2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 2015 SEMI-ANNUAL REPORT August 2015 1 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Section I. Important Reminders, Contents & Explanation The Board of Directors, the Supervisory Committee as well as all directors, supervisors and senior management staff of Tsann Kuen (China) Enterprise Co., Ltd. (hereinafter referred to as “the Company”) warrant that this report is factual, accurate and complete without any false record, misleading statement or material omission. And they shall be jointly and severally liable for that. All directors attended the board session for reviewing this report. The Company plans not to distribute cash dividends or bonus shares or turn capital reserve into share capital. Mr. Pan Zhirong, company principal, and Mr. Wu Yanru, head of the accounting work & the accounting division (head of accounting) jointly declare that the financial statements carried in this report are factual, accurate and complete. English translation is for reference only. Should there be any discrepancy between the two versions, the Chinese version shall prevail. 2 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Contents Section I. Important Reminders, Contents & Explanation………………………………………………………………………………2 Section II. Company Profile …………………………………………………………………………………………………………….5 Section III. Highlights of Accounting Data & Financial Indicators ……………………………………………………………………..6 Section IV. Report of the Board of Directors…………………………………………………………………………………………….8 Section V. Significant Events…………………………………………………………………………………………………………...18 Section VI. Changes in Shares & Shareholders………………………………………………………………………………………...29 Section VII. Preference Shares…………………………………………………………………………………………………………31 Section VIII. Directors, Supervisors & Senior Management Staff …………………………………………………………………….32 Section IX. Financial Report……………………………………………………………………………………………………………32 Section X. Documents Available for Reference………………………………………………………………………………………..32 3 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Explanation Term Refers to Contents Xiamen Tsann Kuen, MCKB, Company, Refers to TSANN KUEN (CHINA) ENTERPRISE CO., LTD. the Company, TKC Tsann Kuen Zhangzhou, TKL Refers to Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. Tsann Kuen Shanghai, TKS Refers to Tsann Kuen China (Shanghai) Enterprise Co., Ltd. Tsann Kuen (Zhangzhou) South Port Electronics Enterprise South Port Electronics, TKN Refers to Co., Ltd. Tsann Kuen Institute, LTC Refers to Tsann Kuen (Zhangzhou) Profession and Technology Institute STD Refers to Shanghai Canxing Trading Co., Ltd. East Sino Development Refers to East Sino Development Limited SCI Refers to Pt.Star Comgistic Indonesia OSI Refers to Orient Star Investments Limited Yuan Refers to RMB Yuan 4 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Section II. Company Profile I. Basic information of the Company Stock exchange listed with Shenzhen Stock Exchange Chinese name of the Company 厦门灿坤实业股份有限公司 Abbr. of the Chinese name of the Company 闽灿坤 English name of the Company TSANNKUEN(CHINA) ENTERPRISE CO. LTD Abbr. of the English name of the Company TKC Legal representative of the Company Pan Zhirong II. Contact information Company Secretary Securities Affairs Representative Name Sun Meimei TSANN KUEN Industrial Park, Taiwanese Investment Zone, Contact address Zhangzhou, Fujian Province, P.R.China Tel. 0596-6268161 Fax 0596-6268104 E-mail mm_sun@tkl.tsannkuen.com III. Other information 1. Ways to contact the Company Did any change occur to the registered address, office address and their postal codes, website address and email address of the Company during the reporting period? □ Applicable √ Inapplicable 2. About information disclosure and where this report is placed Did any change occur to information disclosure media and where this report is placed during the reporting period? □ Applicable √ Inapplicable 3. Change of the registered information Did any change occur to the registered information during the reporting period? □ Applicable √ Inapplicable The registration date and place of the Company, its business license No., taxation registration No. and organizational code did not change during the reporting period. The said information can be found in the 2014 Annual Report. 5 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4. Other relevant information Did any change occur to other relevant information during the reporting period? □ Applicable √ Inapplicable Section III. Highlights of Accounting Data & Financial Indicators I. Major accounting data and financial indicators Does the Company adjust retrospectively or restate accounting data of previous years due to change of any accounting policy or correction of any accounting error? □ Yes √ No Unit: RMB Yuan Major accounting data Reporting period Same period of last year YoY +/-(%) Operating revenues 895,194,158.07 890,216,299.51 0.56 Net profit attributable to shareholders of the Company 15,111,025.18 14,857,989.76 1.70 Net profit attributable to shareholders of the Company 3,666,507.14 17,047,602.69 -78.49 after deducting non-recurring gains and losses Net cash flow from operating activities -50,563,639.81 -33,079,939.03 -52.85 Basic EPS 0.08 0.08 0.00 Diluted EPS 0.08 0.08 0.00 Weighted average ROE (%) 2.73 2.82 -0.09 As at the end of the Major accounting data As at the end of last year +/- (%) reporting period Total assets 1,766,285,350.11 1,651,024,619.41 6.98 Owners’ equity attributable to shareholders of the 533,817,984.80 546,574,409.55 -2.33 Company II. Differences between accounting data under domestic and overseas accounting standards 1. Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards □ Applicable √ Inapplicable No difference in the reporting period. 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable √ Inapplicable No difference in the reporting period. 6 2015 Semi-annual Report of Tsann Kuen (China) Enterprise Co., Ltd. III. Items and amounts of extraordinary gains and losses √ Applicable □ Inapplicable Unit: RMB Yuan Item Amount Explanation Gains/losses on the disposal of non-current assets (including the offset part of asset Gains/losses on the 792,596.73 impairment provisions) disposal of assets Tax rebates, reductions or exemptions due to approval beyond authority or the lack of official approval documents Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at certain quotas or amounts according to the 1,571,749.00 country’s unified standards Capital occupation charges on non-financial enterprises that recorded into current gains and losses Gains due to that the investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the enjoyable fair value of the identifiable net assets of the investees when making the investments Gain/loss on non-monetary asset swap Gain/loss on entrusting others with investments or asset management Asset impairment provisions due to acts of God such as natural disasters Gain/loss on debt restructuring Expenses for business reorganization, such as expenses for staffing, reorganization etc. Gain/loss on the part over the fair value due to transactions with distinctly unfair prices Current gains and losses of subsidies acquired from business combination under the same control as from period-begin to combination date Gain/loss on contingent events irrelevant to the Company’s normal business Gains on sale of forward Gains and losses on change in fair value from tradable financial assets and tradable exchange contracts, fair financial liabilities, as well as investment income from disposal of tradable financial 14,831,578.67 value changes, wealth assets and tradable financial liabilities and financial assets available for sales except for management products effective hedging related with normal businesses of the Company and other current assets Reversal of provision for impairment that made impairment test independently Gain/loss on loans obtained by entrusting others Gain/loss on change of the fair value of investing real estate of which the subsequent measurement is carried out adopting the fair value method Effect on current gains/losses when a one-off adjustment is made to current gains/losses according to requirements of taxation, accounting and other relevant laws and regulations Custody fee income when entrusted with operation Other non-operation income and expenses other than the above 746,947.82 Other gain/loss items that meet the definition of an extraordinary gain/loss Less: Income tax effects 2,687,869.17 Minority interests effects (after tax) 3,810,485.01 Total 11,444,518.04 Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public —Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √ Inapplicable 7 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Section IV. Report of the Board of Directors I. Business review for the reporting period For the reporting period, the Company achieved operating revenues of RMB 895 million, up 0.56% over RMB 890 million of the same period of last year, and net profits of RMB 15.11 million, up 1.70% over RMB 14.86 million of the same period of last year. The financial income showed a strong growth from the same period of last year because we minimized the unfavorable factors of increased labor cost, etc. by strictly controlling our procurement cost, introducing automated jigs and other equipment, enhancing internal operation and optimizing the production and selling processes. II. Main business analysis 1. Overview According to our strategy of “lean reform and transformation for upgrading”, we introduced new technique to improve our productivity effect, optimize our product performance and cut down our manufacturing costs. Meanwhile, committed to green, low-carbon economy, we improved our operating efficiency to save energy and reduce costs. Introducing new technique and at the same time upholding independent product development and innovation with strict quality standards, we will transform our products, amid increasing competition, towards products with high added value and build up a high-end service model to create more intimacy with customers and therefore more market demands. In 2015, the American and European markets continue to recover, with a larger market scale but a slower-than-expected speed. We adjust our product structure, optimize our supplier management framework, reduce our costs in every link of the supply chain, increase our operating efficiency and effectiveness, and provide elaborately designed multifunctional small household appliances with high green, low-carbon technological contents which are exactly what the market needs, trying to increase our profitability. Meanwhile, as smart houses are becoming a trend and people are pursuing more convenient and comfortable life, we will focus, in our efforts for product development and innovation, on smart household appliances to satisfy people’s needs for a fully smart house. We will try to effectively enlarge our share in the market where smart household appliances have been considered a necessary element for a comfortable life. 2. YoY changes in major financial data Unit: RMB Yuan As at the As at the Item +/-% Main reasons for changes period-end year-beginning Financial assets measured at fair value Fair value gains on the undelivered forward and of which changes are recorded into 7,482,150.00 2,610,000.00 186.67 exchange contracts increased. current gains and losses RMB 230 million of wealth management Other current assets 244,113,215.87 13,087,495.75 1,765.24 products were purchased. Fees for the changes of land ownership Construction in progress 353,168.37 233,968.67 50.95 certificates and land requisition 8 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD As at the As at the Item +/-% Main reasons for changes period-end year-beginning Other non-current assets 3,195,929.47 1,929,374.75 65.65 Prepayments for equipment increased. Short-term borrowings 295,103,472.00 61,190,000.00 382.27 Short-term borrowings from banks increased. Financial liabilities measured at fair Forward exchange contracts appraised at the value and of which changes are 27,500.00 3,956,259.85 -99.30 year-beginning produced gains in the current recorded into current gains and losses period. Interest payable 1,119,097.02 68,275.80 1,539.08 Short-term borrowings from banks increased. The gains on the forward exchange contracts in Deferred income tax liabilities 1,349,588.26 618,966.78 118.04 the current period are expected to increase. Same period of Item Reporting period +/-% Main reasons for changes last year Operating revenues 895,194,158.07 890,216,299.51 0.56 Operating costs 771,483,297.01 761,974,414.46 1.25 Business tax and surtaxes 3,084,362.18 4,930,309.19 -37.44 Exempted and offset taxes decreased. Export expenses and advertising fees for sales Selling expenses 41,124,129.32 34,383,454.76 19.60 promotion increased. Administrative expenses 82,998,690.21 72,912,587.41 13.83 Financial expenses -9,197,945.66 -11,216,974.35 18.00 Bad-debt provisions for rents receivable and Asset impairment losses 1,103,733.79 438,958.76 151.44 inventory falling price losses The forward exchange contracts for the current Gains on fair value changes 8,800,909.85 -26,768,171.00 132.88 period are appraised to be profitable. Gains on delivered forward exchange contracts Investment gains 6,030,668.82 14,000,118.50 -56.92 and wealth management products decreased. Non-business income 3,229,489.17 8,820,848.29 -63.39 Subsidy income decreased. Non-business expenses 118,195.62 741,772.95 -84.07 Losses on retirement of fixed assets decreased. Income tax expenses 3,300,757.78 2,957,439.90 11.61 R&D input 36,107,424.66 30,469,780.95 18.50 Net cash flows from operating activities -50,563,639.81 -33,079,939.03 -52.85 Export tax rebates decreased. -1,181,899,628.4 Changes in the restricted term deposits between Net cash flows from investing activities -249,714,881.93 78.87 9 the two periods Financings for export and borrowings from the Net cash flows from financing activities 198,385,922.40 539,659,463.51 -63.24 controlling shareholder decreased. Net increase in cash and cash -103,509,996.36 -670,308,694.60 84.56 equivalents Major changes to the profit structure or sources of the Company during the reporting period: □ Applicable √ Inapplicable No such cases. Reporting period progress of the future development planning in the disclosed documents of the Company such as share-soliciting prospectuses, offering prospectuses, asset reorganization reports, etc.: □ Applicable √ Inapplicable No such cases. 9 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Review the progress of the previously disclosed business plan in the reporting period: For the first half of 2015, the Company achieved operating revenues of RMB 895 million with a net profit attributable to the shareholders of the Company (without subsidiaries) of RMB 15.11 million. III. Breakdown of main business Unit: RMB Yuan Increase/decrease Increase/decrease Increase/decrease Operating Gross profit of operating of operating of gross profit Item Operating costs revenues rate (%) revenues over costs over last rate over last last year (%) year (%) year (%) Classified by industry Small home appliance 860,571,679.13 760,838,332.58 11.59% 0.82% 1.39% -0.49% manufacture Total 860,571,679.13 760,838,332.58 11.59% 0.82% 1.39% -0.49% Classified by product Gourmet 555,817,873.00 485,035,374.13 12.73% 7.86% 8.87% -0.81% cooking Home 175,862,090.09 161,355,707.36 8.25% -32.66% -32.61% -0.06% assistant Tea/coffee 120,747,536.58 109,538,492.39 9.28% 76.05% 78.26% -1.13% Others 8,144,179.46 4,908,758.70 39.73% -3.91% 23.23% -13.27% Total 860,571,679.13 760,838,332.58 11.59% 0.82% 1.39% -0.49% Classified by region America 359,460,518.90 320,193,135.34 10.92% 8.98% 11.13% -1.73% Asia 270,076,646.06 238,498,777.15 11.69% -0.99% -2.49% 1.36% Europe 185,217,404.35 162,165,865.62 12.45% -2.94% -1.85% -0.97% Australia 41,042,382.47 35,669,139.62 13.09% -23.92% -24.98% 1.22% Africa 4,774,727.35 4,311,414.85 9.70% -22.35% -12.66% -10.02% Total 860,571,679.13 760,838,332.58 11.59% 0.82% 1.39% -0.49% IV. Core competitiveness analysis As the small home appliance manufacturers, most of the products were export-oriented of the Company. The advantages of the core competence analysis of the Company were mainly summarized as: based on the strong technology and R&D advantages, the Company could timely make researches and develop of the new products according to the market requirements and continuously gained the recognition from certain global famous brand clients, then maintained the better cooperative relationships that owned a preferable market position. During the reporting period, the Company gained 27 R&D patent, including 2 patents for invention, 3 innovation patents and 22 appearance patents; besides there were dozens of patens under patent application. The gaining of the patents benefited from the perfection of the intellectual property 10 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD protection of the Company, and the Company would continue to exert the advantages of the proprietary intellectual property rights as well as to maintain the technology leading position for enhancing the core competence. During the reporting period, the controlling shareholder of the Company, Zhangzhou Tsann Kuen had purchased all the equities of the related party-(Taiwan) Xianrui Intelligence Co., Ltd. Tsann Kuen Xianrui currently handled the Arduino open type control platform technology, which could make a medium and long term R&D strategic layout for the Company of the IOT and the future ICT as well as the AI. After the completion of the purchase, the Company could in virtue of the R&D advantages enjoyed in Taiwan of the related party Tsann Kuen Xianrui Intelligence Co., Ltd. for further enhance the overall R&D ability of the Company and at the same integrated and focused on the medium and long-term development of strategic management of the Company to form the R&D resources complementary synergy of both sides of the Taiwan Straits for facing with the rapid change of the household appliances industry, enhancing the household appliances intelligent upgrade management and reducing the possible related transactions in the future. V. Investment analysis 1. Overseas equity investments (1) Overseas investments √ Applicable □ Inapplicable Overseas investments Investments in Jan. – Jun of 2015 (Yuan) Investments in Jan. – Jun of 2014 (Yuan) +/- % 0.00 0.00 0.00 Particulars about investees Proportion of the Company’s investment in Name of investee Main business the investee’s total equity interests (%) ORIENT STAR INVESTMENTS Investment 75.00 LIMITED (2) Equity-holdings in financial enterprises □ Applicable √ Inapplicable The Company was not involved with any equity-holding in financial enterprises. (3) Securities investments □ Applicable √ Inapplicable The Company was not involved with any security investment. (4) Equities held in other listed companies □ Applicable √ Inapplicable The Company was not involved with any equity held in other listed companies. 11 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Wealth management entrustment, derivative investments and entrustment loans (1) Wealth management entrustment √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Actual Related-party Principal Impairment Name of Product Amount Beginning Payment Predicted gain/loss in Relation transaction or Ending date actually provision (if trustee variety entrusted date determination gain reporting not recovered any) period Break-even Xiamen floating International No Not 10,000.00 2015-1-19 2015-4-22 5.20% 10,000.00 Naught 134.33 134.33 income Bank product Break-even Xiamen floating International No Not 15,000.00 2015-1-19 2015-12-30 5.00% 0.00 Naught 718.75 0.00 income Bank product Break-even Shenzhen Ping floating No Not 8,000.00 2015-1-20 2015-12-17 7.40% 0.00 Naught 544.31 0.00 An Bank income product Total 33,000.00 -- -- -- 10,000.00 1,397.39 134.33 Source of the entrusted funds Self-owned funds Cumulative overdue principals and gains 0.00 Disclosure date of the board announcement approving the 2014-3-15 wealth management entrustment Disclosure date of the general meeting announcement 2014-5-20 approving the wealth management entrustment 12 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (2) Derivative investments √ Applicable □ Inapplicable Unit: RMB Ten thousand Yuan Proportion of the closing Actual Related-party Type of Initial Opening Closing investment Impairment gain/loss in Operator Relation transaction derivative investment Beginning date Ending date investment investment amount in the provision reporting or not investment amount amount amount Company’s period closing net assets (%) Forward Bank No No 83,752.76 1 Jan. 2015 30 Jun. 2015 61,298.55 51,599.23 96.66 1,348.82 exchange Total 83,752.76 -- -- 61,298.55 51,599.23 96.66 1,348.82 Capital source for derivative investment Self-owned funds Lawsuit N/A Disclosure date of the board announcement approving 2013-3-12 the derivative Investment Disclosure date of the general meeting announcement 2013-5-18 approving the derivative Investment 1. Analysis on risks from holding of derivative products: gains or losses from difference between contracted exchange rate and market exchange rate on value date. 2. Control measures: (1) Principle: The purpose of the financial derivative operation is to avoid risks. The Company shall not conduct transactional operation for other purposes than risk avoidance. The Company shall not conduct complex derivative trading above the actual operation needs and shall not speculate in derivative trading with hedging as an excuse. The overall contractual amount for risk avoidance of the Company shall not exceed the summation of the net risk exposure of the existing assets and liabilities and the net risk exposure of assets and liabilities arising Analysis on risks and control measures of derivative from the operation of the Company in the coming year. products held in the reporting period (including but not (2) Staff requirements: Personnel taking part in the investment shall all fully understand the risks of derivative investment and strictly limited to market risk, liquidity risk, credit risk, execute the business operation and risk management mechanisms for derivative investment. operation risk, legal risk, etc.) (3) Operation standardization: Before making a derivative investment, the Company shall rationally equip itself with professional personnel for investment decision-making, business operation, risk control, etc. It shall also inquire and compare among various markets and products. Besides, it shall strictly control the variety and size of derivative investment and try to choose derivative trading on exchange as much as possible. (4) Periodic evaluation: Derivative investments shall be evaluated at least twice for a month and the evaluation report shall be sent to a high-ranking executive authorized by the Board of Directors. And a derivative investment report shall be sent to the Board of Directors annually. The Company and its subsidiaries only need to submit to the Board of Directors of the subsidiaries. (5) Loss limit: The investment loss on a single derivative and all the investment loss shall not exceed 20% of the total investment amount. 13 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (6) Audit system: The audit department audits derivative product trading periodically and submits audit reports to relevant units. (1) Gains on completed transaction amount of derivative products was RMB 4.6873 million, and loss from undelivered transaction was Changes of market prices or fair values in the reporting RMB8.8009 million in the reporting period, of which the gain rotation amount of the forward evaluation of the undelivered derivative period of the invested derivatives. And the analysis on investment of last year was of RMB 1.3463 million. the fair value of the derivatives should include the (2) The former contracted bank provided monthly sheets of estimated exchange rates for the undue contracted forward exchanges on the last specific use methods and the relevant assumptions and trading day of the month. parameters. (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 There were no significant changes between the Company’s accounting policy and specific accounting principles of derivatives in the derivatives in the reporting period compared to the reporting period and those in the last reporting period. previous reporting period Special opinion from independent directors, sponsor or The Company has carried out a strict internal assessment for the financial derivative business and has established a corresponding financial consultant on the Company’s derivatives supervision mechanism. We are of the opinion that the financial derivative business conducted by the Company is fairly necessary in its investment and risk control routine operation and is in compliance with relevant laws and regulations, with the risks controllable. (3) Entrustment loans □ Applicable √ Inapplicable 3. Use of raised funds □ Applicable √ Inapplicable 14 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 4. Analysis to main subsidiaries and stock-participating companies Particulars about main subsidiaries and stock-participating companies: Unit: RMB Yuan Company Company Operating Operating Industry Main products/services Registered capital Total assets Net assets Net profit name variety revenues profit Development and production of home appliances, electronic products, light-industrial products, and modern furniture and relative modules, communication equipment, all kinds of lamps and lighting devices such as mechanical and electrical product. Processing and manufacturing non-ferrous metal composite Tsann Kuen materials and new alloy material; Sales of the company Small home (Zhangzhou) Controlled products and semi-finished products; providing after-sales appliance USD 160 million 2,129,374,415.98 1,275,007,314.49 849,902,598.38 20,802,733.88 21,350,785.76 Enterprise Co., subsidiary service and technical services; contracting the company business manufacture Ltd. scope of processing according to the buyer’s materials and samples and assembling parts supplied by buyers and compensation trade business. The wholesale of all kinds of home appliances, electronic products, water purification equipment, air purification equipment, communications equipment, security products and prepackaged foods Tsann Kuen Production and sales of household appliances, electronics, light China Small home industrial products and modern office supplies and relevant Controlled (Shanghai) appliance modules. All kinds of computers and peripheral equipment and USD 40 million 99,443,567.50 95,739,099.74 3,074,552.27 -1,790,106.18 -1,726,465.40 subsidiary Enterprise Co., manufacture components, the development of computer software, IC Ltd. packaging and testing and sales of self-produced products Production and sale of display/LCD TV/chandelier/table Pt. Star Subsidiary of a Home lamps/LED lights/fluorescent Comgistic controlled appliance lamp/dehumidifier/mixer/juice/machine/mosquito killer/coffee USD 25 million 110,157,247.80 93,423,213.53 35,414,003.17 -4,646,699.99 -4,647,501.10 Indonesia subsidiary manufacture pot / hair dryer/fan/humidifier/electric oven, microwave oven, toaster/rice cooker/iron/deep fryer 15 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 5. Significant projects of investments with non-raised funds □ Applicable √ Inapplicable VI. Predict the operating results of Jan.-Sep. 2015 Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-begin to the end of the next reporting period according to prediction, as well as explanations on the reasons: □ Applicable √Inapplicable VII. Explanation of the Board of Directors and the Board of supervisors concerning the “non-standard audit report” issued by the CPAs firm for the reporting period □ Applicable √ Inapplicable VIII. Explanation of the Board of Directors concerning the relevant situation of the “non-standard audit report” of last year □ Applicable √ Inapplicable IX. Situation of the execution of the profits distribution of the reporting period of the Company Situation of the execution or adjustment of the profits distribution proposals especially the cash bonus proposal and the proposal of turning capital reserve into share capital √ Applicable □ Inapplicable For the details of the profits distribution of Y2014 of the Company, please refer to the Announcement on the 2014 Annual Equity Distribution Execution disclosed on the Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn on 16 Jun. 2015, which had completed execution according to the announcement aging. Special explanation of cash dividend policy Whether conformed with the regulations of the Articles of association or Yes the requirements of the resolutions of the shareholders’ meeting: Whether the dividend standard and the proportion were definite and clear: Yes Whether the relevant decision-making process and the system were Yes complete: Whether the independent director acted dutifully and exerted the proper Yes function: Whether the medium and small shareholders had the chances to fully express their suggestions and appeals, of which their legal interest had Yes gained fully protection: Whether the conditions and the process met the regulations and was Yes transparent of the adjustment or altered of the cash dividend policy: XV. Pre-plan for profit allocation and turning capital reserve into share capital for the reporting period □ Applicable √ Inapplicable The Company plans not to distribute cash dividends or bonus shares or turn capital reserve into share capital. 16 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD XI. Particulars about researches, visits and interviews received in this reporting period √ Applicable □ Inapplicable Place of Main discussion and materials provided by Time of reception Way of reception Visitor type Visitor reception the Company The Company’s operating situation and Telephone whether the factory in Indonesia had reserved 30 Jan. 2015 Company office Individual Mr. Zhang communication a loss. No written materials provided by the Company. The Company’s operating situation and Telephone 13 Mar. 2015 Company office Individual Mr. Chen relevant policy of B shares with no written communication materials provided by the Company The Company’s operating situation and Telephone 23 Mar. 2015 Company office Individual Ms. Liu relevant policy of B shares with no written communication materials provided by the Company Investor: knew of the reform situation of B shares of the Company and suggested the Company to carry out the reform. Reply from the Company: focusing on the market reform cases and under the current legislations, the Company evaluates the feasibility without any substantial progress. Investor: suggested the Company to enhance the product positioning, to enlarge the automation investment and to enhance the whole competitiveness. Meeting room of 26 May 2015 Zhangzhou Research Individual Chen Ling . Tsann Kuen Reply from the Company: the Company had been focusing on the R&D investment, which including the investment of the R&D of the intelligent household electrical appliance and developed the new products according to the market requirements, as well as strengthened and the strictly controlled the order receiving profits for enhancing the accrual space. The Company currently also executed part of the automation and will pay attention on the service efficiency in future and gradually improve it. 17 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD V. Significant Events I. Corporate governance Company governance practice has no difference with requirements of relevant law and rules of Company Law and CSRC. II. Litigations and arbitrations Significant litigations and arbitrations √Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Situation of Lawsuit Whether form Trial results and influences execution of Basic situation of lawsuit (arbitration) amount (RMB into estimated Process of lawsuit (arbitration) Disclosure date Disclosure index of lawsuit (arbitration) judgment of lawsuit Ten thousand) liabilities (arbitration) The progress events of the appeal between the Company’s controlling Fujian High People’s Court decided to http://www.cninfo. 