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闽灿坤B:2009年半年度报告(英文版)2009-08-03  

						TSANN KUEN (CHINA) ENTERPRISE CO. LTD

    Semi-Annual Report 2009

    (Prepared under China Accounting Standards)

    Contents

    I. Company Profile-------------------------------------------------------------------------------1

    II. Summary of Financial and Business Highlights--------------------------------------2

    (I) Major accounting data and financial indexes -----------------------------------------2

    (II) Explanation on difference between different accounting standards---------------3

    III. Changes in Share Capital and Particular about Shareholders-------------------------3

    (I) Changes in share capital-----------------------------------------------------------------3

    (II) Particular about shareholders ----------------------------------------------------------4

    (III) About controlling shareholders--------------------------------------------------------5

    (IV) About actual controlling shareholders------------------------------------------------5

    IV. Particulars about Directors, Supervisors and Senior Management-------------------6

    V. Report of the Board of Directors-----------------------------------------------------------6

    VI. Significant Events -------------------------------------------------------------------------12

    VII. Financial Report (Attachment) ---------------------------------------------------------18

    VIII. Documents Available for Reference--------------------------------------------------192

    Important Notes

    The Board of Directors, Supervisory Committee, as well as the directors, supervisors and senior

    management of Tsann Kuen (China) Enterprise Co., Ltd. (hereinafter refer to as “the Company”)

    hereby confirm that there is no false information, misleading statements or any material omission

    carried in this report, and collectively and individually accept the responsibilities for the truthfulness,

    accuracy and completeness of the whole contents.

    None of directors, supervisors and senior management has ever declared that he (she) is uncertain of

    or has any objection to the truthfulness, accuracy and completeness of this semi-annual report 2009.

    All the directors had attended the Board meeting which reviewed and approved the semi-annual

    report 2009.

    The Chairman of the Board of Directors Mr. Jian Derong and the Accounting Manager Mr. Chen

    Zongyi jointly declare that the financial report in this semi-annual report is true and complete.

    The financial report in this semi-annual report has not been audited.

    I. Company Profile

    1. Company’s name (Chinese) : 厦门灿坤实业股份有限公司

    Company’s name (English) : Tsann Kuen (China) Enterprise Co., Ltd.

    Company’s name (Abbr.) : TKC

    2. Legal Representative : Jian Derong

    3. Secretary of the Board of Director : Luo Qingxing

    Contact address :Tsann Kuen Industrial Park, Longchi Development Zone, Zhangzhou, Fujian

    province

    Telephone : 0596-6268103

    Fax : 0596-6268104

    E-mail : allenlo@tkl.tsannkuen.com

    Securities Affairs Representative : Sun Meimei

    Contact address : Tsann Kuen Industrial Park, Longchi Development Zone, Zhangzhou, Fujian

    province

    Telephone : 0596-6268161

    Fax : 0596-6268104

    E-mail : mm_sun@tkl.tsannkuen.com

    4. Registered address : No.88, Xinglong Road, Huli Industry District, Xiamen, P.R.C.

    Post code : 361006

    Office address : Tsann Kuen Industrial Park, Longchi Development Zone, Zhangzhou, Fujian

    province

    Post code : 361107

    Website : www.tsannkuen.com

    E-mail : allenlo@tkl.tsannkuen.com3

    5. Newspapers Chosen for Disclosing the Information of the Company:

    Domestic : Securities Times; Overseas: Hong Kong Ta Kung Pao

    Website for publishing semi-annual report: www.cninfo.com.cn

    Place Where the semi-report is prepared and placed: Tsann Kuen Industrial Park, Longchi

    Development Zone, Zhangzhou, Fujian province

    6. Stock Exchange Listed with : Shenzhen Stock Exchange

    Short form for stock : Tsann Kuen B

    Stock code : 200512

    7. Initial registered date and place : Jan. 1, 1988 in Xiamen, P.R.C.

    Business license number : 350200400001420

    Organization Code : 61200217-0

    Tax registration code : NTW Zi 350206612002170

    CPAs engaged by the Company : Reanda Certified Public Accountants Co., Ltd.

    Address of CPAs engaged : Room 2008, Eastern 20/F, No. 1 Building, No. 100 Xili,

    Balizhuang, Chaoyang District, Beijing.

    II. Summary of Financial and Business Highlights

    (I) Major accounting data and financial indices

    Unit: RMB Yuan

    Items

    As at the end of

    this report period

    As at the end of

    last year

    Increase/decrease of the end

    of report period compared

    with the period-end of the

    last year (%)

    Total assets 1,815,519,734.32 2,236,370,415.83 (18.82)

    Owners’ equity attributable to shareholders of listed

    company

    363,702,841.41 343,776,758.97 5.80

    Share capital 1,112,350,077.00 1,112,350,077.00 (0.00)

    Net assets per share attributable to shareholders of listed

    company

    0.3270 0.3091 5.79

    Items The report period

    (Jan. -Jun.)

    The same period of

    last year

    Increase/decrease during the

    report period compared with

    that of the last year (%)

    Operating income 1,184,719,288.10 2,092,963,091.76 (43.40)

    Operating profit 18,952,570.69 38,802,145.05 (51.16)

    Total profit 28,666,124.42 41,568,168.78 (31.04)

    Net profit attributable to shareholders of listed company 20,163,216.18 27,749,022.72 (27.34)

    Net profit after deducting non-recurring gains and losses 17,747,955.08 26,432,093.64 (32.85)

    Earnings per share-basic 0.0181 0.0249 (27.31)

    Earnings per share-diluted 0.0181 0.0249 (27.31)

    Return on equity 5.54% 8.07% (2.53)

    Net cash flow arising from operating activities (36,047,687.38) (159,919,434.80) 77.46

    Net cash flow per share arising from operating activities (0.03241) (0.1438) 77.474

    Items and amount of non-recurring gains and losses

    Unit: RMB Yuan

    Items Amount

    Net profit 27,056,315.48

    Add: gains and losses from disposal of non-current assets, including the part that withdrawn reserve for

    impairment of assets were offset

    (6,013,156.17)

    Gains and losses from change in fair value of tradable financial assets and tradable financial liabilities and

    investment income from disposal of tradable financial assets, tradable financial liabilities and available-for-sale

    financial assets except for effective hedging business related to normal operation business of the Company

    683,060.97

    Government subsidy measured into current gains and losses, while closely related with the business of the

    Company, excluding the fixed-amount or fixed-proportion government subsidy enjoyed according to the certain

    standard

    (2,700,117.03)

    Other non-operating income and expense beside for the above-mentioned each items (1,000,280.39)

    Subtotal (9,030,492.62)

    Less: influence on enterprise income tax (1,474,606.78)

    Less: net profit attributable to minority shareholders after deducting non-recurring gains and losses 1,752,474.56

    Net profit attributable to shareholder of parent company after deducting non-recurring gains and losses 17,747,955.08

    (II) Difference between PRC GAAP and IFRS

    (Unit: RMB)

    Net profit attributable to

    shareholders of listed company

    Net assets attributable to

    shareholders of listed company

    Items

    Jan.-Jun. 2009

    Jan.-Jun.

    2008

    30 Jun. 2009 Dec. 31 2008

    Under IFRSs 19,187,741.44 26,773,547.98 364,252,645.90 345,302,038.21

    Under PRC GAAP 20,163,216.18 27,749,022.72 363,702,841.41 343,776,758.97

    Adjustment pursuant to IFRSs

    Adjustment of fixed assets purchased before

    1994 due to adopting adjusted rate (1,111,317.84) (1,111,317.84) 2,376,139.44 3,487,457.28

    Writing off the depreciation in this year of

    evaluation increment fixed asset of the

    year1993

    135,843.10 135,843.10 (1,826,334.95) (1,962,178.04)

    Total (975,474.74) (975,474.74) 549,804.49 1,525,279.24

    Explanation on difference

    1. Adjustment to property, plant and equipment which acquired

    before 1994 at swap rates

    2. Writing off the depreciation in this year of evaluation increment fixed

    asset of the year1993

    III. Changes in Share Capital and Particular about Shareholders

    (I) Changes in share capital

    □Applicable √Inapplicable5

    (II) Particulars about shareholders

    Total shareholders: 27803

    Shares held by the top ten shareholders

    Unit: Share

    No Name of shareholder Nature of shareholder

    Proportion of

    shares held

    Shares held at

    the period-end

    Non-tradable

    shares held

    Shares pledged or

    frozen

    1

    FORDCHEE

    DEVELOPMENT LIMITED

    Foreign corporation 29.10% 323,643,179 0 0

    2

    EUPA INDUSTRY

    CORPORATION LIMITED

    Foreign corporation 16.35% 181,855,147 0 0

    3

    FILLMAN INVESTMENTS

    LIMITED

    Foreign corporation 9.88% 109,900,037 0 0

    4 TIMMERTON CO INC Foreign corporation 1.30% 14,505,644 0 Unknown

    5 CHEN YONG QUAN Domestic natural person 0.68% 7,596,456 0 Unknown

    6 CHEN YONG QING Domestic natural person 0.53% 5,855,089 0 Unknown

    7 CHEN LI JUAN Domestic natural person 0.51% 5,693,846 0 Unknown

    8 CSC SECURITIES (HK.) LTD Foreign corporation 0.44% 4,929,972 0 Unknown

    9 HE JIAN XIONG Domestic natural person 0.40% 4,439,551 0 Unknown

    10 TSAI SHU HUI Foreign natural person 0.39% 4,294,433 0 0

    Shares held by the top ten stockholders holding tradable shares

    Unit: Share

    No. Name of shareholder Number of tradable shares held Type of shares

    1 FORDCHEE DEVELOPMENT LIMITED 323,643,179 B-share

    2 EUPA INDUSTRY CORPORATION LIMITED 181,855,147 B-share

    3 FILLMAN INVESTMENTS LIMITED 109,900,037 B-share

    4 TIMMERTON CO INC 14,505,644 B-share

    5 CHEN YONG QUAN 7,596,456 B-share

    6 CHEN YONG QING 5,855,089 B-share

    7 CHEN LI JUAN 5,693,846 B-share

    8 CSC SECURITIES(HK)LTD. 4,929,972 B-share

    9 HE JIAN XIONG 4,439,551 B-share

    10 TSAI SHU HUI 4,294,433 B-share

    Explanation on related

    relationship and

    action-in-concert

    among above

    mentioned shareholders

    The top three shareholders are the controlling shareholders. Shareholder Tsai Shuhui is also director of

    TSANN KUEN (Taiwan) ENTERPRISE CO. LTD, which is the actual controller of the Company. The

    Company was not aware that whether there were any related relationships between other shareholders

    holding tradable shares and whether or not the other shareholders holding tradable shares belonged to the

    action-in-concert people specified in The Regulations for Information Disclosure on the Change of Shares

    Held by the Shareholders of the Listed Companies.

    Remark:

    FORDCHEE DEVELOPMENT LIMITED, the controlling shareholder of the Company, has sold

    1,042,789 shares accumulatively in this report period through Shenzhen Stock Exchange, taking up

    0.094% of total share capital of the Company; FILLMAN INVESTMENT LIMITED, The

    controlling shareholder of the Company, has sold 52,442,947 shares accumulatively in this report

    period through Shenzhen Stock Exchange, taking up 4.715% of total share capital of the Company.6

    (III) About controlling shareholders

    Name of shareholders

    Legal

    Representative

    Foundation date

    Business

    scope

    Registered capital Pledge

    FORDCHEE DEVELOPMENT LTD Jian Derong 3 Jan. 1990 Investment HKD 10,000 Naught

    EUPA INDUSTRY CORPORATION LTD Jian Derong 21 Jul. 1989 Investment HKD100,000 Naught

    FILLMAN INVESTMENTS LTD Jian Derong 21 Jul. 1992 Investment HKD10,000 Naught

    Note: all above mentioned controlling shareholders are the controlling subsidiaries of TSANN

    KUEN (Taiwan) ENTERPRISE CO., LTD.

    (IV) About actual controlling shareholders

    1. Name of actual controlling shareholder : TSANN KUEN (Taiwan) ENTERPRISE CO. LTD

    2. Legal representative : Zhuang Xing

    3. Foundation day : 2 Nov. 1978

    4. Major operation and products : Small household appliances and its raw material,

    manufacturing the equipments, manufacturing and sales, appliances retail in department store

    5. Registered capital : NTD 3,209,978,410

    6. Equity structure : Ordinary share

    7. Block diagram of the relationship between the Company and the real controlling shareholders:

    16.35%

    29.10%

    9.88%

    99.98% 99.96%

    81.00%

    Tsai Shuhui Wu Tsann

    Kuen

    Tsai Yuan

    Song

    Tsai Yuan

    Yuan

    Other

    shareholders

    Tsai Shuhui

    Tsann Kuen Investment Co., Ltd.

    Standard Chartered Bank Fidelity

    Bailee

    Tsann Kuen (Taiwan) Enterprise Co., Ltd.

    SINO Global Development

    EUPA Industry

    Corporation Limited

    FORDCHEE Development

    Limited

    FILLMAN Investment

    Limited

    Tsann Kuen (China) Enterprise Co., Ltd.

    21.25% 16.25% 28.75% 16.25% 12.50% 5.00%

    100% Wu Tsann Kuen

    Tsai

    Yuanzhong

    Jiang Huamei

    HSBC hosting Kim Eng

    Securities(Hong Kong) Ltd.

    Accounts.

    Chase Manhattan Bank, Fidelity

    Investment Trust Fidelity hosting

    the Pacific Basin Fund

    Investment accounts

    Tsai Yuan Song

    Hua Nan Commercial Bank by

    Tsann Kuen Enterprise Trust

    property accounts

    Chase Manhattan Bank hosting

    Public Employees Retirement

    System of Ohio Investment

    accounts

    0.80% 0.94% 0.81% 4.90% 5.62% 33.94% 1.06% 0.68% 2.80%

    0.85%7

    IV. Particulars about Directors, Supervisors and Senior Management

    (I) Changes in directors, supervisors and senior management

    □Applicable √Inapplicable

    V. Report of the Board of Directors

    1. Discussion and analysis on operation status of the Company during the report period

    According to relevant date of state, export amount in the first half year of 2009 totaled USD 521.5

    billion, down by 21.8% year-on-year, of which export of electrical appliances and electrical products,

    a decrease of 22.7% year-on-year. Executives of the Company stably actualized target of 2009 which

    was confirmed at the year-begin. Facing severe market, executives of the Company combined

    actuality, adjusted products structure, actively exploited new marker in domestic and overseas,

    deeply acquaint catering and consumption culture of new market, innovated products and technology,

    otherwise, the Company reduced cost of purchase materials with biding and tendering, satisfied

    demand of customers, dispersed risks and promoted profitability of the Company.

    During the report period, the Company realized operating income amounting to RMB 1.185 billion,

    with a decrease of 43.40% year-on-year; operating cost amounting to RMB 10.28 billion, with a

    decrease of 46.61% year-on-year, which was mainly because the Company effectively controlled the

    net profits of orders, optimized sales structure of products with different classes and influenced by

    international financial crisis.

    The Company achieved a net profit amounting to RMB 20 million, with the debt ratio improved

    from 69.54% at the end of 2008 to 60.98% at the end of the report period. In the first half of 2009,

    despite the global economic downturn, the Company managed to maintain a stable business

    performance and optimize its financial structure by taking such actions as improving the internal

    management, strengthening its competitiveness, balancing production and sale, shortening the

    delivery time of raw materials, reducing inventory, activating capital flows, perfecting business

    mode and expense control, and improving the product quality and delivery time.

    Due to influence of international financial crisis, the international economy was in downturn and

    economic difficulties increased obviously. Facing influence of changeful economic environment and

    various disadvantaged factors, the Company would adhere to strategic targets (focus on our own

    industry, improvement on operation management and enhancing the risk control) put award at the

    year-begin of 2008, took “positive cash and profits” as the highest guidelines, guide the technology

    and product innovation, speed up the improvement of globalization manufacturing and marketing

    capacity, adhere to self-management, strengthen the unity between the manufacturing and purchase,

    research and sale, further perfect the internal control rules, finally reach the advanced advantages

    from research, design to marketing system and realized steady development of all business of the

    Company.8

    2. Scope of main business and its operation

    (1) Classifying according to industries and products

    Unit: RMB’0000 Yuan

    Main business classified according to industries

    Industries/products

    Income

    of main

    business

    Cost of

    main

    business

    Gross

    profit

    ratio (%)

    Increase/decrease of

    income from main

    business year-on-year

    (%)

    Increase/decrease of

    cost of main business

    year-on-year (%)

    Increase/decrease

    of gross profit

    ratio year-on-year

    (%)

    Household appliance

    manufacture

    114,737 101,965 11.13 -44.25 -46.84 4.33

    Main business classified according to products

    Home assistant 43,574 40,616 6.79 -46.58 -48.26 3.04

    Gourmet cooking 53,693 45,839 14.63 -42.24 -45.10 4.46

    Tea/coffee 14,068 12,450 11.50 -51.34 -54.72 6.61

    Other 3,402 3,060 10.05 43.83 33.62 6.87

    Among which: total related transaction amount on products and service of controlling shareholders

    and subsidiary companies provided by listed company was RMB 34,435,924.06 in the report period.

    (2) Classifying according to areas

    Unit: RMB’0000 Yuan

    Area Income from main business Increase/decrease of income from main business year-on-year (%)

    America 48,014 -45.23

    Europe 23,265 -47.78

    Asia 38,627 -31.20

    Other 4,832 -72.28

    Total 114,737 -44.25

    (3) The products whose sales income exceeded 10% of income from main business

    Unit: RMB’0000 Yuan

    Product Proportion (%) Sales income Cost of sales Gross profit ratio

    Home assistant 37.98 43,574 40,616 6.79

    Gourmet cooking 46.80 53,693 45,839 14.63

    Tea/coffee 12.26 14,068 12,450 11.50

    Other 2.96 3,402 3,060 10.05

    Home assistant 100.00 114,737 101,965 11.13

    (4) Explanation for significant changes of main business and its structure

    □Applicable √Inapplicable

    (5) Explanation on reasons for significant changes in profitability (gross profit ratio) of main

    businesses compared with the previous year

    □Applicable √Inapplicable

    (6) Analysis of reasons for significant changes in profit structure compared with last year

    □Applicable √Inapplicable9

    3. Operation status and achievements of the Company’s main controlling companies and joint stock

    companies

    01. Tsann Kuen China (Shanghai) Enterprise Co., Ltd.

    A. Business Type: Manufacturing;

    B. Major Products and Services: Production of household appliances, electronic products, light

    industry products, modern office appliances and their related modules, various kinds of computers

    and their related equipments or spare parts. Development of computer software, IC packing and

    testing; sale of our own products (the export of which does not usually require a license and quota;

    where such a license or quota is required, it should be obtained before operation.)

    C. Registered capital: USD 40 million

    D: Asset scale: RMB 106.98 million

    E: Net assets: RMB 103.47 million

    F: Net profit: RMB -3.34 million

    G: Net profit influence over 10%:

    Income of main businesses: RMB 0

    Cost of main business: RMB 0

    02. Tsann Kuen Zhangzhou Enterprise Co. Ltd.

    A. Business Type: Manufacturing;

    B. Major Products and Services: Development, production and sale of small household electrical

    appliances, new-type electronic appliances and parts (such as electrical kits, sensors and sensitive

    transmitters), light industrial products, modern office supplies; designing and producing the molds

    related to the above products; processing non-ferrous metal composite materials, new alloy materials,

    sales of the products and semi-finished products made by the company, processing supplied

    materials within the Company’s business scope and other processing businesses and compensation

    trade (excluding those products restricted by the government or those whose import or export is

    controlled by license or quota) Wholesale of various kinds of small household appliances (When

    involved in those projects which need to be examined and approved first, the company carries out its

    operation and production only within the range and the valid period set in the related license.)

    C. Registered capital: USD 160 million

    D: Asset scale: RMB 2114.12 million

    E: Net assets: RMB 1192.19 million

    F: Net profits: RMB 31.70 million

    G: Net profit influence over 10%:

    Income of main businesses: RMB 1159.13 million

    Cost of main business: RMB 1013.18 million10

    03. Tsann Kuen (Zhangzhou) South Port Eletronics Enterprise Co., Ltd.

    A. Business Type: Manufacturing;

    B: Major Products and Services: Development, production and sale of small household electrical

    appliances, new-type electronic appliances and parts (such as electrical kits, sensors and sensitive

    transmitters), light industrial products, modern office supplies; designing and producing the molds

    related to the above products; processing non-ferrous metal composite materials, new alloy materials,

    sale of the products and semi-finished products made by the company. (excluding those products

    restricted by the government or those whose import or export is controlled by license or quota; when

    involved in those projects which need to be examined and approved first, the company carries out its

    operation and production only within the range and the valid period set in the related license.)

    C. Registered capital: RMB 5 million

    D: Asset scale: RMB 14.11 million

    E: Net assets: RMB 11.92 million

    F: Net profits: RMB 0.62 million

    04. Zhangzhou Tsann Kuen Secondary Vocational School

    A. Business Type: education and training

    B: Major Products and Services: secondary vocational education

    C. Registered capital: RMB 0.5 million

    D: Asset scale: RMB 3.13 million

    E: Net assets: RMB 0.1 million

    F: Net profits: RMB 10,000

    05. Eupa (Hong Kong) Co. Ltd.

    A. Business type: Comprehensive

    B. Main products and services: taking trade orders, purchasing agent, R&D of small household

    appliances, investment, market research

    C. Registered capital: USD 2.90 million

    D: Asset scale: RMB 5.65 million

    E: Net assets: RMB 5.50 million

    F: Net profits: RMB 0.18 million

    06. Shanghai Canxing Commerce & Trade Co., Ltd.

    A. Business type: sale of household appliances;

    B. Main products and services: import, wholesale, retail and after-sales service of household

    appliances, calculator and its parts, communication equipment, electrical and mechanical equipment,

    office supplies and related auxiliary products (including kitchen supplies); and importing and

    exporting various types of goods and technologies on our own and as a agent for others. (Where an

    administrative license is required, such a license will be obtained before operation.)

