TSANN KUEN (CHINA) ENTERPRISE CO., LTD THE FIRST QUARTERLY REPORT 2010 §1. Important Notice 1.1 The Board of Directors, Supervisory Committee, and Directors, Supervisors as well as Senior Management Staff of TSANN KUEN (CHINA) ENTERPRISE CO., LTD. (hereinafter referred to as “the Company”) warrant that this report does not contain any false or misleading statements or omit any material facts and all information set forth herein are true, accurate and complete. 1.2 None of directors, supervisors or senior executives demonstrated uncertainty or disagreement about the truthfulness, accuracy, and integrity of the first quarterly report. 1.3 All directors attended the Board Meeting, at which reviewed and approved the first quarterly report. 1.4 Financial report of the first quarterly report period has not been audited. 1.5 Mr. Jian Derong, Chairman of the Board, and Mr. Chen Zongyi, Accounting Manager, jointly guaranteed that financial statements in this annual report are authentic and complete. [English Translation for Reference Only. Should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail.] §2 Company Profile Short form of stock Min Tsann Kuen B Stock code 200512 Secretary of the Board Securities Affairs Representative Name Luo Qing Xing Sun Mei Mei Contact address TSANN KUEN Industrial Park, Longchi Development Zone, Zhangzhou, Fujian TSANN KUEN Industrial Park, Longchi Development Zone, Zhangzhou, Fujian Telephone 0596-6268103 0596-6268161 Fax 0596-6268104 0596-6268104 E-mail allenlo@tkl.tsannkuen.com mm_sun@tkl.tsannkuen.com2 2.1 Main accounting data and financial indices Unit: RMB Yuan Items At the end of the reporting period At the end of last year Increase/decrease (%) Total assets 1,960,812,937.15 2,117,764,266.23 (7.41) Owner’s equity attributable to shareholders of listed company 415,413,622.61 396,565,377.00 4.75 Share capital 1,112,350,077.00 1,112,350,077.00 0.00 Net asset per share attributable to shareholders of listed company 0.37 0.36 2.78 Items Reporting period Same period of last year Increase/decrease (%) Sales turnover 765,386,616.25 577,748,701.77 32.48 Net profit attributable to shareholders of listed company 18,445,684.38 9,265,540.95 99.08 Net cash flow arising from operating activities 47,910,849.17 (17,067,388.48) 380.72 Net cash flow per share arising from operating activities 0.04 (0.02) 300.00 Basic earnings per share 0.02 0.01 100.00 Diluted earnings per share 0.02 0.01 100.00 Weighted average return on equity 4.54% 2.50% 2.04 Weighted average return on equity after deducting extraordinary gains and losses 3.61% 1.74% 1.87 Items of extraordinary gains and losses Unit: RMB Yuan Items Amount from 1 Jan. to 31 Mar. 2010 Gains on disposal of non-current assets 2,859,362.31 Government grant recognized in current year, except for those acquired in the ordinary course of business or granted continuously in certain standard quota according to relevant national laws and regulations 1,260,563.47 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 other than effective hedging business related to normal operation business of the Company 333,031.31 Other non-operating income and expense other than abovementioned 816,994.28 Income tax of extraordinary gains and losses (238,299.21) Net profit after deducting extraordinary gains and losses attributable to minority shareholders (1,233,272.02) Total 3,798,380.14 Explanation on important items of extraordinary gains and losses: N/A3 2.2 Total number of shareholders at the end of the reporting period and statement on shares held by the top ten shareholders holding tradable shares Unit: Share Total number of shareholders 33604 Shares held by top ten tradable shareholders No. Name of shareholders Number of tradable share held Type of share 1 FORDCHEE DEVELOPMENT LIMITED 323,643,179 B-share 2 EUPA INDUSTRY CORPORATION LIMITED 181,855,147 B-share 3 FILLMAN INVESTMENTS LIMITED 46,214,902 B-share 4 TIMMERTON CO INC 14,505,644 B-share 5 CSC SECURITIES (HK) LTD. 6,432,179 B-share 6 CHEN YONG QING 5,854,989 B-share 7 CHEN LI JUAN 5,694,746 B-share 8 HE JIAN XIONG 4,439,551 B-share 9 TSAI SHU HUI 4,294,433 B-share 10 CHEN YONG QUAN 3,643,844 B-share Explanation on related relationship and