430.49 No Not yet disclosed None 22 Feb. 2014 subsidiary—Zhangzhou Tsann Kuen and hold a hearing on 26 Mar. 2014. com.cn/ Xinda Motor Zhangzhou Intermediate People’s Events of the Company’s controlling Court had put on record and originally http://www.cninfo. subsidiary—Zhangzhou Tsann Kuen 377.04 No Not yet disclosed None 27 Dec. 2013 decided to hold a hearing on 9 Jul. com.cn/ separately sued Xinda Motor 2014 but delayed later. Other lawsuits √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Situation of Lawsuit Whether form Trial results and influences execution of Basic situation of lawsuit (arbitration) amount (RMB into estimated Process of lawsuit (arbitration) Disclosure date Disclosure index of lawsuit (arbitration) judgment of lawsuit Ten thousand) liabilities (arbitration) T he Company sued the members of the Shenzhen Luohu Court had put on According to the judgment liquidating committee of Shenzhen record on 19 Sep. 2011; and the of second instance, the www.cninfo.com.c Amoz Industrial Co., Ltd. for liability 23.71 No judgment of second instance by defendant should pay for In progress 31 Dec. 2011 n litigations (Zhu Huifeng, Gan Yuxing and Shenzhen Intermediate People’s Court RMB 124,166.00 and Wang Xinlin) had come into effect on 20 Feb. 2013. interests 18 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Situation of Lawsuit Whether form Trial results and influences execution of Basic situation of lawsuit (arbitration) amount (RMB into estimated Process of lawsuit (arbitration) Disclosure date Disclosure index of lawsuit (arbitration) judgment of lawsuit Ten thousand) liabilities (arbitration) Contract violation case of the controlling According to the judgment Zhangzhou Longhai Court had put on subsidiary of the Company Zhangzhou of first instance, the www.cninfo.com.c 13.75 No record on 4 Jan. 2012; and decided to In progress 31 Dec. 2011 Tsann Kuen Enterprise Co., Ltd. sued defendant should pay for n hold a hearing on 7 Jun. 2012 DDF Company RMB 137,592 The case of the controlling subsidiary Zhangzhou Tsann Ken had submitted Zhangzhou Tsann Kuen Enterprise Co., the indictment to the local judicatory 1,763.13 No Had no result No No No Ltd. sued Japan UCC Ueshima Coffee in Kobe, Japan on 9 May 2014; Co., Ltd. (contract disputes) recently is in the trial The judgment of first instance of Xiamen Huli People’ Court: 1. The defendant Tianyuan (Xiamen) Assets Management Co., Ltd. should pay the late payment The lease contract default case of the penalty due to breach of Company sued Xiamen Tianyuan Assets Xiamen Huli People’s Court had put contract for Tsann Kuen Management Co., Ltd. about the arrears of 29.43 No on record in Oct. 2014; the judgment within 10 days from the date No No No rent (No. 23 of Huarong Rd, Huli District, of second instance is in progress of the judgment come into Xiamen) effect (calculated according to quadruple of the similar loan interest rates over the same period of the bank) 2. The litigation fee of RMB 360 should be borne by the defendant. The debt disputes case of Xiamen Zhicheng Electrical Material s Co., Ltd. Fujian Zhangzhou Longhai Court had and Qidong Jilai Electronics Co., 45.28 No put on record on 18 Nov. 2014; had Had no result No No No Ltd. sued the controlling shareholder of held the third hearing on 24 Jul. 2015 the Company Zhangzhou Tsann Kuen Enterprise Co., Ltd. The lease contract default case of the Company sued Xiamen Tianyuan Assets Xiamen Huli People’s Court had put Management Co., Ltd. about the arrears of 58.46 No on record on 28 Apr. 2015; and had Had no result No No No rent (North Building of the Factory, No. held the hearing on 11 Jun. 2015 88 of Xinglong Rd, Huli District, Xiamen) 19 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Situation of Lawsuit Whether form Trial results and influences execution of Basic situation of lawsuit (arbitration) amount (RMB into estimated Process of lawsuit (arbitration) Disclosure date Disclosure index of lawsuit (arbitration) judgment of lawsuit Ten thousand) liabilities (arbitration) The lease contract default case of the Company sued Xiamen Tianyuan Assets Xiamen Huli People’s Court had put Management Co., Ltd. about the arrears of 8.32 No on record on 28 Apr. 2015; and had Had no result No No No rent (Southeast Corner, No. 88 of held the hearing on 11 Jun. 2015 Xinglong Rd, Huli District, Xiamen) The lease contract default case of the Company sued Xiamen Tianyuan Assets Xiamen Huli People’s Court had put Management Co., Ltd. about the arrears of 18.61 No on record on 28 Apr. 2015; and had Had no result No No No rent (Northwest Corner, No. 88 of held the hearing on 11 Jun. 2015 Xinglong Rd, Huli District, Xiamen) The house leasing contract disputes of the controlling subsidiary Zhangzhou Tsann Xiamen Huli People’s Court had put Kuen Enterprise Co., Ltd. sued Xiamen 13.76 No on record on 21 Jan. 2015; and had Had no result No No No Yada Building Materials Co., Ltd. (fell held a hearing on 15 Jun. 2015 behind with the rent etc.) The case of the controlling subsidiary Zhangzhou Tsann Kuen Enterprise Co., The complaint evidence had been Ltd. sued Dongguan submitted to Guangzhou Intellectual Kingsun Optoelectronic Co., Ltd. about 10.00 No Had no result No No No Property Court on 1 Mar. 2015; and the production and sales of the latter had held a hearing on 27 Oct. 2015 violated the appearance design patent products of the former The liabilities disputes and rent arrears case of the controlling subsidiary Zha Fujian Zhangzhou Longhai Court had put on record on 30 Mar. 2015; ngzhou Tsann Kuen Enterprise Co., Lt 37.58 No Had no result No No No recently the service by publication d. sued Zhangzhou Xingkun Plastic Pr according to law is in the progress oducts Co., Ltd. The case of the controlling subsidiary Zhangzhou Tsann Kuen Enterprise Co., Had received the receipt notice fro Ltd. sued Shanghai Sunbrem about the 10.00 No m Shanghai Intellectual Property Co Had no result No No No production and sales of the latter violated urt on 9 Jul. 2015 the patent for invention of the former The arbitration case of housing lease contract disputes between the controlling Shanghai Arbitration Commission had subsidiary Shanghai Tsann Kuen 276.63 No put on record in Apr. 2015; and had a Had no result No No No Enterprise Co., Ltd. and Shanghai Tanghai hearing on 22 Jul. 2015 Investment Co., Ltd. 20 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD III. Media’s questions □ Applicable √ Inapplicable The Company was not involved with any media ’s question of the reporting period. IV. Bankruptcy or reorganization events □ Applicable √ Inapplicable The Company was not involved with any bankruptcy or reorganization event of the reporting period. V. Assets transaction events 1. Purchase of assets √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Relationship between Ratio of the net Transaction Asset Influence on Influence on the transaction party profit contributed Related-party party or acquired Transaction the operation the gains and and the Company Disclosure Disclosure Progress by the asset to the transaction or ultimate or bought price of the losses of the (applicable for date index Company to the not controller in Company Company related-party total profit transactions) The company Land controlled by the actual PT. Shen Min Land 80.64 transfer No 0.00 0.00% Yes controller and its Inapplicable Inapplicable Sukabumi completed germane family member Notes: the assets had been purchased in Jun. 2015. 21 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Sale of assets √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Whether or Ratio of the Relationship Net profit Whether or not the net profit between the contributed to not the creditor’s contributed Related-p transaction the Company Impact to ownership right and Disclo Transaction Disposal Transactio by the asset Pricing arty party and the Disclosu Asset sold from the the of the asset liabilities sure party date n price to the principle transactio Company re date period-begin company involved has involved index Company to n or not (applicable for to the disposal been fully have been the total related-party date transferred fully profit (%) transactions) transferred Xinwang Machinery devices 2015.1.31 2.50 2.45 2.45 0.16 Based on Non-relate Inapplicable Yes Yes the market d Nanyanghuan Other devices 2015.1.31 1.51 1.29 1.29 0.09 price, and enterprise Jinyuan Machinery devices 2015.1.31 8.00 3.09 3.09 0.20 settled according Li Qinghua Machinery devices 2015.1.31 9.00 3.20 3.20 0.21 to the Ruicheng Mould devices 2015.1.31 3.40 3.26 3.26 0.22 contract signed by Liao Sezhong Machinery devices 2015.1.31 12.80 2.04 2.04 0.14 both Zheng parties www. Machinery devices 2015.1.31 1.30 0.54 0.54 0.04 Wenhui 2015.04. cninfo Shanghai 25 .com.c Mould devices 2015.1.31 115.00 22.72 22.72 1.50 Excellence n Li Yiming Machinery devices 2015.3.31 10.50 3.72 3.72 0.25 Xinwang Machinery devices 2015.3.31 0.25 0.25 0.25 0.02 Haichengxing Electronic devices 2015.3.31 0.80 0.78 0.78 0.05 Baoxing Mould devices 2015.3.31 0.40 0.39 0.39 0.03 Hongyuan Mould devices 2015.3.31 13.93 13.34 13.34 0.88 Transportation Gusong 2015.3.31 6.50 6.36 6.36 0.42 devices Transportation Inapplic Inappl Yongkun 2015.4.30 3.00 2.94 2.94 0.19 devices able icable Kunsheng Mould devices 2015.4.30 1.25 1.23 1.23 0.08 Hu Songchun Machinery devices 2015.4.30 23.60 -8.54 -8.54 -0.57 Yixin Mould devices 2015.4.30 3.00 2.92 2.92 0.19 22 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Whether or Ratio of the Relationship Net profit Whether or not the net profit between the contributed to not the creditor’s contributed Related-p transaction the Company Impact to ownership right and Disclo Transaction Disposal Transactio by the asset Pricing arty party and the Disclosu Asset sold from the the of the asset liabilities sure party date n price to the principle transactio Company re date period-begin company involved has involved index Company to n or not (applicable for to the disposal been fully have been the total related-party date transferred fully profit (%) transactions) transferred Liao Sezhong Other devices 2015.4.30 1.10 0.94 0.94 0.06 Hongyuan Mould devices 2015.4.30 2.62 2.54 2.54 0.17 Haicheng Electronic devices 2015.5.31 0.80 0.78 0.78 0.05 Xingxin Hufeng Industry and Machinery devices 2015.5.31 0.50 0.48 0.48 0.03 Trade Jinjing Machinery devices 2015.5.31 0.08 0.08 0.08 0.01 Jinjing Other devices 2015.5.31 0.08 0.08 0.08 0.01 Yixin Mould devices 2015.5.31 1.50 1.45 1.45 0.10 Haikun Mould devices 2015.5.31 3.70 3.50 3.50 0.23 Nanyang Mould devices 2015.5.31 1.28 1.24 1.24 0.08 University Hongyuan Mould devices 2015.5.31 3.06 3.00 3.00 0.20 Hongyuan Other devices 2015.5.31 0.19 0.16 0.16 0.01 Dakun Mould devices 2015.6.30 6.35 6.20 6.20 0.41 Suyuan Machinery devices 2015.6.30 5.10 -1.78 -1.78 -0.12 Total 243.10 80.65 80.65 5.34 3. Business combination In Feb. 2015, the controlled subsidiary of the Company Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. had written off its subsidiary Tsann Kuen (Zhangzhou) Profession and Technology Institute. Since the date that completed the written-off, Tsann Kuen (Zhangzhou) Profession and Technology Institute would be no longer included in the consolidated statement scope, while the income, expenses and profits before the completion of the written-off included in the consolidated statement and the cash flow in the consolidated cash flow statement. In Apr. 2015, the controlled subsidiary of the Company Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. had purchased its subsidiary Orient Star Investments Limited and recently had completed 23 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD the business registration formalities but had not paid for the investment account. VI. Implementation situation and influence of equity incentive plan of the Company □ Applicable √ Inapplicable The Company had not involved with any equity incentive plan and its execution situation during the reporting period. VII. Significant related-party transactions 1. Related-party transactions relevant to routine operation Unit: RMB Ten Thousand Yuan Settlemen Proportio Whether t method Pricing Trans Simil Type of the Content of the n in same Approved exceeded of the Discl Disclos principle of the actio Transaction ar Related party Relationship related-party related-party kind of transaction the related-pa osure ure related-party n amount marke transaction transaction transactio quota approved rty date index transaction price t price ns (%) quota transactio n Company directly controlled by Thermaster Electronic Purchase of Purchase of raw actual controller and their close 1,662.55 2.92 4,000.00 No (Xiamen) Ltd. commodities parts family members Based on the Settled STAR COMGISTIC Purchase of Purchase of raw Ultimate controlling company market price 229.77 0.40 280.00 No according CAPITAL CO., LTD. commodities parts www.c and both to the 13 ninfo.c parties abide N/A contract N/A Mar. om.cn Sales of parts by the fair and signed by 2015 TSANN KUEN JAPAN CO., Same ultimate controlling company Sales of commodities and finished reasonable 266.43 0.31 845.00 No both LTD products principle parties Sales of parts STAR COMGISTIC Ultimate controlling company Sales of commodities and finished 676.38 0.79 1,945.00 No CAPITAL CO., LTD. products Total 2,835.13 7,070.00 Details of large amount of sales returns N/A The amount for the above related-party transactions were not exceed the predicted amount in the Announcement on Prediction of As for the prediction on the total amount of routine related-party transactions to be occurred in the reporting period the 2015 Annual Routine Related-party Transactions disclosed on Securities Times, Hong Kong Ta Kung Pao and by relevant types, the actual performance in the reporting period http://www.cninfo.com.cn dated 13 Mar. 2015. Reason for significant difference between the transaction price and the market price N/A 24 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Related-party transactions regarding purchase and sales of assets √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Assessed Book value of value of Market Transaction Transfer Settlement Disclosure Disclosure Related party Related relation Type Content Pricing principle the transferred the fair gains and price method date index assets transferred value losses assets The company Settled controlled by Based on the market according to PT. Shen Min the actual Purchase Purchase price and both parties 71.31 N/A N/A 80.64 the contract 9.33 Inapplicable Inapplicable Sukabumi controller and land land abide by the fair and signed by its germane reasonable principle both parties family member Reason for significant difference between the transaction N/A price and the market price or the assessed price Influence situation on the operating results and the N/A financial conditions of the Company 3. Related-party transitions with joint investments □ Applicable √ Inapplicable 4. Significant credits and liabilities with related parties □ Applicable √ Inapplicable Was there any non-operating credit or liability with any related party? □ Yes √ No 25 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 5. Other related-party transactions √ Applicable □ Inapplicable Unit: RMB Ten thousand Yuan Settlement Pricing Type of Content of Proportio method of principle Approve the the Transacti n in same Whether the Similar Relationsh of the Transacti d Disclosure Disclosu Related party related-par related-par on kind of transacti exceeded the related-pa market ip related-par on price approved quota date re index ty ty amount transactio on quota rty price ty transaction transaction ns (%) transactio transaction n STAR Ultimate Accepting Purchase COMGISTIC controlling labor agency 10.83 100.00 14.00 No CAPITAL Based on company services cost CO., LTD. the market Settled WU WHA MA price and Ultimate according RESTAURAN both www.cni holding to the T Providing Workshop parties 13 Mar. nfo.com. company N/A 6.54 0.21 13.00 No contract N/A MANAGEME service rent abide by 2015 cn have signed by NT CO., LTD. the fair equity both IN XIAMEN and parties Xiamen reasonable Under principle Canxing Providing Workshop same 75.00 2.44 150.00 No Trading Co., service rent controller Ltd. Total 92.37 177.00 Related party transactions interim report disclosure website Name of interim report Disclosure dare Name of the website Announcement on 2015 Daily Related Party 13 Mar. 2015 www.cninfo.com.cn Transactions Plan 26 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD VIII. Occupation of the Company’s funds for non-operating purposes by the controlling shareholder and its related parties □ Applicable √ Inapplicable IX. Significant contracts and execution 1. Particulars about trusteeship, contract and lease (1) Trust □ Applicable √ Inapplicable (2) Contract □ Applicable √ Inapplicable (3) Lease Notes of the leasing Explanation of lease The Proposal on Lease of Property & Related-party Transactions was reviewed and approved at the Fourth Session of the Board of Directors for 2011 dated 13 Aug. 2011 and the First Special Shareholders’ General Meeting for 2011 dated 16 Sept. 2011, for details, please refer to the Announcement on Lease of Property & Related-party Transactions, Announcement on Resolutions Made at the Fourth Session of the Board of Directors for 2011 and Announcement on Resolutions Made at the First Special Shareholders ’ General Meeting for 2011 disclosed on Securities Times, Hong Kong Ta Kung Pao and http://www.cninfo.com.cn. The Proposal on Change of Property Leasing Agreement & Related-party Transaction was reviewed and approved at the Second Special Session of the Board of Directors for 2012 dated 30 Jun. 2012 and the Second Special Shareholders’ General Meeting for 2012 dated 24 Jul. 2012, for details, please refer to the Announcement on Change of Property Leasing Agreement & Related-party Transaction, Announcement on Resolutions Made at the Second Special Session of the Board of Directors for 2012 and Announcement on Resolutions Made at the Second Special Shareholders’ General Meeting for 2012 disclosed on Securities Times, Hong Kong Ta Kung Pao and http://www.cninfo.com.cn.; The proposal on Lease of Property was received and approved at the First Session of the Board of Directors for 2013 dated 26 Jun. 2013 and for details, please refer to the Announcement on Lease of Property, Announcement on Resolutions Made at the First Session of the Board of Directors for 2013 disclosed on Securities Times, Hong Kong Ta Kung Pao and http://www.cninfo.com.cn. The lease whose profits reaching more than 10% of the total profits of the Company in the reporting period √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Recogni Influences Related- Involved Name of Status of Initial Ending tion of rental party Name of amount of Rental Relati contract-out leased date of date of basis of income on transacti leaser the leased income onship party assets leasing leasing rental the on or assets income Company not Xiamen Tianyuan(Xia Accordi Tsann Kun men) Assets Building 1 Jul. 30 Sep. ng to the Naugh (China) 1,968.99 360.78 23.88% No Management and land 2013 2018 contract t Enterprise Co., Ltd. price Co., Ltd. 2. Guarantees provided by the Company □ Applicable √ Inapplicable 27 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (1) Particulars about illegal external guarantee □ Applicable √ Inapplicable The Company was not involved with any illegal external guarantee. 3. Other significant contracts □ Applicable √ Inapplicable 4. Other significant transactions □ Applicable √ Inapplicable X. Commitments made by the Company or shareholders holding over 5% of the Company’s shares in the reporting period or such commitments carried down into the reporting period √ Applicable □ Inapplicable Time of Commitment making Period of Commitment Contents Fulfillment maker commit commitment ment Commitment on share reform Commitment in the acquisition report or the report on equity changes Commitments made upon the assets replacement Commitments made upon first issuance or refinance Based on the confidence on the continuous and The Company’s stable development of the Company, it stocks resumed committed to increase the shareholding if the trading on 31 Dec. Company’s stock price lower than HKD2.40 per 2012, but the share after the implementation of the shares Company’s stock contraction and trading resumption, and it price hasn’t met the Within one would increase no more than 2% shares condition for FILLMAN year since the Other commitments made (i.e.3,707,800 shares ) of the total shares issued 28 Dec. shareholding INVESTMENT date of initial to minority shareholders by the Company within one year since the date 2012 increase since the S LIMITED shareholding of initial shareholding increase. If the plan on date of trading increase increasing holding 2% shares of the total shares resumption, is completed, if the stock price hasn’t reached FILLMAN the target price, it will perform relevant Investment Limited approval procedures, and propose to CSRC on hasn’t implemented continuous implementation of shareholding the shareholding increase by exemption of offering. increase plan. Executed timely or not? Yes Detailed reason for failing The Company’s stocks resumed trading o n 31 Dec. 2012, but the Company’s stock price hasn’t met the condition to execute and the next for shareholding increase since the date of trading resumption, FILLMAN Investment Limited hasn’t plan implemented the shareholding increase plan. XI. Particulars about engagement and disengagement of CPAs firm Has this semi-annual report been audited? □ Yes √ No The semi-annual report had not been audited. 28 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD XII. Particulars about punishment and rectification □ Applicable √ Inapplicable The Company was not involved with any punishment and rectification XIII. Delisting risk due to violation of any law or regulation □ Applicable √ Inapplicable The Company was not involved with any risk due to violation of any law or regulation XIV. Other significant events √ Applicable □ Inapplicable The Company considered and judged as well as in virtue of the R&D advantages enjoyed in Taiwan of the related party Tsann Kuen Xianrui Intelligence Co., Ltd. (refer to as “Tsann Kuen Xianrui Intelligence” for short) for further enhance the overall R&D ability of the Company and at the same integrated and focused on the medium and long-term development of strategic management of the Company to form the R&D resources complementary synergy of both sides of the Taiwan Straits for facing with the rapid change of the household appliances industry, enhancing the household appliances intelligent upgrade management and reducing the possible related transactions in the future. Based on which, the controlling subsidiary of the Company, Zhangzhou Tsann Kuen had set up a wholly-owned subsidiary in Hong Kong, which purchased the whole equity of “Tsann Kuen Xianrui Intelligence”. For the specific contents, please refer to the Announcement on the Controlling Subsidiary of the Company Zhangzhou Tsann Kuen Invested on Its Wholly-owned Subsidiary which Purchased the Equity of Tsann Kuen Xianrui Intelligence and the Related Transactions as well as the Correcting Announcement on the Controlling Subsidiary of the Company Zhangzhou Tsann Kuen Invested on Its Wholly-owned Subsidiary which Purchased the Equity of Tsann Kuen Xianrui Intelligence and the Related Transactions simultaneously disclosed on Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn. on 25 Apr. 2015 and 28 Apr. 2015. The wholly-owned subsidiary in Hong Kong invested by the Company, “ORIENT STAR INVESTMENTS LIMITED” had completed business registration formalities and as for the details, please refer to the Announcement on the Wholly-owned Subsidiary in Hong Kong of Zhangzhou Tsann Kuen, the Controlling Subsidiary of the Company Completed the Business Registration Formalities simultaneously disclosed on Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn. on 21 May 2015. Recently the Company is managing the equity f examination and approval formalities of purchasing “Tsann Kuen Xianrui Intelligence” at Taiwan authorities. Section VI. Change in Shares & Shareholders I. Changes in shares Unit: share Before the change Increase/decrease in the change (+,-) After the change Issuance Capitalization of Bonus Number Proportion of new public reserve Other Subtotal Number Proportion shares shares fund I. Restricted shares 0 0.00% 0 0.00% II. Non-restricted shares 185,391,680 100.00% 185,391,680 100.00% 1. Domestically listed foreign shares 185,391,680 100.00% 185,391,680 100.00% III. Total shares 185,391,680 100.00% 185,391,680 100.00% 29 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Reasons for change in share capital □ Applicable √ Inapplicable Particulars about the approval of the change in share capital □ Applicable √ Inapplicable The transfer of change in share capital □ Applicable √ Inapplicable Change in share capital’s impacts on basic EPS and diluted EPS in recent year and recent issue, and net assets per share attributed to equity shareholder and financial index etc. □ Applicable √ Inapplicable Other contents was necessary to the company or the securities regulators required to be disclosed □ Applicable √ Inapplicable Changes of the Company’s share number and structure, as well as the corresponding changes in its asset-liability structure □ Applicable √ Inapplicable Changes of the Company’s share number and structure, as well as the corresponding changes in its asset-liability structure □ Applicable √ Inapplicable II. Total number of shareholders and their shareholding Unit: share Total number of common shareholders at the end of the Total number of preferred share holders who had resumed 18308 0 reporting period their voting right at the end of the reporting period Particulars about shares held by shareholders with a shareholding percentage over 5% or by the top ten shareholders holding shares Number Pledged or frozen Increase/decre Total shares of Number of shares Nature of Shareholding ase during the Name of shareholder held at the restricted non-restricted shareholder percentage reporting period-end shares shares held Status of Number of period shares shares held FORDCHEE DEVELOPMENT Foreign corporation 29.10% 53,940,530 53,940,530 N/A N/A LIMITED EUPA INDUSTRY 13.04% 24,172,340 Foreign corporation -1,461,378 24,172,340 N/A N/A CORPORATION LIMITED GUOTAI JUNAN SECURITIES(HONGKON Foreign corporation 6.12% 11,339,350 11,339,350 N/A N/A G) LIMITED FILLMAN Foreign corporation 2.49% 4,621,596 4,621,596 N/A N/A INVESTMENTS LIMITED Chen Yongquan Domestic individual 1.02% 1,888,819 220,072 1,888,819 N/A N/A Shanghai Hong Kong Foreign corporation 0.94% 1,746,982 1,728,648 1,746,982 N/A N/A Wanguo Securities Ding Xiaolun Domestic individual 0.65% 1,208,818 176,800 1,208,818 N/A N/A WU CHI LI Foreign individual 0.61% 1,128,006 807,206 1,128,006 N/A N/A Xie Qingjun Domestic individual 0.60% 1,107,376 1,876 1,107,376 N/A N/A Chen Yongqing Foreign individual 0.56% 1,037,898 56,300 1,037,898 N/A N/A Strategic investor or general corporation becoming a top ten shareholder due to placing of N/A new shares The first, the second and the fourth shareholders are the Company’s corporate controlling Explanation on associated relationship or/and shareholders. It is unknown whether the other shareholders of tradable shares are related persons acting in concert among the parties or acting-in-concert parties as prescribed in the Administrative Methods for above-mentioned shareholders Disclosure of the Shareholding Changes of the Listed Company ’s Shareholders. 30 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Particulars about shares held by the top ten shareholders holding shares not subject to trading moratorium Number of non-restricted shares Type of shares Name of shareholder held at the period-end Type Number FORDCHEE DEVELOPMENT LIMITED 53,940,530 Domestically listed foreign shares 53,940,530 EUPA INDUSTRY CORPORATION LIMITED 24,172,340 Domestically listed foreign shares 24,172,340 GUOTAI JUNAN SECURITIES(HONGKONG) 11,339,350 Domestically listed foreign shares 11,339,350 LIMITED FILLMAN INVESTMENTS LIMITED 4,621,596 Domestically listed foreign shares 4,621,596 Chen Yongquan 1,888,819 Domestically listed foreign shares 1,888,819 Shanghai Hong Kong Wanguo Securities 1,746,982 Domestically listed foreign shares 1,746,982 Ding Xiaolun 1,208,818 Domestically listed foreign shares 1,208,818 WU CHI LI 1,128,006 Domestically listed foreign shares 1,128,006 Xie Qingjun 1,107,376 Domestically listed foreign shares 1,107,376 Chen Yongqing 1,037,898 Domestically listed foreign shares 1,037,898 Explanation on associated relationship or/and The first, the second and the fourth shareholders are the Company’s corporate controlling persons acting in concert among the top ten shareholders. It is unknown whether the other shareholders of tradable shares are related tradable shareholders and between the top ten parties or acting-in-concert parties as prescribed in the Administrative Methods for tradable shareholders and the top ten shareholders Disclosure of the Shareholding Changes of the Listed Company ’s Shareholders. Explanation on the top 10 shareholders Naught participating in the margin trading business Whether the shareholders of a company conducted the transaction of repurchase under the agreement during the reporting period □ Yea √ No III. Change of the controlling shareholder or the actual controller Change in controlling shareholder in the reporting period □ Applicable √ Inapplicable There was no any change of the controlling shareholder in the reporting period. Change of the actual controller during the reporting period □ Applicable √ Inapplicable There was no any change of the actual controller during the reporting period. IV. Particulars on shareholding increase scheme during the reporting period proposed or implemented by the shareholders and act-in-concert persons □ Applicable √ Inapplicable To the best knowledge of the Company, no shareholder or its act-in-concert party proposed or implemented any shareholding increase plan during the reporting period. Section VII. Preference Shares □ Applicable √ Inapplicable There was no preference stock during the reporting period. 31 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Section VIII. Directors, Supervisors, Senior Management Staff & Employees I. Changes in shareholding of directors, supervisors and senior management staff □ Applicable √ Inapplicable There was no change in shareholding of directors, supervisors and senior management staffs, for the specific information please refer to the 2014 Annual Report. II. Change of directors, supervisors and senior management staff □ Applicable √ Inapplicable There was no change of directors, supervisors and senior management staffs, for the specific information please refer to the 2014 Annual Report. Section IX. Financial Report I. Auditor’s Report The auditor’s report had not audited. II. Financial report (attached) 1. Balance sheet 2. Income statement 3. Cash flow statement 4. Statement of Change in Owners’ Equity 5. Notes to the Financial Statements Section X. Documents Available for Reference 1. Text of Semi-annual Report 2015 signed and sealed by the Board of Directors of the Company. 2. Financial statements signed and sealed by legal representative, principal of accounting work, and manager of finance department. 3. In the reporting period, all texts and originals of the Company’s documents and public notices have been publicly disclosed in China Securities Journal, Hong Kong Ta Kung Pao and www.cninfo.com.cn designated by CSRC. TSANN KUEN (CHINA) ENTERPRISE CO., LTD The chairman of the Board: Pan Zhirong 7 Aug. 2015 32 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 1. Consolidated balance sheet Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Closing balance Opening balance Current Assets: Monetary funds 782,188,684.28 886,464,448.01 Settlement reserves Intra-group lendings Financial assets measured at fair value of which changes are recorded in current profits and losses 7,482,150.00 2,610,000.00 Derivative financial assets Notes receivable 2,413,324.00 2,004,498.59 Accounts receivable 226,844,762.82 247,336,334.86 Accounts paid in advance 10,199,697.43 12,758,696.10 Premiums receivable Reinsurance premiums receivable Receivable reinsurance contract reserves Interest receivable 4,019,726.47 3,590,399.84 Dividend receivable Other accounts receivable 33,934,114.16 34,873,104.97 Financial assets purchased under agreements to resell Inventories 207,960,623.75 193,150,144.07 Assets held for sale Non-current assets due within 1 year Other current assets 244,113,215.87 13,087,495.75 Total current assets 1,519,156,298.78 1,395,875,122.19 Non-current assets: Loans by mandate and advances granted Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investment Investing real estate 49,003,184.76 51,731,414.90 Fixed assets 158,918,021.18 165,560,208.64 Construction in progress 353,168.37 233,968.67 Engineering materials Disposal of fixed assets Production biological assets Oil-gas assets Intangible assets 13,836,871.02 12,145,423.16 R&D expense Goodwill Long-term deferred expenses 4,631,471.87 4,797,144.17 Deferred income tax assets 17,150,404.66 18,711,962.93 Other non-current assets 3,195,929.47 1,929,374.75 Total of non-current assets 247,129,051.33 255,149,497.22 Total assets 1,766,285,350.11 1,651,024,619.41 33 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Item Closing balance Opening balance Current liabilities: Short-term borrowings 295,103,472.00 61,190,000.00 Borrowings from Central Bank Customer bank deposits and due to banks and other financial institutions Intra-group borrowings Financial liabilities measured at fair value of which changes are recorded in current profits and 27,500.00 3,956,259.85 losses Derivative financial liabilities Notes payable 24,507,059.36 29,749,982.77 Accounts payable 436,650,060.89 533,071,295.43 Accounts received in advance 11,882,501.25 14,769,179.12 Financial assets sold for repurchase Handling charges and commissions payable Payroll payable 39,932,191.98 45,910,725.14 Tax payable 5,356,421.37 6,521,778.61 Interest payable 1,119,097.02 68,275.80 Dividend payable Other accounts payable 66,435,616.54 53,159,623.33 Reinsurance premiums payable Insurance contract reserves Payables for acting trading of securities Payables for acting underwriting of securities Liabilities held for sale Non-current liabilities due within 1 year Other current liabilities Total current liabilities 881,013,920.41 748,397,120.05 Non-current liabilities: Long-term borrowings Bonds payable Of which: preferred shares Perpetual bonds Long-term payables Long-term payroll payables Specific payables Estimated liabilities Deferred income Deferred income tax liabilities 1,349,588.26 618,966.78 Other non-current liabilities Total non-current liabilities 1,349,588.26 618,966.78 Total liabilities 882,363,508.67 749,016,086.83 Owners’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: preferred shares Perpetual bonds 34 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Item Closing balance Opening balance Capital reserves 278,458,862.55 278,458,862.55 Less: Treasury stock Other comprehensive income -958,078.13 -899,380.20 Specific reserves Surplus reserves 16,400,043.27 16,400,043.27 Provisions for general risks Retained profits 54,525,477.11 67,223,203.93 Total equity attributable to owners of the Company 533,817,984.80 546,574,409.55 Minority interests 350,103,856.64 355,434,123.03 Total owners’ equity 883,921,841.44 902,008,532.58 Total liabilities and owners’ equity 1,766,285,350.11 1,651,024,619.41 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 35 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Balance sheet of the Company Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Closing balance Opening balance Current Assets: Monetary funds 4,324,308.61 3,236,270.65 Financial assets measured at fair value of which changes are recorded in current profits and losses Derivative financial assets Notes receivable 2,413,324.00 2,004,498.59 Accounts receivable 35,692,490.02 28,535,190.86 Accounts paid in advance 386,278.25 159,129.74 Interest receivable Dividend receivable Other accounts receivable 2,774,430.09 618,435.08 Inventories 13,857,975.23 9,123,446.86 Assets held for sale Non-current assets due within 1 year Other current assets 189,864.71 259,083.99 Total current assets 59,638,670.91 43,936,055.77 Non-current assets: Available-for-sale financial assets 40,000.00 40,000.00 Held-to-maturity investments Long-term accounts receivable Long-term equity investment 985,814,030.83 985,814,030.83 Investing real estate 41,179,546.66 43,650,654.94 Fixed assets 610,032.59 573,821.18 Construction in progress Engineering materials Disposal of fixed assets Production biological assets Oil-gas assets Intangible assets 123,750.00 R&D expense Goodwill Long-term deferred expenses 573,866.39 758,014.49 Deferred income tax assets 1,785,960.13 1,902,042.53 Other non-current assets 4,000.00 Total of non-current assets 1,030,127,186.60 1,032,742,563.97 Total assets 1,089,765,857.51 1,076,678,619.74 36 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Item Closing balance Opening balance Current liabilities: Short-term borrowings Financial liabilities measured at fair value of which changes are recorded in current profits and losses Derivative financial liabilities Notes payable Accounts payable 64,626,914.36 52,496,435.80 Accounts received in advance 2,273,062.46 5,652,792.49 Payroll payable 1,851,016.69 2,347,177.91 Tax payable 3,046,984.48 898,026.25 Interest payable Dividend payable Other accounts payable 475,569,004.41 475,204,952.74 Liabilities held for sale Non-current liabilities due within 1 year Other current liabilities Total current liabilities 547,366,982.40 536,599,385.19 Non-current liabilities: Long-term borrowings Bonds payable Of which: preferred shares Perpetual bonds Long-term payables Long-term payroll payables Specific payables Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 547,366,982.40 536,599,385.19 Owners’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: preferred shares Perpetual bonds Capital reserves 271,489,596.88 271,489,596.88 Less: Treasury stock Other comprehensive income Specific reserves Surplus reserves 16,400,043.27 16,400,043.27 Retained profits 69,117,554.96 66,797,914.40 Total owners’ equity 542,398,875.11 540,079,234.55 Total liabilities and owners’ equity 1,089,765,857.51 1,076,678,619.74 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 37 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 3. Consolidated income statement Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Reporting period Same period of last year I. Total operating revenues 895,194,158.07 890,216,299.51 Including: Sales income 895,194,158.07 890,216,299.51 Interest income Premium income Handling charge and commission income II. Total operating costs 890,596,266.85 863,422,750.23 Including: Cost of sales 771,483,297.01 761,974,414.46 Interest expenses Handling charge and commission expenses Surrenders Net claims paid Net amount withdrawn for the insurance contract reserve Expenditure on policy dividends Reinsurance premium Taxes and associate charges 3,084,362.18 4,930,309.19 Selling and distribution expenses 41,124,129.32 34,383,454.76 Administrative expenses 82,998,690.21 72,912,587.41 Financial expenses -9,197,945.66 -11,216,974.35 Asset impairment loss 1,103,733.79 438,958.76 Add: Gain/(loss) from change in fair value (“-” means loss) 8,800,909.85 -26,768,171.00 Gain/(loss) from investment (“-” means loss) 6,030,668.82 14,000,118.50 Including: share of profits in associates and joint ventures Foreign exchange gains (“-” means loss) III. Business profit (“-” means loss) 19,429,469.89 14,025,496.78 Add: non-operating income 3,229,489.17 8,820,848.29 Including: Gains on disposal of non-current assets 909,792.35 1,533,850.20 Less: non-operating expense 118,195.62 741,772.95 Including: Losses on disposal of non-current assets 117,195.62 548,863.12 IV. Total profit (“-” means loss) 22,540,763.44 22,104,572.12 Less: Income tax expense 3,300,757.78 2,957,439.90 V. Net profit (“-” means loss) 19,240,005.66 19,147,132.22 Net profit attributable to owners of the Company 15,111,025.18 14,857,989.76 Minority shareholders’ income 4,128,980.48 4,289,142.46 VI. After-tax net amount of other comprehensive incomes -78,263.91 368,173.96 After-tax net amount of other comprehensive incomes attributable to owners -58,697.93 276,130.47 of the Company (I) Other comprehensive incomes that will not be reclassified into gains and losses 1. Changes in net liabilities or assets with a defined benefit plan upon re-measurement 2. Enjoyable shares in other comprehensive incomes in investees that cannot be reclassified into gains and losses under the equity method (II) Other comprehensive incomes that will be reclassified into gains and -58,697.93 276,130.47 losses 38 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Item Reporting period Same period of last year 1. Enjoyable shares in other comprehensive incomes in investees that will be reclassified into gains and losses under the equity method 2. Gains and losses on fair value changes of available-for-sale financial assets 3. Gains and losses on reclassifying held-to-maturity investments into available-for-sale financial assets 4. Effective hedging gains and losses on cash flows 5. Foreign-currency financial statement translation difference -58,697.93 276,130.47 6. Other After-tax net amount of other comprehensive incomes attributable to -19,565.98 92,043.49 minority shareholders VII. Total comprehensive incomes 19,161,741.75 19,515,306.18 Attributable to owners of the Company 15,052,327.25 15,134,120.23 Attributable to minority shareholders 4,109,414.50 4,381,185.95 VIII. Earnings per share (I) Basic earnings per share 0.08 0.08 (II) Diluted earnings per share 0.08 0.08 Where business mergers under the same control occurred in this reporting period, the net profit achieved by the merged parties before the business mergers was RMB 0, with the corresponding amount for the last period being RMB 0. Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 39 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 4. Income statement of the Company Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Reporting period Same period of last year I. Total sales 78,674,806.46 42,607,992.64 Less: cost of sales 64,075,734.45 29,080,243.87 Business taxes and surcharges 527,918.58 666,158.20 Distribution expenses 4,199,997.82 2,999,669.89 Administrative expenses 7,324,578.11 5,578,182.60 Financial costs 486,155.88 272,108.26 Impairment loss -272,850.93 -1,498,177.31 Add: gain/(loss) from change in fair value (“-” means loss) Gain/(loss) from investment (“-” means loss) 28,286,287.22 38,189,978.21 Including: income form investment on associates and joint ventures II. Business profit (“-” means loss) 30,619,559.77 43,699,785.34 Add: non-operating income 59,844.56 20,923.16 Including: Gains on disposal of non-current assets Less: non-operating expense 35,791.72 Including: Losses on disposal of non-current assets III. Total profit (“-” means loss) 30,679,404.33 43,684,916.78 Less: Income tax expense 551,011.77 1,396,262.02 IV. Net profit (“-” means loss) 30,128,392.56 42,288,654.76 V. After-tax net amount of other comprehensive incomes (I) Other comprehensive incomes that will not be reclassified into gains and losses 1. Changes in net liabilities or assets with a defined benefit plan upon re-measurement 2. Enjoyable shares in other comprehensive incomes in investees that cannot be reclassified into gains and losses under the equity method (II) Other comprehensive incomes that will be reclassified into gains and losses 1. Enjoyable shares in other comprehensive incomes in investees that will be reclassified into gains and losses under the equity method 2. Gains and losses on fair value changes of available-for-sale financial assets 3. Gains and losses on reclassifying held-to- maturity investments into available-for-sale financial assets 4. Effective hedging gains and losses on cash flows 5. Foreign-currency financial statement translation difference 6. Other VI. Total comprehensive incomes 30,128,392.56 42,288,654.76 VII. Earnings per share (I) Basic earnings per share (II) Diluted earnings per share Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 40 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 5. Consolidated cash flow statement Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Reporting period Same period of last year I. Cash flows from operating activities: Cash received from sale of commodities and rendering of service 891,092,475.23 933,113,991.58 Net increase of deposits from customers and dues from banks Net increase of loans from the central bank Net increase of funds borrowed from other financial institutions Cash received from premium of original insurance contracts Net cash received from reinsurance business Net increase of deposits of policy holders and investment fund Net increase of disposal of financial assets measured at fair value of which changes are recorded into current gains and losses Cash received from interest, handling charges and commissions Net increase of intra-group borrowings Net increase of funds in repurchase business Tax refunds received 96,320,391.21 112,084,917.29 Other cash received relating to operating activities 31,015,191.04 50,222,647.25 Subtotal of cash inflows from operating activities 1,018,428,057.48 1,095,421,556.12 Cash paid for goods and services 829,124,687.36 863,645,276.78 Net increase of customer lendings and advances Net increase of funds deposited in the central bank and amount due from banks Cash for paying claims of the original insurance contracts Cash for paying interest, handling charges and commissions Cash for paying policy dividends Cash paid to and for employees 135,625,695.10 122,896,952.98 Various taxes paid 12,750,672.45 14,180,644.90 Other cash payment relating to operating activities 91,490,642.38 127,778,620.49 Subtotal of cash outflows from operating activities 1,068,991,697.29 1,128,501,495.15 Net cash flows from operating activities -50,563,639.81 -33,079,939.03 II. Cash flows from investing activities: Cash received from withdrawal of investments 104,687,335.49 168,647,755.48 Cash received from return on investments 1,343,333.33 5,463,196.35 Net cash received from disposal of fixed assets, intangible assets and other 2,448,937.97 1,218,609.75 long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investing activities 652,082,700.00 Subtotal of cash inflows from investing activities 760,562,306.79 175,329,561.58 Cash paid to acquire fixed assets, intangible assets and other long-term 28,960,256.09 20,362,851.60 assets Cash paid for investment 330,000,000.00 440,000,000.00 Net increase of pledged loans Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investing activities 651,316,932.63 896,866,338.47 Subtotal of cash outflows from investing activities 1,010,277,188.72 1,357,229,190.07 41 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Item Reporting period Same period of last year Net cash flows from investing activities -249,714,881.93 -1,181,899,628.49 III. Cash Flows from Financing Activities: Cash received from capital contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received from borrowings 432,643,240.17 592,439,628.00 Cash received from issuance of bonds Other cash received relating to financing activities 143,957,350.00 Subtotal of cash inflows from financing activities 432,643,240.17 736,396,978.00 Repayment of borrowings 197,354,358.17 143,526,470.00 Cash paid for interest expenses and distribution of dividends or profit 36,902,959.60 40,906,844.49 Including: dividends or profit paid by subsidiaries to minority 8,495,712.79 11,589,494.33 shareholders Other cash payments relating to financing activities 12,304,200.00 Sub-total of cash outflows from financing activities 234,257,317.77 196,737,514.49 Net cash flows from financing activities 198,385,922.40 539,659,463.51 IV. Effect of foreign exchange rate changes on cash and cash equivalents -1,617,397.02 5,011,409.41 V. Net increase in cash and cash equivalents -103,509,996.36 -670,308,694.60 Add: Opening balance of cash and cash equivalents 469,965,448.01 834,088,959.68 VI. Closing balance of cash and cash equivalents 366,455,451.65 163,780,265.08 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 42 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 6. Cash flow statement of the Company Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Item Reporting period Same period of last year I. Cash flows from operating activities: Cash received from sale of commodities and rendering of service 70,974,247.92 73,432,284.15 Tax refunds received Other cash received relating to operating activities 23,173,816.87 27,100,050.69 Subtotal of cash inflows from operating activities 94,148,064.79 100,532,334.84 Cash paid for goods and services 66,918,834.13 77,681,958.10 Cash paid to and for employees 6,395,528.78 3,793,394.55 Various taxes paid 2,757,295.68 2,247,632.14 Other cash payment relating to operating activities 17,263,059.96 30,839,863.59 Subtotal of cash outflows from operating activities 93,334,718.55 114,562,848.38 Net cash flows from operating activities 813,346.24 -14,030,513.54 II. Cash flows from investing activities: Cash received from retraction of investments Cash received from return on investments 28,286,287.22 38,189,978.21 Net cash received from disposal of fixed assets, intangible assets and other 5,000.00 long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investing activities Subtotal of cash inflows from investing activities 28,286,287.22 38,194,978.21 Cash paid to acquire fixed assets, intangible assets and other long-term 119,052.90 321,135.90 assets Cash paid for investment Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investing activities Subtotal of cash outflows from investing activities 119,052.90 321,135.90 Net cash flows from investing activities 28,167,234.32 37,873,842.31 III. Cash Flows from Financing Activities: Cash received from capital contributions Cash received from borrowings Cash received from issuance of bonds Other cash received relating to financing activities Subtotal of cash inflows from financing activities 0.00 0.00 Repayment of borrowings Cash paid for interest expenses and distribution of dividends or profit 27,883,693.93 25,954,835.20 Other cash payments relating to financing activities Sub-total of cash outflows from financing activities 27,883,693.93 25,954,835.20 Net cash flows from financing activities -27,883,693.93 -25,954,835.20 IV. Effect of foreign exchange rate changes on cash and cash equivalents -8,848.67 -15,499.05 V. Net increase in cash and cash equivalents 1,088,037.96 -2,127,005.48 Add: Opening balance of cash and cash equivalents 3,236,270.65 11,811,615.43 VI. Closing balance of cash and cash equivalents 4,324,308.61 9,684,609.95 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 43 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 7. Consolidated statement of changes in owners’ equity Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Reporting period Equity attributable to owners of the Company Item Other equity instruments Less: treasury Other comprehensive Specific General risk Minority interests Total owners’ equity Share capital Perpetual Capital reserve Surplus reserve Retained profit Preferred shares Other stock incomes reserve reserve bonds I. Balance at the end of the previous year 185,391,680.00 278,458,862.55 -899,380.20 16,400,043.27 67,223,203.93 355,434,123.03 902,008,532.58 Add: change of accounting policy Correction of errors in previous periods Business mergers under the same control Other II. Balance at the beginning of the year 185,391,680.00 278,458,862.55 -899,380.20 16,400,043.27 67,223,203.93 355,434,123.03 902,008,532.58 III. Increase/ decrease in the period (“-” means decrease) -58,697.93 -12,697,726.82 -5,330,266.39 -18,086,691.14 (I) Total comprehensive incomes -58,697.93 15,111,025.18 4,128,980.48 19,181,307.73 (II) Capital increased and reduced by owners 1. Common shares increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in owners’ equity 4. Other (III) Profit distribution -27,808,752.00 -9,439,680.90 -37,248,432.90 1. Appropriations to surplus reserves 2. Appropriations to general risk provisions 3. Appropriations to owners (or shareholders) -27,808,752.00 -9,439,680.90 -37,248,432.90 4. Other (IV) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other -19,565.97 -19,565.97 IV. Closing balance 185,391,680.00 278,458,862.55 -958,078.13 16,400,043.27 54,525,477.11 350,103,856.64 883,921,841.44 44 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Unit: RMB Yuan Same period of last year Equity attributable to owners of the Company Item Other equity instruments Other Minority interests Total owners’ equity Share capital Preferred Capital reserve Less: treasury stock comprehensive Specific reserve Surplus reserve General risk reserve Retained profit Perpetual bonds Other incomes shares I. Balance at the end of the previous year 185,391,680.00 278,454,447.07 -1,382,202.82 11,495,983.58 46,733,303.43 353,397,081.98 874,090,293.24 Add: change of accounting policy Correction of errors in previous periods Business mergers under the same control Other II. Balance at the beginning of the year 185,391,680.00 278,454,447.07 -1,382,202.82 11,495,983.58 46,733,303.43 353,397,081.98 874,090,293.24 III. Increase/ decrease in the period (“-” means decrease) 4,415.48 482,822.62 4,904,059.69 20,489,900.50 2,037,041.05 27,918,239.34 (I) Total comprehensive incomes 482,822.62 51,348,795.39 14,753,316.11 66,584,934.12 (II) Capital increased and reduced by owners 1. Common shares increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in owners’ equity 4. Other (III) Profit distribution 4,904,059.69 -30,858,894.89 -12,877,215.93 -38,832,051.13 1. Appropriations to surplus reserves 4,904,059.69 -4,904,059.69 2. Appropriations to general risk provisions 3. Appropriations to owners (or shareholders) -25,954,835.20 -12,877,215.93 -38,832,051.13 4. Other (IV) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other 4,415.48 160,940.87 165,356.35 IV. Closing balance 185,391,680.00 278,458,862.55 -899,380.20 16,400,043.27 67,223,203.93 355,434,123.03 902,008,532.58 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 45 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 8. Statement of changes in owners’ equity of the Company Prepared by: Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB Yuan Reporting period Item Other equity instruments Other comprehensive Share capital Capital reserve Less: treasury stock Specific reserve Surplus reserve Retained profit Total owners’ equity Preferred shares Perpetual bonds Other incomes I. Balance at the end of the previous year 185,391,680.00 271,489,596.88 16,400,043.27 66,797,914.40 540,079,234.55 Add: change of accounting policy Correction of errors in previous periods Other II. Balance at the beginning of the year 185,391,680.00 271,489,596.88 16,400,043.27 66,797,914.40 540,079,234.55 III. Increase/ decrease in the period (“-” means decrease) 2,319,640.56 2,319,640.56 (I) Total comprehensive incomes 30,128,392.56 30,128,392.56 (II) Capital increased and reduced by owners 1. Common shares increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in owners’ equity 4. Other (III) Profit distribution -27,808,752.00 -27,808,752.00 1. Appropriations to surplus reserves 2. Appropriations to owners (or shareholders) 3. Other -27,808,752.00 -27,808,752.00 (IV) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other IV. Closing balance 185,391,680.00 271,489,596.88 16,400,043.27 69,117,554.96 542,398,875.11 46 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Unit: RMB Yuan Same period of last year Item Other equity instruments Other comprehensive Share capital Capital reserve Less: treasury stock Specific reserve Surplus reserve Retained profit Total owners’ equity Preferred shares Perpetual bonds Other incomes I. Balance at the end of the previous year 185,391,680.00 271,485,181.40 11,495,983.58 48,616,212.43 516,989,057.41 Add: change of accounting policy Correction of errors in previous periods Other II. Balance at the beginning of the year 185,391,680.00 271,485,181.40 11,495,983.58 48,616,212.43 516,989,057.41 III. Increase/ decrease in the period (“-” means decrease) 4,415.48 4,904,059.69 18,181,701.97 23,090,177.14 (I) Total comprehensive incomes 49,040,596.86 49,040,596.86 (II) Capital increased and reduced by owners 1. Common shares increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in owners’ equity 4. Other (III) Profit distribution 4,904,059.69 -30,858,894.89 -25,954,835.20 1. Appropriations to surplus reserves 4,904,059.69 -4,904,059.69 2. Appropriations to owners (or shareholders) -25,954,835.20 -25,954,835.20 3. Other (IV) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other 4,415.48 4,415.48 IV. Closing balance 185,391,680.00 271,489,596.88 16,400,043.27 66,797,914.40 540,079,234.55 Legal representative: Pan Zhirong Person-in-charge of the accounting work: Wu Yanru Chief of the accounting division: Wu Yanru 47 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Tsann Kuen (China) Enterprise Co., Ltd. Annotation of 30 Jun. 2015 (All amounts are expressed, unless otherwise stated, in Renminbi (CNY).) I. Company Profile Tsann Kuen (China) Enterprise Co., Ltd. (hereafter “the Company or TKC”) was established in the People’s Republic of China (“the PRC”) in 1988 as a wholly owned foreign investment enterprise, the Company named in Tsann Kuen China (Xiamen) Ltd. firstly, invested by the Fordchee (Hong Kong) Co., Ltd., EUPA Industry Corporation Limited and Hong Kong Fillman Investment Co., Ltd.. On 16 February 1993, with the approval of the Ministry of Foreign Trade and Economic Co-operation, the Company was reorganized into an incorporated company 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. In according to the 5th special Board of Director in 2012, “Bill about Implementation of Drawing back Share” authorized by third special General Meeting in 2012,document XTCS[2012] NO.698 “Subscriptions about Reduction of Capital of TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Authorized by Xiamen Investment Promotion Bureau” authorized by Commerce Department, the Company used the general capital of 1,112,350,077 shares as base number implementing the plan of share reduction at the ratio of 1:6 to all the register share holders in 28 December 2012. Upon the completion of share reduction, the general capital of the Company reduced from 1,112,350,077 shares to 185,391,680 shares. By 30 June 2015, the registered capital of the Company decreased to RMB 185,391,680. Follow The Ministry of Commerce of the People’s Republic of China approved (The No. [2005]3107), On December 6, 2006, the Company received the [2006] No.266 file from China Securities Regulatory Commission. The China Securities Regulatory Commission agreed 700,476,830 unlisted shares (account for 62.97% of the share capital) hold by the Company’s shareholders, EUPA Industry Corporation Limited, Fordchee Development Limited and Fillman Investment Limited to transfer into B shares. In November 29, 2007 these B shares could be listed and exercised on Shenzhen Stock Exchange. Up to 30 June 2015, total B shares hold by the three legal shareholders (EUPA Industry Corporation Limited, Fordchee Development Limited and Fillman Investment Limited) are 82,734,466 shares.( account for 44.63% of the share capital). Legal representative: Pan, Zhirong Place of registration: No.88 Xinglong Road, Huli Industrial District, Xiamen, Fujian Province The parent: Star Comgistic Capital Co. Ltd. The Company operates within the electrical machinery and equipment manufacturing industry. The industry of the company: electrical machinery and equipment manufacturing. The approved business scope: the main business is to develop, manufacture household appliances, electronics, light industrial products, modern office supplies. Design and manufacture of molds associated with these products in domestic and international sales of the company’s products and after-sales service. Wholesale and retail household appliances, electronic products, electrical equipment, office supplies, kitchen utensils, pre-packaged food (limited to branches), import and export related business and provide after-sales service (the above description do not involve state trading commodity goods, involving quota license management products are according to the relevant provisions of the State for the regulations application). There were 8 subsidiaries be included in the 2015 semi-annual consolidated scope of the Company. 48 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD The consolidated scope of the reporting period both increased and decreased one subsidiary over the last year, and for the details, please refer to Note VII “Changes of scope of consolidation financial statements”. The Financial Report approved by the Board of the Directors of the Company and disclosed on 7 Aug. 2015. II. Basis for preparation of the financial statements 1. Basis for preparation The financial statements of company have been prepared on basis of going concern in conformity with Chinese Accounting Standards for Business Enterprises and the Accounting Systems for Business Enterprises issued by the Ministry of Finance of People’s Republic of China (Ministry of Finance issued order No. 33, the Ministry of Finance revised order No. 76) on 15 February 2006, and revised Accounting Standards (order 41 of the Ministry of Finance) and Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 – General Provisions on Financial Reports (2014 Revision) issued by the China Securities Regulatory Commission (CSRC). According to the relevant accounting regulations in Chinese Accounting Standards for Business Enterprises, the company has adopted the accrual basis of accounting. Except for certain financial instruments which are measured by at fair value, the Company adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements. 2. Continuation The Company was not involved with any event or situation that supposed to cause significant misgiving on the continuation within 12 months from the period-end of the reporting period. III. Statement of Compliance with Enterprise Accounting Standards The financial statements of the company are recognized and measured in accordance with the regulations in the Chinese Accounting Standards for Business Enterprises and they give a true and fair view of the financial position, business result and cash flow of the Company as of 30 Jun. 2015. In addition, the financial statements of the company comply, in all material respects, with the revised disclosing requirements for financial statements and the Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15—General Provisions on Financial Reports (2014 Revision) issued by China Securities Regulatory Commission (CSRC) in 2014. IV. Important Accounting Principles and Accounting Estimates The Company and subsidiaries are principally engaged in the production and operation. The Company and subsidiaries in accordance with the actual production and management features, according to the relevant provisions of Accounting Standards, to make a number of specific accounting policies and accounting estimates for other transactions and events of revenue recognition, see Note IV. 25 “Revenue” for the description. For description of significant accounting judgments and estimates made by management, see Note IV. 30 “Significant accounting judgments and estimates”. 1. Accounting period The accounting period of the Company is classified as interim period and annual period. Interim period refers to the reporting period shorter than a complete annual period. The accounting period of the Company is the calendar year from January 1 to December 31. 49 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Operating cycle Normal business cycle is realized by the Company in cash or cash equivalents from the purchase of assets for processing until. The company has a 12 -month operating cycle, and its assets and liabilities as liquidity criteria for the classification. 3. Monetary Unit Yuan (CNY) is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose CNY as their functional currency, the overseas subsidiaries decide the HKD or USD as their functional currency in accordance with the business in which currency of the primary economic environment. The Company adopts CNY to prepare its functional statements. 4. Business combination A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations are classified into business combinations involving enterprises under common control and business combinations not involving enterprises under common control. (1) Business combination involving entities under common control A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. Combination date is the date on which the absorbing party effectively obtains control of the party being absorbed. The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjusted to the capital premium (or share premium) in the capital reserve. If the balance of the capital premium (or share premium) is insufficient, any excess is adjusted to retained earnings. The cost of a combination incurred by the absorbing party includes any costs directly attributable to the combination shall be recognized as an expense through profit or loss for the current period when incurred. (2) Business combination involving entities not under common control A business combination involving enterprises not under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties both before and after the business combination. For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. Acquisition date is the date on which the acquirer effectively obtains control of the acquiree. For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred. 50 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD The transaction cost arose from issuing of equity securities or liability securities shall be initially recognized as equity securities or liability securities. The contingent consideration related to the combination shall be booked as combination cost at the fair value at the acquisition date. If, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the contingent consideration need to be adjusted, goodwill can be adjusted. Combination cost of the acquirer’s interest and identifiable net assets of the acquirer acquired through the business combination shall be measured by the fair value at the acquisition date. Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’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 acquiree’s identifiable net assets, the difference shall be accounted for according to the following requirements: (i) the acquirer shall reassess the measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination; (ii) if after that reassessment, the cost of combination is still less than the acquirer’s interest in the fair values of the acquiree’s identifiable net assets, the acquirer shall recognize the remaining difference immediately in profit or loss for the current period. Where the temporary difference obtained by the acquirer was not recognized due to inconformity with the conditions applied for recognition of deferred income tax, if, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the expected economic benefits on the acquisition date arose from deductible temporary difference by the acquiree can be achieved, relevant income tax assets can be recognized, and goodwill offset. If the goodwill is not sufficient, the difference shall be recognized as profit of the current period. Apart from above, the differences shall be taken into profit or loss of the current period if the recognition of deferred income tax assets is related to the combination. For a business combination not involving enterprise under common control, which achieved in stages that involves multiple exchange transactions, according to “The notice of the Ministry of Finance on the issuance of Accounting Standards Interpretation No. 5” (Cai-Kuai [2012] No. 19) and Article 55 of “Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements” on the “package deal” criterion (see Note IV. 5. 2), to judge the multiple exchange transactions whether they are the“package deal”. If it belong to the “package deal” in reference to the preceding paragraphs of this section and the Notes described in 4.13 “long-term investment” accounting treatment, if it does not belong to the “package deal” to distinguish the individual financial statements and the consolidated financial statements related to the accounting treatment: In the individual financial statements, the total value of the book value of the acquiree’s equity investment before the acquisition date and the cost of new investment at the acquisition date, as the initial cost of the investment, the acquiree’s equity investment before the acquisition date involved in other comprehensive income, in the disposal of the investment will be in other comprehensive income associated with the use of infrastructure and the acquiree directly related to the disposal of assets or liabilities of the same accounting treatment (that is, except in accordance with the equity method of accounting in the defined benefit plan acquiree is remeasured net changes in net assets or liabilities other than in the corresponding share of the lead, and the rest into the current investment income). In the combination financial statements, the equity interest in the acquiree previously held before the acquisition date re-assessed at the fair value at the acquisition date, with any difference between its fair value and its carrying amount is recorded as investment income. The previously-held equity interest in the acquiree involved in other comprehensive income and other comprehensive income associated with the purchase of the foundation should be used party directly related to the disposal 51 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD of assets or liabilities of the same accounting treatment (that is, except in accordance with the equity method of accounting in the acquiree is remeasured defined benefit plans other than changes in net liabilities or net assets due to a corresponding share of the rest of the acquisition date into current investment income). 5. Preparation of the consolidated financial statements (1) The scope of consolidation The scope of consolidation for the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The scope of consolidation includes the Company and all of the subsidiaries. Subsidiary is an enterprise or entity under the control of the Company. Once the change in the relevant facts and circumstances leading to the definition of the relevant elements involved in the control of the change, the company will be re-evaluated. (2) Preparation of the consolidated financial statements The subsidiary of the Company is included in the consolidated financial statements from the date when the control over the net assets and business decisions of the subsidiary is effectively obtained, and excluded from the date when the control ceases. For a subsidiary disposed of by the Company, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For a subsidiary disposed during the period, no adjustment is made to the opening balance of the consolidated financial statements. For a subsidiary acquired through a business combination not under common control, the operating results and cash flows from the acquisition (the date when the control is obtained) are included in the consolidated income statement and consolidated statement of cash flows, as appropriated; no adjustment is made to the opening balance and comparative figures in the consolidated financial statements. Where a subsidiary was acquired during the reporting period, through a business combination involving enterprises under common control, the financial statements of the subsidiary are included in the consolidated financial statements. The results of operations and cash flow are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts, from the date that common control was established, and the opening balances and the comparative figures of the consolidated financial statements are restated. When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on the Company’s own accounting period or accounting policies. Where a subsidiary was acquired during the reporting period through a business combination not under common control, the financial statements was reconciliated on the basis of the fair value of identifiable net assets at the date of acquisition. Intra-Group balances and transactions, and any unrealized profit or loss arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Minority interest and the portion in the net profit or loss not attributable to the Company are presented separately in the consolidated balance sheet within shareholders’/ owners’ equity and net profit. Net profit or loss attributable to minority shareholders in the subsidiaries is presented separately as minority interest in the consolidated income statement below the net profit line item. When the amount of loss for the current period attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the opening balance of shareholders’/equity of the subsidiary, the excess is allocated against the minority interests. When the Company loses control of a subsidiary due to the disposal of a portion of an equity investment or other reasons, the remaining equity investment is re-measured at its fair value at the date when control is lost. The difference between 1) the total amount of consideration received from 52 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD the transaction that resulted in the loss of control and the fair value of the remaining equity investment and 2) the carrying amounts of the interest in the former subsidiary’s net assets immediately before the loss of the control is recognized as investment income for the current period when control is lost. Other comprehensive income related to the former subsidiary’s equity investment, using the foundation and the acquiree directly related to the disposal of the same assets or liabilities are accounted when the control is lost(i.e., in addition to the former subsidiary is remeasured at the net defined benefit plan or changes in net assets and liabilities resulting from, the rest are transferred to the current investment income). The retained interest is subsequently measured according to the rules stipulated in the - “Chinese Accounting Standards for Business Enterprises No. 2 - Long-term equity investment” or “Chinese Accounting Standards for Business Enterprises No. 22 - Determination and measurement of financial instruments”. See Note IV. 13 Long-term equity investments and Note IV. 9 Financial instruments for details. The company through multiple transactions step deals with disposal of the subsidiary’s equity investment until the loss of control, need to distinguish between equity until the disposal of a subsidiary’s loss of control over whether the transaction is package deal. Terms of the transaction disposition of equity investment in a subsidiary, subject to the following conditions and the economic impact of one or more of cases, usually indicates that several transactions should be accounted for as a package deal: ① these transactions are considered simultaneously, or in the case of mutual influence made, ② these transactions as a whole in order to achieve a complete business results; ③ the occurrence of a transaction depends on occurs at least one other transaction; ④ a transaction look alone is not economical, but when considered together with other transaction is economical. If they does not belong to the package deal, each of them separately, as the case of a transaction in accordance with “without losing control over the disposal of a subsidiary part of a long-term equity investments“ (see Note IV. 10. 