Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Tsann Kuen (China) Enterprise Co., Ltd. Report for the First Quarter of 2019 April 2019 1 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Section I Important Statements The Board of Directors, the Supervisory Committee as well as all directors, supervisors and senior management staff of Tsann Kuen (China) Enterprise Co., Ltd. (hereinafter referred to as “the Company”) warrant that this report is factual, accurate and complete without any false record, misleading statement or material omission. And they shall be jointly and severally liable for that. All directors attended the board session for reviewing this report. Mr. Pan Zhirong, company principal, and Mr. Wu Jianhua, head of the accounting work & the accounting division (head of accounting) jointly declare that the financial statements carried in this report are factual, accurate and complete. This Report is prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail. 2 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Section II Company Profile I Key financial results Whether the Company performed any retroactive adjustments to or restatement of its accounting data due to changes of accounting policies or correction of accounting errors √Yes □ No Reason for retroactive adjustments or restatement Changes of accounting policies Unit: RMB January-March January-March 2018 +/-% Item 2019 Before After After Operating revenues 414,109,550.74 319,364,654.64 319,364,654.64 29.67 Net profit attributable to shareholders of the Company 34,325,162.34 -21,878,234.79 -21,878,234.79 256.89 Net profit attributable to shareholders of the Company -3,740,527.91 -27,785,628.47 -27,785,628.47 86.54 before exceptional profit and loss Net operating cash flow 12,516,737.69 -8,842,593.74 -8,842,593.74 241.55 Basic earnings per share (RMB/share) 0.19 -0.12 -0.12 258.33 Diluted earnings per share (RMB/share) 0.19 -0.12 -0.12 258.33 Weighted average return on equity (%) 5.15% -3.65% -3.42% 8.57 31 December 2018 +/-% Item 31 March 2019 Before After After Total assets 1,819,660,315.84 1,842,514,750.64 1,843,714,884.35 -1.30 Net assets attributable to shareholders of the Company 682,534,140.64 648,801,684.35 649,617,105.07 5.07 Total share capital up to the former trading date before the disclosure: Total share capital up to the former trading date before the disclosure (share) 185,391,680 Fully diluted EPS calculated by the newest share capital (RMB/share) 0.19 Reason for changes of accounting policies: The Ministry of Finance issued the Accounting Standards for Business Enterprises No. 22-Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No. 23-Transfer of Financial Assets, Accounting Standards for Business Enterprises No. 24-Hedge Accounting, Accounting Standards for Business Enterprises No. 37-Presentation of Financial Instruments revised and printed in 2017 and required all companies listed domestically to implement the revised accounting standards since 1 January 2019. The standards state that, on the date of the standards implementation, enterprises shall classify and measure financial instruments in accordance with regulations, and when the data of previous comparative financial statements are inconsistent with the stipulations of the revised standards, no adjustment is necessary. The difference of financial instruments between its original book value and the new book value after the new standards are implemented shall be recorded into the opening retained earnings for the year that the standards are carried out, other composite income and other items of financial statements. The Company changes the method of impairment provision for accounts receivable into “expected credit loss method” from “incurred loss method” so as to withdraw the impairment provision for financial assets more timely and in full, reveal and control credit risks of financial assets. 3 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Exceptional profit and loss √ Applicable □ Not applicable Unit: RMB Item January-March 2019 Note Profit/loss on disposal of non-current assets (including offset amount of asset 63,163,013.64 impairment provisions) Tax rebates, reductions and exemptions due to approval beyond authority or the lack of official approval documents Government grants charged to the profit/loss for the Reporting Period (except for the government grants closely related to the business of the Company and given at a fixed quota or amount in accordance with the 2,617,767.00 State’s uniform standards) Capital occupation charges on non-financial enterprises that are charged to the profit/loss for the Reporting Period Profit due to the situation where investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the enjoyable fair value of identifiable net assets of investees when making investments Profit/loss on non-monetary asset swap Profit/loss on entrusting others with investments or asset management Asset impairment provisions due to acts of God such as natural disasters Profit/loss on debt restructuring Restructuring costs in staff arrangement, integration, etc. Profit/loss on the part over the fair value due to transactions with distinctly unfair prices Reporting Period net profit/loss of subsidiaries acquired through business mergers under the same control from period-beginnings to merger dates Profit/loss on contingencies irrelevant to the Company’s normal business activities Mainly the investment income Profit/loss on fair value changes of transactional financial assets and of sales of forward foreign liabilities & investment profit on disposal of transactional financial assets exchange contract, income and liabilities as well as financial assets available for sale, except for 6,161,084.91 from changes in fair value, and effectively hedging business related to normal business operations of the other current assets income Company from wealth management products Impairment provision reversal for accounts receivable on which the impairment test is carried out separately Profit/loss on entrusted loans Profit/loss on fair value changes in investing properties of which the