action-in-concert among above mentioned shareholders The top three shareholders are the controlling shareholders. Tsai Shuhui is a spouse of Wu Tsann Kuen, 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.4 §3 Significant Events Sales of assets The Company disclosed the Public Notice on Selling Some Operation Assets of Accessory Factory by Controlling Subsidiary Zhangzhou Tsann Kuen, the Public Notice on Progress of Sales of Some Operation Assets of Accessory Factory By Controlling Subsidiary and New Asset Sale, and the Public Notice on Progress of Sales of Some Operation Assets of Accessory Factory by Controlling Subsidiary and Another New Asset Sale on Securities Times, HK Ta Kung Pao and http://www.cninfo.com.cn respectively on 29 Jul. 2009, 21 Jan. 2009 and 28 Apr. 2009. As at 31 Mar. 2010, the relevant progress is as follows: Unit: RMB 0’000 Transaction party Asset sold Date of selling Selling price Net profit contributed by the sold asset to the Company from the year-begin to the selling date Gains and losses arising from such sale Related transaction or not Explanation on pricing principle Property right of asset was transferred or not Relevant credits and liabilities were transferred or not Related relationship Xiamen Pinrui Hardware equipment 31 Jan. 2010 60.00 9.30 9.30 Hongyuan Electronic Electronic equipment 31 Jan. 2010 71.67 31.35 31.35 Zhangzhou Ruicheng Die casting equipment 31 Jan. 2010 11.00 1.10 1.10 Suzhou YIFAN Bakelite equipment 31 Jan. 2010 4.00 3.92 3.92 Xiamen Jingjing Die casting equipment 31 Jan. 2010 8.65 0.99 0.99 Yes Yes Zhangzhou Shengyuan Hardware equipment 28 Feb. 2010 142.60 9.14 9.14 No No Longhai Yingfa Bakelite equipment 28 Feb. 2010 171.17 15.59 15.59 No No Longhai Yingfa Bakelite equipment 28 Feb. 2010 0.71 0.61 0.61 Yes Yes Zhangzhou Bo’er Die casting equipment 28 Feb. 2010 163.30 (17.45) (17.45) Zhangzhou Xiangkun Hardware equipment 31 Mar. 2010 221.38 9.84 9.84 Zhangzhou Lanboni Injection molding equipment 31 Mar. 2010 173.00 17.50 17.50 No No Zhangzhou Hongkun Injection molding equipment 31 Mar. 2010 0.50 0.43 0.43 Yes Yes Zhangzhou Hewang Bakelite equipment 31 Mar. 2010 155.44 7.89 7.89 No No Xiamen Jingjing Bakelite equipment 31 Mar. 2010 25.34 4.07 4.07 Yes Yes Zhangzhou Kerui Die casting equipment 31 Mar. 2010 115.00 23.42 23.42 No No Zhangzhou Kerui Die casting equipment 31 Mar. 2010 2.96 0.40 0.40 Zhangzhou Ruicheng Die casting equipment 31 Mar. 2010 0.50 0.35 0.35 Xiamen Jingjing Die casting equipment 31 Mar. 2010 5.70 0.89 0.89 Non-related company The transaction prices were decided based on the principle of being above the net book value, as well as based on the assessment and market prices. Yes Yes Non-related company Total 1332.92 119.34 119.345 3.1 Significant changes in major accounting data, financial highlights and reasons for these changes. √Applicable □Non-applicable Unit: RMB’0000 No. Items Closing amount Opening amount Increase/ decrease % Notes to reason for the change 1 Monetary funds 44,950.64 63,227.47 -28.91% Repayment of borrowings to the bank and the controlling shareholder in Jan. 2010. 2 Transaction financial assets 74.47 158.87 -53.13% The transaction financial assets were due, the part of which was recognized under the item “investment income”. 3 Other receivables 4,312.02 1,485.31 190.31% The Company failed to receive tax refunds of RMB 18.94 million due to upgrade of tax system for export tax rebate in March 2010. 4 Financial assets available for sale 43.12 29.36 46.86% The equities of Shanghai Join Buy Co., Ltd. that were not controlled, jointly controlled or had a significant influence belonged to the item of financial assets available for sale. And the difference between the fair value and book value of such equities was included in the capital reserve. 5 Construction in progress 569.04 465.60 22.22% Increase of mould contract, resulting in payment of initial and interim payment 6 Long-term deferred expense 101.64 129.48 -21.50% Influence of amortization amount in the first quarter. 7 Notes payable 7,174.59 5,637.03 27.28% Increase of operating revenue, as well as increase in relevant items year-on-year. 8 Advances from customers 1,971.80 1,468.00 34.32% Increase of operating revenue, as well as increase in relevant items year-on-year. 9 Other payables 8,527.02 25,653.17 -66.76% Repayment of USD 23 million to the controlling shareholder. 