TSANN KUEN (CHINA) ENTERPRISE CO. LTD
THE THIRD QUARTERLY REPORT 2010
§1. Important Notice
1.1 The Board of Directors, the Supervisory Committee and directors, supervisors and senior
management 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 hereby accept, individually and collectively, responsibility for the
truth, accuracy and completeness of the contents of this report.
1.2 None of the directors, supervisors, senior management demonstrated uncertainty or
disagreement about the truthfulness, accuracy, and completeness of the third quarterly report.
1.3 All directors attended the Board Meeting, at which reviewed and approved the third quarterly
report.
1.4 The Financial Report of the quarterly report period has not been audited.
1.5 Mr. Jian Derong, Chairman of the Board of Directors and Mr. Chen Zongyi, Accounting
Manager jointly guaranteed that the financial statements in this quarterly report are true and
complete.
§2 Company Profile
Short form of the stock Tsann Kuen B
Stock code 200512
Stock exchange listed with Shenzhen Stock Exchange
Secretary of the Board Securities Affairs Representative
Name Luo Qingxing Sun Meimei
Contact address
Tsann Kuen Industrial Park, Longchi
Development Zone, Zhangzhou, Fujian
Province
Tsann Kuen Industrial Park, Longchi Development
Zone, Zhangzhou, Fujian Province
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 period-end of this report
period
At the period-end of
last year
Increase/decrease
(%)
Total assets 2,121,057,513.05 2,117,764,266.23 0.16
Owners’ equity attributable to shareholders
of listed company
451,910,737.73 396,565,377.00 13.96
Share capital 1,112,350,077.00 1,112,350,077.00 0.00
Net assets per share attributable to
shareholders of listed company
0.4063 0.3565 13.97
Items
The report
period
Increase/decrea
se year-on-year
(%)
From the year-begin
to the end of report
period
Increase/decrease
year-on-year (%)
Operating revenue 853,595,297.04 21.03 2,518,604,859.66 33.26
Net profit attributable to shareholders of
listed company
17,782,669.68 50.46 54,731,971.89 71.13
Net cash flow arising from operating
activities
105,098,872.53 (28.88) 142,556,055.65 27.59
Net cash flow per share arising from
operating activities
0.0945 (28.89) 0.1282 27.69
Basic earnings per share 0.0160 50.94 0.0492 70.83
Earnings per share-diluted 0.0160 50.94 0.0492 70.83
Weighted average return on equity 3.93% 0.78 12.11% 3.59
Weighted average return on equity after
deducting non-recurring gains and losses
3.93% 1.70 10.39% 3.43
Items of non-recurring gains and losses
Unit: RMB Yuan
Items
Amount from the year-begin to
the period-end
Gains and losses from disposal of non-current assets 7,807,105.25
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
6,490,590.38
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
(4,639,240.45)
Other non-operating income and expense beside for the above-mentioned each items 659,786.57
Influence on enterprise income tax 0.00
Net profit attributable to minority shareholders after deducting non-recurring gains and
losses
(2,528,513.15)
Total 7,789,728.603
2.2 Total number of shareholders at the end of the report period and statement on shares held by
the top ten shareholders holding tradable shares
Unit: Share
Total number of shareholders at the end
of report period
34,736
Shares held by the top ten shareholders holding tradable shares
No. Name of shareholder (full name) Number of tradable shares held Type of share
1 FORDCHEE DEVELOPMENT LIMITED 323,643,179 B-share
2 EUPA INDUSTRY CORPORATION LIMITED 153,802,306 B-share
3 FILLMAN INVESTMENTS LIMITED 27,729,575 B-share
4 TIMMERTON CO INC 14,505,644 B-share
5 CHEN YONG QUAN 9,298,344 B-share
6 CHEN YONG QING 5,889,589 B-share
7 CSC SECURITIES (HK) LTD 5,734,179 B-share
8 CHEN LI JUAN 5,721,246 B-share
9 XU XIN HU 4,469,965 B-share
10 HE JIAN XIONG 4,439,551 B-share
Explanation on related relationship and action-in-concert
among above mentioned shareholder
The top three shareholders are controlling corporate shareholders.
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.
§3 Significant Events
3.1 Particular about large-margin change of main accounting statement item and financial indices
and its reason
√Applicable □Inapplicable
Unit: RMB’0000 Yuan
Items
Amount of
period-end
Amount of
period-begin
Increase/de
crease (%)
Main reasons for changes
Transaction financial assets 0.00 158.87 -100.00
Non-delivered forward exchange in Sep. was
evaluated as transaction financial assets.
Notes receivable 207.51 585.13 -64.54 The note was cashed in when matured.
Accounts receivable 52,199.28 38,983.42 33.90
Balance of relevant items increased when
operating income increased.
Accounts paid in advance 850.30 438.29 94.00 Payment for goods in advance increased.
