TCL集团:2018年年度报告(英文版)

TCL Corporation                    Annual Report 2018
              TCL CORPORATION
           TCL 集团股份有限公司
         ANNUAL REPORT 2018
                   19 March 2019
                               Reform and Transform to Increase Competitiveness and Shareholder Value
                                                   Table of Contents
Part I Important Notes, Table of Contents and Definitions ........................................................... 8
Part II Corporate Information and Key Financial Information ................................................. 11
Part III Business Summary ............................................................................................................. 17
Part IV Directors’ Report ................................................................................................................ 22
Part V Significant Events ................................................................................................................ 56
Part VI Share Changes and Shareholder Information ................................................................. 95
Part VII Directors, Supervisors, Senior Management and Staff ............................................... 105
Part VIII Corporate Governance ................................................................................................. 124
Part IX Corporate Bonds .............................................................................................................. 138
Part X Independent Auditor’s Report and Financial Statements ............................................. 145
                      Reform and Transform to Increase Competitiveness and Shareholder Value
                                       Chairman’s Statement
Dear shareholders, partners and employees,
In 2018, the greater downward pressure on the global and China’s economy, as well as the
slowing-down or even negative market growth posed a tough challenge to the Group’s business
operations. In face of such a complicated and harsh operating environment, TCL followed the set
strategic reform and transformation direction, continued to refine its business structure, and made
great efforts to promote development in all its businesses. As a result, its operating performance
continued to improve. For 2018, the Group recorded operating revenue of RMB113.36 billion, flat
with last year; and a net profit of RMB4.07 billion, of which the net profit attributable to TCL
shareholders amounted to RMB3.47 billion, up by 30.2% over the figure of 2017 (2017-over-2016
growth: 66.3%). Therefore, all the operating objectives set for 2018 have been accomplished. The
operating performance of the past two years has enhanced our determination to move on with the
reform and transformation.
The Group promoted a strategic concentration, increased operational efficiency and
continued to strengthen competitiveness. In 2018, following the reform and transformation
strategy, we further concentrated on our core business, clarified development strategies for all the
major businesses, optimized the organizational structure and flow, increased operational efficiency
and enhanced technological innovation. In the year, the Group divested another 39 non-core
subsidiaries. Its business structure has been adjusted to comprise four business groups, i.e. the
semi-conductor display and material business, the intelligent terminal business, the industrial
finance & investment and venture capital business, as well as the emerging business group, with the
first two being the core. Thanks to better efficiency and competitiveness as a result of reform and
restructuring, the Group’s overall operating performance continued to improve.
Affected by the cyclical downturn of the global industry, the semi-conductor display business has
witnessed, starting from the second quarter of the year, a considerable drop in product prices, a
year-on-year decline in sales revenue and a significantly narrowed gross profit margin. CSOT
maintained full production and sales through various reform and transformation initiatives. The
LTPS plant in Wuhan (the t3 project) reached full capacity in the fourth quarter, and the G11 LCD
                      Reform and Transform to Increase Competitiveness and Shareholder Value
plant in Shenzhen (the t6 project) started production in late 2018. The sales volumes of all the
products registered ongoing growth in the year. Amid a weak industry, CSOT was able to maintain
good profitability by means of promoting cost efficiency, strengthening coordination and improving
technological capability. CSOT not only represented the biggest profit contributor to the Group, but
also posted operating results much better than its peers in the year.
The intelligent terminal business group improved in 2018, turning from a huge deficit in 2017
(primarily caused by the mobile communication terminal business) to a profit of nearly RMB0.3
billion in 2018. To be specific, the color TV business showed a strong growth with a full-year sales
volume (ODM inclusive) of 28.96 million units, ranking second around the world; the home
appliance and smart speaker business registered steady development; and the mobile
communication terminal business recorded a much smaller deficit.
But this is still a low-profit-margin business, with fast product and technology transitions. Except
for a competitive scale for the smart TV business, all the other businesses are of a small scale with
insufficient profitability and driving force. What’s more, the intelligent terminal business and the
semi-conductor display business vary greatly in organizational flow and management logic.
Therefore, in order to concentrate resources for a bigger and stronger semi-conductor display
business, the Group has decided to divest the intelligent terminal business. The newly incorporated
TCL Holdings will acquire this business, together with its assets, liabilities and employees. We
believe that this restructuring will also enable the intelligent terminal business to concentrate on its
core operations, optimize its organizational structure and business flow, as well as increase its
efficiency, economic benefits and competitiveness.
Having been approved at a general meeting, this major asset restructuring is expected to be
completed soon, including the delivery of assets. After the restructuring, the Group will rely on the
semi-conductor display and material business as its core, and sustain the industrial finance &
investment and venture capital business in addition to other businesses.
The Group’s major operating indicators improved significantly through the strategic
restructuring. According to the 2018 figures for reference, after the restructuring, the Group’s net
profit margin will rise from 3.59% to 7.35%; debt/asset ratio will drop from 68.4% to 64.1% with a
cash amount of RMB4.76 billion received; and number of employees will decrease from 90,000 to
                       Reform and Transform to Increase Competitiveness and Shareholder Value
30,000. Furthermore, the organizational and capital structure, as well as the financial position have
been further improved. Despite a considerable drop in consolidated sales revenue caused by the
restructuring, it is believed that the Group’s sales revenue, operating profit and cash flow will
continue to increase in the coming years as CSOT implements a production ramp-up and the other
businesses expand. In addition, this restructuring has boosted the Group’s financings, which means
that equity financing is no longer needed for the subsequent construction and expansion of CSOT’s
t4 and t6 projects, as well as the construction of its t7 project.
This major asset restructuring is a big change to the Group’s operating philosophy and
organizational flow. The Group has shifted from diversified operations to dedicated operations,
which are considered a more efficient and competitive model with a high return for shareholders in
view of the history of business models around the world.
Looking forward into 2019, there are still many challenges and uncertainties ahead for the global
and China’s economy, but the fittest will survive amid the fiercer competition in the industry. What
comes together with challenges is opportunities. The Chinese government continues to provide
great support for the real economy with multiple such initiatives launched this year, which will help
greatly boost the profit of the domestic manufacturing sector. Meanwhile, the reshuffle of the global
economic landscape will also create new opportunities for Chinese enterprises with competitive
global operations. China has become the center of the global semi-conductor display industry, with
the largest scale, as well as fast growing technological capability and related industries. Despite a
recently slight oversupply on the market, the core application expansion of new technologies will
boost global demand and gradually change the supply-demand condition, which means a larger
space for business development. We have absolute faith in the semi-conductor industry, a key basic
high-tech industry with great potentials that calls for outstanding strength in technology, capital and
management. We are confident that we will be able to achieve ongoing growth amid the
competition in the global industry.
After this restructuring, the Group will become a high-tech conglomerate with a greater
ability of sustainable development. CSOT will deepen its reform and transformation through
optimizing the organizational flow, increasing operational efficiency, enhancing technological
capability and fully strengthening competitiveness. Additionally, it will make efforts to develop new
                      Reform and Transform to Increase Competitiveness and Shareholder Value
display technologies and materials, promote upstream and downstream business expansion, as well
as carry out M&As when opportunities arise for better competitiveness. We are at the forefront of
the global new semi-conductor display industry. Guangdong Juhua, a TCL subsidiary, has been
given the green light to establish the “National Printed and Flexible Display Innovation Center”. In
the field of new display materials, China Ray has undertaken the national “Printed OLED Key
Material Commercialization Demonstration Programme”, with the materials developed being of a
world-leading performance. Meanwhile, the research achievements in relation to QLED materials
have been published on Nature Communications, a top international science magazine, with the
number of QLED patents ranking No. 2 around the world. By the end of 2018, the Group has
accumulatively applied for 9,990 patents through PCT, one of the highest numbers among Chinese
companies. We are determined to establish leading competitive edges in the global semi-conductor
display and material industry.
CSOT is believed to register a considerable rise in sales revenue and a double-digit growth in profit
for 2019, driven by its great operating efficiency, global presence, synergy with other businesses
and the production ramp-up of the t6 project.
The industrial finance & investment and venture capital business will concentrate on providing
asset management and financial services for the development of the core business, as well as on
generating steady and increasing profit. It will also actively expand the supply chain finance
business for higher capital gains. The venture capital business will explore opportunities for
business and technological synergy, as well as entering into new businesses. The investment
business will generate stable earnings for the Group. The profit contributions from this business
group can help offset the impact of cyclical performance swings on the semi-conductor display
sector.
As for the emerging business group, the Group will further refine the business structure by
continuing to divest non-core businesses according to the principle of maximum value for
shareholders. The Group will also enter into other key basic high-tech industries when the timing is
ripe by means of M&A, etc., so as to foster new driving force.
In addition to corporate development, we also pay attention to the protection of shareholder
interests, enhancing shareholder value through various effective measures. The Group will maintain
                       Reform and Transform to Increase Competitiveness and Shareholder Value
a proactive and sound business model, and keep operating risks under control while developing, so
as to maintain ongoing, steady growth. We stick to a policy of stable and increasing dividend to
deliver return to our shareholders, attract value investors, and achieve common long-term
development with our shareholders.
On behalf of the Board of Directors of TCL, I’d like to take this opportunity to express my gratitude
for the trust of all our shareholders, for the support from all our partners and users, as well as for the
hard work of TCL’s management team and staff!
                                                                                                Li Dongsheng
                                                                                                19 March 2019
TCL Corporation                                                 Annual Report 2018
            Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,
supervisors and senior management of TCL Corporation (hereinafter referred to as the
“Company”) hereby guarantee the factuality, accuracy and completeness of the contents of
this Report and its summary, and shall be jointly and severally liable for any
misrepresentations, misleading statements or material omissions therein.
All the Company’s directors have attended the Board meeting for the review of this Report
and its summary.
The Board has approved a final dividend plan for the ordinary shareholders as follows: based
on the share capital of 13,402,888,507 shares on 19 March 2019 that are eligible for profit
distribution (the total share capital of 13,549,648,507 shares minus the 146,760,000 shares in
the Company’s special securities account for repurchase that are not eligible for profit
distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be distributed to the
shareholders, totaling RMB1,340,288,851. The retained earnings of RMB7,628,922,531 will
carry forward for future distribution. Meanwhile, there will be no bonus issue from either
profit or capital reserves for the year under review.
Mr. Li Dongsheng, the Chairman of the Board, Ms. Du Juan, the person-in-charge of
financial affairs (Chief Financial Officer), and Mr. Xi Wenbo, the person-in-charge of the
financial department, hereby guarantee that the financial statements carried in this Report
are factual, accurate and complete.
This Report and its summary have been prepared in both Chinese and English. Should there
be any discrepancies or misunderstandings between the two versions, the Chinese versions
shall prevail.
TCL Corporation                                                                      Annual Report 2018
                                                   Definitions
                       Term                                                         Definition
The “Company”, the “Group”, “TCL”, “TCL   TCL Corporation and its consolidated subsidiaries, except where the context
Corp.” or “we”                                otherwise requires
The “Reporting Period”                         The period from 1 January 2018 to 31 December 2018
TCL Holdings, TCL Industries Holdings            TCL Industries Holdings (Guangdong) Inc.
The “Major Asset Restructuring” or             The major asset restructuring approved at the 13th meeting of the 6th Board of
“Restructuring”                                Directors on 7 December and the First Extraordinary General Meeting of 2019
                                                 on 7 January 2019
TCL Electronics                                  TCL Electronics Holdings Limited, a majority-owned subsidiary of the
                                                 Company listed on the Stock Exchange of Hong Kong (stock code: 01070.HK)
TCL Communication                                TCL Communication Technology Holdings Limited
CSOT                                             Shenzhen China Star Optoelectronics Technology Co., Ltd.
Wuhan CSOT                                       Wuhan China Star Optoelectronics Technology Co., Ltd.
TCL Household Electric Appliance Group           Huizhou TCL Household Electric Appliance Group Co., Ltd.
Tonly Electronics                                Tonly Electronics Holdings Limited, a majority-owned subsidiary of the
                                                 Company listed on the Stock Exchange of Hong Kong (stock code: 01249.HK)
CDOT                                             China     Display    Optoelectronics   Technology     Holdings     Limited,      a
                                                 majority-owned subsidiary of the Company listed on the Stock Exchange of
                                                 Hong Kong (stock code: 00334.HK)
Highly                                           Highly Information Industry Co., Ltd., a majority-owned subsidiary of the
                                                 Company listed on the National Equities Exchange and Quotations (stock code:
                                                 835281)
Guangdong Juhua                                  Guangdong Juhua Printed Display Technology Co., Ltd.
China Ray                                        Guangzhou China Ray Optoelectronic Materials Co., Ltd.
Bank of Shanghai                                 Bank of Shanghai Co., Ltd. (stock code: 601229.SH), with the Company
                                                 holding a 4.99% interest
712 Corp.                                        Tianjin 712 Communication & Broadcasting Co., Ltd. (stock code:
                                                 603712.SH), with the Company holding a 19.07% interest as its second largest
                                                 shareholder
Fantasia                                         Fantasia Holdings Group Co., Limited, a listed company on the Stock
                                                 Exchange of Hong Kong (stock code: 01777.HK), with the Company holding a
                                                 20.08% interest as its second largest shareholder
Admiralty Harbour Capital                        Admiralty Harbour Capital Limited
Environmental Resource                           Huizhou TCL Environmental Resource Co., Ltd.
TCL Corporation                                                      Annual Report 2018
Thunderbird Technology             Shenzhen Thunderbird Network Technology Co.
TCL Culture Media                  TCL Culture Media (Shenzhen) Co., Ltd.
Educational Web                    TCL Educational Web Ltd.
Open Edutainment                   Beijing National Center for Open & Distance Education Co., Ltd.
Tsinghua Unigroup                  Tsinghua Unigroup Co., Ltd.
TCL Industries                     TCL Industries Holdings (HK) Limited
TCL Household Electric Appliance   Huizhou TCL Household Electric Appliance Group Co., Ltd.
Hefei Home Appliances              TCL Home Appliances (HeFei) Co., Ltd.
Cool Friends Technology            Huizhou Cool Friends Network Technology Co., Ltd.
Koyoo Online Service               Koyoo Online Service Co., Ltd.
TCL Technology Park                TCL Technology Park Co., Ltd.
JDH                                JDH Information Tech (Zhuhai) Co., Ltd.
Getech                             Getech Ltd.
t1 project                         The generation 8.5 (or G8.5) TFT-LCD production line of CSOT
t2 project                         The generation 8.5 (or G8.5) TFT-LCD (including oxide semiconductor and
                                   AMOLED) production line of CSOT
t3 project                         The generation 6 (or G6) LTPS LCD/AMOLED panel production line of
                                   CSOT
t4 project                         The generation 6 (or G6) flexible LTPS-AMOLED panel production line of
                                   CSOT
t6 project                         The generation 11 (or G11) new TFT-LCD and AMOLED production line of
                                   CSOT
t7 project                         The generation 11 (or G11) new ultra-high-definition (UHD) TFT-LCD and
                                   AMOLED production line of CSOT
TCL Corporation                                                                            Annual Report 2018
          Part II Corporate Information and Key Financial Information
I Corporate Information
Stock name                         TCL                                      Stock code
Stock     exchange   for   stock
                                   Shenzhen Stock Exchange
listing
Company name in Chinese            TCL 集团股份有限公司
Abbr.                              TCL 集团
Company name in English (if
                                   TCL Corporation
any)
Abbr. (if any)                     TCL Corp.
Legal representative               Li Dongsheng
Registered address                 Block 19, Zhongkai Hi-Tech Development District, Huizhou City, Guangdong Province
Zip code
                                   TCL Technology Building, 17 Huifeng 3rd Road, Zhongkai Hi-Tech Development District, Huizhou
Office address
                                   City, Guangdong Province
Zip code
Company website                    http://www.tcl.com
Email address                      ir@tcl.com
                                         R&F Top 100 in Brand Value
                                         Forbes Top 100 Digital Companies
                                         Top 50 Chinese Global Brand Builders 2018
                                         2017-2018 Consumer Electronics Top 10 Brands from China, 2017-2018 Global TV Brands
                                         Top 15, 2017-2018 Global Top 20 Smart Phones Brand, and 2017-2018 Global Consumer
                                         Electronics Brands Top 50 granted by International Data Group (“IDG”)
                                         No. 8 among the 2017 Guangdong Private Enterprises Top 100 for the excellent operating
                                         performance of 2017
Company honors
                                         CES Asia 2018 Innovation Awards for TCL C6 New Theater TV and TCL Crystal Four-Door
                                         Refrigerator
                                         Listed Company Most Respected by Investors 2017
                                         No. 5 among the 2018 Chinese Electronic Information Enterprises Top 100 unveiled by China
                                         Information Technology Industry Federation
                                         Forbes: World’s Best Employers
                                         Best Board of Directors, Best Board Secretary and Best New Media Operation at the 9th
                                         Tianma Awards
TCL Corporation                                                                                Annual Report 2018
TCL Investor Relations Platform                          TCL on Weibo                                     TCL on WeChat
II Contact Information
                                                                                                 Board Secretary
Name                                                                    Liao Qian
                                                                        19/F, Tower B, TCL Building, Gaoxin South First Road,
Address                                                                 Shenzhen High-Tech Industrial Park, Shenzhen, Guangdong
                                                                        Province, China
Tel.                                                                    0755-3331 1666
Fax                                                                     0755-3331 3819
Email address                                                           ir@tcl.com
III Media for Information Disclosure and Place where this Report Is Lodged
Newspapers      designated     by   the     Company     for Securities Times, China Securities Journal, Shanghai Securities News and
information disclosure                                       Securities Daily
Website designated by CSRC for publication of this
                                                             http://www.cninfo.com.cn
Report
Place where this Report is lodged                            Board Office of TCL Corporation
IV Change to Company Registered Information
Unified social credit code                       91441300195971850Y
Change    to principal activity of the
                                                 N/A
Company since going public (if any)
Every change of controlling shareholder
                                                 No change
since incorporation (if any)
V Other Information
The independent audit firm hired by the Company:
Name                                      Da Hua Certified Public Accountants (Special General Partnership)
TCL Corporation                                                                               Annual Report 2018
Office address                          Room 1101, Building 7, No. 16 Xi Si Huan Zhong Road, Haidian District, Beijing
Accountants writing signatures          Zhang Yuanyuan and Li Bingxin
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable ■ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
                 Name                        Office address                     Representative              Period of supervision
                                     CITIC Securities Tower, No. 8
                                                                                                       From 25 December 2017 to 31
CITIC Securities Co., Ltd.           Zhongxin 3rd Road, Futian          Huang Biao and Liu Jian
                                                                                                       December 2018
                                     District, Shenzhen, China
VI Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes ■ No
Series                                                                                        2018-over-2017 change
                        Item                        2018                      2017
 No.                                                                                                  (%)
   1      Operating revenue (RMB)                 113,360,075,545          111,577,362,348                    1.60        106,473,499,866
   2     Gross profit (RMB)                        20,393,602,825           22,512,673,777                    -9.41        17,658,421,891
   3     EBITDA                                    14,096,523,261           13,395,054,317                     5.24         8,615,427,516
   4     Profit before tax (RMB)                    4,944,376,186             4,789,740,570                    3.23         2,796,969,138
         Net profit (RMB)                           4,065,194,164             3,544,702,884                   14.68         2,137,539,667
         Net profit attributable to the             3,468,207,407             2,664,396,006                   30.17         1,602,125,331
         listed company’s shareholders
         (RMB)
   5
         Net profit attributable to the             1,587,391,372             1,190,649,328                   33.32            13,337,995
         listed company’s shareholders
         before    non-recurring     gains
         and losses (RMB)
         Basic    earnings     per   share                    0.2566                 0.2178                   17.81                 0.1312
         (RMB/share) (note)
         Diluted earnings per share                           0.2562                 0.2178                   17.63                 0.1312
   6     (RMB/share)
         Basic    earnings     per   share                    0.1175                 0.0973                   20.76                 0.0011
         before    non-recurring     gains
         and losses (RMB/share)
         Weighted average return on                            11.98                  10.86 Up by 1.12 percentage                     7.17
   7     equity (%)                                                                                         points
         Weighted average return on                              5.48                  4.86 Up by 0.62 percentage                     0.06
TCL Corporation                                                                               Annual Report 2018
    equity before non-recurring                                                                               point
    gains and losses (%)
    Net cash generated from/used               10,486,580,443            9,209,615,123                        13.87         8,028,002,475
    in operating activities (RMB)
   8    Net cash per share generated                        0.7739                   0.6814                       13.57               0.6573
    from/used      in        operating
    activities (RMB/share)
                                                                                              Change of 31 December
                                             31 December 2018         31 December 2017        2018 over 31 December        31 December 2016
                                                                                                       2017 (%)
   9     Total assets (RMB)                     192,763,941,739          160,293,985,835                          20.26      147,136,785,349
  10     Total liabilities (RMB)                131,892,269,092          106,151,046,949                          24.25      101,390,003,766
                                                            68.42                    66.22     Up by 2.2 percentag                   68.91%
         Debt/asset ratio (%)
                                                                                                            e points
         Debt/asset     ratio     before                    67.05                    64.55     Up by 2.5 percentag                   66.42%
  11
         borrowings obtained using                                                                          e points
         bank deposit as a pledge
         and deferred income (%)
         Total      owners’       equity        60,871,672,647           54,142,938,886                          12.43       45,746,781,583
         (RMB)
  12     Owners’ equity attributable            30,494,364,951           29,747,067,178                           2.51       22,764,892,022
         to the listed company’s
         shareholders (RMB)
  13    Share capital (share)                      13,549,648,507          13,514,972,063                           0.26       12,213,681,742
         Equity per share attributable                     2.2506                  2.2010                          2.25              1.8639
  14     to the listed company’s
         shareholders (RMB/share)
The total share capital at the end of the last trading session before the disclosure of this Report:
Total share capital at the end of the last trading session before
                                                                                                                           13,549,648,507
the disclosure of this Report (share)
Fully diluted earnings per share based on the latest total share
                                                                                                                                   0.2562
capital above (RMB/share)
Indicate whether there are any corporate bonds.