10 Long-term borrowing due within one year 0.00 6,828.20 -100.00% loan repayment due to expiration 11 Accrued liabilities 88.42 161.90 -45.39% Exemption agreements were signed between the Company and suppliers in succession, resulting in writing back accrued liabilities. No. Items Jan. –Mar. 2010 Jan.-Mar.2009 Increase/ decrease % Notes to reason for the change 1 Sales turnover 76,538.66 57,774.87 32.48% Economic recovery, resulting in increase of operating revenue 2 Operating cost 66,544.99 49,996.84 33.10% Increase of operating revenue, as well as increase in relevant items year-on-year. 3 Sales expense 2,591.08 1,684.40 53.83% Export expense increased by 19%, and increase of commission and claim payment. 4 Financial expense (136.65) 192.96 -170.81% Year-on-year decrease in exchange, interest income and bank commission. 5 Loss on assets impairment 135.42 (57.46) -335.70% Accounts receivable of RMB 1.35 million was withdrawn as bad debt according to the accounting policy in this reporting period, while long-term accounts receivable of RMB 1.53 million was written back due to the change of accounting policy over the same period of last year. 6 Income from change in fair value (84.40) 40.02 -310.90% Due financial assets was recognized under the item “investment income”. 7 Investment income 118.45 0.75 15693.84% Due financial assets was recognized under the item “investment income”. 8 Non-operating expenses 18.33 102.91 -82.19% Donation outlay at the same period of last year and loss on sale of assets amounting to RMB 830,000.6 3.2 Process of significant events and influence, as well as analysis and explanation on resolving proposal √Applicable □Non-applicable As for Transfer Equities of EUPA Industry Corporation Ltd and related transaction, please refer to the Public Notice on Transferring Equities of EUPA Industry Corporation Ltd and Related Transaction published on Securities Times, Ta Kung Pao and http://www.cninfo.com.cn on 26 Mar. 2006 for details, as at the report date, the relevant progress is as below: In accordance with mode of payment stipulated in the Item II of the Equity Transfer Agreement, the party B should pay down-payment to the party A within 10 days from the date of approval by the department authorized by the government after the Agreement was signed. At present, the Company got the Approval Letter on 12 Apr. 2010. On 13 Apr. 2010, the Company received the first installment amounting to USD 580,000 from SINO Global Development . Zhangzhou Tsann Kuen, subsidiary of the Company, and Longhai Chaoda Industrial Co., Ltd (hereinafter refer to as “Chaoda”) has signed Cooperation Framework Agreement, Agreement on Transfer and Lease of Working Assets etc. on 12 Apr. 2008, on which contracted that Zhangzhou Tsann Kuen would purchase products from Chaoda; meanwhile, it contracted that Chaoda would purchase and lease equipment from Zhangzhou Tsann Kuen, and will hired workshop of Zhangzhou Tsann Kuen which locate Longchi Development Zone to put in production. On 3 Nov. 2009, Chaoda sued to Fujian Zhangzhou Intermediate People’s Court, claimed to eliminate agreement on purchase & sales and lease, and claimed Zhangzhou Tsann Kuen returned payment for equipment transfer and rent totaling RMB 8,174,960; and requested the court to judge that Zhangzhou Tsann Kuen compensate its loss totaling RMB 12.6 million and return deposit of RMB 200,0000. Object of the two cases totaled RMB 20,974,960. Zhangzhang Tsann Kuen requested the court to dismiss all the claims except for protest against violation of Longda. Meanwhile, Zhangzhou Tsann Kuen appealed counterclaim and requested Longda pay balance of RMB 4,042,110.00 for equipment transfer. As for the report day, the intermediate people's court of Zhangzhou Municipality had heard the said two principal claims raised by Longhai Chaoda and counterclaim raised by Zhangzhou Tsann Kuen. As for case of equipment, the court confirmed that Chaoda failed to pay the transfer payment for equipment amounting to RMB 4,042,110 to Zhangzhou Tsann Kuen, and shall make an inventory to the equipment in the near future. As for the case of default losses, Longhai Chaoda only provided the data calculated by it through its conjecture without warranty by the facts. At present, the said case is on the docket for the final judgment from the Court. 