Other account receivable 3,037.85 1,485.31 104.53
Expense for electricity and rent of fitting
factories increased.
Long-term expense to be
apportioned
479.81 129.48 270.55
Payment for sporadic office decoration was
confirmed to be amortized more than one year.
Transaction financial
liabilities
23.36 0.00
Non-delivered forward exchange in Sep. was
evaluated as transaction financial assets,
which will be confirmed as assets at the
year-begin.4
Items
Amount of
period-end
Amount of
period-begin
Increase/de
crease (%)
Main reasons for changes
Other account payable 8,792.57 25,653.17 -65.73
Mainly due to repay borrowing of RMB 157
million to EUPA INDUSTRY
CORPORATION LIMITED
Long-term borrowing due
within one year
0.00 6,828.20 -100.00
Long-term borrowing has been repaid when it
was matured.
Projected liabilities 0.00 161.90 -100.00
Deductible agreements had been reached on
minimum-guarantee purchase contracts.
Foreign exchange difference 0.00 (65.12) -100.00
Difference arising from translation of financial
statements of Eupa (Hong Kong) Co., Ltd.
presented in HK dollars
Items
Jan.-Sep.
2010
Jan.-Sep.
2009
Increase/de
crease (%)
Main reasons for changes
Total revenue 251,860.49 189,001.54 33.26
Economy revived in 2010, and sale of products
and gross profit increased year-on-year.
Operating cost 219,804.41 164,901.50 33.29
Economy revived in 2010, ratio of products sale
compared with the same period of last year rose,
and relevant subject rose year-on-year.
Sales expenses 8,754.33 6,213.20 40.90
Economy revived in 2010, ratio of products sale
compared with the same period of last year rose,
and relevant subject rose year-on-year.
Financial expense (535.98) (264.45) 102.68
Income from interest increased and expense for
interest decreased.
Impairment loss 115.64 22.43 415.66
Mainly due to loss from withdrawal of
impairment loss of inventories.
Gains from change in fair
value (“-” means loss)
(182.23) (28.79) 532.92
Loss evaluated from non-delivered forward
exchange in Sep. the loss.
Gain from investment (“-”
means loss)
(242.57) (180.84) 34.13 Confirmed loss from delivered forward exchange
Non-operating expense 83.29 254.50 -67.27
Loss from disposal of assets confirmed at the
same period of last year.
Cash flows from operating
activities
14,255.61 11,173.12 27.59
More cash inflows due to increase of product
sales
Cash flows from
investment Activities
(310.73) (2,137.47) -85.46
Consideration of transferring share of
wholly-owned subsidiary and fitting factories
decreased purchase of fixed assets
Cash flows from financing
activities
(22,830.08) (11,828.12) 93.02
Paid off borrowing to EUPA INDUSTRY
CORPORATION LIMITED and long-term
borrowings within one year.5
3.2 Progress and influence of significant events and explanation on its solution
3.2.1 About non-standard opinion
□Applicable √Inapplicable
3.2.2 The Company offer capital to the controlling shareholder or other related parties and
provide external guarantees in violation of the prescribed procedures.
□Applicable √Inapplicable
3.2.3 Signing contract and execution of contract on routine operation
√Applicable □Inapplicable
Sales of assets:
Tsann Kuen Zhangzhou Enterprise Co., Ltd., the Company’s holding subsidiary, invited some
spare parts plants into the Tsann 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 overall
market competitiveness of the Company would be strengthened for those more professional
spare parts plants in the industrial park could supply spare parts directly to Tsann 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 overall 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 Tsann 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, all published on
Securities Times, Hong Kong Ta Kung Pao and http://www.cninfo.com.cn dated respectively on
29 Jul. 2008, 21 Jan. 2009, 28 Apr. 2009 and 28 Apr. 2010.
The company sold out a small quantity equipments to the said spare parts plants to meet their
business needs in the reported period, which was detailed as follows:
Unit: RMB’0000 Yuan6
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
Whethe
r a
related
transacti
on 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
Relations
hip with
the
Company
ZhangzhouShengyuan Hardware equipment 28 Feb. 2010 142.60 9.14 9.14 No No
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 Yifeng 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
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 Boer 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
Xiamen Jinwei Hardware equipment 31 Mar. 2010 210.00 2.14 2.14
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
Zhangzhou Shunkun Bakelite equipment 31 Mar. 2010 253.00 34.14 34.14
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 Jan. 2010 2.96 0.40 0.40
Zhangzhou Ruicheng Die casting equipment 31 Jan. 2010 0.50 0.35 0.35
Xiamen Jingjing Die casting equipment 31 Mar. 2010 5.70 0.89 0.89
Zhangzhou Jiafeng Wiring equipment 30 Apr. 2010 47.22 30.29 30.29
Yes
Yes
Yes
Yes
Zhangzhou Dakun Motor equipment 30 Apr. 2010 790.00 107.11 107.11 No No
Zhangzhou Kerui Die casting equipment 30 Apr. 2010 0.65 0.20 0.20
Zhangzhou Yuli Die casting equipment 30 Apr. 2010 3.40 0.78 0.78
Zhangzhou Yongkun Injection molding equipment 30 Apr. 2010 9.52 0.77 0.77
Zhangzhou Yukun Injection molding equipment 30 Apr. 2010 0.69 0.06 0.06
Yes
Yes
Zhangzhou Haoyunda Hot iron equipment 31 May 2010 158.03 16.55 16.55 No No
Suzhou Yifeng Injection molding equipment 31 May 2010 0.25 0.21 0.21
Zhangzhou Keyida Bakelite equipment 31 May 2010 0.92 0.08 0.08
Zhangzhou Yuli Die casting equipment 31 May 2010 1.60 0.20 0.20
Zhangzhou Lanboni Injection molding equipment 31 May 2010 0.23 0.08 0.08
Non-rel
ated
compan
y
The
transaction
prices were
decided
based on
the
principle of
being
above the
book value,
as well as
the
assessment
and market
prices.
