%) and determines the EBITDA (mainly 5.9%-19.6%) based on historical experience and forecasts of market development, combined with the Company's future development strategic plan and adopt a specific risk discount rate (mainly 8%-13.5%) that reflects the relevant asset group. There was no need for the Company to set aside allowances for asset impairment for the asset portfolio of Qingdao Blue Business Consulting Co., Ltd., Tianjin Zhonghuan Advanced Materials & Technology Co., Ltd., and Tianjin Printronics Circuit Corp., semi-conductor and semi-conductor photovoltaic materials, Moka International Limited, Suzhou China Star Optoelectronics Technology Co., Ltd., and the goodwill of Guangdong TCLNew Technology Co., Ltd. on December 31,2021, after the Management analyzed the recoverable amount of each asset portfolio according to the assumption. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 90 VNotes to Consolidated Financial Statements (Continued) 24 Long-term prepaid expense 2021 December 31, 2021 Increase in current period Amortization in current period Others June 30,2022 Improvement expense on leased fixed assets 1,629,475 51,631 (91,874) 49 1,589,281 Others 1,011,055 671,201 (765,956) (36,459) 879,841 2,640,530 722,832 (857,830) (36,410) 2,469,122 25 Deferred income tax assets and deferred income tax liabilities (1) Un-offset deferred income tax assets June 30,2022 January 1,2022 Deductible temporary difference Deferred income tax assets Deductible temporary difference Deferred income tax assets Deductible losses 10,513,282 1,666,877 6,739,226 1,087,993 Asset impairment allowances 2,947,063622,780 3,038,745 633,013 Provisions 886,303140,655 744,189117,497 Changes in fair value 43,69210,074 55,28713,230 Others 2,060,906 376,587 1,546,420298,690 16,451,246 2,816,973 12,123,867 2,150,423 December 31,2021 Deductible temporary difference Deferred income tax assets Deductible losses 6,758,7131,090,916 Asset impairment allowances 3,038,745633,013 Provisions 744,189117,497 Changes in fair value 55,28713,230 Others 1,546,420298,690 12,143,3542,153,346 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 91 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 30,2022 December 31,2021 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred income tax liabilities Accelerated depreciation of fixed assets 11,393,0821,787,225 11,471,2721,787,699 Increase in value of assets as assessed in business combination not involving entities under common control 2,479,347532,811 2,491,577531,018 Changes in fair value 738,029180,103 527,471 129,006 One-off tax deduction for fixed assets 6,369,829967,129 3,184,144501,290 Government grants 538,66280,799 273,47041,021 Others 758,088176,154 721,284168,952 22,277,0373,724,221 18,669,2183,158,986 (3) Unrecognized deferred income tax assets June 30,2022 December 31,2021 Deductible temporary difference 853,246 181,612 Deductible losses 7,393,648 5,840,378 8,246,894 6,021,990 (4) There were no deferred tax assets or liabilities presented at the net amount after offsetting. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 92 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 30,2022 December 31,2021 2021 - 178,533 2022 268,388 268,913 2023 492,734 477,404 2024 481,638 476,543 2025 468,668 464,426 2026 onwards 5,682,220 3,974,559 7,393,648 5,840,378 26 Other non-current assets June 30,2022 December 31,2021 Gross amount Impairment allowance Carrying amount Gross amount Impairment allowance Carrying amount Advance payment for equipment and land use rights (Note) 11,854,211 - 11,854,211 6,310,004 - 6,310,004 Advance payment for patents 339,151 - 339,151 211,606 - 211,606 Others 415,318 - 415,318 927,399 - 927,399 12,608,680 - 12,608,680 7,449,009 - 7,449,009 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 93 VNotes to Consolidated Financial Statements (Continued) 27 Short-term borrowings June 30,2022 December 31,2021 Unsecured borrowings 14,777,405 9,315,505 Borrowings secured by pledge 21,342 22,549 Interest payable 12,993 3,373 14,811,740 9,341,427 As of June 30,2022, the Company's short-term pledged loans were equivalent to RMB21,342 thousand (equivalent to RMB22,549 thousand at the end of 2021), and the transaction financial assets equivalent to RMB34,728 thousand (equivalent to RMB34,337 thousand at the end of 2021) were pledged . As of June 30,2022, the Company does not have any short-term borrowings that have expired and have not been repaid. 28 Borrowings from central bank As of June 30,2022, the balance of the borrowings of TCLTechnology Group Finance Co., Ltd. (a subsidiary of the Company) from the central bank was RMB728,744 thousand (At the end of 2021 : RMB1,437,062 thousand). 29 Customer deposits and deposits from banks and other financial institutions June 30,2022 December 31,2021 Customer deposits and deposits from other banks and financial institutions 265,745 666,056 Customer deposits and deposits from banks and other financial institutions are the deposits of related and nonrelated enterprises absorbed by TCLTechnology Group 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 94 VNotes to Consolidated Financial Statements (Continued) 30 Held-for-trading financial liabilities June 30,2022 December 31,2021 Measured at fair value with changes included Financial liabilities at fair value through profit or loss.989,803 925,035 31 Derivative financial liabilities June 30,2022 December 31,2021 Derivative financial liabilities 430,997 22,205 32 Notes payable June 30,2022 December 31,2021 Bank acceptance notes 3,588,303 2,877,554 Trade acceptance notes 876,460 107,817 Letter of credit 961,589 289,925 5,426,352 3,275,296 As of June 30,2022, the Company had no notes payable that were due but not paid. 33 Accounts payable June 30,2022 December 31,2021 Amounts due to suppliers 24,185,474 24,297,860 As of June 30,2022, there were no significant accounts payable aged over one year. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 95 VNotes to Consolidated Financial Statements (Continued) 34 Advances received June 30,2022 December 31,2021 Advances from customers 6,067 5,794 As of June 30,2022, the Company had no significant accounts receivable aged over one year. 35 Contract liabilities June 30,2022 December 31,2021 Advances from customers 4,367,691 2,593,882 36 Employee benefits payable and long-term employee benefits payable (1) Employee compensation payable June 30,2022 December 31,2021 Short-term employee benefits payable 2,538,796 3,274,021 Defined contribution plans payable 33,444 34,383 Dismissal benefits payable 3,029 3,529 2,575,269 3,311,933 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 96 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 payable January 1,2022 Increase in current period Decrease in current period June 30,2022 Wages, bonuses, allowances and subsidies 2,885,187 5,319,548 (6,177,020) 2,027,715 Employee services and benefits 27,664 202,720 (216,815) 13,569 Social insurance benefits 46,565 182,210 (190,456) 38,319 Of which: Medical insurance premium 44,622 165,359 (173,549) 36,432 Employment injury insurance premium 953 8,893 (8,957) 889 Maternity insurance 990 7,958 (7,950) 998 Housing fund 30,326 204,575 (198,278) 36,623 Trade union funds and staff education funds 27,575 76,303 (72,320) 31,558 Others 256,704 160,252 (25,944) 391,012 3,274,021 6,145,608 (6,880,833) 2,538,796 (b) Defined contribution plans January 1,2022 Increase in current period Decrease in current period June 30,2022 Basic pension insurance 32,979 375,573 (376,438) 32,114 Unemployment insurance 1,404 12,026 (12,100) 1,330 34,383 387,599 (388,538) 33,444 (2) Long-term employee compensation payable June 30,2022 December 31, 2021 Supplementary pension insurance 26,236 26,595 Other long-term benefits 845,969 643,336 872,205 669,931 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 97 VNotes to Consolidated Financial Statements (Continued) 37 Taxes and levies payable June 30,2022 December 31,2021 Corporate income tax 318,718 1,020,711 Value-added tax 194,176 30,967 Individual income tax 57,282 39,920 Urban maintenance and construction tax 40,045 43,081 Education surcharges 28,630 30,800 Others 105,746 73,370 744,597 1,238,849 Please refer to Note IV for the standards for provisions for taxes and the applicable tax rates. 38 Other payables June 30,2022 December 31,2021 Dividends payable 1,310,885 34,607 Other payables 20,313,031 19,352,281 21,623,916 19,386,888 (1) Dividends payable June 30,2022 December 31,2021 Other non-controlling interests 1,310,885 34,607 1,310,885 34,607 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 98 VNotes to Consolidated Financial Statements (Continued) 38 Other payables (continued) (2) Other payables June 30,2022 December 31,2021 Payables for engineering equipment 15,889,328 13,368,026 Amounts due to external entities 2,584,842 4,241,736 Unpaid expenses 1,561,662 1,531,544 Security deposits 277,199 210,975 20,313,031 19,352,281 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 99 VNotes to Consolidated Financial Statements (Continued) 39 Non-current liabilities due within one year Note VJune 30,2022 December 31,2021 Long-term borrowings due within one year (Note 1) 45 4,736,789 6,062,928 Bonds payable due within one year (Note 2) 6,402,876 5,646,822 Current portion of lease liabilities 47265,337 681,087 Current portion of long-term payables 156,883 168,132 Current portion of interest payable 395,371 447,796 11,957,256 13,006,765 Note 1 As of June 30,2022, the long-term loans due within one year of the Company included credit loans equivalent to RMB4,736,789 thousand, and the interest rate range for long-term loans due within one year of the Company was 3.1%~4.28% (2021: 0.46%~4.15%)。