3.3 Special commitments made by the company, shareholders and actual controllers □Applicable √Non-applicable 3.4 Warnings of possible loss or large-margin change of the accumulated net profit made during the period from the beginning of the year to the end of the next report period compared with the same period of the last year according to prediction, as well as explanations on the reasons □Applicable √Non-applicable 3.5 Other significant events need to be explained 3.5.1 Securities investment □Applicable √Non-applicable7 3.5.2 Equity of other listed companies held by the Company √Applicable □Non-applicable Unit: (RMB) Yuan Stock code Short form of stock Initial investment Ratio to equity of invested company (%) Book value at year-end Profit and loss in the reporting period Change of owners’ equity in the report period Accounting item Source of stock 600838 Shanghai Jiubai 30,700.00 0.01 431,222.40 0 107,321.76 Financial assets available for sale Corporation share Total 30,700.00 0.01 431,222.40 0 107,321.76 3.5.3 Reception of research, interviews and visits in the reporting period In the report period, according to Guidelines on Fair Information Disclosure of Listed Companies, the Company and the persons charged with the information disclosure strictly followed the principle of fair information disclosure, didn’t conduct treatment difference policy, neither did they disclose important information of the Company which didn’t publish to any particular object privately by choice in the process of investigation and visit acceptance. The details were as follows: Reception time Reception place Reception way Reception object Major discussion content and the information provided by the Company 19 Jan. 2010 Telephone Miss Fang Operation status of the Company 25 Feb.2010 Company office Telephone Mr. Ding Operation status of the Company 3.5.4 Explanation on other significant events 3.5.4.1 The Company did not provide capital to its controlling shareholder or other related parties or external guarantee in violation of prescribed procedures. 3.5.4.2 There was no shareholding increase plans put forward or carried out in the reporting period by shareholders holding over 30% shares of the Company. 3.5.4.3 Significant contract in the reporting period √Applicable □Non-applicable I. Zhangzhou Tsann Kuen, the controlling subsidiary of the Company, entered into Cooperation Framework Agreement, Purchase Agreement on Operation Assets and Agreement of Supply of Raw Materials for Production with Shanghai Sigma Metals Inc. (hereinafter referred to as Shanghai Sigma) on Dec. 31, 2006 and the main contents of agreements include: Expect for sale of the operation assets, Zhangzhou Tsann Kuen would transfer the business opportunities to Shanghai Sigma with the total transaction amount of RMB 100 million, which becomes the main supplier of raw materials of aluminum products purchased by the Company later, settlement price per ton would be determined according to decreasing amount and proportion stipulated by two parties. In accordance with Purchase Agreement on Operation Assets, Shanghai Sigma would pay the first installment amounting to RMB 38 million, the rest RMB 62 million would be deducted from the processing expense for molten aluminum by the month, which Zhangzhou Tsann Kuen entrusted Shanghai Sigma to do production. Zhangzhou Tsann Kuen committed that it shall, within three years following Agreement of Supply of Raw Materials for Production into force, purchase molten aluminum (aluminum pig) from Shanghai Sigma with purchase volume not less than 70% of total8 demands of Zhangzhou Tsann Kune for molten aluminum (aluminum pig). In case of expiration of three year, because of a shortage of orders, Zhangzhou Tsann Kuen fails to deducted fully the balance from processing expense, it shall agree to give extension to Agreement of Supply of Raw Materials for Production, the balance