■ Yes □ No
Indicate whether the Company has seen a deficit for the past two years.
□ Yes ■ No □ Not applicable
TCL Corporation                                                                             Annual Report 2018
VII Accounting Data Differences under China’s Accounting Standards for Business
Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign
Accounting Standards
□ Yes ■    Not applicable
1. Net Profit and Equity under CAS and IFRS
No such differences for the Reporting Period.
2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards
No such differences for the Reporting Period.
3. Reasons for Accounting Data Differences Above
□ Applicable ■ Not applicable
VIII Key Financial Information by Quarter
                                                                                                                           Unit: RMB
                                                   Q1                    Q2                     Q3                    Q4
Operating revenue                               25,629,844,055        26,893,904,238          29,713,396,587        31,122,930,665
Net profit                                        788,045,509           912,794,351            1,175,114,242         1,189,240,062
Net profit attributable to the listed
                                                  730,837,280           855,101,003              903,723,232           978,545,892
company’s shareholders
Net profit attributable to the listed             521,159,061           472,277,800              601,362,425            -7,407,914
company’s        shareholders       before
non-recurring gains and losses
Net    cash     generated     from/used   in
                                                 3,034,386,560         1,340,841,734           3,181,204,574         2,930,147,575
operating activities
Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what have been
disclosed in the Company’s quarterly or interim reports.
□ Yes ■ No
IX Non-Recurring Gains and Losses
                                                                                                                           Unit: RMB
                       Item                             2018                  2017               2016                 Note
Gain or loss on disposal of non-current
                                                        -58,305,452           420,543,530        461,546,531 Not applicable
assets (inclusive of impairment allowance
TCL Corporation                                                                      Annual Report 2018
write-offs)
Government subsidies charged to current
profit or loss (exclusive of government
subsidies given in the Company’s ordinary
                                                     1,377,064,570   1,159,442,050       1,112,069,855 Not applicable
course of business at fixed quotas or
amounts as per the government’s uniform
standards)
Gain equal to the amount by which
investment costs for the Company to obtain
subsidiaries, associates and joint ventures
                                                                 -    191,917,137          34,527,018
are lower than the Company’s enjoyable fair
value of identifiable net assets of investees
when making investments
Gain or loss on fair-value changes in trading                                                           The RMB163 million
financial assets and liabilities & investment                                                           income   from    wealth
income from disposal of trading financial                                                               managed products in
assets and liabilities and available-for-sale         162,729,226    -207,276,526         250,397,833 the Reporting Period
financial assets (exclusive of effective                                                                was recognized as a
portion     of   hedges    that   arise   in   the                                                      non-recurring gain as
Company’s ordinary course of business)                                                                 per the CSRC rules.
Non-operating income and expense other                                                                  Not applicable
                                                      871,846,769     504,575,138          17,914,360
than the above
Gain on the remeasurement of the fair value
of the remaining equity interests in entities                    -               -        392,545,425
over which the Company has ceased control
Less: Corporate income tax                            191,940,974     310,502,820         251,325,615 Not applicable
         Non-controlling interests (net of tax)       280,578,104     284,951,831         428,888,071 Not applicable
Total                                                1,880,816,035   1,473,746,678       1,588,787,336 Not applicable
Explanation of why the Company reclassifies as recurrent a non-recurring gain/loss item defined or listed in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gain/Loss
Items:
□ Applicable ■ Not applicable
TCL Corporation                                                   Annual Report 2018
                              Part III Business Summary
I Principal Activity of the Company in the Reporting Period
During the Reporting Period, the Group primarily consists of the following three major business
groups:
1. The Semiconductor Display Business Group
It consists of CSOT, CDOT (0334.HK), new technologies and new business layout in relation to
semiconductor displays.
2. The Intelligent Terminal Business Group
It includes TCL Electronics (1070.HK) (including the commercial display operations), TCL
Communication, TCL Household Electric Appliance Group and other new business related to the
consumer electronics such as smart homes.
3. The Emerging Business Group
It is responsible for the overall management of the Group’s platform services, strategic emerging
business and financial control system.
A major asset restructuring plan has been approved at the Group’s general meeting on 7 January
2019. And the restructuring is currently progressing on track. Upon the completion of the
restructuring, the Group’s core businesses will be modified to comprise the semi-conductor display
and material business, the industrial finance & investment and venture capital business and the
emerging business group:
1. The Semi-Conductor Display and Material Business
It consists of CSOT, CDOT (0334.HK), Guangdong Juhua and China Ray.
2. The Industrial Finance & Investment and Venture Capital Business
It includes TCL Finance and TCL Capital.
3. The Emerging Business Group
It comprises Highly, Educational Web and Environmental Resource.
TCL Corporation                                                                             Annual Report 2018
                                                TCL Corporation
  Semi-Conductor Display                      Industrial Finance &                   Emerging Business
    & Material Business                   Investment and VC Business                      Group
               CSOT                                TCL Finance                                 Highly
               CDOT                                TCL Capital                           Education Web
       Guangdong Juhua                                                             Environmental Resource
            China Ray
For further information about the Company’s businesses, please refer to “Part IV Directors’ Report” herein.
II Significant Changes in Major Assets
1. Significant Changes in Major Assets
Please refer to “Part IV Directors’ Report” herein.
2. Major Assets Overseas
□ Applicable ■ Not applicable
III Core Competitiveness Analysis
Upon 38 years of development, TCL has always stuck to industry with constant innovation,
determination and the courage to change. Customer-orientation, all-win and maximized
shareholders’ interests have always been our operating philosophy. TCL will strive to be a
world-class enterprise with global competitiveness. Keeping abreast of the times, leading
technological advancements, forging ahead with responsibility and working hard, TCL has
gradually established its competitive advantages for the future.
Concentration on the Core Business for a Stronger Ability of Sustainable Development
Upon the Restructuring of selling the terminal and supporting business, the Group is able to
concentrate more on the semi-conductor display and material business, with a better capital
structure and a stronger ability of sustainable development. The technology-driven semi-conductor
display and material business with high added value will greatly improve the Group’s profitability.
TCL Corporation                                                    Annual Report 2018
The Group will concentrate the majority of its effort and resources on this business, solidifying its
advantages in operating efficiency, costs and expenses, as well as scale benefits, and at the same
time strengthening investments in links such as R&D, production process improvement, lean
management and supply chain management. In this way, the Group will boost its market share and
competitiveness in the semi-conductor display and material industry. CSOT has two G8.5 and one
G6 LTPS production lines running at full capacity for strong sales. The G11 line, the highest
generation around the world, has started production. The G6 AMOLED line has begun operation.
And the construction of the G11 line of 8K and large-sized AMOLED is underway. These
production lines will significantly boost the production scale and economic benefits.
The Competitive Edge of Technology-Driven, Leading Economic Benefits in the Global
Industry
The Group will promote the R&D and application of new display technologies, materials and
production processes based on CSOT’s business platform. Meanwhile, it will make use of
Guangdong Juhua’s “Printed and Flexible Display Technology Platform” to develop the
next-generation new display technology, as well as to accelerate the development of materials for
printed AMOLED, evaporated AMOLED and electroluminescent QLED. In terms of evaporated
AMOLED, CSOT has completed technology development and reserve on the G4.5 trial line and its
G6 flexible AMOLED production line has started production soon after the start of operation. In the
field of printed display, the \"National Printed and Flexible Display Innovation Center\" of
Guangdong Juhua is the only national innovation center in China’s display sector, as well as the
most advanced printed display public platform around the world. It has successfully developed the
31-Inch 4K Printed OLED and the world’s first 31-Inch 4K Printed H-QLED. Meanwhile, China
Ray has undertaken the national “Printed OLED Key Material Commercialization Demonstration
Programme”, taking the lead in the development and application of printed OLED materials. With
regard to the development of electroluminescent QLED materials, the Group’s QLED R&D team
has solved key issues such as the useful life of red-light and green-light QLEDs, and the
self-developed blue-light QLED shows the best performance around the world. The relevant
research achievements have been published on Nature Communications, a top international science
magazine, indicating industry-wide leading levels of R&D and development progress.
TCL Corporation                                                      Annual Report 2018
The Group develops new display technologies and applications through internal business expansion
and independent development. In addition to that, the Group will proactively leverage incubation,
investment, strategic cooperation, M&A and other means to explore opportunities for industrial
chain extension. CSOT will strive to materialize advanced products and technology, as well as to
maintain the leading efficiency and economic benefits, so as to build up competitive edges in the
global industry.
Great Strength in R&D and Global Operations
The Group has set up R&D centres in Hong Kong, the U.S., the Europe, Wuhan and other places to
strengthen the research on basic technologies such as AI, big data, intelligent manufacturing and the
industrial Internet. The Hong Kong R&D Centre specializes in intelligent product application, as
well as key image and big data technologies; the R&D centre in the U.S. works on supporting
Internet operation technologies; the Wuhan R&D Centre concentrates on algorithms in relation to
AI technologies such as image recognition, as well as voice recognition and understanding; and the
European R&D Centre will focus on AI algorithms. In AI algorithms, data and application scenario
construction, the relevant results have been applied to its products and the development of display
materials. The Group also develops intelligent manufacturing and industrial Internet products,
technologies and solutions with independent core intellectual properties (IP). Deeply integrating
industrial and information technology resources, the Group will provide an industrywide advanced
industrial Internet platform to help upgrade the semiconductor display plants with intelligent, digital
and modular management systems, as well as with scenario-based intelligent manufacturing
solutions.
During the Reporting Period, the Group applied for 1,607 international patents through PCT,
representing a cumulative number of 9,990, covering Europe, the U.S., South Korea, etc. In addition,
up to the end of the Reporting Period, the Group has cumulatively applied for 36,389 Chinese
patents and 8,363 U.S. patents. Among those, CSOT has applied for 14,372 Chinese patents and
7,684 U.S. patents, indicating a domestically advanced level of patented technologies in
domestically; in the quantum-dot electroluminescence field, applications have been filed for 757
patents, ranking the world’s second highest in this regard.
TCL Corporation                                                      Annual Report 2018
The Advantage of Effective Collaboration among the Business Groups
The Group will sustain the industrial finance & investment and venture capital operations after the
restructuring, primarily comprising TCL Finance and TCL Capital. TCL Finance provides financial
services to the upstream and downstream partners of the core businesses and the industrial chain,
which also uses the surplus capital for more gains. TCL Capital focuses on the core business chain,
investing in the forefront of areas such as key electronic devices, basic software and high-end
universal chips. The industrial finance & investment and venture capital business can help
concentrate on the industrial chain of the core businesses. The stable profit contributions from it can
also help offset the impact of cyclical swings on the semi-conductor display sector. Meanwhile,
CSOT will give full play to its existing capacity and technology advantages, so as to transform
faster towards a multi-application-scenario display interface provider. In order to do that, CSOT
continues to refine its existing product and customer structures, as well as actively work on the
development of display products for interactive whiteboards, tiled video walls, advertisement
players, gaming, vehicles, etc. for a larger share in these segment markets with high added value. It
aims to promote market demand with its multi-scenario display application, and boost profit with
differentiated products with high added value.
Enriching the Content of the “Hawkish Spirit” and Strengthening the Corporate Cultural
Gene
The “Hawkish Spirit” is a unique TCL spirit developed through more than ten years of ups and
downs. It is an epitome of TCL’s values and unique competitiveness, as well as TCL’s intellectual
wealth and what unites TCL people. The content of the “Hawkish Spirit” will be re-defined in the
new development process. It will encourage all the TCL people to keep going, face the problems,
change through self-criticism and maintain entrepreneurial passion as always.
TCL Corporation                                                      Annual Report 2018
                                    Part IV Directors’ Report
I Overview
In order to promote high-quality growth on such a large business scale, the Group started in 2017
the reform and transformation through “modifying the operating philosophy, refining the
organizational flow, innovating business models and removing development obstacles”. It
streamlined the operation and management process, optimized the business and organizational
structures, kept promoting cost efficiency, as well as strengthened the position and competitive
edges of its core businesses in the industry. For 2018, the Group recorded operating revenue of
RMB113.36 billion, representing a year-on-year increase of 1.60%; core business revenue of
RMB112.28 billion, rising by 1.60% compared to a year ago; a net profit of RMB4.07 billion,
representing a 14.7% year-on-year increase; and a net profit attributable to TCL shareholders of
RMB3.47 billion, representing an increase of 30.2% compared to a year ago. Meanwhile, net profit
margin was up from 2% in 2016 to 3.6%, ROE up from 7.2% to 12%, and per-capital net profit up
from RMB35,500 to RMB38,600, representing notably better operational efficiency and
performance. In all, this round of reform has yielded preliminary results.
Upon efforts of more than two years, the sale and shutdown of 63 non-core enterprises resulted in a
considerable drop in enterprises running in the red and redirected human, capital and technology
resources to the core businesses with increasing competitiveness. During the Reporting Period,
CSOT maintained full production and sales, as well as industry-wide leading operational efficiency
and profitability, posting a steady profit of RMB2.32 billion amid a weakening industry. The
intelligent terminal business saw better profitability with greater product strength and a larger
market share thanks to resource support from other businesses in R&D, manufacturing, supply
chain management, distribution channel, branding, etc. And all the other businesses registered stable
operation and growth with profit contributions to the Group. As a result, the Group’s profitability is
gradually improving.
However, due to the different natures and development stages of the industries of the Group’s
businesses, they differ greatly in business model and way of operation and management. This
remains the major obstacle of the Group’s business growth and value creation. Therefore, the Group
TCL Corporation                                                       Annual Report 2018
accelerates the refining of its business and capital structures by stripping off its terminal and related
business, so as to further concentrate resources to satisfy the needs of the capital- and
technology-intensive semi-conductor display and material business. It aims to build up the
competitive edges of its core businesses through continuous concentration and sufficient resource
commitment. The said restructuring plan has been approved at the First Extraordinary General
Meeting of 2019 on 7 January 2019. And the restructuring is currently progressing on track. In the
Reporting Period, the Group still managed and measured based on the old business structure, i.e. the
semi-conductor display business group, the intelligent terminal business group and the emerging
business group.
The capital structure and profitability have been improved to build up the Group’s ability of
sustainable development.
The said major asset restructuring is a cash deal. The Group received RMB4.76 billion in cash for
the asset sale, which was considered a one-off restructuring income of the period of the settlement.
This brought up both the assets and profit attributable to TCL shareholders.
Excluding the target assets in the restructuring, for 2018, the Group recorded a net profit of
RMB3.55 billion, of which the net profit attributable to TCL shareholders stood at RMB3.15 billion.
Meanwhile, major financial indicators improved to varying degrees. To be specific, the debt/asset
ratio dropped from 68.4% to 64.1%, the net profit margin on sales rose from 3.59% to 7.35%, the
number of employees decreased from 89,750 to 31,645, and the per-capital net profit increased
from RMB38,600 to RMB99,600.
This restructuring has helped refine the Group’s capital structure, as well as significantly boost
profitability and returns for shareholders. The Group will embrace a whole new development stage
with high-speed and high-quality growth.
The strategic transformation towards a technology conglomerate will help the Group
concentrate resources on its core businesses.
Upon the completion of the restructuring, the Group will become a technology conglomerate.
The semi-conductor display and material business will be the Group’s core business. It will further
solidify its leading advantages in product and technology innovation and operational efficiency,
TCL Corporation                                                    Annual Report 2018
obtain a larger market share and a better position in the industry through production ramp-up plus
technology and production process upgrade, as well as build a bigger and stronger business of
semi-conductor display and materials by vertical extension to the upstream and downstream
industrial chain, as well as by horizontal cross-industry integration. It is committed to becoming a
leader in the global industry.
The industrial finance & investment and venture capital business will be sustained to provide
sufficient resource assurance for the development of the core business. The industrial finance
business is positioned to offer capital and asset management services for the core business. It helps
increase capital utilization efficiency and cut down finance costs under controllable risk. The
investment and venture capital business will explore opportunities at the forefront of
core-business-related new technologies, new materials and new applications, so as to increase the
Group’s control over the key links of its industrial chain. The stable profit contributions from the
industrial finance & investment and venture capital business can also help offset the impact of
cyclical swings on the semi-conductor display sector.
As for the other businesses that have been sustained in the restructuring, they are generally
operating in a steady manner with profit contributions to the Group. But they are not closely
connected to the core business, so for further concentration, the Group will gradually divest these
businesses by means of restructuring, divestiture, sale or other ways at proper timings according to
the principle of maximum value for shareholders.
Meanwhile, the Group will make use of its capital, technology and operational and management
efficiency advantages to look for M&A opportunities in technology- and capital-intensive high-tech
industries. This is to create a new driving force of the Group’s business growth in addition to the
semi-conductor display and material business, driving growth with technology.
The Group focuses on the three core technologies and drives growth through product and
technology innovation.
New semi-conductor display technologies and materials, artificial intelligence (AI) and big data, as
well as intelligent manufacturing and the industrial Internet are the Group’s three major strategic
directions. In 2018, the Group spent RMB5.67 billion on R&D, up by 20% year-on-year.
TCL Corporation                                                      Annual Report 2018
In the field of printed display, the \"National Printed and Flexible Display Innovation Center\" of
Guangdong Juhua is the only national innovation center in China’s display sector, as well as the
most advanced printed display public platform around the world. It has successfully developed the
31-Inch 4K Printed OLED and the world’s first 31-Inch 4K Printed H-QLED. In terms of material
development for OLED, China Ray has developed, in an independent manner, red-light and
green-light evaporated OLEDs which are domestically advanced. In addition, the Group’s QLED
R&D team has solved key issues such as the useful life of red-light and green-light QLEDs, and the
self-developed blue-light QLED shows the best performance around the world.
The Group has set up multiple R&D centres across the world, which are dedicated to the basic
common technology research of AI and big data. The Hong Kong R&D Centre specializes in
intelligent product application, as well as key image and big data technologies; the R&D centre in
the U.S. works on supporting Internet operation technologies; the Wuhan R&D Centre concentrates
on algorithms in relation to AI technologies such as image recognition, as well as voice recognition
and understanding; and the European R&D Centre will focus on AI algorithms. Thanks to the
introduction of global leading talent, the Group has achieved better abilities in algorithm, data and
application scenario construction in a fast pace, which have been applied to its products and the
development of display materials.
In the area of intelligent manufacturing and industrial Internet, the Group develops such products,
technologies and solutions with independent core intellectual properties (IP). Deeply integrating
industrial and information technology resources, the Group will provide an industrywide advanced
industrial Internet platform to help upgrade the semiconductor display plants with intelligent, digital
and modular management systems, as well as with scenario-based intelligent manufacturing
solutions.
During the Reporting Period, the Group applied for 1,607 international patents through PCT,
representing a cumulative number of 9,990, covering Europe, the U.S., South Korea, etc. In addition,
up to the end of the Reporting Period, the Group has cumulatively applied for 36,389 Chinese
patents and 8,363 U.S. patents. Among those, CSOT has applied for 14,372 Chinese patents and
7,684 U.S. patents, indicating a domestically advanced level of patented technologies in
domestically; in the quantum-dot electroluminescence field, applications have been filed for 757
TCL Corporation                                                    Annual Report 2018
patents, ranking the world’s second highest in this regard.
With significantly improved industrial capability, the Group keeps enriching its product
range and multi-scenario applications.
The t6 project (the G11 production line), mainly for 65-inch, 75-inch and other super-large-sized
new display panels, went into production in November 2018, which was ahead of schedule. The t7
project (another G11 production line), positioned to produce 8K and OLED large-sized display
panels, is under construction. As for small- and medium-sized displays, the t3 project (the G6
LTPS-LCD production line) started to run at full capacity for quick sale in the fourth quarter of
2018, with its shipment jumping to No. 3 around the world, representing the world’s fastest growth
speed. The t4 project (the G6 flexible LTPS-AMOLED production line) has started production,
with capacity and the yield rate gradually improving. CSOT is also proactively making plans to
enter new markets of large-sized panels for touch modules, electronic whiteboards, tiled video walls,
specialized high-end monitors, etc. as a way to increase the proportion of high-tech and
high-added-value products in its product mix.
The intelligent terminal business continued to optimize its product mix and significantly improved
its product strength. According to China Market Monitor, a data firm, TCL TV’s brand-price index
on China’s market has risen from 102 in 2017 to 110 in 2018, jumping to No. 2. In the Reporting
Period, the sales volume of TCL Electronics’ 55-inch-and-above products accounted for a market
share 25.2%, up by 4.6 percentage points year-on-year; the sales volume of 4K products went up
fast, with a market share of 40%; and the sales volume of curved TV ranked first on the market.