subsequent measurement is carried out adopting the fair value method Effect on Reporting Period profit/loss when a one-off adjustment is made to Reporting Period profit/Loss according to requirements of taxation, accounting and other relevant laws and regulations Custody fee income when entrusted with operations Non-operating income and expense other than the above 25,429,312.58 Other profit/loss that meet the definition of exceptional profit/loss Less: Income tax effects 23,023,063.59 Minority interests effects (after tax) 36,282,424.29 Total 38,065,690.25 4 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Profit and Loss, or reclassified any exceptional profit/loss item given as an example in the said explanatory announcement to recurrent profit/loss □ Applicable √ Not applicable II Total number of shareholders at the period-end and shareholdings of top ten shareholders 1. Numbers of common shareholders and preference shareholders with resumed voting rights as well as shareholdings of top ten shareholders Unit: share Total number of preference Total number of common shareholders at the 15,972 shareholders with resumed voting 0 period-end rights at the period-end Shareholdings of top ten shareholders Shareholding Number of Pledged or frozen shares Nature of Number of Name of shareholder percentage restricted shares Status of Number of shareholder shares held (%) held shares shares Foreign FORDCHEE DEVELOPMENT LIMITED 29.10% 53,940,530 0 N/A 0 corporation Foreign EUPA INDUSTRY CORPORATION LIMITED 13.09% 24,268,840 0 N/A 0 corporation GUOTAI JUNAN SECURITIES(HONGKONG) Foreign 4.95% 9,181,449 0 N/A 0 LIMITED corporation Foreign FILLMAN INVESTMENTS LIMITED 2.49% 4,621,596 0 N/A 0 corporation SHENWAN HONGYUAN SECURITIES (HK) Foreign 1.09% 2,016,752 0 N/A 0 CO., LTD. corporation Domestic CHEN YONGQUAN 1.03% 1,900,776 0 N/A 0 individual Foreign CHEN YONGQING 0.83% 1,538,949 0 N/A 0 individual Foreign CHEN LIJUAN 0.75% 1,381,334 0 N/A 0 individual Domestic DING XIAOLUN 0.62% 1,148,000 0 N/A 0 individual Domestic XU QIANMING 0.33% 618,259 0 N/A 0 individual Shareholdings of top ten non-restricted shareholders Number of Variety of shares Name of shareholder unrestricted shares held Variety Number FORDCHEE DEVELOPMENT LIMITED 53,940,530 Domestically listed foreign shares 53,940,530 EUPA INDUSTRY CORPORATION LIMITED 24,268,840 Domestically listed foreign shares 24,268,840 GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 9,181,449 Domestically listed foreign shares 9,181,449 FILLMAN INVESTMENTS LIMITED 4,621,596 Domestically listed foreign shares 4,621,596 SHENWAN HONGYUAN SECURITIES (HK) CO., LTD. 2,016,752 Domestically listed foreign shares 2,016,752 CHEN YONGQUAN 1,900,776 Domestically listed foreign shares 1,900,776 CHEN YONGQING 1,538,949 Domestically listed foreign shares 1,538,949 CHEN LIJUAN 1,381,334 Domestically listed foreign shares 1,381,334 DING XIAOLUN 1,148,000 Domestically listed foreign shares 1,148,000 XU QIANMING 618,259 Domestically listed foreign shares 618,259 5 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. The first, the second and the fourth largest shareholders are the Company’s corporate controlling shareholders. It is unknown to the Company whether Related or acting-in-concert parties among the above there exists associated relationship among the shareholders above or they shareholders are acting-in-concert entities as stipulated in the Administrative Measures on Information Disclosure of Changes in Shareholding of Listed Companies. Did any of the top ten common shareholders or the top ten non-restricted common shareholders of the Company conduct any promissory repo during the Reporting Period? □ Yea √ No No such cases in the Reporting Period. 2. Total number of preference shareholders and shareholdings of the top ten of them □ Applicable √ Not applicable Section III Significant Events I Changes in major accounting statement items and financial indicators for the Reporting Period, as well as reasons for such changes √ Applicable □ Not applicable Unit: RMB Item 31 March 2019 31 December 2018 +/-% Main reason for change Financial assets measured at fair value with fair value changes Evaluated gains on forward foreign exchange 2,896,800.00 1,440,700.00 101.07 included in the profit and loss contracts purchased at the end of 2018 for the Reporting Period Completion of asset disposal for policy plant Assets held for sale 0.00 4,311,436.92 -100.00 demolition Phase II in current period Financial liabilities measured at fair value with fair value Evaluated losses on forward foreign exchange changes included in the profit 215,100.00 0.00 100.00 contracts in current period and loss for the Reporting Period Increase in corporate income tax and output tax Taxes and fares payable 6,464,892.77 3,768,531.07 71.55 withdrawn in current period Recognition of deferred income tax liabilities Deferred income tax liabilities 48,731,708.89 27,505,224.10 77.17 from asset disposal for policy plant demolition Phase II in current period Item January-March 2019 January-March 2018 +/-% Main reason for change Decrease in unrealized, evaluated foreign Finance costs 4,612,813.65 11,665,399.89 -60.46 exchange loss in current period Reversal of allowance for doubtful accounts Asset impairment loss 100,325.01 -1,776,486.26 105.65 resulted from collection of payments from customers in same period of last year Increase in government subsidies in current Other income 2,617,767.00 1,255,697.00 108.47 period Gains on asset disposal for policy plant Asset disposal income 63,163,013.64 327,372.40 19,193.93 demolition Phase II in current period Gains on asset disposal for policy plant Non-operating revenue 25,441,381.14 281,354.88 8,942.45 demolition Phase II in current period Recognition of deferred income tax liabilities Income tax expense 23,231,649.72 348,766.94 6,561.08 from asset disposal for policy plant demolition Phase II in current period 6 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Item January-March 2019 January-March 2018 +/-% Main reason for change Receipt of compensation for policy plant Net operating cash flow 12,516,737.69 -8,842,593.74 