owed shall continue to deduct through business cooperation till full deduction. If executive termination due to responsibility of Zhangzhou Tsann Kuen, the balance owed shall not be paid by Shanghai Sigma, if executive termination due to responsibility of Shanghai Sigma, the balance owed shall be paid by Shanghai Sigma one-off. The above contract has been expired on 28 Feb. 2010, for the purpose of keeping the normal operation of the both parties, both the Company and Shanghai Sigma was negotiating about renewal of the contract. As at the balance sheet date, the balance of RMB 39,746,220.40 failed to be carried down, and was included in the subject of “long-term accounts receivable” and “other non-current liabilities” for calculation. II. Zhangzhou Tsann Kuen, subsidiary of the Company, and some supporting manufacturers signed agreement on purchase of raw materials and parts & accessories with the bottom amount. The agreement stimulated that the balance would return to manufactures with discount on purchase in case that the actual purchase amount was lower than the bottom amount. Up to the balance sheet date, Zhangzhou Tsann Kuen and some of supporting manufacturers signed supplementary agreement on exemption, and withdrew accrued liabilities totaling RMB 884,161.90 for supporting manufacturers who had not sign agreement on exemption yet according to agreement. 3.5.5 Changes in scope of consolidation 1. Reduction of subsidiary companies in current period □Applicable √Non-applicable 2. Additional subsidiary companies in current period √Applicable □Non-applicable Unit: RMB Yuan Name Date Closing net assets Profit as of reporting period The scope of consolidation and reason for change Shenzhen Canbao Commerce & Trade Co., Ltd. 29 Mar. 2010 1,000,000.00 0.00 Subsidiary newly established, the Company holds 74.25% of shares of this company indirectly Shenzhen Canbao Commerce & Trade Co., Ltd. (hereinafter referred to as “Shenzhen Canbao”) was established by Shanghai Star Travel Commerce & Trade Co., Ltd., the subsidiary of South Port Electronics (the subsidiary of the Company), through capital contribution in monetary funds on 29 Mar. 2010. The registered capital of Shenzhen Canbao is RMB 1,000,000.00. Shanghai Star Travel Commerce & Trade Co., Ltd. holds 100% equities of Shenzhen Canbao. 3.6 Derivative Investment √Applicable □Non-applicable As a listed company, the Company has not been engaged in derivatives investment. And this derivatives investment deal was conducted by the Company’s holding subsidiary—Zhangzhou Tsann Kuen Enterprise Co., Ltd.—in order to avoid foreign exchange risks, which involved buying and selling derivative financial products such as forward exchange and forward purchase/sale of foreign currency. Zhangzhou Tsann Kuen Enterprise Co., Ltd., the Company’s holding subsidiary, established the Management Procedures for Trading Derivative Financial Products after the Procedures was9 approved by the Board Meeting on 6 Mar. 2008. Analysis on risks and control measures of derivative products held in the report period (including but not limited to market risk, liquidity risk, credit risk, operation risk, law risk, etc.) 1. Analysis on risks from holding of derivative products: gains or losses from difference between contracted exchange rate and market exchange rate on value date. 2. Control measures: (1) Principle: total amount of whole contracted derivative financial commodities will not exceed sum of net position (net position: total foreign currency assets- total foreign currency liabilities) of current assets liabilities plus net position arising from business of the Company in the next 6 months. (2) Separation of post: separation of post of trader, dealer and authorization. (3) Normalization of procedure: trader should offer sufficient market information and risks to people who was authorized, clarify possible risks, consider feasibility of transaction when sign the contract, and complete derivative financial commodities trade with authorization. Documents referring to contract trade need examination of legal affairs ministry, and the dealer will requested to be authorized when complete business transaction. (4) Periodic evaluation: The Company kept an eye on the profit and loss from the fair value changes of the derivative by checking daily/(monthly) the difference between the estimated exchange rate (provided by the bank)*the undue contracted amount and the currency amount when bought in. (5) Loss limit: contracted losses mustn’t exceed 6% of total trading amount. (6) Audit system: Audit ministry audits derivative audit trade of derivative financial products periodically and submit audit report. Changes of market prices or fair values in the report period of the invested derivatives. And the analysis on the fair value of the derivatives should include the specific use methods and the relevant assumptions and parameters. (1) Gains and losses effected by completed transaction amount of derivative products was RMB 1.177 million, and loss from undelivered transaction was RMB 0.844 million in the report period; (2) The former contracted bank provided monthly sheets of estimated exchange rates for the undue contracted forward exchanges on the last trading day of the month; (3) The profit and loss from fair value changes of the derivative was confirmed according to the difference between the contracted amount undue by the month*the estimated exchange rate and the currency amount when bought in. Whether significant changes occurred to the Company’s accounting policy and specific accounting principles of derivatives in the report period compared to the previous report period There were no significant changes between the Company’s accounting policy and specific accounting principles of derivatives in the report period and those in the last report period. Specific opinion from independent directors, sponsors or financial consultants on the Company’s derivatives investment and risk control Derivative investment, which was operated by Zhangzhou Tsann Kuen, controlling subsidary of the Company, was performance of signed contract. Then they will execute the examination and review procedure of the Board Meeting or Shareholder’s Meeting in accordance with regulations and execute obligation of information disclosure in time. 3.6.1 Derivatives held as at the end of the report period √Applicable □Non-applicable Unit: RMB Yuan Type of contract Beginning contract amount Closing contract amount Gain or loss in the reporting period Proportion of the closing contract amount in the closing net assets of the Company (%) Forward foreign exchange trade 33,966,028.92 15,253,243.86 (846,506.90) 3.67% Forward transaction 136,619,000.00 238,986,000.00 2,500.00 57.53% Total 170,585,028.92 254,239,243.86 (844,006.90) 61.20%10 §4 Attachment 4.1 Balance sheet TSANN KUEN (CHINA) ENTERPRISE CO. LTD Balance Sheet (Un-audited) As at Mar. 2010 Unit: RMB Yuan Closing Amount Opening amount Assets Consolidation Parent Company Consolidation Parent Company Current Assets: Monetary Funds 449,506,398.97 1,397,533.13 632,274,671.72 494,441.23 Tradable financial assets 744,654.48 1,588,661.38 Notes receivable 5,315,920.93 5,851,328.67 Account receivables 403,500,630.37 389,834,241.91 Advances to suppliers 5,204,311.02 249,613.95 4,382,912.72 48,231.48 Interest receivables Dividends receivable Other receivables 43,120,226.63 3,059,347.59 14,853,085.85 230,037.15 Inventories 379,546,001.19 350,258,713.95 Non-current assets due within one year Other current assets Total current assets 1,286,938,143.59 4,706,494.67 1,399,043,616.20 772,709.86 Non-current assets: Available-for-sale financial assets 431,222.40 431,222.40 293,630.40 293,630.40 Held-to-maturity investments Long-term account receivables 110,787,593.21 99,661,083.56 Long-term equity investments 40,000.00 1,005,105,478.85 40,000.00 1,005,105,478.85 Investment properties 32,035,975.49 34,666,291.79 33,666,204.47 35,507,404.55 Fixed assets 467,449,095.35 18,277,864.31 519,670,147.89 19,068,274.15 Construction in progress 5,690,411.65 3,940,834.04 4,656,021.02 3,632,934.04 Construction materials Liquidation of fixed assets Production biology assets Oil and gas assets Intangible assets 26,907,741.83 20,076,831.69 27,735,258.23 20,330,648.46 Development expenses Goodwill 996,979.09 996,979.09 Long-term deferred assets 1,016,435.09 119,583.10 1,294,834.29 126,758.11 