With progress in branding and global operations, the Group has started to utilize its
industrial chain capability overseas.
During the Reporting Period, with opportunities arising from the “Belt and Road Initiative” and the
integration of the consumer electronics industry, the Group beefed up its global expansion. As a
result, it has broken into the European market and expanded its business in India and Russia. The
Group integrates the business resources of TCL Electronics, TCL Communication and TCL
Household Electric Appliance Group, as well as promotes intragroup cooperation in product
TCL Corporation                                                      Annual Report 2018
development, industrial chain management, marketing and global branding. Through enhancing
branding and product strength, TCL is shifting from a Chinese brand to a competitive global brand.
The Group owns 28 R&D centres, 10 joint labs and 22 manufacturing bases across the world,
covering over 160 countries and regions. In the Reporting Period, revenue generated by the Group’s
overseas business accounted for 49.7% of its total revenue.
The whole-module integrated intelligent manufacturing industrial park in India, which has started
construction in late December 2018, helps materialize the shift from a single product model to a
screen-to-TV-module industrial chain. This will help improve the global operation and management
ability, so as to lay a solid foundation for the globalization of the Group’s semi-conductor display
and material business.
With a well-established global network covering R&D, products, distribution channels and
marketing, and featuring strong competencies of global management and localized operations
covering supply chain management, IP protection, risk control and compliance, TCL is able to deal
with various trade disputes and maintain steady growth in global business.
The Group builds up its digital operation capability to promote digitization in management
and business operation.
To promote digitization and improve intelligent manufacturing, the Group coordinated internal
resources in a bid to deeply integrate industrial technology and information technology resources, as
well as promote digitization and IT in management and operation. Meanwhile, the Group’s
intelligent manufacturing resources are tapped to establish an intelligent manufacturing service
center to boost the intelligent manufacturing capability of all the businesses. So far, the Company’s
digital operation platform has reserved products with independent IP in the Industrial Internet,
intelligent enabling technology, intelligent plants and intelligent equipment. It is launching products
and services in three major fields, IoT platforms, industrial software and IT service for factory
management. In order to seize overseas opportunities in the accelerating transformation and
upgrade of China’s manufacturing sector, the Group will, based on years of accumulation in the
manufacturing sector and advanced technologies in the industry, provide intelligent manufacturing
products and solutions for overseas customers, as well as build an industry-level industrial Internet
TCL Corporation                                                   Annual Report 2018
platform.
II Core Business Analysis
The major asset restructuring plan has been approved at the Group’s general meeting on 7 January
2019. And the restructuring is currently progressing on track. Upon the completion of the
restructuring, the Group’s core businesses will be modified to comprise the semi-conductor display
and material business, the industrial finance & investment and venture capital business and the
emerging business group:
1. The Semi-Conductor Display and Material Business
It consists of CSOT, CDOT (0334.HK), Guangdong Juhua and China Ray.
2. The Industrial Finance & Investment and Venture Capital Business
It includes TCL Finance and TCL Capital.
3. The Emerging Business Group
It comprises Highly, Educational Web and Environmental Resource.
                                  TCL Corporation
 Semi-Conductor Display           Industrial Finance &       Emerging Business
   & Material Business        Investment and VC Business          Group
             CSOT                   TCL Finance                     Highly
            CDOT                     TCL Capital                Education Web
      Guangdong Juhua                                      Environmental Resource
          China Ray
(I) The Semi-Conductor Display and Material Business
1. CSOT
CSOT is mainly engaged in the R&D, production and sales of semiconductor display panels and the
collaborative management of semiconductor display related industries. In addition to further
TCL Corporation                                                     Annual Report 2018
consolidating its leading position as a large-sized TV panel provider, CSOT is strengthening its
product advantage in the area of small- and medium-sized panels through ongoing technology
innovation, so as to increase its overall competitiveness. In the meantime, it also accelerates its
transformation towards a multi-application-scenario display interface provider. By expanding its
segment market share of products with high added value, it strives for higher profit.
Moreover, CSOT is promoting organizational structure optimization and business model
transformation to further improve efficiency and reduce costs for leading efficiency and
effectiveness in the industry. In the Reporting Period, CSOT recorded operating revenue of
RMB27.67 billion and a net profit of RMB2.32 billion.
1.1 Large-Sized Panel Business Group
During the Reporting Period, the two G8.5 lines of CSOT, t1 and t2 projects, maintained full
production and sales. A total of 3.593 million glass substrates were inputted, representing a
year-on-year increase of 7.95%. CSOT’s large-sized LCD panel shipment remains the fifth in the
globe, with the shipments of the 32-inch and 55-inch UD products both being the second largest in
the world, as well as consecutively ranking first in shipment to major domestic brand customers.
The G11 TFT-LCD and AMOLED new display production line (t6 project), mainly producing
65-inch, 75-inch and other ultra-large-sized new display panels, has started production in November
2018 and is expected to reach full capacity in late 2019. The G11 UHD new display production line
(t7 project), which has started construction in November 2018, is mainly responsible for the
production and sales of 65-inch, 70-inch (21:9) and 75-inch 8K UHD displays and AMOLED
display products.
The first phase of CSOT’s integrated intelligent module manufacturing base (High Generation
Module Project) has been put into production, with an annual processing capacity of 40 million
LCD modules. Bulk shipment has been achieved. Supporting the G8.5 and G11 production lines,
this project is positioned to provide high-end and large-sized display modules to solve problems for
customers, and further enhance the manufacturing capability of CSOT in the sector of
semiconductor displays.
1.2 Small- and Medium-Sized Panel Business Group
TCL Corporation                                                    Annual Report 2018
Benefiting from a sharp rise in the shipment to international top brand customers, the G6
LTPS-LCD production line (t3 project) realized full production and sales in the fourth quarter of the
year under review, with remarkable year-on-year improvements in market share and profitability.
According to AVC, a data firm, in the fourth quarter of 2018, CSOT’s shipment of 24.8 million
pieces ranked No. 3 worldwide and No. 2 domestically, representing the world’s fastest growth
speed.
The G6 LTPS-AMOLED flexible production line (t4 project) is expected to start mass production in
2019, with the development and verification of key technologies well underway. CSOT’s G4.5
flexible AMOLED trial line in Wuhan has helped prepare for the rapid mass production of t4
products in terms of beforehand technology and talent reserve.
CSOT will give full play to its existing capacity and technology advantages, so as to transform
faster towards a multi-application-scenario display interface provider. In order to do that, CSOT
continues to refine its existing product and customer structures, as well as actively work on the
development of display products for interactive whiteboards, tiled video walls, advertisement
players, gaming, vehicles, etc. for a larger share in these segment markets with high added value. It
aims to promote market demand with its multi-scenario display application, and boost profit with
differentiated products with high added value.
2. CDOT
CDOT (0334.HK) is engaged in the R&D, production and sales of small- and medium-sized
TFT-LCD/OLED display modules.
In the Reporting Period, CDOT fully leveraged synergy with CSOT, refined its product mix and
brought in a number of international top brand customers. As a result, it sold 60.48 million modules
(a 13.0% year-on-year increase), generating sales revenue of RMB5.28 billion (a 52.4%
year-on-year increase). Meanwhile, following the business strategy of being a provider of
multi-application-scenario display interface, CDOT is actively expanding its share in the smart
home and commercial display markets by way of working with famous Internet companies to
launch smart home products equipped with its display modules. It will also improve its business
TCL Corporation                                                    Annual Report 2018
composition and enhance its product competitiveness and profitability.
3. Guangdong Juhua
As the contractor of the \"National Printed and Flexible Display Innovation Center\", Guangdong
Juhua is the first national innovation center in China’s display sector. It is mainly engaged in the
research of key common technologies of printed and flexible display. To build up China’s public
R&D platform for printed display and create a printed display eco-system, it cooperates with
universities, research institutes, internationally renowned materials and equipment companies, so as
to integrate resources within the industry and develop such core technology.
In the Reporting Period, Guangdong Juhua’s development of printed display technology went well.
In the large-sized area, it has successfully developed the 31-Inch UHD (4K) Printed OLED and the
31-Inch UHD Top-Emitting Printed H-QLED, which is the world’s highest resolution printed
QLED, as well as the world’s first such product to adopt both advantages of electroluminescent
quantum-dot materials and OLED materials. While in the small-sized area, it completed the
development of the 5-inch ultra-high resolution (400ppi) printed AMOLED, which is the highest
resolution display device completed by the printed technology.
4. China Ray
China Ray is mainly engaged in the development of new OLED key materials with independent IP,
focusing on evaporated OLED small molecule materials and printed OLED materials.
During the Reporting Period, China Ray’s R&D of new materials was progressing in a smooth
manner. It has developed over 700 types of emitting materials with independent IP, many of which
have been accepted by China’s mainstream panel production lines and some of them have realized
bulk supply. China Ray now has three kinds of emitting materials with independent IP—red-light
and green-light materials based on evaporation process, as well as solution-processed green-light
materials, all of which are of a globally advanced performance.
To support the national overall planning of new display materials and technologies, China Ray
TCL Corporation                                                     Annual Report 2018
independently develops printed OLED materials, including red-light and green-light emitting
materials and devices, which reach domestically advanced performance. And breakthroughs have
also been made concerning the blue-light emitting materials.
(II) The Industrial Finance & Investment and Venture Capital Business
The Group will sustain the industrial finance & investment and venture capital operations after the
restructuring, primarily comprising TCL Finance and TCL Capital. TCL Finance provides financial
services to the upstream and downstream partners of the core businesses and the industrial chain,
increasing capital utilization efficiency and cutting down finance costs under controllable risk. It
also uses the surplus capital for more gains. TCL Capital focuses on the core business chain,
investing in the forefront of areas such as key electronic devices, basic software and high-end
universal chips.
The industrial finance & investment and venture capital business can help concentrate on the core
businesses, as well as boost management and operational efficiency. The stable profit contributions
from it can also help offset the impact of cyclical swings on the semi-conductor display sector.
1. TCL Finance
TCL Finance mainly comprises the Group’s finance and the supply chain finance.
The Group’s finance primarily involves providing financial and management support to the major
businesses and subsidiaries within the Group, and undertaking the functions of efficiency
improvement and risk management of Group assets. During the Reporting Period, TCL Finance Co.,
Ltd. enhanced its financial support to the Group’s business development according to the Group’s
strategic goals, and further improved its active management ability for capital and risks. The
operation of TCL Finance is progressing smoothly. Its asset scale, gross profit, ROE and capital
concentration are all of a leading level in the industry.
The supply chain finance is divided into industrial chain finance and consumer finance, providing
financial services for industrial chain partners, Group employees and Group product consumers
respectively. During the Reporting Period, the supply chain finance business was improved
TCL Corporation                                                     Annual Report 2018
internally and externally to provide quality and convenient account receivable financing services for
industry chain partners, especially small and medium enterprises. By 2018, the number of B2B
finance clients reached more than 13,000, while the registered retail finance clients were close to
50,000.
2. TCL Capital
TCL Capital includes the venture capital and financial investment business, as well as Admiralty
Harbour Capital Limited.
The venture capital business focuses on investment opportunities in prospective and innovative
technology according to the development needs of the Group’s core businesses, with major
investments in new materials, new energy, major consumption and high-end manufacturing
industries. Up to the end of the Reporting Period, the venture capital business manages funds of
RMB9.365 billion in total, and has accumulatively invested in 108 projects, with shareholdings in
listed companies such as Petro-King, Sky Solar, Jinyu, ZJBC, HyUnion Holding, CATL and S.C. In
addition, in the non-core investments, the Group cautiously evaluates financial investment
opportunities. At present, it holds a 19.07% interest in 712 Corp. (603712.SH), a 20.08% interest in
Fantasia Holdings (01777.HK), and a 4.99% interest in Bank of Shanghai (601229.SH).
Admiralty Harbour Capital Limited, a majority-owned subsidiary of the Group and a financial
institution holding Licenses No. 1, No. 4 and No. 9 in Hong Kong, is approved in 2017 by the
Securities and Futures Commission of Hong Kong to engage in securities trading, providing
securities-related advice and offering asset management service. The subsidiary signed and
introduced in March 2018 a management and operation team comprising international senior
experts, with the purpose of building an innovative, efficient financial service platform. It has been
providing financial service for third-party clients for revenue since August 2018. On the capital
market, it completed two bond issues in 2018, and provides debt management consulting service for
a Hong Kong listed company as their financial advisor. In regard with asset management, the
subsidiary has accomplished the preparations for two global bond funds, and has been engaged in
investment management since November 2018.
TCL Corporation                                                    Annual Report 2018
(III) The Emerging Business Group
1. Highly Information
Highly Information (835281) is a business platform specializing in the sales and service of IT
products, covering domestic and foreign top-brand notebook computers, desktop computers, digital
products and related accessories.
Following the strategy of \"sales + service\", Highly Information is committed to becoming a
computing equipment provider in the intelligent era. Highly Information achieved sales revenue of
RMB16.54 billion and a net profit attributable to the Company as the parent of RMB0.199 billion in
the Reporting Period.
2. Educational Web
Open Edutainment is the largest web-based degree course provider in China. It is a leader in
web-based degree course services, and also actively develops Internet education and vocational
education. During the Reporting Period, the enrollment for the degree courses of Educational Web
was successfully completed, and teacher training was steadily processing. On the basis of the
existing business, Open Edutainment intensified the integration of educational resources and B2C
business development. Up to the end of the Reporting Period, the registered users of the Internet IT
vocational education platform (IMOOC) reached 14.70 million, ranking first in the industry.
(IV) Major Target Businesses of the Restructuring Plan
Having been approved at a general meeting on 7 January 2019, the Group’s major asset
restructuring plan is targeted at the restructuring of the intelligent terminal and related business.
Upon the completion of relevant transaction, this business will be stripped off from the Group and
excluded from the Group’s consolidated financial statements.
1. TCL Electronics
TCL Corporation                                                      Annual Report 2018
TCL Electronics is mainly engaged in the R&D, production and sales of large-screen display
terminals, and provides users with Internet value-added services and system solutions. It is aimed at
becoming a world-leading intelligent technology firm and achieving market leadership in China and
around the world.
During the Reporting Period, the sales revenue of TCL Electronics increased by 9.25%
year-on-year to RMB38.57 billion (HK$45.58 billion). The net profit attributable to the Company
as the parent increased by 14.4% year-on-year to RMB0.801 billion (HK$0.944 billion). The
aggregate sales volume of LCD TVs reached 28.606 million sets (including commercial displays),
showing an increase of 23.1% year-on-year. According to Sigmaintell, a consulting firm, TCL
Electronics achieved a global market share of 11.6% in terms of TV shipment in 2018, the second
largest.
TCL Electronics achieved a sales volume of 18.214 million TV sets in overseas markets,
representing an increase of 29.5% year-on-year. To be specific, the sales volume in the North
America market rose by 41.8% from a year ago, jumping to No. 2 in the third quarter and
November; the sales volume in the emerging markets increased by 30.7% year-on-year, with
impressive growth in India, Southeast Asia, Brazil and Australia; and the sales volume in the
European market increased by 43.1% year-on-year, with growth particularly in France, Germany,
Italy, Spain, etc.
2. TCL Communication
TCL Communication operates three major brands, namely TCL, Alcatel and BlackBerry worldwide.
It is committed to providing users with innovative mobile terminal products and services. TCL
Communication aims to become the world's leading brand of mobile terminal devices, as well as
establish a customer-oriented product definition and sales system.
Following the operating strategy of “building strength in products, the supply chain and marketing,
as well as improving the basic corporate management system”, TCL Communication shortened the
time needed for the development of a product, increased the supply chain efficiency, and set up a
customer-oriented marketing system. As a result, it has seen the average selling price and gross
profit margin increase, operating expenses go down, and loss decrease as compared to the previous
TCL Corporation                                                   Annual Report 2018
year. However, due to the fiercer market competition and the impact of reforms and adjustments,
TCL Communication sold 33.87 million units of products during the Reporting Period, representing
a drop of 23% year-on-year.
3. TCL Household Electric Appliance Group
TCL Household Electric Appliance Group is mainly engaged in the R&D, production and sales of
air conditioners, refrigerators, washing machines and health electrical products. It maintains its
market position in the second lineup by large-scale development and product innovation.
In face of the complicated operating environment at home and abroad, TCL Household Electric
Appliance Group drove product upgrades based on the category leading strategy, as well as
proactively promoted cost efficiency throughout the industrial chain. Capitalizing on the marketing
and brand advantages of TCL Electronics, it promoted lean management, improved its customer
structure, and optimized the domestic and foreign sales mix to achieve high-quality scale growth.
During the Reporting Period, it sold 9.197 million units of air-conditioners (an 0.3% year-on-year
increase), 2.368 million units of washing machines (a 23.5% year-on-year increase), and 1.77
million units of refrigerators (a 14.6% year-on-year increase). During the Reporting Period, TCL
Household Electric Appliance Group posted sales revenue of RMB17.46 billion, up by 9.87% when
compared to the prior year.
4. Tonly Electronics
Tonly Electronics develops, manufactures and markets high-quality audio and video products and
wireless smart connected products for the world's top consumer electronics brands.
In the Reporting Period, in addition to strengthening the development and innovation of smart voice
speakers, Tonly Electronics also worked actively on cross-industry smart voice application products.
Leveraging its first mover advantage in smart voice technology and the cooperation relationship
with various voice ecosystems, it marketed its smart products to brand customers outside the smart
speaker industry. During the Reporting Period, Tonly Electronics achieved sales revenue of
RMB6.18 billion (HK$7.30 billion), representing a year-on-year increase of 21.8%.
TCL Corporation                                                                                Annual Report 2018
2. Revenue and Cost Analysis
(1) Breakdown of Sales Revenue
                                                                                                                                  Unit: RMB
                                             2018
                                                      As % of total                                 As % of total sales         Change (%)
                           Sales revenue                                      Sales revenue
                                                    sales revenue (%)                                  revenue (%)
      CSOT                       27,537,312,308               24.53%           30,475,095,111                   27.58%                 -9.64%
      Highly                     16,536,580,699               14.73%           15,200,566,276                   13.75%                    8.79%
 TCL Electronics                 38,569,124,963               34.35%           35,304,642,696                   31.95%                    9.25%
  TCL Household                  17,458,889,700               15.55%           15,890,528,400                   14.38%                    9.87%
Electric Appliance
       TCL                       12,564,163,915                11.19%          14,974,744,729                   13.55%               -16.10%
  Communication
 Tonly Electronics                6,176,286,717                5.50%            5,072,397,750                        4.59%            21.76%
    Others and                   -6,559,765,476        Not applicable           -6,407,078,001           Not applicable         Not applicable
    eliminated
   intercompany
     accounts
Total sales revenue          112,282,592,826                  100.00%         110,510,896,961                   100.00%                   1.60%
(2) Sales Revenue by Operating Segment
                                                                                                                                  Unit: RMB
                                      2018
                                              As % of total
                                                                                               As % of total sales           Change (%)
                      Sales revenue           sales revenue             Sales revenue
                                                                                                  revenue (%)
                                                    (%)
Domestic core
                        56,473,133,329                50.30%              56,321,585,935                   50.96%                   0.27%
   business
Overseas core
                        55,809,459,497                49.70%              54,189,311,026                   49.04%                   2.99%
   business
  Total sales
                      112,282,592,826                100.00%             110,510,896,961                 100.00%                    1.60%
   revenue
(3) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable ■Not applicable
TCL Corporation                                                                              Annual Report 2018
(4) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
Compared with 2017, 35 subsidiaries (34 newly incorporated and another one due to acquisition of
control) are newly included in and 31 subsidiaries (20 de-registered, four transferred and another
seven due to cease of control caused by a decreased interest) are excluded from the consolidation
scope of 2018.