    Note 2 The Company's bonds payable due within one year are mainly as follows: Convertible corporate bonds TCL directional transfer 2: Issued in November 2020 with a term of 2 years, and the closing balance as of June 30 was RMB2,478,256 thousand. Medium-term note 20TCLTechnology MTN001: Issued in March 2020, with a term of 3 years, the closing balance as of June 30 was RMB2,998,231 thousand. 40 Other current liabilities June 30,2022 December 31,2021 After-sales service expense (note) 901,256 792,847 Output tax to be transferred 454,217 286,384 Others 174,951 190,656 1,530,424 1,269,887 Note After-sales service expense expected to occur within 1 year is reflected in current liabilities. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 100 VNotes to Consolidated Financial Statements (Continued) 41 Long-term borrowings June 30,2022 December 31,2021 Borrowings secured by collateral 38,398,940 39,633,561 Borrowings secured by pledge 2,123,706 928,156 Unsecured borrowings 60,696,631 52,780,293 101,219,277 93,342,010 Including: Current portion of long-term borrowings which matures in 1 year (4,736,789) (6,062,928) 96,482,488 87,279,082 The maturities of the Company's long-term borrowings vary from 2023 to 2037. As of June 30,2022, the long-term borrowings secured by collateral were equivalent to RMB38,398,940 thousand (including amounts translated from other currencies) (At the end of 2021 : RMB39,633,561 thousand), which were secured by the collaterals of the land use right, houses and buildings, machinery and equipment of about RMB74,795,614 thousand (including amounts translated from other currencies) (At the end of 2021: RMB66,737,167 thousand); the long-term pledged borrowings were equivalent to RMB2,123,706 thousand (At the end of 2021: RMB928,156 thousand), which were pledged by the collaterals of the charge use right, etc., of about RMB689,720 thousand (At the end of 2021: RMB328,069 thousand); The interest rates of the Company’s long-term borrowing ranged from 2.4% to 5.38% in the current period (2021: 1.3% - 5.70%). 42 Bonds payable June 30,2022 December 31,2021 Corporate bonds 8,008,782 8,073,016 MTN 5,490,377 4,993,265 13,499,159 13,066,281 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 101 VNotes to Consolidated Financial Statements (Continued) 42 Bonds payable (continued) (1) Movements in bonds payable Bond name Par value Issue date Maturity Issued amount Beginning amount Issued in current period Accrued interest as per par value Amortization of premium or discount Others (note 1) June 30,2022 18TCL011,000,000 June 6,20185 1,000,000 169,162 - 3,034248 (169,410) - 18TCL022,000,000 August 20, 20185 2,000,000 2,003,039 - 38,242 (921) - 2,002,118 19TCL011,000,000 May 20,20195 1,000,000 998,630 - 18,3703,821 - 1,002,451 19TCL021,000,000 July 23,20195 1,000,000 998,568 - 21,323277 - 998,845 19TCL032,000,000 October 21, 20195 2,000,000 1,996,860 - 41,655554 - 1,997,414 20TCLTECH. MTN0013,000,000 March 27,20203 3,000,000 2,997,041 - 54,444388 (2,997,429) - TCLTEC11,957,483 July 14,20205 1,957,483 1,906,757 - 18,56112,897 88,3002,007,954 21TCLJi MTN001 (High- Growth Debt) 2,000,000 May 10,20213 2,000,000 1,996,224 - 41,386792 - 1,997,016 22TCLJi MTN0012,000,000 January 14, 202232,000,000 - 2,000,00031,759 (3,252) - 1,996,748 22TCLJi GN0021,500,000 April 27,202231,500,000 - 1,500,0008,815 (3,387) - 1,496,613 Total 17,457,483 —— —— 17,457,483 13,066,281 3,500,000 277,58911,417 (3,078,539) 13,499,159 Note 1 Others are the current portion of bonds payable reclassified to the current portion of non-current liabilities. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 102 43 Lease liabilities June 30,2022 December 31,2021 Total lease liabilities 1,422,164 1,783,159 Less: current portion of lease liabilities 265,337 681,087 Total 1,156,827 1,102,072 44 Long-term payables June 30,2022 December 31,2021 Finance lease 723,672 671,344 45 Deferred income December 31,2021 Increase in current period Decrease in current period June 30,2022 Government grants 2,361,171 5,465,012 (2,710,587) 5,115,596 Others 34 - (34) - 2,361,205 5,465,012 (2,710,621) 5,115,596 Items involving government grants 2021 December 31,2021 New grants in current period Amount recorded in non-operating income in current period Amount recorded in other income in current period Amount used to offset costs and expenses in current period Other changes June 30, 2022 Government grants related to assets 1,273,978 1,349,204 (2,000) (27,555) (102,026) (89,305) 2,402,296 Government grants related to income 1,087,193 4,115,808 (58) (1,503,687) (974,778) (11,178) 2,713,300 2,361,171 5,465,012 (2,058) (1,531,242) (1,076,804) (100,483) 5,115,596 Note "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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 103 VNotes to Consolidated Financial Statements (Continued) 46 Share capital December 31,2021 Increase or decrease in current period June 30,2022 Amount Ratio (%) New issues Other Subtotal Amount Ratio (%) I. Restricted Shares 612,110 4.36% - 1,445 1,445 613,555 4.37% Ⅱ. Unrestricted shares 13,418,532 95.64% - (1,445) (1,445) 13,417,087 95.63% III. Total shares 14,030,642 100% - - - 14,030,642 100% As of June 30,2022, the Company's total share capital was 14,030,642,000 shares. Note Except for Chairman of the Board Mr. Li Dongsheng who holds restricted shares subscribed for in a private placement, none of the other incumbent directors, supervisors or senior management hold any restricted shares from a split-share structure reform or a private placement. The shares held by these personnel will stay partially frozen as per the Rules on the Management of Shares Held by the Directors, Supervisors and Senior Management Officers of the Company and the Changes thereof. The trading and information disclosure in relation to these shares shall be in strict compliance with the applicable laws, regulations and rules. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 104 VNotes to Consolidated Financial Statements (Continued) 47 Other equity instruments December 31,2021 Increase in current period Decrease in current period June 30,2022 Convertible bonds 200,334 - (5,933) 194,401 48 Capital reserves December 31,2021 Increase in current period Decrease in current period June 30,2022 Share premium 6,068,268 24,515 (1,920,270) 4,172,513 Other capital reserves 10,999 10,816 (8,753) 13,062 6,079,267 35,331 (1,929,023) 4,185,575 49 Treasury Stocks December 31,2021 Increase in current period Decrease in current period June 30,2022 Treasury stock 1,885,557 502,771 (76,664) 2,311,664 Increase in the period is the result of repurchase of shares from the Company's Employee Stock Ownership Plan. The 16th meeting of the Seventh Session of the Board of Directors held by the Company on March 18, 2022 deliberated on and approved the Repurchase Report on the Repurchase of Some Public Shares in 2022. The repurchase of the company shares will be used for the Employee Stock Ownership Plans or equity incentives. As of June 30,2022, the total number of shares repurchased was 106,484 thousand shares at the total consideration of RMB502,771 thousand. 50 Surplus reserves December 31,2021 Increase in current period Decrease in current period June 30,2022 Statutory surplus reserves 2,367,303 - - 2,367,303 Discretionary surplus reserves 182,870 - - 182,870 2,550,173 - - 2,550,173 As per China's Company Law, Articles of Association for Companies, accounting standards, the Company and several of its subsidiaries shall appropriate 10% of net profits as statutory surplus reserves until the reserve amount reaches 50% of the registered capital. According to the aforesaid laws and regulations, part of the statutory surplus reserves can be converted into share capital of the Company, and the remaining amount shall not be lower than 25% of the registered capital. After the appropriation to the statutory surplus reserves, the Company may appropriate the discretionary surplus reserves. Upon approval, the discretionary surplus reserves can be used to make up the previous loss or increase the share capital. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 105 VNotes to Consolidated Financial Statements (Continued) 51 Specific reserves December 31,2021 Increase in current period Decrease in current period June 30,2022 Production safety reserve 1,549 1,919 - 3,468 52 General reserve December 31,2021 Increase in current period Decrease in current period June 30,2022 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, this subsidiary appropriated 1% of its net profit as general reserve in the previous years. 53 Retained earnings January - June 2022 January - June 2021 Beginning retained earnings 22,458,340 14,009,494 Change in accounting policies (Note) 69,346 - Net profit for current period 663,521 6,802,218 Decrease in current period (2,064,177) (1,509,694) Including: Appropriated as surplus reserves - Distribution of dividends on common stocks (2,050,003) (1,625,590) Others (14,174) 115,896 Ending retained earnings 21,127,030 19,302,018 Due to changes in accounting policies, there were RMB69,346 thousand undistributed profits at the start of the period (see Note III.43 for details). TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 106 VNotes to Consolidated Financial Statements (Continued) 54 Revenue and cost of sales January - June 2022 January - June 2021 Revenue Cost of sales Revenue Cost of sales Core business 82,566,755 75,173,515 73,405,981 57,588,286 Non-core business 1,955,426 1,349,429 999,868 480,685 84,522,181 76,522,944 74,405,849 58,068,971 (1) Business by operating segment Revenue Cost of sales Gross profit January - June 2022 January - June 2021 January - June 2022 January - June 2021 January - June 2022 January - June 2021 Domestic sales 57,379,450 48,121,872 51,272,092 40,165,807 6,107,358 7,956,065 Foreign sales 27,142,731 26,283,977 25,250,852 17,903,164 1,891,879 8,380,813 84,522,181 74,405,849 76,522,944 58,068,971 7,999,237 16,336,878 (2) The sales revenue from the top five customers combined was RMB27,189,512 thousand and RMB23,036,823 thousand respectively for January-June 2022 and January-June 2021 respectively, accounting for 32.9% and 31.4% of the core business revenue. 55 Interest income/expense and exchange gain January - June 2022 January - June 2021 Interest income 38,579 74,133 Interest expenditures 14,292 12,564 Exchange gain/(loss) 24,351 964 The interest income, interest expense and exchange gain/(loss) above occurred with the Company's subsidiary TCLTechnology Group Finance Co., Ltd., which are presented separately herein as required for a financial enterprise. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 107 VNotes to Consolidated Financial Statements (Continued) 56 Taxes and levies January - June 2022 January - June 2021 Property tax 131,638 105,646 Stamp tax 100,211 65,852 Urban maintenance and construction tax 21,608 58,808 Education surcharges 15,407 42,123 Land use tax 13,634 14,563 Others 6,583 7,318 289,081 294,310 The applicable tax and levy standards are detailed in Note IV. 57 Selling expenses January - June 2022 January - June 2021 Employee salaries and benefits 322,046 275,159 After-sales service expense 281,872 337,843 Promotional and marketing expenses 139,964 106,431 Others 309,487 181,743 1,053,369 901,176 58 Administrative expense January - June 2022 January - June 2021 Employee salaries and benefits 759,634 809,470 Depreciation and amortization expenses 370,222 361,440 Digital development expenses 128,251 104,360 Others 458,272 748,098 1,716,379 2,023,368 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 108 VNotes to Consolidated Financial Statements (Continued) 59 R&D expenses January - June 2022 January - June 2021 Depreciation and amortization expenses 1,483,845 1,231,865 Material expenses 1,859,860 1,310,368 Employee salaries and benefits 779,375 712,165 Others 328,684 148,561 4,451,764 3,402,959 60 Financial Expenses January - June 2022 January - June 2021 Interest expenditures 2,031,269 2,160,434 Interest income (325,439) (187,547) Exchange loss / (gain) (55,264) (201,680) Others 69,591 47,776 1,720,157 1,818,983 61 Other income January - June 2022 January - June 2021 R&D subsidies 1,554,890 747,743 VAT rebates on software 17,127 7,905 Over-deduction in taxable amount for VAT 589 605 Others 70,504 53,781 1,643,110 810,034 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 109 VNotes to Consolidated Financial Statements (Continued) 62 Return on investments January - June 2022 January - June 2021 Gain on disposal of debt instruments at fair value through profit or loss 141,285 390,636 Gain on disposal of debt instruments at fair value through profit or loss (75,115) 50,360 Gain on disposal of debt instruments at fair value through profit or loss 7,365 3,708 Gain on disposal of debt instruments at fair value through profit or loss 35,619 107,165 Share of net income of associates 1,769,993 1,318,079 Share of net income of