    C. Registered capital: RMB 5 million

    D: Asset scale: RMB 22.47 million

    E: Net assets: RMB 5.82 million

    F: Net profits: RMB 0.46 million11

    07. Xiamen Canxing International Traval Service Co., Ltd.

    A. Business type: tourism;

    B. Main products and services: inbound and domestic tourist services. (where an authority permit is

    required, such a permit will be obtained before the Company’s operation.)

    C. Registered capital: RMB 5 million

    D. Asset scale: RMB 5.79 million

    E: Net assets: RMB 4.31 million

    F: Net profits: RMB -0.69 million

    08. Xiamen Canxing Commerce & Trade Co., Ltd.

    A. Business type: sale of household appliances

    B. Main products and services: 1. wholesale and retail: daily necessities, household appliances,

    computer and its auxiliary products, communication equipment, electrical and mechanical equipment,

    office supplies, kitchen supplies and their auxiliary products; 2. import and export of various goods

    and technologies (the catalog of the imported and exported goods is not available in this report),

    excluding those whose import and export are restricted by the government. (where an authority

    permit is required, such a permit will be obtained before the Company’s operation.)

    C. Registered capital: RMB 5 million

    D. Asset scale: RMB 5.52 million

    E: Net assets: RMB 4.83 million

    F: Net profits: RMB -0.18 million

    09. Shanghai Fanxin Airlines Service Co., Ltd.

    A. Business type: airlines service

    B. Main products and services: ticket-selling and agent service in passenger transportation of civil

    aviation for domestic routes, excluding HK, Macau and Taiwan routes. (where a license is required,

    such a license would be obtained before the Company’s operation.)

    C. Registered capital: RMB 0.5 million

    D. Asset scale: RMB 0.21 million

    E: Net assets: RMB 0.21 million

    F: Net profits: RMB 012

    4. In the report period, significant changes occurred in the asset composition and relevant expenses

    compared with the same period of last year.

    Unit: RMB’0000

    Items 30 Jun.

    2009

    31 Dec.

    2008

    Increase/

    decrease

    (%)

    Main reasons for changes

    Prepaid accounts 176.01 891.08 -80.25% Some of the prepayments for materials last year were made in this

    period.

    Other

    receivables 1,626.15 2,898.63 -43.90%

    1. On 26 Mar. 2008, RMB 5 million was invested into Xiamen Canxing

    International Travel Service Co., Ltd. But the company in question had

    not been officially founded by then, the long-term investment item was

    thus reclassified into the other receivables item in the same period of

    last year. On 17 Feb. 2009, the said company was officially founded

    and the relevant item was turned back under the item of long-term

    investments.

    2. The balance of export tax rebates in the same period of last year

    amounted to RMB 4.05 million, with that of this period standing at

    RMB 0.

    Available-for-sal

    e financial assets 18.69 10.98 70.25%

    The held shares of Shanghai Join Buy Co., Ltd. which were not subject

    to control, common control or significant influence belonged to the

    available-for-sale financial assets. And the differences between their

    fair value and book value were included in the capital reserves.

    Long-term

    receivables

    10,470.0

    1 6,848.79 52.87% This was due to the increase of income arising from selling equipments

    in this period.

    Long-term

    borrowings 2,247.83 0.00 This was due to the increased credit borrowings in this period.

    Notes payable 8,575.45 17,759.6

    8 -51.71%

    Affected by the financial crisis, the operation revenue decreased by

    43.40% over the same period of last year, which led to the decrease of

    the relevant item.

    Accounts

    payable

    52,234.3

    2

    75,440.6

    0 -30.76%

    Affected by the financial crisis, the operation revenue decreased by

    43.40% over the same period of last year, which led to the decrease of

    the relevant item.

    Other payables 23,807.7

    5

    39,625.4

    0 -39.92% The matured loan of USD 17 million from the controlling shareholder

    was paid off.

    Long-term

    borrowings 0.00 6,834.60 -100.00% The original long-term borrowing due in Jan. 2010 was reclassified to

    the non-current liabilities due within 1 year.

    Deferred income

    tax liabilities 3.12 63.64 -95.09% The unrealised exchange over the same period of last year was

    conductec in this period.

    Converted

    difference in

    foreign currency

    statements

    (83.71) (53.99) -55.05%

    This was due to the converted difference resulted from the fact that the

    subsidiary Eupa (Hong Kong) Co. Ltd. adopted Hong Kong dollar as its

    accounts-keeping unit.

    Items

    This

    reported

    period

    Same

    period of

    last year

    Increase/

    decrease

    (%)

    Main reasons for changes

    Operation

    revenue

    118,471.

    93

    209,296.

    31 -43.40%

    Affected by the financial crisis, the operation revenue decreased by

    43.40% over the same period of last year, which led to the decrease of

    the relevant items.

    Operation cost 102,821.

    49

    192,600.

    24 -46.61%

    Affected by the financial crisis, the operation revenue decreased by

    43.40% over the same period of last year, which led to the decrease of

    the relevant items.

    Financial

    expenses 92.60 2,629.29 -96.48%

    1. The matured loans were paid off, which cut the interest expense by

    RMB 12.22 million;

    2. Due to the fluctuation of exchange rate in the same period of last

    year, an exchange loss of RMB 10.22 million was registered.

    Asset

    impairment loss (235.48) 217.79 -208.12% The asset impairment loss withdrawn in the same period of last year

    was reversed.

    Gains from fair

    value changes (54.70) 498.51 -110.97%

    This was due to the operation of forward exchange. And the loss was

    resulted from the difference between the bank exchange rate and the

    contractual exchange rate.

    Gains from

    investments (67.56) 3,772.16 -101.79% The forward exchange transactions that incurred loss were settled in

    this period.

    Non-operational

    expenses 149.66 679.26 -77.97% This was due to the asset disposal loss and donation expense in the

    same period of last year.

    Income tax

    expenses 160.98 717.29 -77.56% This was due to that the total profit in the reported period decreased by

    31.04% compared to the same period of last year.

    (II) Investment status

    □Applicable √Inapplicable13

    (III) Changes proposed by the Board of Directors to the business plan for the second half

    □Applicable √Inapplicable

    (IV) Significant related transaction resulted from co-investment with related parties

    □Applicable √Inapplicable

    (V) Cautions and explanations for the estimated loss of the accumulated net profit from the

    year-begin to the end of the next reporting period or significant fluctuation compared with that of the

    same period of the previous year

    □Applicable √Inapplicable

    (VI) Explanation of the Board of Directors on changes and handling of relevant events of the

    Qualified Auditor’s Report produced by the CPA firm

    □Applicable √Inapplicable

    VI. Significant Events

    (I) Corporate governance and rectification

    By the end of 2008, the corporate governance of the Company had been faithfully adjusted to the

    requirements of the relevant documents issued by CSRC.

    (II) Significant lawsuits and arbitrations

    □Applicable √Inapplicable

    (III) Asset acquisition and sale and mergers of the Company in the reporting period

    1. Asset acquisition

    □Applicable √Inapplicable

    2. Sale of asset

    Tssan Kuen Zhangzhou Enterprise Co., Ltd., the Company’s holding subsidiary, invited some spare

    parts plants into the Tssan Kuen Industrial Park, so as to focus on its core advantages of R&D,

    design and sale, and reduce the proportion of the self-made spare parts. And the overal market

    competitivenss of the Company would be strengthened for those more professional spare parts plants

    in the industrial park could supply spare parts directly to Tssan Kuen Zhangzhou, which contributed

    to a lower cost and a better quality; Meanwhile, such a move was able to reduce the proportion of the

    occupied fixed assets and increase the overal turnover rate of assets, so as to ensure a steady and

    sustained future development of the Company.

    For more details, please refer to the Public Notice on Selling Some Operating Assets of Spare Parts

    Plants by Holding Subsidiary Tssan Kuen Zhangzhou Enterprise Co., Ltd., the Public Notice on

    Progress of Holding Subsidiary’s Selling Some Operating Assets of Spare Parts Plants and Another

    Sale of Assets and the Public Notice on Progress of Holding Subsidiary’s Selling Some Operating

    Assets of Spare Parts Plants and A Third Sale of Assets, alll published on Securities Times, Hong

    Kong Ta Kung Pao and http://www.cninfo.com.cn dated respectively on 29 Jul. 2008, 21 Jan. 2009

    and 28 Apr. 2009.

    Due to the needs of the said spare parts plants in their actual operation, the plants purchased a small

    quantity of equipments from the Company in the reported period, which was detailed as follows:14

    Unit: RMB’0000

    Transaction party Asset sold Date of sale Selling

    price

    Net profit

    contributed to

    the Company

    by the sold

    asset from

    year-begin to

    the date of sale

    Gains

    and

    losses

    due to

    selling

    the

    asset

    Whether a

    related

    transaction

    or not

    Explanatio

    n on pricing

    principle

    Whether or not the

    ownership of the

    involved asset had

    been transferred

    whether or not the

    relevant creditor’s

    rights and liabilities

    had been

    transferred

    Relationship

    with the

    Company

    Xiamen Haoren Injection molding

    equipment 2009.03.31 1,338.02 (32.47) (32.47)

    Longhai Chaoda Electronic equipment 2009.03.31 434.68 (32.38) (32.38)

    Xiamen Hanrun Injection molding

    equipment 2009.02.28 122.42 11.54 11.54

    Xiamen

    Yuanquanxing

    Injection molding

    equipment 2009.03.31 103.66 13.29 13.29

    Xiamen Yongxinghe Injection molding

    equipment 2009.03.31 99.24 7.43 7.43

    Zhangzhou Weidi Injection molding

    equipment 2009.02.28 95.39 39.57 39.57

    Xiamen Jinyuan Hardware equipment 2009.04.30 41.03 6.59 6.59

    Longhai Fushun Injection molding

    equipment 2009.04.30 18.85 2.03 2.03

    Xiamen Yongkun Electronic equipment 2009.06.30 10.21 1.85 1.85

    Zhangzhou Xinhui Hot iron equipment 2009.06.30 5.37 0.24 0.24

    Xiamen Pinrui Hardware equipment 2009.04.30 3.19 0.23 0.23

    Xiamen Xingrongfei Hardware equipment 2009.04.30 2.34 1.98 1.98

    Xiamen Jingjing Die casting equipment 2009.05.31 894.28 (12.85) (12.85)

    Xiamen Huadaxing Die casting equipment 2009.04.30 570.34 101.01 101.01

    Xiamen Keid Bakelite equipment 2009.04.30 527.31 85.42 85.42

    Fujian Hongyuan Die casting equipment 2009.02.28 482.50 69.22 69.22

    Suzhou Yifeng Injection molding

    equipment 2009.03.31 431.46 38.09 38.09

    Zhangzhou Tianfeng Hardware equipment 2009.03.31 69.25 21.03 21.03

    Zhangzhou

    Shengliang Die casting equipment 2009.03.31 65.02 38.79 38.79

    Xiamen Huyiming Electronic equipment 2009.04.30 33.87 6.35 6.35

    Zhangzhou

    Ruicheng Die casting equipment 2009.05.31 251.24 26.40 26.40

    Zhangzhou Rijin Electronic equipment 2009.05.31 59.91 9.02 9.02

    Longhai Yingfa Bakelite equipment 2009.06.30 58.96 13.96 13.96

    Xiamen Bailong Hardware equipment 2009.06.30 0.27 0.24 0.24

    Total 5,718.81 416.58 416.58

    Non-related

    company

    The

    transaction

    prices were

    decided

    based on

    the

    principle of

    being

    above the

    book value,

    as well as

    the

    assessmen

    t and

    market

    prices.

    Yes Yes Non-related

    company15

    (IV) Significant contracts of the Company and their execution during the reporting period

    □Applicable √Inapplicable

    (V) Guarantees provided by the Company during the reporting period

    Unit: (RMB)’0000

    Guarantees provided for external parties (excluding guarantees provided for subsidiaries)

    Name of the guaranteed

    Date of

    occurrence

    Amount of

    guarantee

    Type of

    guarantee

    Term of

    guarantee

    Implementation

    accomplished or not

    Guarantee for

    related parties or not

    Total guarantees occurred in the reporting

    period

    0

    Total balance of guarantee at period-end 0

    Guarantees for subsidiaries

    Total guarantees provided for subsidiaries in

    the reporting period

    40,034.81

    Total balance of guarantee provided for

    subsidiaries at period-end

    22,259.98

    Total guarantee amount of the Company (including guarantees for subsidiaries)

    Total guarantee amount 22,259.98

    Proportion of total guarantee amount in net

    assets of the Company

    61.20%

    Among which:

    Amount of guarantees provided for

    shareholders, actual controller and other

    related parties

    0

    Amount of debt guarantees provided directly

    or indirectly for parties with asset-liability

    ratio exceeding 70%

    0

    Proportion of total guarantee amount

    exceeding 50% of the Company’s net assets

    4,074.84

    Total amount of the above three guarantees 4,074.84

    Explanation on possibility of taking several

    and joint liability involving immature

    guarantees

    Inapplicable

    Special Statement and Independent Opinions of Independent Directors on Funds Occupation

    By Controlling Shareholder and Other Related Parties and the Company’s External Guarantees

    As Stated in Semi-Annual Report 2009

    According to the Notice on the Regulations of Funds Transfer between Related Parties and Listed

    Companies and its External Guarantee Behaviors issued by CSRC (No.[2003] 56), the Notice on the

    Standardization of the External Guarantee Behaviors of Listed Companies (ZJF No. [2005] 120) and the

    Explanations of Relevant Issues Concerning Implementing Document No. [2005] 120 (Department for

    Listed Companies No. [2006] 25), as the independent directors of TSANN KUEN (CHINA)

    ENTERPRISE CO. LTD, we have conscientiously and thoroughly examined the funds occupation by

    controlling shareholder and other related parties and the Company’s external guarantees as stated in the

    Semi-Annual Report 2009, and expressed our special statement and independent opinions as follows:

    Special statement of independent directors:16

    1. By 30 Jun. 2009, it had been found that the controlling shareholder and other related parties occupied

    no funds of the listed company, and that the funds transfer between the Company and its related parties

    were all resulted from daily operation and sale.

    2. By 30 Jun. 2009, the listed Company had accumulatively provided a guarantee totalling RMB

    400,348,100 to its controlling subsidiary Tsann Kuen Zhangzhou Enterprise Co., Ltd., with the balance

    of guarantee standing at RMB 222,599,800. And the Company and its controlling subsidiary provided

    no guarantees for external parties during the reporting period.

    Opinions of independent directors:

    1. Although there were only operational funds transfer between the controlling shareholder, other related

    parties and the Company, the listed Company still would pay sufficient attention to the Circular on

    Regulating Funds Transfer between the Listed Companies and Related Parties and External Guarantee of

    Listed Companies (ZJF [2003] No. 56), and avoid non-operational funds occupation from occuring;

    Meanwhile, the operational funds transfer would also be made to keep in line with the market

    requirement and fair pricing. Besides, the Company would minimize its transactions with related parties,

    and ensure the legitimacy of the operational transactions with controlling shareholders and other related

    parties so as to safeguard the rights and interests of minority shareholders.

    2. Although the balance of guarantee at the year-begin saw a reduction from RMB 314,507,500 to the

    present RMB 222,599,800 and the guarantees involved were all provided by the listed Company for its

    controlling subsidiaries, the Company still, according to the Circular on Regulating Funds Transfer

    between the Listed Companies and Related Parties and External Guarantee of Listed Companies (ZJF

    [2003] No. 56), continued to ask its controlling subsidiary to take effective measures and reduce the

    guarantee amount step by step, so as to minimize the Company’s risk of contingent liabilities. If there

    was any external guarantee in the future, the Company must go through the necessary approval

    procedure in strict compliance with the Circular on Regulating the Behaviors of External Guarantee in

    Listed Companies (ZJF [2005] No. 120) and the Explanation on Relevant Issues about Implementing

    ZJF No. 120 Document ( Department of Listed Companies, Document [2006] No. 25). Furthermore, the

    Company should draft the contingency plan to protect the shareholders’ right and interests from the risks

    arising from possible financial liquidity difficulties of the guaranteed controlling subsidiary.

    3. Any information that had a significant impact on the Company’s finance will be disclosed on time to

    protect the interests of minority shareholders.

    Independent Directors: Lu Jianxin, Xu Rentang, Ge Xiaoping

    10 Jul. 2009

    (VI) Significant related transactions:

    1. For the related transactions incurred in the reporting period, please refer to the Notes to the financial

    statements.

    2. All transactions with the related parties were priced according to the Pricing Agreement for Related

    Companies’ Transactions issued by the State Tax Bureau, as well as the principle of fair transaction in

    the relevant trade.

    3. The mode of payment was decided by the contracts signed by both parties.

    4. Explanation on necessity and consistency of related transactions: to enhance efficiency of upright

    integration in the group, adopt unified purchase, cut the cost and increase the market share with the help

    of related companies planted all over the world.

    (VII) Implementation of commitments made by shareholders holding over 5% shares

    □Applicable √Inapplicable17

    (VIII) Implementation of related transactions arising from routine operation in the reporting period

    Unit: (RMB) Yuan

    Transaction

    Nature

    Name of related parties Transaction Type

    Total amount in

    2009

    Total amount

    from Jan.-Jun.

    2009

    Proportio

    n

    Raw material 68,440,000.00 18,372,929.16 26.85%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd. Machinery

    equipment / Mold

    10,810,000.00 1,277,645.01 11.82%

    TSANN KUEN JAPAN CO., LTD. Raw material 0.00 604,590.03

    Purchase

    Thermaster Electronic (Xiamen) Ltd. Raw material 61,090,000.00 22,470,088.03 36.78%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd. Finished goods 84,700,000.00 34,435,924.06 40.66%

    Sale TSANN KUEN JAPAN CO., LTD. Finished goods 278,240,000.00 116,360,731.09 41.82%

    Thermaster Electronic (Xiamen) Ltd. Raw material 58,000.00 20,423.23 35.21%

    Offering

    labor

    service

    Thermaster Electronic (Xiamen) Ltd. Consulting service 2,640,000.00 889,603.50 33.70%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd. Technical service 16,000,000.00 7,601,361.22 47.51%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd. Service charge 3,960,000.00 1,000,104.12 25.26%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd. Consulting service 3,000,000.00 0.00 0.00%

    TSANN KUEN JAPAN CO., LTD. Commission 12,300,000.00 5,233,549.98 42.55%

    Receiving

    labor

    service

    TSANN KUEN USA INC Commission 1,200,000.00 646,779.34 53.90%

    (IX ) Explanation on receiving investigation from CSRC in 2007

    On Apr. 26, 2007, the Company received the Notice of Investigation (XDCT Zi No. 0701) from CSRC

    for the Company was “suspected of violating securities regulations”. For detailed information, please

    refer to the Public Notice on Investigation from CSRC disclosed on Securites Times, Hong Kong Ta

    Kung Pao and http://www.cninfo.com.cn dated 27 Apr. 2007; At present, the investigation has been

    almost finished and the Company will disclose the relevant information in time according to rules and

    regulations as soon as the result of CSRC investigation comes out.18

    (X) Researches, interviews and visits in the reporting period

    In the reporting period, according to Guidelines on Fair Information Disclosure of Listed Companies,

    the Company and the staff in charge of relevant information disclosure strictly followed the principle of

    fair information disclosure by not treating visitors differently, or leaking undisclosed information of the

    Company to any particular party privately or selectively. The details were as follows:

    Reception time Reception place Reception way Visitor Main discussion and materials provided

    9 Jan.2009 By telephone Mr. Zhang Operation status of the Company

    15 Jan. 2009 By telephone Mr. Zhou Operation status of the Company

    13 Feb. 2009 By telephone Ms. Lin Operation status of the Company

    16 Feb. 2009 By telephone Ms. Chen Operation status of the Company

    18 Feb. 2009 By telephone Mr. Luo Date of annual report disclosure

    18 Feb. 2009 By telephone Mr. Liu Operation status of the Company

    25 Feb. 2009 By telephone Mr. Wang Date of annual report disclosure

    2 Mar. 2009 By telephone Mr. Chen Operation status of the Company

    11 Mar. 2009 By telephone Mr. Cai Operation status of the Company

    11 Mar. 2009 By telephone Mr. Li Operation status of the Company

    13 Mar. 2009 By telephone Mr. Huang Operation status of the Company

    19 Mar. 2009 By telephone Ms. Gao Operation status of the Company

    27 Mar. 2009 By telephone Mr. Lin Operation status of the Company

    10 Apr. 2009 By telephone Mr. Tang Operation status of the Company

    10 Apr. 2009 By telephone Mr. He Operation status of the Company

    16 Apr. 2009 By telephone Mr. Tang Operation status of the Company

    5 May 2009 By telephone Mr. Feng Operation status of the Company

    13 May 2009 By telephone Mr. Xie Operation status of the Company

    8 Jun. 2009 By telephone Ms. Li Operation status of the Company

    (XI) Other significant matters: Inapplicable

    VII. Financial Report (Refer to Attachment)

    (I) Auditor’s opinion

    Financial Report √Un-audited □Audited

    Auditors’ Report □ Non-qualified audit report □ Qualified audit report

    Un-audited19

    (II) Accounting statements

    1. Balance sheet

    2. Income statement

    3. Cash flow statement

    4. Statement of owners’ equity

    VIII. Documents Available for Reference

    (I) The Financial statements with signatures and seals of the legal representative, person in charge of

    accounting work, person in charge of accounting organization and the statement producer.

    (II) All the company’s documents and announcement originals that were publicly disclosed during the

    report period on the newspapers designated by CSRC.

    (III) Articles of Association of the Company.

    (IV) The above-mentioned documents are placed in the secretary office of the Board of Directors.

    Tsann Kuen (China) Enterprise Co., Ltd.