Yes Yes
Non-relat
ed
company7
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
Whethe
r a
related
transacti
on 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
Relations
hip with
the
Company
Zhangzhou Chuangyi Injection equipment 31 May 2010 0.40 0.05 0.05
Zhangzhou Kerui Die casting equipment 31 May 2010 9.50 1.25 1.25
Zhangzhou Ruicheng Die casting equipment 31 May 2010 18.00 7.08 7.08
Zhangzhou Haikun Die casting equipment 31 May 2010 0.85 0.04 0.04
Zhangzhou Fushun Injection molding equipment 31 May 2010 0.46 0.31 0.31
Suzhou Yifeng Motor equipment 31 May 2010 2.50 0.28 0.28
Zhangzhou Wangcheng Injection Molding equipment 30 Jun. 2010 91.45 9.33 9.33 No No
Zhangzhou Shunkun Bakelite equipment 30 Jun. 2010 1.32 1.13 1.13
Zhangzhou Kerui Die casting equipment 30 Jun. 2010 16.00 1.37 1.37
Zhangzhou Chuangyi Injection molding equipment 30 Jun. 2010 0.10 0.04 0.04
Zhangzhou Qiankun Injection molding equipment 30 Jun. 2010 0.30 0.05 0.05
Zhangzhou Lanboni Injection molding equipment 30 Jun. 2010 0.30 0.13 0.13
Zhangzhou Fushun Injection Molding equipment 30 Jun. 2010 0.90 0.61 0.61
Yes Yes
Zhangzhou Huasheng Mold equipment 31 Jul. 2010 17.96 4.67 4.67 Yes Yes
Zhangzhou Fenlong Slitting equipment 31 Aug. 2010 922.00 92.06 92.06 No No
Zhangzhou Hongyuan Die casting equipment 31 Jul. 2010 2.00 0.46 0.46
Zhangzhou Hongyuan Die casting equipment 31 Jul. 2010 7.30 1.50 1.50
Zhangzhou Haoyunda Die casting equipment 31 Jul. 2010 1.20 0.25 0.25
Zhangzhou Ruicheng Die casting equipment 31 Jul. 2010 0.10 0.06 0.06
Zhangzhou Boer Die casting equipment 31 Jul. 2010 0.40 0.06 0.06
Zhangzhou Hailong Hardware equipment 31 Jul. 2010 0.12 0.10 0.10
Zhangzhou Keid Bakelite equipment 31 Jul. 2010 0.25 0.21 0.21
Zhangzhou Lanboni Injection molding equipment 31 Jul. 2010 2.00 0.10 0.10
Zhangzhou Xiangkun Hardware equipment 31 Jul. 2010 22.60 1.67 1.67
Zhangzhou Yizheng Bakelite equipment 31 Jul. 2010 0.83 0.76 0.76
Zhangzhou Wangcheng Injection molding equipment 31 Jul. 2010 1.50 0.94 0.94
Zhangzhou Ruicheng Die casting equipment 31 Jul. 2010 0.90 0.13 0.13
Zhangzhou Dakun Motor equipment 31 Jul. 2010 16.00 1.49 1.49
Zhangzhou Xiangkun Slitting equipment 31 Jul. 2010 7.25 0.28 0.28
Longhai YIngfa Bakelite equipment 31 Jul. 2010 1.73 0.02 0.02
Zhangzhou Hewang Bakelite equipment 31 Jul. 2010 0.37 0.32 0.32
Yes Yes8
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
Whethe
r a
related
transacti
on 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
Relations
hip with
the
Company
Zhangzhou Keyida Bakelite equipment 31 Jul. 2010 7.47 0.84 0.84
Zhangzhou Wankun Bakelite equipment 31 Jul. 2010 1.95 0.99 0.99
Zhangzhou Chuangyi Injection molding equipment 31 Jul. 2010 0.60 0.15 0.15
Zhangzhou Chuangyi Injection molding equipment 31 Jul. 2010 0.30 0.14 0.14
Zhangzhou Wankun Injection molding equipment 31 Aug. 2010 1.69 0.76 0.76
Zhangzhou Shengyuan Hardware equipment 31 Aug. 2010 25.40 2.38 2.38
Zhangzhou Shunkun Bakelite equipment 31 Aug. 2010 2.80 0.39 0.39
Zhangzhou Fushun Injection molding equipment 31 Aug. 2010 0.20 0.17 0.17
Zhangzhou Hongyuan Injection molding equipment 31 Aug. 2010 1.65 1.41 1.41
Zhangzhou Yongkun Injection molding equipment 30 Sep. 2010 0.62 0.22 0.22
Zhangzhou Xinhui Hot iron equipment 30 Sep. 2010 0.35 0.34 0.34
Zhangzhou Shunkun Bakelite equipment 30 Sep. 2010 0.41 0.35 0.35
Zhangzhou Hewang Bakelite equipment 30 Sep. 2010 0.11 0.09 0.09