Deferred income tax assets 28,519,339.45 30,706,491.08 Other non-current assets Total non-current assets 673,874,793.56 1,082,618,106.18 718,720,650.03 1,084,065,128.56 Total assets 1,960,812,937.15 1,087,324,600.85 2,117,764,266.23 1,084,837,838.4211 TSANN KUEN (CHINA) ENTERPRISE CO. LTD Balance Sheet –Con. (Un-audited) As at 31 Mar. 2010 Unit: RMB Yuan Closing Amount Opening amount Assets Consolidation Parent Company Consolidation Parent Company Current liabilities: Short-term loans Tradable financial liabilities Notes payables 71,745,934.21 56,370,310.39 Account payables 871,195,884.97 728,829.66 837,178,756.46 1,665,294.11 Advances from customers 19,718,012.60 14,680,017.93 Payroll payables 40,678,628.18 120,832.94 48,929,470.49 113,858.79 Taxes and fares payable 49,906,605.18 68,937,781.02 40,091,138.11 68,631,609.07 Interest payables Dividend payables Other account payables 85,270,235.83 613,000,436.26 256,531,703.89 616,799,841.82 Non-current liabilities due within one year 68,282,000.00 Other current liabilities Total current liabilities 1,138,515,300.97 682,787,879.88 1,322,063,397.27 687,210,603.79 Non-current liabilities: Long-term borrowings Bond payable Long-term account payable Deferred incomes Accrued liabilities 884,161.90 1,618,986.20 Deferred income tax liabilities 199,813.11 88,114.93 296,143.90 57,844.69 Other non-current liabilities 44,871,698.78 40,106,220.40 Total non-current liabilities 45,955,673.79 88,114.93 42,021,350.50 57,844.69 Total liabilities 1,184,470,974.76 682,875,994.81 1,364,084,747.77 687,268,448.48 Shareholders' equity: Share capital 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 Capital reserve 125,321,312.59 123,797,588.87 125,213,990.83 123,690,267.11 Less: inventory shares Surplus reserve General risk reserve Retained earnings (821,943,155.69) (831,699,059.83) (840,347,470.50) (838,470,954.17) Exchange difference (314,611.29) (651,220.33) Total equity attributable to the holders of parent company 415,413,622.61 404,448,606.04 396,565,377.00 397,569,389.94 Minority interests 360,928,339.78 357,114,141.46 Total shareholders’ equity 776,341,962.39 404,448,606.04 753,679,518.46 397,569,389.94 Total liabilities and shareholders’ equity 1,960,812,937.15 1,087,324,600.85 2,117,764,266.23 1,084,837,838.42 Prepared by Tsann Kuen (China) Enterprise Co., Ltd. Legal Representative: Jian Derong CFO: Chen Zongyi Accounting Manager: Chen Zongyi12 4.2 Income Statement Tsann Kuen (China) Enterprise Co., Ltd. Income Statement (Un-audited) 1 Jan.-31 Mar. 2010 Unit: RMB Yuan Jan. – Mar. 2010 Jan. – Mar.2009 Items Consolidation Parent Company Consolidation Parent Company I. Total operating revenues 765,386,616.25 1,519,018.01 577,748,701.77 1,467,310.50 II. Total operating cost 743,281,526.43 2,695,449.83 567,161,640.20 4,134,470.91 Less: Operating cost 665,449,907.42 1,473,143.30 499,968,355.39 1,436,833.51 Business taxes and surtax 1,042,276.29 76,031.62 1,122,723.93 73,732.59 Selling expenses 25,910,761.19 16,844,004.28 Administrative expenses 50,890,790.47 1,574,840.54 47,871,493.75 1,998,357.36 Financial costs (1,366,457.41) 22,156.93 1,929,636.45 385,828.92 Impairment loss of assets 1,354,248.47 (450,722.56) (574,573.60) 239,718.53 Add: Gains from the fair value changes (The loss is listed beginning with “-“) (844,006.90) 400,184.39 Investment income (The loss is listed beginning with “-“) 1,184,538.21 7,849,213.97 7,500.00 7,500.00 Including: the investment income from associated and joint ventures enterprises III. Operating profit 22,445,621.13 6,672,782.15 10,994,745.96 (2,659,660.41) Add: Non-operating income 5,120,196.58 99,112.19 4,690,529.35 526,848.45 Less: Non-operating expense 183,276.52 1,029,050.35 (3,125.79) Including: Loss from disposal of non-current assets 183,276.52 831,805.87 IV. Total profits (The loss is listed beginning with “-“) 27,382,541.19 6,771,894.34 14,656,224.96 (2,129,686.17) Less: Income tax expense 2,453,123.41 1,903,026.99 V. Net profits (the net loss is listed beginning with “-”) 24,929,417.78 6,771,894.34 12,753,197.97 (2,129,686.17) Net profits attributable to equity holders of the parent company 18,445,684.38 6,771,894.34 9,265,540.95 (2,129,686.17) Minority interests 6,483,733.40 