    Chairman of the Board: Jian Derong

    1 Aug. 200920

    Tsann Kuen (China) Enterprise Co. Ltd

    Notes to Consolidated Financial Statements

    As of 30 June 2009

    (All amounts are expressed in RMB Yuan unless otherwise stated)

    I. General

    1. Company’s history

    Tsann Kuen (China) Enterprise Co., Ltd. (“the Company or TKC”) was established by Fordchee

    Development Ltd, EUPA Industry Corporation Ltd and Fillman Investments Ltd. in the People’s

    Republic of China (“the PRC”) in 1988 under the name of Tsann Kuen China (Xiamen) Ltd. as a wholly

    owned foreign investment enterprise. On 16 February 1993, with the approval of the Ministry of Foreign

    Trade and Economic Co-operation, the Company was reorganized into a joint stock company limited by

    shares and was renamed as Tsann Kuen (China) Enterprise Co., Ltd. In June 1993, the Company issued

    40,000,000 new shares pursuant to an international placing and public offer and these new shares (“B

    shares”) were then listed on the Shenzhen Stock Exchange on 30 June 1993. Until 30 June 2009, the

    Company’s registered capital is RMB 1,112,350,077, B shares among the total shares issued on the

    Shenzhen Stock Exchange.

    Follow The Ministry of Commerce of the People’s Republic of China approved (The No. [2005]3107

    号《商务部关于原则同意厦门灿坤实业股份有限公司发起人股上市流通的批复》), On 6 December

    2006, the Group received [2006] No.266 file 《关于核准厦门灿坤实业股份有限公司非上市外资股上

    市流通的通知》from China Securities Regulatory Commission. China Securities Regulatory

    Commission agreed 700,476,830 unlisted shares (62.97% paid in capital of the Group) hold by three

    shareholders, EUPA Industry Corporation Ltd, Fordchee Development Limited and Fillman Investment

    Limited to transfer into B shares. One year after 29 November 2007 these B shares could be listed and

    exercised on Shenzhen Stock Exchange.

    2. The industry

    The Company operates within the electrical machinery and equipment manufacturing industry.

    3. Scope of business

    The Company approved business scope: the main business is to develop, produce and sell household

    appliances, electronics, light industrial products, modern office supplies. Those subsidiary’s main

    business is to produce household appliances, electronics, light industrial products, sell products by

    wholesale, distribution appliances, communication equipment, electrical equipment, office equipment,

    computer accessories, general merchandise and food; Design, produce and sell Precision (Punching) Die,

    Precision Mold Cavity, and Model Standard Unit, engaged in the research and development of those

    products.

    4. Main changes

    The Company has no major changes within reporting period.

    II. Basis for preparation

    The company and its subsidiaries maintain their accounting record and prepare their statutory financial

    statement base on the assumption of going concern, accordance to transaction and item’s substance and

    economic reality, and according to the New Accounting Standard for Business Enterprise issued by the

    Ministry of Finance on 15 February 2006, and also accordance to those Accounting policy and

    Accounting estimate that described in part four of this FS notes.21

    III. Declaration of Compliance with the Enterprise Accounting Standards

    The Company’s financial statements prepared follow the requirements of the Accounting Standards for

    Business Enterprise promulgated by the Ministry of Finance; fairly and completely present the financial

    position, operation result and cash flows, and other relevant information of the Company.

    IV. Summary of Significant accounting policies and accounting estimates and methods of

    consolidation

    (1) Accounting Year

    The Company employs a period of calendar days from January 1 to December 31 each year as

    accounting year.

    (2) Presentation currency

    The Company’s presentation currency is Renminbi (“RMB”).

    (3) Record-keeping basis and measurement characters

    The Company is to use accrual basis as record-keeping basis for accounting recognition, measurement

    and reporting.

    The Company commonly measures accounting factors by historical cost method; the determined

    accounting factor amount can be obtained or reliably measured, then replacement cost, net realizable

    value, net value and fair value method may be employed for some individual accounting factors.

    During the reporting period, with the fair value measurement and the changes are included in the current

    profits and losses of the financial assets and financial liabilities, available for sale financial assets and

    financial derivatives in the fair value measurement; Those inventories and fixed assets are measured by

    present value of purchase price, when purchasing payment is delayed beyond the normal credit

    conditions of inventories, fixed assets to the current value of the purchase price measurement; The

    inventory with impairment loss is measured by net realizable value, and other assets with impairment

    loss are measured by recoverable amount(which is higher of fair value or present value).Other financial

    statements items are measured by historical cost.

    By using historical cost method, assets are accounted for on the basis of cash or cash equivalents paid, or

    fair value of the considerations paid when are acquired. The liabilities are accounted for on the basis of

    amount actually received or asset amount for performing current obligations, or contract amount for

    performing the current obligations, or expected cash or cash equivalent amount paid to repay the debts

    in daily activities.

    There is no change in measure characters of financial statement items during the reporting period.

    (4) Standard of cash equivalents

    The cash equivalents is that cash equivalents of the company include investment with short term (it

    usually expires within three months from the purchase date), highly liquidity, easy to convert into

    known amount of cash, and low-risk of changes in value.

    (5) Foreign currency transactions

    1 Foreign currency transactions

    The Company’s foreign currency transactions are translated into presentation currency at spot exchange

    rates (Usually refers to the middle rate of the exchange price quotation that announced by the People's

    bank of China) prevailing on the day in which the transactions take place.

    On balance sheet date, those foreign currency items to use in such currencies are translated at the rates

    prevailing on the balance sheet date. The exchange gains and losses arising on the exchange are included

    in profit and loss for the year. With historical cost measurement of foreign currency non-monetary items,

    the transaction is translated at the spot exchange rate, without changing its presentation currency amount.

    In the fair value measurement of foreign currency non-monetary items, translated at the spot exchange

    rate at that day when the fair value can be determined, the difference between amount after convert into

    presentation currency and the original presentation currency amount, as the changes in the fair value, in

    the current profits and losses.22

    2 Translation of financial statement denominated in foreign currency

    1) Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are restated

    into the reporting currency using the spot exchange rates at that date. Among the equity items, all items

    are translated into reporting currency at spot exchange rates on the occurrence date in which the

    transactions take place except for the item of retained earnings.

    2) Income and expense listed in the Income Statement are translated into reporting currency at average

    spot exchange rate on the occurrence date.

    The exchange difference from translation of financial statements denominated in foreign currency is

    included in the equity and presented individually.

    3) Cash Flow Statement items are restated into the reporting currency using the spot exchange rates on

    the day in which the cash flow take place. As reconciling items, impact on cash due to exchange rate

    change is presented individually in the Cash Flow Statement.

    (6)Financial Instruments: Recognition and Measurement

    1 Confirmation of financial instruments

    When the Company became party to a contract of financial instruments, related financial assets or

    financial liabilities are recognized.

    2 Classification of financial assets and financial liabilities

    The Company in accordance with the investment purpose and economic substance of the ownership of

    financial assets are divided into four category, which is fair value through profit or loss;

    Held-to-maturity investments; Loans and receivables; Available-for-sale financial assets.

    According to the economic substance those financial liabilities are divided into fair value through profit

    or loss and others.

    1) Financial assets or financial liabilities at fair value through profit or loss: including held for trading

    financial assets or financial liabilities and designated by the company as at fair value through profit or

    loss.

    A financial asset or financial liability is classified as held for trading if it is:

    (i) Acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

    (ii) Part of a portfolio of identified financial instruments that are managed together and for which there

    is evidence of a recent actual pattern of short-term profit-taking; or

    (iii) A derivative (except for a derivative that is a designated and effective hedging instrument, a

    derivative of financial guarantee contract, a derivative that settle by equity instrument, which the price

    of instrument could not be quoted in active market and the fair value could not measure reasonably).

    A financial asset or financial liability is classified as designated if it is:

    (i) The designation can be eliminated or significantly reduced the inconsistent situation or relate profit

    and loss cause by different measurement basis of financial assets and financial liabilities;

    (ii) Company risk management or investment strategy has been enshrined in a formal written document

    that the financial assets portfolio, the financial liabilities portfolio, or the financial assets and financial

    liabilities portfolio are management in fair value-based and evaluation and report to key management

    person.

    2) Held-to-maturity investments: are non-derivative financial assets with fixed or determinable

    payments and fixed maturity that company has the positive intention and ability to hold to maturity.

    Mainly include the company's management has a clear intention and ability to hold to maturity of

    fixed-rate bonds, floating-rate corporate bonds.

    3) Receivables: are non-derivative financial assets with fixed or determinable payments that are not

    quoted in an active market. Receivables of the Company mainly refer to the Company's sales of goods

    or rendering of services to form the accounts receivable and other receivables.23

    4) Available-for-sale financial assets: are those non-derivative financial assets that are designated as

    available for sale at initial recognized, or those asset are not measured in fair value based and through to

    profit and loss (a) loans and receivables, (b) held-to-maturity investments ,(c) financial assets.

    5) Other financial liabilities: financial liabilities not divided into measurement in fair value base and

    through into profit and loss account.

    3 Measurement of financial assets and financial liabilities

    When a financial asset or financial liability is recognized initially, the company shall measure it at its

    fair value. For financial assets or financial liabilities at fair value through profit or loss, transaction costs

    that are directly attributable to current profit and loss; for other types of financial assets or financial

    liabilities, transaction costs related to the amount included in the initial confirmation.

    Subsequent measurement of financial assets and financial liabilities:

    1) Financial assets or financial liabilities at fair value through profit or loss measured at its fair value, at

    balance sheet date, the changes of fair value are accounted for profit and loss in current period.

    2) Held-to-maturity investments, which shall be measured at amortized cost using the effective interest

    method, its termination confirmation, impairment or amortization profit or loss included in the profit and

    loss account.

    3) Loans and receivables, which shall be measured at amortized cost using the effective interest method,

    its termination confirmation, impairment or amortization profit or loss included in the profit and loss

    account.

    4) Available-for-sale financial assets, are measured with fair value, any changes of fair value of

    available-for-sale financial assets at the end of period are accounted for capital reserve (other capital

    reserve). Disposal of available-for-sale financial assets, the difference between consideration received

    and the book value of financial assets including into investment income; at the same time, turn out the

    original cumulative amount of corresponding part within the equity, included into investment profit. The

    impairment losses and Exchange differences of foreign monetary financial assets including into current

    profit and loss. Interest received and cash dividends received during the period held are recognized as

    investment income.

    5) Other financial liabilities, measured at amortized cost using the effective interest method. Its

    termination confirmation, impairment or amortization profit or loss included in the profit and loss

    account.

    The financial guarantee contract is not belong to financial liabilities designated by the company as at fair

    value through profit or loss, as well as the loan commitment is not belong to financial liabilities

    designated by the company as at fair value through profit or loss and below-market rate, After initial

    recognition, measured higher of : 1 、amount confirmed by < Enterprise Accounting Standard

    13--Provisions, Contingent Liabilities and Contingent Assets>;Initial recognition amount minus the

    balance of the accumulated amortization refer to .

    Other financial liabilities, which shall be measured at amortized cost using the effective interest method,

    its termination confirmation or amortization profit or loss included in the profit and loss account.

    6)Fair value: It’s the amount for which an asset could be exchanged or a liability settled, between

    knowledgeable, willing parties in an arm’s length transaction. In a fair deal, the transaction should the

    two sides are continuing operations enterprises, do not intend to carry out the liquidation, a major

    reduction in scale of operation, or under adverse conditions is still trading. The existence of an active

    market of financial assets or financial liabilities, the quotation within the active market should be used to

    determine its fair value. If there is no active market, company should adopt valuation techniques to

    determine the fair value.24

    7) The amortized cost of a financial asset or financial liability: it’s the amount at which the financial

    asset or financial liability is measured at initial recognition minus principal repayments, plus or minus

    the cumulative amortization using the effective interest method of any difference between that initial

    amount and the maturity amount, and minus any reduction (directly or through the use of an allowance

    account) for impairment or unrecoverable.

    8)The effective interest method: It’s a method of using effective interest calculating the amortized cost

    of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of

    allocating the interest income or interest expense over the relevant period. The effective interest rate is

    the rate that exactly discounts estimated future cash payments or receipts through the expected life of the

    financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial

    asset or financial liability. Then calculating the effective interest rate, company shall estimate cash flows

    considering all contractual terms of the financial instrument (for example, prepayment, call and similar

    options) but shall not consider future credit losses.

    4 Transfers and derecognize of financial assets

    (1) Derecognize financial asset if, and only if, meets one of the following three conditions:

    1) the contractual rights to the cash flows from the financial basset expire;

    2) the financial assets have been transferred, and the ownership of financial assets of almost all the risks

    and rewards transfer to other party;

    3) The financial assets have been transferred, but the company neither retains the ownership of financial

    assets of almost all the risks and rewards, nor gives up control of the financial assets.

    (2) When derecognize condition of entire transferred assets has been satisfied, the differences between

    the amounts of following two items shall be accounted for profits and losses of current period.

    1) The book value of transferred financial assets;

    2) The sum of consideration received from the transfer, and the accumulative amount of the changes of

    the fair value originally recorded in the shareholders’ equities (in the event that the financial asset

    involved in the transfer is a financial asset available-for-sale)

    (3) If the transfer of partial financial assets satisfies the conditions of derecognize the entire book value

    of the transferred financial asset shall, between the portion whose derecognize and the recognized

    portion (under such circumstance, the service asset retained shall be deemed as a portion of financial

    asset whose derecognize), be apportioned according to their respective relative fair value, and the

    difference between the amounts of the following two items shall be accounted for the profits and losses

    of the current period .

    1) The portion book value derecognized;

    2) The sum of consideration of the portion whose derecognize and the portion of accumulative amount

    of the changes in the fair value originally recorded in the shareholders’ equity which is corresponding to

    the portion whose derecognized ( in the event that the financial assets involved in the transfer is a

    financial assets available-for-sale).

    (4) If the Company fails to satisfy the conditions of derecognize for transferred financial assets, it shall

    continue to recognize the entire financial assets to be transferred and shall recognize the consideration it

    receives as a financial liability.

    5 Impairment of financial assets

    The Company assesses the financial assets that carry at fair value, and those financial assets which

    changes of fair value are recognized in profit and loss accounts at the balance sheet date. If there is

    objective evidence that the one or several financial assets are impaired, the Company shall determine the

    amount of any impairment loss.25

    (1) Accounts receivable (including account receivable and other receivables)

    At the end of the period, those individual accounts receivable and individual other receivable make up

    more than 10% (include 10%) is considered as individual significant amounts, One by one to carry out

    impairment test, if there is objective evidence that the accounts receivable have been impaired, the

    impairment loss shall be recognized based on the difference of the book values higher than the present

    value of future cash flows.

    At the end of the period, for those individual accounts receivable with not significant amounts, if there is

    objective evidence that the accounts receivable have been impaired, recognize impairment loss alone.

    For other individual the amount of non-significant receivables, classification primarily on the basis of

    account age, and those accounts receivable’s account age more than one year will be classified as

    non-significant in amount but in accordance with the characteristics of credit risk portfolio, the risk of

    the portfolio is high, others classified as other non-significant receivables. For those account receivables

    classified as non-significant in amount but in accordance with the characteristics of credit risk portfolio,

    the risk of the portfolio is high, as well as other individual non-significant receivable accounts that not

    impaired after impairment test, these account receivables will carry out age analysis by the company and

    consider the debtor’s actual business situation and cash flow to determine the recoverable amount of

    receivables, a reasonable estimate of bad debts.

    On the basis of the actual loss rate of receivable accounts, with same or similar credit risk characteristics

    of accounts receivable package in previous year, the Company also considers current situation and

    determine the percentage of bad debt provision.

    Age Percentage

    1-90days 0

    91-180days 10

    181-270days 30

    271-360days 50

    Over 360 days 100

    (2) Long-term accounts receivable

    Long-term accounts receivable shall be made collection on the date of receipt in accordance with the

    Contract, whose aging shall be measured at the expiration of the day of receipt. Combining to the

    current situation, the provision for bad debts of the long-term accounts receivable combination shall be

    withdrawn at the following proportion:

    Before deadline of collection: 0%

    1-60 days: 10%

    61-120 days: 30%

    121-180 days: 50%

    Over 181 days: 100%

    Account receivable between the company and related party do not calculate bad debt provision.

    (2) Held-to-maturity investment

    At the balance sheet date, if there is objective evidence that the investment have been impaired calculate

    and recognize the impairment loss, based on the difference between the asset’s carrying amount and the

    present value of future cash flows. The measurement of impairment loss of held-to-maturity investment,

    please refer to impairment loss treatment of accounts receivable.

    (3) Available-for-sale financial assets

    At the balance sheet date, the Company will test and analyze the impairment situation of the

    available-for-sale financial assets, and analyze whether the fair value of the financial assets continued to

    decline. If there is objective evidence that available-for-sale financial assets have significant depreciated,

    or after considering various relevant factors, this downward tendency is deemed as not temporary, the26

    impairment loss shall be recognized, record into current profit and loss. When recognize the impairment

    loss, the previously recognized impairment loss within the fair value of equity shall be reversed, record

    into current profit and loss.

    In a subsequent period, objective evidence that fair value has increased to exist, and relevant the matters

    that after original impairment loss recognized, the previously recognized impairment loss shall be

    reversed. However, for those investments that no active market as well as whose fair value cannot be

    measured accurately, or those derivative financial assets that should be linked with the equity

    instruments and settlement must through pay the equity instruments, as well as does not have control,

    joint control or significant influence, there is no active market and fair value measurement is not

    reliable , all of those type of long-term equity investment, whose impairment loss occurred, cannot be

    reversed.

    (7) Inventory: Recognition and Measurement

    1. Inventory of the Company refers to enterprises in the day-to-day activities of the holder for the sale of

    finished goods or merchandise, product that in the production process, and materials consumed in the

    production process or provision of services. Inventories category: materials in transit, raw materials,

    work-in-process, finished goods, and low-value consumable supplies.

    2. Inventories stock physical count system:perpetual inventory method.

    3. Valuation methods of inventories input and output: Inventories are calculated at actual costs when

    acquire. Inventories costs include purchasing costs, processing costs and other costs. The issue of

    inventories is calculated by the weighted average method. The company's inventories costs adopt

    planned cost in the day-to-day accounting, over carrying the cost differences at the ending period, and

    adjust planned cost to actual cost.

    4. Low-value consumable products amortization method :The low–value consumable supplies are

    amortized at one time.

    5. Impairment loss of inventories

    At the balance sheet date, the evaluation criteria should base on the lower value between costs and net

    realizable value. When net realizable values are lower than costs, provision for impairment loss of

    inventories shall be made. Under normal circumstances, the Company provision impairment loss in

    according to individual inventory items, for large quantity and low-unit-price inventories, provision for

    impairment loss of inventories shall be made based on the category of inventories; for those inventories

    that relating to the same product line that have similar purposes or end uses, are produced and marketed

    in the same geographical area, and cannot be practicably evaluated separately from other items in that

    product line, their impairment loss provision shall be consolidated.

    When the circumstances that previously caused inventories to be written down below cost no longer

    exist or when there is clear evidence of an increase in net realizable value because of changed economic

    circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of the

    original write-down) so that the new carrying amount is the lower of the cost and the revised net

    realizable value. The amount reversed recording into current profit and loss.

    Estimates of net realizable value: Those stocks used for directly sale, for example: finished goods,

    merchandise and materials used for sale etc., the net realizable value is referred to the estimated selling

    price minus the estimated selling expenses and related tax and fees in normal operating process. Those

    stocks need to process; the net realizable value is referred to the estimated selling price minus the

    estimated finished cost and estimated selling expenses and related tax and fees in normal operating

    process; the net realizable value of the quantity of inventory held to satisfy firm sales or service

    contracts is based on the contract price. If the sales contracts are for less than the inventory quantities

    held, the net realisable value of the excess is based on general selling prices.27

    (8) Long-term Equity Investment

    Long-term equity investment including the equity investments held by the company, who can able to

    exercise control, joint control or significant influence to the invested entity, or the company do not have

    control, joint control or significant influence on the invested entity, and there is no active market

    quotation, the fair value measurement should not reliable.

    1. Initial measurement

    The Company separates the following two cases of long-term equity investment in the initial

    measurement:

    (1) Long-term equity investment obtained through business combinations:

    1) For obtaining subsidiary under common control, the consideration cost can be cash payment,

    non-monetary assets transfer or taking over the subsidiary’s liability. Under this situation, the initial

    investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. The

    difference between the carrying amount of the net assets obtained and initial investment cost of

    long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to

    absorb the difference, any excess shall be adjusted against retained earnings. In the case of company

    issues equity securities as the consideration, the initial investment cost is carrying amount of

    shareholder’s equity of the subsidiary on the merger date. If the book value amount of the issued shares

    is deemed as the capital, the difference between the carrying amount of the issued shares and initial

    investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve

    is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings All direct

    expenses related to the merger, including the auditor fee, evaluation expense, legal service expense, etc

    will be accrued to the current profit and loss.

    2) For obtaining subsidiary not under common control, the cost of long-term equity investment is fair

    value of assets paid or liabilities undertaken by the Company. Where the cost of a business combination

    exceeds the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, the difference

    shall be recognized as goodwill, Where the cost of combination is less than the acquirer’s interest in the

    fair value of the bargainor’s identifiable net assets, after reassessment, the difference shall be recognized

    in profit or loss for the current period (non-operating income). The costs directly related to business

    combinations shall be included in the cost of business combinations (except issuing expenses of bonds

    and equity instruments).

    (2) Other types of long-term equity investment, accordance with the following principles to determine

    their initial investment costs:

    1) Long-term equity investment, which is acquired by cash consideration, the actual cash payment

    amount will be deemed as the initial investment cost. The initial investment cost includes the direct

    expenses related to the long-term equity investment, taxes and other necessary expenses. But if the

    actual payment contains cash dividend that has not been received but has been announced, that should

    be accounted separately.

    2) Long-term equity investment, which is acquired by issuing equity securities, the fair value of the

    issued equity will be deemed as the initial investment cost.

    3) For the long-term equity investment made by the investors, the values agreed in the investment

    contracts or agreements will be deemed as the initial investment cost, except that the contracts or

    agreements provide that the values are not fair.