joint ventures (12,343) (2,895) Net income from disposal of long-term equity investments 491,319 849,880 Others (577,608) 71,272 1,780,515 2,788,205 63 Gain on changes in fair value January - June 2022 January - June 2021 Held-for-trading financial assets (139,785) (20,788) Derivative financial assets (1,176) (327,549) Held-for-trading financial liabilities 46,194 (11,045) Derivative financial liabilities 209,262 45,186 114,495 (314,196) 64 Credit impairment loss January - June 2022 January - June 2021 Loss on uncollectible accounts receivable (21,227) 21,834 Loss on uncollectible other receivables (4,351) (6,171) Other financial assets (1,579) (27,108) (27,157) (11,445) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 110 VNotes to Consolidated Financial Statements (Continued) 65 Inventory valuation loss January - June 2022 January - June 2021 Inventory valuation loss (1,006,908) (624,164) Loss on impairments of fixed assets - (45,424) Others (3,379) (127,931) (1,010,287) (797,519) 66 Asset disposal income January - June 2022 January - June 2021 Income/(loss) from disposal of fixed assets (17,103) (2,338) Income/(loss) from disposal of intangible assets (8,498) 27,166 Others 1,970 (501) (23,631) 24,327 67 Non-operating income January - June 2022 January - June 2021 Amount through current non-recurring gains and losses Gains on retired or damaged non-current assets 116 - 116 Government grants and others 596,424 267,948 596,424 596,540 267,948 596,540 68 Non-operating expense January - June 2022 January - June 2021 Amount through current non-recurring gains and losses Losses on retired or damaged non-current assets 2,020 2,394 2,020 Others 50,372 9,593 50,372 52,392 11,987 52,392 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 111 VNotes to Consolidated Financial Statements (Continued) 69 Income tax expenses (1) Table of income tax expenses January - June 2022 January - June 2021 Current income tax expense 338,743 1,119,370 Deferred income tax expense (427,141) 297,127 (88,398) 1,416,497 (2) Accounting profit and income tax adjustment process January - June 2022 January - June 2021 Gross profit 1,838,318 10,713,982 Income tax expense calculated at statutory/applicable tax rate 275,748 2,678,496 Impact of different tax rates applied to subsidiaries 365,664 (16,420) Impact of adjusting income tax in previous periods (51,310) (12,685) Impact of non-taxable income (488,118) (599,904) Impact of non-deductible costs, expenses and losses 44,556 5,418 Impact of the use of deductible losses carry forward without recognize deferred tax assets in the previous periods (329,838) (201,562) Impact of unrecognized deferred tax assets of deductible temporary differences or deductible losses in the current period 324,802 81,396 Others (229,902) (518,241) Income tax expense (88,398) 1,416,497 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 112 VNotes to Consolidated Financial Statements (Continued) 70 Other comprehensive income (1) Other comprehensive income items, income tax effects and reclassifications to profit or loss January - June 2022 January - June 2021 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 388 1,270 Share of the period 388 1,270 Previous other comprehensive income reclassified to retained earnings for current period 2. Changes in fair value of other equity instruments (13,674) (185,629) Current gain/(loss) (9,968) (84,931) Previous other comprehensive income reclassified to retained earnings for current period - (115,871) Income tax effects recorded in other comprehensive income (3,706) 15,173 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 4,046 (153,326) Share of the period 4,046 (153,326) Income tax effects recorded in other comprehensive income - - 2. Changes in fair value of financial assets recorded in other comprehensive income - 487 Current gain/(loss) - 487 3. Cash flow hedges (209,875) (4,105) Current gain/(loss) (158,364) (782) Previous other comprehensive income reclassified to profit for current period (48,626) Income tax effects recorded in other comprehensive income (2,885) (3,323) 4. Differences arising from translation of foreign currency financial statements of overseas operations (153,882) 123,814 5. Net income arising from disposal of overseas operations through profit or loss - (372,997) (217,489) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 113 V Notes to Consolidated Financial Statements (Continued) 70 Other comprehensive income (continued) (2) Changes in other comprehensive income items Equity attributable to shareholders of the Company as the parent Accounting policy changes Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method Gain/loss on changes in fair value of financial assets Gain/(Loss) on changes in cash flow hedges Differences arising from translation of foreign currency-denominated financial statements Fair value changes of other equity instruments Fair value changes of other debt instruments Other comprehensive income transferred to retained earnings Subtotal Non-controlling interests Total other comprehensive income January 1,2021334,950313,950 (350,569) (5,688) (509,439) 71,195 - 28 (145,573) (18,972) (164,545) Increase and decrease for 2021 - (267,062) - 68,234270,260 (212,485) - (122,821) (263,874) 19,871 (244,003) December 31,2021334,95046,888 (350,569) 62,546 (239,179) (141,290) - (122,793) (409,447) 899 (408,548) Change in H12022 - 4,400 - (185,753) (163,688) (9,974) - (355,015) (17,982) (372,997) June 30,2022334,95051,288 (350,569) (123,207) (402,867) (151,264) (122,793) (764,462) (17,083) (781,545) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 114 VNotes to Consolidated Financial Statements (Continued) 71 Earnings per share (1) Basic EPS January - June 2022 January - June 2021 Net profit attributable to shareholders of the Company as the parent 663,521 6,802,218 Weighted average outstanding common shares (in thousand shares) 13,568,366 13,497,433 Basic earnings per share (RMB yuan/share) 0.0489 0.5040 (2) Diluted EPS January - June 2022 January - June 2021 Net profit attributable to shareholders of the Company as the parent 663,521 6,802,218 Adjusted weighted average number of common shares outstanding (in thousand shares) 13,675,093 14,030,788 Diluted earnings per share (RMB yuan/share) 0.0485 0.4848 72 Cash generated from other operating activities Other cash received in the consolidated cash flow statement of the Company related to operating activities amounted to RMB5,538,379 thousand (RMB5,032,866 thousand for the same period of the previous year), mainly including current accounts, government grants and special appropriations received. 73 Cash used in other operating activities Other cash payments related to operating activities in the Company's consolidated cash flow statement amounted to RMB5,670,402 thousand (RMB3,522,074 thousand for the same period of the previous year), mainly for various expenses and current accounts. 74 Cash generated from other investing activities Other cash received in the Company's consolidated cash flow statement related to investing activities amounted to RMB73,748 thousand (the same period last year: RMB7,079 thousand), mainly due to the receipt of project bid bonds. 75 Cash used in other investing activities Other cash paid in the Company's consolidated cash flow statement related to investing activities amounted to RMB333,406 thousand (RMB101,676 thousand for the same period of the previous year), mainly due to the refund of project bid bonds. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 115 VNotes to Consolidated Financial Statements (Continued) 76 Cash generated from other financing activities Other cash received in the consolidated cash flow statement of the Company related to financing activities amounted to RMB6,000 thousand (RMB249,287 thousand for the same period of the previous year), mainly including deposits received. 77 Cash used in other financing activities Other cash paid in the Company's consolidated cash flow statement related to financing activities of RMB4,454,836 thousand (the same period of last year: RMB3,060,099 thousand), mainly for the repurchase of minority interests in subsidiaries, repurchase of company shares, and payment of financial lease payments. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 116 VNotes to Consolidated Financial Statements (Continued) 78 Supplementary information for the cash flow statement (1) Reconciliation of net profit to net cash generated from/used in operating activities January - June 2022 January - June 2021 Net profit 1,926,716 9,297,485 Add:Asset impairment allowance 1,037,444 808,964 Depreciation of fixed assets 9,659,290 7,148,930 Depreciation of right-of-use assets 152,525 112,734 Amortization of intangible assets 753,154 554,138 Amortization of long-term prepaid expense 857,830 631,044 Loss/(Gain) on disposal of fixed assets, intangible assets and other long-lived assets 23,631 (24,327) Loss on retired or damaged fixed assets 1,904 2,394 Loss/(Gain) on changes in fair value (114,495) 314,196 Financial expenses 1,965,946 1,970,354 Return on investments (1,780,515) (2,788,205) Decrease/(Increase) in deferred income tax assets (663,627) (517,573) Increase/(Decrease) in deferred income tax liabilities 565,235 637,970 Decrease/(Increase) in inventory (119,965) (5,690,016) Decrease/(Increase) in operating receivables (2,029,270) (9,741,065) Increase/(Decrease) in operating payables (2,332,939) 13,615,809 Others (886,228) (2,437,117) Net cash generated from operating activities 9,016,636 13,895,715 (2) Net cash payments for acquisition of subsidiaries in the current period January - June 2022 January - June 2021 Payments of cash and cash equivalents made in current period due to business combinations incurred in current period - 9,768,401 Less: cash and cash equivalents held by subsidiary on acquisition date - 5,628,896 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 - 4,139,505 (3) Net cash proceeds from disposal of subsidiaries in the current period January - June 2022 January - June 2021 Cash or cash equivalents received in current period due to disposal of subsidiary in current period - 1,412,399 Less: cash and cash equivalents held by subsidiary on the date when the Company’s control over the subsidiary ceased - 900,823 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 117 VNotes to Consolidated Financial Statements (Continued) 78 Supplementary information for the cash flow statement (continued) (3) Net cash proceeds from disposal of subsidiaries in the current period (continued) January - June 2022 January - June 2021 Add: Cash or cash equivalents received in current period due to disposal of subsidiaries in prior periods - - Net proceeds from the disposal of subsidiaries - 511,576 (4) Breakdown of cash and cash equivalents June 30,2022 December 31,2021 I. Cash 31,676,321 30,081,705 Including: Cash on hand 601 789 Bank deposits available for payment on demand 30,529,692 28,970,585 Other monetary assets available for payment on demand 1,144,303 987,347 Deposits with the central bank available for payment 1,725 122,984 II. Cash equivalents - - III. Cash and cash equivalents, end of the period 31,676,321 30,081,705 79 Changes in cash and cash equivalents, net January - June 2022 January - June 2021 Ending cash and cash equivalents 31,676,321 24,493,712 Less: Beginning cash 30,081,705 18,208,417 Net increase in cash and cash equivalents 1,594,616 6,285,295 Analysis of ending cash and cash equivalents: Ending monetary assets 33,795,517 27,374,279 Less: Ending non-cash equivalents (note) 2,119,196 2,880,567 Ending cash and cash equivalents 31,676,321 24,493,712 Note: The ending non-cash equivalents primarily included interest receivable on bank deposits, the statutory reserve deposits placed by TCLTechnology Group Finance Co., Ltd. in the central bank and other monetary assets, detailed in Note V,1. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 118 VNotes to Consolidated Financial Statements (Continued) 80 Assets with restricted ownership or use rights June 30,2022 Reason for restriction Monetary assets 432,087 Deposited in the central bank as the required reserve Monetary assets 1,687,109 Other restricted monetary assets Notes receivable 278,564 Pledge Fixed assets 86,032,862 As collateral for loan Intangible assets 3,184,049 As collateral for loan Held-for-trading financial assets 34,728 Put in pledge for loan Right-of-use assets 28,256 As collateral for lease Accounts receivable 1,018,119 Pledge Contract assets 150,375 Pledge 92,846,149 81 Foreign currency monetary items June 30,2022 Foreign currency balance Conversion rate RMB balance Monetary assets Including: USD 795,8536.71145,341,289 HKD 341,2340.8553291,857 EUR 6,6477.004746,558 SGD 874.8186419 Accounts receivable Including: USD 1,139,0206.71147,644,419 HKD 1,471,6900.85531,258,736 INR 838,6820.085071,288 Accounts payable Including: USD 245,6416.71141,648,595 HKD 1,642,1040.85531,404,492 JPY 2,929,3640.0491143,832 INR 192,7570.085016,384 EUR 104.767.0047733.8 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 119 VNotes to Consolidated Financial Statements (Continued) 81 Foreign currency monetary items (continued) June 30,2022 Foreign currency balance Conversion rate RMB balance Other receivables Including: USD 17,4886.7114117,369 HKD 202,8570.8553173,504 JPY 11,9700.0491588 PLN 1,6881.50022,532 INR 92,4160.08507,855 KRW 102,5900.0052530 MXN 7,9500.33272,645 Other payables Including: USD 109,6756.7114736,071 HKD 713,6680.8553610,400 JPY 6,8110.0491334 INR 2,042,9410.0850173,650 PLN 3351.5002503 KRW 113,0150.0052583 AUD 1164.6174536 MXN 8,9290.33272,971 EUR 47.004728 Notes payable Including: USD 56,3846.7114378,413 EUR 6,7837.004747,510 JPY 1,677,8140.049182,381 Short-term borrowings Including: USD 198,9366.71141,335,140 Long-term borrowings Including: USD 1,281,8406.71148,602,941 Receivables financing Including: USD 97,1216.7114651,817 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 120 VI. Changes in consolidation scope 1 Newly consolidated entities for the period Name of investee Consolidated period Reason for change Registered capital (RMB) Contribution ratio Zhonghuan Advanced Semiconductor (Tianjin) Co., Ltd. January - June 2022 Newly incorporated RMB10,000,000100.00% Huanou (Wuxi) New Energy Materials Co., Ltd. February - June 2022 Newly incorporated RMB10,000,000100.00% Huaian Municipal Huanxin New Energy Co., Ltd. February - June 2022 Newly incorporated RMB1,000,000100.00% Lingwu Huanju New Energy Co., Ltd. March - June 2022 Newly incorporated RMB1,000,000100.00% Inner Mongolia Zhonghuan Electronic Materials Co., Ltd. April - June 2022 Newly incorporated RMB10,000,000100.00% Tianjin Zhonghuan Industrial Park Co., Ltd. April - June 2022 Newly incorporated RMB39,000,000100.00% Tianjin Huanrui Technology Co., Ltd. May - June 2022 Newly incorporated RMB100,000,000100.00% Shaanxi Huanyu Green New Energy Co., Ltd. June 2022 Newly incorporated RMB1,000,000100.00% Shaanxi Huanshuo Green New Energy Co., Ltd. June 2022 Newly incorporated RMB1,000,000100.00% Xi'an Shangpai Technology Co., Ltd. June 2022 Newly incorporated RMB100,000 100.00% 2 Deconsolidated entities for current period Name of investee Time of deconsolidation Reason for change Tongliao Guangdong New Energy Co., Ltd. January 2022 De-registered TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 121 VII Interests in Other Entities 1 Interests in subsidiaries (1) Principal subsidiaries Name of investee Place of registration Nature of business Principal place of business Shareholding ratio (%) How subsidiary was obtained Direct Indirect TCLChina Star Optoelectronics Technology Co., Ltd. Shenzhen Manufacturin g and sales Shenzhen 83.68% - Incorporated Shenzhen China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Shenzhen Manufacturin g and sales Shenzhen - 54.31% Incorporated Guangzhou China Ray Optoelectronic Materials Co., Ltd. Guangzhou Research and development Guangzhou - 100% Incorporated Wuhan China Star Optoelectronics Technology Co., Ltd. Wuhan Manufacturin g and sales Wuhan - 93.93% Incorporated Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. Wuhan Manufacturin g and sales Wuhan - 57.14% Incorporated Shenzhen CPTDisplay Technology Co., Ltd. Shenzhen Manufacturin g and sales Shenzhen - 100% Business combination not under common control China Star Optoelectronics International (HK) Limited Hong Kong Sales Hong Kong - 100% Incorporated China Display Optoelectronics Technology Holdings Limited Bermuda Investment holding Bermuda - 64.20% Business combination not under common control China Display Optoelectronics Technology (Huizhou) Co., Ltd. Huizhou Manufacturin g and sales Huizhou - 100% Incorporated Wuhan China Display Optoelectronics Technology Co., Ltd. Wuhan Manufacturin g and sales Wuhan - 100% Incorporated Suzhou China Star Optoelectronics Technology Co., Ltd. Suzhou Manufacturin g and sales Suzhou - 100% Business combination not under common control Suzhou China Star Optoelectronics Display Co., Ltd. Suzhou Manufacturin g and sales Suzhou - 100% Business combination not under common control Beijing HAWKCloud Information Technology Co., Ltd. Beijing Internet service Beijing 100% - 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 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 122 VIIInterests in Other Entities (Continued) 1 Interests in subsidiaries (Continued) (1) Composition of key subsidiaries (Continued) Name of investee Place of registration Nature of business Principal place of business Shareholding ratio (%) How subsidiary was obtained Direct Indirect 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 Kong Research and development Hong Kong - 100% Incorporated TCLTechnology Investments Limited Hong Kong Investment business Hong Kong 100% - Incorporated TCLZhonghuan New Energy Technology Co., Ltd. (Note) Tianjin Manufacturin g and sales Tianjin 2.41% 27.39% Business combination not under common control Tianjin Printronics Circuit Corporation Tianjin Manufacturin g and sales Tianjin - 26.86% Business combination not under common control Tianjin Huan'Ou Semiconductor Material&Technology Co., Ltd. Tianjin Manufacturin g and sales Tianjin - 100% Business combination not under common control Wuxi Zhonghuan Applied Materials Co., Ltd. Wuxi Manufacturin g and sales Wuxi - 98.08% Business combination not under common control Tianjin Huanzhi New Energy Technology Co., Ltd. Tianjin Manufacturin g and sales Tianjin - 62.00% Business combination not under common control Inner Mongolia Zhonghuan Solar Material Co., Ltd. Inner Mongolia Manufacturin g and sales Inner Mongolia - 100% Business combination not under common control TianJin Zhonghuan Advanced Material&Technology Co., Ltd. Tianjin Manufacturin g and sales Tianjin - 100% Business combination not under common control Huansheng Solar (Jiangsu) Co., Ltd. Wuxi Manufacturin g and sales Wuxi - 83.73% Business combination not under common control Tianjin Huanou International Silicon Material Co., Ltd. Tianjin Procurement & sales Tianjin - 100% Business combination not under common control Zhonghuan Hong Kong Holding Limited Hong Kong Sales Hong Kong - 100% Business combination not under common control TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 123 VIIInterests in Other Entities (Continued) 1 Interests in subsidiaries (Continued) (1) Principal subsidiaries (Continued) Name of investee Place of registration Nature of business Principal place of business Shareholding ratio (%) How subsidiary was obtained Direct Indirect Tianjin Huanrui Electronic Technology Co., Ltd. Tianjin Procurement & sales Tianjin - 100% Business combination not under common control Inner Mongolia Zhonghuan Xiexin Solar Material Co., Ltd. Inner Mongolia Manufacturin g and sales Inner Mongolia - 59.32% Business combination not under common control Inner Mongolia Zhonghuan Advanced Semiconductor Material Co., Ltd. Inner Mongolia Manufacturin g and sales Inner Mongolia - 100% Business combination not under common control Zhonghuan Advanced Semiconductor Materials Co., Ltd. Wuxi Manufacturin g and sales Wuxi - 58.79% Business combination not under common control Moka International Limited BVI Investment holding BVI 100% Business combination not under common control Moka Technology (Guangdong) Co., Ltd. Huizhou Manufacturin g and sale Huizhou 100% Business combination not under common control Note: Tianjin Zhonghuan Semiconductor Co., Ltd. changed its name to TCLZhonghuan New Energy Technology Co., Ltd. on June 16,2022. (2) Subsidiaries with substantial non-controlling interests Name of subsidiary Non-controlling shareholding ratio (%) Current period profit or loss attributable to non-controlling interests Current period Dividends distributed to non-controlling interests Ending non-controlling interests Shareholder equity TCLChina Star Optoelectronics Technology Co., Ltd. 16.32% (1,129,675) 1,884,536 43,910,595 TCLZhonghuan New Energy Technology Co., Ltd.70.20% 2,369,069 249,235 34,653,477 Highly Information Industry Co., Ltd.33.54% 46,201 43,309 498,822 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 124 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 30,2022 January 1,2022 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities TCLChina Star Optoelectronics Technology Co., Ltd. 74,854,571 143,813,111218,667,681 72,396,36270,754,153143,150,515 68,597,560 135,290,612 203,888,172 53,275,700 66,065,421 119,341,121 TCLZhonghuan New Energy Technology Co., Ltd. 26,226,595 62,488,239 88,714,834 21,492,022 22,413,742 43,905,764 24,458,844 53,758,790 78,217,634 20,443,660 15,865,920 36,309,580 Highly Information Industry Co., Ltd. 8,117,943 110,883 8,228,826 6,870,890 20,764 6,891,654 6,035,827 100,060 6,135,887 4,782,662 22,603 4,805,265 January - June 2022 January - June 2021 Revenue Net profit Total comprehensive income Net cash generate from/used in operating activities Revenue Net profit Total comprehensive income Net cash generate from/used in operating activities TCLChina Star Optoelectronics Technology Co., Ltd. 32,429,876 (2,631,952) (2,880,645) 10,250,591 38,948,799 6,293,405 6,285,562 14,481,000 TCLZhonghuan New Energy Technology Co., Ltd. 31,698,337 3,224,900 3,224,900 2,809,898 17,644,419 1,915,184 1,915,184 2,125,294 Highly Information Industry Co., Ltd. 14,728,215 118,259 118,259 (574,296) 14,450,787 125,103 125,103 (437,244) TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 125 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 registration Nature of business Strategic to the Group’s activities or not Shareholding ratio (%) Direct Indirect Associate Bank of Shanghai Co., Ltd. Shanghai Financial industry