(5) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable ■Not applicable
(6) Major Customers and Suppliers
Major customers:
Total sales to top five customers (RMB)                                                                               17,833,273,051
Total sales to top five customers as % of total sales of the
                                                                                                                             15.88%
Reporting Period (%)
Total sales to related parties among top five customers
                                                                                                                                   -
as % of total sales of the Reporting Period (%)
Top five customers:
                                                           Sales revenue contributed for
   No.                       Customer                                                            As % of total sales revenue (%)
                                                               the Reporting Period (RMB)
      1                     Customer A                                       5,320,999,943                                     4.74%
      2                     Customer B                                       3,633,016,047                                     3.24%
      3                     Customer C                                       3,500,719,617                                     3.12%
      4                     Customer D                                       2,954,321,077                                     2.63%
      5                     Customer E                                       2,424,216,367                                     2.16%
Total                             Total                                     17,833,273,051                                   15.88%
Other information about major customers:
□ Applicable ■ Not applicable
Major suppliers:
Total purchases from top five suppliers (RMB)                                                                         19,095,960,306
Total purchases from top five suppliers as % of total
                                                                                                                             20.78%
purchases of the Reporting Period (%)
Total purchases from related parties among top five
suppliers as % of total purchases of the Reporting Period                                                                          -
(%)
TCL Corporation                                                                             Annual Report 2018
Top five suppliers:
                                                             Purchase in the Reporting
    No.                           Supplier                                                        As % of total purchases (%)
                                                                  Period (RMB)
    1                     Supplier A                                    6,307,241,108                                       6.86%
    2                     Supplier B                                    4,351,718,884                                       4.74%
    3                     Supplier C                                    3,898,168,759                                       4.24%
    4                     Supplier D                                    2,388,167,687                                       2.60%
    5                     Supplier E                                    2,150,663,868                                       2.34%
Total                                                                      19,095,960,306                                      20.78%
Other information about major suppliers:
□ Applicable ■ Not applicable
7. Expense
                                                                                                                              Unit: RMB
                                      2018                 2017              Change (%)          Reason for any significant change
                                                                                              A decline in advertising expense and
Selling expense                   8,887,021,380.00      9,511,063,675.00             -6.56%
                                                                                              sales promotional expense
Administrative expense            4,299,610,008.00      4,676,573,595.00             -8.06% Intermediary fees
R&D expense                       4,677,578,988.00      4,779,466,163.00             -2.13% Cost control
Finance costs                       973,260,519.00      1,665,274,997.00            -41.56% Exchange rate fluctuations
8. R&D Expense
Details about R&D expense:
                                                 2018                            2017                            Change (%)
Number of R&D personnel                                     12,481                            10,946                           14.02%
R&D personnel as % of total                                16.63%                            14.58%                             7.36%
employees
R&D expense (RMB)                                    5,670,918,950                   4,721,201,060                              20.1%
R&D expense as % of operating                               5.00%                             4.25% Up by 0.75 percentage point
revenue
Capitalized R&D expense (RMB)                        1,832,275,281                   1,627,463,339                             12.58%
Capitalized R&D expense as %                                                                           Down by 2 percentage points
                                                           32.31%                            34.33%
of total R&D expense
Reasons for any significant YoY change in the percentage of R&D expense in operating revenue:
□ Applicable ■ Not applicable
TCL Corporation                                                                            Annual Report 2018
Reason for any sharp variation in the percentage of capitalized R&D expense and rationale:
□ Applicable ■ Not applicable
9. Cash Flows
                                                                                                                         Unit: RMB
                  Item                                2018                               2017                   Change (%)
Subtotal of cash generated from                          130,101,601,946                 127,113,578,788                      2.4%
operating activities
Subtotal of cash used in operating                       119,615,021,503                 117,903,963,665                      1.5%
activities
Net cash generated from/used in                           10,486,580,443                   9,209,615,123                     13.9%
operating activities
Subtotal of cash generated from                           60,058,874,214                  28,596,545,129                 110.0%
investing activities (note 1)
Subtotal of cash used in investing                        88,289,416,141                  45,521,704,534                     94.0%
activities (note 2)
Net cash generated from/used in                          -28,230,541,927                 -16,925,159,405                     -66.8%
investing activities (note 3)
Subtotal of cash generated from                           63,323,909,094                  51,420,471,219                     23.1%
financing activities
Subtotal of cash used in financing                        43,284,087,005                  42,868,342,032                      1.0%
activities
Net cash generated from/used in                           20,039,822,089                   8,552,129,187                 134.3%
financing activities (note 4)
Net increase in cash and cash                                2,421,213,397                  -534,486,172                 553.0%
equivalents (note 5)
Explanation of why any of the data above varies significantly on a year-on-year basis:
Note 1: Cash generated from investing activities rose 110% as compared to 2017, primarily driven by the withdrawal of cash on
wealth management.
Note 2: Cash used in investing activities rose 94% as compared to 2017, primarily driven by fixed asset investments and wealth
management purchases.
Note 3: Net cash generated from investing activities declined 67% as compared to 2017, primarily driven by fixed asset investments
and wealth management purchases.
Note 4: Net cash generated from financing activities rose 134% as compared to 2017, primarily driven by borrowings obtained.
Note 5: Net increase in cash and cash equivalents rose 553% as compared to 2017, primarily driven by a larger amount of net cash
generated from operating and financing activities.
III Analysis of Non-Core Businesses
□ Applicable ■ Not applicable
TCL Corporation                                                                                   Annual Report 2018
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
                                                                                                                                       Unit: RMB
                          31 December 2018                  31 December 2017                Change in
                                          As % of                             As % of       percentage         Reason for any significant change
                          Amount                           Amount
                                         total assets                        total assets       (%)
Accounts                13,651,444,917       7.08%        14,793,671,898         9.23%           -2.15% Remittances of the Group
receivable
Construction       in   38,924,586,355      20.19%        14,775,237,325         9.22%           10.97% More ongoing constructions for the t4
progress                                                                                                  and G11 LCD panel production lines
Short-term              13,287,723,834       6.89%        16,036,554,607        10.00%            -3.11% Repayment of borrowings
borrowings
Long-term               36,864,922,669      19.12%        20,283,380,765        12.65%            6.47% New borrowings obtained
borrowings
2. Assets and Liabilities at Fair Value
                                                                                                                                       Unit: RMB
                                         Gain/loss on      Cumulative
                                                                              Impairment
                                          fair-value        fair-value                          Purchased in the     Sold in the
                        Beginning                                            allowance for
    Item                            changes in the       changes                               Reporting          Reporting        Ending amount
                         amount                                              the Reporting
                                          Reporting         charged to                                Period            Period
                                                                                 Period
                                            Period            equity
Financial assets
1.Financial assets
at    fair   value
through profit or       1,543,843,738      -54,348,583                   -                  -                    -     768,100,000        721,395,155
loss (exclusive of
derivatives)
2.Derivative
                         687,431,897      -298,956,859                   -                  -         27,709,511                   -      416,184,549
financial assets
3.
Available-for-sale      1,159,165,770                    - -438,844,906         96,717,659        2,179,984,949        886,421,741      1,917,166,413
financial assets
Subtotal           of
                        3,390,441,405     -353,305,442 -438,844,906             96,717,659        2,207,694,460      1,654,521,741      3,054,746,117
financial assets
Financial
                         442,942,029      -204,115,699                   -                  -                    -      26,729,263        212,097,067
liabilities
TCL Corporation                                                                                     Annual Report 2018
Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes ■    No
3. Restricted Asset Rights as at the Period-End
Restricted         Carrying                                     Reason for restriction                                     As %         Remark
  assets           amount                                                                                                 of total
                  (RMB’000                                                                                               assets
                       )
Monetary              868,900         Deposited by the finance subsidiary in the central bank as the required              0.45%       Restricted
  capital                                                               reserve
Monetary              224,940                                  Other monetary capital                                      0.12%       Restricted
  capital
Accounts               47,090                             Factored or put in pledge for loans                              0.02%       In pledge
receivable
  Fixed                                                         As collateral for loan                                      22.37     Collateralize
  assets          43,113,350                                                                                                     %           d
Intangible                                                      As collateral for loan                                     2.25%      Collateralize
  assets           4,337,850                                                                                                                 d
  Total                                                                                                                     25.21
                  48,592,130                                                                                                     %
V Investments Made
1. Total Investment Amount
 Total investment amount in 2018 (RMB)              Total investment amount in 2017 (RMB)                            Change (%)
                                  12,577,112,494                                  10,178,152,467                                            23.57%
2. Major Equity Investments Made in the Reporting Period
                                                                                                                                        Unit: RMB
             Core                          The                                            Investm             Return                         Index
                                                                                                                         Any
            busines              Amoun Compa                                                ent     Project     on                               to
                       Way of                       Fundin              Term of Type of                                  legal    Disclos
Investe s scope                    t of    ny’s               Joint                      progres     ed      investm                       disclose
                       investm                        g                 investm investm                                 matter ure date
    e         of                 investm interest            investor                     s as at earning ent in                                 d
                           ent                      source                ent      ent                                  involve (if any)
            investe                ent      in                                            balance      s      Reporti                       informa
                                                                                                                           d
              e                           investe                                          sheet                ng                          tion (if
TCL Corporation                                                                                   Annual Report 2018
                                             e                                             date               Period                            any)
Shenzh
en                                                          Shenzh
China                                                       en
Star       G11                                              Major
Optoele UHD                                                 Industr
                     With                                                        UHD                                                        http://w
ctronics New                                                y
                     moneta 7,000,0               Self-fu                        new                                                22 May ww.cni
Semico Display                           35.89%             Develo 7 years                                -            -   None
                     ry        00,000             nded                           display                                              2018 nfo.co
nductor Product                                             pment
                     capital                                                     s                                                          m.cn
Display ion                                                 Fund
Technol Line                                                One
ogy                                                         Co.,
Co.,                                                        Ltd.
Ltd.
Guangd                                                      Guangd
ong                                                         ong
           G11
CSOT                                                        Utrust
           UHD
Industri             With                                   Industri             UHD                                                        http:/
           New
al                   moneta 2,000,0               Self-fu al                     new                                                3 Augu /www.c
           Display                       17.54%                        9 years                            -            - None
Equity               ry        00,000             nded      Investm              display                                            st 2018 ninfo.c
           Product
Invest               capital                                ent                  s                                                          om.cn
           ion
ment                                                        Fund
           Line
Co.,                                                        Partner
Ltd.                                                        ship
                               9,000,0
Total          --         --                 --        --         --      --         --     --           --           --   --         --         --
                               00,000
3. Major Non-Equity Investments Ongoing in the Reporting Period
□ Applicable ■ Not applicable
4. Financial Investments
(1) Securities Investments
                                                     Gain/Lo
                                                                             Accumu
                                                       ss on
                                                                               lated
                                                     fair-valu                         Purchas         Gain/los
                            Initial         Beginni                          fair-valu         Sold in
Security Security Security          Measure               e                              ed in           s in   Ending Account Funding
                                               ng                                 e            Reporti
                           investm ment              changes                           Reporti         Reporti carrying
  type    code     name                     carrying                         changes             ng
                                    method               in                               ng              ng    amount ing title source
                           ent cost         amount                           charged           Period
                                                      Reporti                           Period          Period
                                                                                 to
                                                        ng
                                                                              equity
                                                      Period
-          -          -                  -         -             -       -           -       -       -            -             -          --
TCL Corporation                                                                                       Annual Report 2018
Other                 securities
investments         held       at           -     --             -         -         -            -      -         -         -    --        --
period-end
Total                                       -     --             -         -         -            -      -         -         -    --        --
Disclosure          date      of
announcement on Board’s
                                    39 March 2017
consent      for      securities
investments
Disclosure          date      of
announcement on general
meeting’s    consent         for 14 April 2017
securities investments (if
any)
(2) Investments in Derivative Financial Instruments
Funding source                                  Mostly foreign-currency revenue
Legal matters involved (if applicable) Not applicable
Disclosure          date      of        board
announcement approving derivative 28 April 2018
investment (if any)
Disclosure date of general meeting
announcement approving derivative Not applicable
investment (if any)
                                                In order to effectively manage the exchange and interest rate risks of foreign currency assets,
                                                liabilities and cash flows, the Company, after fully analyzing the market trend and predicting
                                                the operation (including orders and capital plans), adopts forward foreign exchange
                                                contracts, options and interest rate swaps to avoid future exchange rate and interest rate
                                                risks. As its business scale changes subsequently, the Company will adjust the exchange rate
Analysis     of     risks     and      control risk management strategy according to the actual market conditions and business plans.
measures associated with derivative Risk analysis:
investments held in Reporting Period 1. Market risk: the financial derivatives business carried out by the Group belongs to
(including but not limited to market hedging and trading business related to main business operations, and there is a market risk
risk,   liquidity     risk,   credit     risk, of loss due to the fluctuation of underlying interest and exchange rates, which lead to the
operational risk, legal risk, etc.)             fluctuation of prices of financial derivatives;
                                                2. Liquidity risk: the derivatives business carried out by the Group is an over-the-counter
                                                transaction operated by a financial institution, and there is a risk of loss due to paying fees to
                                                the bank for the operations of evening up or selling the derivatives below the buying prices;
                                                3. Performance risk: the Group conducts the derivative business based on rolling budgets for
                                                risk management, and there is a risk of performance failure due to deviation between the
TCL Corporation                                                                               Annual Report 2018
                                         actual operating results and budgets;
                                         4. Other risks: in the case of specific business operations, if the operator fails to finish the
                                         prescribed procedures for report or approval, or fails to record the financial derivative
                                         business information accurately, timely and completely, it may result in loss of derivative
                                         business or trading opportunities. Moreover, if the trading operator fails to fully understand
                                         the terms of transaction contracts or product information, the Group will face the legal risks
                                         and transaction losses therefrom.
                                         Measures taken for risk control:
                                         1. Basic management principles: the Group strictly follows the hedging principle and the
                                         main purpose of locking costs and avoiding risks. It is required that the financial derivatives
                                         business to be carried out matches the variety, size, direction and duration of spot goods, and
                                         no speculative trading should be involved. In the selection of hedging instruments, only
                                         simple financial derivatives that are closely related to the main business operation and meet
                                         the requirements of hedge accounting treatment should be selected, and avoid complex
                                         business that exceeds the prescribed business scope or is difficult to recognize in terms of
                                         risk and pricing;
                                         2. The Group has formulated a special risk management system tailored to the risk
                                         characteristics of the financial derivatives business, covering all key aspects such as
                                         pre-emptive prevention, in-process monitoring and post-processing. Professional personnel
                                         are rationally arranged for investment decision-making, business operations and risk control.
                                         Investment participants are required to fully understand the risks of financial derivatives
                                         investment and strictly implement the business operations and risk management systems of
                                         derivatives. Before starting the derivatives business, the holding company must submit to
                                         the management department of the Group detailed business reports including its internal
                                         approval, main product terms, operational necessity, preparations, risk analysis, risk
                                         management strategy, fair value analysis and accounting methods, and special summary
                                         reports on business operated. Operations can be implemented only after getting opinions
                                         from the professional department of the Group;
                                         3. Relevant departments should track the changes in the open market price or fair value of
                                         financial derivatives, timely assess the risk exposure changes of invested financial
                                         derivatives, and make reports to the board of directors on business development;
                                         4. When the combined impairment of the fair value of derivatives and changes in the value
                                         of the assets (if any) used for risk hedging by the Group results in a total loss or floating loss
                                         amounting to 10% of the recently audited net assets of the Company, and the absolute
                                         amount exceeds RMB10 million, the Group will disclose it in a timely manner.
                                         With the rapid expansion of overseas sales, the Company keeps following the above rules in
Changes in market prices or fair value
                                         the operation of forward foreign exchange contracts, interest rate swap contracts and futures
of    derivative    investments     in
                                         contracts to avoid and hedge foreign exchange risks arising from operation and financing. It
Reporting Period (fair value analysis
                                         saw a gain of RMB52.938 million for the Reporting Period. The fair value of derivatives is
should include measurement method
                                         determined by real-time quoted price of the foreign exchange market, based on the
and    related     assumptions    and
                                         difference between the contractual price and the forward exchange rate quoted immediately
parameters)
                                         in the foreign exchange market on the balance sheet date.
Major changes in accounting policies No major changes
TCL Corporation                                                                               Annual Report 2018
and specific accounting principles
adopted for derivative investments in
Reporting Period compared to last
reporting period
                                           In view of the fact that nearly half of the main business of the Company is 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,
Opinion of independent directors on
                                           formulating reasonable accounting policies and specific accounting principles, setting limits
derivative   investments    and     risk
                                           for risk exposure management, and operating simple financial derivatives. The contracting
control
                                           agent for financial derivatives business of the Company is a sound financial agent with good
                                           credit standing.
                                           The independent directors believe that the financial derivatives transactions carried out by
                                           the Company in 2018 are closely related to the daily operation needs of the Company with
                                           controllable risks. The business is in line with the interests of minority shareholders of the
                                           company and the relevant laws and regulations.
Positions of derivative investments at the period-end:
                                                                                                                              Unit: RMB’000
                                                                                                                Ending contractual amount
                                   Beginning amount                   Ending amount                              as % of the Company’s
                                                                                               Gain/loss in
                                                                                                                    ending net assets
    Type of contract                                                                            Reporting
                                                                                                              Contrac
                            Contractual           Actual         Contractual      Actual          Period
                                                                                                                 tual         Actual amount
                              amount              amount          amount          amount
                                                                                                               amount
1. Forward forex
                                                                                                                 415.9                   14.1
contracts                    20,369,370             697,160      25,316,330         860,700
                                                                                                 52,938
2. Interest rate swaps        4,168,820              83,380       4,653,250         139,600                       76.4                    2.3
3. Currency swaps             1,633,550              31,840       3,115,890         155,790                       51.2                    2.6
Total                        26,171,740             812,380      33,085,470       1,156,090      52,938          543.5
5. Use of Funds Raised
(1) General Information about the Use of Raised Funds
                                                                                                                              Unit: RMB’000
  Year of     Way of       Total       Used in      Cumulativ      Amount      Cumulativ Cumulativ     Unused      Purpose         Amount
  raising      raising     amount           the       ely used       with      e amount    e amount    amount           and       being idle
TCL Corporation                                                                                            Annual Report 2018
                               raised     Current                     changed          with               with                  whereabou for more
                                           Period                     use in the     changed           changed                    ts of the         than two
                                                                      Reporting        use             use as %                    unused                years
                                                                       Period                           of total                  amount
                                                                                                        amount
                                                                                                         raised
            Public
            offering to
2018                          3,000,000 3,000,000 3,000,000               -                -               -             -               -                 -
            qualified
            investors
Total             --          3,000,000 3,000,000 3,000,000               -                -               -             -               --                -
                                                                      Remark
During the Reporting Period, TCL Corporation raised a total of RMB3 billion through the Corporate Bonds Publicly Offered in
2018 to Qualified Investors (Phase 1) and (Phase 2), which was used up for supplementing the working capital and repaying loans.
(2) Promised Use of Raised Funds
□ Applicable ■ Not applicable
(3) Changed Use of Raised Funds
□ Applicable ■ Not applicable
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
                                                                                               Relatio
                                          Net               Ratio
                                                                                                nship
                                         profit             of the
                                                                                               betwee                Credito Execute
                                        contrib              net
                                                                                                n the     Owners       r’s     d as
                                        uted to             profit
                                                                                               transact hip of       rights schedul
                                          the               contrib
                                                                                                 ion           the    and      ed or                      Index
                               Transac Compa Effect uted by                        Related
                                                                                                party       asset    liabiliti not; if                         to
Transac                         tion    ny from on the the sale Pricing -party
          Asset Date of                                                                        and the involve         es       not,          Disclos disclose
  tion                          price     the     Compa of the principl transact
           sold        sale                                                                    Compa       d has     involve    give          ure date         d
 party                         (RMB’ period- ny (see asset to            e        ion or
                                                                                                 ny       been all d have reasons                        informa
                                000)     begin    note 3)    the                     not
                                                                                               (applica transfer been all       and                        tion
                                         to the             Compa
                                                                                               ble for     red or transfer measur
                                        date of              ny’s
                                                                                               related-        not   red or      es
                                         sale                total
                                                                                                party                  not     taken
                                        (RMB’              profit
                                                                                               transact
                                         000)                (%)
                                                                                                ions)
TCL Corporation                                                                        Annual Report 2018
         100%                               The
         interest                           Compa
         of TCL                             ny sold
         Industri                           the
         es,                                intellig
         100%                               ent
         interest                           termina
         of TCL                             l
         Househ                             (consu
         old                                mer
         Electric                           electron
         Applian                            ics,                            As Mr.
         ce,                                home           The              Li
         100%                               applian        deal is          Dongsh
         interest                           ces,           priced           eng is a
         of                                 etc.)          upon             director
         Hefei                              and            friendly         of both
         Home                               support        negotiat         TCL
TCL      Applian                            ing            ion of           Corpor
Industri ces,                               busines        the              ation
es       56.50%                             ses in         transact         and
                    7                                                                         Not
Holdin interest               4,760,0       this           ion              TCL
                    January             -              -              Yes              Not    applica Yes
gs       in Cool               00.00        deal for       parties          Holdin
                    2019                                                                      ble
(Guang Friends                              restruct       accordi          gs, TCL
dong)    Technol                            uring.         ng to            Holdin
Inc.     ogy,                               Upon           the              gs is
         100%                               the            assesse          conside
         interest                           deal,          d value          red a
         of                                 the            of the           related
         Koyoo                              Compa          target           party of
         Online                             ny’s          assets.          TCL
         Service                            diversif                        Corpor
         , 100%                             ied                             ation.
         interest                           busines
         of TCL                             s
         Technol                            structur
         ogy                                e will
         Park,                              be
         75%                                simplifi
         interest                           ed to
         in JDH,                            focus
         and                                on the
         36.00%                             semi-co
         interest                           nductor
TCL Corporation              Annual Report 2018
       in         display
       Getech     and
                  materia
                  l
                  busines
                  s.
                  Accordi
                  ng to
                  the
                  restruct
                  uring
                  arrange
                  ments,
                  TCL
                  senior
                  manage
                  ment
                  personn
                  el
                  formerl
                  y
                  workin
                  g in the
                  target
                  compan
                  ies
                  have
                  resigne
                  d. As
                  the
                  target
                  assets
                  were
                  still
                  include
                  in the
                  consoli
                  dated
                  financia
                  l
                  stateme
                  nts of
                  the
                  Reporti
TCL Corporation                                                                          Annual Report 2018
                                             ng
                                             Period,
                                             this
                                             restruct
                                             uring
                                             had no
                                             impact
                                             on the
                                             Compa
                                             ny’s
                                             financia
                                             l
                                             position
                                             and
                                             operati
                                             ng
                                             results
                                             of the
                                             Reporti
                                             ng
                                             Period.