    4) Long-term equity investment is acquired by exchange of non-monetary assets, if this transaction has

    commercial substance or the fair values of exchange assets can be reliably measured, the fair values of

    these assets and relevant taxes will be deemed as the initial investment cost; the difference between the

    fair values of the assets and book values will be record into the current profit and loss; if the28

    non-currency asset exchange does not satisfy these two conditions mention above, the book values of the

    assets and relevant taxes will be deemed as the initial investment cost.

    5) Long-term equity investment, which is acquired by the debt restructuring, the fair values of the

    obtained equities will be deemed as the initial investment cost; the difference between the initial

    investment cost and book values of credit will be record into the current profit and loss.

    2. Subsequent Measurement

    The cost method is employed to calculate the long-term equity investment of subsidiaries and will be

    adjusted in accordance with the equity method in the preparation of the consolidated financial

    statements.

    The company uses cost method for the following conditions: a long-term equity investment where the

    investing enterprise does not have joint control or significant influence over the investee, the investment

    is not quoted in an active market and its fair value can’t be reliably measured.

    When an investing enterprise can exercise joint control or significant influence over the investee, a

    long-term equity investment cost shall be treated as a recovery of initial investment cost.

    (1) Long-term equity investment measured at cost method

    Such long-term equity investments as investment of the Company that is able to control the invested

    enterprise, or investment of the Company that does not do joint control or does not have significant

    influences on the invested entity, and entity, and has no offer in the active market and its fair value

    cannot be reliably measured shall be measured by employing the cost method. The price of a long-term

    equity investment measured by employing the cost method shall be included at its initial investment cost.

    If there are additional investments or disinvestments, the cost of the long-term equity investment shall be

    adjusted. As for long-term equity investment measured by employing the cost method, investing

    enterprise shall, in accordance with the attributable share of the cash dividends or profits declared to

    distribute by the invested entity, recognized investment income except for the purchase cost which is

    actually paid when obtaining investment or cash dividend and profit which has been declared but not to

    be distributed included in the consideration. The investment of the Company that is able to control the

    invested enterprise shall be adjusted at the equity method when the Company prepared the consolidated

    financial statement.

    2) When using equity method, after the investing enterprise has acquired a long-term equity investment,

    it shall recognize its share of net profits or losses made by the investee as investment income or losses,

    and adjust the carrying amount of the investment accordingly.

    Base on the investee’s book value of net profit, if the investee used inconsistent accounting policies with

    the company, the company shall adjust the net profits by the balances of the depreciation or amortization

    of the investee’s fixed assets and intangible assets measured by fair value on the investment acquired

    date, as well as adjust the net profits by the balance of the impairment losses of investee’s assets

    measured by fair value on the investment acquired date. Set off the internal transaction profit and loss

    between the company and the joint enterprises or the jointly-run enterprises, and then recognize the

    investment profit or loss on this basis.

    The internal transaction profit and loss between the company and the joint enterprises or the jointly-run

    enterprises, refer to the < Enterprise Accounting Standard 8: Impairment of assets>, belong to asset

    impairment loss is recognized in full.

    If an investor’s share of losses of an associate equals or exceeds its interest in the associate, the investor

    discontinues recognizing its share of further losses, after the investor’s interest is reduced to zero,

    additional losses are provided for, and a liability is recognized, only to the extent that the investor has

    incurred legal or constructive obligations or made payments on behalf of the associate; If the associate

    subsequently reports profits, the investor resumes recognizing its share of those profits only after its

    share of the profits equals the share of losses not recognized, restore long-term investment interests, and29

    in the book value of the long-term equity investment.

    (9) Investment property: Recognition and Measurement

    Investment property is held to earn rentals or for capital appreciation or for both. Investment property

    includes leased or ready to transfer after capital appreciation land use rights and leased buildings.

    Property investment is measured by cost model, according to its expected useful life and net residual

    rate on buildings and land-use right to calculate depreciation or amortization. The company’s expected

    useful life, net residual rate and annual depreciation rate of investment property as follow:

    Categories Expected residual Expected useful Annual depreciation

    rate% life(years) (amortization) rate %

    Housing and

    building 10 20 4.50

    Land use right 0 20, 40, 50 5.00, 2.50, 2.00

    The balance sheet date, there are indications that the investment property has impairment, refer

    (10) Recognize and Measurement of Fixed Asset

    1. Fixed asset are tangible asset that have characteristic simultaneity

    ①Are held for use in production or supply of goods or services, for rental to others, or for administrative

    purpose;

    ②Have useful lives more than one accounting year.

    2. Fixed assets shall be recognized if they meet the following conditions:

    (a) The economic benefits related to fixed asset probably flows to the enterprise;

    (b) The cost of fixed asset may be reliably measured.

    The expenses relate meet above condition to fixed asset would be capitalized in the cost of asset, if not,

    it would be recognize as expense in profit and loss account of that period.

    3. Fixed assets shall be initially measured at cost. Asset acquire through financial lease would be

    measured in the lower of its fair value at the date of lease begin or the present value of the minimum

    lease payment, and depreciate according to the depreciation accounting policy.

    4. The category and depreciation method of fixed assets

    Straight-line method is in used to calculate the depreciation of fixed assets (including finance leased

    fixed assets). The estimated useful lives, expected residual value and annual depreciation rate of various

    types fixed assets are listed as follows:

    Category Residual value rate Estimated useful life Annual depreciation rate

    (%) (years) (%)

    Housing

    and building 10 20 4.50

    Machineries Furniture and

    Equipments 0 11-18 5.56-9.09

    Electronic device and

    Modules 0 6 16.67

    Vehicles 0 6 16.67

    Maintenance expense

    of leased fixed assets 0 the shorter lease term and beneficial lives

    5. Fixed asset would be treats as idle asset because of lack of working hours (except season reason) or

    nature disaster cause the asset unused for 6 months. The idle asset is depreciated as the same with other

    fixed asset that in the similar characteristic.

    6. If there is evidence provide that the value of fixed asset are decreased on each balance sheet date, the

    method of provision for the decrease value would according the method of this notes in No.1430

    impairment of assets.

    (11) Construction in progress

    1. The construction project should meet the condition of inflow of future economic benefit; the cost

    could be measured reliable simultaneity. The cost would be measured in the project is substantially

    ready for its intend use

    2. Construction in progress is transferred to fixed assets when the project is substantially ready for its

    intended use. The project is in condition of ready for used but not transact in the final account would be

    transferred to fixed assets in its estimate value, and adjust the value after transact in the final account,

    but would not adjust depreciated value that have been depreciated.

    3. If there is evidence provide that the value of project are decreased on each balance sheet date, the

    method of provision for the decrease value would according the method of this notes in No.14

    impairment of assets.

    (12) Recognize and measurement of intangible asset

    1. Intangible asset are recognize initially at cost.

    2. Period of intangible asset that could bring future economic benefit inflow to company could

    determined reasonably according to the judgment according to reason of contract right or other legal

    right, condition in same industry, history experience, and demonstrate of expert would be recognize as

    finite useful years asset. Otherwise, the asset would be recognize as infinite useful years asset.

    3. To estimate the life of finite useful years asset would consider factor of:

     The life cycle of the asset to produce product, and the information of similar asset;

     The development of craftwork and technology, and the estimate of future development trend

     The demand condition in market of the product produced by the asset;

     The estimate action would be taken by competitor or potential competitor;

     The expense expects to maintain the asset to bring future economic benefit and the ability of the

    company to pay for it.

     The relate law restriction on control period of the asset or other similar restriction such as franchise,

    lease period.

     Relation with other asset holds by company.

    4. The intangible asset with finite useful years should be amortization on a systematic and rational basic

    according its economic benefit achievement plan. A straight line method would be used if the plan could

    not define. Intangible asset with infinite useful years would not amortize, but would conduct impairment

    test every year.

    5. Conduct test to ability of the asset to bring future economic benefit on balance sheet date, and make

    provision for impairment of intangible asset according to method describe in Notes 14.

    6. Internal organizational research expenses are accounted through profit and loss in current period;

    development costs which are recognized as intangible assets shall satisfy the following conditions: It is

    technical feasible for use or sales upon the completion of the intangible assets; it is intended for use or

    sales upon the completion of the intangible assets; the manner to provide that expect future economic

    benefits that are attributable the intangible assets including a market is exist for the asset or product of

    the asset or provide evidence of serviceable if asset are inside used; the entity should have enough

    technology, financial and other resources to support the completion of development, and have ability to

    use or sale the intangible assets; the cost of intangible asset can be measured reliably.

    (13) Long-term deferred expenses

    The Long-term deferred expenses are defined as those expenses in this year but should be allocated in

    flowing years. The amount transfer to the account are the amount actual paid, and allocate equally in

    project period.31

    (14) Impairment of Asset

    1. An impairment test should be conduct to Goodwill whether impairment evidence has been provided.

    The entity should check the carrying amounts of fixed assets, construction in process, intangible assets,

    investment properties and long term equity investment that measure in cost, and make judgment if any

    indication of impairment loss for those assets exists. If there is objective indication that the asset is

    impaired, recoverable amount of the asset shall be estimated base on the higher value between fair value

    less disposal expense and present value of estimated future cash flow. When the recoverable amount of

    the asset is less than its carrying amount, the differences are recognized as impairment loss. Recoverable

    amount shall be estimated for the individual asset .If it is not possible to estimate the recoverable amount

    of the individual asset, the entity shall determine the recoverable amount of the asset group to which the

    individual asset belongs. The entity determines asset group base on the cash flow which generate from

    the asset group is independent with other asset or other asset group.

    2. Assets may be impaired when the following indication exists

    ① During the period, an asset’s market valve has declined significantly more than would be expected as

    a result of the passage of time or normal use.

    ② Significant changes with adverse effect on the entity have taken place during the period, or will take

    place in near future, in the technology, market, economic or legal environment in which the entity

    operates or in the market to which an asset is dedicated.

    ③ Market interest rate or other market rates on investment return have been increased during the period,

    and those increases are likely to affect the discount rate that are used in calculation of present value of

    future cash flows, resulting material decrease of recoverable amount of assets.

    ④ There is indication that an asset is obsolete, outdated or physically damaged.

    ⑤ There is indication that an asset is idle, and the entity plans to discontinue the usage of an asset, or

    plans to disposal of an asset before the previous expected date.

    ⑥ Information of internal report of the entity indicates that the economic performance of an asset is

    lower than expectation, net cash flow the asset created or realized operating profits (or losses) are far

    below (or higher) than expected amount.

    3. Recognize of Asset group

    The entity determines asset group base on the cash flow which generate from the asset group is

    independent with other asset or other asset group. Meanwhile, the entity should consider the method of

    administration, production and operation activities, and held-for-use assets or disposal decision. Once

    the asset group is determined, it shall keep consistence in each accounting period.

    Several assets would be recognize as asset group accord with condition mention above if product (or

    other output) produce by those assets have an activity market whether part or all of the products (or

    other out) are provide interior. If cash flow of the asset group is affected by internal transaction price,

    the cash flow should be estimated in the best estimate amount in the light of a fair shake.

    The goodwill reflected in the consolidated financial statement shall not include the goodwill of

    subsidiary attributable to minority interests; However, for relative group asset, the goodwill attributable

    to minority interests shall be included, and the entity shall adjust the book values of the asset group, and

    compare the adjusted value with its receivable amounts, then to determine whether the asset group

    (including the goodwill) is impaired. If aforesaid asset group is impaired, the entity will deduct the share

    of minority interests proportionately from the loss, and then determine the impaired loss of goodwill

    attributable to parent company.

    4. Impairment loss would not reverse once determined whether value of asset increase in future period.32

    (15) Employment Benefit

    1. Employment benefit

    Mainly include salary, bonus, allowance, employee welfares, society insurance, housing accumulation

    fund, employee education fee and other payment to acquire service provide by employee.

    The companies recognizes employment benefit as liability when employee is providing service during

    account period, and capitalize it in the cost of asset or treat as expense according to beneficiary.

    Compensation because of release employee from labor contract would transfer to current profit and loss

    account.

    2. Dismiss compensation

    Dismiss compensation means compensate to employee because of release labor relation by the company.

    Compensation includes release before the end of contract and without agreement with employee;

    encourage employee unconstraint accept cut down; the internal retirement plan implement by the

    company.

    (1) The principal to recognize dismiss compensation

    i. The company has establish a formal release plan or announce an proposal to unconstraint accept cut

    down, and is going to conduct.

    ii. The plan or proposal could not withdraw by the company unilateral.

    (2) Measurement method of compensation

    i. To the plan that employee could not refused, accrued payroll according to the plan.

    ii. To the proposal of unconstraint accept cut down, accrued payroll according to the proposal on a

    predict number of employee would accept the proposal.

    (3) Measurement standard of compensation

    i. To the plan or proposal implement by stages, recognize accrued liability that produced by the plan or

    proposal in that stage and reckon in administration fee of the period.

    ii. For the internal retirement plan, recognize accrued liability equal to amount that the company would

    pay salary and society insurance to employee from the date of stop provide service to the date of normal

    retirement date according to the plan, and reckon in administration fee of current period.

    (16) Recognize and measurement of shares-based payment

    The types of shares-based payment of the company are: cash-settle, equity-settle.

    1. Cash-settle

    The measurement of cash-settle is according with the fair value of liability undertake by the company,

    which is calculated base on the company’s share or other equity instrument.

    The value of cash-settle shares-based payment that could exercise immediately after award would be

    reckoned to relate cost or expense, and increase liability corresponds to it.

    On each balance sheet date, a best estimated of situation of exercise cash-settle right that with

    waiting-period should be undertaken, and reckon cost or expense and increase liability which is on the

    base of service award by the company, according to the fair value of company’s liability.33

    2. Equity-settle

    The measurement is base on the fair value of the equity instrument.

    The value of equity-settle payment that could be exercised immediately after award would be reckoned

    in relates cost and expense and capital reserves.

    On each balance sheet date, a best estimated of amount of exercise equity-settle should be undertaken,

    and reckon in cost or expense and capital reserves which is on the base of service award by the company,

    according to the fair value of company’s liability.

    When recognizing the fair value of the equity instruments on the date of the grant, the influence from

    market conditions in the specified vesting conditions and non-vesting conditions stipulated in the

    share-based payment agreement shall be considered. As to the non-vesting conditions existing in the

    share-based payment, as long as employee or other parties meet the non-market conditions in all vesting

    conditions (i.e. service period and etc.), costs that corresponds to the service has been obtained.

    If the equity instruments granted is cancelled during the vesting period, such equity instruments shall be

    settled as accelerated exercise of rights, while the rest amount that shall be recognized in the vesting

    period shall be recorded into the current profits and losses immediately as the capital reserves at the

    same time.

    (17) Accrued liabilities

    1. Recognize of accrued liabilities:

    Obligation with contingency factor such as external hypothecate, lawsuit or arbitrage in dispute,

    guarantee on quality of product, cut-down plan, loss of contract, recombine obligation, obligation on

    abandon fixed asset, and meet the follow condition simultaneously would determine as liabilities:

    A. This obligation is current obligation of the company; and,

    B. The performance of this obligation will probably cause economic benefits outflow of the company;

    and,

    C. The amount of this obligation can be reliably measured.

    Loss contracts and restructuring obligations of the company meet the above conditions shall be

    recognized as accrued liabilities.

    2. Measurement of accrued liabilities

    Accrued liabilities would be measured initial according to the optimum evaluation of outflow of

    economic benefit if the company perform relate obligation that consider risk, incertitude, time value of

    currency of contingency factor. Discount future cash flow to present value to determine the optimum

    evaluation if the time value of currency has great impact. On balance sheet date, check the carry amount

    of accrued liabilities, and make adjustment to carry amount to reflect the optimum evaluation. The

    increase amount in carry amount of accrued liabilities cause by time process would be determined as

    interest fee.

    3. Optimum evaluation of accrued liabilities

    If the necessary payments have scopes, the optimum evaluation shall be determined based on the

    average amount between the upper and lower limit amount of scope ; if the necessary payments do not

    have such scopes, then the optimum evaluation shall be determined in the following method:

    (a) If the contingent event is involved in an individual project, the optimum evaluation amount will be

    determined base on the most possible amount;

    (b)If the contingent event is involved more than one project, the optimum evaluation amount shall be

    determined base on possible amount and occurrence probability. In case of all or part of payments about

    the confirmed liquidation liabilities are expected to be compensated by the third parties or other parties,

    and the compensation amounts are surely received, then such amounts shall be separately recognized.

    The confirmed compensation amounts shall not exceed book values of confirmed liabilities.34

    (18) Revenue recognition

    1. Sale of goods

    Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied:

    a. the entity has transferred the significant risks and reward ownership of goods to the buyer;

    b. the entity retains neither continuing managerial involvement to the degree usually associated with

    ownership nor effective control over goods sold

    c. the amount of revenue can be measured reliably;

    d. relate economic benefit is probably inflow to the enterprise;

    e. the associated costs incurred or to be incurred can be measured reliably.

    2. Rendering of services

    1) The entity recognize revenue from rendering of service when come out of rendering of service can be

    measured reliably at balance sheet date, and adopt percentage of completion method in recognition of

    revenue. The method depends on schedule of complete to determined revenue and expense.

    The outcome of service could be measure reliably must meet flow condition;

    a. the amount of revenue can be measured reliably;

    b. relate economic benefit is probably inflow to the enterprise;

    c. the complete of schedule could be determined reliably;

    d. the associated costs incurred or to be incurred can be measured reliably;

    2) When the outcome of rendering of service cannot be measured reliably at balance sheet date, revenue

    shall be recognized to the extent of costs incurred that are expected to be recoverable if compensation

    are predict to be award; to those cost that without compensation in predict, through to profit and loss

    account without recognize revenue.

    3. Transfer of asset use right

    When the economic benefits related to the transaction are probably will flow into enterprise and the

    amounts can be reliably measured, the entity shall recognize them as income from the transfer of asset

    use right under following situations:

    (a) The amount of interest income is determined by the capital usage period and actual interest rate.

    (b) The amount of royalties is determined by the period and method of charging as stipulated in the

    relevant contract or agreement.

    (19) Government grants

    1. Government grants shall be recognized at fair value on the conditions that the entity can receive the

    grant and comply with the condition attached to the grant.

    2. Government grant will initial measure in amount received if the grant is currency-asset, if not, the

    grant will measure either in its fair value when the fair value could be obtained or nominal amount.

    A government grant related to an asset shall be recognized as deferred income, and evenly amortized to

    profit and loss over the useful lives of the related asset. Unamortized amount would be recognized in

    profit and loss account when the asset is sale, convey, scrap, derogation before its employee life.

    3. For government grant related to income, if the grant is a compensation for related expenses or losses

    to be incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in

    profit and loss over the periods in which the related cost are recognized.35

    (20) Capitalization of borrowing costs

    1. Recognition of capitalization of borrowing costs

    Borrowing costs that are direct attributable to construction, purchase and production of assets and

    comply with capitalization conditions, shall be capitalized and accounted to costs of relate assets;

    otherwise, borrowing costs shall be recognized as expenses when incurred and accounted through in

    profit and loss in current period.

    Assets which comply with the capitalization conditions refer those assets such as fixed assets,

    investment properties and inventories etc that require a long time of construction and production

    activities before being intended for use or for sales

    2. Capitalization period

    The capitalization of borrowing costs shall satisfy the following conditions:

    a. The capital expenditures have been incurred; and,

    b. The borrowing costs have been incurred; and,

    c. Activities relating to acquisition, construction or production that are necessary to make the assets

    being intended for use or sales have been launched.

    d. Capitalization of borrowing costs shall be suspended during periods in which acquisition, construction

    or production of assets is interrupted abnormally, and is interrupted for a continuous period of three

    months.

    Capitalization of borrowing costs also shall be suspended when the acquisition, construction or

    production of assets are prepared for intended use or sales.

    3. Measurement of capitalized borrowing costs

    During the capitalization period, the amount of interest to be capitalized for each accounting period shall

    be determined as following:

    - for a specific purpose borrowing, the amount of interest to be capitalized shall be the actual interest

    expenses incurred for the period less temporary deposit interests or investment income; the amount of

    assistant expense for a specific purpose would be capitalized that before the acquisition, construction or

    production of asset are prepared for intended use or sales, the amount after would be reckoned in current

    profit and loss account;

    - Where funds are borrowed under general purpose, the entity shall determine the amount of interest to

    be capitalized by applying capitalization rate to weighted average of the excess amount between

    cumulative expenditures on the asset and the amount of specific-purpose borrowings. The capitalization

    rate shall be weighted average of the interest rates applicable to the general-purpose borrowings; the

    assistant expense for the general purpose borrowing would be reckoned in current profit and loss

    account;

    - During the capitalization period, interest to capitalized would not exceed total amount of interest of

    relate borrowing in every financial year; exchange margin of foreign currency borrowing and interest

    would capitalized in capitalization period.

    (21) Income taxes

    1. The company uses deferred income tax liability method in calculation of income taxes.

    2. According tothe deductible temporary differences between carry amount of asset and liability and its

    tax base, apply tax rate to determine deferred income tax asset or liability according the predict period of

    recover asset or discharge liability.

    3. Deferred income tax assets

    a. Deferred income tax assets shall be recognized according to deductible temporary differences to the

    extent that is probable that tax profits will be available against which the deductible temporary

    differences can be utilized, but deferred income tax asset arise from initial recognize of asset and

    liabilities in transaction that have character listed below would not recognized:36

    1) The transaction is not business combination;

    2) At the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible

    loss)

    b. For deductable temporary differences associated with investment in subsidiaries, associates, and

    interests in jointly controlled enterprises, recognize as deferred income tax asset if the temporary

    difference could be reverse in the foreseeable future and it is probably award the tax profit to again the

    difference.

    4. Deferred income tax liabilities

    Deferred tax liabilities shall be recognized for all taxable temporary differences, except to the extent that

    the deferred tax liabilities arise from:

    a) the initial recognition of goodwill;

    b) the transaction is not a business combination, at the time of the transaction, it affects neither

    accounting profit nor taxable profit (or deductible loss)

    For temporary differences associated with investment in subsidiaries, associates, and interests in jointly

    controlled enterprises, the investing enterprise is able to control the timing of the reversal of the

    temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable

    future. On balance sheet date, check the carry amount of deferred tax asset; decrease the carry amount if

    it is not probably to obtain enough tax profit to again the difference in the foreseeable future, and set-of

    the decrease amount when probably to obtain enough tax profit.