241.55 demolition Phase II in current period Increase in outflow of restricted fixed time Net investing cash flow -89,510,560.55 -301,809,247.49 70.34 deposit of same period of last year Decrease in distribution outflow for dividend Net financing cash flow -1,589,694.76 -6,164,673.70 74.21 payment by TKL in current period II Progress of significant events and analysis & explanations on their influence and solutions √ Applicable □ Not applicable 1. Contingencies As MTN Products, Inc. / Water Solutions (Hong Kong) Ltd. ("MTN / WSL") did not pay the relevant payment in time and fulfill the order according to the contract, the subsidiary of the Company, TsannKuen (Zhangzhou) Enterprise Co., Ltd. submitted the indictment to the SUPERIOR COURT OF CALIFORNIA COUNTY OF LOS ANGELES on 23 November 2016 to sue MTN / WSL for payment of USD707,522.92 and USD1,402,940 for reserve losses, totaling USD2,110,462.92. As of the reporting date, the case is still pending. 2. Progress of significant events Website where the relevant Overview of significant event Disclosure date current announcement is disclosed The controlling subsidiary company, Tsann Kuen China (Shanghai) Enterprise Co., Ltd signed the Expropriation Compensation 16 January 2019 www.cninfo.com.cn Agreement (second phase of the factory) and received the first installment of expropriation compensation of RMB44,172,066.5. The controlling subsidiary company, Tsann Kuen China (Shanghai) Enterprise Co., Ltd signed the Expropriation Compensation 26 January 2019 www.cninfo.com.cn Agreement (second phase of the factory) and received the final installment of expropriation compensation of RMB44,172,066.5 III Commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers, unfulfilled in this reporting period √ Applicable □ Not applicable Time of Commitment Commitment Period of Commitment Contents making Fulfillment maker type commitment commitment Commitment on share reform Commitment in the acquisition report or the report on equity changes Commitments made upon the assets replacement Commitments made upon first issuance or refinance 7 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Time of Commitment Commitment Period of Commitment Contents making Fulfillment maker type commitment commitment Commitment on equity incentive The Company’s Based on the confidence on the stocks resumed continuous and stable development of trading on the Company, it committed to increase December 31, the shareholding if the Company’s stock 2012, but the price lower than HKD2.40 per share Company’s stock after the implementation of the shares price hasn’t met contraction and trading resumption, and the condition for it would increase no more than 2% shareholding Commitment shares (i.e. 3.7078 million shares) of the Other commitments FILLMAN increase (closing on total shares issued by the Company December made to minority INVESTMEN Longstanding price was lower shareholding within one year since the date of initial 28, 2012 shareholders TS LIMITED than HKD2.40) increase shareholding increase. If the plan on since the date of increasing holding 2% shares of the trading total shares is completed, if the stock resumption, price hasn’t reached the target price, it FILLMAN will perform relevant approval Investment procedures, and propose to CSRC on Limited hasn’t continuous implementation of implemented the shareholding increase by exemption of shareholding offering. increase plan. Commitment on share Yes reform No such cases in the reporting period. IV Operating result forecast for January-June 2019 Forecast of a possible deficit or considerable YoY change in the accumulative net profit made during the period from the beginning of the year to the end of the next reporting period, as well as explanation of why: □Applicable √ Not applicable V Securities investments □ Applicable √ Not applicable No such cases in the Reporting Period. 8 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. VI Investments in derivative financial instruments √ Applicable □ Not applicable Unit: RMB’0,000 Ratio of investment amount at Type of Investment Investment the end of investment amount at Pursed in Sold in Amount amount Actual Related-party Initial the period Operating in Commencement Termination the this this provided profit/loss Relation transaction investment at the end to the party derivative date date beginning reporting reporting for for the or not amount of the Company's financial of the period period impairment period period net asset at instruments period the end of the period (%) Forward January 1, 201 March 31, Bank Non-related No 36,894.16 22,778.24 14,115.92 13,794.50 23,099.66 33.84 438.75 forex 9 2019 Total 36,894.16 22,778.24 14,115.92 13,794.50 23,099.66 33.84 438.75 Source of investment funds All from the Company's own funds Lawsuits No lawsuits Disclosure date of the announcement about the board’s 2013-03-12 consent for the investment Disclosure date of the announcement about the general 2013-05-18 meeting’s consent for the investment 1. Analysis on risks from holding of derivative products: gains or losses from difference between contracted exchange rate and market exchange rate on value date. 2. Control measures: (1) Principle: The purpose of the financial derivative operation is to avoid risks. The Company shall not conduct transactional operation for other purposes than risk avoidance. The Company shall not conduct complex derivative trading above the actual operation needs and shall not speculate in derivative trading with hedging as an excuse. The overall contractual amount for risk avoidance of the Company shall not exceed Risk analysis and risk control measures for positions held the summation of the net risk exposure of the existing assets and liabilities and the net risk exposure of assets and liabilities arising from the in derivatives in this reporting period (including but not operation of the Company in the coming year. limited to market risk, liquidity risk, credit risk, (2) Staff requirements: Personnel taking part in the investment shall all fully understand the risks of derivative investment and strictly execute