2, 4) and “due to the disposal of certain equity investments or other reasons lost control of a subsidiary of the original” (see previous paragraph) principles applicable accounting treatment. Until the disposal of the equity investment loss of control of a subsidiary of the transactions belonging to the package deal, the transaction will be used as a disposal of a subsidiary and the loss of control of the transaction. However, before losing control of the price of each disposal entitled to share in the net assets of the subsidiary ‘s investment corresponding to the difference between the disposal, recognized in the consolidated financial statements as other comprehensive income, loss of control over the transferred together with the loss of control or loss in the period. 6. Joint arrangement A joint arrangement is an arrangement of which two or more parties have joint control. A joint arrangement is either a joint operation or a joint venture, depending of the rights and obligation of the Company in the joint arrangement. A joint operation is a joint arrangement whereby the Company has rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the Company has rights to the net assets of the arrangement. The Company accounts for joint ventures using the equity method, see Note IV. 13. 2.② “Long-term equity investment measured by equity method” for details. The company, a joint operator, recognizes in relation to its interest in a joint operation: (a) its assets, including its share of any assets held jointly; (b) its liabilities, including its share of any liabilities incurred jointly; (c) its revenue from the sale of its share of the output arising from the joint operation; (d) its share of the revenue from the sale of the output by the joint operation; and (e) its expenses, including its share of any expenses incurred jointly. When the Company enters into a transaction with a joint operation in which it is a joint operator, such as a sale or contribution of assets, the Company, prior to disposal of the assets to a third party by the joint operation, recognizes gains and losses resulting from such a transaction only to the 53 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD extent of the other parties’ interests in the joint operation. When there is evidence of a reduction in the net realizable value of the assets to be sold or contributed to the joint operation, or of an impairment loss of those assets which is in line with provision stipulated by CAS 8, those losses are recognized fully by the Company. When there is evidence of a reduction in the net realizable value of the assets to be purchased or of an impairment loss of those assets, the Company shall recognize its share of those losses. 7. Recognition standard of cash and cash equivalent Cash and cash equivalents of the Company include cash on hand, ready usable deposits and investments having short holding term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be measured reliably and have low risks of change. 8. Translation of foreign currency operation and foreign currency statement (1) Translation in foreign exchange transactions The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying the spot exchange rate on the date of the transaction/an exchange rate that approximates the actual spot exchange rate on the date of transaction. The exchange of foreign currency and transactions related to the foreign exchange are translated at the spot exchange rate. (2) Translation of monetary foreign currency and non-monetary foreign currency On the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balance sheet date. All the exchange differences thus resulted are taken to profit or loss, except for ① those relating to foreign currency borrowings specifically for construction and acquisition of qualifying assets, which are capitalized in accordance with the principle of capitalization of borrowing costs, ② hedging accounting, the exchange difference related to hedging instruments for the purpose of net oversea operating investment is recorded in the comprehensive income till the date of disposal and recognized in profit or loss of the period; exchange difference from changes of other account balance of foreign currency monetary items, ③available-for-trade is recorded into profit or loss except for amortized cost. Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair values are determined. The exchange difference thus resulted are recognized in profit or loss for the current period or as capital reserve. (3) The translation of financial statement in foreign currency When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognized as “exchange differences arising on translation of financial statements denominated in foreign currencies” in owner’s equity, and in profit or loss for the period upon disposal of the foreign operation. The Group translates the financial statements of its foreign operations into CNY by following rules. Assets and liabilities in the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; all equity items except for retained earnings are translated at the spot exchange rates at the dates on which such items occur; income and expenses in income statement are translated at the spot exchange rates at the date of transaction; the opening retained earnings is the closing retained earnings of the last period after translation; the closing balance of retained earnings is calculates and presented in the basis of each translated income statements and profit distribution item; the difference arising between the assets and liabilities and shareholders’ equity shall be booked as translation difference of foreign currency statements, and shall be presented as a separate component of equity in the balance sheet. On a loss of control over Group’s oversea operation due 54 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD to disposal, the Company transfers the accumulated or proportionate share of the accumulated exchange difference arising on translation of financial statements of this oversea operation attributable to the owners’ equity of the Company and presented under shareholders’ equity, to profit or loss in the period in which the disposal occurs. Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange rates on the date of cash flows. The effect of exchange rate changes on cash is separately presented as an adjustment item in the cash flow statement. The opening and actual amount of last year are presented in the financial statement after translation. At the disposal of all of the company’s ownership interest in a foreign operation, or due to the disposal of part of the equity investment or other reasons, the loss of control over a foreign operation, the project owner’s equity in the balance sheet listed under the relevant overseas operations attributable to statements of the parent company ‘s shareholders’ equity of foreign currency translation differences, all transferred to the disposal of the income statement. At the disposal of part of the equity investment or other causes lower hold percentage overseas business interests, but does not lose control over a foreign operation, and disposal of the foreign operation section related to foreign currency translation differences attributable to minority interests, is not transferred to the income statement. At the disposal of a foreign operation as part of the equity joint venture or joint ventures, foreign currency financial statements of the foreign operation and the associated translation difference in proportion to dispose of the foreign operation into the disposal of the income statement. 9. Financial instruments When the Company becomes a party to a financial instrument, it shall recognize a financial asset or financial liability. The financial assets and financial liabilities initially recognized by the Company shall be measured at their fair values. For the financial assets and liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, the transaction expenses thereof shall be directly recorded into the profits and losses of the current period and for other categories of financial assets and financial liabilities, the transaction expenses thereof shall be included into the initially recognized amount. (1) Determination of financial assets and liabilities’ fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. For a financial instrument which has an active market, the Company uses quoted price in the active market to establish its fair value. The quoted price in the active market refers to the price that can be regularly obtained from exchange market, agencies, industry associations, pricing authorities; it represents the fair market trading price in the actual transaction. For a financial instrument which does not have an active market, the Company establishes fair value by using a valuation technique. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. The Company measures initially and subsequently the fair value of an interest rate swap at the value of a competitor’s interest rate swap quoted by a recognized financial institution as at the Company’s balance sheet date in accordance with the principle of consistency. (2) Classification, recognition and measurement of financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. On initial recognition, the Company’s financial assets are classified into one of the four categories, including financial assets at fair value though profit or loss, held-to maturity investments, loans and receivables and available-for-trade financial assets. A financial asset is recognized initially at fair value. In the case of financial assets at fair value through profit or loss, relevant transaction costs are immediately charged to the profit and loss of the current period; transaction 55 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD costs relating to financial assets of other categories are included in the amount initially recognized. ① Financial assets at fair value through profit or loss: Including financial assets held-for-trade and financial assets designated at fair value through profit or loss. Financial asset held-for-trade is the financial asset that meets one of the following conditions: A. the financial asset is acquired for the purpose of selling it in a short term; B. the financial asset is a part of a portfolio of identifiable financial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profits; C. the financial asset is a derivative, except for a derivative that is designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. For such kind of financial assets, fair values are adopted for subsequent measurement. Financial asset is designated on initial recognition as at fair value through profit or loss only when it meets one of the following conditions: A. the designation eliminates or significantly reduces the inconsistency in the measurement or recognition of relevant gains or losses that would otherwise arise from measuring the financial instruments on different bases. B. a Group of financial instruments is managed and its performance is evaluated on a fair value basis, and is reported to the enterprise’s key management personnel. Formal documentation regarding risk management or investment strategy has prepared. Financial assets at fair value through profit or loss are subsequently measured at the fair value. Any gains or losses arising from changes in the fair value and any dividends or interest income earned on the financial assets are recognized in the profit or loss. ② Investment held-to maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Such kind of financial assets are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition, impairment or amortization are recognized in profit or loss for the current period. Effective interest rate is the rate that exactly discounted estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company shall estimate future cash flow considering all contractual terms of the financial asset or financial liability without considering future credit losses, and also consider all fees paid or received between the parties to the contract giving rise to the financial asset and financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc. ③ Loans and receivables Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in an active market. Financial assets classified as loans and receivables by the Company include note receivables, account receivables, interest receivable dividends receivable and other receivables. Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain or loss arising from derecognition, impairment or amortization is recognized in profit or loss. ④ Financial assets available-for-trade Financial assets available-for-trade include non-derivative financial assets that are designated on initial recognition as available for trade, and financial assets that are not classified as financial 56 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD assets at fair value through profit or loss, loans and receivables or investment held-to-maturity. Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income and included in the capital reserve, except that impairment losses and exchange differences related to amortized cost of monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which time the gains or losses are released and recognized in profit or loss. Interests obtained and dividends declared by the investee during the period in which the financial assets available-for-trade are held, are recognized in investment gains. (3) Impairment of financial assets The Company shall carry out an inspection, on each balance sheet day, on the carrying amount of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made. The Company assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, a provision is provided for the impairment. ① Impairment on held-to maturity investment, loans and receivables The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of impairment loss on the reserving date. ② Impairment loss on available-for-trade financial assets Where the fair value of the equity instrument investment drops significantly or not contemporarily according to the integrated relevant factors, an available-for-trade financial asset is impaired. When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value that had been recognized in capital reserve shall be removed and recognized in profit or loss. The amount of the cumulative loss that is removed shall be difference between the acquisition cost with deduction of recoverable amount less amortized cost, current fair value and any impairment loss on that financial asset previously recognized in profit or loss. If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset is recovered, and it is objectively related to an event occurring after the impairment loss was recognized, the initial impairment loss can be reversed and the reserved impairment loss on available-for-trade equity instrument is recorded in the profit or loss, the reserved impairment loss on available-for-trade debt instrument is recorded in the current profit or loss. The equity instrument where there is no quoted price in an active market, and whose fair value cannot be reliably measured, or impairment loss on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument shall not be reversed. (4) Recognition and measurement of financial assets transfer The Group derecognizes a financial asset when one of the following conditions is met: ① the rights to receive cash flows from the asset have expired; ② the enterprise has transferred its rights to receive cash flows from the asset to a third party under a pass-through arrangement; or ③ the enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 57 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD If the enterprise has neither retained all the risks and rewards from the financial asset nor control over the asset, the asset is recognized according to the extent it exists as financial asset, and correspondent liability is recognized. The extent of existence refers the level of risk by the financial asset changes the enterprise is facing. For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of the financial asset transferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss. If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair value of those parts. The difference between (a) the carrying amount allocated to the part derecognized; and (b) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit or loss. (5) Classification and measurement of financial liabilities The Group’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss and other financial liabilities. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilities are included in the initial recognition amounts. ① Financial liabilities measured by the fair value and the changes recorded in profit or loss The classification by which financial liabilities held-for-trade and financial liabilities designed at the initial recognition to be measured by the fair value follows the same criteria as the classification by which financial assets held-for-trade and financial assets designed at the initial recognition to be measured by the fair value and their changes are recorded in the current profit or loss. For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair values are adopted for subsequent measurement. All the gains or losses on the change of fair value and the expenses on dividends or interests related to these financial liabilities are recognized in profit or loss for the current period. ② Other financial liabilities Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an active market and their fair value cannot be measured reliably, is subsequently measured by cost Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition or amortization is recognized in profit or loss for the current period. (6) Derecognition of financial liabilities The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or part of it) is discharged or cancelled or has expired. An agreement between the Company (an existing borrower) and existing lender to replace original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. When the Company derecognizes a financial liability or a part of it, it recognizes the difference between the carrying amount of the financial liability (or part of the financial liability) derecognized the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss. (7) Derivatives and embedded derivatives Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. The resulting gain and loss is recognized in profit or loss. An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not 58 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss. (8) Offsetting financial assets and financial liabilities When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset. (9) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The consideration received from issuing equity instruments, net of transaction costs, are added to shareholders’ equity. All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted from shareholders’ equity. The Group does not recognize any changes in the fair value of equity instruments. 10. Receivables The receivables by the Company includes account receivables, and other receivables. (1) Criteria for recognition of bad debts: The Company carries out an inspection on the balance sheet date. Where there is any objective evidence proving that the receivables have been impaired, an impairment provision shall be made: ① A serious financial difficulty occurs to the issuer or debtor; ② The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.; ③ The debtor will probably become bankrupt or carry out other financial reorganizations; ④ Other objective evidences showing the impairment of the receivables. (2) Method for bad debts provision ① Provisions of bad debts in account receivables that is individually significant. Individual receivables equal to or higher than 10Proportion receivables are classified as receivables of individual significance. For an account receivable that is individually significant, the asset is individually assessed for impairment, the impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly. ② Provisions of bad debts in account receivables that individually insignificant items with similar credit risk characteristics that have significant risk: A. Evidence of credit risk characteristics Whether the financial asset is individually significant or not individually significant, it is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Such credit risk reflects the repayment of all due amount under the contract, and is related to the estimation of future cash flow expected to be derived from the assets. 59 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Evidence of portfolios: Item Basis Age portfolios Age condition Related party portfolios Related party relationship B. Provision by credit risk characteristics During the Company impairment test, the amount of bad debts provisions is determined by the assessed result from the experience of historical loss and current economic status and the existing loss in the estimated account receivables according to the set of account receivables and credit risk characteristic. Provision for different portfolios: Item Provision Age portfolios Age analysis method Related party portfolios No allowance for bad debt, Unless the related party is insolvent a. Portfolio by age analysis Category Proportion for accounts receivable (%) Proportion for other receivable (%) 1-90 days 0.00 0.00 91-180 days 10.00 10.00 181-270 days 30.00 30.00 271-365 days 50.00 50.00 Over 365 days 100.00 100.00 b. Adopt other methods for recognition of impairment allowances Group name Proportion for accounts receivable (%) Proportion for other receivable (%) Related party group 0.00 0.00 ③ Provisions of bad debts that is individually insignificant. For the account receivables not individually significant, the Company assesses the account receivables individually for impairment when are of following characteristics: if there is objective evidence indicating the impairment, the impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly. For examples: receivables of individual insignificance bears differing credit risk characteristics to other receivables of individual insignificance account receivables with related parties; account receivables under litigations or arbitrations, or account receivables with obvious indication that debtor cannot fulfill the obligation of repayment. (3) The reversal of bad debts provision If there is objective evidence of recovery in value of account receivables, and the recovery can be related to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and recognized in profit or loss. However, the reversal shall not result in a carrying amount that exceeds what the amortized cost would have been had the impairment loss not been recognized at the date the impairment is reversed. 60 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 11. Inventories (1) Classification of inventory Inventories are classified into materials in transit, raw materials, work-in-progress, finished goods, materials and goods of consignment and revolving materials etc. (2) Valuation method of inventories Inventories are initially carried at the planed cost, to record the difference between planned cost and actual cost through the cost variances account, and carryover the cost variances of issued inventory on schedule, to adjust the planned cost to actual cost. Cost of issue is measured using the weighted average method. (3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events. At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined normally by the difference of the cost of individual item less its realizable value. For large quantity and low value items of inventories, Provision for decline in value is made based on categories of inventories. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line provision for decline in value is determined on an aggregate basis. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. (4) The perpetual inventory system is maintained for stock system. (5) Amortization method for low cost and short-lived consumable items and packaging materials. Low cost and short-lived consumable items are amortized using immediate write-off method, packaging materials are amortized using immediate write-off method. 12. Held-for-sale assets If a non-current assets could be immediately sold only according to the usual terms of selling this kind of assets under current situation, and the Group has made a decision on disposing a non-current asset, entered into an irreversible transfer agreement with the transferee and the transfer is likely to be completed within one year, the non-current asset is measured as a non-current asset held for sale, which shall not be depreciated or amortized since the date held for sale but shall be measured at the lower one of the net amounts of the book value and the fair value after deducting the disposal expense. Non-current assets held for sale include single-item assets and disposal groups. Where a disposal group is an asset group and the goodwill obtained in the business combination is apportioned to the asset group according to the “Accounting Standard No. 8 for Business Enterprises—Asset Impairment”, or a disposal group is an operation in such an asset group, the disposal group shall include the goodwill in the business combination. The non-current assets of single amount and the assets among the disposing group that both be divided as assets held for sale, should be listed alone of the current assets on the balance sheet; liabilities related to the assets transfer among the disposing group which be divided as assets held 61 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD for sale, should be listed alone of the current assets on the balance sheet. An asset or an disposal group was classified as held for sale before, but if it couldn’t meet the recognition conditions for held-for-sale non-current asset later, the Company shall cease to classify it as held for sale, and measure it by the lower amount of the followings: (1) its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or impairment before the asset (or disposal group) being classified as held for sale; or (2) its recoverable amount on the date of the subsequent decision not to sell. 13. Long-term equity investments Long-term equity investments referred to in this section refer to the Company invested entity has control, joint control or significant influence over the long-term equity investments. The Company invested does not have control, joint control or significant influence over the long-term equity investments as financial assets available for sale or at fair value and the changes included financial assets through profit or loss, which refer to the accounting policies in Note IV. 9 “financial Instruments”. Joint control is the Company control over an arrangement in accordance with the relevant stipulations are common, related activities and the arrangement must be after sharing control participants agreed to the decision-making. Significant influence is the Company s financial and operating policies of the entity has the right to participate in decision-making, but can not control or with other parties joint control over those policies. (1) Determination of Investment cost The cost of a long-term equity investment acquired through business combination under common control is measured at the acquirer’s share of the combination date book value of the acquiree’s net equity in the ultimate controller’s consolidated financial statements. The difference between the cost and book value of cash paid, non-monetary assets transferred and liabilities assumed is adjusted to capital reserves, and to retained earnings if capital reserves is insufficient. If the consideration is transferred by way of issuing equity instruments, the face value of the equity instruments issued is recognised in share capital and the difference between the costs of the face value of the equity instruments issued is adjusted to capital reserves, and to retained earnings if capital reserves is insufficient. Where a business combination under common control is achieved by multiple acquisition of the acquiree’s shareholding, the multiple acquisitions shall be assessed to determine whether the multiple acquisitions shall be viewed as one single transaction. If the multiple acquisitions shall be viewed as one single transaction, the multiple acquisitions shall be accounted for as one single transaction accordingly. If the multiple acquisitions shall not be viewed as one single transaction, the difference between the cost of combination and the sum of the book value of the investment in the acquiree immediately before the combination and the book value of the consideration transferred to acquire additional shareholding is adjusted to capital reserves, and to retained earnings if capital reserves is insufficient. Cumulative other comprehensive income associated with the investment recognised as a result of the treatment of equity method or available-for-sale financial assets prior to the combination is not affected by the combination. The cost of a long-term equity investment acquired through business combination not under common control is the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued. Where a business combination not under common control is achieved by multiple acquisition of the acquiree’s shareholding, the multiple acquisitions shall be assessed to determine whether the multiple acquisitions shall be viewed as one single transaction. If the multiple acquisitions shall be viewed as one single transaction, the multiple acquisitions shall be accounted for as one single transaction accordingly. If the multiple acquisitions shall not be viewed as one single transaction, the cost of combination is measured at the sum of book value of the investment in the acquiree immediately before the combination and cost of acquisition of additional shareholding. If the investment prior to the combination is measured by fair value, cumulative other 62 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD comprehensive income associated with the investment prior to the combination is not affected by the combination. If the investment prior to the combination is measured as an available-for-sale financial asset, the difference between the fair value and the book value of the investment immediately before the combination and the associated cumulative other comprehensive income recognised prior to the combination are carried to profit or loss. All expenses incurred directly associated with the acquisition by the acquirer, including expenditure of audit, legal services, valuation and consultancy and other administrative expenses, are recognised in profit or loss for the period during which the acquisition occurs. Long-term equity investments acquired not through business combination are measured at cost on initial recognition. Depending on the way of acquisition, the cost of acquisition can be the total cash paid, the fair value of equity instrument issued, the contract price, the fair value or book value of the assets given away in the case of non-monetary asset exchange, or the fair value of the relevant long-term equity investments. The cost of acquisition of a long-term equity investment acquired not through business combination also includes all directly associated expenses, applicable taxes and fees, and other necessary expenses. The cost of a long-term equity investment, which enables the Company, has significant influence or joint control over the acquiree which is achieved through additional investment, is measured as the fair value determined in accordance with CAS 22 - Financial Instruments: Recognition and Measurement plus the cost of additional investment. (2) Subsequent measurement To be invested joint control (except constitute common operator) or long-term equity investments significant influence are accounted for using the equity method. In addition, the Company’s financial statements using the cost method of accounting for long-term equity can exercise control over the investee. ① Cost method of accounting for long-term equity investments Under the cost method, a long-term equity investment is measured at initial investment cost. Except for cash dividends or profits declared but not yet paid that are included in the price or consideration actually paid upon acquisition