    (22) Basis of Consolidation

    1. Consolidation Scope

    The consolidated financial statements prepared are in accordance with the No. 33 Enterprise Accounting

    Standards – Consolidated Financial Statement issued in February, 2006. The consolidated financial

    statements incorporate the financial statements of the Company and enterprises controlled by the

    Company (“its subsidiaries”). Control is achieved where the Company has the power to govern the

    financial and operating policies of an investee enterprise so as to obtain benefits from its activities.

    If there is evidence provide that the invested company is not control by invest company, the invested

    company would not in consolidation scope.

    2. Bought and sale the share of subsidiaries

    The date of acquire or disposal the right of share of subsidiaries is recognized at the effect date of

    transfer material risk or reward. The consolidation profit and loss statement and cash flow statement has

    include the result of management and cash flow of subsidiaries(not in the same control) before disposal

    or after acquire the share; for the subsidiaries in the same control from business combination, the

    management result and cash flow has been included in consolidation profit and loss account and cash

    flow statement from begin of current period to consolidation date and disclose in statement individual,

    the compare amount in consolidation statement has been adjust correspond to it.

    If parent company acquires new equity of subsidiaries, on the date of work out consolidation statement,

    adjust shareholder reserve according to margin between the values of long-term equity investment and

    proportion of net asset of subsidiaries, adjust retain earning if the reserve is not enough to offset.

    3. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the

    accounting policies used into line with those used by other members of the Group.

    4. Consolidation method

    All significant intercompany transaction and balances between group enterprises are eliminated on

    consolidation. The minority interest would disclose in consolidation statement. Decrease minority

    interest if minorities afford to the loss of the subsidiaries that allocate to minorities, otherwise, the

    company would bear the loss of exceed.37

    V Change in accounting policies, accounting estimates and correct previous accounting period

    errors:

    There are no changes in accounting policies, accounting estimates and no accounting errors in prior

    accounting period.

    VI Taxation

    (1) The type of tax and tax rate for the company are list below:

    Tax type Tax base Rate %

    VAT Sale of product and raw material 17

    Business Tax Business turnover 5

    Local Education Surcharge

    VAT payable, business tax, consumer tax、Tax that shall not be

    exempt from tax allowance and deduction

    1

    Corporation Income Tax Taxable profit 15

    According to《Notice about Implementation of Preferential Policies of the on Transition of Enterprise

    Income Tax 》[No.39(2007 of State Council]issued by The State Council on Dec 16 2007 and《Notice

    of the Ministry of Finance and State Administration of Taxation about Implementation of Preferential

    Policies of the State Council on Transition of Enterprise Income Tax》[No. 21 [2008] of the Ministry of

    Finance] issued by the ministry on Feb 23 2008, the income tax rate for the company in 2008 is 18%,

    and 20% in 2009,22% in 2010, 24% in 2011.

    (2) The tax type and tax rate for primary subsidiaries

    1. Tsann Kuen (ZhangZhou) Enterprise Ltd(TKL)

    Tax type Tax base Rate %

    VAT Sale of product and raw material 0, 17

    Business Tax Business turnover 5

    Local Education Surcharge

    VAT payable, business tax, consumer tax、Tax that shall not be

    exempt from tax allowance and deduction

    1

    Corporation Income Tax Taxable profit 15

    TKL was cognizance as high technology enterprise by the Fujian Province High Technology Enterprise

    Cognizance Group (No. 8 [2009] Ming Ke Gao), according to the tax law, the corporation tax rate is

    15%.

    2. Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., Ltd. (TKN)

    Tax type Tax base Rate %

    VAT Sale of product and raw material 17

    Business Tax Business turnover 5

    Local Education Surcharge VAT payable, business tax, consumer tax、 1

    Corporation Income Tax Taxable profit 12.5

    Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., Ltd is a production enterprise which is

    located at Zhangzhou Fujian, the enterprise income tax is levied at 25% of taxable income. According to

    Income tax rules and regulations for foreign investment enterprises and foreign-owned enterprises, the

    Company is exempted from income tax from the first to the second accounting period, and is levied at

    12.5% from the third to the fifth accounting period since the Company is profitable. The Company’s

    first profitable year is in the year of 2005.38

    3. Tsann Kuen (ShangHai) Enterprise Ltd (TKS)

    Tax type Tax base Rate %

    VAT Sale of product and raw material 17

    Business Tax Business turnover 5

    Urban Construction Tax VAT payable, business tax, consumer tax、 1

    Corporation Income Tax Taxable profit 25

    4. Shanghai Canxing Trading Co.Ltd

    Tax type Tax base Rate %

    VAT Sale of product and raw material 17

    Business Tax Business turnover 5

    Urban Construction Tax VAT payable, business tax, consumer tax 1

    Education Surcharge VAT payable, business tax, consumer tax 3

    Corporation Income Tax Taxable profit 25

    5. The Company’s subsidiary EUPA (Hong Kong) Co., Ltd is registered in Hong Kong Special

    Administrative Zone, and income tax rate for the company is 17.5% in 2007, 16.5% in 2008 and 2009.

    6. Xiamen Canxing International Travel Agency Co., Ltd.

    Tax type Tax base Rate %

    Business Tax Business turnover 5

    Urban Construction Tax VAT payable, business tax, consumer tax、 7

    Education Surcharge VAT payable, business tax, consumer tax、 3

    Local Education Surcharge VAT payable, business tax, consumer tax、 1

    Corporation Income Tax Taxable profit 25

    7. Xiamen Canxing Trading Co. Ltd

    Tax type Tax base Rate %

    VAT Sale of product and raw material 17

    Business Tax Business turnover 5

    Urban Construction Tax VAT payable, business tax, consumer tax、 7

    Education Surcharge VAT payable, business tax, consumer tax、 3

    Local Education Surcharge VAT payable, business tax, consumer tax、 1

    Corporation Income Tax Taxable profit 25

    8. Shanghai Fanxin Airline Services Limited

    Tax type Tax base Rate %

    Business Tax Business turnover 5

    Urban Construction Tax VAT payable, business tax, consumer tax、 7

    Education Surcharge VAT payable, business tax, consumer tax、 3

    Local Education Surcharge VAT payable, business tax, consumer tax、 1

    Corporation Income Tax Taxable profit 2539

    VII Enterprise consolidation and consolation statement scope

    7.1 Information of subsidiaries in consolidation scope (The monetary unit is ten thousand unless

    otherwise stated)

    Company name

    Registration

    location

    Registered

    capital

    Actual

    investment

    amount

    Holding

    proportion

    Voting

    rights

    proportion

    Business scope

    Nature of

    economy

    Merger

    or not

    Tsann Kuen (ShangHai)

    Enterprise Ltd(TKS)

    ShangHai USD4,000 USD2,500 62.50% 62.50%

    Manufacture and sales of small home electronic

    appliance, electronic device, light-industrial

    product, and modern furniture and relative modules

    limited liability

    company

    Yes

    Tsann Kuen (ZhangZhou)

    Enterprise Ltd(TKL) (Note1)

    ZhangZhou USD16,000 USD16,000 75.00% 75.00%

    Development, production and sales of small home

    electronic appliance, new style of electronic device,

    light-industrial product, and modern furniture and

    relative modules

    limited liability

    company

    Yes

    Tsann Kuen (Zhangzhou)

    South Port Electronics

    Enterprise Co., Ltd. (TKN)

    ZhangZhou RMB500 RMB375 75.00% 75.00%

    Development and production of small home

    electronic appliance, new style of electronic device,

    light-industrial product, and modern furniture

    limited liability

    company

    Yes

    Eupa (Hong Kong)

    Ltd(EUPA)

    HongKong USD290 USD140 100% 100%

    Trading, purchase, small home appliance research,

    investment, market research

    limited liability

    company

    Yes

    Tsann Kuen (Zhangzhou)

    Profession and Technology

    College (College)

    Zhangzhou RMB50 RMB50 75.00% 75.00%

    Secondary vocational education

    non-governmental

    non-enterprise

    entities

    Yes

    Xiamen Canxing

    International Travel Agency

    Co., Ltd. (Xiamen Canxing

    Travel)

    XiaMen RMB500 RMB500 100% 100% Inbound tourism and domestic tourism

    limited liability

    company

    Yes

    Shanghai Canxing Trading

    Co. Ltd (Shanghai Canxing)

    ShangHai RMB500 RMB495 74.25% 74.25%

    Import, wholesale, retail, and after service of home

    electronic appliance, computer and its fitting

    equipment, communication equipments, mechanical

    and electronic equipments, office equipments and

    related complete product(include kitchen

    equipments);Import or export products or

    technology by independence or act as agency.

    limited liability

    company

    Yes

    Shanghai Fanxin Airline

    Services Limited (Shanghai

    Fanxin)

    ShangHai RMB50 RMB50 37.87% 37.87%

    Civil air transport of domestic air routes, excluding

    Hong Kong, Macao and Taiwan, sale and agency of

    passenger transport

    limited liability

    company

    Yes

    Xiamen Canxing Trading Co.

    Ltd (Xiamen Canxing

    Trading)

    XiaMen RMB500 RMB500 70.54% 70.54%

    1. Wholesale and retail of general merchandise,

    home electronic appliance, computer and its fitting

    equipment, communication equipments, mechanical

    and electronic equipments, office equipments,

    kitchen equipments and related complete products.

    2. Importing and exporting different kinds of

    commodities and technologies

    limited liability

    company

    Yes40

    7.2 Change in consolidation scope

    1. New subsidiary during reporting period

    Company name Indirect holding proportion% Registration date

    Xiamen Canxing Travel 100% 17 Feb. 2009

    Xiamen Canxing Trading 70.54% 13 Mar. 2009

    Shanghai Fanxin 37.87% 10 Apr. 2009

    Xiamen Canxing International Travel Agency Co., Ltd. (“Xiamen Canxing Travel”) was established by the Company

    by monetary funds in 17 Feb. 2009, the registered capital is RMB 5,000,000.00, which the Company holds 100% of

    shares.

    Xiamen Canxing Trading Co. Ltd. (“Xiamen Canxing Trading”) was established by Shanghai Canxing Trading Co.,

    Ltd., a subsidiary company of TKN (the subsidiary of the Company) and individual shareholders by monetary funds in

    13 Mar. 2009, the registered capital is RMB 5,000,000.00, which Shanghai Canxing Trading holds 95% of shares.

    Shanghai Fanxin Airline Services Limited (“Shanghai Fanxin”) was established by Shanghai Canxing Trading Co.,

    Ltd., a subsidiary company of TKN (the subsidiary of the Company) and individual shareholders by monetary funds in

    10 Apr. 2009, the registered capital is RMB 500,000.00, which Shanghai Canxing Trading holds 51% of shares.

    VIII There is no joint-venture enterprise or associate enterprise41

    IX. Main items in Consolidation Financial Statement

    9.1 Monetary fund

    2009.06.30 2008.12.31

    Original

    currency

    Exchange

    rate

    Presentation

    currency

    Original

    currency

    Exchange

    rate

    Presentation

    currency

    Cash on hand 517,083.03 753,580.34

    CNY 244,316.04 1.0000 244,316.04 243,387.23 1.0000 243,387.23

    HKD 500.75 0.8810 441.16 1,907.91 0.8819 1,682.59

    USD 6,993.85 6.8319 47,781.28 19,891.04 6.8346 135,947.30

    JPY 20,572.90 0.0714 1,468.91 1,470,508.90 0.0757 111,244.00

    IDR 600,000.00 0.0007 420.00 0.00 0.00

    FRF 7.00 6.3229 44.26 0.00 0.00

    EUR 22,809.48 9.6323 219,707.75 27,054.48 9.6590 261,319.22

    GBP 3.13 11.3930 35.66 0.00 0.00

    HUF 81,016.00 0.0354 2,867.97 0.00 0.00

    Cash in bank 209,572,299.85 335,536,344.49

    CNY 98,637,388.42 1.0000 98,637,388.42 127,576,436.82 1.0000 127,576,436.82

    HKD 1,059.80 0.8810 933.68 1,509,697.21 0.8819 1,331,401.97

    USD 14,446,533.26 6.8319 98,697,270.56 28,084,570.81 6.8346 191,946,807.65

    JPY 103,372,995.00 0.0714 7,380,831.84 177,565,874.00 0.0757 13,432,858.41

    EUR 504,124.18 9.6323 4,855,875.35 129,292.85 9.6590 1,248,839.64

    Other Monetary fund 91,682,200.93 80,216,349.99

    CNY 91,115,482.39 1.0000 91,115,482.39 77,191,317.54 1.0000 77,191,317.54

    HKD 0.00 0.8810 0.00 32,010.25 0.8819 28,229.84

    USD 82,951.82 6.8319 566,718.54 438,475.20 6.8346 2,996,802.61

    Total 301,771,583.81 416,506,274.82

    Other monetary fund including bank acceptance notes, commercial acceptance notes and deposits for

    issuance of letter of credit.

    9.2 Notes Receivable

    Items of notes 2009.06.30 2008.12.31

    Bank acceptance notes-no pledge 1,661,299.64 5,823,544.00

    Commercial acceptance bill-no pledge 3,143,863.00 0.00

    Total 4,805,162.64 5,823,544.00

    Compared with the beginning of reporting period, the ending balance of notes receivable is decreased by

    17.49%, which is caused by acceptance maturity.

    9.3 Accounts receivable

    (1) Accounts Receivable

    Items 2009.06.30 2008.12.31

    Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Individual transaction

    with significant amount

    176,845,426.05 49.01% 11,231,512.17 165,613,913.88 161,545,803.31 35.73% 12,904,956.35 148,640,846.96

    Individual transaction

    with not so significant

    amount but significant

    recoverable risk

    41,187,436.95 11.42% 41,187,436.95 0.00 41,258,039.77 9.12% 41,258,039.77 0.00

    Other transaction with

    no significant amount

    142,794,521.67 39.57% 831,262.67 141,963,259.00 249,342,672.13 55.15% 820,937.38 248,521,734.75

    Total 360,827,384.67 100.00% 53,250,211.79 307,577,172.88 452,146,515.21 100.00% 54,983,933.50 397,162,581.7142

    (2) Age Analysis

    Aging 2009.06.30 2008.12.31

    Balance Proportion

    %

    Bad debit

    provision

    Net value Balance Proportion

    %

    Bad debit

    provision

    Net value

    Within 1 year 306,655,686.86 84.99% 842,661.06 305,813,025.80 397,638,202.33 87.94% 508,820.53 397,129,381.80

    1-2 years 1,844,577.44 0.51% 80,430.36 1,764,147.08 13,376,232.29 2.96% 13,346,444.36 29,787.93

    2-3 years 11,195,039.78 3.10% 11,195,039.78 0.00 41,132,080.59 9.10% 41,128,668.61 3,411.98

    Above 3 years 41,132,080.59 11.40% 41,132,080.59 0.00 0.00 0.00% 0.00 0.00

    Total 360,827,384.67 100.00% 53,250,211.79 307,577,172.88 452,146,515.21 100.00% 54,983,933.50 397,162,581.71

    (3) As at 30 Jun. 2009, the amount due from shareholder who own 5% or more than 5% of voting right

    as followed:

    Name 2009.06.30 2008.12.31

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 18,618,197.43 27,157,898.62

    (4) Total amount of top five account receivable is 245,487,675.16, representing 68.04% of account

    receivables balance.

    Aging 2009.06.30 2008.12.31

    Amount Proportion% Amount Proportion%

    Within 1 year 234,349,586.09 95.46% 232,873,277.00 94.75%

    1-2 years 24,382.09 0.01% 12,895,690.10 5.25%

    2-3 years 11,113,706.98 4.53% 0.00 0.00%

    Total 245,487,675.16 100.00% 245,768,967.10 100.00%

    (5) Other explanation

    ① Individual transaction with significant amount: Individual amount which represents more than 10%

    (includes 10%) of ending balance of account receivable shall be treated as Individual transaction with

    significant amount.

    ② Individual transaction with not so significant amount but significant recoverable risk which

    represents any individual transaction with no so significant amount, but the age is more than 1 years,

    those transaction are treated as Individual transaction with not so significant amount but significant

    recoverable risk.

    ③ Other transactions with no significant amount represent any transaction except set forth in ①, ②.

    9.4 Advance to suppliers

    (1) Age analysis

    Aging 2009.06.30 Proportion% 2008.12.31 Proportion%

    Within 1 year 1,760,148.92 100.00% 5,915,476.53 66.39%

    1-2 years 0.00 0.00% 2,995,322.41 33.61%

    Total 1,760,148.92 100.00% 8,910,798.94 100.00%

    (2) The ending balance is decreased of 80.25% compare with the beginning balance is caused by partial

    advance for material are settle.

    (3) Total amount of top five advance to supplier is 890,937.89, representing 50.62% of ending balance.

    (4) Up to 30 Jun. 2009, there is no amount due from shareholder who own 5% or over 5% of voting

    shares.43

    9.5 Other receivables

    (1) Other receivables

    Items 2009.06.30 2008.12.31

    Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Individual transaction with

    significant amount

    2,698,608.41 13.83% 0.00 2,698,608.41 9,284,077.19 27.16% 0.00 9,284,077.19

    Individual transaction with

    not so significant amount

    but significant recoverable

    risk

    2,397,501.71 12.29% 2,397,501.71 0.00 3,403,176.27 9.96% 3,403,176.27 0.00

    Other transaction with no

    significant amount

    14,410,983.96 73.88% 848,111.50 13,562,872.46 21,495,669.25 62.88% 1,793,422.09 19,702,247.16

    Total 19,507,094.08 100.00% 3,245,613.21 16,261,480.87 34,182,922.71 100.00% 5,196,598.36 28,986,324.35

    (2) Breakdown of individual account receivable with significant amount

    Debtor Amount Age Proportion Content

    Fujian Longhai Power Supply

    Co., Ltd.

    2,698,608.41 Within 30 days 0.00% 70% of electrical charge in advance

    Total 2,698,608.41

    (3) Age analysis

    Aging 2009.06.30 2008.12.31

    Balance Proportion

    %

    Bad debit

    provision

    Net value Balance Proportion

    %

    Bad debit

    provision

    Net value

    Within 1 year 17,109,592.37 87.71% 848,111.50 16,261,480.87 30,779,746.44 90.04% 1,793,422.09 28,986,324.35

    1-2 years 1,532,956.36 7.86% 1,532,956.36 0.00 2,386,574.47 6.98% 2,386,574.47 0.00

    2-3 years 864,545.35 4.43% 864,545.35 0.00 572,898.96 1.68% 572,898.96 0.00

    Over 3 years 0.00 0.00% 0.00 0.00 443,702.84 1.30% 443,702.84 0.00

    Total 19,507,094.08 100.00% 3,245,613.21 16,261,480.87 34,182,922.71 100.00% 5,196,598.36 28,986,324.35

    (4) Up to 30 Jun. 2009, there is no amount due from shareholder who own 5% or over 5% of voting

    shares.

    (5) The total amount of top five other receivable is 7,300,555.48, represent 37.42% of ending balance

    Name Amount Nature Aging Proportion%

    Fujian Longhai Power Supply Co., Ltd. 2,698,608.41 70% of electrical charge in advance Within 30 days 13.83%

    People’s Court of Xiamen City HuLi District

    1,908,990.00 To pay margins of preservation prior to

    lawsuit

    Within 1 year 9.79%

    Ni YiLian

    1,100,000.00 Payment for selling 9/F of Information

    Building

    Over 1 year 5.64%

    Medical Insurance Management Center

    of Longhai Municipality

    866,761.20 Temporary medical insurance premiums of

    staffs

    Over 1 year 4.44%

    China Export & Credit Insurance

    Corporation, Fujian Branch

    726,195.87 Deposit of export credit insurance

    Within 1 year 3.72%

    Total 7,300,555.48 37.42%

    (6) Other explanation

    ① Individual transaction with significant amount: Individual amount which represents more than 10%

    (includes 10%) of ending balance of other receivables shall be treated as Individual transaction with

    significant amount.

    ② Individual transaction with not so significant amount but significant recoverable risk which

    represents any individual transaction with no so significant amount, but the age is more than 1 years,

    those transaction are treated as Individual transaction with not so significant amount but significant

    recoverable risk.

    ③ Other transactions with no significant amount represent any transaction except set forth above44

    9.6 Inventory

    (1) Inventories

    Items 2009.06.30 2008.12.31

    Amount

    Provision for

    impairment

    Net Value

    Amount

    Provision for

    impairment

    Net Value

    Raw material 214,136,978.91 6,104,106.20 208,032,872.71 190,355,952.68 6,624,807.61 183,731,145.07

    Product in

    process

    49,295,271.33 0.00 49,295,271.33 91,693,725.66 0.00 91,693,725.66

    Finished product 104,335,145.01 2,008,163.06 102,326,981.95 169,764,797.46 2,505,969.67 167,258,827.79

    Material in

    transit

    865,797.64 0.00 865,797.64 8,542,553.88 0.00 8,542,553.88

    Total 368,633,192.89 8,112,269.26 360,520,923.63 460,357,029.68 9,130,777.28 451,226,252.40

    (2) Provision for Impairment

    Items 2008.12.31 Increase Reversal Write off 2009.06.30

    Raw material 6,624,807.61 0.00 244,019.40 276,682.01 6,104,106.20

    Product in

    process

    0.00 0.00 0.00 0.00 0.00

    Finished product 2,505,969.67 207,923.33 0.00 705,729.94 2,008,163.06

    Total 9,130,777.28 207,923.33 244,019.40 982,411.95 8,112,269.26

    (3) The total procurement amount of top five suppliers is RMB 133,617,116.47 in total, accounting for

    22.31% of total procurement.

    (4) The impairment loss provision for inventories is made base on the difference of the lower net

    recoverable value into cash and book value on 30 Jun. 2009. Net recoverable value into cash refers

    estimated sale price less estimated selling expense and related taxes expense in the course of normal

    production and operation. The decrease of impairment loss of inventories is due to low balance of

    inventories at report date.