operational risk, legal risk, etc.) the business operation and risk management mechanisms for derivative investment. (3) Operation standardization: Before making a derivative investment, the Company shall rationally equip itself with professional personnel for investment decision-making, business operation, risk control, etc. It shall also inquire and compare among various markets and products. Besides, it shall strictly control the variety and size of derivative investment and try to choose derivative trading on exchange as much as possible. (4) Periodic evaluation: Derivative investments shall be evaluated at least twice for a month and the evaluation report shall be sent to a high-ranking executive authorized by the Board of Directors. And a derivative investment report shall be sent to the Board of Directors annually. The Company and its subsidiaries only need to submit to the Board of Directors of the subsidiaries. 9 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. (5) Loss limit: The investment loss on a single derivative and all the investment loss shall not exceed 20% of the total investment amount. (6) Audit system: The audit department audits derivative product trading periodically and submits audit reports to relevant units. (1) Gains on delivered derivatives in the Reporting Period were RMB 3.1465 million, and assessed gains on those undelivered were RMB 1.241 Changes in market price or fair value of derivatives million, of which, the rotation of forwards assessed gains on undelivered derivatives in the last year was RMB 1.4407 million. invested in this reporting period (specific methods used (2) The former contracted bank provided monthly sheets of estimated exchange rates for the undue contracted forward exchanges on the last and relevant assumption and parameter settings shall be trading day of the month. disclosed for analysis of fair value of derivatives) (3) The profit and loss from fair value changes of the derivative was confirmed according to the difference between the contracted amount undue by the month*the estimated exchange rate and the currency amount when bought in. Significant changes in the Company’s accounting policies and specific accounting principles for derivatives in this No significant changes reporting period as compared to the prior period Special opinions expressed by independent directors The Company has carried out a strict internal assessment for the financial derivative business and has established a corresponding supervision concerning the Company’s derivatives investment and mechanism. We are of the opinion that the financial derivative business conducted by the Company is fairly necessary in its routine operation risk control and is in compliance with relevant laws and regulations, with the risks controllable. 10 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. VII Visits paid to the Company in the Reporting Period for purposes of research, communication, interview, etc. √ Applicable □ Not applicable Date of visit Way of visit Type of visitor Index to main inquiry information Inquired of the operation of the 2019-02-27 Telephone communication Individual Company, and the reform of B-share Inquired of the operation and operating 2019-03-22 Telephone communication Individual result forecast of the Company VIII Illegal provision of guarantees for external parties □ Applicable √ Not applicable IX Occupation of the Company’s funds by the controlling shareholder or its related parties for non-operating purposes □ Applicable √ Not applicable 11 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Section IV Financial Statements I Financial statements 1. Consolidated balance sheet Prepared by TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Unit: RMB Item 31 March 2019 31 December 2018 Current assets: Monetary funds 460,577,475.15 469,692,295.47 Financial assets measured at fair value with fair value changes 2,896,800.00 1,440,700.00 included in the profit and loss for the Reporting Period Derivative financial assets Notes and accounts receivable 226,804,782.38 280,796,130.89 Of which: Notes receivable 150,000.00 200,000.00 Accounts receivable 226,654,782.38 280,596,130.89 Accounts paid in advance 2,270,686.20 2,668,796.33 Other accounts receivable 27,374,076.76 29,944,042.47 Of which: Interest receivable 577,196.15 Dividends receivable Inventories 230,073,417.06 243,262,500.58 Assets held for sale 4,311,436.92 Non-current assets due within one year Other current assets 593,824,357.99 527,497,484.82 Total current assets 1,543,821,595.54 1,559,613,387.48 Non-current assets: Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investments Investment property 24,607,201.75 25,014,648.31 Fixed assets 186,262,040.67 191,073,302.46 Construction in progress 1,144,144.32 895,756.17 Productive living assets Oil-gas assets Intangible assets 27,434,685.33 27,771,236.03 R&D expense Goodwill Long-term deferred expenses 7,387,372.56 8,058,867.12 Deferred income tax assets 25,606,275.55 26,552,328.43 Other non-current assets 3,357,000.12 3,495,224.64 Total non-current assets 275,838,720.30 282,901,363.16 Total assets 1,819,660,315.84 1,842,514,750.64 12 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Item 31 March 2019 31 December 2018 Current liabilities: Short-term borrowings 10,234,889.51 10,432,044.21 Financial liabilities measured at fair value with fair value 215,100.00 changes included in the profit and loss for the Reporting Period Derivative financial liabilities Notes and accounts payable 573,179,629.03 672,895,647.66 Accounts received in advance 11,712,883.38 9,747,158.90 Payroll payable 37,305,402.03 48,587,140.78 Taxes and fares payable 6,464,892.77 3,768,531.07 Other accounts payable 55,127,771.61 52,818,204.91 Of which: Interest payable 23,919.09 Dividends payable Reinsurance premiums payable Insurance contract reserves Payables for acting trading of securities Payables for acting underwriting of securities Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 694,240,568.33 798,248,727.53 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term accounts payable Long-term payroll payable 