Note: The Proposal on the Review of the Report of TCL Corporation on the Sale of Major Assets & Related-Party Transaction (Draft)
and Its Summary, as well as the relevant proposals, were approved at the 13th meeting of the 6th Board of Directors on 7 December
2018 and later at the First Extraordinary General Meeting of 2019 on 7 January 2019. For details of this restructuring, see the Report
of TCL Corporation on the Sale of Major Assets & Related-Party Transaction (Draft), its revised version and other relevant
documents disclosed on www.cninfo.com.cn dated 8 and 22 December 2018, respectively. The restructuring is currently progressing
on track. The Board will urge the transaction parties to execute the duties of this restructuring, so as to ensure a smooth
implementation of the project and protect shareholder interests.
2. Sale of Major Equity Interests
□ Applicable ■ Not applicable
VII Major Subsidiaries
                                                                                                                          Unit: RMB
                       Relati
                      onship Princi                                                                                            Net profit
                       with   pal    Registered                                             Operating                        attributable to
    Name                 activit                    Total assets      Net assets                      Operating profit
                       the            capital                                                revenue                         the Company as
                       Comp       y                                                                                            the parent
                        any
TCL Corporation                                                                    Annual Report 2018
TCL       Electronics Subsid Colour HK$2.333
                                                    23,845,922,677   7,754,133,579 39,098,170,408       970,054,426    801,439,035
Holdings Limited         iary   TVs    billion
Shenzhen         China
Star Optoelectronics
                         Subsid LCD    RMB19.822
Technology        Co.,                             116,348,577,621 47,689,154,902 27,666,368,029    2,596,202,783     2,215,225,113
                         iary   panels billion
Ltd.       (as       a
consolidated group)
VIII Structured Bodies Controlled by the Company
□ Applicable ■ Not applicable
IX Prospects
2019 is a year of opportunities and challenges. What we are facing currently is profound change in
external environment. Setbacks in economic globalization, challenges to multilateralism, shocks in
the international financial market, and especially the China-US economic and trade frictions, have
an adverse effect on market expectations. Economic performance is generally stable with changes,
some of which cause concern. From the perspective of macro environment, China is still facing a
complicated and challenging environment for its development with many predictable and
unpredictable risks and challenges in the future. At the same time, however, China remains in a
stage of important strategic opportunities for its development with adequate resilience, huge
potentials and vitality for innovation bursting out continuously. In light of the new challenges and
historical opportunities, the country will continue to drive the transformation and upgrading of
traditional industries, center around the promotion of the high-quality development of
manufacturing industry, reinforce industrial foundation and technical innovation capabilities,
advance the integrated development of advanced manufacturing and modern service industries, and
accelerate the building of a strong manufacturing country. The development of new growth drivers
will make progress rapidly.
Through the reform and reorganization in the previous stages, the semi-conductor display and
material business has become the Company’s core business. As a representative of national
competitiveness in China’s semi-conductor display area, it has vast development prospects and
huge potentials for growth. As one of the strategic emerging industries prioritized, semi-conductor
TCL Corporation                                                      Annual Report 2018
display has been listed into the country’s “12th Five-Year Plan”, “13th Five-Year Plan” and
“Outline of the National Program for Long- and Medium-Term Scientific and Technological
Development (2006-2020)”. Driven by increasing demands in the terminal market, as a big country
of manufacturing and consumption at the intelligent terminal, China fully benefits from the general
trend of focus shift of global display area by virtue of its advantages in investment, industrial chain
and cost. While high-end display products are in short supply with vast market prospects and space,
as the fastest growing market with the biggest industrial volume of semi-conductor display, China
will usher in the opportunity of standing in the global leading position and driving the industrial
development of next-generation semi-conductor display. Semi-conductor display products are
widely used in TVs, computers, mobile phones and other terminal devices. With the rapid
development of information and intelligence, the display demands and new products and
applications targeting commercial, household and mobile application scenarios keep arising; the
booming development of industrial control display, commercial display, educational white board,
E-sports monitor, tablet, vehicle-mounted and VR/AR products are improving and diversifying the
efficiency and user experience of work, entertainment, learning, life and other activities and will
bring sustained growth to the display industry.
Through strategic business transformation, the Group has optimized its asset structure and business
flows, improved operating efficiency and benefits, as well as increased comprehensive
competitiveness and corporate value. The Group is positioned as a technology conglomerate with a
prominent core business, clear development strategies, a clear business structure and high operating
efficiency. It will further concentrate its resources to increase CSOT’s business scale and market
competitiveness, so as to strengthen and deepen the semi-conductor display and material industrial
chain. It will also explore integration and expansion opportunities in the area of key, high-end and
basic information electronic devices.
To concentrate on the core business and increase the market share and competitiveness of the
semi-conductor display and material business
The Group will concentrate its capital, human and technology resources on the semi-conductor
display and material business. On one hand, the Group will take technological capability
improvement as the most important strategy in a bid to promote leading products and technologies
TCL Corporation                                                      Annual Report 2018
in addition to leading efficiency. Through developing the next-generation new display technology
and materials, the Group will build up core competitiveness for its high-end products. On the other
hand, the Group will continue to give play to the scale advantage of concentrated production lines,
as well as improve operating efficiency and various economic indicators. A larger scale and an
improved product structure of CSOT will help further promote the Group’s position in the industry,
in addition to better operating efficiency and profitability.
To develop products and customers in various application scenarios and promote the
horizontal development strategy
After the Restructuring, the Group becomes an operation platform with the semi-conductor display
and material business as the core. It will independently develop new products and applications for a
more open market and a wider range of customer needs, so as to further expand its market share.
Meanwhile, CSOT will continue to optimize the product and customer structures of the existing
display business, while proactively developing products for new application areas such as
commercial display, notebook computers and vehicle-mounted display. By focusing on segment
markets with high added value, it will beef up business transformation.
To give play to the advantage of the industrial finance business so as to contribute steadily
growing operating results
The finance and venture capital businesses of the Group provide sufficient resource assurance for
the Group’s member enterprises and the major partners of the Group’s industrial chain. Through
domestic and overseas finance licenses covering finance companies, small loans, online loans,
factoring, finance leases and asset management, the industrial chain finance business provides
various financial services to related enterprises. It helps increase capital utilization efficiency and
cut down finance costs under controllable risk. It also uses the surplus capital for more gains. The
investment and venture capital business concentrates on the cutting-edge technologies in relation to
the core business. In addition to helping build the semi-conductor display and material industrial
eco-chain, this business also takes into account venture capital projects with stable earnings. It has
successfully invested in a batch of star technology firms. The industrial finance & investment and
venture capital business can help concentrate on the core businesses, as well as offset the impact of
cyclical swings on the semi-conductor display and material sector.
TCL Corporation                                                            Annual Report 2018
To increase investment in basic technology research and development for new competitive
edges
The Group will strengthen AI and big data R&D. By setting up R&D centres around the world and
introducing global leading talent, the Group will achieve better abilities in algorithm, data and
application scenario construction in a fast pace, as well as improve manufacturing efficiency and
product application experience. Meanwhile, in the area of intelligent manufacturing and industrial
Internet, the Group will keep developing such products and solutions with independent core
intellectual properties (IP). It will provide an industrywide advanced industrial Internet platform,
build up intelligent, digital and modular management systems, as well as offer intelligent
manufacturing solutions for various scenarios.
X Communications with the Investment Community such as Researches, Inquiries and
Interviews
1. During the Reporting Period
                                                   Type of communication          Index to main information
              Date        Way of communication
                                                             party                     communicated
17 January 2018        By visit                  Institutional investor     www.cninfo.com.cn
31 January 2018        By visit                  Institutional investor     www.cninfo.com.cn
5 March 2018           By visit                  Institutional investor     www.cninfo.com.cn
13 March 2018          By visit                  Institutional investor     www.cninfo.com.cn
22 March 2018          By visit                  Institutional investor     www.cninfo.com.cn
                       2017 Annual Results
3 May 2018                                       Institutional investor     www.cninfo.com.cn
                       Briefing
7 May 2018             By visit                  Institutional investor     www.cninfo.com.cn
10 May 2018            By visit                  Institutional investor     www.cninfo.com.cn
17 May 2018            By visit                  Institutional investor     www.cninfo.com.cn
24 May 2018            By visit                  Institutional investor     www.cninfo.com.cn
29 May 2018            By visit                  Individual investor        www.cninfo.com.cn
29 May 2018            By visit                  Institutional investor     www.cninfo.com.cn
5 June 2018            By visit                  Institutional investor     www.cninfo.com.cn
6 July 2018            By visit                  Institutional investor     www.cninfo.com.cn
18 July 2018           By visit                  Institutional investor     www.cninfo.com.cn
TCL Corporation                                                                      Annual Report 2018
27 July 2018                 By visit                       Institutional investor    www.cninfo.com.cn
27 July 2018                 By visit                       Institutional investor    www.cninfo.com.cn
                             2018 Interim Results
29 August 2018                                              Institutional investor    www.cninfo.com.cn
                             Briefing
30 October 2018              By visit                       Institutional investor    www.cninfo.com.cn
31 October 2018              By visit                       Institutional investor    www.cninfo.com.cn
31 October 2018              By visit                       Institutional investor    www.cninfo.com.cn
7 November 2018              By visit                       Institutional investor    www.cninfo.com.cn
Times of communications
Number of institutions communicated with
Number of individuals communicated with
Number of other communication parties
Tip-offs    or    leakages      of      substantial
supposedly-confidential   information       during None
communications
TCL Corporation                                                                           Annual Report 2018
                                            Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)
                                           Special statement about the cash dividend policy
In compliance with the Company’s Articles of Association and
                                                                      Yes
resolution of general meeting
Specific and clear dividend standard and ratio                        Yes
Complete decision-making procedure and mechanism                      Yes
Independent directors faithfully performed their duties and
                                                                      Yes
played their due role
Non-controlling interests are able to fully express their opinion
                                                                      Yes
and desire and their legal rights and interests are fully protected
In case of adjusting or changing the cash dividend policy, the No changes to the dividend policy and the relevant conditions
conditions and procedures involved are in compliance with and procedures are in compliance with applicable regulations and
applicable regulations and transparent                                transparent
The 2016 annual equity distribution plan: based on the share capital of 12,213,681,742 shares on 27
April 2017, a cash dividend of RMB0.8 (tax inclusive) per 10 shares was to be distributed to the
shareholders, totaling RMB977,094,539.36. The retained earnings will carry forward for future
distribution. Meanwhile, there was no bonus issue from either profit or capital reserves for the year.
The 2017 annual equity distribution plan: based on the share capital of 13,514,972,063 shares on 27
April 2018 (plus the reserved restricted shares for distribution, a total of 13,550,916,063 shares), a
cash dividend of RMB1 (tax inclusive) per 10 shares was to be distributed to the shareholders,
totaling RMB1,355,091,606.3. The retained earnings will carry forward for future distribution.
Meanwhile, there was no bonus issue from either profit or capital reserves for the year.
The 2018 annual equity distribution plan: based on the share capital of 13,402,888,507 shares on 19
March 2019 that are eligible for profit distribution (the total share capital of 13,549,648,507 shares
minus the 146,760,000 shares in the Company’s special securities account for repurchase that are
not eligible for profit distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be
distributed to the shareholders, totaling RMB1,340,288,851. The retained earnings of
RMB7,628,922,531 will carry forward for future distribution. Meanwhile, there will be no bonus
issue from either profit or capital reserves for the year under review.
TCL Corporation                                                                             Annual Report 2018
Cash dividend for ordinary shareholders in the past three years (including the Reporting Period):
                                                                                                                            Unit: RMB
                                                    Net profit
                                                  attributable to
                                                     ordinary
                                                                                             Cash dividends in
                             Cash dividends     shareholders of the                         other forms (such as
    Year                                                          A as % of B (%)                              C as % of B (%)
                       (tax inclusive) (A)      listed company in                            share repurchase)
                                                                                                     (C)
                                                   consolidated
                                                statements for the
                                                     year (B)
2018                            1,340,288,851         3,468,207,405               38.65%                       -                      -
2017                          1,355,091,606.3         2,664,396,006               50.86%                       -                      -
2016                           977,094,539.36      1,602,125,331.00               61.00%                       -                      -
Indicate whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that the
Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to the ordinary
shareholders are positive.
□ Applicable ■ Not applicable
II Final Dividend Plan for the Reporting Period
Bonus issue from profit (share/10 shares)
Cash dividend/10 shares (RMB) (tax inclusive)                                                                                     1.00
Bonus issue from capital reserves (share/10 shares)
Share base (share)                                                                                                     13,402,888,507
Total cash dividends (RMB) (tax inclusive)                                                                              1,340,288,851
Distributable profits (RMB)                                                                                             8,969,211,382
Cash dividends as % of total profits to be                                                                                       100%
distributed (%)
                                                           Cash dividend plan
Based on the share capital of 13,402,888,507 shares on 19 March 2019 that are eligible for profit distribution (the total share capital
of 13,549,648,507 shares minus the 146,760,000 shares in the Company’s special securities account for repurchase that are not
eligible for profit distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be distributed to the shareholders,
totaling RMB1,340,288,851.
                                                Cash and/or stock dividend plan in detail
Based on the share capital of 13,402,888,507 shares on 19 March 2019 that are eligible for profit distribution (the total share capital
of 13,549,648,507 shares minus the 146,760,000 shares in the Company’s special securities account for repurchase that are not
TCL Corporation                                                                          Annual Report 2018
eligible for profit distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be distributed to the shareholders,
totaling RMB1,340,288,851.
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and
Acquirers, as well as the Company Itself and other Entities Fulfilled in the Reporting Period
or Ongoing at the Period-end
                                                            Type
                                                             of                                  Date of
                                                                                                              Term of    Fulfillme
            Commitment                      Promisor        com       Details of commitment    commitme
                                                                                                            commitment      nt
                                                            mit                                 nt making
                                                            ment
                                                                    1. Before and after this
                                                                    transaction, I/we as an
                                                                    enterprise or our controlled
                                                                    enterprises shall have no
                                                                    horizontal competition with
                                                                    the principal activities of
                                                                    TCL Corporation or its
                                                                    subsidiaries.
                                                                    2. After this transaction,
                                                                    I/we as an enterprise shall
                                                                    take active measures to
                                                                    avoid carrying out business
                                                                    activities that are or may be
                                                                    in competition with the
                                                                    principal activities of TCL
                                                            Abo     Corporation or its
                                                             ut     subsidiaries, and shall urge           During the
                                                                    our controlled enterprises to
                                                            avoi    do so.                                 period when
                                                            ding    3. In the event that I/we as           being the
                                         Li Dongsheng,              an enterprise or any
Commitments made in major asset                             hori                                           biggest        No
                                        Jiutian Liancheng           enterprise controlled by      December
restructuring                                               zont    me/us as an enterprise                 shareholder violations
                                      and Donging Huarui            obtains an opportunity for a    2018
                                                             al                                            of TCL
                                                                    new business, which
                                                            com     constitutes or may constitute          Corporation
                                                                    horizontal competition with
                                                            petit   the main business of TCL
                                                             ion    Corporation or any of its
                                                                    affiliates, I/we as an
                                                                    enterprise will make
                                                                    maximum efforts to drive
                                                                    the business opportunity to
                                                                    be provided to TCL
                                                                    Corporation or its affiliate
                                                                    on reasonable and fair terms
                                                                    and conditions in favor of
                                                                    the interests of TCL
                                                                    Corporation under the
                                                                    permission of conditions.
                                                                    4. If due to the investment
                                                                    needs of me/us as an
                                                                    enterprise or the business
                                                                    development of TCL
TCL Corporation                                                      Annual Report 2018
                                               Corporation, the business of
                                               me/us as an enterprise or
                                               any enterprise controlled by
                                               me/us as an enterprise
                                               overlaps with that of TCL
                                               Corporation, which may
                                               constitute horizontal
                                               competition, I/we as an
                                               enterprise and the enterprise
                                               controlled by me/us as an
                                               enterprise agree to solve the
                                               horizontal competition
                                               problem arising thereof
                                               within the time limit
                                               specified then.
                                               5. During the period of
                                               being the first majority
                                               shareholder of TCL
                                               Corporation, the
                                               aforementioned
                                               commitments are
                                               unconditional and
                                               irrevocable. I/we as an
                                               enterprise will make
                                               comprehensive and timely
                                               joint compensations in full
                                               amount to TCL Corporation
                                               for any losses incurred from
                                               the violation of the
                                               aforementioned
                                               commitments.
                                               1. I/we as an enterprise will
                                               minimize related-party
                                               transactions between me/us
                                               as an enterprise as well as
                                               any enterprise controlled by
                                               me/us as an enterprise and
                                               TCL Corporation as well as
                                       Abo     any of its affiliates.
                                               2. In respect of any
                                        ut     unavoidable or reasonable
                                       redu    related-party transaction,
                                               I/we as an enterprise as well
                                       cing    as the enterprise controlled              During the
                                       and     by me/us as an enterprise                 period when
                                               and TCL Corporation as
                                       cont    well as its affiliate shall deal          being the
                    Li Dongsheng,
                                       rolli   with it in accordance with                biggest        No
                   Jiutian Liancheng           fair market principles and       December
                                        ng     normal commercial                         shareholder violations
                  and Donging Huarui
                                       relat   conditions, ensure the                    of TCL
                                               fairness of related-party
                                       ed-p    transaction prices, perform               Corporation
                                       arty    the decision-making
                                               procedures for related-party
                                       trans   transactions in accordance
                                       actio   with laws, undertake not to
                                               make use of the transaction
                                        ns     to transfer the funds or
                                               profits of TCL Corporation
                                               illegally, and undertake not
                                               to take advantage of the
                                               transaction to infringe upon
                                               the legitimate rights and
                                               interest of TCL Corporation
                                               and its shareholders.
TCL Corporation                                                     Annual Report 2018
                                               3. I/we as an enterprise and
                                               the enterprises controlled by
                                               me/us as an enterprise will
                                               not request TCL
                                               Corporation or any of its
                                               affiliates to offer more
                                               favorable conditions than
                                               the conditions offered to an
                                               independent third party in
                                               any fair market transaction.
                                               4. During the period of
                                               being the first majority
                                               shareholder of TCL
                                               Corporation, the
                                               aforementioned
                                               commitments are
                                               unconditional and
                                               irrevocable. I/we as an
                                               enterprise will make
                                               comprehensive and timely
                                               joint compensations in full
                                               amount to TCL Corporation
                                               for any losses incurred from
                                               the violation of the
                                               aforementioned
                                               commitments.
                                               Upon the completion of this
                                               transaction, I/we as an
                                               enterprise will continue to
                                               exercise the shareholder’s
                                               rights in accordance with
                                               laws, regulations and the
                                               Articles of Incorporation of
                                               TCL Corporation and
                                               maintain the independence
                                               of TCL Corporation in
                                               assets, personnel, finance,
                                       Abo     business and institution. The
                                               specific contents are as
                                        ut     follows:
                                       keep    (I) Commitment to the                  During the
                                               personnel independence
                                       ing                                            period when
                                               from TCL Corporation
                                       the     I/we as an enterprise                  being the
                    Li Dongsheng,              undertake to maintain
                                       liste                                          biggest        No
                   Jiutian Liancheng           personnel independence        December
                                        d      from TCL Corporation.                  shareholder violations
                  and Donging Huarui           General managers, deputy        2018
                                       com                                            of TCL
                                               general managers, financial
                                       pany    principals, board secretaries          Corporation
                                               and other senior managers
                                       inde
                                               of TCL Corporation will not
                                       pend    serve in any position other
                                               than Director and
                                       ent
                                               Supervisor in any enterprise
                                               which is a wholly-owned or
                                               holding subsidiary of me/us
                                               as an enterprise or any other
                                               subsidiary over which I/we
                                               as an enterprise has control
                                               (hereinafter referred to as
                                               “the subsidiaries”). They
                                               will not be paid salaries in
                                               the subsidiaries of me/us as
                                               an enterprise. The financial
                                               personnel of TCL
TCL Corporation                         Annual Report 2018
                  Corporation will not work in
                  the subsidiaries of me/us as
                  an enterprise on a part-time
                  basis.
                  (II) Commitment to the
                  asset independence and
                  completeness of TCL
                  Corporation
                  1. I/we as an enterprise
                  undertake that TCL
                  Corporation has
                  independent and complete
                  assets.
                  2. I/we as an enterprise
                  undertake that TCL
                  Corporation has no funds or
                  assets misappropriated by
                  me/us as an enterprise or the
                  subsidiaries of me/us as an
                  enterprise.
                  (III) Commitment to the
                  financial independence of
                  TCL Corporation
                  1. I/we as an enterprise
                  undertake that TCL
                  Corporation establishes an
                  independent finance
                  department and an
                  independent financial
                  accounting system.
                  2. I/we as an enterprise
                  undertake that TCL
                  Corporation has standard
                  and independent financial
                  accounting policies.
                  3. I/we as an enterprise
                  undertake that TCL
                  Corporation opens accounts
                  independently in the bank
                  without sharing any bank
                  account with me/us as an
                  enterprise.