of the long-term equity investment, investment income is recognized in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee. ② Equity method of accounting for long-term equity investments Where the initial investment cost of a long-term equity investment exceeds the investing enterprise’s interest in the fair values of the investee’s identifiable net assets at the time of acquisition, no adjustment shall be made to the initial investment cost. The carrying amount of a long-term equity investment measured using the equity method is adjusted by the Company’s share of the investee’s net profit and other comprehensive income, which is recognized as investment income and other comprehensive income respectively. The carrying amount of a long-term equity investment measured using the equity method is reduced by profit distribution or cash dividends announced by the investee. The carrying amount of a long-term equity investment measured using the equity method is also adjusted by the investee’s equity movement other than net profit, other comprehensive income and profit distribution, which is adjusted to capital reserves. The net profit of the investee is adjusted by the fair value of the investee’s identifiable assets as at acquisition. The financial statements and hence the net profit and other comprehensive income of an investee which does not adopt accounting policies or accounting period uniform with the Company is adjusted by the Company’s accounting policies and accounting period. The Company’s share of unrealized profit or loss arising from related party transactions between the Company and an associate or joint venture is deducted from investment income. Unrealized loss arising from related party transactions between the Company and an associate or joint venture which is associated with asset impairment is not adjusted. Where assets transferred to an associate or joint venture which form part of the Company’s investment in the investee but which 63 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD does not enable the Company obtain control over the investee, the cost of the additional investment acquired is measured at the fair value of assets transferred and the difference between the cost of the additional investment and the book value of the assets transferred is recognized in profit or loss. Where assets transferred to an associate or joint venture form an operation, the difference between the consideration received and the book value of the assets transferred in recognized in profit or loss. Where assets transferred from an associate or joint venture form an operation, the transaction is accounted for in accordance with CAS 20 - Business Combination, any gain or loss is recognized in profit or loss. The Company’s share of an investee’s net loss is limited by the sum of the book value of the long-term equity investment and other net long-term investments in the investees. Where the Company has obligation to share additional net loss of the investee, the estimated share of loss would be recognized as accrued liabilities and investment loss. Where the Company has unrecognized share of loss of the investee when the investee generates net profit, the Company’s unrecognized share of loss is reduced by the Company’s share of net profit and when the Company’s unrecognized share or loss is eliminated in full, the Company’s share of net profit, if any, is recognized as investment income. For long-term equity investments in associates and joint ventures which had been held by the Company before its first time adoption of Accounting Standards for Business Enterprises, where the initial investment cost of a long-term equity investment exceeds the Company’s interest in the investee’s net assets at the time of acquisition, the excess is amortized and is recognized in profit or loss on a straight line basis over the original remaining life. ③ Acquisition of minority interest The difference between newly increased equity investment due to acquisition of minority interests and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted against returned earnings. ④ Disposal of long-term equity investment Where the parent company disposes long-term investment in a subsidiary without a change in control, the difference in the net asset between the amount of disposed long-term investment and the amount of the consideration paid or received is adjusted to the owner’s equity. If the disposal of long-term investment in a subsidiary involves loss of control over the subsidiary, the related accounting policies in Note IV. 5. (2) applies. For disposal of long-term equity investments in any situation other than the fore-mentioned situation, the difference between the book value of the investment disposed and the consideration received is recognized in profit or loss. Where a long-term equity investment is measured by the equity method both before and after part disposal of the investment, cumulative other comprehensive income relevant to the investment recognised prior to the acquisition is treated in the same manner that the investee disposes the relevant assets or liabilities proportionate to the disposal. The investee’s equity movement other than net profit, other comprehensive income and profit distribution is recognised in profit or loss proportionate to the disposal. Where a long-term equity investment is measured at cost both before and after part disposal of the investment, cumulative other comprehensive income relevant to the investment recognised, as a result of accounting by equity method or recognition and measurement principles applicable to financial instruments, prior to the Company’s acquisition of control over the investee is treated in the same manner that the investee disposes the relevant assets or liabilities and recognised in profit or loss proportionate to the disposal. The investee’s equity movement other than net profit, other comprehensive income and profit distribution, as a result of accounting by equity method, is recognised in profit or loss proportionate to the disposal. Where the Company’s control over an investee is lost due to partial disposal of investment in the 64 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD investee and the Company continues to have significant influence over the investee after the partial disposal, the investment in measured by the equity method in the Company’s separate financial statements; where the Company’s control over an investee is lost due to partial disposal of investment in the investee and the Company ceases to have significant influence over the investee after the partial disposal, the investment in measured in accordance with the recognition and measurement principles applicable to financial instruments in the Company’s separate financial statements and the difference between the fair value and the book value of the remaining investment at the date of loss of control is recognized in profit or loss. Cumulative other comprehensive income relevant to the investment recognised, as a result of accounting by equity method or recognition and measurement principles applicable to financial instruments, prior to the Company’s acquisition of control over the investee is treated in the same manner that the investee disposes the relevant assets or liabilities on the date of loss of control. The investee’s equity movement other than net profit, other comprehensive income and profit distribution, as a result of accounting by equity method, is recognised in profit or loss when control is lost. Where the remaining investment is measured by equity method, the fore-mentioned other comprehensive income and other equity movement are recognised in profit or loss proportionate to the disposal; Where the remaining investment is measured in accordance with the recognition and measurement principles applicable to financial instruments, the fore-mentioned other comprehensive income and other equity movement are recognised in profit or loss in full. Where the Company’s joint control or significant influence over an investee is lost due to partial disposal of investment in the investee, the remaining investment in the investee is measured in accordance with the recognition and measurement principles applicable to financial instruments, the difference between the fair value and the book value of the remaining investment at the date of loss of joint control or significant influence is recognized in profit or loss.Cumulative other comprehensive income relevant to the investment recognised, as a result of accounting by equity method, prior to the partial disposal is treated in the same manner that the investee disposes the relevant assets or liabilities on the date of loss of joint control or significant influence. The investee’s equity movement other than net profit, other comprehensive income and profit distribution is recognised in profit or loss when joint control or significant influence is lost. Where the Company’s control over an investee is lost through multiple disposals and the multiple disposals shall be viewed as one single transaction, the multiple disposals are accounted for one single transaction which results in the Company’s loss of control over the investee. Each difference between the consideration received and the book value of the investment disposed is recognised in other comprehensive income and reclassified in full to profit or loss at the time when control over the investee is lost. 14. Investment property 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. In addition, the Company holds for future operating lease vacant buildings, if the board of directors (or similar body) to make a written resolution, made it clear that their intention for rent and shall not occur in the short term change, but also as an investment real estate presentation .Investment property is initially measured at cost. Subsequent expenditures related to an investment real estate are likely to flow about the economic benefits of the asset and its cost can be measured reliably, is included in the cost of investment real estate. Other subsequent expenditures should be recorded in the current profits or losses when incurred. The Group uses the cost model for subsequent measurement of investment property, and in accordance with the depreciation or amortization of buildings or land use rights policy. Investment property impairment test method and impairment accrual method described in Note IV. 17 “Non-current and non-financial assets impairment”. 65 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Occupied real estate for investment property or investment property is transferred to owner-occupied real estate or stock conversion as the recorded value after the conversion, according to the book value before the conversion. When an investment property is changed for personal use, since the change of date, the investment property is transferred to fixed assets or intangible assets. Owner-occupied property is changed to earn rentals or for capital appreciation, change the date, will be converted to fixed assets or intangible investment property. When the transition occurs, the conversion to the use of investment property cost model, the carrying value before conversion as the book value after conversion, convert to investment property measured at fair value model, the fair value of the conversion date as the conversion after the recorded value. When the investment property is disposed of or permanently withdrawn from use and no future economic benefits are expected from the disposal, derecognition of the investment property. Investment property is sold, transferred, retired or damaged, the disposal income after deducting the book value and related taxes and profit or loss. 15. Fixed assets (1) The conditions of recognition Fixed assets refers to the tangible assets that are held for the sake of producing commodities, rendering labor service, renting or business management and their useful life is in excess of one fiscal year. Fixed assets only in the economic benefits associated with it will flow to the company and the cost can be measured reliably only are confirmed. Fixed assets are stated at cost and considering the expected costs of abandoning the initial measurement. (2) The method for depreciation From the following month of state of intended use, depreciation method of the straight-line method is used for different categories of fixed assets to take depreciation. The recognition of the classification, useful life and estimated residual rate are as follows: Category Estimated residual value (%) Expected useful life Depreciation (%) Houses and building 10.00 20 4.50 Machineries 0.00 11-18 5.56-9.09 Electronic device、furniture and modules 0.00 5-6 16.67-20.00 Vehicles 0.00 6 16.67 Improvement expense of leased fixed assets 0.00 the shorter of lease term and beneficial lives Expected net residual value of fixed assets is the balance of the Company currently obtained from the disposal of the asset less the estimated costs of disposal amount, assuming the asset is out of useful life and state the expected service life in the end. (3) Measurement and recognition of fixed assets impairment Impairment and provisions of fixed assets are disclosed on Note IV. 17 Impairment of non-current and non-financial assets. (4) Fixed Assets under finance leases A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. Fixed assets that are held under finance leases shall be depreciated by applying the same policy as that for the fixed assets owned by the Company. If it can be reasonably determined that the ownership of the leased assets can be obtained at the end of the lease period, the leased assets are depreciated over their useful lives; otherwise, the leased assets are depreciated over the shorter of the lease terms and the useful lives of the leased assets. 66 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (5) Others A fixed asset is recognized only when the economic benefits associated with the asset will probably flow to the Company and the cost of the asset can be measured reliably. Subsequent expenditure incurred for a fixed asset that meet the recognition criteria shall be included in the cost of the fixed asset, and the carrying amount of the component of the fixed asset that is replaced shall be derecognized. Otherwise, such expenditure shall be recognized in profit or loss in the period in which they are incurred. The revenue from selling or transferring, or disposing a fixed asset is booked into profit and loss after deduction of carrying value and related tax. The Company conducts a review of useful life, expected net realizable value and depreciation methods of the fixed asset at least on an annual base. Any change is regarded as change in accounting estimates. 16. Construction in progress Construction in progress is measured at its actual cost. The actual costs include various construction expenditures during the construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs. Construction in progress is transferred to a fixed asset when it is ready for intended use. Testing method for provision impairment of construction in progress and accrued method for provision impairment please refer to Note IV. 20. 17. Borrowing costs Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized. The amounts of other borrowing costs incurred are recognized as an expense in the period in which they are incurred. Qualifying assets are asset (fixed assets, investment property and inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale. Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such borrowings is determined by applying a weighted average interest rate to the weighted average of the excess amounts of accumulated expenditure on the asset over and above the amounts of specific-purpose borrowings. During the capitalization period, exchange differences related to a specific-purpose borrowing denominating in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognized in profit or loss in the period in which they are incurred. Assets qualified for capitalization are the fixed assets, investment properties or inventories which need a long time of construction or production activities before ready for intended used or sale. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted by activities other than those necessary to prepare the asset for its intended use or sale, when the interruption is for a continuous period of more than 3 months. Borrowing costs incurred during these periods recognized as an expense for the current period until the acquisition, construction or production is resumed. 67 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 18. Intangible assets (1) Intangible asset The term “intangible asset” refers to the identifiable non-monetary assets without physical shape, possessed or controlled by enterprises. The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded as cost of intangible assets. The expenses other than this shall be booked in the profit or loss when they occur. Land use rights that are purchased by the Company are accounted for as intangible assets. Buildings, such as plants that are developed and constructed by the Company, and relevant land use rights and buildings, are accounted for as intangible assets and fixed assets, respectively. Payments for the land and buildings purchased are allocated between the land use rights and the buildings; if they cannot be reasonably allocated all of the land use rights and buildings are accounted for as fixed assets. When an intangible asset with a definite useful life is available for use, its original cost less net residual value and any accumulate impairment losses is amortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized. For an intangible asset with a definite useful life, the Company reviews the useful life and amortization method at the end of the period, and makes adjustment when necessary. An additional review is also carried out for useful life of the intangible assets with indefinite useful life. If there is evidence showing the foreseeable limit period of economic benefits generated to the enterprise by the intangible assets, then estimate its useful life and amortize according to the policy of intangible assets with definite useful life. (2) Research and development cost Cost of research and development is distinguished into the research phase and the development phases. Cost of the research phase is recognized in the profit or loss in the period in which it is incurred. Unless the following conditions are satisfied, cost of the development phase is recognized in the profit or loss in the period in which it is incurred: 1) It is technically feasible to complete the intangible asset so as to use it or sell it; 2) It is clearly invented to complete the intangible asset in order to use it or sell it; 3) it is probable that the intangible asset is capable of generating future economic benefit, such as the market for the product produced by the intangible asset or the intangible asset itself, it is objectively evidential that the intangible asset is economically usable if it is going to be used internally; 4) There are sufficient technical, financial and other resources to complete the intangible asset and to use it or sell it; 5) The cost of the development of the intangible can be measured reliably. If the cost cannot be distinguished into the search phase and the development phase, it is recognized in the profit or loss for the period in which it is incurred. (3) Impairment of intangible assets Impairment and provisions of intangible assets are disclosed on Note 4.20. 19. Long-term deferred expenditure An item long-term deferred expenses is an expense which has been incurred and which has a beneficial period (a period during which an expense is expected to bring economic benefits to an entity) which is longer than one year and which includes at least part of the reporting period during which the expense was incurred and subsequent reporting periods. An item of long-term deferred 68 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD expenses is recognized at the actual amount of the expense incurred and allocated in each month of the beneficial period using the straight line method. 20. Impairment of long-term assets Non-financial assets with non-current nature include fixed assets, construction in progress, intangible assets with definite useful lives, investment properties measured by cost methods and long-term equity investment on subsidiaries, jointly operations. The Company assesses whether there are any indicators of impairment for all non-financial assets at the balance sheet date, and impairment test is carried out and recoverable value is estimated if such an indicator exits. Goodwill and intangible assets with indefinite useful lives, as well as intangible assets not ready for use, are tested for impairment annually regardless of indicators of impairment. Impairment of loss is calculated and provisions taken by the difference if the recoverable value of the assets is lower than the book value. The recoverable value is the higher of estimated present value of the future expected cash flows from the asset and net fair value of the asset less disposed cost. The fair value of asset is determined by the sales agreement price within an arm’s length transaction. In case there is no sales agreement, but there is active market of assets, the fair value can be determined by the selling price. If there is neither sales agreement nor active market, the fair value of the asset can be estimated based on the best information obtained. Disposal expenses include expenses related to the legislation, taxes, transportations and the direct expense for the asset to be ready for sale. When calculating the present value of expected future cash flows from an asset or asset Group, the management shall estimate the expected future cash flows from the asset or asset Group and choose a suitable discount rate in order to calculate the present value of those cash flows. Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is hard to estimate, the recoverable amount can be determined by the asset Group where subject asset belongs. Asset Group is the smallest set of assets that can have cash flow in independently. The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the present value of the future expected cash flows from the asset Groups or sets of asset Groups to which the goodwill is allocated. Estimating the present value requires the Company to make an estimate of the expected future cash flows from the asset Groups or sets of asset Groups and also choose a suitable discount rate in order to calculate the present value of those cash flows. Once the loss from above asset impairment is recognized, the recoverable part cannot be reserved in the subsequent periods. 21. Employee Benefits The employee benefits of the company include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits: Short-term employee benefits includes wages, bonuses, allowances and subsidies, welfare, health insurance , maternity insurance, work injury insurance, housing funds, labor union funds, employee education funds, non-monetary benefits and etc. The company provides services accounting period in which an employee of the company will be short-term employee benefits are recognized as liabilities actually incurred and loss account or the costs associated with the asset. The non -monetary benefits are measured at fair value. Post-employment benefits include defined contribution plans and defined benefit plans. Defined contribution plan which includes the basic old-age insurance, unemployment insurance and annuities shall be deposited in the appropriate amount accrued to the cost of related assets or profit or loss. Prior to the employment contracts terminate the labor relationship with employees, or to encourage employees to accept voluntary redundancy compensation proposals in this company can not 69 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD unilaterally withdraw due to termination of employment or layoff proposal termination benefits provided, and the company recognized costs related to both pay and termination benefits related to the restructuring which is early to confirm employee benefits liabilities, and recorded as profit or loss. However, termination benefits expected at the end of the annual reporting period of twelve months can not be fully paid, in accordance with other long-term employee benefits processing. Retirement plan would be adopted the same principles as the unemployment. The company will stop providing services from the employee to be paid during the normal retirement date of retired staff salaries, social insurance and etc., when in compliance with the conditions on recognition in profit or loss (termination benefits). Other long-term employee benefits provided by the Company for the employees, in line with defined contribution plans, the accounting treatment in accordance with a defined contribution plan, in addition to the set-benefit plans in accordance with the accounting treatment. 22. Accrued liabilities Recognition 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 determined as liabilities: ①This obligation is current obligation of the Company; and, ②The performance of this obligation will probably cause economic benefits outflow of the Company; and, ③The amount of this obligation can be reliably measured. On balance sheet date the Company performs relate obligation that consider risk, incertitude, time value of currency of contingency factor. According to the best estimate of the expenditure required to settle the present obligation for estimated liabilities measured. If the expenditure required to settle the liability is expected to be fully or partly compensated by a third party, to determine the amount of compensation will be received at the basic, separately recognized as an asset, and is recognized in the amount of compensation does not exceed the carrying value of estimated liabilities. 23. Shares-based payment (1) Categories of share-based payment The types of shares-based payment of the Company are: cash-settle and equity-settle. ① Equity-settled share-based payment Equity settled share-based payments for employee services are measured by the fair value of the instruments granted to employees on the date of grant. For instruments exercisable upon satisfaction of performance of expiry of vesting period for services, the fair value is amortized by the straight-line method and recognized in profit or loss for the relevant periods; for those with immediate vesting conditions, the fair value is recognized immediately in profit or loss and added to capital reserves. Equity settled share-based payments for services rendered by third parties are measured by the fair value of services on the receipt date if the relevant fair value can be reliably estimated and by the fair value of the instruments on the service receipt date if the fair value of services received cannot be reliably estimated and the fair value of the instruments is reliably estimated. The measured fair value is recognized in the profit or loss and added equity. ② Cash-settled share-based payment The measurement of cash-settle is according with the fair value of liability undertake by the 70 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Company, which is calculated base on the Company’s share or other equity instrument. The value of cash-settle share-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-settled 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. (2) Implementation, modification, termination of share-based payment plan with the relevant accounting treatment The Company to modify the plans of shares payments, if the modification increases the fair value of the equity instruments granted; in accordance with the increase in the fair value of equity instruments are recognized accordingly get increased services. Increase in the fair value of the equity instruments is the difference of fair value between before and after of the modified date. If the modification reduces the total fair value of the shares paid or used other workers is not conducive to the way the service will continue to be made in the accounting treatment, as if the change had not occurred, unless the company to cancel some or all of the granted equity tool. If canceled equity instruments granted during the waiting period, the Company canceled equity instruments granted as an acceleration of vesting treatment, the amount of the remaining waiting period should be recognized immediately in profit or loss, while recognizing the capital reserve. Employees or other parties can choose to meet non-vesting conditions are not met in the waiting period; the Company will be treated as canceled equity instruments granted. (3) The accounting treatment related to the Company and the shareholders of the Company or actual control of share-based payment transactions Shares in respect of the Company and the shareholders of the Company or actual control of payment transactions, one of the settlement enterprise and receiving services enterprise is in the Company and the other is outside of the Company, the Company's consolidated financial statements are accounted for the following provisions treatment: ① Settlement companies settled in its own equity instruments to pay the share transaction as an equity-settled share-based payment processing; in additional, as a cash-settled share-based payment processing. Settlement companies are receiving services business investors, the fair value of the equity instruments at the grant date fair value of liabilities assumed or to be recognized as the acceptance of long-term equity investment service companies, while recognizing capital reserve (other capital surplus) or liability. ② Receive services companies do not settle the obligation or the employees of the enterprise is granted its own equity instruments, the share-based payment transaction as equity-settled share-based payment processing; accept the obligations and settlement services companies with enterprise workers are not granted its own equity instruments of the share-based payment transaction as cash-settled share-based payment processing. Shares occurred between the companies trading in the Company's payment, acceptance and settlement service business enterprise is not the same enterprise, the recognition and measurement of share-based payment transactions in accepting the settlement enterprise and service enterprises in the each individual financial statement, as above principles treatment. 24. Preferred shares and sustainable debts (1) Distinguish between preferred shares and sustainable debts Preferred shares and sustainable debts issued by the Company are recognized as equity instruments are all of the following conditions are satisfied: ① the financial instrument does not render the Company the obligation to transfer cash or other financial assets to other parties or exchange financial assets or financial liabilities with other parties 71 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD in potentially disadvantageous conditions; ② where the financial instrument must be settled by the Company's equity instruments, the financial instrument does not render the Company the obligation to deliver variable number of equity instruments in settlement of the financial instrument if it is not a derivative instrument or renders the Company the obligation to deliver fixed number of equity instruments for exchange of cash or other financial instruments in settlement of the financial instrument if it is a derivative financial instrument. Preferred shares and sustainable debts not satisfying the fore-mentioned conditions are recognized as financial liabilities. Where a financial instrument issued by the Company is a hybrid instrument, the liability element of the instrument is recognized as a liability which is measured at the fair value of the liability element and residual of the instrument is recognized as other equity instruments. The transaction costs of issuance of a hybrid instrument are allocated to the liability element and equity element proportionate to proceeds for each elements. (2) Accounting treatment for preferred shares and sustainable debts. Interests, dividends, gains or loss, gains or loss arising from repurchase or refinance of preferred shares or sustainable debts recognized as liabilities, except for those satisfying the condition of capitalization of borrowing costs (see Note 4.17 for details), are recognized in profit or loss. The issuance, refinancing, repurchase, sales or cancellation of preferred shares or sustainable debts recognized as equity instruments is treated as equity movement and the associated transaction costs are deducted from equity. Distribution to holders of the Company's equity instruments are treated as profit distribution. Changes in fair value of the Company's equity instruments are not recognized. 25. Revenue (1) Revenue from sales of goods Revenue from sales of goods is recognized when significant risks and rewards attached to the ownership of the goods sold are passed to the buyer, when neither continual involvement in the rights normally associated with the ownership of the goods sold nor effective control over the goods controls are retained, when revenue arising from the goods sold is reliably measurable, when inflow of future economic benefits is probable, and when cost incurred or to be incurred associated with the goods sold is reliably measurable. For the export sales of the products of the Company, no matter what the sales pattern adopt, recognition of revenue according to the sales contract or conventions listed in the orders, for those product sales employ the FOB domestic ports settlement, revenue recognition upon the bill of lading acquired from the shipping company and conducted the export declaration; for those product sales employ the FOB oversea ports settlement, revenue recognition upon the export declaration finished and shipment at the buyer’s receiving dock, as well as acquired the bill of lading from the shipping company. Accounting treatment for sales return: in accordance with the international trade prevailing rules, the FOB settlement employed, indicate to the buyer has inspected and accepted those purchased commodities at the shipment dock, after acceptance and shipping the relevant risks has been transferred to buyer, therefore the Company has no individually recognized for the events, but the amount shall be recognized when incurred and accounted through in profit and loss in current period. Accounting treatment for product claims: calculate the claim indemnity rate, according to the proportion of actually payment for those product claims during recently two years account for the corresponding period sales revenue, at the end of period, on the basis of current period sales revenue and the claim indemnity rate to recognize the claim indemnity expense. 