Zhangzhou Chuangyi Injection molding equipment 30 Sep. 2010 0.15 0.06 0.06
Zhangzhou Wankun Injection molding equipment 30 Sep. 2010 2.95 0.31 0.31
Total 4,001.67 447.30 447.309
3.2.4 Changes in scope of consolidation
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 859,836.18 (104.163.82)
Subsidiary newly established, the
Company holds 74.25% of shares of
this company indirectly
Xiamen Star
Comgistic
Commerce & Trade
Co., Ltd.
12 Aug. 2010 27,978,684.15 (21,315.85)
Subsidiary newly established, the
Company holds 75% of shares of this
company indirectly
Shenzhen Canbao Commerce & Trade Co., Ltd. (hereinafter referred to as “Shenzhen
Canbao”) was a wholly-owned subsidiary company established by Shanghai Star Travel
Commerce & Trade Co., Ltd.--the subsidiary of South Port Electronics (the subsidiary of the
Company) on 29 Mar. 2010 with RMB 1,000,000.00.
Xiamen STAR Comgistic Commerce & Trade Co., Ltd. (hereinafter referred to as Xiamen
STAR Comgistic) was a wholly-owned subsidiary company established by the subsidiary of
Tsann Kuen Zhangzhou Enterprise Co., Ltd. (the subsidiary of the company) on 12 Aug. 2010
with RMB 28,000,000.00.
Unit: RMB Yuan
Name Date
Closing net
assets
Profit as of
reporting period
The scope of consolidation and
reason for change
EUPA (Hong Kong) Limited 1 May 2010 0.00 548,843.70 Share right transfer
3.2.5 Transfer of equity under the same control
Aim at the layout of industries and the integration of resources, it is necessary for the
company to rearrange the structure of investment in its production, tourism, and channel
industry in which to attain the administrative objective of professional division, explicit
responsibility, and definable performance. The company conducted share transfer and capital
increase to the two subsidiaries Xiamen Star Commerce and Trade and Shanghai Fanxin in
Sep. 2010 according to net profit of Aug. 2010, and shareholders, proportion of shareholding
and registered capital before and after the change were as follows:
Unit: RMB Yuan
Before the change After the change
Company Full name of
shareholder
Proportion
Registered
Capital
Full name of
shareholder
Proportion
Registered
Capital
Shanghai STAR
Commerce & Trade
Co., Ltd. Commerce &
Trade Co., Ltd
99%
Xiamen Star
Commerce &
Trade Co.,
Ltd.
Dai Huiyuan 1%
9,000,000
Xiamen Star
Comgistic
Commerce & Trade
Co., Ltd.
100% 30,000,000
Shanghai Star
Commerce & Trade
Co., Ltd
51%
Shanghai
Fanxin
Aviation
Services Ltd. Zhu Decheng 49%
1,500,000
Xiamen Star
Commerce & Trade
Co., Ltd
100% 5,500,0001011
3.2.6 Other equity investment
Tsann Kuen Zhangzhou Enterprise Co., Ltd., the Company’s holding subsidiary, has
completed the procedures of commerce registration for Globe Strong Limited and Brilliant
Leader Limited which are two wholly owned subsidiaries. For more details, please refer to
Public Notice on Completing Procedures of Business Registration by Holding Subsidiary
Tsaan Kuen Zhangzhou Enterprise Co., Ltd. published on Securities Times, Ta Kung Pao and
http://www.cninfo.com.cn dated on 11 Oct. 2010.
Xiamen Star Commerce & Trade Co., Ltd, the Company’s holding subsidiary, purchased
Suzhou Taihu Int,L Travel Service Co., Ltd. on 10 Sep. 2010 with a purchasing amount of
RMB 486,867.8. Xianmen Star Commerce & Trade has paid 20% of the payment for share
transfer until the reporting day and the balance would be paid after the change of license.