                  4. I/we as an enterprise
                  undertake that the financial
                  personnel of TCL
                  Corporation not work in the
                  subsidiaries of me/us as an
                  enterprise on a part-time
                  basis.
                  5. I/we as an enterprise
                  undertake that TCL
                  Corporation is able to make
                  financial decisions
                  independently and that I/we
                  as an enterprise not
                  intervene in the fund use of
                  TCL Corporation.
                  (IV) Commitment to the
                  institutional independence
                  of TCL Corporation
                  1. I/we as an enterprise
                  undertake that TCL
                  Corporation has an
                  independent and complete
                  organizational institution
TCL Corporation                                                                        Annual Report 2018
                                                                 and run it independently and
                                                                 autonomously.
                                                                 2. I/we as an enterprise
                                                                 undertake that the office
                                                                 institutions and production
                                                                 and operation places of TCL
                                                                 Corporation are separate
                                                                 from my subsidiaries/us as
                                                                 an enterprise.
                                                                 3. I/we as an enterprise
                                                                 undertake that the Board of
                                                                 Directors, Board of
                                                                 Supervisors and functional
                                                                 departments of TCL
                                                                 Corporation are operated
                                                                 independently without any
                                                                 affiliation with the
                                                                 functional department of us
                                                                 as an enterprise.
                                                                 (V) Commitment to the
                                                                 business independence from
                                                                 TCL Corporation
                                                                 1. I/we as an enterprise
                                                                 undertake to maintain
                                                                 business independence from
                                                                 the TCL Corporation after
                                                                 this transaction.
                                                                 2. I/we as an enterprise
                                                                 undertake that TCL
                                                                 Corporation has the assets,
                                                                 personnel, qualifications
                                                                 and capabilities for
                                                                 independent performance of
                                                                 operating activities and the
                                                                 capabilities for autonomous
                                                                 operation targeting market.
                                                                 I/we as an enterprise or the
                                                                 subsidiaries of me/us as an
                                                                 enterprise will make bear
                                                                 the corresponding
                                                                 compensation liabilities in
                                                                 accordance with laws for
                                                                 any losses incurred to TCL
                                                                 Corporation due to the
                                                                 violation of the
                                                                 commitments under the
                                                                 commitment letter.
                                                         Abo
                                                         ut
                                                                 We agree not to transfer the
                                    Hubei Changjiang     shar
                                                                 shares that we subscribe for
                                    Hezhi Hanyi Equity e                                        25       25
                                                                 within 12 months since the                         No
                                    Investment Fund      tradi                                  December December
                                                              end of TCL’s asset purchase                          violations
Commitments made in asset purchase Partnership (Limited ng                                 2017
                                                              via share offering (25
via share offering                 Partnership)         restr
                                                              December 2017).
                                                        ictio
                                                         ns
                                    Star Century         Abo We agree not to transfer the 25
                                                                                                                    No
                                    Enterprises Limited; ut      shares that we subscribe for December December
                                                                                                                    violations
                                    Linzhou Xinglan      shar within 36 months since the        2017     2020
TCL Corporation                                                         Annual Report 2018
                  Venture Investment e           end of TCL’s asset purchase
                  Management             tradi via share offering (25
                  Partnership (Limited ng        December 2017).
                  Partnership);          restr
                  Linzhou Xingyong       ictio
                  Venture Investment ns
                  Management
                  Partnership (Limited
                  Partnership);
                  Linzhou Xingyuan
                  Venture Investment
                  Management
                  Partnership (Limited
                  Partnership); and
                  Linzhou Xinglian
                  Venture Investment
                  Management
                  Partnership (Limited
                  Partnership)
                                         Abo
                                         ut      1) I shall avoid horizontal
                                         hori competition between the
                                         zont companies, enterprises or
                                         al      other business organizations
                                         com that I own, control, control
                                                                                             During the
                                         petit with others, have significant
                                                                                             period when
                                         ion, influence on and TCL
                                                                                             being TCL
                                         relat Corporation with its
                                                                                             Corporation’
                                         ed-p subsidiaries; and                  30 August                   No
                  Li Dongsheng                                                               s director,
                                         arty 2) I shall reduce and control 2013                             violations
                                                                                             supervisor
                                         trans related-parties transactions
                                                                                             or senior
                                         actio between the companies,
                                                                                             management
                                         n       enterprises or other business
                                         and organizations that I own,
                                         capit control, control with others,
                                         al      have significant influence
                                         occu on and TCL Corporation
                                         patio with its subsidiaries.
                                         n
                                         Abo I will comply with
                  Li Dongsheng; Bo
                                         ut      obligations specified in the
                  Lianming; Liao                                                 4 February Long-standi No
                                         hori management regulations for
                  Qian; Huang Xubin;                                             2015        ng              violations
                                         zont short-swing trading, insider
                  Yan Xiaolin and Shi
                                         al      trading and changes in the
TCL Corporation                                                          Annual Report 2018
                  Wanwen                com shareholding of senior
                                        petit management; I agree to
                                        ion, have me and the partnership
                                        relat enterprise recognized as
                                        ed-p persons acting in concert
                                        arty and have the number of
                                        trans shares I hold of TCL
                                        actio Corporation and that the
                                        n       partnership enterprise holds
                                        and of TCL Corporation
                                        capit calculated in consolidation
                                        al      in accordance with the
                                        occu provisions of related
                                        patio regulations such as Article
                                        n       83 of the Management
                                                Measures on the Acquisition
                                                of Listed Companies and the
                                                Articles of Incorporation
                                                when the related parties
                                                perform their legal
                                                obligations of information
                                                disclosure on major equity
                                                changes and tender offer.
                  Huizhou Investment
                  Holding Co., Ltd.;
                  Beijing Ziguang
                  Investment Co.,
                  Ltd.; Xinjiang
                  Dongxing Huarui
                  Equity Investment     Abo
                  Partnership (Limited ut
                                                We agree not to transfer the
                  Partnership);         shar
                                                shares that we subscribe for
                  Xinjiang Jiutian      e
                                                within 36 months since the                25 February No
                  Liancheng Equity      tradi                                  February
                                                end of TCL’s asset purchase              2018       violations
                  Investment            ng
                                                via share offering (25
                  Partnership (Limited restr
                                                December 2017).
                  Partnership); CDB     ictio
                  Innovation Capital    ns
                  Co., Ltd.; BOSC
                  Asset Management
                  Co., Ltd.; CDB
                  Jingcheng (Beijing)
                  Investment Fund
                  Co., Ltd.; CDB
TCL Corporation                                                        Annual Report 2018
                    Equipment
                    Manufacturing
                    Industrial
                    Investment Fund
                    Co., Ltd.; CITIC
                    Capital (Tianjin)
                    Equity Investment
                    Partnership (LLP);
                    and Tianjin
                    Chengbai
                    Investment Fund
                    Center
                                               The Company undertakes to
                                               TCL Multimedia that: The
                                               Company and its
                                               subsidiaries (other than TCL
                                               Multimedia and its
                                               subsidiaries) will not engage
                                         Abo in the manufacturing,
                                         ut    assembly and distribution of
                                         hori TV sets (“restricted
                                         zont businesses”) and will
                                         al    engage in the R&D,
                                         com manufacturing and sales of
                                         petit audio and video products
                                         ion, (excluding TV sets)
                                         relat (“related businesses”) which
                                         ed-p are not restricted businesses, 16 June   Long-standi No
Other commitments   The Company
                                         arty provided that the party           2014   ng         violations
                                         trans making the commitment or
                                         actio any party therein runs or
                                         n     engages in related
                                         and businesses through equity
                                         capit investment in Tonly
                                         al    Electronics. The distribution
                                         occu and maintenance of TV sets
                                         patio and the manufacturing,
                                         n     assembly, distribution and
                                               maintenance of information
                                               technology products related
                                               to Internet from time to time
                                               will no longer be included
                                               in the scope of restricted
                                               businesses. The termination
TCL Corporation                                                                               Annual Report 2018
                                                                      condition is that the total
                                                                      equity which TCL
                                                                      Multimedia and its
                                                                      subsidiaries hold of Cool
                                                                      Friends Technology is less
                                                                      than 15%.
                                                              Abo
                                                              ut
                                                              not
                                          Li Dongsheng;      redu
                                                                      I/We as an enterprise shall
                                          Xinjiang Jiutian    cing
                                                                      not reduce our
                                          Liancheng Equity    shar                                  19 June   19 June   No
                                                                      shareholdings in the
                                          Investment          ehol                                  2018      2019      violations
                                                                      Company within 12 months
                                          Partnership (Limited ding
                                                                      since 19 June 2018.
                                          Partnership)        s in
                                                              the
                                                              Com
                                                              pany
Fulfilled on time                         Yes
Specific reasons for failing to fulfill
commitments on time and plans for Not applicable
next step
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still
within the forecast period, explain why the forecast has been reached for the Reporting Period.
□ Applicable ■ Not applicable
Commitments made by the Company’s shareholders and transaction counterparties regarding the operating performance of the
Reporting Period:
□ Applicable ■ Not applicable
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□ Applicable ■ Not applicable
V Explanations Given by the Board of Directors, the Supervisory Committee and the
Independent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on
the Financial Statements of the Reporting Period
□ Applicable ■ Not applicable
TCL Corporation                                                                         Annual Report 2018
VI YoY Changes to Accounting Policies, Estimates and Methods
□ Applicable ■ Not applicable
VII Retrospective Restatements due to Correction of Material Accounting Errors in the
Reporting Period
No such cases in the Reporting Period.
VIII YoY Changes to the Scope of the Consolidated Financial Statements
□ Applicable ■ Not applicable
IX Engagement and Disengagement of Independent Auditor
Current independent auditor:
                                                                  Da Hua Certified Public Accountants (Special General
Name of the domestic independent auditor
                                                                  Partnership)
The Company’s payment to the domestic independent auditor
                                                                  4,050
(RMB’000)
How many consecutive years the domestic independent auditor
has provided audit service for the Company
Names of the certified public accountants from the domestic
                                                                  Zhang Yuanyuan and Li Bingxin
independent auditor writing signatures on the auditor’s report
How many consecutive years the certified public accountants
                                                                  Four and five years
have provided audit service for the Company
Note: The service years start from the day when the first audit agreement is signed between the audit firm and the Company.
Indicate whether the independent auditor was changed for the Reporting Period.
□ Yes ■ No
Indicate whether the independent auditor was changed during the audit period.
□ Yes ■ No
X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable ■ Not applicable
XI Insolvency and Reorganization
□ Applicable ■ Not applicable
TCL Corporation                                                  Annual Report 2018
XII Major Legal Matters
□ Applicable ■ Not applicable
XIII Punishments and Rectifications
□ Applicable ■ Not applicable
XIV Credit Quality of the Company as well as Its Controlling Shareholder and Actual
Controller
□ Applicable ■ Not applicable
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures
for Employees
1. On 2 March 2018, the Proposal on the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the Proposal on the
Measures for the Implementation of the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation, the Proposal on Asking the General Meeting to
Authorize the Board to Handle Matters Related to the 2018 Restricted Stock Incentive Plan and
other proposals were approved at the Sixth Meeting of the Sixth Board of Directors. Meanwhile, the
Company’s independent directors expressed their independent opinion on whether these incentive
plans would be good for the Company’s sustained development and whether the interests of the
Company and its shareholders would be jeopardized in an observable way.
2. On 2 March 2018, the Proposal on the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the Proposal on the
Measures for the Implementation of the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation, and the Proposal on the Awardee List for the 2018
Restricted Stock Incentive Plan were approved at the Third Meeting of the Sixth Supervisory
Committee.
3. Following the publication of the awardee list within the Company, the Supervisory Committee’s
Statement Regarding the Review and Publication of the Awardee List for the 2018 Restricted Stock
TCL Corporation                                                   Annual Report 2018
Incentive Plan and the Global Innovation Partner Plan of TCL Corporation was disclosed to the
public on 16 March 2018.
4. On 19 March 2018, the Proposal on the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation (Draft) and the Summary, the Proposal on the
Measures for the Implementation of the 2018 Restricted Stock Incentive Plan and the Global
Innovation Partner Plan of TCL Corporation, and the Proposal on Asking the General Meeting to
Authorize the Board to Handle Matters Related to the 2018 Restricted Stock Incentive Plan were
approved at the First Extraordinary General Meeting of 2018.
5. On 21 March 2018, the Proposal on the Grant of Restricted Stock to the Awardees, and the
Proposal on the Adjustments to the 2018 Restricted Stock Incentive Plan and the Global Innovation
Partner Plan of TCL Corporation were approved at the Seventh Meeting of the Sixth Board of
Directors and at the Fourth Meeting of the Sixth Supervisory Committee. As such, it was approved
to grant 35,944,000 restricted shares to 1,522 eligible awardees on 21 March 2018. The Company’s
independent directors expressed their independent opinion that the awardee determination method
and the grant date were in compliance with the applicable requirements.
6. On 3 April 2018, the First Meeting of the Holders of the First Top 400 and Key Personnel Stock
Ownership Plan and the Global Partner Plan of TCL Corporation was convened, where the Proposal
on the Establishment of a Management Committee for the Stock Ownership Plan and other
proposals were approved, and Fu Heping was elected as the director of this management committee.
7. On 16 May 2018, the Company disclosed the Announcement on the Completion of the Grant of
Restricted Stock for 2018. This grant had been completed by the Board. As certain awardees had
voluntarily waived their rights to some to-be-granted restricted shares due to lack of subscription
funds or other personal reasons, the number of the granted restricted shares had been reduced to
34,676,444, which were listed on 16 May 2018.
8. During the period from 22 June 2018 to 25 July 2018, Shanghai Guotai Junan Securities Asset
Management Co., Ltd., the administrator of the Company’s Stock Ownership Plan, purchased a
total of 99,148,115.00 TCL shares from the secondary market at an average price of RMB2.82/share,
TCL Corporation                                                                                        Annual Report 2018
which was funded by TCL’s specialized fund of RMB279,682,200 for the Stock Ownership Plan.
These purchased shares will be locked up from 26 July 2018 to 25 July 2019.
XVI Major Related-Party Transactions
1. Continuing Related-Party Transactions
                                                                             As % of                                     Obtaina
                                                                               total     Approv                               ble             Index
            Relation                                                                                  Over
                                                                    Total    value of       ed                   Method market                  to
               ship    Type of Specific Pricing Transact                                               the
 Related                                                            value       all      transacti                 of    price for Disclos disclose
            with the transacti transacti principl          ion                                       approve
  party                                                            (RMB’0 same-ty on line                       settleme same-ty ure date      d
            Compan        on          on         e         price                                     d line or
                                                                     00)        pe       (RMB’0                   nt         pe             informa
                   y                                                                                   not
                                                                             transacti     00)                           transacti             tion
                                                                               ons                                            ons
                       Banking Routine The
                       services services interest
                                and        rate for
                                other      the
                                financial Compan
                                services, y’s
                                includin deposits
                                g          in Bank
                                deposits, of
                                loans,     Shangha
                                financin i shall
            A legal             gs,        not be
            person              interban lower                                                                                               http://w
Bank of                                                                                                                  Not
            of the              k loans, than the                                                                                    28 April ww.cni
Shanghai                                               -           9,309.3      1.3% 714,000              Not           - applicab
            Compan              note       benchm                                                                                    2018    nfo.co
Co., Ltd.                                                                                                                le
            y’s                discount ark                                                                                                 m.cn
            director            ing,       interest
                                low-risk rate
                                wealth     stipulate
                                manage d by the
                                ment       People’s
                                and        Bank of
                                intermed China
                                iary       for the
                                services same
                                           type of
                                           deposits
                                           for the
TCL Corporation                                                                                Annual Report 2018
                                            same
                                            period,
                                            nor
                                            shall it
                                            be
                                            lower or
                                            higher
                                            than the
                                            interest
                                            rate of
                                            the
                                            Bank of
                                            Shangha
                                            i for any
                                            third-pa
                                            rty
                                            same-ki
                                            nd
                                            deposit
                                            for the
                                            same
                                            period.
                      Labour Purchas
Shenzhen A legal services es and            Raw
Thunderb person       from      sales of material                                                                                http://w
                                                                                                             Not
ird        of the     related   whole       costs +                                                                      28 April ww.cni
                                                                  80,890    1.34% 200,000       Not         - applicab
Network Compan party            TV sets processi                                                                         2018    nfo.co
                                                                                                             le
Technolo y’s                   and         ng costs                                                                             m.cn
gy Co.     director             parts,
                                etc.
CJ                    Labour Logistic Based
Speedex               services s            on
Logistics A legal from          services market
Co., Ltd. person      related   includin prices                                                                                  http://w
                                                                                                             Not
           of the     party     g                                 1,275,4            1450,00                             28 April ww.cni
                                                        --                  92.92%              Not         - applicab
           Compan               transport                             62                  0                              2018    nfo.co
                                                                                                             le
           y’s                 ation                                                                                            m.cn
           director             and
                                warehou
                                sing
                                                                  1,365,6            2,364,0
Total                                             --         --              --                --      --         --        --      --
                                                                    61.3
Large-amount sales return in detail         Not applicable
TCL Corporation                                                                                 Annual Report 2018
Give the actual situation in the
Reporting Period (if any) where an
estimate had been made for the total
                                             Not applicable
value     of    continuing   related-party
transactions by type to occur in the
Reporting Period
Reason for any significant difference
between the transaction price and the Not applicable
market reference price (if applicable)
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable ■Not applicable
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable ■ Not applicable
4. Credits and Liabilities with Related Parties
                                                                                                                          Unit: RMB’000
Related party                                                        Total capital      Total         Balance at      Reason
                    Relationship    Accounting       Balance at 1                                                                   Nature of
occupying the                                                        occupied in     repayment            31         for capital
                      with the       title of the       January                                                                      capital
 Company’s                                                           Reporting      in Reporting     December       occupatio
                     Company         Company             2018                                                                      occupation
    capital                                                             Period         Period            2018            n
Active              Associate      Other                                                                             Current       For
Industries                         receivable                                                                        account       operating
                                                        161,795.0                       72,913.1         88,881.9
International                                                                                                                      purposes
Limited
Good      Vision    Associate      Account                                                                           For selling   For
Limited                            receivable             5,453.8                        5,453.8                     products      operating
                                                                                                                                   purposes
Good      Vision    Associate      Other                                                                             Current       For
Limited                            receivable                             5,722.2                 -       5,722.2    account       operating
                                                                                                                                   purposes
Harvey              Associate      Account                                                                           Current       For
Holdings                           receivable                 43.7                          43.7                     account       operating
Limited                                                                                                                            purposes
Harvey              Associate      Interest                                                                          Current       For
Holdings                           receivable             2,411.4         2,541.3                 -       4,952.7    account       operating
Limited                                                                                                                            purposes
Harvey              Associate      Other                                                                             Current       For
Holdings                           receivable            42,353.2                        8,981.5         33,371.7    account       operating
Limited                                                                                                                            purposes
TCL Corporation                                                         Annual Report 2018
KAIOSTECH           Associate    Other                                                       Current       For
NOLOGIESI                        receivable   43,988.0   23,224.9   54,397.3     12,815.6    account       operating
NC                                                                                                         purposes
T2MobileInte        Joint        Account                                                     For selling   For
rnationalLimit      venture      receivable   15,364.8   30,997.4          -     46,362.2    products      operating
ed                                                                                                         purposes
T2MobileInte        Joint        Other                                                       Current       For
rnationalLimit      venture      receivable                   5.9          -          5.9    account       operating
ed                                                                                                         purposes
Palm Venture        Associate    Account                                                     Current       For
Group                            receivable              18,582.4          -     18,582.4    account       operating
                                                                                                           purposes
Palm Venture        Associate    Other                                                       Current       For
Group                            receivable              12,266.3          -     12,266.3    account       operating
                                                                                                           purposes
TCL Sun, Inc.       Joint        Account                                                     For selling   For
                    venture      receivable   73,999.0   26,312.6   20,639.8     79,671.8    products      operating
                                                                                                           purposes
TCL         Zhiyi   Joint        Account                                                     For selling   For
Technology          venture      receivable                                                  products      operating
                                               6,764.1   11,156.0   16,440.7      1,479.4
Huizhou Co.,                                                                                               purposes
Ltd.
Beijing             Joint        Account                                                     For selling   For
National            venture’s   receivable                                                  products      operating
Center        for   subsidiary                                                                             purposes
Open           &                                 97.5         4.0          -        101.5
Distance
Education
Co., Ltd.
Beijing             Associate    Other                                                       For selling   For
WeMed                            receivable                                                  products      operating
Medical                                        3,776.6               3,776.6                               purposes
Equipment
Co., Ltd.
Wealthy Way         Associate    Other                                                       Current       For
Group                            receivable                  88.5       10.9         77.6    account       operating
Limited                                                                                                    purposes
Guangdong           Associate    Other                                                       Current       For
Regency                          receivable                                                  account       operating
                                                184.0     5,675.0    5,859.0
Optics-Electro                                                                                             purposes
n Corp.