Yes 5.76% - Xinjiang Xiexin New Energy Material Technology Co., Ltd. (note) Xinjiang R&D, production & sales of polycrystalline silicon & monocrystalline silicon; Yes - 27% (2) Key financial information of major associates June 30,2022 December 31,2021 Bank of Shanghai Co., Ltd. Xinjiang Xiexin New Energy Material Technology Co., Ltd. Bank of Shanghai Co., Ltd. Xinjiang Xiexin New Energy Material Technology Co., Ltd. Total assets 2,814,652,57815,097,306 2,653,198,67911,377,813 Total liabilities 2,602,477,6964,994,938 2,447,430,2345,110,841 Non-controlling interests 577,340 Not applicable 564,813 Not applicable Equity attributable to shareholders of the Company as the parent 211,597,54210,102,368 205,203,6326,266,973 Share of equity in proportion to the Company’s interest 12,188,0182,727,639 11,813,8951,692,083 Carrying amount of investment in associate 12,326,3792,731,300 11,919,7961,691,361 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 126 VIIInterests in Other Entities (Continued) 2 Interests in joint ventures and associates (2) Key financial information of major associates (continued) January - June 2022 January - June 2021 Bank of Shanghai Co., Ltd. Xinjiang Xiexin New Energy Material Technology Co., Ltd. Bank of Shanghai Co., Ltd. Xinjiang Xiexin New Energy Material Technology Co., Ltd. Revenue 27,941,6626,649,119 27,704,5562,905,071 Net profit attributable to the parent company 12,674,3063,835,377 12,278,1021,322,643 Dividends from associate to the Group in current period 327,157 - 327,157 - (3) Financial information of other joint ventures and associates combined respectively End of June 2022/January-June 2022 End of June 2021/January-June 2021 Joint ventures: Aggregated carrying amount of investments 542,914 555,257 Aggregate of following items calculated in proportion to the Company’s interest Net profit (note) (12,343) (2,895) Other comprehensive income (note) Total comprehensive income (12,343) (2,895) Associate: Aggregated carrying amount of investments 11,064,477 11,474,164 Aggregate of following items calculated in proportion to the Company’s interest Net profit (note) (13,791) 320,124 Other comprehensive income (note) 366 (16) Total comprehensive income (13,425) 320,108 Note: The net profit and other comprehensive income have taken into account the impacts of both the fair value of the identifiable assets and liabilities upon the acquisition of investment and accounting policies unifying. (4) The Company had no significant joint ventures in the reporting period. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 127 VIII Risks Related to Financial Instruments The purpose of the Company’s risk management is to achieve a right balance between the risk and the benefit and maximally reduce the adverse impact of financial risks on the Company’s financial performance. Based on such purpose, the Company has established various risk management policies to recognize and analyze possible risks to be encountered by the Company, set an appropriate risk acceptable level and designed corresponding internal control procedures so as to control the Company’s risk level. In addition, the Company will regularly review these risk management policies and relevant internal control system in order to adapt to the market or handle various changes in the Company’s operating activities. Meanwhile, the Company’s internal audit department will also regularly or randomly check whether the implementation of internal control system conforms to relevant risk management policies. In fact, the Company has applied proper diversified investment and business portfolio to disperse various financial instrument risks and worked out corresponding risk management policies to reduce the risk of concentrating on one single industry, specific region or specific counterpart. 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, bills receivable, account receivable, issued loan and monies advanced and other receivables. The Group’s bank deposits and due from central bank are mainly deposited in stated-owned banks and other large and medium-sized listed banks. The Group considers no significant credit risk existed and no significant loss will be caused by the counterpart’s breach of contract. For notes receivable, accounts receivable, loans and advances to customers and other receivables, the Group has established relevant policies to control the credit risk exposure, and will evaluate the client’s credit qualification and determine corresponding credit period based on the client’s financial status, the possibility of obtaining guarantees from the third party, relevant credit records and other factors (like the current market situation). In the meantime, the Group will regularly monitor the client's credit records. For any client with unfavorable credit records, the Group will issue written reminders, shorten the credit period or cancel the credit period so as to keep the Group's overall credit risk controllable. As of June 30,2022, 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 headquarters shall firstly summarize predictions on the cash flow of various subsidiaries and then continuously monitor the short-term and long-term fund demand at the Group's level so as to maintain sufficient cash reserves and negotiable securities that can be realized at any time; meanwhile, special 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 30,2022, the Group had no liquidity risk events. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 128 VIII Risks Related to Financial Instruments (Continued) (3) Market risk (a) Foreign exchange risk The Group has carried out various economic activities around the world including manufacturing, selling, investment and financing etc., and corresponding interest rate fluctuation risks exist in the Group’s foreign currency assets and liabilities and future foreign currency transactions. The Group always regards "Locking the Cost and Avoiding Possible Risks" as the foreign currency risk management goal. Through the natural hedging of settlement currency, matching with the foreign currency liabilities, signing simple derivative products closely related to the owner's operation and meeting corresponding hedge accounting treatment requirements and applying other management methods, the foreign currency risk exposure can be controlled within a reasonable scope and the impact of interest rate fluctuations on the Group's overall profit and loss will be reduced. (A) On June 30,2022, 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 USD341,208 thousand, equivalent to RMB2,289,981 thousand based on the spot exchange rate on the balance sheet date. The differences arising from the translation of foreign currency financial statements were not included. The Group applies the following exchange rate of USD against RMB: Average exchange rate Exchange rate at period-end January - June 2022 June 30,2022 USD/RMB 6.5058 6.7114 Assuming that other risk variables other than exchange rate remain unchanged, a 5% depreciation/appreciation of Renminbi due to the Group’s exchange rate change of Renminbi against the U.S. dollar on June 30,2022 will result in an increase/decrease of both shareholders’ equity and net profit by RMB114,499 thousand. 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 30,2022, the Group’s liabilities with floating interest rates accounted for 74.50% 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 129 IX. Classification of Financial Instruments and Fair Value Fair value of financial instruments and levels 1 Fair value is divided into the following levels in measurement and disclosure: Level 1 refers to the (unadjusted) quotation of the same type of assets or liabilities on the active market; and the Company mainly adopts the closing price as the value of a financial asset. Financial instruments of level 1 mainly include exchange listed stocks and bonds. Level 2 refers to the directly or indirectly observable input of a financial asset or liability that does not belong to level 1. Level 3 refers to the input of a financial asset or liability determined based on variables other than the observable market data (non-observable input). 2 Basis for determining the market value of items measured at continuous level 1 fair value The Company adopts the active market quotation as the fair value of a level 1 financial asset. 3 Items measured at continuous level 2 fair value adopt the following valuation techniques and parameters: The Company’s receivables financing was bank acceptance notes and trade acceptance notes, of which the market prices were determined based on the transfer or discounted amounts. Derivative financial assets and liabilities are multiple IRS and CCS signed between the Group and financial institutions. The Company adopts the 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 130 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 Total Held-for-trading financial assets (see Note V.2) 321,814 8,585,498 67,701 8,975,013 Derivative financial assets (see Note V.3) - 488,428 - 488,428 Receivables financing (see Note V.6) - 2,223,849 - 2,223,849 Investments in other equity instruments (see Note V.15) 88,092 - 839,444 927,536 Other non-current financial assets (see Note V.16) 617,486 - 511,125 1,128,611 Total assets continuously measured at fair value 1,027,392 11,297,775 1,418,270 13,743,437 Financial liabilities Item Level 1 Level 2 Level 3 Total Held-for-trading financial liabilities (see Note V,30) 140,276 666,142 183,385 989,803 Derivative financial liabilities (see Note V,31) - 430,997 - 430,997 Total liabilities continuously measured at fair value 140,276 1,097,139 183,385 1,420,800 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 131 X Related 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 1,159,085,000 shares in total and becoming the largest shareholder of the Company. As per Article 217 of the Company Law, a controlling shareholder refers to a shareholder who owns over 50% of a limited liability company’s total capital or over 50% of a joint stock company’s total share capital; or, despite the ownership of less than 50% of a limited liability company’s total capital or less than 50% of a joint stock company’s total number of shares, who can still prevail in the resolution of a meeting of shareholders or a general meeting of shareholders according to the voting rights corresponding to 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 Company Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. Associate Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. Associate SunPower Systems International Limited Associate Shenzhen Jucai Supply Chain Technology Co., Ltd. Associate Shenzhen Tixiang Business Management Technology Co., Ltd. Associate Tianjin 712 Communication & Broadcasting Co., Ltd. Associate Xinjiang Xiexin New Energy Material Technology Co., Ltd. Associate Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. Associate Inner Mongolia Shengou Electromechanical Engineering Co.. Ltd. Associate Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. Associate Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) Associate Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) Associate Inner Mongolia Huanye Material Co., Ltd. Associate Zhonghuan Aineng (Beijing) Technology Co., Ltd. Associate LGElectronics (Huizhou) Co., Ltd. Associate TCLIntelligent Technology (Ningbo) Co., Ltd. Associate Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. Associate TCLFinance (Hong Kong) Co., Limited Associate Huizhou TCLHuman Resources Service Co., Ltd. Joint venture Huaxia CPV (Inner Mongolia) Power Co., Ltd. Joint venture Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) Joint venture Zhonghuan Feilang (Tianjin) Technology Co., Ltd. Joint venture Tianjin Huanyan Technology Co., Ltd. Joint venture SunPower Systems Sar Associate’s subsidiary TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 132 X Related parties and related-party transactions (continued) 2 The nature of related parties without control relationship (continued) Qihang International Import & Export Limited Associate’s subsidiary Qihang Import&Export Limited Associate’s subsidiary Jucai Supply Chain International (Hong Kong) Co., Ltd. Associate’s subsidiary Shanghai Tixiang Enterprise Management Consulting Co., Ltd. Associate’s subsidiary Shenzhen Xirang International Network Information Technology Co., Ltd. Associate’s subsidiary Elite Excellent Investments Limited Associate’s subsidiary Huixing Holdings Limited Associate’s subsidiary Marvel Paradise Limited Associate’s subsidiary Union Dynamic Investment Limited Associate’s subsidiary Esteem Venture Investment Limited Associate’s subsidiary Zijinshan Investment Co., Ltd. Associate’s subsidiary Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. Associate’s subsidiary SunPower Malaysia Manufacturing Sdn.Bhd. Associate's subsidiary SunPower Systems Sarl Associate's subsidiary TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. Joint venture’s subsidiary Moxing Semi-conductor (Guangdong) Co., Ltd. Joint venture’s subsidiary Jiangsu Huanxin Semiconductor Co.. Ltd. Joint venture’s subsidiary Anhui TCLHuman Resources Service Co., Ltd. Joint venture’s subsidiary Shanxi Shengwei Enterprise Management Co., Ltd. Joint venture’s subsidiary Peer College Education Technology (Huizhou) Co., Ltd. Joint venture’s subsidiary Hubei Shifen Sharing Technology Co., Ltd. Joint venture’s subsidiary Moxun Semiconductor Technology (Shanghai) Co., Ltd. Joint venture’s subsidiary TCl Environmental Technology Co., Ltd. and its subsidiaries Associate and its subsidiaries Getech Ltd. and its subsidiaries Associate and its subsidiaries TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries Associate and its subsidiaries TCLIndustries Holdings Co., Ltd. and its subsidiaries Other relationships CJSpeedex Logistics Co., Ltd. Significantly influenced by the Company’s senior management TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 133 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 2022 January - June 2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 5,156,979 9,060,288 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 1,176,332 360,585 SunPower Systems Sar 1,031,484 642,868 Qihang International Import & Export Limited 497,015 130,212 SunPower Malaysia Manufacturing Sdn.Bhd. 171,070 - SunPower Systems International Limited 106,752 2,511 TCl Environmental Technology Co., Ltd. and its subsidiaries 59,645 85,317 Jiangsu Huanxin Semiconductor Co.. Ltd. 19,542 885 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 16,015 3,594 Getech Ltd. and its subsidiaries 4,704 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 4,680 - Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 2,940 - Shenzhen Jucai Supply Chain Technology Co., Ltd. 688 791 Moxing Semi-conductor (Guangdong) Co., Ltd. 44 - Qihang Import&Export Limited - 5,755 Shenzhen Tixiang Business Management Technology Co., Ltd. - 17 Tianjin 712 Communication & Broadcasting Co., Ltd. - 661 CJSpeedex Logistics Co., Ltd. - - 8,247,890 10,293,484 (2) Purchasing raw materials and finished products from related parties Note 2 January - June 2022 January - June 2021 Xinjiang Xiexin New Energy Material Technology Co., Ltd. 2,464,489 1,078,653 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 2,230,372 1,333,171 Shenzhen Jucai Supply Chain Technology Co., Ltd. 607,566 375,137 TCLIndustries Holdings Co., Ltd. and its subsidiaries 438,112 815,005 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 154,854 120 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 89,991 50,755 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 70,157 110,776 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 32,406 3,635 Getech Ltd. and its subsidiaries 12,062 - Qihang Import&Export Limited 15,776 - TCl Environmental Technology Co., Ltd. and its subsidiaries 2,308 23,155 TCLIntelligent Technology (Ningbo) Co., Ltd. 861 977 Jucai Supply Chain International (Hong Kong) Co., Ltd. 1,126 - 6,120,080 3,791,384 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 134 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (3) Receiving funding from related parties Note 3 January - June 2022 January - June 2021 Shenzhen Jucai Supply Chain Technology Co., Ltd. 149,714 115,342 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 56,146 86,875 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 52,452 16,528 Qihang Import&Export Limited 36,860 44,641 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 27,985 192,068 Qihang International Import & Export Limited 19,047 28,453 Shanghai Tixiang Enterprise Management Consulting Co., Ltd. 10,904 - Shenzhen Xirang International Network Information Technology Co., Ltd. 6,516 6,155 Anhui TCLHuman Resources Service Co., Ltd. 6,148 5,916 Elite Excellent Investments Limited 5,412 1,989 Shanxi Shengwei Enterprise Management Co., Ltd. 3,808 - Peer College Education Technology (Huizhou) Co., Ltd. 3,744 - Shenzhen Tixiang Business Management Technology Co., Ltd. 1,494 1,724 Huixing Holdings Limited 670 674 Marvel Paradise Limited 600 586 Union Dynamic Investment Limited 397 392 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 205 236 Huizhou TCLHuman Resources Service Co., Ltd. 158 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 93 400,000 Hubei Shifen Sharing Technology Co., Ltd. 85 - Esteem Venture Investment Limited 40 49 Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 33 257,053 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 8 - TCLFinance (Hong Kong) Co., Limited - 1,369,249 TCLIndustries Holdings Co., Ltd. and its subsidiaries - 100 382,519 2,528,030 (4) Providing funding for related parties Note 3 January - June 2022 January - June 2021 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 531,312 1,279,116 TCLIndustries Holdings Co., Ltd. and its subsidiaries 372,247 1,170,000 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 39,488 - Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 12,689 - TCLIntelligent Technology (Ningbo) Co., Ltd. - 682,500 TCl Environmental Technology Co., Ltd. and its subsidiaries - 2,438 955,736 3,134,054 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 135 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (5) Leases January - June 2022 January - June 2021 Rental income TCLIndustries Holdings Co., Ltd. and its subsidiaries 38,683 45,434 Asahi Glass New Electronic Display Glass (Shenzhen) Co., Ltd. 34,756 41,998 Getech Ltd. and its subsidiaries 683 241 TCl Environmental Technology Co., Ltd. and its subsidiaries 534 531 Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 439 - Shenzhen Jucai Supply Chain Technology Co., Ltd. 414 402 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 182 - TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 834 Huizhou TCLReal Estate Development Co., Ltd. - 241 75,691 89,681 Rental expense TCLIndustries Holdings Co., Ltd. and its subsidiaries 28,999 29,908 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 2,581 478 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 1,120 291 Shenzhen Jucai Supply Chain Technology Co., Ltd. 137 - 32,837 30,677 (6) Providing labour service for or accepting labour service from related parties January - June 2022 January - June 2021 Providing labour service for related parties 120,933 90,804 Accepting labour service from related parties 567,820 335,790 (7) Receiving interest from or paying interest to related parties Note 3 January - June 2022 January – June 2021 Interest received 11,457 45,475 Interest paid 8,387 10,157 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 136 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) (8) Remuneration of key management personnel January - June 2022 January - June 2021 Remuneration of key management personnel 7,460 7,710 (9) Other related transactions In June 2022, the Group signed a property share transfer agreement with TCLIndustrial Holdings Co., Ltd. to transfer all the property shares held by the Group in Chongqing Zhongxin Rongxin Investment Center (Limited Partnership) to TCLIndustrial Holdings Co., Ltd., with the transaction price of RMB960 million. 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. 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 TCLTechnology Group 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 The transactions between Maojia International Co., Ltd. and its subsidiaries and the Company from January to March 2021 are included in TCLIndustrial Holdings Co., Ltd. and its subsidiaries. Note 5 The transactions between TCLFinancial Holding (Guangzhou) Group Co., Ltd. and its subsidiaries and the Company in June 2021 are included in TCLIndustrial Holdings Co., Ltd. and its subsidiaries. Note 6 The transaction between TCLHuanxin Semiconductor (Tianjin) Co., Ltd. and the Company in June 2021 is a related-party transaction. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 137 XRelated Parties and Related-Party Transactions (Continued) 3 Major related-party transactions (continued) 4 Balances due from and to related parties (continued) (1) Notes receivable June 30,2022 December 31,2021 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. - 13,441 - 13,441 (2) Accounts receivable June 30,2022 December 31,2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 2,715,368 2,230,056 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 1,027,582 276,090 SunPower Systems Sarl 495,948 281,163 Qihang International Import & Export Limited 413,892 235,474 SunPower Systems International Limited 53,704 119,817 Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 7,199 199 Jiangsu Huanxin Semiconductor Co., Ltd. 6,385 - TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 3,161 24,710 Inner Mongolia Huanye Material Co., Ltd. 2,695 - Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 1,860 - Zhonghuan Feilang (Tianjin) Technology Co., Ltd. 1,816 1,569 TCl Environmental Technology Co., Ltd. and its subsidiaries 1,608 - Shenzhen Jucai Supply Chain Technology Co., Ltd. 816 - Getech Ltd. and its subsidiaries 800 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 608 - Tianjin Huanyan Technology Co., Ltd. 162 - Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 157 - Tianjin 712 Communication & Broadcasting Co., Ltd. 23 40 SunPower Malaysia Manufacturing Sdn.Bhd. 20 2,183 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 15 1 4,733,819 3,171,302 (3) Receivables financing June 30,2022 December 31,2021 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. - 500 - 500 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 138 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (4) Accounts