3,487,657.02 VI. Earnings per share 1. Basic earnings per share 0.02 0.01 2. Diluted earnings per share 0.02 0.01 VII. Other comprehensive gains 443,930.80 (110,357.50) VIII. Total comprehensive gains 25,373,348.58 6,771,894.34 12,642,840.47 (2,129,686.17) Attributable to shareholders of parent company 18,889,615.18 6,771,894.34 9,155,183.45 (2,129,686.17) Attributable to minority shareholders 6,483,733.40 3,487,657.02 Prepared by Tsann Kuen (China) Enterprise Co., Ltd. Legal Representative: Jian Derong CFO: Chen Zongyi Accounting Manager: Chen Zongyi13 4.3 Cash Flow Statement Tsann Kuen (China) Enterprise Co., Ltd. Cash Flow Statement (Un-audited) 1 Jan.-31 Mar. 2010 Unit: RMB Yuan Jan. – Mar. 2010 Jan. – Mar.2009 Items Consolidation Parent Company Consolidation Parent Company I. Cash flows from operating activities: Cash received from sales of goods or rendering of services 757,929,692.49 694,634,048.06 Tax refund 49,601,510.57 39,832,838.47 Cash received related to other operating activities 20,767,380.01 10,860,348.65 20,812,493.27 9,571,107.36 Subtotal of cash inflow 828,298,583.07 10,860,348.65 755,279,379.80 9,571,107.36 Cash paid for purchasing goods and receiving services 600,565,170.61 629,930,367.48 97,875.24 Cash paid to and on behalf of employees 88,976,481.56 8,814,086.55 82,053,671.94 8,049,475.30 Tax payments 6,505,020.50 1,017,765.88 4,604,107.30 844,585.11 Cash paid to other operating activities 84,341,061.23 9,149,387.14 55,758,621.56 2,287,988.26 Subtotal of Cash outflow 780,387,733.90 18,981,239.57 772,346,768.28 11,279,923.91 Net cash flow arising from operating activities 47,910,849.17 (8,120,890.92) (17,067,388.48) (1,708,816.55) II. Cash flows from investing activities Cash received from disposals of investments Cash received from returns on investments 7,500.00 7,849,213.97 7,500.00 7,500.00 Net cash received from disposals of fixed assets and intangible assets 5,820,974.43 5,013,299.10 Net cash received from disposal of subsidiaries and other business units Cash received related to other investing activities Subtotal of cash inflow 5,828,474.43 7,849,213.97 5,020,799.10 7,500.00 Cash paid to purchase fixed assets, intangible assets and other long-term assets 8,663,435.33 1,240,357.88 11,903,131.66 Cash paid for investments 222,000.00 5,000,000.00 Net cash paid to acquire subsidiaries and other business units Cash paid to other investing activities Subtotal of Cash outflow 8,885,435.33 1,240,357.88 11,903,131.66 5,000,000.00 Net cash flow arising from investing activities (3,056,960.90) 6,608,856.09 (6,882,332.56) (4,992,500.00) III. Cash flows from financing activities Cash received from absorbing investments Including: Cash received from subsidiary absorbing investments from minority shareholders Cash received from borrowings 198,581,782.40 157,261,700.00 Cash received related to other financing activities 160,000,000.00 120,000,000.00 Subtotal of cash inflow 0.00 160,000,000.00 198,581,782.40 277,261,700.00 Repayment of loans or debts 225,948,239.46 157,577,962.02 293,362,263.82 274,400,368.22 Cash paid for dividends, profits, or interests 2,352,514.18 Including: Dividends and profits paid by subsidiaries to minority shareholders 2,352,514.18 Cash paid to other financing activities Subtotal of Cash outflow 228,300,753.64 157,577,962.02 293,362,263.82 274,400,368.22 Net cash flow arising from financing activities (228,300,753.64) 2,422,037.98 (94,780,481.42) 2,861,331.78 IV. Effects on cash and cash equivalents from the change of foreign exchange rates (151,457.62) (6,911.25) (1,913,245.04) (49,428.08) V. Net increase in cash and cash equivalents (183,598,322.99) 903,091.90 (120,643,447.50) (3,889,412.85) Add: beginning balance of cash and cash equivalents 540,739,906.30 494,441.23 399,276,546.68 4,939,594.77 VI .Ending balance of cash and cash equivalents 357,141,583.31 1,397,533.13 278,633,099.18 1,050,181.92 Prepared by Tsann Kuen (China) Enterprise Co., Ltd. Legal Representative: Jian Derong CFO: Chen Zongyi Accounting Manager: Chen Zongyi14 4.4 Auditor’s report Auditor’s opinion: un-audited Board of Directors of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Chairman of the Board: Jian Derong 17 Apr. 2010