Xinhua Far East China Ratings Downgrades the Issuer Rating of TCL to BB

Xinhua Far East China Ratings Downgrades the Issuer Rating of TCL to BB

April 07, 2006

    HONG KONG, April 7 /Xinhua-PRNewswire/ -- Xinhua Far
East China Ratings (Xinhua Far East) today downgraded the
domestic currency issuer credit rating of TCL Corporation
(`TCL' or `the Company', SZ 000100) to "BB" from
"BBB".  The ratings outlook remains negative.

    The downgrade was prompted by TCL's poor performance in
3Q05 and its projected losses for the full-year 2005. 
Meanwhile, the downgrade reflects the structural impact on
TCL's credit profile of a more difficult operating
environment for its TV and handset businesses.  Moreover,
the rating action also considers TCL's weak results from
international business integration, as well as its
inexperience in international business management. 

    Xinhua Far East noted TCL's performance worsened
significantly in 2005, with its TV business in Europe and
handset business in the PRC contributing to most of the
losses.  TCL posted an EBIT margin of negative 5.5% in
1-3Q05, compared to a marginal profit in 2004.  Meanwhile,
tightened operating cash flow and elevated financial
leverage further deteriorated its financial profile.  TCL
also announced a projected loss for full-year 2005.

    Consumer demand for TVs is stagnant in European and
North American markets. Competition is intense and margins
are being squeezed.  Amidst this environment, the Company
has been slow to launch marketable products to meet
changing consumer preferences.  In the handset market,
especially the domestic market, the Company is facing
fierce competition from both foreign branded handsets and
Original Design Manufacture (ODM) products, while
experiencing rising manufacturing costs as a result of
consumer demand for mobile handsets with more sophisticated
functionality. 

    The downgrade also reflects Xinhua Far East's view that
TCL has failed to achieve synergies from international
business integration and has experienced inefficiencies
resulting from the management of a more internationalized
company.  High overheads required to integrate the
Company's acquired TV and handset businesses have had a
lingering negative effect on TCL's overall performance. 
Meanwhile, the Company owns an excess of business lines and
faces significant challenges in fully integrating and
optimizing these resources, especially at a time when the
operating environment is difficult. Its business risks may
further increase if it decides to move upstream to produce
LCD TV components.

    Nevertheless, Xinhua Far East notes TCL's positive
efforts to enhance performance.  The establishment of TCL
Group Finance Co., Ltd. to save on funding costs, the
distribution of new, more marketable products, and actions
to divest the electrical accessories business to remedy
working capital will benefit the Company.  We do not
dismiss the Company's upside potential if it improves its
management structure significantly. 

    TCL Corporation is principally engaged in the
manufacture of TV sets and handset products.  In 2005, TCL
recorded shipments of 23.0 million TV sets and 10.9 million
handsets. 

    TCL Corporation is a constituent of the Xinhua/ FTSE
China 200 Index.  As of market close on April 6, 2006, the
Company's total market capitalization was RMB6.05 billion
and its investable capitalization stood at RMB 2.42
billion.   

    For the rating report summary, please visit
http://www.xinhuafinance.com/creditrating .

    About Xinhua FTSE China 200 Index

    Xinhua FTSE China 200 Index is the large cap index in
the Xinhua FTSE China A Share Index Series and includes the
top 200 companies in China by market cap.  It is designed as
a tradable index and is calculated in real-time every 15
seconds.  For daily data and further information, see
http://www.xinhuaftse.com .

    About Xinhua Far East China Ratings

    Xinhua Far East China Ratings (Xinhua Far East) is a
pioneering venture in China that aims to rank credit risks
among corporations in China.  It is a strategic alliance
between Xinhua Finance (TSE Mothers: 9399), and Shanghai
Far East Credit Rating Co., Ltd.  Shanghai Far East became
a Xinhua Finance partner company in 2003 and the first
China member of The Association of Credit Rating Agencies
in Asia in December 2003.

    Capitalizing on the synergy between Xinhua Finance and
Shanghai Far East, Xinhua Far East's rating methodology and
process blend unique local market knowledge with
international rating standards.  Xinhua Far East is
committed to provide investors with independent, objective,
timely and forward-looking credit opinions on Chinese
companies.  It aims to help investors differentiate the
credit risks among the corporations in China, thereby,
cultivating their awareness and promoting information
disclosures and transparency in China market. For more
information, see http://www.xfn.com/creditrating .

    About Xinhua Finance Limited

    Xinhua Finance Limited is China's unchallenged leader
in financial information and media, and is listed on the
Mothers board of the Tokyo Stock Exchange (symbol: 9399)
(OTC ADRs: XHFNY). Bridging China's financial markets and
the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through four focused and
complementary service lines: Indices, Ratings, Financial
News and Investor Relations.  Founded in November 1999, the
Company is headquartered in Shanghai with 21 news bureaus
and offices in 18 locations across Asia, Australia, North
America and Europe.  For more information, please visit
http://www.xinhuafinance.com . 

    About Shanghai Far East Credit Rating Co., Ltd

    Shanghai Far East Credit Rating Co., Ltd. is the first
and leading professional credit rating company with
comprehensive business coverage in China.  It is an
independent agency established by the Shanghai Academy of
Social Sciences with the mission to develop internationally
accepted standards for capital market in China.  The company
is a pioneer in conducting bond-rating business in China. 
For years, it has been authorized by the Shanghai branch of
the PBOC to undertake loan certificate credit rating.

    Since establishment, it has rated over 1,000 corporate
long-term bonds and commercial papers, based on the
principles of objectivity, fairness and independence.  The
company has also maintained over 50% market share in the
loan certificate-rating sector in Shanghai for three
consecutive years.  With its strong local presence and
knowledge, it provides investors with unique and the most
insightful credit opinion. For more information, see
http://www.fareast-cr.com .

    For more Information, pleae contact: 

    Hong Kong
     Joy Tsang
     Corporate & Investor Communications Director
     Xinhua Finance
     Tel:   [phone]
            [phone]
            [phone]
     Email: [e-mail]

    US
     David Leeney
     Taylor Rafferty (IR/PR Contact in US)
     Tel:   [phone]
     Email: [e-mail]

SOURCE  Xinhua Far East China Ratings