payable June 30,2022 December 31,2021 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 537,889 552,883 TCLIndustries Holdings Co., Ltd. and its subsidiaries 298,110 448,553 Shenzhen Jucai Supply Chain Technology Co., Ltd. 274,170 274,366 Getech Ltd. and its subsidiaries 39,242 10,762 Inner Mongolia Shengou Electromechanical Engineering Co.. Ltd. 29,754 30,029 TCl Environmental Technology Co., Ltd. and its subsidiaries 24,454 24,033 Qihang International Import & Export Limited 12,416 - Inner Mongolia Huanye Material Co., Ltd. 11,725 1,457 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 9,795 2,240 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 2,901 - Jucai Supply Chain International (Hong Kong) Co., Ltd. 2,324 6,503 Qihang Import&Export Limited 2,179 - Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 884 5,246 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 392 - Peer College Education Technology (Huizhou) Co., Ltd. - 38 Shenzhen Xirang International Network Information Technology Co., Ltd. - 1,195 1,246,235 1,357,305 (5) Other receivables June 30,2022 December 31,2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 576,979 1,390,733 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 12,696 - TCl Environmental Technology Co., Ltd. and its subsidiaries 9,566 2,139 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 7,987 - Getech Ltd. and its subsidiaries 2,198 404 Inner Mongolia Huanye Material Co., Ltd. 3,310 - Shenzhen Xirang International Network Information Technology Co., Ltd. 3,171 1,185 Zhonghuan Aineng (Beijing) Technology Co., Ltd. 3,099 3,099 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 2,133 663 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 214 524 LGElectronics (Huizhou) Co., Ltd. 153 109 Jiangsu Huanxin Semiconductor Co.. Ltd. 122 - Inner Mongolia Shengou Electromechanical Engineering Co.. Ltd. 100 64 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 4 - TCLIntelligent Technology (Ningbo) Co., Ltd. - 3,777 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. - 8 Moxing Semi-conductor (Guangdong) Co., Ltd. - 7 621,732 1,402,712 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 139 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (6) Other payables June 30,2022 December 31,2021 Tianjin Zhonghuan Haihe Intelligent Manufacturing Fund Partnership (Limited Partnership) 428,100 428,100 Getech Ltd. and its subsidiaries 146,637 118,911 Shenzhen Jucai Supply Chain Technology Co., Ltd. 115,765 84,988 TCLIndustries Holdings Co., Ltd. and its subsidiaries 78,813 39,554 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 40,703 48,969 Qihang Import&Export Limited 36,861 12,779 Qihang International Import & Export Limited 19,047 3,234 TCl Environmental Technology Co., Ltd. and its subsidiaries 9,647 1,365 Aijiexu New Electronic Display Glass (Shenzhen) Co., Ltd. 9,317 1,330 Anhui TCLHuman Resources Service Co., Ltd. 7,487 6,073 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 5,564 5,316 Elite Excellent Investments Limited 5,412 3,860 Shenzhen Xirang International Network Information Technology Co., Ltd. 3,966 - Shanxi Shengwei Enterprise Management Co., Ltd. 3,814 725 Peer College Education Technology (Huizhou) Co., Ltd. 3,753 3,624 Inner Mongolia Shengou Electromechanical Engineering Co., Ltd. 2,841 - Moxun Semiconductor Technology (Shanghai) Co., Ltd. 2,057 1,000 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 1,685 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 824 245 Huixing Holdings Limited 670 672 Marvel Paradise Limited 600 570 Union Dynamic Investment Limited 397 377 CJSpeedex Logistics Co., Ltd. 202 1,772 Shenzhen Tixiang Business Management Technology Co., Ltd. 197 197 Huizhou TCLHuman Resources Service Co., Ltd. 157 370 Hubei Shifen Sharing Technology Co., Ltd. 85 - Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) 66 33 Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 55 - Huaxia CPV (Inner Mongolia) Power Co., Ltd. 45 45 Esteem Venture Investment Limited 40 41 Xinjiang Xiexin New Energy Material Technology Co., Ltd. - 4 Zijinshan Investment Co., Ltd. - - 924,807 764,154 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 140 X Related Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (7) Current portion of non-current liabilities due within a one-year period June 30,2022 December 31,2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 15,717 6,346 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 4,192 4,648 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 957 957 20,866 11,951 (8) Prepayments June 30,2022 December 31,2021 Getech Ltd. and its subsidiaries 126,354 4,850 Xinjiang Xiexin New Energy Material Technology Co., Ltd. 120,347 74,672 Tianjin Huanyan Technology Co., Ltd. 39,113 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 16,790 - Inner Mongolia Zhongjing Science and Technology Research Institute Co., Ltd. 12,046 - Shenzhen Jucai Supply Chain Technology Co., Ltd. 98 TCLIndustries Holdings Co., Ltd. and its subsidiaries 775 40 Shenzhen Xirang International Network Information Technology Co., Ltd. 550 - TCLIntelligent Technology(Ningbo) Co., Ltd. - - 316,073 79,562 (9) Contract liabilities June 30,2022 December 31,2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 5,955 10,633 TCl Environmental Technology Co., Ltd. and its subsidiaries 3,124 2,885 Moxun Semiconductor Technology (Shanghai) Co., Ltd. 1,000 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. - 111 10,079 13,629 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 141 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (10) Lease liabilities June 30,2022 December 31,2021 TCLIndustries Holdings Co., Ltd. and its subsidiaries 8,329 6,576 Huaxia CPV (Inner Mongolia) Power Co., Ltd. 3,741 6,242 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 275 275 12,346 13,093 (11) Deposits from related parties (note) June 30,2022 December 31,2021 Shenzhen Jucai Supply Chain Technology Co., Ltd. 149,769 101,181 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 52,464 25,040 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 27,996 45,018 Ningbo Dongpeng Weichuang Equity Investment Partnership (Limited Partnership) 15,693 114,413 Shanghai Tixiang Enterprise Management Consulting Co., Ltd. 10,910 4,940 Shenzhen Xirang International Network Information Technology Co., Ltd. 6,519 7,559 Shenzhen Tixiang Business Management Technology Co., Ltd. 1,495 7,873 Anhui TCLHuman Resources Service Co., Ltd. 579 - TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 205 46 Zhihui Xinyuan Commercial (Huizhou) Co., Ltd. 93 185 TCLHuanxin Semi-conductor (Tianjin) Co., Ltd. 8 229,154 Jiangsu Huanxin Semiconductor Co.. Ltd. - 109,395 TCLFinance (Hong Kong) Co., Limited - 21,241 265,731 666,045 These deposits are made by related parties in the Company’s subsidiary TCLTechnology Group Finance Co., Ltd. (12) Other current assets June 30,2022 December 31,2021 TCLAir Conditioner (Wuhan) Co., Ltd. and its subsidiaries 531,312 - TCLIndustries Holdings Co., Ltd. and its subsidiaries 372,247 - Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd. 39,539 - 943,098 - TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 142 XRelated Parties and Related-Party Transactions (Continued) 4 Balances due from and to related parties (continued) (13) Other non-current assets June 30,2022 December 31,2021 Ziteng Intellectual Property Operation (Shenzhen) Co., Ltd. 233,582 - Getech Ltd. and its subsidiaries 22,004 - 257,824 - TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 143 XI Commitments 1 Capital commitments June 30,2022 December 31,2021 Under contractual obligations but not provided for Note 128,235,439 17,764,772 Approved by Board but not under contractual obligations Note 210,346 172,384 28,245,785 17,937,156 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 30,2022, apart from the disclosures above, there were no other major commitments that are required to be disclosed. XII Contingencies Guarantees Provided for External Parties External guarantees provided for related party bank loans, commercial bills, letters of credit, etc.: RMB6,185,884 thousand. XIII Events after Balance Sheet Date 1 The Company issued a medium-term note on July 4,2022 with the code 22TCLGroup MTN003 (Science and Technology Notes). The issue size was RMB2 billion, the value date is July 6,2022, with the maturity date being 4 July,2025. The term is 3 years, and the coupon rate is 3.45%. 2 In July 2022, the Company received 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, which approved the Company's non-public issue of no more than 2,806,128,484 shares. If the total share capital changed due to new shares, conversion to share capital, etc., the number of shares offered in the issue would be adjusted accordingly, and the approval would be valid within 12 months from the date of issuance. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 144 XIV Other Important Matters (I) Discontinued operations In May 2021, the Company's second extraordinary general meeting reviewed and approved the proposal to sell 100% equity of TCLFinancial Holding (Guangzhou) Group Co., Ltd.: to sell 100% of the Company's equity to TCLIndustrial Holdings Co., Ltd. at RMB2,572,020 thousand. The Company completed the closing at the end of May. January - June 2022 January - June 2021 Revenue from discontinued operations - 168,312 Gross profit of discontinued operations - 63,259 Income tax expense of discontinued operations - 15,502 Net profit of discontinued operations - 47,757 Add: Net gain/loss on disposal of discontinued operations - 10,539 Total net profit of discontinued operations - 58,296 (II) Segment reporting 1 Basis for determining reporting segment and accounting policies According to the Company’s internal organizational structure, management requirements and internal reporting system, the Company’s business is divided into 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, investment income, 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 145 XIVOther Important Matters (Continued) (II) Segment reporting (continued) 2 Financial information of reporting segments For the six-month period ending June 30,2022 Semi-conductor display New energy photovoltaics and semi-conductor materials business Distribution business Other and offsets Total Revenue 37,262,162 31,698,337 14,728,215 833,46784,522,181 Gross profit (2,750,561) 3,480,014 165,175 943,690 1,838,318 Income tax expense (477,736) 255,114 46,916 87,308 (88,398) Net profit (2,272,825) 3,224,900 118,259 856,382 1,926,716 Total assets 222,752,118 88,714,834 8,228,826 10,660,749 330,356,527 Total liabilities 145,828,388 43,905,764 6,891,654 14,592,438 211,218,244 Other items Depreciation and amortization 7,868,657 1,982,213 15,991 1,555,938 11,422,798 Capital expenditure 13,126,031 4,963,363 - 162,24218,251,636 Net interest expense 424,130 384,456 33,041 839,9161,681,543 For the six-month period ending June 30,2021 Semi-conductor display and materials business New energy photovoltaics and semi-conductor materials business Distribution business Other and offsets Total Revenue 40,863,497 17,644,419 14,450,787 1,447,146 74,405,849 Gross profit 7,676,130 2,135,060 167,885 734,909 10,713,982 Income tax expense 1,049,844 219,876 42,782 103,995 1,416,497 Net profit 