TCL Corporation                                                             Annual Report 2018
Huan        Tech   Associate       Other                                                         Current       For
Co., Ltd.                          receivable        2.7        19.7           -         22.4    account       operating
                                                                                                               purposes
Huan        Tech   Associate       Account                                                       For selling   For
Co., Ltd.                          receivable     565.8                   135.8         430.0    products      operating
                                                                                                               purposes
Honpe              Associate’s    Prepayment                                                    Current       For
Technology         subsidiary                                                                    account       operating
                                                 1,056.9                 1,056.9
(Shenzhen)                                                                                                     purposes
Co., Ltd.
China              Associate       Other                                                         Current       For
Merchants                          receivable                                                    account       operating
Real     Estate                                                                                                purposes
                                                           995,841.4   848,804.0    147,037.4
(Pingshan,
Shenzhen)
Co., Ltd.
Huizhou TCL        Associate’s    Account                                                       For selling   For
Real     Estate    subsidiary      receivable                                                    products      operating
                                                  241.6                   235.2           6.4
Development                                                                                                    purposes
Co., Ltd.
Huizhou            Associate’s    Interest                                                      Current       For
Gaoshengda         subsidiary      receivable                                                    account       operating
                                                                34.4           -         34.4
Technology                                                                                                     purposes
Co., Ltd.
LG      Innotek    Associate       Other                                                         Current       For
Huizhou Co.,                       receivable                    9.7           -          9.7    account       operating
Ltd.                                                                                                           purposes
LG      Innotek    Associate       Account                                                       For selling   For
Huizhou Co.,                       receivable   10,704.8                10,704.8                 products      operating
Ltd.                                                                                                           purposes
LE SHI ZHI         Key             Account                                                       For selling   For
XIN                subsidiary’s   receivable                                                    products      operating
Electronic &       minority                                 23,975.0    20,533.4      3,441.6                  purposes
Technology         shareholder
Co., Ltd.
LE SHI ZHI         Key             Prepayment                                                    For selling   For
XIN                subsidiary’s                                                                 products      operating
Electronic &       minority                      2,127.5                 2,109.8         17.7                  purposes
Technology         shareholder
Co., Ltd.
LE SHI ZHI         Key             Notes          607.3                   607.3                  For selling   For
TCL Corporation                                                             Annual Report 2018
XIN               subsidiary’s   receivable                                                     products      operating
Electronic &      minority                                                                                     purposes
Technology        shareholder
Co., Ltd.
LE SHI ZHI        Key             Other                                                          Current       For
XIN               subsidiary’s   receivable                                                     account       operating
Electronic &      minority                        800.0                        -        800.0                  purposes
Technology        shareholder
Co., Ltd.
Nanjing Zijin     Associate       Other                                                          Current       For
Chuangdong                        receivable                                                     account       operating
Investment                                                                                                     purposes
                                                              296.4            -        296.4
Partnership
(Limited
Partnership)
Qihang            Associate’s    Account                                                        For selling   For
Import&Expo       subsidiary      receivable   162,962.9   560,945.9   673,685.4     50,223.4    products      operating
rt Limited                                                                                                     purposes
Qihang            Associate’s    Interest                                                       Current       For
Import&Expo       subsidiary      receivable                    78.2           -         78.2    account       operating
rt Limited                                                                                                     purposes
Saipwell TCL      Associate       Other                                                          Current       For
Electronics                       receivable                                                     account       operating
Industrial                                                 236,839.4           -    236,839.4                  purposes
Technology
Co., Ltd.
Saipwell TCL      Associate       Dividend                                                       Dividend      For
Electronics                       receivable                                                     distributio   operating
Industrial                                          88.0         4.5           -         92.5        n         purposes
Technology
Co., Ltd.
Saipwell TCL      Associate       Account                                                        For selling   For
Electronics                       receivable                                                     products      operating
Industrial                                     167,673.8     5,977.1           -    173,650.9                  purposes
Technology
Co., Ltd.
T2       Mobile   Associate’s    Other                                                          Current       For
(Shanghai)        subsidiary      receivable     3,676.0                 3,676.0                 account       operating
Limited                                                                                                        purposes
T2       Mobile   Associate’s    Prepayment                                                     For selling   For
                                                 1,784.4     1,130.3     1,784.4      1,130.3
(Shanghai)        subsidiary                                                                     products      operating
TCL Corporation                                                            Annual Report 2018
Limited                                                                                                       purposes
T2        Mobile   Associate’s   Account                                                       For selling   For
(Shanghai)         subsidiary     receivable      404.0     2,370.1           -      2,774.1    products      operating
Limited                                                                                                       purposes
Shanghai           Associate      Other                                                         Current       For
Chuangxiang                       receivable                                                    account       operating
Venture                                                                                                       purposes
Capital                                          2,180.0                2,180.0
Partnership
(Limited
Partnership)
Shenzhen           Associate      Other                                                         Current       For
Jucai Supply                      receivable                                                    account       operating
Chain                                                       5,079.8     1,721.7      3,358.1                  purposes
Technology
Co., Ltd.
Shenzhen           Associate      Prepayment                                                    For selling   For
Jucai Supply                                                                                    products      operating
Chain                                                        492.1       462.6          29.5                  purposes
Technology
Co., Ltd.
Shenzhen           Associate      Account                                                       For selling   For
Qianhai                           receivable                                                    products      operating
Qihang                                                                                                        purposes
                                               299,867.2   51,388.1   215.206.4    136,048.9
Supply Chain
Management
Co., Ltd.
Shenzhen           Associate      Other                                                         Current       For
Qianhai                           receivable                                                    account       operating
Qihang                                                                                                        purposes
                                                49,500.0       58.2    27,466.6     22,091.6
Supply Chain
Management
Co., Ltd.
Shenzhen           Associate      Prepayment                                                    For selling   For
Qianhai                                                                                         products      operating
Qihang                                                                                                        purposes
                                                22,693.2               22,693.2
Supply Chain
Management
Co., Ltd.
Canyon             Associate      Interest                                                      Current       For
Circuit                           receivable                   17.9           -         17.9    account       operating
Technology                                                                                                    purposes
TCL Corporation                                                       Annual Report 2018
(Huizhou)
Co., Ltd.
Shenzhen           Associate      Interest                                                 Current       For
Qianhai                           receivable                                               account       operating
Qihang                                                                                                   purposes
                                                 77.0                  5.6         71.4
Supply Chain
Management
Co., Ltd.
Shenzhen           Associate      Other                                                    Current       For
Jiutian Matrix                    receivable                                               account       operating
Investment                                                   1.9         -          1.9                  purposes
Management
Co., Ltd.
Shenzhen           Associate’s   Other                                                    For selling   For
Thunderbird        subsidiary     receivable                                               products      operating
Network                                         694.8    1,546.6   1,990.3        251.1                  purposes
Media       Co.,
Ltd.
Shenzhen           Associate’s   Account                                                  For selling   For
Thunderbird        subsidiary     receivable                                               products      operating
Network                                          69.9     290.7     360.6                                purposes
Media       Co.,
Ltd.
Shenzhen           Associate      Other                                                    For selling   For
Thunderbird                       receivable                                               products      operating
Network                                         545.0     259.6     804.6                                purposes
Technology
Co.
Shenzhen           Associate’s   Other                                                    For selling   For
Thunderbird        subsidiary     receivable                                               products      operating
Information                                     762.1      17.0     779.1                                purposes
Technology
Co., Ltd.
Shenzhen           Associate’s   Other                                                    For selling   For
Thunderbird        subsidiary     receivable                                               products      operating
Smart                                            35.9    1,852.1     39.5       1,848.5                  purposes
Products Co.,
Ltd.
Shenzhen           Associate’s   Account                                                  For selling   For
Thunderbird        subsidiary     receivable                                               products      operating
                                               3,809.9   8,702.8         -     12,512.7
Smart                                                                                                    purposes
Products Co.,
TCL Corporation                                                          Annual Report 2018
Ltd.
CJ      Speedex    Joint          Prepayment                                                  Current       For
Logistics Co.,     venture                      1,760.1    1,419.1    1,421.0      1,758.2    account       operating
Ltd.                                                                                                        purposes
TV University      Associate      Dividend                                                    Dividend      For
Online                            receivable                                                  distributio   operating
Distance                                                                                          n         purposes
                                                          47,656.0          -     47,656.0
Education
Technology
Co., Ltd.
Tianjin     712    Associate      Other                                                       Current       For
Communicati                       receivable                                                  account       operating
on             &                                    5.7                   5.7                               purposes
Broadcasting
Co., Ltd.
Wuhan              Associate’s   Other                                                       Current       For
Lesheng            subsidiary     receivable                                                  account       operating
                                                           8,000.0          -      8,000.0
Times Trading                                                                                               purposes
Co., Ltd.
Xinjiang           Associate      Dividend                                                    Dividend      For
Dongpeng                          receivable                                                  distributio   operating
Weichuang                                                                                         n         purposes
Equity
                                               11,015.0              11,015.0
Investment
Partnership
(Limited
Partnership)
Xinjiang           Associate      Other                                                       Current       For
Dongpeng                          receivable                                                  account       operating
Weichuang                                                                                                   purposes
Equity
                                               40,300.0              40,300.0
Investment
Partnership
(Limited
Partnership)
Hubei              Associate      Other                                                       Current       For
Changjiang                        receivable                                                  account       operating
Hezhi Equity                                                                                                purposes
Investment                                                 7,844.9          -      7,844.9
Fund
Partnership
(Limited
TCL Corporation                                                                    Annual Report 2018
Partnership)
Changzhou           Associate      Other                                                                Current   For
Chuangdong                         receivable                                                           account   operating
Fund                                                                  2.3             -           2.3             purposes
Management
Co., Ltd.
Shenzhen            Associate      Other                                                                Current   For
Tixiang                            receivable                                                           account   operating
Enterprise                                                                                                        purposes
                                                                   340.6              -        340.6
Management
Technology
Co., Ltd.
Shenzhen            Associate      Other                                                                Current   For
Changcheng                         receivable                                                           account   operating
Commercial                                                                                                        purposes
Technology                                                          20.5              -         20.5
Property
Service      Co.,
Ltd.
Xionghua            Associate’s   Other                                                                Current   For
Investment          subsidiary     receivable         16.6            0.8                       17.4    account   operating
Co., Ltd.                                                                                                         purposes
Total                                           1,142,259.2   2,099,089.6   2,078,301.3   1,163,047.5
5. Other Major Related-Party Transactions
No such cases in the Reporting Period.
XVII Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
No such cases in the Reporting Period.
TCL Corporation                                                                               Annual Report 2018
(2) Contracting
No such cases in the Reporting Period.
(3) Leases
No such cases in the Reporting Period.
2. Major guarantees
(1) Guarantees
                                                                                                                                Unit: RMB'000
   Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries)
                                                                               Actual
                                                     Disclos                   occurre                                                   Guar
                                                                                                                                  Ha
                                                       ure                          nce                                                  antee
                                                                                                                                  vin
                                                     date of                    date      Actual        Type                             for a
                                                                Line of                                                            g
                                                       the                      (date     guarant        of          Term of             relate
                    Obligor                                     guarant                                                           exp
                                                     guarant                        of      ee         guaran       guarantee              d
                                                                   ee                                                             ired
                                                     ee line                   agreem     amount         tee                             party
                                                                                                                                   or
                                                     announ                         ent                                                   or
                                                                                                                                  not
                                                     cement                    signing                                                    not
                                                                                     )
                                                                               2018/7                  Joint-li     30—208
Canyon Circuit Technology (Huizhou) Co., Ltd.                    50,000                    39,352                                 Not    Yes
                                                                               /11                     ability      days
                                                                               2018/7                  Joint-li     61—338
Huizhou Shenghua Industrial Co., Ltd.                            90,000                                                           Not    Not
                                                                               /3          86,250      ability      days
                                                                               2018/7                  Joint-li     112—184
Taiyang Electro-optic (Huizhou) Co., Ltd.             2018/1     40,000                                                           Not    Not
                                                                               /10         26,100      ability      days
                                                        0/30
Shenzhen Qianhai Qihang Supply Chain                            1,100,0        2018/3     625,936      Joint-li     62-365
                                                                                                                                  Not    Not
Management Co., Ltd.                                                    00     /27                .6   ability      days
                                                                 300,00        2018/7     245,364      Joint-li     365-365
Qihang Import&Export Limited                                                                                                      Not    Not
                                                                         0     /31                .0   ability      days
                                                                               2018/7                  Joint-li     60—210
Huizhou Gaoshengda Technology Co., Ltd.                          90,000                    67,190                                 Not    Not
                                                                               /26                     ability      days
                                                                                          Total         actual
                                                                                          amount of such
Total approved line for such guarantees in Reporting Period
                                                                                          guarantees           in                   1.453,260
(A1)                                                                         1,670,000
                                                                                          Reporting Period
                                                                                          (A2)
TCL Corporation                                                                               Annual Report 2018
                                                                                        Total             actual
                                                                                        balance of such
Total approved line for such guarantees at end of Reporting
                                                                                        guarantees at end
Period (A3)                                                               1,670,000                                               1,090,190
                                                                                        of             Reporting
                                                                                        Period (A4)
                              Guarantees provided by the Company as the parent for its subsidiaries
                                                                            Actual
                                                   Disclos                  occurre                                                    Guar
                                                                                                                                Ha
                                                     ure                         nce                                                   antee
                                                                                                                                vin
                                                   date of                      date    Actual            Type                         for a
                                                              Line of                                                            g
                                                     the                        (date   guarant            of        Term of           relate
                    Obligor                                   guarant                                                           exp
                                                   guarant                       of          ee          guaran     guarantee            d
                                                                ee                                                              ired
                                                    ee line                 agreem      amount             tee                         party
                                                                                                                                or
                                                   announ                        ent                                                    or
                                                                                                                                not
                                                   cement                   signing                                                     not
                                                                                  )
TCL King Electrical Appliances (Huizhou) Co.,                 3,450,0       2018/4                       Joint-li   22—311
                                                                                        1,603,1                                 Not    Not
Ltd.                                                                 00     /28                          ability    days
                                                              1,200,0       2018/6                       Joint-li   52—360
TCL Overseas Electronics (Huizhou) Ltd.                                                                                         Not    Not
                                                                     00     /29         802,690          ability    days
TCL King Electrical Appliances (Chengdu) Co.,                 600,00        2018/6                       Joint-li   170—587
                                                                                                                                Not    Not
Ltd.                                                                  0     /5          179,200          ability    days
                                                              4,500,0       2018/7                       Joint-li   1—365
Huizhou TCL Mobile Communication Co., Ltd.                                              2,443,9                                 Not    Not
                                                                     00     /25                          ability    days
TCL Communication Technology Holdings                         1,200,0       2017/1                       Joint-li
                                                   2018-1                               1,120,3                     1-3 years   Not    Not
Limited                                                              00     1/20                         ability
                                                     0-30
TCL Mobile Communication (HK) Company                         2,485,0       2018/9                       Joint-li   62—186
                                                                                                                                Not    Not
Limited                                                              00     /5          661,610          ability    days
                                                                            2018/8                       Joint-li
TCT Mobile Overseas Limited                                                                                         365 days    Not    Not
                                                              66,250        /29          13,730          ability
                                                                                                         Joint-li
TCT Mobile (US) Inc.                                          845,00                                                  -         Not    Not
                                                                            -                      -     ability
                                                              310,00        2018/8                       Joint-li
TCT Mobile International Limited                                                                                    365 days    Not    Not
                                                                      0     /29          20,590          ability
                                                                                                         Joint-li   90—180
TCT Mobile Italy S.R.L                                                                                                          Not    Not
                                                              16,000        2018/0       11,750          ability    days
TCL Corporation                                                        Annual Report 2018
                                                           4/19
                                                           2018/5             Joint-li
TCT MOBILE - TELEFONES LTDA.                     120,00                                  365 days    Not   Not
                                                           /31      108,010   ability
Wuhan China Star Optoelectronics Technology                2016/4             Joint-li   20—96
                                                 7,500,0            4,226,5                          Not   Not
Co., Ltd.                                                  /13                ability    month
                                                     00
Shenzhen China Star Optoelectronics
                                                 21,500,   2017/3             Joint-li   2—96
Semiconductor Display Technology Co.,                               12,875,                          Not   Not
                                                    000    /31                ability    month
Ltd.-note (1)
                                                                                         38 days
Shenzhen China Star Optoelectronics Technology             2015/3             Joint-li
                                                 6,000,0            3,905,9              –96        Not   Not
Co., Ltd.                                                  /10                ability
                                                     00                 80               months
Wuhan China Star Optoelectronics                 11,600,   2017/9             Joint-li   3—96
                                                                    5,124,5                          Not   Not
Semiconductor Display Technology Co., Ltd.          000    /29                ability    months
Huizhou China Star Optoelectronics Technology              2018/3             Joint-li   3—13
                                                 5,000,0                                             Not   Not
Co., Ltd.                                                  /9       120,410   ability    months
China Star Optoelectronics International (HK)              2018/1             Joint-li
                                                 2,600,0                                 24 months   Not   Not
Limited                                                    /8       310,210   ability
                                                                                         33 days
China Display Optoelectronics Technology                   2018/6             Joint-li
                                                 1,500,0                                 –12        Not   Not
(Huizhou) Co., Ltd.                                        /15      469,830   ability
                                                     00                                  months
Wuhan China Display Optoelectronics                        2018/1             Joint-li   1—6
                                                 300,00                                              Not   Not
Technology Co., Ltd.                                       0/22      10,740   ability    months
Guangdong Juhua Printed Display Technology                 2017/1             Joint-li   6—144
                                                 300,00                                              Not   Not
Co., Ltd.                                                  2/22      10,410   ability    months
                                                 1,400,0   2017/9             Joint-li   1—459
TCL Home Appliances (Hefei) Co., Ltd.                                                                Not   Not
                                                     00    /28      884,990   ability    days
                                                           2018/6             Joint-li   1—238
TCL Home Appliances (Zhongshan) Co., Ltd.        160,00                                              Not   Not
                                                           /19      125,610   ability    days
                                                 1,586,0   2016/9             Joint-li   1—843
TCL Air-Conditioner (Zhongshan) Co., Ltd.                           1,101,1                          Not   Not
                                                     00    /9                 ability    days
TCL Air Conditioner (Wuhan) Co., Ltd.            1,316,0   2018/6             Joint-li   1—234      Not   Not
TCL Corporation                                                       Annual Report 2018
                                                    00    /25      1,039,2   ability    days
Zhongshan TCL Refrigeration Equipment Co.,      753,00    2018/7             Joint-li   1—213
                                                                   272,570                         Not   Not
Ltd.                                                 0    /26                ability    days
Guangdong TCL Smart Heating & Ventilation                 2018/7             Joint-li   91—208
                                                70,000              57,780                         Not   Not
Equipment Co., Ltd.                                       /27                ability    days
                                                115,00    2018/1             Joint-li   1—118
TCL Home Appliances (Huizhou) Co., Ltd.                             19,590                         Not   Not
                                                     0    0/6                ability    days
                                                          2018/1             Joint-li   1—150
TCL Intelligent Technology (Hefei) Co., Ltd.     8,000               4,210                         Not   Not
                                                          1/3                ability    days
                                                250,00    2018/7             Joint-li   1—208
TCL Air-Conditioner (Jiujiang) Co., Ltd.                           122,690                         Not   Not
                                                     0    /4                 ability    days
                                                200,00                       Joint-li
TCL Home Appliances (Hong Kong) Limited                                  -                  -      Not   Not
                                                     0    -                  ability
Shenzhen TCL Hangxiang Supply Chain Service                                  Joint-li
                                                 5,000                   -                  -      Not   Not
Co., Ltd.                                                 -                  ability