367,193.38 361,923.23 Estimated liabilities Deferred income Deferred income tax liabilities 48,731,708.89 27,505,224.10 Other non-current liabilities Total non-current liabilities 49,098,902.27 27,867,147.33 Total liabilities 743,339,470.60 826,115,874.86 Shareholders’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 296,808,965.79 296,808,965.79 Less: Treasury stock Other composite income 4,525,603.04 5,924,132.67 Special reserves Surplus reserves 37,770,482.76 37,804,354.59 Provisions for general risks Retained profit 158,037,409.05 122,872,551.30 Total equity attributable to shareholders of the Company 682,534,140.64 648,801,684.35 Minority interests 393,786,704.60 367,597,191.43 Total shareholders’ equity 1,076,320,845.24 1,016,398,875.78 Total liabilities and shareholders’ equity 1,819,660,315.84 1,842,514,750.64 Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 13 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. 2. Balance sheet of the Company Unit: RMB Item 31 March 2019 31 December 2018 Current Assets: Monetary funds 13,555,765.00 6,985,345.44 Financial assets measured at fair value with fair value changes included in the profit and loss for the Reporting Period Derivative financial assets Notes and accounts receivable 11,422,448.23 16,443,882.91 Of which: Notes receivable 150,000.00 200,000.00 Accounts receivable 11,272,448.23 16,243,882.91 Accounts paid in advance 3,669.11 260,472.55 Other accounts receivable 2,404,308.19 2,213,373.51 Of which: Interest receivable Dividends receivable Inventories 7,989,068.43 9,339,180.06 Assets held for sale Non-current assets due within one year Other current assets 469,134.42 381,431.15 Total current assets 35,844,393.38 35,623,685.62 Non-current assets: Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investments 921,914,701.56 921,914,701.56 Investment property 29,280,670.55 29,863,349.12 Fixed assets 1,199,363.16 1,189,309.65 Construction in progress Productive living assets Oil-gas assets Intangible assets 22,499.99 29,249.99 R&D expense Goodwill Long-term deferred expenses Deferred income tax assets 11,276,471.06 10,946,860.01 Other non-current assets 53,879.31 Total non-current assets 963,733,706.32 964,037,349.64 Total assets 999,578,099.70 999,661,035.26 14 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Item 31 March 2019 31 December 2018 Current liabilities: Short-term borrowings Financial liabilities measured at fair value with fair value changes included in the profit and loss for the Reporting Period Derivative financial liabilities Notes and accounts payable 46,551,447.34 58,463,830.39 Accounts received in advance 1,434,164.96 1,708,795.17 Payroll payable 3,430,526.62 5,338,618.00 Taxes and fares payable 528,378.58 666,695.14 Other accounts payable 251,548,856.89 262,786,311.87 Of which: Interest payable Dividends payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 303,493,374.39 328,964,250.57 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term accounts payable Long-term payroll payable Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 303,493,374.39 328,964,250.57 Shareholders’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 271,490,289.82 271,490,289.82 Less: Treasury stock Other composite income Special reserves Surplus reserves 37,770,482.76 37,804,354.59 Provisions for general risks Retained profit 201,432,272.73 176,010,460.28 Total shareholders’ equity 696,084,725.31 670,696,784.69 Total liabilities and shareholders’ equity 999,578,099.70 999,661,035.26 Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 15 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. 3. Consolidated income statement Unit: RMB Item January-March 2019 January-March 2018 1. Operating revenues 414,109,550.74 319,364,654.64 Including: Sales revenue 414,109,550.74 319,364,654.64 2. Total operating costs 419,168,621.41 358,168,095.81 Including: Cost of sales 361,136,922.92 293,239,451.95 Taxes and surtaxes 3,171,428.43 3,143,568.77 Selling expenses 13,587,124.77 13,638,807.57 Administrative expenses 19,337,403.42 21,715,402.71 R&D expenses 17,222,603.21 16,541,951.18 Finance costs 4,612,813.65 11,665,399.89 Of which: Interest expenses 106,348.89 121,230.66 Interest revenue 2,046,820.39 2,727,723.26 Asset impairment loss 100,325.01 -1,776,486.26 Add: other income 2,617,767.00 1,255,697.00 Profit/loss on investment (“-” means loss) 4,920,084.91 5,902,804.29 Including: Share of profit in associates and joint ventures Profit/loss on fair value changes (“-” means loss) 1,241,000.00 1,523,700.00 Income arising from disposal of assets (“-” means loss) 63,163,013.64 327,372.40 3. Operating profit (“-” means loss) 66,882,794.88 -29,793,867.48 Add: Non-operating revenue 25,441,381.14 281,354.88 Less: Non-operating expense 12,068.56 29,831.46 4. Total profit (“-” means loss) 92,312,107.46 -29,542,344.06 Less: Corporate income tax 23,231,649.72 348,766.94 5. Net profit (“-” means loss) 69,080,457.74 -29,891,111.00 5.1 Classified by operating continuity 5.1.1 Net profit from going concern (“-” means net loss) 69,080,457.74 -29,891,111.00 5.1.2 Net profit from discontinued operations (“-” means net loss) 5.2 Classified by ownership 5.2.1 Minority shareholders’ income (“-” means net loss) 34,755,295.40 -8,012,876.21 5.2.2 Net profit attributable to owners of the Company (“-” means 34,325,162.34 -21,878,234.79 net loss) 6. After-tax net amount of other composite income -1,877,502.36 -3,351,759.83 After-tax net amount of other composite income attributable to -1,408,126.77 -2,513,819.87 shareholders of the Company 6.1 Other composite income that will not be reclassified to profit or loss 6.1.1 Changes caused by remeasurements on defined benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 6.2 Other composite income that will be reclassified to profit or -1,408,126.77 -2,513,819.87 loss 16 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Item January-March 2019 January-March 2018 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets 6.