3.3 Particulars about fulfillment of commitments made by the Company, its shareholders or
actual controller
□Applicable √Inapplicable
3.4 Warnings of estimated losses or major changes of the accumulative net profit achieved
during the period from year-begin to the end of the next report period compared with the
same period of last year, as well as explanation on reasons
□Applicable √Inapplicable
3.5 Other significant events to be explained
3.5.1 Securities investment
□Applicable √Inapplicable
3.5.2 Equity of other listed companies held by the Company
√Applicable □Inapplicable
Unit: (RMB) Yuan
Stock
code
Short
form of
stock
Initial
investment
Ratio to
equity of
invested
company
Book value at
period-end
Profit and
loss in
report
period
Change of
owners’
equity in
report period
Accounting
entry
Source
of
stock
600838
Shanghai
Jiubai
30,700.00 0.01 298,166.40 0 3,538.08
Financial
assets
available
for sale
Corpor
ate
share
Total 30,700.00 0.01 298,166.40 0 3,538.0812
3.5.3 Researches, interviews and visits received in the report period
In the report period, when receiving researches and interviews, the Company and relevant
information disclosure obligors abided by the Guide for Fair Information Disclosure of Listed
Companies, not conducting differential treatments or selectively and privately leak
undisclosed information to certain parties. And the researches and interviews received were
listed as follows:
Time Place
Way of
reception
Visitor
Main discussion and materials
provided by the Company
19 Jan. 2010 By telephone Ms. Fang Operation status of the Company
25 Feb. 2010 By telephone Mr. Ding Operation status of the Company
20 Apr. 2010 By telephone Mr. Liu Operation status of the Company
28 Jun. 2010 By telephone Ms. Li Operation status of the Company
3 Sept. 2010 By telephone Mr. Yu Operation status of the Company
16 Sept. 2010 By telephone Ms. Wang Operation status of the Company
16 Sept. 2010 Field research Mr. Xu Operation status of the Company
27 Sept. 2010
Company office
By telephone Mr. Mu Operation status of the Company
3.6 Derivative investments
√Applicable □Inapplicable
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—Tsann
Kuen Zhangzhou 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.
Tsann Kuen Zhangzhou Enterprise Co., Ltd., the Company’s holding subsidiary, established
the Management Procedures for Trading Derivative Financial Products after the Procedures
was approved by the Board of Directors 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.13
(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) Losses effected by completed transaction amount of derivative products was RMB
2,816,970.85, and loss from undelivered transaction was RMB 233,608.22 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 subsidiary
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 Position-holding situation of derivative investments as at the end of the report period
√Applicable □Inapplicable
Unit: (RMB) Yuan
Type of contract
Opening
contract amount
Closing
contract
amount
Gains and
losses for
report period
Proportion of the closing contract
amount in the Company’s net assets as
at the end of the report period
Buying and selling
forward exchange
33,966,028.92 33,717,968.00 (2,339,608.22) 7.46%
Forward purchase/sale
of foreign currency
136,619,000.00 135,851,000.00 2,106,000.00 30.06%
Total 170,585,028.92 169,568,968.00 (233,608.22) 37.52%14
3.7 Contingencies
1. Contingent liabilities caused by pending lawsuits or arbitrations, as well as the financial
impact
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 filed two lawsuits to Fujian Zhangzhou Intermediate People’s Court,
with details as follows:
1) Concerning the case of the equipment purchase & sales and lease dispute, Chaoda claimed
to terminate all equipment purchase & sales and lease agreements between both parties and
claimed Zhangzhou Tsann Kuen to return the equipment transfer payment which had been
paid by Chaoda. On 16 Sept. 2010, the Court entered a verdict, terminating equipment
purchase & sales and lease agreements between both parties. Not satisfied with the verdict of
the first trial, Zhangzhou Tsann Kuen appealed on 7 Oct. 2010. Up until the report date, the
second trial has not begun.
2) Concerning the case of the product supply agreement termination and compensation
dispute, Chaoda claimed to terminate the product supply agreement between both parties and
claimed Zhangzhou Tsann Kuen to compensate for various losses reaching RMB 12.6 million
and return the performance bond of RMB 200,000. On 29 Jun. 2010, the Court entered a
verdict, terminating the product supply agreement between both parties and ordering
Zhangzhou Tsann Kuen to pay about RMB 6.06 million to Chaoda for materials provided by
Chaoda and return the performance bond of RMB 200,000 to Chaoda. The said verdict had
no influence on gains and losses of the Company. Not satisfied with the verdict of the first
trial, Zhangzhou Tsann Kuen appealed on 14 Jul. 2010. Up until the report date, the second
trial has not begun.