Zhongshan Hhappy Tree Network Technology                  2018/1             Joint-li   30—181
                                                20,000                760                          Not   Not
Co., Ltd.                                                 2/6                ability    days
                                                                             Joint-li   4
                                                400,00    2016/1
TCL Tonly Electronics (Huizhou) Co., Ltd.                          244,830   ability    days—48   Not   Not
                                                     0    1/4
                                                                                        months
TCL Commercial Information Technology           140,00    2018/9             Joint-li   87—268
                                                                    56,320                         Not   Not
(Huizhou) Co., Ltd.                                  0    /20                ability    days
Huizhou TCL Light Electrical Appliances Co.,              2018/7             Joint-li   90—182
                                                55,000              18,370                         Not   Not
Ltd.                                                      /12                ability    days
Huizhou VERY Light Source Technology Co.,                 2018/8             Joint-li   5—240
                                                40,000              46,810                         Not   Not
Ltd.                                                      /28                ability    days
                                                1,500,0                      Joint-li
TCL Finance Co., Ltd.                                                    -                  -      Not   Not
                                                    00    -                  ability
                                                1,000,0                      Joint-li
TCL Capital (Hong Kong) Limited                                          -                  -      Not   Not
                                                    00    -                  ability
                                                500,00                       Joint-li
TCL Commercial Factoring (Shenzhen) Co., Ltd.                            -                  -      Not   Not
                                                     0    -                  ability
Huizhou Zhongkai TCL Zhirong Technology         500,00    2018/1             Joint-li   12—12
                                                                     9,500                         Not   Not
Microcredit Co., Ltd.                                0    0/10               ability    months
                                                500,00                       Joint-li
Guangzhou TCL Internet Microcredit Co., Ltd.                             -                  -      Not   Not
                                                     0    -                  ability
Highly Information Industry Co., Ltd.           3,000,0   2016/6   1,520,0   Joint-li   1—36      Not   Not
TCL Corporation                                                                            Annual Report 2018
                                                                     00   /23               00         ability    months
                                                                 200,00   2018/1                       Joint-li   12—36
Beijing Hecheng Nuoxin Technology Co., Ltd.                                         190,000                                     Not   Not
                                                                      0   /1                           ability    months
                                                                 350,00   2017/6                       Joint-li   1—15
Beijing Lingyun Data Technology Co., Ltd.                                           274,470                                     Not   Not
                                                                      0   /1                           ability    months
                                                                 500,00   2012/6                       Joint-li   12—79
Beijing Sunpiestore Technology Co., Ltd.                                            340,000                                     Not   Not
                                                                      0   /1                           ability    months
                                                                                                       Joint-li
Shaanxi Titi Electronic Technology Co., Ltd.                     30,000                       -                     -           Not   Not
                                                                          -                            ability
Huizhou Cool Friends Network Technology Co.,                     130,00   2018/1                       Joint-li   7 days –12
                                                                                      93,000                                    Not   Not
Ltd.                                                                  0   0/30                         ability    months
                                                                          2018/8                       Joint-li   1—6
SHIFENDAOJIA Online Service Co., Ltd.                            30,000               29,950                                    Not   Not
                                                                          /16                          ability    months
                                                                2,000,0                                Joint-li
TCL Technology Park (Huizhou) Co., Ltd.                                                       -                     -           Not   Not
                                                                     00   -                            ability
                                                                 270,00                                Joint-li
TCL Technology Park Co., Ltd.                                                                 -                     -           Not   Not
                                                                      0   -                            ability
Guangzhou Yunsheng Tianji Technology Co.,                       1,100,0   2017/9                       Joint-li   10—12
                                                                                    530,000                                     Not   Not
Ltd.                                                                 00   /28                          ability    years
Guangzhou TCL Science and Technology                            2,000,0   2018/1                       Joint-li
                                                                                    150,000                       13 years      Not   Not
Development Co., Ltd.                                                00   2/18                         ability
Shenzhen Bao’an TCL Haichuanggu Technology                      200,00   2018/9                       Joint-li
                                                                                    161,440                       3 year        Not   Not
Park Development Co., Ltd.                                            0   /25                          ability
                                                                8,000,0   2016/1     7,245,7           Joint-li
TCL Industries Holdings (HK) Limited                                                                              1—5 years    Not   Not
                                                                     00   0/4               60         ability
                                                                          2018/1                       Joint-li   7 days
Huizhou TCL Environment Technology Co., Ltd.                                              9,590                                 Not   Not
                                                                 60,000   2/24                         ability    -365 days
                                                                                    Total               actual
                                                                                    amount of such
Total approved line for such guarantees in the Reporting
                                                                       99,480,250   guarantees in the                            73,316,890
Period (B1)
                                                                                    Reporting Period
                                                                                    (B2)
                                                                                    Total               actual
                                                                                    balance of such
Total approved line for such guarantees at the end of the                           guarantees at the
                                                                       99,480,250                                                48,567,440
Reporting Period (B3)                                                               end           of       the
                                                                                    Reporting Period
                                                                                    (B4)
                                               Guarantees provided between subsidiaries
TCL Corporation                                                                                Annual Report 2018
                                                                             Actual
                                                   Disclos                   occurre                                                           Guar
                                                                                                                                        Ha
                                                     ure                         nce                                                           antee
                                                                                                                                        vin
                                                   date of                       date    Actual              Type                              for a
                                                              Line of                                                                    g
                                                     the                         (date   guarant               of       Term of                relate
                    Obligor                                   guarant                                                                   exp
                                                   guarant                        of          ee             guaran     guarantee                d
                                                                ee                                                                      ired
                                                   ee line                   agreem      amount               tee                              party
                                                                                                                                        or
                                                   announ                        ent                                                            or
                                                                                                                                        not
                                                   cement                    signing                                                            not
                                                                                   )
  -                                                  -               -       -                      -         -          -                -      -
                                                                                         Total               actual
                                                                                         amount of such
Total approved line for such guarantees in the Reporting
                                                                                         guarantees in the
Period (C1)                                                              -                                                          -
                                                                                         Reporting Period
                                                                                         (C2)
                                                                                         Total               actual
                                                                                         balance of such
Total approved line for such guarantees at the end of the                                guarantees at the
Reporting Period (C3)                                                    -               end            of        the               -
                                                                                         Reporting Period
                                                                                         (C4)
                              Total guarantee amount (total of the three kinds of guarantees above)
                                                                                         Total
                                                                                         actual
                                                                                         guarant
                                                                                         ee
                                                                                         amount
Total guarantee line approved in the Reporting Period
                                                                                         in      the
(A1+B1+C1)                                                           101,150,250                                                        74,770,150
                                                                                         Reporti
                                                                                         ng
                                                                                         Period
                                                                                         (A2+B
                                                                                         2+C2)
                                                                                         Total
                                                                                         actual
                                                                                         guarant
Total approved guarantee line at the end of the Reporting                                ee
Period (A3+B3+C3)                                                    101,150,250         balance                                         49,657,640
                                                                                         at      the
                                                                                         end       of
                                                                                         the
TCL Corporation                                                                          Annual Report 2018
                                                                                    Reporti
                                                                                    ng
                                                                                    Period
                                                                                    (A4+B
                                                                                    4+C4)
Total actual guarantee amount (A4+B4+C4) as % of the
                                                                                                                          162.84%
Company’s net assets
Of which:
Balance of guarantees provided for shareholders, actual
controller and their related parties (D)                          -
Balance of debt guarantees provided directly or indirectly for
                                                                                                                      21,773,900
obligors with an over 70% debt/asset ratio (E)
Amount by which the total guarantee amount exceeds 50%
                                                                                                                      33,167,810
of the Company’s net assets (F)
Total of the three amounts above (D+E+F)                                                                              54,941,710
Joint liability possibly borne or already borne in the
                                                                  Not applicable
Reporting Period for outstanding guarantees (if any)
Guarantees provided in breach of prescribed procedures (if
                                                                  Not applicable
any)
(2) Irregularities in Provision of Guarantees
□ Applicable ■ Not applicable
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
                                                                                                                  Unit: RMB’000
                                                                                                           Unrecovered overdue
            Type                  Source of capital              Amount             Undue amount
                                                                                                                 amount
       Bank’s wealth
                               Self-owned capital                      9,705,760                200,000                          -
  management product
 Securities firm’s wealth
                               Self-owned capital                         751,000                21,900                          -
  management product
       Trust wealth
                               Self-owned capital                      2,515,000               1,500,000                         -
  management product
            Other              Self-owned capital                      1,360,640                907,510                          -
TCL Corporation                                                                            Annual Report 2018
                        Total                                         14,332,400                  2,629,410                           -
High-risk wealth management transactions with a significant single amount, low liquidity and no principal protection:
□ Applicable ■ Not applicable
Situation where the principal is expectedly irrecoverable or an impairment may be incurred:
□ Applicable ■ Not applicable
(2) Entrusted Loans
                                                                                                                        Unit: RMB’000
         Total amount                     Source of capital                  Undue amount                Unrecovered overdue amount
                        70,252.4 Self-owned capital                                         52,456.0                                  -
Note: The entrusted loans were primarily provided for the employees of CSOT and its subsidiaries with their self-owned capital to
pay the down payment for their first family house under the CSOT Housing Program.
High-risk entrusted loans with a significant single amount, low liquidity and no principal protection:
□ Applicable ■ Not applicable
Situation where the principal is expectedly irrecoverable or an impairment may be incurred:
□ Applicable ■ Not applicable
4. Other Major Contracts
□ Applicable ■ Not applicable
XVIII Corporate Social Responsibility (CSR)
1. Measures Taken to Fulfill CSR Commitment
Please refer to The 2018 Annual Corporate Social Responsibility & Sustainable Development
Report of TCL Corporation.
2. Measures Taken for Targeted Poverty Alleviation
(1) Plans
To respond to the \"Opinions of the China Securities Regulatory Commission on the Role of Capital
Markets in Serving the Country in Poverty Alleviation\", the Company has been fulfilling its social
responsibilities in poverty alleviation and public service, especially in the field of education poverty
alleviation. The \"TCL Hope Engineering Candlelight Awards Program\" jointly established by
CYDF and Shenzhen TCL Public Welfare Foundation in 2013 is one of the earliest public welfare
TCL Corporation                                                      Annual Report 2018
projects for rural teachers rewards and funding in the country. The investment to this project is over
RMB30 million in five years. The purpose of the award is to demonstrate the morality and
professional dreams of outstanding rural teachers who have worked hard in the grassroots education
front in poverty-stricken areas for their posts, and encourage more outstanding young teachers to
take root in rural basic education and promote rural education development.
(2) Summary of the Related Work Done in the Reporting Period
In the 2018 \"Candlelight Awards Program\", a total of 400 outstanding rural teachers were selected.
The 100 rural teacher representatives who participated in the award ceremony were awarded the
\"Candlelight Award\" for dedication, innovation and guidance. The award-winning teachers will
receive funding and training support. The individual award, which is worth RMB12,000, includes a
cash reward of RMB8,000 and a \"candle classroom\" training of RMB4,000 in online and offline
\"Flipped Classroom\" per person. In 2018, the coverage of \"Candlelight Micro-Loan\" was expanded.
Except for the outstanding teachers who were rewarded by the \"TCL Hope Engineering Candlelight
Awards\", all the teachers under training in 2018 who belong to the Hope Primary School Teacher
Training Office of CYDF can apply for the loan.
(3) Results
                      Indicators                  Measurement Unit   Quantity/Development
I. Overall summary                                     ——                                      ——
  Of which: 1. Cash                                  RMB’000                                  5,923.6
II. Investment breakdown                               ——                                      ——
  4. Poverty alleviation by education                  ——                                      ——
Of which:     4.1 Investment amount in aiding
                                                     RMB’000
students in poverty
              4.2 Number of students in poverty
                                                       Person
who got aid
              4.3 Investment amount in
improvement of educational resources in              RMB’000                                  5,475.8
poverty-stricken areas
  8. Poverty alleviation by public programmes          ——                                      ——
              8.2 Investment amount in targeted      RMB’000                                    36.8
TCL Corporation                                                                             Annual Report 2018
poverty alleviation
              8.3 Investment amount in public
                                                        RMB’000
fund for poverty alleviation
(4) Subsequent Plans
In 2019, Shenzhen TCL Public Welfare Foundation and CYDF have signed another five-year
strategic cooperation agreement. Together they will expand the existing award scale and publicity
impact of the TCL Hope Engineering Candlelight Awards Program, and improve user interaction on
the Internet platform for social concern. Starting from 2019, we will also expand the publicity and
coverage of the Candlelight Micro-loan Project to solve the financial needs of some rural teachers
for their better services in rural education.
In order to serve the national poverty alleviation work and respond to the call for targeted poverty
alleviation, Shenzhen TCL Public Welfare Foundation initiated an \"assistance program for retired
private substitute teachers\" jointly with CYDF to solve the problem of low-paid and difficult living
for retired private substitute teachers in poverty-stricken areas. This program helps and supports
retired private substitute teachers who contributed to education in poverty-stricken areas to improve
their living conditions by funding services and social advocacy, and encourage them to develop for
social respect and self-development.
3. Issues Related to Environmental Protection
                                                                                                                   Approved
                                                                      Discharge      Governing
Name of the                                 Number of Distribution                                     Total         total
                 Major          Way of                               concentratio discharge                                         Excessive
Company or                                  discharge of discharge                                   discharge     discharge
                pollutants     discharge                                  n          standards                                      discharge
 subsidiary                                  outlets     outlets                                    (metric ton)    (metric
                                                                       (mg/L)         (mg/L)
                                                                                                                   tons/year)
Shenzhen                     Discharged
                  COD                                                         78.5         260           519.12       1226.05
China Star                   after being
Optoelectro                  duly treated
                                                        Northwest
nics                           in waste         1                                                                                     None
               Ammonia                                   of plant
Technology                      water                                         3.35             30         22.17                 /
                nitrogen
Co., Ltd.                      treatment
(Phase I)                       system
Shenzhen                     Discharged                 Artificial
                  COD                           1                             18.6             30         84.84        174.89         None
China Star                   after being               wetland to
TCL Corporation                                                            Annual Report 2018
Optoelectro               duly treated        north of
nics                       in waste             plant
Technology                   water
Co., Ltd.                  treatment
(Phase II)     Ammonia    system and
                                                               0.33        1.5       1.67          7.7   None
               nitrogen      going
                            through
                           artificial
                            wetland
                            system
                          Discharged
Wuhan           COD                                       8.5-116.20   400mg/L     185.74       353.55   None
                          after being
China Star
                          duly treated
Optoelectro                                  Northwest
                           in waste      1
nics           Ammonia                        of plant
                             water                           0-4.45         30      18.57        35.36   None
Technology     nitrogen
                           treatment
Co., Ltd.
                            system
                                              Exhaust
TCL-AOB                   Discharged          funnel of
O                 PM        at high      1    physical           4.7       120      0.264         5.76   None
Environmen                  altitude          crushing
tal                       after being        workshop
Protection                duly treated        Exhaust
And                         in bag            funnel of
Developme         PM      dust-cleanin   1     plastic           2.2       120      0.267         5.76   None
nt Co., Ltd.               g system           treatment
                                             workshop
Shantou                   Discharged
TCL                         at high
Deqing                      altitude
                                              Exhaust
Environmen                after being
                  PM                     1    funnel of          20        120      0.844          2.9   None
tal                       duly treated
                                             workshop B
Protection                  in bag
Developme                 dust-cleanin
nt Co., Ltd.               g system
                COD       Discharged                          23.08         90      0.857        3.996   None
Huizhou
                          after being
TCL
                          duly treated
Environmen                                    West of
               Ammonia     in waste      1
t                                               plant          1.21         10      0.045        0.444   None
               nitrogen      water
Technology
                           treatment
Co., Ltd.
                            system
Construction and operation of facilities for preventing pollution:
TCL Corporation                                                      Annual Report 2018
During the Reporting Period, no major environmental pollution incidents occurred in either the
Company or any of its subsidiaries. An advanced sewage management system has been established
for each subsidiary, and regular monitoring and supervision and inspection mechanisms have been
adopted to ensure the emission and disposal of waste water, waste gas, solid waste and factory
noises generated during the operation are in compliance with the national and local laws and
regulations.
The waste water of each subsidiary company includes domestic waste water and industrial waste
water, of which domestic waste water is discharged into the local municipal sewage treatment pipe
network after being pre-treated by oil separation and septic treatment, and industrial waste water
enters different treatment systems according to its characteristics, and is discharged subjected to the
standards after physical and chemical and biochemical treatment. The atmospheric pollutants
produced by each subsidiary are mainly process waste gases in the production process. For different
types of waste gases, each subsidiary has constructed corresponding waste gas treatment systems,
such as alkaline waste gas treatment system, acidic waste gas treatment system, organic waste gas
treatment system, waste gas treatment system for waste water treatment station, cloth bag dedusting
system, etc. for the collection of waste gases through pipelines to the corresponding waste gas
treatment system, where waste gases are discharged at a high altitude after meeting 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 each subsidiary include general
waste, hazardous waste and domestic garbage, of which, hazardous wastes are treated by an
entrusted qualified hazardous waste disposal agency according to the regulations; general wastes are
disposed of by a resource recycling firm after being classified in the plant area; while domestic
garbage is disposed of by the property management company. All the disposals meet the regulatory
requirements. The factory noise generated by each subsidiary comes from the mechanical noises of
production and power equipment, including refrigerators, cooling towers, air compressors, fans,
various types of pumps, etc.. The Company reduces the impact of noise on the surrounding
environment by the use of low-noise equipment, vibration reduction, noise reduction, etc., and noise
reduction measures such as sound insulation and sound absorption in the factories and equipment
rooms. The monitoring results show that the factory boundary noise and emission of all subsidiaries
TCL Corporation                                                      Annual Report 2018
meet the standards in a stable manner.
Environmental Impact Assessment on Construction Projects and Other Environmental
Protection Administrative Licenses
Each subsidiary complies with the laws and regulations of environmental impact assessment on
construction projects and other environmental protection administrative licenses, and no violations
occurred during the Reporting Period.
Emergency Response Plan for Environmental Incidents
Each subsidiary has set up an environmental incident emergency organization led by the senior
management of the enterprise and prepared an environmental emergency response plan, which has
been filed with the local environmental protection department in accordance with relevant national
laws and regulations. In addition, regularly emergency drills are conducted for environmental
incidents according to the plan to ensure the validity of emergency response plan.
Environmental Self-Monitoring Program
Each subsidiary has formulated an environmental self-monitoring program in accordance with
national regulations, and monitors the discharge of pollutants by manual monitoring or manual
monitoring performed by a third-party qualified agency. The monitoring plans and annual
monitoring reports can be checked on the key environmental monitoring information platform
managed by local environmental authorities or subsidiary websites.
Other environment-related information that should be disclosed:
None.
Other relevant information:
None.
XIX Other Significant Events
On 24 March 2018, the Company disclosed the Announcement on the Establishment of Strategic
Investment Funds (announcement No. 2018-029). It intended to, together with Shenzhen China Star
Optoelectronics Technology Co., Ltd. and TCL Multimedia Technology Holdings Limited, establish
an overseas M&A fund of a target scale of approximately US$75 million and a domestic M&A fund
of a RMB201 million scale. So far, the domestic M&A fund has been registered with the industrial
and commercial administration, received the business license and been filed with the Asset
TCL Corporation                                                    Annual Report 2018
Management Association of China as per the Securities Investment Fund Law, the Interim Measures
for the Supervision and Administration of Privately Offered Investment Funds, as well as other
applicable laws and regulations. For further information, please refer to the Announcement on the
Progress of the Establishment of the Strategic Investment Funds (announcement No. 2018-101)
disclosed by the Company on 29 October 2018.
On 15 May 2018, the Company disclosed the Announcement on the Progress of the Establishment
of an Equity Investment Fund (announcement No. 2018-047). TCL Culture Media, a wholly-owned
subsidiary of the Company, intended to, as a limited partner together with Deqing Puying
Investment Management Partnership (Limited Partnership), Hangzhou Shunwang Technology Co.,
Ltd. and Wang Wengan (natural person), to establish Qiyu Investment with a contribution of
RMB70 million. Qiyu Investment specializes in the acquisition of the RMB118,990,957 limited
partnership share of the Puhua Fund held by Shanghai Liyou, which is corresponding to the
investment of the Puhua Fund in Shengqu Games. The fund is currently running well.
On 3 August 2018, the Company disclosed the Announcement on the Investment Progress of an
Industrial Equity Investment Fund with the Company as a Co-Founder (announcement No.
2018-077). The changes to the partners of Xinjiang Dongpeng Heli Equity Investment Partnership
(Limited Partnership), co-founded by the Company’s wholly-owned subsidiary Xinjiang TCL
Equity Investment Ltd. have been registered with the industrial and commercial administration and
submitted to the Asset Management Association of China. The fund is currently running well.
On 29 August 2018, the Company disclosed the Announcement on the Establishment of a Startup
Investment Fund (announcement No. 2018-089). Ningbo TCL Equity Investment Ltd., a
wholly-owned subsidiary of the Company, together with Changzhou Chuangdong Fund
Management Co., Ltd., Changzhou Peony Jiangnan Startup Investment Co., Ltd. and Changzhou
Tianrong Equity Investment Center (Limited Partnership), intended to establish a startup investment
fund of a target scale of RMB501 million. The fund would focus on investment in high-quality
growing unlisted startups in the establishment or re-establishment process in TMT, new materials,
intelligent manufacturing and other areas. The fund is currently running well.
On 30 November 2018, the Company completed the issuance of a three-year MTN of RMB2 billion
at the offering price of RMB100/RMB100 par value with a coupon rate of 4.58%. For further
TCL Corporation                                                              Annual Report 2018
information, please refer to the announcement No. 2018-107 disclosed by the Company on the
designated media.
XX Significant Events of Subsidiaries
    Title of current announcement                  Disclosure date               Disclosure website
Voluntary Announcement on the Result of
                                              18 January 2018            http://www.cninfo.com.cn
Subsidiary TCL Multimedia’s Rights Issue
Reminder of the IPO Shares of
Minority-Owned Subsidiary 712 Corp.           26 February 2018           http://www.cninfo.com.cn
Beginning Public Trading
Announcement on the Construction of the G11
                                              22 May 2018                http://www.cninfo.com.cn
New UHD Display Production Line
Voluntary Announcement on the Acquisition
by TCL Multimedia of an Interest in TCL
                                              1 June 2018                http://www.cninfo.com.cn
Commercial Information Technology
(Huizhou) Co., Ltd.
Announcement on the Introduction of
Strategic Investor by Subsidiary Shenzhen
                                              3 August 2018              http://www.cninfo.com.cn
China Star Optoelectronics Semiconductor
Display Technology Co., Ltd.
TCL Corporation                                                                          Annual Report 2018
                    Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
                                                                                                                           Unit: share
                           Before                 Increase/decrease in the Reporting Period (+/-)                  After
                                                           Shar
                                                           es as
                                                         &en