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4 Effective gain/loss on cash flow hedges 6.2.5 Differences arising from translation of foreign -1,408,126.77 -2,513,819.87 currency-denominated financial statements 6.2.6 Other After-tax net amount of other composite income attributable to -469,375.59 -837,939.96 minority shareholders 7. Total composite income 67,202,955.38 -33,242,870.83 Attributable to shareholders of the Company 32,917,035.57 -24,392,054.66 Attributable to minority shareholders 34,285,919.81 -8,850,816.17 8. Earnings per share 8.1 Basic earnings per share 0.19 -0.12 8.2 Diluted earnings per share 0.19 -0.12 Where business mergers under the same control occurred in the Reporting Period, net profit achieved by the merged parties before the business mergers was RMB 0.00, with the corresponding amount for the same period of last year being RMB0.00. Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 17 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. 4. Income statement of the Company Unit: RMB Item January-March 2019 January-March 2018 1. Operating revenues 22,032,609.07 25,078,057.17 Less: Operating costs 18,531,455.88 20,332,971.17 Taxes and surtaxes 489,640.35 605,071.88 Selling expenses 1,301,565.65 1,754,858.63 Administrative expenses 1,523,173.90 1,433,363.89 R&D expenses Finance costs -19,731.29 -1,065.19 Of which: Interest expenses Interest revenue 22,891.31 4,646.80 Asset impairment loss 289,922.04 -251,973.27 Add: other income Profit/loss on investment (“-” means loss) 25,443,358.87 33,547,555.83 Including: Share of profit in associates and joint ventures Profit/loss on fair value changes (“-” means loss) Income arising from disposal of assets (“-” means loss) 2. Operating profit (“-” means loss) 25,359,941.41 34,752,385.89 Add: Non-operating revenue 150,012.50 18,469.97 Less: Non-operating expense 4,632.00 3. Total profit (“-” means loss) 25,509,953.91 34,766,223.86 Less: Corporate income tax -216,704.97 16,826.32 4. Net profit (“-” means loss) 25,726,658.88 34,749,397.54 4.1 Net profit from going concern (“-” means net loss) 25,726,658.88 34,749,397.54 4.2 Net profit from discontinued operation (“-” means net loss) 5. After-tax net amount of other composite income 5.1 Other composite income that will not be reclassified to profit or loss 5.1.1 Changes caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 5.2 Other composite income that will be reclassified to profit or loss 5.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 5.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets 5.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.4 Effective gain/loss on cash flow hedges 5.2.5 Differences arising from translation of foreign currency-denominated financial statements 5.2.6 Other 6. Total composite income 25,726,658.88 34,749,397.54 Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 18 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. 5. Consolidated cash flow statement Unit: RMB Item January-March 2019 January-March 2018 1. Operating cash flow: Cash received from sale of commodities and rendering of service 470,292,109.02 421,714,037.46 Net increase in money deposits from customers and inter-bank placements Net increase in loans from the Central Bank Net increase in funds borrowed from other financial institutions Cash received from premium of original insurance contracts Net cash received from reinsurance business Net increase in deposits of policy holders and investment fund Net increase in disposal of financial assets measured at fair value with fair value changes included in the profit and loss for the Reporting Period Cash received from interest, handling charges and commissions Net increase in loans from banks and other financial institutions Net increase in funds in repurchase business Tax refunds received 45,294,291.73 54,253,887.28 Other operating cash received 40,299,144.22 8,917,968.49 Subtotal of operating cash inflow 555,885,544.97 484,885,893.23 Cash paid for goods and services 423,416,730.73 388,927,995.77 Net increase in loans and advances to customers Net increase in funds deposited in the Central Bank and inter-bank placements Cash for paying claims of original insurance contracts Cash for paying interest, handling charges and commissions Cash for paying policy dividends Cash paid to and for employees 70,899,203.15 66,421,877.12 Taxes and fares paid 4,374,193.52 3,866,015.63 Other cash payment relating to operating activities 44,678,679.88 34,512,598.45 Subtotal of operating cash outflow 543,368,807.28 493,728,486.97 Net operating cash flow 12,516,737.69 -8,842,593.74 2. Investment cash flow: Cash received from retraction of investments 97,734,524.30 46,450,800.00 Cash received from return on investments 2,037,009.88 1,396,650.10 Net cash received from disposal of fixed assets, intangible assets and other 67,196,727.16 287,716.15 long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investment activities 34,369,502.82 62,300,000.00 Subtotal of investment cash inflow 201,337,764.16 110,435,166.25 Cash paid to acquire fixed assets, intangible assets and other long-term 16,968,527.22 13,979,813.74 assets Cash paid for investment 160,681,186.08 40,000,000.00 Net increase in pledged loans Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investment activities 113,198,611.41 358,264,600.00 Subtotal of investment cash outflow 290,848,324.71 412,244,413.74 Net investment cash flow -89,510,560.55 -301,809,247.49 19 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Item January-March 2019 January-March 2018 3. Financing cash flow: Cash received from capital contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received as borrowings 5,108,330.63 Cash received from issuance of bonds Other financing cash received 7,000,000.00 Subtotal of financing cash inflow 7,000,000.00 5,108,330.63 Repayment of borrowings Cash paid for interest expenses and distribution of dividends or profit 8,589,694.76 11,273,004.33 Including: dividends or profit paid by subsidiaries to minority 8,481,119.62 11,182,518.61 shareholders Other cash payments relating to financing activities Sub-total of financing cash outflow 8,589,694.76 11,273,004.33 Net financing cash flow -1,589,694.76 -6,164,673.70 4. Effect of foreign exchange rate changes on cash and cash equivalents -2,236,584.61 -7,687,492.59 5. Net increase in cash and cash equivalents -80,820,102.23 -324,504,007.52 Add: Opening balance of cash and cash equivalents 448,492,295.47 564,381,960.88 6. Closing balance of cash and cash equivalents 367,672,193.24 239,877,953.36 Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 20 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. 