2. Up until the report date, there have been no contingent liabilities and their financial
influence caused by the Company’s providing liability guarantees for other parties that needs
to be disclosed.
3. Other contingent liabilities and their financial influence
TKC’s Coffee Grinder, which was supplied to Starbucks (Chinese name is called “星巴克”)
by subsidiary of the Company Zhangzhou Tsann Kuen during 2002 to 2008, was called back
due to complaint from customers of Starbucks. After 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.15
TKL has been delivered 36,000-set finished products in Sep. 2009, and caused loss of RMB
1,180,400. Up to the report day, neither there was new order, nor did the trader require the
residual sets of 4,000.
3.8 Other matters
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 total demands of
Zhangzhou Tsann Kuen 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.
Up until the report date, RMB 39,746,220.40 has been left untransferred, which can be used
for deduction for the future to come.16
§4 Attachment
4.1 Balance Sheet
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
Balance Sheet (Un-audited)
30 Sep. 2010
Unit: RMB Yuan
Closing balance Opening balance
Assets
Consolidation Parent company Consolidation Parent company
Current Assets:
Monetary funds 540,899,099.24 2,030,987.44 632,274,671.72 494,441.23
Transaction financial asset 1,588,661.38
Notes receivable 2,075,144.27 5,851,328.67
Accounts receive bale 521,992,817.06 389,834,241.91
Account paid in advance 8,503,028.78 278,166.95 4,382,912.72 48,231.48
Interest receivable
Dividend receivable
Other account receivable 30,378,541.02 2,940,427.99 14,853,085.85 230,037.15
Inventories 430,507,753.34 350,258,713.95
Non-current assets due within 1 year
Other current assets
Total current assets 1,534,356,383.71 5,249,582.38 1,399,043,616.20 772,709.86
Non-current assets
Financial assets available for sale 298,166.40 298,166.40 293,630.40 293,630.40
Held to maturity investments
Long-term account receivable 106,856,737.33 99,661,083.56
Long-term equity investment 40,000.00 994,604,030.83 40,000.00 1,005,105,478.85
Investing property 20,757,833.95 24,966,382.69 33,666,204.47 35,507,404.55
Fixed asset 396,595,502.34 27,929,124.25 519,670,147.89 19,068,274.15
Project in construction 4,455,619.60 4,656,021.02 3,632,934.04
Engineering material
Fixed asset disposal
Bearer biological asset
Oil assets
Intangible assets 25,764,122.00 19,569,198.15 27,735,258.23 20,330,648.46
Development expense
Goodwill 996,979.09 996,979.09
Long-term expense to be
apportioned
4,798,072.27 153,414.54 1,294,834.29 126,758.11
Deferred tax assets 26,138,096.36 30,706,491.08
Other non-current assets
Total of non-current assets 586,701,129.34 1,067,520,316.86 718,720,650.03 1,084,065,128.56
Total assets 2,121,057,513.05 1,072,769,899.24 2,117,764,266.23 1,084,837,838.42
Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi17
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
Balance Sheet-Continued (Un-audited)
30 Sep. 2010
Unit: RMB Yuan
Closing balance Opening balance
Items
Consolidation Parent company Consolidation Parent company
Current liabilities:
Short-term borrowings
Transaction financial liabilities 233,608.22
Notes payable 68,893,946.39 56,370,310.39
Account payable 987,951,181.87 308,748.92 837,178,756.46 1,665,294.11
Account received in advance 18,655,976.99 146,260.00 14,680,017.93
Employee’s compensation payable 42,665,974.15 194,523.12 48,929,470.49 113,858.79
Tax payable 44,881,607.01 68,947,954.19 40,091,138.11 68,631,609.07
Interest payable
Dividend payable
Other account payable 87,925,714.50 604,800,907.31 256,531,703.89 616,799,841.82
Non-current liabilities due within 1 year 68,282,000.00
Other current liabilities
Total current liabilities 1,251,208,009.13 674,398,393.54 1,322,063,397.27 687,210,603.79
Non-current liabilities:
Long-term borrowings
Bonds payable
Long-term accounts payable
Special accounts payable
Deferred income
Projected liabilities 1,618,986.20
Deferred tax liabilities 58,842.61 58,842.61 296,143.90 57,844.69
Other non-current liabilities 44,008,881.36 40,106,220.40
Total of non-current liabilities 44,067,723.97 58,842.61 42,021,350.50 57,844.69
Total liabilities 1,295,275,733.10 674,457,236.15 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 125,217,528.91 123,693,805.19 125,213,990.83 123,690,267.11