72 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (2) Revenue from rendering of service Revenue arising from rendering of services is recognized on the balance date using the percentage of completion method when the outcome of the services rendered can be reliably estimated. The percentage of completion of the services rendered is calculated by dividing the cost to date by the budgeted total cost. The outcome of the services rendered can be reliably estimated when revenue from the services render can be reliably measured, when the inflow of associated future economic benefits is probable, when the percentage of completion can be reliably measure, and when the cost incurred or to be incurred associated with the services can be reliably measured. When the outcome of the services rendered cannot be reliably estimate, revenue is recognized as cost reimbursement received or to be received, if any, and cost incurred is recognized in profit or loss for the period in which the cost is incurred. No revenue is recognized if cost reimbursement is not probable. When a contract between the group and another entity involves both sales of goods and rendering for services, the sales of goods and rendering of services are accounted for separately if they are distinguishable and separately measurable; the contract is accounted for as if it is a contract involves only sales of goods if the sales of goods and rendering of services are either indistinguishable or distinguishable but not separately measurable. (3) Revenue from construction contracts When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: ①total contract revenue can be measured reliably; ②it is probable that the economic benefits associated with the contract will flow to the enterprise; ③the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates; and, ④both the contract costs to complete the contract and the stage of contract completion at the balance sheet date can be measured reliably. When the outcome of a construction contract cannot be estimated reliably, but revenue should be recognized only to the extent of contract costs incurred that it is probable will be recoverable; and If the cost can not be recovered, contract costs should be recognized as an expense in the period in which they are incurred. So that the results of a construction contract can not be reliably estimated uncertainties exist, to determine the percentage of completion method and construction contracts related income and expense. An expected loss on the construction contract should be recognized as an expense immediately. (4) Royalty Revenue According to the contract or agreement, the revenue is recognized on an accrual basis. (5) Interest Income The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the enterprise's cash is used by others and the actual interest rate. 26. Government Grants Government grants are transfer of monetary assets and non-monetary assets from the government to the Company at no consideration, excluding the capital invested by the government as equity owner. Government grant can be classified as grant related to the assets and grants related to the income. 73 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD The government grants which were acquired by the Company will be used to purchase or otherwise form become long-term assets will be defined as grant related to the assets; the others will be defined as grants related to the income. If the files have not clearly defined government grants objects, it will be divided in the following manner compartmentalize the grants related to the assets and grants related to the income: (1) government documents defined specific projects targets, according to the relative proportion of the budgets of specific items included the expenditure of to form assets and the expenditure will be charged into expense to be divided, the division ratio required at each balance sheet date for review and make changes if necessary; (2) government documents to make a general presentation purposes only, does not specify a particular project, as grants related to the income. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a nominal amount is recognized immediately in profit or loss for the period. When received the government grants actually, recognized and measured them by the actual amount received. However, there is strong evidence that the end of fiscal support policies able to meet the conditions specified in the relevant funds are expected to be able to receive financial support, measured at the amount receivable. Government grants are measured according to the amount receivable shall also comply with the following conditions: (1)grantsreceivable of government departments issued a document entitled have been confirmed, or could reasonably estimated in accordance with the relevant provisions of its own official release of financial resources management approach, and the expected amount of a material uncertainty which does not exist; (2) it is based on the local financial sector to be officially released and financial support for the project and its financial fund management approach voluntarily disclosed in accordance with the provisions of “Regulations on Disclosure Government Information”, and the management approach should be (inclusive of any compliance business conditions may apply), and not specifically formulated for specific businesses;(3) related grants approval has been clearly committed the deadline, and is financed by the proceeds of a corresponding budget as a guarantee, so that will be received within the prescribed period with the a reasonable assurance; (4) according to the specific circumstances of the Company and the subsidy matter, should satisfy the other conditions (if any). A government grant related to an asset is recognized as deferred income, and evenly amortized to profit or loss over the useful life of the related asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period. For repayment of a government grant already recognized, if there is a related deferred income, the repayment is offset against the carrying amount of the deferred income, and any excess is recognized in profit or loss for the period. If there is no related deferred income, the repayment is recognized immediately in profit or loss for the period. 27. Deferred tax assets and deferred tax liabilities (1) Income tax for the current period At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects at the balance sheet date, to recover the assets or settle the liabilities. 74 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD At the balance sheet date, current income tax liabilities or assets for the current and prior periods, are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. The calculation for income tax expenses in the current period is based on the taxable income according to the related tax laws after adjustment to the accounting profit of the reporting period. (2) Deferred income tax assets and liabilities For temporary differences between the carrying amount of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized using the balance sheet liability method. For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized. For taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax liability related is recognized except where the Company is able to control the timing of reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned above are recognized. For temporary deductible differences associated with the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset is recognized. For taxable temporary deductible differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax asset related is recognized if it is impossible to reversal the temporary difference in the foreseeable future, or it is not probable to obtain taxable income which can be used for the deduction of the temporary difference in the future. Except mentioned above, the Company recognizes other deferred income tax assets that can deduct temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates according to tax laws that are expected to apply in the period in which the asset is realized or the liability is settled. At the balance sheet date, the Company reviews the carrying amount of deferred tax assets. If it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefits of the deferred tax assets to be used, the Company reduces the carrying amount of deferred tax assets. The amount of such reduction is reversed when it becomes probable that sufficient taxable profit will be available. (3) Income tax expenses Income tax expenses consist of current income tax and deferred income tax. The expenses from income tax and deferred income tax, as well as the revenue, shall be recorded into profit or loss in current accounting period, except expense for income tax of the current period and deferred income tax that booked into other income or equity and adjusted carrying value of deferred income tax goodwill arose from business combination. (4) Income tax offset 75 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD When we have the legal right, and have intended to, to make settlement with net amount, or through the asset acquisition and liability fulfillment simultaneously, the Company shall present the net value from the offset between current income tax asset and current income tax liability in the financial statement. When the Company has the legal right to make a settlement with the current income tax asset and current income tax liability, and the deferred income tax asset and deferred income tax liability are related to the same taxable subject under the same tax payer, or related to different taxable subject, but the intension of net value settlement in regard of the current income tax asset and current income tax liability, the Company shall present net value after the offset of deferred income tax asset and deferred income tax liability. 28. Leases A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. An operating lease is a lease other than a finance lease. (1) The Company as Lessee under operating Lease Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the lease term, and either included in the cost of the related asset or charged to profit or loss for the current period. The contingent rents shall be recorded in the profit or loss of the period in which they actually arise. (2) The Company as Leasor under operating Lease Lease income from operating leases shall be recognized by the leasor in profit or loss on a straight-line basis over the lease term. Initial direct cost of significance in amount shall be capitalized when incurred. If another basis is more systematic and rational, that basis may be used. Contingent rents are credited to profit or loss in the period in which they actually arise. (3) The Company as Lessee under financing Lease For an asset that is held under a finance lease, at the lease commencement, the leased asset is recorded at the lower of its fair value at the lease commencement and the present value of the minimum lease payments, and the minimum lease payment is recorded as the carrying amount of the long-term payables; the difference between the recorded amount of the leased asset and the recorded amount of the payable is accounted for as unrecognized finance charge, Initial direct costs incurred by the lessee during the process of negotiating and securing the lease agreement shall be added to the amount recognized for the leased asset. The net amount of minimum lease payment deducted by the unrecognized finance shall be separated into long-term liabilities and long-term liability within one year for presentation. Unrecognized finance charge shall be computed by the effective interest method during the lease term. Contingent rent shall be booked into profit or loss when actually incurred. (4) In the case of the lessor of a financing lease For an asset that is leased out under a finance lease, the aggregate of the minimum lease receipts at the inception of the lease and the initial direct costs is recorded as a finance lease receivable, and unguaranteed residual value is recorded at the same time; the difference between the aggregate of the minimum lease receipt, initial direct costs, and unguaranteed residual value, and the aggregate of their present values, is recognized as unearned finance income, which is amortized using the effective interest rate method over each period during the lease term. Finance lease receivable less unearned finance income shall be separated into long-term liabilities and long-term liability within one year for presentation. Unearned finance income shall be computed by the effective interest method during the lease term. Contingent rent shall be credited into profit or loss in which actually incurred. 76 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 29. Changes in major accounting policies and accounting estimates (1) Change of accounting policies There is no change of accounting policies for the company during the reporting period. (2) Change of accounting estimates There is no significant change of accounting estimates for the company during the reporting period. 30. Significant account judgment and estimates The Company is required to make judgments, estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately, due to the internal uncertainties of operation activities. These judgments, estimates and assumptions are based on historical experiences of the Company’s management as well as other factors that are considered to be relevant. These judgments, estimates and assumptions may affect value of the financial statements in revenue, expenses, assets and liabilities and the disclosure of contingency at the balance sheet date. However, the result derived from those uncertainties in estimates may lead significant adjustments to the carrying amounts of the assets or liabilities affected in the future. The Company has reviews the judgments, estimates and assumptions regularly on the basis of going concern. Where the changes in accounting estimates only affect the period when changes occurred, and they are recognized within the same period. Where the changes in accounting estimates affect both current period and future period, the changes are recognized within the period of change and future period. At balance sheet date, the followings are the significant areas where the Company needs to make judgment, estimates and assumptions over the value of items in the financial statements: (1) Revenue Recognition - Construction Contracts When the result in the construction contract can be estimated reliably, contract revenue is recognized by the Company at the balance sheet date using the percentage of completion method. The percentage of completion of the contract is confirmed in accordance with this Note 4.25“Revenue recognition”, and a cumulative basis in each accounting year of the implementation of the construction contract. In determining the percentage of completion of the contract costs incurred, the estimated total contract revenue and total costs, as well as the recoverability of the contract requires significant judgment. Project management is primarily relying on past experience and work judgment. The estimated total contract revenue and total cost, and the estimated contract changes the results are likely to change the current or future periods revenues, operating costs, and gains and losses during the impact, and may have a significant impact. (2) Classification of lease The Company classifies leases as operating lease and financing lease according to the rule stipulated in the Accounting Standard for Business Enterprises No. 21--Leasing. The management shall make analysis and judgment on whether the risks and rewards related to the title of leased assets has been transferred to the leaser, or whether the Company has substantially held the risks and rewards related to the ownership of leased assets. (3) Allowance for bad debt According to the relevant accounting policies of the Company in receivables, allowance method is used for bad debt’s calculation. The impairment of receivables is calculated based on the assessment of recoverable of receivables. Assurance of receivable impairment needs judgments and estimations from the management. The difference between actual results and original estimates shall have impact on the carrying amount of receivables and receivable bad debt provisions or the reverse during the change of estimation. (4) Impairment of inventories 77 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD The Company measures inventories by the lower of cost and realizable net value according to the accounting policies in regard of inventories and provisions for decline in value of inventories is made if the cost is higher than their net realizable value, and obsolete and slow-movement inventories. Inventories decline in value to net realizable value is the estimated selling price in the ordinary course of business. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events. The difference between the actual result and the original estimates shall have impact on reverse of the carrying amount of the inventories and their decline in value or provisions during the period of change. (5)The fair value of financial instruments For a financial instrument which has no active market, the Company establishes fair value by using various valuation methods, including of discounted cash flow analysis model. The Company needs to estimate future cash flow, credit risk, volatility and relationship during the valuation and choose appropriate discount rate. Such assumptions have uncertainties and their changes shall have impact on the fair value of financial instruments. (6) Held-to-maturity investments The Company will comply with the conditions of a fixed or determinable payments and fixed maturities that the Company has the positive intention and ability to hold to maturity are non-derivative financial assets are classified as held-to-maturity investments. This classification requires significant judgment. In the process of this judgment, the Company should make the assessment of its maturity willingness and ability to hold such investments. Except in specified circumstances (for example, towards the maturity date of the sale amount is not significant investment), if the Company is unable These investments held-to-maturity, shall be all the class investments classified as available-for-sale financial assets and in the current fiscal year and the next two fiscal year shall not classify any financial assets as held-to-maturity investments. in this theoretical situation, there have a significant impact on the financial statements listed on the reported value of financial assets, and affect the Company's financial instruments risk management strategy. (7) Held-to-maturity investments impairment The Company to determine the held-to-maturity investments are impaired in dependent on management's judgment. Occurred objective evidence of impairment including the disappearance of severe financial difficulties that financial asset cannot continue to be traded in an active market, unable to fulfill the terms of the contract (for example, interest or principal payments as a default) . In processing of judgment, the Company is required to assess the occurred objective evidence of impairment of the investment in expected future cash flows. (8) Impairment of financial assets available-for-sale The Company determine the available-for-sale financial asset is impaired relies on judgments and assumptions of management, to determine whether impairment loss is recognized in the income statement. The process of making the judgments and assumptions, the Company is required to assess the extent and duration of the fair value of the investment below cost, as well as investment financial position and short-term business outlook, including industry conditions, technological change, the credit rating, default rates and counterparty risk. (9) Impairment of non-financial, non-current assets The Company assesses whether there are any indicators of impairment for all non-current assets other than financial assets at the balance sheet date. For an intangible asset that has indefinite useful life, impairment test is made in addition to the annual impairment test if there is any indication of impairment. For non-current assets other than financial assets, impairment test is made when there is any indication that its account balance cannot be recovered. 78 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Impairment exists when the recoverable amount of an asset is the higher of its fair value less cost of disposal and present value of the future cash flows expected to be derived from the asset. Net value between the difference of fair value and disposal cost is determined by reference of the price of similar product in a sale agreement in an arm’s length transaction or an observable market price less the additional cost directly attributable to the disposal of the asset. When estimating the present value of future cash flow, significant judgments are made over the asset’s production, selling price and relevant operating expenses, and discount rate used to calculate present value. All available materials that are considered to be relevant shall be used in the estimation of recoverable value. These materials include estimations of production, selling price and operating expenses based on reasonable and supportable assumptions. The Company makes an impairment test for goodwill at least at each year end. This requires an estimation of present value of future cash flow of the assets or assets group where goodwill has been allocated. The Company shall makes estimation on the future cash flow derived from assets or assets group and determine an appropriate discount rate for the present value of future cash flow when the estimation of present value of future cash flow is made. (10) Depreciation and amortization Investment property, fixed assets and intangible assets are depreciated and amortized using the straight-line method over their useful lives after taking into account residual value. The useful lives are regularly reviewed to determine the depreciation and amortization costs charged in each reporting period. The useful lives are determined based on historical experience of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factor used to determine the depreciation or amortization, the rate of depreciation or amortization is revised. (11) The development expenditure In determining the amount of capitalization, the Company's management needs to make the relevant asset the estimated future cash flows, applicable discount rate assumptions of the estimated benefit period. (12) Deferred tax assets The group shall recognize all unused tax losses as deferred tax assets to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. This requires the management of the Company make a lot of judgments over the estimation of time period, value and tax planning strategies when future taxable profit incurs so that the value of deferred tax assets can be determined. (13) Income tax There are some transactions where ultimate tax treatments and calculations have uncertainties in the Company’s everyday operation. Whether it is possible for some items to make expenditure before tax needs approval from competent tax authorities. If there is any difference between finalized determination value and their initial estimations value, the difference shall have the impact on the income tax and deferred income tax of the current period during the final determination. (14) Early retirement benefits and supplemental retirement benefits The Company's internal early retirement benefits and supplemental retirement benefit expenses and liabilities amount determined based on various assumptions. These assumptions include the discount rate, the average growth rate of health care costs, retired officers and retired officers subsidy rate and other factors. Differences between actual results and assumptions will be immediately recognized in the cost of the year. Although management considers reasonable assumptions have been used, but the actual experience or changes in assumptions will affect the Company's internal early retirement benefits and supplemental retirement benefit costs and liabilities balance. 79 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (15) Accrued liabilities According with the terms of the contract, the existing knowledge and historical experience, product quality assurance and expected contract losses, delay in delivery of liquidated damages are estimated and recognized as a accrued liabilities. In these matters has been the formation of a current obligation, and fulfilling the duty is likely to lead to the outflow of economic benefits of the Company, the Company or the best estimate of the current obligation expenditure required recognized as a accrued liabilities. Recognition and measurement of accrued liabilities is dependent on the judgment of management. In the processing of judgment the company needed to appraise the related risks, uncertainties and time value of money and other factors. The Company will sell, repair and renovation of goods sold to provide customers with quality after-sales service commitment is accrued liabilities. Accrued liabilities have considered the recent experience in the maintenance data, but recent maintenance experience may not reflect future maintenance. Any increase or decrease in the accrued liabilities may affect the profit or loss in future. 80 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD V. Taxation 1. Taxes and surcharges applicable to the Company Taxes and surcharges Tax base Tax rate (%) Value added tax Revenues from sales of products and raw materials 0、17 Business tax Business tax taxable revenue 5 Urban maintenance and construction Sum of VAT payable, consumption duty payable and business tax payable for 7 surcharge the reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for Education surcharge 3 the reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for Local education surcharge 2 the reporting period, and exempt and deductible tax Corporate income tax Taxable profits 25 Products, raw materials export sales applied the policy of exemption, reduction and refund of VAT, the rate is 0%. 2. Taxes and surcharges applicable to the primary subsidiaries (1) Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. (hereafter, TKL) Taxes and surcharges Tax base Tax rate (%) Value added tax Revenues from sales of products and raw materials 0、17 Business tax Business tax taxable revenue 5 Urban maintenance and construction Sum of VAT payable, consumption duty payable and business tax payable for 5 surcharge the reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for Education surcharge 3 the reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for Local education surcharge 2 the reporting period, and exempt and deductible tax Corporate income tax Taxable profits 15 Products, raw materials export sales applied the policy of exemption, reduction and refund of VAT, the rate is 0%. In accordance with the “The Notice Regarding to Fujian Province 2014 Second Group of High Technology Enterprise Review” (No. Mingkegao [2015] 6), TKL was identified as Fujian Province High Technology Enterprise (The certification No. GR201435000140), the validity is from the year 2014 to 2016.The current income tax at 15%. (2) Tsann Kuen China (Shanghai) Enterprise Co., Ltd. (hereafter, TKS) Taxes and surcharges Tax base Tax rate% Value added tax Revenues from sales of products and raw materials 17 Business tax Business tax taxable revenue 5 Urban maintenance Sum of VAT payable, consumption duty payable and business tax payable for the 1 and construction surcharge reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for the Education surcharge 3 reporting period, and exempt and deductible tax Sum of VAT payable, consumption duty payable and business tax payable for the Local education surcharge 2 reporting period, and exempt and deductible tax Corporate income tax Taxable profits 25 81 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD VI. Notes to significant elements of the financial statements 1. Monetary funds Items 2015.06.30 2014.12.31 Cash in hand 783,900.30 554,909.96 Bank deposit 781,404,783.98 885,909,538.05 Other monetary fund 0.00 0.00 Total 782,188,684.28 886,464,448.01 Including: the total amount of deposit abroad 13,253,617.42 21,699,601.60 Notes: At the end of current year, the balance of bank deposits in financial institution for the purpose of obtaining interest income is CNY 415,733,232.63. 2. Financial assets measured by fair value with changes in fair value recognized in profit or loss (1) Disclosure by classification Items 2015.06.30 2014.12.31 Held for trading financial assets 7,482,150.00 2,610,000.00 Including: Derivative financial assets 7,482,150.00 2,610,000.00 Total 7,482,150.00 2,610,000.00 (2) Explanation The derivative financial asset is forward foreign exchange contract signed with financial institutions. 3. Notes receivable (1) Disclosure by classification Items 2015.06.30 2014.12.31 Bank acceptance 2,413,324.00 2,004,498.59 Total 2,413,324.00 2,004,498.59 (2) The end of the reporting period has been endorsed to other parties but not yet due bills (3) The end of the reporting period due to no drawer has not performed then transfer into account receivables 82 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 4. Accounts receivable (1) Disclosure by classification 2015.06.30 Items Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Accounts receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Accounts receivable portfolio subject to impairment by credit risk: Portfolio by age 227,400,515.79 98.93 3,025,261.53 1.33 224,375,254.26 Portfolio by related parties 2,469,508.56 1.07 0.00 0.00 2,469,508.56 Subtotal 229,870,024.35 100.00 3,025,261.53 1.32 226,844,762.82 Accounts receivable of individually insignificance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Total 229,870,024.35 100.00 3,025,261.53 1.32 226,844,762.82 (Continued) 2014.12.31 Items Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Accounts receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Accounts receivable portfolio subject to impairment by credit risk: Portfolio by age 244,344,498.25 97.32 3,744,690.14 1.53 240,599,808.11 Portfolio by related parties 6,736,526.75 2.68 0.00 0.00 6,736,526.75 Subtotal 251,081,025.00 100.00 3,744,690.14 1.49 247,336,334.86 Accounts receivable of individually insignificancesubject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Total 251,081,025.00 100.00 3,744,690.14 1.49 247,336,334.86 ① Accounts receivable using age analysis method for measurement of allowance for bad debt 2015.06.30 Age Carrying amount Allowance for bad debt Proportion Within 1 year 225,622,523.14 1,247,268.88 0.55 Including: 1-90 days 215,857,236.93 0.00 0.00 91-180 days 8,607,304.14 860,730.42 10.00 181-270 days 962,262.87 288,678.86 30.00 271-365 days 195,719.20 97,859.60 50.00 1 to 2 years 296,229.95 296,229.95 100.00 2 to 3 years 212,413.58 212,413.58 100.00 Over 3 years 1,269,349.12 1,269,349.12 100.00 Total 227,400,515.79 3,025,261.53 1.33 83 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD ② Accounts receivable using related party group method for measurement of allowance for bad debt 2015.06.30 Items Carrying amount Allowance for bad debt Proportion Related parties 2,469,508.56 0.00 0.00 Total 2,469,508.56 0.00 0.00 (2) Recognisation, recovery and reversal of allowance for bad debt The amount of allowance for bad debts recognized during the reporting period is CNY64,486.41.The amount of recovered or reversed allowance for bad debts during the reporting period is CNY 783,863.61. (3) Details of top five accounts receivable The total amount of top five accounts receivablessummaried by debtors as at the end of reporting period is CNY 129,367,155.81, accounting for 56.27% of the total accounts receivable as at the end of reporting period, the total corresponding allowance for bad debts is CNY1,939,623.44. 5. Advances to suppliers (1) Disclosure by age 2015.06.30 2014.12.31 Age Amount Proportion Amount Proportion Within 1 year 9,823,571.43 96.31 12,250,817.50 96.02 1 to 2 years 376,126.00 3.69 507,878.60 3.98 Total 10,199,697.43 100.00 12,758,696.10 100.00 (2) Details of top five advance to suppliers The total amount of top five advance to suppliers as at the end of current year is CNY 8,110,626.64, accounting for 79.52% of the total advance to suppliers. 