6. Cash flow statement of the Company Unit: RMB Item January-March 2019 January-March 2018 1. Operating cash flow: Cash received from sale of commodities and rendering of service 16,891,797.09 22,858,389.74 Tax refunds received Other operating cash received 12,140,390.98 10,659,931.71 Subtotal of operating cash inflow 29,032,188.07 33,518,321.45 Cash paid for goods and services 20,998,592.16 35,107,058.89 Cash paid to and for employees 773,062.49 704,419.01 Taxes and fares paid 1,818,111.09 1,021,402.40 Other operating cash payments 24,252,801.23 13,419,027.17 Subtotal of operating cash outflow 47,842,566.97 50,251,907.47 Net operating cash flow -18,810,378.90 -16,733,586.02 2. Investment cash flow: Cash received from retraction of investments Cash received from return on investments 25,443,358.87 33,547,555.83 Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investment activities Subtotal of investment cash inflow 25,443,358.87 33,547,555.83 Cash paid to acquire fixed assets, intangible assets and other long-term 62,500.00 assets Cash paid for investment Net cash paid to acquire subsidiaries and other business units Other investment cash payments Subtotal of investment cash outflow 62,500.00 0.00 Net investment cash flow 25,380,858.87 33,547,555.83 3. Financing cash flow: Cash received from capital contributions Cash received as borrowings Cash received from issuance of bonds Other financing cash received Subtotal of financing cash inflow Repayment of borrowings Cash paid for interest expenses and distribution of dividends or profit Other cash payments relating to financing activities Sub-total of financing cash outflow Net financing cash flow 4. Effect of foreign exchange rate changes on cash and cash equivalents -60.41 -76.06 5. Net increase in cash and cash equivalents 6,570,419.56 16,813,893.75 Add: Opening balance of cash and cash equivalents 6,985,345.44 5,342,389.95 6. Closing balance of cash and cash equivalents 13,555,765.00 22,156,283.70 Legal representative: Pan Zhirong Chief of the accounting work: Wu Jianhua Chief of the accounting organ: Wu Jianhua 21 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. II Adjustments to the Financial Statements 1. Adjustments to the financial statements at the beginning of the first execution year of any New Standards Governing Financial Instruments, Revenue or Leases √ Applicable □ Not applicable Retroactive restatement of consolidated balance sheet Prepared by TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Unit: RMB Item 1 January 2019 31 December 2018 Adjusted Current assets: Monetary funds 469,692,295.47 469,692,295.47 Financial assets measured at fair value with fair value 1,440,700.00 1,440,700.00 changes included in the profit and loss for the Reporting Period Derivative financial assets Notes and accounts receivable 282,087,350.72 280,796,130.89 1,291,219.83 Of which: Notes receivable 200,000.00 200,000.00 Accounts receivable 281,887,350.72 280,596,130.89 1,291,219.83 Accounts paid in advance 2,668,796.33 2,668,796.33 Other accounts receivable 29,944,042.47 29,944,042.47 Of which: Interest receivable Dividends receivable Inventories 243,262,500.58 243,262,500.58 Assets held for sale 4,311,436.92 4,311,436.92 Non-current assets due within one year Other current assets 527,497,484.82 527,497,484.82 Total current assets 1,560,904,607.31 1,559,613,387.48 1,291,219.83 Non-current assets: Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investments Investment property 25,014,648.31 25,014,648.31 Fixed assets 191,073,302.46 191,073,302.46 Construction in progress 895,756.17 895,756.17 Productive living assets Oil-gas assets Intangible assets 27,771,236.03 27,771,236.03 R&D expense Goodwill Long-term deferred expenses 8,058,867.12 8,058,867.12 Deferred income tax assets 26,461,242.31 26,552,328.43 -91,086.12 Other non-current assets 3,495,224.64 3,495,224.64 Total non-current assets 282,810,277.04 282,901,363.16 -91,086.12 Total assets 1,843,714,884.35 1,842,514,750.64 1,200,133.71 22 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Retroactive restatement of consolidated balance sheet (Continued) Prepared by TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Unit: RMB Item 1 January 2019 31 December 2018 Adjusted Current liabilities: Short-term borrowings 10,432,044.21 10,432,044.21 Financial liabilities measured at fair value with fair value changes included in the profit and loss for the Reporting Period Derivative financial liabilities Notes and accounts payable 672,895,647.66 672,895,647.66 Accounts received in advance 9,747,158.90 9,747,158.90 Payroll payable 48,587,140.78 48,587,140.78 Taxes and fares payable 3,768,531.07 3,768,531.07 Other accounts payable 52,818,204.91 52,818,204.91 Of which: Interest payable 23,919.09 23,919.09 Dividends payable Non-current liabilities due within one year Other current liabilities Total current liabilities 798,248,727.53 798,248,727.53 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term accounts payable Long-term payroll payable 361,923.23 361,923.23 Estimated liabilities Deferred income Deferred income tax liabilities 27,505,224.10 27,505,224.10 Other non-current liabilities Total non-current liabilities 27,867,147.33 27,867,147.33 Total liabilities 826,115,874.86 826,115,874.86 Shareholders’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 296,808,965.79 296,808,965.79 Less: Treasury stock Other composite income 5,933,729.81 5,924,132.67 9,597.14 Special reserves Surplus reserves 37,770,482.76 37,804,354.59 -33,871.83 Provisions for general risks Retained profit 123,712,246.71 122,872,551.30 839,695.41 Total equity attributable to shareholders of the Company 649,617,105.07 648,801,684.35 815,420.72 Minority interests 