    9.7 Available-for-Sale Financial Asset

    Items 2009.06.30 2008.12.31

    Available-for-sale equity instrument 186,883.20 109,771.20

    Total 186,883.20 109,771.20

    9.8 Long-term Receivable

    Items 2009.06.30 2008.12.31

    Receivable 104,700,136.71 68,487,888.93

    Total 104,700,136.71 68,487,888.93

    9.9 Long-term Equity Investment

    (1) Long-term equity investment and impairment loss provision:

    Item 2009.06.30 2008.12.31

    Investment

    cost

    Impairment loss

    provision Carrying value Investment cost

    Impairment

    loss provision Carrying value

    Calculation by

    cost method 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00

    Total 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00

    (2) Long-term equity investment measured by cost method:

    Investee

    Initial

    Investment cost

    2008.12.31

    Increment Decrement

    2009.06.30

    Xiamen Foreign Investment

    Enterprise Association

    40,000.00 40,000.00 0.00 0.00 40,000.00

    Total 40,000.00 40,000.00 0.00 0.00 40,000.0045

    9.10 Investment Property

    (1) Subsequent measurement by cost model

    Item 2008.12.31 Increment Decrement 2009.06.30

    Total cost:

    Buildings and structures 67,534,204.94 39,000.00 0.00 67,573,204.94

    Land use right 0.00 0.00 0.00 0.00

    Subtotal 67,534,204.94 39,000.00 0.00 67,573,204.94

    Accumulated depreciation and

    accumulated amortization

    Buildings and structures 30,079,317.83 700,858.32 0.00 30,780,176.15

    Land use right 0.00 0.00 0.00 0.00

    Subtotal 30,079,317.83 700,858.32 0.00 30,780,176.15

    Total accumulated impairment loss

    provision

    Buildings and structures 0.00 0.00 0.00 0.00

    Land use right 0.00 0.00 0.00 0.00

    Subtotal 0.00 0.00 0.00 0.00

    Total carrying value

    Buildings and structures 37,454,887.11 0.00 0.00 36,793,028.79

    Land use right 0.00 0.00 0.00 0.00

    Subtotal 37,454,887.11 0.00 0.00 36,793,028.79

    9.11 Fixed assets and accumulated depreciation

    (1) Fixed assets and accumulated depreciation

    Item 2008.12.31 Increment Decrement 2009.06.30

    Total cost:

    Buildings and structures 136,021,801.61 48,703.40 3,891.61 136,066,613.40

    Machinery equipment 809,742,834.05 386,589.43 111,828,707.58 698,300,715.90

    electronic equipment, modules and others 1,840,315,843.39 12,096,744.83 58,303,493.42 1,794,109,094.80

    Vehicles 54,543,057.24 244,329.52 2,939,349.43 51,848,037.33

    Capitalized maintenance expenses for fixed asset 59,253,093.84 1,518,378.69 579,050.00 60,192,422.53

    Subtotal 2,899,876,630.13 14,294,745.87 173,654,492.04 2,740,516,883.96

    Total Accumulated depreciation:

    Buildings and structures 63,718,812.42 3,806,665.76 95,333.39 67,430,144.79

    Machinery equipment 415,624,712.98 26,301,926.43 59,655,806.63 382,270,832.78

    electronic equipment, modules and others 1,533,711,373.55 62,107,941.88 53,484,212.55 1,542,335,102.88

    Vehicles 44,193,091.78 1,458,030.66 2,273,774.91 43,377,347.53

    Capitalized maintenance expenses for fixed asset 16,167,367.24 2,933,810.75 173,524.08 18,927,653.91

    Subtotal 2,073,415,357.97 96,608,375.48 115,682,651.56 2,054,341,081.89

    Net value:

    Buildings and structures 72,302,989.19 0.00 0.00 68,636,468.61

    Machinery equipment 394,118,121.07 0.00 0.00 316,029,883.12

    electronic equipment, modules and others 306,604,469.84 0.00 0.00 251,773,991.92

    Vehicles 10,349,965.46 0.00 0.00 8,470,689.80

    Capitalized maintenance expenses for fixed asset 43,085,726.60 0.00 0.00 41,264,768.62

    Subtotal 826,461,272.16 0.00 0.00 686,175,802.07

    Impairment loss provision:

    Buildings and structures 0.00 0.00 0.00 0.00

    Machinery equipment 20,625,867.39 658,940.72 593,449.24 20,691,358.87

    electronic equipment, modules and others 40,854,730.33 1,138,851.45 6,589,112.01 35,404,469.77

    Vehicles 66,319.84 623,370.19 4,563.45 685,126.58

    Capitalized maintenance expenses for fixed asset 821,736.09 448,108.12 933.25 1,268,910.96

    Subtotal 62,368,653.65 2,869,270.48 7,188,057.95 58,049,866.18

    Net value: 764,092,618.51 0.00 0.00 628,125,935.8946

    (2) The amount of fixed assets that are transferred from construction in progress in the reporting period

    is RMB 3,590,067.55.

    (3) Details of purpose to dispose fixed assets:

    Items Cost

    Accumulated

    depreciation

    impairment loss

    Provision Net value

    Predicted disposal

    date

    A batch of equipment 7,053,998.18 3,431,984.25 106,364.55 3,515,649.38 July 2009

    Total 7,053,998.18 3,431,984.25 106,364.55 3,515,649.38

    (4) The Company has no finance leased fixed asset.

    (5) The Company has no operating leased fixed asset.

    (6) Fixed assets which have not completed the process of property right certificate.

    Item

    Cost

    Accumulated

    depreciation

    impairment loss

    Provision

    Net value

    Reason

    Buildings and structures 1,957,670.50 220,238.70 0.00 1,737,431.80 Being processed

    (7) The Company has no pledged fixed assets.

    (8) Details of idle fixed assets:

    Items Cost

    Accumulated

    depreciation

    Impairment loss

    Provision

    Net value

    Machinery equipment 58,918,026.45 21,792,756.17 13,567,985.16 23,557,285.12

    Electronic equipment,

    modules and others

    30,854,682.88 17,979,362.60 4,869,799.40 8,005,520.88

    Total 89,772,709.33 39,772,118.77 18,437,784.56 31,562,806.00

    9.12 Construction in progress

    (1) Details of construction in progress

    Project name 2009.06.30 2008.12.31

    Carrying

    value

    Impairment loss

    Provision

    Net value Carrying value Impairment loss

    Provision

    Net value

    Device Installation 0.00 0.00 0.00 58,630.00 0.00 58,630.00

    Module-in-process 943,660.92 0.00 943,660.92 2,967,294.68 0.00 2,967,294.68

    Decoration 1,465,177.36 0.00 1,465,177.36 398,415.73 0.00 398,415.73

    Total 2,408,838.28 0.00 2,408,838.28 3,424,340.41 0.00 3,424,340.41

    (2) Details of construction in progress (Con.)

    Project name Budget 2008.12.31 Increment

    Transfer to

    Fixed assets

    Other

    decrement

    2009.06.30

    Sources of

    capital

    Project

    input

    over its

    budget

    %

    Device

    Installation

    8,099,536.00 58,630.00 50,665.99 86,531.45 22,764.54 0.00 Self-owned

    capital

    0.63%

    Module-in-process 14,451,566.00 2,967,294.68 1,005,373.34 2,836,020.37 192,986.73 943,660.92 Self-owned

    capital

    6.96%

    Decoration 3,000,000.00 398,415.73 1,734,277.36 667,515.73 0.00 1,465,177.36 Self-owned

    capital

    57.81%

    Total 25,551,102.00 3,424,340.41 2,790,316.69 3,590,067.55 215,751.27 2,408,838.28

    (3) There is no amount to interest capitalization in construction in progress until 30 June 2009.

    (4) The ending balance is decreased by 29.66% compared with the beginning of the period, which was

    mainly due to transfer to fixed assets.47

    9.13 Intangible assets and accumulated amortization

    Items

    Carrying balance on

    2008.12.31

    Increment Decrement

    Carrying balance on

    2009.6.30

    (1) Total cost 45,165,918.80 441,575.32 0.00 45,607,494.12

    Information system software 15,605,191.29 441,575.32 0.00 16,046,766.61

    Land use right 29,560,727.51 0.00 0.00 29,560,727.51

    (2)Total accumulated

    amortization

    14,572,459.40 1,627,202.29 0.00 16,199,661.69

    Information system software 6,414,176.15 1,300,013.89 0.00 7,714,190.04

    Land use right 8,158,283.25 327,188.40 0.00 8,485,471.65

    (3)Total accumulated

    impairment loss provision

    0.00 0.00 0.00 0.00

    Information system software 0.00 0.00 0.00 0.00

    Land use right 0.00 0.00 0.00 0.00

    (4)Total carrying value 30,593,459.40 0.00 0.00 29,407,832.43

    Information system software 9,191,015.14 0.00 0.00 8,332,576.57

    Land use right 21,402,444.26 0.00 0.00 21,075,255.86

    9.14 Goodwill

    Name of investee

    Balance on

    2008.12.31

    Increment Decrement

    Balance on

    2009.6.30

    Impairment loss

    Provision on

    2009.6.30

    Sources

    Shanghai Fanxin Airline

    Services Limited

    0.00 71,870.08 71,870.08 0.00

    Difference between

    long-term equity

    investment and net

    assets when purchasing

    Total 0.00 71,870.08 0.00 71,870.08 0.00 -

    9.15 Long-term deferred expense

    Items Carrying balance on 2009.6.30 Carrying balance on 2008.12.31

    Telecommunications engineering 141,108.13 155,458.15

    Other 77,103.06 0.00

    SUN computer service fees 291,666.75 341,666.73

    Internet charges 323,232.00 375,648.00

    Total 833,109.94 872,772.88

    9.16 Deferred income tax assets

    Recognition of deferred income tax assets

    Category Deductible temporary difference Deferred income tax assets

    2009.06.30 2008.12.31 2009.06.30 2008.12.31

    Impairment loss of fixed assets 50,569,911.06 48,765,101.41 7,585,486.66 7,314,765.21

    Unrealized loss or gain on

    exchange

    2,411,151.84 0.00 361,672.78 0.00

    Changes in fair value 547,025.01 0.00 82,053.75 0.00

    Provision for bad debts 32,317.58 158,583.32 4,847.64 19,822.92

    Accrued Expense 177,192.48 177,192.43 44,298.12 44,298.11

    Provision for falling price of

    Inventory

    0.00 982,411.95 0.00 122,801.49

    Loss relief 81,181,782.06 101,066,374.38 12,177,267.30 15,177,213.44

    Total 134,919,380.03 151,149,663.49 20,255,626.25 22,678,901.1748

    9.17 Impairment provision for assets

    Decrement

    Items 2008.12.31 Increment

    Reversal Written-off

    2009.06.30

    Provision for bad debts 61,683,769.00 0.00 5,187,944.00 0.00 56,495,825.00

    Provision for falling price

    of inventories

    9,130,777.28 207,923.33 244,019.40 982,411.95 8,112,269.26

    Impairment loss provision

    for fixed assets

    62,368,653.65 2,869,270.48 0.00 7,188,057.95 58,049,866.18

    Total 133,183,199.93 3,077,193.81 5,431,963.40 8,170,469.90 122,657,960.44

    9.18 Restricted assets

    Items 2008.12.31 Increment Decrement 2009.06.30

    Pledged assets:

    Buildings and structures 30,007,359.86 0.00 30,007,359.86 0.00

    Machinery equipment 134,097,376.43 0.00 134,097,376.43 0.00

    Modules 199,364,791.07 0.00 199,364,791.07 0.00

    Land use right 14,145,624.25 0.00 14,145,624.25 0.00

    Other causes of asset ownership restrictions

    Other monetary fund 80,216,349.99 171,173,242.76 159,707,391.82 91,682,200.93

    Total 457,831,501.60 171,173,242.76 537,322,543.43 91,682,200.93

    9.19 Short-term loan

    Type 2009.06.30 2008.12.31

    Borrow money on credit 22,478,317.38 0.00

    Total 22,478,317.38 0.00

    9.20 Transaction financial liabilities

    Items 2009.06.30 2008.12.31

    Derivative financial liabilities 547,025.01 0.00

    Total 547,025.01 0.00

    9.21 Notes payable

    Items 2009.06.30 2008.12.31

    Bank acceptance notes 77,629,855.16 104,065,444.40

    Trade acceptance notes 8,124,630.08 73,531,316.49

    Total 85,754,485.24 177,596,760.89

    (1) The ending balance of notes payable shall be due in before December 2009.

    (2) There is no amount due to shareholders who own 5% or more than 5% voting rights until 30 June

    2009.

    9.22 Accounts payable

    (1) Aging

    Aging 2009.06.30 2008.12.31

    Within 1 year 522,198,096.12 750,391,401.61

    Over 1 year 145,094.42 4,014,554.37

    Total 522,343,190.54 754,405,955.98

    Account payable, which the aging is more that one year accounts for 0.03% of the ending balance, which caused by

    unsettled payment for goods by suppliers in time.49

    (2) As at 30 Jun. 2009, the amount due to shareholders who own 5% or more than 5% voting right is as

    followed:

    Name of Shareholders amount in arrear Aging Proportion % Nature

    Tsann Kuen (Taiwan) Enterprise Co.

    Ltd

    7,167,658.92 Within one year 1.37%

    Payment for goods

    that bill undue

    9.23 Advanced from customers

    (1) Aging

    Aging 2009.06.30 2008.12.31

    Within 1 year 13,404,798.08 20,285,350.06

    Over 1 year 10,638,882.99 1,166,879.95

    Total 24,043,681.07 21,452,230.01

    (2) There is no amount due to shareholders who own 5% or more than 5% voting rights until 30 Jun.

    2009.

    9.24 Payroll payables

    Items 2008.12.31 Increment Pay out 2009.06.30

    Salary, bonus and allowance 30,329,618.43 128,369,088.91 133,449,980.99 25,248,726.35

    Employee welfare 0.00 5,206,503.18 3,379,486.16 1,827,017.02

    Social insurance 11,113,996.43 11,465,698.98 16,734,354.51 5,845,340.90

    Including: Medical insurance 580,647.53 3,513,542.45 2,668,460.37 1,425,729.61

    Basic retirement insurance 9,155,979.17 6,162,567.60 11,462,777.56 3,855,769.21

    Unemployment insurance 901,235.88 606,355.26 1,110,464.24 397,126.90

    Injury insurance 340,197.60 812,237.96 1,033,019.43 119,416.13

    Pregnancy insurance 135,936.25 370,995.71 459,632.92 47,299.04

    Housing accumulation fund 7,226,224.15 3,622,763.52 3,107,137.59 7,741,850.08

    Labour union fee and employee education

    fee

    0.00 168,000.00 168,000.00 0.00

    Redemption for termination of labor

    contract

    132,000.00 38,458.00 162,628.00 7,830.00

    Others 3,800.00 1,001,862.98 995,114.95 10,548.03

    Total 48,805,639.01 149,872,375.57 157,996,702.20 40,681,312.38

    9.25 Tax payable

    Types 2009.06.30 2008.12.31

    Business Tax (95,059.76) 1,105,750.68

    Income Tax (4,765,669.04) (4,438,943.55)

    VAT 50,621,535.33 26,021,612.62

    Personal Income Tax 435,330.76 304,432.16

    Education fee 100,804.40 159,778.99

    Withholding Income Tax 1,144.12 0.00

    Others 11,975,921.65 21,125,967.93

    Total 58,274,007.46 44,278,598.83

    9.26 Other account payables

    (1) Aging analysis

    Aging 2009.06.30 2008.12.31

    Within 1 year 235,345,948.71 395,710,661.53

    Over 1 year 2,731,538.86 543,311.60

    Total 238,077,487.57 396,253,973.13

    Other account payables, which the aging is more that one year accounts for 1.15% of the ending balance, which caused

    by deposit of rent payable.50

    (2) The balance of other account payables, which is significant and age is more than one year:

    Company name

    Amount in

    arrear

    Aging Reasons

    Repayment after the

    balance sheet date

    Fujian Zhangzhou Sigma Metals Co., Ltd. 800,000.00 Over 1 year Deposit for rent 0

    Xiamen Hexing Packing Printing Co., Ltd. 348,720.00 Over 1 year Deposit for rent 0

    Zhangzhou Rijin Wire Co., Ltd. 212,000.00 Over 1 year Deposit for rent 0

    Xiamen Jingwei Hardware Industry Co., Ltd 210,000.00 Over 1 year Deposit for rent 0

    Zhangzhou Yisheng Packing Materials Co., Ltd 160,000.00 Over 1 year Deposit for rent 0

    Total 1,730,720.00

    (3) As at 30 Jun. 2009, the amount due to shareholders who own 5% or more than 5% voting right is as

    followed:

    Name of Shareholders Amount in arrear Aging Proportion % Reasons

    Tsann Kuen (Taiwan) Enterprise Co.

    Ltd

    8,329,905.14 Within one year 3.50%

    Not to maturity

    EUPA (Hong Kong) Limited 157,133,700.00 Within one year 66.00% Not to maturity

    Total 165,463,605.14 69.50%

    9.27 Long-term borrowings due within one year

    Items 2009.06.30 2008.12.31

    Long-term borrowings due within one year 68,319,000.00 0.00

    Total 68,319,000.00 0.00

    9.28 Long-term loans

    Types 2009.06.30 2008.12.31

    Guaranteed loan 0.00 68,346,000.00

    Total 0.00 68,346,000.00

    9.29 Deferred Income

    Items 2009.06.30 2008.12.31

    Deferred income 46,603,733.73 43,400,202.15

    Total 46,603,733.73 43,400,202.15

    9.30 Deferred income tax liabilities

    Types 2009.06.30 2008.12.31

    Taxable temporary differences arising from available-for-sale

    financial assets

    31,236.64 14,232.82

    Unrealized exchange gains and losses 0.00 622,195.82

    Total 31,236.64 636,428.6451

    9.31 Share capital

    Chang in current reporting period(+、-)

    Items 2008.12.31

    Allotment

    of shares

    Bonus

    shares

    Transfer

    reserve into

    shares

    Additional

    offering

    Others Subtotal

    2009.06.30

    I. Unlisted shares

    Including: Shares held by the

    State

    0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    Share held by domestic

    corporation

    0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    Share held by foreign corporation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    Total unlisted shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    II. Listed circulation shares

    1. RMB ordinary shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    2. Domestically listed foreign

    shares

    1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00

    3. Overseas listed foreign shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

    Total listed shares 1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00

    III. Total Share 1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00

    9.32 Capital Reserves

    Items 2008.12.31 Increment Decrement 2009.06.30

    Share premium 62,019,360.00 0.00 0.00 62,019,360.00

    Other capital reserves 63,054,383.50 60,108.18 0.00 63,114,491.68

    Total 125,073,743.50 60,108.18 0.00 125,133,851.68

    The increment in capital reserve is due to changes in fair value of available-for-sale financial assets.