6. Interests receivable (1) Disclosure by classification Items 2015.06.30 2014.12.31 Fixed deposit receipt 4,019,726.47 3,590,399.84 Total 4,019,726.47 3,590,399.84 7. Other receivable (1) Disclosure by classification 2015.06.30 Items Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Other receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Other receivable portfolio subject to impairment by credit risk: Portfolio by age 34,618,445.39 96.80 1,830,401.23 5.29 32,788,044.16 Portfolio by related parties 0.00 0.00 0.00 0.00 0.00 Subtotal 34,618,445.39 96.80 1,830,401.23 5.29 32,788,044.16 84 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Other receivable of individually insignificance subject to 1,146,070.00 3.20 0.00 0.00 1,146,070.00 individually assessment for impairment Total 35,764,515.39 100.00 1,830,401.23 5.12 33,934,114.16 (Continued) 2014.12.31 Items Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Other receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Other receivable portfolio subject to impairment by credit risk: Portfolio by age 34,410,218.27 97.25 508,563.30 1.48 33,901,654.97 Portfolio by related parties 0.00 0.00 0.00 0.00 0.00 Subtotal 34,410,218.27 97.25 508,563.30 1.48 33,901,654.97 Other receivable of individually insignificance subject to individually 971,450.00 2.75 0.00 0.00 971,450.00 assessment for impairment Total 35,381,668.27 100.00 508,563.30 1.44 34,873,104.97 ① Other accounts receivable using the age analysis method for measurement of allowance for bad debt 2015.06.30 Age Carrying amount Allowance for bad debt Proportion Within 1 year 34,104,320.20 1,316,276.04 3.86 Including:1 to 90 days 29,326,987.80 0.00 0.00 91 to 180 days 655,884.14 65,588.42 10.00 181 to 270 days 4,050,182.58 1,215,054.78 30.00 271 to 365 days 71,265.68 35,632.84 50.00 1 to 2 years 181,448.15 181,448.15 100.00 2 to 3 years 0.00 0.00 0.00 Over 3 years 332,677.04 332,677.04 100.00 Total 34,618,445.39 1,830,401.23 5.29 85 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD ② Other receivable of individually insignificance subject to individually assessment for impairment Carrying Total Allowance for bad Items Reason(s) for allowance amount proportion debt Niuhai E-commerce ( Shanghai ) Co., Guaranteed deposits, absence of 30,000.00 0.00 0.00 Ltd. impairment Beijing Dangdangkewen E-Commerce Guaranteed deposits, absence of 20,000.00 0.00 0.00 Co., Ltd. impairment Guaranteed deposits, absence of Gome Online E-Commerce Co., Ltd. 10,000.00 0.00 0.00 impairment Jiangsu Suning Electronic Commerce Guaranteed deposits, absence of 30,000.00 0.00 0.00 Co., Ltd impairment Alipay (China) Network Technology Co., Guaranteed deposits, absence of 103,000.00 0.00 0.00 Ltd. impairment Guaranteed deposits, absence of Zhejiang Tmall Network Limited 100,000.00 0.00 0.00 impairment Alibaba (China) Network Technology Guaranteed deposits, absence of 3,000.00 0.00 0.00 Co., Ltd. impairment China Export & Credit Insurance Guaranteed deposits, absence of 648,450.00 0.00 0.00 Corporation, Fujian Branch impairment Guaranteed deposits, absence of Longhai city People's Court 201,620.00 0.00 0.00 impairment Total 1,146,070.00 0.00 0.00 (2) Reorganization, recovery and reversal of allowance for bad debt The amount of allowance for bad debts recognized during the reporting period is CNY1,322,132.20.There was no recovered or reversed allowance for bad debts during the reporting period. (3) There was no other accounts receivable written off during the reporting period. (4) List of other accounts receivable classified according to the accounts nature Nature Book balance at the period-end Book balance at the period-begin Non-related 35,764,515.39 35,381,668.27 Related 0.00 0.00 Total 35,764,515.39 35,381,668.27 (5) Details of top five other receivables Proportion at Allowance for bad debt Debtors Nature of OR Carrying amount Age period-end as at period-end No. 1 Export tax rebate 16,000,000.00 0-30days 44.74 0 No. 2 Rent fee 3,850,369.00 181-270 days 10.77 1,155,110.70 Dividend withholding No. 3 2,082,094.27 0-30 days 5.82 0 income tax No. 4 Rent fee 1,539,024.40 0-122 days 4.3 30,780.49 No. 5 Electricity bill 830,450.91 0-30 days 2.32 0 Total 24,301,938.58 67.95 1,185,891.19 86 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 8. Inventories (1) Disclosure by classification 2015.06.30 2014.12.31 Items Carrying amount before Impairment Net carrying Carrying amount before Impairment Net carrying impairment allowance allowance amount impairment allowance allowance amount Raw material 98,602,822.98 25,513,869.05 73,088,953.93 87,977,009.15 26,097,578.86 61,879,430.29 Work in progress 16,719,226.09 0.00 16,719,226.09 17,499,962.24 17,499,962.24 Self-manufactured semi-finished 19,135,297.42 2,663,231.89 16,472,065.53 19,932,405.48 2,663,231.89 17,269,173.59 goods Finished goods 104,855,933.22 12,908,926.99 91,947,006.23 97,948,909.55 12,407,948.20 85,540,961.35 Low-value 6,890,741.39 0.00 6,890,741.39 6,776,739.39 0.00 6,776,739.39 consumables Materials in transit 2,842,630.58 0.00 2,842,630.58 4,183,877.21 0.00 4,183,877.21 Total 249,046,651.68 41,086,027.93 207,960,623.75 234,318,903.02 41,168,758.95 193,150,144.07 (2) Impairment allowance for inventories Increase in reporting period Decrease in reporting period Items 2014.12.31 Recovered or 2015.06.30 Accrual Other Other Written off Raw material 26,097,578.86 0.00 0.00 583,709.81 0.00 25,513,869.05 Self-manufactured 2,663,231.89 0.00 0.00 0.00 0.00 2,663,231.89 semi-finished goods Finished goods 12,407,948.20 500,978.79 0.00 0.00 0.00 12,908,926.99 Total 41,168,758.95 500,978.79 0.00 583,709.81 0.00 41,086,027.93 (3) The basis of recognizing impairment allowance and the reason of recovering or writing off the impairment allowance for invertories The basis of recognition of impairment The reason of recovering impairment The reasons for inventory Items allowance for invertories allowance for invertories impairment write-off at current year Market prices decrease, and resulting in Raw material raw material’s net realizable value Inactive disposal lower than cost (4) The amounts of capitalized borrowing cost is CNY0.00 of the carrying amount of inventories as at period-end 9. Other current assets Items 2015.06.30 2014.12.31 Input tax to be deducted 14,113,215.87 13,087,495.75 Financial products 230,000,000.00 0.00 Total 244,113,215.87 13,087,495.75 10. Available-for-sale financial assets (1) The situation of available-for-sale financial assets 2015.06.30 2014.12.31 Items Net Net carrying Carrying amounts Impairment Carrying amounts Impairment carrying amounts amounts Available for sale 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 equity instruments Including: measured 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 by cost Total 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 87 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (2) The measurement of the cost of available for sale financial assets at the end of reporting period Carrying amounts Impairment Cash dividend Investee Increase Decrease Increase Decrease Proportion for in in in in reporting 2014.12.31 2015.06.30 2014.12.31 2015.06.30 period reporting reporting reporting reporting period period period period Xiamen Association of Enterprises 40,000.00 40,000.00 1.48 with Foreign Investment Total 40,000.00 40,000.00 1.48 11. Investment property (1) Investment property measured at cost method Houses and Construction Items Land use rights Total buildings in-progress I. original book value 1. Balance as at beginning of the year 128,248,009.10 29,260,577.51 0.00 157,508,586.61 2 .Increased in current year 2,401,285.29 0.00 0.00 2,401,285.29 (1) Purchase 0.00 0.00 0.00 0.00 (2) Transferred from inventories, 2,401,285.29 0.00 0.00 2,401,285.29 fixed assets, construction in-progress (3) Increased by business combination 0.00 0.00 0.00 0.00 3 .Decreased in current year 0.00 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 0.00 (2) Investment property transferred to 0.00 0.00 0.00 0.00 fixed assets 4 .Balance as at year-end 130,649,294.39 29,260,577.51 0.00 159,909,871.90 II. Accumulated Depreciation and accumulated amortization 1.Opening balance 93,971,782.93 11,805,388.78 0.00 105,777,171.71 2. Increased in current year 4,818,459.53 311,055.90 0.00 5,129,515.43 (1) Accrual or amortization 3,191,252.05 311,055.90 0.00 3,502,307.95 (2)Transferred from fix assets 1,627,207.48 0.00 0.00 1,627,207.48 3. Decreased in current year 0.00 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 0.00 (2) Investment property transferred to 0.00 0.00 0.00 0.00 fixed assets 4. Balance as at year-end 98,790,242.46 12,116,444.68 0.00 110,906,687.14 III. Impairment allowance 1. Balance as at beginning of the year 0.00 0.00 0.00 0.00 2 .Increased in current year 0.00 0.00 0.00 0.00 (1) Accrual 0.00 0.00 0.00 0.00 3 .Decreased in current year 0.00 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 0.00 (2) Other transferred out 0.00 0.00 0.00 0.00 4. Balance as at year-end 0.00 0.00 0.00 0.00 IV. Carrying amount 1 .Carrying amount as at year-end 31,859,051.93 17,144,132.83 0.00 49,003,184.76 88 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Houses and Construction Items Land use rights Total buildings in-progress 2 .Carrying amount as at beginning of the year 34,276,226.17 17,455,188.73 0.00 51,731,414.90 (2) Investment property with pending ownership registration Items Carrying amount Reason for pending Lvyuan three country villa 2,499,033.19 Legal procedures in process 12. Fixed assets (1) Circumstance of fixed assets Improvement Electronic Houses and expense of Items Machineries device, modules Vehicles Total buildings leased fixed and others assets I. original book value 1. Balance as at beginning of the year 97,404,653.05 153,679,330.78 1,231,926,727.30 17,984,602.01 66,776,989.36 1,567,772,302.50 2. Increased in current year 2,139,441.60 4,837,383.14 11,395,477.00 -2,242.25 126,879.62 18,496,939.11 (1) Purchase 0.00 5,469,770.26 9,256,355.70 0.00 77,135.81 14,803,261.77 (2) Transferred from construction 0.00 0.00 0.00 0.00 59,031.22 59,031.22 in-progress (3) Transferred from investment property 0.00 0.00 0.00 0.00 0.00 0.00 (4) Impact of changes in 0.00 -21,419.32 6,945.08 -2,242.25 -9,287.41 -26,003.90 exchange rates (5) Other 2,139,441.60 -610,967.80 2,132,176.22 0.00 0.00 3,660,650.02 3. Decreased in current year 2,401,285.29 11,212,619.31 15,374,938.51 514,873.12 0.00 29,503,716.23 (1) Disposal or scrap 0.00 11,212,619.31 15,374,938.51 514,873.12 0.00 27,102,430.94 (2)Transfer from Investment property 2,401,285.29 0.00 0.00 0.00 0.00 2,401,285.29 4. Balance as at year-end 97,142,809.36 147,304,094.61 1,227,947,265.79 17,467,486.64 66,903,868.98 1,556,765,525.38 II. Accumulated Depreciation 1. Balance as at beginning of the year 38,402,482.33 104,053,421.51 1,150,750,340.51 16,375,714.50 50,764,769.54 1,360,346,728.39 2 .Increased in current year 1,924,521.23 2,197,940.38 13,521,410.41 137,377.63 3,526,007.08 21,307,256.73 (1) Accrual 1,924,521.23 2,098,383.68 13,322,297.02 137,377.63 3,526,007.08 21,008,586.64 (2) Transferred from investment property 0.00 0.00 0.00 0.00 0.00 0.00 (3) Impact of changes in 0.00 99,556.70 199,113.39 0.00 0.00 298,670.09 exchange rates 3. Decreased in current year 1,627,207.48 8,442,925.09 14,086,385.94 514,873.12 0.00 24,671,391.63 (1) Disposal or scrap 0.00 8,442,925.09 14,086,385.94 514,873.12 0.00 23,044,184.15 (2) Transferred from investment property 1,627,207.48 0.00 0.00 0.00 0.00 1,627,207.48 4. Balance as at year-end 38,699,796.08 97,808,436.80 1,150,185,364.98 15,998,219.01 54,290,776.62 1,356,982,593.49 III. Impairment allowance 1. Balance as at beginning of the year 0.00 20,736,652.60 20,138,609.01 356.88 989,746.98 41,865,365.47 2 .Increased in current year 0.00 -65.40 -55.83 0.00 0.00 -121.23 (1) Accrual 0.00 0.00 0.00 0.00 0.00 0.00 (2) Impact of changes 0.00 -65.40 -55.83 0.00 0.00 -121.23 in exchange rates 3. Decreased in current year 0.00 573,236.32 427,097.21 0.00 0.00 1,000,333.53 (1) Disposal or scrap 0.00 573,236.32 427,097.21 0.00 0.00 1,000,333.53 4. Balance as at year-end 0.00 20,163,350.88 19,711,455.97 356.88 989,746.98 40,864,910.71 IV. Carrying amount 1 .Carrying amount as at period-end 58,443,013.27 29,332,306.93 58,050,444.84 1,468,910.76 11,623,345.38 158,918,021.18 2 .Carrying amount as at beginning of the 59,002,170.72 28,889,256.67 61,037,777.78 1,608,530.63 15,022,472.84 165,560,208.64 year (2) Fixed assets with pending ownership registration Items Carrying amount Reason for pending Qingying garden 217,085.55 Legal procedures in process 89 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Lvyuan three country villa 749,709.96 Legal procedures in process 13. Construction in progress (1) Details of construction in progress 2015.06.30 2014.12.31 Items Carrying Impairment Net carrying Carrying Impairment Net carrying amount allowance amount amount allowance amount Other 353,168.37 0.00 353,168.37 233,968.67 0.00 233,968.67 Total 353,168.37 0.00 353,168.37 233,968.67 0.00 233,968.67 (2) Movement of construction in progress Transferred to fixed Increase during the Other Items Budgeted cost 2014.12.31 assets during the 2015.06.30 reporting period decrease reporting period Factory -- 0.00 214,500.00 0.00 214,500.00 0.00 building project Other -- 233,968.67 419,082.24 59,031.22 240,851.32 353,168.37 Total -- 233,968.67 633,582.24 59,031.22 455,351.32 353,168.37 (Continued) Including: Capitalization Weight of cost Stage of Cumulative interests rate applicable to date in completion capitalized Items interests to the current Source of finance budgeted cost during the (%) capitalized reporting (%) current reporting period (%) period Factory building project -- -- 0.00 0.00 0.00 Self-owned Other -- -- 0.00 0.00 0.00 Self-owned Total -- -- 0.00 0.00 0.00 14. Intangible assets Items Land rights Software Total I. original book value 1. Balance as at beginning of the year 12,402,545.60 14,718,110.04 27,120,655.64 2 .Increased in current year 806,379.92 1,367,155.34 2,173,535.26 (1) Purchase 806,379.92 1,367,155.34 2,173,535.26 (2) Impact of changes 0.00 0.00 0.00 in exchange rates 3. Decreased in current year 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 (2) Impact of changes 0.00 0.00 0.00 in exchange rates 4. Balance as at year-end 13,208,925.52 16,085,265.38 29,294,190.90 II. Accumulated amortization 1. Balance as at beginning of the year 1,523,126.31 13,452,106.17 14,975,232.48 2 .Increased in current year 201,857.52 280,229.88 482,087.40 (1) Accrual 201,857.52 280,229.88 482,087.40 (2) Impact of changes 0.00 0.00 0.00 in exchange rates 3. Decreased in current year 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 90 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Items Land rights Software Total (2) Impact of changes 0.00 0.00 0.00 in exchange rates 4. Balance as at year-end 1,724,983.83 13,732,336.05 15,457,319.88 III. Impairment allowance 1. Balance as at beginning of the year 0.00 2 .Increased in current year 0.00 0.00 0.00 (1) Accrual 0.00 0.00 0.00 (2) Impact of changes 0.00 0.00 0.00 in exchange rates 3. Decreased in current year 0.00 0.00 0.00 (1) Disposal 0.00 0.00 0.00 (2) Impact of changes 0.00 0.00 0.00 in exchange rates 4. Balance as at year-end 0.00 0.00 0.00 IV. Carrying amount 1 .Carrying amount as at period-end 11,483,941.69 2,352,929.33 13,836,871.02 2 .Carrying amount as at beginning of the year 10,879,419.29 1,266,003.87 12,145,423.16 15. Long-term deferred charge Increase Amortisation Other decrease Items 2014.12.31 during the reporting for the reporting during the current 2015.06.30 period period year Telecommunications 741,866.45 0.00 168,000.06 0.00 573,866.39 engineering Houses and buildings 4,039,129.68 1,147,902.17 1,129,426.37 0.00 4,057,605.48 renovation expenses Landscape engineering 16,148.04 0.00 16,148.04 0.00 0.00 Total 4,797,144.17 1,147,902.17 1,313,574.47 0.00 4,631,471.87 16. Deferred tax assets and deferred tax liabilities (1) Without offsetting deferred tax assets 2015.06.30 2014.12.31 Items Deductible temporary Deductible temporary Deferred tax assets Deferred tax assets difference difference Impairment allowance 73,308,156.51 11,178,061.40 74,390,647.44 11,367,720.13 Accrued expenses 9,275,784.04 1,796,127.60 8,451,204.35 1,585,779.18 Held for trading 27,500.00 4,125.00 3,956,259.85 593,438.98 financial liabilities Payroll liability 24,278,388.33 3,641,758.25 29,342,266.85 4,401,340.03 Unrealized profits from 718,783.58 179,695.90 718,783.58 179,695.90 intra-group transactions Undistributed deficit 2,337,576.71 350,636.51 2,335,954.85 583,988.71 Total 109,946,189.17 17,150,404.66 119,195,116.92 18,711,962.93 91 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (2) Without offsetting deferred tax liabilities 2015.06.30 2014.12.31 Items Taxable temporary Taxable temporary Deferred tax assets Deferred tax assets difference difference Accumulated depreciation 909,063.04 227,265.76 909,867.12 227,466.78 of fixed assets Held for trading financial 7,482,150.00 1,122,322.50 2,610,000.00 391,500.00 assets Total 8,391,213.04 1,349,588.26 3,519,867.12 618,966.78 (3) Details of unrecognized deferred tax assets Items 2015.06.30 2014.12.31 Impairment allowance for fixed assets 8,433,924.40 8,434,045.63 Bad debt 1,909,615.46 724,066.95 Accrued expenses 20,745,285.76 18,469,353.81 Impairment allowance for inventories 3,154,908.03 3,738,617.84 Payroll liability 3,179,372.52 1,384,448.27 Undistributed deficit 48,812,179.08 55,117,853.35 Total 86,235,285.25 87,868,385.85 (4) The deductible losses of unrecognized deferred tax assets shall be matured in the following years Year 2015.06.30 2014.12.31 Note Year 2015 683,172.28 63,700.89 Year 2016 10,473,369.24 3,187,362.29 Year 2017 11,427,700.61 17,618,598.88 Year 2018 19,249,693.65 21,913,253.09 Year 2019 7,585,688.20 12,334,938.20 Year 2020 6,384,732.08 0.00 Total 55,804,356.06 55,117,853.35 17. Other non-current assets Items 2015.06.30 2014.12.31 Prepaid mold fee 3,195,929.47 1,929,374.75 Total 3,195,929.47 1,929,374.75 18. Short-term borrowings (1) Categories Items 2015.06.30 2014.12.31 Credit borrowings 295,103,472.00 61,190,000.00 Total 295,103,472.00 61,190,000.00 19. Financial liabilities measured as at fair value and the changes recorded into profit and loss 92 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Items 2015.06.30 2014.12.31 Held for trading financial liabilities 27,500.00 3,956,259.85 Including: Derivative financial liabilities 27,500.00 3,956,259.85 Total 27,500.00 3,956,259.85 Note: The derivative financial liabilities are forward foreign exchange contract signed with financial institutions. 20. Notes payable Items 2015.06.30 2014.12.31 Bank acceptance 9,791,095.40 9,672,364.33 Commercial acceptance 14,715,963.96 20,077,618.44 Total 24,507,059.36 29,749,982.77 Note: There is no note payable expired but unpaid at the end of current year. 21. Accounts payable (1) Detail for accounts payable Items 2015.06.30 2014.12.31 Within 1 year 431,044,267.05 522,517,246.90 Over 1 year 5,605,793.84 10,554,048.53 Total 436,650,060.89 533,071,295.43 (2) Details of significant accounts payable remaining unsettled for more than one year Creditors Amounts outstanding as at period-end Reason(s) for unsettlement Xingda Electronical & Mechanical Co., Ltd. 3,033,786.68 Quality disputes Ningbo Jiesiluo Electrical Equipment Co., Ltd. 521,533.67 Quality disputes Ningbo Chaochao Electrical Equipment Co., Ltd. 500,237.01 Quality disputes Ningbo Bao Er Kang Electric Appliance Co., Ltd. 255,781.87 Quality disputes Unity Optoelectronic Co., Ltd. 164,995.31 Quality disputes Total 4,476,334.54 22. Advances from customers (1) Detail for advances from customers Items 2015.06.30 2014.12.31 Within 1 year 9,321,742.77 13,458,842.62 Over 1 year 2,560,758.48 1,310,336.50 Total 11,882,501.25 14,769,179.12 (2 )The details of significant advances from customers remaining unsettled for more than one year Items 2015.06.30 Reason(s) for unsettlement Diamond Business Trading S/A 531,902.06 Not yet complete the settlement temporarily CAINZ CORPORATION 286,332.94 Not yet complete the settlement temporarily Philips (China) Investment Co., Ltd. 185,653.04 Not yet complete the settlement temporarily Tempo (AUST) Pty Limited 167,656.82 Not yet complete the settlement temporarily Bialetti Industrie S.P.A 160,068.69 Not yet complete the settlement temporarily Total 1,331,613.55 93 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 23. Employee benefits payable (1) Disclosure by classification Increase during the Decrease during the Items 2014.12.31 2015.06.30 reporting period reporting period 1. Short-term employee benefits 44,132,014.98 124,822,249.61 129,158,508.80 39,795,755.79 2. Post-employment benefits 1,608,710.16 4,784,912.33 6,257,186.30 136,436.19 3. Termination benefits 170,000.00 40,000.00 210,000.00 0.00 4. Other long-term employee 0.00 0.00 0.00 0.00 benefits within one year Total 45,910,725.14 129,647,161.94 135,625,695.10 39,932,191.98 (2 ) Disclosure by classification of short-term employee benefits Increase during the Decrease during the Items 2014.12.31 2015.06.30 reporting period reporting period 1. Wages, salaries and 31,405,772.66 112,961,943.18 119,231,057.92 25,136,657.92 subsidies 2. Employee welfare 2,748.00 4,629,933.92 3,636,196.77 996,485.15 3. Social insurance: 886,538.25 4,320,485.52 3,906,783.71 1,300,240.06 Including: Medical insurance 475,271.74 2,793,343.44 2,626,358.34 642,256.84 Employment injury insurance 367,778.55 1,202,497.58 958,949.25 611,326.88 Maternity insurance 43,487.96 324,644.50 321,476.12 46,656.34 4.Housing provident fund 10,086,281.81 3,154,168.60 2,384,470.40 10,855,980.01 5.Labour union fee and employee 0.00 0.00 0.00 0.00 education fee 6. Short-term paid absences 1,750,674.26 -244,281.61 0.00 1,506,392.65 7. Short-term profit-sharing 0.00 0.00 0.00 0.00 plan Total 44,132,014.98 124,822,249.61 129,158,508.80 39,795,755.79 (3) Disclosure by defined contribution plan Increase during the reporting Decrease during the reporting Items 2014.12.31 2015.06.30 period period 1. Basic pension 1,444,646.60 4,318,477.99 5,638,281.75 124,842.84 2. Unemployment insurance 164,063.56 466,434.34 618,904.55 11,593.35 3. Annuity payment 0.00 0.00 0.00 0.00 Total 1,608,710.16 4,784,912.33 6,257,186.30 136,436.19 24. Taxes payable Items 2015.06.30 2014.12.31 Business tax 1,043,277.83 1,120,916.39 Corporate income tax 379,083.54 3,297,898.90 Value added tax 330,438.45 1.59 Personal income tax 413,149.90 602,035.27 Education surcharge 349,780.26 479,352.30 Urban maintenance and construction surcharge 312,346.02 443,507.87 Others 2,528,345.37 578,066.29 94 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Total 5,356,421.37 6,521,778.61 25. Interests payable Items 2015.06.30 2014.12.31 Interests on short-term borrowings 1,119,097.02 68,275.80 Total 1,119,097.02 68,275.80 26 Other payables (1) Detail for other payables Items 2015.06.30 2014.12.31 Within 1 year 51,879,877.39 39,741,179.54 Over 1 year 14,555,739.15 13,418,443.79 Total 66,435,616.54 53,159,623.33 (2 )Details of significant other payables remaining unsettled for more than one year Items 2015.06.30 Reason(s)for unsettlement Land use fee 1,382,556.00 The other party did not open an invoice Mold fees 674,224.20 Generation advances, unpaid Deposit 9,179,586.04 Termination be returned Total 11,236,366.24 27. Share capital 2014.12.31 Movements during the reporting period (+、-) 2015.06.30 Conversion Share Bonus Items from Others Subtotal Total amount % issue issue Total amount % reserves I. Shares with restriction on disposal 1.State-held shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2. Shares held by state-owned entities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3. Shares held by other domestic investors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Within: Held by institutional investors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Held by non-institutional investors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4. Shares held by foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 investors Within: Held by institutional 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 investors Held by non-institutional 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 investors Subtotal of shares with 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 restriction on disposal II.Floating shares 1. Ordinary shares issued in 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 CNY 2. Shares issued in domestic stock market 185,391,680.00 100.00 0.00 0.00 0.00 0.00 0.00 185,391,680.00 100.00 in foreign currency 3. Shares issued in foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 market in foreign currency 4. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Subtotal of floating shares 185,391,680.00 100.00 0.00 0.00 0.00 0.00 0.00 185,391,680.00 100.00 III. Total 185,391,680.00 100.00 0.00 0.00 0.00 0.00 0.00 185,391,680.00 100.00 95 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 28. Capital reserves Increase during the Decrease during the reporting Items 2014.12.31 2015.06.30 reporting period period Share premium 210,045,659.80 0.00 0.00 210,045,659.80 Other capital 68,413,202.75 0.00 0.00 68,413,202.75 reserves Total 278,458,862.55 0.00 0.00 278,458,862.55 29. Other comprehensive income Total amount in reporting period Amount Less: previously Less: After tax After tax Items 2014.12.31 for the recognized in other 2015.06.30 Income attributable attributable reporting comprehensive tax to the parent to minority period income transferred expense company shareholders before tax into profit or loss 1.Other comprehensive income will be reclassified into income or loss in the future Including: foreign currency translation differences of -899,380.20 -78,263.91 0.00 0.00 -58,697.93 -19,565.98 -958,078.13 financial statements Total of other comprehensive -899,380.20 -78,263.91 0.00 0.00 -58,697.93 -19,565.98 -958,078.13 income 30. Surplus reserves Items 2014.12.31 Increase during the reporting period Decrease during the reporting period 2015.06.30 Statutory surplus reserve 16,400,043.27 0.00 0.00 16,400,043.27 Total 16,400,043.27 0.00 0.00 16,400,043.27 31. Retained earnings Items 2015.06.30 2014.12.31 Pre-adjustment balance brought forward 67,223,203.93 46,733,303.43 Total adjustment to retained earnings b/f (+, -) 0.00 0.00 Retained earnings b/f after adjustment 67,223,203.93 46,733,303.43 Add: Net profit attributable to shareholders of the parent 15,111,025.18 51,348,795.39 Less: Appropriation to statutory surplus reserve 0.00 4,904,059.69 Appropriation to discretionary surplus reserve 0.00 0.00 General reserve 0.00 0.00 Ordinary dividends declared 27,808,752.00 25,954,835.20 Bonus issue 0.00 0.00 Balance carrying forward 54,525,477.11 67,223,203.93 32. Operating revenues and costs Current period Prior period Items Revenues Costs Revenues Costs Principal 860,571,679.13 760,838,332.58 853,536,487.98 750,410,484.64 operating income Other operating 34,622,478.94 10,644,964.43 36,679,811.53 11,563,929.82 96 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD income Total 895,194,158.07 771,483,297.01 890,216,299.51 761,974,414.46 33. Business tax and surcharges Items Current period Prior period Business tax 2,026,579.47 1,941,628.44 Education surcharge 522,830.70 1,478,879.69 Urban maintenance and construction tax 533,328.80 1,489,554.01 Others 1,623.21 20,247.05 Total 3,084,362.18 4,930,309.19 34. Sales expenses Items Current period Prior period Export expanses 16,949,226.08 16,377,256.67 Employee remunerations 11,070,639.29 10,238,256.77 Claims experiment expenses 2,486,199.67 -1,225,317.76 Sales commission and after sales service fees 1,846,683.75 1,369,690.46 Assets lease expenses 1,480,366.65 1,485,206.71 Travel expenses 1,438,843.82 2,302,320.71 Advertisements charges and sales promotion 4,649,273.77 2,749,456.16 Administrative expenses 490,754.03 359,560.00 Transportation 520,230.75 375,274.89 Others 191,911.51 351,750.15 Total 41,124,129.32 34,383,454.76 35. General and administrative expenses Items Current period Prior period R&D expenses 36,107,424.66 30,469,780.95 Employee remunerations 17,469,263.60 13,510,399.40 Depreciation and amortization of assets 5,441,909.19 5,172,379.73 Rental expenses 9,564,512.91 8,260,918.04 Insurance expenses 876,240.01 905,634.04 Administrative expenses 1,684,491.29 3,063,340.05 Travel expenses 1,772,778.91 823,312.06 Consultant fees 1,358,858.98 1,025,718.06 Maintenance expenses 2,987,379.79 3,502,443.67 Taxes and surcharges 1,987,191.55 2,120,135.29 Other expenses 3,748,639.32 4,058,526.12 Total 82,998,690.21 72,912,587.41 36. Financial costs Items Current period Prior period Interest expenses 1,622,486.32 5,286,440.55 Less: Interest income 6,370,313.97 15,453,140.23 Less: Realized financing gains 375,581.49 551,374.62 97 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Exchange gain or loss -5,073,550.77 -1,817,398.65 Bank charges 999,014.25 1,318,498.60 Other 0.00 0.00 Total -9,197,945.66 -11,216,974.35 37. Impairment loss on assets Items Current period Prior period Impairment loss on receivables 602,755.00 -3,225,929.92 Impairment loss on inventories 500,978.79 858,827.82 Impairment loss on fixed assets 0.00 2,920,419.99 Impairment loss on construction in progress 0.00 -114,359.13 Total 1,103,733.79 438,958.76 38. Gain from changes in fair value Source of fair value change Current period Prior period Financial assets measured by fair value with changes in fair value recognised in profit or loss 4,872,150.00 0.00 Including: Derivative financial assets 4,872,150.00 0.00 Financial liabilities measured by fair value with changes in fair value recognised in profit or loss 3,928,759.85 -26,768,171.00 Total 8,800,909.85 -26,768,171.00 39. Investment income Items Current period Prior period Long-term equity investment income under equity method 0.00 0.00 Investment income from disposal of long-term equity investment 0.00 0.00 Investment income from disposal of ffinancial assets measured by 4,687,335.49 8,647,755.48 fair value with changes in fair value recognised in profit or loss Investment income from financial products 1,343,333.33 5,352,363.02 Total 6,030,668.82 14,000,118.50 40. Non-operating income Included in current year Items Current period Prior period non-recurring profit and loss Gains from disposal of non-current assets 909,792.35 1,533,850.20 909,792.35 Including: Gains from disposal of fixed assets 909,792.35 1,533,850.20 909,792.35 Income from indemnities 0.00 0.00 0.00 Government grants 1,571,749.00 1,913,721.00 1,571,749.00 Inventory profit 0.00 0.00 0.00 Others 747,947.82 5,373,277.09 747,947.82 Total 3,229,489.17 8,820,848.29 3,229,489.17 Details of government grants which are recognized into profit or loss during current year: Government assistance Current period Prior period Related with assets/income Patents subsidies 63,000.00 160,500.00 Related with income Technology development grants 0.00 500,000.00 Related with income 98 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Enterprise development subsidies 0.00 900,000.00 Related with income Subsidies for export letter guarantees 751,749.00 313,221.00 Related with income Haixi special subsidies 400,000.00 0.00 Related with income The exhibition subsidies 350,000.00 40,000.00 Related with income Others 7,000.00 0.00 Related with income Total 1,571,749.00 1,913,721.00 41. Non-operating expenses Included in current period Items Current period Prior period non-recurring profit and loss Loss on disposal of non-current assets 117,195.62 548,863.12 117,195.62 Including: Loss on disposal of fixed assets 103,977.53 2,627.18 103,977.53 Loss on scraped fixed assets 13,218.09 546,235.94 13,218.09 Inventory losses of fixed assets 0.00 7,982.12 0.00 Fines 1,000.00 102,177.57 1,000.00 Public donation 0.00 14,464.05 0.00 Others 0.00 68,286.09 0.00 Total 118,195.62 741,772.95 118,195.62 42. Income tax expenses (1) General information Items Current period Prior period The income tax expenses of the current period 1,008,377.01 1,273,760.49 Deferred income tax expenses 2,292,380.77 1,683,679.41 Total 3,300,757.78 2,957,439.90 (2) Reconciliation of account profit and income tax expenses Items Current period Total profit 22,540,763.44 Income tax computed in accordance with the applicable tax rate 5,635,190.86 Impact of differing tax rates applicable to subsidiaries -2,378,012.45 Impact of adjustment for prior period tax expenses 572,505.70 Impact of non-taxable income Impact of non-deductible costs, expenses and losses 178,948.02 Impact of utilization of prior period deductible temporary differences and taxable temporary differences of which 0.00 no deferred tax asset has been recognized Impact of current period deductible temporary differences and taxable temporary differences of which no deferred 1,317,235.64 tax asset has been recognized Adjustment of deferred tax assets and deferred tax liabilities brought forward due to changes in tax rates Impact of additional deduction for R&D expenses -2,025,109.99 Income tax expenses 3,300,757.78 43. Notes to the statement of cash flows (1) Other cash received relating to operating activities Items Reporting period Prior period 99 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Government grants 1,571,749.00 1,913,721.00 Interests income 5,941,235.93 7,432,615.24 Rent income 19,349,933.72 16,628,012.01 Funds in current account and others 4,152,272.39 24,248,299.00 Total 31,015,191.04 50,222,647.25 (2) Other cash payments relating to operating activities Items Reporting period Prior period Penalties and donations paid 1,000.00 116,641.62 Bank charges paid by cash 919,501.88 1,017,121.51 Sales expenses and general and administrative expenses paid by cash 56,586,074.88 73,203,627.45 Current accounts and others 33,984,065.62 53,441,229.91 Total 91,490,642.38 127,778,620.49 (3) Other cash received relating to investing activities Items Reporting period Prior period To recover the maturity time deposits that for purpose to earn interest income in financial 652,082,700.00 0.00 institutions Total 652,082,700.00 0.00 (4) Other cash payments relating to investing activities Items Reporting period Prior period Deposits in financial institutions for the purpose of earning interest income 651,316,932.63 896,866,338.47 Total 651,316,932.63 896,866,338.47 (5) Other cash received relating to financing activities Items Reporting period Prior period Capital absorbed and loan between related parties 0.00 143,957,350.00 Total 0.00 143,957,350.00 (6) Other cash payments relating to financing activities Items Reporting period Prior period Capital absorbed and loan between related parties 0.00 12,304,200.00 Total 0.00 12,304,200.00 44. Supplementary information to the statement of cash flows (1) Supplementary information to the statement of cash flows Items Reporting period Prior period ① Reconciliation of cash flows from operating activities to net profit: Net profit 19,240,005.66 19,147,132.22 Add: Loss on asset impairment 1,103,733.79 438,958.76 Depreciation of fixed assets, oil and gas assets, biological assets held for production 24,510,894.59 25,761,482.07 100 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Items Reporting period Prior period Amortisation of intangible assets 482,087.40 535,676.51 Amortisation of Long-term deferred expenditure 1,313,574.47 1,008,080.19 Loss on non-current assets disposal (gain presented by "-" prefix) -805,814.82 -1,659,864.90 Loss on scrap of fixed assets (gain presented by "-" prefix) 13,218.09 554,218.06 Loss on fair value changes (gain presented by "-" prefix) -8,800,909.85 26,768,171.00 Financial costs (gain presented by "-" prefix) -4,176,211.61 -6,101,935.05 Investment loss (gain presented by "-" prefix) -6,030,668.82 -14,000,118.50 Decrease of deferred tax assets (increase presented by "-" prefix) 1,561,558.27 4,725,077.01 Increase of deferred tax liabilities (increase presented by "-" prefix) 730,621.48 -3,041,397.60 Decrease of inventories (increase presented by "-" prefix) -15,311,458.47 6,527,226.13 Decrease of operating receivables (increase presented by "-" prefix) 23,219,161.39 70,447,473.89 Increase of operating payables (decrease presented by "-" prefix) -87,613,431.38 -164,190,118.82 Others Net cash flows generated from operating activities -50,563,639.81 -33,079,939.03 ②Significant investing and financing activities involve no cash: Debt-to-capital conversion Convertible loan due within one year Fixed assets acquired under financial lease ③Movement of cash and cash equivalents: Cash as at period-end 366,455,451.65 163,780,265.08 Less: Cash as at beginning of the period 469,965,448.01 834,088,959.68 Add: Cash equivalents as at period-end Less: Cash equivalents as at beginning of the period Net increase of cash and cash equivalents -103,509,996.36 -670,308,694.60 (2) Net cash paid for disposal of subsidiary in reporting period In Apr. 2015, the Company’s subsidiary Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. (TKL) purchase its subsidiary Orient Star Investments Ltd, so far, the procedures for commercial registration had been accomplished but the investment fee had not been paid. (3) Net Cash receive from disposal of the subsidiary Items Reporting period 101 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Cash and cash equivalents receive from disposal of the subsidiary 0.00 Of which: Cash received from disposal of LTC 0.00 Net cash received from disposal of the subsidiary 0.00 (3) Cash and cash equivalents Items Reporting period Prior period ①Cash 366,455,451.65 163,780,265.08 Including: Cash at hand 783,900.30 661,293.17 Demand bank deposit 365,671,551.35 163,118,971.91 Demand other monetary funds 0.00 0.00 Demand deposit in the Central Bank 0.00 0.00 Deposit in peer firms 0.00 0.00 Loan to peer firms 0.00 0.00 ②Cash equivalents 0.00 0.00 Including: Debt instrument matured within three months 0.00 0.00 ③Cash and cash equivalents as at period-end 366,455,451.65 163,780,265.08 Including: restricted cash and cash equivalents in parent company 0.00 0.00 or subsidiary 45. The assets with the ownership or use right restricted Item Closing book value Restricted reason Time deposits for the purpose of earning interest income in financial Monetary capital 415,733,232.63 institutions Total 415,733,232.63 46. Foreign currency monetary items (1) Foreign currency monetary items Closing foreign currency Item Exchange rate Closing convert to RMB balance balance Monetary funds Including: -USD 75,833,812.73 6.1136 463,617,597.43 -JPY 39,281,068.80 0.0501 1,966,096.05 -IDR 4,739,881,924.04 0.0005 2,173,566.18 -EUR 240,951.08 6.8699 1,655,309.82 -GBP 13,170.60 9.6422 126,993.56 -HKD 64,441.14 0.7886 50,818.93 -HUF 81,016.00 0.0220 1,782.35 -FRF 7.00 6.6600 46.62 Total 469,592,210.94 Short-term borrowings Including: -USD 48,270,000.00 6.1136 295,103,472.00 102 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Closing foreign currency Item Exchange rate Closing convert to RMB balance balance Total 295,103,472.00 Accounts receivable Including: -USD 29,146,353.62 6.1136 178,189,151.90 -JPY 35,820,836.00 0.0501 1,792,899.61 Total 179,982,051.51 Accounts payable Including: -USD 18,522,207.85 6.1136 113,237,369.91 -EUR 398,799.42 6.8699 2,739,712.14 -HKD 470,081.86 0.7886 370,711.26 -JPY 17,864,822.00 0.0501 894,170.07 Total 117,241,963.38 Other receivables Including: -EUR 15,750.00 0.7886 12,420.61 -HKD 450,000.00 0.0501 22,523.40 -JPY 387,317.46 6.1136 2,367,904.02 -USD 4,240.10 0.0000 0.00 -IDR 2,097,630,411.66 0.0000 0.00 Total 2,402,848.03 Other payables Including: -HKD 4,483.75 0.7891 3,538.08 -JPY 564,741.00 0.0530 29,948.09 -USD 315,062.32 6.1832 1,948,103.20 Total 1,981,589.37 (2) Description of overseas operating entities The Company's holding sub-subsidiaries company Pt. Star Comgistic Indonesia locate at West Java province in Indonesia, due to Pt. Star Comgistic Indonesia are mostly settled in US dollars by usual purchases and sales, so that it adopt the US dollar as its functional currency. VII. Changes of merge scope 1. Business merger not under same control Unit: Yuan Income of Net profits of Time and Cost of Way to gain Recognition acquiree acquiree Name of place of Proportion of gaining the the stock Purchase date basis of during the during the acquiree gaining the stock rights stock rights rights purchase date purchase date purchase date stock rights to period-end to period-end Business Orient Star Sale and merger not Investments 28 Apr. 2015 HKD1.00 100% 23 Apr. 2015 purchase 0.00 0.00 under same Ltd, agreement control Notes: In Apr. 2015, the Company’s subsidiary Tsann Kuen (Zhangzhou) Enterprise Co., Ltd .