367,981,904.42 367,597,191.43 384,712.99 Total shareholders’ equity 1,017,599,009.49 1,016,398,875.78 1,200,133.71 Total liabilities and shareholders’ equity 1,843,714,884.35 1,842,514,750.64 1,200,133.71 23 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Explanation of adjustments According to the revised and printed Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets, Accounting Standards for Business Enterprises No. 24 – Hedging Accounting, and Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments issued by Ministry of Finance in 2017, enterprises listed domestically shall implement it from 1 January 2019. The Company shall classify and measure financial instruments on implementation date of the standards in accordance with the regulations. No adjustment is needed if the previous comparative data of financial statements are inconsistent with the requirements of the standards. The balance between the original carrying value of financial instruments and the new carrying value on implementation date of the standards shall recorded into the items of beginning retained earnings, other comprehensive income and other items of financial statements during the reporting period of implementation date of the standards. The Company shall change withdrawal method of accounts receivable impairment from “incurred loss method” to “expected credit loss method” in order to make provision for financial assets impairment more timely and sufficiently, revealing and controlling credit risks of financial assets. 24 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Retroactive restatement of balance sheet Prepared by TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Unit: RMB Item 1 January 2019 31 December 2018 Adjusted Current assets: Monetary funds 6,985,345.44 6,985,345.44 Financial assets measured at fair value with fair value changes included in the profit and loss for the Reporting Period Derivative financial assets Notes and accounts receivable 15,992,258.57 16,443,882.91 -451,624.34 Of which: Notes receivable 200,000.00 200,000.00 Accounts receivable 15,792,258.57 16,243,882.91 -451,624.34 Accounts paid in advance 260,472.55 260,472.55 Other accounts receivable 2,213,373.51 2,213,373.51 Of which: Interest receivable Dividends receivable Inventories 9,339,180.06 9,339,180.06 Assets held for sale Non-current assets due within one year Other current assets 381,431.15 381,431.15 Total current assets 35,172,061.28 35,623,685.62 -451,624.34 Non-current assets: Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investments 921,914,701.56 921,914,701.56 Investment property 29,863,349.12 29,863,349.12 Fixed assets 1,189,309.65 1,189,309.65 Construction in progress Productive living assets Oil-gas assets Intangible assets 29,249.99 29,249.99 R&D expense Goodwill Long-term deferred expenses Deferred income tax assets 11,059,766.09 10,946,860.01 112,906.08 Other non-current assets 53,879.31 53,879.31 Total non-current assets 964,150,255.72 964,037,349.64 112,906.08 Total assets 999,322,317.00 999,661,035.26 -338,718.26 25 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Retroactive restatement of balance sheet (Continued) Prepared by TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Unit: RMB Item 1 January 2019 31 December 2018 Adjusted Current liabilities: Short-term borrowings Financial liabilities measured at fair value with fair value changes included in the profit and loss for the Reporting Period Derivative financial liabilities Notes and accounts payable 58,463,830.39 58,463,830.39 Accounts received in advance 1,708,795.17 1,708,795.17 Payroll payable 5,338,618.00 5,338,618.00 Taxes and fares payable 666,695.14 666,695.14 Other accounts payable 262,786,311.87 262,786,311.87 Of which: Interest payable Dividends payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 328,964,250.57 328,964,250.57 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term accounts payable Long-term payroll payable Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 328,964,250.57 328,964,250.57 Shareholders’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 271,490,289.82 271,490,289.82 Less: Treasury stock Other composite income Special reserves Surplus reserves 37,770,482.76 37,804,354.59 -33,871.83 Provisions for general risks Retained profit 175,705,613.85 176,010,460.28 -304,846.43 Total shareholders’ equity 670,358,066.43 670,696,784.69 -338,718.26 Total liabilities and shareholders’ equity 999,322,317.00 999,661,035.26 -338,718.26 Explanation of adjustments According to the revised and printed Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets, Accounting Standards for Business Enterprises No. 24 – Hedging Accounting, and Accounting Standards for Business Enterprises No. 37 – Presentation of 26 Report for the First Quarter of 2019 of Tsann Kuen (China) Enterprise Co., Ltd. Financial Instruments issued by Ministry of Finance in 2017, enterprises listed domestically shall implement it from 1 January 2019. The Company shall classify and measure financial instruments on implementation date of the standards in accordance with the regulations. No adjustment is needed if the previous comparative data of financial statements are inconsistent with the requirements of the standards. The balance between the original carrying value of financial instruments and the new carrying value on implementation date of the standards shall recorded into the items of beginning retained earnings, other comprehensive income and other items of financial statements during the reporting period of implementation date of the standards. The Company shall change withdrawal method of accounts receivable impairment from “incurred loss method” to “expected credit loss method” in order to make provision for financial assets impairment more timely and sufficiently, revealing and controlling credit risks of financial assets. 2. Retrospective restatement of previous comparative data due to the first execution of any New Standards Governing Financial Instruments or Leases □ Applicable √ Not applicable III Auditor’s report Is this Report audited? □ Yes √ No This Report is not audited. 27