6,626,286 1,915,184 125,103 630,914 9,297,485 Total assets 199,819,530 66,067,765 5,377,523 30,986,182 302,251,000 Total liabilities 112,805,489 36,283,034 4,193,839 43,677,696 196,960,058 Other items Depreciation and amortization 6,926,888 1,411,961 8,121 99,878 8,446,848 Capital expenditure 10,616,137 3,036,386 - 31,508 13,684,031 Net interest expense 668,046 382,859 23,015 837,3981,911,318 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 146 XV Notes to the key items presented in the financial statements of the Company 1 Accounts receivable June 30,2022 December 31,2021 Amount Ratio (%) Allowance Accrual Ratio (%) Amount Ratio (%) Allowance Percentage Within 1 year 137,256 100% 338 0.25% 93,929 100% 363 0.39% 2 Other receivables June 30,2022 December 31,2021 Dividends receivable 9,618,555 - Other receivables 20,249,449 13,819,512 29,868,004 13,819,512 (a) Nature of other receivables is analyzed as follows: June 30,2022 December 31,2021 Equity transfer receivables 471,010 1,260,290 Receivables from external entities 104,104 107,708 Security deposits 1,840 1,407 Others 19,672,495 12,450,107 20,249,449 13,819,512 (b) Allowance for doubtful other receivables is analyzed as follows: 12-month ECL Lifetime ECL (credit not impaired) Lifetime ECL (credit impaired) Total December 31,2021962 - 31,966 32,928 Accrued in current period - - - - Reversal of current period - - (2) (2) Write-off of current period - - June 30,2022962 - 31,964 32,926 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 147 XVNotes to Financial Statements of the Parent Company (Continued) 2 Other receivables (continued) (c) The aging of other receivables is analyzed as follows: June 30,2022 December 31,2021 Amount Ratio (%) Amount Ratio (%) Within 1 year 19,225,308 94.80% 12,536,263 90.50% 1 to 2 years 31,167 0.15% 363,773 2.63% 2 to 3 years 651,701 3.21% 587,773 4.24% Over 3 years 374,199 1.84% 364,631 2.63% 20,282,375 100% 13,852,440 100% The outstanding other receivables were mostly current accounts with related parties. The top five other receivables of the Company amounted to approximately RMB18,121,026 thousand (At the end of 2021: RMB12,357,035 thousand), accounting for 89.34% of the total other receivables of the Company (At the end of 2021: 89.20%). 3 Long-term equity investments June 30,2022 December 31,2021 Gross amount Allowance for doubtful accounts Carrying amount Gross amount Impairment allowance Carrying amount Associates and joint ventures (1) 15,148,219 - 15,148,219 14,968,764 - 14,968,764 Subsidiaries (2) 58,418,945 - 58,418,945 56,334,362 - 56,334,362 73,567,164 - 73,567,164 71,303,126 - 71,303,126 As of June 30,2022, 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 1,2022 to June 30,2022 ___________(RMB’000)_____________ 148 XVNotes 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 30,2022 Beginning amount Increase/decrease in investment in current period Investment gains and losses recognized by equity method Other comprehensive income adjustment Other equity changes Declared cash dividends or profits Impairment allowance Other increases and decreases Bank of Shanghai Co., Ltd.11,919,796 - 729,672 4,068 - (327,157) - - 12,326,379 China Innovative Capital Management Limited 1,063,219 - (74,814) - - - - - 988,405 LGElectronics (Huizhou) Co., Ltd.92,079 - 5,763 - - (13,000) - - 84,842 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd.36,160 - (1,405) - - - - - 34,755 Shenzhen Tixiang Business Management Technology Co., Ltd.3,620 - (1,823) - - - - - 1,797 Shenzhen Jucai Supply Chain Technology Co., Ltd.10,706 - 2,311 - - - - - 13,017 TCLEnvironmental Technology Co., Ltd.122,391 - 3,539 - - - - - 125,930 Guangdong Innovative Lingyue Intelligent Manufacturing and Information Technology Industry Equity Investment Fund Partnership (Limited Partnership) 372,976 - (5,792) - - - - - 367,184 Guangdong Utrust Emerging Industry Equity Investment Fund Partnership (Limited Partnership) 151,026 (279) 13,636 - - - - - 164,383 Huizhou TCLHuman Resources Service Co., Ltd.3,296 - 3,030 - - - - - 6,326 TCLMicrochip Technology (Guangdong) Co., Ltd.313,434 - (14,358) - - - - - 299,076 Shenzhen Qianhai Sailing International Supply Chain Management Co., Ltd.49,964 - 3,020 - - - - - 52,984 Hubei Consumer Finance Co., Ltd.168,654 - 6,091 - - - - (14,174) 160,571 Tianjin 712 Communication & Broadcasting Co., Ltd.661,443 (88,084) 21,332 - - (7,777) - (64,343) 522,570 14,968,764 (88,363) 690,202 4,068 (347,934) (78,517) 15,148,219 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 149 XVNotes to Financial Statements of the Parent Company (Continued) 3 Long-term equity investments (continued) (2) Subsidiaries Direct shareholding Ratio (%) Beginning amount Increase in current period Decrease in current period June 30, 2022 TCLChina Star Optoelectronics Technology Co., Ltd.83.68% 32,700,898 268,400 - 32,969,298 TCLTechnology Group Finance Co., Ltd.82% 1,256,003 - - 1,256,003 TCLTechnology Group (Tianjin) Co., Ltd.100% 15,000,000 - - - 15,000,000 TCLZhonghuan New Energy Technology Co., Ltd.2.41% 1,752,635 - - - 1,752,635 Wuhan China Star Optoelectronics Technology Co., Ltd. - - - - - - TCLCulture Media (Shenzhen) Co., Ltd.100% 361,414 - - - 361,414 Xinjiang TCLEquity Investment Ltd.100% 200,000 - - - 200,000 Huizhou Sailuote Communication Co., Ltd.100% 110,000 - - - 110,000 Highly Information Industry Co., Ltd.66.46% 107,296 - - - 107,296 TCLCommunication Equipment (Huizhou) Co., Ltd.75.00% 79,500 - - - 79,500 TCLMedical Radiological Technology (Beijing) Co., Ltd.100% 58,497 - - - 58,497 Shenzhen TCLStrategic Equity Investment Fund Partnership (Limited Partnership) 100% 70,826 183 - 71,009 TCLIndustrial Technology Research Institute, Ltd. (Europe) 100% 20,000 - - - 20,000 Wuhan TCLIndustrial Technology Research Institute, Ltd. 100% 20,000 - - - 20,000 Shenzhen TCLHigh-Tech Development Co., Ltd.100% 20,000 - - - 20,000 Beijing HAWKCloud Information Technology Co., Ltd.100% 20,000 - - - 20,000 Huizhou Hongsheng Science and Technology Development Co., Ltd.100% 1,000 - - - 1,000 Beijing Zhiqujia Technology Co., Ltd.100% 257,627 - - - 257,627 Tianjin Silica Material Technology Co., Ltd.100% 1,000,000 1,800,000 - 2,800,000 Xiamen TCLTechnology Industrial Investment Co., Ltd.100% - 1,000 - 1,000 TCLInternet Technology (Shenzhen) Co., Ltd.100% - 15,000 - 15,000 Ningbo TCLEquity Investment Ltd.100% 300,000 - - 300,000 TCLTechnology Investments Limited 100% 2,988,293 - - 2,988,293 Equity incentives of subsidiaries 10,373 - - 10,373 56,334,362 2,084,583 - 58,418,945 For the registered capital of subsidiaries and the Company's equity interests in the subsidiaries, see Note V. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 150 XVNotes to Financial Statements of the Parent Company (Continued) 4 Investments in other equity instruments June 30,2022 December 31,2021 Equity of unlisted companies 5,000 5,000 5 Other non-current financial assets June 30,2022 December 31,2021 Equity investments 126,644 1,051,536 6 Revenue and cost of sales January - June 2022 January - June 2021 Revenue Cost of sales Revenue Cost of sales Core business 339,768 333,523 618,241 606,953 Non-core business 249,803 78,878 155,431 28,602 589,571 412,401 773,672 635,555 7 Return on investment January - June 2022 January - June 2021 Gain on disposal of debt instruments at fair value through profit or loss 140,452 62,402 Profit from holding debt instruments at fair value through profit or loss - 19,419 Debt instruments at amortized cost through profit or loss - 877 Dividends from subsidiaries 9,292,231 378,888 Share of profit of associates for current period 701,530 629,051 Share of profit of joint ventures for current period (11,328) (1,345) Net income from disposal of long-term investments 484,672 761,859 10,607,557 1,851,151 As of June 30,2022, there were no significant restrictions on the collection of return on investment. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 151 XVNotes to Financial Statements of the Parent Company (Continued) 8 Net cash generated from operating activities In the cash flow statement of the Company, the net cash inflow from operating activities was RMB975,555 thousand. 9 Cash and cash equivalents, end of the period The balance of cash and cash equivalents of the Company at the end of the period was RMB14,738,040 thousand. 10 Contingent liabilities As of June 30,2022, the contingent liabilities not provided for in the financial report were as follows: June 30,2022 December 31,2021 Guarantees for trade notes and letters of guarantee of subsidiaries 17,462,870 10,025,125 Guarantees for bank loans of subsidiaries 33,269,665 29,542,641 Guarantees for bank loans, trade notes, letters of credit, etc. of related parties 6,185,884 15,991,207 TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 152 XVI Comparative Data Certain comparative data have been reclassified to comply with the presentation of the current period. XVII Non-Recurring Gains and Losses January - June 2022 January - June 2021 Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) 464,268 739,340 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) 429,923 359,192 Gain equal to the amount by which investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the Company’s fair value of identifiable net assets of investees when making investments; - 40,300 The 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. (11,164) 210,273 Reversal of provision for impairment of receivables that have been individually tested for impairment 10,180 - Non-operating income and expenses other than the above 538,585 244,570 Income tax effects (47,766) (82,886) Non-controlling interests effects (93,634) (224,722) Non-recurring gains and losses attributable to ordinary shareholders of the parent company 1,290,392 1,286,067 The Company recognizes non-recurring gain and loss items in accordance with the provisions of (2008) No.43 Explanatory Announcement No.1-Non-recurring Gains and Losses (2008) issued by the China Securities Regulatory Commission. TCLTechnology Group Corporation Notes to Financial Statements For the period from January 1,2022 to June 30,2022 ___________(RMB’000)_____________ 153 XVIII Weighted Average Return on Equity (ROE) and Earnings per Share (EPS) The Company calculates the ROE and EPS as follows in accordance with the Compilation Rules No.9 for Information Disclosure of Companies Offering Securities to the Public-Calculation and Disclosure of Return on Equity and Earnings per Share (Revised in 2010) issued by China Securities Regulatory Commission and relevant provisions of accounting standards: Item Reporting period Net profit attributable to the parent Company for the reporting period Weighted average return on equity (%) EPS (RMB yuan) Basic earnings per share Diluted EPS income Net profit attributable to ordinary shareholders of the Company 663,521 1.71% 0.0489 0.0485 Net profit attributable to ordinary shareholders of the Company before non-recurring gains and losses (626,871) (1.62%) (0.0462) (0.0458) Company Name: TCLTechnology Group Corporation Date: August 26,2022 The financial statements and the notes thereto from to are signed by: Legal representative: Li Dongsheng Person-in-charge of financial affairs: Li Jian Person-in-charge of the accounting department: Xi Wenbo

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