(TKL) purchase its subsidiary Orient Star Investments Ltd, so far, the procedures for commercial registration had been accomplished but the investment fee had not been paid. 103 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2 .Business merger under same control in reporting period The Company's holding subsidiary Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. cancelled its subsidiary Tsann Kuen (Zhangzhou) Profession and Technology Institute (LTC). in Feb. 2015. Since the date of cancellation that Tsann Kuen (Zhangzhou) Profession and Technology Institute (LTC). is no longer included in the consolidated financial statements, the revenue, expense and profit before completion of cancellation are included in the consolidated income statement, cash flow before completion of cancellation is included in the consolidated statement of cash flows. VIII. Equity in other entities 1. Equity in subsidiary (1) The structure of the enterprise group Place of Place Nature Holding proportion (%) Subsidiaries Acquired method operation of registration of business Directly Indirectly Manufacture home TKL Zhangzhou Zhangzhou 75.00 75.00 Acquired through incorporation electronic appliance Acquired through business Manufacture home TKS Shanghai Shanghai 62.50 62.50 combination under common electronic appliance control (2) Significant not wholly owned subsidiary Holding proportion of Profit and loss attributable to Dividends attributable to Total amount of minority Subsidiaries minority shareholders minority equity during minority shareholders equity at the period-end (%) reporting period TKL 25.00 4,847,832.13 9,428,762.40 311,843,339.09 TKS 37.50 -647,424.52 0.00 35,902,162.42 (3) The main financial information of significant not wholly owned subsidiary Closing balance Subsidiaries Non-current Current Non-current Current assets Total assets Total liability assets liabilities liability TKL 1,875,211,591.30 254,162,824.68 2,129,374,415.98 853,244,778.99 1,122,322.50 854,367,101.49 TKS 76,674,828.67 22,768,738.83 99,443,567.50 3,704,467.76 0.00 3,704,467.76 (Continued) Opening balance Subsidiaries Non-current Current Non-current Current assets Total assets Total liability assets liabilities liability TKL 1,750,566,275.80 261,075,742.61 2,011,642,018.41 719,878,940.06 391,500.00 720,270,440.06 TKS 76,107,385.62 24,641,697.87 100,749,083.49 3,283,518.35 0.00 3,283,518.35 104 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (Continued) Reporting period Subsidiaries Total comprehensive Operation revenue Net profit Operating cash flow income TKL 849,902,598.38 21,350,785.76 0.00 -46,378,546.22 TKS 3,074,552.27 -1,726,465.40 0.00 279,283.47 (Continued) Prior period Subsidiaries Total comprehensive Operation revenue Net profit Operating cash flow income TKL 862,438,262.13 17,496,448.18 0.00 -22,898,200.33 TKS 3,679,952.94 4,446,435.14 0.00 7,398,050.10 2. The equity in sub-subsidiaries (1) The construction of the sub-subsidiaries Sub-subsidiar Place of Place Nature Holding proportion % Acquired method ies operation of registration of business Directly Indirectly Manufacture home TKN Zhangzhou Zhangzhou electronic appliance 56.25 75.00 Acquired through incorporation Sales of home STD Shanghai Shanghai electronic 56.25 100.00 Acquired through incorporation Acquired through business East Sino Hong Kong Hong Kong Investment, Trading 75.00 100.00 combination under common control Acquired through business Manufacture home SCI Indonesia Indonesia electronic appliance 74.76 99.69 combination under common control Orient Star Acquired through business Investments Hong Kong Hong Kong Investment, Trading 75.00 100.00 Ltd combination under common control (2) Significant non-wholly-owned sub-subsidiary Dividends Holding proportion Profit and loss attributable Total amount of attributable to Sub-subsidiaries of minority to minority equity during minority equity at the minority shareholders (%) reporting period period-end shareholders TKN 25.00 -56,846.71 1,091.85 1,246,595.99 STD 0.00 0.00 0.00 0.00 East Sino 0.00 0.00 0.00 0.00 SCI 0.31 -14,580.42 0.00 248,095.97 Orient Star Investments Ltd 0.00 0.00 0.00 0.00 (3) The main financial information of significant not wholly owned sub-subsidiary Closing balance Sub-subsidiaries Non-current Current Non-current Current assets Total assets Total liability assets liabilities liability TKN 850,393.13 4,950,000.00 5,800,393.13 114,150.10 0.00 114,150.10 STD 7,790,298.54 1,011,073.83 8,801,372.37 4,551,231.42 0.00 4,551,231.42 East Sino 35,142.09 146,366,660.20 146,401,802.29 29,896.21 0.00 29,896.21 SCI 44,178,512.68 65,978,735.13 110,157,247.81 16,506,768.51 227,265.76 16,734,034.27 Orient Star 0.00 0.00 0.00 0.00 0.00 0.00 Investments Ltd 105 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (Continued) Opening balance Sub-subsidiaries Current Non-current Current assets Non-current assets Total assets Total liability liabilities liability TKN 910,501.92 4,950,000.00 5,860,501.92 126,532.65 0.00 126,532.65 STD 7,895,820.60 1,135,651.53 9,031,472.13 4,557,996.61 0.00 4,557,996.61 East Sino 53,391.15 146,414,916.41 146,468,307.56 34,244.85 0.00 34,244.85 SCI 54,107,897.96 65,287,362.80 119,395,260.76 21,021,950.25 227,466.78 21,249,417.04 Orient Star 0.00 0.00 0.00 0.00 0.00 0.00 Investments Ltd (Continued) Reporting period Sub-subsidiaries Total comprehensive Operation revenue Net profit Operating cash flow income TKN 0.00 -4,052.26 0.00 -18,566.66 STD 30,017.10 -223,334.57 0.00 -126,252.29 East Sino 0.00 -10,765.58 0.00 -18,249.00 SCI 35,414,003.17 -4,647,501.10 0.00 -5,114,464.46 Orient Star Investments Ltd 0.00 0.00 0.00 0.00 (Continued) Prior period Sub-subsidiaries Total comprehensive Operation revenue Net profit Operating cash flow income TKN 0.00 260,427.05 0.00 198,034.83 STD 135,492.21 -265,226.66 0.00 -1,546,206.92 East Sino 42,103.03 41,573.15 0.00 45,876.78 SCI 24,079,395.14 -6,739,531.08 0.00 -1,806,412.47 Orient Star Investments Ltd 0.00 0.00 0.00 0.00 IX. The risk associated with financial instruments The main financial instruments of the Company including equity investments, loans, accounts receivable, accounts payable, derivative financial instruments and etc., please see Note 6 for detail of related items. The risk associated with financial instruments, and risk management policies which the company uses to reduce these risks as described below. The management of the Company manages and supervises the risks to ensure that the risks can be controlled within a limited range. (I) The targets and policies of risks management The target of risks management is to obtain the proper balance between the risks and benefits, to reduce the negative impact that caused by the risk of the Company to the lowest level, and to maximize the benefits of shareholders and other equity investors. Based on the targets of risk management, the basic strategy of the Company’s risk management is to identify and analyze the risks which are faced by the Company, establish suitable risk tolerance baseline and precede the risk management, and supervise a variety of risks timely and reliably, and control the risk within a limited range. 1. Market Risk (1) Foreign exchange risk 106 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Foreign exchange risk refers to the risk of loss due to exchange rate fluctuations generally. The company bears the foreign exchange risk primarily concerned with USD, JYP, IDR, EUR and HKD, in addition to the Company's subsidiary TKL and SCI purchases and sales used by USD, the other main business activities of the Company used by CNY. 30 June 2015, except the following assets or liabilities are recorded in foreign currency, the others are recorded in CNY. Foreign exchange risk of the assets and liabilities in foreign currencies may have an impact on the Company's performance of operation. Items 2015.06.30 2014.12.31 Monetary funds 469,592,210.94 265,678,689.15 Accounts receivable 179,982,051.51 230,432,201.21 Other receivables 2,402,848.03 2,524,982.28 Accounts payable 117,241,963.38 64,913,478.77 Other payables 1,981,589.37 2,726,760.09 Short-term borrowing 295,103,472.00 61,190,000.00 The Group purchases foreign currency forward contracts to reduce the foreign exchange risk, and foreign currency forward contracts shall be based on the amount of foreign currency assets. (2) Interest rate risk - the risk of changes in cash flow Due to the risk of changes in cash flows of a financial instrument is mainly concerned with the floating rate of bank borrowings. The company's policy is to maintain a floating interest rate on the borrowings. 2. Credit Risk That would lead the Company’s maximum credit risk of financial losses mainly from the losses of financial assets, which are resulted by the other party of contract fails to fulfill the obligations, as at 30 June 2015. In order to reduce credit risk, the Company set up a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that the necessary measures be taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure recognized fully provision for bad debts for the money cannot be recovered. So that the Company's management believes the Company’s credit risk has been greatly reduced. The Company's circulating funds deposited in banks which with high credit ratings, so that the lower credit risk of circulating funds. 3. Liquidity risk When managing the liquidity risks, the Company’s management believes maintaining adequate cash and cash equivalents, and monitoring that at same time, in order to meet the needs of operation of the Company, and to reduce the impact of fluctuations in cash flows. The management of the Company monitors the use of bank borrowings and ensures to abide by loan agreements. 107 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD X. The disclosure of the fair value 1. Closing fair value of assets and liabilities calculated by fair value Closing fair value Item Fair value Fair value Fair value measurement measurement measurement Total items at level 1 items at level 2 items at level 3 1. Continuous measurement by fair value The financial assets are measured by fair value and the changes are recognized into current profit or loss 1.1 Trading financial assets (1) Debt instruments investment (2) Equity instruments investment (3) Derivative financial assets 7,482,150.00 7,482,150.00 Total amount of assets continuous measurement by fair value 7,482,150.00 7,482,150.00 2. Trading financial liabilities including: Issued trading bonds Derivative financial liabilities 27,500.00 27,500.00 Other Total amount of liabilities continuous measurement by fair value 27,500.00 27,500.00 2. Determined on the basis of continuous first level for fair value measurement of the market of project Based on the identical assets or liabilities acquired on unadjusted quoted in an active market at balance sheet day. XI. Related party and related Transaction 1. Information related to parent company of the Company Place of Parents Relationship Type of incorporation Legal representative Nature of business registration STAR COMGISTIC CAPITAL Manufacture and sales Ultimate holding company INC Taiwan Yang Wenfang CO.,LTD. electrical equipment (Continued) Shareholding Voting right Ultimate controller Organization Parents Registered capital in the Company % in the Company % of the Company code STAR COMGISTIC CAPITAL TWD 1,343,000.00thousand 42.85 44.63 Wu Cankun 28986660 CO.,LTD. 2. Subsidiaries See Note VIII. 1 “The equity in subsidiaries”. 3. Joint ventures and associated enterprises of the Company There have no joint ventures and associated enterprises of the Company. 108 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 4. Details of other related parties Other related parties Relationship Organisation code EUPA Industry Corporation Limited Shareholder 12959659-000-07-14-6 Fordchee Development Limited Shareholder 14676920-000-01-15-5 Fillman Investment Limited Shareholder 16269694-000-07-14-A Tsann Kuen Japan Co., Ltd. Same ultimate holding company 0105-01-021064 The company directly controlled by the key Thermaster Electronic (Xiamen) Ltd. 61201968-5 management and closed family members Xiamen Tsann Kuen Trading Co., Ltd. Same actual controller 58126129-1 Sino Global Development Limited Same actual controller ―― The company directly controlled by the key PT. Shen Min Sukabumi ―― management and closed family members WU WHA MA RESTAURANT MANAGEMENT Ultimate holding company have equity 31055232-9 CO., LTD. IN XIAMEN Tsann Kuen Enterprise Co., Ltd. Same ultimate holding company 69568009 5.Transactions with related parties (1) Transactions through purchase or sell goods and accept or supply services ① The situation of purchases goods or accepts services Over the Trading limit Related-party Content Reporting period trading limit Prior period approved or not Thermaster Electronic (Xiamen) Ltd. Purchase of goods 16,991,120.1 16,625,490.15 40,000,000.00 No 5 STAR COMGISTIC CAPITAL CO., LTD. Purchase of goods 2,297,732.78 2,800,048.00 No 1,993,309.61 Total 18,923,222.93 42,800,048.00 18,984,429.76 ②The situation of sells goods or rendering services Related-party Content Reporting period Prior period Tsann Kuen Japan Co., Ltd. Sale of goods 2,664,287.68 5,832,857.86 STAR COMGISTIC CAPITAL CO., LTD. Sale of goods 6,763,782.24 19,698,104.28 Total 9,428,069.92 25,530,962.14 (2) Lease between related parties ①The Company is as the leasor Leasee classification Lease rental recognized in current period Lease rental recognized in prior period Xiamen Tsann Kuen Trading Property Co., Ltd 750,000.00 750,000.00 Xiamen Wuhuama Restaurant Property Management Co., Ltd. 65,400.00 0.00 Total 815,400.00 750,000.00 (3) Assets transfer, Debt restructuring between related parties Related-party Content Reporting period Prior period Tsann Kuen Enterprise Co., Ltd. Sell the fixed assets 0.00 100,099.39 Total 0.00 100,099.39 Purchase of the fixed PT. Shen Min Sukabumi assets 806,379.92 0.00 Total 806,379.92 0.00 109 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (4) Other transactions with related parties Related-party Content Reporting period Prior period Payments STAR COMGISTIC CAPITAL CO., Purchasing agent fees LTD. (Note) 108,256.44 97,839.44 Total 108,256.44 97,839.44 Note: The Company and its subsidiaries entrust related companies to purchase raw material, modules and machineries. The procurement agency fees (including service charges) are calculated based on 110% of the actual procurement expense incurred by the agencies. 6. The balance of payables and receivables among related parties (1) Receivables owed by related parties 2015.06.30 2014.12.31 Related party Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt Accounts receivable: Tsann Kuen Japan Co., Ltd. 81,665.64 0.00 1,653,388.58 0.00 STAR COMGISTIC CAPITAL CO., LTD. 2,387,842.92 0.00 5,083,138.17 0.00 Total 2,469,508.56 0.00 6,736,526.75 0.00 (2) Payables owed to related parties Related party 2015.06.30 2014.12.31 Accounts payable: Thermaster Electronic (Xiamen) Ltd. 8,584,063.50 10,554,478.81 STAR COMGISTIC CAPITAL CO., LTD. 956,890.89 761,114.88 Total 9,540,954.39 11,315,593.69 Other payable: Tsann Kuen Japan Co., Ltd. 17,926.47 104,052.63 STAR COMGISTIC CAPITAL CO., LTD. 50,065.13 37,181.49 Xiamen Tsann Kuen Trading Co., Ltd. 463,210.38 738,531.20 Xiamen Wuhuama Restaurant Management Co., Ltd. 55,440.00 59,100.00 Total 586,641.98 938,865.32 XII. Share payments There is no share payment during the reporting period XIII. Commitments and contingencies 1. Important commitments Irrevocable lease contracts under performance and their financial effects as at the end of reporting period. 110 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Unit: CNYten thousands Items 2015.06.30 2014.12.31 The minimum lease payments of irrevocable operating lease contracts: House rent 1st year after the balance sheet date 3,727 3,727 2nd year after the balance sheet date 3,727 3,727 rd 3 year after the balance sheet date 3,727 3,727 Subsequent years 128,575 130,438 Total 139,756 141,619 2. Contingencies The subsidiary of the Company –Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. (hereafter, TKL) signed the < Product Supply Agreement> with Xinda Electromechanics Co., Ltd. (hereafter, Xinda) on July 20, 2009. The validity of the contract is from July 1, 2009 to June 30, 2012. Furthermore, on 1 January 2011, they signed the and relevant , and other agreements. According to those agreements, TKL should purchase products from Xinda. TKL rejected to pay for the purchase and terminated those agreements due to the poor quality products from Xinda. On 23 November 2011, Xinda lodged petition for civil litigation to the Intermediate People’s Court of Zhangzhou for the order of Intermediate People’s Court of Zhangzhou that TKL pay for purchase from Xinda amounting to USD 479,089.06 (CNY 3,071,535.78) immediately together with the liquidated damages for delay payment and resume performance of the agreement (the value of the unperformed agreement amounting to USD 189,423.25). On 8 January 2012, TKL lodged counterclaim to the Court claiming that due to unsatisfactory quality of goods supplied by Xinda, goods supplied by TKL had been returned from clients and orders cancelled, resulting in substantial financial loss and reputation damage suffered by the TKL. TKL therefore petitioned for the court order for relief of agreement and that Xinda shall pay to TKL liquidated damage amounting to CNY 1 million together with financial loss amounting to CNY 7.6216 million. Intermediate People’s Court of Zhangzhou made the judgement on 15 August 2013 as follow: 1. TKL should pay goods payments amount USD 479,089.06 to plaintiff Xinda within 15 days from the date on which the judgement becomes effective, equivalent to CNY 3,071,535.78. 2. Plaintiff Xinda and the third party BoLuoLianyuan industry Co., Ltd. (hereafter Lianyuan) should jointly pay the liquidated damage for CNY1,233,399.70toTKLwithin 15 days from the date on which the judgementbecomes effective. 3. Unperformed 10 orders entered into by TLK, Xinda and Lianyuan are declared cancelled. 4. Reject other claims partitioned by the plaintiff Xinda. 5. Reject other claims partitioned by TKL. After the first judgement, both parties appealed against the judgment. Up to the end of the reporting date, the financial statement of TKL included accounts payable to Xinda amounting to USD 479,089.06. As the second hearing was yet to be finalized, TKL unrecognized contingent assets CNY1, 233,399.70 to Xinda. Besides, the defective motor products provided by Xinda were104,691 in total, however, only 23,035 were deal with in the case, there were remaining 81,656 to be handled, thus, TKL filed a suit to Intermediate People’s Court of Zhangzhou on 24 Dec. 2013, the claims amount was CNY3,770,430.64 and Intermediate People’s Court of Zhangzhou had accepted the case. XIV. Post reporting date events 1. Important unadjusted events □ Applicable √ inapplicable 111 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 2. Distribution of profits Unit; CNY Profits or dividends plan to distribute 27,808,752.00 Profits or dividends approved and declare to issue 27,808,752.00 XV. Other significant events There has no other significant event needs to disclose at the balance sheet day. XVI. Notes of main items in the financial statements of the Company 1. Accounts receivable (1) Accounts receivable classified by category 2015.06.30 Category Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Accounts receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Accounts receivable portfolio subject to impairment by credit risk: Portfolio by age 35,913,545.93 99.21 506,430.51 1.41 35,407,115.42 Portfolio by related parties 285,374.60 0.79 0.00 0.00 285,374.60 Subtotal 36,198,920.53 100.00 506,430.51 1.40 35,692,490.02 Accounts receivable of individually insignificance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Total 36,198,920.53 100.00 506,430.51 1.40 35,692,490.02 (Continued) 2014.12.31 Category Carrying amount Allowance for bad debt Book value Amount Proportion Amount Proportion Accounts receivable of individual significance subject to 0.00 0.00 0.00 0.00 0.00 individually assessment for impairment Accounts receivable portfolio subject to impairment by credit risk: Portfolio by age 29,724,857.96 99.66 1,290,294.12 4.34 28,434,563.84 Portfolio by related parties 100,627.02 0.34 0.00 0.00 100,627.02 Subtotal 29,825,484.98 100.00 1,290,294.12 4.33 28,535,190.86 Accounts receivable of individually insignificancesubject 0.00 0.00 0.00 0.00 0.00 to individually assessment for impairment Total 29,825,484.98 100.00 1,290,294.12 4.33 28,535,190.86 112 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD ① Accounts receivable using the age analysis method for measurement of allowance for bad debt 2015.06.30 Age Carrying amount Allowance for bad debt Proportion Within 1 year 35,896,469.93 489,354.51 1.36 Include:1 to 90 days 31,123,643.59 0.00 0.00 91 to 180 days 4,726,395.66 472,639.57 10.00 181 to 270 days 32,502.00 9,750.60 30.00 271 to 365 days 13,928.68 6,964.34 50.00 1 to 2 years 17,076.00 17,076.00 100.00 Total 35,913,545.93 506,430.51 1.41 ②Accounts receivable using the related party method for measurement of allowance for bad debt 2015.06.30 Related parties Carrying amount Allowance for bad debt Proportion Related parties 285,374.60 0.00 0.00 Total 285,374.60 0.00 0.00 (2) Recognization, recovery and reversal of allowance for bad debt Recovery and reversal of allowance for bad debts is CNY783, 863.61. (3) Accounts receivable written off during the current year (4) Details of top five accounts receivable The total amount of top five accounts receivables which are summaried by the balance as at the end of current year is CNY35,937,543.81 accounting for the proportion of the total accounts receivable balance as at the end of current year is 98.28%, the total amount of corresponding allowence for bad debts is CNY487,910.90. 2. Other receivable (1) Disclosure by classification 2015.06.30 Items Carrying amount Allowance for bad debt Carrying amount Book value Amount Proportion Amount Proportion Other receivable of individual significance subject to 0.00 0.00 0.00 0.00 0.00 individually assessment for impairment Other receivable portfolio subject to impairment by credit risk: Portfolio by age 2,491,433.88 89.38 13,003.79 0.52 2,478,430.09 Portfolio by related parties 0.00 0.00 0.00 0.00 0.00 Subtotal 2,491,433.88 89.38 13,003.79 0.52 2,478,430.09 Other receivable of individually insignificancesubject to 296,000.00 10.62 0.00 0.00 296,000.00 individually assessment for impairment Total 2,787,433.88 100.00 13,003.79 0.47 2,774,430.09 113 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD (Continued) 2014.12.31 Items Carrying amount Allowance for bad debt Carrying amount Book value Amount Proportion Amount Proportion Other receivable of individual significance subject to individually 0.00 0.00 0.00 0.00 0.00 assessment for impairment Other receivable portfolio subject to impairment by credit risk: Portfolio by age 298,404.98 48.02 2,969.90 1.00 295,435.08 Portfolio by related parties 0.00 0.00 0.00 0.00 0.00 Subtotal 298,404.98 48.02 2,969.90 1.00 295,435.08 Other receivable of individually insignificancesubject to 323,000.00 51.98 0.00 0.00 323,000.00 individually assessment for impairment Total 621,404.98 100.00 2,969.90 0.48 618,435.08 ①Accounts receivable using the age analysis method for measurement of allowance for bad debt 2015.06.30 Age Carrying amount Allowance for bad debt Proportion Within 1 year 2,491,433.88 13,003.79 0.52 Include:1 to 90 days 2,448,021.26 0.00 0.00 91 to 180 days 100.00 10.00 10.00 181-270 days 43,312.62 12,993.79 30.00 Total 2,491,433.88 13,003.79 0.52 (2) Recognization, recovery and reversal of allowance for bad debt Recognization of allowance for bad debts is CNY 10,033.89 during reporting period. There was no any recovered or reserved bad debt provision. (3) Accounts receivable written off during the current year There has no accounts receivable written off during the current year (4) List of other accounts receivable classified according to the accounts nature Nature Book balance at the period-end Book balance at the period-begin Non-related 2,787,433.88 621,404.98 Related 0.00 0.00 Total 2,787,433.88 621,404.98 (5) Top 5 of the closing balance of the other accounts receivable colleted according to the arrears party Closing Proportion of the total Name of the balance of Nature Amount Aging year end balance of the units the bad debt accounts receivable % provision Dividend withholding income No. 1 2,082,094.27 0-30 days 74.70 0.00 tax No. 2 Utilities 225,679.39 0-30 days 8.10 0.00 No. 3 Margin 153,000.00 61-270 days 5.49 0.00 No. 4 Margin 100,000.00 91-120 days 3.59 0.00 No. 5 patent fee 55,556.00 0-30 days 1.99 0.00 Total 2,616,329.66 93.86 0.00 114 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 3. Long-term equity investments (1) Disclosure by classification 2015.06.30 2014.12.31 Items allowance for Net carrying Carrying amount Carrying amount allowance for bad debts Net carrying amount bad debts amount Invest to subsidiaries 1,116,460,573.74 130,646,542.91 985,814,030.83 1,116,460,573.74 130,646,542.91 985,814,030.83 Total 1,116,460,573.74 130,646,542.91 985,814,030.83 1,116,460,573.74 130,646,542.91 985,814,030.83 (2)Investment for subsidiaries Withdrawn impairment Closing balance Items Opening balance Increase Decrease Closing balance provision in of impairment the reporting provision period TKS 194,545,872.18 0.00 0.00 194,545,872.18 0.00 130,646,542.91 TKL 921,914,701.56 0.00 0.00 921,914,701.56 0.00 0.00 Total 1,116,460,573.74 0.00 0.00 1,116,460,573.74 0.00 130,646,542.91 4. Operating revenues and costs Reporting period Prior period Item Revenues Costs Revenues Costs Revenue from principal 69,782,827.53 61,811,239.11 31,655,528.61 26,639,150.58 operating activities Revenue from other 8,891,978.93 2,264,495.34 10,952,464.03 2,441,093.29 operating activities Total operating revenue 78,674,806.46 64,075,734.45 42,607,992.64 29,080,243.87 5. Investment income Item Reporting period Prior period Long-term equity investment income under cost method 28,286,287.22 38,189,978.21 Investment income from disposal of long-term equity investment 0.00 0.00 Total 28,286,287.22 38,189,978.21 XVII. Supplementary information 1. Extraordinary gains or losses for current period Supplemental information Total amount Explanation Loss from disposal of Gains or losses arising from disposal of non-current assets 792,596.73 assets Tax repayments or waiving of taxes not officially authorised or not with proper authorisation Government grants accounted for through profit or loss for the current reporting period (excl. grants directly associated with the Company’s operations and 1,571,749.00 subject to national quotas) Cost of monetary funds charged on non-financial institutions accounted for through profit or loss for the current reporting period 115 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Supplemental information Total amount Explanation Gains from the investment costs paid less than the acquirer’s interest in the fair value of the bargainor’s identifiable net assets( During acquire subsidiary、joint venture and associates) Gains or losses arising from non-monetary assets exchange Gains or losses arising from entrusted assets and investments Impairment allowances arising from force majeure, such as natural disasters Gain or loss arising from debt restructuring Restructuring expenses, such as employee settlement and relocation costs and costs of integration Gains or losses arising from transactions of which the prices are deemed unfair (the difference between the price and the fair value) Net profit or loss of subsidiaries acquired through business combination under common control from the beginning of the current reporting period to the combination dates. Gains or losses arising from contingent events not associated with the Company’s operating activities Mainly were investment Gains or losses arising from changes in the fair values of financial instruments income from forward held for trading (excl. effective hedging instruments associated with the foreign exchange contract, Company’s operating activities) or disposal of financial instruments held for 14,831,578.67 changes of fair value, trading and available-for-sale financial assets (excl. effective hedging finance products and other instruments associated with the Company’s operating activities) current assets Recovery of impairment allowance for receivables subject to individual assessment for impairment Gains or losses arising from entrusted borrowings Gains or losses arising from changes in the fair values of investment property measured at fair value Impact of one-off adjustment required by tax laws, accounting standards and relevant regulations on the profit or loss for the current reporting period Revenue arising from entrusted operation Other non-operating revenue and non-operating expenses not listed above 746,947.82 Other gains or losses satisfying the definition of extraordinary gains or losses Less: Effect of corporate income tax 2,687,869.17 Less: Net amount attributable to minority interests (after tax) 3,810,485.01 Total 11,444,518.04 2. Yield Rate of Net Assets and Earnings Per Share Earnings Per Share(Yuan per share) Weighted average yield rate Profits for the reporting period of net assets% Basic EPS Diluted EPS Net profits attributable to ordinary 2.73 0.08 0.08 shareholders Net profits attributable to ordinary shareholders (excl. extraordinary gains or 0.67 0.02 0.02 losses) 116 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD 3. Differences between accounting data under domestic and overseas accounting standards (1) Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards □ Applicable √ Inapplicable (2) Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable √ Inapplicable (3) Explain reasons for the differences between accounting data under domestic and overseas accounting standards, for audit data adjusting differences had been foreign audited, should indicate the name of the foreign institutions □ Applicable √ Inapplicable 4. Explain reasons and abnormal condition in the main items of consolidated financial statements of the Company Unit: CNY Year-on-year Closing Opening Item increase or Reason amount amount decrease (%) Financial assets measured by The increase of income of fair value fair value with the changes be from the undelivered forward 7,482,150.00 2,610,000.00 186.67 included in the current gains foreign exchange contracts at and losses period-end The CNY 230 million of finance Other current assets 244,113,215.87 13,087,495.75 1,765.24 products purchased in reporting period The increase land changes and soil Construction in progress 353,168.37 233,968.67 50.95 preparation cost Other non-current assets 3,195,929.47 1,929,374.75 65.65 The increase prepayment of equipment Short-term borrowings 295,103,472.00 61,190,000.00 382.27 The increase of short term bank loans Financial liabilities measured The forward exchange at beginning of by fair value with the changes 27,500.00 3,956,259.85 -99.30 the year realized income in reporting be included in the current period gains and losses Interest payable 1,119,097.02 68,275.80 1,539.08 The increase of short term bank loans; The increase of estimate income of Deferred income tax 1,349,588.26 618,966.78 118.04 forward exchange contracts in liabilities reporting period 117 2015 Semi-Annual Report of TSANN KUEN (CHINA) ENTERPRISE CO., LTD Year-on-year Opening Item Closing amount increase or Reason amount decrease (%) The decrease of free of tax credits in Business s tax and surcharges 3,084,362.18 4,930,309.19 -37.44 reporting period The increase of export costs and Selling expenses 41,124,129.32 34,383,454.76 19.60 advertising promotion in reporting period Rent received at period-end and Assets impairment loss 1,103,733.79 438,958.76 151.44 recorded into bad debt provision and loss on inventory valuation Gains on the changes in the fair The evaluation income of forward 8,800,909.85 -26,768,171.00 132.88 value exchange contracts The decrease of income from delivery Investment income 6,030,668.82 14,000,118.50 -56.92 forward foreign exchange contracts and income from finance products The decrease of subsidy revenue in Non-operating income 3,229,489.17 8,820,848.29 -63.39 reporting period The decrease of fixed assets scrap loss Non-operating expense 118,195.62 741,772.95 -84.07 in reporting period Net cash flows from operating The decrease of the export tax rebate -50,563,639.81 -33,079,939.03 -52.85 activities return in reporting period Net cash flows from investing -1,181,899,628. Quota varied difference in limited -249,714,881.93 78.87 activities 49 deposit amount in two periods The decrease of export financing Net cash flows from financing 198,385,922.40 539,659,463.51 -63.24 borrowings and borrowings from activities controlling shareholders 118