    9.33 Retained Earnings

    Items 2009.06.30 2008.12.31

    Retained profit as of 31 Dec. 2008 (893,107,158.60) (935,643,358.89)

    Add: Transfer-in net profit in this period 20,163,216.18 42,536,200.29

    Other transfer-in 0.00 0.00

    Less:Withdrawal of statuary surplus reserve 0.00 0.00

    Withdrawal of employees’ reward and welfare fund 0.00 0.00

    Withdrawal of reserve fund 0.00 0.00

    Withdrawal of Enterprise development fund 0.00 0.00

    Reimbursement of investment 0.00 0.00

    Less: dividends payable for preference shares 0.00 0.00

    Withdrawal of discretionary surplus reserves 0.00 0.00

    Dividends payable for ordinary shares 0.00 0.00

    Dividends for ordinary shares transfer into capital 0.00 0.00

    Balance as at 30 Jun. 2009 (872,943,942.42) (893,107,158.60)

    9.34 Operating revenues and operating costs

    (1) Items

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Items

    Operating revenue Operating cost Operating profit Operating revenue Operating cost Operating profit

    Main

    operation

    1,147,374,671.39 1,019,651,336.00 127,723,335.39 2,057,915,920.07 1,917,936,482.56 139,979,437.51

    Others 37,344,616.71 8,563,526.42 28,781,090.29 35,047,171.69 8,065,911.56 26,981,260.13

    Total 1,184,719,288.10 1,028,214,862.42 156,504,425.68 2,092,963,091.76 1,926,002,394.12 166,960,697.6452

    (2) Segment report of main operation by category of products:

    Accumulative amount from Jan.-Category of Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    products Operating revenue Operating cost Operating profit Operating revenue Operating cost Operating profit

    Catering

    Cooking

    536,929,822.94 458,392,494.49 78,537,328.45 929,524,208.62 835,032,752.06 94,491,456.56

    Home best help 435,742,365.43 406,164,716.42 29,577,649.01 815,636,416.44 785,050,557.68 30,585,858.76

    Tea/Coffee 140,681,760.01 124,504,414.45 16,177,345.56 289,102,493.45 274,959,805.79 14,142,687.66

    Other 34,020,723.01 30,589,710.64 3,431,012.37 23,652,801.56 22,893,367.03 759,434.53

    Total 1,147,374,671.39 1,019,651,336.00 127,723,335.39 2,057,915,920.07 1,917,936,482.56 139,979,437.51

    (3) Segment report of main operation by areas:

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Items

    Operating revenue Operating cost Operating profit Operating revenue Operating cost Operating profit

    America 480,136,612.90 415,316,892.87 64,819,720.03 876,640,761.95 802,941,933.29 73,698,828.66

    Europe 232,649,511.17 209,432,091.91 23,217,419.26 445,505,283.92 427,287,197.27 18,218,086.65

    Asia 386,272,469.26 357,287,898.12 28,984,571.14 561,454,748.61 532,482,308.61 28,972,440.00

    other 48,316,078.06 37,614,453.10 10,701,624.96 174,315,125.59 155,225,043.39 19,090,082.20

    Total 1,147,374,671.39 1,019,651,336.00 127,723,335.39 2,057,915,920.07 1,917,936,482.56 139,979,437.51

    (4) Sales revenues form top five clients

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Name of clients

    Sales

    Proportion to total sale

    revenues

    Sales

    Proportion to total sale

    revenues

    Total sales revenues from the

    top five clients

    652,232,968.01 56.85% 825,678,618.32 40.12%

    (5) Segment report of other business income and cost by category of business:

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Items

    Other operation income Other operation cost

    Other operation

    income

    Other operation cost

    Leftover material

    sales

    22,224,747.37 0.00 22,840,242.45 0.00

    Rental income 11,758,063.65 5,615,221.94 8,974,099.62 5,084,776.19

    Education income 2,113,482.98 2,100,983.38 1,534,308.86 1,080,885.08

    Consultant fee 889,603.50 845,948.10 1,379,205.79 1,313,529.32

    Other 358,719.21 1,373.00 319,314.97 586,720.97

    Total 37,344,616.71 8,563,526.42 35,047,171.69 8,065,911.56

    9.35 Business tax and surtax

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Business tax 786,330.45 500,142.26

    Educational surtax 1,058,838.38 1,262,543.12

    Urban construction tax 875.50 0.00

    Total 1,846,044.33 1,762,685.38

    9.36 Financial expense

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Interest expense 1,855,773.58 14,084,631.42

    Less: Interest Income (2,810,689.25) (3,282,824.62)

    Exchange gain (or loss) (1,055,862.03) 9,172,925.30

    Bank charges 2,936,736.61 6,318,133.34

    Total 925,958.91 26,292,865.44

    9.37 Impairment loss of assets

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Loss on bad debts (5,187,944.00) 1,236,803.72

    Loss on falling price of inventories (36,096.07) 0.00

    Loss on impairment of fixed assets 2,869,270.48 941,096.25

    Total (2,354,769.59) 2,177,899.9753

    9.38 Gain from changes in fair values

    Source of Gain from changes in fair

    values

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Transaction financial assets 0.00 4,985,120.00

    Including: Derivative financial assets 0.00 4,985,120.00

    Transaction financial liabilities (547,025.01) 0.00

    Including: Derivative financial liabilities (547,025.01) 0.00

    Total (547,025.01) 4,985,120.00

    9.39 Investment income

    Source of investment income

    Accumulative amount from

    Jan.-Jun. 2009

    Accumulative amount from

    Jan.-Jun. 2008

    Income from long-term equity investment measured by

    cost method

    7,500.00 0.00

    Investment income obtained during held for tradable

    financial assets

    0.00 37,721,620.00

    Investment income obtained during held for tradable

    financial liabilities

    (683,060.97) 0.00

    Total (675,560.97) 37,721,620.00

    9.40 Non-operating income

    (1) Details of non-operating income:

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Gains from disposal of non-current assets 7,209,772.81 4,563,139.95

    Including: Gains from disposal of fixed

    assets

    7,209,772.81 4,563,139.95

    Income from penalties 0.00 2,556.20

    Government grants 2,700,117.03 317,000.00

    Other 1,300,285.67 4,675,940.73

    Total 11,210,175.51 9,558,636.88

    (2) Government grants

    Types

    Accumulative

    amount from

    Jan.-Jun. 2009

    Accumulative

    amount from

    Jan.-Jun. 2008

    Approval organ Approval Documents

    Encouragement funds for

    technique innovation

    program

    500,000.00 20,000.00

    Finance Bureau of Longhai

    City

    Zhangjingmaofazhan [2006] No. 263

    Export insurance subsidy 2,000,717.03 0.00

    Finance Bureau of Fujian

    Province

    《China Export & Credit Insurance

    Corporation Fujian Branch》

    Technology 0.00 48,000.00

    Municipal Accounting

    Center of Zhangzhou

    Contract from proposed technology projects of

    Zhangzhou

    Subsidy for patent 0.00 179,000.00

    Intellectual property Bureau

    of Xiamen

    Xiacaijiao (2006) No. 22

    Other 199,400.00 70,000.00

    Intellectual property Bureau

    of Xiamen

    Xiazhi [2009] No. 3 /《Intellectual

    property Bureau of Xiamen》

    Total 2,700,117.03 317,000.00

    9.41 Non-operating expenses

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Loss on disposal of non-current assets 1,020,524.77 0.00

    Including: Loss on disposal of fixed assets 1,020,524.77 0.00

    Losses on scraped fixed assets 176,091.87 4,183,809.37

    Fines 5.14 37,836.77

    Donation 300,000.00 2,030,000.00

    Other 0.00 540,967.01

    Total 1,496,621.78 6,792,613.1554

    9.42 Income tax expense

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Income Tax for current period (208,273.98) 380,885.55

    Deferred Income Tax Expense 1,818,082.92 6,792,047.54

    Total 1,609,808.94 7,172,933.09

    9.43 Other consolidated income

    Items Capital reserve Influence on income tax

    Available-for-sale financial assets 60,108.18 31,236.64

    Total 60,108.18 31,236.64

    9.44 Cash received relate to other operating activities

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Deposit collected 747,842.40 1,504,140.40

    Rental 13,499,880.34 10,466,546.14

    Interest Income 2,810,689.25 3,282,824.62

    Income from compensation and penalties 0.00 2,556.20

    Government grants 2,700,117.03 317,000.00

    Other 17,266,302.96 40,663,105.09

    Total 37,024,831.98 56,236,172.45

    9.45 Cash paid relate to other operating activities

    Items

    Accumulative amount from

    Jan.-Jun. 2009

    Accumulative amount from Jan.-Jun.

    2008

    Compensation as to technological know-how 7,601,361.22 10,262,073.49

    Bank commission charge 2,933,883.41 6,373,364.56

    Expense for purchase and sales commission 9,152,208.41 988,829.25

    Cash paid in Sales expense and administration expense 128,923,266.26 262,496,740.50

    Penalties and donation 300,005.14 2,067,836.77

    Total 148,910,724.44 282,188,844.57

    9.46 Supplemental information for cash flow statement

    Items

    Accumulative amount from

    Jan.-Jun. 2009

    Accumulative amount

    from Jan.-Jun. 2008

    1 Adjusting net profit to cash flow from operating activities:

    Net profit 27,056,315.48 34,395,235.69

    Add: Impairment loss provision of assets (2,354,769.59) 2,177,899.97

    Depreciation of fixed assets, oil and gas assets and production biological

    assets 97,309,233.80 121,564,064.26

    Amortization of intangible assets 1,627,202.29 1,420,102.16

    Amortization of Long-term deferred expenses 39,662.94 744,163.50

    Loss on disposal of fixed assets, intangible assets and other long-term

    deferred assets(Loss/Gain +/-) (6,189,248.04) (379,330.58)

    Loss on retirement of fixed assets(Loss/Gain +/-) 176,091.87

    Loss on change in fair value(Loss/Gain +/-) 547,025.01 (4,985,120.00)

    Financial cost(Loss/Gain +/-) 799,911.55 23,257,556.72

    Loss on investment(Loss/Gain +/-) 675,560.97 (37,721,620.00)

    Decrease of deferred income tax assets(Decrease/Increase +/-) 2,423,274.92 11,302,742.55

    Increase of deferred income tax liabilities (Increase/Decrease +/-) (605,192.00) (4,520,416.11)

    Decrease of inventories(Decrease/Increase +/-) 91,723,836.79 151,418,106.96

    Decrease of operating receivables (Decrease/Increase +/-) (79,454,979.91) 39,640,416.57

    Increase of operating payables (Increase/Decrease +/-) (169,821,613.46) (498,233,236.49)

    Net cash flows arising from operating activities (36,047,687.38) (159,919,434.80)

    Significant investing and financing activities that without cash flows

    Debts transfer to capital - -

    Net increase (decrease) of cash and cash equivalents:

    Ending balance of cash equivalents 254,320,197.38 240,407,757.96

    Less: Beginning balance of cash equivalents 399,276,546.68 534,372,308.53

    Net increase of cash and cash equivalents (144,956,349.30) (293,964,550.57)55

    9.47 Cash and cash equivalent

    Items

    Accumulative amount from

    Jan.-Jun. 2009

    Accumulative amount from

    Jan.-Jun. 2008

    1. Cash

    Including: Cash on hand 517,083.03 657,317.98

    Unrestricted bank deposit 209,572,299.85 123,996,344.53

    Unrestricted other monetary funds 44,230,814.50 115,754,095.45

    2. Ending balance of cash and cash equivalents 254,320,197.38 240,407,757.96

    Including: Restricted cash or cash equivalent of the parent company

    or subsidiaries in the Group

    47,451,386.43 65,843,777.28

    X. Notes to financial statements for parent company

    10.1 Account receivable

    (1) Breakdown of account receivable

    2009.06.30 2008.12.31

    Items Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Individual transaction with

    significant amount

    0.00 0.00% 0.00 0.00 36,375.82 100.00% 0.00 36,375.82

    Individual transaction with not so

    significant amount but significant

    recoverable risk

    0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Other transaction with no

    significant amount

    0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Total 0.00 0.00% 0.00 0.00 36,375.82 100.00% 0.00 36,375.82

    (2) Aging analysis

    2009.06.30 2008.12.31

    Aging Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Within 1 year 0.00 0.00% 0.00 0.00 36,375.82 100.00% 0.00 36,375.82

    1-2 years 0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    2-3 years 0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Above 3 years 0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Total 0.00 0.00% 0.00 0.00 36,375.82 100.00% 0.00 36,375.82

    (3) Up to 30 Jun. 2009, there is no amount due from shareholder who own 5% or over 5% of voting

    shares.

    10.2 Other receivables

    (1) Breakdown of other receivables

    2009.06.30 2008.12.31

    Items Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Individual transaction

    with significant amount

    15,269,358.97 88.98% 0.00 15,269,358.97 3,608,990.00 82.12% 2,272,697.00 1,336,293.00

    Individual transaction

    with not so significant

    amount but significant

    recoverable risk

    1,212,777.26 7.07% 1,212,777.26 0.00 0.00 0.00% 0.00 0.00

    Other transaction with

    no significant amount

    677,430.25 3.95% 30,200 647,230.25 10,983,335.66 17.88% 214,648.14 10,768,687.52

    Total 17,159,566.48 100.00% 1,242,977.26 15,916,589.22 14,592,325.66 100.00% 2,487,345.14 12,104,980.5256

    (2) Aging analysis

    2009.06.30 2008.12.31

    Aging Balance Proportion% Bad debit

    provision

    Net value Balance Proportion% Bad debit

    provision

    Net value

    Within 1 year 15,946,789.22 92.93% 30,200.00 15,916,589.22 12,685,555.66 86.93% 580,575.14 12,104,980.52

    1-2 years 1,212,777.26 7.07% 1,212,777.26 0.00 1,906,770.00 13.07% 1,906,770.00 0.00

    2-3 years 0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Over 3 years 0.00 0.00% 0.00 0.00 0.00 0.00% 0.00 0.00

    Total 17,159,566.48 100.00% 1,242,977.26 15,916,589.22 14,592,325.66 100.00% 2,487,345.14 12,104,980.52

    (3) Up to 30 Jun. 2009, there is no amount due from shareholder who own 5% or over 5% of voting

    shares.

    (4) The total amount of top five other receivable is 16,886,803.33, represent 98.41% of ending balance

    Name Amount Nature Aging Proportion%

    Tsann Kuen (Zhangzhou) Enterpeise Co. Ltd 13,360,368.97 Payment for goods Within 30 days 77.86%

    People’s Court of HuLi District, Xiamen City 1,908,990.00

    To pay margins of preservation prior

    to lawsuit

    Within 1 year

    11.12%

    Ni Yi Lian 1,100,000.00

    Payment for selling 9/F of

    Information Building

    Over 1 year 6.41%

    Xia Men Shou Chuang Jun He Patent Firm Ltd 317,444.36 To pay patent expense Within 1 year 1.85%

    Hong Shao Shu 200,000.00 Temporary business agency fees Within 1 year 1.17%

    Total 16,886,803.33 98.41%

    10.3 Long-term Equity Investment

    (1) Long-term equity investment and impairment loss provision:

    2009.06.30 2008.12.31

    Item

    Investment cost

    Impairment

    loss provision Carrying value

    Investment

    cost

    Impairment

    loss provision Carrying value

    Investing in

    subsidiaries

    1,135,712,021.76 130,646,542.91 1,005,065,478.85 1,130,712,021.76 130,646,542.91 1,000,065,478.85

    Other equity

    investment

    40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00

    Total 1,135,752,021.76 130,646,542.91 1,005,105,478.85 1,130,752,021.76 130,646,542.91 1,000,105,478.85

    (2) Long-term equity investment measured by cost method:

    Investee

    Initial

    Investment cost

    2008.12.31

    Increment Decrement

    2009.06.30

    Tsann Kuen (ShangHai) Enterprise

    Ltd(TKS)

    194,545,872.18 194,545,872.18 0.00 0.00 194,545,872.18

    Tsann Kuen (ZhangZhou) Enterprise

    Ltd(TKL) (Note1)

    921,914,701.56 921,914,701.56 0.00 0.00 921,914,701.56

    Tsann Kuen (Zhangzhou) South Port

    Electronics Enterprise Co., Ltd. (TKN)

    3,750,000.00 3,750,000.00 0.00 0.00 3,750,000.00

    Eupa (Hong Kong) Ltd(EUPA) 10,503,848.02 10,501,448.02 0.00 0.00 10,501,448.02

    Xiamen Canxing International Travel

    Agency Co., Ltd. (Xiamen Canxing

    Travel)

    5,000,000.00 0.00 5,000,000.00 0.00 5,000,000.00

    Xiamen Foreign Investment

    Enterprises Association

    40,000.00 40,000.00 0.00 0.00 40,000.00

    Total 1,135,754,421.76 1,130,752,021.76 5,000,000.00 0.00 1,135,752,021.76

    (3) Long-term equity investment measured by cost method

    Investee

    Carrying balance as of

    31 Dec. 2008

    Withdrawal Decrease

    Carrying balance as of

    30 Jun. 2009

    Tsann Kuen (ShangHai)

    Enterprise Ltd(TKS)

    130,646,542.91 0 0.00 130,646,542.91

    Total 130,646,542.91 0 0.00 130,646,542.9157

    10.4 Operating revenues and operating costs

    (1) Items

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Items

    Operating revenue Operating cost Operating profit Operating revenue Operating cost Operating profit

    Main

    operation

    0.00 0.00 0.00 2,221,434.03 3,423,454.91 (1,202,020.88)

    Others 2,706,627.73 2,645,120.32 61,507.41 8,053,175.67 5,867,782.75 2,185,392.92

    Total 2,706,627.73 2,645,120.32 61,507.41 10,274,609.70 9,291,237.66 983,372.04

    (2) Segment report of other operation income and cost by category of businesses:

    Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Items

    Other operation income Other operation cost Other operation income Other operation cost

    Leftover material

    sales

    0.00 0.00 53,098.76 0.00

    Rental income 1,818,382.22 1,799,172.22 6,636,693.55 5,867,782.75

    Consultant fee 888,245.51 845,948.10 1,363,383.36 0.00

    Total 2,706,627.73 2,645,120.32 8,053,175.67 5,867,782.75

    10.5 Business tax and surtax

    Items Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Business tax 142,675.31 342,287.69

    Education fee 1,347.82 46,987.22

    Total 144,023.13 389,274.91

    10.6 Investment income

    Source of investment income Accumulative amount from Jan.-Jun. 2009 Accumulative amount from Jan.-Jun. 2008

    Income from long-term equity investment

    measured by cost method

    7,500.00 0.00

    Total 7,500.00 0.00

    XI. Related party and related party transactions

    11.1 Confirmation related parties

    The Company has control, jointly control or significant influence on the other party, or is under same party’s control,

    jointly control or significant influence with other company, is deemed as related parties.

    11.2 The relationship of related parties

    (1) Related party with controllable relationship

    Name

    Registration

    address

    Main operation Registration number

    Relation of with the

    company

    Nature

    Legal representative

    Tsann Kuen (Taiwan)

    Enterprise Co., Ltd

    Taiwan Manufacturing

    北市商一字第

    00408469-10 号

    Final controlling party Listed company Zhuang Xing

    Information of other subsidiaries are shown in note VI

    (2) The registered capital and changes the related parties with controllable relationship (NT$)

    Name 2008.12.31 Incremental Decrement 2009.06.30

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 3,209,978,410 —— —— 3,209,978,410

    (3) Particulars about equities held by related party with controllable relationship and related change

    Name 2008.12.31 proportion

    %

    Incremental Decrement 2009.6.30 proportion%

    Tsann Kuen (Taiwan)

    Enterprise Co., Ltd

    861,792,526 50.26 41,914,058 0.00 903,706,584 49.79

    Tsann Kuen Enterpise Co., Ltd holds the Company’s shares by holding the Company’s subsidiaries of EUPA

    (Hongkong) Industry Co., Ltd, Fordchee (Hongkong) Co., Ltd and Hongkong Fillman Investment Co., Ltd.58

    (4) The related party without controllable relationship

    Relate Party Organization code Relationship

    EUPA (Hongkong) Industry Co., Ltd 12959659-000-07-6 Shareholder

    Tsann Kuen(USA) Co., Ltd Under control by the same holding company

    Tsann Kuen(Japan) Co., Ltd 0105-01-021064 Under control by the same holding company

    Xiamen Shengming Electronic Co., Ltd 61201968-5 Under control directly by key management and closed family members

    11.3 Related party transactions between the Company and the above related party

    (1) Sales of accessories and finished products

    Related parties

    Accumulative amount in the current

    period

    Accumulative amount at the same period

    of last year

    Tsann Kuen(Japan) Co., Ltd 116,360,731.09 195,914,939.66

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 34,435,924.06 51,153,040.60

    Xiamen Shengming Electronic Co., Ltd 20,423.23 12,729.68

    Total 150,817,079.38 247,080,709.94

    The price of transaction between the Company and related parties is based on the market price in

    contract signed by both parties.

    (2) Purchase of raw materials, spare parts and machine accessories

    Related parties

    Accumulative amount in the current

    period

    Accumulative amount at the same period

    of last year

    Tsann Kuen(Japan) Co., Ltd 604,590.03 44,469,876.30

    Xiamen Shengming Electronic Co., Ltd 22,470,088.03 36,022,584.92

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 18,372,929.16 54,671,949.70

    Total 41,447,607.22 135,164,410.92

    The Company and its subsidiaries purchase raw materials, spare parts and machine accessories from

    related parties at cost price except Xiamen Shengming Electronic Co., Ltd. The Company purchases raw

    materials, spare parts and machine accessories Xiamen Shengming Electronic Co., Ltd at market price in

    the contract signed by both parties.

    (3) Purchase of modules and machineries

    Related parties

    Accumulative amount in the current

    period

    Accumulative amount at the same period

    of last year

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 1,277,645.01 6,697,202.06

    Total 1,277,645.01 6,697,202.06

    The Company purchases asset from related parties at its carrying value.

    (4) Internal borrowings

    Related parties

    Accumulative amount in the current

    period

    Accumulative amount at the same period

    of last year

    EUPA (Hongkong) Industry Co., Ltd 157,133,700.00 234,433,000.00

    Total 157,133,700.00 234,433,000.0059

    (5) Other transactions

    Related party Content

    Accumulative

    amount in the current

    period

    Accumulative amount at

    the same period of last

    year

    Payment

    Tsann Kuen (Taiwan) Enterprise

    Co., Ltd

    Technical knowledge support fee (note

    1)

    7,601,361.22 10,262,073.49

    Tsann Kuen(USA) Co., Ltd Pay for after sales service in America

    area (note 2)

    646,779.34 2,080,281.68

    Tsann Kuen (Taiwan) Enterprise

    Co., Ltd Pay for procurement agencies (note 3)

    1,000,104.12 988,829.25

    Tsann Kuen(Japan) Co., Ltd selling commission (note 4) 5,233,549.98 7,511,179.24

    Tsann Kuen (Taiwan) Enterprise

    Co., Ltd consulting fees (note 5)

    0.00 2,059,402.02

    Total 14,481,794.66 22,901,765.68

    Income

    Xiamen Shengming Electronic Co.,

    Ltd consulting fees (note6)

    889,603.50 1,379,205.79

    Total 889,603.50 1,379,205.79

    Note 1: The Company and its subsidiaries measure technical knowledge support fees base on

    proportionate monthly excess accumulated sales of net amount of licensed products.

    Note 2: Tsann Kuen (USA) Co., Ltd provides after sales services in America area for the Company and

    its subsidiaries’ sales in American area, the company and its subsidiaries pay for those after sales service

    base on 102% of the actual expense incurred.

    Note 3: The Company and its subsidiaries entrust Tsann Kuen Enterprise Co., Ltd to purchase raw

    material, modules and machineries. The procurement agency fees (including service charges) are

    calculated base on 110% of the actual procurement expense incurred by the agencies.

    Note 4: It refers to relative product quality expenses for those sales from TKL to TKJ.

    Note 5: Tsann Kuen Enterprise Co., Ltd provided professional consultant service for the company and

    its subsidiaries related to the worldwide purchase activities. The company and its subsidiaries pay for the

    consultant fees base on 105% of the actual related expenses incurred.