Less: Treasury Stock
Surplus reserves
Retained earnings (785,656,868.18) (837,731,219.10) (840,347,470.50) (838,470,954.17)
Foreign exchange difference (651,220.33)
Total shareholders' equity attributable to
parent company
451,910,737.73 398,312,663.09 396,565,377.00 397,569,389.94
Minority interest 373,871,042.22 357,114,141.46
Total shareholder’s equity 825,781,779.95 398,312,663.09 753,679,518.46 397,569,389.94
Total liabilities and shareholders’ equity 2,121,057,513.05 1,072,769,899.24 2,117,764,266.23 1,084,837,838.42
Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi18
4.2 Income statement during the reporting period
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
Income Statement (Un-audited)
1 Jul.-30 Sep. 2010
Unit: RMB Yuan
Jul.-Sep. 2010 Jul.-Sep. 2009
Items
Consolidation Parent company Consolidation Parent company
I. Total revenue 853,595,297.04 1,319,236.20 705,296,161.86 1,633,727.82
II. Total sales cost 826,189,199.04 3,330,148.43 695,069,310.25 2,760,205.42
Less: sales cost 733,014,214.31 1,271,516.44 620,800,104.52 1,577,155.78
Taxes and associate charges 1,196,073.91 69,995.34 873,413.01 81,798.67
Sales expenses 34,290,108.06 22,340,569.47
Administrative expenses 58,850,194.13 1,957,188.40 52,046,676.80 1,230,594.64
Financial expense 1,069,630.77 30,322.06 (3,570,480.13) 110,796.87
Impairment loss (2,231,022.14) 1,126.19 2,579,026.58 (240,140.54)
Add: gain/(loss) from change in fair
value (“-” means loss)
(9,256.59) 259,111.76
Gain/(loss) from investment (“-” means
loss)
(4,521,157.79) (1,132,867.40)
III. Business profit (“-” means loss) 22,875,683.62 (2,010,912.23) 9,353,095.97 (1,126,477.60)
Add: non-business income 4,531,665.78 131,428.37 9,035,708.60 154,752.42
Less: non-business expense 24,392.70 1,048,362.32
Including: loss from non-current asset
disposal
16,938.86 203,451.94
IV. Total profit (“-” means loss) 27,382,956.70 (1,879,483.86) 17,340,442.25 (971,725.18)
Less: income tax expense 2,693,598.03 1,725,088.86
V. Net profit (“-” means loss) 24,689,358.67 (1,879,483.86) 15,615,353.39 (971,725.18)
Attributable to parent company 17,782,669.68 (1,879,483.86) 11,819,201.62 (971,725.18)
Minority interest 6,906,688.99 3,796,151.77
VI. Earnings per share
(I) Basic earnings per share 0.0160 0.0106
(II) Diluted earnings per share 0.0160 0.0106
VII. Other comprehensive income 36,560.16 (357,763.56) 62,043.54
VIII. Total comprehensive income 24,725,918.83 (1,879,483.86) 15,257,589.83 (909,681.64)
Total comprehensive income attributable
to owner of parent company
17,819,229.84 (1,879,483.86) 11,461,438.06 (909,681.64)
Total comprehensive income attributable
to minority shareholders
6,906,688.99 3,796,151.77
Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi19
4.3 Income statement from the year-begin to the end of reporting period
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
Income Statement (Un-audited)
1 Jan.-30 Sep. 2010
Unit: RMB Yuan
Jan.-Sep. 2010 Jan.-Sep. 2009
Items
Consolidation Parent company Consolidation Parent company
I. Total revenue 2,518,604,859.66 4,340,328.62 1,890,015,449.96 4,340,355.55
II. Total sales cost 2,448,299,260.58 9,112,221.91 1,859,613,441.68 8,725,357.77
Less: sales cost 2,198,044,090.73 4,192,428.15 1,649,014,966.94 4,222,276.10
Taxes and associate charges 3,295,459.81 220,540.00 2,719,457.34 225,821.80
Sales expenses 87,543,256.12 62,131,985.82
Administrative expenses 163,619,886.37 5,292,973.14 148,167,295.81 5,144,948.19
Financial expense (5,359,845.71) 77,161.81 (2,644,521.22) 616,820.10
Impairment loss 1,156,413.26 (670,881.19) 224,256.99 (1,484,508.42)
Add: gain/(loss) from change in fair value
(“-” means loss)
(1,822,269.60) (287,913.25)
Gain/(loss) from investment (“-” means loss) (2,425,692.45) 5,266,277.58 (1,808,428.37) 7,500.00
III. Business profit (“-” means loss) 66,057,637.03 494,384.29 28,305,666.66 (4,377,502.22)
Add: non-business income 15,790,354.63 245,350.78 20,245,884.11 769,094.81
Less: non-business expense 832,872.43 2,544,984.10 (2,714.93)
Including: loss from non-current asset
disposal
57,570.89 1,223,976.71 (2,714.93)
IV. Total profit (“-” means loss) 81,015,119.23 739,735.07 46,006,566.67 (3,605,692.48)
Less: income tax expense 6,424,153.67 3,334,897.80
V. Net profit (“-” means loss) 74,590,965.56 739,735.07 42,671,668.87 (3,605,692.48)
Attributable to parent company 54,731,971.89 739,735.07 31,982,417.80 (3,605,692.48)
Minority interest 19,858,993.67 10,689,251.07
VI. Earnings per share
(I) basic earnings per share 0.0492 0.0288
(II) diluted earnings per share 0.0492 0.0288
VII. Other comprehensive income 654,758.41 3,538.08 (297,655.38) 62,043.54
VIII. Total comprehensive income 75,245,723.97 743,273.15 42,374,013.49 (3,543,648.94)
Total comprehensive income attributable to
owner of parent company
55,386,730.30 743,273.15 31,684,762.42 (3,543,648.94)
Total comprehensive income attributable to
minority shareholders
19,858,993.67 10,689,251.07
Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi20
4.4 Cash flow statement from the year-begin to the end of reporting period
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
Cash Flow Statement (Un-audited)
1 Jan.-30 Sep. 2010
Unit: RMB Yuan
Accumulative amount as of reporting
period
Accumulative Amount at the same
Items period of last year
Consolidation Parent company Consolidation Parent company
I. Cash flows for operating activities:
Cash received from sales of goods or rending of
services
2,349,018,074.47 1,902,634,202.37
Refund of tax and fare received 197,497,897.91 92,087,126.18 284,154.60
Other cash received relating to operating activities 86,687,534.97 31,885,487.28 57,685,588.52 30,745,711.47
Sub-total of cash inflows 2,633,203,507.35 31,885,487.28 2,052,406,917.07 31,029,866.07
Cash paid for goods and services 1,959,390,817.91 1,486,435,557.73 122,176.65
Cash paid to and on behalf of employees 265,834,906.95 24,118,979.65 253,361,643.42 22,801,699.13
Tax and fare paid 16,934,214.63 2,372,762.40 15,622,497.93 2,024,664.73
Other cash paid relating to operating activities 248,487,512.21 20,070,510.17 185,255,985.89 6,270,515.25
Sub-total of cash outflows 2,490,647,451.70 46,562,252.22 1,940,675,684.97 31,219,055.76
Net cash flow from operating activities 142,556,055.65 (14,676,764.94) 111,731,232.10 (189,189.69)
II. Cash Flows from Investment Activities:
Cash received from return of investments 1,061,500.00
Cash received from investment income 7,925,803.21 15,767,517.18 7,500.00 7,500.00
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets
17,020,782.09 17,165,208.34
Net cash received from disposal of subsidiaries and
other operating units
Other cash received relating to investment activities
Sub-total of cash inflows 24,946,585.30 15,767,517.18 18,234,208.34 7,500.00
Cash paid for acquiring fixed assets, intangible assets
and other long-term assets
27,399,317.27 1,919,183.89 37,883,916.73 1,939,914.00
Cash paid for acquiring investments 654,557.82 1,725,000.00 5,000,000.00
Net cash used in acquiring subsidiaries and other operating units
Other cash paid relating to investment activities
Sub-total of cash outflows 28,053,875.09 1,919,183.89 39,608,916.73 6,939,914.00
Net cash flow from investing activities (3,107,289.79) 13,848,333.29 (21,374,708.39) (6,932,414.00)
III. Cash Flows from Financing Activities:
Cash received from absorbing investment
Including: Cash received from increase in minority interest
Cash received from borrowings 266,013,820.76 157,261,700.00
Cash received from issuance of bonds
Other cash relating to financing activities 160,000,000.00 120,000,000.00
Sub-total of cash inflows 160,000,000.00 266,013,820.76 277,261,700.00
Cash paid for settling debt 225,948,239.46 157,577,962.02 384,294,974.87 274,400,368.22
Cash paid for distribution of dividends or profit or
reimbursing interest
2,352,514.18
Including: dividends or profit paid to minority interest 2,352,514.18
Other cash payments relating to financing activities
Sub-total of cash outflows 228,300,753.64 157,577,962.02 384,294,974.87 274,400,368.22
Net cash flow from financing activities (228,300,753.64) 2,422,037.98 (118,281,154.11) 2,861,331.78
IV. Effect of foreign exchange rate changes (1,234,182.37) (57,060.12) (308,586.25) (49,210.85)
V. Increase in cash and cash equivalents (90,086,170.15) 1,536,546.21 (28,233,216.65) (4,309,482.76)
Add: Cash and cash equivalents at year-begin 540,739,906.30 494,441.23 399,276,546.68 4,939,594.77
VI. Cash and cash equivalents at the end of the year 450,653,736.15 2,030,987.44 371,043,330.03 630,112.01
Legal Representative: Jian Derong CFO: Chen Zongyi Person in charge of Accounting Office: Chen Zongyi21
4.5 Auditors’ Report
Audit opinion: Un-audited
Chairman of the Board: Jian Derong
TSANN KUEN (CHINA) ENTERPRISE CO. LTD
16 October 2010