    Note 6: The Company assists Xiamen Shengming Electronic Co., Ltd for its management, the consulting

    fees from Xiamen Shengming Electronic Co., Ltd are calculated base on 105% of actual expenses

    incurred from the assistance of management.60

    11.4 The balance of payables and receivables among related parties

    2009.06.30 2008.12.31

    Related party

    Amount Proportion% Amount Proportion%

    Accounts receivable

    Tsann Kuen (Japan) Co., Ltd 84,720,358.98 23.48% 61,813,298.98 13.67%

    Xiamen Shengming Electronic Co., Ltd 15,211.82 0.00% 34,784.20 0.01%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 18,618,197.43 5.16% 27,157,898.62 6.01%

    Total 103,353,768.23 28.64% 89,005,981.80 19.69%

    Accountants Payable

    Xiamen Shengming Electronic Co., Ltd 7,380,370.10 1.41% 411,418.86 0.05%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 7,167,658.92 1.37% 13,633,806.27 1.81%

    Tsann Kuen (Japan) Co., Ltd 34,909.65 0.01% 1,242,838.44 0.16%

    Total 14,582,938.67 2.79% 15,288,063.57 2.02%

    Other accountant payable

    Tsann Kuen (USA) Co., Ltd 27,267.23 0.01% 423,167.88 0.11%

    Tsann Kuen (Japan) Co., Ltd 3,702,616.89 1.56% 1,980,480.74 0.50%

    Xiamen Shengming Electronic Co., Ltd 162,205.79 0.07% 49,515.15 0.01%

    EUPA (Hongkong) Industry Co., Ltd 157,133,700.00 66.00% 157,195,800.00 39.67%

    Fordchee (Hongkong) Co., Ltd 0.00 0.00% 82,015,200.00 20.70%

    Hongkong Fillman Investment Co., Ltd 0.00 0.00% 34,173,000.00 8.62%

    Tsann Kuen (Taiwan) Enterprise Co., Ltd 8,329,905.14 3.50% 17,482,751.86 4.41%

    Total 169,355,695.05 71.13% 293,319,915.63 74.02%

    Advance to supplier

    Xiamen Shengming Electronic Co., Ltd 0.00 0.00% 1,468,866.52 16.48%

    Total 0.00 0.00% 1,468,866.52 16.48%

    Advance from customers

    Xiamen Shengming Electronic Co., Ltd 0.00 0.00% 193.02 0.01%

    Total 0.00 0.00% 193.02 0.01%

    XII. Contingencies

    As to the customer complaints on the holdings subsidiary, Tsannkuen (Zhangzhou) Enterprise Co.,Ltd

    ( here-in-after referred to as 'TKL') about the coffee grinders shipped to Starbucks (Chinese name is

    called “星巴克”) during 2002-2008.After some negotiation, Starbucks and U.S. consumer Product

    Safety Commission (hereinafter referred to as “CPSC”) agreed to callback by goods replacement. The

    traders has placed an order with Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. (a subsidiary under

    controlled by the Company, hereinafter referred to as “TKL”) for 40,000-set coffee grinders in the light

    of the quantity declared by the consumers and the potential recall in the future.As at the date of the

    announcement, TKL has been delivered 21,804-set finished products. The influence on profit and loss is

    about RMB 715,063.61

    XIII. Commitment

    13.1 Capital Commitment: Naught

    13.2 Leased commitment

    Up to balance sheet date, the irrevocable operating lease contracts signed with third parties as followed:

    Items 30 Jun. 2009 31 Dec. 2008

    RMB’000 RMB’000

    Minimum lease payment of irrevocable operating

    leases

    House lease

    1st year after balance sheet date 40,000 40,000

    2nd year after balance sheet date 40,000 40,000

    3rd year after balance sheet date 40,000 40,000

    Years after 1,600,000 1,640,000

    Total 1,720,000 1,760,000

    XIV. Return on equity and earnings per share

    Return on equity (%) Earnings per share (RMB/share)

    Profit in the report period

    Fully diluted

    Weighted

    average

    Basic earnings

    per share

    Diluted earnings

    per share

    Net profit attributable to

    shareholders of listed company

    20,163,216.18 5.54% 5.70% 0.0181 0.0181

    Net profit after deducting

    non-recurring gains and losses

    17,747,955.08 4.88% 5.02% 0.0160 0.016062

    Tsann Kuen (China) Enterprise Co., Ltd

    Balance Sheet (Un-audited)

    30 Jun. 2009

    Monetary unit: ( RMB) Yuan

    30 Jun. 2009 31 Dec. 2008

    Assets Note

    Consolidation Parent Company Consolidation Parent Company

    Current Assets:

    Monetary Funds IX.1 301,771,583.81 400,802.17 416,506,274.82 4,939,594.77

    Tradable financial assets - - - -

    Notes receivables IX.2 4,805,162.64 - 5,823,544.00 -

    Account receivables IX.3 307,577,172.88 - 397,162,581.71 36,375.82

    Advances to suppliers IX.4 1,760,148.92 96,000.00 8,910,798.94 -

    Interest receivables - - - -

    Dividends receivable - - - -

    Other receivables IX.5 16,261,480.87 15,916,589.22 28,986,324.35 12,104,980.52

    Inventories IX.6 360,520,923.63 - 451,226,252.40 -

    Non-current assets due within

    one year

    - - - -

    Other current assets - - - -

    Total current assets 992,696,472.75 16,413,391.39 1,308,615,776.22 17,080,951.11

    Non-current assets:

    Available-for-sale financial assets IX.7 186,883.20 186,883.20 109,771.20 109,771.20

    Held-to-maturity investments - - - -

    Long-term account receivables IX.8 104,700,136.71 - 68,487,888.93 -

    Long-term equity investments IX.9 40,000.00 1,005,105,478.85 40,000.00 1,000,105,478.85

    Investment properties IX.10 36,793,028.79 42,276,958.73 37,454,887.11 43,714,625.57

    Fixed assets IX.11 628,125,935.89 24,538,753.31 764,092,618.51 26,967,210.64

    Construction in progress IX.12 2,408,838.28 1,361,577.36 3,424,340.41 -

    Construction materials - - - -

    Liquidation of fixed assets - - - -

    Production biology assets - - - -

    Oil and gas assets - - - -

    Intangible assets IX.13 29,407,832.43 16,192,842.59 30,593,459.40 16,643,800.55

    Development expenses - - - -

    Goodwill IX.14 71,870.08 - - -

    Long-term deferred assets IX.15 833,109.94 141,108.13 872,772.88 155,458.15

    Deferred income tax assets IX.16 20,255,626.25 - 22,678,901.17 -

    Other non-current assets - - - -

    Total non-current assets 822,823,261.57 1,089,803,602.17 927,754,639.61 1,087,696,344.96

    Total assets 1,815,519,734.32 1,106,216,993.56 2,236,370,415.83 1,104,777,296.07

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)63

    Tsann Kuen (China) Enterprise Co., Ltd

    Balance Sheet (Un-audited)-Con.

    30 Jun. 2009

    Monetary unit: ( RMB) Yuan

    30 Jun. 2009 31 Dec. 2008

    Items Note

    Consolidation Parent Company Consolidation Parent Company

    Current liabilities:

    Short-term loans IX.19 22,478,317.38 - - -

    Tradable financial liabilities IX.20 547,025.01 - - -

    Notes payables IX.21 85,754,485.24 - 177,596,760.89

    Account payables IX.22 522,343,190.54 1,129,044.33 754,405,955.98 142,211.99

    Advances from customers IX.23 24,043,681.07 - 21,452,230.01 -

    Payroll payables IX.24 40,681,312.38 113,766.55 48,805,639.01 111,791.55

    Tax payable IX.25 58,274,007.46 68,248,094.89 44,278,598.83 69,208,975.75

    Interest payables - - - -

    Dividend payables - - - -

    Other account payables IX.26 238,077,487.57 631,745,787.91 396,253,973.13 627,777,161.60

    Long-term borrowings due within one year IX.27 68,319,000.00 - - -

    Other current liabilities - - - -

    Total current liabilities 1,060,518,506.65 701,236,693.68 1,442,793,157.85 697,240,140.89

    Non-current liabilities:

    Long-term borrowings IX.28 - - 68,346,000.00 -

    Bond payable - - - -

    Long-term account payable - - - -

    Special account payable - - - -

    Deferred incomes IX.29 46,603,733.73 - 43,400,202.15 -

    Accrued liabilities 0.00 - -

    Deferred income tax liabilities IX.30 31,236.64 31,236.64 636,428.64 14,232.82

    Other non-current liabilities - - - -

    Total non-current liabilities 46,634,970.37 31,236.64 112,382,630.79 14,232.82

    Total liabilities 1,107,153,477.02 701,267,930.32 1,555,175,788.64 697,254,373.71

    Shareholders' equity:

    Share capital IX.31 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00

    Capital reserve IX.32 125,133,851.68 123,610,127.96 125,073,743.50 123,550,019.78

    Less: treasury stock

    Surplus reserve - - - -

    Retained earnings IX.33 (872,943,942.42) (831,011,141.72) (893,107,158.60) (828,377,174.42)

    Exchange difference of foreign currency

    financial statements translation

    (837,144.85) - (539,902.93) -

    Equity attributable to the holders of parent

    company

    363,702,841.41 404,949,063.24 343,776,758.97 407,522,922.36

    Minority interests 344,663,415.89 - 337,417,868.22 -

    Total shareholders’ equity 708,366,257.30 404,949,063.24 681,194,627.19 407,522,922.36

    Total liabilities and shareholders’ equity 1,815,519,734.32 1,106,216,993.56 2,236,370,415.83 1,104,777,296.07

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)64

    Tsann Kuen (China) Enterprise Co., Ltd

    Income Statement – (Un-audited)

    January – June 2009

    Monetary unit: ( RMB) Yuan

    January–June 2009 January–June 2008

    Items Note

    Consolidation Parent Company Consolidation Parent Company

    1. Total operating income IX.34 1,184,719,288.10 2,706,627.73 2,092,963,091.76 10,274,609.70

    Less: Operating cost IX.34 1,028,214,862.42 2,645,120.32 1,926,002,394.12 9,291,237.66

    Business taxes and surtax IX.35 1,846,044.33 144,023.13 1,762,685.38 389,274.91

    Selling expenses 39,791,416.35 - 52,124,346.98 -

    Administrative expenses 96,120,619.01 3,914,353.55 88,507,494.82 4,739,690.00

    Financial costs IX.36 925,958.91 506,023.23 26,292,865.44 (6,452,430.99)

    Impairment loss of assets IX.37 (2,354,769.59) (1,244,367.88) 2,177,899.97 926,555.05

    Add: gains from the fair value changes

    (The loss is listed beginning with “-“)

    IX.38 (547,025.01) - 4,985,120.00 -

    Investment income (The loss is listed

    beginning with “-“)

    IX.39 (675,560.97) 7,500.00 37,721,620.00 -

    II. Operating profit 18,952,570.69 (3,251,024.62) 38,802,145.05 1,380,283.07

    Add: non-operating income IX.40 11,210,175.51 614,342.39 9,558,636.88 2,822,833.29

    Less: non-operating expense IX.41 1,496,621.78 (2,714.93) 6,792,613.15 258,565.43

    Including: loss from disposal of non-current

    assets 1,020,524.77 (2,714.93)

    III. Total profits (The loss is listed

    beginning with “-“) 28,666,124.42 (2,633,967.30) 41,568,168.78 3,944,550.93

    Less: income tax expense IX.42 1,609,808.94 - 7,172,933.09 -

    IV. Net profits (the net loss is listed

    beginning with “-”) 27,056,315.48 (2,633,967.30) 34,395,235.69 3,944,550.93

    Net profits attributable to equity

    holders of the parent company

    20,163,216.18 (2,633,967.30) 27,749,022.72 3,944,550.93

    Minority interests 6,893,099.30 - 6,646,212.97 -

    V. Earnings per share

    1. Basic earnings per share 0.0181 0.0249

    2. Diluted earnings per share 0.0181 0.0249

    VI. Other consolidated income IX.43 60,108.18 (82,325.38)

    VII. Total consolidated income 27,116,423.66 34,312,910.31

    Total consolidated income attributable

    to owners of parent company

    20,223,324.36 27,666,697.34

    Total consolidated income attributable

    to minority interest

    6,893,099.30 6,646,212.97

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)65

    Tsann Kuen (China) Enterprise Co., Ltd

    Cash Flow Statement (Un-audited)

    January - June 2009

    Monetary unit: ( RMB) Yuan

    January–June 2009 January–June 2008

    Items Note

    Consolidation Parent Company Consolidation Parent Company

    I. Cash flows from operating activities:

    Cash received from sales of goods or rendering of

    services 1,274,906,800.81 - 1,843,216,916.92 6,108,467.06

    Tax refund 67,793,346.42 - 75,561,779.56 -

    Cash received related to other operating activities IX.44 37,024,831.98 19,833,717.68 56,236,172.45 87,886,439.26

    Subtotal of cash inflow from operating activities 1,379,724,979.21 19,833,717.68 1,975,014,868.93 93,994,906.32

    Cash paid for sales of goods and received services 1,097,811,391.75 118,008.42 1,604,687,103.17 386,033.07

    Cash paid to and on behalf of employees 157,865,803.60 15,632,959.79 229,813,522.35 16,482,504.47

    Tax payments 11,184,746.80 1,464,239.15 18,244,833.64 3,285,173.66

    Cash paid to other operating activities IX.45 148,910,724.44 4,558,189.64 282,188,844.57 80,181,391.21

    Subtotal of Cash outflow from operating

    activities 1,415,772,666.59 21,773,397.00 2,134,934,303.73 100,335,102.41

    Net cash flow arising from operating activities (36,047,687.38) (1,939,679.32) (159,919,434.80) (6,340,196.09)

    II. Cash flow from investment activities:

    Cash received from investments 421,500.00 - - -

    Cash dividends received from investment 7,500.00 7,500.00 - -

    Net cash received from disposal of fixed assets,

    intangible assets and other long-term assets 11,765,565.84 - 8,374,700.50 7,822,888.77

    Net cash received from disposal of subsidiaries an

    other business units - - - -

    Cash received related to other investing activities - - - -

    Subtotal of cash inflow from investing activities 12,194,565.84 7,500.00 8,374,700.50 7,822,888.77

    Cash paid to acquire and construct fixed assets,

    intangible assets and other long-term assets 24,443,477.66 418,550.00 30,033,017.45 95,150.00

    Cash paid to acquire investments - 5,000,000.00 - 3,473,600.00

    Net cash paid to acquire subsidiaries and other

    business units - - - -

    Cash paid related to other investing activities - - - -

    Subtotal of Cash outflow from investing

    activities 24,443,477.66 5,418,550.00 30,033,017.45 3,568,750.00

    Net cash flow arising from investing activities (12,248,911.82) (5,411,050.00) (21,658,316.95) 4,254,138.77

    III. Cash flow from financing activities:

    Cash received from investments - - 50,000.00 -

    Including: subsidiaries received cash investment

    from minority shareholders - - 50,000.00 -

    Cash received from loans 253,061,652.18 157,261,700.00 364,900,969.19 234,248,600.00

    Cash received from issuance of securities - - - -

    Cash received related to other financing activities - 120,000,000.00 - -

    Subtotal of cash inflow from financing activities 253,061,652.18 277,261,700.00 364,950,969.19 234,248,600.00

    Repayment of loans or debts 349,085,555.47 274,400,368.22 471,533,960.27 -

    Cash paid for dividends, profits, or interests - - - -

    Including: subsidiaries paid to minority

    shareholders with cash dividends and profits - - - -

    Cash paid related to other financing activities - - - 232,899,900.00

    Subtotal of cash outflow from financing activities 349,085,555.47 274,400,368.22 471,533,960.27 232,899,900.00

    Net cash flow arising from financing activities (96,023,903.29) 2,861,331.78 (106,582,991.08) 1,348,700.00

    IV. Effects on cash and cash equivalents for the

    change of foreign exchange rates (635,846.81) (49,395.06) (5,803,807.74) (646,790.32)

    V. Net increase in cash and cash equivalents (144,956,349.30) (4,538,792.60) (293,964,550.57) (1,384,147.64)

    Add: beginning balance of cash and cash

    equivalents 399,276,546.68 4,939,594.77 534,372,308.53 3,722,741.66

    VI .Ending balance of cash and cash equivalents IX.47 254,320,197.38 400,802.17 240,407,757.96 2,338,594.02

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)66

    Tsann Kuen (China) Enterprise Co., Ltd

    Consolidated Statement of Changes in Equity

    30 June 2009

    Monetary unit: ( RMB) Yuan

    Amount for the current period Amount for the same period of last year

    Equity attributable to the holders of parent company Equity attributable to the holders of parent company

    Items

    Share capital Capital reserve

    Capital

    surplus

    Retained earnings Other

    Minority

    interests

    Total equity

    Share capital Capital reserve

    Capital

    surplus

    Retained earnings Other

    少数股东权益 所有者权益合计

    I. Balance at the end of last year 1,112,350,077.00 125,073,743.50 0.00 (893,107,158.60) (539,902.93) 337,417,868.22 681,194,627.19 1,112,350,077.00 126,726,569.01 0.00 (935,643,358.89) (252,565.30) 321,152,341.65 624,333,063.47

    II. Balance at the beginning of this

    year 1,112,350,077.00 125,073,743.50 - (893,107,158.60) (539,902.93) 337,417,868.22 681,194,627.19 1,112,350,077.00 126,726,569.01 0.00 (935,643,358.89) (252,565.30) 321,152,341.65 624,333,063.47

    III. Increase/ decrease of amount in

    this year (“-” means decrease) - 60,108.18 - 20,163,216.18 (297,241.92) 7,245,547.67 27,171,630.11 - (1,652,825.51) - 42,536,200.29 (287,337.63) 16,265,526.57 56,861,563.72

    (I) Net profit - - - 20,163,216.18 - 6,893,099.30 27,056,315.48 - - - 42,536,200.29 13,386,205.51 55,922,405.80

    (II)Gain/loss listed to owners’ equity

    directly - 60,108.18 - - - - 60,108.18 - (1,652,825.51) - - - 2,829,321.06 1,176,495.55

    1. Net amount on changes in book

    value of financial assets available for

    sale

    - 60,108.18 - - - - 60,108.18 - (115,305.12) - - - - (115,305.12)

    2. Effect on income tax related to

    items listed to owners’ equity - - - - - - - - - - - - - -

    3. Others - - - - - - - - (1,537,520.39) - - - 2,829,321.06 1,291,800.67

    Subtotal of (I)and (II) 0.00 60,108.18 0.00 20,163,216.18 0.00 6,893,099.30 27,116,423.66 - (1,652,825.51) - 42,536,200.29 - 16,215,526.57 57,098,901.35

    (III) Input an reduced capital of

    owners - - - - - 352,448.37 352,448.37 - - - - - 50,000.00 50,000.00

    1. Input capital of owners - - - - - 421,500.00 421,500.00 - - - - - 50,000.00 50,000.00

    2. Amount of Shares included in the

    owners’ equity - - - - - - - - - - - - -

    3. Others - - - - - (69,051.63) (69,051.63) - - - - - - -

    (IV) Profit distribution - - - - - - - - - - - - - -

    1.Withdrawing surplus public

    reserve - - - - - - - - - - - - - -

    2. Withdrawing general risk reserve - - - - - - - - - - - - - -

    3. Distribution to owners

    (shareholders) - - - - - - - - - - - - - -

    4. Other - - - - - - - - - - - - - -

    (V)Internal carrying forward of

    owners’ equity - - - - - - - - - - - -

    1. New increase of capital (share

    capital) from capital reserves - - - - - - - - - - - - - -

    2. Convert surplus reserves to

    capital(share capital) - - - - - - - - - - - - - -

    3. Surplus reserves make up losses - - - - - - - - - - - -

    4. Others - - - - - - - - - - -

    (VI) Other (297,241.92) - (297,241.92) (287,337.63) (287,337.63)

    IV. Balance at the end of this period 1,112,350,077.00 125,133,851.68 - (872,943,942.42) (837,144.85) 344,663,415.89 708,366,257.30 1,112,350,077.00 125,073,743.50 - (893,107,158.60) (539,902.93) 337,417,868.22 681,194,627.19

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)67

    Tsann Kuen (China) Enterprise Co., Ltd

    Statement of Changes in Equity of Parent Company

    30 June 2009

    Monetary unit: ( RMB) Yuan

    Amount for the current period Amount for the same period of last year

    Items

    Share capital Capital reserve

    Capital

    surplus

    Retained earnings Total equity Share capital Capital reserve

    Capital

    surplus

    Retained earnings Total equity

    I. Balance at the end of last year 1,112,350,077.00 123,550,019.78 0.00 (828,377,174.42) 407,522,922.36 1,112,350,077.00 123,665,324.90 0.00 (627,995,170.14) 608,020,231.76

    II. Balance at the beginning of this year 1,112,350,077.00 123,550,019.78 - (828,377,174.42) 407,522,922.36 1,112,350,077.00 123,665,324.90 0.00 (627,995,170.14) 608,020,231.76

    III. Increase/ decrease of amount in this year (“-” means decrease) - 60,108.18 - (2,633,967.30) (2,573,859.12) - (115,305.12) 0.00 (200,382,004.28) (200,497,309.40)

    (I) Net profit - - - (2,633,967.30) (2,633,967.30) - - - (200,382,004.28) (200,382,004.28)

    (II)Gain/loss listed to owners’ equity directly - 60,108.18 - - 60,108.18 - (115,305.12) - - (115,305.12)

    1. Net amount on changes in book value of financial assets available for sale - 60,108.18 - - 60,108.18 - (115,305.12) - - (115,305.12)

    2. Effect on income tax related to items listed to owners’ equity - - - - - - - - - -

    3. Others - - - - - - - - -

    Subtotal of (I)and (II) 0.00 60,108.18 0.00 (2,633,967.30) (2,573,859.12) - (115,305.12) - (200,382,004.28) (200,497,309.40)

    (III) Input an reduced capital of owners - - - - - - - - - -

    1. Input capital of owners - - - - - - - - - -

    2. Amount of Shares included in the owners’ equity - - - - - - - - - -

    3. Others - - - - - - - - - -

    (IV) Profit distribution - - - - - - - - - -

    1.Withdrawing surplus public reserve - - - - - - - - - -

    2. Withdrawing general risk reserve - - - - - - - - - -

    3. Distribution to owners (shareholders) - - - - - - - - - -

    4. Other - - - - - - - - - -

    (V)Internal carrying forward of owners’ equity - - - - - - - - -

    1. New increase of capital (share capital) from capital reserves - - - - - - - - - -

    2. Convert surplus reserves to capital(share capital) - - - - - - - - - -

    3. Surplus reserves make up losses - - - - - - - -

    4. Others - - - - - - - - - -

    (VI) Other -

    IV. Balance at the end of this period 1,112,350,077.00 123,610,127.96 - (831,011,141.72) 404,949,063.24 1,112,350,077.00 123,550,019.78 - (828,377,174.42) 407,522,922.36

    Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi Lister: Chen Zongyi

    (The notes form an integral part of these consolidated financial statements.)